News for March 16, 2017

Important News from The Hindu:

• India hosts world’s oldest algae fossil

  [Important for: Archaeology]

• ED attaches assets worth Rs. 414 crore in NSEL scam

  [Important for: Economy]

• ‘Post polls, all political parties must support labour reforms’

  [Important for: Polity]

• Centre unveils plan for export infra

  [Important for: Economy]

25 YEARS OF INDIAN ECONOMIC REFORMS

The economic policy that India followed after independence was built on five pillars—comprehensive planning, heavy industry strategy, priority to the public sector, import substitution and government intervention. This policy was the product of those times. The Great Depression of the 1930s, the ascendency of the Soviet Union and the decolonisation following the world war II created a political and economic environment that favoured such a policy. Leaders like Jawaharlal Nehru were impressed by the initial success of the socialist experiment in the Soviet Union. Thus, the Soviet model five-year plans and the public sector-led industrialisation drive became strong pillars of India’s economic policy.

This policy did prod use some beneficial impact on the Indian economy. It gave India a well-diversified industrial system; the Green Revolution made India self-sufficient in food and the government’s focus on centres of excellence like the IITs and IIMs gave India a strong base in excellent human resources. But this policy, which was government-led, also created a ‘Permit License Quota raj, which stifled initiative and enterprise and fostered corruption. Well-meaning government intervention led to over-regulation of industry and suppression of private enterprise. The success of the Asian Tigers—Hong Kong, Singapore, South Korea and Taiwan—which followed a different economic model led to reconsideration in economic policy in developing economies. The collapse of the Soviet Union in the late eighties and the change of direction in China following the ascendency of Deng Xiao Peng created an environment of change in economic policy. The Balance of Payments crisis of 1991 forced the change in economic policy and the initiation of economic reforms in India.