Credible commitment in India’s economic success
In the 1960s and 1970s, the Indian government followed a command-and-control regime that makes an atmosphere of mutual distrust between the political and economic elites, and the government had a strong anti-business attitude (Kohli 2007). With a change of government in 1980 and the return of Indira Gandhi as Prime Minister, the promotion of economic growth became the focus of the government’s economic policy, leading to a growing alliance between the political and economic elites. Indira Gandhi let it be known that improving production was now her top priority to build the economy of India.
Therefore, beginning in the 1980s, the Indian state clearly signaled to domestic capitalists its intention to commit credibly to an environment where private enterprise would be supported and growth-enhancing policies followed (De Long 2003, Rodrik and Subramanian 2004). This was reflected in changes in economic policies, such as the slow but steady liberalization of import controls, especially on capital and intermediate goods. The shift in the relationship between political and economic elites from one of mutual distrust to a more collaborative and synergistic relationship was further accentuated …show more content…
2014). This was the principal development agency of the government, but it was able to maintain independence from the bureaucracy, which allowed it to be the key coordinating agency for the formulation and implementation of an export-oriented industrialization strategy, with a clear focus on electronics as the leading sector. Key components of industrial policy were a strong emphasis on cluster development, the encouragement of close links between multinationals and local firms, and the effective use of industrial estates for infrastructure
In the 1960s and 1970s, the Indian government followed a command-and-control regime that makes an atmosphere of mutual distrust between the political and economic elites, and the government had a strong anti-business attitude (Kohli 2007). With a change of government in 1980 and the return of Indira Gandhi as Prime Minister, the promotion of economic growth became the focus of the government’s economic policy, leading to a growing alliance between the political and economic elites. Indira Gandhi let it be known that improving production was now her top priority to build the economy of India.
Therefore, beginning in the 1980s, the Indian state clearly signaled to domestic capitalists its intention to commit credibly to an environment where private enterprise would be supported and growth-enhancing policies followed (De Long 2003, Rodrik and Subramanian 2004). This was reflected in changes in economic policies, such as the slow but steady liberalization of import controls, especially on capital and intermediate goods. The shift in the relationship between political and economic elites from one of mutual distrust to a more collaborative and synergistic relationship was further accentuated …show more content…
2014). This was the principal development agency of the government, but it was able to maintain independence from the bureaucracy, which allowed it to be the key coordinating agency for the formulation and implementation of an export-oriented industrialization strategy, with a clear focus on electronics as the leading sector. Key components of industrial policy were a strong emphasis on cluster development, the encouragement of close links between multinationals and local firms, and the effective use of industrial estates for infrastructure