External constraints on policy-making and industrial development in India

Indian policy-makers resisted external pressure to liberalise imports and capital flows for four decades. As a reaction to serious macroeconomic imbalances in 1989-91, however, major policy changes were introduced. Indian industrialists initially endorsed the new policies, but by the mid-1990s many felt that liberalisation had gone too far and was carried out too fast. With the unsatisfactory progress of Indian industry achieved by the late 1990s domestic opposition strengthened. After 1998 this prompted the government to adopt more cautious policies that were also aimed at delaying and diluting the impact of the WTO membership. At a higher level of abstraction the analyses indicate that the policy options available to the Indian state have been narrowed since the late 1980s, yet they also show that the government has the capability of modifying external influences. Much is still needed, though, in terms of increasing the capacity to manage both the domestic economy and its further integration into the global economy in accordance with national interests and priorities. © 2002 European Association of Development Research and Training Institutes.