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Understanding ReformsPost-1991 India$
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Suresh Tendulkar and T.A. Bhavani

Print publication date: 2012

Print ISBN-13: 9780198085584

Published to Oxford Scholarship Online: September 2012

DOI: 10.1093/acprof:oso/9780198085584.001.0001

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The Slow-growth Phase: 1950–1 to 1980–1

The Slow-growth Phase: 1950–1 to 1980–1

Chapter:
(p.39) 4 The Slow-growth Phase: 1950–1 to 1980–1
Source:
Understanding Reforms
Author(s):

Suresh D. Tendulkar

T.A. Bhavani

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780198085584.003.0004

This chapter explores the resultant incentive structure in the period 1950–1 to 1980–1 that emerged from the interaction of the new institutional matrix (comprising public sector expansion, controls over the market, and foreign exchange and import controls) with the existing environment. It then addresses the incentive effects of the regulation of markets and the private sector including the industrial investment licensing mechanism. It explains how the three elements of the new institutional matrix considerably reduced the scope for competition in terms of costs, quality, and productivity. The blue-collar workers in the organized factory manufacturing segment were the passive beneficiaries of autarkic industrialization with the support of the activist state. The period experienced low growth despite the doubling of the rate of gross domestic savings due to the combined result of competition-limiting policies and growth-constricting direct discretionary controls, as well as the distortion of prices arising out of differentiated excise and customs duties and other quantitative controls that managed to maintain fiscal and external payment stability.

Keywords:   distributional coalition, import controls, market failure, domestic savings, licensing, capitalist sector, foreign exchange, public sector, interest groups, bureaucracy

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