Avinash Roy asked: Why did India lag behind other South-East Asian countries in terms of level of economic development after 1990s reforms?

Udai Bhanu Singh replies: India initiated its liberalisation policy in the early 1990s - the same time it introduced its Look East Policy. Prior to it, the immediate post-independence period was marked by economic policy which had its roots in anti-colonialism, socialism and non alignment /reticence to join any power blocs. It was anti-Western to the extent that it was neither interested in SEATO (Southeast Asia Treaty Organisation) type of blocs and nor did it show any keenness in joining ASEAN (Association of Southeast Asian Nations) at the time of its formation in 1967. India’s non-alignment was deemed to have a pro-Soviet tilt having signed the Treaty of Peace, Friendship and Cooperation with the Soviet Union in 1971. Thus, the planning model that India adopted in the Nehruvian era was based on self-reliance and indigenous production; with a focus on heavy industry and the strategic sectors of the economy located primarily in the public sector. Although this created a very good base which served the country well in later years, but at the same time it perpetuated the license raj and stifled the private sector.

The end of the Cold War and the economic liberalisation when it happened in 1991 came as a breath of fresh air. The East Asian economies following the Flying Geese model were able to climb up the industrial value chain in the interim. However, India's strong fundamentals will hold it in good stead in the years to come. And if the Reserve Bank of India (RBI) Governor Raghuram Rajan is to be believed, Indian economic growth is poised to grow to 7 per cent over the next three years.

Posted on September 22, 2014