From Dirgisme to Neoliberalism : Aspects of the Political Economy of the Transition in India

Abstract

This paper argues that internal contradictions arising from the inability of the post Independence Indian state to introduce the institutional changes and adopt the interventions needed for successful import-substituting industrialisation, had resulted in a crisis in that growth strategy by the mid-1960s. Yet the transition to neoliberalism occurred only after a decade-and a half, and in accelerated fashion only after two decades. The paper would trace this lag to the timing of changes in the international financial system that was a prerequisite for liberalization. It would argue that once the transition occurred and gained momentum India emerged as a successful instance of neoliberal growth because of the foundations created in the import substituting years, her fortuitous ability to avoid severe balance of payments and financial crises, and the human face which governments were forced to adopt given the compulsions of democracy in a populous country with significant poverty.