State Interventionism and its Consequences

Baldev Raj Nayar

in The Myth of the Shrinking State

Published in print April 2009 | ISBN: 9780195699395
Published online October 2012 | e-ISBN: 9780199080526 | DOI:
State Interventionism and its Consequences

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This chapter examines the interventionist role assumed by the Indian state in the early years following independence, under the leadership of Prime Minister Jawaharlal Nehru. That policy was driven by the aim to seize the commanding heights of the economy with a view to leading the country ultimately to socialism. Prime Minister Indira Gandhi supplemented the entrepreneurial role of the state with an expansive nationalization programme. These measures converted the state into an economic leviathan and the public sector into an industrial colossus. However, they also proved dysfunctional, in that a heavily invested, but rather unprofitable public sector made for slow economic growth, even stagnation over long stretches of time, and eventually led to economic crises. It is out of the compulsion of these consequences that economic liberalization became a necessity.

Keywords: public sector; state intervention; industrialization; economic policy; socialism; Jawaharlal Nehru; nationalization programme; Indira Gandhi; economic liberalization

Chapter.  8197 words. 

Subjects: Political Economy

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