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

Suresh D. Tendulkar and T.A. Bhavani

in Understanding Reforms

Published in print August 2012 | ISBN: 9780198085584
Published online September 2012 | e-ISBN: 9780199082087 | DOI:
The Slow-growth Phase: 1950–1 to 1980–1

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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

Chapter.  6669 words.  Illustrated.

Subjects: Economic Development and Growth

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