5.44 ndian onom
social sector). In a sense, during this time, we see (v) Excessive government dependence on
an ideological shift in the government towards the financial system continued ‘crowding
giving an ‘active’ or ‘central’ role to the private out’ funds, and as a result, the private
sector in the process of economic development. sector could not mobilise suitable levels
This was an advice for a completely different kind of funds for their requirements.
of investment model. But due to lack of political (vi) Technological upgradation and initiation
will, the governments of the time could not go of new technologies into the economy
in for the same. Though, we find the government got hampered due to non-availability
going for a kind of limited degree of economic of foreign currency to the private sector
reforms through the Industrial Policies of 1985 (GoI, by late 1970, started facing the
and 1986 (this should not be taken as Economic difficulty of paying its external liabilities,
Reforms in India which officially starts in 1991 which were mainly created due to the
only). expansion of the PSUs).
As a summary of the investment models up (vii) Main sources of fund in this model
to 1990, we can highlight the following points. were, government’s tax revenue, internal
(i) Government remains the main investor borrowings, external borrowings and the
in the economy and experts believe freshly printed currencies.
that India did undue delay in putting There always prevailed a lag between the
in place an investment model by which requirement of funds and their mobilisation
the potential of the private sector could resulting into government investment targets
be channelised into the process of getting derailed most of the times. In the
developmental investment. meanwhile, the biggest crisis was building-up
in the areas of infrastructure shortcomings. By
(ii) Emphasis on the public sector continued
early 1960s itself the Indian private sector was
together with nationalisation drives
eager to enter this sector so that adequate levels
also by late 1960s and early 1980s (the of infrastructure could be developed. But due to
PSUs, to a large extent, were privatised several reasons we see the GoI continuing as the
by the South East Asian economies by monopoliser in these sectors.
now, making these socially-oriented and
loss-making units to catapult into hubs PhAse-iv (1991 onWArD)
of profit and real drivers of growth and
Due to prolonged follow-up of weak fundamentals
development).
of economics and immediated after Gulf War-I,
(iii) Tax system was structured to raise India headed for a severe Balance of Payment
maximum tax revenue (which led to tax crisis by late 1980s, which made India go to the
evasion and excessive tax burdens on the IMF for financial help. It comes up but at some
citizens). ‘conditions’—the design of the ‘conditions’
(iv) GoI continued cutting its non-plan made India to go for a ‘restructuring’ of the
expenditures so that resources could economy under the process of economic reforms
be allocated for the purpose of planned commencing in 1991.
development (which led to expenditure Reform era shifted India towards including
cuts even in essential areas like education, the ‘private sector’ (domestic as well as foreign)
health care, etc.). for the future development of the economy—and