Development pattern of India during the first three decades (1950-80) after attaining independence in 1947 was characterized by strong centralized planning, government ownership of basic and key industries, excessive regulation and control of private enterprise, trade protectionism through tariff and non-tariff barriers and a cautious and selective approach towards foreign capital. It was a quota, permit and license regime all the way, guided and controlled by a bureaucracy trained in colonial style. This so-called inward looking import substitution strategy of economic development began to be widely questioned with the beginning of 1980s. Policy makers started realizing the drawbacks of this strategy, which inhibited competitiveness and efficiency and produced a much lower rate of growth than expected.
After assuming power at the center, the Government of Prime Minister Rajiv Gandhi introduced a series of measures through 1985 industrial policy to reduce control on industries, particularly large ones. These measures, described as new economic policy, coincided with the policy framework of the seventh Five Year Plan )1985-90).
The process of economic reforms initiated in 1985 got a big boost when the Government of Prime Minister P.V. Narasimha Rao announced a new industrial policy in the Indian Parliament on July 24, 1991. The new policy introduced radical changes to unshackle the Indian industrial economy from the cobwebs of unnecessary bureaucratic controls. The new policy was widely welcomed for ensuring competitive and market economy in place of the outmoded command and controlled economy. Many saw it as a reversal of the 1956 industrial policy resolution.
After the reforms, the Indian economy has been growing faster than its historical growth rate. Tenth five year plan recorded annual growth rate of 7.2 percent and the underway eleventh five year plan aims to achieve 9.0 percent growth rate per annum. On the flip side, India’s high growth rate is all very well but its moral virtues in terms of equity ad environment are falling by the wayside. In other words the growth process must be made as inclusive and as environment friendly as possible.