1 - What kind of economic system did India have during 1947 to 1990?Wat are the impediments to completing this transformation?
The model followed by India through 1947 to 1990 was essentially the socialist Nehruvian model. This was characterized by the License Raj.
a) - Most heavy industry and petroleum production was under state owned enterprise.
b) - Production of Steel and coal was under government (though some part was under private enterprise).
c) - All Banks were nationalized.
d) - Introduction of new products was very difficult and corruption ensured that import licenses would go to the one with maximum political and economic clout, which led to oligarchy of few producers producing much of the goods that was consumed in India.
Impediments to changing of this system.
The impediments were
a) - Fear of the public sector employees of loosing their "safe" jobs.
b) - Fear of takeover of most industry by Multinationals (Indira Gandhi's Coca-Cola episode was an indicator).
c) - Great influence in states such as West Bengal and Kerela of Marxist ideology.
d) - The entrenched vested interests of the bureaucracy.
f) - Un competitive "captive market" situation had led to overpriced poor quality goods. Such companies feared they would be edged out of the market (The 1950s vintage Ambassador car by Hindustan motors was a case in point.
2 - How might public ownership of business and extensive government regulations impact efficiency of state and private business, and the rate of new business formation in India during the 1947-90 ?Does these factors affect the rate of economic growth in India?
As listed earlier, the prevailing environment had promoted oligarchies where 4 or 5 businesses controlled most of the market from tea to cars to refrigerators.
Public ownership of important and large enterprises had ensured the labor force had become inefficient and the companies overstaffed. The excessive red tapism was discouraging new businesses from coming from outside. This had imposed a self set "Hindu rate of growth" of 3% to 5% GDP per year, depending on the vagaries of the monsoon.
3 - How would privatization,deregulation and removal of barriers to foreign direct investment affect the efficiency of business, new business formation and the rate of economic growth during the post 1990 time period?
Removal of these barriers (import barriers on most consumption goods) meant that foreign multinationals flooded the market with their competitive product and the domestic Industry had to shape up or ship out. This happened and soon Government corporations that had been making losses turned out to make good profits (BEML & Bharat Forge are cases in point).
The growth rate surged and remained around 10% for a decade! Effectively catapulting the country in the Newly Industrialized countries (NIC) block.
4 - India now has pocket of strength in key high-technology industries such as software and pharmaceuticals. Why is India developing strength in these areas? How could success generate growth in other sectors of the Indian economy?
India now can boast of pockets of excellence such as The IT and the Pharmaceuticals Industry, mainly because, of it has a large pool of English speaking young people, who are highly qualified, and because standards of education have remained high.
This success has had a trickle down effect as the world becomes aware of India's strengths in numbers and advantage in lower labor costs. Focus is now also on the Auto ancillary industries such as car seats, wheel hubs and engine parts.
India's engineering exports rose 10 to 14 percent for a decade.
5 - Does the country represent an attractive target for inward investment selling by foreign multinationals selling consumer products? Why?
Yes it does because The burgeoning middle class represents the population as affluent as that of France, embedded in India. This large purchasing power makes the attraction of India as a market place really compelling. One can sell almost anything here! From a Rolls Royce to a private jet, and you would always find a buyer!!
Secondly, India represents a more benign face as compared to communist china for which many investors have a visceral hatred. The law and order situation is good and the stock market is showing that Indian companies manage their funds well.