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Lecture 2

Week 20 - Political Economy II.docx

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Department
Political Science
Course
POL101Y1
Professor
Professor Kanta Murali
Semester
Winter

Description
Week 20- Economic liberalization and high growth in India March 4, 2013 -the period of the 1980s – a transition phase but not a major period of economic liberalization -1991 – the period of economic liberalization begins -changed india’s engagement with the external economy – opened up trade and external investment -post 1991 – a high growth path -the relationships between economics and politics Agenda -India’s high growth phase in comparative perspective -esp with other East Asian countries -overview of India’s growth transformation -policy changes and effects in the 1980s -policy changes and effects after 1991 -the political economy of liberalization -India’s growth record and its political consequences -scholarly debates on India’s growth transformation India’s growth in comparative perspective -how India differs from other examples of rapid growth in the developing world after WWII -growth in a consolidated democracy -high growth phase and greater electoral competition -poor electorate -ethnic diversity -the academic expectation is this leads to ethnic fragmentation and tends to lead to negative economic outcomes (but that hasn’t happened in India necessarily) -a dynamic of democracy before development -leads to two clear questions – what do patterns of policy imply in an electorate that is predominantly poor? -why does India have such pro-Business policies? -process in India is largely a domestic-driven process – driven by domestic investors -the presence of domestic capital -importance of domestic investment and greater inward-orientation -the policy leverage domestic investors have on the state -nature of state-business relations -distinct than what we might see in other countries -idiosyncratic composition of growth -service sector-oriented, capital-intensive growth -not focused on labour-intensive manufacturing (which is interesting given the country’s pop’n and therefore the ability of labour) -most of the population works in agriculture -small share of manufacturing India’s growth in comparative perspective -relatively low human development and poor infrastructure -differences in the nature of market reforms -gradual and incremental Week 20- Economic liberalization and high growth in India March 4, 2013 -privatization and deeper reforms -much more limited privatization in India -for most economies in transition in the 80s – Washington Consensus reigned supreme and Shock Therapy style economic reforms -India an exception – its economic liberalization has been much more gradual Phases of India’s growth transformation -change since 1980s (transitional period) -post 1990s (significant difference – changes are extensive) -Trajectories of the shift -the 1980s and incremental changes -domestic liberalization and marginal changes -crisis and change in 1991 -post 1991 era and extensive liberalization -domestic and external liberalization -extensive, incremental changes 1980s: signs of policy change -Indira Gandhi’s return to power (1980-1984) -marginal signs of change – easing controls on the private sector -Rajiv Gandhi’s term -emphasis of change – both politically and economically -much more comfortable with technology and less oriented towards Nehruvian socialism – diff worldview than his mom -towards domestic deregulation (1985 budget) -licensing requirements eased -restrictions on big business eased -relationship with business – Case of the Confederation of Indian Industry -tax relief to the middle class -marginal changes in external orientation -emphasis on technology -encouraged businesses to get more involved in policy -political opposition and stalled reforms -from labour -the political left The 1991 crisis and extensive reforms -balance of payments crisis in 1991 -fiscal imbalances in 1980s -collapse of USSR, 1990 Gulf War, oil prices and remittances, internal political problems -Soviet union – had been India’s major trading partner until then (and also had political ties) -Gulf War – India had a large number of workers in Gulf who sent remittances back – so decrease of remittances -also India dependent on external oil reserves and the gulf war led to an increase in oil prices -internal political problems Week 20- Economic liberalization and high growth in India
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