Challenges for Industrialisation in India: State versus Market Policies

Abstract

The study is important because there currently seems to be a gap in the literature, since most published research has highlighted India’s overall GDP growth rates. Little academic research has been done on the importance and performance of industrial sectors in a developing economy like that of India. The industrial sector there has languished at around 16% of GDP, which is much less than that of China or of any other country at India’s stage of economic development.The neoliberal reforms of 1991 in India removed tariffs and barriers to foreign trade and investment. India reduced the role of state and public sector, and dismantled controls, while increasing the role of the market and private sector within the economy. As a result, foreign capital investment and foreign exchange reserves improved. However, job expansion did not occur and there has been no corresponding decline in the share in agricultural employment. Even the much heralded IT sector’s dramatic expansion over the last two decades has provided jobs directly to less than a million people.This study argues that it would be misleading to think that a large country like India could industrialise and modernise its economy whilst the unequal distribution of land and rural assets, and the dismal performance of the agricultural sector remains. This study concludes that more than two decades have passed since the neoliberal reforms were launched, but industrial growth has still not witnessed rapid expansion, especially in manufacturing areas. It seems, then, that neoliberal policies have failed to create jobs and thus improve the living conditions of a significant proportion of the population.