India Essay

1030 WordsApr 25, 20115 Pages
India’s Transformation Summary: India’s economic system after 1947 was a mixed economy consisting of a large number of state owned enterprises, centralized planning and subsidies. In addition, factors like production quotas and high tariffs on imports and labor laws were main barriers in the development of the private sector. The system didn’t seem to work in the democratic system of government and India’s growth development was stagnant; a fact substantiated by the country’s GDP capita and the percentage of its desperately poor. This sad state of events led to the government to employ an economic reform program in 1991 which started with the privatization of most state-owned businesses, permission of foreign ownership and investments, reduction of tariff on exports, and reduction of income tax. As a result of the reforms, the economy expanded at a rate of 6.3 percent per annum from 1994-2004 and further increased to 9 percent during 2005-2008. Despite the huge developments that occurred, a need for much more is required. However, attempts for further developments are restricted by political opposition, the prevailing government and the country’s laws. Questions & Answers 1. What kind of economic system did India operated under during 1947 to 1990? What kind of system is it moving toward today? What are the impediments to completing this transformation? During 1947 until the 1990s, India was operating under a mixed economic system comprising of a large number of state owned companies, centralized planning and subsidies. Due to the government’s inability to develop the economy under that system, India is now beginning to embrace a democratic economic system where privatization of most state-owned business occurred, foreign ownership and investments are allowed, tariff on exports is reduced, and income tax is also reduced. The main impediments of the complete

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