India’s growing interface with the global economy in recent years has contributed to a state of
rapid flux in its macroeconomic scenario. The process of increasing integration with the
global economy, as per the ‘official’ version, has been remarkable in terms of facilitating the
Indian economy’s progress with respect to most economic and social indicators since the early
1990s. As is well-documented, gradual changes in the country’s macro economic regime
commenced in late 1980s with trade liberalization (e.g. a shift from quota to tariffs for some
commodities) and slow but steady deregulation of investment and output controls; however it
was in the early 1990s that the Indian economy witnessed a transition from a State-led
development model to a neoliberal paradigm1
. The rapid and sharp shift in the economic
policy since July 1991 had its ostensible immediate trigger in the balance of payment crisis that
the country then was faced with. The important measures, initiated in the early 1990s, as a part
of the stabilization and structural adjustment package, included: currency devaluation in July
1991 against the US dollar; withdrawal of cash incentives for exports; significant cutbacks in
central government spending; increase in the interest rate and reduction of public investment;
replacement of import licensing with tradable permits; rapid reduction of tariff rates; reduction
of entry barriers and controls over FDI; disinvestment in public sector; entry of private sector
banks and dilution of commitments towards directed credit for vulnerable sectors and groups;
among others. Throughout this paper, in line with the widespread usage, the period since early
1990s has been described as one of economic reforms/liberalization/ globalization.