FOR A LITTLE MORE THAN THREE DECADES AFTER INDIA GAINED INDEPENDENCE
IN 1947, its growth narrative and growth potential were circumscribed by
the logic of self-sufficiency, import substitution, and protection. Internally, the focus was
on the gradual development of capacity in the public and private investment sectors.
Tose policies, however, eventually reached the limits of their usefulness, and their
harmful effects became too obvious to be ignored. Indian industry had become woefully
uncompetitive. Agricultural production had begun to stagnate, and the economic
growth rate was stuck at around 3.5 percent on average. Te next two decades, starting
with the 1980s, saw a hesitant liberalization as the pendulum swung in the other direction.
Tese two decades were also marked by excess borrowing, a balance of payments
crisis that pushed the country into near bankruptcy, and a banking crisis, all occurring
in the late 1980s to early 1990s.