IGNOU MPS-003 Democracy and Development Notes In English Medium

Question 1. What is Liberalisation? To What extent economic and political consequences of Liberalization impact working of Indian democracy?  (June 2010: Q. 8, June 2012: Q. 2, June 2013: Q. 7, Dec 2013: Q. 2, Dec 2015: Q. 4, June 2016: Q. 10, Dec 2016: Q. 5, June 2018: Q. 7, June 2020: Q. 6, Dec 2020: Q. 4, June 2024: Q. 9)  

ANSWER:

Liberalisation

Liberalisation relers to the process of reducing or removing government restrictions and regulations on economic activities means giving more freedom to busmesses, markets and individuals to operate with less govemment contrul Economic reforms implemented in India, primarily in the 1990s, aimed at:

Reducing government intervention: This includes lessening controls and regulations on industries, trade, and investment. Opening the economy: This means reducing barriers to international trade (e.g, tariffs, quotas) and encouraging foreign investment. Shifting towards a market-oriented system: This involves relying more on market forces (supply and demand) to allocate resources, rather than government planning and controls.

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India adopted Import Substituting Industrialisation (151) which involved industries being developed by preventing imports and state taking action for bringing about industrialization. Following the balance of payments crisis, the country had to shift toward liberalization by enabling the inflow of foreign capital and industrial investment.

Economic Consequences of Liberalization:

1. Growth Rates: The text notes that there is no significant change in the rates of growth of agriculture and manufacturing.

2. Increased Exports: There is evidence to suggest that exports of labor-intensive goods have increased3. Productivity: No strong evidence of increased productivity in Indian industry.

4. Foreign investment: internal regulations on industrial investment has also been eliminated and the inflow of foreign capital liberalized.

5. Poverty Reduction: Continued decline in poverty in the 1990s, although potentially at a slower pace than in the 1980s

6. Income Inequality: Evidence suggests that globalization may exacerbate income inequality.

7. Infrastructure: The text mentions that the elimination of restrictions failed to generate the corresponding benefits. Also the lack of government investment leads to outdated infrastructure thereby stagnating the growth.

8. Reduced government investment: Government investment has resulted in a very poor and outdated infrastructure which is a constraint to faster growth.

Political Consequences of Liberalization:

Debate over "Just Growth": Liberalization has sparked debate about whether economic growth is "justle, whether it reduces poverty, promotes equality, and strengthens democracy.

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Changing Role of the State: Shift from direct involvement in production to providing physical and human capital, regulating private enterprise, and drawing the poor into the economic system. Concern about the state's ability to regulate effectively due to potential political interference.

Poverty Reduction and Empowerment: The objective of Indian policy makers since the inception of planning was to achieve what is today called "just growth", namely growth that reduces poverty and leads to a more equal distribution of income and is accompanied by democracy.

Reservations: The lack of employment growth is prompting demands for reservation in the private sector also.

Increasing claims from disadvantaged people: Increased over the years and many programmes established to improve both the condition of the poor and to provide more power to them.

Challenges and Conflicts

Conflict between poverty reduction and reducing income inequality:

Globalisation brings to the fore a possible conflict between poverty reduction and reducing income inequality, a possible contradiction that had been ignored earlier in India.

Sustainability:

This all raises concems about the sustainability of progress in reducing poverty and empowering disadvantaged groups, especially in the face of over-manning in the public sector and infrastructure deficits.

CONCLUSION:

Liberalization in India has had mixed results. While it may have contributed to economic growth and some poverty reduction, it has also raised concerns about income Inequality, the changing role of the state, and the need for greater investment in infrastructure and human capital to ensure "just growth." There is a debate about whether liberalization has strengthened or weakened Indian democracy, particularly in terms of its impact on poverty and equality. The liberalisation has sparked debate about whether economic growth is "just" ie, whether it reduces poverty, promotes equality, and strengthens demoстасу.

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