India in the move
With more than 1,5 billion citizens, India represent a huge market for national and international companies. However India is still facing some difficulties that are slowing it expansion and its economic growth.
Trying to solve them is the main objective of the minister of finance Jaswant Singh that has to craft a budget to achieve the 10th five years plan, which constitutes an economic, and social growth project for 2002-2007. Among its main objectives is achieving, a growth rate of 8% (Exhibit 2), removing interstate barriers to trade and commerce, implementing a more efficient fiscal management, creating jobs, reducing poverty, illiteracy and solving the social, politic and religious conflicts within the country.
What were the reforms that led to this new plan? Is this developing India attractive for foreign direct investment?
To answer to this question, we will start by analyzing India’s Background and we will finish by studying its process towards globalization
I. India’s Background
India’s population in 2002 knew a continuous growth of 1,5% and is estimated to keep and on growing. Live expectancy had reached 62 in 2002 and the literacy rate was 65% in 2001. Having a very diversified population, the country has 18 official languages, Hindu being the most prevalent. Many religion try to cohabite, not always successfully, inside the territory. Hindu-Muslim frictions represent a major problem for the country; indeed, they have been taking thousands of lives during many violent episodes between the two religions, as the Ayodha temple dispute that resulted on the death of more than 2000 people. The insecurity of this national war has been leading many Muslims and Hindus to run away from their cities. More over, the political parties are also implicated in those conflicts, for example BJP party is the political wing of the Hindu religious group (RSS) and criticized for it fundamentalism.
Although an urbanization tendency, 72% of its population is still rural in 2001. Poverty is hardly hitting some parts of the country, 44% of the population is poor.
Having been a British crown colony for 89 year, India was able to benefit form a legal educational system based on English standards, however, the colon gave very little authority to Indian which anger the population and led to revolutions. Mahatma Ghandhi, leader of the revolution, led a campaign of civil disobedience with the ideals of “swadeshi”, self-sufficiency, which had lasted over 25 years until India’s Independence in 1947.
However, after the independence, India experienced a relatively slow economic growth until 1991 which was due to multiple reasons:
India’s republic is a parliamentary democracy based on the British system, it is a central bureaucracy composed of 28 states and 7 union territories. Each state has all tax right on its agricultural income, land and regulation on property ownership. Of 44 years after the independence, the Congress party, led by the Nehru-Gandhi dynasty, was in control for 33 years. However, having known some big scandals, the party lost its strengths. Following its defeat, the Indian electorate got divided into regional and caste groups and in order to gain the majority, many parties’ coalitions had to be made.
Influenced by the soviet model, Nehru created a socialist state. Following many plans and reforms, the government gained control of most of the sectors and aimed to strengthen the agriculture and increase self-sufficiency. To do so, several controls were instituted including licensing and imposing very protective trade and investment restriction. Called “Permit Raj”, created by the Indian bureaucracy, a complex system of licensing created both inefficiency and corruption in the country. Restricting a multitude of items, imposing very high tariffs on imported capital goods and limiting competitiveness led to low quality and high price goods and services.