After more than four decades of following the socialist and mixed economy models, India´s political economy entered uncharted waters after the country reached the edge of bankruptcy in 1991. At that time, Prime Minister P.V. Narasimha Rao and Finance Minister Manmohan Singh initiated the process of economic reform which will now doubtless be affected by the outcome of the forthcoming general elections.
The process has been erroneously described both by the Rao regime and various commentators as market-oriented liberalisation based upon the model set by the United States and, to a lesser extent, by Western Europe. In line with this description, the World Bank and the International Monetary Fund, as well as many Western and Indian analysts, are attempting to chart a course for India based on the Western experience. Others have tried to draw lessons from the experiences of the Southeast Asian tigers and China, which began serious economic liberalization programmes in the mid-1970s, well ahead of India.
But what India is doing is unlike anything done before in any nation. It is trying to graft a modern 2lst-century market economy upon a population which remains illiterate or semi-literate except for an upper crust of about 10 percent, and an infrastructure which can be described as backward at best. How India handles this experiment and emerges from it will be of particular interest to other countries in the region.
India´s politics and economy mirror the rotten conditions found generally in the region; the only difference is that, in India, it is on a grander scale: corruption, nepotism, mud-slinging, misuse of legal fora, inefficiency and uninterrupted political infighting. Big business buys the political influence needed to capture domestic markets to make profits from goods in scarce supply, without investing in research and development or finding new ways to provide improved goods or services to consumers.