Building a Market Economy in India
ASSIGNMENT ON
BUILDING A MARKET ECONOMY IN INDIA
&
THE RISE OF ISLAMIC BANKING IN PAKISTAN
Prepared for:
Prof. Dr. Masud Rahman
Prepared by:
Gazi Md. Ali Zafar
Roll-1003013
BANGLADESH UNIVERSITY OF PROFESSIONALS
Mirpur Cantonment, Dhaka-1216
BUILDING A MARKET ECONOMY IN INDIA
1. What were the features of pre reform India and what were the justifications of that?
Answer: The features of pre reform India were as following:
a) The economic system that developed in India after 1947 was mixed economy system characterized by a large number of state-owned enterprises, centralized planning, and subsidies.
b) This system constrained the growth of private sector and that time in India private companies could expand only with government permission. Under this system, dubbed the “License Raj,” private companies often had to wait months for government approval of routine business activities, such as expanding production or hiring a new director. It could take years to get permission to diversify into new product.
c) Much of heavy industry, such as auto, chemical, and steel production was reserved for state-owned enterprises.
d) Production quotas and high tariffs on imports also stunted the development of a private sector, and that time restrictive labor laws that made it difficult to fire employees.
e) In pre reform India, access to foreign exchange was limited, investment by foreign firms was severally restricted, land was strictly controlled, and the government routinely managed prices as opposed to letting them be set by market forces.
f) By the early 1990s, it was clear that before reform in India, this economic system was incapable of delivering the economic progress.
Justifications:
At the end of colonial rule, India inherited an economy that was one of the poorest in the developing world, with industrial development stalled, agriculture unable to feed a rapidly growing population, a largely illiterate and unskilled labor
BUILDING A MARKET ECONOMY IN INDIA
&
THE RISE OF ISLAMIC BANKING IN PAKISTAN
Prepared for:
Prof. Dr. Masud Rahman
Prepared by:
Gazi Md. Ali Zafar
Roll-1003013
BANGLADESH UNIVERSITY OF PROFESSIONALS
Mirpur Cantonment, Dhaka-1216
BUILDING A MARKET ECONOMY IN INDIA
1. What were the features of pre reform India and what were the justifications of that?
Answer: The features of pre reform India were as following:
a) The economic system that developed in India after 1947 was mixed economy system characterized by a large number of state-owned enterprises, centralized planning, and subsidies.
b) This system constrained the growth of private sector and that time in India private companies could expand only with government permission. Under this system, dubbed the “License Raj,” private companies often had to wait months for government approval of routine business activities, such as expanding production or hiring a new director. It could take years to get permission to diversify into new product.
c) Much of heavy industry, such as auto, chemical, and steel production was reserved for state-owned enterprises.
d) Production quotas and high tariffs on imports also stunted the development of a private sector, and that time restrictive labor laws that made it difficult to fire employees.
e) In pre reform India, access to foreign exchange was limited, investment by foreign firms was severally restricted, land was strictly controlled, and the government routinely managed prices as opposed to letting them be set by market forces.
f) By the early 1990s, it was clear that before reform in India, this economic system was incapable of delivering the economic progress.
Justifications:
At the end of colonial rule, India inherited an economy that was one of the poorest in the developing world, with industrial development stalled, agriculture unable to feed a rapidly growing population, a largely illiterate and unskilled labor