India had a Luddite attitude toward foreign trade, especially imports. Despite NAM, South-South, etc. we were wary of foreign countries in the matter of trade and foreign investment. We pulled down the shutters and refused to open them for four decades. We wrote the dreaded manuals for import and export: everything required licenses and permits. Most imports, and some exports, were ‘canalised’ through state-owned corporations. We had an officer called Chief Controller of Imports and Exports who had an army of officers spread throughout the country whose only business was to issue licenses for imports and exports. It was a profitable business. No one paused to ask the obvious question, ‘Alright, we understand why we have a controller of imports, but why do we have a controller of exports?’

The Beginning

The policy did not boost exports or build an export-oriented manufacturing sector or augment the foreign exchange reserves. Meanwhile, several countries, whose economies were at the same level as India’s, opted for an open economy and allowed free trade, and became rich.

A combination of factors brought the Indian economy to the edge of a financial crisis in 1990-91. India was forced to embrace economic reforms. Trade policy reforms, industrial policy reforms, and a focus on fiscal discipline pulled India back from the brink, and put the economy on a growth path.

We lowered tariffs........

© Mathrubhumi English