Spatial Implications of India’s New Economic Policy

This paper examines the spatial implications of India's new economic policy operating through two instrumentalities of stabilisation and structural adjustment. Stabilisation is aimed at correcting the balance of payments situation and reducing the deficit in the Union government budget, which has had an adverse effect on social development, employment generation, and poverty alleviation in hill, tribal, drought prone and other backward areas. Devaluation of the rupee benefitted the major foreign remittance receiving states like Kerala, Gujarat, Punjab and Tamil Nadu. Structural adjustment, through rationalisation of trade, industrial, agricultural, human resource development, and power policies had spatial implications of varying nature. Trade policy enhanced investment attraction of big urban industrial centres; industrial policy attracted foreign direct investment in mineral‐rich backward states; and export orientation in agriculture was to a greater advantage of rice and cotton producing states. Reduction in subsidies for fertilisers had more serious implications for the agriculturally backward states. Higher tariffs in the power sector were to the disadvantage of Punjab, Haryana, Tamil Nadu and Kerala. Urban–rural and inter‐state disparities in social development widened, with relatively lower allocations to education and health. On balance, though new economic policy offers new opportunities it does have a spatially differential impact.