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The context and consequences of economic liberalization in India

Author

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  • Prabhat Patnaik

Abstract

Liberalization is supposed usually to bring in large amounts of direct foreign investment. What has come into the Indian economy after liberalization however is not so much direct foreign investment as 'hot money' interested in speculation. This is hardly surprising: what we have witnessed of late is a 'globalization of finance' rather than a 'globalization of production'. Liberalization in these circumstances causes economic stagnation, rather than growth, as the economy gets tied to the caprices of international rentiers. It also reduces domestic food availability in the pursuit of agri-exports. The Indian experience confirms this, but with one exception: an increase in the fiscal deficit after an initial phase of deflation (contrary to what liberalization entails) stimulated a brief industrial recovery, but this too has started petering out.

Suggested Citation

  • Prabhat Patnaik, 1997. "The context and consequences of economic liberalization in India," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 6(2), pages 165-178.
    • Handle: RePEc:taf:jitecd:v:6:y:1997:i:2:p:165-178
    DOI: 10.1080/09638199700000012
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    Cited by:

    1. Vertica AGARWAL & Jean H.P. PAELINCK & Kenneth A. REINERT & Roger R. STOUGH, 2008. "Trade Liberalization and Income Inequality in India: A Poisson Distributed-Lag Analysis," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 8(2), pages 187-192.
    2. Tanveer Ahmad Khan, 2022. "Current and Capital Account Dynamics in India: An Empirical Analysis of the Post-Reform Period," Foreign Trade Review, , vol. 57(1), pages 41-65, February.

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