[Dec 2007, Volume 4 Quarterly Issue] Pdf File size - The IIPM Think ...

Anandajit Goswami,
Associate Fellow, The Energy
and Resources Institute (TERI),
New Delhi
Larger Market Role, Reduced
Government Interventions – Is It A Misnomer?
"Liberty is the only thing you
cannot have unless you are
willing to give it to others."
-William Allen White
The above title highlights some basic
facets of the reformist changes that
have taken place in India during
the liberalization period. The “India Shining”
campaign marked by stupendous
growth rates of the economy owing to diversified
market led reforms has created a notion
of reimagination of India fraught by
greater role of the market with less government
intervention. But it is absolutely imperative
to look onto other dimensions of
the growth story before such a reimagination
of India is well established. The following
sections of this article would dwell upon
some of those dimensions.
The Growth Story
We all know that the growth of the Indian
economy has not followed the classical
growth pattern as stated by many growth
theorists like Solow where the growth of the
economy starts from agriculture sector followed
by its transmission to the manufacturing
and services sector. In India’s case the
larger part of the growth has been a result
of service led growth. The growth in agriculture
sector started with green revolution
in Indian economy. There after there has
been a leap frogging jump in the growth pattern
towards service sector during the period
from 1990s till now without a subsequent
growth in manufacturing sector. The
manufacturing growth has stagnated at the
same time. According to recent estimates
the share of service sector has increased to
more than 50 percent of the GDP of the Indian
economy whereas the sectoral share for
agriculture in the GDP has dropped down
to 16 percent. 1 Another factor that has contributed
to the growth of Indian economy is
the opening up of the economy through
larger exports and imports. This has been
evident in the double digit (close to 20 percent)
growth rate in the export of principal
commodities from India in the recent years.
The trade policy (2004–2009) 2 of India also
highlights the point of the growth of Indian
economy by meeting export targets. Statistics
show that our current account is in a
deficit due to huge imports, which is balanced
by capital account surplus. This has
been triggered mainly by large amount of
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