Till recently, India’s official economic policy during the planning era has been to assign a commanding position to the public sector in the mixed economy, with a view to preventing the concentration of economic power into a few hands in the private sector, and to check the inflow of foreign capital as well as imports in order to provide protection to the domestic industries.

As a matter of fact, India’s economic policy until now was largely at odds with the free enterprise, free market, and free trade philosophy of the IMF and the World Bank.

Though, the socialist pattern-oriented plan strategy did not allow free flow of foreign capital into the country, Indian industrial strategy has always remained dependent on foreign capital inflows. This is because India has never made any serious efforts in developing indigenous technologies.

India’s economic policies led to a control-permit raj in the Nehruvian era and thereafter. Following the Soviet model planning, with due Indianisation, however, the country had tended to become a closed economy.

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This was never appreciated by the IMF and World Bank authorities. Hence, these international institutions have always tried to press their views at every opportune moment. Whenever, India experienced a foreign exchange crisis, these international authorities tried their level best to dilute Indian industrial and trade policies. In 1966, for instance, when India had a severe problem of BOP deficit, the World Bank insisted on a degree of import liberalisation as a quid pro quo for its financial support for BOP adjustments. In the seventies and onwards, India had to change her economic policies quite often.

Most of such changes were towards the process of liberalisation, attributed to the IMF pressure. The imposition of emergency rule in June 1975 is also attributed to crush the political opposition against the IMF programme and strategy. In fact, Smt. Indira Gandhi was heavily pressurised to abandon her quasi-socialist policies and accept the market ideology of the West.

A very patient, calculated and long-term campaign was launched by the IMF and the World Bank to see it that, India opens up its door to Western private investment, western technology and western exports on a growing scale in due course of time. To quote Prof. S.L.N. Sinha in this context, “In the last 2-3 years, the IMF and the World Bank have laid a great deal of emphasis on measures of economic liberalisation, much less on controls and artificial props and much more free play of the market forces.

A lot of stress has also been laid on going very slow on the setting up of public sector enterprises, including financial intermediaries. This attitude reflects partly the ideological preference for free enterprise and a market-oriented economy but primarily dissatisfaction with the general performace of economies which were based on planning, regulation and public enterprises in a big way, in the light of experience of over three decades.

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These international authorities went on giving financial help to the country on such conditions. In 1981, India received 5 million on SDR loan under the pretext of development assistance. In 1991, when India was confronted by a severe foreign exchange and financial crisis, the IMF and World Bank came to her rescue not with sympathy but to fulfil their long-cherished objective.

India was forced to accept all conditions of the IMF for such assistance. She was asked to globalise her economy very rapidly with an open door policy of free trade. The country had to change the planning strategy and to redesign it on market-friendly approach. The New Economic Policy with all its dimensions towards liberalisation was chalked out under the IMF’s direction. In effect, trade and exchange liberalisation are imposed upon the Indian economy at a very faster rate which probably the country had never expected.

Under the zeal of globalisation of the Indian economy, less attention was paid to its age-old problems of poverty, inequality and chronic unemployment. Developing countries including India must realise that some policy changes in the right direction are inevitable for their own benefit.

There should be no scope left for the politicians to raise wrong issues or false ideas of prestige or outworn ideologies. Nonetheless, no country should consider itself to be weak enough to mortgage its sovereignty in right decision-making. When countries like India need to borrow from the international sources, they must be alert to discourage overt and covert attempts on the part of officials of the IMF or World Bank from doing propaganda for only those proposals and reforms which they think as the the only best for the country’s improvement, especially when they are unduly dogmatic, biased and unreasonable.

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India’s main problem uptil now has been the government’s incapacity to act rightly, firmly and effectively in time, on account of being more emotional to set ideologies and compromising attitude to safeguard the party’s interest more than the national interest.