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The system was not sustainable in the long term because it encouraged inefficiency in the industry performance. For instance, the average GNP per capita at that period of time was as low as $2301. Moreover, India’s growth performance plan has been written in a five year scope in which the actual growth from the periods of 1956-1961, 1961-1966, and 1969-1974 did not surpass the target (see Exhibit 1). The “Hindu rate of growth” around 3.5% prevailed in the period of 1950-1980 and then with oriented market reforms the growth rate change to approximately 6-8%2.
Why did Rao adopt the post crisis, “Washington Consensus” strategy? How is it working?
The Prime Minister Narasimha Rao, elected in 1991, had to ask for urgent help to the International Monetary Fund (IMF) as a result of a balance of payment crisis due to high interest rates, inflation driven by the fall of its principal trading partner: the Soviet Union...
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