India's economic policies

In 1947, the average annual income in India was $439, compared with $619 for China, $770 for South Korea, and $936 for Taiwan. By 1999, the numbers were $1,818; $3,259; $13,317; and $15,720. (numbers are in 1990 international Maddison dollars) In other words, the average income in India was not much different from South Korea in 1947, but South Korea became a developed country by 2000s. At the same time, India was left as one of the world's poorest countries.


Hindu rate of growth is a expression used to refer to the low annual growth rate of the economy of India, which stagnated around 3.5% from 1950s to 1980s, while per capita income averaged 1.3%. At the same time, Pakistan grew by 8%, Indonesia by 9%, Thailand by 9%, South Korea by 10% and in Taiwan by 12%. The term, was coined by Indian economist Raj Krishna.


Licence Raj refers to the elaborate licences, regulations and the accompanying red tape that were required to set up and run business in India between 1947 and 1990. The Licence Raj was a result of India's decision to have a planned economy, where all aspects of the economy are controlled by the state and licences were given to a select few. Corruption flourished under this system.


The labyrinthine bureaucracy often led to absurd restrictions - up to 80 agencies had to be satisfied before a firm could be granted a licence to produce and the state would decide what was produced, how much, at what price and what sources of capital were used.