Indian Industry and Industrial policy at the crossroads

Abstract

DURING the last few years we have heard and read quite a bit about how the past industrial and trade policies stifled Indian industry and the recent policy reforms would release the caged tiger. Sometimes the excess obsession with the restrictive nature of the previous policies appears to make many researchers blind to several other important aspects of the industrial structure and its evolution; in the process, they fail to identify the important gaps and shortcomings of the present policy reforms. One simple example is that one has heard several times how the industrial licensing had been a major source of entry barrier and long run market power which, in turn, made Indian oligopoly firms highly X-inefficient. But one rarely comes across a serious analysis of othfer important sources of entry barriers like capital market imperfections and high domestic market transaction costs, which persist even in the post-liberalisation period