Growth of percapita GDP between 1980 and 2000 doubled compared with the period 1960-80 -- an increase that seems to have been the result of a survey in productivity.
Why? ( two views )
(1) Exceptional nature of the fiscal policy stance in 1980s which temporarily ignited growth but received its deserved come-uppance in the crisis of 1991.
(2) Role of liberalisation (it includes easing access to foreign technology, foreign capital goods, and foreign exchange, lowering tax rates, easing licensing etc.,).
The congress' traditionally hostile attitude to the private sector was the constraint on economic growth, the slight lifting of which around 1980 stimulated the animal spirits of the business and industrial class.
Because of foreign competition the reforms in the 1980s were not pro-competition but pro-business i.e., they served to boost the profits of the existing businesses with out facilitating the entry of new participants.
for ex:- Allowing a single foreign firm, suzuki to enter the domestic car market under exisiting conditions of limited external liberalization is very different from opening the domestic car market to all foreign producers, which is the normal liberalization strategy , and the approach adopted in 1990s.
Source : The Hindu
Source Writers : Dani Rodrik & Arvind Subramanian