Economic Consequences of Rajiv Gandhi

Economic Consequences of Rajiv Gandhi Pulapre Balakrishnan In terms of its macro balances, the Indian economy over the past five years has behaved exactly as would be expected of any open economy subjected to a similar stimulus. Thus an expanding budget deficit has predictably fed through into a current account deficit. However, what is more interesting is the nature of the growth process that has accompanied the economic policy instituted by the previous government THE government led by Rajiv Gandhi instituted substantial changes to certain aspects qf the economic policy framework. Notable were liberalisation of the foreign trade regime, which involved the dismantling of controls with respect to imports on private account, and the raising of limits for industrial investment not requiring a licence. It would not be inappropriate to describe this as a package aimed at the supply-side of the (non-agricultural) economy. As a complement, there was the reduction of the income-tax rate in the Budget of 1985, propping up the demand side of the strategy, as it were.1 With agricultural incomes remaining untaxed, the changes essentially concerned the non-agricultural sector.