Before GST: Ten measures that changed India’s economy

1. Nationalisation
While there had been state takeover of private businesses in some sectors, the large scale nationalisation of banks in 1969, the insurance business in 1972 and of coal and oil in 1973 fundamentally transformed the economy.

2. FERA
Brought in in Indira’s heyday to conserve foreign exchange, then a scarce and precious resource, made dealing in even tiny sums of $50 illegal for individuals. It forced most foreign-owned firms, except in a few sectors, to dilute foreign equity to 40 per cent or less. The law famously led to the exit of

Coca Cola

from India in 1977.

3. Near 100% I-T rate
At the peak of Indira Gandhi’s ‘socialist’ phase in the early 1970s, the top income tax rate was 98.75 per cent. This meant that beyond that level of income you could only keep 1.25 for every 100 earned. Tax evasion, became the norm for the well-heeled.

4. Maruti
Set up in 1981, the company changed India’s automobile scene beyond recognition after the 1982 joint venture between the government of India and

Suzuki

led to the launch of the Maruti 800 in 1983. The car, till then an unaffordable dream for most of the middle class, became its new aspirational symbol.

5. Delicensing
Among reforms unleashed in July 1991, the decision to end “licence-permit raj” meant private Indian businesses no longer needed govt approval to build capacity to meet potential demand. The ‘animal spirits’ of Indian entrepreneurs were allowed to showcase their skills in the economic jungle.

6. Freeing up exchange rates
Strictly managed by govt till 1991, the Indian rupee’s exchange rate against foreign currencies was initially allowed limited exposure to market forces. But by 1993, the rupee was let free to be dictated by the currents of demand and supply.

7. Foreign investment easing
In sharp contrast to the FERA mindset, the post-1991 era government almost enticed foreign investment to India. The Foreign Investment Promotion Board was set up to attract FDI and portfolio investors allowed to enter Indian stock markets in 1992. Today, they’re a dominant presence.

8. Opening up
Liberalisation also saw Indian producers challenged by imports as the grip of government agencies on imports was loosened and customs duty rates were rapidly brought down from peak rates of 150 per cent to around 20 per cent in just over a decade.

9. Entering a global trade regime
WTO agreements from 1995 onwards totally changed the rules of engagement with the world in many ways. The coming in of new patent laws and the abolishing of quantitative restrictions on imports had arguably the biggest impact.

10. Privatisation
Three decades after the nationalisation wave, the wheel turned full circle. While some equity in state-owned firms had been sold starting 1991-92, 2000 saw the first case of a public-sector unit turning into a privately controlled firm with the ‘strategic sale’ of Modern Foods, followed next year by a similar sale of Bharat Aluminium.












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