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11 Chapter 5

11 Chapter 5

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Published by Shivam Agrawal

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Published by: Shivam Agrawal on Aug 27, 2012
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CHAPTER
FIVE
FOREIGN ECONOMIC POLICY
M
THE
ERA
OFGLOBALISATION
AND
COALITIONPOLITICS: FEDERAL INPUTS
he
contanporaiy world
system
is undergoing a fmncndous transfomtian
and
one of the issues
being
seriously debated is the impact of economicllbcralisation
on
the interface beween federalism and fomign policy. The
prcssurcs
for
faded
restructuring have
grown
subswtially. Fiscal federalism,
In
particular,
hu
grown
into
an
area of abundant interest. The concern
for
fiscal dccentralisation
has
been prompted by the stress on market arising
from
cconornic liberalisation.
As
a
result. there has been a pat cnkt on the waysIn which the
wo
levels of the Govcmmcnt-- linion and the Slates.. interactamong them~lvesnd with other national and internstima1 level acton.
A
federal scning is characterixd by a close rcl~tlonshipbetween
[he
ldcological stance of a regime and the concept of thc "levels of Govcmrncnt
"
The more a regime
is
positively oriented to\cards wcllarisrn
and
regulatedgrowth, the stronger is the possibility for the linion level la grow powerful
MJ
hence the chances for the mergence of Mime
sun
of'
a "hcgmonicfederalism."
On
the other hand, thc morc
a
rcgirnc
IS
lihml. and related to he~nsrnunntal alue
of
the market economy. the more there
1%
the pcnsibllin ofintn.gwemmmral reladons being bared
on
dccenmli~d etworlring mrha
lhan
himhiul
control.
'
Ad
ay,
"New
Economic Policy
ud
ndun
Fcdcnl~rm,"
konornu
ond
Polrr~cd
WrrUy
(Mlmrhi),
vd.27,
m.4,25
hurry
1992,
p
147
167
 
A
signifi~twirble
in
this
eontext
it
dK
M
f the crisis
ppclling
the
need
for
a mjaeconomic policy shift.
Wha~va
momic
msh
arises
8s
a
result of
marka
failure,
as
was
in
the
use
of 1929 depmsion,
thcn
arises
a
danurd
either
hm
he public
or
from
the ding clrua or
hm
hxh
faa
pod
ational Government to regulate the chaotic market forcn.thereby necessitating a
mppmisal
of the pn-existing priaritics, raulting
in
rnew policy
priority
of growlh-cum-welfare statism,
as
was
embodied
in
the
Arncricdn
New
Dd.
his
has
he effect of strengthening immcdia~ely hemtlonal level Govanmcnt and later generating a strong ccnhliring tendency
In
the working stnictun of inter-govcmrnental relations.
If
the fallwe of thctiovment
nther
rhm
that
of the market forces, gcneralcs
r
cris~s, n thcother
hand
there my
be
a demand for dercguiat~on nd rrstoralron
of
marketautonomy. Concumntly, there may also
be
a hostile public nrctlon agatnstcenuali.5cd State control.
Towards
A
Federal Market Economy
In India, the mounting economic crisis in 1990 had
ttu
roob
in Govcmrncn~alfallurc to regulate the national economic forcn. Hcg~nn~ng~th ndcpendencc,Ihc first Indian Prime Minister,
R.
awaharlal Nchru envisioned
I
modem
Indian economy that entailed ccnmliscd planning
To
achieve indwuial hc
mdc
be Planning Commission. with thc Prime Minisla
u
ts hd,
r
ky
uutitutia.
While this approach to dcvclopmcnt helped lndir in building
i
it
on
led
to
an
economy of -icy
and
caruption.
For,
the
161
 
am@
o
8
~~~c of society
by
giving
8
-dingpitian
to
he
SW
in
ngulating
the
economy
reduced
incentives
for
cost
duction
mdCPJdiV
imptomcnt and instcad prompted
cnuep-un
to
past
the
prlms
of politician3 and b~umtso get licence quo~or
prodUc0.
In
addition
lo 'the Ii~Cncequota-permit aj,' the crisis owed much tobjiv
Gandhi's
massive
milimy modernisation programme of the
1980s.
For
IWO
wNeCUtive
years,
India spat more upon weapon
purchase
ha
pcrhrp
any
other
couw
in the world. Wilh the Govenvncnt
of
India doing awayw~th he British raj-inherited fiscal consmatism hat continued till then,India's debt burden
reached
ominous proportions. This wara result ofannual
fiscal
deficits and patly a mull
of
succumb~ng o the Icmptations
hy
comrnmial
banks.'
At the
Stale
lcvel, deficits owed much lo he populisl pollcics
and
programme
and their faulty implcmcn~onmulling in badly
Urged
subsidies, administrative pricing and labour redundancy fhc ringlc lugestdrain on the Sutc exchequers
had
been
the State eiecvic~fy
bauds,
which~ncurrcd
ossa
around
10
per
ccnt
of
the State plans in
IW?
[hat
mx
to
30
pn
cent in
1999,
In
1994.97,
the commerc~el asm
of
the Stale clcctriciIy
boor6
'
Lloyd
I
Rudolph,
"The
Fdtming
Nowuue:
bjiv
G&
rt
Horn
md
Abmd,"
m
Maddl
M.hm
rd
Philip
K.Oldcnburp,
&.
Indm
19rkPng
1989
fiew
Yal;:
WeavicvRy
Barlda,TheAbiSocicly.
1919).

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