1991: The Industrial Policy did away with licensing for all but 18 industries, allowed foreign investment up to 51 per cent in high-priority industries, and reduced the number of sectors reserved for public sector from 12 to eight.

1991: Two reform packages allowed tradable import benefits against exports, pruned the canalised-imports list, and scrapped actual-user norms on several categories

1991: The MRTP Act was amended to let companies expand without government permission.

1991: The Automobile Policy opened up the auto sector to foreign manufacturers.

1991: The new power policy, 1991, allowed private participation in power generation.

1992: The disinvestment process was kicked off with the sale of 20 million shares of IPCL.

1992: The SEBI Act was amended to make SEBI a statutory body; and new-issue pricing was made market-determined.

1992: Cellular services were opened up to private players.

1994: The National Highways Authority of India Act was amended to allow toll-collection and private-sector participation in the road sector.

2000: The Insurance Regulation and Development Act was passed, opening up the industry to the private sector.

India And World Trade

The Second Five-Year Plan's emphasis on industrialisation necessitated imports of capital equipment. India didn't have the exports to balance this, and its trade policy became isolationist (big on import substitution). Its share in world trade declined from 2 per cent in the 1950s to 0.6 per cent in the 1990s. The first real signs of change came in 1985 with V.P. Singh's efforts at rationalising import tariffs. This was the time the Uruguay Round of negotiations was launched. The round was a bargaining disaster and lies at the root of the uneasy relationship between India and the WTO. Only recently has India learnt that the WTO can be used to its advantage. The process of full-scale integration with the world economy began in 1991. The share of external trade in GDP has increased to 21 per cent from around 10 per cent a decade back.

-T.R. Vivek

Crown Jewels Or Bleeding Ulcers?

A typical asset- heavy PSu

The seeds of the mammoth public sector were sown way back in 1951, when the first Five-Year Plan said: ''the State has a special responsibility for developing key industries like iron and steel, heavy chemicals, manufacturing of electrical equipment and the like.'' The Industrial Policy Resolution, 1956-and later the Second Five-Year Plan-reinforced this point, saying that ''the State will progressively assume predominance and direct responsibility for setting up new industrial undertakings and for developing transport facilities''. The two main objectives of the public sector-which Jawaharlal Nehru envisaged as occupying the commanding heights of the economy-were to help in rapid economic and industrial growth and create the necessary infrastructure, and to earn return on investment and generate resources for development. There were sundry other objectives as well, including redistribution of income and wealth, employment generation and balanced regional development.

However, the public sector seems to have succeeded only in employment generation (the wages: net sales ratio in manufacturing sector PSUs hovered around 10 per cent through the 1990s against an average of 8.1 per cent in the private sector). The infrastructure for economic development is still inadequate and, far from generating resources for development, the 236 public sector undertakings have only drained the nation's resources. Between 1968-69 and 1999-2000, PSUs never earned post-tax profits that exceeded 5.5 per cent of the capital employed. And the government is required to keep investing more and more money into them. Between 1990 and 1999, an extra Rs 61,211 crore was pumped into the public sector. No wonder, disinvestment minister Arun Shourie often asks whether the PSUs are crown jewels or bleeding ulcers.

-Seetha

BUDGETS THAT MATTERED

It's hard to think of a time when Union budgets did not generate the kind of excitement they do now. But as long as the five-year plans set the economy's direction, budgets were mere accounting exercises.

Manmohan Singh, 1991

P. Chidam- baram, 1996

Yashwant Sinha, 1998

The first milestone budget was T.T. Krishnamachari's Budget:1957. Responsible for finding the money to finance the second Plan, TTK. raised taxes and even introduced new ones. That set the tone for a taxation system that continued till 1985.

Indira Gandhi's one and only budget-Budget:1970-will be remembered for laying the foundations of the socialist policies. It was finally left to Rajiv Gandhi to undo the harm that her policies did. His finance minister, V.P. Singh, was the first to talk about the need for structural changes in the economy in Budget:1985. He proposed some amount of industrial delicencing and reduced the maximum marginal rate of personal income tax from 61.8 per cent to 50 per cent.

The paradigm shift in India's economic management came with Manmohan Singh's first budget in 1991-92. Direct and indirect taxes were cut, export and fertiliser subsidies reduced and social sector expenditure pruned. Significantly, Singh spoke of the need for Indian industry to get ready for global competition.

The second dream budget in 1997-98 was authored by P. Chidambaram. Kicking off tax reforms, he brought down the peak income tax rate down to 30 per cent, the peak rate of customs, to 40 per cent.

Yashwant Sinha's Budget: 2001 was similar to Budget: 1991 in the canvas it tried to cover. Sinha carried forward the task of tax rationalisation, attempted to widen the tax net, cut subsidies and promised a slew of second generation reforms. Unfortunately, he hasn't been able to deliver on these promises.

-Seetha

Plans that Mattered

From directing the course of the Indian economy to merely deciding on allocations for ministries and state governments, it's been a quite a decline for the Planning Commission. When it was set up in 1951 (prompting the then finance minister John Mathai to resign), the Planning Commission was charged with the task of formulating Soviet Union-style five-year plans for the ''most effective and balanced utilitisation of the country's resources'' and determine how these were to be implemented. But only two qualify as watershed plans whose effects on the economy are being felt even today.

The Second Plan (1956-61)-also known as the Mahalanobis Plan after its author, the eminent economist P.C. Mahalanobis-really set the tone for the model of development India was to follow. It spoke of ''rapid industrialisation, with particular emphasis on the development of basic and heavy industries'' as being the core of development. Saying absorption of labour was ''an important objective in itself'', it also emphasised the use of labour-intensive modes of production. That really laid the foundations of an economy that, economist D.K. Srivastava says, ''nurtured inefficiency in the system.''

The Fifth Plan (1974-79) came against the backdrop of runaway inflation (which soared 31.8 per cent between 1973 and September 1974), a balance of payments problem because of the steep rise in global oil prices and the severe drought conditions in 1972-73. Poverty alleviation and self-reliance became its avowed objectives, to achieve which it decided to concentrate on agriculture and energy and on employment generation. From this sprung various employment generation and anti-poverty programmes, which now account for nearly 10 per cent of total central government expenditure.

The beginning of the end of the Plan as an instrument of economic management came in 1985 when V.P. Singh's budget marked the first break with the country's socialist past.

-Seetha

INFRA-INITIATIVES

POWER: The GoI invites private participation in generation in 1991. In 1998, it announces the Mega Power Policy, aimed at promoting select projects; creates Power Trading Corporation, and opens up transmission. In 1998, it also creates the central electricity regulatory commission. The GoI has now tabled the Electricity Bill, 2001, in Parliament delicensing power generation, allowing access in transmission, and trading.

ROADS: In 1994, the GoI invites the private sector into the roads sector and amends the National Highways Authority of India Act to provide for the collection of tolls (hitherto not allowed). Status today: model concession agreements for BOT projects have been finalised, a Re 1 cess on diesel and petrol has been levied, proceeds of which will go straight into a dedicated Central Road Fund.

PORTS: The private sector is allowed into the ports sector on a build-operate-transfer basis in 1996, and in a significant move, P&O leases two berths at the Jawaharlal Nehru Port Trust. In 2000, the government also clears amendments to the Indian Port Trust Act to allow corporatisation of the 12 major ports, paving the way for the improvement and modernisation of the country's shipping infrastructure.

TELECOM: In 1992, the government allows private participation in e-mail, voice mail, and cellular services. In 1994, the New Telecom Policy allows private participation in basic services. The New Telecom Policy, 1999, allows cellular operators move to a revenue-sharing regime. In 2000, the government announces unrestricted entry into basic and domestic long distance telephony.

India & foreign investment

Before 1991, foreign direct investment (FDI) in companies was allowed only up to 40 per cent, with the finance ministry giving approval on a case-to-case basis. Portfolio investments were a strict no-no. The Industrial Policy, 1991, permitted FDI up to 51 per cent in high-priority industries. But FDI applications had to go through a three-tier approval process-the Foreign Investment Promotion Board (FIPB) set up in 1993, and located in the Prime Minister's Office, an empowered committee headed by the finance minister and the cabinet committee on economic affairs (CCEA). In order to speed up the approval process, the FIPB was shifted to the industry ministry in 1996, the empowered committee was scrapped and only proposals for projects above Rs 600 crore were required to get the CCEA's approval. The FDI regime has been progressively liberalised since then, with investment allowed in all but five sectors, FIPB permission required only in 16 sectors and investment ceilings being raised little by little. Clearances under FIPB are also faster, from between three and four months two years back to around 30 days now. However, red tape and infrastructure bottlenecks have resulted in the FDI realisation rate (inflows as against approvals) hovering around a mere 40 per cent.

Portfolio investments were first allowed in September 1992. During 2001, net inflows tot up close to $2.8 billion, could well end up coming close to twice the figure in the boom years of 1999 and 2000, and might just break the 1996 record of $3.05 billion.

-Seetha