India, an industrializing economy in transition

This report analyzes the industrial and trade policies that would help assure a smooth transition from the highly protected industrial environment of the past, in which direct controls were a key means of allocating resources, to a more open environment in which competitive forces have a much greater role in shaping investment, output and pricing decisions. The report examines the past framework of domestic regulatory policies and incentives for industrial development, the impact of these policies on industrial structure and performance, the recent changes in industrial policies, and extensions of these measures that would accelerate the transition. The report goes on to examine ways in which trade policies have protected domestic industry, the effects of this protection on manufacturing performance, and the measures which could be taken over time to restore a greater degree of competition -- both with imports and in export markets. The report concludes that reforms of domestic and external regulatory policies would need to be made simultaneously over the medium term to effect a successful transition to a more competitive, efficient and faster growing industrial sector.