B U DAY SH ANKARA
Some Recent Trends in the Indian Economy
IT is now almost exactly a year since the Board of Executive Directors of the IMF approved a five billion SDR loan to the Government of India under the Extended Fund Facility. This enabled India to draw 900 million SDR for the first year of the three-year agreement and the IMF subsequently approved, on July 9, 1982, the Government of India's request to draw another 1800 million SDR for the period July 1982 to June 1983. The approval of the loan by the IMF was contingent upon the acceptance, by the Government of India, of several explicit and binding performance clauses along with a whole range of policy prescriptions which were intended to bring about a "structural adjustment' of the economy. The focus of the debate on the IMF loan has been the argument that these conditionalities were unacceptable because of their impact on the broad economic policies followed in the country and that there exist alternative policy options that would not similarly restrict the manoeuvrability of the government. It would perhaps be interesting, at this juncture, to examine some recent trends in the Indian economy in order to see whether the changed economic policies have brought about an improvement in the short-term prospects for the country.
During the first year of the agreement the Government of India has successfully fulfilled both the explicit conditions specified in the loan agreement with the IMF as well as those implicit in its policy package. Total domestic credit and net bank credit to the government during 1981-82 were both contained within the ceilings specified by the IMF. The dictates of a disciplined monetary-fiscal policy were met by the imposition of a credit squeeze, on the one hand, and a tight expenditure policy with an effective reduction in food subsidies, on the other. The price reforms advocated by the IMF have taken the form of increased postal and railway charges and higher administered prices of a whole range of commodities, including coal, petroleum products, electricity tariffs and, most recently, steel. Imports have been liberalised and technology imports have virtually been freed of the scrutiny to which they had till now been subjected. In the sphere
^Research Student in Economics, Jawaharlal Nehru University, New Delhi.