Accumulating Changes in the Nature of Controls in the Indian Economy
OVER the last few years several fairly systematic tendencies in the area of economic policy have become discernible in our economy. These tendencies, incipient during the days of emergency in the middle of the last decade and somewhat less detectable during the Janata regime, have become clearer since, and seem to have picked up momentum since 1983-84. In official pronouncements there is anadmissson of a concerted change from physical to fiscal controls. The terms of appointment of the M Narasimham Committee mentions this clearly and the Central Advisory Council on Trade, in January 1984, made a strong pica for controlling exports and imports through fiscal levies instead of physical restrictions. More recently the official pronouncements of the government, both in parliament and outside, have repeatedly rcfeircd to the government's intentions of replacing physical controls through a variety of fiscal levies.
A close examination of the measures already taken and those being contemplated, however, reveals at least three distinct patterns of change in the nature of controls, and many of the important policy changes cannot be described as a changeover from a physical to a fiscal form of control.
The major areas of physical control in our economy have been the following: (i) licensing of the establishment of new large industries, (ii) licensing of capacity and its subsequent expansion in large establishments; (iii) control of capital issues; (iv) control of import, export and foreign exchange; (v) control of bank credit through fixing of target percentages and through the Credit Authorisation Scheme (CASj.
Physical control in the area of agricultural marketing through ihc takeover of wholesale trade by the government and procurement through physical levies, which looked like a possibility in the early 1970's, never got going and is accordingly kept out of our discussion.
Looking through the diverse range of policy changes, three broad types, as we have already suggested, can be indentified. The first group
^Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi.