A RAMANA* ADSTYA BHATTACHAWEA^ Theoretical Presuppositions/or Liberalisation A Critique THIS paper attempts a critique of the theoretical and ideological underpinnings of the far reaching liberalisation which is envisaged under the so-called "New Economic Policy^ of the government. The critique is posed at two levels of abstraction. This is because we believe^thatany theoretical basis for liberalisation could be composed of two distinctive elements. Firstly, at a high level of abstraction, it could be argued that the free operation of the market force would lead to an efficient allocation of resources, if one takes recourse to theoretical welfare economics or the neo-classical version of trade theory. However, it is also possible to justify a far reaching liberalisation from a Schumpetarian point of view, by arguing that an unfettered market mechanism is inherendy dynamic. It is argued m this paper, that any such theoretical basis for liberalisation can be questioned from within the neo-classical framework itself. In fact, it is also possible to argue that Keynesian economics could have destructive implications for any theoretical structure justifying liberalisation. Secondly, at a lower level of abstraction, an implicit assumption made in formulating the current economic policy, is a belief that the crisis in the Indian economy is related to inefficiencies arising from a set of unimaginative controls. The implication being that a way out of the crisis is through the removal of controls on domestic production and trade. However, it is our contention that the crisis in Indian industry is a structural one, which implies that the way out of the impasse has to be through structural change. In this context, we present a schematic model for explaining crisis in Indian industry. The Current Economic Policy and Its Theoretical Basis The essence of this policy is a tendency towards an all-round liberalisation of the economy through removing existing controls on domestic production and foreign trade. This, it should be noted, is something which the IMF-Worid Bank circles have been trying to foist on the Indian economy for some time now. However, it would be fallacious to conclude from this that the recent policy package has been forced upon an unwilling government. St. Stephen's College, Delhi University, Delhi * St. Stephen*! College, Delhi University, Delhi