THE INDIAN ECONOMY IN ADVERSITY AND DEBT 9 ever is not this acutencss as such, but the fact that it was unrelated to any specific developments in the sphere of production or trade, i.e., in the real spheres of the economy, or to any tangible international shocks, during the period in question. Looking at it differently, the recent crisis was qualitatively different from any thing which the economy had faced previously. It arose primarily, as we shall see below, because of the caprices of capital, both domestic and, more importantly, international. The fact that the economy has become so vulnerable to the caprices of international capital is a result of the so-called 'liberalisation measures, adopted with special vigour since the mid-1980s. A marked characteristic of the economic policy-regime erected in the 50s and continued thereafter, though admittedly with a gradual drift towards 'liberalisation', had been not only the hemming in, to an extent, of direct foreign investment, and the use of the State capitalist sector as a counterweight against foreign capital (again only upto a point until multinationals started penetrating this sector itself), but more importantly a reluctance to go in for loan capital in international commercial markets. It relied heavily on 'aid' but eschewed the temptation to go in for commercial borrowings. An important consequence was the insulation of the Indian economy from the caprices of international investers. The 'liberalisation' of the 1980s removed this insulation. If earlier we had episodes of crisis, even acute ones, arising from specific developments on the production or the trade front, in 1991 we had crisis arising from an altogether peculiar cause; namely that international investors 'lost their confidence in India'. It is in this fundamental sense that the recent crisis was unprecedented, and it is for this reason that we have to look carefully at how we came to such a pass and what are the options before us. The economic policy regime erected in the 1950s was not just a brainchild of Nehru, as is often made out both by its admirers as well as its critics. Its roots lay in the freedom struggle itself. The economy had been dominated by metropolitan capital and metropolitan commodities in the pre-independence period. Freedom meant freedom from this domination; and this could not be ensured without giving the State in independent India a major role in building up infrastructure, expanding and strengthening the productive base of the economy, setting up new financial institutions and regulating and coordinating economic activity. This was necessary for building capitalism itself, though some no doubt entertained the fond hope that all this would add up to a transition to socialism. State capitalism and State intervention in other words were essential instruments for the development of a relatively autonomous Indian capitalism, displacing metropolitan