Market Liberalisation Success, Failures And Challenges

1207 Words Nov 11th, 2014 5 Pages
Evidence of Market Liberalisation Success, Failures and Challenges
The BRIC emerging economies are some of the most successful market liberalisers with India having particular prosperity in liberalising its inward capital flows and currency convertibility from 1991 to foreign investors. Post liberalisation India is regarded as one of the fastest growing economies with an annual growth rate of 6.86% compared to 4.07% pre liberalisation (World Bank, 2014). Economists such as Saikia (2012) regards this success down to India’s rise in investment. In the decade after reforms FDI inflows to India has grown by a staggering sixty fold increase to $6 billion (Kletzer, 2004) showing how the India economy has become a major destination for FDI and is reaping the economic benefits.
One of the policies causing this attraction is the ongoing gradual privatisation of varied sectors. This gradualism approach has promoted efficiency through competition away from monopolized state owned enterprises but also into global competition. The increased profitability of this process has created an environment for investors to thrive upon. Aside from India’s great success the issue of the continued dominant role of state-owned banks is an ongoing issue. India follows our theoretical argument of being inefficient due to government guarantees and consequently must fund recapitalisation in the light of declining market share and profitability. However recent private bank involvement in crises around the…
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