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By Rajesh Kumar
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Additional info for Doing Business in India
While the economic imperatives for reforming the economy were clear, it was the collapse of the Soviet Union, and the emergence of China as a major actor on the world stage, that impelled the Indian government to initiate bold and decisive action. The reform process of 1991, was spearheaded by Dr. Manmohan Singh, the then Finance Minister and the current Prime Minister. He initiated a series of first generation reforms, that is, reforms covering industrial policy, trade and exchange rate policy, and financial markets.
In the changed scenario, India is becoming an active participant in the global economy, while at the same time drawing increasing interest among foreign investors as well as national governments in Europe, North America, and Asia. A number of factors indicate the growing integration of India in the world economy and is reflected by a number of different indicators. To begin with, there has been a significant increase in the flow of foreign direct investment to India. 2 During the period 1991–2002 India is estimated to have received a total amount of US$24 billion in foreign direct investment.
Although pragmatically expedient, this policy continued to maintain the cultural gap between the parties, and generated its own counterreaction in the form of a nationalist reaction. This manifested itself in the formation of the Indian National Congress, a political party that was founded in 1885, and was the precursor of the post-independence Congress party. The impact of colonialism on the Indian mind-set should not be underestimated. It has shaped India’s attitude toward foreign investment, played a role in stressing the importance of self-reliance and autonomy in the country’s developmental strategy, and more broadly, it has traditionally made the country more cautious when engaging with the outside world.