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Pathways Through Financial Crisis: India

Pathways Through Financial Crisis: India Global Governance 12 (2006), 413– 429 Pathways Through Financial Crisis: India Arunabha Ghosh India survived near-crisis situations twice in the 1990s. How did internal and external constraints shape that country’s ability to respond to the crises? This article argues that India’s success can be attributed to four sets of deci- sions taken during the period 1991–1997: devaluation, involvement of the IMF, partial liberalization of the domestic financial sector, and gradual opening up of the external sector. The article analyzes the options, politi- cal opposition, and eventual outcomes for each set of decisions. India’s ownership of its reform program helped set the pace of reform, while close interaction between technocrats and the IMF added credibility. But the balance between entrenched traditional interest groups and the demands KEYWORDS: India, finan- of new interests determined the scope of reform. cial crisis, economic reform, IMF, interest groups. ndia survived near-crisis situations twice in the 1990s, and in 1991 was nearly bankrupt. In response, a reform process began. Engagement with the Inter- Inational Monetary Fund (IMF) had its risks: if India could not deliver on its promises of economic reform, investors would exit again; if the government pushed too hard on reforms, domestic opposition http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Global Governance: A Review of Multilateralism and International Organizations Brill

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Publisher
Brill
Copyright
Copyright © Koninklijke Brill NV, Leiden, The Netherlands
ISSN
1075-2846
eISSN
1942-6720
DOI
10.1163/19426720-01204006
Publisher site
See Article on Publisher Site

Abstract

Global Governance 12 (2006), 413– 429 Pathways Through Financial Crisis: India Arunabha Ghosh India survived near-crisis situations twice in the 1990s. How did internal and external constraints shape that country’s ability to respond to the crises? This article argues that India’s success can be attributed to four sets of deci- sions taken during the period 1991–1997: devaluation, involvement of the IMF, partial liberalization of the domestic financial sector, and gradual opening up of the external sector. The article analyzes the options, politi- cal opposition, and eventual outcomes for each set of decisions. India’s ownership of its reform program helped set the pace of reform, while close interaction between technocrats and the IMF added credibility. But the balance between entrenched traditional interest groups and the demands KEYWORDS: India, finan- of new interests determined the scope of reform. cial crisis, economic reform, IMF, interest groups. ndia survived near-crisis situations twice in the 1990s, and in 1991 was nearly bankrupt. In response, a reform process began. Engagement with the Inter- Inational Monetary Fund (IMF) had its risks: if India could not deliver on its promises of economic reform, investors would exit again; if the government pushed too hard on reforms, domestic opposition

Journal

Global Governance: A Review of Multilateralism and International OrganizationsBrill

Published: Aug 3, 2006

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