The liberalization process in India was made to start in 1991 when the country had faced serious crises especially in its BOPs and Forex reserve. The then government of India tried to tackle the problem by opening the economy to the outer world and taking huge loans (tied) from the international financial institutions like the World Bank, IMF, etc. The world was then in an worldwide recession. The capitalist countries have been experiencing serious economic crises mainly due to lack of effective demand in their domestic markets. The old Keynesian prescription of fiscal policy, which saved the capitalist countries from recession in the 30s, has now failed to deliver the good because of the gravity of the problem. So they now require a new medicine which is nothing but to capture the potential and growing domestic markets in the developing countries. Although the financial crises in the developing countries like India could have been averted by alternative economic policies, unfortunately, they surrendered to the trap laid by the developed countries. They borrowed huge amounts from the World Bank and the IMF at the expense of opening their economies to the developed nations to make these happy dumping grounds of the excess supplies of goods of the latter. Every economic policy of India is now governed by the those international financial institutions which are governed by the representatives of the developed countries. As per the directions of the World Bank and the IMF it has to reduce the extent of subsidies given to the farmers and poor consumers of foodgrains, close the profit-making PSUs, retrench workers under the guise of VRSs, opening the key sectors like, insurance, telecommunications, etc. to the foreign investors and so on. We have to judge the successes and failures of the ‘swadeshi’ economic policy of the BJP government in this background.

The coalition government headed by the BJP, soon after resuming office, proved its presence felt by the successful blast of five nuclear bombs and launching of Agni II missile. Within a few days, its neighbour Pakistan retaliated with six-nuclear-bomb fusion. As a consequence, the bitterness between the countries in the political level has deteriorated. Does it imply a success of the BJP government in its foreign policy? The answer is simply ‘no’. It fell into the trap laid by the capitalist countries which always try to create and persevere tensions between two neighbouring countries and a pseudo atmosphere of possible third world war to find market outlets of the output of their armament industries. In the last general budget, the Finance Minister had allotted more than forty per cent of the planned outlay in defense expenditure. This is absolutely an unproductive expenditure, which not only had kept the fiscal deficit at a very high level but also kept resources away from allocating in the most essential heads like, education and health. Soon as the BJP government resumed office, the country had experienced an all time high rate of inflation continuing over several months. The CPI registered an increase at the rate of more than thirty per cent. The government took no real action to tackle the grave situation exacerbating the whole country but enacted laws to safeguard the interests of the speculative hoarders and blackmarketiers which added fuel to the inflationary pressure The poor working class had been the worst affected. The position has not been changed much in the recent months, so far as the rate of increase of CPI is concerned. Let’s now come to the case of foreign direct investment and the credit policies of the government. The annual general budget of 1999-2000 has been a share-market and MNCs benevolent budget. In the credit policy announced by the RBI soon after the budget , the Bank Rate and the repo rate have been slashed by 1 and 2 per cent, respectively. These have made equities more attractive relative to debt instruments. As a consequence, the BSE Sensex rose sharply to 3,640, registering a rise of nearly 13 per cent in just three trading sessions largely due to heavy buying of speculative shares by foreign institutional investors (FIIs). Foreign investment has registered a decline, and a lion’s share of it has gone to the secondary share market and FIIs are making huge speculative profits out of it. Adding to the economy’s dismay, Indian industries continued to be in the grip of a slowdown with industrial production growth plummeting to a paltry 3.8 per cent in the financial year 1998-99 from 6.6 per cent in the previous year. The government’s policy relating to the Multinational Corporations(MNCs) have made India a happy hunting ground for them to drain resources away from the host country. A recent analysis of the performances of 15 MNCs vis-à-vis 320 Indian companies (including MNCs) has revealed that while the aggregate net sales climbed 15 per cent and aggregate profit after tax was up by 34 percent in 1998 over the previous year for the first group, these figures were 5 per cent and – 1.5 per cent, respectively for the latter group in the same period. It is worthwhile to mention that sharp growth in profits of MNCs have not come so much from growth in volumes of sales but from improved realizations which have been possible by government’s amiable policies towards MNCs. The domestic manufacturing sector contracts in size and leaves its place to the MNCs. This dangerous process weakens the economic sovereignty of the country and leaves it precariously at the mercy of the foreign capital owners.