India received more than $100 billion of foreign aid between 1950 and 1990. Foreign aid was the only source of foreign currency as India did not have much to export that world wanted. Aid India Club met annually in Paris to make commitments so India would know how much to expect. Foreign currency was tightly controlled hence FERA and FEMA and famous $8 men, of which I am one.

Foreign Aid was the worst possible thing that could have happened. It enabled bad economic behavior to last far longer than would have been possible. It was the economic crisis of 1991 that forced the hand. Now, India has a close to a $500 Billion in foreign currency reserve. India has an IT industry of almost $300 Billion dollars.

1991 liberalization only dismantled the extremes of the license/permit Raj. Vajpayee government got back to liberalization when finance sector, aviation sector, automobile sector and telecom sectors were liberalized. The results were spectacular.

There is a lot more liberalization yet to be done. For India to emerge as an economic powerhouse it needs to back to that agenda.

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