c Politcally the devaluaton was a disaster It was blamed for infaton and

C politcally the devaluaton was a disaster it was

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c. Politcally the devaluaton was a disaster . It was blamed for infaton and recession though these had mainly other causes such as the droughts and a fscal squeeze that was imposed by the government. 6. As a result, Mrs Gandhi backtracked on liberalizaton , and was put of liberal economic policies for many years. She also needed a new base of support to free herself from the Congress old guard, so she turned in a populist—socialist directon . a. Bhagwat and Panagaria, tell us that beginning with the dramatc decision to natonalize 14 largest banks in 1969 , she went on to natonalize general insurance, oil companies and coal mines in the following 4 years. b. Alongside, she went afer the large private frms, domestc and foreign, with the stated objectve of combatng the concentraton of wealth and economic power. 7. Amongst the decisions she took were - a. Forced diluton of foreign equity in virtually all frms to 40% or less (FERA) b. Confnement of investments by large domestc and foreign frms to 19 narrowly defned highly capital intensive industries c. Reservaton of a large number of labour intensive products for exclusive producton by small scale enterprises d. Strict limits on the size of urban land holdings, and prohibitve restrictons on the layof of workers in large frms e. To further enhance government control, she extended government monopoly over the imports and exports of several new products. f. She also atempted a government takeover of wholesale trade in food grains but had to retreat mid way once it became clear that this was beyond the government’s capacity. 8. Her turn to socialism paid of electorally and, together with the resounding military victory over Pakistan in 1971, handed her wing of the Congress party, Congress(l), a landslide victory in the natonal electon held that year. Encouraged by the electon win, she moved even more frmly in the directon of controls and state ownership . 9. There followed severe challenges in 1972—74 : a. two droughts, b. a quadrupling of the oil price, and c. raging infaton. Downloaded by Vicky Gupta ([email protected]) lOMoARcPSD|3929542
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10. The government responded with a monetary and fscal crackdown but this led to widespread discontent . 11. In the ferment that followed, Mrs Gandhi was challenged in the courts for someminor electon ofences. In response, claiming that democracy and natonal unitywere threatened, she imposed an Emergency in June 1975. Individual rights weresuspended and the country acquired some of the characteristcs of a police state. a.In January 1977, Mrs Gandhi, seeking democratc legitmacy, called anelecton, and was comprehensively defeated. b.A JanataParty coaliton government took over but it was plagued byfactonalism, and by 1979, virtually immobilized. c.In 1979, there was a severe drought, the worst since Independence, and adoubling of world oil prices. As a result, infaton rose sharply. The Janatacoaliton split up; and in the electon that followed, the Congress(l), led byMrs Gandhi, returned with a sweeping victory.
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