chapter  1
14 Pages

State–business relations and economic development in Africa and India: the analytical issues

ByKUNAL SEN

Introduction The nature of the relationship between the state and business lies at the heart of the big debates on economic development. The dominant view in African and Indian economic policy, during the immediate post-independence period, was that the state needed to play an overarching role in the economy. Therefore, while most African countries and India chose a mixed economy development path, where the private sector had a considerable presence, most African countries and India chose a development strategy where the state would shape the investment and productions decisions of the private sector, and the public sector would occupy the ‘commanding heights’ of the economy. Thus, in this view, the state would need to be the dominant player and the private sector would be subservient to the latter. This then changed during the onset of structural adjustment programmes when there was a withdrawal of the state from most core areas of economic activity, and the market took centre stage. However, in recent years, and especially in the aftermath of the global financial crisis, there has been a new questioning on whether markets by themselves can bring about economic prosperity, and whether there needs to be a return to the state as the primary player in economic development both in Africa and India, and globally (Rajan 2010; Stiglitz 2010).