Corporate Governance in India: Understanding the History and Peeking into the Future

Abstract

(This article is Part II of the essay. Part I dealt with corporate governance practices in India from the colonial period until the command capitalism – 1950 to 1990 – period; it was published in the previous issue of Artha. Part III will be published in the next issue. With Economic liberalisation in 1991 India ushered into the market economy from a command economy. Indian economy got integrated with the world economy. It opened up new opportunities and transformed the sellers’ market to buyers’ market with easy availability of foreign consumer products. The government dismantled the license raj, opened up most sectors (including the infrastructure sector) for the private sector enterprises, and liberalized foreign investment in Indian companies through foreign direct investment (FDI) and foreign portfolio investment. All those policy changes opened up new avenues for Indian business and a vast Indian market for foreign multinationals. Although the government adopted the policy of privatisation of or disinvestment in public sector enterprises (PSE), existing PSEs continue to occupy dominating position and securities some of the large well-run PSEs have been listed in stock exchanges.