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There was support for economic liberalization from other quarters from new businessmen involved in what were essentially “parallel market” transactions; a section of the top bureaucracy and perhaps more significantly the large and politically powerful urban middle classes, along with more prosperous rural farming groups, whose real incomes increased in the consumption –led boom of the 1980s. The letter groups actively began to desire access to international goods and gave potency to the demands for trade liberalization. And of course the technological and media revolution, especially the growing importance of satellite television imparted a significant impetus to the international demonstration effect, which further fuelled liberalizing and consumerist demands. This process was given further stimulus by the accelerated globalization of a section of Indian society. Apart from the media, one major instrument of this was the postwar Indian Diaspora. The “NRI phenomenon” by means of which of qualitatively significant number of people from Indian elites and middle classes actually become resident abroad, contributed in no small measure to consumerist demands for opening up the economy. The important of non resident Indians was not only because they were viewed as potentially important sources of capital inflow but also because of their close links with dominant groups within the domestically resident society.

Despite the imbalanced and unequal economic growth pattern of these years, there was a definite improvement in material conditions for a substantial section of the upper and middle classes. Since these groups had a political voice that was far greater than their share of population they were able to influence economic strategy to their own material advantage. So the local elites and middle classes were not only complicit in the process of integration with the global economy, but active proponents of the process. This becomes clear even from data on the distribution of consumption, expenditure by different fractal groups. As chart 5 suggests6, in the 1990s and until 2002, the urban top 20 percent of the population experienced increases in per capita consumption which were the most rapid in post independence history. The other groups that also appear to have increased per capita consumption significantly were the next 40 percent of the urban population and the top 20 percent of the rural population. By contrast the per capita consumption of the bottom 40per cent of the rural population actually declined over this same period. Such pattern not only gives some idea of the spread of the “gainers” of the economic growth process, but also indicates the political constituency for the liberalizing reforms of the 1990s. The economic context of India in 2004 was one in which the need to rethink, modify and revise at least some of the economic strategy of the recent past was becoming increasingly obvious. In particular, the supposed emphasis on fiscal discipline, which had not been reflected so much in actual declines in the fiscal deficit to GDP ratios, but in compression of important productive public expenditure, with high linkage and multiplier effects required reversal. The neglect of important policy issues with respect to agriculture could not continue. In addition to greater emphasis on public expenditure with high direct and indirect effects on employment generation, addressing the issue of higher resource mobilization from the rich had become urgent. Further, it was necessary to counter some of the adverse effects of trade liberalization on employment, apart from more directly addressing the basic structural issues of asset and income inequality and the persistence of low productivity employment. Mentioned above, which remained so significant in the Indian economy?