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Industrial licensing required private firms to obtain government permission to start, expand, or change production, turning capacity decisions into political favours rather than market responses. Because approval was scarce and discretionary, firms invested their energy in lobbying Delhi rather than serving customers, and incumbents with connections used licences to block competitors.
Das argues that the 'Hindu rate of growth' of roughly 3.5% a year was not rooted in culture, religion, or fatalism but in specific policy decisions: import substitution, public-sector dominance of heavy industry, and controls on private enterprise. The proof is that the same people grew rapidly once those controls were lifted after 1991.
As an executive at Richardson Hindustan, Das faced government-set production limits and price controls that barred the firm from meeting proven consumer demand for its products. The episode shows how a regulatory system meant to curb monopoly profits instead produced shortages, black markets, and wasted managerial talent spent on compliance.
India's 1991 liberalisation happened because a balance-of-payments crisis, with foreign reserves down to weeks of imports, forced the government's hand, not because the political class had been persuaded of the market's merits. Because reform came 'by stealth' without a public argument being won, it remained fragile and incremental, and politicians rarely defended it openly.
Das points out that India's most successful industries, such as software and IT services, flourished in sectors the government neither understood nor regulated, and that communication links rather than roads carried their output. Looking at where growth happens tells you where the state's reach is weakest, suggesting that state neglect can be more enabling than state patronage.
Das contends that a rising middle class, created by private-sector jobs and consumer markets, is the most durable engine of both growth and democratic stability, because its members hold aspirations tied to merit and markets rather than to state patronage. Reforms that expand this class build their own political constituency and make reversal harder over time.