Developing countries with inward oriented trade regimes are characterised by serious policy imposed distortions in the product and factor markets. Price and investment controls are widespread and tend to perpetuate what they are designed to avoid. Factor market distortions interfere with resource allocation according to comparative advantage. In general, government intervention has adverse effects on economic growth, employment and income distributions. The growth experience of NICs has an important lesson for India: Opening the economy brings limited results if controls are maintained and if public enterprises dominate the economy.
