In a series of newspaper articles...right-of-center congressman Vasant Sathe had pointed out that the public-sector steel industry in India employed ten times as many people to produce half as much steel as the South Koreans (according to 1986 figures not yet available to Sathe, the facts were even worse: the Steel Authority of India paid 247,000 people to produce some 6 million tons of finished steel, whereas 10,000 South Korean workers employed by the Pohan Steel Company produced 14 million tons that same year). The home-grown product that emerged from this labor-intensive process was uneconomically expensive: India's finished steel cost $650 a ton, so it found few buyers abroad, since world prices were between $500 and $550 a ton. Ironically, India's raw material- iron ore- was cheap enough to be imported by foreign steel manufacturers, who used Indian iron ore to manufacture their own finished steel cheaper than India could. Sathe pointed out that if India had been able to make steel efficiently to world standards and at the world price, it would be earning four thousand rupees a ton in profit from exporting finished steel, whereas it was now exporting iron ore and making just seventy-five rupees a ton. This was, ironically, what had happened under colonialism - India being used as a source of raw material by countries that did their own manufacturing abroad. Now the same thing was being done in a spirit of anticolonialism: we were doing it to ourselves.
...The rooting of economic policy in political atavism made change difficult; wary of opening the economy to foreign business for fear of repeating the experience of the East India Company, whose merchants had become rulers, India relied on economic self-sufficiency as the only possible guarantee of political independence. The result was extreme protectionism, high tariff barriers (import duties of 350 percent were not uncommon, and the top rate as recently as 1991 was 300 percent), severe restrictions on the entry of foreign goods, capital, and technology, and great pride in the manufacture within India of goods that were obsolete, inefficient, and shoddy but recognizably Indian (like the clunky Ambassador automobile, a revamped 1948 Moris Oxford produced by a Birla quasi-monopoly, which had a steering mechanism with the subtlety of an oxcart, guzzled gas like a sheik, and shook like a guzzler, and yet enjoyed waiting lists of several years at all the dealers).
(Excerpt from "From Midnight to the Millenium")