The previous chapter outlined the evolution of India's policy choices associated with economy-wide national and sector-specific global institutional changes. In particular, new global rules of the game regarding international trade and global competition in the textile and pharmaceutical industries in 1995 overlapped with domestic economic liberalisation underway during the previous years. The subtle but important implications of this interaction of national and global institutional changes are reflected in the epigraph passages from the preamble to India's five-year plans. While the development path put in place in the Eighth Five-Year Plan (1992–1997) to further economic liberalisation was through specialisation (that is, focusing on domestic production in employment-intensive industries while allowing free imports in industries that are not employment-intensive), the path in the Ninth Five-Year Plan (1997–2002) recognised the need for integration with global markets and sought to improve the competitiveness of Indian industry so that it can effectively compete in international markets. Both the textile and pharmaceutical industries belonged to the group of key sectors that would anchor India's development strategy, and, accordingly, industry-specific policies were put in place to help achieve the international competitiveness of the two industries.

The objective of this chapter is to evaluate the evolution of the Indian textile and pharmaceutical industries within the context of the multilevel institutional changes.