The Relevance of New Institutional Economics for the Indian Economy

Abstract

The rules of the economics game included both governmental institutions and policy. The fundamental characteristics of a government, such as whether the rule of law is upheld, property rights are maintained, and taxes are applied consistently and fairly, are determined by the policies established by the government. An economy with strong institutions can endure the odd bad policy, but a strong economy cannot have weak institutions. On the relative weight of the factors and circumstances that influence whether a country is prosperous or impoverished, several economists had divergent opinions. They concentrated on the so-called "good institutions," which motivated people to put in hard effort, develop their economies, and so benefited. But the crux of the matter was that it only focused on understanding economic institutions as they currently stand. Hence, this was where the concept of new institutional economics came into the picture. While the Keynesian macroeconomics has been a major factor in the growth, development, and distribution issues that the Indian economy has encountered, the planners and intellectuals of the Indian economy have not seen the term New Institutional Economics (NIE) as being pertinent. The NIE uses comparative institutional analysis, which distinguishes this economics from conventional classical economics. The welfare of the populace would result from the distribution of resources in an economically efficient manner. A suitable institutional framework must be developed, nevertheless, in order to make the welfare economy more effective and community-focused.