Q.2 Analyse the steps taken by the Indian Government to globalize the economy. Discuss the threats to the Indian economy from globalization.
Meaning of Globalisation (Introductory)
Globalisation means increasing integration of a country’s economy with the world economy through free flow of goods, services, capital, technology and information.
Since 1991 India has consciously followed policies to open up and integrate with the world market.
Steps taken by the Indian Government to Globalise the Economy
(1) New Economic Policy, 1991
- Introduction of Liberalisation, Privatisation and Globalisation (LPG).
- The objective was to move from a closed, highly regulated economy to a more open and competitive one.
(2) Liberalisation of Industrial Policy
- Abolition of most industrial licensing and controls.
- Reduction in the role of the public sector, allowing private and foreign firms to enter many areas.
- Removal of asset limits of MRTP Act, enabling large business houses and MNCs to expand. Threats to the Indian economy from globalization
(3) Trade Policy Reforms
- Progressive reduction in import duties and removal of many quantitative restrictions.
- Simplification of export–import procedures.
- Shift from an inward-looking import-substitution strategy to an outward-looking export-oriented strategy.
(4) Encouragement to Foreign Direct Investment (FDI)
- Allowing automatic approval for FDI up to specified limits in many industries.
- Raising sectoral caps and opening new sectors like telecom, insurance, civil aviation, retail, etc. Threats to the Indian economy from globalization
- Setting up Foreign Investment Promotion Board (FIPB) (earlier) to clear FDI proposals quickly.
(5) Financial Sector and Capital Market Reforms
- Modernisation and regulation of stock markets; establishment of SEBI as a regulator.
- Permission to Foreign Institutional Investors (FIIs) and foreign venture capital funds to invest in Indian capital markets. Threats to the Indian economy from globalization
- Reforms in banking and Insurance sector to make them more competitive and globally integrated.
(6) Exchange Rate and Convertibility Reforms
- Partial devaluation in 1991 and later move to market-determined exchange rate.
- Introduction of current account convertibility of the rupee to facilitate trade and remittances.
- Easing norms for foreign currency accounts and external commercial borrowings. Threats to the Indian economy from globalization
(7) Promotion of Export-Oriented Units
- Setting up of Export Processing Zones (EPZs) and later Special Economic Zones (SEZs) with tax concessions, easy customs procedures and world-class infrastructure to attract global investors. Threats to the Indian economy from globalization
- Various export incentives, export credit facilities and marketing assistance.
(8) Integration with World Trade Organisation (WTO)
- India became a founding member of WTO in 1995.
- Adoption of WTO agreements on tariffs, services (GATS), intellectual property (TRIPS) etc., which further integrated India with global trade rules.
(9) Sector-Specific Initiatives
- Policies like Information Technology Policy, Telecom Policy, New Manufacturing Policy, Make in India, Start-up India etc. to integrate Indian industry with global production networks and value chains. Threats to the Indian economy from globalization
These measures collectively pushed India towards a more open, competitive and globally linked economy.
Threats to the Indian Economy from Globalisation
Along with benefits, globalisation has also posed serious challenges:
(1) Tough Competition to Domestic Industry
- Highly efficient foreign firms and MNCs compete with Indian companies.
- Many small-scale and inefficient units may be forced to close, leading to loss of employment.
(2) Vulnerability to Global Economic Crises
- Greater integration makes India more exposed to global recessions, financial crises and commodity price shocks.
- Capital flows can be highly volatile, causing instability in exchange rates and stock markets. Threats to the Indian economy from globalization
(3) Problems for Agriculture and Small Producers
- Cheap imports of agricultural products and manufactured goods can depress prices received by Indian farmers and small producers.
- Traditional and cottage industries face difficulty in surviving against mass-produced branded foreign goods.
(4) Dominance of Multinational Corporations (MNCs)
- MNCs, with their huge financial and technological resources, may acquire a dominant position in key sectors, influencing prices, employment and even government policies.
- Profits may be repatriated abroad, causing pressure on balance of payments. Threats to the Indian economy from globalization
(5) Widening Inequalities and Regional Imbalances
- Benefits of globalization are often concentrated in urban, educated and industrial regions, whereas rural areas and unskilled workers gain less.
- This can increase income inequality and create social tensions.
(6) Cultural and Social Threats
- Heavy inflow of foreign media, brands and lifestyles may lead to erosion of local culture and values and growth of consumerism.
- Traditional habits of saving may decline, increasing indebtedness. Threats to the Indian economy from globalization
(7) Environmental Concerns
- Intense competition to attract foreign investment may lead to over-exploitation of natural resources, lax environmental regulations and higher pollution.
(8) Loss of Economic Policy Autonomy
- To remain attractive to global investors and comply with international institutions, the government may have to adjust its policies, sometimes at the cost of domestic priorities like employment and social welfare.
Conclusion
The Indian Government has undertaken wide-ranging reforms since 1991 to globalise the economy through liberalization, encouragement to FDI, trade and financial sector reforms, WTO commitments and export promotion. Threats to the Indian economy from globalization
However, globalisation also brings serious threats in the form of intensified competition, vulnerability to external shocks, dominance of MNCs, threats to small producers, widening inequalities and cultural as well as environmental problems. Therefore, India needs a carefully managed globalisation in which appropriate policies protect vulnerable sections while taking full advantage of global opportunities.
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