IS GLOBALIZATION GOOD FOR INDIAN ECONOMY?

Introduction:
Globalization of a nation means that the country is open for global companies,
investors to invest or start businesses in the country. A closed economy does not allow
foreign investors to invest in the country. There are various effects of globalization on the
country’s economy and there are various factors that impact a country’s performance
under the extreme competition posed by other countries. When it comes to India,
liberalization took place in India in 1991 under the then Union Finance Minister Dr
Manmohan Singh. Before 1991, India practiced restricted trading which restricted the
import of or levied heavy taxes on products that are not produced in India or products
that are expensive which made it near impossible for foreign businesses to play in India.
But due to intense competition by developed countries like US in World Trading
Organization and International Monetary Fund India was one of the reasons for India to
open up to the world. In 1991 India was in a balance payment crisis where India’s import
reserves are down to three weeks low. This has forced India to get help from
International Monetary Fund and thus opening up for international players. Moreover,
the GDP of India was so low that the slow growth rate of GDP has been sarcastically
named as “Hindu Rate of Growth” and India has seen an extensive growth in its GDP after
globalization. The Hindu rate of growth rate was as low as 0.8% and after
globalization/liberalization (1991-1992) India bounced back and achieved a growth of
5.3% and sped up to 6.2% and 7.5% in consequent years.

1991 Economic reform policy:

In 1991, India was under economic crisis when it started having problems in
balance of payments of the increased imports. This resulted in the twin deficit. Due of the
Gulf-war in 1990, the situation was very serious that the government could only finance
only imports worth three weeks with not much time left for India in defaulting its own
payment obligations. To come out of this situation, India had to get a loan from the
International Monetary Fund worth $ 2.2M by depositing 67 tons of gold of which 47 tons
were airlifted to Bank of England and 20 tons to Union Bank of Switzerland. The prime
minister then P V Narasimha Rao along with the finance minister Dr. Manmohan Singh
initiated economic reforms which were altogether termed as Liberalization.

The salient highlights of the Liberalization, Privatization and Globalization Policy in India:
(Jeswani, n.d.)

• Foreign Technology Agreements

 • Foreign Investment
• Industrial Licensing
• Beginning of privatization
• Opportunities for overseas trade
• Steps to regulate inflation
• Tax reforms. (KUMAR, 2013)

Post Globalization Effects:

The first thing that changes in a globalized economy is the regulations in trading.
This makes the economy more competitive as businesses from outside the country are
allowed to operate in the country. After liberalization in 1991, India has seen a large
change in trade and business and experienced high rate of growth. Globalization will also
provide many options and opportunities to Indians to invest, trade and provide jobs. All
these opportunities played an integral part in growth of Indian GDP. There are multiple
reforms seen India as part of globalization and all these factors prove that globalization
has bought about a huge change in the way the India as an economy works and how India
is coping up with the competition from the other countries.

Indians were able to secure more jobs & large sums of investments are flown into India
because of globalization. From the past few years, the Indian economy has been
increasing at unprecedented rate which open the way for many opportunities. The
economic boom created by globalization for India is very large with many positive effects.

Effect on Economy:
Even though there are lots of investments from foreign investors and their
businesses being setup here in India, there has been a constant competition to local
businesses and farmers. Farmers are affected by the cheap imports which will obviously
affect the business of the farmers. In the starting years of globalization, there have been
little to no restrictions so that there has been a huge loss and as the years went on
restrictions have been laid so that it farmers/local businesses will also have a fighting
edge over the foreign players.

Effect on education sector:

Globalization has not only paved the way to businesses to go global but also to the
students who aspire to pursue higher studies. There has been increase in the availability
of books which implied to the increased availability of knowledge. Globalization has
allowed students to go to foreign countries and study there and also allowed Indian
universities to implement the pedagogy or to learn from the education system there and
improve the same here.
Effect on Health Sector:
Globalization has permitted foreign countries to bring in their advanced
machinery into the health sector of India and helped millions of Indians to live a healthy
life. Albeit this huge advantage, the prices of pharmaceuticals have been skyrocketed and
it has been there ever since. Government has been imposing price caps on medicines and
imposing restrictions on the health industry to make it more attainable to poor and
middle-class people.

Effect on IT Industry:
Globalization has attracted numerous IT companies to India and there are large
number of foreign IT companies that are operation in India. Now-a-days foreign
companies are also investing in the Indian start-ups and supporting them to grow. Due to
the advent of IT companies, there has been a boom in employment and subsequent
growth in GDP. One of the instances where globalization has helped Indian employment
is when Y2K bug is identified. Huge number of Indians are hired to fix the bug and if it
was not for globalization, there would not be a mass hiring from India and rise in
employment as well.

Indian market also experienced a downfall and recession due to the Great financial
crisis and other crises due to the advent of globalization. Many jobs have been lost and
businesses were in losses due to these crises.

Effect on Agriculture:
There has been not a very large change in Indian agriculture due to globalization,
but the agriculture sector has seen a decline. This decline is due to channeling of funds
that are supposed to be allocated to the agriculture sector but have been allotted to
private sector which has increased the production cost of the agriculture products. Thus,
the agriculture industry has seen a decline in growth.

Effect on Investments:
Globalization has attracted large number of investors from foreign countries to
invest in India. India has been known for its abundance of resources from the start and
India has received investments in chemical, pharmaceutical, apparel industries. Due to
inflow of cash/ investment from Foreign Direct Investments the GDP of India has
increased from 0.8% in 1990 to 2% in 1991. There are still discussion continuing in India
on the FDI policy and how it should not affect the Indian businesses.
Effect on import and export:
India majorly exports manufactured goods such as engineering goods, petroleum
products, chemicals and allied products, gems and jewelry, textiles and electronic goods
etc. which constitutes over 80% of our exports. India majorly imports capital goods and
intermediates which supports the manufacturing sector. After globalization, many Indian
companies have started becoming respectable players in the international scene. In
2000-2001, agricultural products valued at more 6M $ US were exported from the
country, 23% of which was contributed by the marine products alone. Marine products
in recent years have emerged as the single largest contributor to the total agricultural
export from the country accounting for over one fifth of the total agricultural exports.
(Hanumanthappa.N, 2018)

Conclusion:
There is no doubt globalization is good for an economy as it provides abundance
of opportunities to a country and gives competition which can force a country to grow.
However, an open country will only thrive in this global competitive world only if there
is strong leadership. If the control of foreign investors on the businesses/ resources of
the country are not kept under a check, it will only lead to the doom of the country. This
is the main concern of the current FDI tussle going on in India. Allowing Foreign Direct
Investors to invest in India without strict rules will hand over the resources and this will
also grab th (Jeswani, n.d.)e opportunities of other Indian businesses to even survive. So,
there must be a constant adaptation and country centric thinking from the government
in order to completely leverage the fruits provided by the globalization.

Bibliography
Hanumanthappa.N, P. (2018). IMPACT OF LPG ON INDI ADMINISTRATION . IJCRT.

Jeswani, K. (n.d.). Internatoional Env Report. Retrieved from Scribd:

https://www.scribd.com/document/35912945/Internatoional-Env-Report

KUMAR, N. (2013). GLOBALIZATION AND ITS IMPACT ON INDIAN ECONOMY.

INNOVARE JOURNAL OF BUSINESS MANAGEMENT.