ECONOMIC IMPACT OF GLOBALIZATION ON INDIA

ECONOMIC IMPACT OF GLOBALIZATION ON INDIA
Effect of Globalization on economic sector was most far reaching and diverse in its impact. We will analyse the various effects of Globalization Indian economy under following heads:
A. LPG ERA
Historical Perspective: Economic setup before LPG
Economy world over had globalised quite earlier than India; Indian economy remained isolated for long time. After independence Democratic socialism was prominent model in India; theoretical basis for socialism was provided by Marx and Engels who believed in order to cease exploitation, it was necessary to abolish the system of private property and replace this system with communal ownership. When India became independent Indian people were steeped in mass poverty, unemployment and under employment. India had an illiterate and untrained labour force, static agriculture with semi feudal relations and less developed industrial sector.
Jawaharlal Nehru was greatly inspired by success of planning model of Soviet Union, at the same time he regarded the democratic values of capitalist society as indispensable for full growth of an equitable society. Thus, in his endeavour to take advantage of the best among two extreme of societies, which were themselves also undergoing transformation, Nehru’s vision of new India came to known as democratic socialism. Equality of opportunity to education, health care, employment etc i.e. to foster free and fuller growth of human personality is supreme goal of Socialism as also highlighted in preamble of constitution.
However due to few strategic faults like:

1. Neglect of agricultural growth by plan makers in initial years.
2. Import Substitution strategy followed by Plan makers increased the cost of production of import substituting industries as they had to import many components which became expensive due to high import duty; thus entailing for manufacturers to raise the market price of goods…
3. Due to less external competition in domestic market Indian manufacturing companies could not be incentivised for Quality improvement; also leading to failing improvement in production value.
4. Due to policy of isolationism and import substitution Indian market could not face the stiff competition in external market thus reducing competitiveness in export market and fall in exports.
   5.above reasons Indian economy was staring at High Fiscal Deficit, Balance of Payment Crisis and High inflation which assumed crisis proportion till 1991.
   Globalization in other economies
   context of globalization it could be argued that partly responsible for the above crisis was the economic isolationist approach followed by government till 1991;
   Globalization had already led to integration of economies much earlier, for instance the European Coal and Steel Community (ECSC) and the European Economic Community (EEC), formed by the Inner Six countries i.e. France Belgium, West Germany, Luxemburg, Italy and Netherlands as early as 1951 and 1958, respectively eventually led to formation of present European Union; similarly many trade blocs comprising multiple nations were built. The idea was to remove economic barriers in free flow of goods and services like Import Quotas, tariffs, etc. and promote integration of economies.
   Thus in wake of fast integration of markets and economic crisis at home, India had to adopt what is known as LPG or Liberalisation, Privatisation and Globalization Model of Development. Let us analyse briefly what were the implications of the changes brought about by Globalization: