Globalisation and the Indian Economy

🌐 Globalisation

  • 🔗 Globalisation is the process of integration/inter-connection between different countries.
  • 🏢 MNCs (multinational companies) play a major role in the globalisation process.
  • 🚚 Encourages free flow of trade, capital, and human resources across borders.
  • 🗺️ Due to globalisation, boundaries between countries have almost vanished.

📶 Levels of Globalisation

  1. 🛒 Markets: Producers/sellers from abroad can enter the Indian market; Indians can enter international markets.
  2. 💼 Investment: Foreign entrepreneurs can invest in India; Indian entrepreneurs can invest abroad.
  3. 👷 Labour mobility: Indian workers can move abroad for better jobs; foreign workers can come to India.

⚙️ Reasons for Globalisation

  1. 🚢 Rapid technological advancement in transport: Goods move worldwide faster and at lower cost.
  2. 📡 Growth of telecom, computers, and the internet: Instant information access and communication from remote locations.

💻 Role of IT in Globalisation

  1. 🌍 Encourages global communication at minimal cost.
  2. 🧩 Connects markets.
  3. 💸 Enables instant transfer of money across countries.
  4. 🎧 Helps establish customer service centres.
  5. 🗂️ Fast data/information transfer.

🪙 Liberalisation

Liberalisation = lessening/removal of government regulations and restrictions to encourage economic development. In other words, removing barriers set by the government.

📅 In 1991, the Government of India decided to lift unnecessary restrictions such as industrial licensing, import licensing, price controls, etc.

🚧 Trade Barriers

  • Trade barriers are restrictions put by the government on trade (e.g., a tax on imports).

🇮🇳 After independence, India imposed many barriers on foreign trade and investment because:

  1. 🏗️ Basic industries needed huge investment beyond private capacity; developed under the public sector.
  2. 🧭 Government wanted to control critical industries to mobilise resources for development across sectors.
  3. ⚖️ Private sector could operate but under controls/rules/laws to prevent concentration of resources/wealth in few hands.

Goal of the mixed economy strategy: reduce poverty, income/wealth inequalities, and unemployment, and promote economic growth with social justice.

🧭 Steps Taken Under Liberalisation

  1. 🏭 All industries (except three) exempted from industrial licensing.
  2. 📈 Industries are free to expand/produce in response to market demand.
  3. 🛠️ Producers can import machinery & raw materials from other countries.
  4. 🛰️ Industries can import advanced technologies without restriction.

🏢 Privatisation

Privatisation is a component of liberalisation. It means allowing the private sector to set up industries previously reserved for the public sector.

🪜 Steps Taken

  1. 🏷️ Number of industries reserved for the public sector reduced to 2.
  2. 🏗️ Public sector can enter core industries such as iron & steel, electricity, communication, transportation, shipbuilding, etc.
  3. 💳 Government started disinvestment in loss-making public sector enterprises.
  4. 🆓 Private sector freed from many restrictions: licensing, permissions to import raw materials, price regulations, and investment limits.

⬅ Back to Lesson