Effects of Globalization on Indian Economy

Introduction

The term Globalization was coined in 1960s by Theodore Levitt, a former

professor from Harvard Business School. Globalization is a process,
which involves economic interdependence of countries worldwide
removing all barriers for economic integration.

Indian Economy before Globalization

There were stringent controls on the import of a large number of a large

number of commodities, and likewise controls over foreign investments
through a complicated licensing system which in most cases did not
allow more than 40 percent of the equity in any company to be held
by foreign capital. In this sense it could be said that there was
considerable state intervention in the economy. The system – popularly
known as ‘license-permit raj’ – provided a protected environment in
which domestic industry could develop and grow.

During the budget of 1991 the then finance minister Dr. Manmohan
Singh introduced economic liberalization (P V Narasmha Rao). This led
to the full-fledged integration of Indian economy with global economy.
In other terms introduction of economic liberalization led India towards
rapid globalization. (Include point about Free Trade point).

To globalize themselves different countries take trade related measures

and developmental policies so as to increase cross border trade relations.
The same way, Indian government also took 4 major measures to
encourage Globalization:

i) Reduction of trade barriers so as to permit free flow of goods across

national frontiers;
ii) Creation of an environment in which free flow of capital can take place
among nations,
iii) Creation of environment, permitting free flow of technology;
iv) Lastly, from the point of view of the developing countries, creation of an
environment in which free movement of labor can take place in different
countries of the world.

Foreigen Direct Investment (FDI)

Foreign Direct Investment is an important tool of globalization.

Prior to 1991, the government exercised a high degree of control over

industrial activity by regulating and promoting much of the economic
activity. The development strategy discouraged inputs from abroad in the
form of investment.

Globalization allowed foreign investments flow into Indian markets. Year by

year India is attracting more and more FDI inflow. According to FDI
Confidence Index of 2018 by AT Kearney, India is the 11th highest country
in attracting FDI investors.

On 2nd September 2018 Economic Times reported that Mauritius is the

largest source FDI to India. Singapore takes the second place. Total inflow
of FDI during the financial year was 2017-18 37.36 billion USD out which
Mauritius has a share of 13.41 USD whereas Singapore has a share of 9.27
billion USD rest of the FDI comes from many different countries like Japan,
Netherlands, USA, UK, Germany, UAE, Switzerland
India Post Globalization

 In India GDP was 57.47 billion dollars before globalization and

today India’s GDP has gone up to 2,848.23 billion dollars.

 Global Technologies and techniques are being implemented in

Indian agriculture. Ex: - Kumar swami has planned to implement
Israeli irrigation system in Karnataka. For that he has purchased
5000 acres of land in different places of Karnataka like Chitradurga,
Koppal, Gadag etc and is spending about 150 crores to implement it.
This technique helps farmers in Drought prone areas to effectively
use available water for agriculture.
 Education is also growing since globalization. Ex:- student exchange
programs, foreign universities participating in Indian education fairs
to attract Indian students.

 In any country globalization leads to transfer of technology. That is

transfer of technology from developed country to a developing
country. It was the same in case of India also. This transfer of
technology led to the optimum utilization of resources in our
country. Any technological changes in the world economy will have
an impact on Indian economy too. Ex: - AI & IOT

 Soon after Globalization, highest FDI came to telecom market. As a

result between 1991 – 1996 mobile subscriber base grow from 0 to 3
lakh and today there 116.8 core mobile subscribers.
 Times of India on May 17th 2017 report that India has been the
world’s biggest market for two wheelers with almost 48,000 units
sold every day.
 The Economic Times on May 24th 2018 reports that India is fourth
largest market for automobiles.
 According to Internet and Mobile Association of India (IMAI)
report around 481 million people in India has an access to
Internet.
 Today we can find a lot of internationally well-established food
chains in India.
 Many Indian movies are released abroad and many foreign
productions are investing in Indian movies & channels. Ex:- Walt
Disney has started its Walt Disney India and has its channels in
Hindi, Tamil & Telugu.
 Multiplexes, Malls and apartment culture are all an impact of
globalization.
 Lot of fashion brands like Armani, Gucci, Nike, omega etc. are
investing in Indian market.