Nothing
can flourish in isolation and a perfect way to illustrate this is the story of
“Economic Liberalization in India”. The Indian government considered it best to
guard the domestic industries against any kind of foreign competition. But this
step had more negative impacts than positive outcomes. And to find out about
those negative impacts read further…
Prior
the 1991 liberalization reforms India’s closed door economy was confronted with
economic crisis. These crises were shaped by problems like depreciation of the
Indian Rupee against the foreign currency and huge fiscal imbalances. These
traces of financial difficulty for India began surfacing in the mid 1980s.
Balance
of payment crisis to be simply put, is imbalance between the imports and
exports of a country. But in realistic terms in the pre liberalization era such
an imbalance would be an understatement to quote the condition of Indian
economy that time.
To
make the situation worse India was denied credit by the Indian central bank -
Reserve Bank of India. This was done because the foreign reserves of India were
not enough to even afford three weeks worth of imports then. All thanks to the
Indian insular economy which had more imports (from countries like Russian)
than its exports and closed doors for Multinational Corporations pre LPG
reforms.
In
such a grave condition it was the International Monetary Fund which then came
to rescue India from the verge of economic catastrophe. But help from IMF came for a cost which can be
better termed as economic reforms of 1991. To fulfill the condition of IMF as a
part of their bailout India’s 9th Prime Minister Dr. PV Narasimha
Rao roped Dr. Manmohan Singh the Finance minister then and implemented the
globalisation reforms in India in 1991. These economic reforms resultant of a
deal with IMF due which India had to go through changes in terms of its
economic structure and trade policy with the rest of the world.
Prior
to this change in the economic policy the Indian government had been protecting
its domestic industries from the rivalry by the foreign market. In such
conditions the domestic industries had no incentive to perform better or match
the standards of the foreign market. The consumers on the other hand had to
purchase whatever was available to them in the Indian domestic market. Hence,
the Indian consumers in the pre globalisation era were deprived the option or
variety.
The
liberalization policy, however, changed the face of Indian economy by leaps and
bounds. The trade policy had undergone complete transition. India lifted may of
its trade barriers against other countries from entering the Indian market and
selling their products.
Now
certain sectors like Infrastructure, automobiles, Information Technology, Food
and beverages were open for Multinational Corporations to set their businesses
in India. They started pouring in not only capital but also technological
knowledge and other valuable resources as well. This lead to a surge in the
Gross Domestic Product (GDP) and upliftment of the economy as a whole. By mid
90s the private capital had surpassed the public capital. India’s foreign
reserves grew from 1 billion dollars to 140 billion dollars in a short span of
four years after liberalization.
Nevertheless,
many did not welcome this change. Like every new policy even this step by the
government was detested by the small domestic companies which could not stand
the competition. Small industries which did not have resources to expand and
grow could not survive in the age to globalisation and had to exit the markets.
Thus, the concept survival of fittest came into being for the Indian economy.
More
than a decade later of this economic revolution in India, in the late 2000s it
was time for India to see the other slope of Globalization. This was a negative
and downward facing slope called “Recession”. Crisis like stock market crash, obstacles
in banking sector, other financial crisis in U.S.A and its detrimental effects
in the world economy are also effects of Globalization. India too had to bear
its part of crisis like the other countries. One of the worst hit sections of
the society was the hard-working middle class who were fired from their jobs
and for others salaries were reduced. Investors too had to face a tough time as
the stock market was covered by gloom worldwide. Nevertheless, India made a speedy
recovery from this economic illness but everyone realized that in the era of
globalization when a superpower like U.S.A sneeze the rest of the world economy
catches cold.
Moreover,
what is interesting to note about the period post recession is that developing
countries recovered better and faster than the developed ones. This ‘Reversal
of fortunes’ is ironical and of the many impacts of globalization. Nevertheless,
what catches the attention of aam adami (common
man) are the negative implications of globalisation like inflation, hike in
petrol prices, fall in investment, depreciation of rupee, etc. By dint of such
a situation we tend to overlook the progress that India made against the other
developing nations in the world in recent past. The introduction of the rupee
symbol, increasing GDP growth rate, strong spending on infrastructure for a
strong base, boon of food security bill across India to as many as 200 villages
and the list continues. The ones mentioned are just a few examples which remind
us of the caliber that this country possesses to prove that it is ready to make
itself a prominent figure in the global economy.
