Globalisation: Assessing the Impact of Liberalisation and Privatisation on the Indian Economy

Unraveling the Impact of Globalisation: A Comprehensive Assessment of Liberalisation and Privatisation

Globalisation is a multifaceted phenomenon resulting from liberalisation and privatisation policies, entailing the integration of national economies with the global economy. It encompasses diverse policies aimed at fostering interdependence and integration among nations, transcending social, economic, and geographical boundaries. Globalisation establishes intricate networks where events in one corner of the world influence occurrences in distant lands, effectively creating a borderless world.

Outsourcing:

Globalisation has brought forth the trend of outsourcing, where companies hire external services, often from other countries, that were previously managed internally or within national boundaries. India has emerged as a prominent destination for various outsourced services due to its skilled workforce and cost advantages. Services like BPOs, record-keeping, accountancy, banking, music recording, film editing, clinical advice, and teaching are now extensively outsourced to India.

World Trade Organisation (WTO):

At the heart of the globalisation process lies the World Trade Organisation (WTO), founded in 1995 as the successor to the General Agreement on Trade and Tariffs (GATT). The WTO's mission is to create a rule-based trading regime ensuring equal opportunities for all countries in the international market. Encompassing trade in goods and services, the WTO facilitates international trade by removing tariff and non-tariff barriers and offering greater market access to member countries. India, a crucial WTO member, actively advocates fair global rules, safeguarding the interests of the developing world. Nonetheless, concerns arise about asymmetry in international trade, with developed countries imposing barriers on imports from developing nations while seeking open access to their markets.

Disinvestment:

Disinvestment of Public Sector Undertakings (PSUs) is a crucial aspect of economic reforms. Critics contend that during disinvestment, the assets of PSUs might have been undervalued, resulting in losses for the government. Moreover, proceeds from disinvestment are sometimes used to offset budgetary deficits rather than reinvested in the development of PSUs and social infrastructure.

Impact on Indian Economy during Reforms:

The performance of the Indian economy during the one and a half decades of the reform process has been evaluated through GDP growth. From 1980-91 to 1992-2001, the GDP growth increased from 5.6% to 6.4%, signifying overall growth during the reform period. However, the agricultural and industrial sectors experienced declining growth, while the service sector saw an increase, becoming the primary driver of growth. The Tenth Plan projected an ambitious 8% GDP growth rate, raising concerns about the sustainability of such high growth rates. The economy's opening to globalisation led to a rapid increase in foreign direct investment and foreign exchange reserves, positioning India as the sixth-largest foreign exchange reserve holder globally. While India excelled as an exporter in auto parts, engineering goods, IT software, and textiles, it faces challenges in addressing employment, agriculture, industry, infrastructure development, and fiscal management issues.

Reforms in Agriculture:

The agricultural sector confronted significant challenges amid economic reforms. Declining public investment in agricultural infrastructure, including irrigation, power supply, roads, market linkages, research, and extension services, hindered overall productivity and efficiency. Reductions in fertiliser subsidies raised production costs, disproportionately affecting small and marginal farmers. Additionally, policy changes under WTO agreements exposed Indian farmers to increased international competition. The focus on export-oriented policies shifted production from food grains for the domestic market to cash crops, intensifying pressure on food grain prices and food security.

Reforms in Industry:

The industrial sector faced hurdles as cheaper imports from developing countries flooded the Indian market, reducing demand for domestic industrial products. Inadequate investment in infrastructure, such as power supply and transportation facilities, hindered domestic industrial growth, impacting production capacity and costs. Globalisation compelled developing countries to open their economies to foreign goods and capital, making industries vulnerable to external competition. Developing nations faced barriers to access developed countries' markets, exacerbating the trade imbalance.

Globalisation, driven by liberalisation and privatisation, presents both opportunities and challenges for India. While it provides access to global markets and technology, it can exacerbate economic disparities and create social imbalances. Striking a balance is crucial, addressing sector-specific concerns while leveraging globalisation's benefits to foster inclusive growth and development in India.