In response to the financial crisis of 1991 that struck the Indian economy, the government had set in motion the process of structural reforms that changed its development strategy and set India on the path of globalisation.
The process of globalisation had the following impact on India:
a. It expanded the choices for consumers with a variety of goods like cell phones and electronic products available at a cheaper price.
b. There are a large number of brands available today to offer a wide variety of goods to people. Eating joints like Pizza Hut, KFC and McDonald’s allow Indians to enjoy cuisines of the Western European world.
c. Greater connectivity through internet and social networking sites has contributed towards creating more awareness among the people.
d. MNCs provide employment opportunities to the masses, and local companies supplying raw materials to these industries have also prospered.
e. Industries have gained from the successful collaborations with foreign companies. This way, many large companies have emerged as multinationals like the Tata motors, Ranbaxy, Asian Paints and the Sundaram Fasteners.
f. Globalisation has also created new opportunities for companies providing services, particularly those offering IT services.
However, the entire policy of globalisation has been questioned on the grounds as to what is so global about it.
a. Instead of integrating the communities, globalisation has only benefited a certain section of the society.
b. It has rather widened the gap between the rich and the poor.
c. Growth of MNCs and the increased inflow of foreign goods have posed fierce competition to the local industries.
d, Many small manufacturers and small scale industries had to shut down because of their inability to cope with foreign brands leading to unemployment.
e. Globalisation has given advantage to the private sector which operates for profit and not for the welfare of the society.
f. Globalisation has impacted the agrarian economy, where the government, in an attempt to create SEZs, has acquired the land of poor farmers without reasonably compensating them.
g. Globalisation has also induced uncertain terms of employment. Casual workers are hired on contract when the demand is high and are fired when the demand declines.
h. It has created a class of people who indulge in lavish consumerism, luxury and extravagant lifestyle, while the others are reduced to abject poverty.
i. It has drastically reduced the government spending on welfare schemes like education and health.
India responded to globalisation in the following manner:
a. The Indian government brought about transition from an inward looking economy to an outward looking approach, characterised by liberalisation and privatisation. It brought about fundamental changes in the strategy of development as India moved towards a market-driven capitalist model.
b. India removed the barriers of foreign trade and foreign investment to a large extent, thereby making it easier to import and export goods.
c. The Indian government encouraged the MNCs to establish their own production units.
d. It has encouraged more private sectors to come up and end the license-raj. The government exempted all the industries (except those for alcohol, cigarettes, hazardous chemicals, explosives, electronic, aerospace and drugs) from any kind of industrial licensing.
e. The Indian government created Special Economic Zones (SEZs) to give impetus to the country's economic development by attracting foreign investments and giving them extensive range of incentives and tax exemptions.
f. The country brought about major financial reforms whereby the private and foreign banks were allowed to expand their operations and functioning.
Thus, it brought about a fundamental shift and an overturning of the old economic order towards a new economic policy.