Effect of Globalization on India's Economic Growth

Topics: International trade, Economics, Free trade Pages: 13 (4257 words) Published: October 28, 2010

Kishore G. Kulkarni, Ph.D.,
Professor of Economics,
And Editor, Indian Journal of Economics and Business (visit: www.ijeb.com) Metropolitan State College of Denver,
Campus Box 77. P. O. Box 173362,
Denver, CO 80217-3362, USA.

First draft of this paper was presented in the Oxford Roundtable Conference held in Oxford University, UK, in July 2005. Author thanks School of Business, MSCD for financial assistance, and Profs. John Cochran, Alex Padilla and Steven Call for their valuable input in completing this paper.

Abstract of “Effect of Globalization on India’s Economic Growth”

The wave of globalization appeared on India’s shores only in 1991, much after China’s and some other Southeast Asian countries such as Malaysia, Singapore and Hong Kong. Moreover the intensity of opening country’s borders is much higher in other countries than in India where democratic political forces delay decision making significantly. Nonetheless the Indian economy has broken the shackles of protectionism with great vigor which has led to some positive developments. The paper is an attempt to summarize the difference between policy making before and after the realization of gains from trade. In economic terms, one can undoubtedly prove that there are benefits realized .and the Indian economy is on a smooth sail partly because of the gains form trade. Of course any economy’s real growth appears only with increased total factor productivity, greater and better use of her resources and public policy that understands and protects the private sector’s interest. India still has a long way to go but major benefits already accrued from the right policies should serve as lessons to learn.



As a new participant in the globalization wave, India went through several structural and policy changes only in early 1990s, even if the awareness of need for opening up country’s borders was started in late 1980s, when Mr. Rajiv Gandhi was at the helm of policy design. With almost 20% devaluation of the Indian rupee in 1991, the process began that for a while slowed down a little but rarely anyone was in doubt about its existence. The recent reports show that Indian economy grew at the record breaking and astonishing pace of 8% growth in real GDP in 2003-2004. The real question is how did the economy that was an “almost autarky” from 1950 to 1985 period, reached to such a realization that gains from trade are there to reap and the economic transition necessary for globalization is a pre-condition for wider economic growth? This paper attempts to investigate if globalization is a cause of India’s economic growth and if the new culture of trade policy change in India is there permanently or temporarily.

The present paper is organized as follows: Section 1 makes the survey of trade policy in period 1950 to 1985, Section 2 summarizes the economic changes in period 1985 to 2005 with special focus on the liberalization attempt in 1991 and its aftereffects. Section 3 summarizes results and makes a conclusion. In general it is not very hard to prove that even a limited attempt of globalization has benefited Indian economy in the best possible way. As it is argued numerous times in other circles and by other economists (such as Prof. Jagdish Bhagwati and T. N. Srinivasan,) the drive of liberalization has to pick up the speed for better and faster gains for the economy.

Section 1: The Big Move Toward Protectionist Posture

The Indian independence movement in 1940s, led by Mahatma Gandhi, was based on the general dislike of anything and everything “foreign”, especially the one originating from Britain. The public rallies to burn imported goods were famous. There was a strong belief that India can produce everything at home, can be “self reliant” and “self dependent” (popularly called...
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