Sunday, September 6, 2009

Seminar on Globalization

It has been such a long time that I didn’t visit my blog at all. I thought of writing down one or other things quite lot of times but may be it was b’coz of lack of enthusiasm that I haven’t posted anything for so long.


Recently, I attended 15 days seminars at my Institute (ICWAI, Lodi Road) and that was an enriching experience. There was a lecture on ‘Globalization and WTO’ which provided with some really good knowledge. The professor told us about how in 1991 India was left with only one week foreign exchange reserves and how certain developed countries and International Financial Instt. (e.g., IMF, World Bank etc.) were not willing to lend us unless we succumb to their demands. Industries in developed nations at that time were operating at an optimum capacity and producing large quantities of goods but the problem faced by them was very low population base of their own countries and hence insufficient demand for their products. These nations were forcing India to open up its economy due its large population and hence could serve as a big market for them.


It is important to mention here that prior to 1991 our economy was almost a closed economy. In order to discourage foreign investments we had very heavy custom duties, red tapism and bureaucracy, license raj etc. The negative aspects of having a closed economy, to name a few, were:

  • Industrialization didn’t take place as per the expectations


  • Corruption, lack of efficiency in work and ineffective management became the common features of the public sector


  • Many public sector companies were making losses


  • Official machinery became a major hindrance to the development


  • Technological backwardness


  • Shortage of adequate capital


  • Brain drain etc



So, all in all we were following the policy of protectionism in the favor of our domestic industries. Needless to say that the agriculture was a major contributor in GDP and almost all sectors had government intervention. There were very few private players in the market and certainly ‘consumer was not a king’ during those days.


Ultimately, India opened up its doors in 1991 through New Economic Policy (NEP) - that led to the globalization, liberalization and privatization as three strategies - under the leadership of Shri. P. V. Narasimha Rao and then finance minister Dr. Manmohan Singh. It was a major breakthrough and a historical event in the Indian economy. License Raj was abolished and a new Industrial Policy was promulgated by the government. It’s been almost 18 years of our opening up and it is clearly evident that India has emerged as a leading global player. The recent crisis has reaffirmed that it is not beneficial for the world to ignore certain advanced developing nations, particularly BRIC (Brazil, Russia, India and China) countries. A recent development where BRIC nations have decided to invest $80 billion in IMF(China will contribute $50 bn and rest will be contributed by other nations equally) to have a more say in the organization is another step towards ending the dominance of United States in IMF and other International Financial Institutions.


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