Department of Commerce

Assam University,
Silchar-788011
Assam, India

GLOBALISATION AND DEVELOPMENT IN INDIA – AN OVERVIEW

Dr. Kingshuk Adhikari

Assistant Professor
Department of Commerce
Assam (Central) University, Silchar
Assam
Email : adhikari_lecturer@rediffmail.com

This paper can be downloaded without charge from the Social Science Research
Network electronic library at: http://ssrn.com/

Prepared on 15 January, 2010

Submitted to Social Science Research Network (SSRN) on 12 June, 2010
Working paper on Globalization # 03/2010

©2010 by Kingshuk Adhikari. All rights reserved. Short sections of text, not to exceed
two paragraphs, may be quoted without explicit permission provided that full credit,
including © notice, is given to the source.

Electronic copy available at: http://ssrn.com/abstract=1624252

 GLOBALISATION AND DEVELOPMENT IN INDIA – AN OVERVIEW
Dr. Kingshuk Adhikari
Assistant Professor
Department of Commerce
Assam (Central) University, Silchar
Assam
Email : adhikari_lecturer@rediffmail.com

Abstract
Globalization is a process of ever growing economic interdependence of countries of the world
which constitutes integration of national economies with the international economy through cross
border transactions in goods and services, international capital flows and widespread diffusion of
technology. The present paper is divided into three distinct sections. Section 1 provides a brief
introduction, Section 2 highlights some points on Globalization, Global Economy and particularly
about Indian economy and in section 3 the condition of economically challenged section of India in
the context of globalization has been analyzed. However, the analysis being presented here is
sketchy and the endeavour is to raise certain issues that certainly call for further investigations by
future researchers.
Keywords : Capital, Labour, MNCs, LDCs, Economic Reforms,

SECTION I
Introduction
Globalization is not an epochal departure of the world capitalist system, but it is a process that has
been going on for a long time, in fact ever since capitalism came into the world as a viable form of society
(Sweezy: 1997). Capitalism not only grows inside a country it always tends to expand spatially. There are
considerable debates among numerous proponents and opponents. Those who take a positive view of
globalization observe it as a wonderful contribution of capitalism to the world. It is the continuation of
modernization and a force of progress, increased wealth, freedom, democracy, and happiness. Its defenders
present globalization as beneficial, generating fresh economic opportunities, political democratization, cultural
diversity, and the opening to an exciting new world. From the opposite standpoint, it is perceived as a march of
predatory capital subjugating the human race world over (Sen: 2002). Its critics see globalization as harmful,
bringing about increased domination and control by the wealthier overdeveloped nations over the poor
underdeveloped countries, thus increasing the hegemony of the “haves” over the “have nots.” However, the
process of globalization is marked by -
1) Ever increasing economic interactions and trans-border migrations of trade, technology and finance
capital at the international level;
2) Retreat of the state in regulating these flows and in intervening in the welfare of citizens.
3) Increasing influence of the market forces in the economy (Baker, Epstein, and Polin: 1998)
Therefore, globalization can be defined as a process of ever growing economic interdependence of
countries of the world which constitutes integration of national economies into the international economy

Electronic copy available at: http://ssrn.com/abstract=1624252

through cross border transactions in goods and services, international capital flows and widespread diffusion
of technology.
SECTION II
Globalization, Global Economy and India
The global economy is characterized by ever-increasing economic interdependence among the
countries of the world in which there is multiplicity of linkages, interconnections and interdependence
(McGrew and Lewis: 1994; John Ishiyama: 2005). Advocates of globalization are of the opinion that the
parameters of globalization should be unhindered flow of trade, capital and technology. But the economists
from developing countries suggest that in addition to the above three parameters globalization must also
include free flow of labour internationally. Historical evidences reveal that the flow of trade, capital and
technology helped the imperialist nations to drain out the resources from the less developed colonial nations.
The present global economy is strongly influenced by industrialized countries where the MNCs and
the international financial organizations are headquartered. Oligopolistic Multinational Corporations (MNCs)
are the key managers of international economy. This has sometimes produced unenthusiastic consequences
for less developed countries (LDCs). In the present age, it seems, there will be no national products or
technologies, no national corporations and no national industries (Aqueil Ahmad: 2001).
The cold war ended with the collapse of Soviet Union and all socialist states barring one or two.
Before the end of cold war the nations freed after second world war which pursued capitalist economy had
the distinct advantage of bargaining with both the blocks-USA as well as USSR. Although the state policies
of these countries were pursued for the fullest development of national capitalists of these countries, they had
a contradiction with the traditional capitalist countries in the post colonial era. These countries, in which
category India fits, invited foreign industrial and finance capital so long it suits the overall interest and
necessity of their own national capital. They thwart MNCs if the interest of their own national capitalists is at
jeopardy. But after the collapse of soviet Russia and East European countries, the world is not same again.
Two things happened.

• First, there is almost no more non capitalist space for the spatial extension of capitalism and

• Second, the countries like India lost the advantage which we have just referred. One cannot have the
cake and eat it too; one’s own finance capital cannot go to other countries until it allows other to come.
In this backdrop India had to do away with its protectionist policy.
There is a universal desire to modernize business, industry and agriculture using advanced
technologies and systems. In addition to technology, other essential inputs in this process are Financial and
human resources. Economists of different countries at different point of time may suggest different strategies
for acquiring these inputs. Throughout the decades of the 1950s, 1960s, and 1970s, India emphasized
building techno-economic self-reliance basically through indigenous efforts in a fully or semi-protected
environment. The Indian capital did not posses enough muscles in the immediate aftermath of independence
to invest in the infrastructure. The state had to come to its aid in the name of ‘Nationalization’. The policy of
nationalization had the added advantage that it seemed more ‘pro-people’ and left enough to catch the
imagination of common people. In the mid 1980s, the then Prime Minister Mr. Rajiv Gandhi took a different
policy of opening up of Indian economy irrevocably to western capital. Markets were still not entirely free in
India. But even a partially restricted entry of the MNCs was seen by many critics as having adverse
consequences for budding industries, indigenous entrepreneurs and self-reliance. The critics opined that the
Nehruvian model, so far pursued, was the appropriate one for building self-reliance.
Globalization in India practically started with the introduction of new economic policy in July 1991.
Globalization, liberalization and privatization constituted the trinity under the structural adjustment
programme (SAP) pushed by the World Bank (WB) and International Monetary Fund (IMF) in a new

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situation. The present prime-minister of India was a champion of “commanding height of public sector
economy” who was instrumental to start liberalization and privatization in India under the Prime
Ministership of Mr. P.V.Narashima Rao. However, it needs to be emphasized that India never fought shy to
acquire capital, technology, and training from multiple foreign sources, including the United States, Canada,
UK, France, Germany, and Soviet Union even in the days of license-permit raj.
The first generation economic reforms are over. As of now, India is engaged in the second
generation reforms. During the post 1991 period, India has witnessed a mix of political stability and
instability, affecting the reforms one way or the other. Globalization has hardly lived up to its promise. It has
benefited only limited part of business and industry of India and highly qualified professionals in the certain
disciplines, such as, information technology (software), management, engineering, medicine, etc. For India,
the major thrust is to acquire more and more foreign capital and technology on reasonable terms and
conditions. On the social front, in general intellectual capital has been strengthened, incomes have risen, and
general standard of living has improved in India. On the negative side, environmental regulations are not
strictly imposed causing serious problems in sewage disposal and air and water quality management.
Economic disparity has also increased in India like other parts of the world.
Much of the discourse on globalization in relation to the developing countries is one-sided whereby
the global economy is considered either a universal remedy or a medium for exploitation of less developed
nations by giant MNCs and global financial organizations generally dominated by advanced industrial
countries. The LDCs like India have always been portrayed as helpless victims of MNCs de-emphasizing the
inner strength and resilience of Indian capital.
In this context, it needs to be emphasized that Indian industrialists are not only exporting to other
developing countries but to the developed countries like USA, UK too. The Indian capitalists export not
merely raw materials but finished products also. Furthermore, the export of Finance capital, distinct from
industrial capital, is a symptom of Imperialism. Indian monopoly capitalist also export finance capital. Thus
far from being exploited, the Indian capitalist are a junior partner in the new “Empire”.
SECTION III
Globalisation and Equitable Distribution in India
This section of the paper makes an attempt to analyze the impact of globalization from the view
point of LDCs and particularly India. Globalisation is still a topic of great controversy in India. The
proponents of globalisation argue that it makes an attempt to rationalize the human skills and rewards
according to performance and believes in market forces and withdrawals of state intervention. On the
otherhand, the opponents of globalisation strongly opine that other process globalisation is purposely
designed by the world capitalist class to upkeep its interest protected. The relevance of globalisation in less
developed countries like India is still questioned and the nature, structure and dimension of it In India is still
blur and vague.
It is often argued by economists and sociologists that the inequality between capital and labour, the
developed and developing regions have been growing at a galloping rate. The on-going scheme of
globalisation designed and implemented at the initiative of the metropolitan capital has added many new
dimensions to the pattern of capital labour relation. The exploitative framework of modern capitalism has
been more pronounced in the age globalisation. The future of labour in India, more particularly unskilled and
unorganised labours appears grim. The current phase of globalisation provides evidences of increased
impoverishment, unemployment, lower income, regional disparity, growing malnutrition and hunger (Moyo
and Amin :1992;Wood:1997).
The principal challenge relates to inequality is not only international but also intra-national. An
imperative question in this regard is the division of the prospective benefits from globalization, if any,
between affluent and underprivileged countries and among different groups and regions within a country
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(Chanda: 2002). There is a genuine need for more precision in formulating the distributional questions as it is
often argued that the rich are getting richer and the poor poorer. But this is by no means uniformly so. Much
depends on the region or the group chosen and what indicators of economic prosperity are used. However,
the defenders of globalization believe that the poor who participate in trade and exchange are generally
getting richer; globalization is not totally unfair to the poor and they too benefit from it. Even if the poor
were to get just a marginally richer, this would not necessarily imply that the poor were getting a pale share
of the potentially enormous benefits of global economic interrelations (Sen:2002). Following points
highlight the fact that globalization does not support the overall development of the economy of less
developed regions or the less dominant sections of the society:

• There has been a gradual shrinkage in employment opportunities in various sectors of the economy. The
scope of employment opportunities has been eroded in the age of globalisation particularly in the public
sector linked with both micro and macro privatization. Further, ever-increasing private sector offers
employment opportunities for skilled workers only leaving limited space for unskilled workers. As the
greatest fear of globalisation lies in its bias to capital-intensive production, it has obiviously led to the
shrinkages of employment opportunities for bulk of the people who cannot afford to be exceptionally skilled.
• Inflationary trend without any corresponding rise in real income of the people in general creates
problems for the lower and middle class people of the society. Over the years, although money income of the
common masses increases, the corresponding rise in the price level at a persistent rate practically earns no or
marginal level of real income for the masses.

• Decline in investment in agriculture leading to the further marginalisation of marginal cultivator is

caused due to the withdrawal of the government mainly from providing subsidies. The replacement of
subsistence type of farming by commercial agriculture as a part of the structural adjustment program has
given access to the MNCs in agricultural sector causing a real threat to the survival of small and marginal
farmers.

• Extermination of many cottage and small scale industries due to uneven competition from national large
scale industries, foreign companies and also from MNCs. Generally, the infrastructural facilities to
invigorate the small scale and indigenous industries is not favourable in most of the developing and
underdeveloped countries. The situation has further worsened due to the de-reservation in the small-scale
sector that practically invites medium scale industries to reap the benefit and subsidies which were earlier
exclusively available only for the small-scale industries. To cite the case of India, the uneven competition
between the domestic companies of India and mighty MNCs has even resulted in closure of some industrial
units under small and medium scale categories.
• Disinvestment and privatization of even profit-making public sector undertakings. The trend of
disinvestments and privatization that has been set in as a part of the on going reform process over last one
and half decade has even led to the privatisation of many profit making public sector enterprises in
developing countries including India. The over all force of globalisation that is operating from above is
compelling governments in many countries to take such decisions without no economic consideration as
such. As a result, it is not only affecting the internal development of the country adversely but also leading to
retrenchment of unskilled or semi skilled workers from public sector undertakings without providing suitable
alternative avenues. The unemployment problem that is resulting out of the process will be the most crucial
crisis for under developed and developing countries in the days ahead.
Conclusion :
In theory, globalization provides an opportunity to raise incomes through increased specialization
and trade. But this opportunity is conditioned by the size of the markets in question, which in turn depends
on geography, transportation costs, communication networks, and the institutions that support markets. There

5
should be a general consensus that completely free unregulated capitalist growth is not likely to address
poverty, unemployment etc and that some deliberate measures are to be adopted by governments. The state
intervention is absolutely necessary in the developmental strategies of LDCs like India. More specifically,
the development of less developed regions like India cannot be left entirely on market forces.
There is an urgent need to rethink on the process of globalization from the view point of
economically challenged sections and less dominant countries like India. It is a fact that the process of
globalization cannot be reversed. But the present process is not able to maximize global welfare and
moreover is resulting in increasing international economic instability. What is ideally and presently needed is
a fundamental approach to define development and a new development strategy, which puts redistribution of
gains of globalization and human needs at the pinnacle of its agenda. The achievement of rapid increase in
wealth without a corresponding increase of the welfare of the masses cannot and should not be the ultimate
goal of the global economy. The Government should concentrate on infrastructure and human resource
development in near future.
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