A STUDY ON GLOBALIZATION & ITS IMPACT ON

INDIAN ECONOMY
Dr. Pramod Kumar Patjoshi
Associate Professor, Centurion University of Technology and Management, Jatni,
ABSTRACT
Globalisation is the new essence that has come to dictate the world since the nineties of the last
century. The limitations of the national with increased self-confidence on the market economy
and transformed faith in the private capital and resources, a process of structural adjustment
encouraged by the studies and influences of the World Bank and other International
organisations have started in many of the developing countries. Globalisation has fetched in new
openings to developing countries. The higher computation and access to developed country
markets and technology allocate offer potential improved productivity and higher living
standard. The Indian economy was well-organized by the barriers to trade and investment
liberalisation of trade up to the nineties. The development of globalisation of, investment and
financial flows originated in the nineties has increasingly depressed the barriers to competition
and accelerated the pace of globalisation. Therefore this paper studies the economic performance
of the Indian economy with the impact of globalisation with several factors of the Indian
economy are measured for the study.

Key words: Globalisation, growth trends, GDP, growth rate of the economy, FDI

INTRODUCTION
The strategic objective of Indian economy policy had experienced major changes during early
1990s. The economic reform, commonly known as, Liberalisation, Privatisation and
Globalisation (LPG model) intended to make the Indian economy as fast moving economy and
globally competitive. The main aim of changes in policy was for creation of a independent
economy and the reduction of the high levels of poverty that existed, all within a democratic
political framework. The different policies improvements commenced with respect to industrial
sector, trade in addition to the carious financial sectors aimed at reforming the Indian economy
more competent. With the beginning of reforms to liberalise in July of 1991, a new era has
emerged for India and its economy. The discussion which made that capital being scarce in
India, and it was vital to standardize the flow of the existing capital into socially projected
channels. This was achieved by an extravagant system of industrial licensing, state monopoly
and control over key industries. The foreign exchange had to be saved by restraining imports, as
it was thought that India was not accomplished of earning foreign exchange through exports.
Consequently the policy highlighted independence and neglected foreign trade as a means of
economic growth.

This period of economic changeover has had an incredible impact on the overall economic
growth of practically all major sectors of the economy, and its effects over the last two decade
can hardly be disregarded. In addition, it also marks the beginning of the real incorporation into
the global economy. Currently that India is in the way of streamlining its economy, with
ambitions of inspiring the present isolated position in the world, the need to accelerate the
economic growth is especially overbearing. And also the positive and vital role that Foreign
Direct Investment (FDI) has played in the speedy economic growth of most of the Southeast
Asian countries and most particularly China, India has boarded on an determined plan to outdo
the achievements of its neighbors to the east and is annoying to sell as a safe and profitable
purpose for FDI.
“Globalisation” denotes to the grooming incorporation of economies around the world,
particularly in terms of trade and financial flows, however it also includes labour and knowledge.
Globalisation has various meanings depending on the context and not only includes opening up
of world trade, development of advanced means of communication, internationalization of
financial markets, growing importance of MNCs, population migrations and more generally
increased mobility of persons, goods, capital, data and ideas but also infections, diseases and
pollution. The term globalisation also denotes to the incorporation of economies of the world
through immoral trade and financial flows, as also through mutual exchange of technology and
knowledge.

Objectives of the Study

1. To study the impact of globalization on Indian economy.
2. To analyse the Economic performance and growth of India due to globalization.

The Important Reform Processes

The Important Reform Processes (Step Towards liberalisation privatisation and Globalisation)
was in deep crisis in July 1991, when foreign currency reserves had tumbled to almost $1 billion;
Inflation had boomed to an annual rate of 17 percent; fiscal deficit was very high and had
become unsustainable; foreign investors and NRIs had lost confidence in Indian Economy.
Capital was flying out of the country and we were close to defaulting on loans. Along with these
bottlenecks at home, many unforeseeable changes swept the economies of nations in Western
and Eastern Europe, South East Asia, Latin America and elsewhere, around the same time. These
were the economic pressures at home and abroad that called for a complete renovating of our
economic policies and programs. Major measures initiated as a part of the liberalization and
globalization strategy in the early nineties included the following:
 Devaluation of Indian currency by 18-19 percent against major currencies in the international
foreign exchange market.
 Disinvestment to make the process of globalization smooth, privatization and liberalization
policies are moving along as well.
 Dismantling of the industrial Licensing Regime mainly on accounting of environmental
safety and strategic considerations.
 Allowing foreign Direct Investment (FDI) across a wide spectrum of industries and
encouraging non-debt flows.
 Non Resident Indian Scheme the general policy and facilities for foreign direct investment as
available to foreign investors / Companies are fully applicable to NRIs as well.
 Throwing open industries reserved for the public sector to private participation.
 Abolition of the (MRTP) Act, which necessitated prior approval for capacity expansion
 The removal of quantitative restrictions on imports.
 The reduction of the peak customs tariff-Wide-ranging financial sector reforms in the
banking, capital markets, and insurance sectors, including the deregulation of interest rates.

Consequences of Globalisation to Indian Economy

Globalisation offers both opportunities and challenges for our country in many ways. It has
created significant opportunities for manufacturing, agriculture, service sectors and many others.
Besides, there has been significant inflow of foreign investments in to India. The challenges of
globalisation lies not in stopping the expansion of global market, but in setting rules and
institutions for better governance at local, national, regional and global levels. Further,
globalisation is not just to reservation the advantages of global market and competition but also
to provide enough space for human, community and environmental resources to ensure that
globalisation works for people and not just for profits.

Analysis of India GDP Annual Growth Rate from 1991-92 to 2013-14

The table-1 and graph-1 show the trend of GDP Annual Growth Rate from 1991-92 to 2013-14.

Table-1
Annual Growth of GDP (In %)
Annual Growth Annual Growth
Year Year
of GDP (In %) of GDP (In %)
1991-92 1.4 2002-03 3.9
1992-93 5.4 2003-04 8.0
1993-94 5.7 2005-06 7.1
1994-95 6.4 2006-07 9.5
1995-96 7.3 2007-08 9.6
1996-97 8.0 2008-09 9.3
1997-98 4.3 2009-10 6.7
1998-99 6.7 2010-11 8.6
1999-2000 8.0 2011-12 8.9
2000-01 4.1 2012-13 6.7
2001-02 5.4 2013-14 4.5
Source: Economic Survey 2013-14
Graph-1
Annual Growth of GDP (In %)
12
10
8
6
4
2
0
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99

2000-01
2001-02
2002-03
2003-04
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
1999-2000

Annual Growth of GDP (In %)

The economic scenario in India has been pretty stable and fluctuated around 5% to 10% after
globalization in the most of the period of study. The Indian GDP has shown an increasing trend
over years of study. It observes from above table and graph that the average percentage growth
of GDP of India 6.61% and touched all time high of 9.6% 2007-08 after globalization.

Analysis of India's Food Grain Production from 1991-92 to 2013-14

The table-2 and graph-2 show the India's Food Grain Production from 1991-92 to 2013-14.
Table-2
India's Food Grain Production in million tons
India's Food Grain Production India's Food Grain Production
Year Year
in million tons in million tons
1991-92 168.38 2002-03 174.78
1992-93 179.48 2003-04 213.19
1993-94 184.26 2005-06 198.36
1994-95 191.50 2006-07 208.59
1995-96 180.42 2007-08 217.28
1996-97 199.43 2008-09 230.78
1997-98 193.12 2009-10 234.47
1998-99 203.61 2010-11 218.11
1999-2000 209.80 2011-12 244.49
2000-01 196.81 2012-13 259.29
2001-02 212.85 2013-14 257.13
Source: Economic Survey 2013-14
Graph-2
India's Food Grain Production in million tons
300
250
200
150
100
50
0
1997-98
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97

1998-99

2000-01
2001-02
2002-03
2003-04
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
1999-2000

India's foodgrain production in million tonnes

The India's Food Grain Production has shown an increasing trend after globalization. It has
increased from 168.38 million tons in the year 1991-92 to 257.13 million tons in the year 2013-
14 after recording an all-time high of 259.29 million tons in the year 2012-13. The average
India's Food Grain Production is 208.01 million tons for study period. India's Food Grain
Production increased by 52.71 per cent after globalization from the year 1991-92 to 2013-14.

Analysis of India Imports from 1991-92 to 2013-14

The table-3 and graph-3 show the India Imports from 1991-92 to 2013-14 . Imports to India has
shown as increasing trend year-on-year to USD 490737 million in 2013-14 from USD 19411
million in 1991-92. India averaged of USD 144708.64 million from 1991-92 until 2013-14.
Table-3
India's Imports in US$ million

India's Imports India's Imports

Year Year
in US$ million in US$ million
1991-92 19411 2002-03 61412
1992-93 21882 2003-04 78149
1993-94 23306 2005-06 111517
1994-95 28654 2006-07 149166
1995-96 36678 2007-08 185735
1996-97 39133 2008-09 251654
1997-98 41484 2009-10 303696
1998-99 42389 2010-11 288373
1999-2000 49738 2011-12 369769
2000-01 49975 2012-13 489319
2001-02 51413 2013-14 490737
Source: Economic Survey 2013-14
Graph-3
India's Imports in US$ million
600000
500000
400000
300000
200000
100000
0
1991-92

1996-97

2001-02

2007-08

2012-13
1992-93
1993-94
1994-95
1995-96

1997-98
1998-99

2000-01

2002-03
2003-04
2005-06
2006-07

2008-09
2009-10
2010-11
2011-12

2013-14
1999-2000

India's imports in US$ million

Indian imports increased by 2428.14 per cent after globalization from the year 1991-92 to 2013-
14 and touched all time high of US$ 490737 million during 2013-14. It can clearly observe from
the above that the import has increased significantly year by year from the globalization. This
occurred mainly due to India is heavily dependent mainly on crude oil imports. Apart from crude
oil India also imports gold and silver, machinery, electronic goods and pearls, precious and semi-
precious stones. India’s main import partners are China, United Arab Emirates, Saudi Arabia,
Switzerland and the United States.

Analysis of Indian Exports from 1991-92 to 2013-14

The table-4 and graph-4 show the trend of Indian Exports from 1991-92 to 2013-14. Like Import,
Exports has shown an increasing trend and reached to USD 300401 million in 2013-14 from
USD 17865 million in 19961-92. Exports in India averaged USD 98061.86 Million from 1991-
92 until 2013-14, reaching an all-time high of USD 305964 Million in the year 2012-13 and a
record low of USD 17865 Million in 1991-92.
Table-4
India's Exports in US$ million

India's Exports India's Exports

Year Year
in US$ million in US$ million
1991-92 17865 2002-03 52719
1992-93 18537 2003-04 63843
1993-94 22238 2005-06 83536
1994-95 26330 2006-07 103091
1995-96 31797 2007-08 126414
1996-97 33470 2008-09 163132
1997-98 35006 2009-10 185295
1998-99 33218 2010-11 178751
1999-2000 36715 2011-12 251136
2000-01 44076 2012-13 305964
2001-02 43827 2013-14 300401
Source: Economic Survey 2013-14
Graph-4
India's Exports in US$ million
350000
300000
250000
200000
150000
100000
50000
0
1991-92

1996-97

2001-02

2007-08

2012-13
1992-93
1993-94
1994-95
1995-96

1997-98
1998-99

2000-01

2002-03
2003-04
2005-06
2006-07

2008-09
2009-10
2010-11
2011-12

2013-14
1999-2000

India's exports in US$ million

It has depicted from table and graph, the export has increased by 1581.51 per cent after
globalization from the year 1991-92 to 2013-14 and touched USD 300401 million during 2013-
14. In recent years, India has become one of the biggest refined product exporters in Asia with
petroleum accounting for around 20 percent of total exports. The country also exports:
engineering goods (19 percent of the total shipments), chemical and pharmaceutical products (14
percent), gems and jewellery (14 percent), agricultural and allied products (10 percent) and
textiles and clothing (10 percent). India’s main export partners are: United Arab Emirates (12.1
percent of the total exports), the United States (12 percent), Singapore (4.5 percent), China (4.5
percent), Hong Kong (4 percent) and Netherlands (3.5 percent).

Analysis of India Foreign Exchange Reserves from 1991-92 to 2013-14

The table-5 and graph-5 show the trend of India Foreign Exchange Reserves from 1991-92 to
2013-14.

Table-5
India Foreign Exchange Reserves in USD million
India's Foreign Exchange India's Foreign Exchange
Year Year
Reserves in USD million Reserves in USD million
1991-92 9220 2002-03 76100
1992-93 9832 2003-04 112959
1993-94 19254 2005-06 141514
1994-95 25186 2006-07 151622
1995-96 21687 2007-08 199179
1996-97 26423 2008-09 309723
1997-98 29367 2009-10 251986
1998-99 32490 2010-11 279057
1999-2000 38036 2011-12 304818
2000-01 42281 2012-13 294397
2001-02 54106 2013-14 292047
Source: Economic Survey 2013-14
Graph-5
 India's Foreign Exchange Reserves in US$ million
350000
300000
250000
200000
150000
100000
50000
0
1991-92

1996-97

2001-02

2007-08

2012-13
1992-93
1993-94
1994-95
1995-96

1997-98
1998-99

2000-01

2002-03
2003-04
2005-06
2006-07

2008-09
2009-10
2010-11
2011-12

2013-14
1999-2000
India's foreign exchange reserves in US$ million

India Foreign Exchange Reserves has shown as increasing trend year-on-year to USD 292047
million in 2013-14 from USD 9220 million in 1991-92. India Foreign Exchange Reserves
averaged of USD 123694.73 million from 1991-92 until 2013-14. Indian Foreign Exchange
Reserves increased by 3067.58 per cent after globalization from the year 1991-92 to 2013-14 and
touched all time high of USD 309723 million during 2008-09.

Analysis of Indian External Debt from 1991-92 to 2013-14

The table-6 and graph-6 show the trend of Indian External Debt from m 1991-92 to 2013-14.
External Debt in India averaged USD 159063.64 million from 1991-92 until 2013-14, reaching
an all-time high of USD 404900 million in the year 2013-14 and a record low of USD 85300
million in the year 1991-92. External Debt in India is reported by the Ministry of Finance,
Government of India. Indian External Debt has increased by 374.68 per cent after globalization
from the year 1991-92 to 2013-14.
Table-6
India's External Debt in USD million
India's External Debt India's External Debt
Year Year
in USD million in USD million
1991-92 85300 2002-03 104900
1992-93 90000 2003-04 112700
1993-94 92700 2005-06 134000
1994-95 99000 2006-07 139100
1995-96 93700 2007-08 172400
1996-97 93500 2008-09 224400
1997-98 93500 2009-10 224500
1998-99 96900 2010-11 260900
1999-2000 98300 2011-12 317900
2000-01 101300 2012-13 360700
2001-02 98800 2013-14 404900
 Source: Economic Survey 2013-14
Graph-6
India's External Debt in US$ million
500000
400000
300000
200000
100000
0
1991-92

1996-97

2001-02

2007-08

2012-13
1992-93
1993-94
1994-95
1995-96

1997-98
1998-99

2000-01

2002-03
2003-04
2005-06
2006-07

2008-09
2009-10
2010-11
2011-12

2013-14
1999-2000 India's external debt in US$ million

Analysis of Capital Market in India from 1991-92 to 2013-14

The table-7 and graph-7 show the trend of Capital Market in India from 1991-92 to 2013-14.
Table-7
Year Sensex Year Sensex
1991-92 2615.37 2002-03 5838.96
1992-93 3346.06 2003-04 6602.69
1993-94 3926.9 2005-06 9397.93
1994-95 3110.49 2006-07 13786.91
1995-96 3085.2 2007-08 20286.99
1996-97 3658.98 2008-09 9647.31
1997-98 3055.41 2009-10 17464.81
1998-99 5005.82 2010-11 20509.09
1999-2000 3972.12 2011-12 15454.92
2000-01 3262.33 2012-13 19426.71
2001-02 3377.28 2013-14 21170.68
Source: Economic Survey 2013-14
Graph-7
 Sensex
25000

20000

15000

10000

5000

2009-10
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99

2000-01
2001-02
2002-03
2003-04
2005-06
2006-07
2007-08
2008-09

2010-11
2011-12
2012-13
2013-14
1999-2000
Sensex

The India Sensex Stock Market Index reached an all-time high of 21170.68 in 2013-14 and a
record low of 2615.37 in 1991-92. The Sensex (BSE30) is a major stock market index which
tracks the performance of 30 major companies listed on the Bombay Stock Exchange. The
companies are chosen based on the liquidity, trading volume and industry representation. The
Sensex is a free-float market capitalization-weighted index. The Index has a base value of 100 as
of 1978-79. The average Sensex value is 9000.13 and has increased by 709.47 per cent after
globalization from the year 1991-92 to 2013-14.

The Positive Effects of Globalization

 Entrance of multi-national companies where the consumers have wider range of products
to choose from.
 Increase in flow of investments which help developing countries can be used for
economic reconstruction.
 Cultural barriers use to overcome due to faster flow of information among different
countries.
 Technological development has resulted in reverse brain drain in developing countries.

The Negative Effects of Globalization

 The outsourcing of jobs to developing countries has resulted in loss of jobs in developed
countries.
 There is a greater threat of spread of communicable diseases.
 There is an underlying threat of multinational corporations with immense power ruling
the globe.
 Smaller developing nations at the receiving end, it could indirectly lead to a subtle form
of colonization.

Conclusion
India gained highly from the LPG model as economic scenario in India has been pretty stable
over the last two decades. India's GDP growth has been slow but careful and steady. India is all
set to rule and give the global force a run for their money. To the extent that the economic
development is concerned India is surely on a roll. The previous twenty five years have certainly
showed tremendously advantageous for India. India's food grain production has more than
doubled over the decades, The India’s foreign exchange reserves have grown significantly since
1991-92 in spite of India's imports have shot up at a faster pace than exports over the decades
resulting in a widening gap in the trade balance. In respect of capital market (which takes into
account the market value of a quoted company by multiplying its current share price by the
number of shares in issue), According to trade pundits India will take the third position as Far as
GDP growth in concerned by 2020 replacing Germany, the UK, and Japan. Only United States
and China will be ahead of it.

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