Question

How did the process of liberalisation initiated in India in the 1990s, promote globalisation? Explain.

Answer 1

In 1991, India adopted liberalisation as part of its New Economic Policy (NEP) to overcome an economic crisis. Liberalisation involved reducing government control over the economy, easing trade restrictions, and encouraging private and foreign investment. This process played a significant role in promoting globalisation in India in the following ways:

1. Removal of Trade Barriers.
   1. Before 1991, India had strict trade restrictions, including high import tariffs and quotas.
   2. Liberalisation removed these barriers, making it easier for foreign companies to trade in India and for Indian businesses to expand internationally.
   3. This increased the flow of goods and services, leading to greater integration with the global market.
2. Attraction of Foreign Direct Investment (FDI)
   1. The Indian government allowed 100% foreign investment in certain sectors, encouraging multinational companies (MNCs) to set up businesses in India.
   2. Major industries like automobiles, IT, telecommunications, and banking saw significant foreign investment.
   3. This increased employment opportunities and advanced technology transfer, strengthening India’s connection to the global economy.