Question.
Discuss the effects of globalization and liberalization policies on the Indian economy with particular reference to foreign trade, capital flows, and technology transfer.
( UPPSC, UP PCS Mains General Studies-III/GS-3 2022)
Answer.
Globalization and liberalization policies on the Indian economy has a significant impact since the 1990s. Globalization and liberalization have contributed integration of the Indian economy with the global economy.
Here are some of the effects of globalization and liberalization policies on foreign trade, capital trade, and technology transfer:
Foreign trade; Globalisation and liberalization policies have increased India’s foreign trade. Now, India is a major player in global trade, with both exports and imports increasing significantly. Liberalization of trade policies has made foreign companies do business in India. Prior to the 1990s, we mainly exported agricultural goods whereas now the majority of our export is comprised of manufacturing goods and IT services.
Capital flow; Liberalization and globalization have increased foreign investment in India and capital flows. Foreign investors have invested in various sectors in India like manufacturing, services, and infrastructure; which has led to an increase in economic growth and job creation. Now, India is one of the largest Foreign Direct investment destinations in the world. In the year 2022, India received approximately 85 $ billion of FDI, which is the highest ever.
Technology transfer; Globalization and liberalization have facilitated the transfer of technology to India. Foreign companies have brought in new technologies in various sectors like automobile, manufacturing, defense, space, and agriculture sectors that helped to improve productivity and competitiveness in the Indian economy.
Due to foreign trade, capital flow, and technology transfer, India has become the hub of technology, particularly in the information technology (IT) and pharmaceutical sectors.
However, there is also a negative effect of globalization and liberalization policies on the Indian economy as it increases inequality, vulnerability to global economic shocks, and environmental degradation.
In conclusion, we can say globalization and liberalization and both negative and positive impacts on the Indian economy. The government needs to take steps to mitigate the negative effects of globalization and liberalization policies to promote inclusive and sustainable growth in the country.
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