Political Science · Ch 7 — Globalisation
India and Globalisation
India and Globalisation
The story of India and globalisation is not new — it is a long arc of connection, disruption, and deliberate choice.
Flows of capital, commodities, ideas, and people have moved into and out of India for centuries. What changed over time was who controlled those flows and for whose benefit.
The colonial rupture
Under British rule, India’s role in the global economy was forced into a specific mould: we became an exporter of primary goods and raw materials (cotton, indigo, tea, minerals) and a consumer of finished manufactured goods from Britain. This was not a natural exchange — it was engineered to serve Britain’s imperial ambitions. Indian industry was systematically de-industrialised, and the economy was made dependent.
The post-independence turn: protectionism
Because of this bitter experience, independent India chose a radically different path. The core logic was: we must make things ourselves rather than rely on others. This meant two things:
- Import substitution: we decided not to allow others to export to us, so that our own producers could learn to manufacture.
- Protectionism: high tariffs, quotas, and licensing were used to shield domestic industry from foreign competition.
Protectionism was a deliberate response to colonial exploitation, but it came with its own costs. It is a mistake to see it as either wholly good or wholly bad — the textbook presents both its achievements and its failures.
What protectionism achieved — and what it missed
Some advances were made in certain sectors (heavy industry, scientific research, public sector enterprises). But critical areas of human development were neglected:
- Health
- Housing
- Primary education
These did not receive the attention they deserved. Meanwhile, the overall rate of economic growth remained sluggish — India’s growth rate for much of the post-independence period was around 3–4% per year, derisively called the "Hindu rate of growth".
The 1991 turning point
In 1991, two forces converged:
- A financial crisis — India’s foreign exchange reserves had fallen so low that they could barely cover a few weeks of imports.
- A desire for higher rates of economic growth — the protectionist model had not delivered the prosperity needed for a vast population.
India embarked on a programme of economic reforms that sought to de-regulate various sectors, including trade and foreign investment. This meant:
- Reducing import tariffs and quotas
- Allowing foreign direct investment (FDI) in many industries
- Removing the licensing system (the "Licence Raj") for most businesses
- Encouraging private sector participation in areas previously reserved for the state
The ultimate test — not just growth
The textbook is careful not to declare a final verdict. It says: it may be too early to say how good this has been for India. The real measure is not high growth rates alone. …