Globalisation, Liberalisation and Changes in Indian Industry

The 1990s mark a sharp turn in India’s industrial story. Before that, the government tightly controlled what private companies could do, where they could invest, and how much they could produce. Since the 1990s, the policy of liberalisation has opened up the economy. The idea was to let market forces, not government permits, decide what gets made and sold.

What liberalisation changed

• Private companies, especially foreign firms, were encouraged to invest in sectors that were earlier reserved for the government. These include telecom, civil aviation, power, and many others.
• Licenses are no longer required to open industries. This removed a major hurdle that earlier made it difficult to start a business.
• Foreign products became easily available in Indian shops. From soft drinks to electronics, the range of goods on shelves expanded dramatically.

The rise of multinationals and the fate of Indian companies

As a result of liberalisation, many Indian companies — both small and large — have been bought over by multinationals. At the same time, some Indian companies have themselves grown into multinationals.

An example of the first kind: Parle drinks was bought by Coca-Cola. Parle’s annual turnover was Rs 250 crore, while Coca-Cola’s advertising budget alone was Rs 400 crore. This level of spending naturally increased the consumption of Coke across India, replacing many traditional drinks.

Disinvestment and its human cost

The government is trying to sell its share in several public sector companies, a process called disinvestment. Many government workers fear that after disinvestment, they will lose their jobs.

A telling case is Modern Foods, a government company set up to make healthy bread available at cheap prices. It was the first company to be privatised. In the first five years after privatisation, 60% of its workers were forced to retire.

The shift to outsourcing and contract labour

More and more companies are reducing the number of permanent employees and outsourcing their work to smaller companies or even to homes. For multinationals, this outsourcing happens across the globe, with developing countries like India providing cheap labour.

Because small companies have to compete for orders from big companies, they keep wages low, and working conditions are often poor. It is also more difficult for trade unions to organise in smaller firms.

Almost all companies — even government ones — now practice some form of outsourcing and contracting. But the trend is especially visible in the private sector.

The big picture: employment and inequality

India is still largely an agricultural country. The service sector — shops, banks, the IT industry, hotels, and other services — is employing more people. The urban middle class is growing, along with urban middle-class values like those seen in television serials and films.

But there is a darker side. Very few people in India have access to secure jobs. Even the small number in regular salaried employment are becoming more insecure due to the rise in contract labour. Employment by the government was once a major avenue for increasing well-being, but that avenue is shrinking.

Some economists debate this, but liberalisation and privatisation worldwide appear to be associated with rising income inequality.

Land acquisition and displacement …