Globalisation

Globalisation

Globalisation refers to the process of integrating a country's economy with the economies of the rest of the world, through freer flows of trade (goods and services), investment (capital), and technology across national borders. For India, globalisation after 1991 meant deliberately reversing decades of a relatively closed, import-substituting trade regime.

Key measures under Globalisation:

1. Trade-policy liberalisation. Import tariffs (customs duties), which had been among the highest in the world, were progressively reduced over successive years. The elaborate system of import and export licensing was dismantled, and most quantitative restrictions (QRs) on imports — outright bans or fixed quotas — were removed, replaced mainly by tariffs (which are more transparent and market-friendly than direct quantity limits).
2. Liberalisation of Foreign Direct Investment (FDI). FDI was permitted, and progressively expanded, across a large and growing number of sectors of the economy. An automatic route was introduced for many sectors, under which foreign investment up to a specified limit does not require prior government approval at all — a sharp change from the pre-1991 position where nearly all foreign investment needed case-by-case clearance. FDI limits/caps in individual sectors have also been progressively raised over time.
3. Foreign Portfolio/Institutional Investment (FPI/FII). Foreign institutional investors were permitted to invest in the Indian stock market and other securities, opening Indian capital markets to global investors and giving Indian companies wider access to funds.
4. Currency convertibility. The rupee was made convertible on the current account (i.e. freely exchangeable for foreign currency for the purpose of trade in goods and services and other current transactions), a major step toward integrating India's trade with world markets; capital-account convertibility has moved more cautiously and remains only partial.
5. Access to global capital markets. Indian companies were permitted to raise funds directly from international investors through instruments such as Global Depository Receipts (GDRs) and American Depository Receipts (ADRs), rather than being confined only to domestic sources of capital.
6. Membership of the World Trade Organization (WTO). India became a founding member of the WTO in 1995 (the successor to GATT — the General Agreement on Tariffs and Trade), committing to a rules-based multilateral trading system and to agreements such as TRIPS (intellectual property) and TRIMS (trade-related investment measures).
7. Growth of trade in services, outsourcing, and IT. Liberalised trade and investment rules, combined with India's skilled English-speaking workforce, enabled rapid growth of information technology (IT) services and business process outsourcing (BPO), integrating India deeply into global service supply chains.