New Economic Policy Of India
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NEW ECONOMIC POLICY OF INDIA India was under socialist-based policies for an entire generation from the 1950s until the 1980s. The economy was characterised by extensive regulation, protectionism, and public ownership, leading to pervasive corruption and slow growth. Indian economic policy after independence was influenced by the colonial experience and by those leaders' exposure to socialism
Policy tended towards protectionism, with a strong rules on import substitution, industrialization, financial markets, a large public sector etc., India’s plan resembled central planning in the Soviet Union because Russia was the india’s major trading patner. Jawaharlal Nehru, the first prime minister, along with the statistician Prasanta Chandra, carried on by Indira Gandhi formulated and oversaw economic policy. The policy of concentrating simultaneously on capital- and technology-intensive heavy industry
The Rockefeller Foundation's research in highyielding varieties of seeds, their introduction after 1965 and the increased use of fertilizers and irrigation are known collectively as the Green Revolution, which provided the increase in production needed to make India self-sufficient in food grains, thus improving agriculture in India.
In the late 80s, the government led by Rajiv Gandhi eased restrictions on capacity expansion, removed price controls and reduced corporate taxes. While this increased the rate of growth, it also led to high fiscal deficits and a worsening current account. The collapse of the Soviet Union, which was India's major trading partner, and the first Gulf War, which caused a spike in oil prices, caused a major balance-of-payments crisis on Loan for India.
In response, Prime Minister Narasimha Rao along with his finance minister Manmohan Singh initiated the economic liberalisation of 1991,which allowed foreign direct investment in many.During this period India has emerged as one of the fastest-growing economies in the developing world; during this period, the economy has grown constantly, but with a few major setbacks. This has been accompanied by increases in life expectancy, literacy rates and food security.
The economy of India is the twelfth largest economy in the world by market exchange rates and the fourth largest by purchasing power parity India's large service industry accounts for 54% of the country's GDP while the industrial and agricultural sector contribute 29% and 17% respectively. Agriculture is the predominant occupation in India, accounting for about 60% of employment. The service sector makes up a further 28%, and industrial sector around 12%. India currently accounts for 1.5% of World trade as of 2007 according to the WTO.
While the credit rating of India was hit by its nuclear tests in 1998, it has been raised to investment level in 2007.In 2003, it was predicted that India's GDP in current prices will overtake • France and Italy by 2020, • Germany, UK and Russia by 2025 and • Japan by 2035. By 2035, it was projected to be the third largest economy of the world, behind US and China.
GLOBALIZATION
Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology. Globalization has been driven by policies that have opened economies domestically and internationally
Globalization means increasing the interdependence, connectivity and integration on a global level with respect to the social, cultural, political, technological, economic and ecological levels. Worldwide movement toward economic, financial, trade, and communications integration. Globalization implies opening out beyond local and nationalistic perspectives to a broader outlook of an interconnected and inter-dependent world with free transfer of capital, goods, and services across national
Proponents of globalization argue that it allows poor countries and their citizens to develop economically and raise their standards of living, while opponents of globalization claim that the creation of an unfettered international free market has benefited multinational corporations in the Western world at the expense of local enterprises, local cultures, and common people
Effects of The various beneficial effects of globalization in Indian Industry are globalization that it brought in huge amounts of foreign investments into the
industry especially in the BPO, pharmaceutical, petroleum, and manufacturing industries. As huge amounts of foreign direct investments were coming to the Indian Industry, they boosted the Indian economy. The benefits of the effects of globalization in the Indian Industry are that many foreign companies set up industries in India, especially in the pharmaceutical, BPO, petroleum, manufacturing, and chemical sectors and this helped to provide employment to many people in the country. This helped reduce the level of unemployment and poverty in the country. Also the benefit of the Effects of Globalization on Indian Industry are that the foreign companies brought in highly advanced technology with them and this helped to make the Indian Industry more technologically advanced.
Effect of Globalization on Manufacturing Industries, • The initiation and development of globalization of the Indian manufacturing sector took place simultaneously in the 1990s • The introduction and the subsequent development of globalization of the Indian manufacturing sector respectively helped India to shed its age old tag of being 'an agriculture based country'. The main growth driver of the Indian manufacturing sector are Information Technology and hardware, telecommunication hardware, automobile, pharmaceutical, biotechnology, infrastructure, electronic, electrical, textiles, etc.
The positive effect of the globalization of the Indian manufacturing sector can be corroborated from the following facts The Indian industrial growth exceeded 10% Manufacturing growth rate exceeded 12 % Manufacturing of consumer durables and non-durables have also recorded upswings Telecommunication sector with inflows of US$ 405 million has registered the maximum growth of 950% Merchandise exports recorded strong growth The automotive industry achieved a growth rate of over 20% in 2006-07 The biotechnology industry witnessed another good year in 2006-07 and registering more than 40% of growth. The US$6.4 billion Indian retail industry is expected to grow over 20% annually to US$ 23 billion by 2010
Although, the process of globalization of the Indian manufacturing sector have contributed immensely for the overall development of the Indian economy but it still suffers from some bottlenecks, like the following Use of primitive technology or under utilization of technology Poor infrastructure Over staffed operations Expensive financing and bureaucracy
Industries effected by Globalization are, • • • • • •
The Indian Petroleum Industry, The Indian Pharmaceutical Industry, The Indian Chemical Industry, The Indian Textile Industry, The Indian Steel Industry, The Indian Cement Industry.
Globalization and the Indian Petroleum The Indian Petroleum Industry was dependent from the very beginning on foreign capital, expert personnel, and technology, which led to the industry's globalization . The incentives that were declared by the government to encourage Globalization and the Indian Petroleum Industry are that • on imports that were required for petroleum operations custom duty would not have to be paid, • no tax on the production of crude oil, provisions for liberal depreciation • tax holidays for 7 years from the day that production starts • freedom to sell natural gas and crude oil in the domestic market.
Industry:
Globalization and Indian Pharmaceutical Industry : •
•
•
Globalization of Indian Pharmaceutical Industry are that it brought in huge amounts of foreign currency into the industry which in its turn helped to boost the Indian economy. Many Indian pharmaceutical companies took over international pharmaceutical companies such as Ranbaxy merged with Croslands, Wockhardt with Merind, and Nicholas Piramal with Sumitra Pharma. This helped the Indian pharmaceutical companies to grow and make even more profits
The various disadvantages of Globalization of Indian Pharmaceutical Industry are
,
competition increased in the Indian market between the foreign pharmaceutical companies and domestic companies. This reduced the profit levels of the Indian pharmaceutical companies as a result of which many had to close down such as Hindustan Ciba Geigy, Park Davis, Boehringer Mannheim, and Abbot.
Many foreign pharmaceutical companies are taking over the Indian pharmaceutical companies such as SKB merged with Sterling, Ciba Geigy merged with Sandoz, and Rhone Poulenc merged with Fashions. This has led to the fear that foreign pharmaceutical companies will take over the Indian Pharmaceutical Industry.
Globalization and Indian chemical industry: After Independence,Indian Government controlled majority of the Indian chemical Industries. Globalization of Indian chemical Industries started at early 1990s. Foreign Institutional Investors (FII). Foreign Direct Investments (FDI ).
Globalization and the Indian Textile Industry: •
•
•
The Indian textile industry, until the economic liberalization of Indian economy was predominantly an unorganized industry. The economic liberalization of Indian textile industry in the early 1990s led to growth of this industry. The Indian textile industry is one of the largest textile industries in the world and India earns around 27% of the foreign exchange from exports of textiles and its related products. The contribution of the Indian textile Industry towards the GDP of India is around 3%.
•
•
Textile manufacturing sector in India accounts for 76% of the total textile production. The Indian textile industry employs around 35 million personnel directly and it accounts for 21% of the total employment generated in the economy.
Globalization and The Indian steel industry :
The effects of Globalization on Indian steel industry are not same throughout the country. The effects depend on the different regions, the type of raw materials used, the condition of the markets, technological advancements, the policies of the governmental authorities In this age of the globalization, the Indian steel manufacturing sector needs to restructure itself, in order to have a sustainable growth.
The reduction of the cost is another major factor in the survival of the Indian steel industry in the age of globalization. The cost reduction would be the main aspect of the improvement pertaining to the competitiveness of the industry. The manufacturers under the steel industry in India have to focus their attention in the areas such as: The reduction in the cost of operations The reduction in the costs pertaining to the working capital The reduction in the costs pertaining to the production inventory or stock that is not sold The improvement in the economics operating in the technological aspects of production The transposition of basic materials of production The sources of the procurement should be different
Globalization and The Indian Cement Industry :
Globalization of Indian Cement Industry has helped the industry to restructure itself to coop up with the alterations in the global economic and trading system. The increase in the construction activities has led to the increase in the demand for updated quality building materials and other allied products. Cement being one of the major elements in the construction work, there is a growth in the cement industry in India.With the globalization of Indian cement industry many foreign cement manufacturers are engaging themselves in agreements and deals with their India counter parts to have a share of the growth.
Globalization of Indian Cement Industry includes several foreign companies engaging in mergers and acquisitions of Indian cement companies like, • Heidelberg Cement - Indorama Cement Ltd. • Holcim Cement - Gujarat Ambuja Cements(GACL). • Italcementi cement - Zuari Cement Limited. • the Lafarge Cement Company - the Tisco and the Raymond cement plants.
Advantages of Globalization:
Increased free trade between nations Increased liquidity of capital allowing investors in developed nations to invest in developing nations Corporations have greater flexibility to operate across borders Global mass media ties the world together Increased flow of communications allows vital information to be shared between individuals and corporations around the world Greater ease and speed of transportation for goods and people Reduction of cultural barriers increases the global village effect Spread of democratic ideals to developed nations Greater interdependence of nation-states Reduction of likelihood of war between developed nations Increases in environmental protection in developed nations
Disadvantages of Increased flow of skilled and non-skilled jobs from Globalization: developed to developing nations as corporations
seek out the cheapest labor Increased likelihood of economic disruptions in one nation effecting all nations Corporate influence of nation-states far exceeds that of civil society organizations and average individuals Threat that control of world media by a handful of corporations will limit cultural expression Greater chance of reactions for globalization being violent in an attempt to preserve cultural heritage Greater risk of diseases being transported unintentionally between nations
Spread of a materialistic lifestyle and attitude that sees consumption as the path to prosperity International bodies like the World Trade Organization infringe on national and individual sovereignty Increase in the chances of civil war within developing countries and open war between developing countries as they vie for resources Decreases in environmental integrity as polluting corporations take advantage of weak regulatory rules in developing countries
Policy tended towards protectionism, with a strong rules on import substitution, industrialization, financial markets, a large public sector etc., India’s plan resembled central planning in the Soviet Union because Russia was the india’s major trading patner. Jawaharlal Nehru, the first prime minister, along with the statistician Prasanta Chandra, carried on by Indira Gandhi formulated and oversaw economic policy. The policy of concentrating simultaneously on capital- and technology-intensive heavy industry
The Rockefeller Foundation's research in highyielding varieties of seeds, their introduction after 1965 and the increased use of fertilizers and irrigation are known collectively as the Green Revolution, which provided the increase in production needed to make India self-sufficient in food grains, thus improving agriculture in India.
In the late 80s, the government led by Rajiv Gandhi eased restrictions on capacity expansion, removed price controls and reduced corporate taxes. While this increased the rate of growth, it also led to high fiscal deficits and a worsening current account. The collapse of the Soviet Union, which was India's major trading partner, and the first Gulf War, which caused a spike in oil prices, caused a major balance-of-payments crisis on Loan for India.
In response, Prime Minister Narasimha Rao along with his finance minister Manmohan Singh initiated the economic liberalisation of 1991,which allowed foreign direct investment in many.During this period India has emerged as one of the fastest-growing economies in the developing world; during this period, the economy has grown constantly, but with a few major setbacks. This has been accompanied by increases in life expectancy, literacy rates and food security.
The economy of India is the twelfth largest economy in the world by market exchange rates and the fourth largest by purchasing power parity India's large service industry accounts for 54% of the country's GDP while the industrial and agricultural sector contribute 29% and 17% respectively. Agriculture is the predominant occupation in India, accounting for about 60% of employment. The service sector makes up a further 28%, and industrial sector around 12%. India currently accounts for 1.5% of World trade as of 2007 according to the WTO.
While the credit rating of India was hit by its nuclear tests in 1998, it has been raised to investment level in 2007.In 2003, it was predicted that India's GDP in current prices will overtake • France and Italy by 2020, • Germany, UK and Russia by 2025 and • Japan by 2035. By 2035, it was projected to be the third largest economy of the world, behind US and China.
GLOBALIZATION
Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology. Globalization has been driven by policies that have opened economies domestically and internationally
Globalization means increasing the interdependence, connectivity and integration on a global level with respect to the social, cultural, political, technological, economic and ecological levels. Worldwide movement toward economic, financial, trade, and communications integration. Globalization implies opening out beyond local and nationalistic perspectives to a broader outlook of an interconnected and inter-dependent world with free transfer of capital, goods, and services across national
Proponents of globalization argue that it allows poor countries and their citizens to develop economically and raise their standards of living, while opponents of globalization claim that the creation of an unfettered international free market has benefited multinational corporations in the Western world at the expense of local enterprises, local cultures, and common people
Effects of The various beneficial effects of globalization in Indian Industry are globalization that it brought in huge amounts of foreign investments into the
industry especially in the BPO, pharmaceutical, petroleum, and manufacturing industries. As huge amounts of foreign direct investments were coming to the Indian Industry, they boosted the Indian economy. The benefits of the effects of globalization in the Indian Industry are that many foreign companies set up industries in India, especially in the pharmaceutical, BPO, petroleum, manufacturing, and chemical sectors and this helped to provide employment to many people in the country. This helped reduce the level of unemployment and poverty in the country. Also the benefit of the Effects of Globalization on Indian Industry are that the foreign companies brought in highly advanced technology with them and this helped to make the Indian Industry more technologically advanced.
Effect of Globalization on Manufacturing Industries, • The initiation and development of globalization of the Indian manufacturing sector took place simultaneously in the 1990s • The introduction and the subsequent development of globalization of the Indian manufacturing sector respectively helped India to shed its age old tag of being 'an agriculture based country'. The main growth driver of the Indian manufacturing sector are Information Technology and hardware, telecommunication hardware, automobile, pharmaceutical, biotechnology, infrastructure, electronic, electrical, textiles, etc.
The positive effect of the globalization of the Indian manufacturing sector can be corroborated from the following facts The Indian industrial growth exceeded 10% Manufacturing growth rate exceeded 12 % Manufacturing of consumer durables and non-durables have also recorded upswings Telecommunication sector with inflows of US$ 405 million has registered the maximum growth of 950% Merchandise exports recorded strong growth The automotive industry achieved a growth rate of over 20% in 2006-07 The biotechnology industry witnessed another good year in 2006-07 and registering more than 40% of growth. The US$6.4 billion Indian retail industry is expected to grow over 20% annually to US$ 23 billion by 2010
Although, the process of globalization of the Indian manufacturing sector have contributed immensely for the overall development of the Indian economy but it still suffers from some bottlenecks, like the following Use of primitive technology or under utilization of technology Poor infrastructure Over staffed operations Expensive financing and bureaucracy
Industries effected by Globalization are, • • • • • •
The Indian Petroleum Industry, The Indian Pharmaceutical Industry, The Indian Chemical Industry, The Indian Textile Industry, The Indian Steel Industry, The Indian Cement Industry.
Globalization and the Indian Petroleum The Indian Petroleum Industry was dependent from the very beginning on foreign capital, expert personnel, and technology, which led to the industry's globalization . The incentives that were declared by the government to encourage Globalization and the Indian Petroleum Industry are that • on imports that were required for petroleum operations custom duty would not have to be paid, • no tax on the production of crude oil, provisions for liberal depreciation • tax holidays for 7 years from the day that production starts • freedom to sell natural gas and crude oil in the domestic market.
Industry:
Globalization and Indian Pharmaceutical Industry : •
•
•
Globalization of Indian Pharmaceutical Industry are that it brought in huge amounts of foreign currency into the industry which in its turn helped to boost the Indian economy. Many Indian pharmaceutical companies took over international pharmaceutical companies such as Ranbaxy merged with Croslands, Wockhardt with Merind, and Nicholas Piramal with Sumitra Pharma. This helped the Indian pharmaceutical companies to grow and make even more profits
The various disadvantages of Globalization of Indian Pharmaceutical Industry are
,
competition increased in the Indian market between the foreign pharmaceutical companies and domestic companies. This reduced the profit levels of the Indian pharmaceutical companies as a result of which many had to close down such as Hindustan Ciba Geigy, Park Davis, Boehringer Mannheim, and Abbot.
Many foreign pharmaceutical companies are taking over the Indian pharmaceutical companies such as SKB merged with Sterling, Ciba Geigy merged with Sandoz, and Rhone Poulenc merged with Fashions. This has led to the fear that foreign pharmaceutical companies will take over the Indian Pharmaceutical Industry.
Globalization and Indian chemical industry: After Independence,Indian Government controlled majority of the Indian chemical Industries. Globalization of Indian chemical Industries started at early 1990s. Foreign Institutional Investors (FII). Foreign Direct Investments (FDI ).
Globalization and the Indian Textile Industry: •
•
•
The Indian textile industry, until the economic liberalization of Indian economy was predominantly an unorganized industry. The economic liberalization of Indian textile industry in the early 1990s led to growth of this industry. The Indian textile industry is one of the largest textile industries in the world and India earns around 27% of the foreign exchange from exports of textiles and its related products. The contribution of the Indian textile Industry towards the GDP of India is around 3%.
•
•
Textile manufacturing sector in India accounts for 76% of the total textile production. The Indian textile industry employs around 35 million personnel directly and it accounts for 21% of the total employment generated in the economy.
Globalization and The Indian steel industry :
The effects of Globalization on Indian steel industry are not same throughout the country. The effects depend on the different regions, the type of raw materials used, the condition of the markets, technological advancements, the policies of the governmental authorities In this age of the globalization, the Indian steel manufacturing sector needs to restructure itself, in order to have a sustainable growth.
The reduction of the cost is another major factor in the survival of the Indian steel industry in the age of globalization. The cost reduction would be the main aspect of the improvement pertaining to the competitiveness of the industry. The manufacturers under the steel industry in India have to focus their attention in the areas such as: The reduction in the cost of operations The reduction in the costs pertaining to the working capital The reduction in the costs pertaining to the production inventory or stock that is not sold The improvement in the economics operating in the technological aspects of production The transposition of basic materials of production The sources of the procurement should be different
Globalization and The Indian Cement Industry :
Globalization of Indian Cement Industry has helped the industry to restructure itself to coop up with the alterations in the global economic and trading system. The increase in the construction activities has led to the increase in the demand for updated quality building materials and other allied products. Cement being one of the major elements in the construction work, there is a growth in the cement industry in India.With the globalization of Indian cement industry many foreign cement manufacturers are engaging themselves in agreements and deals with their India counter parts to have a share of the growth.
Globalization of Indian Cement Industry includes several foreign companies engaging in mergers and acquisitions of Indian cement companies like, • Heidelberg Cement - Indorama Cement Ltd. • Holcim Cement - Gujarat Ambuja Cements(GACL). • Italcementi cement - Zuari Cement Limited. • the Lafarge Cement Company - the Tisco and the Raymond cement plants.
Advantages of Globalization:
Increased free trade between nations Increased liquidity of capital allowing investors in developed nations to invest in developing nations Corporations have greater flexibility to operate across borders Global mass media ties the world together Increased flow of communications allows vital information to be shared between individuals and corporations around the world Greater ease and speed of transportation for goods and people Reduction of cultural barriers increases the global village effect Spread of democratic ideals to developed nations Greater interdependence of nation-states Reduction of likelihood of war between developed nations Increases in environmental protection in developed nations
Disadvantages of Increased flow of skilled and non-skilled jobs from Globalization: developed to developing nations as corporations
seek out the cheapest labor Increased likelihood of economic disruptions in one nation effecting all nations Corporate influence of nation-states far exceeds that of civil society organizations and average individuals Threat that control of world media by a handful of corporations will limit cultural expression Greater chance of reactions for globalization being violent in an attempt to preserve cultural heritage Greater risk of diseases being transported unintentionally between nations
Spread of a materialistic lifestyle and attitude that sees consumption as the path to prosperity International bodies like the World Trade Organization infringe on national and individual sovereignty Increase in the chances of civil war within developing countries and open war between developing countries as they vie for resources Decreases in environmental integrity as polluting corporations take advantage of weak regulatory rules in developing countries
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