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 high-
yielding 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
globalization
The various beneficial effects of globalization in Indian Industry are
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,
Industry:
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.
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
Globalization:
 Increased flow of skilled and non-skilled jobs from
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