Globalisation and its opposition

The essentials

In 1991 India faced a severe economic crisis. Its foreign exchange reserves had fallen so low that it could pay for only a few weeks of imports, and it had difficulty repaying foreign loans. The Congress government of P.V. Narasimha Rao, with Manmohan Singh as Finance Minister, introduced the New Economic Policy (NEP). It was based on liberalisation, privatisation and globalisation.

Key points

• Liberalisation: removal of many controls, such as most industrial licensing, so that private businesses could start or expand more freely.
• Privatisation: reducing the role of the state, for example by selling shares in public sector enterprises (disinvestment).
• Globalisation: opening the economy to foreign trade and investment, reducing import duties and allowing multinational companies to operate more freely.
• Loans from international institutions such as the IMF and the World Bank came with conditions for structural adjustment.
• Supporters argued that the reforms raised growth, increased consumer choice and expanded industries such as information technology.
• Critics included left parties, trade unions, some farmers' groups and some swadeshi groups. They argued that the reforms reduced job security, cut public spending on welfare, hurt small producers and farmers, increased inequality and threatened local culture.
• Despite their differences, later governments of different parties continued the broad direction of reform; this became part of the post-1990s political consensus.
• Global movements against corporate-led globalisation, such as the World Social Forum, also held a meeting in Mumbai in 2004.

Exam tips

• Remember LPG = liberalisation, privatisation, globalisation, and give one example of each.
• Be ready to present arguments both for and against globalisation.

Common mistakes

• Thinking the NEP was introduced by the Janata Party; it was introduced in 1991 by the Narasimha Rao government.
• Treating opposition to globalisation as coming only from the left; it came from varied groups.