Impact of Economic Globalization on India
Sabrina Mallavarapu
University of Maryland, College Park

Impact of Economic Globalization on India Many people fail to realize that it was only 69 years ago that India gained independence from British rule. India is generally thought of as very poor country but it is because it is still a new country. India has undergone major socio-economic changes since its independence from Great Britain. While India did not fair well under Great Britain’s rule, India benefitted from Britain in terms of creating an infrastructure and industry that is still in use today. While India still has many problems, India has benefitted from economic globalization because it has resulted in major economic growth that led to it having the fastest growing GDP of any nation. With the power of the East India Trading Company, the British already had control of several ports, as the company had been a major presence in India since the 1600s, even with the Mughal Empire ruling India. The British had immense power in India’s economy, creating settlements known as Madras, Bombay, and Calcutta, which are now major modern cities in India. Britain’s military power led to its ability to have a monopoly on trade, but also later establish their rule in India. In the early 1700s, South Asia saw the decline of the Mughal Empire as it weakened from repeated wars, rebellions, and invasions (Embree, 2006). India was fighting the remnants of the Mughal Empire when the British saw their chance. The rule of the British Raj was a nightmare for the majority of Indians as the British cared solely for the wealth India could provide for them. However, the British did modernize India with Western ideals. The British created a system of infrastructure in India, introducing railroads, the telegraph system, new roads, as well as an improved postal service. Additionally, the British created higher education, modeling three universities after the British system, which is still in use today. While Indians in British established regions appreciated the new infrastructure, many despised how the British were implementing themselves in every aspect of their lives including religion. Opinions like this led to the Sepoy Mutiny, where Indian soldiers were angered that their issued bullets were greased with cow and pig fat, as cows are scared in the Hindu religion and pigs are sacred in the Islamic religion. These soldiers murdered their British officers and declared the Mughal emperor as their leader. This uprising was considered a betrayal to the British and caused the beginning of India’s revolution for independence. In 1946, after World War II, Great Britain was weakened and could no longer rule India by force. The British agreed to give India independence but also created a partition that created the separate nations of India and Pakistan (Embree, 2006). India angered by the partition as well as its hatred towards Western ideals, chose to align itself with the Soviet Union in order for India to gain full independence from the West in terms of strategic security and economic concepts. Although the Soviet Union was hesitant at first to align itself with India due to its major Western influences, after India refused to follow in the West’s footsteps during the Cold War, the Soviet Union fully embraced India as an ally. From 1962 to 1990, the Soviet Union was India’s strongest and closest ally. India grew its agriculture, nuclear powers, space exploration, as well as cultural growth because of its relationship with the Soviet Union. Then in 1991, India had a major economic crisis. India depended on the Soviet Union for exports, as India wanted no relationship with the West. In the late 1980s, Soviet Union started to crack and by 1991 was split into 15 nations (Khan, 2006). Now, India had a major problem because its primary buyer was in turmoil and exports were significantly down. India also relied on Kuwait and Iraq for oil, and the beginning of the Gulf War led to the destruction of oil imports, which caused prices to increase extensively. Lastly, there was major political trouble as leaders of India were involved in major scandal and corruption (Sen, 2006).
India began it’s a more immense economic liberalization when Narasimha Rao became India’s Prime Minister in 1991. The reforms moved India away from the its past socialism that had shaped the country's economic policy for 40 years and helped India throw off its protectionist and statist cloaks. Tariffs were slashed from 300 percent in 1991 to 50 percent four years later (Masci, 2002). The high taxes on many imported products were reduced substantially which allowed for new growth in several industries. Indian law stated that a license was needed to import anything and this license was very hard to obtain. There was also a law that government's permission was necessary in what was allowed to be produced and how much to produce. These economic reforms allowed for import and product licensing to be abolished (Panagariya, 2006). A huge stimulus was given to local industries as stock market rules were relaxed and foreign investors were allowed to come, as India was no longer living in the paranoia of the Eat India Trading Company. Many sectors were opened for foreign investment and collaboration that allowed companies like Coca-Cola and Nike to come in. The government started selling some of its businesses to the private, which brought more wealth and a new round of efficiency.
India’s economy has had constant growth since it’s independence from Britain despite the crisis in 1991. After major reforms, India has had an enormous affect on an international level. It has the seventh highest GDP of any nation and has an annual growth rate of 7%. There are now internationally competitive Indian companies, not just in information technology, biotechnology and pharmaceuticals, but also in garments, jewelry, auto parts, bicycles, and electrical machinery. However, industry only counts for 25% of India’s GDP, which is substantially lower when compared to East Asia. Service makes up for 50% of India’s GDP while agriculture makes up for the last 25%. However, for India to become a more developed nation, industry should count for at the very least 35% of India’s GDP (Debroy, 2006). While India’s tremendous economic growth rate shows a great nation, when measured by other standards, India still needs significant improvement. In 1960, India’s life expectancy rate was 41 and as of 2013 it is now 66. While the rate has grown tremendously it is proof that India still needs a lot of improvement, as the age 66 is still much lower than other developed countries. India is the world's third-largest food producer and regularly produces a grain surplus. However, one in every three Indians still goes hungry at least some of the time, a problem that is especially acute with children. In fact, more than half of all Indian children under age 4 suffer from malnutrition, and 30% of all newborns are underweight, according to the World Bank. A 2001 UNICEF report found that half of all Indian children have suffered stunted growth. In terms of the everyday Indian citizen, the quality of life is still poor. India’s literacy rate is only at 69%, one of the lowest literacy rates in the world. India’s GNI per capita is extremely low, being only 1,570 dollars (The World Bank Indicators, 2014). With over one billion people living in India, there is a stark contrast in income inequality, as a quarter of its population lives below the poverty line. It seems that an Indian citizen is either extremely rich or extremely poor.
According to this data from the Credit Suisse’s Global Wealth Databook 2014, the top 10% of India’s population has 370 times more wealth than India’s bottom 10%. They have 74% of the population’s total wealth and the gap has only grown larger since 2000 (Rukimini, 2014). These indicators show the contrast between the wealth of the nation and the wealth of its population. India’s economy is based on the concept of planning, following the Soviet’s model of centralized planning. In 1947, under the direction of India’s first prime minister, Jawahrlu Nehru, the country created it’s first of many Five Year Plans, which details the direction the Indian economy will take. The first Five Year Plan focused on the agricultural sector, while the second one focused on industry (Amundson, 1960). These plans have continued onto modern India, with the country being on it’s twelfth Five Year Plan, which focuses on reducing poverty by 10% and will end in 2017. Economic globalization has changed India only for the better. While its economy has endured many tumultuous changes, it has resulted in India potentially being an emerging superpower because of the nation’s wealth, industries, and security capabilities. The only thing hindering India’s power is its poverty. In order for India to succeed as a major world power it is necessary that there is domestic reform that will allow for increased education as well as increased welfare for the nation’s impoverished.

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