Introduction
The first major shock of what
subsequently came to be called globalisation in India was the economic liberalisation
programme initiated in July 1991. The Congress government headed by Narasimha
Rao, faced with a crisis resulting from foreign exchange reserves sufficient
for just a fortnight’s imports, undertook some of the measures recommended by
the International Monetary Fund (IMF) and World Bank in the late 1980s. The new
policy included abolition of licensing procedures for manufacturing investment
(which had popularly come to be known as a corruption-ridden ‘license-permit
raj’), reduction of the high import tariffs on most goods (but not consumer
goods), liberalising terms of entry for foreign investors, and liberalising
capital markets (Balasubramanyam and Mahambare, 2001). It would be a mistake to
see these changes simply as being imposed on India. Many of them were designed
to encourage the expansion of big business after what were perceived as decades
of stagnation, for example by removing restrictions on mergers and
acquisitions, encouraging businesses to seek finance abroad, and sparking a
wave of expansion into new sectors which had either barely developed (e.g. telecom),
or had until then been reserved for the public sector (e.g. banking).
The next milestone was the birth of
the World Trade Organisation (WTO) on 1 January 1995, with India being a member from the
beginning. This involved new pressures, for example to eliminate quantitative
restrictions on imports, simplify and reduce tariffs, reduce export
constraints, reduce the number of activities reserved for the public sector and
small-scale sector, further liberalise the Foreign Direct Investment (FDI)
regime, and address the fiscal deficit (cf. WTO, 2002). The process of
integrating India
more closely into the world economy has been more or less continuous since
1991, despite changes of government, and the world economy itself has globalised
rapidly during this period.