For a long time since Nehru's days, India followed the model of 'mixed economy'. Its economic philosophy was 'democratic socialism'.
For a long time since Nehru's days, India followed the model of 'mixed economy'. Its economic philosophy was 'democratic socialism'. As Nehru himself believed in socialism, he did not have faith in rich people. He was of firm view that the rich exploited the poor. Therefore, his government laid stress on the development of poor, and the state was given the main responsibility for this.
Nehru viewed state as the main agency of economic development. In the regime of mixed economy, security of country, social welfare and economic development were mainly the responsibility of government. The public sector was under government control. Other industries were in the hands of industrialists.
Nehru's mode! Of economic development lasted long. But in course of time it became clear that the industries in the public sector were incurring heavy losses while private industries were making big profits. The weakness of Indian economy was exposed in the middle of 1980s. The government faced a serious foreign exchange reserve crisis. It miserably failed to repay the debts taken from the World Bank and the IMF.
Against this background the Narasimha Rao government, adopted the New Economic policy in July 1991. The main elements of this policy were liberalisation and privatisation which were also the elements of globalization. The Finance minister in the Rao government was an eminent economist, Dr. Manmohan Singh who is now the Prime Minister of India.
The introduction of New Economic Policy by the Rao government was part of India welcoming globalization. Free economy and market economy received boost. Thelicense raj was discarded. The government control over economy largely loosened.
The importance of public sector decreased, and that of private sector increased. As a result of this, India's economy had a turnaround within a short period. The foreign exchange reserve crisis was successfully tackled, inflation decreased and the rate of economic growth increased.
The economic growth that globalization gave to India was praised not only in India, but also abroad. The fear of Indian industrialists and business people that they would be great losers because of globalization did not prove to be true.
On the other hand, some of them successfully competed at the international level and took over some major industries and business concerns of other countries.
But, in course of time, some bad consequences of globalization were felt. These harmful effects were:
1. The importance of state in the economic field decreased. Capital was withdrawn from many industries in the public sector.
2. Market economy was encouraged and private sector became more influential.
3. The ordinary people suffered a lot as the state largely withdrew from the field of social welfare. The poor suffered most as MNCs and other private companies entered the fields of education, health, insurance and banking etc.
4. Many small industries and cottage industries were closed. They could not compete with big industries - either MNCs or other big private industries.
5. There took place increase in unemployment. As big industries in the private sector got many of their works done through mechanized machines, many employees were fired from jobs, and there was hardly any fresh recruitment.
6. Women, in particular, suffered a lot. More than male employees, female employees lost their jobs, and the small number of employees who were recruited was mostly males.
Globalization is capitalism in its globalized form. In fact, capitalism enriches itself only when it makes the globe or a number of countries its field of operation.
The end of the cold war marked the victory of capitalism over communism. Capitalist democracy has decisively won, and communism has accepted defeat. This, Fukuyama claims, marks the 'end of history'.
For the time being capitalism has come to stay, and there is no alternative to capitalism. Those who until the other day, bitterly criticized capitalism have willy-nilly accepted it. Now the choice is between neoliberal capitalism advocated by neo-conservatives of the west and regulated capitalism, advocated by liberal democrats of many developing countries.
As it seems, globalization is irreversible. The challenge is to force it to have a 'human face'. Globalization will be universally acceptable only when it brings freedom, rights, peace, security and economic benefits to the vast number of people across the globe that have remained poor, weak and deprived.