Economic transformation:  Global Economy and Economic Reforms in India.

Global economic integration involves agreements between countries that usually include the elimination of trade barriers and aligning monetary and fiscal policies, leading to a more inter-connected global economy. Globalization provides easy access to foreign resources, including labour markets, to maximize returns and benefit the common good. The capital moved between two or more places, commodities were traded across borders, and people moved in search of better livelihoods to different parts of the world. It also involves the exchange of services, information, and ideas across borders. The exchange is facilitated by advancements in technology, transportation, and communication. This phenomenon has led to the integration of economies, cultures, and societies. However, globalization has both positive and negative impacts. Globalisation also brings people across the countries together to trade, share their cultures and depend on each other for sustenance.

In the Indian context, globalization refers to the integration of the Indian economy with the global economy. The major goal of the globalisation aims at Export promotion, Foreign Exchange, import libaralisation.  It also offers secure socio- economic integration and development of all the people of the world through a free flow of goods, services and attracts foreign direct investments (FDI).  It also had a tremendous impact on the social, monetary, cultural, and political areas. In recent years, globalisation has increased due to improvements in transportation and information technology. With the improved global synergies, comes the growth of global trade, doctrines, and culture.

In India, economic reforms were introduced in 1991, with the implementation of a new economic policy also known as LPG reforms. LPG represents liberalisation, privatisation and globalisation reforms. The Government of India announced the liberalization policy in the:

Industrial sector: The new policy abolished the requirement of obtaining a licence for all industries except alcohol, cigarettes, hazardous chemicals; industrial explosives. Additionally, the government de-licensed the industrial sector and abolished the Monopolies and Restrictive Trade Practices (MRTP) Act.

Foreign trade: The new policy abolished the requirement of obtaining a licence for all industries except alcohol, cigarettes, hazardous chemicals; industrial explosives.  Trade liberalization removes or reduces barriers to trade among countries, such as tariffs and quotas. Having fewer trade barriers reduces the cost of goods sold in importing countries. Reduction of trade tariffs and import quotas by India has enhanced international trade and investment. India’s participation in global trade agreements has increased its global presence.  Bilateral trade agreements with various countries have increased trade and market access. Further, the government also allowed foreign investments to enter the infrastructure sector. Finally, the policy amended the Foreign Exchange Regulation Act (FERA) and enacted the Foreign Exchange Management Act (FEMA).

Exchange rate: India currently follows a market-determined exchange rate regime. This came into being in March 1993. This regime allows the market to determine the exchange rates. The International Monetary Fund (IMF) has revised India’s exchange rate regime, shifting it from a “floating” status to a “stabilised arrangement” for the period December 2022 to October 2023.

Banking and financial sector:  Financial liberalization in banking sector aimed to increase the efficiency of the banks, improve the allocation of credits, stimulate savings and, thus, attain a higher economic growth. The abolition of explicit controls on the pricing and allocation of credit and direct government intervention in bank credit decisions is brought to an end. The fiscal sector, etc.: The government also freed the capital markets and opened them to private enterprises.

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