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Globalization Will Kill Small Scale Industries in India

Has globalization become a nightmare or a boon for the small scale industrial sector in India? We’ll never know unless experience tells us.

Before we begin with the topic in hand, it is important to know what the concept of globalization means. Technically, globalization means the breaking down of all physical barriers and borders between countries and interconnecting them by the means of easy transport and communication. Globalization is the easy exchange of ideas, goods, services, trade, technology and a lot more. Transport and communication is the essence of globalization. Without effective transport and communication, there can be no globalization.

Globalization is a relatively new phenomena in India. Till 1991, India followed a rather closed policy. It believed in self-reliance and self-sufficiency. It did not have a lot of contact with the outside world. In 1991, as a result of an impending economic crisis, the Indian government, then under the leadership of Prime Minister P.V Narasimha Rao, took up a number of reforms that opened us to the outside world. These reforms were namely the Liberalization, Privatization and Globalization reforms. We opened up our economy to the outside world so that there would be more exchange.

Even though the Indian government had initiated reforms, it was clear that India would take a really long time to start making quick progress. This was because for more than 40 years we followed a very closed policy and as a result we were not on the radar of the countries. To them, India wasn’t a very big opportunity. But the new reforms definitely changed all that.

Like any drug, the reforms took time to work up on the problems of the ailing Indian economy. But the initiation of the reforms was a huge step forward for India. India opened up to the outside world. India tried to attract foreign investment in order to boost its economy. The reforms were indeed a success. The reforms has put India back on the map. A country once ignored and forgotten is now a contender for a superpower status.

After foreign capital was pumped into the Indian economy, the economy grew extremely fast. Production increased manifold, millions of people now got jobs, new firms were established, new technology was introduced into India, incomes rose, opportunities multiplied and a lot more happened.

Globalization has had a very profound impact on the manufacturing and industrial sector of India. Before the reforms happened in 1991, the Indian government had a very bad industrial policy. India was trying to become socialist like the Soviet Union. Socialism was a very appealing dream to many Indian leaders but what these leaders forgot was that in order to empower the people, you need to provide them with the means to do so. Indian leaders forgot this and tried to replicate the Soviet model. The same applied to the industrial sector.

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User Comments
  1. drelayaraja

    On October 16, 2010 at 1:03 am

    Well said.. we have to learn from china to globalize small scale industries..

  2. lapasan

    On October 16, 2010 at 1:09 am

    Globalization also causes big multinational company to establish production facilities in developing countries where labor and production cost are cheaper. This situation brought about reduced employment in the country where these companies came from.

  3. Raj the Tora

    On October 16, 2010 at 3:25 am

    Excellent point. I completely agree with Dr Elayaraja.While we rise to globalization, also pull along the small scale industries along.

  4. Sharif Ishnin

    On October 17, 2010 at 12:13 pm

    It gets competitive and makes smaller scale industries more creative. Very informative and well presented article oh how globalization had affected India SMEs.

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