Commerce Department, Mahila Mahavidyalay, Amravati, M.S., India.
Online published on 11 January, 2012.
In early 1990’s the Indian economy had witnessed dramatic policy changes. The idea behind the new economic model known as Liberalization, Privatization and Globalization in India (LPG), was to make the Indian economy one of the fastest growing economies in the world. An array of reforms was initiated with regard to industrial, trade and social sector to make the economy more competitive. The economic changes initiated a dramatic effect on the overall growth of the economy. It also heralded the integration of the Indian economy into the global economy. The Indian economy was in major crisis in 1991 when foreign currency reserves went down to $1 billion and inflation was as high as 17%.
India gained highly from the LPG model as its GDP increased to 9.7% in 2007–2008. In respect of market capitalization, India ranks fourth in the world. But even after globalization, condition of agriculture has not improved. The share of agriculture in the GDP is only 17%. But seeing the positive effects of globalization, it can be said that very soon India will overcome these hurdles too and march strongly on its path of development.
Has Increasing Globalization Limited the Effectiveness of National Policies in India? In the wake of the global financial crisis, financial globalization has come under scrutiny once again. Critiques Of globalization have re-emphasized that globalization does not bring any additional gains than what can already come from free trade. In the context of increasing capital flows, it has been time and again pointed out by the critiques that gains from trade in goods (widgets) are of first order, while gains from trade in capital (dollars) are of second order. Another observation has been that countries have benefited most from free-market globalization are not those that have embraced it whole heartedly, but those that have adopted parts of it selectively. Contrarian arguments have been equally strong. Financial globalization and the various economic policies that could help developing economies effectively manage the process of financial globalization. They find that policies promoting sound macro economy, financial sector development, institutional quality and trade openness appear to help developing countries derive the benefits of financial integration. While advanced economies face inflationary pressures from high commodity prices, EMEs face pressures from both strong domestic demand and high commodity prices. CPI inflation in the advanced economies is projected to increase from 1.6 percent in 2010 to 2.2 per cent in 2011, and in the EMEs from 6.2 per cent to 6.9 per cent.
