Be Vocal for Local – Globalisation’s Impact on India’s Local Market

Be Vocal for Local

The New Economic Policy of 1991, also referred to as the LPG Model of Growth (Liberalization, Privatization, and Globalization), was the first measure made by the government of India to introduce the country into the global market. Though the NEP-1991 benefitted India in many ways and propelled it to the position it currently enjoys on the global scale, it was decidedly catastrophic for India’s small businesses and industries.

What is Globalization?

According to Stilglitz, globalization is the closer integration of the countries and people of the world, initiated by the massive reduction of the costs of transportation and communication and the breaking down of artificial barriers to the flow of goods, services, capital, knowledge, and (to a lesser extent) people across borders. Essentially, it aims to open countries up to businesses, inventions, and products from beyond one’s own nation. However, the developments that have been taking place since the early 1990s, when India began moving towards globalization with the NEP-1991, are mostly confined to the free movement of goods from developed to developing countries.

Why are Small Industries important?

With a country as large as India, small industries and businesses are the backbones of our economy. They help with our largest goals, such as employment, economic development, and poverty reduction. They increase production levels and enable us to provide for a country as large as ours. Furthermore, they contribute to the total exports from India. Investing in these industries and creating better technological and economic infrastructure is essential for our growth as a nation.

New Economic Policy and Globalization

The first attempt at globalization, the model called for reduced import duties, the opening of various public sectors to India’s private sectors, and the devaluation of Indian currency from 18% to 19% in an attempt to increase export. The bill succeeded in reinvigorating the then-floundering economy, allowing for unrestricted international flow of goods, services, capital, human resources and technology, and bringing down the inflation rate. Increased competition due to the privatization of many industries gave Indian citizens more choices in the good and services they needed, as opposed to the single seller system that public sectors used to have. It also increased the efficiency of the businesses in place.

For example, in the 1990s, the aviation industry was booming. The government’s 1991 ‘Open Skies‘ policy, which allowed private players into the aviation industry, has resulted in various well-established private airlines that operate both domestically and internationally. Similarly, by reducing restrictions on foreign imports, India had easier access to up-and-coming technology like cell phones and motor vehicles. This gave India a jumpstart compared to its geographical neighbors, and prevented it from lagging behind other global superpowers.


The telecommunication industry was arguably the biggest beneficiary of the new policies. Once it began opening up to private players, many new competing service providers popped up. The number of telephone subscribers increased by almost 40 million between the years 1991 and 2002.

The NEP-1991 did have its drawbacks though. The reforms were largely concentrated in the formal sectors of the economy, leaving agricultural and forestry industries undeveloped. This led to uneven economic growth and distribution of wealth among Indians. Additionally, social sectors like health and education were left out of the reforms, leaving them underdeveloped and underperforming.

The economic shift to free-market capitalism, away from the socialist model pioneered by India’s founding fathers, also led to an exacerbated wealth gap. While capitalism tends to improve the overall economic situation of a country, it’s infamous for increasing disparities between the rich and poor and crushing small industries and businesses. Capitalism rewards those at the top and crushes those at the bottom.

Globalization’s Impact on Local Market

While globalization kept India in the loop about international developments, it inevitably began chipping away at the livelihoods of Indian citizens. Just like during the British rule when Indian artisans and craftsmen were put out of business due to the cheaper and more advanced imports from Britain, local vendors found it hard to compete with international multi-billion dollar companies. These companies came from countries that were already developed and far beyond the level at domestic ones were at, allowing them to produce goods, services, technology, etc. of both higher quality and lower prices. Indian companies don’t get the chance to thrive because they’re being beaten out by international players. Indian companies began seeing heavy losses.


Often, this kind of free market disadvantages local businesses in developing nations. The emergence of the WTO (World Trade Organization) has only accelerated the process of scaling down on tariff and non-tariff restrictions on imports. India, as a member of the WTO, will have to face much stronger international competition as a result of its compliance with WTO guidelines. Additionally, with the shift away from public to private sectors, small businesses are losing their biggest customers. The public sector has been a major consumer of small enterprises in India.

However, globalization has done positive things for small-scale industries too. Most of India’s small businesses use outdated and inefficient technology, and a subpar operation standard. The introduction of foreign competitors and technology have given them access to newer technology and also inspired them to improve their operations to match up to their competitors. This helps India push its businesses up to the global standard.


While globalization poses a concerning threat to our small industries, it has also done wonders for our growth as a country. In order to combat the negative effects of globalization, we need to invest in our local businesses by creating better infrastructural and operational facilities for them so they can compete with international companies. The point of globalization is to increase quality and efficiency – if Indian businesses can’t compete with international ones, they need to adapt. The small industries need to understand the need of modification and diversification of their production according to international standards and adapt to a changing market.

Editor’s Note
The article begins with the explanation of Globalization. Globalization, basically, is the integration of the economies of the world and the people. It was introduced in 1991 with the purpose of introducing the country in the global market. The entire article precisely explains the impacts that globalization brought along with it.

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