Globalisation and the Indian Economy

A phone designed in one country, with parts from several others, assembled in a third and sold across the world: this is the everyday reality of globalisation. Over the past few decades the economies of the world have become tightly connected through trade, investment and technology. Globalisation has reshaped India since 1991, bringing both new opportunities and hard challenges.

Globalisation is the rapid integration or interconnection of countries' economies through:

• Trade in goods and services across borders,
• Investment flowing between countries,
• Technology, especially in transport and communication, and
• the movement of people and ideas.

Fast, cheap information technology has been the great driver. The internet, telephones and container shipping have shrunk distances. They have made it possible to split production across the globe.

The leading force in globalisation is the Multinational Corporation (MNC), a company that owns or controls production in more than one country.

MNCs set up factories and offices where it is cheapest to produce, where labour is low-cost, resources are available and government rules are favourable. They sell their goods worldwide. By spreading production across countries and connecting distant markets, MNCs have tied the world's economies closely together. They bring investment and technology. But they also dominate markets and can out-compete local firms.

For decades India protected its economy with barriers to trade (high taxes on imports and limits on foreign goods) to shield Indian industries. From 1991, India changed course and adopted liberalisation: removing or reducing these barriers so that goods, services and investment could move more freely. This opened India to globalisation.

At the world level, the World Trade Organisation (WTO) promotes free trade between countries and sets the rules of international trade. Critics argue the WTO's rules often favour rich, developed countries over poorer ones.

Liberalisation did not remove all controls on foreign investment. India still regulates foreign direct investment (FDI), sector by sector. The rules for online retail are a clear example.

• Marketplace model: a foreign-owned e-commerce firm may run a platform that connects independent sellers with buyers. This model is allowed.
• Inventory model: the firm owns the stock of goods and sells it directly to consumers. For foreign-owned e-commerce firms this model is prohibited.
• Equity limits: a foreign-owned marketplace also faces limits on its equity ownership in the large sellers that trade on its own platform. This stops the platform from controlling its sellers and becoming an inventory seller in disguise.

In short, foreign-owned e-commerce companies in India may operate only as platforms. They cannot sell their own inventory.

WTO membership also commits India to rules on intellectual property rights (IPR), such as patents, copyrights and trademarks. Two terms matter here.

• TRIPS Agreement: the WTO's Agreement on Trade-Related Aspects of Intellectual Property Rights. It sets minimum IPR standards that all member countries must follow.
• Doha Development Agenda: the WTO negotiating round launched at Doha in 2001. It aimed to make trade rules work better for developing countries.

India adopted the National Intellectual Property Rights Policy in 2016. The policy reiterates India's commitment to both the Doha Development Agenda and the TRIPS Agreement. The Department of Industrial Policy and Promotion (DIPP), since renamed the Department for Promotion of Industry and Internal Trade (DPIIT), is the nodal agency for regulating intellectual property rights in India.

Globalisation has had mixed effects on India:

• Benefits: consumers enjoy more choice and better quality at lower prices. Some industries (like IT and services) and skilled workers have gained new jobs and higher incomes. Foreign investment and technology have also flowed in.
• Costs: small producers and manufacturers face fierce competition they cannot always survive. Many workers, especially in the unorganised sector, face insecurity, low wages and poor conditions. Firms cut costs, and workers bear the burden.

So globalisation has not benefited everyone equally. The challenge is to make it fairer. This means policies that protect workers and small producers, and ensure the gains are widely shared.