How Government and Globalisation Influence Economic Change in India

Government Policy

• Economic Reforms: India began significant economic reforms in the 1990s to attract foreign investment, reducing trade restrictions and opening up markets. This shift helped India transition into a newly industrialised country by increasing trade links and creating opportunities for Indian businesses globally.
• Focus on Innovation: The Indian government has prioritised innovation, boosting funding for science and technology to encourage progress in sectors such as IT, pharmaceuticals, and manufacturing. This push has strengthened India’s role in the global tech industry.
• Education and Workforce: Education is a key focus, with free and compulsory schooling for children aged 6-14. India has over 1.4 million schools and 36,000 higher education institutions, creating a large, skilled, English-speaking workforce. This workforce has attracted foreign direct investment (FDI) in sectors like technology and telecommunications.

Role of Aid

• From Recipient to Donor: India was once a major recipient of international aid, but as the economy grew, it reduced its reliance on foreign assistance. Since 2015, India has focused on giving aid to neighbouring countries, such as Nepal and Bhutan, while still receiving technical assistance from certain donors.
• Impact of Aid: Aid contributed to infrastructure, health, and education, helping India transition to an emerging economy. India’s shift from an aid recipient to a donor highlights its progress in overcoming development challenges.

Globalisation

• Foreign Direct Investment (FDI): India attracts foreign direct investment (FDI) from transnational corporations (TNCs) due to its large, young, and skilled workforce, which includes many English speakers and offers low labour costs, enhancing profitability. Additionally, India’s massive consumer base, with over 1.4 billion people and rising incomes, provides TNCs with substantial market potential. Government policies supporting FDI, such as tax incentives and reduced regulatory barriers, further increase India’s appeal. With recent improvements in transport and communication infrastructure, India’s strategic position in Asia makes it an ideal hub for regional and global business operations, drawing substantial interest from TNCs worldwide.
• Transnational Corporations (TNCs): TNCs have expanded in India, moving up the “value chain” by producing more sophisticated products, such as software and electronics. This development has allowed India to combine low-cost production with high-value exports, strengthening its role in global supply chains.
• Outsourcing: Outsourcing is the practice of hiring external organisations or individuals to handle tasks or services previously done in-house, often transferring work to other countries to reduce costs and increase efficiency. India is a global leader in outsourcing, with call centres, software development, and IT support for companies worldwide. Cities like Bangalore and Hyderabad host service centres for Western companies, providing affordable and efficient customer service and back-office operations.
• Growth of the Service Sector: India’s service sector, particularly IT and software services, has driven economic growth. The sector’s exports alone were valued at around $100 billion in 2014-2015, with significant contributions from outsourced services. This growth has helped raise GDP and diversify India’s economy. Tourism has also become an increasingly important part of this sector, contributing significantly to GDP and creating employment opportunities. Tourism brings in foreign exchange, supports local economies, and fosters cultural exchange. It creates a variety of jobs, from tour guides, hotel staff, and travel agents to roles in transportation, retail, and hospitality management. This diverse job creation helps reduce poverty, especially in rural areas and popular tourist regions, by providing income and skill-building opportunities for local communities.

Transport and Communication Technology

• Transport Network Expansion: India has doubled its road network from 3 million km in 1990 to over 6 million km by 2012. The country also has extensive rail (over 63,000 km), seaports, and airport infrastructure, supporting domestic and international trade.
• Seaports and Airports: India’s 12 major seaports and 11 international airports handle a vast portion of its trade, enabling efficient transport of goods and resources to and from the country.
• Communication Technology: India has developed its information and communications technology (ICT) sector, now home to the world’s second-largest wireless network after China. This connectivity supports India’s role as an outsourcing hub and aids in its economic integration with global markets.

India’s government policies and globalisation have driven economic transformation, with advancements in education, infrastructure, and industry that support global integration. These developments have positioned India as a rapidly growing economy, strengthening its role as a key player in the global economy.