Components of New Economic Policy - Globalisation

Globalisation means making the world into one big market, where countries are connected through the exchange of goods, services, ideas, technology, money, and people. It’s like the earth becoming one large community without major economic boundaries.

Globalisation means connecting a country's economy with economies around the world. In simple terms, it allows the movement of goods, services, capital, people, and technology across borders without many restrictions. Think of it as creating one big marketplace for everyone.

Integration of national economies and societies through cross-country flows of information, ideas, technologies, goods, services, capital, finance, and people.

1. Removal of Restrictions on Trade

• India lifted most limits on imports and exports.
• Tariff rates (taxes on imports) were reduced, making foreign goods cheaper.

2. Encouraging Foreign Investment

• Government allowed foreign companies to invest in India.
• This brought more money and new technology into the country.
• Example: Maruti Suzuki (Japan-India partnership).

3. Flexible Exchange Rate

• The rupee’s exchange rate was made flexible, helping it adjust according to the market.
• Rupee became fully convertible for current transactions.

4. Foreign Collaborations

• Indian companies could collaborate with overseas firms to boost technology and expertise.
• Examples: Hero-Honda, Tata-Corus.

5. Long-Term Trade Policy

• Policies were changed for stable and lasting foreign trade relationships.
• Main features: more freedom in trade, easier collaboration.

6. Boosting Exports

• Special Economic Zones (SEZs) are set up to help businesses export goods easily.
• Exporters got special incentives and help.

• Smartphones: Designed in the USA, components sourced from Korea and Japan, assembled in China, sold globally.
• Brands: McDonald’s, Netflix, and Tata Motors operate in multiple countries.

• Globalisation means integrating a country’s economy with the world economy and treating the world as one single market.
• It involves free flow of goods, services, capital, technology, information, and people across national borders.
• Globalisation goes beyond trade and includes worldwide coordination in production, marketing, finance, and human resources.
• It increases economic integration and interdependence among countries.
• A global company views the entire world as one market and does not differentiate between domestic and foreign markets.
• Globalisation promotes free-market competition and benefits businesses and consumers, but also increases dependence among nations.
• Outsourcing is a result of globalisation, where foreign companies hire Indian firms for services like IT and BPO due to low cost and skilled labour.