Liberalization and Globalization

In one line

Liberalization is a state loosening its control over its own economy; globalization is the growing interconnection of societies across the world, in economy, culture, politics and communication.

In the wording a student can write in an exam: liberalization is the process of reducing state control over economic activity, by removing licensing and quantitative restrictions, opening sectors to private and foreign participation, lowering tariffs, and allowing prices and investment to be determined by the market. Globalization is the process by which societies, economies and cultures across the world become increasingly interconnected and interdependent, through the movement of goods, capital, people, information and ideas across national boundaries, so that events in one part of the world have rapid consequences elsewhere.

Liberalization in India

The occasion. India faced a severe balance of payments crisis in 1991 and adopted a programme of economic reform in response.

What it consisted of. Industrial licensing was dismantled for most industries; the areas reserved for the public sector were reduced; foreign investment was permitted and progressively widened; tariffs and quantitative restrictions on imports were reduced; the rupee's exchange rate was adjusted and later made convertible on the current account; and financial and capital markets were opened and given regulators.

The shorthand LPG, liberalisation, privatisation and globalisation, is the usual description of the package, and privatisation, the transfer or dilution of public ownership, is the third element.

The social consequences

Give both columns; an answer with one is incomplete.

The changes usually presented as gains

Growth and a rise in average incomes, with a substantial reduction in the proportion of the population below the poverty line over the following decades, a change on which official and independent estimates differ in magnitude but not in direction.

New occupations and a larger service sector: software, telecommunications, finance, business services, media, aviation, retail.

The expansion of the urban middle class, and with it the pattern of identity through consumption described in [Post Modernism].

Consumer choice and access to goods, where the earlier regime had produced shortages and waiting.

Communication and mobility: telephony, air travel, and the movement of Indians into work abroad, with remittances flowing back.

Opportunities for women in the new service occupations, though [Sex and Gender] records that participation overall did not rise as expected.

The changes usually presented as costs

Inequality. The gains were unevenly distributed between regions, between urban and rural areas, and between the educated and the rest. This is the criticism most consistently supported by evidence.

Agrarian distress, and the persistence of a very large agricultural workforce with low and uncertain incomes.

Informalisation. Employment growth occurred substantially in work without contracts, security or social protection, which is the fact [Class] identifies as central to Indian stratification.