LIBERALISATION OF FOREIGN TRADE AND FOREIGN INVESTMENT POLICY
LIBERLISATION: Removing barriers or restrictions set by government is known as liberalization.It has two components.,
1.goods could be imported and exported easily.
2. foreign companies could set up factories and offices here-in India.
TRADE BARRIER—Tax on imports.It is called so because some restriction has been setup.
--govt. can use barriers to increase or decrease(regulate)foreign trade and to decide what kind of goods and services and how much of each should come into the country.
Q. Why did the Indian govt., after independence had put barriers to foreign trade & investments?
--This was considered necessary to protect the producers with the country from foreign competition.
--As the industries were just coming up in 1950’s and 1960’s and the competition from imports at that stage would not have allowed these industries to come up.
--India allowed the imports of essential items as machinery, petroleum, fertilizers etc.
CHANGES AFTER 1991.----WHY?
Around 1991, some far-reaching changes were made in India
The govt. decided that the time has come for Indian producers to compete with producers around the globe.
--It felt that the competition would increase performance of the producers with in the country since they would have to improve their quality.
--Thus the barriers on foreign trade &foreign investments were removed to a large extent.
--This was Liberalisation and with it business were are allowed to take decisions freely about what they wish to export to import.
--The govt. imposes much less restriction than before, & therefore is said to be more liberal.
WORLD TRADE ORGANISATION
It is an organization whose aim is to liberalise international trade.
--It was started at the initiative of developed countries.
--It establishes rules regarding international trade and sees that these rules are obeyed.
--149 countries are at present members of the WTO.
--Though WTO is supposed to allow free trade for all, in practice, it is seen that the developed nations have unfairly retained trade barriers. On the other hand, WTO rules have forced the developing countries to remove trade barriers.
IMPACT OF GLOBALISATION
In the lasy fifteen years, globalisation of the Indian economy has come a long way.
1.MNC’s have increased their investments over the past 15 years, which means that investing in India has been beneficial to them.
a)MNC’S have invested in cell phones, automobiles, electronic, soft drinks, fast foods & in the areas such as banking in urban areas. Thses products have large number of well off buyers.
b) In these industries various new jobs have been created.
c)local companies who are supplying them raw material have also prospered.
2. Several top Indian companies have been able to benefit from the increased competition.
a) They have invested in newer technology and production methods & raised their production & standards.
some have gained from successful collaborations with foreign companies.
b)Globalisation has enabled some large companies to emerge as multinationals themselves as.,Tata motors, Ranbaxy. Asian Paints, Sundaram Fasteners (nuts& bolts).
3. Globalisation has also created new opportunities for companies providing services, particularly those involving IT. The Indian companies are the host of services like, data entry, accounting, administrative tasks, engineering are now being done cheaply in India & are exported to the developed countries.
4.Globalisation& competition among producers-both local and foreign has been of advantage to the consumer, particular of the well off section.
a)Now there is greater choice.
b) They enjoy improved quality and lower prices.
c) As a result these people, today enjoy much high standards fo living than they had before.
BUT THE IMPACT OF GLOBALISATION HAS NOT BEEN UNIFORM.
There are several drawbacks also.
1.Small producers, compete or perish—for a large number of small producers & worker it has posed major challenges.
-- Rising competition has led to shutting down of many units and many workers have been rendered jobless.
--Batteries, capacitors, plastics, toys, dairy products and vegetable oil are the examples of the industries which have been hit hard due to hard competition.
2. Competition and uncertain Employment—Globalisation & pressure of competition have substantially changed the lives of workers, faced with growing competition, most employers prefer to employ workers flexibly.
-This means that the workers are no more secure; they have long working hours, work night shifts on regular basis during peak season, no job security, no benefits as of pension, overtime, medical leave etc.
-Workers are denied their fair share of benefits brought about by globalisation.
-With this the conditions of work in the organized sector has come to resemble that of the unorganized sector.
STEPS TO ATTRACT FOREIGN INVESTMENT
In the recent years central and state govt. in India is taking some special steps to attract foreign companies to invest in India.
--Industrial zones -called SEZ’s, Special economic zones are being setup.
--SEZ’s are to have world class facilities like electricity, water road transport, storage, recreational and educational facilities.
--The industries which will set up their production units here will not have to pay taxes for initial five years.
these companies are allowed to ignore many of rulers that aim to protect the workers i.e., instead of hiring workers on regular basis, companies hire workers flexibly for short period during the peak period.
--this is done to reduce the cost of labour for the company.
STRUGGLE FOR A ‘FAIR GLOBALISATION’
Fair Globalisation: this would create opportunities for all &also ensure that the benefits of globalisation are shared better.
ROLE OF THE GOVERENMENT IN MAKING ‘FAIR GLOBALISATION.’
The govt. can play a major role in the making this possible.
1.Its policies must protect the interests, not only of rich & powerful but all in the country.
2.the govt. can ensure that labour laws are properly implemented and the workers get their rights.
3.It can support small producers to improve their performance till the time they become strong enough to compete.
4.If necessary govt. can use trade & investment barriers.
5.It can negotiate at the WTO for the ‘fairer rules’.
6.It can also align with other developing countries with similar interests to fight against the domination of the developed countries in WTO.
In past few years, massive campaigns and representations have influenced important decisions relating to trade & investments at WTO. This shows that even people can also play an important role in the struggle for fair globalisation.