Globalisation: Effects, Impact & Government Initiatives

Q: What is Globalisation?

Globalisation is the inclusion of economies, societies, and cultures through cross border trade, investment, and exchange of ideas.

Q: When did globalisation start in India?

Globalisation began after the economic liberalisation and LPG reforms in India in 1991.

Q: What is the impact of globalization on India?

Globalisation boosted growth, export, and job creation in India. However, it increased the income inequality among people.

Updated on September 22, 2026Author:NEXT IAS Contributors

Globalisation is the concept of connecting people, culture and world economies together. It began in India with the 1991 economic reforms, aftermath of the Balance of Payments (BoP) crisis. The government of India reduced custom tariffs, relaxed the earlier strict Import-Export capping, allowed the Foreign Direct Investments (FDI) and finally, transformed India into an open economy from closed economy before 1991.

The major reasons behind globalization include the Information technology revolution, lower trade barriers, cheaper and faster Air travel, expansion of Multi National Companies (MNCs). The positive impacts of globalization include affordable market access, better customer choices, and knowledge exchanges that further increased scientific innovation.

Five Effects of Globalization

S.No.	Effect	Explanation	Example
1	Greater consumer choice and lower prices	The integration of markets increases competition among producers which offer more varieties and cheaper goods.	Indian consumers can buy smartphones, cars, and apparel from various global brands at competitive prices.
2	Growth of foreign investment and jobs	The Multinational Companies or MNCs set up their units or outsource work. They bring capital, technology, and employment.	Various sectors such as IT or BPO in Bengaluru, Hyderabad, and Pune expanded due to FDI and outsourcing.
3	Technology transfer and innovation	Globalisation brings advanced technology, management practices, and skills to domestic firms.	Indian automobile and pharmaceutical companies adopted Research and Development, quality standards, and production techniques globally.
4	Expansion of exports and services	Many countries specialise in sectors of comparative benefits which boost exports and GDP.	The IT services, pharmaceuticals, and textiles exports in India grew rapidly after 1991.
5	Cultural exchange and lifestyle changes	The movement of people, media, and ideas propagate cultures, values, and consumption patterns.	The rise of global food chains, fashion trends, festivals, and English speaking media in India.

Globalisation and the Indian Economy

Globalisation in the integration of an economy with the rest of the world through trade, investment, technology, and displacement of people. In India, globalization began after the new economic policy in 1991. It introduced Liberalisation, Privatisation, and Globalisation or popularly known as the 'LPG reforms'. It reduced tariff, removed license raj, and opened many sectors to FDI, investment by MNCs and finally boosted the competition. It resulted in rapid growth in India's GDP, exports, foreign reserves, and expansion of the service sector such as Information Technology (IT). Indian companies got access to global markets and advanced technology and consumers got better quality goods at lower prices.

The benefits were unevenly distributed as the skilled or urban worker gained access to big companies and thus gained more. On the other hand, the small scale industries, traditional sectors, and some of the farmers had to face price competition due to large imports.

Major Impact

Globalisation has various impacts on the Indian economy and people. It increased the economic growth, diversified the industrial base and transformed India into a global centre for services such as IT, pharmaceuticals, and other businesses. The inflow of FDI and transfer of technology improved productivity and created skilled labour jobs.

Globalisation provided a platform for several companies to be recognised at world level. Such companies include TATA, Infosys, among others. The urban consumers enjoyed access to a broad range of choices, qualitative products with affordable prices. The quality of life improved and poverty declined rapidly after 1991.

Globalisation built competition for small manufacturers which led to many closures and job losses in many sectors. The agricultural costs were affected due to global price levels in many regions. The income inequality broadened, higher income groups benefitted out of it, and informal sector workers felt insecure.

Government Initiatives to Promote Globalisation

S.No.	Initiative	Year	Features
1	New Economic Policy (LPG Reforms)	1991	It includes liberalised trade, reduced licensing, and open FDI. It integrated India with the global market or economy.
2	Foreign Trade Policy (FTP)	2015 to 2020 2021 to 2026	It boosts exports by offering incentives, simplifying procedures, and promoting ‘Make in India for the World’.
3	Make in India	2014	It attracts FDI, promotes manufacturing, and integrates Indian firms into global value chains.
4	Startup India & Standup India	2016	It encourages innovation-led startups, facilitates global funding and market access.
5	Production Linked Incentive (PLI) Scheme	2020 onwards	It provides incentives for domestic manufacturing in electronics, pharmaceuticals, and automobiles to become export hubs.
6	Digital India & promotion of IT or ITES	2015 onwards	It strengthens digital infrastructure, supports IT exports and promotes global outsourcing.
7	Special Economic Zones (SEZs)	2000s (SEZ Act, 2005)	It includes the creation of export oriented regions or zones. They get tax and regulatory benefits to attract global investors.