Question

Some economists argue that: “Post-1991 economic reforms, globalisation played a major role in poor performance of the industrial sector.”
Present your arguments to justify the given statement.

Hint:

While globalization helped some sectors flourish, it hurt traditional and domestic industries that were not ready to face global competition. Always evaluate both benefits and drawbacks in reform questions.

Answer 1

The statement is justified by examining the consequences of globalization on India’s industrial sector after the 1991 economic reforms. The reforms aimed to liberalize the economy and integrate it with the global market. However, the outcomes for the industrial sector were mixed, and in many ways, adverse.

Increased Competition from MNCs: Post-globalisation, Indian industries—particularly small and medium enterprises—faced stiff competition from technologically advanced multinational corporations. Many indigenous industries could not survive this competition due to lack of scale and efficiency.

Neglect of Domestic Industrial Policy: After liberalization, focus shifted from state-led industrial development to privatization and deregulation. This resulted in a decline in protective support for domestic industries and reduced incentives for infrastructure and R&D investment.

Low Growth in Employment: Despite an increase in output in some sectors, industrial employment grew very slowly. The focus on capital-intensive industries limited the sector’s ability to absorb labor, leading to jobless growth.

Increased Import Dependency: The post-1991 period saw a surge in imports of cheap manufactured goods, particularly from countries like China. This undermined domestic manufacturers and increased India’s trade deficit.

Limited Technological Transfer: One of the promises of globalization was better technology. However, MNCs rarely transferred core technology to Indian firms, and many operated as independent units, restricting spillover benefits to the domestic sector.

Thus, although globalization opened new opportunities, its unregulated impact on Indian industry led to multiple challenges, supporting the economists’ argument of its adverse effect on industrial performance.