Globalization, Labor Markets and Inequality in India

Globalization, Labor Markets and Inequality in India

Globalization, Labor Markets and Inequality in India

Globalization, Labor Markets and Inequality in India

Excerpt

India embarked on a policy of liberalization and globalization in the latter part of the last century. There has been some discussion in the literature as to when India took steps to move away from the regime of comprehensive state control of the economy and dismantle the restrictive structure. A distinction has been made in this connection between 'reforms' and 'globalization'. Strictly speaking the former is supposed to emphasize the process of easing control of the domestic economy, while the latter refers to the attempts at liberalization on the external account. It is useful to keep the two sets of policy distinct, and will be referred to below.

In practice the former entails the latter. As Nayar (2006a, p. 10) observes:

Economic liberalization within a country creates pressures to integrate the
national economy with the world economy… Say, for example, a country
commences economic reform and removes restrictions on production by the
private sector to accelerate growth. Eventually the state would have to allow
imports of capital goods and intermediate goods to increase production –
and that means integration into the world economy. And if it allows imports
of these goods, then it must also promote exports in order to pay for them –
further integration into the world economy.

In fact the process is more extensive than suggested in the above quotation. External liberalization also involved removing a good deal of restrictions on the import of consumer goods, not just capital and intermediate goods to aid production. The motivation for this was to promote competition in the domestic economy, and bring the efficiency levels in the Indian economy nearer the levels of the world economy.

It is clear that reforms of the domestic economy started earlier in India. Rodrick and Subramanain (2004) date the beginning of this process to the return of Indira Gandhi to power at the beginning of the 1980s. They ascribe the new direction to an 'attitudinal' shift in the perception of the leaders after the Congress Party had been 'chastened' by its electoral defeat in the earlier election of . . .

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