G lobalisation , L iberalisation and C hanges in I ndian I ndustry Since the 1990s, the government has followed a policy of liberalisation. Private companies, especially foreign firms, are encouraged to invest in sectors earlier reserved for the government, including telecom, civil aviation, power, etc. Licenses are no longer required to open industries. Foreign products are now easily available in Indian shops.
As a result of liberalisation, many Indian companies— small and large, have been bought over by multinationals. At the same time some Indian companies are becoming multinational companies. An instance of the first is when, Parle drinks was bought by Coca Cola. Parle’s annual turnover was ` crores, while Coca Cola’s advertising budget alone was ` crores.
This level of advertising has naturally increased the consumption of coke across India replacing many traditional drinks. The next major area of liberalisation is in retail. Do you think that Indians will prefer to shop in grocery stores, small textile shops in your neighbourhood or in small towns, departmental stores, or will they go out of business? The government is trying to sell its share in several public sector companies, a process which is known as disinvestment.
Many government workers are scared that after disinvestment, they will lose their jobs. In ‘Modern Foods’, which was set up by the government to make healthy bread available at cheap prices, and which was the first company to be privatised, % of the workers were forced to retire in the first five years. More and more companies are reducing the number of permanent employees and outsourcing their work to smaller companies or even to homes. For multinational companies, this outsourcing is done across the globe, with developing countries like India providing cheap labour.
Because small companies have to compete for orders from the big companies, they keep wages low, and working conditions are often poor. It is more difficult for trade unions to organise in smaller firms. Almost all companies, even government ones, now practice some form of outsourcing and contracting. But the trend is especially visible in the private sector.
To summarise, India is still largely an agricultural country. The service sector – shops, banks, the IT industry, hotels and other services are employing more people and the urban middle class is growing, along with urban middle class values like those we see in television serials and films. But we also see that very few people in India have access to secure jobs, with even the small number in regular salaried employment becoming more insecure due to the rise in contract labour. So far, employment by the government was a major avenue for increasing the well-being of the population, but now even that is coming down.
Some economists debate this, but liberalisation and privatisation worldwide appear to be associated with rising income inequality. You will be reading more about this in the next chapter on globalisation. At the same time as secure employment in large industry is declining, the government is embarking on a policy of land acquisition for industry.