7.3.4. Features of the Globalisation Policy

As part of implementation of the agenda of globalisation, the Government of India has undertaken the following policy measures since 1991:

a) Exchange Rate Reforms: The most important measure for integrating Indian economy with the global economy was to change over from the fixed exchange rate to market-determined exchange rate. This policy of allowing the exchange rate to be determined in the international market without official intervention is known as convertibility of the currency. The full convertibility of Indian rupee on trade account was achieved in August 1994. Along with this, various types of exchange control measures were remονed in a phased manner. As a result, restrictions on the transfer of foreign exchange have been considerably relaxed over the years.

b) Import Liberalisation: India is committed to reducing trade barriers as a member of the World Trade Organization (WTO). The government has also taken a number of steps in the direction of import liberalisation.

♤ The system of import licensing has been dismantled.

♤ Quantitative restrictions on imports have been almost totally abolished under agreement with the WTO.

♤ Duties on imports and exports have been reduced to make the trade between nations freer than before.

c) Foreign Investment: FDI is expected to add to the domestic investment, and thereby, contribute to industrial and economic development of the country. It leads to higher efficiency and productivity by increasing competition and by bringing new technology into the country. In the changing global scenario of industrial and economic cooperation, promotion of FDI is important. In a bid to attract foreign capital and to integrate Indian economy with the global economy, the Government of India has thrown open its doors to

foreign investors. The government is committed to encourage flow of FDI for better technology, modernisation and for providing goods and services of international standard. In order to invite foreign investment in high priority industries requiring large investments and advanced technology, the government decided in 1991 to grant approval for FDI up to 51 per cent foreign equity. This limit was raised from 51 per cent to 74 per cent and subsequently to 100 per cent for many of these industries. The policy of the government is also aimed at encouraging foreign investment in the core infrastructure sectors like road development, airports, airlines, real estate, banks, power generation, oil exploration, etc. Moreover, foreign institutional investors have been allowed to invest in the Indian capital market subject to certain regulations.

d) Foreign Technology: With a view to encourage technological development in Indian industries, free flow of technology is allowed by the government. Government provides automatic approval for technological agreements in case of high priority industries. Similar facilities are provided for other industries as well, provided such agreements do not require foreign exchange. Foreign technology induction is facilitated both through FDI and through foreign technology agreements.