The Process of Liberalization in India:
Foreign Direct Investment and the Indian Auto Industry
India, the second most populous country in the world, and the largest democracy, evokes images of teeming populations, widespread poverty and, more recently, of software technology and call centers. It has often been claimed that everything that can be said about India is true. India is a vast country with rampant problems of poverty, inequality, illiteracy and poor health care, ranking very low on the Human Development Index Scale (see Fig. [Country Profile India]). At the same time, Indian industry has picked up in the last decade to make India the third largest economy (Footnote: expected ranking 2005-06 in the world, in GDP (Purchasing Power Parity) terms, after the U.S.A. and China). Today the Indian economy is a fourth of the US economy, and half of China´s. But current GDP growth rates, one of the highest in the world for India, suggest an upward trend.
<Graphics file: country profile india, population, economic, health, source UN.bmp>
<Country Profile India>Country Profile India Source: UNO
This increase in GDP has been contributed mainly by the industrial and service sectors, with the service sector playing an increasingly important role. India´s almost stagnant agricultural sector, even today one of the most underdeveloped in the world, still constitutes around a quarter of national GDP, much above the world average (see Fig. [Country Profile India]). It is widely believed that the current strength of industry in India has followed liberalization reforms that took place in the early 1990´s (see Section [sec:Economic-Reforms:-An]). Since then, India´s trade has boomed and there has been sustained investment into industry by foreign players, bringing in not only foreign capital, but also international technology and know-how. There have also been indirect consequences of development, employment, efficiency and rising per capita incomes.
The economic reforms of the the 1990's have changed the face of the Indian economy. They have made available to Indian consumers, at increasingly affordable prices, offerings that were never before available. While making India more attractive for foreign investors, the reforms have also helped integrate the Indian economy with the global economy, enabling Indian companies and labor to seek avenues abroad.
An increasing level of foreign investment reflects international confidence in the Indian market, leads to better infrastructure, creates jobs, increases the level of sophistication of the local demand, and strengthens Indian companies by exposing them to international competition. Foreign investment and GDP growth can often have a bi-directional causal relationship[key-18]. Foreign investment in a sustainable way can thus lead to a better standard of living for a developing country like India.
The role of the government in the process of economic reforms cannot be overemphasized. Since the reform process is in the end driven by the government, though it is certainly initiated, accelarated or slowed down by various groups, it would be possible to conjecture the role that the government has played in improving overall industry and public welfare through market reforms. It may also be possible to guess possible new roles of the government in the post-reform era (Footnote: I hardly suggest that the era of reforms is over, or that the reforms so far are sufficient. But only that the process has made a beginning, to allow the Indian economy to achieve greater heights.)
As the direct and indirect effects of liberalization in general, and FDI in particular can be seen, certain social tasks that need to be tackled also present themselves. The most important of these tasks are the decrease in the level of poverty, and to reduce the gap between "the two Indias": the rich, affluent, and upwardly mobile urban India, and the rural India, which still dwells in poverty levels of a century before. Reforming the agricultural sector should be, and is, one of the foremost priorities of policy makers, the sector affecting directly the plight of rural India.
While the beginning of the current economic liberalization policy in India could be traced to the period much earlier than the 1990s, the explicit acceptance and implementation of the economic liberalization program during mid-1991 by Indian government could be seen as the starting point of the new reform program, and its subsequent change of approach and priorities with regard to its governance. It was based on the belief that economic globalization/liberalization worked toward the integration of national economies into the international economy through trade, direct foreign investment, short-term capital flows, international flow of workers and humanity, and flow of technology. But in the process of liberalizing the economy, the state’s role has transformed in prioritizing a strong military, police and legal structures, and functions to protect private property rights and ensure proper functioning of markets. If the markets do not exist in the areas of land, water, education, health care, social security, and so on, the state must take initiative in creating a market. After creating such markets, the state should keep its activities to bare minimum without interfering with the functions of the market for it to perform efficiently (Harvey, 2005). Such thinking based on Neoliberalism1 started occupying the minds, in a measured manner, in the policy circle worldwide during the 1970s, which led to a major shift in the political–economic practices, and started moving toward deregulation, privatization, and withdrawal of state from many areas of social security, for efficient governance, based on market economy.
Such policy transformations in India from the 1990s (officially) have not only changed the nature of state but also varied implications in the domain of education. Along with these political–economic changes, the Indian state through its Eighty-Sixth Amendment in 2002 made elementary education a fundamental right by inserting Article 21A in Indian Constitution, which says that “the state shall provide free and compulsory education to all children of the age of six to fourteen years in such manner as the state may, by law, determine” (Government of India [GOI], 2007, p. 11). The policy changes along with constitutional guarantee for education have given more scope to critically evaluate the role of state in educational governance, in fulfilling the constitutional right to education and, at the same time, strengthening the governance structures of neoliberal political economy.
This article will assess the changes in the domain of education, particularly elementary education, after the beginning of economic liberalization in India. Furthermore, the article will contrast the contemporary situation with the period before economic reforms in 1991 to understand the nuances of policy vicissitudes that engulf the governance paradigm. The research follows the methodology of critical policy analysis, to evaluate the policy changes in the domain of educational governance and its implications, in India, within the theoretical framework of neoliberalism. This article uses secondary data, collected from primary and secondary sources to understand the trajectory of policy changes.
Elementary Education in India (1947-1990)