LONDON—The British decision to leave the European Union is seen by many as a rejection of globalization, although the thumbs down was on free movement of labor within the bloc and not on free trade or unrestricted flow of capital within. At the same time, the world’s largest democracy—India—was preparing to mark its 25th anniversary of joining the list of globalizing nations. While lifting India’s GDP, globalization has increased an already wide chasm between a rich minority and poor majority.
Over the years the New Economic Policy, or NEP, introduced by the Indian government in 1991, morphed into a compendium of economic liberalization, privatization, and opening up to the world. NEP has come to be viewed as combining India’s entry into a globalizing world with its adoption of the neoliberal model of economic development—a brainchild of the International Monetary Fund (IMF) and the World Bank. Also known as the Washington Consensus, this model requires a government to reduce the state’s role in the economy, cut state spending and subsidies, abolish price controls, privatize public undertakings, reduce tariffs, welcome foreign direct investment, and regulate the financial sector lightly.
In India the NEP architect was Manmohan Singh, then finance minister and later prime minister, who had once served as chief trade economist at the U.N. Conference on Trade and Development, an associate of the IMF and the World Bank. Narendra Modi, the current prime minister, is also committed to implementing the NEP.
Pursuit of this policy resulted in annual economic growth breaking out of the 3 to 5 percent band of the pre-1991 era. But redistribution of the extra wealth has been skewed. Those already better off have improved their living standards further whereas the large majority who lagged behind before have stagnated or grown poorer.
