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Impact of Globalization:
The implications of globalization for a national economy are many.
Globalization has intensified interdependence and competition between
economies in the world market. These economic reforms have yielded
the following significant benefits: Globalization in India had a favorable
impact on the overall growth rate of the economy.This is major
improvement given that India’s growth rate in the 1970’s was very low
at 3% and GDP growth in countries like Brazil, Indonesia, Korea, and
Mexico was more than twice that of India. Though India’s average
annual growth rate almost doubled in the eighties to 5.9%, it was still
lower than the growth rate in China, Korea and Indonesia. The pick up
in GDP growth has helped improve India’s global position.
Consequently India’s position in the global economy has improved from
the 8th position in 1991 to 4th place in 2001; when GDP is calculated on
a purchasing power parity basis. During 1991-92 the first year of Rao’s
reforms program, The Indian economy grew by 0.9%only. However the
Gross Domestic Product (GDP) growth accelerated to 5.3 % in 1992-
93, and 6.2% 1993-94. A growth rate of above 8% was an achievement
by the Indian economy during the year 2003-04.
India’s GDP growth rate can be seen from the following graph since
independence
Devaluation: The first step towards globalization was taken with the
announcement of the devaluation of Indian currency by 18-19 percent
against major currencies in the international foreign exchange market.
In fact, this measure was taken in order to resolve the BOP crisis
Disinvestment-In order to make the process of globalization smooth,
privatization and liberalisation policies are moving along as well.
Under the privatization scheme, most of the public sector undertakings
have been/ are being sold to private sector.
Dismantling of The Industrial Licensing Regime At present, only six
industries are under compulsory licensing mainly on accounting of
environmental safety and strategic considerations. A significantly
amended locational policy in tune with the liberalized licensing policy is
in place. No industrial approval is required from the government for
locations not falling within 25 kms of the periphery of cities having a
population of more than one million.
Allowing Foreign Direct Investment (FDI) across a wide spectrum
of industries and encouraging non-debt flows. The Department has put
in place a liberal and transparent foreign investment regime where most
activities are opened to foreign investment on automatic route
without any limit on the extent of foreign ownership. Some of the recent
initiatives taken to further liberalise the FDI regime, inter alias, include
opening up of sectors such as Insurance (upto 26%); development of
integrated townships (upto 100%); defence industry (upto 26%);
tea plantation (upto 100% subject to divestment of 26% within five years
to FDI); enhancement of FDI limits in private sector banking, allowing
FDI up to 100% under the automatic route for most manufacturing
activities in SEZs; opening up B2B e-commerce; Internet Service
Providers (ISPs) without Gateways; electronic mail and voice mail to
100% foreign investment
subject to 26% divestment condition; etc. The Department has also
strengthened investment facilitation measures through Foreign
Investment Implementation Authority (FIIA).
Non Resident Indian Scheme the general policy and facilities for
foreign direct investment as available to foreign investors/ Companies
are fully applicable to NRIs as well. In addition, Government has
extended some concessions specially for NRIs and overseas corporate
bodies having more than 60% stake by NRIs
Throwing Open Industries Reserved For The Public Sector to
Private Participation. Now there are only three industries reserved for
the public sector
Abolition of the (MRTP) Act, which necessitated prior approval for
capacity expansion
The removal of quantitative restrictions on imports.
The reduction of the peak customs tariff from over 300 per cent
prior to the 30 per cent rate that applies now. 168 International
Research Journal of Finance and Economics - Issue 5 (2006)
Severe restrictions on short-term debt and allowing external
commercial borrowings based on external debt sustainability.
Wide-ranging financial sector reforms in the banking, capital
markets, and insurance sectors, including the deregulation of interest
rates, strong regulation and supervisory systems, and the introduction of
foreign/private sector competition.
Strategy of Globalization:
In the Report (2006) East Asian Renaissance, World Bank Advisor Dr
Indermit Gill stated: Cities are at the core of a development strategy
based on international integration, investment and innovation. East Asia
is witnessing the largest rural-to-urban shift of population in history.
Two million new urban dwellers are expected in East Asian cities every
month for the next 20 years. This will mean planning for and building
dynamic, connected cities that are linked both domestically and to the
outside world so that economic growth continues and social cohesion is
strengthened.The market economy seems to be more concerned with the
growth of consumerism to attract the high income groups who are
mostly in the cities in the developing countries. Rural economy and the
agricultural sector were out of focus in the strategy of globalization.
WHAT IS GLOBALISATION?
In the past two to three decades, more and more MNCs
have been looking for locations around the world which
would be cheap for their production. Foreign investment
by MNCs in these countries has been rising. At the same
time, foreign trade between countries has been rising
rapidly. A large part of the foreign trade is also controlled
by MNCs. For instance, the car manufacturing plant of
Ford Motors in India not only produces cars for the Indian
markets, it also exports cars
to other developing countries and exports car
components for its many
factories around the world. Likewise,activities of most
MNCs involve
substantial trade in goods and also services.
The result of greater foreign investment and greater
foreign trade
has been greater integration of production and markets
across countries. Globalisation is this process of
rapid integration or
interconnection between countries. MNCs are
playing a major role in
the globalisation process. More and more goods and
services, investments and technology are moving
between countries. Most
regions of the world are in closer contact with each other
than a few
decades back.Besides the movements of goods, services,
investments and technology, there is one more way in
which the countries can be connected. This is through the
movement of people between countries. People usually
move from one country to another in search of better
income, better jobs or better education. In the past few
decades, however, there has not been much increase in
the movement of people between countries due to
various restrictions.
FACTORS THAT HAVE ENABLED
GLOBALISATION :
Technology
Even
more
Social Services
About the quality of education given to children, the
Approach to the Eleventh Five Year Plan stated: A recent
study has found that 38 per cent of the children who
have completed four years of schooling cannot read a
small paragraph with short sentences meant to be read
by a student of Class II. About 55 per cent of such
children cannot divide a three digit number by a one digit
number. These are indicators of serious learning
problems which must be addressed.
Victims of Globalization
IN his Making Globalization Work, Nobel Laureate Stiglitz
wrote: Trade liberalizationopening up markets to the free
flow of goods and services was supposed to lead to
growth. The evidence is at best mixed. Part of the reason
that international trade agreements have been so
unsuccessful in promoting growth in poor countries is
that they were often unbalanced. The advanced
industrial countries were allowed to levy tariffs on goods
produced by developing countries that were, on average,
four times higher that those on goods produced by other
advanced industrial countries.
Conclusion:
The lesson of recent experience is that a country must
carefully choose a combination of policies that best
enables it to take the opportunity - while avoiding the
pitfalls. For over a century the United States has been the
largest economy in the world but major developments
have taken place in the world economy since then,
leading to the shift of focus from the US and the rich
countries of Europe to the two Asian giants- India and
China. Economics experts and various studies conducted
across the globe envisage India and China to rule the
world in the 21st century. India, which is now the fourth
largest economy in terms of purchasing power parity,
may overtake Japan and become third major economic
power within 10 years.
Acknowledgement:
I would like to express profound gratitude to prof.Nair
and Head Prof. bane for giving encouragement and
guidance to work on Impact of Globalization on Indian
Economy An Overview. Also I would like to express
thanks to Mr. Balwant Salunke, Mr. Keshav Anand, Mr.
Dashrath Sharma, Mr. Rahul Joshi and Mr. Ankur Jain.
References:
Globalisation and Poverty: Centre for International
Economics, Australia.
Globalisation Trend and Issues T.K.Velayudham,
Globalisation and India Lecture: Prof .Sagar Jain,
University of N.Carolina.
Repositioning India in the Globalised World Lecture:
V.N.Rai.
Globalization of Indian economy by Era Sezhiyan
Globalisation and Indias Business prospectives Lecture
Ravi Kastia.
Globalisation and Liberalisation Prospects of New World
Order Dr.A.K.Ojha, Third Concept An International Journal
of Ideas, Aug 2002.
Globalisation: Imperatives, Challenges and the
Strategies.
GLOBALIZATION ON INDIAN
ECONOMY :
Abstract :