Globalisation & Liberalisation

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GLOBALISATION AND LIFE INSURANCE
Dr. H. Sadhak
Director, Management Development Center Life Insurance Corporation of India

A. Globalisation & Liberalisation
Globalisation, according to Penguin Dictionary of Economics, “Stresses the geographical dispersion of industrial and service activities (for example research and development, sourcing of inputs, production, distribution) and the cross boarder networking of companies (for example through joint ventures and the sharing of assets”. According to Herman E Daly, Globalisation serves the vision of a single, cosmopolitan, integrated global economy. This definition focuses on the cross border movement of goods, services and resources (financial and human) impacting on the domestic and global assets and employment. Globalisation, thus focuses on an integrated economic world in which the economy is a single market characterised by trade and investment flows, cross border economic activities in production, investment financing, movement of capital, technology, labour, internationalisation of consumption, capital, and services. Economic liberalisation is the gateway of globalisation and financial liberation plays the most crucial role in integration of one country’s economy on the global economic network. However, very often the term liberalisation and globalisation are used simultaneously. Important instruments of liberalisation are regulation of financial market to allow foreign capital, foreign investment, to and fro flow of capital etc. reduction of tariff and non-tariff barriers of trade, simplifications of customs measures etc. For successful global integration a country must move to economic liberalization by dismantling entry barriers and Licensing system, reduction in physical restrictions on imports, reduction in control on capital and current account, reforming financial system and opening up financial market to private (domestic and foreign) players, removing controls on foreign capital (FD and portfolio) flow to the country etc. Globalisation however, is not a new phenomena of the current world activities. Economic historians have traced two strong waves of globalization. The first wave of globalization spread over 1870 – 1914 while the second wave of globalization began roughly in 1960 and continuing. The current wave of globalization is much faster and deeper. Globalization today is fundamentally a new economic phenomenon, and a process to set up a new economic order globally increased integration and interdependence of production, consumption and services. The present wave of

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Bimaquest - Vol. V Issue 1, January 2005

Globalisation and Life Insurance

globalisation has significantly influenced improved specialisation in resource allocation, productivity enhancement and specialisation and greater innovation, adaptability and utilisation of technology which has necessitated the need for cross border economic activity for all the countries. Resource mobility has not only reduced the cost of production and distribution but also boosted competition across the border.

Drivers of Globalisation
The present wave of globalisation has been significantly influenced by advances in information and computer technology, increased flow of trade and capital. improved specialisation in resource allocation, productivity enhancement and specialisation and greater innovation, adaptability and utilisation of technology which has necessitated the need for cross border economic activity for all the countries. These have not only reduced the cost of production and distribution but also boosted competition across the border. Therefore important drivers of globalisation are expansion of International Trade, Internationalisation of Financial Market and Migration, Baldwin and Martin (1999) observed key aspects of globalization namely Trade, investment, migration and Factor prices , Capital flows and Markets, and Industrialization and Income Convergence and Divergence. Both...
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