Globalization in India has allowed companies to increase their base of operations, expand their workforce with minimal investments, and provide new services to a broad range of consumers.
The process of globalization has been an integral part of the recent economic progress made by India. Globalization has played a major role in export-led growth, leading to the enlargement of the job market in India.
One of the major forces of globalization in India has been in the growth of outsourced IT and business process outsourcing (BPO) services. The last few years have seen an increase in the number of skilled professionals in India employed by both local and foreign companies to service customers in the US and Europe in particular. Taking advantage of India’s lower cost but educated and English-speaking work force, and utilizing global communications technologies such as voice-over IP (VOIP), email and the internet, international enterprises have been able to lower their cost base by establishing outsourced knowledge-worker operations in India.
As a new Indian middle class has developed around the wealth that the IT and BPO industries have brought to the country, a new consumer base has developed. International companies are also expanding their operations in India to service this massive growth opportunity.
Notable examples of international companies that have done well in India in the recent years include Pepsi, Coca-Cola, McDonald’s, and Kentucky Fried Chicken, whose products have been well accepted by Indians at large.
Globalization in India has been advantageous for companies that have ventured in the Indian market. By simply increasing their base of operations, expanding their workforce with minimal investments, and providing services to a broad range of consumers, large companies entering the Indian market have opened up many profitable opportunities.
Indian companies are rapidly gaining confidence and are themselves now major players in globalization through international expansion. From steel to Bollywood, from cars to IT, Indian companies are setting themselves up as powerhouses of tomorrow’s global economy.
Impact of Globalisation on Developing Countries and India
Globalised World - What does it mean?
Does it mean the fast movement of people which results in greater interaction?
Does it mean that because of IT revolution people can be in touch with each other in any part of the world?
Does it mean trade and economy of each country is open in Non-Intrusive way so that all varieties are available to consumer of his choice?
Does it mean that mankind has achieved emancipation to a level of where we can say it means a social, economic and political globalisation?
Though the precise definition of globalisation is still unavailable a few definitions worth viewing, Stephen Gill: defines globalisation as the reduction of transaction cost of transborder movements of capital and goods thus of factors of production and goods. Guy Brainbant: says that the process of globalisation not only includes opening up of world trade, development of advanced means of communication, internationalisation of financial markets, growing importance of MNC's, population migrations and more generally increased mobility of persons, goods, capital, data and ideas but also infections, diseases and pollution
Impact on India:
India opened up the economy in the early nineties following a major crisis that led by a foreign exchange crunch that dragged the economy close to defaulting on loans. The response was a slew of Domestic and external sector policy measures partly prompted by the immediate needs and partly by the demand of the multilateral organisations. The new policy regime radically pushed forward in favour of amore open and market oriented economy.
Major measures initiated as a part of the liberalisation and globalisation strategy in the early nineties included scrapping of the industrial licensing regime, reduction in the number of areas reserved for the public sector, amendment of the monopolies and the restrictive trade practices act, start of the privatisation programme, reduction in tariff rates and change over to market determined exchange rates.
Over the years there has been a steady liberalisation of the current account transactions, more and more sectors opened up for foreign direct investments and portfolio investments facilitating entry of foreign investors in telecom, roads, ports, airports, insurance and other major sectors.
The Indian tariff rates reduced sharply over the decade from a weighted average of 72.5% in 1991-92 to 24.6 in 1996-97.Though tariff rates went up slowly in the late nineties it touched 35.1% in 2001-02. India is committed to reduced tariff rates. Peak tariff rates are to be reduced to be reduced to the minimum with a peak rate of 20%, in another 2 years most non-tariff barriers have been dismantled by march 2002, including almost all quantitative restrictions.
India is Global:
The liberalisation of the domestic economy and the increasing integration of India with the global economy have helped step up GDP growth rates, which picked up from 5.6% in 1990-91 to a peak level of 77.8% in 1996-97. Growth rates have slowed down since the country has still bee able to achieve 5-6% growth rate in three of the last six years. Though growth rates has slumped to the lowest level 4.3% in 2002-03 mainly because of the worst droughts in two decades the growth rates are expected to go up close to 70% in 2003-04. A Global comparison shows that India is now the fastest growing just after China.
This is major improvement given that India is 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.
Globalisation and Poverty:
Globalisation in the form of increased integration though trade and investment is an important reason why much progress has been made in reducing poverty and global inequality over recent decades. But it is not the only reason for this often unrecognised progress, good national polices , sound institutions and domestic political stability also matter.
Despite this progress, poverty remains one of the most serious international challenges we face up to 1.2 billion of the developing world 4.8 billion people still live in extreme poverty.
But the proportion of the world population living in poverty has been steadily declining and since 1980 the absolute number of poor people has stopped rising and appears to have fallen in recent years despite strong population growth in poor countries. If the proportion living in poverty had not fallen since 1987 alone a further 215million people would be living in extreme poverty today.
India has to concentrate on five important areas or things to follow to achieve this goal. The areas like technological entrepreneurship, new business openings for small and medium enterprises, importance of quality management, new prospects in rural areas and privatisation of financial institutions. The manufacturing of technology and management of technology are two different significant areas in the country.
There will be new prospects in rural India. The growth of Indian economy very much depends upon rural participation in the global race. After implementing the new economic policy the role of villages got its own significance because of its unique outlook and branding methods. For example food processing and packaging are the one of the area where new entrepreneurs can enter into a big way. It may be organised in a collective way with the help of co-operatives to meet the global demand.
Understanding the current status of globalisation is necessary for setting course for future. For all nations to reap the full benefits of globalisation it is essential to create a level playing field. President Bush's recent proposal to eliminate all tariffs on all manufactured goods by 2015 will do it. In fact it may exacerbate the prevalent inequalities. According to this proposal, tariffs of 5% or less on all manufactured goods will be eliminated by 2005 and higher than 5% will be lowered to 8%. Starting 2010 the 8% tariffs will be lowered each year until they are eliminated by 2015.
GDP Growth rate:
The Indian economy is passing through a difficult phase caused by several unfavourable domestic and external developments; Domestic output and Demand conditions were adversely affected by poor performance in agriculture in the past two years. The global economy experienced an overall deceleration and recorded an output growth of 2.4% during the past year growth in real GDP in 2001-02 was 5.4% as per the Economic Survey in 2000-01. The performance in the first quarter of the financial year is5.8% and second quarter is 6.1%.
Export and Import:
India's Export and Import in the year 2001-02 was to the extent of 32,572 and 38,362 million respectively. Many Indian companies have started becoming respectable players in the International scene. Agriculture exports account for about 13 to 18% of total annual of annual export of the country. In 2000-01 Agricultural products valued at more than US $ 6million were exported from the country 23% of which was contributed by the marine products alone. Marine products in recent years have emerged as the single largest contributor to the total agricultural export from the country accounting for over one fifth of the total agricultural exports. Cereals (mostly basmati rice and non-basmati rice), oil seeds, tea and coffee are the other prominent products each of which accounts fro nearly 5 to 10% of the countries total agricultural exports.
Where does Indian stand in terms of Global Integration?
India clearly lags in globalisation. Number of countries have a clear lead among them China, large part of east and far east Asia and eastern Europe. Lets look at a few indicators how much we lag.
•Over the past decade FDI flows into India have averaged around 0.5% of GDP against 5% for China 5.5% for Brazil. Whereas FDI inflows into China now exceeds US $ 50 billion annually. It is only US $ 4billion in the case of India
•Consider global trade - India's share of world merchandise exports increased from .05% to .07% over the pat 20 years. Over the same period China's share has tripled to almost 4%.
•India's share of global trade is similar to that of the Philippines an economy 6 times smaller according to IMF estimates. India under trades by 70-80% given its size, proximity to markets and labour cost advantages.
•It is interesting to note the remark made last year by Mr. Bimal Jalan, Governor of RBI. Despite all the talk, we are now where ever close being globalised in terms of any commonly used indicator of globalisation. In fact we are one of the least globalised among the major countries - however we look at it.
•As Amartya Sen and many other have pointed out that India, as a geographical, politico-cultural entity has been interacting with the outside world throughout history and still continues to do so. It has to adapt, assimilate and contribute. This goes without saying even as we move into what is called a globalised world which is distinguished from previous eras from by faster travel and communication, greater trade linkages, denting of political and economic sovereignty and greater acceptance of democracy as a way of life.
The implications of globalisation for a national economy are many. Globalisation has intensified interdependence and competition between economies in the world market. This is reflected in Interdependence in regard to trading in goods and services and in movement of capital. As a result domestic economic developments are not determined entirely by domestic policies and market conditions. Rather, they are influenced by both domestic and international policies and economic conditions. It is thus clear that a globalising economy, while formulating and evaluating its domestic policy cannot afford to ignore the possible actions and reactions of policies and developments in the rest of the world. This constrained the policy option available to the government which implies loss of policy autonomy to some extent, in decision-making at the national level.
The human society around the world, over a period of time, has established greater contact, but the pace has increased rapidly since the mid 1980’s.The term globalization means international integration. It includes an array of social, political and economic changes. Unimaginable progress in modes of communications, transportation and computer technology have given the process a new lease of life.
The world is more interdependent now than ever before .Multinational companies manufacture products across many countries and sell to consumers across the globe. Money, technology and raw materials have broken the International barriers. Not only products and finances, but also ideas and cultures have breached the national boundaries.
Laws, economies and social movements have become international in nature and not only the Globalization of the Economy but also the Globalization of Politics, Culture and Law is the order of the day. The formation of General Agreement on Tariffs and Trade (GATT), International Monetary Fund and the concept of free trade has boosted globalization.
Globalization in India
In early 1990s the Indian economy had witnessed dramatic policy changes. The idea behind the new economic model known as Liberalization, Privatization and Globalization in India (LPG), was to make the Indian economy one of the fastest growing economies in the world. An array of reforms was initiated with regard to industrial, trade and social sector to make the economy more competitive. The economic changes initiated have had a dramatic effect on the overall growth of the economy. It also heralded the integration of the Indian economy into the global economy. The Indian economy was in major crisis in 1991 when foreign currency reserves went down to $1 billion and inflation was as high as 17%. Fiscal deficit was also high and NRI's were not interested in investing in India. Then the following measures were taken to liberalize and globalize the economy.
Steps Taken to Globalize Indian Economy
Some of the steps taken to liberalize and globalize our economy were:
1. Devaluation: To solve the balance of payment problem Indian currency were devaluated by 18 to 19%.
2. Disinvestment: To make the LPG model smooth many of the public sectors were sold to the private sector.
3. Allowing Foreign Direct Investment (FDI): FDI was allowed in a wide range of sectors such as Insurance (26%), defense industries (26%) etc.
4. NRI Scheme: The facilities which were available to foreign investors were also given to NRI's.
Merits and Demerits of Globalization
The Merits of Globalization are as follows:
• There is an International market for companies and for consumers there is a wider range of products to choose from. • Increase in flow of investments from developed countries to developing countries, which can be used for economic reconstruction. • Greater and faster flow of information between countries and greater cultural interaction has helped to overcome cultural barriers. • Technological development has resulted in reverse brain drain in developing countries. The Demerits of Globalization are as follows:
• The outsourcing of jobs to developing countries has resulted in loss of jobs in developed countries. • There is a greater threat of spread of communicable diseases. • There is an underlying threat of multinational corporations with immense power ruling the globe. • For smaller developing nations at the receiving end, it could indirectly lead to a subtle form of colonization. Summary
India gained highly from the LPG model as its GDP increased to 9.7% in 2007-2008. In respect of market capitalization, India ranks fourth in the world. But even after globalization, condition of agriculture has not improved. The share of agriculture in the GDP is only 17%. The number of landless families has increased and farmers are still committing suicide. But seeing the positive effects of globalization, it can be said that very soon India will overcome these hurdles too and march strongly on its path of development.
History of Globalization
Globalization is mainly a socio-economic term which is nowadays synonymous with the economic development of a country. In simple terms, it is a continuous process through which different societies, economies, traditions and culture integrate with each other on a global scale through the means of communication and interchange of ideas. By having an idea of the history of globalization, one will be able to properly understand the causes which led to such social and economic change.
Alexander the Great forges eastward link with Chandragupta Maurya for overland routes between the Mediterranean, Persia, India, and Central Asia. During the 1st century CE the trans-world trade makes its first major appearance in China under the Han dynasty and successfully established trade relations with Asian and European countries. The period from 650-850 AD records the expansion of Islam and trade relations with the west Mediterranean region with the Indian sub-continent. The Rise of Genghis Khan during 1100 AD gave rise to the integration of overland routes across Eurasia. The 1650s marks the expansion of the slave trade and it sustained the expansion of Atlantic Economy, giving birth to integrated economic and industrial systems across the Ocean. The period from 1776 to 1789 AD marks the US and French Revolutions and the creation of modern state as a fall-out of military and business interests. These integrated empires expand during the industrial revolution. The eighteenth century marks the merging of the modernity with globalization and it also marks the foundation for the creation of international trade law.
Early history of globalization
According to most scholars and researchers, it is the modern age which led to the origin of globalization. In this age, wide spread development took place in the field of infrastructure and connectivity. This led to more interaction between the nations and sharing of ideas, culture and tradition took place. All these put a direct impact on the process of globalization. In the economic scenario, more trade links started taking place between countries on a global scale which influenced global as well as domestic economies to a great extent.
However, there are some scholars who point out that the origins of the history of globalization can be traced back to the ancient civilizations. Scholars who advocate this theory say that the example of the earliest forms of globalization is the trade links between the Sumerian civilization and the Indus Valley Civilization in third millennium B.C. In fact, after this age, there are numerous instances where trade links were established between various countries like India, Egypt, Greece, and Roman Empire and so on. There were regular business links between the Parthian Empire, Roman Empire and Han Dynasty. The popularity of the trade relations led to the development of various trade routes like Silk Road and so on.
Globalization in the medieval age
The Islamic period in the medieval era is an important epoch in the history of globalization. This was when the Jewish and the Muslim traders started going to various parts of the world to sell various items. This led to a blend of ideas, traditions and customs.
In China, the first postal service was introduced and paper was invented. This led to better knowledge sharing. As more and more people started traveling to various countries across the world, it led to more communication between people and intermingling of languages. Explorers like Columbus and Vasco Da Gama sailed through the oceans in search of new countries and establish trade links with them or to make other countries their colonies. All these factors were a major cause for the development of the pre-globalization era.
The medieval period was the age of discovery. It was in this period that Africa and Eurasia engaged in cultural and economic exchange between them. Gradually, this led to the growth of colonies in various parts of Africa, Asia and Latin America. As a result, there was constant blend of the ideas, languages, rituals and customs between the natives and the foreign inhabitants. In fact, this system of colonization put a deep impact on agriculture, trade, ecology and culture on a global scale.
Globalization between the pre modern periods to modern period
The industrial revolution in the 19th century was one of the major periods in the history of globalization. Due to the industrial revolution, there was a significant increase in the quantity and quality of the products. This led to higher exports and better trade and business relations. Due to better products and colonization, lots of countries across the world became the consumers of the European market.
The phase of pre globalization perhaps came to an end after the First World War was fought. The war put a significant adverse effect on the economic scenario and it led to the Great Depression and gold standard crisis in the later part of the 1920s and early 1930s.
Globalization in the modern era
Globalization, in the modern sense of the term, came into existence after the Second World War. One of the main factors for this was the plan by the world leaders to break down the borders for fostering trade relations between nations. It was also in this period that major countries like India, Sri Lanka, Indonesia and some countries in South America gained independence. As a result, these countries too started having their own economic systems and made established trade relations with the rest of the world. The establishment of the United Nations Organization (UNO) was also a major step in this regard.
Gradually, the economic scenario of the world strengthened and it led to better trade relations and communication. Some other factors which have put a positive impact on globalization are: • Promotion of free commerce and trade
• Abolition of various double taxes, tariffs, and capital controls • Reduction of transport cost and development of infrastructure • Creation of global corporations
• Blend of culture and tradition across the countries
Another milestone in the history of globalization is the creation of the World Trade Organization which led to the growth of a uniform platform to settle trade and commercial disputes. According to economic surveys, the world exports improved significantly from 8.5% to around 16.2% due to globalization.
India and globalization
The wake of globalization was first felt in the 1990s in India when the then finance minister, Dr Manmohan Singh initiated the economic liberalization plan. Since then, India has gradually become one of the economic giants in the world. Today, it has become one of the fastest growing economies in the world with an average growth rate of around 6-7 %. There has also been a significant rise in the per capita income and the standard of living. Poverty has also reduced by around 10 %.
The service industry has a share of around 54% of the annual Gross Domestic Product while the industrial and agricultural sectors share around 29% and 17% respectively. Due to the process of globalization, the exports have also improved significantly.
Globalization has really out a positive impact on today's economy and it is expected to develop in the years to come.
Not only the word globalization has amplified over the last few years, but the term anti-globalization has appeared and is still growing. Anti-globalization or against globalization is the umbrella term for a collection of diverse protest grounds, incorporating: conservationism, third world obligation, animal rights, child labor, lawlessness, against capitalism and disagreement to MNCs.
World Trade Organization (WTO), International Monetary Fund (IMF), and World Bank are the institutes which has been the focus of anti-globalization disputes. As the industries are flourishing globally, anti-global operations and disputes are also growing aggressively.
The disadvantages of globalization are as under:
1. Big companies with international businesses are charged of social inequality, poor working conditions, turning blind eye towards environmental issues, unprofessional handling of natural resources, and biological harm. Anti-globalization supporters feel that the World Trade Organization, the World Bank and the International Monetary Fund are the leaders of economic globalization and blindly follow only those guidelines which yield them corporate interests. 2. Anti-globalists feel that the economic growth is not the only factor which make people happier but can often make their lives depressing with organizations like WTO making the rich richer and the poor poorer. These organizations get away with their share of profits by ignoring nature and human interests. 3. Globalization elevates the inflow of skilled and non-skilled employment opportunities from the developed economies to third world in search of cheap workforce. 4. Growth in chances of monetary commotions in one country effecting all other countries 5. Corporate control of nation-states is greater than that of civil society associations 6. The privatization of world media and its authority in the hands of a few restricts the artistic and ethnic expression 7. Globalization might lead to greater risks of violent behavior from people at the receiving end in an effort to conserve cultural inheritance 8. Restriction less international travel and influx of foreign visitors generate greater chances of spread of diseases carried accidentally between countries 9. Anti-globalists predict that the globalization is responsible for altering people's mindset, outlook and lifestyle and promote materialistic way of living 10. They also hold international organizations like the World Trade Organization responsible for violating national and individual independence 11. Greater probability of civil war within the third world nations and open conflict between them as they compete for resources
Reasons stating anti-globalists stand on opposing the World Trade Organization:
1. The WTO norms only serves the purpose of MNCs – The WTO, as per the anti-global campaigners, is not an autonomous establishment. The guidelines of WTO are formed by and for institutions with close access to discussions. Moreover, this international organization heavily depends on its 17 "Industry Sector Advisory Committees" for the supply research data for the purpose of trade consultations. Contributions by consumer, human rights, labor and environmental organizations are deliberately and repeatedly overlooked. 2. The WTO ignores labor and human rights – Probable solutions to curbing child labor and human rights abuses are wedged by the WTO clarifying that it is beyond the legal jurisdiction for an administration to prohibit a product on the basis of the way it is manufactured and secondly the administration can neither consider the code of conduct of the firms that do business with governments nor can take the behavior of companies into account that perform business with brutal despotism. 3. The WTO is a foe for environment – The WTO terms the environmental policies as "hindrance to trade" and encourages firms to break them. Practices such as removing tax on wood products by WTO were a deliberate attempt for amplifying the timber demand which would eventually trigger deforestation. 4. The WTO is responsible for slaying people – The vicious resistance of intellectual property rights-official documents, copyrights and trademarks by WTO is implemented at the cost of ignoring wellbeing and human lives. The administration of developing nations has been pressurized by the international organization to trigger the utility of standard drugs and remove the practice of producers providing monetary help to medicos who recommend their products which permits firms to import medicines from other nations where cheap drugs are available. 5. The WTO is increasing social disparity – The phenomenon of free commerce is not helping the majority of the world. Social disparity worsened during 1960 to 1998 both internationally and within nations. This period on the contrary witnessed a rapid increase in global commerce and investments. As per the UN Development Program the 20% of world's richest population devour 86% of world's natural resources while the 80% of the underprivileged are left with 14% of the resources. Culture and Globalization
Can culture and globalization come together in the today's world of interconnectedness and cooperation? Is it not possible to follow both concepts at the same time? Let's take a look... Culture and globalization are two different concepts. The word 'culture' originated from the Latin word, 'cultura', meaning 'to cultivate'. Culture is a way of life adopted by a certain group of people of a particular society at a specific time and place. While the second term, globalization, is an economic interaction between more than two countries. It shows global context than a limited interest of a country.
Every society has its own culture and way of life. Culture is established by a group of people who live together and adhere to some principles in their society. In a broader sense, culture is a phenomenon of inheritance, unconsciously adopted by a person who is born within that group. When a culture newly is introduced to the globalization, people find it detrimental to their way of life. Such as they scared some inconsiderable concepts of other culture might take the place of their culture.
The foremost effect of globalization on the world is 'Westernization'. It is a modern concept that has been developing in the past few decades because of the impacts of western expansion and colonization. Westernization is a process, in which people practice or imitate western customs, lifestyle and ideas. Here, we find globalization spreading its roots all across the world to make communication easier.
Some societies find globalization as a dominating concept. It might effect on their lifestyle. If a society has complex cultural conditions such as exploiting people on the ground of race, gender or class, people will really try to get rid of such society.
A culture, the restricted group of people has some other issues like chauvinism, fundamentalism, religion, ethnic and racial hatred in controversy.
According to the views of developing countries, globalization increases phobia of inequality, conflicts and instability. They cannot compete in business deals or cultivate their cultural values as compared to the developed countries.
One of the advantages of globalization is that it brings a worldwide identity. Everyone can represent their own culture and business independently. A country can take part in business deals as well as get a platform to share their culture with other.
Globalization is the one voice that represents world-wide communication. It welcomes all countries of the world, to increase interdependency and bridge the economic gap between two countries. After World War Two (1939-1945), globalization brought forth a cosmopolitan approach in the international market where all developed and developing countries could compete as well as share their culture with each other.
How does globalization help us?
• It's a social collaboration that not only integrates a society to a larger world economy but also roots out its flaws. • Globalization nourishes innovative ideas can be easily implemented. • Every society has its own cultural identity. You can learn a foreign language and lifestyle of other cultures as well as talk about your mother tongue. • It's a unity of world culture where people are able to share their beliefs, rituals, values, and goals. • Multiculturalism, a concept that emerged from globalization in 1960, maintains different cultures and promote their social linking. • The theory of globalization enables to share and adopt culture of other countries. Both concepts, culture and globalization are interconnected to each other via movie, television, business, tourism and Internet today. Assimilation of culture and globalization is a good way of communication that symbolizes one voice throughout the world.
What are the effects of globalization on youth?
cross culture, loss of pure culture, a mish-mash of culture results culture does not matter anything. But the morality of the world in being changed from a just way to an unjust manner. I am am islond theory is being applicated on the new generation. The new generation does not want to do something new, they need onely sistmaizare le cose. Benefits of Globalization
The continuing global tendency towards the free flow of business and monetary infusions across nations describes globalization which helps in the formation of international financial system. It provides economic independence and triggers competition stimulating globalization to elevate the living standard of people in the nations that offer themselves to the world trade.
Benefits of globalization
"We have moved from a world where the big eat the small to a world where the fast eat the slow", as observed by Klaus Schwab of the Davos World Economic Forum. All economic analysts must agree that the living standards of people have considerably improved through the market growth. With the development in technology and their introduction in the global markets, there is not only a steady increase in the demand for commodities but has also led to greater utilization. Investment sector is witnessing high infusions by more and more people connected to the world's trade happenings with the help of computers. As per statistics, everyday more than $1.5 trillion is now swapped in the world's currency markets and around one-fifth of products and services are generated per year are bought and sold.
Buyers of products and services in all nations comprise one huge group who gain from world trade for reasons encompassing opportunity charge, comparative benefit, economical to purchase than to produce, trade's guidelines, stable business and alterations in consumption and production. Compared to others, consumers are likely to profit less from globalization.
Another factor which is often considered as a positive outcome of globalization is the lower inflation. This is because the market rivalry stops the businesses from increasing prices unless guaranteed by steady productivity. Technological advancement and productivity expansion are the other benefits of globalization because since 1970s growing international rivalry has triggered the industries to improvise increasingly.
Some other benefits of globalization as per statistics:
• Commerce as a percentage of gross world product has increased in 1986 from 15% to nearly 27% in recent years. • The stock of foreign direct investment resources has increased rapidly as a percentage of gross world product in the past twenty years. • For the purpose of commerce and pleasure, more and more people are crossing national borders. Globally, on average nations in 1950 witnessed just one overseas visitor for every 100 citizens. By the mid-1980s it increased to six and ever since the number has doubled to 12. • Worldwide telephone traffic has tripled since 1991. The number of mobile subscribers has elevated from almost zero to 1.8 billion indicating around 30% of the world population. Internet users will quickly touch 1 billion.
Globalization leading to social anxieties:
Listed below are the three sources of anxiety between worldwide markets and social steadiness: • Across the nations, globalization triggers the services of large sections of working people more effortlessly substitutable, • Commerce can set free factors that weaken guidelines in national practices, for example workers in South Carolina are replaced by child laborers in Honduras, • Globalization and its cutthroat rivalry makes it hard for administration to perform important tasks of offering the social programs Key areas which demand immediate attention:
• Public education, which will demand proper evaluation and outcomes of globalization incorporating its benefits. • Amending practices to review the international fiscal institutions to assist in averting crises, facilitating helpful early warning systems, better synchronization of exchange rates among the world markets and arranging the private sector in order in performing rescue functions, and • Reorganizing the bilateral liberalization of the global financial system, which should tackle the major areas related to food trade, labour pacts and the environment.
Globalization and Inequality
Does globalization concentrates on making the world an equal place to reside for all sections of the society or does it help in making the rich richer and the poor poorer, rather poorest? With the emergence of WTO as a factor behind the liberalization of business globally, this issue has assumed greater significance than ever. We are advancing towards the 21st century with no agreement between the social analysts and the social scientist regarding what the future has in store for us in terms of economics, politics and social equality. Certain presumptions have been connected with the word ‘globalization’ with little or no truth behind them. This new era of globalization has comprehensive connotations for the financial fitness of the world population and equality among the income groups. |[pic][pic][pic|
Comparisons between the distributional outcomes of globalization
While one school of thought maintains that globalization results in growing income between all the sections of the society and even low-income groups have emerged as winners, the second school of thought propose that globalization may increase total incomes but the advantages are not equally distributed among the national population, indicating clear losers. Moreover the ever-increasing social disputes not only increase the welfare and social issues but also restrict the factors of growth due to the lesser utilization of prospects opened by globalization. The extensive backing up by the citizens is the major factor for the sustainability of globalization, which could be negatively influenced by growing social inequality.
The research data recommends that the income inequality has increased across the nations over the last twenty years and at the same time the average real incomes of the weaker sections of the society has elevated. The evaluations reveal that growing business and economic globalization have had equal and opposite effects on income distribution pattern. The factors which are connected with lower income inequality are liberalization of business and export growth, whereas higher inequality is associated with growing economic openness.
In a world where 400 highest income earners from the United States earn as much money annually as the total population of 20 African countries, something seems to be intensely wrong.
Global inequalities exist at astounding levels. As per the data from the International Monetary Fund ten percent of the richest global population is 117 times higher than the poorest ten percent. This is a massive increase from the percentage in 1980, when the earnings of the 10 percent of richest population was around 79 times greater than 10 percent of the poorest population.
In spite of these numbers, there is a considerable debate among economic analysts about whether the entire global disparity is increasing in the time of corporate globalization. That is because of the impact of China and India, huge nations have been developing while most of the developing economies have been dormant or decreasing financially and most of the developed economies have been growing sluggishly.
Inequality within the countries is increasing which is evident in developed nations of the United States and the European Union. Organizations like the World Trade Organization, the International Monetary Fund (IMF) and World Bank can be held responsible for such state of affairs and for laying guidelines of the global economy.
Other factors which are equally contributing are domestic power scuffle over national tax strategy, corruption, investment decisions in education and healthcare, etc.
But these forewarnings albeit, corporate globalization in many ways does produce, contribute to and strengthen increasing and constant bizarre disparities, both between and within nations.
Below is the list of factors responsible for social inequalities:
• Financial liberalization and financial instability
• Debt which the developing nations together owe $2.3 trillion to foreign creditors. • Higher interest rates
• Trade liberalization – increasing wage disparity
• Agricultural layoffs and agricultural business liberalization • Business liberalization which divides the profit between capital and labor • Flexibility of labor market
• Intellectual property fortification
• Privatization of market – transferring public wealth to private assets • Privatization of water and other public services
• Uneven disease liability and economic disparity
Globalization and Liberalization
Globalization and liberation are directly linked with each other. The first wake of globalization started in India when the economic liberalization policies were undertaken in the 1990s by Dr Manmohan Singh, the then Finance Minister of the country. Since then, the economy of India has improved to a great extent and has significantly led to the rise in the standard of living of the citizens.
Pre liberalization period and globalization
From independence till the later part of the 1980s, India economic approach was mainly based on government control and a centrally operated market. The country did not have a proper consumer oriented market and foreign investments were also not coming in. This did not do anything good to the economic condition of the country and as such the standard of living did not go up.
In the 1980s, stress has given on globalization and liberalization of the market by the Congress government under Rajiv Gandhi. In his government tenure, plenty of restrictions were abolished on a number of sectors and the regulations on pricing were also put off. Effort was also put to increase the condition of the GDP of the country and to increase exports.
Even if the economic liberalization policies were undertaken, it did not find much support and the country remained in its backward economic state. The imports started exceeding the exports and the India suffered huge balance of payment problems. The IMF asked the country for the bailout loan. The fall of the Soviet Union, a main overseas business market of India, also aggravated the problem. The country at this stage was in need of an immediate economic reform.
Liberalization in the 1990s
It was in the 1990s that the first initiation towards globalization and economic liberalization was undertaken by Dr Manmohan Singh, who was the Finance Minister of India under the Congress government headed by P.V. Narasimha Rao. This is perhaps the milestone in the economic growth if India and it aimed towards welcoming globalization. Since, the liberalization plan, the economic condition gradually started improving and today India is one of the fastest growing economies in the world with an average yearly growth rate of around 6-7%.
Impact of globalization and liberalization
Globalization and liberalization has greatly influenced the Indian economy and made it a huge consumer market. Today, most of the economic changes in the country are based on the demand supply cycle and other economic factors. Today, India is the world’s 12th largest economy in terms of market exchange rate and 4th largest in terms of the Purchasing Power Parity. According to a report by the World Bank, the Indian market is expected to grow at around 8% in the year 2010.
Globalization and liberalization has also made a positive impact on various important economic segments. Today, the service sectors, industrial sectors and the agriculture sector have really grown to a great extent. Around 54% of the annual Gross Domestic Product (GDP) of India comes from the service industry while the industrial and agriculture sector contributes around 29% and 17% respectively. With the improvement of the market, more and more new sectors are coming up and reaping profits such as IT services, chemical, textiles, cement industry and so on. With the increase in the supply level, the rate of employment is also increasing considerably.
There has been an improvement in the manufacturing sector as well which grew from 8.98% in 2005 to around 12%. The communication segment has grown up to around 16.64%. The condition is expected to improve further with more demand and increase in customer base. The yearly growth of the industrial sector has been around 6.8 % which will rise more in the future. India is one of the well known industrial markets in the Asia-Pacific region.
Globalization and foreign investment
One of the main aspects of globalization is foreign investment. India today has emerged as one of the perfect markets for foreign investors due to its vast market base. More and more foreign companies are investing in the Indian market to get more returns. The foreign institutional investments (FII) amounts to around US$ 10 billion in FY 2008-09, while the rate of Foreign direct investments (FDI) has grown around 85.1% in 2009 to US$ 46.5 billion from US$ 25.1 billion (2008).
Globalization and Mergers in India
Globalization and Mergers
The extent to which cross border mergers and acquisitions are growing are all due to the globalization process. It has been observed of late that there are several sectors of the economy that are heating up with a number of cross border mergers and global alliances. This is only to improve the economic state of the country.
Globalization and mergers in India has only helped in improving the economic state. The automobile sector, steel, cement, pharmaceutical, petrochemical, and many more sectors have only experienced successful mergers with overseas companies in India. These global associations have brought them an array of success which has created a brand value in the market. The sector which rules the merger scenario in India and is a result of the globalization process is the automobile sector. The mergers of Maruti Udyog Pvt Ltd and Tata Motors in India have led this sector to a booming path.
Countries that are seeking mergers in India for enhancing the trade scenario are Canada, Holland, Belgium, Italy, Sweden, Norway, Poland, Germany, Spain and the United Kingdom. Globalization and mergers in India is an important standpoint of any corporate executive on every detail of mergers and acquisitions implemented around the world. Mergers in India may include mergers, joint ventures, acquisitions, takeovers, and other kinds of cross-border transactions. The trends and growth of mergers and acquisition dealings has led to a noticeable increase in the globalization and mergers in India.
Globalization and mergers in India have been massively advantageous for all sectors across India and this has increased the global market efficiency.
The relation between globalization and mergers in India are quite noteworthy. The important elements of Indian mergers for globalization can be cited as follows: 1. M&A is a good growth strategy in context of globalization – Corporates in India have been experiencing a surge in the revenue growth due to cross border mergers and the figures are only to go up more. 2. Most Indian companies have a clear M&A strategy – the market strategy is clear for most corporates. That is why when finalizing a deal, there arises no confusion. 3. Top M&A markets – The top M&A markets are US, India and UK.
Future of Globalization and Mergers in India
Companies usually choose the growing through the M&A route, rather than going in for an organic growth strategy due to a lot of added advantages. The inclination towards globalization and expanding through mergers and acquisitions is a rising phenomenon nowadays.
Finally, the globalization trend has set in. As companies plan to expand their territory, global expansion is what they aim at. And this is where the marriage of two overseas companies gives rise to the concept of globalization.
There have been instances where cross-border M&As have proved to have reaped unsatisfactory results. Considering a lot of external factors like corporate governance, political factors, countries involved, and regulatory norms can actually lead the company towards the success path. This is why the mergers in India have seen a considerable surge.
Globalization and Risk Sharing
Globalization and risk sharing are closely inter-linked. Economic globalization is defined as the incorporation of national economy into international economy through factors like capital inflow, migration, trade and foreign direct investment. Risk sharing basically means the risks associated with any enterprise is distributed among the various participants in the enterprise. The current trend of globalization has encouraged many entrepreneurs and manufacturers to explore the market beyond their own inhabited territories. The liberal economic policies and the changing consumerism are the two major factors that have encouraged investors to invest in markets abroad. It goes without saying that globalization and risks sharing also go hand in hand.
Advantages of Globalization
One of the primary benefits of globalization is that it has allowed certain evolutions in the risk sharing pattern. Trade with other countries has definitely become easier than it was before. Due to globalization there is a higher likelihood of developed countries investing in developing countries and this can bring about a dynamic change in developing the economy of a country. Globalization has ensured that corporates have a higher flexibility in operating across borders. As a result of this, there has emerged a greater interdependence of nation-states. |[pic][pic][pic|
Globalization and International Risk Sharing
Credit inflow from around the globe can be used as an insurance against adverse financial crisis that may hamper an economy. It is better for the investors if risk sharing is distributed with other countries. Studies suggest that globalization and international risk sharing is very small. It is likely that there are more unexploited gains of international risk sharing for developing countries. Generally, people prefer to have steady consumption yearly rather than widely fluctuating amounts. This helps them to counter any adverse economic situation that they may encounter.
There are three things that need to be considered for international risk sharing. They are:
• To ask for a unified investigation in the risk sharing economies and to analyze the emerging markets in developing countries • To examine changes caused due to the globalization and risk sharing programs in different countries and then correlate them with the growth rate of financial inflows. • To evaluate different cyclical actions undertaken by risk sharing programs with the help of research.
Disadvantage of globalization and risk sharing
One of the primary disadvantages of risk sharing in globalization is that the age old patterns of risk sharing have not been replaced in the global market with newer ones. The steps currently being followed for risk management is not conducive to all developing and emerging economies. Every market is different and generally the risk sharing welfare programs are not suitable for these varied economies. Studies have indicated that the openness of financial inflows improves risk sharing in a country’s economy; however this is not a global phenomenon. It has been seen that developing economies have attained better benefits from the risk sharing schemes.
State Policies in the Globalization Era
Globalization along with liberalization of economy has brought several changes across the world. And the changes can be noticed in varied aspects, starting from the economy of the nation to its people, their lifestyles, and many more. State policies of government have also changed accordingly. In fact, state policies in the globalization era depend upon a lot of components, which change from time to time and are also subject to continuity. Though even in the age of globalization, one can still find the state relations in the governing body, however, the most distinguishing features of this is again the fact that, it has been able to bring changes in the policies of the state.
Let's have a look at globalization. Is it good for the economy or a harmful one? The principles of globalization were questioned in terms of the Westphalia system – a theory of governance. According to some agnostic, globalization is a threat to the state governing body. Being the framework of it, there is every possibility that globalization would affect Westphalia. In this juncture, the statehood principles and self-government come into limelight. According to the statehood, world is divided into territorial shares, and for the governance of each shares, it would require a separate government. Sovereignty is also classified into two categories, viz. Internal Sovereignty and External Sovereignty. Internal sovereignty is the case when the government exercises complete authority on a particular region. On the other hand, in case of External Sovereignty, there is no practice of absolute authority. While formulating policies, the state should consider these features of sovereignty.
Globalization and the State Policies
Globalization has had a huge impact on the state at every level of activity and functioning. As a result, state policies in the globalization era are also formulated accordingly, considering the above said impacts of globalization. If we look more into the term ‘Globalization', the term is popularly defined as “the integration of economic, social and cultural relations across the borders”. There are three dimensions of globalization that showcase the relationship between the sovereign state and the globalized world.
Economic globalization is associated with finance, trade, production, distribution and management. MNCs have played a major role in accelerating the integration of the global economy. During the 1960s and 70s, augmentation of foreign direct investment (FDI) by the U.S. MNCs were observed. It's the Japanese as well as the west European FDI that saw an increasing graph during 1980s. Besides these, financial flows including portfolio-type transactions have also started increasing. National capital got integrated with the international financial capital, corporate alliances also started coming about. |[pic][pic][pic|
Political globalization is defined by “the shifting reach of political power, authority and forms of rule”. Political relations become closely knitted, posing a challenge to the distinctions between domestic and international politics. In this present era, one can see the emergence of regional and global law in global politics. It challenges the state sovereignty.
Military / Security Globalization
Globalization extends the scope of security. The military/security globalization leads to re-definition of national security as international security or also sometimes as new cooperative security community. Here states can no longer be in charge of their non-physical security requirements like protection of technology assets or information.
State policies play a major role in the governing powers – national or international, state or non-state and public or private. State policies in the globalization era involve transformation of powers to the international agencies and unions such as the EU and the regional and sub-national agencies. The changes that happened during to the financial globalizations largely depended upon the state support and approval.
The last 10 years saw huge changes in the globalization era state policies. Globalization has been the reason behind the flow of money transfers, capital flow, computer data flow, satellite communications, electronics upsurge and merchandise trade. The state policies have also changed accordingly.
Globalization and Labor Standards
Globalization is an important factor behind the high rate of labor standards in India. The economic liberalization policies, the economic and market growth and the trends of globalization have really made India into a vast consumer market which has increased demand to a great extent. All these factors have positively affected the rate of labor and employment in the country.
Economic liberalization and labor standards
Prior to the economic liberalization policies, employment in India was mainly based on the government and public sector. Most of employment used to be generated in various government enterprises, banks, financial organizations and public sector units. This led to high scale red-tapism, License Raj and other problems of workforce. The standard of labor significantly started getting worse and there were constant labor problems, lockouts, strikes and so on. Due to all these factors, the overall work culture and the labor situation in India suffered a set back.
It was in the 1990s that the economic liberalization policies were first undertaken by the government. The shift towards these open market policies really did a lot to bring about a change and make the country into a vast consumer market. The Gross Domestic Product as well as the exports started increasing significantly. This shift towards the consumer market and the demand supply chains led to the growth of various sectors which provided the scope of employment in the country. The open market economy also gradually led to the growth of the private sector which provided ample employment scope for the skilled workforce. Since then, the job prospect in India has really grown up over the years.
New segments in the market
Globalization and labor standards were also favorably affected by the entry of new segments in the market. Due to high demand and the consumer market, more and more sectors have entered into the market of the country. Some of the well known sectors that have been successfully operating their businesses are Information Technology, agro products, health care, beauty and personal care and so on. All these sectors have led to high demand which has improved the overall labor standard of the country.
Labor standards have also increased in the unorganized sector as well. Recent surveys have shown that there has been an improvement in the standard of living of the people who are working in the unorganized sector. The pay package and the labor benefits in the unorganized sector have also improved to a great extent.
Today, the three main sectors in India are the service sector, agricultural sector and industrial sector. The share of the service sector is around 54% of the annual Gross Domestic Product (GDP). The agriculture sector and the industry sector also contribute around 17% and 29% to the annual GDP. Over the years, these sectors are expected to increase more and add to the revenue of the country.
Improvement in the standard of living
Globalization has also led to the growth of the standard of living in the country. This has put a favorable impact on the overall labor standards in the country. With the rise in the civic amenities and the improvement in the health care sector, the standard of living has also improved. Improvement in education has also given rise to skilled workforces who are very much suited to the changing trends and needs of the market. According to recent surveys, the standard of labor in both the organized as well as the unorganized sector has improved to a great extent.
Initiatives of the government
Various initiatives of the government have also provided a fillip to the labor standards in India. The government has started a number of employment programs like CM Rojgar Yojna and Prime Minister Rojgar Yojna to help the employment people in the country. Stress is also being given to improve the quality of labor in the government and the public sector units. The Minimum Wages scheme has also been very successful in the rural areas.