Impact of globalisation on Indian Economy (With reference to Service Sector) By VIVEKKUMAR. S MBA(Iyr), BSMED, BHARATHIAR UNIVERSITY COIMBATORE
Introduction Globalisation is the buzzword that has come to dominate the world since the nineties of the last century. Till 90s the process of globalisation of the Indian economy was constrained by the barriers to trade and investment. Liberalisation of trade, investment and financial flows initiated in the nineties has progressively lowered the barriers to competition and hastened the pace of globalisation.
Impact of Globalization of Indian Economy The impact of globalisation has been highly positive in almost all spheres of economic and social life and virtually no negative effect. India's economic growth has been high, exports have boomed, incidence of poverty has been reduced, employment has surged, begging by India for economic aid has stopped, long-term inflation rate has gone down, scarcity of goods have disappeared, the quality of products available have improved substantially and overall India has become progressively vibrant and internationally competititive.
Impact of Globalization of Indian Economy Service sector is the lifeline for the social economic growth of a country. The real reason for the growth of the service sector is due to the increase in urbanization, privatization and more demand for intermediate and final consumer services. In advanced economies the growth in the primary and secondary sectors are directly dependent on the growth of services like banking, insurance, trade, commerce, entertainment, etc.
The Bright Side of Globalization The rate of growth of the Gross Domestic Product of India has been on the increase from 5.6 per cent during 1980-90 to 7% in the 1993-2001 period. The foreign exchange reserves (as at the end of the financial year) were $ 39 billion (2000-01), $ 107 billion (2003-04), $ 145 billion (2005-06) and $ 180 billion (in February 2007). In respect of market capitalization India is in the fourth position with $ 894 billion As per the Forbes list for 2007, the number of billionaires of India has risen to 40 (from 36 last year) more than those of Japan (24), China (17), France (14) and Italy (14) this year.
The Dark Side of Globalization On the other side of the medal, there is a long list of the worst of the times, the foremost casualty being the agriculture sector. Globalisation has lowered the per capita income of the farmers and increased the rural indebtedness. The agricultural growth of 3.2 per cent observed from 1980 to 1997 decelerated to two per cent subsequently. With more than half the population directly depending on this sector, low agricultural growth has serious implications for the inclusiveness of growth.
Strategy of Globalization 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 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.
Indian Service Sector Indian service sector has witnessed a major boom and is one of the major contributors to both employment and national income in recent times. Trading, transportation and communication, financial, real estate and business services, community, social and personal services come within the gambit of the service industry Services account for more than 60 per cent of world GDP and trade in services has grown.
The Modes of service delivery and respective share in world trade in services
India’s -Export of Commercial Services India has become one of the top five exporters of services amongst developing countries. India’s exports of services are mainly to the EU and the US. India’s export services growth rate was 33.3% in 2005-06, 36.9% in 2006-07, 25.9% in 2007-08 and 16.3 in 2008-09. India has been deemed as a major exporter of services in the world with a market share of 2.72% in 2008 as against 0.6% in 1995.
India’s -Import of Commercial Services In terms of imports of services software, miscellaneous, business and financial services ware adversely affected suffering a decline of growth rate 11% in 2008-09 compare to 2007-08 that is 33%. Imports of commercial services have become important in recent years reaching US$ 52.5 billion in 2007-08 though its growth moderated to 18.5 percent in 20007-08. Business service is the most important category of service in imports, followed by transportation and travel. Interestingly, good growth of imports was registered in financial services and communication services despite the global financial crisis.
Conclusion Indian economy has made rapid strides in the process of globalisation. Globalisation is increasing the integration of national markets and the interdependence of countries world wide for a wide range of goods, services, and commodities. The most important lesson that we must learn from the crisis is that we must be self-reliant. India’s trade reform programme resulted in strong economic growth in the globalization age. In particular, difficult decisions are to redress the fiscal imbalance, by reducing subsidies, completing the process of tariff and tax reform, and stepping-up privatization of state-owned enterprises. The efforts are needed to balance the trade and consider expansion of trade in other countries of the world.