Features of globalization and india in global economy


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- The worldwide movement toward economic, financial, trade, and communications integration.
Globalization implies the opening of local and nationalistic perspectives to a broader outlook of an interconnected and interdependent world with free transfer of capital, goods, and services across national frontiers. However, it does not include unhindered movement of labor and, as suggested by some economists, may hurt smaller or fragile economies if applied indiscriminately

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Features of globalization and india in global economy

  1. 1. Globalization: - The increasing interconnection of the world’s economic, cultural and political systems. - Legrain‘ the way in which people’s lives are becoming increasingly intertwined with those of distant people and places around the world economically, culturally and politically’ . - Robertson (1992) ‘globalization as a concept refers both to the compression of the world and the intensification of consciousness of the world as a whole. - ‘The growing interdependence of countries worldwide through the increasing volume and variety of cross border transactions in goods and services and of international service capital flows, and through the more rapid and widespread diffusion of technology’--- (IMF) Guardian report. - The worldwide movement toward economic, financial, trade, and communications integration. Globalization implies the opening of local and nationalistic perspectives to a broader outlook of an interconnected and interdependent world with free transfer of capital, goods, and services across national frontiers. However, it does not include unhindered movement of labor and, as suggested by some economists, may hurt smaller or fragile economies if applied indiscriminately. Modern Form of globalization - It is the actual period in which globalization took another phase, it worked towards promotion of free trade - Globalization has been facilitated by advances in technology which have reduced the costs of trade and trade negotiation rounds, originally under the auspices of the General Agreement on Tariffs and Trade (GATT) - Barriers to international trade have been considerably lowered through international agreements such as GATT
  2. 2. Main Form of globalization 1) Economic: Under both the General Agreement on Tariffs and Trade (GATT) and its successor the World Trade Organization (WTO), world trade has expanded rapidly. TNCs have been the major force in increasing economic interdependence and several generations of newly industrialized countries have emerged. 2) Cultural Mixing of cultures has occurred through - Migration - Rapid spread of news, ideas and fashions through the media, trade and travel - Growth of global brands – Nike, Coca cola, MacDonalds Western culture has diffused to all parts of the world through television, cinema, the internet, newspapers and magazines. This has been reflected in media, art, sport and leisure pursuits. 3) Political The influence of nation states has diminished in many areas as more and more countries organize themselves into trade blocs. The influence of western democracies on developing countries has also been strong. Relationships are also political – the increasing role played by the United Nations around the world epitomizes the developing cooperation between nations. Growing importance of cross border pressure groups – Friends of the Earth, Amnesty International – ‘global civil society’. Their actions have led to international rules on trade, environment, human rights, war etc. Globalization can be seen in terms of: - Urban - a hierarchy of global cities has emerged to act as Centre’s for the global economy - Demographic – the growth of international migration and the rise of multicultural societies - Linguistic – the emergence of English as the working language of the ‘global village’ - Environmental – the impact of activity in one country has a clear impact in others – e.g. the spread of pollutants and the impacts of global warming
  3. 3. Globalization is caused by four fundamental forms of capital movement throughout the global economy. The four important capital flows are:- - Human Capital - Financial Capital - Resource Capital - Power Capital Effect of globalization - Industrial - Financial - Economic - Political - Informational - Language - Competition - Competition - Cultural - Ecological - Social - Technical - Legal Advantages - Goods and people are transported with more easiness and speed - The possibility of war between the developed countries decreases - Free trade between countries increases - Global mass media connects all the people in the world - The global village dream becomes more realistic - There is a propagation of democratic ideals - The interdependence of the nation-states increases - As the liquidity of capital increases, developed countries can invest in developing ones - The flexibility of corporations to operate across borders increases - The communication between the individuals and corporations in the world increases
  4. 4. Disadvantage - Increased flow of skilled and non-skilled jobs from developed to developing countries - Increased likelihood of economic disruptions in one nation affecting all nations - Corporate influence of nation-states far exceed of civil society organization and average individuals - Threat that control the world media by a handful of corporation that limit cultural expression - Greater chance of reactions for globalization being violent in an attempt to preserve cultural heritage. - Greater risk of diseases being transported unintentionally between nations - Spread of a materialistic lifestyle and attitude that sees consumption as the path to prosperity - International bodies like the World Trade Organization infringe on national and individual sovereignty Indian Economy 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. Thus, Indian economy had experienced major policy changes in early 1990s. The new economic reform, popularly known as, Liberalization, Privatization and Globalization . (LPG model) aimed at making the Indian economy as fastest growing economy and globally competitive. The series of reforms undertaken with respect to industrial sector, trade as well as financial sector aimed at making the economy more efficient. Indian economy was in deep crisis in July 1991, when foreign currency reserves had plummeted, inflation had roared, fiscal deficit was very high and had become unsustainable; foreign investors and NRIs had lost confidence in Indian economy. So major measures were initiated as a part of the liberalization and globalization strategy in the early nineties included the following:- - Devaluation - Disinvestment - Dismantling of The Industrial Licensing Regime - Allowing Foreign Direct Investment - Non Resident Indian Scheme Throwing Open Industries Reserved For The Public Sector to Private Participation. - Abolition of the (MRTP) Act - The removal of quantitative restrictions on imports
  5. 5. - The reduction of the peak customs tariff - Wide-ranging financial sector reforms The novel Tale of Two Cities of Charles Dickens begins with a piquant description of the contradictions of the times: It was the best of times, it was the worst of times; it was the age of wisdom, it was the age of foolishness; it was the epoch of belief, it was the epoch of incredulity; we had everything before us, we had nothing before us. At the present, we can also say about the tale of two India’s. We have the best of times; we have the worst of times. There is sparkling prosperity, there is stinking poverty. We have dazzling five star hotels side by side with darkened ill-starred hovels. We have everything by globalization, we have nothing by globalization. Bright Side of Globalization: Particulars 1980-90 1993-2001 2003-04 2004-05 2005-2006 2006-07 Growth Rate GDP 5.6% 7.0% 1.4% AGR(GDP) 7.5% 8.5% 9.0% 9.2% 1.7% FER $ 39 B $ 107 B $ 145 B $ 180 B $ 141 B Cum FDI $ 43.29 B GOM $ 50 B … Note : Covers 45% of global market FER: Foreign exchange reserve, GOM: gross operating Margin,GDP: Gross domestic product Export increased by 24 percent in 2004-05 as compared to previous year. It stood at US $ 79 billion in 2004-05 compared with US $ 63 billion in the previous year. Dark Side of Globalization: On the other side of the medal, there is a long list of the worst of the times - (Demoting) Agriculture - Growth of poverty and unemployment
  6. 6. - Degrading society - Growth of slum capitals - GDP Growth Rate - 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%. - India’s imports in 2004-05 stood at US$ 107 billion recording an increase of 35.62 percent compared with US$ 79 billion in the previous fiscal. - Latest GDP numbers indicate a growth of 5.5% in Q1 of 2012-13. This growth rate is slightly higher than the 5.3% growth registered in Q4 of FY12, a consecutive decline for five quarters. See chart below Where does India stand - 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
  7. 7. 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 part 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 economy 6 times smaller according to IMF estimates. India under trades by 70-80% given its size, proximity to markets and labor cost advantages Future Challenges - Sustaining the growth momentum and achieving an annual average growth of 9-10 % - Simplifying procedures and relaxing entry barriers for business - Boosting agricultural growth - Expanding industry - Developing world-class infrastructure - Allowing foreign investment in more areas - Effecting fiscal consolidation and eliminating the revenue deficit - Protecting domestic culture - proper pricing mechanisms and better direction of subsidies - Empowering the population
  8. 8. … To be continued