• It can be defined as a process of economic
integration of the entire world through the removal
of barriers to free trade and capital mobility as well
– diffusion of knowledge and information
• It would mainly consist of
– Globalisation of Production
– Globalisation of Markets
National Controls/ Barriers to Entry
• Orientations of Management (EPRG)
• International Monetary Framework
• World Trading System
– Regional Trade Agreement
Domestic Economic Growth
Communications & Transportation Technology
Global/ Transnational Corporations
• Beginning of 1990s saw growth of US as a major
Economy followed by Japan and Germany
• It could be attributed to ,willingness of US business
to cut their workforce,reorganize their
operations, invest heavily in R & D
• OECD; organization for economic and Cooperation
Development (OECD); A group of 30 wealthy
members countries that facilitates a forum for the
discussion of economic, social and governance issues
across the world.
International Trade regulations
• International Business has seen the emergence of
trade and investment liberalization
• GATT ; General agreement on Tariffs and Trade; was
established to negotiate trade concession among
member countries. It gave way to WTO
• WTO; World Trade Organisation; deals with the rules
of trade among member countries. One of the most
important function is to act as a dispute settlement
• The 3 major trading and investment blocs in the
international arena: the US, EU and Japan
• US has the largest economy of the world with GDP of
over 10$ trillion
• NAFTA ;North American Free trade agreement between
the Canada, the US and Mexico
• EU; today there are 15 members and large number are
• The collective GDP of EU is greater than US or Japan
Reasons For Entering International
Achieving Economics of Scale
Access to Imported Inputs
Uniqueness of Product or Service
Business Opportunities due to life cycle
Spreading R & D Costs
• ETHNOCENTRIC; home country is superior, sees similarities
in foreign countries
• POLYCENTRIC; Each host country is unique, sees differences
in foreign countries
• REGIOCENTRIC; sees similarities and differences in world
region; is ethnocentric in its view of the rest of the world
• GEOCENTRIC; world view, sees similarities and differences in
home and host countries
Evolutionary process of Global
Global Business / Transnational Business
• Domestic Business
• Export Business
– Extending to similar market
• International Business
– Extends Business, manufacturing and other activities in
– Ethnocentric approach
– It normally has an international division
– Focus is on home country market
– Business strategy is extension
• Multinational Business
– Adaptation of Business mix
– Multidomestic strategy,each subsidy is an independent
– Polycentric approach
• Global Business
– Will either have a global Business strategy or a global
sourcing strategy but not both
– Key assets are in home country
• Transnational Business
– Works in integration, linking global resources with global
markets at a profit
– Geocentric in approach
– Recognizes similarities and differences and adopts a world
view to add value
– Key assets are dispersed interdependent and specialized
– Experience and knowledge are shared globally
• Glocal Business
• It is a ranking of globalised countries carried out by
A T Kearnery
• It has following key components
– Economic Integration;trade, portfolio,FDI,investment
Integration;telephone, travel, remittances, personal
hosts, secure Internet services
– Political Integration;international organisations, UN
peacekeeping, treaties and government transfers
Definitions of The Term “Liberalization”
and “Economic Liberalization”
• The term “Liberalization” stands for “the act of making less
• Liberalization in Economy stands for “The process of making
policies less constraining of economic activity." And also
“Reduction of tariffs and/or removal of non-tariff barriers.”
• Economic liberalization is a very broad term that usually
refers to fewer government regulations and restrictions in the
economy in exchange for greater participation of private
• In developing countries, economic liberalization refers
more to liberalization or further "opening up" of their
respective economies to foreign capital and
• The fastest growing developing economies today;
Brazil, Russia, India, and China have achieved rapid
economic growth in the past several years or decades
after they have "liberalized" their economies to foreign
Pre-Liberalization Era of Indian
• The low annual growth rate of the economy of India
before 1980, which stagnated around 3.5% from
1950s to 1980s, while per capital income averaged
• Only four or five licenses would be given for
steel, power and communications. License owners
built up huge powerful empires.
• A huge public sector emerged.
enterprises made large losses.
• License Raj established the "irresponsible, self-perpetuating
bureaucracy that still exists throughout much of the
• Infrastructure investment was poor because of the public
• The economic crisis was primarily due to the large and
growing fiscal imbalances over the 1980s.
• During mid eighties, India started having balance of payments
problems. Precipitated by the Gulf War, India’s oil import bill
swelled, exports slumped, credit dried up and investors took their
• The foreign exchange reserves had dried up
to the point that India could barely finance
three weeks worth of imports.
Liberalization in Indian Economy
• 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
fast growing economy and globally competitive.
• The series of reforms undertaken were in respect to
industrial sector, trade as well as financial sector aimed
at making the economy more efficient.
• With the onset of reforms to liberalize the Indian
economy in July of 1991, a new chapter has dawned for
India and her billion plus population.
• This period of economic transition has had a tremendous
impact on the overall economic development of almost
all major sectors of the economy, and its effects over the
last decade can hardly be overlooked.
• Besides, it also marks the advent of the real integration
of the Indian economy into the global economy.
• This era of reforms has also ushered in a remarkable
change in the Indian mindset, as it deviates from the
traditional values held since Independence in 1947.
• Such as self reliance and socialistic policies of economic
development, which mainly due to the inward looking
restrictive form of governance.
• Resulted in the isolation, overall backwardness and
inefficiency of the economy, amongst a host of other
• Though, India has always had the potential to be on the
fast track to prosperity.
• Now that India is in the process of restructuring her economy, to
maintain the position as one of the most emerging economies of
• The need to speed up her economic development is even more
• And having witnessed the positive role that Foreign Direct
Investment (FDI) has played in the rapid economic growth of most
of the Southeast Asian countries and most notably China.
• India has embarked on an ambitious plan to emulate the successes
of her neighbors to the east and is trying to sell herself as a safe
and profitable destination for FDI.
Definitions Of The Term “Privatization” and
• The term “Privatization” refers to “The transfer of
ownership of property or businesses from a
government to a privately owned entity.”
• The transition from a publicly traded and owned
company to a company which is privately owned and
no longer trades publicly on a stock exchange.
• The process of converting or "selling off"
government-owned assets, properties, or production
activities to private ownership.
activities, privatization came into vogue in the
1980s, along with business deregulation and
an overall movement toward greater use of
• Privatization is frequently associated with
industrial or service-oriented enterprises, such
as mining, manufacturing or power
generation, but it can also apply to any
asset, such as land, roads, or even rights to
• In recent years, government services such as
health, sanitation, and education have been
particularly targeted for privatization
• Privatization helps establish a "free market", as well
as fostering capitalist competition, which will give the
public greater choice at a competitive price.
Reason for Indian Privatization
1. Crippling Budget deficit
2. Spectacular growth by economies of Korea,
Taiwan, Malaysia in private sector
3. Collapse of USSR& communist government in
4. Changes in China
5. Emergence of professional management
6. IMF & World Bank extended arm to capitalism
8.Lack of demand in economy
9.Integration of world trade
10. Developed local capital market and Financing
•To STENGTHEN Competition
•To improve public finance
•To fund Infrastructure Growth
•Accountability of share holders
•To reduce unnecessary interference
The main reason for increased efficiency gain as a result
of privatization can be attributed to
(i) Less political interference in decision making
(i) Staff remuneration is more closely linked to productivity
(ii)Firm are exposed to open market discipline as opposed to
(iii)Firm’s cost reducing effort are higher under competitive
Key obstacle to privatization
(i) Lack of strong and high level political commitment to the
(ii) Unclear and weak institutional frame workdecentralized or centralized. (ministry and provincial
iii) Lack of proper preparation of enterprise for
privatization or divestment eg. Accounting and auditing
, treatment of losses, social and environmental safety net
(iv) Insufficient transparency and flexibility in term
privatization, balancing, ownership, and control
(v) Vested interest of manager, employees and
(vi) Lack of appropriate legal frame work (eg.
Property right, foreign ownershipbankruptcy
(vii) Underdeveloped capital markets
WAYS OF PRIVATIZATION
• DISINVESTMENT The action of an organization or
government selling or liquidating an asset or subsidiary. Also
known as "divestiture".
• A company or government organization will divest an asset
or subsidiary as a strategic move for the company, planning
to put the proceeds from the divestiture to better use
that garners a higher return on investment.
• Disposition or sale of an asset by a company. A company will
often divest an asset which is not performing well, which is
not vital to the company's core business, or which is worth
more to a potential buyer or as a separate entity than as part
of the company.
• CONTRACTING : policy established in 1984 to encourage
competition for government contracts.
• The idea behind the policy is that the increased
competition will result in improved savings to the
government through more competitive pricing.
• FRANCHISING: Franchising is a method of doing
business in which someone who has a successful
business model shares it with other people in exchange
for an annual fee and a percentage of the gross profits.
• PREMITING PRIVATE SECTOR ENTER INTO PSU
RESERVED AREA like Arms and Ammunition, Railway
Transport, Atomic Energy
• LIQUIDATION: When a business or firm is terminated
or bankrupt, its assets are sold and the proceeds pay
creditors. Any leftovers are distributed to shareholders.
• LEASING: A lease is a contractual arrangement calling
for the lessee (user) to pay the lessor (owner) for use of an
Why Agriculture Is Important
Before the Green Revolution, agriculture was widely seen as a stagnant, lowproductivity, and residual sector
Agriculture came to be seen as a growth sector that could:
1. Generate more food and raw materials at
1. Free up foreign exchange for the importation of
strategic industrial and capital goods;
3. with rising rural incomes, provide a growing
domestic market for nascent national industries;
4. reduce poverty by increasing labor productivity
and employment in rural areas,
Role in Economic Development:
1. Contribution to National Income
2. Major source of Livelihood
3. Provider of Employment
4. Industrial development
5. International Trade
6. Capital Formation and Investment
7. Food and Fodder
Simon Kuznets identifies four factors contributing to the overall economic development.
1.Product contribution i.e., making available food
and raw materials.
2. Market contribution i.e., providing the market
for producer goods and consumer goods
produced in the non-agricultural sector.
3.Factor contribution; making available labour and
capital to the non-agricultural sector
4. Foreign Exchange contribution.
Relationship between Agricultural and
During the process of development,
inter-dependence Between agriculture and industry
has become stronger
Arise from the interdependence of agriculture and industry for productive inputs.
Linkages have got further strengthened with agriculture’s dependence on industry
reflecting the modernization of agricultural sector.
There are strong demand linkages between the
There is an impact of income and industrialization on the demand for food and agricultural
Savings and Consumption linkages
There is an impact of rural income on industrial
consumption goods, i.e., clothing, footwear, sugar, edible oils, TV sets, washing
machines, refrigerators, motor bikes, etc.
“Rural bazaar out buys urban market”.
Features of Indian Agriculture
Dependency on Monsoons
Multiplicity of Crops
Diversity in different Spheres
Predominance of small farmers
Low level of productivity
Factors responsible for the backwardness of agriculture.
Factors can be classified as under:
1. Demographic factors
2. General factors
3. Technological factors
1. Demographic factors
Important Demographic factor responsible for low yield in agriculture is the increasing
pressure of population on land.
Increasing population has fallen back on land for its livelihood,
Created problems like fragmentation and subdivision of holdings;
The supply of improved practices and services has always fallen short of requirements.
Excess or surplus labour in Agriculture
Inadequate non-farm services
Size of holdings
Defective land tenure structure
Indebtedness of the farmers
Inadequate irrigation facilities
Poor inputs and techniques
Agriculture Policy of India
Agricultural policy followed during the last five decades can be broadly distinguished In 3
The period from 1950/51 to mid 1960s which is also called pre green revolution period
1. Tremendous agrarian reforms,
2. Institutional changes and
3. Development of major irrigation projects.
The intermediary landlordism was abolished, tenant operations were given security of
farming and ownership of land.
Land ceiling acts were imposed by all the states to
Eliminate large sized holdings
Cooperative credit institutions were strengthened to minimise exploitation of Cultivators by
private money lenders and traders
Expansion of area was the main source of growth in the pre green revolution period.
The scope for area expansion diminished considerably in the green revolution period
Increase in productivity became the main source of
Growth in crop output
There was significant acceleration in yield growth
in green revolution period.
The country faced severe food shortage and crisis in early 1960s which forced the policy
makers to realise that;
Continuous reliance on food imports and aid imposes
Heavy costs in terms of political pressure and economic instability
There was a desperate search for a quick
breakthrough in agricultural production.
One choice before the country was to go for spread of new seeds of high yielding varieties
(HYV) of wheat and rice
This marked second phase of agriculture policy in the country.
The green revolution technology involved use of modern farm inputs, its spread led to fast
growth in agro input industry.
Agrarian reforms during this period took back seat while;
Price support and
Spread of Technology
were the prime concern of policy makers
Two very important institutions were created in this period, namely:
Food Corporation of India
To maintain buffer stock to guard against adverse impact of
year to year fluctuations in output on price stability.
Agricultural Prices Commission,
To ensure remunerative prices to producers, maintain reasonable prices for consumers.
These two institutions have mainly benefited rice and wheat crops which are the major
cereals and staple food for the country.
The next phase in Indian agriculture began in early 1980s.
While there was clear change in economic policy towards de-licensing and deregulation in
Industry sector, agriculture policy lacked direction and was
marked by confusion.
There has been a considerable increase in subsidies and support to agriculture sector
during this period
Investments by farmers kept on moving on a rising trend
The rural economy started witnessing process of diversification which resulted into fast
growth in non food grain output like milk, fishery, poultry, vegetables, fruits etc which
accelerated growth in agricultural GDP during the 1980s.
Though green revolution has been widely diffused in irrigated areas throughout the country,
The dryland areas did not see benefit of technological
National Agricultural Policy in July 2000.
Formulated to meet challenges facing Indian agriculture
Grouped in four categories relating to
(3) Efficiency and
There are also other important concerns like;
Improvement in standard of living of agricultural population.
The National Policy on Agriculture seeks to actualize the vast untapped growth potential of
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