5. Definitions
• In geography, globalization is defined as the set of processes (economic,
social, cultural, technological, institutional) that contribute to the relationship
between societies and individuals around the world. It is a progressive
process by which exchanges and flows between different parts of the world
are intensified.
6. • Globalization means the speedup of movements and exchanges (of human
beings, goods, and services, capital, technologies or cultural practices) all over
the planet. One of the effects of globalization is that it promotes and
increases interactions between different regions and populations around the
globe.
7. • globalization can be defined as ” the increased interconnectedness and
interdependence of peoples and countries. It is generally understood to
include two inter-related elements: the opening of international borders to
increasingly fast flows of goods, services, finance, people and ideas; and the
changes in institutions and policies at national and international levels that
facilitate or promote such flows.” WHO
8. • the increasing interdependence of world economies as a result of the
growing scale of cross-border trade of commodities and services, the flow
of international capital and the wide and rapid spread of technologies. It
reflects the continuing expansion and mutual integration of market frontiers
(…) and the rapid growing significance of information in all types of
productive activities and marketization are the two major driving forces for
economic globalization.”
9. Evolution of Globalization
• For some people, this global phenomenon is inherent to human nature.
Because of this, some say globalization begun about 60,000 years ago, at the
beginning of human history. Throughout time, human societies’ exchanging
trade has been growing. Since the old times, different civilizations have
developed commercial trade routes and experienced cultural exchanges. And
as well, the migratory phenomenon has also been contributing to these
population exchanges. Especially nowadays, since traveling became quicker,
more comfortable, and more affordable.
10. • This phenomenon has continued throughout history, notably through
military conquests and exploration expeditions. But it wasn’t until
technological advances in transportation and communication that
globalization speeded up. It was particularly after the second half of the 20th
century that world trades accelerated in such a dimension and speed that the
term “globalization” started to be commonly used.
11. • Economic globalization: is the
development of trade systems within
transnational actors such as corporations
or NGOs;
• Financial globalization: can be linked with
the rise of a global financial system with
international financial exchanges and
monetary exchanges. Stock markets, for
instance, are a great example of the
financially connected global world since
when one stock market has a decline, it
affects other markets negatively as well as
the economy as a whole.
12. • Ecological globalization: accounts for the
idea of considering planet Earth as a
single global entity – a common good all
societies should protect since the weather
affects everyone and we are all protected
by the same atmosphere. To this regard, it
is often said that the poorest countries
that have been polluting the least will
suffer the most from climate change.
13. • Political globalization: the development and growing influence of international
organizations such as the UN or WHO means governmental action takes place at an
international level. There are other bodies operating a global level such as NGOs
like Doctors without borders or Oxfam;
• Sociological globalization: information moves almost in real-time, together with the
interconnection and interdependence of events and their consequences. People
move all the time too, mixing and integrating different societies;
• Technological globalization: the phenomenon by which millions of people are
interconnected thanks to the power of the digital world via platforms such as
Facebook, Instagram, Skype or Youtube.
14. • The Benefits of Globalization
• Globalization has benefits that cover many different areas. It reciprocally
developed economies all over the world and increased cultural exchanges. It
also allowed financial exchanges between companies, changing the paradigm
of work. Many people are nowadays citizens of the world. The origin of
goods became secondary and geographic distance is no longer a barrier for
many services to happen. Let’s dig deeper.
15. • The Engine of Globalization – An Economic Example
• The most visible impacts of globalization are definitely the ones affecting the
economic world. Globalization has led to a sharp increase in trade and economic
exchanges, but also to a multiplication of financial exchanges.
• In the 1970s world economies opened up and the development of free trade
policies accelerated the globalization phenomenon. Between 1950 and 2010, world
exports increased 33-fold. This significantly contributed to increasing the
interactions between different regions of the world.
16. • Globalization Benefits – A Financial Example
• At the same time, finance also became globalized. From the 1980s, driven by neo-liberal
policies, the world of finance gradually opened. Many states, particularly the US under
Ronald Reagan and the UK under Margaret Thatcher introduced the famous “3D Policy”:
Disintermediation, Decommissioning, Deregulation.
• The idea was to simplify finance regulations, eliminate mediators and break down the
barriers between the world’s financial centers. And the goal was to make it easier to
exchange capital between the world’s financial players. This financial globalization has
contributed to the rise of a global financial market in which contracts and capital exchanges
have multiplied.
17.
18. Benefits
• Transfer of Technology
• Better Services
• Standardization of Living
• Development of Infrastructure
• Foreign Exchange Reserves
• Economic Growth
• Affordable Products
• Contribution to World GDP Growth Rate
• Extensions of Market
31. This shows the importance of exports to these developing economies. Since the mid-1980s, there has been a
significant growth in exports as % of GDP, especially for countries like Vietnam, Korea and Thailand.
Highest earners, who are in a position to negotiate higher wages. The World Bank found that between 1988
and 2008, the real income of the world’s top 1% of the world’s earners – went up by more than 60%. (World
Bank)
New middle class in emerging economies, who are experiencing rising real incomes
Wealthy who can invest abroad and take advantage of lower tax rates.
Multinational companies who can take advantage of tax breaks and lower cost labour abroad. For example,
Amazon and Google have set up subsidiaries in countries like Ireland and Luxembourg to get lower tax rates.
Also, production is increasingly globalised, e.g. Apple design in the US, but manufacture in China.
Workers who gain employment in export industries.
Consumers who benefit from lower prices.
Greater movement of labour has made labour markets more flexible. For example, filling labour vacancies in
health care with foreign born workers
32. Losers
Unskilled manual labour who have seen a decline in employment opportunities with a structural change to the
economy
Average taxpayers who lose out from tax avoidance schemes of global multinationals.
The environment which is experiencing global warming and loss of natural resources.
Manufacturing sector in high-cost labour countries. Manufacturing companies in UK and US have seen a
comparative decline as they struggle to compete with lower labour cost competitors.
While top earners and the middle class have seen rising incomes, the World Bank found the poorest 5% of the
world’s population have seen stagnant real incomes from the period 1988-2008. (World Bank)
Developing economies who lack the infrastructure to developing exporting manufacturing sector. The agricultural
sector has seen comparatively smaller growth in real earnings. Agricultural commodities have low-income elasticity
of demand, so with rising real GDP, demand for agriculture does not rise a the same rate.
Some countries have seen a ‘brain drain‘ as young skilled workers move to higher income countries. This is
especially an issue for Eastern European economies which have seen a net outer migration to Western Europe.
Net migration to Western Europe has created social pressures.
46. Factors influencing Foreign Direct Investment in a Country
Stability of the Government: ...
Flexibility in the Government Policy: ...
Pro-active measures of the Government to promote investment (infrastructure): ...
Exchange rate stability: ...
Tar policies and concessions: ...
Scope of the market:
50. A stable government, strong economic growth, robust domestic demand, economic
reforms and a young workforce are just some of the reasons that FDI investments are
growing in India.
Foreign direct investments into India means that companies overseas set up manufacturing
facilities here, provide services and produce goods and do business here that earns them
revenues, creates local jobs and provide tax inflow to the government.
51.
52. The top ten countries investing in India are
Mauritius, Singapore,
Japan, U.K
Netherlands, United States,
Germany, Cyprus,
France and the UAE[1]. Some of the best investments are the
services sector, which was at the top in terms of FDI at $6.7 billion,
followed by telecoms at $6.2 billion and computer hardware and
software at $6.2 billion.., the Netherlands, United States, Germany,
Cyprus, France and the UAE[1]. Some of the best investments are
the services sector, which was at the top in terms of FDI at $6.7
billion, followed by telecoms at $6.2 billion and computer hardware
and software at $6.2 billion.
53.
54. Reasons for rise in FDI
• The reason for the rise in FDI and its sustaining at the high levels is not far
to seek. India’s macro fundamentals have improved. There is an upward
pressure on inflation but that is due to rising crude prices. The economic
growth at 7%-plus makes it one of the fastest growing economies in the
world
55. Initiatives
• Relaxation in FDI norms:
• In real estate broking services, the government has done away with the need for approvals
up to 100%.
• Department of Revenue approvals will no longer be required for FDI proposals, easing the
mechanism for FDI, which will now be cleared in 10 weeks of application.
• The government has allowed 100% FDI in single brand retail through the automatic route.
• FDI in defence is further sought to been enhanced to 51% through the automatic route
from 49% now.
56. contd
• A young and cheap labour force
• We have all heard of India’s demographic dividend and it is true. With 47%
of the population below the age of 25, India has one of the youngest
populations in the world. This means a labour force that will be active and
productive for a long time.
57. Contd..
• Size of the Market
• India’s vast growing and consuming middle class, which is prepared to spend
is a big lure for companies, which are seeing saturation points in developed
countries. India is the third largest economy in the world in terms of
purchasing power parity. There is a reason why large retail companies such as
Amazon, Walmart and Apple are committed to the Indian market.
58. Contd..
• Economic performance
• Economic growth is strong and expected to sustain over the next two years.
The domestic economy is strong enough to sustain demand and inflation
rate, which is more than the target of 4%, still at manageable levels. Rising
crude oil prices are a concern, but they are a concern all over the world.
59. Contd..
• Technological and innovation capabilities
• The institutes of technology churn out some of the brightest engineering
graduates in the region and this is a huge plus for companies who find a
ready-made talent pool. The cream of the engineering talent are able to find
an outlet to their creativity and innovative instincts while working in the labs
of some of the global technology companies, which have set up their
manufacturing facilities here.
60. FOREIGN PORTFOLIO INVESTMENT
• Foreign portfolio investment (FPI) refers to the purchase of securities and
other financial assets by investors from another country. Examples of
foreign portfolio investments include stocks, bonds, mutual funds, exchange
traded funds, American depositary receipts (ADRs), and global depositary
receipts (GDRs).
61. Foreign Portfolio Investors (FPIs), Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs),
Foreign Central Banks, Multilateral Development Bank, Long term investors like Sovereign Wealth
Funds (SWFs), Multilateral Agencies, Endowment Funds, Insurance Funds and Pension Funds
62. The primary benefits of foreign portfolio investment are:
Portfolio diversification. ...
International credit. ...
Access to markets with different risk-return characteristics. ..
.
Increases the liquidity of domestic capital markets. .
..
Promotes the development of equity markets. ...
Volatile asset pricing. ...
Jurisdictional risk.
63. What is FPI limit?
The limits for FPI investment in Corporate bonds shall remain unchanged at 15% of
outstanding stock of securities for FY 2021-22.
64. WHO IS A FOREIGN PORTFOLIO INVESTOR?
An FPI means a person who satisfies the prescribed
eligibility criteria and has been registered under the
SEBI(Foreign Portfolio Investors) Regulations, 2014. All
existing Foreign Institutional Investors (FIIs ) and Qualified
Foreign Investors (QFIs), holding a valid certification of
Registration are deemed to be FPIs, till the expiry of the
block of three years for which they have paid fees as per
the Securities and Exchange Board of India (Foreign
Institutional Investors) Regulations, 1995.
65. Eligibility Of FPI
- Should not be a person resident in India
- Should be a resident of a country which is a signatory to bilateral
Memorandum of Understanding with SEBI or should be a
resident of a country whose securities market regulator is a
signatory to International Organisation of Securities
Commission’s Multilateral Memorandum of Understanding
- Should not be resident of a country identified in the public
statement of Financial Action Task Force ( FATF) as
a) A jurisdiction having a strategic Anti-Money Laundering or
Combating the Financing of Terrorism deficiencies to which
counter measures apply, or
b) a jurisdiction that has not made sufficient progress in
addressing the deficiencies or has not committed to an action plan
developed with the FATF to address the deficiencies
66. External Commercial Borrowings (ECB) refers to the debt shouldered by an
eligible entity in India for solely commercial purposes, that has been extended
by external sources, i.e. from any recognized entity outside India. These
borrowings are expected to conform to norms and conditions put forth by the
RBI. The ECBs fall under the umbrella of RBI regulations as postulated under
the Master Direction - External Commercial Borrowings, Trade Credits and
Structured Obligations (Master Direction), and the Foreign Exchange
Management Act, 1999 (FEMA).
67. ECBs have proven to be instruments that greatly aid
Indian firms and organizations in their efforts to raise
funds from beyond India's borders, especially with regard
to bringing in fresh investments. One might recognize that
structures similar to ECBs include those of Foreign
Currency Convertible Bonds (FCCBs) and Foreign
Currency Exchangeable Bonds (FCEBs).
68. Availing of External Commercial Borrowing
As of today, there exist two paths to raise funds by
employing ECBs- the approval route, and the automatic
route. There are a variety of eligibility regulations created
by the government for availing of finance under the
automatic route. These regulations are in relation to
amounts, industry, the end-use of the funds, etc.
Companies that desire to raise finance via ECB must
necessarily meet these eligibility criteria; thereafter, funds
can be raised without the need for approval.
69. The approval route, on the other hand, mandates that
companies which fall under certain pre-specified sectors
must obtain the RBI's or the government's explicit
permission, prior to raising funds through External
Commercial Borrowing. The RBI has issued circulars and
formal guidelines, specifying the borrowing structure.
70. Eligible Borrowers and Recognized Lenders
The ECBs come in two configurations: Foreign Currency
ECB (FCY ECB) and Indian Currency ECB (INR ECB).
Eligible borrowers could be a label that fits any entity that
is eligible to seek Foreign Direct Investment (FDI). It can
also include specific entities the likes of Port Trusts, Units
in Special Economic Zones, Small Industries
Development Bank of India and the EXIM Bank of India.
The ECBs are to be obtained from 'recognized lenders'.
These terms could refer to any entity that is a member of
the International Organization of Securities Commissions
(IOSCO) and Financial Action Task Force (FATF).
