Global

2. What is Globalisation?
• The term globalisation refers to the integration of the economy of the nation
with the world economy. It is a multifaceted aspect. It is a result of the
collection of multiple strategies that are directed at transforming the world
towards a greater interdependence and integration.

3. Advent of New Economic Policy
• After suffering a huge financial and economic crisis Dr. Man Mohan Singh
brought a new policy which is known as Liberalization, Privatization and
Globalization Policy (LPG Policy) also known as New Economic Policy,1991
as it was a measure to come out of the crisis that was going on at that time.
The following measures were taken to liberalize and globalize the economy:

4. • Devaluation: To solve the balance of payment problem Indian currency were
devaluated by 18 to 19%.
• Disinvestment: To make the LPG model smooth many of the public sectors
were sold to the private sector.
• Allowing Foreign Direct Investment (FDI): FDI was allowed in a wide range of
sectors such as Insurance (26%), defense industries (26%) etc.
• NRI Scheme: The facilities which were available to foreign investors were also
given to NRI's.

5. Under Globalisation following steps were taken:
• Import liberalisation (capital goods)
• Rationalisation of Tarrif Structure
• Abolition of Import Duty
• Reduction of import duty

6. Effect of Globalisation in India
• India is one of the countries that succeeded significantly after the initiation and
implementation of globalisation. The growth of foreign investment in the field
of corporate, retail, and the scientific sector is enormous in the country.
• It also had a tremendous impact on the social, monetary, cultural, and political
areas. In recent years, globalisation has increased due to improvements in
transportation and information technology. With the improved global
synergies, comes the growth of global trade, doctrines, and culture.

7. Impact Of Globalisation on Industrial Sector
• Outsourcing: This is one of the principal results of the globalisation method. In
outsourcing, a company recruits regular service from the outside sources, often from other
nations, that was earlier implemented internally or from within the nation (like computer
service, legal advice, security, each presented by individual departments of the
corporation, and advertisement).
• As a kind of economic venture, outsourcing has increased, in recent times, because of the
increase in quick methods of communication, especially the growth of information
technology (IT).
• Many of the services such as voice-based business processes (commonly known as BPS,
BPO, or call centres), accountancy, record keeping, music recording, banking services,
book transcription, film editing, clinical advice, or teachers are being outsourced by the
companies from the advanced countries to India.

8. • More consumer choice
• Rise of WTO: The formation of WTO in 1994 led to reduction in
tariffs and non-tariff barriers across the world. It also led to the
increase in the free trade agreements among various countries
• Improved mobility of capital: In the past few decades there
has been a general reduction in capital barriers, making it
easier for capital to flow between different economies. This has
increased the ability for firms to receive finance. It has also
increased the global interconnectedness of global financial
markets.

9. Impact of Globalization on Agricultural Sector:
• Raising living standards.
• Alleviating poverty,
• Assuring food security,
• Generating buoyant market for expansion of industry and services, and
• Making substantial contribution to the national economic growth.

10. Advantages of Globalisation
• Increase in employment: With the opportunity of special economic zones (SEZ), there is an
increase in the number of new jobs available. Including the export processing zones (EPZ) centre in
India is very useful in employing thousands of people.
• Another additional factor in India is cheap labour. This feature motivates the big companies in the
west to outsource employees from other regions and cause more employment.
• Increase in compensation: After globalisation, the level of compensation has increased as
compared to the domestic companies due to the skill and knowledge a foreign company offers. This
opportunity also emerged as an alteration of the management structure.
• High standard of living: With the outbreak of globalisation, the Indian economy and the standard
of living of an individual has increased. This change is notified with the purchasing behaviour of a
person, especially with those who are associated with foreign companies. Hence, many cities are
undergoing a better standard of living along with business development.

11. • Greater access to global markets
• Advanced technology
• Better future prospects for large industries of developing countries to become
important players in the international arena.
• Access to Education.
• Greater Employment opportunities

12. • 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.

13. Disadvantages of Globalisation(Challenges)
• 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.

14. • The number of rural landless families increased from 35 %in 1987 to 45 % in
1999, further to 55% in 2005. The farmers are destined to die of starvation or
suicide.

15. Foreign direct investment ( FDI)
A foreign direct investment (FDI) is an
investment made by a company or entity of a
country into company or entity of another
company.
Non Resident investors invest in resident
business.
Fdi may be done by any individual , business
entities or government.
It is thus distinguished from a foreign
portfolio investment
or foreign indirect investment by a notion of
direct control.

16. TYPES OF FDI
•By Target
•By Motive
•By Direction
•By Entry modes

17. By Target :-
• Horizontal fdi:-
Where the company carries out the same activities abroad as at home
( For example Toyota assembling cars in both japan and U.k)
• Vertical fdi :-
When a different storage of activities are added to abroad.
Where the fdi takes the firm nearer to the market is called forward vertical
fdi.( For example Toyota acquiring a car distributorship in America)
Where international integration moves back towards raw materials is called
backward vertical fdi ( for example Toyota acquiring a tyre manufacturers).

18. By Motive :-
• Resource seeking :- looking for resources at a lower real cost.
• Market seeking:- secure market share and sales growth in target
foreign market.
• Efficiency seeking :- seeks to establish efficient structure through
useful factors, cultures, policies or markets.
• Strategic asset seeking :- seeks to acquire assets in foreign farms that
promote corporate long term objectives.

19. By Direction:-
• Inward fdi :- An inward investment involves an foreign entity either
investing in or purchasing the goods of local company
• Outward fdi :- An outward investment is a business strategy where a
domestic firm expands its operations to a foreign country either by
acquisition or expansion of a existing foreign facility.

20. By Entry modes :-
• Greenfield investment:-
Greenfield investment is the investment in a manufacturing , office etc.
It is the idea of building a facility on a green field such as farmland or a
forest.
• Mergers And Acquisitions:-
A merger is a combination of two companies to form a new company
while an acquisition is the purchase of one company another company
in which a new company is formed.

21. Benefits of FDI
• Improve foreign exchange position of the country.
• Employment generation and increase in production.
• Help in capital formation by bringing fresh capital .
• Helps in transfer of new technologies and management skill.
• Helps in increase experts.
• Increases tax revenues.

22. Disadvantages of FDI
• Domestic companies fear that they may lose their ownership.
• Small companies fear that they may not be able to compete with
world class large companies.
• Foreign companies invest more in machinery and intellectual property
than in wages of the local people.
• Government has less control over the functioning of such companies
as they usually work as wholly owned subsidiary of an overseas
company.

23. FDI IN INDIA
• Foreign direct investment in India is a major monetary source for economic
development in India. Foreign companies invest directly in fast growing
private auspicious businesses to take benefits of cheaper wages and
changing business environment of India. Economic liberalisation started in
India in wake of the 1991 economic crisis and since then FDI has steadily
increased in India, which subsequently generated more than one crore (10
million) jobs.
•
• On 17 April 2020, India changed its foreign direct investment (FDI) policy to
protect Indian companies from “opportunistic takeovers/acquisitions of
Indian companies due to the current COVID-19 pandemic”, according to the
Department for Promotion of Industry and Internal Trade. While the new
FDI policy does not restrict markets, the policy ensures that all FDI will now
be under scrutiny of the Ministry of Commerce and Industry.