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. See more essay sample at Studyfaq and can order your unique paper.
Globalization has many meanings depending on the context. In context to India, this implies opening up the economy to foreign direct investment by providing facilities to foreign companies to invest in different fields of economic activity in India, removing constraints and obstacles to the entry of MNCs in India, allowing Indian companies to enter into foreign collaborations and also encouraging them to set up joint ventures abroad; carrying out massive import liberalization programs by switching over from quantitative restrictions to tariffs and import duties, therefore globalization has been identified with the policy reforms of 1991 in India.
IMPACT OF GLOBLIZATION ON INDIAN ECONOMY
Now the concept of localization is totally changed it??™s conevertated into globalization. Go globally and think globally is the mantra of present era. Right from Manufacturing to services, thrust is on globalization. For example, Mazada??™s sport car MX-5 Maita, was designed in Californiyya, it??™s proto type product is created in England, assembled in Michigan and Maxico using advanced electronic components which are invented in New Jersy, fabricated in Japan by sourcing the finance from Tokyo and New York and marketed world wide.
As you all know, for the good part of the last decade and even before, various forces in the world have been active to shape the economy of their own countries and internationally in the post Cold War world.Globalisation refers to one of the main trends of there orientation of the economy in this period and its main content is to strengthen “market forces”. The end
of Cold War created a new situation world wide and no force could remain aloof from the demands of this new situation. One of the camps of the bipolar world, the one led by the US, seized that opportunity and released numerous initiatives in the political, military, social and
ideological spheres – and most importantly, in the economic sphere. One objective was to give a knockout blow to its arch-rival, the Soviet Union so that it could not rise again, politically, militarily and economically, at least in near term. The other objective was to ensure that this period of global disequilibrium does not give rise to popular revolutions and people??™s power, which had been kept in check by both super powers for the good part of the Cold War period.
India??™s Export Market :
FY2001 (US$ 45bn) FY 2007(US$126 bn)
|North America |24% |16% |
|Africa |6% |8% |
|West Europe |27% |23% |
|Asia and Oceania |39% |49% |
|CIS and Baltics |2% |1% |
|South America |2% |3% |
India??™s major Trading Partners:
|USA |18.7 US BN $ |
|UAE |14.0 US BN $ |
|China |9.0 US BN $ |
|Singapore |6.4 US BN $ |
|UK |6.1 US BN $ |
|Hong Kong |5.6 US BN $ |
|Germany |4.6 US BN $ |
|Netherlands |4.5 US BN $ |
|Belgium |3.7 US BN $ |
|Italy |3.5 US BN $ |
Major export items
|Pre and semi finished iron and steel |24.0% | |
|Iron ore |17.8% |
|Cotton yarn and fabrics |7.9% |
|Transport equipment |6.7% |
|Mfgs. Of metals |6.6% |
|Phama products |6.3% |
|RMG Cotton |6.1% |
|Machinery and instrument |4.5% |
|Gems and jewellery |4.1% |
|Petro products |3.5% |
India??™s direct investment flows:
The cumulative FDI inflows from 1991 to September 2008 were Rs.19253 US $ mn.
|Electrical equipment |18% |
|Service sector |13% |
|telecommunication |10% |
|Transportation industry |9% |
|Industry |APRIL-JUNE (Q1) |
| |(Rs. in crore) |Percentage change |
| |Gross Domestic Product |Over previous year Q1 |
| |for Q1 of | |
| |2006-07 |2007-08 |2008-09 |2007-08 |2008-09 |
|1.? agriculture, forestry & fishing |1,22,660 |1,28,042 |1,31,831 |4.4 |3.0 |
|2.? mining & quarrying |13,852 |14,083 |14,760 |1.7 |4.8 |
|3.? manufacturing |1,03,009 |1,14,270 |1,20,705 |10.9 |5.6 |
|4.? electricity, gas & water supply |14,942 |16,121 |16,537 |7.9 |2.6 |
|5.? construction |48,967 |52,720 |58,715 |7.7 |11.4 |
|6.? trade, hotels, transport & |1,72,481 |1,95,068 |2,16,957 |13.1 |11.2 |
|? ? ? ? communication | | | | | |
|7.? financing, ins., real est. &? bus. |97,331 |1,09,559 |1,19,738 |12.6 |9.3 |
|? ? ? ? services | | | | | |
|8.? community, social & personal |90,404 |95,086 |1,03,114 |5.2 |8.4 |
|? ? ? ? services | | | | | |
|? ? ? ? GDP at factor cost |6,63,645 |7,24,949 |7,82,357 |9.2 |7.9 |
The Bright side of globalization:
Globalization has many positive, innovative and dynamic aspects, all related to the
increased market access, increased access to capital, and increased access to technology and
information which have led to greater income and employment opportunities. There is no dearth of examples: The world as a whole is definitely more prosperous and more healthy, with average per capita incomes tripling in the last fifty years, child mortality rates halving and life expectancy increasing by ten years since 1965. Trade flows also increased 12-fold in the past fifty years as a result of the removal of natural and artificial barriers.
The rate of growth of the Gross Domestic Product of India has been on the increase from 5.6 % during 1980-90 to 7% in the 1993-2001 period. In the last four years, the annual growth rate of the GDP was impressive at 7.5% (2003-04), 8.5% (2004-05),9% (2005-06) and 9.2% (2006-07). The foreign exchange reserves (as at the end of the financial year) were $ 39 bn (2000-01), $107 bn (2003-04),$145 bn (2005-06) and $180 bn (in February 2007). It is expected that India will cross the $200 billion mark soon.
India controls at the present 45% of the global outsourcing market with an estimated income of $ 50 bn.
In respect of market capitalization (which takes into account the market value of a quoted company by multiplying its current share price by the number of shares in issue), India is in the fourth position with $ 894 billion after the US ($ 17,000 billion), Japan ($ 4800 billion) and China ($ 1000). India is expected to soon cross the trillion dollar mark.
The Dark side of Globlization
While the world as a whole has benefited from globalization, there are negative and marginalizing aspects of globalization. These are what have led to a backlash, as reflected to a certain extent in the demonstrations by civil society accompanying recent international conferences, and by increasing expressions of dissatisfaction at the governmental level.
Unbalanced Distribution of Benefits:
Between Countries. The first negative aspect ofglobalization is that its gains are not equally distributed, both between and within countries. Examples of the badly skewed distribution among countries of the benefits of globalization can be gleaned from
the following data from the period1980 to 1997: While world per capita income increased, per capita
income contracted in fifty nine countries, widening income disparities. Exports of goods and services
grew at less than 5% annually in 46 countries, and at less than 1% a year in 9 countries.
Insofar as financial flows are concerned, the majority (58%) of flows of foreign direct investment in
the ???90??™s went to developed countries. 85% of the FDI that went to developing and transition
economies went to only 20 countries, with the bottom sixteen of these receiving less than what the top two got. And for nine countries, the flows have been negative.
The distribution of portfolio and other short-term flows is even worse: 94% of these went to only 20 countries in 1997, with the bottom 13 of these countries receiving less in total than the top two. Finally, only twenty-five developing countries have access to private markets for bonds, commercial bank loans and portfolio equity.The benefits from the Uruguay Round are also expected to be unbalanced, with 70% accruing to the developed countries and 30% to the developing countries. Among developing countries, China is expected to get the lion??™s share (27% of the 30%). The most excluded from the benefits of globalization are the Least Developed Countries (LDCs) and Sub-Saharan Africa. They are actually expected to lose as things stand ??“ US$600 million and US$1.2 billion a year respectively.What all these mean is that while the world has shrunk into a global village, the gap between the rich and the poor in that village is widening. Hundreds of millions of people are being excluded from the benefits of globalisation.
The information and communication technology revolution, which is regarded as the newest sinew of
globalization, has created a gap of its own ??“ the so-called digital divide. The exponential growth of
internet users adverted to earlier masks tremendous disparities: In 1998, industrial countries
accounting for 15% of the world??™s population had 88 per cent of internet users. In contrast,
SouthAsia, home to 20% of that population, had less than one per cent of the internet users, while Sub-Saharan Africa, with 9.7% of the world??™s people, had only 0.1 per cent connected to the internet.
2. Unbalanced distribution of benefits:
Within Countries. The benefits of globalization are also badly skewed within countries, both developing and developed. Income inequality is rising in many countries, particularly in the OECD countries. Worse, job and income insecurity is increasing, particularly for unskilled labor, although corporate restructuring has also meant job insecurity for professionals. Within developing countries, the increased world agricultural prices expected to result from the Uruguay Round should benefit those in agriculture. The urban poor will suffer when food prices rise, but will gain from employment in new export industries. Young women hired by multinationals are likely to benefit most ??“ their incomes increase, with a concomitant increase in their household status. Consumers also gain from the reduction in local prices due to increased competition from abroad.
3. Financial Volatility:
Unbalanced benefit flows are not the only negative aspects of globalization. Globally integrated markets have financial volatility as a permanent feature, the frequency of financial crises increasing with the growth in international capital flows. The human costs of such financial volatility can be very high, as shown by the effects of the Asian crisis ??“ bankruptcies, poverty increase, rising unemployment, reduced schooling, reduced public services, and increased social stress
and fragmentation ??“ in short, a reversal in human development.
The closer linkages that characterize globalization also allow for contagion and worldwide recession, or at least slowdown. The Asian crisis had repercussions everywhere — in South America, Russia, Africa, the Middle East ??“ which were affected either directly or indirectly..
5. More human insecurity:
crime, disease, and loss of cultural identity. Unfortunately, the many opportunities opened up by the widening and deepening of information flows and contacts among the world??™s people also include increasing opportunities for crime (trafficking in drugs, weapons, women, international syndicates), for the spread of HIV/AIDS as well as ideas, and for the flow of culture and cultural products which may lead to cultural homogeneization, which, while considered enriching by some, is considered as a loss of cultural identity by others.