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.
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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 problems. This, despite the fact that 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, with aspirations of elevating herself from her present desolate position in the world, the need to speed up her economic development is even more imperative. 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.
Globalization has many meanings depending on the context and on the person who is talking about. Though the precise definition of globalization is still unavailable a few definitions are worth viewing, Guy Brainbant: says that the process of globalization not only includes opening up of world trade, development of advanced means of communication, internationalization of financial markets, growing importance of MNCs, population migrations and more generally increased mobility of persons, goods, capital, data and ideas but also infections, diseases and pollution. The term globalization refers to the integration of economies of the world through uninhibited trade and financial flows, as also through mutual exchange of technology and knowledge. Ideally, it also contains free inter-country movement of labor. 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 GLOBALIZATION:
The implications of globalization for a national economy are many. Globalization has intensified interdependence and competition between economies in the world market. These economic reforms have yielded the following significant benefits: Globalization in India had a favorable impact on the overall growth rate of the economy. This is major improvement given that India’s growth rate in the 1970’s was very low at 3% and GDP growth in countries like Brazil, Indonesia, Korea, and Mexico was more than twice that of India. Though India’s average annual growth rate almost doubled in the eighties to 5.9%, it was still lower than the growth rate in China, Korea and Indonesia. The pick up in GDP growth has helped improve India’s global position. Consequently India’s position in the global economy has improved from the 8th position in 1991 to 4th place in 2001; when GDP is calculated on a purchasing power parity basis. During 1991-92 the first year of Rao’s reforms program, The Indian economy grew by 0.9%only. However the Gross Domestic Product (GDP) growth accelerated to 5.3 % in 1992- 93, and 6.2% 1993-94. A growth rate of above 8% was an achievement by the Indian economy during the year 2003-04.
India’s GDP growth rate can be seen from the following graph since Independence.
India- A Growing Economy
ROLE OF INDIAN ECONOMY IN GLOBALIZATION:
Indian markets have been transformed relatively as there is addition of wide range of goods in the recent years. These rapid transformations can be understood by analyzing the various aspects like:-
Production across countries:
Before the middle of the twentieth century, production was largely organized within countries. Raw materials, food stuff and finished products were crossing the boundaries. Trade was the main channel connecting distant countries. This was before large companies called multinational corporations emerged pm the scene. Whence the goods and services are produced globally and production is organized in increasingly complex ways. The production process is divided into small parts and spread out across the globe. The advantages o f spreading out production across the borders to the multinationals can be truly immense.
2) Interlinking production across countries:
Almost all MNC’s set up production where it is close to the markets; where there is skilled and unskilled labour available at low costs; and where the availability of other factors of production is assured. The money that is spent to buy assets such as land, building, machines and other equipment is called investment. Investment made by MNC’s is called foreign investment. At times, MNC’s set up production jointly with some of the local companies of these countries. MNC’s provide money for additional investments like buying new machines for faster production and they might bring with them the latest technology for production. As a result, production in these widely dispersed locations is getting interlinked.
3) Foreign trade and integration of markets:
Foreign trade has been the main channel for connecting countries. It is an opportunity for the producers to reach beyond the domestic markets. Producers can sell their produce not only in markets located within the country but can also compete in markets located in other countries of the world. Similarly, for the buyers, import of goods produced in another country is one way of expanding the choice of goods beyond what is domestically produced. Therefore, foreign trade results in connecting the markets of integration of markets in different countries.
4) By understanding the meaning of globalization:
Globalization means integrating the Indian economy with the world economy. In the process India becomes economically interdependent with other countries at the global or international level. It seeks removal of trade barriers. There are various features of globalization they are:
1. Many producers from other countries can sell their goods and services in India.
2. India can also sell its goods and services in other countries.
3. Businessmen of other countries can establish their enterprises in India, produce goods for sale within the country or to other countries as export.
4. In the same way entrepreneurs from India can also invest in other countries.
5. Globalization includes not only movement of capital and goods but also allows exchange of technology experience and laborers from one country to other and
6. In pursuance of this policy government of India has removed restrictions on imports of goods, reduced taxes
5) Factors enabled globalization: Rapid improvement in technology has been one major factor that has stimulated the globalization process. This has made much faster delivery of goods across long distances possible at lower costs. There have been remarkable developments in information and communication technology. Information and communication technology has played a major role in spreading out production of services across countries. Removing barriers or restrictions set by the government is what is known as liberalization. The government imposes much less restrictions than before and is therefore said to be more liberal.
6) WTO – meaning and its functions: It was set up in 1995 by the member countries of the United Nation to promote trade among countries. Headquarter is located in Geneva. It has influenced the liberalization and globalization processes in most of the developing countries, including India. It aims at conducting international trade among countries of the world in an open uniform and non-discriminating manner. WTO allows free trade to all, in practice, in developed countries. On the other hand, it rules have forced the developing countries to remove trade barriers.
7) Impact of Globalization in India:
Globalization has taken an important place in the Indian economy for the last fifteen years. Globalization in combination with greater competition among producers – internal as well as external, has been of greater advantage to consumers, particularly the well-off sections in the urban areas. Although the impact of globalization has not been uniform, because, MNC have increased their investments in India during the last fifteen years, which has proved to be beneficial to India. Mushrooming of industries like cell phones, automobiles electronics, soft drinks, fast food or services, via MNCs have created new avenues. It has given an opportunity to the raw material suppliers to prosper too. On the other hand, the top Indian companies have been able to benefit from the increased competition by investing in new technology and production methods and raised their production standards. Moreover, globalization has enabled some large Indian companies to emerge as multinationals themselves! Some of the Indian companies which are spreading their operations world-wide are Tata-Motors (automobiles), Infosys (IT), Ranbaxy (Medicines), Asian Paints (Paints). It has created new opportunities for companies providing services, particularly those involving IT. But for a large number of small producers and workers, globalization has posed major challenges. Globalization and the pressure have also posed a threat to the worker’s jobs, as they are not secure any more. Workers are low and workers are forced to work overtime to make both ends meet. The workers are sometimes denied their fair share of benefits which is brought about by globalization.
8) The struggle for a fair globalization:
Globalization has not benefited everyone by way of not giving the best of the new opportunities and have not shared the proper benefits. Fair globalization would create opportunities for all and ensure the benefits of globalization are shared better. It is possible if government takes major steps in this respect. The policies should be framed to protect the interests of all the people in the country, such as labour laws are properly implemented and thus the workers get their rights. By supporting small producers to improve their performance till the time they become strong enough to compete.
Understand of Globlization
Globalization is one of the most overused and misunderstood words being used today. Most people, when asked about it, will think of the jobs that have been exported to countries like India and China . For them, globalization means that work which was once theirs is now given to others. To understand it better, let’s look at what it really is, at least in general terms.
Globalization is not a new phenomenon, although what exists today is in a form unimaginable in the past. Thousands of years ago traders from all over the orient travelled the famed Silk and Spice routes, buying and selling silks and spices as the travelled. This was where globalization began. And it never looked back and it has been an integral part of world society ever since.
Understanding the nature of globalization in India is more than just understanding an
economic definition of poverty – it includes an understanding of the culture and history of
India and ways in which globalization means adding layers of complexity within India, not
simply replacing one India (traditional) with another (modern). This paper situates the
economic liberalization policies of the Indian government from the early 1990s to the
present in the context of the larger globalization debate. The paper then puts the context
around which the economic reforms were taken within India ‘s recent development history.
After understanding this greater context the paper reviews several recent studies that have
examined whether the economic growth in India has come at the expense of growing
Advantages of Globalization
India have moved from a world where the big eat the small to a world where the fast eat the slow”, as observed by Klaus Schwab of the Davos World Economic Forum. All economic analysts must agree that the living standards of people have considerably improved through the market growth. With the development in technology and their introduction in the global markets, there is not only a steady increase in the demand for commodities but has also led to greater utilization. Investment sector is witnessing high infusions by more and more people connected to the world’s trade happenings with the help of computers. As per statistics, everyday more than $1.5 trillion is now swapped in the world’s currency markets and around one-fifth of products and services are generated per year are bought and sold.
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Buyers of products and services in all nations comprise one huge group who gain from world trade for reasons encompassing opportunity charge, comparative benefit, economical to purchase than to produce, trade’s guidelines, stable business and alterations in consumption and production. Compared to others, consumers are likely to profit less from globalization.
The stock of foreign direct investment resources has increased rapidly as a percentage of gross world product in the past twenty years.
For the purpose of commerce and pleasure, more and more people are crossing national borders. Globally, on average nations in 1950 witnessed just one overseas visitor for every 100 citizens. By the mid-1980s it increased to six and ever since the number has doubled to 12.
Worldwide telephone traffic has tripled since 1991. The number of mobile subscribers has elevated from almost zero to 1.8 billion indicating around 30% of the world population. Internet users will quickly touch 1 billion.
Other Advantages of globalization:
Cheaper Products for Consumer: Trainers are Cheap.
Leads to Outsourcing in some cases which can lead to job loses: Moving call centers to India .
Lowering of international Bariers:
Helps prevent market Saturation in a specific market: stops there being too much competitors in one place e.g too much call centres in Uk , so move to India
Standardisation of product: the same products can be seen in some many places – e.g coke and McDonalds
Challenging Of Globalization
Sustaining the growth momentum and achieving an annual average
growth of 9-10 % in the next five years.
Simplifying procedures and relaxing entry barriers for business
Activities and Providing investor friendly laws and tax system.
Checking the growth of population; India is the second highest populated country in the world after China. However in terms of density India exceeds China as India’s land area is almost half of China’s total land. Due to a high population growth, GNI per capita remains very poor. It was only $ 2880 in 2003 (World Bank figures).
Boosting agricultural growth through diversification and development of agro processing.
Expanding industry fast, by at least 10% per year to integrate not only the surplus labour in agriculture but also the unprecedented number of women and teenagers joining the labour force every year.
Developing world-class infrastructure for sustaining growth in all
the sectors of the economy
Further Recommendation India Economy AND SUMMARY OF FUTER INDIAN ECONOMY:
It is generally said that future is always uncertain. This saying is correct to some extent. But at the same time it is also said that exceptions are always there. This exception is about India’s certain higher rate of growth in the coming future.
The future of Indian economy is brighter because of its huge human resources, rapidly upcoming service sector, availability of large number of competent professionals, vest market for every product, increasing impact of consumerism, absence of controls and licenses, interest of foreign entrepreneurs in India and existence of four hundred million middle class people. Even today, India is producing largest number of billionaires in a year, take over by Indian multinational is amazing the craze of Indians to go abroad is rapidly diminishing the Rupee is becoming stronger and stronger in relation to Dollar. Our Country’s say in the international diplomacy and political affairs has now become meaningful, thousands of foreigners are working as executives in India, packaged are becoming lucrative and competitive and annual rate of growth is highest after China.
1. Particability of Concept of Special Economic Zone
2. Employment Generation and Micro financing
3. Knowledge Economy: Problems and Prospects
4. Outsourcing in Service Sector
5. Insurance: Policies and Prospects
6. Retailing: Reality of Destructive Development
7. Future Trading in Commodities: Uncertain Future
8. Prospects of Medical Tourism in India
9. Changing Pattern of Lending and Borrowing
10. Banking Reforms in NPA Regime
11. Future of India in Future Banking
12. Challenges Before Public Sector Banks