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Globalization Introduction

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Globalization Introduction

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akankshabhardwaj111
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Study Notes

Globalization
Globalization

Globalization

Globalisation refers to the process how trade and technology have made the world a more
connected and interdependent place. In broad sense, the term “globalization” implies
combination of economies and societies through cross country flows of information, ideas,
technologies, goods, services, capital, finance and people.
Globalization has several aspects and can be political, cultural, social, and economic, out of
which financial integration is the most common aspect.
India’s massive economic growth is largely due to globalization which was a transformational
change that didn’t occur until the 1990s. Since then, the country’s gross domestic product
(GDP) has grown at an exponential rate.

Old vs New Globalization


Old Globalisation

 It began with the overseas expansion of capitalism in the form of imperial conquests and
colony settlements across the world since fifteenth century or even earlier.
 This phase of globalization brought the Asian, African and Latin American countries under
European political and economic domination. These countries were compelled to 'open-up'
their economies.
 This phase is termed as “Widening phase” of globalization.
 During this phase, the economic integration of the world was confined to international trade
and colonial exploitative relationships.
New Globalisation

 New developments in the field of communications have forced the imperial powers to
renounce the use of force for the exploitation of 'colonies'.
 Instead, indirect pressure through World Bank, IMF, GATT, WTO, etc., was generated on the
capital-starved developing societies to make structural adjustments to accommodate the
interests of the Multi-National Companies.
 This is the new phase of globalization which “compresses” the world into one market, one
factory, one land, one ideal etc.
 A distinctive feature of this phase is the remarkable growth in Foreign Direct Investment
(FDI).

Impact of Globalization
Due to the perception of being overwhelmed by the companies of the developed West , most of
the developing countries had adopted protectionist policies post-independence to protect the
indigenous entrepreneurs against the big Multi-National Companies.
In India also policies like FERA, MRTP Act, Licensing, Nationalization of Banks, requirement of
governmental approval for various industrial collaborations etc. were all meant for protection of

2
Globalization

Indian entrepreneurs from “outsiders” and to protect small scale Indian entrepreneurs from big
Indian Business Houses.
However, Globalization is based on the principle of universalism against protectionism. Also,
Globalization is a reality which can’t be wished away.

Positive impact of Globalization


Economic efficiency and productivity- With the advent of the international brands with
modern features, the Indian manufacturers, too, becoming more consumer friendly in terms of
latest features and low prices.
Widened tax net- It led to incorporation of sales of imported goods in the tax-net. o Increased
export-With the vanishing restrictions on international trade the producers get access to the
global markets which boost their sales and country’s export profile.
Political- With an open country it is very difficult to suppress the genuine demands and
concerns of citizens even by autocrats. This strengthens the democratic polity culture across the
world.
Education-Globalization helps in making the obsolete education systems up-to date. With the
demolition of restrictions and barriers, Universities and institutions of the developed countries
will be offering their knowledge in the less developed ones with multiple positive outcomes.
Foreign direct investment- This has been the biggest benefit of globalization for resource
scare developing countries. These countries need investment on huge scale to move from
developing to developed countries. With more liberal FDI policies these countries have become
the biggest recipients of FDIs in recent decades.
Infrastructure- With increased FDI and global manufacturers coming to these countries the
infrastructure sector got the boost it required. However still there is huge scope to improve the
same for which Globalization could be of great help.
Employment- Globalization brought new opportunities for skilled workers. Specifically, Services
sector industries got the required boost because of increasingly global market.

Negative impact of Globalization


Economy-Post independence some protectionist measures were required to save the
indigenous entrepreneurs from the unequal competition with the Multi-National companies of the
developed world. Breaking up of barriers and protectionist measures marginalized the
indigenous manufacturers.
MNCs domination-The big MNCs backed by big capital, advanced technologies and their
powerful States (Western developed countries) have become the main beneficiaries of
globalization.
Public sector subdues- Public sector enterprises not only play economic but social roles too
with mass employment and appropriate price mechanisms for goods and services they produce.

3
Globalization

However, Globalization terms these irrational and proposes to replace public sector units with
private ones. This undermines the other objectives public sectors cater to in developing
countries.
Cultural hegemony- U.S. being the most powerful country slowly usurped the cultural aspects
of almost every country in the world. Today the festivals we celebrate, the costumes we wear,
food we eat etc all are influenced by the West and specifically U.S. This cultural hegemony is
dangerous to the cultural diversity of world which is necessary for a balanced world.
Agriculture- Domestic agriculture production suffered because of competition from western
farmers’ production which is capital intensive and highly mechanized. This affected rural
economy adversely and created uncertainties for their income.

India and Globalization

 India has experienced Globalization in both phases – old and new.


 New phase of Globalization started in India post 1991 LPG reforms.
 It has given rise to new opportunities but it has also brought new challenges and
responsibilities.
 Since its journey towards globalization started, India has moved up the ranks but is still
among the poorest countries in G-20 because of poor per capita income. It needs to focus on
harnessing the fruits of globalization to benefit not only economy but social at large.
 Demographic is a big advantage for India in today’s globalized world. Its dependency ratio
will decline from an estimated 74.8 in 2001 to 55.6 in 2026 with corresponding increase in
share of working population. This is a golden opportunity for India in an increasingly aged
world. However, to harness the demographic dividend India need to build its human capital
adequately.
 Export as a share of GDP has increased for India over the last three decades. However still
there is huge scope to increase the same and expand our export to Asian African and Latin
American markets beyond the conventional Western countries.
 India majorly depends on its energy supply on imports. Around 80% of its crude oil
consumption is fulfilled through imports. This dependency is a big cause of concern for
India’s macroeconomic stability. To contain this contingency India needs to expand its energy
mix and shift it towards renewable sources. This requires investment and technology. To
fulfill these requirements India along with France established International Solar Alliance in
2015.
 Indian not only received FDI but Indian companies also invested abroad through various
acquisitions and joint ventures. This strengthens India’s position in global world.
 In today’s multi polar world India needs to ascertain its position on global arena for which
Globalization is the main instrument.

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