Impact Of Globalization


globalizationWhat is Globalization?

The world dictionary defines globalization as World English Dictionary-(a) The process enabling financial and investment markets to operate internationally, largely as a result of deregulation and improved communications. (b) The emergence since the 1980s of a single world market dominated by multinational companies, leading to a diminishing capacity for national governments to control their economies. (c) The process by which a company, etc, expands to operate internationally

Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology. This process has effects on the environment, on culture, on political systems, on economic development and prosperity, and on human physical well-being in societies around the world.

Globalization is not new, though. For thousands of years, people—and, later, corporations—have been buying from and selling to each other in lands at great distances, such as through the famed Silk Road across Central Asia that connected China and Europe during the Middle Ages. Likewise, for centuries, people and corporations have invested in enterprises in other countries. In fact, many of the features of the current wave of globalization are similar to those prevailing before the outbreak of the First World War in 1914.

Though the precise definition of globalisation is still unavailable a few definitions worth viewing, Stephen Gill: defines globalisation as the reduction of transaction cost of trans border movements of capital and goods thus of factors of production and goods. Guy Brainbant: says that the process of globalisation not only includes opening up of world trade, development of advanced means of communication, internationalization of financial markets, growing importance of MNC’s, population migrations and more generally increased mobility of persons, goods, capital, data and ideas but also infections, diseases and pollution.

Merits and De-merits of Globalization

The Merits of Globalization are as follows:

• There is an International market for companies and for consumers there is a wider range of products to choose from.

• 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.

• Technological development has resulted in reverse brain drain in developing countries.

The Demerits of Globalization are as follows:

• 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.


Globalisation is the new buzzword that has come to dominate the world since the nineties of the last century with the end of the cold war and the break-up of the former Soviet Union and the global trend towards the rolling ball. The frontiers of the state with increased reliance on the market economy and renewed faith in the private capital and resources, a process of structural adjustment spurred by the studies and influences of the World Bank and other International organisations have started in many of the developing countries. Also Globalisation has brought in new opportunities to developing countries. Greater access to developed country markets and technology transfer hold out promise improved productivity and higher living standard. But globalisation has also thrown up new challenges like growing inequality across and within nations, volatility in financial market and environmental deteriorations. Another negative aspect of globalisation is that a great majority of developing countries remain removed from the process. Till the nineties the process of globalisation of the Indian economy was constrained by the barriers to trade and investment liberalisation of trade, investment and financial flows initiated in the nineties has progressively lowered the barriers to competition and hastened the pace of globalisation.

Impact on India

India opened up the economy in the early nineties following a major crisis that led by a foreign exchange crunch that dragged the economy close to defaulting on loans. The response was a slew of Domestic and external sector policy measures partly prompted by the immediate needs and partly by the demand of the multilateral organisations. The new policy regime radically pushed forward in favour of a more open and market oriented economy.

Major measures initiated as a part of the liberalisation and globalisation strategy in the early nineties included scrapping of the industrial licensing regime, reduction in the number of areas reserved for the public sector, amendment of the monopolies and the restrictive trade practices act, start of the privatisation programme, reduction in tariff rates and change over to market determined exchange rates.

Over the years there has been a steady liberalisation of the current account transactions, more and more sectors opened up for foreign direct investments and portfolio investments facilitating entry of foreign investors in telecom, roads, ports, airports, insurance and other major sectors.

India is Global

In early 1990s the Indian economy had witnessed dramatic policy changes. The idea behind the new economic model known as Liberalization, Privatization and Globalization in India (LPG), was to make the Indian economy one of the fastest growing economies in the world. An array of reforms was initiated with regard to industrial, trade and social sector to make the economy more competitive. The economic changes initiated have had a dramatic effect on the overall growth of the economy. It also heralded the integration of the Indian economy into the global economy.

The liberalisation of the domestic economy and the increasing integration of India with the global economy have helped step up GDP growth rates, which picked up from 5.6% in 1990-91 to a peak level of 77.8% in 1996-97. Growth rates have slowed down since the country has still been able to achieve 5-6% growth rate in three of the last six years. Though growth rates has slumped to the lowest level 4.3% in 2002-03 mainly because of the worst droughts in two decades. This is major improvement given that India is 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 pickup in GDP growth has helped improve India’s global position.

India, an emerging economy, has witnessed unprecedented levels of economic expansion, along with countries like China, Russia, Mexico and Brazil. India, being a cost effective and labor intensive economy, has benefited immensely from outsourcing of work from developed countries, and a strong manufacturing and export oriented industrial framework. With the economic pace picking up, global commodity prices have staged a comeback from their lows and global trade has also seen healthy growth over the last two years. The global economy seems to be recovering after the recent economic shock. The Indian economy, however, was hit in the latter part of the global recession and the real economic growth witnessed a sharp fall, followed by lower exports, lower capital outflow and corporate restructuring. But nevertheless, India’s position is being improved, since 1991, though; India remains a poor country but a fast growing developing country. In the world there is great expectation that India will within a few decades become a developed country, an economic super power by growing rapidly and consistently. At present India’s position of the Indian economy is one of poor country with large population, low per capita income, high corruption, low quality of life, with low productivity but with lot of potential that has just entered the path of high growth.

Globalisation and Poverty

Globalisation in the form of increased integration though trade and investment is an important reason why much progress has been made in reducing poverty and global inequality over recent decades. But it is not the only reason for this often unrecognised progress, good national policies, sound institutions and domestic political stability also matter.

It was in the 1990s that the first economic liberalization policies were initiated by the then Finance Minister Dr Manmohan Singh to encourage the wake of globalization in India. Since then, the economic condition of India has significantly increased. Over the years, India has gradually become one of the fastest growing economies in the world. It has become the 4th largest economy in the world in terms of the purchasing power parity (PPP). It has been expected that the average yearly economic growth will range between 6% and 7 %

Due to the high economic growth, there has been rapid progress in the civic amenities. The per capita income has increased which has improved the standard of living of the masses. As economic growth is a great factor behind the improvement of the poverty, the rise in the economic condition of India had a favorable impact on the reducing the rate of poverty in the country. A major portion of the poverty level in India is from the rural areas whose staple form of income is agriculture and farming. Due to the globalization, Indian agriculture has improved to some extent which has helped to reduce the poverty problems of the rural masses.

Over the years, with the advent of more technology, there has been a significant change in the process of agriculture in the country. Earlier farmers used traditional farming techniques for growing crops. As such, they suffered a lot and the output was affected by a number of factors like pest problems, weather situations and lots more. Due to the globalization and introduction of better equipments, there has been a stark improvement in the techniques of agriculture. Today, farmers are using gadgets like rowers, tractors, electric pipelines and lots more for the cultivation of crops. This has increased the produce in terms of quantity as well as quality. As such, farmers have started earning more and have improved their per capita income and the standard of living.

The government has also taken several positive steps to improve the poverty situation in the rural areas. Irrigational projects have been undertaken, dams have been built and more facilities have been provided to the farmers to increase their agricultural produce. As lots of farmers are poor, they are not in a position to buy expensive equipments. To solve this problem and make them self sufficient, the government also grants financial help and loan to the farmers at very cheap rates. The government has set up the National Bank for Agriculture and Rural Development (NABARD) and various other Regional Rural Banks (RRBs) to financially help the farmers in need. Housing projects are also being undertaken to solve the accommodation problems of the poor.

Also, many of the studies in Globalization and Poverty in fact suggest that globalization has been associated with rising inequality, and that the poor do not always share in the gains from trade. One is that the poor in countries with an abundance of unskilled labor do not always gain from trade reform. Another is that the poor are more likely to share in the gains from globalization when workers enjoy maximum mobility, especially from contracting economic sectors into expanding sectors. Gains likewise arise when poor farmers have access to credit and technical know-how (Zambia), when poor farmers have such social safety nets as income support (Mexico) and when food aid is well targeted (Ethiopia).

The relationship between globalization and poverty is complex, yet, a number of persuasive conclusions may be drawn from the studies in Globalization and Poverty. One conclusion is that the relationship depends not just on trade or financial globalization but on the interaction of globalization with the rest of the economic environment: investments in human capital and infrastructure, promotion of credit and technical assistance to farmers, worthy institutions and governance, and macroeconomic stability, including flexible exchange rates.

Import and export of India

With the growing expansion of free market and influence of globalization, export and import industry has gained momentum in India. Many Indian companies have started becoming respectable players in the International scene. Since Independence, India has made a lot of progress in agriculture in terms of growth in output, yields and area under crops. It has gone through a Green Revolution (food grains), a White Revolution (milk), a Yellow Revolution (oilseeds) and a Blue Revolution (aquaculture). Today, India is one of the largest producers of milk, fruits, cashew nuts, coconuts and tea in the world. It is also well known for the production of wheat, vegetables, sugar, fish, tobacco and rice.

Certain types of agriculture such as horticulture, organic farming, floriculture, genetic engineering, packaging and food processing have the potential to see a surge in revenues through exports. Over the past few years, the government has stressed on the development of horticulture and floriculture by creating vital infrastructure for cold storage, refrigerated transportation, packaging, processing and quality control. If India wishes to optimize the production and export potential of these commodities, then it is essential to improve these facilities, marketing and export networks much further.

In recent years, the Central Government has offered different fiscal incentives for bettering storage facilities in rural areas. It also provides financial assistance to the State Governments for acquiring and distributing food grains at subsidized rates, especially to families with annual income below the poverty line. Today, the improved availability of bank credit through priority lending, favourable terms of trade and liberalized domestic and external trade for agricultural commodities have also encouraged private players to invest in agriculture.

The major thrust of the policies and programmes of the Government of India relating to livestock and fisheries is in the areas of rapid genetic upgradation of milch animals, improvement in the delivery mechanism of breeding inputs, control of animal diseases, creation of disease free zones, increased availability of nutritious feed, development of dairy activities and backyard poultry, development of processing and marketing facilities and enhancement of production and profitability of livestock.

Agriculture exports account for about 13 to 18% of total annual of annual export of the country. Marine products in recent years have emerged as the single largest contributor to the total agricultural export from the country accounting for over one fifth of the total agricultural exports. Cereals (mostly basmati rice and non-basmati rice), oil seeds, tea and coffee are the other prominent products each of which accounts for nearly 5 to 10% of the countries total agricultural exports.


The implications of globalisation for a national economy are many. Globalisation has intensified interdependence and competition between economies in the world market. This is reflected in Interdependence in regard to trading in goods and services and in movement of capital. As a result domestic economic developments are not determined entirely by domestic policies and market conditions. Rather, they are influenced by both domestic and international policies and economic conditions. It is thus clear that a globalising economy, while formulating and evaluating its domestic policy cannot afford to ignore the possible actions and reactions of policies and developments in the rest of the world. This constrained the policy option available to the government which implies loss of policy autonomy to some extent, in decision-making at the national level.



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