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Globalization and liberation are directly linked with each other.

The first wake of globalization started in India when the economic liberalization policies were undertaken in the 1990s by Dr Manmohan Singh, the then Finance Minister of the country. Since then, the economy of India has improved to a great extent and has significantly led to the rise in the standard of living of the citizens.

Pre liberalization period and globalization

From independence till the later part of the 1980s, India economic approach was mainly based on government control and a centrally operated market. The country did not have a proper consumer oriented market and foreign investments were also not coming in. This did not do anything good to the economic condition of the country and as such the standard of living did not go up. In the 1980s, stress has given on globalization and liberalization of the market by the Congress government under Rajiv Gandhi. In his government tenure, plenty of restrictions were abolished on a number of sectors and the regulations on pricing were also put off. Effort was also put to increase the condition of the GDP of the country and to increase exports. Even if the economic liberalization policies were undertaken, it did not find much support and the country remained in its backward economic state. The imports started exceeding the exports and the India suffered huge balance of payment problems. The IMF asked the country for the bailout loan. The fall of the Soviet Union, a main overseas business market of India, also aggravated the problem. The country at this stage was in need of an immediate economic reform.

Liberalization in the 1990s

It was in the 1990s that the first initiation towards globalization and economic liberalization was undertaken by Dr Manmohan Singh, who was the Finance Minister of India under the Congress government headed by P.V. Narasimha Rao. This is perhaps the milestone in the economic growth if India and it aimed towards welcoming globalization. Since, the liberalization plan, the economic condition gradually started improving and today India is one of the fastest growing economies in the world with an average yearly growth rate of around 6-7%.

Impact of globalization and liberalization

Globalization and liberalization has greatly influenced the Indian economy and made it a huge consumer market. Today, most of the economic changes in the country are based on the demand supply cycle and other economic factors. Today, India is the worlds 12th largest economy in terms of market exchange rate and 4th largest in terms of the Purchasing Power Parity. According to a report by the World Bank, the Indian market is expected to grow at around 8% in the year 2010.

Globalization and liberalization has also made a positive impact on various important economic segments. Today, the service sectors, industrial sectors and the agriculture sector have really grown to a great extent. Around 54% of the annual Gross Domestic Product (GDP) of India comes from the service industry while the industrial and agriculture sector contributes around 29% and 17% respectively. With the improvement of the market, more and more new sectors are coming up and reaping profits such as IT services, chemical, textiles, cement industry and so on. With the increase in the supply level, the rate of employment is also increasing considerably. There has been an improvement in the manufacturing sector as well which grew from 8.98% in 2005 to around 12%. The communication segment has grown up to around 16.64%. The condition is expected to improve further with more demand and increase in customer base. The yearly growth of the industrial sector has been around 6.8 % which will rise more in the future. India is one of the well known industrial markets in the AsiaPacific region.

Globalization and foreign investment

One of the main aspects of globalization is foreign investment. India today has emerged as one of the perfect markets for foreign investors due to its vast market base. More and more foreign companies are investing in the Indian market to get more returns. The foreign institutional investments (FII) amounts to around US$ 10 billion in FY 2008-09, while the rate of Foreign direct investments (FDI) has grown around 85.1% in 2009 to US$ 46.5 billion from US$ 25.1 billion (2008). What is the truest definition of Globalization?

Answer: Princess Diana's death.

Question: How come?

Answer: An English princess

with an Egyptian boyfriend

crashes in a French tunnel,

driving a German car

with a Dutch engine,

driven by a Belgian who was drunk

on Scottish whisky,

followed closely by Italian Paparazzi,

on Japanese motorcycles;

treated by an American doctor,

using Brazilian medicines.

This is sent to you by Indian,

using Bill Gates 's technology,

and you're probably reading this on your computer,

that use Taiwanese chips,

and a Korean monitor,

assembled by Bangladeshi workers

in a Singapore plant,

transported by Pakistan lorry-drivers,

hijacked by Indonesians,

unloaded by Sicilian longshoremen,

and trucked to you by Mexican illegals.... .

That, my friend, is Globalization Advertisement

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Status: Offline Posts: 9 Join Date: May 2006 impact of globalization and liberalization on industries in our country - December 18th, 2006 Q.1 (a) What is the impact of globalization and liberalization on industries in our country? Ans: 1 (a) The Programme of Economic Liberalization The New Economic policy During the mid 1980s, the Congress Government headed by Rajiv Gandhi made a move to change its policies regarding business, licenses and permits, as also its attitude towards multinational companies (MNCs) operating in India. However, it was only during the succeeding government of Narasimha Rao (1991-96) that a strategy was actually formulated in this direction and marketed both in India and abroad. The strategy aimed to bring the Indian economy into the mainstream of the global economy, and, at the same time allow a whiff of competition and growth to India business. This, it was hoped would bring a new dimension to the concepts of quality, productivity and growth. Inevitably, the winds of liberalization that swept through the nation opened a variable Pandoras box, with far-reaching implications for human resource management. It brought in a new era of technology, quality consciousness and competition, which compelled Indian business to wake up from its somnambulism and reassess its assumptions for dealing with the compete-or-perish situation. The Pre-reform Scenario In the pre-liberalization period India had pursued a shortsighted policy in the name of self-reliance, blocking out the rest of the world in the manufacturing and services sectors. Relying on bureaucratic controls, through licensing and centralized planning, the government had imposed restrictions on the capacity of business units, their location, choice and source of raw materials and so on. It had also kept a check on corporate takeovers and mergers, through the monopolies and Restrictive Trade Practices Commission (MRTP). India had actively discouraged foreign investments in its capital markets to protect domestic industries. It had also denied itself access to international capital, technology and markets; Unlike the Asian Tigers who went on to beat the first World nations at their own game. However, as seen by the recent downslide in the South Asian economy and the currency crisis in Indonesia, this access to international capital and markets has been

a mixed blessing for these countries. Notwithstanding this, the tremendous progress made by the Asian Tigers during the last three decades can certainly serve as an example to developing countries such as India. Not that socialistic state planning did not have its benefits in India. Heavy industries were established and significant strides were made in the field of agriculture, Industrial growth rose from 7 per cent in the early 1950s to 9% in the early 1960s. However the inevitable

problems of socialism outweighed the benefits. Protected employment led to loss making units where as the License Raj worked against competitive forces. The Reform Process and Imperatives After 1991 there was a two fold shift in the Indian economic policy-at the global level as also the national level. 1. At the global level, it sough to integrate the Indian economy with the world economy by allowing free movement of capital investment, both into and from India. This exchange would also expose India to new technology Table 1.1 indicates that there has been a significant time lag between foreign direct investment (FDI) approvals and actual in-flows. This has been possibly due to the governments failure to ensure a smooth single-window clearance for projects. Other factors have been the governments tendency to backtrack on its own policy, and lack of congruity in Center-state clearance for FDI inflows. 2. At the national level, it envisaged a decontrolled business environment where free market forces would be given more freedom to operate and state control would be reduced or eliminated. The omnipotent role of public sector corporations would be redefined, allowing disinvestments of their equity holdings by the government. One of the desired effects of such a major restructuring of the economy was growth and generation of employment which, it was hoped would lead to more purchasing power for the common man. The central governments reform package was a mix of policy and administrative changes. The budget was used as a major instrument for altering the financial policies. The 1996 budget, which was awaited with both skepticism and hope proved to be turnaround in many ways-custom duties applicable to coreindustries were reduced, excise duty was rationalized and a commitment was made towards disinvestments of PSUs. The budget identified the existing infrastructure as inadequate for growth and indicated efforts to encourage investment in this critical area. Further it took cognizance of the aspirations of farmers and the poor, offering schemes and subsidies to uplift these neglected sections. Unfortunately the budget elicited a lukewarm response and failed to energies the capital

market. This resulted in a slow down of economic reforms and loss of investor confidence in the Indian economy. In February 1997, the budget presented by the formed finance minister, Mr. P.Chidambaram, tried to firmly establish Indias commitment to the reform process and managed to enthuse both Indian and Foreign business. The budget showed a spirit of optimism and growth. Market-men were amply encouraged and share indices recorded their biggest jump in any post budget session in the last two decades. The budget reformed Indias tax structure in line with the structure

in developed countries; significantly reduced tariffs; rationalized excise rates; encouraged investment in infrastructure; and also opened up the insurance sector partially. On the negative side, however the budget paid more lip-service to reduction in government expenditure and remained silent on the huge oil-pool deficit. (This was subsequently tackled by an administrative decision). One of the imperatives of the environment is to have a skilled and educated workforce, which can understand and cope with the requirements of IT and other technologies in the manufacturing and services sectors. Therefore, the state has to make heavy investments in education. It is worth noting that Yashwant Sinha, minister of finance, in his 1998 budget speech, stressed on the importance of education as a key vehicle for social transformation and provided total budgetary allocation of Rs70, 470 million to the sector. This was an increase of 50% over the preceding years allocation. Here, it must, however, be pointed out that a significant share of this increase would go into paying the increases in salaries. The finance minister also expressed the governments intention to eventually raise total resource allocation for education to 6% of GDP, in a phased manner. He further stated the governments plan to implement the constitutional provision for making primary education free and compulsory up to fifth standard, and also to go beyond and provide free education for girls up to the college level. Mahajan (1998) estimates that the central governments expenditure on human resource development (HRD), which was Rs 32,410 million in 1989-90, dropped to Rs28, 910 million in 1992-93. The expenditure by the states was Rs 1,23,100 million in 1989-90, which marginally improved to Rs 1,29,020 million in 1992-93. Given Indias vast population, the number of poor and school drop-outs (turned child laborers), it is indeed a critical situation. Unfortunately, not much has gone into the National Renewal Fund (NRF) either, which was originally created to impart training, retrain workers whose skills has become inadequate or redundant as a result of technology up gradation. The new economic programme has opened up the economy to a greater degree of international participation and investments. The service industry has taken significant strides in areas such as tourism, hospitalize or medicine, banking and financial services. Consequently, not only have more players come into India, but mergers and acquisitions of a large number of India companies have also taken place. This has compelled Indian companies to sit up and re-examine their strategies and practices, as also the type of business they are in. Such a shake-out is indeed in stark contrast to their attitude in the

recent past, where cornering a license mattered more than a companys product or competence. Liberalization has thus resulted in paradigmatic shift
Impact of Globalisation on Developing Countries and India by Chandrasekaran Balakrishnan Chandrasekaran Balakrishnan for The 2004 Moffatt Prize in Economics Introduction: 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 Definition: Globalised World - What does it mean? Does it mean the fast movement of people which results in greater interaction? Does it mean that because of IT revolution people can be in touch with each other in any part of the world? Does it mean trade and economy of each country is open in Non-Intrusive way so that all varieties are available to consumer of his choice? Does it mean that mankind has achieved emancipation to a level of where we can say it means a social, economic and political globalisation? 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 transborder 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, internationalisation 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

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 amore 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. The Indian tariff rates reduced sharply over the decade from a weighted average of 72.5% in 1991-92 to 24.6 in 1996-97.Though tariff rates went up slowly in the late nineties it touched 35.1% in 2001-02. India is committed to reduced tariff rates. Peak tariff rates are to be reduced to be reduced to the minimum with a peak rate of 20%, in another 2 years most non-tariff barriers have been dismantled by march 2002, including almost all quantitative restrictions. India is Global: 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 bee 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 the growth rates are expected to go up close to 70% in 2003-04. A Global comparison shows that India is now the fastest growing just after China. 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 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. 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 polices , sound institutions and domestic political stability also matter. Despite this progress, poverty remains one of the most serious international challenges we face up to 1.2 billion of the developing world 4.8 billion people still live in extreme poverty. But the proportion of the world population living in poverty has been steadily declining and since 1980 the absolute number of poor people has stopped rising and appears to have fallen in recent years despite strong population growth in poor countries. If the proportion living in poverty had not fallen since 1987 alone a further 215million people would be living in extreme poverty today. India has to concentrate on five important areas or things to follow to achieve this goal. The areas like technological entrepreneurship, new business openings for small and medium enterprises, importance of quality management, new prospects in rural areas and privatisation of financial institutions. The manufacturing of technology and management of technology are two different significant areas in the country. There will be new prospects in rural India. The growth of Indian economy very much depends upon rural participation in the global race. After implementing the new economic policy the role of villages got its own significance because of its unique outlook and branding methods. For example food processing and packaging are the one of the area where new entrepreneurs can enter into a big way. It may be organised in a collective way with the help of co-operatives to meet the global demand. Understanding the current status of globalisation is necessary for setting course for future. For all nations to reap the full benefits of globalisation it is essential to create a level playing field. President Bush's recent proposal to eliminate all tariffs on all manufactured goods by 2015 will do it. In fact it may exacerbate the prevalent inequalities. According to this proposal, tariffs of 5% or less on all manufactured goods will be eliminated by 2005 and higher than 5% will be lowered to 8%. Starting 2010 the 8% tariffs will be lowered each year until they are eliminated by 2015. GDP Growth rate: The Indian economy is passing through a difficult phase caused by several unfavourable domestic and external developments; Domestic output and Demand conditions were adversely affected by poor performance in agriculture in the past two years. The global economy experienced an overall deceleration and recorded an output growth of 2.4% during the past year growth in real GDP in 2001-02 was 5.4% as per the Economic Survey in 2000-01. The performance in the first quarter of the financial year is5.8% and second quarter is 6.1%.

Export and Import: India's Export and Import in the year 2001-02 was to the extent of 32,572 and 38,362 million respectively. Many Indian companies have started becoming respectable players in the International scene. Agriculture exports account for about 13 to 18% of total annual of annual export of the country. In 2000-01 Agricultural products valued at more than US $ 6million were exported from the country 23% of which was contributed by the marine products alone. 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 fro nearly 5 to 10% of the countries total agricultural exports. Where does Indian stand in terms of Global Integration? India clearly lags in globalisation. Number of countries have a clear lead among them China, large part of east and far east Asia and eastern Europe. Lets look at a few indicators how much we lag. Over the past decade FDI flows into India have averaged around 0.5% of GDP against 5% for China 5.5% for Brazil. Whereas FDI inflows into China now exceeds US $ 50 billion annually. It is only US $ 4billion in the case of India Consider global trade - India's share of world merchandise exports increased from .05% to .07% over the pat 20 years. Over the same period China's share has tripled to almost 4%. India's share of global trade is similar to that of the Philippines an economy 6 times smaller according to IMF estimates. India under trades by 70-80% given its size, proximity to markets and labour cost advantages. It is interesting to note the remark made last year by Mr. Bimal Jalan, Governor of RBI. Despite all the talk, we are now where ever close being globalised in terms of any commonly used indicator of globalisation. In fact we are one of the least globalised among the major countries however we look at it. As Amartya Sen and many other have pointed out that India, as a geographical, politico-cultural entity has been interacting with the outside world throughout history and still continues to do so. It has to adapt, assimilate and contribute. This goes without saying even as we move into what is called a globalised world which is distinguished from previous eras from by faster travel and communication, greater trade linkages, denting of political and economic sovereignty and greater acceptance of democracy as a way of life.

Consequences: 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.