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Globalisation and the Indian Economy

Globalisation and Indian Economy: Enabling factors, Struggle, Impact of Globalization.

Globalization in India (LPG) made the Indian economy one of the world’s quickest developing economies. Started various changes concerning industrial, trade, and social sectors to make the economy more competitive. It also heralded the integration of the Indian economy into the global economy.

Globalisation is the process of rapid integration or interconnection between countries. 

Production across Countries:

  • Trade acts as a virtual channel of connecting distant countries 
  • Large companies, which are now Multinational Corporations (MNCs), played a significant role in the trade
  • Globalisation also happens through the movement of people between countries
  • Today, more and more goods and services, investments, and technology are moving between countries, not just in terms of overseas sales and global production
  • People migrate from place to place one country to another to search for jobs for better income or better education

Enabling factors of Globalisation

  • Technology
  • For instance, rapid technological improvements and transportation innovation have made a lot quicker conveyance across significant distances conceivable at lower costs
  • Information and communication technology has made global transmission of information and communication possible at negligible costs
  • Liberalisation of foreign trade and investment policy
  • Liberalisation is a process of removing barriers or restrictions set by the government
  • With the liberalisation of trade, businesses can make decisions freely about imports, exports, and investments
  • Starting around 1991 in India, the government decided to lift many barriers to foreign trade and foreign investment to a large extent 

Today, goods and services are produced globally. As a result, production is organized in increasingly complex ways, spanning across national boundaries.

Impact of Globalization on the World

Interlinking production across countries:

  • Corporations look for the availability of factors of production and favourable government policy while scouting to set up production in a country
  • The money spent by corporations to acquire assets is termed a foreign investment by the host country
  • These MNCs use various routes like setting up new companies, joint ventures with local companies, buying a local company (most common), or placing orders to the local companies to manufacture under MNC’s brand name to set up in the host country
  • These corporations also bring enormous wealth and technical know-how with them
  • In this way, geographically dispersed production is getting interlinked

Foreign trade and Integration of Markets

  • Foreign trade allows producers to sell their goods outside their domestic nations
  • It will enable consumers to buy goods apart from those made in their country
  • Foreign trade thus results in connecting the markets or integration of needs in different countries

Effects of Globalization on India

Positive impact

  • Increased investment by MNCs in India has led to the profitable growth of local supplier companies in India
  • Increased competition benefits the Indian economy and companies by inducing higher quality goods
  • Creation of new opportunities for domestic service sector companies in more unique servicing fields like accounting, data entry, engineering and so on
  • Some own Indian companies have themselves prospered into MNCs. For example, TATA, Infosys, Asian Paints

Negative impact

  • Small manufacturers and industries such as domestic industries of toys, tyres, vegetable oils, etc., cannot compete with large MNC’s leading to their shut down
  • Flexible employment culture, due to increasing competition for jobs leading to unsecured careers

Struggle for a Fair Globalization

Not everyone has benefited from globalization. Equally, people with education and skill have made the most out of it while leaving many out. This highlights the need for a fair globalization process and can achieve by the following methods: 

  • By using government policies
  • For example, strong implementation of labour laws, protection of small manufacturing units
  • Cases of unfair use of the process can be vocalized through the World Trade Organization (WTO) platform 
  • People can play a significant role by being vocal about their concerns and inducing favourable policy at the domestic and international levels  

World Trade Organisation

  • It is an international organisation whose aim is to liberalise international trade
  • Starting at the initiative of the developed countries, it establishes rules regarding international trade 
  • Though it is supposed to get international trade liberalised, many developed countries have unjustifiably held exchange hindrances. Then again, the WTO has constrained emerging nations to eliminate all exchange hindrances
  • For example, farmers in the USA are receiving massive sums of money from the US government to produce and export agricultural produce to other countries
  • They can sell their produce at abnormally low prices in other countries, adversely impacting the farmers in these destination countries

In a nutshell, the positive effects of the globalization process have immensely benefited various industries and people. As mentioned above, the need of the hour is for fair globalization to equitably share benefits among all by creating additional opportunities for all.