INTRODUCTION:-
Globalization means different things to different people. It can be defined simply as an expansion of economic activities across the political boundaries of nation-states. More importantly, it refers to a process of deepening economic integration, increasing economic openness, and growing economic interdependence between countries in the world economy.
The real thrust to globalization was provided by the economic reforms of 1991 initiated by the Government of India. At the beginning of 90’s the reform process was started by the then Finance Minister of India, Manmohan Singh.
India’s economic reforms began in 1991 under the Narasimha Rao Government. By that time the surge in oil prices triggered by the Gulf War in 1990 imposed a severe strain on a balance of payments already made fragile by several years of large fiscal deficits and increasing external debt.
Indian economy had experienced major policy changes in the early 1990s. The new economic reform is popularly known as Liberalization, Privatization, and Globalization (LPG), aimed at making the Indian economy the fastest growing economy and globally competitive. The series of reforms undertaken concerning the industrial sector, trade as well as financial sector aimed at making the economy more efficient. With the onset of reforms to liberalize the Indian economy in July of 1991, a new chapter has dawned for India and its billion-plus population.
This period of economic transition has a tremendous impact on the overall economic development. For the LPG policy, Indian people could get rid of traditional, stubborn thinking, superstition, and illiteracy.
Major measures initiated as part of liberalization, privatization, and globalization in the early nineties included the following:-
1) Devaluation:-The first step towards globalization was the devaluation of the currency by 18-19 percent against major currencies in the international foreign exchange market. These measures were taken to resolve the balance of payment crisis.
2) Disinvestment:-In order to make the process of globalization smooth, under the privatization scheme, most of the public sector undertakings were sold to the private sector to give opportunities to private players in the economy.
3) Dismantling the Industrial licensing regime at present, only three industries are under the compulsory licensing regime, mainly on the accounting of environmental safety and strategic considerations. A significantly amended policy in tune with the liberalized licensing policy is in place. No industrial approval is required from the government for locations not falling within 25 kilometers of the periphery of cities having a population of more than one million.
4) Allowing foreign direct investment across a wide spectrum of industries and encouraging non-debt flows. The department has put in place a liberal and transparent foreign investment regime where most activities are opened to foreign investment on an automatic route without any limit on the extent of foreign investment.
5) Abolition of MRTP Act: ‘Monopoly and Restrictive Trade Practices’ act was abolished as per the process of liberalization. Investors needed to get approval from the government to have further capacity expansion under MRTP Act. Globalization has positive as well as negative effects. On one side globalization has accelerated the growth rate of GDP on the other side it has generated high inequalities among Indian people. Few people are exploiting the resources of the economy and most of the proportion of national income is possessed by them. This type of unequal distribution of income is generating poverty, unemployment, etc.
Globalization as a Boon:-
India’s foreign exchange reserves:-
The crisis of the 1990s enabled India to do what China had been able to do in the 1960s and 1970s, and South Korea in the 1970s—experimented with policy shifts and reforms, and the rewards were visible. They caused many changes, most notably in India’s international sector, best captured by India’s foreign exchange reserves, which increased exponentially after 1993, as depicted in the below Figure There was also the removal of India’s notorious licensing system.
(The data are in US$ Million)
The foreign exchange reserves were $39 billion (2000-01), $107 billion (2003-04), $145 billion (2005-06), and $180 billion in 2007. According to the reserve bank of India, India’s foreign exchange reserves are $351.83 billion as of 19 Feb 2016.
Net FDI Inflows in India
It shows that in value terms net FDI inflows in 1980 were a meager sum of $ 0.08 billion. In 1990, this increased to $ 0.24 billion or by 3 times. During the post-reform period, it increased by 99 times from $ 0.25 billion in 1992 to $ 24.64 billion in 2010. During 2008 it was at the peak, $42.55 billion.
India’s rank in market capitalization
India’s rank was fourth in market capitalization in 2005; it was preceded by USA, Germany, and China. But at present, its rank is ninth, which means it is now preceded by eight countries and India’s position has worsened but India was able to join the trillion-dollar market by going through all ups and downs. India’s market capitalization is $1.6 trillion and it is 2.5 percent of the world’s capital market.
As per the Forbes list 2015, India has 100 billionaires. There were only 40 billionaires in India as per ‘Forbes’ 2007 list. The assets of these 100 billionaires are more than cumulative investment in the 91 public sector undertakings by the central government of India. This was largely a result of the liberalization policies initiated by Manmohan Singh.
The Implications of Globalization for a National Economy:-
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 a major improvement given that India’s growth rate in the 1970s 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.
Globalization as a Curse:-
(1) Drastic Increase in Child Labour:- India is home to the largest number of child laborers in the world. The census found an increase in child laborers from 11.28 million in 1991 to a 12.59million in 2001. M.V. foundation in Andhra Pradesh found nearly 40, 0000 lakh children mostly girls between 7 and 14 years of age, toiling for 14-16 hours a day in cottonseed production across the country of which 90 percent are employed in Andhra Pradesh. Poverty and lack of security are the main causes of child labor. Post reform period has witnessed a drastic increase in child labor because due to LPG policy the role of the public sector was reduced. Therefore corporate is working for profit-motive only.
(2) The agricultural sector is the backbone of the Indian economy. Above 50 percent of people are working in the agriculture sector. This sector has been neglected by the government in the post-reform period and the share of agriculture has decelerated continuously. At the time of independence, agriculture was contributing nearly half of the GDP but now its share is only 14 percent of the total GDP of the country. Reasons for the backwardness of agriculture are lack of public investment, indebtedness of farmers, and the presence of intermediaries between sellers (farmers) and buyers.
(3) Job and social insecurity: Globalization has generated problems like job and social insecurity. The public sector provides jobs along with social as well as job security and other benefits also. But in the modern era, a person can get a job but neither he would get neither secure job nor social security. Therefore, increasing insecurity in society is perpetuating other social evils like the dowry system, crimes, unemployment, etc.
(4) Poverty and unemployment: as per the ‘Forbes’ list 2015, India’s number of billionaires has crossed 100 and the wealth they possess is more than the investment in public sector undertakings by the central government. This has led to a wide range of inequalities of wealth among Indian people. Some people are dying from starvation and some are dying due to the consumption of excessive food in our country. Consequently, malnutrition, child labor, and crimes are on the rise. Still a large proportion of people in India living below the poverty line even India has been unable to achieve millennium development goals in case of many indicators.
(4) FDI flow: A Comparison with other Developing Countries Consider global trade- India’s share of world merchandise exports increased from .05 percent to .07 percent over the past twenty years. Over the same period, China’s share has tripled to almost 4 percent. India’s share of global trade is similar to that of the Philippines and the economy 6 times smaller according to IMF estimates. Over the past decade, FDI flows into India have averaged around 0.5 percent of GDP against 5 percent for China and 5.5 percent for Brazil. FDI inflows to china now exceed US $ 50 billion annually. It is the only US $ 4 billion in the case of India. The present NDA government has tried to maintain status very well by allowing maximum FDI in different sectors as much as it may be possible. NDA’s foreign policy has been commended all over\ the world but the consequences of initiatives taken to increase FDI inflows in India are still on the waiting list.
Policy Implications/Suggestions:-
1. In the case of agriculture, if the FDI is allowed 100 percent in the multi-brand retail sector, then farmers can get remunerative prices for their crops. Farmers are getting meager prices for their produce due to many types of intermediaries between sellers (farmers) and buyers.
2. Policymakers need to take cognizance of the fact that it is a domestic investment that has provided an overwhelmingly large share of India's capital formation that should not be neglected because of foreign phobia.
3. Communal disharmony has been the issue of debate for the present government. Whether India’s ease of doing business rank has improved to 34 but due to violence, riots, and strifes at domestic level India has lost its international reputation. Recently agitation by jats in Haryana for the reservation was so horrible that shops, malls were set afire. After the withdrawal of protests when owners were advised to start their shops and malls along with financial help they refused to do so. The reason is that they are feeling insecure in such an environment. Therefore, communal harmony is a must to attract foreign as well as domestic investors.
4. To attract investors from different countries infrastructure, Social, as well as physical, should be improved. Social infrastructure includes education and health on the other hand physical infrastructure includes transportation, energy, banking services, etc. Good and efficient infrastructure can play a vital role in the augmentation of the globalization process.
5. The government has already set the ball rolling. It has relaxed FDI norms to encourage both domestic and foreign companies to manufacture in India sell their products abroad.
Concluding Remarks:-
Globalization has its own negative, as well as positive impacts in the modern era. Our policymakers have been against the common man. It is the government that can reap the benefits from globalization if it prepares and implement pro-people policies to attract foreign direct investment. There is an example of many developed as well as developing countries such as south ASEN countries like china, we have yielded a lot from globalization by trading all over the world. Our policies are influenced by big corporates and elites as proved by the increasing number of billionaires as per the Forbes list. Even our elections are financed by corporates so it is obvious that government policies are too influenced by corporates to fulfill their own personal interests. It is the policies of China and Russia that have utilized foreign direct investment to elevate masses above the poverty line. Such policies and attitudes should be adopted by India towards globalization.
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