IN 1990 After India gained independence, stress was given to stabilize the economic system of the country. Wide scale development was made in sectors such as agriculture, village industries, mining and so on. New roads were built, dams and bridges were constructed, and electricity was spread to the rural areas to improve the standard of living.
In the subsequent Five Year Plans, a number of economic reforms and policies were formulated. Public and rural sectors were developed, emphasis was given to increase the quantity and quality of the export items, making the country self sufficient and minimize imports and other related reforms. The political leaders also put stress on business regulations, central planning and nationalization of the industries in mining, electricity and infrastructure.
It was in July 1991, when foreign currency reserves had tumbled down to almost $1 billion; inflation was at a soaring high of 17%, highest level of fiscal deficit, and foreign investors loosing confidence in Indian Economy. With all these coupling factors, capital was on the verge of flying out of the country and we were on the brink of become loan defaulters. It was at this time that with so many bottlenecks at bay, a complete overhauling of the economic system was required. Policies and programs changed accordingly. This was the best time for us to realize the importance of globalization.
. Indian economy in the initial stage of the 1990s was dismal. The main trading partner, Soviet Union was dissolved and India faced huge balance of payment problems. The loans kept on increasing and the IMF asked for a bailout loan. In this situation, the then Finance Minister initiated the liberalization plan. This is one of the milestones in the history of Indian Economy. In the liberalization plan, foreign direct investments were welcomed, public monopolies were abolished and banking, service and tertiary sectors were developed. Boost was also given to develop the money and capital market.
Since the open market plan in the 1990s, India has experienced favourable economic growth. Today it has become one of the fastest growing economies in the world with a GDP growth rate of around 6-7 %. To complement the growing GDP, the country has also experienced growth in per capita income, standard of industrial development.
ECONOMY REFORM IN INDIA Globalization is a term that includes a wide range of social and economic variations. It can encompass topics like the cultural changes, economics, finance trends, and global market expansion. There ought to be positive and negative effects of globalization – it all comes as a package. Globalization helps in creating new markets and wealth, disorder and unrest.
INTEGERATION of economies across the globe Majorly there have been positive impacts of this global phenomenon – through liberalization, privatization and globalization (LPG). Due to globalization, there has been significant flow of inward foreign direct investment. MNC are getting a chance to explore various different markets across economies and explore the untapped potential.
The India GDP is a combination of all the differential factors, contributing to the welfare of the India economy. India GDP gives us a combined report of the performance of the Indian economy. ‘Cost factor’ or ‘Actual price’ method – these are the two methods to calculate Indian Gross Domestic Product. The main factor that contributed to the growth of India GDP post 1990s was the opening-up of the Indian economy.
Gauging the health of the India economy – India GDP is the best tool! Going by figures, India GDP has already crossed the trillion-dollar mark, other peers in this sphere being US, Japan, Germany, China, UK, France, Italy, Spain, Canada, Brazil and Russia.
After the liberalization era of the India economy, the growth story of the India GDP was driven by the following sectors of Indian industry –
The GDP of India, even after the opening up of the economy and other relaxed norms couldn’t survive the aftermath of the global financial crisis. The GDP of India over the past two fiscals (2008-09 and 2009-10) experienced considerable slowdown.
This moderate growth of the India economy has given rise to moderate expectations with respect of India GDP. Though various rating agencies, economists, business houses predict a healthy growth in India GDP in the next two years, yet skepticism is still the order of the day. Achieving a 9% GDP growth by 2012 is immensely impractical, looking at the rate at which things are improving.
Reasons for fall in India’s GDP growth Interest rates are at its peak (experiencing a 6-year high), thus consumer spending has gone down considerably and in a way investments have also reduced. Else than exploring better export prospects, Indian economy doesn’t have any other elements which can steer its growth path. Year-on-year GDP growth rate stood at around 8.8% for first three months of 2009 but then again experienced a fall.
Is the Indian economy severely affected? Countering the inflationary pressures had been the main agenda of the Government for a long time during the initial months of the financial year. But, the Government must aim at achieving a high GDP growth rate, rather than aiming at countering other external pressures. A dramatic improvement might not be expected, but a slow and steady growth path is surely desirable.
SECTORS WHERE THERE HAS BEEN TREMENDOUS IMPROVMENT 1-Indian Economy, India Social Sector, India Agriculture and Development, span of time it is sure to register a tremendous growth rate on all fronts. There has been a rapid increase in the industrial sectors in India in recent times. and computer industry in India has made a rapid improvement recently.
2-Improvement in industry sector There was lot of improvement in this sector TODAY Indian economy is largely dependent on textile manufacturing and exports. There is speculation in the industry that profits have been FOR INDIA IN MALAYSIA’S BIOTECH, OFFHSHORE SERVICES AND REAL ESTATE SECTORS: … Over this period the country has witnessed a tremendous improvement IN India Textile Industry is one of the largest textile industries in the world. Today, Indian economy is largely dependent on textile manufacturing and exports. India earns around 27% of the foreign exchange from exports of textiles Textile Industry involves around 35 million workers directly and it accounts for 21% of the total employment generated in the economy. The Indian Textile Industry contributes approximately 12 percent to industrial production, 15 per cent to the manufacturing sector, 4 percent to the GDP and 12 per cent to the country’s total export earnings. The sector provides direct employment to over 35 million people, the second largest provider of employment after agriculture.
3. INDUSTRIAL SECTOR Biotechnology is among the fast growing knowledge-based industrial sectors which have the immense potential to revolutionize agriculture, healthcare, industrial processing and environmental sustainability. Indian biotech segment has been making rapid strides on the global platform. There are large number of therapeutic biotech drugs and vaccines, being currently produced and marketed in the country and helping mankind enormously. The sector registered revenue of $ 1.07 billion and recorded a 36.55 per cent growth in the year 2005-06.
Drugs and pharmaceutical is another significant industry showing considerable progress over the years. It is one of the largest and most advanced sectors in the world, acting as a source for various drugs, medicines and their intermediates as well as other pharmaceutical formulations. Being the intense knowledge-driven industry, it offers innumerable business opportunities for the investors corporate the world over. India has been recognized as one of the leading global players in pharmaceuticals.
TELECOM SECTOR India’s telecommunication network is the third largest in the world and the second largest among the emerging economies of Asia. It is also amongst the fastest growing telecom markets in the world. Indian telecom industry manufactures a complete range of telecom equipments using the state of the art technologies designed specifically to match the diverse terrain and climatic conditions.
There has been an expansion in global trade in recent months. …. lead to some gains for Indian exporters, especially in sectors like textiles, footwear,etc. Over this period the country has witnessed a tremendous improvement .
So for, the Indian textile industry has targeted traditional textile markets such as USA and Western Europe. Even though tremendous improvements have been made to enhance the cotton.
3. IMPROVMENT IN AGRICULTURE SECTOR OF PUNJAB Punjab farmers of secondary and tertiary sector, for removing distortions in the Indian economy and ceramics, information technology, textiles, plastics etc.
fibres and yarns. These can find application in geo textiles and composite sectors.
Indian economy grew by 7.4% in 2009-10, with a better than expected. There has been an expansion in global trade in recent .To some gains for Indian exporters, especially in sectors like textiles, footwear, and machinery. Over this period the country has witnessed a tremendous improvement in the Innovation in Manufacturing relatively higher margins in the services economy greatly impede the ability of Indian manufacturing dominance tends to converge towards those sectors . On an average, there were over 10 improvement suggestions per employee per … Technology has been a tremendous driving force for innovation in businesses.
The textile industry plays a pivotal role in the Indian economy in terms of … workers directly and 47 Million workers in allied sectors like Agriculture. .over from the third quarter of 2009-10, there has been improvement in technology.
Biotechnology is among the fast growing knowledge-based industrial sectors which have the immense potential to revolutionize agriculture, healthcare, industrial processing and environmental sustainability. Indian biotech segment has been making rapid strides on the global platform. There are large number of therapeutic biotech drugs and vaccines, being currently produced and marketed in the country and helping mankind enormously. The sector registered a revenue of $ 1.07 billion and recorded a 36.55 per cent growth in the year 20
SECTORS where the POSITION has worsened for INDIA The sectors least affected (directly) by the slowdown are Pharmaceuticals, Oil
Essential Conditions For Globalization Economics Essay
The sub-prime mortgage crisis which originated in the United States of America in late 2007 and 2008 not only toppled the US economy ; but it created a sort of ripple effect around the world economy which was accompanied by the soaring high inflation rates around the globe. So this global credit crisis was analyzed upon and thorough research named many culprits for this situation. Among the many reasons cited, the repeal of Glass – Steagall Act was the one that actually was substantial enough to be blamed upon for the crisis.
The Glass – Steagall Act was introduced after The Great Depression and its main agenda was to separate commercial banks and investment banks, in part to avoid potential conflicts of interest between the lending activities of the former and rating activities of the latter.
However, some experts and economists of various countries claimed that Globalization might also have played a major role in the recent surge in inflation and the sub – prime mortgage crisis.
So in the following pages we will study in detail about globalization and its advantages and disadvantages and try to find out if those claims have any weight in them.
Globalization Globalization is defined as the integration of countries into world economy or the global market. Such integration involves removal of all trade barriers between countries. It is the process of internationalization of products, markets, technologies, capital, human resources, information and cultures. Globalization refers to the free flow of goods and services, capital, technology and labour among different countries.
The main features of Globalization:
1. Globalization involves expansion of business operations throughout the world.
2. It leads to integration of individual countries of the world into one global market thereby erasing differences between domestic markets and foreign markets.
3. It creates interdependency between nations.
4. Buying and selling of goods and services takes place from to/any country in the world.
5. Manufacturing and marketing facilities are set up anywhere in the world n the basis of their feasibility and viability rather than on national considerations.
6. Products are planned and developed for the world market.
7. Factors of production like raw materials, labour, finance, technology and managerial skills are sourced from the entire globe.
8. Corporate strategies, organizational structures, managerial practices have a global orientation. The entire globe is viewed as a single market.
9. Globalization does not take place overnight. It proceeds gradually through several stages of internationalization.
Essential Conditions for Globalization In order to smoothen the process of globalization, the following are necessary:
1. Removal of quotas and tariffs.
2. Liberalization of Government rules and regulations.
3. Freedom to business and industry.
4. Removal of bureaucratic formalities and procedures.
5. Adequate infrastructure.
6. Competition on the basis of quality, price, delivery, and customer service.
7. Autonomy to public sector undertakings.
8. Incentives for research and development.
9. Administrative and Government support to industry.
10. Development of money markets and capital markets.
Indicators of Globalization The level of globalization of a country can be judged from the following:
1. Share of foreign trade in national income.
2. Foreign investment as a proportion of total investment in the country.
3. International investments income flows as a proportion of the total transactions in the economy.
4. Foreign exchange transactions as a proportion of the total value of transactions in the economy.
5. International tourism traffic as a proportion of total population of the country.
6. Emigrant and immigrant population as a proportion of total population in the country.
7. Share of foreign remittances.
8. Value of credits and debits to Balance of Payments as a proportion of total national income.
9. The share of domestic output of foreign multinationals and foreign output of domestic multinationals in the country’s national income.
Advantages of Globalization 1. Wider Markets
Globalization offers larger markets to domestic producers. Domestic firms can export their surplus output. They can understand the nature of foreign markets through direct and indirect marketing channels. Domestic firms can realize higher prices from foreign markets. Global operations help to improve public image which is helpful in attracting better talent.
2. Rapid Industrialization
Globalization helps in the free flow of capital and technology between countries. Global firms can acquire finance at lower cost of capital. Free flows of capital and technology from advanced countries help the developing countries to boost up their industrialization. Industrialization of developing countries leads to balanced development of all the countries.
3. Greater Specialization
Globalization enables the domestic firms to specialize in areas where they enjoy competitive or comparative advantage. By focusing on the functions or products of their core competence domestic firms can compete successfully in the international markets. Specialization also helps to save resources and promote exports of the country.
4. Competitive Gains
Globalization increase competition for domestic firms through imports and multinational corporations. Domestic firms learn about new products, new technologies and new management systems. They are under pressure to increase efficiency, introduce innovations and reduce costs. The domestic entrepreneurs who fail to learn from their foreign rivals suffer in the long run.
5. Higher Production
Globalization leads to spread up o manufacturing facilities in different countries. Firms with worldwide contacts can outsource funds, technology, distribution and other functions from anywhere in the world. They can negotiate subcontracting to remain focused on areas of their core competence. International outsourcing and subcontracting help to improve operational efficiency and o reduce costs.
6. Price Stabilization
Globalization can reduce price differences between countries. Free trade and international competition help to equalize price levels in international markets. Countries with a high degree of globalization can attract greater foreign investment which supplements domestic funds, brings in foreign and improves balance of payments.
7. Increase in Employment and Income
Globalization creates job opportunities in developing countries and the incomes of people increases due to increased industrialization.
8. Higher Standards of Living
Lower prices, better quality and higher incomes help to enhance consumption and living standards of people particularly in developing countries. Moreover, increased economic development enables the governments of these countries to provide better welfare facilities like education, health, sanitation, etc. There is all round increase in welfare and prosperity of public.
9. International Economic Cooperation
Globalization improves economic cooperation between nations in the form of trade agreements, international treaties, standardization of commercial procedures, avoidance of double taxation, intellectual property protection and so on. International cooperation also helps countries to harmonize their macroeconomic policies for their mutual benefit.
10. World Peace
Globalization promotes cultural exchange and mutual understanding among different nations. International cooperation and brotherhood contribute to peace and prosperity in the world.
Disadvantages of Globalization 1. Interdependence
Globalization increases interdependence between nations of the world. As a result, economic sovereignty and control over the domestic economy are reduced. There is a danger of foreign economic dominance over the developing economies.
2. Threat to Domestic Industry
Globalization leads to the establishment of manufacturing and marketing facilities by multinationals n developing countries. The domestic firms in these countries fail to face the onslaught of multinationals. As a result they sell out to foreign firms. Cheap imports from china and other countries also kill domestic business particularly in the small sector. Availability of high quality foreign products reduces the demand for domestic products and domestic production is eroded.
Globalization leads to restructuring of industry. Technology upgradation and focus on areas of comparative advantage create unemployment and underemployment among low skilled workers. As a result income inequality, poverty and social unrest may increase.
4. Drain of Basic Resources
Globalization results in exploitation of natural resources and basic raw materials in developing countries. These countries are often the sellers of agricultural and other inputs and buyers of finished products. Talented human resources are also transferred to developed nations which offer better remuneration and career prospects. Economic underdevelopment of poor countries is the result of exploitative character of international trade.
5. Technological Dependence
Globalization offers readymade foreign technology which scuttles domestic research and development. Foreign technologies are available at a high cost and often are not adaptable to local conditions. Developing countries become technologically dependent on developed countries.
6. Alien Culture
Globalization promotes consumption patterns and lifestyles which are inconsistent with the local culture and values. It may lead to shift in the industrialization pattern contrary to the national priorities.
Now after looking at Globalization from both supportive and contradicting point of view; we can now take a stand on whether the claims against globalization are sustainable or not.
Based on the above points, we can firmly say that globalization is not responsible fully for the global economic situations alone. It might have played a part in the crisis, but it did not start the fire.
The one reason which can be held responsible for the mishap is the repeal of Glass – Steagall Act. The claims that globalization is the culprit are true but only to little extent. The sub – prime mortgage crisis spread around the globe because of globalization and as a result, led to a sharp surge in the inflation rates.