Globalization101 :

A student's guide to globalization

What Is globalization? Is it the integration of economic, political, and cultural systems
across the globe? Or is it the dominance of developed countries in decision-making, at the
expense of poorer, less powerful nations? Is globalization a force for economic growth,
prosperity, and democratic freedom? Or is it a force for environmental devastation,
exploitation of the developing world, and suppression of human rights? Does globalization
only benefit the rich or can the poor take advantage of it to improve their well-being?

Globalization is a process in which economic, political, and socio-cultural relations are

established across a long geographic distance. Globalization gains its strength from the
possibilities opened up by technologies, strategies and policies. The reality takes effect
when the fears, ideas, actions and reactions occur due to globalization. In a fully globalized
society, borders no longer protect people, goods, and symbols. The world becomes this
worldwide network where the borders fade away. A factor within globalization is
consolidation. This is when globalization is forcing companies that used to enjoy prote 

Impact of Globalisation on Developing Countries and India

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.
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.

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.