Globalisation

Definition:
An economic phenomenon? A social phenomenon? A cultural phenomenon?

The movement towards the expansion of economic and social ties between countries through the spread of corporate institutions and the capitalist philosophy that leads to the shrinking of the world in economic terms.

History of Globalization
Globalization is not new. For thousands of years people have been trading goods and traveling across great distances. During the Middle Ages, merchants traveled along the Silk Road, which connected Europe and China. The modern age of globalization started with the Industrial Revolution at the end of the 18th century. New machines were able to produce cheaper goods. Trains and steam-powered boats transported products farther and faster. Since 1980, globalization has been moving at a faster pace. Today it is easier for companies to work in other countries. The Internet gives them the chance of reaching more customers around the world. Teleworkers work for firms that may be far away.

Steps Taken to Globalize Indian Economy

Some of the steps taken to liberalize and globalize our economy were: 1. Devaluation: To solve the balance of payment problem Indian currency were devaluated by 18 to 19%. 2. Disinvestment: To make the LPG model smooth many of the public sectors were sold to the private sector. 3. Allowing Foreign Direct Investment (FDI): FDI was allowed in a wide range of sectors such as Insurance (26%), defense industries (26%) etc. 4. NRI Scheme: The facilities which were available to foreign investors were also given to NRI's.

The drivers of globalisation

Market drivers Per capita income converging among industrialised nations Convergence of lifestyles and tastes Organisations beginning to behave as global customers Increasing travel creating global consumers Growth of global and regional channels Establishment of world brands Push to develop global advertising Government drivers Reduction of tariff barriers Reduction of non-tariff barriers Creation of blocs Decline in role of governments as producers and customers Privatisation in previously state-dominated economies Shift to open market economies from closed communist systems in eastern Europe Increasing participation of China and India in the global economy Other drivers Revolution in information and communication Competitive drivers Continuing increases in the level of world trade Increased ownership of corporations by foreign acquirors Rise of new competitors intent upon becoming global competitors Growth of global networks making countries interdependent in particular industries More companies becoming globally centred rather than nationally centred Increased formation of global strategic alliances Globalisation of financial markets Improvements in business travel Cost drivers Continuing push for economies of scale Accelerating technological innovation Advances in transportation Emergence of newly industrialised countries with productive capability and low labour costs. Increasing cost of product development relative to market life

The drivers of globalisation

Market drivers Per capita income converging among industrialised nations Convergence of lifestyles and tastes Organisations beginning to behave as global customers Increasing travel creating global consumers Growth of global and regional channels Establishment of world brands Push to develop global advertising Government drivers Reduction of tariff barriers Reduction of non-tariff barriers Creation of blocs Decline in role of governments as producers and customers Privatisation in previously state-dominated economies Shift to open market economies from closed communist systems in eastern Europe Increasing participation of China and India in the global economy Other drivers Revolution in information and communication Competitive drivers Continuing increases in the level of world trade Increased ownership of corporations by foreign acquirors Rise of new competitors intent upon becoming global competitors Growth of global networks making countries interdependent in particular industries More companies becoming globally centred rather than nationally centred Increased formation of global strategic alliances Globalisation of financial markets Improvements in business travel Cost drivers Continuing push for economies of scale Accelerating technological innovation Advances in transportation Emergence of newly industrialised countries with productive capability and low labour costs. Increasing cost of product development relative to market life

The drivers of globalisation

Market drivers Per capita income converging among industrialised nations Convergence of lifestyles and tastes Organisations beginning to behave as global customers Increasing travel creating global consumers Growth of global and regional channels Establishment of world brands Push to develop global advertising Government drivers Reduction of tariff barriers Reduction of non-tariff barriers Creation of blocs Decline in role of governments as producers and customers Privatisation in previously state-dominated economies Shift to open market economies from closed communist systems in eastern Europe Increasing participation of China and India in the global economy Other drivers Revolution in information and communication Competitive drivers Continuing increases in the level of world trade Increased ownership of corporations by foreign acquirors Rise of new competitors intent upon becoming global competitors Growth of global networks making countries interdependent in particular industries More companies becoming globally centred rather than nationally centred Increased formation of global strategic alliances Globalisation of financial markets Improvements in business travel Cost drivers Continuing push for economies of scale Accelerating technological innovation Advances in transportation Emergence of newly industrialised countries with productive capability and low labour costs. Increasing cost of product development relative to market life

The drivers of globalisation

Market drivers Per capita income converging among industrialised nations Convergence of lifestyles and tastes Organisations beginning to behave as global customers Increasing travel creating global consumers Growth of global and regional channels Establishment of world brands Push to develop global advertising Government drivers Reduction of tariff barriers Reduction of non-tariff barriers Creation of blocs Decline in role of governments as producers and customers Privatisation in previously state-dominated economies Shift to open market economies from closed communist systems in eastern Europe Increasing participation of China and India in the global economy Other drivers Revolution in information and communication Competitive drivers Continuing increases in the level of world trade Increased ownership of corporations by foreign acquirors Rise of new competitors intent upon becoming global competitors Growth of global networks making countries interdependent in particular industries More companies becoming globally centred rather than nationally centred Increased formation of global strategic alliances Globalisation of financial markets Improvements in business travel Cost drivers Continuing push for economies of scale Accelerating technological innovation Advances in transportation Emergence of newly industrialised countries with productive capability and low labour costs. Increasing cost of product development relative to market life

The drivers of globalisation

Market drivers Per capita income converging among industrialised nations Convergence of lifestyles and tastes Organisations beginning to behave as global customers Increasing travel creating global consumers Growth of global and regional channels Establishment of world brands Push to develop global advertising Government drivers Reduction of tariff barriers Reduction of non-tariff barriers Creation of blocs Decline in role of governments as producers and customers Privatisation in previously state-dominated economies Shift to open market economies from closed communist systems in eastern Europe Increasing participation of China and India in the global economy Other drivers Revolution in information and communication Competitive drivers Continuing increases in the level of world trade Increased ownership of corporations by foreign acquirors Rise of new competitors intent upon becoming global competitors Growth of global networks making countries interdependent in particular industries More companies becoming globally centred rather than nationally centred Increased formation of global strategic alliances Globalisation of financial markets Improvements in business travel Cost drivers Continuing push for economies of scale Accelerating technological innovation Advances in transportation Emergence of newly industrialised countries with productive capability and low labour costs. Increasing cost of product development relative to market life

The drivers of globalisation

Market drivers Per capita income converging among industrialised nations Convergence of lifestyles and tastes Organisations beginning to behave as global customers Increasing travel creating global consumers Growth of global and regional channels Establishment of world brands Push to develop global advertising Government drivers Reduction of tariff barriers Reduction of non-tariff barriers Creation of blocs Decline in role of governments as producers and customers Privatisation in previously state-dominated economies Shift to open market economies from closed communist systems in eastern Europe Increasing participation of China and India in the global economy Other drivers Revolution in information and communication Competitive drivers Continuing increases in the level of world trade Increased ownership of corporations by foreign acquirors Rise of new competitors intent upon becoming global competitors Growth of global networks making countries interdependent in particular industries More companies becoming globally centred rather than nationally centred Increased formation of global strategic alliances Globalisation of financial markets Improvements in business travel Cost drivers Continuing push for economies of scale Accelerating technological innovation Advances in transportation Emergence of newly industrialised countries with productive capability and low labour costs. Increasing cost of product development relative to market life

Pros Of Globalization
With globalization, there is a global market for companies to trade their products and a wider range of options for people, to choose from among the products of different nations. Developing countries benefit a lot from globalization, as there is a sound flow of money and thus, a decrease in the currency difference. To meet the increasing demands that follow globalization, there is an increase in the production sector. This gives loads of options to the manufacturers as well. Competition keeps prices relatively low, and as a result, inflation is less likely to occur. The focus is diverted and segregated among all the nations. No country remains the single power head; instead there are compartmentalized power sectors. The decisions at higher levels are meant for the people at large. Communication among the countries is on the rise, which allows for better understanding and broader vision. As communication increases amongst two countries, there is interchange of cultures as well. We get to know more about the other's cultural preferences. As we feed to each other's financial needs, the ecological imbalance is also meted out. Governments of countries show concern about each other.

Cons Of Globalization
Globalization is causing Europeans to lose their jobs as work is being outsourced to the Asian countries. The cost of labor in the Asian countries is low as compared to other countries. The high rate of profit for the companies, in Asia, has resulted in a pressure on the employed Europeans, who are always under the threat of the business being outsourced. Companies are as opening their counterparts in other countries. This results in transferring the quality of their product to other countries, thereby increasing the chances of depreciation in terms of quality. There are experts who believe that globalization is the cause for the invasion of communicable diseases and social degeneration in countries. The threat that the corporate would rule the world is on high, as there is a lot of money invested by them. It is often argued that poor countries are exploited by the richer countries where the work force is taken advantage of and low wages are implemented.

Where does Indian stand in terms of Global Integration?

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.

Where does Indian stand in terms of Global Integration?

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.

Indian Scenario
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.