Monday, November 4, 2013

Globalization and its impact on Indian economy

 Globalization and its impact on Indian economy
First about globalization, its meaning, dimensions, measurement and content perspectives: 
Globalization is the increasing interconnection of people and places as a result of advances in transport, communication, and information technologies that causes political, economic, and cultural convergence. The word "globalization" can be traced back to 1944. The term has been used by economists since 1981; however, its concepts did not permeate popular consciousness until the latter half of the 1990s. The earliest concepts and predictions of globalization were penned by an American entrepreneur-turned-minister Charles Taze Russell who first coined the term 'corporate giants' in 1897. Various social scientists have tried to demonstrate continuity between contemporary trends of globalization and earlier periods. The first era of globalization (in the fullest sense) during the 19th century was the rapid growth of international trade between the European imperial powers, the European colonies, and the United States. After World War II, globalization was restarted and was driven by major advances in technology, which led to lower trading costs. Globalization in the era since World War II was first the result of planning by economists, business interests, and politicians who recognized the costs associated with protectionism and declining international economic integration. Their work led to the Breton Woods conference and the founding of several international institutions intended to oversee the renewed processes of globalization, promoting growth and managing adverse consequences.
These were the International Bank for Reconstruction and Development (the World Bank) and the International Monetary Fund. It has been facilitated by advances in technology which have reduced the costs of trade, and trade negotiation rounds, originally under the auspices of GATT, which led to a series of agreements to remove restrictions on free trade. The Uruguay round (1984 to 1995) led to a treaty to create the World Trade Organization (WTO), to mediate trade disputes and set up a uniform platform of trading. Other bi- and multilateral trade agreements, including sections of Europe's Maastricht Treaty and the North American Free Trade Agreement (NAFTA) have also been signed in pursuit of the goal of reducing tariffs and barriers to trade. 

Looking specifically at economic globalization, it can be measured in different ways. These centre on the four main economic flows that characterize globalization: 

Goods and services, e.g. exports plus imports as a proportion of national income or per capita of population Labor/people, e.g. net migration rates; inward or outward migration flows, weighted by population Capital, e.g. inward or outward direct investment as a proportion of national income or per head of population 
Technology, e.g. international research & development flows; proportion of populations (and rates of change thereof) using particular inventions (especially 'factor-neutral' technological advances such as the telephone, motorcar, broadband) To what extent a nation-state or culture is globalised in a particular year has until most recently been measured employing simple proxies like flows of trade, migration, or foreign direct investment, as described above. 

As globalization is not only an economic phenomenon, a multivariate approach to measuring globalization is the recent index calculated by the Swiss Think tank KOF. The index measures the three main dimensions of globalization: economic, social, and political. In addition to three indices measuring these dimensions, an overall index of globalization and sub-indices referring to actual economic flows, economic restrictions, and data on personal contact, data on information flows, and data on cultural proximity is calculated. Data are available on a yearly basis for 122 countries. According to the index, the world's most globalised country is Belgium, followed by Austria, Sweden, the United Kingdom and the Netherlands. The least globalised countries according to the KOF-index are Haiti, Myanmar the Central African Republic and Burundi. Other measures conceptualize Globalization as Diffusion and develop interactive procedure to capture the degree of its impact
Jan 2006.

Impact on Indian Economy
A.T. Kearney and Foreign Policy Magazine jointly publish another Globalization Index. According to the 2006 index, Singapore, Ireland, Switzerland, the U.S., the Netherlands, Canada and Denmark are the most globalised, while Egypt, Indonesia, India and Iran are the least globalised among countries listed. In 2007, the figures for globalization index for India is 49.70 (82nd rank) compared with Pakistan's 52.35 (rank 71), Brazil 59.60 (rank 54), United States 80.83 (rank 19), UK 89.29 (rank 4). 

Notwithstanding the low level of globalization of Indian economy, the impact of globalization has been highly positive in all most all spheres of economic and social life and virtually no negative effect. It is only because of opening up of the hitherto closed, govt.-oppressed and controlled economy to the process of globalization that has helped Indian economy to grow rapidly: in the last 10-12 years, India's economic growth has been high, exports have boomed, incidence of poverty has been reduced, employment has surged, begging by India for economic aid has stopped, long-term inflation rate has gone down, scarcity of goods have disappeared, the quality of products available have improved substantially and overall India has become progressively vibrant and internationally competitive. Indian companies are setting up companies abroad; India has better technological development for the benefit of the common man (mobiles, road transport, cheap clothes, etc - only because of globalization. 
Effect of globalization on Indian industry has been very positive, though some industrial firms with the baggage of high cost, inefficient plants and processes inherited from the past because of closed economy's government dictated industrial policies and priorities had to face serious problems in the beginning. But soon most of the industries have become more and more efficient; customer focused and improved their international competitiveness in term of costs, prices, product quality and variety. Industrial growth has been very high and strong during the past decade because of globalization. Exports have increased tremendously. Indian industries are also expanding abroad. Foreign companies have substantially increased their investments in Indian industries. Wages of industrial labour has increased substantially as they have become very productive. Lock out and strikes have declined to insignificantly low levels because industrial labor is happy. Those who cannot be efficient and past their prime age to retrain themselves in modern methods and processes have been retired with very attractive voluntary retirement schemes. The trade unions are finding it difficult to influence industrial workers into agitation because labor has started benefiting from the positive fallout of globalisation on the prosperity and growth of the industrial sector. Talented and merited labor is commanding premium compensation in the labor market. Several new types of industries have also come up. Small scale industries of the past have fast grown into medium scale companies. Incidence of industrial sickness has gone done drastically. 
However, the communists will not agree to this view because with industrial workers becoming richer following increasing demand for and the wages of industrial labour resulting from liberalization and globalization. 

India has done very little reforms in agriculture to enable private and individual economic initiative that would help harness the benefits of globalisation. Despite this govt. created hurdles to globalisation, Indian agriculture has benefited substantially from whatever little globalisation that has ben allowed in Indian agriculture. The farmers that got the exposure to global links of markets, technology and investment, benefited in terms of improving their yields, getting better prices and secured off take. In many areas of the country, tomatoes growers, potato farmers and fruit growers farmers benefited from tie-up and collaborations with ketchup, potato chips, fruit juices, etc. Indian agricultural exports have grown where Indian farmers in selected pockets are competitive: these include spices made from agricultural produce, flowers, mangoes, other fruits, rice, vegetables, pickels, papads, tobacco, etc. The e-choupals network created by an Indian company and the spread of mobile telephones have provided on line market price and climatic information on on-line real-time basis and helped them to get the best prices and sell to the most attractive buyers and brought them freedom from the clutches of the middlemen and traders. Because of the resistance from the traders and the politicians, more and more farmers are not getting the benefits of globalisation: vested interests are stopping the entry of more professional and honest buyers of agricultural produce of high quality for supply to urban areas through network of malls. Fishermen in Kerala have increased their incomes using mobile phones to find out the best mandis where the prices are the highest on each day. There have not been any negative effect of globalisation on Indian farming. But faulty and restrictive policies of Indian politicians have made it difficult for farmers to consolidate their holdings for larger scale commercial farming, acess to large, high paying buyers with retail chains, support of well-organised transparent mandis not ruled by traders. As a result in many areas farmers have committed suicides because of crop failures and high indebtedness. Using the old British Indian laws of land acquisition, the state govts  are forcing farmers to sell their lands for industries at prices they consider justified rather than asking industrialists and companies to bid for agricultural land which will increase the market prices of land,. Once these policy impediments are removed, globalisation will proceed in Agriculture and farming in the proper way and benefit Indian agriculture and farming throughout the country. India does not need all the land under agriculture now for agricultural use: much less area would suffice to feed the nation and export if agricultural productivity can be raise substantially through private investment in agriculture by companies that need agricultural produce for their business growth and India's economic growth. 

To reiterate, There are absolutely no negative effects of globalisation on Indian farming. The politicians are spreading rumors to get votes from farmers promising to save them from the threats of globalisation. There is however threat to farmers to some extent: they may have to sell land against compensation to allow industrialisation to progress. There would also be displacement of agricultural labor as a result and they have to be compensated, rehabilitated and absorbed in the expanding industrial, construction and other service sector. But all these have to take place whether India globalizes or not. India's economic growth in future will demand significant rise in agricultural productivity so that some part of agricultural lands can be diverted for industrial growth and residential accommodation. Without releasing agricultural land for industry, development of roads etc,. Agriculture itself will suffer along with the farmers. The farmers should be careful that they get fairly compensated instead of getting fooled by govts. and industries saying that they are offering more than market price. There is no active market for agricultural land in India. Industries and Govt. should be in competitive bidding process to buy any agricultural land to get real fair price which may be much higher than what they are getting now. 

Farming in India urgently needs consolidation of holdings, large sized farms and considerable investments that would raise India's farm output many fold even after giving up a part of agricultural lands for industrial and infrastructure development. The food prices world over are going to shoot up. Indian farming needs to be allowed to make the maximum gains. Today, politicians are keeping the urban poor happy by keeping most farmers poor that helps keep food prices low. But this policy will soon fail and India may have to import grains if farming sector does not radically improve its productivity. 
India has done very little reforms in agriculture to enable private and individual economic initiative that would help harness the benefits of globalisation. Despite this govt. created hurdles to globalisation, Indian agriculture has benefited substantially from whatever little globalisation that has ben allowed in Indian agriculture. The farmers that got the exposure to global links of markets, technology and investment, benefited in terms of improving their yields, getting better prices and secured off take. In many areas of the country, tomatoe growers, potato farmers and fruit growers farmers benefited from tie-up and collaborations with ketchup, potato chips, fruit juices, etc. Indian agricultural exports have grown where Indian farmers in selected pockets are competitive: these include spices made from agricultural produce, flowers, mangoes, other fruitsrice, vegetables, pickels, papads, tobacco, etc. The e-choupals network created by an Indian company and the spread of mobile telephones have provided on line market price and climatic information on on-line real-time basis and helped them to get the best prices and sell to the most attractive buyers and brought them freedom from the clutches of the middlemen and traders. Because of the resistance from the traders and the politicians, more and more farmers are not getting the benefits of globalisation: vested interests are stopping the entry of more professional and honest buyers of agricultural produce of high quality for supply to urban areas through network of malls. Fishermen in Kerala have increased their incomes using mobile phones to find out the best mandis where the prices are the highest on each day. There have not been any negative effect of globalisation on Indian farming. But faulty and restrictive policies of Indian politicians have made it difficult for farmers to consolidate their holdings for larger scale commercial farming, access to large, high paying buyers with retail chains, support of well-organized transparent mandis not ruled by traders. As a result in many areas farmers have committed suicides because of crop failures and high indebtedness. Using the old British Indian laws of land acquisition, the state govts. are forcing farmers to sell their lands for industries at prices they consider justified rather than asking industrialists and companies to bid for agricultural land which will increase the market prices of land,. Once these policy impediments are removed, globalisation will proceed in Agriculture and farming in the proper way and benefit Indian agriculture and farming throughout the country. India does not need all the land under agriculture now for agricultural use: much less area would suffice to feed the nation and export if agricultural productivity can be raise substantially through private investment in agriculture by companies that need agricultural produce for their business growth and India's economic growth. 

As for the services sector, it is because of opening up of the economy that has allowed globalisation to transform the services sector with the most rapid growth in telecommunications, internet, mobile telephone, ATMs, insurance, capital markets, retailing, airlines, and of cause the software and BPO services industry and entertainment industry creating wealth, income and employment opportunities. If there was no globalisation, most of these activities would have remained dormant and inefficient under govt. monopolies or private oligopolies. The exports from India have grown tremendously after India slowly started opening up to globalisation. Except for the old haggards of Nehruvian planning socialist politicians and the old haggards of outdated and irrelevant, Marxist-Leninist-Stalinist- Maoist ideology addicted politicians earning livelihood and comfortable living by fooling illiterate, poor masses, and who continues to hurt India's economic growth, everyone knows that globalisation has been a boon to Indian industry, Indian consumers, Indian agriculture (could have been more), Indian services sector, Indian exports, Indian achievements in many other fields including running businesses abroad. India now has a top rated capital market that was till mid 1990s was a shoddy place. India leads in the international software industry. Small and medium industries in steel, engineering, project execution, travel, tourism, hotels, food processing, etc are thriving. All these are the effects of globalisation - notwithstanding the hurdles created by the Govt. of India and the state Govt.s or the politicians or the economists or the Planning Commission or the bureaucrats. 


There are some people in India and abroad who try to project that international trade and globalization are more beneficial to rich nations and big multinationals. These views are not substantiated by facts or ant consistent theory. These views are propounded generally by a set of intellectuals who want to control the lives of the common citizens of their own countries and enjoy royal life. Globalization makes the life of these power hungry politicians and pseudo intellectuals. It is globalisation that has given the Indian software, steel making, and other corporations to establish themselves as competitors to foreign multinationals. It is the developed countries which are losing jobs because of globalisation. It is because of globalisation that China has got the chance to become a major industrial nation supplying goods to rich world. The poor Chinese, Vietnamese, Sri Lankans and Indians are getting the benefit of globalisation more than the Americans or the British or the Japanese. In a globally competitive world, inefficient, incapable and intellectually poor leaders of the poor countries will be losing their jobs to more capable fellow citizens. That is why they are trying to stop globalisation. But people will not be fooled for long. They will accept only globally competitive leaders - others have to quit their leadership based on protected monopoly of political and intellectual businesses in their respective countries. When monopolists and oligopolistic cartels are threatened, they naturally become activists and hire activist workers to protect the status quo for their own survival. 

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