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Facing Globalisation: India's response

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Responding to Globalization: India's response

Globalization and its interpretation

In general, the term "globalization" means the integration of economies and societies through the flow of cross country information, ideas, technologies, goods, services, capital, finance and people. integration border may have several dimensions – cultural, social, political and economic. In fact, some people fear the social and cultural integration, more than economic integration. The fear of "cultural hegemony" still haunts many. By limiting itself to the integration Economic, we can see that this happens through the three channels (a) trade in goods and services, (b) the movement of capital and (c) financial flows. In addition, there is also the channel through the movement of people.

Historical Development

Globalization has been a historical process of ebb and flow. During World War II, pre-1870 to 1914, there was a rapid integration of economies in terms of flows of trade, capital flows and migration people. The growth was driven primarily by globalization technological strengths in the areas of transportation and communication. There were fewer barriers the movement of goods and persons between the geographical boundaries. In fact there were no passports and visas, and very few obstacles non-tariff restrictions on cash flows. The pace of globalization, however, slowed down between the first and second world war. The inter- wars saw the construction of various barriers to restrict the free movement of goods and services. Most of the savings they thought they could prosper best under the walls of protection. After the Second World War, all the major countries determined not to repeat the errors they made before opting for isolation. Even after 1945 there was a campaign for greater integration has time to reach the pre-First World War. As a percentage of exports and imports to total production, the United States could reach the level before the First War world, only 11 per cent in 1970. Most developing countries that gained independence from colonial rule after World War II followed a diet industrialization of import substitution. Soviet bloc countries were also protected against the process of global economic integration. However, times have changed. Over the past two decades, the process of globalization has proceeded with more vigor. The first country the Soviet bloc are increasingly integrated into the global economy. More and more developing countries turn to foreign policy focused on growth. However, studies indicate that the capital markets and trade are more globalized today than they were in the late 19th century. However, there are more concerns about globalization now than before because of the nature and speed of processing. What is striking about the current episode is not only fast but also the enormous impact of new technologies in the integration of markets, efficiency and industrial organization. The globalization of financial markets has exceeded the integration of product markets.

Gains of Globalization

The benefits of globalization can be analyzed in the context of the three types of channels of economic globalization identified earlier.

Trade in goods and services

According to standard theory, international trade leads to the allocation of resources consistent with comparative advantage. This led to the specialization that improves productivity. It is recognized that international trade is generally beneficial and restrictive business practices that impede growth. That is why many emerging economies, which initially depended on growth model of import substitution, increased to a policy of openness to the outside. However, as regards trade of goods and services, there is a big concern. Emerging economies will reap the benefits of international trade only if the potential availability of resources. This will probably need time. Therefore, international trade agreements to make exceptions to allow more time for developing economies terms of reducing tariff and nontariff barriers. "Special and differential treatment", as it is often called has become an accepted principle.

Circulation of capital

Capital flows between countries have played an important role in improving the productive base. This was particularly true in the 19th and 20th centuries. The mobility of capital means total savings of the world to be shared among countries that have the greatest investment potential. As a result, the growth of a country is limited by its own domestic savings. The influx of foreign capital played an important role in the development of recent years the countries of Asia. The current account deficit of some of these countries have exceeded 5 per cent of GDP in most of the time when growth has been rapid. Capital flows may take the form of FDI or investment portfolio. For developing countries the preferred foreign direct investment. The investment portfolio does not lead not directly to the expansion of productive capacity. You can do this, however, a new stage. The investment portfolio may be volatile, especially in times of loss of confidence. This is why countries want to impose restrictions on portfolio investment. Without But in an open system such restrictions can not work easily.

Financial flows

The rapid development of capital markets has been one of the characteristics important in the globalization process underway. Although the growth of capital and currency markets has facilitated the transfer of funds through border, the figure Gross sales on the foreign exchange markets was very high. It is estimated that the gross sales of about $ 1.5 trillion U.S. per day worldwide (Frankel, 2000). This is about a hundred times the volume of trade in goods and services. currency exchange has become an end in itself. Expansion exchange markets and financial markets is a necessary condition for the international transfer of capital. However, the volatility in the foreign exchange market and the ease with which funds can be withdrawn from the country have created panic situation on several occasions. The most recent example of this was the Asian crisis. The contagion of financial crises is a worrying phenomenon. When a country faces a crisis that affects others. It not like the financial crises are caused solely by currency traders. What the financial markets tend to do is exaggerate weaknesses. instinct gregariousness is not uncommon in financial markets. When an economy becomes more open to capital and financial flows is even greater constraint to ensure that factors related to macroeconomic stability are not ignored. It is a lesson for all developing countries to learn from the Asian crisis. As one commentator rightly said "The trigger was the sentiment but the vulnerability is due to fundamentals. "

The concerns and fears

On the impact of globalization, there are two major concerns. These can be described as fear itself. In each of the main topics of concern that there are many concerns. The main concern is that globalization leads to an inequitable distribution of income between countries and within countries. The second fear is that globalization leads to the loss of sovereignty and country that countries are increasingly difficult to remain independent of national policies. These two issues must be addressed both theoretically and empirically.

The argument that globalization leads to the discrimination is based on the premise that globalization focuses on efficiencies benefit to countries that are better endowed with natural and human resources. The advanced countries have an advantage over other countries at least three centuries. The technological base these countries is not only big, but very sophisticated. Although the benefits of trade to all countries, higher profits accrue to industrial countries advanced. That is why, even in the current trade agreements, a case has been built for the special and differential treatment by compared to developing countries. In general, this treatment provides longer transition periods in respect of reductions. However, Two changes in international trade and they can work for the benefit of developing countries. First, for various reasons, the industrially Advanced why some areas of production. These may be filled by the developing countries. A good example of this is that Asian countries did in the 1970 and 1980. Second, international trade is increasingly determined by the distribution of natural resources. With the advent of information technology, the role of human resources has become more important. expertise of the man will become the determining factor in the decades to come. Production activities are increasingly in "knowledge intensive" than "many resources." Although The gap between developed and developed, even in this region – some call "the digital divide – a gap that is can be saved. A globalized economy with greater specialization may lead to greater productivity and faster growth. What is required is an adjustment mechanism to ensure that the disadvantages of developing countries exceeded.

Regardless of whether distribution inequitable income between countries has also argued that globalization leads to the expansion of the income gap within countries as well. This may happen in the developed and developing countries. The argument is the same as that advanced in relation to unfair distribution between countries. Globalization can benefit in the same country with the skills and technology. The highest growth rate achieved by an economy can be at the expense of reducing income people who may become useless. In this context, it should be noted that while globalization may accelerate the replacement of technology in the economies developing countries, even without globalization facing the problem associated with moving from low to high technology. If the rate of economic growth Acceleration is adequate, then a part of the resources may be diverted by the state to modernize and retool those could be affected by the last stage classification technology.

The second concern relates to the loss of autonomy the Economic Policy Research. In a highly integrated world economy, it is true that a country can not implement policies that are not online with global trends. Capital and technology are fluid and move When profits are higher. As nations meet, whether in the political, social or economic, a sacrifice of sovereignty is inevitable. The boundaries of a globalized economic system in pursuit national policies must be recognized. However, it is not necessary lead to the abdication of national objectives.

Another concern is linked to the globalization of insecurity and instability. When countries are closely linked a small spark can ignite a fire General. Panic and fear spread quickly. The downside of globalization focuses mainly need to create forces countervailing institutions and the level of international politics. Global governance can not be relegated to the periphery, such as integration accelerating.

Empirical evidence on the impact of globalization on inequality is unclear. The overall share of world exports and developing countries in the world has increased. In total world exports, the participation of developing countries rose 20.6 per cent in 1988-90 to 29.9 per cent in 2000. Similarly, the share of total world production in developing countries has increased from 17.9 percent in 1988-90 40.4 percent in 2000. The growth rate of developing countries in terms of GDP and GDP per capita was higher than those of industrialized countries. These growth rates were higher in 1990 than in the 1980s. All these data indicate that developing countries as a group have suffered in the process of globalization. In fact, there has been substantial progress. But in developing countries, Africa has not done well and some South Asian countries have done better in the 1990s alone. Although the rate of growth of per capita income of developing countries in the 1990s is almost two times that of industrialized countries in absolute terms the gap in per capita income has increased. Regarding income distribution within countries, it is difficult to judge whether globalization is the main factor responsible for deterioration in income distribution. We have had considerable controversy in our country what happened with the poverty index in the second half of the 1990s. Most analysts, including India would agree that the relationship between poverty decreased during the 1990s. There may be differences in the speed at which it fell. However, if you are in India or in any other country, it is very difficult to follow the evolution of income distribution in the countries directly globalization.

Laying India

What should India position in this increasingly globalized world? Must first mention that the choice of globalization is a viable option. There are now 149 members of the World Trade Organization (WTO). Some 25 countries are waiting to join the WTO. China has recently been admitted as a member. What is needed is to develop an appropriate framework to extract the maximum benefits of international trade and investment. This should include (a) specification of a list of applications that India wants to do in the multilateral trading system, and (b) measures that India should take to realize the full potential of globalization.

Claims in the trading system

Without being exhaustive, requests from developing countries in multilateral trading system should include (a) establish a symmetry between the movement of capital and persons, (2) of environmental and labor standards in the decoupling of trade negotiations (3) to zero tariffs in industrial countries in exports labor in developing countries, (4) adequate protection of genetic material and biological knowledge and traditional country Developing (5) does
unilateral action of Commerce and the extraterritorial application of laws and regulations, and (6) effective restraint in the countries industrialized initiate antidumping and countervailing measures against exports from developing countries.

The aim of the new system business should be to ensure "free and fair trade between countries. The focus has so far been" free "instead of trade "Fair". It is in this context that the rich industrialized countries have the obligation. They often presented as "double standards". All by requiring developing countries to eliminate barriers and join the mainstream of international trade have been raised tariff and non tariff barriers to trade in developing countries. Very often, this was the result of heavy lobbying in the advanced countries to protect "work". Although average tariffs in the United States, Canada, Europe, European Union and Japan – the so-called Quad -: of only 4.3 per cent in Japan to 8.3 percent in Canada, their tariffs and trade barriers are still much higher on many products exported by developing countries. Main foodstuffs such as meat, sugar and dairy products attract tariffs of more than 100 percent. Fruits and vegetables banana is hit with a tariff of 180 per cent European Union, once the quotas are exceeded. The fees collected by the U.S. $ 2 billion worth of imports from Bangladesh are higher than those imposed on imports worth 30 billion dollars in France. In fact, these trade barriers impose a heavy burden on the developing countries. It is important that if rich countries want a trading system that is truly just, must submit to reduce trade barriers and subsidies prevent products from developing countries to reach their markets. Otherwise, the reasons for these countries a competitive system ring hollow.

As in some conflicts between countries on trade are endemic. Until recently, agriculture has been a apple of conflict between the U.S. and EU countries. The frictions are also bound to emerge among developing countries. Import tariffs on edible oil in India has increased, the most serious protests from Malaysia, who was one of the leading exporters of palm oil. Indian entrepreneurs complain of cheap imports from China. In the export of rice, a major competitor of India is Thailand. If development is recognized as the main objective of Trade and the Doha Declaration proclaims, should be possible to develop a trade agreement which is beneficial to all countries.

There were lengthy negotiations in the WTO in trade reform. It is true that the barriers tariff and non tariff downward. However, it is feared that the concerns of developing countries are not adequately addressed. Seen from this perspective, the recent Hong Kong Ministerial is a modest success. Despite the limitations, we must recognize that it is a step forward. The domestic support to agriculture developed countries is a major obstacle to the expansion of third world trade. However, the position of India with regard to agriculture was "defensive." We are not a major player in the world agricultural market. The impact of what has been accepted in respect of non-agricultural market access and services vary from one country to another. Notwithstanding any contrary view, gain for India Services may be important. However, the Hong Kong Ministerial is a broad statement of intent. Much will depend on how these ideas are translated into action.

Shares in India

The second set of measures that should be part of the action plan should refer to strengthen India's position in international trade. India has many strengths, several countries no development. In this sense, India is different and in a better position to benefit from trade and international investment. India rather than the top of the IT industry in the world is a reflection of the abundance of skilled labor in our country. It is therefore in the interest India to ensure that there is free movement of skilled workers. At the same time, we try to do everything possible to ensure to remain a frontline country in the field of skilled labor. India can attract more foreign investment if it can accelerate our growth and stability. Stability in this context means the balance in fiscal and external accounts. We maintain a competitive environment at the national level so that we can enjoy wider access to the market. We must make good use prolonged time in developing countries to eliminate trade barriers. Wherever the laws have an obligation to protect such areas as agriculture, they need to be approved quickly. In fact, we took the time to spend the Plant Variety Protection Act and the Farmers' Rights. Also must be active to ensure that our companies make effective use of patent rights. South Korea has been able to provide recent years up to 5000 patent applications in the United States, while in 1986 the country had only 162. China has also been very active in this field. We need to be a real force in India to encourage Indian companies to file patent applications. Indeed, we must create the institutions necessary to further maximize the benefits trade and investment.

Changes in foreign trade and investment policies foreigners have changed the environment in which Indian industry must operate. The path of the transition is undoubtedly difficult. Greater integration Indian economy to the world is inevitable. It is important that the Indian industry and organized Look before you compete with the rest of the world rates comparable to those of other developing countries. Clearly, the Government of India should be vigilant to ensure that industries in India are victims of unfair trade practices. The warranties on the WTO agreement must be fully used to protect the interests industry in India.

Indian industry has the right to require that the macroeconomic environment of economic policy must be favorable for rapid economic growth. The configuration of policy decisions in recent times has attempted to do so. It is, however, the time of industrial units in India to recognize that the challenges of the new century demand more action at the enterprise level. They must learn to swim in the turbulent waters of competition and outside protected waters of the pool. India is no longer a producer of goods and services for the domestic market. Indian companies are emerging and are becoming global players. At a minimum, be able to compete world. The search for identifying new competitive advantages to begin in earnest. India increased information technology (IT) is that partly by design. However, it must be said that the disposal of the policy once the potential of this area was discovered, the industry Environmental friendly policy became strongly.

Over a wide range of activities, the benefit of India, true and what can be accomplished in a short period of time must be developed. Of course, in some cases will require the construction of factories worldwide. But this does not require in every case. In fact, the advent of information technology is changing the industrial structure. The revolution in telecommunications is both creation of a huge single market economy, while the parts smaller and more powerful. We need today is a general guide for industry in India. It should define the way different industries must take to achieve productivity and efficiency comparable to the best in the world.

Globalization in a fundamental sense, is not a phenomenon again. Its roots are broader and deeper than the visible part of the plant. It is as old as history, starting with the great migrations of people across large land masses. Only the latest developments in computer and communication technologies have accelerated the integration process geographic distance becomes a less important factor. Is this the end "of geography" a blessing or a curse? Borders have become porous and the sky is open. With modern technology that has not geography, it is not possible to contain the ideas, whether in the political, economic or cultural. Every country must prepare itself to face new challenges when you're not out of this great wave of technological and institutional changes.

Nothing is an unmixed blessing. Globalization in its present form but encouraged by the profound change technology is not a phenomenon purely technological. You have several dimensions, including ideological. To cope with this phenomenon, we must understand the gains and losses, benefits and hazards. To be warned, as the saying goes, so be prepared. But we must not throw the baby with the bathwater. They must also resist the temptation to blame globalization for all our failures. Very often, as the poet said, the fault lies in ourselves.

The risk of open economy are well known. We must not, however, miss the chances that the global system can offer. As an eminent critic has noted, the world can not marginalize India. But India, if desired, can marginalize itself. We must guard against this danger. More than many other developing countries, India is able to wrest a significant increase in globalization. However, we must express our concerns and in cooperation with other developing countries to modify the international trading system to meet the needs of these countries. At the same time, we must identify and strengthen our comparative advantages. This dual approach will help us meet the challenges of globalization, which may be the main feature of the new millennium.

The key to India's growth lies in improving productivity and efficiency. It must permeate all spheres of our lives. Contrary to general impression, the natural resources of our country are not very large. India accounts for 16.7 percent the world while the population is only 2.0 percent of the world's land area. While the population of China is 30 percent higher than in India, has an area of land that is three times that of India. In fact, the point of view of sustainability, the need for greater efficiency in the management of natural resources land, water and minerals has become urgent. In a capital scarce economy like ours, the use effective our ability becomes even more critical. For all these things, we need well trained and highly skilled. In today's world, competition in all areas of competition is in knowledge. Therefore, we create institutions of excellence. I am therefore pleased that the Ahmedabad Management Association among other functions, also focuses on excellence in education. Increased productivity resulting from improved skills is the real response to globalization.

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MBA/NET qualified