Costs and benefits of Globalisation on Indias Economy

cost and benefits of Globalisation on Indias EconomyIntroductionIn this essay we ar about to go Global. Recent events on the fiscal market show how interdependent the piece is. Common value should not be forbid moreover what about common losses. Who should be responsible for them? M either blame globalization. What is it and does the valet de chambre has other options to develop. Should we return to the st footstepgies of the ult? Or should we continue to live through an age of essential economic revolution? The term globalisation generates constant debates and controversies. But most of those who talk about globalisation atomic number 18 not even sensitive of its fundamentals.The term globalisation is used rather vaguely. Globalisation is the one specific modality of inter farmingal integration. applied science has definitely changed the kernel of counselling we live and in like manner the ways in which the championship is done in human beings today. The body politic by means of internet connection and enthusiastic workers commode reserve main course to unlimited jobs and industries. Lets imagine a picture of a homo where all limitations argon disappearing. A initiation where in that location are no boundaries and where emulation send word come from anywhere. Thats the world where our future lies. To make this world a healthier place globalisation is going to play a really important portion.thither are some who believe that we must elbow grease to turn our back on this novel world. They as well as think that the chance to preserve our donjon standard is to make a fortress around the country and s die trading and depend only on our own industries. But at present it is hopeless to turn back the waves of globalisation but in doing so we can actually make ourselves thrash off. So instead of fearing the future we should embrace it.Globalisation and Structure of Indian EconomyThe best ex do of globalisation has been expressed through a poem by Canadian economist Gerald Helleiner- The unequal complain, they forever and a day do, but that is just idle chatter. Our system (globalisation) brings reward to all, at least to all who matter.Broadly sermon the term globalisation is most definitely an economic process. Even though it is modeled as a way of bringing the world together, globalisation is all about the business community breaking tweak the remaining barriers to the free flow of its capital around the world.It fundamentally means opening up of any country parsimoniousness system and its integration among the other economies of the world. It involves liberalism and implementation of economic liberalization policies and reforms to promote the onward motion of private sector. The word globalisation itself means something new is happening to the world. The world is becoming a star place and experiencing global practices, values and technologies that are shaping people lives to the point that we are entering a global age. For India, there are ample confusions about the costs and benefits of globalisation. Generally Indians think that as the nation state has laid down their arms to globalisation all the perils are hurting and hunting.Data line of descent Projection VMW Analytic ServicesIndias commonwealth is fast approaching a trillion this fact is easy to tell but much more difficult to absorb one thousand million people, each of whom sees the world in a slightly or radically distinguishable way from the others. Since Indian independence in 1947, the economy of India has out produced almost exponentially (Refer Fig. 1). From early 1990s, different governments kick in adopted inward orientated development strategies i.e. the state encouraging an economy through self sufficiency and a dominant part in the economy via state planning. Forces of demand and preparation were not allowed to play any identify role in resource allocation.ImportsAfter 1991 balance-of-payments crisis, where foreign currency reserves fell to $1 billion inflation went eminent to 17%, India laid numbers of stabilization-cum-structural adjustment measures with widespread effects. The main aim was to remerge the Indian economy with the world economy by reducing barriers to trade and investment, and deregulation of a exaltedly bureaucratized economy. The opposed Direct coronation was also encouraged to reduce the countrys reliance on debt-creating capital inflows, simultaneously renovating Indias ancient technologies and advancing good into global markets.ExportsIndia GDP cometh from 1991 2007. Since then the real export growth rates of goods and services in 2006 and 2007 record high levels 8.6% and 9.7% (Refer Fig. 2). The propellant growth of exports doubled Indias section in world exports of goods and services from 0.5% in 1991 to almost 1.7% in 2007. Even India imported 11.4% more goods in 2006 and 13% in 2007 as compared to the mediocre growth rate from 1995 to 2005 (11 .3%). As a result, Indias trade ratio of imports plus exports to GDP has twofold since 1991, from 16.5% to 45% in 2007.Regardless the unfinished reform agenda, Indias GDP growth (Refer Fig. 3) has increased 9% over the past 3 years, by an average of 5.8% yearbookly during the period 1991-2004. It contributes nearly 2% to world GDP and around 1% to world exports of goods and services ( address World Development Indicators). Consistent with excellent growth, per capita incomes were doubled from 1990 to 2007 and privation dropped from 46% in 1986 to 36% in 2000. However, poverty remains a grave problem.Recently several economists and lobbyists gather in compared Indian economy with that of China but its progress path has been significantly different from Chinas. Indeed, it has been also rattling different from that followed earlier by Japan, Korea and the other Asian giants. Firstly, the novel economic rise in India is generally give thanks to services rather than manufacturing sector. India has became a global player in several services sectors such as IT and business process outsourcing, while its manufacturing sector keep suffering from low productivity. Secondly, the 2/3rd of Indias population still rely on agriculture for a living as compared other Asian countries and thirdly, India try to remains closed to trade in comparison to other developing and emerging countries. Even FDI inflows have also ten folded in bear two decades. It has been tripled since 2005 and in 2007 it was around $23 billion (Data Source Government of India, Ministry of Finance, scotch survey). But India is not yet as present in the Central and eastern Europe markets as China is. Its share in the European market was 0.7% (2006), almost unchanged from 1990s. However, Chinas share in these markets has increased sharply from 1.3% in 1992 to 5.7% in 2006 (Data Source OECD).Indian has the potential and should make the efforts to behave from good growth to rapid constant growth. The problem in India lies in the spurring productivity which is badly affected by the low education and health reforms and also by the petite openness of the Indian economy. Indias weak infrastructure has hurt the booming potential of Indian production. From undependable energy, lacking water supply to bad road and train conditions, infrastructure shortages have created high business costs across the sectors (Source OECD, 2007c).Benefits and Costs of Globalisation on Indian EconomyGlobalisation has been a classical process with ups and downs. Its growth has been largely led by the technological forces in the fields of transport and communication. The flow of trade has been frequent and there are lesser barriers for the people across the geographical boundaries. There are less tax barriers and few limitations on fund flows. India is no exception to globalisation. In year 1991, when we were neck-deep in financial deficit, precise high inflation (around 17%), balance of payments crisi s and low industrial production, the World Bank and the International financial Fund (IMF) bailed us out with significant loans with assistant Structural Adjustment Program (SAP). This guided in Liberalisation, Privatisation and Globalisation.Indian Economy has undergone many important reforms in the 1990s. The LPG model has helped the Indian economy to grow quick and become internationally competitive. From early 1991, a new epoch has dawned for India and its huge population. This formidable phase of economic evolution has had a wonderful impact on the overall Indias economic development. All major sectors of the economy have improved dramatically and its effects over the last decade can hardly be ignored. Moreover, it has marked the dawn of the real integration of Indians economy into Worlds economy.Globalisation has created many employments bought large investments to India. Our economy has been on the rise at good rates for the past few years many new prospects have opened u p for India. We have highly benefited from economies of scale. The change in global barriers has permitted the companies to profit from the largest cheapest promote market, rude(prenominal) material and technology. Foreign businesses have significantly augmented their investments in Indian industries. The salaries of industrial labor have improved largely therefore, the lock outs and strikes have declined sharply as labor is happy. Now days business market has no boundaries and companies can promote their products globally. This has helped the Indian companies to lay hand on global technologies which has sure increased our qualities of living standards. Indian Entrepreneurs has been more aware about the competitors, recent trends and quality of products. The competition betwixt the global companies can be seen in the improve qualities of the brands and services to the customer.Presently, we can talk about the apologue of two Indias We have the best of times we have the worst o f times. There is overbold prosperity, there is high poverty. We have stunning 5 star hotels with dark ill-starred homes. Globalisation gave us everything, globalisation gave us nothing.Although Rajiv Gandhi government, the sixth prime government minister of India, introduced some economic reforms between 1985 -1989 but it was the Narasimha Rao government, ninth prime minister of India from 1991-1996, that gave a exact shape and started the novel economic reforms in India.Below are the highlights of some positive benefits of globalisation on Indian EconomyGross Domestic Product (GDP) growth rate The rate of increase of Indias real GDP was low during 1980-90 (5.6%) to 1993-2001 (7%). But in the last few years, the GDP annual growth rate in India has been remarkable i.e. 7.5% (2003-2004), 8.5% (2004-2005), 9% (2005-2006) and 9.2% (2006-2007) (Ref Fig. 3). Present P.M. Dr. Manmohan Singh is certain to have a 10% increase in the GDP for 11th five year plan (2007 2012). In 2006-2007, the sectors contributing highest in GDP growth are Industry sector (26%), Service sector (55%) and agriculture sector (19%) (Ref Fig. 4). The increase in GDP has in fact helped to increase the foreign exchange reserves from $39 billion (2000-01), $107 billion (2003-04), $145 billion (2005-06), $200 billion (2007-2008) to around $268 billion on 1st February 2011 (Source IMF).Foreign Direct Investment (FDI) Since early 2003, Indias FDI promotion board is officially run by government i.e. Ministries of Economic and Finance. Since then there has been drastic reforms in the rules and regulations of FDI in India. The FDI is now acknowledged as a key driver of development in the country. India is ranked 2nd in international FDI in year 2010 tramp 1st ranked China and ahead of Brazil Russia and it will continue to be in the top 5 destinations to draw global investors during 2010-12 (Source World Investment Prospects Survey 2009-2012 by UNCTAD (United Nations Conference on apportion and Development)). India attracted cumulative FDI equity inflows of $122.68 billion from mid 2000 to end 2010, according to the data released by the Department of industrial Policy and Promotion (DIPP). In October 2010, the FDI inflows were $1,392 million. The figure 5 on next page shows the Indias top cities and sectors which attracted highest FDI inflows in Jan 2008 (Source DIPP India). The main attractive sectors have been information technology, telecom, services, healthcare and telecommunications. India controls almost 45% of the global outsourcing market with income more than $50 billion.Imports and Exports The general idea of the independence movement in India (year 1940s), led by great M. Gandhi, was establish on the hatred for anything foreign, especially the one originating from Britain. The imported goods were burnt on regular basis and everyone believed that everything can be produced home. The belief was that we can be self reliant and self dependent and import of goods ca n bring the foreign dominance. In 2009, 7 decades later India ranked 15th in world in terms of import volume and 22nd in the terms of export volume. In 2004 2005 our imports were $107 billion (Ref knock back 1), a record increase of around 36% as compared to $79 billion in 2003 2004. The exports also jumped by 24% recording $79 billion as compared to $63 billion the previous fiscal. The oil imports increased by 19% and the import bill zoomed from $21 billion to $29 billion in two fiscal years. Other imports excluding oil were $77 billion in 2004 2005 that is 34% higher than $58 billion in 2003 2004.Other Benefits Information Technology (IT) and outsourcing has been given a special status in the growth of Indian economy. The reason may be that the government desires to present our country as a technological advanced nation and to achieve this they must encourage the IT sector. The term special status means that the sector and global / local investors will get many special advan tages from the government. Furthermore, the impact of the global economies has influenced the Indian education system over the last few years. Improved educational institutions, hi- tech colleges, advanced schools are the fruits of globalisation. The colleges have implemented the developed teaching technologies, to make the students aware of the latest developments. India is in the 4th position in respect to market capitalization with $894 billion after the US ($17,000 billion), Japan ($4800 billion) and China ($1000billion). India should concisely cross the trillion $ mark.Even though we have not so far reached the end of memorial but globalisation has sure took us closer to the end of geography. The globalisation has not always been fair. The currency flow over the last two decades has been very unsymmetrical. Every $1 of aid money to poor countries, the rich countries get $10. It has deepened the poverty and inequality. It has affected both the social and political stability a mong and within states. ceiling rights are given more advantages over the labor rights. The trade and finance rule are raw and this has had mixed effects on rich and poor countries. In India, the main casualties of globalisation are the poverty and the agriculture sector. Here are some costs which India paid because of globalisationAgriculture Sector Agriculture has always been the strength of the Indian economy. It plays crucial part not only in providing food to people, as well as the supply of raw material to industries and to export trade. 60% of the Indian population work in agriculture sector and however its contribution in GDP is only 20.6%. India agricultural growth continued to drop down from 13% in 2003 to 1% in 2002-2003 (Source agricoop.nic.in/Agristatistics). This knack back in agriculture is in contrary to 6% expansion in Indian economy in last decade. The reasons of this decrease, according to Economic Survey 2006-07, are less investments, disproportions in fertil izer use, low seeds replacement rate, a distorted incentive system and low post-harvest value addition. Indian farmers are offered almost no subsidiaries and very less help from government. The Indian government has taken no significant measures to negotiate with foreign companies to set up technologies for the farmers assistance. All these factors have led to decrease in the income of the farmers and have increased the rural debts. In 2000, the farmer suicides were registered to 12% of total suicides in the country.Poverty Though globalisation has drastically improved our living standards but still it doesnt have the significant effect in improving the poverty. According to 2007 Forbes list, the number of billionaires in India has risen to 40 and yet there is 80% of Indias population which lives on less than $2 a day. Nevertheless, Indian government is making lots of efforts to improve poverty in rural areas. They are toilsome to provide more facilities to the poorer. The 2005 Wor ld Bank estimation was that 41% of Indian population live beneath the international poverty line of $1.25 a day. So India government has still a long way to go to improve the poverty situation of India.Industry The globalisation has raised a high competition between the foreign companies and domestic companies. As the foreign products being better, the people prefer to buy them instead of Indian ones. This has reduced significantly the amount of profit of India companies. The new technology has reduced the requirement of labor and thus resulted in the cost of their jobs. No doubts that the effects have been positive as well as negative but the Indian government should make such economic policies related to industry that are beneficial and not harmful.Human trafficking and increase in diseases like HIV are also the very high cost paid for globalisation. And the pity is that womens and childrens are among the most exposed to it.ConclusionsGlobalisation has provided India the opportun ity to grow substantially. Though we have to be more careful on the whole as all the economies are linked together and crisis in one economy have drastic effect on others and recent events has confirmed that. But still globalisation has definitely helped India to become a better economy. We have the abilities and skills to reconcile and change according to the flow of global market. In the end my keen hope for the betterment and the bright future of our country is to go out and face this globalising world. I am certain that India of 2025 will be a different place. It will be much more leading force in the world economy, than 25 years ago or even at the start of the 21st century.