• Globalization essentially means integration of the national economy with the world economy.
  • It implies a free flow of information, ideas, technology, goods and services, capital and even people across different countries and societies.
  • It increases connectivity between different markets in the form of trade, investments and cultural exchanges.
  • The concept of globalization has been explained by the IMF (International Monetary Fund) as ‘the growing economic interdependence of countries worldwide through increasing volume and variety of cross border transactions in goods and services and of international capital flows and also through the more rapid and widespread diffusion of technology.’


The phenomenon of globalization caught momentum in India in 1990s with reforms in all the sectors of the economy. The main elements of globalization were:

  1. To open the domestic markets for inflow of foreign goods, India reduced customs duties on imports. The general customs duty on most goods was reduced to only 10% and import licensing has been almost abolished. Tariff barriers have also been slashed significantly to encourage trade volume to rise in keeping with the World trade Organization (WTO) order under (GATT) General Agreement on Tariff and Trade.
  2. The amount of foreign capital in a country is a good indicator of globalization and growth. The FDI policy of the GOI encouraged the inflow of fresh foreign capital by allowing 100 % foreign equity in certain projects under the automatic route. NRIs and OCBs (Overseas Corporate Bodies) may invest up to 100 % capital with repatriability in high priority industries. MNCs and TNCs were encouraged to establish themselves in Indian markets and were given a level playing field to compete with Indian enterprises.
  3. Foreign Exchange Regulation Act (FERA) was liberalized in 1993 and later Foreign Exchange Management Act (FEMA) 1999 was passed to enable foreign currency transactions.
  4. India signed many agreements with the WTO affirming its commitment to liberalize trade such as TRIPs (Trade Related Intellectual Property Rights), TRIMs (Trade Related Investment Measures) and AOA (Agreement on Agriculture).


Advantages of Globalization:

  There is a decline in the number of people living below the poverty line in developing countries due to increased investments, trade and rising employment opportunities.

  There is an improvement in various economic indicators of the LDCs (Less Developed Countries) such as employment, life expectancy, literacy rates, per capita consumption etc.

  Free flow of capital and technology enables developing countries to speed up the process of industrialization and lay the path for faster economic progress.

  Products of superior quality are available in the market due to increased competition, efficiency and productivity of the businesses and this leads to increased consumer satisfaction.

  Free flow of finance enable the banking and financial institutions in a country to fulfill financial requirements through internet and electronic transfers easily and help businesses to flourish.

  MNCs bring with them foreign capital, technology, know-how, machines, technical and managerial skills which can be used for the development of the host nation.


Disadvantages of Globalisation:

  Domestic companies are unable to withstand competition from efficient MNCs which have flooded Indian markets since their liberalized entry. It may lead to shut down of operations, pink slips and downsizing.

  Moreover skilled and efficient labours get absorbed by these MNCs that offer higher pay and incentives leaving unskilled labour for employment in the domestic industries. Thus there may be unemployment and underemployment.

  Payment of dividends, royalties and repatriation has in fact led to a rise in the outflow of foreign capital.

  With increased dependence on foreign technology, development of indigenous technology has taken a backseat and domestic R and D development has suffered.

  Globalization poses certain risks for any country in the form of business cycles, fluctuations in international prices, specialization in few export tables and so on.

  It increases the disparities in the incomes of the rich and poor, developed nations and LDCs. It leads commercial imperialism as the richer nations tend to exploit the resources of the poor nations.

  Globalization leads to fusion of cultures and inter-mingling of societies to such an extent that there may be a loss of identities and traditional values. It gives rise to mindless aping of western lifestyles and mannerisms however ill-suited they may be.

  It leads to overcrowding of cities and puts pressure on the amenities and facilities available in urban areas.



In support of the movement for globalisation, the following arguments are put forth:

  1. Globalisation promotes foreign direct investment and, thus, it enables developing countries to raise capital without incurring international indebtedness.
  2. Globalisation helps developing countries to make use of and adapt technologies developed by advanced countries without undertaking heavy expenditures in Research and Development (R&D).
  3. Globalisation widens the access of developing countries to export their goods and services to developed countries. Similarly, globalisation enables consumers in developing countries to acquire quality consumer goods, especially consumer durables, at relatively much lower prices.
  4. Globalisation implies faster diffusion of knowledge and, thus, it enables developing countries to attain international standards of production and productivity.
  5. Globalisation by reducing tariffs and quantitative restriction increases the share of foreign trade as a percentage of GDP.

In brief, the advocates of globalisation consider it as the engine of growth, technological advancement, raising levels of productivity, enlarging employment and bringing about poverty reduction with modernisation.



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