In this blog we will examine the global integration of the various economies of the world. Globalization is the increasing degree of openness in respect of international trade, international investment and finance. In simple word, globalization is the process of transformation of the world into a single united economics unit. But Globalization has also created important global opposition over concerns that it has increased inequality and environmental degradation. There is a need to study the impact of globalization on developing countries from the viewpoint of inward foreign direct investment. Attention should also be focused on the role which some developing countries, particularly from parts of Asia and Latin America are playing. Globalization is a word came since nineties of last century to dominate the world economy, without any obstacles it is allowing the free flow of goods and services, techonology, capital, labor and human capital. Developing countries like India’s government should take the immediate steps to reduce the poverty and inequality in rural and urban area, to increase the agriculture production and employment.
Globalization signifies the process of internationalization and liberalization. It has enormous reduction of costs of transportation and communication for breaking down the barriers to the flow of goods, service, capital and knowledge for the people across the borders. As we talk about the living standard globalization has also thrown up new challenges like growing inequality across and within nations, volatility in financial market and environmental deteriorations. Another negative aspect of globalization is that a great majority of developing countries remain removed from the process. Till the nineties the process of globalization of the Indian economy was constrained by the barriers to trade and investment liberalization of trade, investment and financial flows initiated in the nineties has progressively lowered the barriers of competition and hastened the pace of globalization. The liberalization 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 been 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.
As we find a comparative view on world economies it is major changes given that India’s 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 pickup 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. The Important Reform Measures (Step Towards liberalization privatization and Globalization): Indian economy was in deep crisis in July 1991, when foreign currency reserves had plummeted to almost $1 billion; Inflation had roared to an annual rate of 17 percent; fiscal deficit was very high and had become unsustainable; foreign investors and NRIs had lost confidence in Indian Economy. Capital was flying out of the country and we were close to defaulting on loans. Along with these bottlenecks at home, many unforeseeable changes swept the economies of nations in Western and Eastern Europe, South East Asia, Latin America and elsewhere, around the same time. These were the economic compulsions at home and abroad that called for a complete overhauling of our economic policies and programs. Major measures initiated as a part of the liberalization and globalization strategy in the early nineties included the following: Devaluation: The first step towards globalization was taken with the announcement of the devaluation of Indian currency by 18-19 percent against major currencies in the international foreign exchange market. In fact, this measure was taken in order to resolve the BOP crisis Disinvestment-In order to make the process of globalization smooth, privatization and liberalization policies are moving along as well. Under the privatization scheme, most of the public sector undertakings have been/ are being sold to private sector dismantling of the Industrial Licensing Regime: At present, only six industries are under compulsory licensing mainly on accounting of environmental safety and strategic considerations. .
Author: Jyoti Sharma