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The Costs and Benefits of Globalisation on Indian Economy

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Introduction

Recent events on the fiscal markets show how mutualist the universe is. Common value should non be forbidden but what about common losingss. Who should be responsible for them? Many blasted globalization. But what is globalization and does the universe have any other options to develop? Should we return to the schemes of the past? Or should we go on to populate in an age of indispensable economic revolution? The term globalization generates changeless arguments and contentions. But most of those who talk about globalization are non even cognizant of its basicss.

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Globalization is the 1 specific mode of international integrating. Technology has decidedly changed the manner we live and besides the ways in which the concern is done. The states by agencies of internet connexion and enthusiastic workers can hold entree to limitless occupations and industries. Let ‘s conceive of a image of a universe where all restrictions are vanishing. A universe where there are no boundaries and where competition can come from anyplace.

That ‘s the universe where our hereafter lies. To do this universe a healthier topographic point globalization is traveling to play a really of import function.

There are some people in developed universe who believe that we must seek to turn our dorsum on this novel quickly altering and incorporate universe. They besides think that the opportunity to continue one ‘s populating criterion is to do a fortress around one ‘s state, stop trading with other states and depend merely on ain industries. But at present it is impossible to turn back the moving ridges of globalization but in making so we can really do ourselves pip off. So in my sentiment, alternatively of fearing the hereafter we should encompass it.

Globalization and Structure of Indian Economy

Globalization has been expressed attractively through a verse form by Canadian economic expert Gerald Helleiner- “ The hapless complain, they ever do, but that is merely idle yak. Our system ( globalization ) brings wages to all, at least to all who affair ”.

Broadly talking the term globalization is an economic procedure. Even though it is modeled as a manner of ‘bringing the universe together ‘, globalization is all about the concern community interrupting down the staying barriers to the free flow of its capital around the universe.

It basically means opening up of any state economic system system and its integrating among the other economic systems of the universe. It involves liberalism and execution of economic liberalisation policies and reforms to advance the patterned advance of private sector. The word globalization itself means something new is go oning to the universe. The universe is going a “ Flat ” and sing planetary patterns, values and engineerings that are determining people lives. For India, there are ample confusions about the costs and benefits of globalization.

Data Source & A ; Projection: VMW Analytic Services

Figure 1: Indian Economy since its Independence at Constant Prices ( Projected up to FY 2012 ) India ‘s population has already crossed the billion grade ; this fact is easy to read but much more hard to absorb – one thousand million people, each of whom sees the universe in a somewhat or radically different manner from the other. Since Indian independency in 1947, the economic system of India has increased about exponentially ( Refer Fig. 1 ). From early 1990s, different authoritiess have adopted inward – oriented development schemes i.e. the province promoting an economic system through self sufficiency and a dominant function in the economic system via province planning. Forces of demand and supply were non allowed to play a cardinal function in resource allotment.

After 1991 balance-of-payments crisis, where foreign currency militias fell to $ 1 billion & A ; rising prices went high to 17 %, India laid Numberss of stabilization-cum-structural accommodation steps with widespread effects. The chief purpose was to remerge the Indian economic system with the universe economic system by cut downing barriers to merchandise and investing, and deregulating of a extremely bureaucratized economic system. The Foreign Direct Investment was besides encouraged to cut down the state ‘s trust on debt-creating capital influxs, at the same time restituting India ‘s antediluvian engineerings and progressing easy into planetary markets.

Figure 2: India GDP growing from 1991 – 2007Regardless of the unfinished reform docket, India ‘s GDP growing ( Refer Fig. 2 ) has increased & gt ; 9 % over the past 3 old ages, by an norm of 5.8 % yearly during the period 1991-2004. It contributes about 2 % to universe GDP and about 1 % to universe exports of goods and services ( Beginning: World Development Indicators ). Consistent with first-class growing, per capita incomes were doubled from 1990 to 2007 and poorness dropped from 46 % in 1986 to 36 % in 2000. However, still poorness remains a grave job.

Recently several economic experts and lobbyists have compared Indian economic system with that of Chinese economic system but India ‘s advancement way has been significantly different from China ‘s. Indeed, it has been besides really different from that followed earlier by Japan, Korea and the other Asiatic giants. First, the recent economic rise in India is mostly due to services instead than fabricating sector. India has became a planetary participant in several services such as IT and concern procedure outsourcing, while its fabrication sector keep enduring from low productiveness.

Second, the bulk of India ‘s population still relies on agribusiness for a life as compared with Asiatic states and thirdly, India tried to stay closed to merchandise in comparing to other developing and emerging states. Even FDI influxs have besides ten folded in last two decennaries. It has been tripled since 2005 and in 2007 it was about $ 23 billion ( Data Source: Government of India, Ministry of Finance, Economic study ). But India is non yet as nowadays in the Central and Eastern Europe markets as China is. Its portion in the European market was 0.7 % ( 2006 ), about unchanged from 1990s. However, China ‘s portion in these markets has increased aggressively from 1.3 % in 1992 to 5.7 % in 2006 ( Data Source: OECD ).

Indian economic system has the possible and should do the attempts to travel from good growing to rapid changeless growing. The job in India lies in the goad productiveness which is severely affected by the low instruction and hapless wellness system and besides by the bantam openness of the Indian economic system. India ‘s weak substructure has hurt the dining potency of Indian production. From unreliable energy, missing H2O supply to bad roads and train conditions, substructure deficits have created high concern costs across the sectors ( Beginning: OECD, 2007c ).

Benefits and Costss of Globalisation on Indian Economy

Globalization has been a classical procedure with ups and downs. Its growing has been mostly led by the technological forces in the Fieldss of conveyance and communicating. The flow of trade has been frequent and there are lesser barriers for the people across the geographical boundaries. There are less revenue enhancement barriers and fewer restrictions on fund flows. India is no exclusion to globalization. In twelvemonth 1991, when India was up to my neck in fiscal shortage, really high rising prices ( around 17 % ), balance of payments crisis and low industrial production, the World Bank and the International Monetary Fund ( IMF ) bailed India out through important loans with adjunct Structural Adjustment Program ( SAP ). This led to Liberalisation, Privatisation and Globalisation.

Indian Economy has undergone many of import reforms in the 1990 ‘s. The LPG theoretical account has helped the Indian economic system to turn quickly and go internationally competitory. From early 1991, a new era has dawned for India and its immense population. This formidable stage of economic development has had a fantastic impact on the overall India ‘s economic development. All major sectors of the economic system have improved dramatically and its effects over the last decennary can barely be ignored. Furthermore, it has marked the morning of the existent integrating of India ‘s economic system into the World ‘s economic system.

Globalization has created employment & A ; bought big investings to India. Indian economic system has been on the rise at good rates for the past few old ages & A ; many new chances have opened up for India. It has extremely benefited from economic systems of graduated table. The alteration in planetary barriers has permitted the companies to gain from the largest & A ; cheapest labour market, natural stuff and engineering. Foreign concerns have significantly augmented their investings in Indian industries. The wages of industrial labour have improved mostly ; hence, the lock outs and work stoppages have declined aggressively as labour category is happy. Now twenty-four hours ‘s concern market has no boundaries and companies can advance their merchandises globally. This has helped the Indian companies to put manus on planetary engineerings which has surely increased our life qualities criterions. Indian Entrepreneur ‘s has become more cognizant about their rivals, recent tendencies and quality of merchandises. The competition between the planetary companies can be seen in the improve quality of the trade names and services to the client.

Soon, we can speak about the narrative of two India ‘s: It has the best of times ; it has the worst of times. There is bright prosperity, there is high poorness. We have stupefying 5 star hotels and near by these large hotels places without electricity. The undermentioned phrase is perfect to depict the state of affairs in India “ Globalisation gave us everything, globalization gave us nil ”.

Although Rajiv Gandhi authorities, the 6th premier curate of India, introduced some economic reforms between 1985 -1989 but it was the Narasimha Rao authorities, 9th premier curate of India from 1991-1996, that gave a exact form and started the fresh economic reforms in India. Below are the high spots of some utmost benefits of globalization on Indian Economy:

Figure 3: The sector wise part to Indian GDP ( Source: MOSPI Statistics ( Ministry of Statistics and Programme Implementation ) )

Gross Domestic Product ( GDP ) growing rate: The rate of addition of India ‘s existent GDP was low during 1980-90 ( 5.6 % ) to 1993-2001 ( 7 % ). But in the last few old ages, the GDP one-year growing rate in India has been singular i.e. 7.5 % ( 2003-2004 ), 8.5 % ( 2004-2005 ), 9 % ( 2005-2006 ) and 9.2 % ( 2006-2007 ). Present P.M. Dr. Manmohan Singh is certain to hold a 10 % addition in the GDP for 11th five twelvemonth program ( 2007 – 2012 ). In 2006-2007, the sectors lending highest in GDP growing are Industry sector ( 26 % ) ; Service sector ( 55 % ) and Agriculture sector ( 19 % ) ( Ref Fig. 3 ). The addition in GDP has in fact helped to increase the foreign exchange militias 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 ( Beginning: IMF ).

Figure 4: An overview of India ‘s top metropoliss which contributed to a great extent in FDI equity influxs.

Foreign Direct Investment ( FDI ) : Since early 2003, India ‘s FDI publicity board is officially run by authorities i.e. Ministries of Economic and Finance. Since so there have been drastic reforms in the regulations and ordinances of FDI in India. The FDI is now acknowledged as a cardinal driver of development in the state. India is ranked 2nd in international FDI in twelvemonth 2010 behind 1st graded China and in front of Brazil & A ; Russia and it will go on to be in the top 5 finishs to pull planetary investors during 2010-12 ( Beginning: World Investment Prospects Survey 2009-2012 by UNCTAD ( United Nations Conference on Trade and Development ) ). India attracted cumulative FDI equity influxs of $ 122.68 billion from mid 2000 to stop 2010, harmonizing to the informations released by the Department of Industrial Policy and Promotion ( DIPP ). In October 2010, the FDI influxs were $ 1,392 million. The figure 4 shows India ‘s top metropoliss and sectors

which attracted the highest FDI influxs in Jan 2008 ( Beginning: DIPP India ). The chief attractive sectors have been information engineering, telecom, services, health care and telecommunications. India controls about 45 % of the planetary outsourcing market with income more than $ 50 billion. Foreign stockholders are acquiring good returns in India. The possibility for FDI in India is eternal. Foreign investors are offered just bundles of financial inducements for exports and industrial investings.

Imports and Exports: The general thought of the independency motion in India ( twelvemonth 1940s ), led by great M. Gandhi, was based on the disfavor for anything foreign, particularly the one originating from Britain. The imported goods were burnt on regular footing and everyone believed that everything can be produced place. The belief was that we can be self reliant and self dependant and import of goods can convey the foreign laterality. In 2009, 7 decennaries subsequently India is ranked 15th in universe in footings of import volume and 22nd in the footings of export volume. In 2004 – 2005 our imports were $ 107 billion ( Ref Table 1 ), a record addition of around 36 % as compared to $ 79 billion in 2003 – 2004. The exports besides jumped by 24 % entering $ 79 billion as compared to $ 63 billion the old financial. The oil imports increased by 19 % and the import measure zoomed from $ 21 billion to $ 29 billion in two financial old ages. Other imports excepting oil were $ 77 billion in 2004 – 2005 that is 34 % higher than $ 58 billion in 2003 – 2004.

Poverty: Though globalization has drastically improved our life criterions but still it does n’t hold the important consequence in bettering the poorness. The 2005 World Bank appraisal was that 41 % of Indian population live below the international poorness line of $ 1.25 a twenty-four hours. The figure 5 shows the Indian population populating below poverty line from 1973-2000. We can see that since 1973 -1974 ( 54.9 % ), Indian population populating below the poorness line has improved a batch ( 26.1 % in 1999-2000 ). Nevertheless, Indian authorities is still doing tonss of attempts to take poorness in rural countries. It is seeking to supply more installations to the poorer. India authorities

Figure 5: Indian population below poorness line. ( Beginning: Planning Commission of India ) has still a long manner to travel to better the poorness state of affairs of India.

Other Benefits: Information Technology ( IT ) and outsourcing has been given a particular position in the growing of Indian economic system. The ground may be that the authorities desires to show India as a technologically advanced state and to accomplish this they must promote the IT sector. The term particular position means that the sector and planetary / local investors will acquire many particular advantages from the authorities. Furthermore, the impact of the planetary economic systems has influenced the Indian instruction system over the last few old ages. Improved educational establishments, high engineering colleges, developed schools are the fruits of globalization. The colleges have implemented the urbanised instruction engineerings so that pupils can be cognizant of the latest developments. India is in the 4th place in regard to market capitalisation with $ 894 billion after the US ( $ 17,000 billion ), Japan ( $ 4800 billion ) and China ( $ 1000billion ). India will shortly traverse the trillion $ grade.

Even though we have non so far reached “ the terminal of history ” but globalization has certain took us closer to “ the terminal of geographics ”. The globalization has non ever been just. The hard currency flow over the last two decennaries has been really unsymmetrical. For $ 1 of assistance money to hapless states, the rich states get $ 10. It has deepened the poorness and inequality. It has affected both the societal and political stableness among and within provinces. Capital rights are given more advantages over the labour rights. The trade and finance regulation are unjust and this has had mixed effects on rich and hapless states. In India, the chief casualties of globalization are the poorness and the agribusiness sector. Here are some costs which India paid because of globalization:

Agribusiness Sector: Agribusiness has ever been the strength of the Indian economic system. It plays important portion by non merely in supplying nutrient to people, but besides provision of natural stuff to industries and to export trade. 60 % of the Indian population plants in agribusiness sector and nevertheless its part in GDP is merely 20.6 %. India agricultural growing continued to drop down from 4.70 % in 1991 to 1 % in 2003 ( Beginning: agricoop.nic.in/Agristatistics ). The seeds are most of import constituent for husbandmans. Before globalization, Indian husbandmans got seeds from province authorities establishments. The provinces were bring forthing their ain seeds and they were keeping the good quality and lower monetary values for seeds. Even the private seed quality was really good as the seed market was good regulated. But with globalization, the seed market has been opened to planetary agricultures and more than half of the authorities treating units have been closed in 2003 due to IMF deregulating guidelines.

This had hit the husbandmans really severely as due to open market the monetary values have raised aggressively and bad quality seed has made its manner to market. Furthermore with the devaluation of Indian currency rupee in 1991, more and more husbandmans were attracted towards export and hence they started bring forthing much more of hard currency harvests like baccy than traditional harvests. Indian husbandmans are offered zero subordinates and really less aid from authorities. The Indian authorities has taken no important steps to negociate with foreign companies to put up engineerings for the husbandman ‘s aid. All these factors have led to diminish in the income of the husbandmans and have increased the rural debts. In 2000, the husbandman self-destructions were registered to 12 % of entire self-destructions in the state.

Industry: The globalization has raised a high competition between the foreign companies and domestic companies. As the foreign merchandises being better, people prefer to purchase them alternatively of Indian 1s. This has reduced significantly the sum of net income for Indian companies. The new engineering has reduced the demand of labour and therefore resulted in occupation losingss. No uncertainty that the effects have been both positive every bit good as negative but the Indian authorities should do such economic policies related to industries that are good and non harmful.

Human trafficking and addition in diseases like HIV are besides the really high cost paid for globalization. And the commiseration is that adult females ‘s and kids ‘s are among the most open to it.

Decisions

Globalization has provided India the chance to turn well. Though through globalization all the economic systems are linked together and crisis in one have drastic consequence on the others and recent events have confirmed so. Though India sailed through the crisis without being excessively affected due to its balanced and resilient macro constructions but it has certainly given India a aftermath up call to concentrate on the challenges and chances to determine its developing economic system. Nevertheless, globalization has decidedly helped India to go a better economic system, better and unleash it possible.

It has the ability and accomplishments to accommodate and alter harmonizing to the flow of planetary market. In my sentiment, for the improvement and the bright hereafter of India it is imperative that India should travel out and confront this “ globalising ” universe. I am certain that India of 2025 will be a different topographic point. It will be much more prima force in the universe economic system, than it was 25 old ages ago or even at the start of the twenty-first century.

Cite this The Costs and Benefits of Globalisation on Indian Economy

The Costs and Benefits of Globalisation on Indian Economy. (2018, Apr 15). Retrieved from https://graduateway.com/the-costs-and-benefits-of-globalisation-on-indian-economy/

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