The last decade has witnessed much talk about globalization, economic liberalization and economic integration of the Indian economy with the world economy.
Specially after the completion of Uruguay Round of trade negotiations in April 1994 and the establishment of the World Trade Organization in January 1995, many issues have been raised regarding India’s participation in world trade in future, its integration with the world economy and the likely cost and benefits from the integration.
Globalization, in brief, is a process of increasing economic integration and growing economic interdependence between countries in the world economy. It is a relative softening up of economic and trade barriers across the countries so as to facilitate a free interflow of capital technology, people, goods and services.
Eventually globalization would mean being able to manufacture in the most cost-effective way anywhere in the world. It means being able to procure raw materials and labour and drawing management! Resources from the cheapest source anywhere in the world.
Globalization intends to integrate the Indian economy with the world economy. Globalization is considered to be an important element in the reforms package. It has four parameters:
1. Reduction of trade barriers to permit free-flow of goods and services | across national frontiers.
2. Creation of an environment in which free flow of capital can take place.
3. Creation of an environment permitting free flow of technology among nation-states.
4. Creation of an environment in which free movement of labour can take place in different countries of the world.
□ It is argued that globalization of UDCs will improve the allocative efficiency of resources, reduce the capital output ratio and increase labour productivity, help to develop the export spheres and export culture, increase the inflow of capital and updated technology into the country, increase the degree of competition, and give a boost to the average growth rate of economy.
1. It will help to restructure the production and trade pattern in capital- scarce, labour-abundant economy in favour of labour-intensive goods and techniques.
2. Foreign capital will be attracted and with its entry, updated technology will also enter the country.
3. With the entry of foreign competition and the removal of import tariff barriers, domestic industry will be subject to price reducing and quality improving effects in the domestic economy.
4. It is believed that the main effect of integration will be felt in the industrial and related sectors and cheaper and high quality consumer goods will be manufactured at home. As a result, employment opportunities would go up.
5. It is also believed that the efficiency of banking and financial sectors will improve, as there will be competition from to foreign and foreign banks.
1. The globalization process is in essence a tremendous redistribution of economic power at the world level which will increasingly translate into a redistribution of political power.
2. One study reveals that in the globalizing world the economies of the world are ironically moving away from one another more than coming together.
3. With the lightening speed at which globalization is taking place, it is increasing the pressure on economies for structural and conceptual readjustments to a breaking point.
4. It is becoming hard for the countries to ask their public to go through the pains and uncertainties of structural adjustment for the sake of benefits yet to come.