Globalization and the Indian Economy: Benefits and Challenges

Globalization (or globalization) refers to the process by which regional economies, societies, and cultures are integrated through a global network of communications, transportation, and commerce. The term is sometimes used to refer specifically to economic trade: the integration of the world economy into the international economy through trade, direct foreign investment, inflows, migration, and the spread of technology. The initiated economic reforms have had a profound effect on overall economic growth. It also announced the integration of the Indian economy into the global economy. India's economy was in dire straits in 1991 when foreign exchange rates plummeted to $ 1 billion. International trade has had an impact on various sectors including Agriculture, Industry, Finance, Health and many more. It is only after the LPG policy of liberation, private trade and international trade that was established by then-Finance Minister Manmohan Singh that India saw its progress in various fields.

What is Globalization? What Do You Mean by Globalization?

Globalization is a term used to describe the interdependence of economies, populations, and cultures. Although the term connotes cross border trade mainly, it can also refer to cross border assimilation of cultures, identities, and philosophies. In the context of commerce and economics, globalization purely refers to a global economy, where a product created in a country can be sold across the world. In such an economy, a customer has access to products made in their country and has access to products made in other countries.

Key Features of Global Trade

• Release: It represents the freedom of the entrepreneur to establish any industry or trade or business, in their own country or abroad.

• Global Trade in Economic Activity: Economic activity is dominated by the domestic market and the global market. It represents the process of integrating the local economy with the global economy.

• Export Export-Export Program: It represents liberating the function of export and protecting the free flow of goods and services across borders.

• Privacy: Keeping the state away from owning production and distribution systems and allowing free movement of industry, trade and economic activities across borders.

• Enhanced Collaboration: Promoting a partnership program for entrepreneurs with the aim of achieving rapid modern development, advancement and technological advancement.

• Economic Transformation:Promoting financial and financial transformation with a view to empowering free real estate, free businesses, and market forces.

• Several components of Globalization: growth and Effective Social, Economic and Cultural Relationships between people. Globalization has social, economic, political, cultural and technological dimensions. Includes all communication between all the people of the world.

Free flow of information, technical goods and people services to all communities is its key feature. It tries to soften local boundaries, allowing everyone to improve their relationships and links.

Salient Features of Globalization

Interconnected Societies

In a highly transparent economy, where all commodities are openly traded, no society exists in a silo. Globalization and the Indian economy is a classic example to cite in this regard. The barriers to trade across countries are becoming more and more obscure. Societies and communities are becoming interconnected now more than ever. The growth of the internet, high internet penetration, thriving e-commerce ecosystem, and growing prosperity in developing countries have contributed to this upsurge in globalization.

Economic Integration

Global production of manufactured goods and local production of goods have been integrated. When a product is made, its parts are manufactured and supplied by various vendors, where these vendors could be from different geographies. A streamlined manufacturing process across geographies creates uniformity and standardization of manufacturing principles and techniques. Product quality is also consistent – this aspect enables a product to retail across countries.

Global Consumerism

Growth of media, the proliferation of digitization, and an ever-expanding information era have created more awareness. Globalization's impact on the Indian economy and many developing countries is directly proportional to commerce's digitization. Consumers understand what to purchase and how. They have multiple options before them. All of this creates competition in the market. Different product manufacturers across the globe create products for the global consumer. Global competition creates global consumerism – which in turn feeds the burgeoning globalization even more.

Global Tourism

An after-effect or side effect of globalization is global tourism. With more expendable income in the hands of the middle class in developing and developed countries, tourism has taken off. More people are traveling across borders. The growth of tourism creates more international trade and more demand for products that cater to an international consumer market.

Transnational Corporations

The days of nationalized corporations are slowly phasing out. In a globalized economy, corporations want to become globalized. They want to tap into a global consumer market. Hence, global conglomerates have a global workforce in manufacturing, verification, sales, pre-sales, and post-sales. The growth of transnational corporations or global companies has contributed to the establishment of globalization as a bare minimum for economies' sustenance.

Globalization's Impact on India

India is one of the countries that has reaped considerable benefits from globalization's inception and execution. Foreign investment in the corporate, retail, and scientific sectors has increased dramatically in the country. It had a significant social, monetary, cultural, and political impact as well. Globalization has accelerated in recent years as transportation and information technologies have improved. Global trade, doctrines, and culture are all growing as global synergies improve.

How has the Indian Economy benefited from Globalization?

Urbanization and globalization have had a significant impact on Indian society. Economic policies have had a direct impact on the formation of the economy's core foundation. The government's economic policies also played an important role in determining the levels of savings, employment, income, and investments in society. One of the most significant effects of globalization on Indian society is cross-country culture. It has had a tremendous impact on the country's cultural, social, political, and economic dimensions. However, economic unification is the most important factor in transforming a country's economy into a global economy.

Globalization KOF Index

This index measures the social dimensions and effects of and on globalization and measures political impacts on globalization. The following set of graphs show the globalization indices of each globalization factor.

Ways to measure Globalization

There are four methods to measure globalization:

• Trade Flows:

The flow of products and services can include merchandise as well as services trade. 

• Capital Flows:

The quantity and quality of foreign direct investment that is percolating throughout the money markets.

• Information:

The amount of information consumed across the world and the quantum of information technology consumed by consumers. 

• People Flow:

The number of people traveling to other countries, be it in immigration, tourists, students, etc.

Tabular Example for Ways to Measure Globalization

Types of Globalization

• Political Globalization:

In this type of globalization, the number of cooperating countries contributes to the rise of political globalization. If political relations are not convenient or favorable between countries, then the global economy is not truly politically globalized.

• Social Globalization:

When countries share ideas and information, then this gives rise to social globalization. Societies can develop relationships with each other irrespective of the geographical distance or geopolitical or geophysical dissimilarities.

• Economic Globalization:

When economies are interconnected through trade and commerce, then economic globalization increases. There are currently very few national economies that operate in isolation with no dependency on the outside world. Therefore, economic globalization is generally higher than the other types of globalization.

Did you know? 

Transnational corporations control more than two-thirds of the world economy. Their grip over national economies is higher than the national governments of countries in which they operate. These organizations' substance becomes critical for the job market, employment, and economic success of many countries.

Global Trade Results:

The effects of globalization on the global economy are many. Globalization has strengthened trust and competitiveness within the global economy. This is reflected in the dependence on trade in goods and services and the flow of funds. As a result local economic development is not entirely determined by domestic policies and market conditions. Rather, they are influenced by both domestic and international economic policies and conditions. It is clear, then, that the global economy, while developing and evaluating its domestic policy, cannot afford to ignore potential actions and global policy and development responses. This has hampered the policy option available to the government which means the loss of policy independence to some degree, in decision-making at the national level.

Benefits of Globalization:

• There is an international corporate market and for consumers there is a wide range of products to choose from.

• Increased investment from developed countries to developing countries, which could be used to rebuild the economy.

• The rapid and rapid flow of information between countries and the great interdependence of cultures have helped to overcome cultural barriers.

• Technological advances have caused some brainstorming in developing countries.

Global Trade Issues (Challenges):

• Unemployment in developing countries has led to job losses in developed countries.

• There is a serious threat of the spread of infectious diseases.

• There is a fundamental threat to multinational corporations.

• In small developing countries where it is acquired, it can indirectly lead to a more subtle form of colonization.

• The number of landless rural households increased from 35% in 1987 to 45% in 1999, to 55% in 2005. Farmers are destined for starvation or suicide. The Indian Economy.

Fun Facts about Globalization

• The first multilateral global trade agreement was called the General Agreement on Tariffs and Trade (GATT), which was signed in 1948. In 1995, it was replaced by a more structured World Trade Organization. Essentially, the function of WTO is to set a treaty that restricts countries from imposing high import tariffs for globally competing products, thus allowing the growth of economic globalization.

• Globalization was first referred to as comparative advantage, a phrase created by David Ricardo in the 19th century. Ricardo was a prominent economist. This phrase implied the use of land, capital, and labor to labor activities in which one gets a competitive advantage over others. An organization has a competitive advantage if it has access to natural resources, labor, labor capital, low-cost power source, low-cost energy source, attractive and highly connected geographic location, politically stable geographic location, low barriers for entry, access to the latest technology, etc.

• There are anti-globalization movements named as Movement of Movements and the Global Justice Movement, to name a few. These entities do not believe in the concept of globalization and being part of the global economy.

Conclusion:

India benefited most from the LPG model as its GDP rose 9.7% in 2007-2008. In terms of market capitalization, India is ranked fourth in the world. But even after global trade, the agricultural climate is far from ideal. The agricultural share in GDP is only 17%. The number of landless families has increased and farmers are still committing suicide. But given the positive effects of globalization, it can be said that India will soon overcome these barriers and march firmly on its development path. The lesson from recent experience is that a country should carefully choose a combination of policies that better allow it to take advantage - while avoiding pitfalls. For more than a century the United States has been the largest economy in the world but major developments have taken place in the global economy since then, which has led to a shift in focus from US and rich European countries to two major Asian countries - India. and China. Economists and various studies conducted around the world predict that India and China will rule the world in the 21st century. India, now the fourth largest economy in terms of purchasing power, could surpass Japan and become the third largest economy in 10 years. In conclusion we can say that the modernity we see all the time in our daily lives is a contribution of Globalization. Global trade has both positive and negative implications for various sectors of the Indian Economy. Globalization has therefore come a long way since 1991 which has resulted in the development of our country.