Professional Documents
Culture Documents
GLOBALISATION
& ITS EFFECTS
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Name; Nishant Anand Kumar Kankaria.
Class; F.Y. BBA. (M.S. UNIVERSITY , VADODARA)
Section: 1st.
Roll No; 52.
TABLE OF CONTENT;
2) Meaning Of Globalisation. 3
8) Summary. 16
9) References. 18
Definition of Globalisation;
Globalisation can be defined in the following manner
Globalisation may be defined as a primarily economic phenomenon, which involves
increasing interaction and integration of national economic systems. This leads in turn to
growth in international trade, investment and capital flows. Moreover, there is a rapid
increase in cross-border social, cultural and technological exchanges because of the
phenomenon of globalization
In simple economic terms….
Globalisation is a process of linking the economy of a
country with the economy of the world more and more.
Meaning of Globalisation:
It is a process which draws countries out of their insulation and makes them join rest of
the world in its march towards a new world economic order. It involves increasing
interaction among national economic systems, more integrated financial markets
,economies of trade, higher factor mobility, free flow of technology and spread of
knowledge throughout the world.
The World Bank defines globalisation as “Freedom and ability of individuals and firms to
initiate voluntary economic transactions with residents of other countries”.
After independence, India followed the policy of planned growth and for this it pursued
conservative policies. The public sector was given dominant position and was made the
main instrument for growth. The fiscal policy was framed in a way that it mobilized
resources from the private sector to finance development programme and public
investment in infrastructure. Similarly monetary policy sought to regulate financial flows
in accordance with the needs of the industrial sector and to keep the inflation under
control.
Foreign trade policy was formulated to protect domestic industry and keep trade balance
in manageable limits.
These conservative policies continued for decades, but it was noticed as early as in 1980s
that there was:
Liberalisation;
In general, liberalisation refers to relaxation of previous government restrictions usually
in areas of social and economic policies. Thus, when government liberalises trade it
means it has removed the tariff, subsidies and other restrictions on the flow of goods and
services between countries
Thus in the process of liberalization:
• Restrictions and controls of economy are gradually reduced.
• As a result, economy is liberated from government interference.
• Economic decisions are taken by the market system.
Privatisation;
In general, privatisation refers to the transfer of asset or services functions from public to
private ownership or control and the opening of hitherto closed areas of private sector
entry. Privatization can be achieved in many ways –franchising, leasing, contracting and
divesture.
Globalisation;
Globalisation as explained earlier, means integrating the domestic economy with the
world economy,
Measures taken towards Globalisation;
To pursue the objective of Globalisation, the following measures have been taken:
A) Convertibility of rupee:
The most important measure for integrating the economy of any country is to make its
currency fully convertible.ie, allow it to determine its own exchange rate in the
international market without any official interventions.
India achieved full convertibility on current account in August, 1994.
Current account convertibility means freedom to buy or sell foreign exchange for the
following transactions
• All payments due in connection with foreign trade, other current account
business, including services and normal short term banking and credit
facilities,
• Payment due as interest on loans and as net income from other investments
• Payment of moderate amount of ammortisation of loans or for depreciation
of direct investment and
• Moderate remittances for family living expenses
Certain steps towards full convertibility on capital account have also been taken like
authorized dealer have been allowed to invest abroad their unimpaired Tier1 capital, they
have been delegated powers to release exchange for opening of offices abroad, banks
fulfilling certain criteria have been permitted to import gold for release in india.resident
individuals and listed companies have been permitted to invest in overseas companies
listed on a recognized stock exchange, limit on banks investment from/in overseas market
has been raised , Indian companies are allowed to access ADR/GDR markets through an
automatic route, Indian companies with a proven track record are allowed to invest up to
100 percent of their net worth in foreign entity, ADs are allows to issue international
credit cards,NRIs are allowed to remit up to U.S.$1 million per calendar year out of their
non-resident ordinary accounts/sale proceeds of assets and so on.
A) Import liberalisation:
As per the recommendations of the World Bank, free trade of all items except negative
list of imports and exports has been allowed In addition, import duties on a wide range of
capital commodities have been drastically cut down.
The peak rate of custom duty (on non agricultural goods) has been brought down from
150percent in early 90’s to just 10 percent in 2007-08 budget. Tariffs on import of raw
materials and manufactured intermediates have also been reduced. In addition to the
phased reduction of import duties,india,being member of World Trade
Organisation(WTO) has since April 2001,totally removed the quantitative restrictions on
foreign trade.moreover,as a part of the agreement on Trade Related Intellectual Property
Rights (TRIPs),the Patents (amendments) act,1999,was passed in 1999 to provide for
Exclusive Marketing Rights (EMRs).
D) Other measures;
Many other measures have been announced from time to time. For instance, foreign
companies have been allowed to use their trademarks in India and carry on any activity of
a trading, commercial or industrial nature; repatriation of profits by foreign companies
has been allowed, foreign companies (other than banking companies) wanting to borrow
money or accept deposits are now allowed to do so without taking the permission of the
RBI,foreign companies can deal in immovable property in India, restrictions on transfer
of shares from one non-resident to another non-resident have been removed, reputed
Foreign Institutional Investors (FIIs) have been allowed to invest in Indian capital market
subject to certain conditions,etc.All these initiatives are supposed to integrate the Indian
economy with the world economy.
This reform sought to remove the barriers preventing entry of new firms and the limits to
growth in the size of existing firms.
The strategies are:
The objective of the trade reform is to encourage free flow of imports and exports to the
maximum possible extent.
This involves,
The financial sector reforms aimed at profit oriented financial services and the better
functioning of the money and capital markets.
The three major sub-divisions are:
The efforts are liberalisation of interest rate controls and controls over bank credit
allocation, introduction of prudential norms and improved supervisory standards,
liberalisation of entry for private banks and introduction of minority private share holding
in public sector banks.
Reforms in insurance:
Insurance sector is being opened to new private sector insurers but with a capital of 26
per cent in foreign equity.
Fiscal reforms:
The fiscal reforms are aimed at reducing the financial burden of the state and
Improve the stability of the nation.
The specific strategies adopted are:
• Reducing the fiscal deficit of both the central and state governments.
• Tax reforms at the central and state government levels including moderation of
rates of tax, simplification and introduction of VAT principles in domestic indirect
taxation by the central government and more recently by state governments also.
• Sale of minority equity in public sector organisations to mobilise resources for the
budget.
• Adoption of a general strategy for public-private partnership in developing
infrastructure.
• Efforts to open up the following sectors under varying regulatory structures:
power, telecommunications, roads. Post, airports and. most recently, railways
The process of globalisation initiated in 1991 and far reaching changes in industrial and
other policies have led to considerable changes.
Summary;
Till mid eighties, the Indian economy was a controlled one in the sense the public sector
was given a dominant role and the private sector was regulated with the help of a number
of Acts like Industrial Development Regulation Act, Foreign Exchange Regulation Act,
Monopolistic and Restrictive Trade Practices Act and many more.
These acts and regulations strangulated the initiative of the private sector to grow and
resulted in inefficiencies, corruptions, and mismanagement.to meet the challenge
economic reforms were introduced in industrial, financial, external and fiscal areas.
As a result of these reforms, many positive changes have taken place in India such as
improved rate of growth, lesser prices, more efficiency and competition. But failure to
have fiscal discipline, ad-hocism, slow financial reforms and not fully opening the
economy still mar the progress of economic reforms.
Liberalisation, Privatisation and disinvestment are the outcomes of the modern economic
world.
Liberalisation refers to relaxation of government’s restrictions in the arena of economic
and social policies., Privatisation refers to partial or full transfer of ownership and control
of PSUs to the private sector. Disinvestment is one of the methods of privatisation. It
means selling of government share in the PSU to other PSUs or private sector or banks.
In India, disinvestment has progressed slowly. It has been carried out in a hasty,
unplanned and hesitant manner. As a result, the progress has been quite poor.
References;
• Essentials of business environment (seventh edition), author;
k.Aswathappa, Himalya publishing house.
• http://en.wikipedia.org/wiki/File:BPL_Data_GOI.png
• http://mpra.ub.uni-muenchen.de/9597/
MPRA Paper No. 9597 posted 10. August 2008 / 11:49
• General economics, The institute of charted accountants of India.