Globalization means the coming together of different societies and economies via cross border flow of ideas, finances, capital, information, technologies, goods and services. The cross border assimilation can be social, economic, cultural, or political. But most of the people fear cultural and social assimilation as they believe this would have a negative impact on the existing culture of their society.
Globalization therefore has mostly narrowed down to economic integration and this mainly happens through three channels; flow of finance, trade of goods and services and capital movement.
Globalization is a term that includes a wide range of social and economic variations. It encompasses topics like the cultural changes, economics, finance trends, and global market expansion. There are positive and negative effects of globalization - it all comes as a package. Globalization helps in creating new markets and wealth, at the same time it is responsible for extensive suffering, disorder, and unrest.
The great financial crisis that just happened is the biggest example of how negative globalization can turn. It clearly reveals the dangers of an unstable, deregulated, global economy. At the same time, this gave rise to important global initiatives, striving towards betterment. Globalization is a factor responsible for both repression and the social boom.
What happens when there is a growing integration of economies across the globe? Majorly there have been positive impacts of this global phenomenon - through liberalization, privatization and globalization (LPG). Due to globalization, there has been significant flow of inward foreign direct investment. companies are getting a chance to explore various different markets across economies and explore the untapped potential.
Globalization has had a huge impact on the Indian economy. Globalization affected the Indian economy both positively and negatively.
The liberalization of the along with globalization helped the country to step up its GDP growth rate considerably. The GDP growth rate picked up instantly from 5.6 percent in 1990-91 to 77.8 percent in 1996-97. Since then the growth rate did manage to slump down due to drought and other factors but the country still managed to survive in the rat race and maintained a GDP growth of about 5 to 6 percent. Today
is regarded as being the one of the fastest developing countries just after India . China
Globalization has also played a major role in generating employment opportunities in
Impact of Globalization
It was in July 1991, when foreign currency reserves had tumbled down to almost $1 billion; was at a soaring high of 17%, highest level of fiscal deficit, and foreign investors loosing confidence in Indian Economy. With all these coupling factors, capital was on the verge of flying out of the country and we were on the brink of become loan defaulters. It was at this time that with so many bottlenecks at bay, a complete overhauling of the economic system was required. Policies and programs changed accordingly. This was the best time for us to realize the importance of globalization.
Measures of Globalization
Devaluation: The first initiative towards globalization had been taken the moment there was an announcement of devaluating the Indian currency by a hoping 18-19% against all the major global currencies. This was a major initiative in the international foreign exchange arena. The Balance of payment crisis could also be resolved by this measure.
Disinvestment: The core elements of globalization are privatization and liberalization. Under the privatization scheme, bulk of the public sector undertakings have been/ and are still being sold to the private sector. Thus the concept of
PPP (public private partnership) came up.
Allowing Foreign Direct Investment (FDI): Allowing inflows is a major step of globalization. The foreign investment regime has been quite transparent and thus the economy is getting boosted up. Various sectors were opened up for liberalizing the FDI regime.
Disadvantages of Globalization
Along with its many benefits globalization also comes with some negative effects. One of the major concerns of globalization is that it leads to unequal distribution of income within the country, the second fear is that globalization hampers the domestic policies of the country, Globalization also increases the risk of spreading of communicable diseases, monopoly can also set in with globalization and lastly outsourcing of jobs to the developing nations only results in the loss of jobs for the developed nations.
Is globalization delivering all the desired results to the masses? Or only a few can feel the benefits of ?Figures have out rightly proved that the global average per capita income showed a strong surge throughout the 20th century but the income gap between rich and poor countries have not been bridged for many decades now. The ultimate inference being that globalization hasn't shown positive results.
Benefits of globalization
The continuing global tendency towards the free flow of business and monetary infusions across nations describes globalization which helps in the formation of international financial system. It provides economic independence and triggers competition stimulating globalization to elevate the living standard of people in the nations that offer themselves to the world trade.
"We have moved from a world where the big eat the small to a world where the fast eat the slow", as observed by Klaus Schwab of the Davos World Economic Forum.
All economic analysts must agree that the living standards of people have considerably improved through the market growth. With the development in technology and their introduction in the global markets, there is not only a steady increase in the demand for commodities but has also led to greater utilization. Investment sector is witnessing high infusions by more and more people connected to the world's trade happenings with the help of computers.
As per statistics, everyday more than $1.5 trillion is now swapped in the world's currency markets and around one-fifth of products and services are generated per year are bought and sold.
Buyers of products and services in all nations comprise one huge group who gain from world trade for reasons encompassing opportunity charge, comparative benefit, economical to purchase than to produce, trade's guidelines, stable business and alterations in consumption and production. Compared to others, consumers are likely to profit less from globalization.
Another factor which is often considered as a positive outcome of globalization is the lower inflation. This is because the market rivalry stops the businesses from increasing prices unless guaranteed by steady productivity. Technological advancement and productivity expansion are the other benefits of globalization because since 1970s growing international rivalry has triggered the industries to improvise increasingly.
Globalization leading to social anxieties:
Listed below are the three sources of anxiety between worldwide markets and social steadiness:
- Across the nations, globalization triggers the services of large sections of working people more effortlessly substitutable,
- Commerce can set free factors that weaken guidelines in national practices, for example workers in
are replaced by child labourers in South Carolina , Honduras
- Globalization and its cutthroat rivalry makes it hard for administration to perform important tasks of offering the social programs
Key areas which demand immediate attention:
- Public education, which will demand proper evaluation and outcomes of globalization incorporating its benefits.
- Amending practices to review the international fiscal institutions to assist in averting crises, facilitating helpful early warning systems, better synchronization of exchange rates among the world markets and arranging the private sector in order in performing rescue functions, and
- Reorganizing the bilateral liberalization of the global financial system, which should tackle the major areas related to food trade, labour pacts and the environment.