Impact of Globalization on India

Document Type:Thesis

Subject Area:Economics

Document 1

One of the greatest negative impacts of globalization cited by literature is the creation of few elite billionaires who control a lot of resources and the economy leaving behind a large bunch of poor people struggling to obtain daily basic needs. The second negative impact cited is that importation resulting from globalization resulted to death of some agricultural firms, which were hit hard by cheap food imported and since agriculture was an initial main activity of India’s in rural areas, has resulted to them lacking stable income and thus poverty. The positive impacts as cited by literature are many exceeding the challenges /negative impact. Literature has cited improvement in GDP, creation of employment opportunities, increase in trade activities and exports among others as the positive impacts.

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The paper also discusses the other parameters that have come with globalization such as BRICs with clear discussion of role of India in the BRICS, World Trade Organization, Foreign Direct Investments and Foreign Trade. 1 Social Impact 14 3. 2 Economic Impact 19 3. 3 Political Impact 25 CHAPTER 4 28 The BRICS, World Trade Organization and Foreign Trade 28 4. 1 Role of India in BRICS 28 4. 1 BRICS 28 4. 324 billion people1. India’s economic system flourished in the 2800 BC as a result of civilization. Agriculture was at the time the main economic activity of the people before the rise of urbanization that saw a number of urban centers grow in the northern part of India. Most of the Indian population currently dwells in the rural area with the rural economy being sustainable. According to Thapar et al (2018), by 2015 32.

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This saw the birth and rapid growth of industrialization. The country then adopted mixed economic system until the early 1990’s when it was realized that state controlled economy could not achieve the desired outcome. It was then that the country decided to pursue on economic policy anchored on liberalization, privatization and globalization. This has resulted to India experiencing rapid economic growth to date3. The country has had external businesses establishing in the country hence creating employment, FDI’s have been on the increase while India has had an opportunity to join in trade blocks with other countries, like the BRICS. The thesis of this paper will be addressing the following questions: Whether globalization is addressing the challenges facing India such as unemployment, poverty, inflation, fiscal deficit, poor education standards, poor infrastructure and corruption or not and what are the impacts of globalization in Indian market? CHAPTER 2 Globalization Globalization refers to the worldwide integration of international trade, investment, information technology and cultures of different countries.

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In other words, it is the integrations of economies and societies through intercountry exchange of information, ideas, technologies, goods, services, capital, finance and people4. In a wider perspective, it is a legal phenomenon bringing together the social, cultural and political structures of different countries. Socially, it connects people globally. Culturally, it is a symbol of sharing ideas and values among cultures. This has increased industrialization and financial opportunities globally7. Considering the role of technology in globalization, advancement in information technology have resulted to free and easy flow of information across borders of the countries hence leading to increased awareness of economic trends and investment opportunities. Digitalization has eased easy transfer of financial assets across the globe from one country to other countries.

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1 Historical Perspective of Globalization The origin of Globalization has been a matter of argument among various historians and writers. Many have come up with different sources indicating the origin of Globalization. This led to advanced inter-continental trade through shipping (Osterharmel and Peterson, 2005). The second phase originates from the late 18th century all the way to 19th century. In this phase, there is observed industrialization and free trade development therefore commonly referred to as the industrial revolution phase. The phase also observed sequences of disruptions in the late 19th century. Most nations departed from their normal way of doing things and adopted new systems (Osterharmel and Peterson, 2005). The interconnectedness of countries causes a ripple effect to many countries whenever there are economic downtowns in one country.

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For instance, the economic crisis that faced Greece in 2010 caused a domino effect to other European countries (Kumar, 2011). Furthermore, globalization has been viewed to be skewed towards the western countries and enhanced wealth disparity10. Free trade has been believed to pose great threat to small local businesses competing in a global market making the international companies mostly owned by the western territories to dominate. Ideally, it has resulted to a deliberation of information and power in the hands of small elite, with some acquiring resources and power that surpass those of any single nation, posing new threats to human rights on an international scale. As such, India observed a more sustainable growth in 1992. In 1994, the India’s economy continued to show tremendous improvement resulting from increased international trade, free economy and technological advancement all attributed by the growth of information technology (Sran, 2013).

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The country has continued to grow in promoting globalization to date with its active roles in BRICS,WTO and FDI. As an Asian country that has seen tremendous development in the industrialization and skilled professionalism, globalization has been at the center of allowing companies to increase their initial operations, increase workforce and provide new services to a wide broad of consumers. It has also been at the center stage in the export-led growth leading to an increase in job market in the country. As indicated in figure 1 below, the globalization index for India has risen from 20. 76 to 48. 19 in 2010. KOT Globalization Index Chart 1: India Globalization Index13 2. 4 A comparison with Other Developing Countries Over the past 20 years, India’s share of world merchandise exports increased from 0.

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0 Impact of Globalization in India The process of globalization has been a basic piece of the ongoing monetary advance made by India. Globalization has assumed a noteworthy part in trade driven development, prompting the extension of the activity showcase in India. One of the major fruits of globalization in India has been in the growth of subcontracted Information Technology and business process outsourcing services the has seen the last few years having an increase in the number of skilled professionals in India employed by both local and foreign companies to service customers in the US and Europe in particular 16.  Discussed below are the impacts of globalization in broader perspective. 1 Social Impact Globalization has led to Social and cultural integration and intermingling.

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2 Technological Advancement According to Upadhyay (2014), liberation and globalization has resulted to influx of many technological firms in Indian market leading to positive changes in the overall technological profile as observed in the last two years19. This has seen India to be one of the country advanced technological field as internet and new technologies are available and affordable to every citizen. The technologies are empowering Indians to soft power and opportunities to socialize and get exposure to the rest of the world. According to Harindranath (2016), globalization has resulted to entry of new technologies and technological equipment in India that has resulted to Indians being capable to interact freely with people from other countries, share opportunities and also get opportunities from the interaction20.

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3 Health Care Improvement There are noticeable vast upgrades in the general social health framework in India on account of globalization of Indian economy what's more, collaboration with the universal associations and outside interests in human services framework such prescriptions and supplies and so forth. This has resulted in expanded freedom of women in Indian society. Women have increasingly joined in participating in industrialization activities such as manufacturing and export business24. 6 Language and Literature According to Khilnani (2004), numerous dialects, for example, French, Chinese and Japanese are getting to be prominent with increased demand for them. English has ended up being the national dialect of India. This is having sway on the writing too. For instance, India has changed the majority of segments of its economy and culture yet has been following protectionist approach in media and agribusiness division.

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9 Social Structure of the Society Each general public used to have its own one of a kind culture as for the language, social standards, ethical quality, community sense and so forth. With the approach of media which has this special capacity to impact millions in the meantime has tested the social foundations of the general public for the most part family. A specific culture following their style of living without being much impacted by the western culture is currently observed as 'unseemly' which was a shrewdly composed purposeful publicity of the west to teach their way of life into whatever remains of the world and in this manner commanding the globe. Other significance impacts of globalization can be summarized as follows: Access to TV developed from 10% of the urban populace (1991) to 75% of the urban populace (1999) and to 90% (2009)26.

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Consequently, India’s position in the global economy has improved from the 8thposition in 1991 to 4th place in 2001; when GDP is calculated on a purchasing power parity basis (Das, 2016)29.   Chart2: India’s Economic Growth30 3. 1Positive Economic Impacts According to Raghunath (2017), since the period of 1993-2001 the growth rate of GDP of India has grown to 7 percent from 5. 6 percent in 1980-1990 and further increased in the last fifteen years with a rate more than 7 percent31. Between 2006 and 2007 the rate was 9. FDI Flows in India Compared to total global flow Chart 3: FDI flows India35 As a result of globalization, India was ranked fourth in market capitalization in 2005 after USA, Germany and China. Even though the country recently dropped to position nine, it was able to join world market leaders by going through all the challenges.

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As such, India’s market capital is $1. 6 trillion and it is 2. 5 percent of world’s capital market. This is because globalization has allowed free trade which has resulted to a boom of consumer’s products in the Indian market. 2 Negative Economic Impact Globalization has led to a wide range of inequalities of wealth among Indian people since as per to the Forbes (2015), the top 100 richest Billionaires in India have wealth more than the investment in public sector undertakings by central government39. This has led to many Indians surviving on subsistence wages, The Seasonal, underemployment and structural unemployment (Raghunath, 2017). With more investments lying in the hand of the rich, problem of job and social security arisen in India. It is only the few jobs provided by the government that have a surety of social and job security therefore most of the jobs which are provided by individual investors lack job security.

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3 Political Impact The first impact of globalization to Indian reflects in the decrease in power of decision or policy making of India as a sovereign state. Development of supranational institutions, for example, the European Union, the WTO, the G8, and The International Criminal Court among others supplanted or stretched out the national capacities to encourage universal agreement. This has reduced the sovereign power of country states in taking vital choices as for their nation where we see enormous mediation of these associations in all fields. The Loan advanced to India by IMF through Structural Adjustment Programmed are given with conditions relating to structural changes in Indian economy, but in a more though perspective, it has changed the whole political culture of India thus leading to end of welfare state.

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The conditions that comes with the financial aid have resulted to loss of control to the market, privatization of public sector, free trade and reduced export subsidies. The societies have been participating in protests against any form of capitalism therefore indicating the existence of social sphere above and beyond national, regional and local societies43. Globalization, according to Rasam (2013) has resulted to markets substituting political ideology as the dominant force guiding national and global policies44. The effect has been that the national governments, Indian government included, have been having varying thoughts between ascendancy of markets and response in pressure from the private sector to expand their activities. This has caused the governments to fail in providing social services. There has been an increasing trend to privatization of education system in India which imply the government getting off its role of providing basic education to its citizens.

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BRICs first summit was held in Yekaterinburg in 2009. At the summit, the heads of the countries issued a joint statement that they had agreed to promote dialogue and cooperation among their countries in an incremental, proactive, pragmatic, open and transparent way with the aim of serving common interests of emerging market economies and developing countries and also building a tuneful world of lasting peace and common prosperity. In the year 2011, South Africa joined the group that has since seen it being named BRICS. BRICS influence globally has been attributed by the growing economic might of the involved countries, their relevance as one group driving global economic development, the group’s substantial population and the plentiful availability of resources in the participating countries.

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The BRICS countries together account for 26. India hosted the fourth summit in March 2012 which saw a proposal on the creation of the New Development Bank passed. The fifth summit in Durbin South Africa proposed for A BRICS contingent Reserve Arrangement. The sixth summit in Brazil witnessed conclusion of initiatives associated with the new development bank and contingent reserve arrangements (Indian embassy). 2 India in BRICS India’s involvement in BRICS may be viewed in a context of pro-active and broad-based global engagement in contributing towards building a peaceful and Developed world. The contribution of India to BRICS has seen the coming up of new developments and signing of deals to the group and individual countries involved. India has also played a role in BRICS by tabling a report in March 2012 at Delhi during the fourth summit on synergies and complementarities between the BRICS economies taking note on their positions as the global economy growth leaders.

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In tackling challenges of rapid Urbanization in BRICS countries, India proposed for an urban forum to BRICS Cooperation strategy that would see a future great focus on intra-BRICS interaction to benchmarking to gain experience in solving the underlying problem. India proposed and held the first BRICS academic forum meetings which would be a preparatory meeting for the main summit agendas. India also proposed for online education, affordable health care platform, virtual BRICS university, BRICS language schools, cooperation in small and medium enterprises, tourism, youth exchanges, a young scientist forum and disaster management initiatives to strengthen the intra-BRICS cooperation. Cooper and Farooq (2016) in their Journal ‘The role of China and India in the G20 and BRICS: Commonalities or Competitive behavior’ postulated that India as an emerging power together with china have opted to try to restructure the terrain of international politics by soliciting change through engaging and reinventing the scope of informal governance and institutions such as G20 and BRICS.

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The main aim of World Trade Organization is to ensure smooth and free flow, and predictability of trade (WTO, 2018). World Trade Organization was established in 1st January 1995 emanating from the General Agreement on Tariffs and Trade of 1947 and created by the Uruguay Round negotiations of 1946-1994. It has its headquarters located at Geneva in Switzerland. As at 29th July 2016, World Trade organization had 164 country members with a secretariat staff of 628. The prerequisite for joining World Trade Organization is by the government submitting it’s economic and trade policies that are aligned with the World Trade Organization laws and the government negotiate its terms of joining the World Trade membership. Figure 6: World Merchand, 2013ise trade (WTO, 2017)49 World of commercial services increased from US $ 2.

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9 trillion in 2006 to US $ 4. 8 in 2016. Figure 7: World Trade in commercial services ( WTO, 2017)50 Travel and other commercial services also increased in 2016 with a margin of 1. 7 times higher than that of 2006. The unilateral policy actions included the exchange regime, foreign investment, external borrowing, import licensing, import tariffs, and export subsidies. It was estimated that India welfare will gain 0. 68%(US $ 2. 8 billion) of its GDP in 2005 with the fully implementation of the Uruguay round agreement and a gain of 1. 7% (US $ 7 billion) when the Doha Development Agreement would be fully implemented (Matoo and Stern, 2003). However, the 10 % ownership does not guarantee the investor a higher voting power in the business decisions even though the influence over the company's management, operations, and policies. is usually guaranteed. For emerging and developing countries, FDI is crucial such that the countries companies needs to require assistance in form of funding and expertise from multinationals to gain international presence and markets.

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FDI in developed countries like the European union and United States of America is through mergers and acquisition between developed companies52. There are various ways in which FDI can be made. However, the growth came with international criticism and challenges relating to statistical recoding, balance of payment projections, surveillance and vulnerability analysis. As such the demand for new statistical work in international organizations, industrial and developing world has since been on high demand. During the year 1990-1997, the recorded world inflows of FDI increased by an average of 13 per cent. The inflows later dropped by 50 percent between 1998 and 2000. In the year 2000 the FDI inflows recorded a new high value of US$ 1. 449 total FDI inflows (OECD, 2018). With the adoption and rise on FDI statistical guidance and publications with recommendations, many countries have been in apposition to improve the FDI inflows basing on the recommendations from the statistical manuals.

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However, this has not been although the countries as some have failed to boost the FDI inflows as a result of difference in systems and operations among the countries therefore resulting to the recommendations not being useful or practicable in other countries. The IMF and OECD therefore committed to developing a statistical system that will cater relevant FDI recommendation across the world (Carson,2003). Figure 9: Global FDI inflows (World Bank,201854) Figure 10: Global FDI outflows (World Bank,201855) 4. 15 billion inflows respectively (OECD, 2018). The highest FDI equity inflows came from Mauritius accounting to US$ 15. 94 billion, followed by Singapore with US$ 12. 18 billion, Netherlands with US$ 2. 80 billion, USA with US$ 2. In October 2017, the Department of Economic affairs and the Government of India approved three Foreign Direct Investments proposals worth US$ 3.

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80 million60. The world bank through its investment Arm-International Finance Corporation announced a plan to invest US$ 6 billion in various sustainable and renewable energy programs in India that will run to 202261 (IBEF, 2018). The government of India has also place on board initiatives that aim at increasing the FDI equity inflows. The government in January 2018 allowed foreign airlines to invest in air India up to 49 per cent with government authorization. For instance, Foreign trade had the highest contribution to GDP of Luxemburg with 186% of GDP on imports and 221% of GDP on exports64. Trade in Goods and Services: Exports and Imports, % of GDP, 2016 Figure 12: Foreign Trade % of GDP 2016 (OECD, 2018)65 In 2016, the European Union Countries had the highest amount of export and imports trade66. The countries US$ 8288245 million in form of exports and US$ 7809346 million in form of imports (OECD,2018).

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Trade in Goods and Services: Exports/Imports, Million Us Dollars,2016 Figure 13: Export/Imports in million us dollars (OECD,2018) The main driver to foreign trade is that countries needs goods and services to satisfy the needs of their citizens. However, the countries cannot produce all the goods and services needed, nor do they have all the resources they require to produce the good and services67. Several acts have been put in place by the Indian government to create an enabling environment for international trade. The foreign trade of India is governed by the Foreign Trade Development and Regulation Act 199269. The act contain the rules and orders pertaining payment for imports and exports transactions and are governed by the Foreign Exchange Management Act of 1992 (Chand, 2013,).

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CHAPTER 5 Discussion When India is viewed as an emerging economy or a developing country70. Being listed in that category doesn’t come easily as one can imagine, but with a lot of initiatives, interactions and trade with other countries besides having an active government with cross border friendly trade policies. CHAPTER 6 Conclusion With statistics (as indicated in earlier discussion in chapter 1 to 4) indicating India’s Gross Domestic Product having grown since the time of liberalization and globalization depicts a positive causal relationship between India’s economic growth and globalization. With globalization increasing concurrently with GDP growth cements the positive relationship between globalization and economic growth74. The BRICS, World Trade Organization, Foreign Direct Investments and Foreign trade, all resulting from globalization, have greatly benefited India in terms of significance contribution to India’s GDP, availing goods and services that India is not able to produce, providing a market for excess good and services produced in India and providing an enabling environment for smooth flow trade between countries.

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The challenges that have come with globalization are of much less significance as compared to the great benefits that India has gained from globalization. Furthermore, most of the challenges have a solution that can be framed in terms of policies. com/sites/douglasbulloch/2017/09/20/india-not-china-is-now-central-to-the-future-of-the-brics/ BRICS. History of BRICS. Retrieved August 9, 2018, from http://infobrics. org/page/history-of-brics/ BRICS. (2017, January 26). (2013, December 11). The Meaning and Definition of Foreign Trade or International Trade – Explained! Retrieved August 9, 2018, from http://www. yourarticlelibrary. com/foreign-trade/the-meaning-and-definition-of-foreign-trade-or-international-trade-explained/5972 Cooper, A. F. Retrieved August 9, 2018, from http://www. imf. org/external/datamapper/NGDP_RPCH@WEO/OEMDC/ADVEC/WEOWORLD Koyama, K. , PHD. (november 2016). India and the WTO. Retrieved August 9, 2018, from https://openknowledge. worldbank. org/bitstream/handle/10986/15082/9780821354100. pdf?sequence=4 Maverick, J. htm VanGrasstek, C.

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The History and Future of the World Trade Organization. Retrieved August 9, 2018, from https://www. bing. com/cr?IG=C7A875A183ED4AE29494603B67715232&CID=3F22F99A130263312A9DF5DF12FF62F0&rd=1&h=gMYM6BIeB0dVMV9uixtFYKkngZUVciPq1OOPj6qyYJw&v=1&r=https://www. The World Trade Organization. Retrieved August 9, 2018, from https://www. wto. org/english/thewto_e/whatis_e/whatis_e. htm World Bank. culturalindia. net/indian-history/economic-history. html Bisht, R. , Pitchforth, E. , & Murray, S. Retrieved July 18, 2018, from http://www. economywatch. com/economy-articles/globalization-in-india. html Fathima, M. Globalization And Its Social-Cultural-Political And Economic Impacts. Harindranath, G. , & Liebenau, J. The impact of globalization on India's information technology industry.  Information Technology for Development,6(2), 73-84. Retrieved July 18, 2018, from https://www. Retrieved July 18, 2018, from http://www.

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imf. org/external/datamapper/PPPSH@WEO/OEMDC/ADVEC/WEOWORLD Jindal, J. Globalization- its Socio-Economic Impact in India. International Journal of Emerging Research in Management &Technology, Volume-2, Issue-12 Kellner, D. (2011, January 01). ECONOMIC,SOCIAL AND CULTURAL IMPACT OF GLOBALIZATION ON INDIA. Retrieved July 19, 2018, from http://vijaysvision. blogspot. com/2011/12/economicsocial-and-cultural-impact-of. jstor. org/stable/41856193. OECD. FDI IN FIGURES - OECD. Retrieved July 18, 2018, from http://www. investopedia. com/articles/economics/10/globalization-developed-countries. asp Raghunath (2017). “Globalization And Its Impact On Indian Economy. ” International Journal of Research - Granthaalayah, 5(6), 544-549. net/publication/283792860_Repercussions_of_Globalization_on_Indian_Culture&p=DevEx. LB. 1 Thapar, R. , Alam, M. , Subrahmanyam, S. K. Socio-Cultural Impact Of Globalization In India.  The Discussant Journal of Centre for Reforms, Development and Justice,2(3), 65-72. doi:https://poseidon01. ssrn.

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