Sample Materials of SSC CGL (Tier -3) Study Kit

Subject: Essay

Topic: The implications of globalization for India

Globalization-the most prevalent pheno-menon during the 1990s and for the future means coming together of various nations and their economies under a single umbrella. It is a process where there is no restriction on the movement of capital, investment, funds, profits, labour, information, ideas, politics and what not. If economics is the basis of everything then the process of globalization has been accelerated because of the ongoing economic reforms started since 1991. Indian economy had experienced major policy changes in early 1990s. The new economic reform, popularly known as, Liberalization, Privatization and Globalization (LPG model) aimed at making the Indian economy as fastest growing economy and globally competitive. The series of reforms undertaken with respect to industrial sector, trade as well as financial sector aimed at making the economy more efficient. With the onset of reforms to liberalize the Indian economy in July of 1991, a new chapter has dawned for India and her billion plus population. This period of economic transition has had a tremendous impact on the overall economic development of almost all major sectors of the economy, and its effects over the last decade can hardly be overlooked. Besides, it also marks the advent of the real integration of the Indian economy into the global economy.

Globalization is essentially an economic phenomenon which has strong implications. To understand the effect of globalization on Indian economy, society, culture, religion and psyche, it is essential for us to know how and when economic reforms were carried out. IMP (International Monetary Fund) has prescribed a set of rules for the carrying out of economic reforms. When the Chandra Sekhar’s government was defeated at the hands of Congress, Indian economy was undergoing through a chaotic situation. The 1991 Gulf war aggravated the international oil prices, which seriously affected India’s BoP (Balance of Payment) situation. Exports were low and imports were high (due to high price of oil and petroleum). India’s economic performance was in doldrums because industrial production plunged to the _round. Fiscal deficit soared up to new heights. This era of reforms has also ushered in a remarkable change in the Indian mindset, as it deviates from the traditional values held since Independence in 1947, such as self reliance and socialistic policies of economic development, which mainly due to the inward looking restrictive form of governance, resulted in the isolation, overall backwardness and inefficiency of the economy, amongst a host of other problems. This, despite the fact that India has always had the potential to be on the fast track to prosperity.

Now that India is in the process of restructuring her economy, with aspirations of elevating herself from her present desolate position in the world, the need to speed up her economic development is even more imperative. And having witnessed the positive role that Foreign Direct Investment (FDI) has played in the rapid economic growth of most of the Southeast Asian countries and most notably China, India has embarked on an ambitious plan to emulate the successes of her neighbors to the east and is trying to sell herself as a safe and profitable destination for FDI.

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Which earned nothing except high rate of inflation? Due to the populist form of government spending in the I980s, supported by huge borrowings without sufficient return, India’s internal and external debt touched the sky. Short terms commercial borrowings from abroad led to a difficult situation for the government. India virtually came to the brink of default. Under this situation, the Government borrowed a huge sum of conditional loan’ from IMF. Thus India became obliged to follow IMF prescribed ‘structural reforms’. The IMF package consists of a set of economic policies for a debt-ridden and low performing economy for the short run which is called `stabilization measures’, and which includes

(i) Monetary policies

• positive real interest rates

• increase in reserve rate

• more vigorous open market operations

• credit controls

(ii) Realignment of the exchange rate to a near market determined rate.

(iii) Reduction of budgetary deficits

• increased revenue mobilization efforts

• Review of public investment priorities and identification of a core programme of investment.

(iv) Real wage restraint removal of formal indexation arrangements

• The Long Term ‘Structural Reforms’ prescribed by IMF include

(i) Promotion of private sector (domestic and foreign)

• definitive political commitment

• rapid improvement in infrastructure

• improvement in regulatory regimes

• facilitation of investment approval procedures

(ii) Commercialization of public enterprises-improvement in operational efficiency

• Privatization programmes

(iii) Financial sectors reforms

• movement to market determined rates

• capital market development

• including promotion of stock exchanges

(iv) Liberalization of trade regime

• removal of import and exchange control and progress towards lower and less-dispersed band of tariffs.

(v) Price-flexibility

(vi) Tax-reforms

• reduction of distortionary effects on resource allocation increased elasticity of tax-system

(vii) Administrative reforms reduction in size of public service

• safety net well targeted programmes of transfers to vulnerable groups.

• training, credit and employment programmes for vulnerable group.

Impact of Globalization on Indian Economy

Due to globalization, the export sector of the Indian economy received a big boost. The growth performance of the exports improved during 1993-1996. During theperiod April-September 2000, the export growth rate touched the figure of 22"),, while imports stood at around 15%. Thus India’s current account situation improved due to globalization led economic reforms. Government investment expenditure has been reduced but not fiscal deficit which is still around 5% of GDP (Gross Domestic Product). This is because of high consumption expenditure on the part of the government. Government is stressing on disinvestment of public sector units. For the employees. government has started VRS (Voluntary Retirement Scheme). Although defence expenditure has gone up, but Government has reduced subsidies on food. Fertilizer and electricity. Social sector investment as a percentage of GDP has not increased. Expenditure on health and education is not substantial. Although efforts of privatization has given an impetus to the private sector, but employment generation by the private sector is meagre.

The proponents of globalization in India have argued that economic integration will improve the allocative efficiency of resources, reduce the capital output ratio, and increase the labour productiyig, help to develop the export spheres and export culture, increase the inflow of the capital and updated technology into the country, increase the degree of competition in the domestic economy, reduce the relative prices of industrial and manufactured goods, improve terms of trade in agriculture and in general give a boost to the average growth of the economy in the years to come. lo some extent this has proved true.

Effect of Globalization on Poverty and Malnutrition

In the World Food Summit, in 1996, it was estimated that around 840 million people around the world are suffering from malnutrition and the major cause behind this is poverty. Globalization did not uplift the position of agricultural labourers and share croppers. Since the majority of Indian population is engaged in the agrarian sector, thus low impact of globalization on agricultures did not cure poverty and thus malnutrition. Prof. Amartya Sell has emphasized the need for building ‘safety net’ for the vulnerable section of the society, so that globalization process does not pauperize the poor. In India we’ve found that globalization did not help in reducing the incidence of poverty. It is mainly because government investment to agricultural sector has been reduced along with an increase in the issue price in the PDS (Public Distribution System).

The package for poors never reached them. Although procurement prices of grains has been increased by the Commission of Agricultural Cost and Pricing, but it helped mainly the rich farmers of Punjab and Haryana. Middlemen who buy grains at cheaper rates from small farmers also benefitted under this scheme. The issue prices of grains through PDS have become higher than the market prices, leading to surplus stock of food available with the FCI (Food Corporation of India). Due to anachronistic methods of food storage, there has been a lot of wastage. Thus in a country where food grain production touched 206 million tonnes in the year 1999-2000 there has been an insufficient demand due to insufficient distribution and poverty leading to under nutrition and malnutrition. Moreover pulse and coarse grain production has declined over the period, leading to less nutritious diet available for the masses.

Though the New Agricultural Policy (2000) aims at 4% growth rate in food grain production through large-scale capital-intensive farming, but we can discern that globalization has not yet benefitted the poor.

Implications of Globalisation for Agriculture

Under WTO agreement, the product patent has replaced process patent and this extends over to agriculture. Large MNCs (Multi-National Companies) with immense R & D (Research and Development) facilities, are encroaching upon India’s agriculture. which can be disastrous for the Indian farmers. The impact of biotechnology can be tremendous as it may lead to more technology division rather than diffusion between the East and the West. High yielding pest resistant breeds of plants from foreign companies can help the west, leading to decline in India’s primary exports. Until and unless government funds are siphoned off to research. the result can be horrendous.
Moreover cheaper food import from abroad can lead to declining demands for Indian food, which can have worse impact on Indian farmers side by side, if the -government reduces subsidies on fertilizer and other raw materials, then it will have a fatal impact on Indian agricultural sector. The failure of Seattle WTO Conference in December, 1999 shows that West is also divided about the question of giving subsidies to the agricultural sector. Though due to poor management and storage facilities, India is wasting a bulk of food it produces, but through an alternative method of better marketing and distribution, India’s position can be improved. The process of globalisation will bear more fruits, if government takes the initiative in the areas of poverty reduction, rural development and agricultural growth.

Impact on Politics, Religion, Culture and Indian Psyche

Globalization means more economic inter-dependence and globalization of markets. A new thrust on international business has emerged. Commercialization has become the target of each and every firm. Hardly one has not heard the name of Pepsi or Coca-Cola. Brand name of companies has replaced the last shred of ethics from our heart. Degeneration of humanity has become a part and parcel of everyday life. Though American economists often wonder about more transparency accompanied with globalization, but in India the period of economic reforms for globalization has coincided with the era of corruption and degeneration. There is also a link between globalization and communali-zation. Our secular politics is under threat from communalism. There is a pre­planned agenda to change the constitution. But what is the relation between globalization and communalism? Globalization leads to more unemployment if economic reforms are not properly implemented. According to some, globalization is a conspiracy of the West against the development of the East. It is a capitalist phenomenon and has been termed as ‘neo-imperialism’.

Globalization will lead to the end of sovereignty of a nation. Indian political system now seems to work under instructions given from White House. The essence of Indian State and nationalism is eroding. Under such a situation. Some political parties on one hand are too much bothered about economic reforms without thinking about its consequences, and oil the other hand to pacify people’s frustration and anger owing to unemployment and inequality; they are playing with the sentiments by instigating one religion against another. The cult of Hindutva has become prevalent because public has been misguided that the cause behind their impoverishment and economic decline, is a particular community. In this way, people can be brain-washed and their intellect can be channelized into destructive activities rather than questioning the very basis of globalisation. A country with 80% of its population being Hindus, does not need to be told how to be a ‘Hindu’. The politics of ‘Ram’ has spread from USA to India, because of some NRIs (Non-Residential Indians) sending funds from USA.

Some kind of vested interest always lies behind such activities. Thus religion has become politics; politics has become economic reforms’. Commercialisation has narrowed down people’s thinking horizon. Hypocrisy of being a ‘modern’ man is like holding a ‘cell phone’ without knowing about the ‘enlightenment movement in Europe’. The two antagonistic forces of money-making (greed) and holding ones religious belief (orthodoxy) will clash, only if hypocrisy is absent. Otherwise it can be said Indians have stopped becoming conscious (at mental state), or they don’t think or know about their own culture, which says that maximum welfare means welfare to the maximum number of people. India being a land of Buddha and Veda, is now teaching the world how to kill thousands of people through a single nuclear device. Thus globalization has not spread the message of peace and tranquility; it has taught us how to be powerful. India has become a small shark among big sharks.

Globalization, Information Technology and India’s World Diplomacy

India is on the verge of becoming an IT (Information Technology) giant. The Hyderabad’s name has been changed into ‘Cyberabad’ because of Chief Minister Chandrababu Naidu’s initiative of promoting IT in his state. It is due to globalization only that India has carved a niche for itself in the development of softwares and its export. The diffusion of IT from Silicon Valley of the US to Bangalore has been possible only because of globalization. Globalization policy includes curbing of trade barriers for freer trade and enhancement of market-economy. Indeed, India’s role in solving the Y2K bug and other problems, is immense.

The availability of cheap computer skilled and English speaking labour has greatly helped countries like USA. Germany who are facing shortage of IT-professionals. The IT will enhance E-Commerce (electronic-commerce) and thus endorse commercialization of product in the form of technological knowhow, as well as real products. India has become a huge market for the US and Chinese goods.

It is a strategy of every developed country to tap India’s market as well as its potential. On the other hand India has emerged as a strong country in world’s politics and diplomacy. The year 2000 will go down as the year in which India scored one diplomatic triumph after another. Following former US President Bill Clinton’s epoch-making visit to India in March 2000 and Prime Minister Atal Bihari Vajpayee’s equally important visit to the US. Russian President Vladimir Putin came visiting fit the intenegnum, diplomacy was a high profile activity with External Affairs Minister Jaswant Singh Flying to various pans of the globe to propagate and further India’s interests in the various global fora, mainly emphasizing our concern with cross-border terrorism that had brought the Kargil conflict in the wake of Vajpayee’s historic Lahore trip in 1999.

Conclusion

Globalization has many meanings depending on the context and on the person who is talking about. Though the precise definition of globalization is still unavailable a few definitions are worth viewing, Guy Brainbant: says that the process of globalization not only includes opening up of world trade, development of advanced means of communication, internationalization of financial markets, growing importance of MNCs, population migrations and more generally increased mobility of persons, goods, capital, data and ideas but also infections, diseases and pollution. The term globalization refers to the integration of economies of the world through uninhibited trade and financial flows, as also through mutual exchange of technology and knowledge.

Ideally, it also contains free inter-country movement of labor. In context to India, this implies opening up the economy to foreign direct investment by providing facilities to foreign companies to invest in different fields of economic activity in India, removing constraints and obstacles to the entry of MNCs in India, allowing Indian companies to enter into foreign collaborations and also encouraging them to set up joint ventures abroad; carrying out massive import liberalization programs by switching over from quantitative restrictions to tariffs and import duties, therefore globalization has been identified with the policy reforms of 1991 in India. India made it clear, time and again, that it would not talk to Pakistan until it stopped aiding and abetting cross-border terrorism by Musharraf and his men in the garb of Jehadis or Mujahideen- It is only because of the ‘opening-up of India’, that the international community is listening to us.

Globalization has provided a platform to India to reach to its audience either for political cause or economic. The progress of economic reforms has impressed the World Bank Chief Mr. James Wolfenson and he promised more loans to India in the coining years, if India’s performance betters.’ 

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