THE GLOBALIZATION OF INDIAN ECONOMY
The concept of globalization was first introduced by Adam Smith, the father of modem economics in the year 1776 through the book titled, “The Wealth of the Nations”, and since then the globalization has been liked yo-yo. In the days of yore, British, Chinese, Indians and Mughals were involved in global business. The Chinese used to sell silk to the world and buy dynamites. The British used to come to India to buy condiments and in return India used to buy ammunition. So, the point is that globalization is not a new concept. In the good old days, globalization was even more prevalent because Indian spices, silk handicrafts, gold and silver jeweler, etc., were ubiquitous everywhere in Europea. In the past, globalization meant quid pro quo i.e., one thing for another. But in the early 20th century, everything changed when France introduced the system of protectionism and every nation began to create boundaries. Protectionism destroyed globalization in toto. But again in the late 20th century the winds of globalization began to blow. Dr. Allen Green Span as well as Dr. Paul Walker began to egg the nation in favour of globalization and it was July 1, 1991, when India became the part and parcel of globalization and today every nation, which happens to be a pursuer of globalization, derives plenty of basketfuls of fruits. or educational activities, in which every participant nation should be a beneficiary. Globalization in a nutshell is “one for all and all for none”. The purpose behind globalization has been to open the portals for each and every nation in different fields. A nation can buy from other nation and sell to other nation.
At the time when many analysts predict a booming future for the Indian economy India remains hesitant to fully embrace globalization. India and its neighbour China have been tagged as the world’s next economic super powers. Yet while China industriously makes its economy hospitable to foreign capital, Indian reformers continue to grapple with an intransigent domestic opposition to liberalization. Such are the pitfalls of Indian democracy.
“As Nobel Laureate Amartya Sen and many other experts have pointed out that India, as a geographical, politico-cultural entity has been interacting with the outside world throughout history and still continue to do so. India has to adapt, assimilate and contribute.” There are numerous experts to tell all who listen, that globalization opens up tremendous potential for growth and poverty alleviation, and an outward looking model frees up entrepreneurs to innovate and invest Globalization means many things to the hoi polloi, particularly in India, which is host to probably the widest range of anti-globalization groups in the world. Indian economy needs globalization because it can reduce the poverty as also increase India’s forex level which means Indian can manage the economic crisis through it. During 1990’s India was passing through a mammoth economic crisis. The economic crisis of 1991 proved a real turning point for the Indian economy. Indian ambivalence towards markets and free trade has been evident in the way it has dealt with the Bretton Woods institutions. The World Bank and the International Monetary Fund were created with the fundamental premise that protecting and expanding the system of liberal international trade would help avert a third major global conflict. India has been a vibrant participant in these institutions, not only as a major client, but also through its brilliant staff members and its commending executive directors. Since the dark days of 1991, India has come a long way. It has comfortable foreign exchange reserves (despite high levels of domestic debt); booming software and services export market, and a burgeoning knowledge economy dearly, India has tremendous opportunities to benefit from globalization, but there is also consensus that the challenges confronting Indian development are substantial, even daunting. India remains handicapped by enormous infrastructure and labour and capital constraints.
“Everyone is talking the talk, but not everyone is walking the walk”. This statement was made by Planning Commission Deputy Chairman, Dr. Montek Singh Ahluwalia, in the closing remarks of his talk “Globalization and Indian Economy.” Dr. Ahluwalia suggested that most people in India now agree in India’s greater participation in the global economy, but more needs to be done to achieve that objective. Even so, there have been significant changes made, especially compared to the 1980s, when there were much talk of liberalization, but no action. Before the 1990, India’s economic model was dominated by a large public sector, which favoured partitions for domestic industry. There was distrust for private sector and suspicion of foreign investment, with extremely high taxation levels on imported goods and a different business environment for foreign business interests. However, a balance of payment crisis in 1991 pushed India to seek loans from the International Monetary Fund and liberalize the economy. Dr. Ahulwalia stressed that this economic liberalization led to a rapid paradigmatic shift that significantly reduced suspicion of the private sector. Dr. Ahluwalia argued that India has undoubtedly benefited from the 1990s reforms. His argument was substantiated by two major facts: (1) The reduction of Indian poverty rates in the 90s and (2) India’s ranking second next to China, in comparison with growth rates for large developing countries.
“India, A Hub for Globalization”, is timely. India fever has caught on in the world’s investment community. Nowadays the Western press rarely mentions that certified growth miracle, that leviathan of global trade, China, without adding India”. India and China are amongst the most pro-competition countries. India produces bountiful of software engineers and software analysts, while China supplies all kinds of equipments. So, as per the current scenario, the conclusion has been derived, “India as back office supplier, China as front office supplier.” Globalization involves FDIs &FHs.
FDIs. India is the ‘best destination’ for Foreign Direct Investment (FDI) and joint ventures, claims country’s Commerce and Industry Minister Mr. Kamal Nath. Addressing an audience of United States investors at the Focus India Show in Chicago recently, he said that India had emerged as an across the board low cost base, attractive enough to multinationals, to relocate in the country. More than one hundred of the Fortune 500 companies have a presence in India, as compared to only 33 in China. Reiterating that India promises high returns on investments.. Mr. Kamal Nath said that repatriation of profits was freely permitted, while according to a survey conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI) a few months ago, 70 percent of foreign investors were making profit and another 12 percent were breaking even. These figures would have since improved further, adding that FDI policies in India were among the most liberal, lucrative and attractive in emerging economics. Mr. Kamal Nath listed out the policy initiatives taken by the Government in specific sectors such as telecom, ports, airports, railways, roads, and energy construction development with a view to improving competitiveness of the Indian economy. Further, lucrative investment opportunities were being offered to investors through tax incentives and customs duty concessions for import of plant and machinery needed for the projects. The Special Economic Zone (SEZ) Act was also in place to facilitate this process. India has an open system with social and political safety valves and regulatory mechanism that provides comfort, long-term stability and security to the foreign investors. FDI plays an important role in the long-term economic development of the country, not only as a source of capital but also for enhancing competitiveness of the domestic economy through transfer of technology, strengthening infrastructure, raising productivity and generating new employment opportunities. According to a survey by the global consultancy firm KMPG, India has emerged as the top FDI destination on the basis of higher returns on investment that foreign investors earn in the country compared to the other emerging markets like China, Brazil and Mexico.
The Foreign Institutional Investment flows to India are very high. India is believed to be a good investment destination among the European investors despite political uncertainty bureaucratic hassles, shortages of power and infrastructural deficiencies. India presents a vast potential for overseas investment and is actively encouraging the entrance of foreign players into the market. A report published by Goldman Sachs shows that India has grabbed the major share of the $1 billion of investments made by Foreign Institutional Investors (FIIs) in emerging markets in the last week of July 2006.
Due to globalization, the Gross, Domestic Product (GDP) increases with meteoric speed. GDP is the value of all goods and services produced in a country during a given period. Today, India’s rank is 10th in the list of top ten economies (GDP). The USA is numero Uno in this. India is the 5th largest economy in the world (ranking above France, Italy, the United Kingdom and Russia).
Indian exports grew by 27.08 percent during April 2006, while the imports registered a growth of 20.52 percent during the same period. The exports of India are increasing due to globalization.
Commerce and Industry Minister Mr. Kamal Nath announced the fresh trade initiatives to give incentives to make an India global hub for gems and jeweler as well as auto components and to tailor export to create more jobs. Mr. Kamal Nath launched two new schemes aimed at creating more jobs in rural and semi-urban areas with diversifying the trade basket to emerging markets of Africa and Latin America. In a bid to take the benefits of foreign trade to rural areas, Krishi VisheshUpaj Yojana is being expanded to include village and cottage industries while being renamed as the Krishi Vishesh Upaj Aur GramUdyog Yojana.
Now, in rural areas, denizens can also get benefit of the globalization and they can get employment also.
Today, the foreign universities and different educational institutions are establishing their branches in other nations. Due to globalization in education, a student gets foreign education in his own country. India has also launched many sub-centres of different educational institutions in other countries. The Indian Institutes of Management (IIMs) are its best example.
The RBI recently formed a six-member committee headed by former Deputy Governor Mr. S.S. Tara pore to prepare a roadmap towards capital account convertibility (CAC), the first step towards making the Rupee fully convertible. The committee was formed to review the experience of various measures of capital account liberalization in India, examine implications of fuller capital account convertibility on monetary and exchange rate management and provide a comprehensive medium term operational framework. The committee has already submitted its report.
Nowadays globalization has become laissez faire i.e., unrestricted commerce. Today, Indian economy is burgeoning due to globalization, ergo, the contribution of globalization in the progress of Indian economy is very crucial.