Impact of globalization on Indian businesses

Globalization (or Globalization) describes a process by which regional economies, societies, and cultures have become integrated through a global network of communication, transportation, and trade. The term is sometimes used to refer specifically to economic globalization: the integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, and the spread of technology. Globalization as a spatial integration in the sphere of social relations when he said “Globalization can be defined as the intensification of worldwide social relations which link distant locations in such a way that local happenings are shaped by events occurring many miles away and viceversa.” Globalization generally means integrating economy of our nation with the world economy. The economic changes initiated have had a dramatic effect on the overall growth of the economy. It also heralded the integration of the Indian economy into the global economy. The Indian economy was in major crisis in 1991 when foreign currency reserves went down to $1 billion. Globalization had its impact on various sectors including Agricultural, Industrial, Financial, Health sector and many others. It was only after the LPG policy i.e. Liberalization, Privatization and Globalization launched by the then Finance Minister Man Mohan Singh that India saw its development in various sectors.

Globalisation as a term may be new, but countries have built economic relationships with each other for centuries. This particular term gained popularity in recent years, primarily due to the advent of technologies.

Advent of New Economic Policy:

After suffering a huge financial and economic crisis Dr. Man Mohan Singh brought a new policy which is known as Liberalization, Privatization and Globalization Policy (LPG Policy) also known as New Economic Policy,1991 as it was a measure to come out of the crisis that was going on at that time. The following measures were taken to liberalize and globalize the economy:

1. Devaluation: To solve the balance of payment problem Indian currency were devaluated by 18 to 19%.
2. Disinvestment: To make the LPG model smooth many of the public sectors were sold to the private sector.
3. Allowing Foreign Direct Investment (FDI): FDI was allowed in a wide range of sectors such as Insurance (26%), defence industries (26%) etc.
4. NRI Scheme: The facilities which were available to foreign investors were also given to NRI’s.

Positive impacts:

• Investments, new jobs, local companies supplying raw materials, etc. to these industries have prospered.
• Indian companies gained from successful collaborations with foreign companies. Ex: Tata Motors, Infosys.
• With big Indian MNCs contributing to world trade, India can raise its voice for fairer trade rules at WTO.
• Exports would potentially increase therefore making our trade more favourable.
• Consumers have an option to choose from a wide range of products- they can have cheapest, best thing.
• Technological development has Increase in volume of trade will increase world’s GDP.
• Extension of internet facilities +Infra to remotest rural areas>rural development, inclusive growth.
• We can export what we produce in excess. So, less wastage and we can import what we produce in deficient.
• In agricultural sphere, Globalization promotes contract farming which increases the earning capacities of farmers.

Negative impacts:

• Outsourcing of jobs from developed countries to developing countries. It has led to loss of jobs in developed countries and subsequent protectionist measures as recently in USA and Saudi Arabia.
• Trade deficit (as in case of India) which hurt most in case of under-developed and developing economies and widen the gap between the developed & not so developed economies.
• As the economies are interlinked any financial crisis in one country, especially developed countries will result in slow down in developing economies. Eg-crisis in COVID 19 times
• Neo-colonialism in smaller developing countries.
• Agriculture sector not improved as much as services and manufacturing sector becoming an expensive affair. & state is withdrawing its extensive role in agriculture.
• MNC’s ruling the globe and exercising a great political control all over the worldwide economic inequalities.
• Not sustainable growth, development on growing negligence of environment, forests, wildlife etc.
• Destruction of traditional service providers. For example, old restaurants, parathas and lassi are replaced by Mc. Donald’s, Chinese restaurants, etc.
• Advent of a consumer credit society. A person can now buy goods and services even if he does not have sufficient purchasing power at his disposal.

Impact on Financial Sector:

Reforms of the financial sector constitute the most important component of India’s programme towards economic liberalization. The recent economic liberalization measures have opened the door to foreign competitors to enter into our domestic market. Innovation has become a must for survival. Financial intermediaries have come out of their traditional approach and they are ready to assume more credit risks. As a consequence, many innovations have taken place in the global financial sectors which have its own impact on the domestic sector also. The emergences of various financial institutions and regulatory bodies have transformed the financial services sector from being a conservative industry to a very dynamic one. In this process this sector is facing a number of challenges. In this changed context, the financial services industry in India has to play a very positive and dynamic role in the years to come by offering many innovative products to suit the varied requirements of the millions of prospective investors spread throughout the country. Reforms of the financial sector constitute the most important component of India’s programme towards economic liberalization.

Impact on Export and Import:

India’s Export and Import in the year 2001-02 was to the extent of 32,572 and 38,362 million respectively. Many Indian companies have started becoming respectable players in the International scene. Agriculture exports account for about 13 to 18% of total annual of annual export of the country. In 2000-01 Agricultural products valued at more than US $ 6million were exported from the country 23% of which was contributed by the marine products alone. Marine products in recent years have emerged as the single largest contributor to the total agricultural export from the country accounting for over one fifth of the total agricultural exports. Cereals (mostly basmati rice and non-basmati rice), oil seeds, tea and coffee are the other prominent products each of which accounts for nearly 5 to 10% of the country’s total agricultural exports.