16 Jul 2013

GLOBALIZATION : Good or Bad for Indian and World Economy?

Gone are the days when Ambassador and Fiat were the only cars on Indian roads. Today, Indians are buying cars produced by nearly all the top companies in the world. Such wide-ranging choice of goods in our markets is a relatively recent phenomenon. You wouldn’t have found such a wide variety of goods in Indian markets even two decades back. In a matter of years, our markets have been transformed!

How do we understand these rapid transformations? What are the factors that are bringing about these changes? And, how are these changes affecting the lives of the people?

“Globalization is the process of international integration arising from the interchange of world views, products, ideas, and other aspects of culture.” Put in simple terms, globalization refers to processes that increase world-wide exchanges of national and cultural resources. Advances in transportation and telecommunications infrastructure, including the rise of the telegraph and its posterity the Internet, are major factors in globalization, generating further interdependence of economic and cultural activities.


During the 19th century, globalization approached its modern form. Industrialization allowed standardized production of household items using economies of scale while rapid population growth created sustained demand for commodities. Globalization in this period was decisively shaped by nineteenth-century imperialism. In the 19th century, steamships reduced the cost of international transport significantly and railroads made inland transport cheaper. The transport revolution occurred sometime between 1820 and 1850.More nations embraced international trade. Globalization in this period was decisively shaped by nineteenth-century imperialism such as in Africa and Asia. The invention of shipping containers in 1956 helped advance the globalization of commerce. 

After the Second World War, work by politicians led to the Bretton Woods conference, an agreement by major governments to lay down the framework for international monetary policy, commerce and finance, and the founding of several international institutions intended to facilitate economic growth multiple rounds of trade opening simplified and lowered trade barriers. Initially, the General Agreement on Tariffs and Trade (GATT), led to a series of agreements to remove trade restrictions. GATT's successor was the World Trade Organization (WTO), which created an institution to manage the trading system. Exports nearly doubled from 8.5% of total gross world product in 1970 to 16.2% in 2001.

Globalization has been facilitated by several factors. Three of these have been highlighted: rapid improvements in technology, liberalization of trade and investment policies and, pressures from international organizations such as the WTO.


In general, MNCs set up production where it is close to the markets; where there is skilled and unskilled labour available at low costs; and where the availability of other factors of production is assured. In addition, MNCs might look for government policies that look after their interests. Having assured themselves of these conditions, MNCs set up factories and offices for production. The money that is spent to buy assets such as land, building, machines and other equipment is called investment. Investment made by MNCs is called foreign investment. Any investment is made with the hope that these assets will earn profits. At times, MNCs set up production jointly with some of the local companies of these countries. The benefit to the local company of such joint production is two-fold. First, MNCs can provide money for additional investments, like buying new machines for faster production. Second, MNCs might bring with them the latest technology for production. 
But the most common route for MNC investments is to buy up local companies and then to expand production. MNCs with huge wealth can quite easily do so. To take an

Example, Cargill Foods, a very large American MNC has bought over smaller Indian companies such as Parakh Foods. Parakh Foods had built a large marketing network in various parts of India, where its brand was well-reputed. Also, Parakh Foods had four oil refineries, whose control has now shifted to Cargill. Cargill is now the largest producer of edible oil in India, with a capacity to make 5 million pouches daily!



It is not only modernizing but also westernized the native cultures. The power play is leading to the linguicide or linguistic, cultural and traditional genocide. That is probably where we need to keep a check and not let diffusion go wild. There has been significant de-localization that needs people to be more tolerant since face-to-face interaction is no more the order of the day. It so happens that an American is trying to sort out his billing issue of his mobile phone with an Indian call center employee who is not the direct employee of the service provider. Now that sounds complicated and has to be dealt carefully. 

Globalization cannot be stopped. But, one can always keep a check on its spread and outcomes. This was all about globalization pros and cons. Globalization makes the world better. The question is how prepared are we to face all the pros and cons of this global change.


#The pros of globalization are many and they are as follows:

1]There is a worldwide market for the companies and for the customers there is a better access to products from different countries.

2] There is a steady cash flow into the developing countries, which gradually decreases the dollar difference.
3] Due to the presence of a worldwide market, there is an increase in the production sector and there are lots of options for investments for different companies.
4] Gradually there a world power is being created instead of compartmentalization of power sectors. Politics is merging and decisions that are being taken which are actually beneficial to people all over the world.
5] The influx of information between two countries increases, especially those nations who do not have anything in common between them.
6] Cultural intermingling increases and every nation tries to know more about the other nations cultural preferences. In this process, we are actually coming across things that we like and in the course of time adopt it.
7] Since we share financial interests, corporate and governments are trying to sort out ecological problems for each other.
8] Socially we have become more open and tolerant towards each other and these who live in the other parts of the world appear more approachable than before.
9] There is a lot of technological development that countries have undergone over the years. Thus, helping in sharing of information and technology. This helps most of the developing nation’s progress at the same speed as the developed nations.
10] Globalization helps in increase of demand of products. This in turn increases rate of production. Manufacturers thus, find this profitable and help in availability of more jobs.
11] Globalization makes the economy of one country dependent on the economy of the other country. Any change in economy one country will affect the other. Thus, governments become more concerned about one another to curb the economical imbalance between them.

# There are cons of globalization are as follows:

1]Many people from developed nations are losing jobs and that is posing a problem for them since the companies are outsourcing work to developing countries since the cost of labor is low and profits the company considerably. This gives rise to Recession.

2] There is immense pressure on the employed people of developed countries who are always under the threat of their jobs being outsourced.
3] Corporate are building up units in other countries that equally well equipped, thus transferring the quality to other countries.
4] There are some experts who think that globalization along with the positive aspects is also leading to the incursion of negatives like communicable diseases and social degeneration.
5] There is also a threat of corporate ruling the world because there is a lot of power and money invested by them due to globalization.
6] For nations that are at the receiver's end are also giving up the reins in the ends of a foreign company which might again lead to a sophisticated form of colonization.
7] Globalization may lead to loss of cultural identity as Western ideas are always imposed upon the Eastern thoughts.
8] Due to large MNC’s the small scale industries are closing down which increases unemployment.

Why do developed countries want developing countries to liberalize their trade and investment?

What do you think, should the developing countries demand in return? Should globalization be in excess or in control?

Please give your valuable opinions in comment box...

(Written by co-host Komal Patil of the event Group Discussion for UPSC CSE (Daily 9PM to 11PM) of the group Mission Mussoorie UPSC Civil Services based up on daily discussions. Please join and give your valuable views)

You may also want to read :
An Insight on Globalization : How much Beneficial and Actually for Whom, its Pros and Cons !



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