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Home » GLOBALISATION A BRIEF ANALYSIS

GLOBALISATION A BRIEF ANALYSIS

GS 1 - Effects of globalization on Indian society,

GS 3 - Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.

Globalization is the spread of products, technology, information, and jobs across national borders and cultures. In economic terms, it describes an interdependence of nations around the globe fostered through free trade.

Globalization is a social, cultural, political, and legal phenomenon. 

  • Socially, it leads to greater interaction among various populations.
  • Culturally, globalization represents the exchange of ideas, values, and artistic expression among cultures.
  • Globalization also represents a trend toward the development of single world culture. 
  • Politically, globalization has shifted attention to intergovernmental organizations like the United Nations (UN) and the World Trade Organization (WTO).
  • Legally, globalization has altered how international law is created and enforced.

 

A brief history

Globalization is not a new concept. Traders travelled vast distances in ancient times to buy commodities that were rare and expensive for sale in their homelands. The Industrial Revolution brought advances in transportation and communication in the 19th century that eased trade across borders.

The think tank, Peterson Institute for International Economics (PIIE), states globalization stalled after World War I and nations' movements toward protectionism as they launched import taxes to more closely guard their industries in the aftermath of the conflict. This trend continued through the Great Depression and World War II until the U.S. took on an instrumental role in reviving international trade.

One of the critical steps in the path to globalization came with the North American Free Trade Agreement (NAFTA), signed in 1993. One of NAFTA's many effects was to give American auto manufacturers the incentive to relocate a portion of their manufacturing to Mexico where they could save on the costs of labor.

Governments worldwide have integrated a free market economic system through fiscal policies and trade agreements over the last 20 years. The core of most trade agreements is the removal or reduction of tariffs. This evolution of economic systems has increased industrialization and financial opportunities in many nations.

 

Globalisation in India

India currently accounts for 2.7% of world trade (as of 2015), up from 1.2% in 2006 according to the World Trade Organization (WTO). Until the liberalisation of 1991, India was largely and intentionally isolated from the world markets, to protect its fledgling economy and to achieve self-reliance. Foreign trade was subject to import tariffs, export taxes and quantitative restrictions, while foreign direct investment was restricted by upper-limit equity participation, restrictions on technology transfer, export obligations and government approvals; these approvals were needed for nearly 60% of new FDI in the industrial sector. The restrictions ensured that FDI averaged only around $200M annually between 1985 and 1991; a large percentage of the capital flows consisted of foreign aid, commercial borrowing and deposits of non-resident Indians.

Since liberalisation, the value of India's international trade has become more broad-based and has risen to Rs. 63,0801 billion in 2003–04 from Rs.12.50 billion in 1950–51.India's significant trading partners are China, the US, the UAE, the UK, Japan and the EU.

 

Key Takeaways

  • The Economic Policy of Liberalisation: The term liberalisation refers to a range of policy decisions that the Indian state took since 1991 to open up the Indian economy to the world market. This marked a break with an earlier stated policy of the government to have a greater control over the economy.
  • The transnational corporations: Among the many economic factors driving globalisation, the role of transnational corporations (TNCs) is particularly important. TNCs are companies that produce goods or market services in more than one country. These may be relatively small firms with one or two factories outside the country in which they are based. They could also be gigantic international ones whose operations crisscross the globe.
  • A new international division of labour: A new international division of labour has emerged in which more and more routine manufacturing production and employment is done in the Third World cities. This flexibility of labour often works in favour of the producers. Instead of mass production of goods at a centralised location (Fordism), we have moved to a system of flexible production at dispersed locations (post-Fordism).
  • Political changes: In many ways it was a major political change, namely, the collapse of the erstwhile socialist world that hastened globalisation. And also gave a specific economic and political approach to the economic policies that underpin globalisation. These changes are often termed as neo-liberal economic measures. Another significant political development which is accompanying globalisation is the growth of international and regional mechanisms for political collaboration. The European Union (EU), the Association of South East Asian Nations (ASEAN), South Asian Regional Conference (SARC) are just some of the examples that indicate the greater role of regional associations. The other political dimension has been the rise of International Governmental Organisations. (IGOs) and International Non-Governmental Organisations (INGOs).
  • Culture: A central contention is that all cultures will become similar, that is homogeneous. Others argue that there is an increasing tendency towards glocalisation of culture. Glocalisation refers to the mixing of the global with the local. It is not entirely spontaneous. Nor is it entirely delinked from the commercial interests of globalisation. Another important change was culture of consumption and corporate culture.

 

To sum up, Globalisation refers to the growing interdependence between different people, regions and countries in the world as social and economic relationships come to stretch world-wide. Although economic forces are an integral part of globalisation, it would be wrong to suggest that they alone produce it. It has been driven forward above all by the development of information and communication technologies that have intensified the speed and scope of interaction between people all over the world. Moreover, there was a political context within which it grew.

 

Previous Year Questions

  1. What is a digital signature? What does its authentication mean? Give various salient built-in features of a digital signature. (2013)
  2. Discuss the advantage and security implication of cloud hosting of servers vis-a-vis in house machine based hosting for government business. (2015)
  3. Discuss the potential threats of Cyber-attack and the security framework to prevent it. (2016)
  4. Pradhan Mantri Jan-Dhan Yojana (PMJDY) is necessary for bringing unbanked to the institutional finance fold. Do you agree with this for financial inclusion of the poorer section of the Indian society? Give arguments to justify your opinion. (2017)
  5. Why did the industrial revolution first occur in England? Discuss the quality of life of the people there during the industrialization. How does it compare with that in India at present times? (2015)
  6. Discuss the changes in the trends of labour migration within and outside India in the last four decades. (2015)
  7. Discuss the positive and negative effects of globalization on women in India? (2015)
  8. To what extent globalization has influenced the core of cultural diversity in India? Explain. (2016)
  9. In the context of diversity of India, can it be said that the regions form cultural units rather than the states? Give reasons with examples for your viewpoint. (2017)