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.
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.
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.
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