Effect of Globalization on Indian Economy (Essay Sample)

Effect of Globalization on Indian Economy
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Table of Contents TOC \o "1-3" \h \z \u Executive Summary PAGEREF _Toc404731260 \h 31.Introduction PAGEREF _Toc404731261 \h 42.Influence on the Economy PAGEREF _Toc404731262 \h 62.1.Effect on the Economy PAGEREF _Toc404731263 \h 6Disinvestment. PAGEREF _Toc404731265 \h 6Devaluation. PAGEREF _Toc404731266 \h 6Fragmenting the industrial licensing regime (obliteration of the MRTP- Monopolies and Restrictive Trade Practices Act). PAGEREF _Toc404731267 \h 6The financial sector PAGEREF _Toc404731268 \h 7Imports. PAGEREF _Toc404731269 \h 7Short-term debts. PAGEREF _Toc404731270 \h 72.1.2.Economy Structure PAGEREF _Toc404731271 \h 72.1.3.Foreign Trade PAGEREF _Toc404731272 \h 82.1.4.FDI investment flows PAGEREF _Toc404731273 \h 92.2.Education PAGEREF _Toc404731274 \h 92.2.1. Commoditization PAGEREF _Toc404731275 \h 102.2.2.Information technology PAGEREF _Toc404731276 \h 102.2.3.Expensive education PAGEREF _Toc404731277 \h 102.2.4.Competitiveness PAGEREF _Toc404731278 \h 112.3.Agriculture PAGEREF _Toc404731279 \h 112.4.Information Technology PAGEREF _Toc404731280 \h 122.5.Small scale industries and local business PAGEREF _Toc404731281 \h 124.Conclusions and Recommendations PAGEREF _Toc404731282 \h 135.References PAGEREF _Toc404731283 \h 146.Appendices PAGEREF _Toc404731284 \h 166.1.Appendix 1 PAGEREF _Toc404731285 \h 166.2.Appendix 2 PAGEREF _Toc404731286 \h 166.3.Appendix 3 PAGEREF _Toc404731287 \h 166.4.Appendix 4 PAGEREF _Toc404731288 \h 176.5.Appendix 5 PAGEREF _Toc404731289 \h 18
Executive Summary
Investigating the concept of globalization in India, the globe’s biggest economy at the start of the Christian epoch, is not new to the country. Since time immemorial, Indian-produced products have been exported to far-flung destinations across the entire globe. The globalization wave struck India since the end of the previous century and is currently keeping pace with contemporary global transformations. This is a trend that has persisted, and for this reason, this paper intends to study globalization’s effects on aspects such as cultural, social, and economic on India. To augment this research, different facets were investigated in detail, including gender functions, education status, the family structures, agriculture, information technology, economic situation, and local businesses. The results indicated that globalization outcomes in areas such as employment, information technology, industrialization, and agriculture contributed to both positive and negative influences on the socio-cultural, psychological, and structural revolution of the Indian society. These outcomes are evident in distinct traits of the contemporary Indian society (as demonstrated by empirical studies) such as social structure, general economy, attitudes and lifestyles of the people.
1 Introduction
Many scholars have offered different definitions for the phrase, but for the purposes of this paper, the definition adopted is that by Harvard School of Business professors who state that it is the "state of the world involving networks of independence at multi-continental distances… the networks are linked through flows and influences of capital and goods, information and ideas, people and force, as well as biologically and environmentally relevant substances " (Westerfield & Abbink, 2004, p. 81). In other words, globalization is a phrase that describes the process of intercontinental social, political, and economic integration. Despite scholars attributing the origins of this practice to contemporary times, others have traced its history to long before the age of discovery in Europe and excursions to the New World (Stever, 1972). Its origins have even been traced to the 3rd millennium BCE, though the late 19th and early 20th centuries experienced an increased interconnectedness among the global cultures and economies. However, as outlined by International Monetary Fund (2000), the phrase "globalization" has seen increased usage from the mid-1980s and particularly from the mid-1990s, leading to the International Monetary Fund identifying four elementary facets of globalization: dissemination of knowledge, migration and movement of individuals, capital and investment movements, and trade and transactions.
The Indian economy has undergone significant policy transformations since the early 1990s that have become popular by the phrase, "LPG model," which essentially stands for Liberalization, Privatization and Globalization (Malik, 2014). The model was designed with the intention of making the economy the quickest-growing and most competitive economy globally. The series of reforms implemented with regard to the financial, trade, and industrial sectors were designed to make the economy efficient. The commencement of this particular series of reforms in July 1991 had a profound effect for the Indian economy, as well as for her billion-plus population. Besides, this period market the onset of India’s actual; integration into the global economy. The also heralded a remarkable transformation of the country’s mindset, shifting from the conventional attitudes and values held since the 1947 independence, for instance socialistic policies relating to economic development and self-reliance, which mostly because of the inward-inclined restraining form of governance, contributed to isolation, economy inefficiency, and overall backwardness, amongst a variety of other challenges. Nevertheless, India has always possessed the potential for climbing the fast track to prosperity.
Globalization, implemented under the LPG model, has transformed India’s economy remarkably, contributing to significant cultural and social impacts of the population. Factors such as the transformed economic situations, practices and lifestyles of the people, employment mobility, culture interchange, information of technology, and interaction with foreigners have had mixed effects on the country. Augmenting the LPG model with an unending source of cheap labor, high quality products at subsidized rates and application of technology have affected all aspects of the economy, ranging from agriculture to local businesses. Additionally, the population’s educational levels and employment opportunities and preferences have changed significantly. This paper will investigate the cultural, economic, and social impacts that globalization has had on the general Indian economy and society. Special emphasis will also be placed on areas like local businesses, agriculture, information technology, education, family relationships, gender values and attitudes, and roles.
2 Influence on the Economy
1 Effect on the Economy
At the start of the 1990s, India underwent a key financial recession that saw foreign currency reserves plummeting to $1 billion while inflation rates reached an all-time high of 17 percent (Somalkar, 2008). During this period, fiscal deficit rose to unsustainable levels, NRIs- non-resident Indians and foreign investors lost confidence in the economy. Capital flew outside the economy and default on loans was imminent (see summary in appendix 1). Besides, numerous unforeseen transformations swept across the economies of Eastern and Western Europe, Latin America, South East Asia, and elsewhere simultaneously, implying that there was an urgent need for radical overhaul of the economy’s programs and policies. Critical measures were introduced as components of the LPG model, and are outlined below:
Permitting foreign direct investment. To enhance efficiency across diverse industries and encourage non-debt flows, liberal and visible investment regimes were established, with most activities being opened up to foreign investments without restriction on the degree of foreign rights (Somalkar, 2008). For instance, insurance was opened up by up to 26 percent, defense industry (26 percent), tea plantation (100 percent), and development of incorporated townships (100 percent).
Disinvestment. To ease globalization, a privatization scheme was adopted through which the private sector purchased public sector businesses
Devaluation. To ease globalization, the government devalued the Indian currency against the major currencies in the forex market. This measure was aimed at resolving the financial recession.
Fragmenting the industrial licensing regime (obliteration of the MRTP- Monopolies and Restrictive Trade Practices Act). Currently, only six industries are categorized under obligatory licensing, primarily based on accounting of strategic considerations and environmental safety (Somalkar, 2008). A substantially-amended locational policy in line with the relaxed licensing policy was introduced. For instance, no industrial approval is necessary for locations beyond 25 kilometers of city peripheries and with populations of over 1 million.
The financial sector. This saw various reforms in the capital markets, insurance sector, and banking systems
Imports. Elimination of quantitative limitations on imports
Short-term debts. Separation of limitations on short-term debts to permit external money-making borrowings founded on sustainability of external debt
Prior to the adjustments in the economic reforms, the Indian economy has evolved from a constrained, closed economy into a liberalized one. The measures described in the previous subsection were introduced to help the economy attain efficiency and potential expansion. Towards this end, the significant effects that globalization had on the economy are outlined below:
1 Economy Structure
Because of globalization, there was an increase of GDP and the overall direction of growth in diverse sectors (Somalkar, 2008). Previously, a greater proportion of the GDP was derived from the primary sector, an aspect that was taken over by...