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Write about Globalization & the Drivers of Globalization
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Introduction
Globalization is a phenomenon whose economic dimensions encompasses growths in the flows of trading, capitalization, and information, along with the movement of individuals across the boundaries. The term globalization can be defined as a process that integrates different world economies of the world. Therefore, Globalization is an integration among the people, government, and organizations of various countries in the world. The main elements of the integration provided by globalization are international trading and cross-border investment flows. (Globalization and International Trade, n.d.)
Globalization started post World War II and enhanced considerably by mid-1980s. It was driven by two critical characteristics namely, technological advances and the inclining liberalization of trade and capital markets. The technological advances have reduced the cost of transportation, computation, and communication, making it feasible for the firms to relocate or locate various phases of production in various countries. Another factor i.e. the inclining liberalization of trade and capital markets where more and more government to defend their economies from foreign competition or impact the import tariff and non-tariff barriers like legal prohibitions, export restraints, import quotas. . There are four dimensions related to globalization (Kivikkokangas, 2015):
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1. This dimension involves stretching the social, political and economic activities across the political barriers and continents.
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2. This gives suggestions towards the emerging magnitude of connection i.e. flows of capital, trading, migration, culture, investment.
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3. The inclining connection all over the globe can directly be linked to the acceleration of the interactions taking place globally as the progress of the global system of transport, and communication further increases the speed of circulation of goods, information, finance and people.
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4. The growth in intensity and acceleration of interactions globally that is related to their deep rooted impacts so as to identify their significant impacts and even local and less- important developments may show massive consequence world-wide. In this way, the boundaries amongst the domestic as well as global matters are becoming blurred.
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This paper examines the drivers of globalization in the Indian economy.
The Indian Government could not help the Indian Economy to flourish in the year of 1990-91 and turned to privatization for increasing the economy and adopted the liberalized economic policies. With globalization and privatization and liberalization policies, the Indian economy flourished and experiences that the Fiscal deficit came down to 5.9% in 1991-92 itself whereas the real GDP improved at an annual rate of about 6%. (Jindal, 2013)
The changes in the structure were as follows:
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1. Industrial licensing Raj Abolishment
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2. Unrestricted access to international technology
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3. Abolishing the Government control over capital issues
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4. Creation of SEBI for encouraging equity culture
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5. Reduction in trades reserved for public sector
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6. Went for partial disinvestment in public sector enterprises
Drivers of Globalization
There are five most critical interrelated drivers of change ("Indian Business Environment: Globalization trends in Indian economy", n.d.):
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Foreign Trade: Lower the barriers to trade the more the competition increases
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Financial Integration
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Communication channels either via traditional media and the internet.
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The advances in technology either in the communication, transportation, electronics or similar fields
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Mobility in population, especially the workers
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More attentions towards environment etc.
The Demographic Transition or mobility in population, especially the workers: There is a massive Demographic Transition, which has intensified especially in the last decade and is thought to intensify further more in upcoming years. It has been estimated that at this rate of demographic transition, a large ratio of adult populations would be left compared to the young population. The labor forces are leaving the country for finding a better employment opportunities worldwide. This had led to the transition of more skilled workers across the boundaries. India has, therefore creating policies for absorbing as many skilled laborers as they can. But this poses the tremendous challenge as there are increased chances of the hiring of ill-equipped and less skilled laborers which further increased the chances of inequalities and a social upheaval.
The second driver of globalization is the alteration in the economic power balance: India is gradually becoming a center for IT services, R&D centers in financial services along with the boom in Pharmaceutical industries due to its trained manpower and skilled employees. The manpower in India is efficient and cheaper as compared to other countries. Thus, India is gradually becoming a preferred location for services. While China has become world’s largest manufacturing factory while the services are being given to India.
These two countries are now emerging as the economic power of the world.
More attention to the social and environmental values: The people these days have integrated their thinking either business schools and firms along with paying attention to the environment and social issues. The precursor towards human resettlement in India was Narmada Dam movement. During that issue the forces in globalization were not prominent, still the awareness created had stirred the world. Due to these impacts, World Bank had abandoned the finance of Narmada Dam due to the issues for resettlement and displacing of agitated humans. Now, if there are similar issues in any part of the world, the community will react quickly to revert to it. Hence, the ethical, social and environmental values have to be integrated for making a sustainable model for the business.
Financial Integration
The whole world was impacted due to the 2008-2009 financial crisis, and the world could see the outcomes of financial integration. India and other Asian countries were not impacted significantly as they were not directly linked to the foreign system but still India pursued cautious liberalization policies. India recovered significantly from the crisis because of its resilient economy. Indian is faced with capital inflows and hence for reducing the competitiveness issues, India needs to sterilize the capital flows. The sterilizing of capital flows can help to expand their money supplies which will be beneficial to cause inflationary pressure on Indian economy. So a developing country like India should further handle its financial integration efficiently, and its financial market should be provided with ingenuity.
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Globalization and International Trade (1st ed.). Retrieved from http://www.worldbank.org/depweb/beyond/beyondco/beg_12.pdf
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Indian Business Environment: Globalization trends in Indian economy. Business-environment.blogspot.in. Retrieved 12 March 2016, from http://business-environment.blogspot.in/2009/02/globalization-trends-in-indian-economy.html
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Jindal, J. (2013). Globalization- It’s Socio-Economic Impact in India. permit. Retrieved 12 March 2016, from http://www.ermt.net/docs/papers/Volume_2/issue12_December2013/V2N12-126.pdf
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Kivikkokangas, R. (2015). What is globalisation? (1st ed.). Retrieved from http://www.helsinki.fi/geography/development_geography/what_is_globalisation.pdf
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