Globalization: Meaning and Impacts on Indian Economy

Globalization is seen as a process defining the growing interdependence between various economies of the world. The term is also used specifically for economic globalisation which stands for aligning regional economies with the global economies through the vehicle of trade, FDI, flow of capital, technological advancement and also wide-scale migration. It was only after the economic liberalisation in 1991, Indian economy tasted freedom in real sense. The LPG Policy of 1991, had four basic premises:

1. Devaluation: Indian currency was devalued by 18-19%.
2. Disinvestment: Many public sectors were sold to the private sector
3. Allowing FDI: FDI was allowed in both in Insurance and Defence sector.
4. NRI Scheme: NRIs were given same benefits as FIIs.

Thus, the policy opened Indian economy to new horizons and embraced privatisation in a big way. This served as the first footprint of globalisation on Indian economy. Due to the increased global interdependence, all economic policy formulations on a domestic front is not done in isolation from the outside world. They are heavily dependent on international economic health and norms. Likewise, any decision taken at a global platform has direct or indirect impact on domestic policies. Thus, it can be deduced that government has lost policy autonomy to the global forces.

Various sectors of Indian Economy:

• Agriculture:  India is an agrarian economy as agriculture is the primary source of living for over 55% of the population. In addition to this, agriculture also provides wage goods and raw materials for various non-agriculture sectors and industry. It is blessed with natural endowments of 23 agro-climatic zones and huge diversification of crops.

• Globalisation has touched every aspect of agriculture like technological advancement, improved production techniques and quality based enhancement. All three sectors of agriculture viz. farming, marketing and industrial support have made tremendous progress.
• In farming, globalisation has introduced complete mechanisation of the farms. Many new techniques are being used for seed development and production. Introduction of organic and hybrid varieties of seeds has revitalised the entire sector. Furthermore, new irrigation methods and techniques have also been used.
• In marketing of the produce, globalisation has helped farmers fetch new markets. This has given a boost to the agricultural exports. Introduction of big retailers from abroad to India has also come in favour of the farmers who work hard to feed the nation. They offer them good procurement price and a continuous market for the produce. Also, e-commerce has helped in the post production activities like selling.
• Industrial development also is a direct by-product of globalisation as it has led to highly sophisticated farm machinery, fertilizer etc. Also, there is a growth in food processing industry due to increased consumerism.
• On the other hand, there are issues like GM crops, competition in pricing, WTO compliance issues which limits the support the governments can extend to farmers etc. Relaxation of import duties has also harmed the Indian farmer.

Impact on Industry

The last decade has been highly pressurising for the world economy. Many nations could not recover completely from the 2008 financial downturn. However, India managed to register growth when other nations were falling apart. This sent positive signals to the world about the robustness of the economic framework in India.  As a result investor confidence was sky-high. The country provided promising future for both domestic and foreign investors. Entrepreneurial ventures also started booming on home front.  The entire procedure of doing business with India changed in terms of psychology, methodology, technology, ease of doing business and work culture. Indians were more aware of the global business ethics and therefore contributed immensely as human capital to the foreign firms. Moreover India is demographically a young country which is another major attraction for firms to invest in India. Furthermore, there is an apparent trend towards rapid urbanisation and many government-aided schemes to help people gain required skills to be able to become more employable.

• It has become possible for the present-day government to start schemes like Make in India, Skill India, Digital India as government has relaxed many norms for doing work.
• Many Indian industries have invested abroad and have entered into various kinds of agreements like joint ventures or mergers and acquisitions etc. This has raised their global competitiveness.
• Relaxation of investment norms and licences has attracted huge amounts of foreign investment especially in services, telecommunications, electrical equipments etc.
• The export-orientation is also increasing by setting up of various Special Economic Zones. These have made international presence felt through the route of mergers and acquisitions.
• The government is giving a lot of impetus to the small scale industrial sector. There is abundant availability of loans, microfinance and even other forms of easy credit. This has made them grow into medium scale operations.
• On the contrary, opening of some sectors to foreign investment led to the exploitation of their resources by the MNCs. Also, MNCs resort to less sophisticated technology in their Indian subsidiaries.
• The entry of MNCs has added to competition in the market and has led to excessive pressure on domestic companies to both raise quality and productivity to ensure survival.

Impact on Banking and Financial Sector

Financial sector reforms have been a major driver of Indian economic liberalisation.

• Globalisation has opened door to foreign investors to enter the domestic market. This has led to more competition as innovation has become the new norm. Due to rise in awareness people have also become less averse to the industry.
• The domestic financial intermediaries have taken on more risk-intensive roles to ensure survival in this highly competitive age.
• The industry has been transformed from a conservative outlook to a highly dynamic one as many new regulatory bodies and financial institutions have come up.
• The whole industry is undergoing an apparent transition due to large-scale market shifts, competition and technological developments.
• Banking structures and products have become more streamlined and efficient. A new work culture ethic has been embraced even by the domestic banks to live upto the sophistication of procedures presented by the foreign banks.