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integration of economies and societies through cross country flows of information, ideas, technologies, goods, services, capital, finance and people
PHENOMENON OF GLOBALISATION :
Proximity Location Attitude
Historical Development
Globalization has been a historical process with ebbs and flows. During the Pre-World War I period of 1870 to 1914, there was rapid integration of the economies in terms of trade flows, movement of capital and migration of people. The growth of globalization was mainly led by the technological forces in the fields of transport and communication. There were less barriers to flow of trade and people across the geographical boundaries.
ADVANTAGES of Globalization
1. Cost reduction
2. Global learning 3. Rapid industrialization 4. Better allocation of resources
5. Reduction in poverty
6. Employment generation 7. Balanced development 8. Better quality of life 9. Human development
A coca- cola stall outside the Grand Gateway 66 shopping mall in Xujiahui , Shanghai
About 85% of Dubai's population consists of migrant workers, a majority of whom are from India
DISADVANTAGES of globalization
1. THREAT TO DOMESTIC INDUSTRIES
2. UNEMPLOYEMENT 3. EXPLOIATATION OF LABOUR
Stages of Globalization
Domestic firm exports through dealers Domestic firm exports directly Domestic firm sets up units
Political Factors
Globalization
Social Factors
Competitive Factors
Globalization on Investment
Globalization of Technology
insurance companies were forced to buy State Issued bonds - primary investment. Bombay Stock Exchange was closed market. Run by Brokers for the benefit of its members. There was no right governance and regulation. There was no single derivative market. All financial transactions were controlled by the RBI and Ministry of Finance
Weapons
act, 1947 Indian Companies Act, 1956 Industries Act, 1956 Foreign Exchange Regulation Act, 1973
economy
Regime Abolition of the MRTP Act Allowing Foreign Direct Investment Wide-ranging financial sector reforms
IMPACT
Indias growth rate in the 1970s was very low at 3% and
GDP growth in countries like Brazil, Indonesia, Korea, and Mexico was more than twice that of India.
Though Indias average annual growth rate almost doubled
in the eighties to 5.9%, it was still lower than the growth rate in China, Korea and Indonesia. The pick up in GDP growth has helped improve Indias global position.
Indias position in the global economy has improved from
the 8th position in 1991 to 4th place in 2001; when GDP is calculated on a purchasing power parity basis.
Large Number of Multinationals Have Moved to India Post Globalization (Strategy 100% Equity, Collaboration, Franchise, Importing, Manufacturing)
Beverages (Coke, Pepsi) Fast Foods (McDonalds, Pizza Hut, KFC)
A Framework for Understanding the Impact of Globalization on the Financial Services Sector
Change in Structure
Change in Function
equity issues and subordinated debt. Prudential norms were introduced and progressively tightened for income recognition, classification of assets, provisioning of bad debts, marking to market of investments. Pre-emption of bank resources by the government was reduced sharply. New private sector banks were licensed and branch licensing restrictions were relaxed. At the same time, several operational reforms were introduced in the realm of credit policy: Detailed regulations relating to Maximum Permissible Bank Finance were abolished Consortium regulations were relaxed substantially Credit delivery was shifted away from cash credit to loan method
markets Regulations were framed for insider trading Abolition of capital issues control Introduction of free pricing of equity issues On-line trading was introduced at all stock exchanges
averaged around 0.5% of GDP against 5% for China 5.5% for Brazil. Whereas FDI inflows into China now exceeds US $ 50 billion annually. It is only US $ 4billion in the case of India
Consider global trade - India's share of world
merchandise exports increased from .05% to .07% over the past 20 years. Over the same period China's share has tripled to almost 4%.
Contd.
India's share of global trade is similar to that of the
Philippines, an economy 6 times smaller according to IMF estimates. India under trades by 70-80% given its size, proximity to markets and labor cost advantages.
Conclusion
A country must carefully choose a combination of policies that best enables it to take the opportunity while avoiding the pitfalls and utilizing globalization to the fullest extent possible.
Dont ask too many questions Use your analytical skills to develop your thinking
Thank you