GLOBALISATION

CLOSED ECONOMIES
In the initial years of development, most economies are inward-looking (closed)
economies with a strong focus on domestic demand, domestic population, domestic resources
and fulfilling the basic needs in an economy. These economies are characterised by high-levels
of insulation from the rest of the world virtually and complete cut-off from trade with imports
restricted to essentials not possible to produce in the domestic economy and exports are
permitted only of surplus overdomestic demand.
Such economies have a large role in the government as a direct producer of goods and
services in the economy, highly regulated (remember India before 1991 reforms), focused on
self-reliance and import substitution. However, as economies move up the development
ladder, inflexibility, high levels of controls, relative inefficiencies and high-wage cost starts
building up of a highcost economy stifling the economy.
 This gets compounded by their relative inability to increase growth rates and income
because of the inadequacy and misallocation of resources, technology and knowledge.
Further, import of goods increases to meet domestic requirements.
The inward character of such economies become liability and forces them or pushes
them to look outwards not as a matter of choice but as a compulsion, which is looking
‘outwards’ to meet ‘inward’ or domestic requirements of an economy.
Fast-paced global developments over the last two decades have played the role of
facilitators to the changed outlook, making this transformation seamless and a natural
outcome.
WHAT ARE THESE FACILITATORS?
(1) Global Accessibility: The global economy has virtually shrunk with multi-modal fast
global accessibility in terms of speed and time taken to travel. Air travel previous?,
meant for ‘elite’ has been brought closer to the ‘common man by making it affordable
Travel today is faster, lesser time-consuming, comfortable and also affordable for the
people. This has given boost to tourism and more importantly increased the ‘awareness’
of different economies.
(2) Telecommunication Revolution: Telecommunication has undergone a complete
revolution in the last two decades, both in terms of global tele density as well as reach.
Technology-intensive telephony is cost-effective and provides cheaper mode of
telecommunication. Audio telecommunication is now giving way to visual
telecommunication allowing one to view and talk at the same time. Multilocation video
conferencing is gaining popularity as it saves time of travel besides providing an
alternate way of telecommunication simultaneously across multiple locations.
However, the real revolution is mobile telephony which has completely redefined
telecommunications globally. Information Metamorphosis: It is a metamorphosis of the form
of information from physical gathering, books, literature, magazines, previously known as
‘information asymmetrical’ (less information) to that of now symmetrical information
(complete information) through the internet powered by the ‘search engines' (google, yahoo,
etc.).
What this has done is global information’ right on your computer cutting across countries,
products, services and knowledge. This has not only increased awareness, speed of
information gathering but also the knowledge base of people. Media Transformation: The
media transformation has been a gradual shift away from the print media to electronic media
with the advent of televisions.
Satellite connectivity today allows one to watch global developments right in ones own
drawing room. Redefined Living Standards: The living standards of people have also
undergone a change from ‘hard living’ to ‘soft living’ facilitated by the availability, enlarged
choice set with greater stress on convenience and comfort. Increased demands for televisions,
refrigerators, washing machines, air conditioners, etc., is not only because of increased
income levels but also because of their continuous falling prices making them affordable. The
easy paced lifestyle has paved way to fast-paced lifestyle such as fast foods, convenient goods,
etc.
Cultural Exchanges: Globalisation has facilitated and still facilitating socio-cultural
exchanges across the countries and communities. These exchanges of ideas have cross border
influence now, than ever before.
All the above factors have led to integration of the world economy from an economic
perspective to what is known as a ‘global village’. Goods and services today are not confined
to geographies but are available across the countries. Countries of origin have lost relevance
with emergence of global brands and global players.
It is difficult to ascertain today that a good being purchased is of which country. For
example, Sony, a Japanese company could be selling televisions in India which may have been
manufactured in Korea or Taiwan. Today goods and services, and their availability not
identifiable by geographical boundaries but are driven by markets.
The above facilitators have served as an accelerator to the transformation of an in ward
looking (closed) economy to an outward-looking (open) economy which is known as the
process of globalization. The first thing to understand is that globalization is not an objective
but a process or a journey towards opening up of an economy by looking towards the rest of
the world and to achieve integration in a rapidly transforming global village.
GLOBALISATION INDICATORS
The degree of openness and thus globalisation though generic in nature, differs from country
to country in the process followed, but has a few common characteristic such as:
(1) Lowering the levels of insulation from the rest of the World.
(2) Easing of restriction on cross borders inflow of goods, services, resources and
investment.
(3) Increasing share of exports and imports to GDP of economies.
(4) Greater thrust on exports.
(5) Increasing share of exports of goods and services in GDP.
(6) Increase in foreign currency transactions in relation to the total output.
(7) Focus on competitive forces, greater efficiency levels aiming at achieving global
competitiveness.
(8) Globalization is also a reflection of the changed ideology and mind set of the
government. Inward-looking economies like erstwhile
USSR or the Soviet Union. China initiated their transformation in the seventies and India
still later in the nineties. It can be said that curtains have fallen on the era of closed economies
with the largest inward-looking economies which comprises of the erstwhile USSR, China and
more recently India having adopted open policies through reforms in the domestic sector.
India’s efforts at globalisation, as mentioned previously in the nineties, was a part of
Economic Reforms of 1991 centred around the three pillars of liberalization, privatization and
globalization also known as the L,P,G of economic reforms. Liberalization and privatization are
to achieve domestic competitiveness while globalization is to achieve global competitiveness.
Their roles are complimentary reinforcing each other. It is not possible to achieve the global
competitiveness unless domestic sector is competitive and efficient.
 All of them are processes rather than objectives to achieve better qualitative growth and
widespread economic betterment, besides meeting ever expanding domestic requirements of
the economy but with the active government interventions.
India’s efforts at globalisation had two significant aspects—one was the traderelated
globalisation which was relatively slow, compared to the other aspect of financial integration,
with the capital inflows on the current and capital account sharply increasing and exceeding
100 per cent of the GDP.
Globalisation is a relatively new concept, dynamic, continuously evolving, requiring
redefinition in terms of need and the most important aspect is, it is driven naturally across
economies and could be said to have crossed the stage of ‘as a matter of choice’, but a matter
of compulsion’ or being driven naturally with the tide.
WHILE BEING DRIVEN INTO THE GLOBAL VILLAGE, CAN HAVE ITS OWN FALLOUT
TOO
While it is a fact that globalisation has been a natural process driven out of need it could
also have its own set of fall outs as under:
(1) Coupling of Economies: The relative coupling of economies in a global perspective
would not allow decoupling of economies from adverse global fallouts.
(2) The ability of economies to insulate themselves from crisis of one country adversely
impacting their economies was possible rill the nineties.
(3) Like the earlier crises of Mexico, Chile, South-east Asia and Argentina, economies did
nor impact countries like India. It was widely believed that globalisation and decoupling
theory could co-exist i.e., economies even when following open policies could remain
relatively de-coupled from adverse global fallouts.
However, the world recession of 2008 has exposed the earlier belief. It is not possible for
economies to remain as ‘hermit economies’, which is insulated from rest of the world in
adverse times.
Economies of the world including India, China and other emerging economies were also
impacted by the global crisis, though to a lesser degree. However, as they pursue open policies
they would increasingly be coupled making them vulnerable and susceptible to adverse global
fallouts.
The coupling neither be geographic nor be selective but is global in nature. Problems of
Greece and Spain can also impact countries such as India and China.
GLOBALISATION WOULD ALSO BRING ITS OWN SET OF CHALLENGES
While globalisation does provide for means of betterment for economies, it has some inherent
challenges which will have to be addressed:
(1) While decisive thrust on exports is required, there would be pressures for liberal
imports which could create issues in the domestic sector by making imported goods
cheaper threatening domestic goods. Already, the Indian market has a large number of
low-priced Chinese goods.
(2) With easing of restrictions on inflows there could be a surge on foreign funds which
could have an adverse impact like appreciating home currency and hurting exports
especially for a country like India (explained in the section on Exchange Rate later).
(3) It could lead to increase conspicuous consumption or ‘consumerism’ leading India into a
consumption-driven from investmentdriven economy. This can lead to lopsided
development neglecting the interests of the masses. Greater production of goods
demanded and lesser production of those which are less-demanded. Any consumerism
also leads to lower savings in
(4) the economy.
(5) The biggest challenge of globalization would be in making the domestic sector globally
competitive, ability co withstand global competition and make inroads into global
markets.
(6) The other is about expectations from globalisation. It is not’ to provide answers for
larger issues of poverty, unemployment, reducing regional imbalances or other such
issues.
 As mentioned previously, it is all about achieving integration with the rest of the world,
global competitiveness as the key to globalisation. Therein, lies the challenge of the ability of
the government to change the misconception of globalisation .
The Economic Reforms of 1991 comprising of liberalisation , privatisation and globalisation
seeking to achieve domestic and global competitiveness , increased share in global trade,
efficient and competitive domestic manufacturing base, higher growth driven by
manufacturing sector and exports.
The increased growth, would ‘over a period of time’, bring about overall development. And
the government in letting economic reforms to deliver should also be conscious of the fact
that answers to the larger issues of poverty, unemployment, regional imbalances lie within
‘its’ domain.
A criticism of the economic reforms of not delivering in these areas or not impacting social
issues, is an acceptance, by the government, of not being able to clearly delineate deliverables
from economic reforms from ‘deliverables falling within government’ own domain.
IMPACT ON INDIAN SOCIETY SO FAR
Indian society is one among the oldest in the world, varied and complex in its heritage.
It has a diverse culture of unity in diversity; having withstood the colonial rule but yet
impacted, with society entrenched and weaved around considerations of race, religion, caste,
community, language and region.
A heterogeneous society with overriding concerns of a low income economy and large-
scale poverty inherited postIndependence. The painstaking rebuilding of the economy was a
slow and gradual process , culminating in the process of a series of reforms lifting growth,
economic empowerment and improvement in standards of living of its people . This is not to
say that poverty is no longer an issue. Higher growth has led to a reduction in poverty levels.
But, rural India where the heart of India resides , by and large , has not undergone any
significant transformation and a society still, with a traditional outlook
and conservative beliefs.
 Reforms and their impact on economy and the people have largely been around urban
India. The economic perspective has been dealt in the previous sections. An attempt is made
here to understand how it has affected lives of urban India.
Growing Middle Class
A direct impact of globalisation widely accepted is the growing middle class, especially
China and India as a part of Brazil, Russia, India, China and S. Africa (BRICS) economies, a
potential market of the future with definite increased income, enhanced purchasing power,
demand for better variety of goods and distinct improved and changed life style.This is being
observed not only in metro cities but also spreading across tier 2 and 3 cities.
This class is creating a niche for newer goods attracting more foreign companies to set
up shops. The ‘mall culture’ as shopping and entertainment under one roof, is gradually
spreading across a large number of cities, witnessing a large number of foot falls. ‘Fast food’ is
gradually gaining acceptability amongst the middle class. Dining out which was once only for
the elite society, has now become a common feature of the growing middle class.
Global Goods and Services
As has been addressed earlier, one of the objectives which globalization seeks to
achieve, is to enlarge the choice set’ of a wider and diversified basket of goods and services,
available globally, at ‘affordable’ prices for the people in India. Today, goods and services are
moving pan India, without any nationality but as brands, reaching different sections of people.
Another notable feature has been goods and services fit every class of consumer.
Information Symmetry
Globalisation has not only increased choice set, but also provided for ‘information
symmetry’ enabling them to take informed decisions, on their requirements and the best bet
for them. This is complete contrast to the earlier information asymmetry, which often resulted
in decisions based on the seller of goods, rather than own perception about goods/ services.
These information gaps have now been sealed. This has raised levels of awareness of the
people who are now better informed. It has also raised levels of knowledge of people cutting
across different age groups.
Mobile Telephony
One of its biggest contributions has been the spread of affordable mobile telephony even into
villages, achieving a penetration level of over 80 per cent in about five years. Villages which
were earlier cut-off from the communication links due to adverse topography, difficult and
hilly terrains are now well-covered. It has definitely improved communications and also the
life style of the people in general.
Social Networking
An outcome of globalisation has been the spread of social networking sites which has
allowed a novel way to connect with people irrespective of their location. It provides a wide
platform for ‘faceless communication’ and ‘free and frank expression’ of views almost
instantaneously across the world. It has allowed ‘discovery’ of friends and acquaintances, of
connecting with those people who had lost contact or whose whereabouts were not known.
This has led to a more ‘open society’ not bound by caste, creed or religion.
Cross Border Cultural Engagement
Thanks to the growing middle class for increasing income, together with air travel becoming
cheaper, has promoted cross border tourism, with many Indians travelling abroad for
vacations and holidays, increasing their exposure to different people and culture of different
countries. Further, there is also an increase ‘in bound tourism’ with more and more foreigners
visiting in India which has increased cross border cultural engagement. This has led to better
understanding and acceptability of different cultures and developing mutual respect of each
other.
Emergence of a Harmonised Culture
Globalisation has resulted in not only greater cross border cultural engagement, but
also marks emergence of a harmonized culture, with cross border acceptability. This culture
can be seen, in the perceived preferences or unisex personal wear, celebrations such as
fathers , mother ’s and valentine ’s day. This harmonised culture cuts across caste and creed,
fostering a cohesive society.
Changing Role of Women
Women have always occupied centre stage in society. There are an increasing number
of women today who are seeking a career, being independent, leading a life as they wanted,
rather than being directed by a family. The more important aspect is acceptance of this fact by
the society, of going beyond running homes and marriage as the ultimate for any girl. They
today have the same status as their male counter parts, commanding respect from them.
Many Indian women have reached the top of the ladder both in India as well as globally. Many
jobs which were considered as male bastion are now being performed by women. Flying
aircrafts, army, police, etc., now have sizeable women participation. Dowry system which
virtually had become institutionalized in the past has seen a decline.
However, can we say that this globalization has not impacted society’ in any adverse
manner? While globalisation has been able to expand the middle class, there is now an upper
and a lower’ middle class with wide income in equality. It has led to consumerism. But it
cannot be attributed to the process of globalisation, as in general income levels have
increased and as mentioned previously, globalisation has only allowed for increase in the
choice set for the consumers’.
But the present society has become more materialistic; life styles have become fast
tracked, lesser time for relationships, with everyone in a rat race of out doing the other.
Satisfaction levels have become relative and craving for more. Nothing wrong with this, except
that it has led to increase in health disorders and an early ‘burn out’ of the people.
Even though women have now changed and bigger role, crime against them, in
particular has increased. Cases of physical abuse, marital discords leading to divorces have
only increased. Newer concepts of ‘live in relationships have emerged. Urban India has
become more liberal and modern in outlook especially the young generation. Their addiction
to the internet and social networking sites has led to their abuse. Extensive use of mobile for
purposes, other than communication has increased, resulting in distraction and taking them
away from studies.
 There is also an exodus of students going abroad for higher studies and seeking
employment overseas, resulting in ‘brain drain’ from India.
Can it be said that globalization has been a bane for society?
Globalisation is not only about India, it has been a wave encompassing the world
economy and cannot be seen as a bane either from the economy or societal perspective. It is
not about an option but about acceptance as part of global integration. As a process, it cannot
be faulted and its abuse is not a fault of the process. Social ills seen as fallout of globalisation
have always been there only that now they have been highlighted. Globalisation is about
economic betterment and the benefits of such betterment will always be in the society itself.
Yes, some may benefit more others less, but benefits will always be there.
People, society and economy are integral in any development process. Reforms are
aimed at not only uplifting the economy as a whole but also provide better standards of living
for its people. Globalisation is getting the ‘best’ at the door step of people. It is about our
people benefiting from others. It is a blend of the world economy looking for newer markets
and our people getting the best of the world. The world order is changing, so also has to be
our thinking and perceptions. It is about accepting change. The endeavour should be how to
reach out to a larger cross section of people? How to overcome the hurdles which come in the
way?
Globalisation today is not a subject matter of debate, but a natural process driven
across economies, as a necessity, for meeting own needs of economies.