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The term globalization means

integration of economies and societies through cross country flows of information, ideas, technologies, goods, services, capital, finance and people

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




We have everything by globalization, we have nothing by globalization

Stages of Globalization
Domestic firm exports through dealers Domestic firm exports directly Domestic firm sets up units

Becomes a global firm by serving the needs of the customers

Domestic firm establishes a subsidiary

The Dimensions of Globalisation

Factors Causing Globalization

Technological Factors

Political Factors


Social Factors

Competitive Factors

Impact of Globalization on International Business

Globalization of Markets Globalization on production

Globalization on Investment
Globalization of Technology

India before LPG (prior to 1991)

Most banks were state-owned Banks, pension funds and

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

Pre-LPG period (prior to 1991)

Socialistic Model
Strict entry barriers in every subindustry. Difficult to start a bank, a mutual fund, a brokerage firm, an insurance company, a pension fund, a securities exchange or subbroking firm. Foreign firms were restricted to touch any one of these parts Comprehensive capital control and restrictive legislations


Big Villains were

MRTP act, 1969

The Capital Issues (control)

act, 1947 Indian Companies Act, 1956 Industries Act, 1956 Foreign Exchange Regulation Act, 1973

Globalization and India

Globalize its economy in 1991 Mounting problems- huge fiscal deficits, BoP crisis

and foreign exchange crisis

Foreign investors and NRIs had lost confidence in Indian


Major measures as a part of the Globalization strategy

Devaluation of Currency Disinvestment

Dismantling of The Industrial Licensing

Regime Abolition of the MRTP Act Allowing Foreign Direct Investment Wide-ranging financial sector reforms

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.

GDP growth rate before and after 1991

GDP growth rate %
12 10 8 6 4 2 0 1989 1990 1991 1992 1993 1995 1996 2004 2005 2006 2007 GDP growth rate %

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)

Coffee (Barista, Caf Coffee Day)

Sports Wear & Goods (Nike, Adidas) Apparels & Garments (Levis, Reid & Taylor) Cosmetics (Revlon, Oriflamme, Maybellene) Two/Four Wheelers (Honda, Toyota, Suzuki, Hyundai, General Motors, Ford, Mercedes) Computers (Dell, HP, IBM, Samsung, Sony) Construction Engineering Companies

Pharmaceuticals (US, Europe, Britain)

Music (Sony, BMG, Warner) Entertainment Channels (Star, National Geographic, Discovery, Sony)

Globalization in the context of the financial services sector

A Framework for Understanding the Impact of Globalization on the Financial Services Sector
Change in Structure
Change in Function

Reforms relating to the banking system

Capital base of the banks were strengthened by recapitalization, public

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

Exchange Control and Convertibility

Exchange controls on current account transactions were progressively relaxed culminating in current account convertibility. Foreign Institutional Investors were allowed to invest in Indian equities subject to restrictions on maximum holdings in individual companies. Restrictions remain on investment in debt, but these too have been progressively relaxed. Indian companies were allowed to raise equity in international markets subject to various restrictions. Indian companies were allowed to borrow in international markets subject to a minimum maturity, a ceiling on the maximum interest rate, and annual caps on aggregate external commercial borrowings by all entities put together. Indian mutual funds were allowed to invest a small portion of their assets abroad. Indian companies were given access to long dated forward contracts and to cross currency options.(Derivatives)

Reforms in the capital market

SEBI- the apex regulator of the Indian capital

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

Where does Indian stand in terms of Global Integration?

Over the past decade FDI flows into India have

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%.

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.

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