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Responding to Globalization: India's Response
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RESPONSE TO GLOBALIZATION: INDIA'S RESPONSE
Globalization and What They Mean
In general, the term "globalization" means the integration of economies and societies through the cross-country flows of information, ideas, technologies, goods, services, capital, finance and people. cross-border integration can have several dimensions – cultural, social, political and economic. In fact, some people fear the social and cultural integration even more than economic integration. The fear of "cultural hegemony" haunts many. Limiting ourselves to economic integration, one can see that this happens through the three channels (a) trade in goods and services, (b) the movement of capital and (c) The flow of finance. In addition, there is also the channel through the movement of people.
Historical Development
Globalization has been a historical process with ebbs and flows. During the pre-World War from 1870 to 1914, there was a rapid integration of economies in terms of flows of trade, capital movements and migration of people. The growth was driven globalization mainly by the technological forces in the areas of transport and communication. There were fewer barriers to the flow of trade and people across the geographical boundaries. In fact there were no passports and visas and very few non-tariff barriers and restrictions on cash flows. The pace of globalization, however, decelerated between the First and the Second World War. The interwar period saw the construction of various barriers to restrict the free movement of goods and services. Most of the savings they thought they could prosper better under high protection walls. After World War II, all major countries determined not to repeat the mistakes they had made prior to opting for isolation. Even after 1945, there was a campaign for greater integration took long time to reach the level of pre-First World War. In terms of percentage of exports and imports to total production, the U.S. could reach the level before the World War only 11 percent in 1970. Most developing countries that gained independence from colonial rule in the immediate aftermath World War II followed a regime of import substitution industrialization. Soviet bloc countries were also protected from the process global economic integration. However, times have changed. In the past two decades, the process of globalization has proceeded with greater vigor. The first Soviet bloc countries are increasingly integrated into the global economy. More and more developing countries are turning to foreign policy-oriented growth. However, studies indicate that trade and capital markets are more globalized today than they were in the late 19th century. However, there are more concerns about globalization now than before because of the nature and speed of processing. What is striking about the current episode is not only fast but also the enormous impact of new technologies in the market integration, efficiency and industrial organization. Globalisation of financial markets has outpaced the integration of product markets.
Gains from globalization
The benefits of globalization can be analyzed in the context of the three types of channels of economic globalization identified earlier.
Trade in Goods and Services
According to standard theory, international trade leads to resource allocation is consistent with comparative advantage. This leads to the specialization that improves productivity. It is accepted that trade internationally, in general, is beneficial and that restrictive business practices hinder growth. That is the reason why many emerging economies, which in a principle depended on a growth model of import substitution, have moved to a policy of outward orientation. However, in relation trade in goods and services, there is a big concern. Emerging economies will reap the benefits of international trade only if the full potential availability of resources. This will probably require time. That is why international trade agreements to make exceptions to allow more time for economies developing in terms of reduction of tariff and non-tariff barriers. "Special and differential treatment" as it is often called has become an accepted principle.
Movement of capital
Capital flows between countries have played an important role in improving the productive base. This was especially true in the 19th and 20th centuries. Capital mobility allows the world's total savings to be distributed among countries that have the greatest investment potential. In Accordingly, the growth of a country is constrained by its own domestic savings. The inflow of foreign capital has played a significant role in developing the recent period of East Asian countries. The current account deficit of some of these countries have exceeded 5 percent of GDP in most of the period when growth was rapid. Capital flows may take the form of foreign direct investment or portfolio investment. For developing countries the preferred alternative is foreign direct investment. Portfolio investment does not directly lead to the expansion of productive capacity. You can do this, however, a step further. The investment portfolio may be volatile especially in times of loss of confidence. That is why countries want to place restrictions on portfolio investment. Without But in an open system such restrictions can not work easily.
Financial Flows
The rapid development of capital markets has been one of the important features of the current globalization process. While the growth of capital and foreign exchange markets have facilitated the transfer of resources through border, the gross turnover in foreign exchange markets has been very high. It is estimated that the gross turnover is about 1.5 trillion U.S. dollars per day the world (Frankel, 2000). This is of the order of one hundred times the volume of trade in goods and services. currency trading has become an end in itself. Expansion in foreign exchange markets and capital markets is a necessary prerequisite for the international transfer of capital. However, the volatility in the market foreign exchange and the ease with which funds can be withdrawn from the countries have created panic situations many times. The most recent example of this was the East Asian crisis. The contagion of financial crises is a worrying phenomenon. When a country faces a crisis that affects others. It's not like financial crises are caused only by currency traders. What the financial markets tend to do is exaggerate weaknesses. herd instinct is not uncommon in financial markets. When an economy becomes more open to capital and financial flows is even greater compulsion to ensure that factors relating to macroeconomic stability are not ignored. This is a lesson to all developing countries to learn from the East Asian crisis. As one commentator rightly said "The trigger was the feeling but the vulnerability is due to fundamentals. "
Concerns and fears
On the impact of globalization, there are two major concerns. These can be described as fear, even. In each of the major concerns that there are many concerns related. The main concern is that globalization leads to an unfair distribution of income between countries and within countries. The second fear is that globalization leads to loss of sovereignty country and that countries are increasingly difficult to stay independent national policies. These two issues must be addressed both theoretically and empirically.
The argument that globalization leads to the discrimination is based on the premise that, from globalization emphasizes the efficiency gains benefit to countries that are better endowed with natural and human resources. The advanced countries have had an advantage over other countries at least three centuries. The technological base of these countries is not only big, but very sophisticated. While the benefits of trade to all countries, higher profits accrue to countries industrially advanced. It is the reason why even in the current trade agreements, a case has been built for special and differential treatment in relation to countries developing. In general, this treatment provides longer transition periods in respect of reductions. However, there are two changes to international trade and who can work to benefit developing countries. First, for a variety of reasons, the industrially advanced countries are pushing certain areas production. These can be filled by the developing countries. A good example of this is what the East Asian countries did in the 1970 and 1980. Secondly, the International trade is no longer determined by the distribution of natural resources. With the advent of information technology, the role of human resources has become more important. human specialized skills will become the determining factor in the coming decades. The productive activities are becoming in "knowledge intensive" rather than "many resources." While there is a gap between developed and advanced countries, even in this area – some call "the digital divide – which is a gap that can be saved. A globalized economy with greater specialization can lead to greater productivity and faster growth. What is required is a balancing mechanism to ensure that the disadvantages of developing countries exceeded.
Regardless of whether inequitable distribution of income among countries has also been argued that globalization leads to the expansion of the income gaps within countries as well. This can occur in both the developed and developing countries. The argument is the same as that advanced in relation to the iniquitous distribution among countries. Globalization can benefit even within a country who have the skills and technology. The highest rate of growth achieved by an economy can be at the expense of reduced income of people who may be rendered redundant. In this context it should be noted that while globalization may accelerate the process of replacing technology in developing economies, these countries even without globalization facing the problem associated with moving from low to high technology. If the growth rate the economy is accelerating enough, then part of the resources can be diverted by the state to modernize and re-equip the people who may be affected by the last process grading technology.
The second concern relates to the loss of autonomy in economic policy research. In an economy highly integrated world, it is true that a country can not implement policies that are not in line with global trends. Capital and technology are fluid and move where profits are higher. As nations come together, whether in the political, social or economic field, some sacrifice of sovereignty is inevitable. The limitations of a globalized economic system in the pursuit of national policies must be recognized. However, it is not necessary lead to the abdication national targets.
Another fear associated with globalization is the insecurity and instability. When countries are strongly interrelated a small spark can start a general conflagration. Panic and fear spread quickly. The downside of globalization mainly emphasizes the need to create countervailing forces as institutions and international policy level. Global governance can not be relegated to the periphery, such as integration gathers speed.
The empirical evidence on the impact of globalization on inequality is not very clear. The aggregate share of world exports and the world's developing countries has been increasing. In total world exports, the participation of developing countries rose from 20.6 percent in 1988-90 to 29.9 percent in 2000. Similarly, the share of total world production in developing countries has increased from 17.9 percent in 1988-90 to 40.4 percent in 2000. The growth rate of developing countries in terms of GDP and GDP per capita has been higher than those of industrial countries. These growth rates were actually higher in the 1990s than in the 1980s. All these data indicate that developing countries as a group have suffered in the process of globalization. In fact, there has been substantial progress. But in developing countries, Africa has not done well and some South Asian countries have done better in the decade only 1990. Although the rate of growth of per capita income of developing countries in the 1990s is almost twice that of industrialized countries countries in absolute terms the gap in per capita income has increased. As for income distribution within countries, it is difficult to judge whether globalization is the primary factor responsible for any deterioration in income distribution. We have had a considerable controversy in our country about what happened with the index poverty in the second half of the 1990s. Most analysts, including India would agree that the relationship between poverty has declined in the decade 1990. There may be differences as to what speed at which it has fallen. However, if you are in India or in any other country, it is very difficult for track changes in income distribution within countries directly to globalization.
India Pose
What should be the India's attitude in this environment of increasing globalization? First we must mention that the choice of globalization is not a viable option. There are now 149 members in the World Trade Organization (WTO). Some 25 countries are waiting to join the WTO. China has recently been admitted as a member. What is needed is to develop an appropriate framework to wrest maximum benefits from international trade and investment. This should include (a) make explicit the statement of claims that India wants to do in the multilateral trading system, and (b) the measures that India should take to realize the full potential of globalization.
Claims in the trading system
Without being exhaustive, the demands of developing countries in the multilateral trading system should include (1) establish a symmetry between the movement of capital and individuals, (2) environmental and labor standards decoupling considerations in trade negotiations, (3) to zero tariffs in industrialized countries export labor-intensive in developing countries, (4) adequate protection for genetic material or biological and traditional knowledge of developing countries, (5) no
unilateral trade action and the extraterritorial application of laws and regulations, and (6) effective restraint in industrialized countries to initiate antidumping and countervailing measures against exports from countries developing.
The aim of the new trading system should be to ensure "free and fair trade among countries. The emphasis so far has been in "free" instead of "fair" trade. It is in this context that rich industrially advanced countries have an obligation. They have often presented to "double standards". While requiring developing countries to remove barriers and join the mainstream of international trade have been raised significant tariff and nontariff barriers to trade in developing countries. Very often, this has been the result of heavy lobbying in countries advanced to protect "work." Although average tariffs in the United States, Canada, Europe, European Union and Japan – the so-called Quad countries -: of only 4.3 percent in Japan to 8.3 percent in Canada, their tariffs and trade barriers are still much higher on many products exported by countries developing. The major food products such as meat, sugar and dairy products attract tariff rates of more than 100 percent. Fruits and vegetables as banana is hit with a 180 percent tariff on European Union, once the quotas are exceeded. The fees collected by the U.S. U.S. $ 2 billion of value imports from Bangladesh are higher than those imposed on imports worth 30 billion U.S. dollars in France. In fact, these trade barriers impose a heavy burden developing countries. It is important that if rich countries want a trading system that is truly just, must submit to reduce trade barriers and subsidies prevent products from developing countries reach their markets. Otherwise the reasons for these countries for a competitive system will ring hollow.
In some As the conflicts between countries on trade are endemic. Until recently, agriculture was a major bone of conflict between the U.S. and EU countries. The frictions are also bound to emerge among developing countries. When import tariffs on edible oil in India increased, protest most serious came from Malaysia, who was one of the leading exporters of palm oil. Indian Entrepreneurs complain of cheaper imports from China. In the export of rice, a major competitor of India is Thailand. If development is accepted as the main objective of trade and the Doha Declaration proclaims, should be possible to develop a trade agreement that is beneficial to all countries.
There have been lengthy negotiations in the WTO in reforming the trading system. It is true that the tariff and nontariff barriers are coming down. However, there are fears that the concerns of developing countries are not being addressed adequately. Looked at from this point of view, the recent Hong Kong Ministerial is a modest success. Despite reservations, we must recognize that it is a step forward. Domestic support to agriculture developed countries is a major obstacle to the third expansion of world trade. However, India's position in relation to agriculture has been "defensive." We are not a major player in the world agricultural market. The impact of what has been accepted in relation to non-agricultural products and services market access vary from one country to another. Notwithstanding any contrary view, the gain to India of the services can be significant. However, the Hong Kong Ministerial is only a broad statement of intent. Much will depend on how these ideas are translated into action.
Actions for India
The second set of measures that should be part of the action plan should refer to strengthening India's position in international trade. India has many strengths, several developing countries lack. In that sense, India is different and is in a stronger position to benefit from trade and international investment. part of India at the top IT industry in the world is a reflection of the abundance of skilled labor in our country. It is therefore in the interest of India to ensure that there is greater freedom movement of skilled labor. At the same time, we try to make every effort to ensure that we remain a frontline country in the area of labor skilled labor. India can attract more foreign investment if it can accelerate our growth with stability. Stability in this context means balance in fiscal and external accounts. We maintain a nationally competitive environment so that we can fully benefit from wider market access. We must make good use of time extended to developing countries to eliminate trade barriers. Wherever the laws have an obligation to protect such areas as agriculture, they need to be approved quickly. In fact, we had taken time to pass the Protection of New Varieties of Plants and the Law on Farmers' Rights. Also must be active to ensure that our companies make effective use of new patent rights. South Korea has been able to provide in recent years up to 5000 applications patents in the United States, while in 1986 the country had only 162. China has also been very active in this field. We need a real body active in India to encourage Indian companies to file patent applications. Indeed, we must build the institutions necessary to further maximize the benefits trade and investment.
Changes in foreign trade and foreign investment policies have altered the environment in which Indian industries have to operate. The path of the transition is undoubtedly difficult. Greater integration of the Indian economy with the rest of the world is inevitable. It is important that industry Indian and organized look forward to compete with the rest of the world at rates comparable to those of other developing countries. Obviously, the Government of India should be vigilant to ensure that industries in India are victims of unfair trade practices. The safeguards available on the WTO agreement must be fully utilized to protect the interests of the industries in India.
Indian industry has the right to demand that the macroeconomic environment of economic policy should be conducive for rapid economic growth. The configuration of policy decisions in recent times has been trying to do that. It is, however, the time of India industrial units to recognize that the challenges of new century demand greater action at the enterprise level. They must learn to swim in the stormy waters of competition and outside protected waters of the pools. India is no longer a producer of goods and services for the domestic market. Indian companies are emerging and have to become global players. At a minimum, be able to face global competition. The search for the identification of new competitive advantages to begin in earnest. rise India in information technology (IT) is only partly by design. However, it must be said that the provision of policy makers once the potential of this area was discovered, the political environment friendly industry became strongly.
Over a wide range of activities, the advantage of India, real and what can be accomplished in a short space of time must be developed. Of course, in a number of cases will require the construction of plants worldwide. But this does not have to be so in all cases. In fact, the advent of IT is changing the industrial structure. The revolution in telecommunications and is both creating a huge single market economy, while the smaller parts and more powerful. What we need today is a roadmap for industry India. It should delineate the path of different industries must take to achieve productivity and efficiency levels comparable to the best in the world.
Globalization in a fundamental sense, is not a new phenomenon. Its roots extend further and deeper than the visible part of the plant. It is as old as history, starting by the great migrations of people across large land masses. Only the latest developments in computer and communication technologies have accelerated the process of integration, geographical distance becoming less of a factor. Is this "end of geography" a boon or a bane? Borders have become porous and the sky is open. With modern technology that does not geography, it is not possible to contain the ideas, whether in the political, economic or cultural. Every country must prepare itself to face new challenges so that you are not apart of this great wave of technological and institutional changes.
Nothing is an unmixed blessing. Globalization in its present form but encouraged by the far-reaching technological change is not a purely technological phenomenon. You have many dimensions including ideological. To cope with this phenomenon, we must understand the gains and losses, benefits and dangers. To be forewarned, as the saying goes, to be prepared. But we must not throw the baby with the bathwater. They must also resist the temptation to blame globalization for all our failures. Very often, as the poet said, the fault lies in ourselves.
The risks of an open economy are well known. We must not, however, miss the opportunities that the global system can offer. As an eminent critic has noted, the world can not marginalize India. But India, if desired, can marginalize itself. We must guard against this danger. More than many other developing countries, India is able to snatch a significant increase in globalization. However, we must express our concerns and in cooperation with other developing countries modify the international trading system to meet the special needs of these countries. At the same time, we must identify and strengthen our comparative advantages. It is this dual approach will enable us to meet the challenges of globalization, which may be the defining feature of the new millennium.
The key to India's growth lies in improving productivity and efficiency. It must permeate all areas of our lives. Contrary to general impression, the natural resources of our country are not very large. India accounts for 16.7 percent of the world while population is only 2.0 percent of the global land surface. While China's population is 30 percent higher than in India, has an area of land that is three times that of India. In fact, from the point of view of long-term sustainability, the need for greater efficiency in the management of natural resources land, water and minerals has become urgent. In a capital scarce economy like ours, efficient use of our capacity becomes even more critical. For all these things happen, we need well-trained and highly skilled. In today's world, competition in any field is competition in knowledge. Therefore, we to create institutions of excellence. I am therefore happy that the Ahmedabad Management Association, among other functions, also focuses on excellence in education. Increased productivity resulting from improved skills is the real answer to globalization.
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