The history of globalization is probably as old as the history of human civilization.

The history of
globalization can be traced back to the Harappan civilization era. During that period, farming was the main
lively hood and these farmers mainly grew wheat, rice, and cotton. The people in coastal region of India
produced salt. These farmers of India had transnational business relations with West Asian countries and
the most prominent of them being Iraq (then Mesopotamia). They traded articles like gold, silver, metals,
potteries, gems, cotton, silk, food grains, honey, and spices like cinnamon and pepper. The history of
globalization also suggests that the economy of ancient India had a strong cross border trade and
commerce relation with China and they mainly traded food grains, spices, cottons, gold, silver, and
metals. Further, a more organized form of trans-world trade has been in force from the mid of 14th
century and it started as a means to explore new business destination and opportunities. Furthermore,
Chandragupta Maurya who reigned during the period 325 BC popularized expansive trade and economy.

Alexander the Great forges eastward link with Chandragupta Maurya for overland routes between the
Mediterranean, Persia, India, and Central Asia. During the 1st century CE the trans-world trade makes its
first major appearance in China under the Han dynasty and successfully established trade relations with
Asian and European countries. The period from 650-850 AD records the expansion of Islam and trade
relations with the west Mediterranean region with the Indian sub-continent. The Rise of Genghis Khan
during 1100 AD gave rise to the integration of overland routes across Eurasia. The 1650s marks the
expansion of the slave trade and it sustained the expansion of Atlantic Economy, giving birth to integrated
economic and industrial systems across the Ocean. The period from 1776 to 1789 AD marks the US and
French Revolutions and the creation of modern state as a fall-out of military and business interests. These
integrated empires expand during the industrial revolution. The eighteenth century marks the merging of
the modernity with globalization and it also marks the foundation for the creation of international trade
law.

The modern day Indian economy (1900) had taken cue from the history of globalization and structured its
foreign trade policy accordingly. The liberalized economic policy adapted and implemented by the
Government of India, finds its root back to the rich history of globalization.

The latest effects of globalization with respect to Indian markets are as follows -

• Industrial Growth - for the first time has exceeded 10%. Manufacturing growth rate has exceeded
12 % in 6 months (April-September 2006). The mining and quarrying sector has registered a
growth of 4%. The electricity sector recorded a double-digit growth of 12% during September 2006
as compared to September 2005. Consumer durables and non-durables have also recorded
upswings. The use-base economic sub-groups, intermediate goods have registered an impressive
growth of almost 15% during September 2006 over September 2005. Consumer goods have
recorded a high growth of 13%. The National Manufacturing Competitiveness Council has targeted
12 to 14% growth in the 11th Plan period

• Foreign Institutional Investors (FIIs) - net investments in equities crossed US$ 7 billion in calendar
2006. FII net investment till 6 November 2006 has been US$ 7.08 billion, according to the
Securities and Exchange Board of India. 151 new FIIs have opened their offices in India during first
10 months of 2006. The total number of FIIs in India stands at 974 as on November 2006

• Foreign Direct Investment (FDI) - India envisage of attracting $10 billion of foreign direct
investment (FDI) this year as inflows have nearly doubled to US$ 4.4 billion in April-September
2006. In September 2006, FDI inflows grew 225% to US$ 916 million as compared to US$ 282
million in the same month last year. Services attracted maximum investment of US$ 1.5 billion
recording growth of 350%. Telecommunication sector with inflows of US$ 405 million has
registered the maximum growth of 950%. Corporate India has recorded its highest rise in salaries
at 22% in the first half of 2006-07 against increase of 17% in 2005-06
 • India's Balance of Payments - is expected to remain comfortable
• Merchandise Exports - recorded strong growth
• The Invisibles Account - remained positive during last financial year and financed 2/3 of the trade
deficit
• India's Foreign Exchange Reserves - were US$ 166.2 billion as on October 2006, showing
increment of US$ 14.5 billion over end-March 2006
• India's economy grew at 9.3% in quarter April-June and it was driven by manufacturing,
construction and services sector and agriculture sector
• GDP factor for the first quarter of 2007-08 was at Rs 7,23,132 crore, registering a growth rate of
9.3% over the corresponding quarter of previous year
• Manufacturing industry registered 11.9% growth
• The passenger vehicles sector grew by 11.61% during April-May 2007
• Electricity, gas & water supply performed well and recorded an impressive growth rate of 8.3%
• Construction growth rate rose to 10.7%
• Trade, hotels, transport and communication registered a growth rate of 12%
• Financing, insurance, real estate and business services recorded an impressive growth rate of at
11% during the 1st quarter of this fiscal
• Community, social and personal services maintained a decent growth rate of 7.6%
• The growth rate of agriculture, forestry & fishing' and 'mining & quarrying' are estimated at 3.8 per
cent, and 3.2 %, respectively during the 1st quarter of 2007-2008
• Exports grew by 18.11% during the 1st quarter of 2007-2008 and the imports shoot up by 34.30%
during the same period
• India's FOREX reserves (excluding Gold and SDRs) stood at $219.75 billion at the end of July ' 07
• The food sector is estimated to be of US$ 200 billion and it is expected to grow to $310 billion by
2015
• Stocks of food-grains grew by 13.1% to 17.73 million tons
• The annual inflation rate was 4.45% for the week ended July 28, 2007
• India's Balance of Payments is expected to remain comfortable
• Merchandise Exports recorded strong growth

Impact of Globalisation on Developing Countries and India

Impact of Globalisation on Developing Countries and India
by Chandrasekaran Balakrishnan

Chandrasekaran Balakrishnan for The 2004 Moffatt Prize in Economics

Introduction:

Globalisation is the new buzzword that has come to dominate the world since the nineties of the last
century with the end of the cold war and the break-up of the former Soviet Union and the global trend
towards the rolling ball. The frontiers of the state with increased reliance on the market economy and
renewed faith in the private capital and resources, a process of structural adjustment spurred by the
 studies and influences of the World Bank and other International organisations have started in many of
the developing countries. Also Globalisation has brought in new opportunities to developing countries.
Greater access to developed country markets and technology transfer hold out promise improved
productivity and higher living standard. But globalisation has also thrown up new challenges like growing
inequality across and within nations, volatility in financial market and environmental deteriorations.
Another negative aspect of globalisation is that a great majority of developing countries remain removed
from the process. Till the nineties the process of globalisation of the Indian economy was constrained by
the barriers to trade and investment liberalisation of trade, investment and financial flows initiated in the
nineties has progressively lowered the barriers to competition and hastened the pace of globalisation

Definition:

Globalised World - What does it mean?

Does it mean the fast movement of people which results in greater interaction?

Does it mean that because of IT revolution people can be in touch with each other in any part of the
world?

Does it mean trade and economy of each country is open in Non-Intrusive way so that all varieties are
available to consumer of his choice?

Does it mean that mankind has achieved emancipation to a level of where we can say it means a social,
economic and political globalisation?

Though the precise definition of globalisation is still unavailable a few definitions worth viewing, Stephen
Gill: defines globalisation as the reduction of transaction cost of transborder movements of capital and
goods thus of factors of production and goods. Guy Brainbant: says that the process of globalisation not
only includes opening up of world trade, development of advanced means of communication,
internationalisation of financial markets, growing importance of MNC's, population migrations and more
generally increased mobility of persons, goods, capital, data and ideas but also infections, diseases and
pollution

Impact on India:

India opened up the economy in the early nineties following a major crisis that led by a foreign exchange
crunch that dragged the economy close to defaulting on loans. The response was a slew of Domestic and
external sector policy measures partly prompted by the immediate needs and partly by the demand of the
multilateral organisations. The new policy regime radically pushed forward in favour of amore open and
market oriented economy.

Major measures initiated as a part of the liberalisation and globalisation strategy in the early nineties
included scrapping of the industrial licensing regime, reduction in the number of areas reserved for the
public sector, amendment of the monopolies and the restrictive trade practices act, start of the
privatisation programme, reduction in tariff rates and change over to market determined exchange rates.
Over the years there has been a steady liberalisation of the current account transactions, more and more
sectors opened up for foreign direct investments and portfolio investments facilitating entry of foreign
investors in telecom, roads, ports, airports, insurance and other major sectors.

The Indian tariff rates reduced sharply over the decade from a weighted average of 72.5% in 1991-92 to
24.6 in 1996-97.Though tariff rates went up slowly in the late nineties it touched 35.1% in 2001-02. India
is committed to reduced tariff rates. Peak tariff rates are to be reduced to be reduced to the minimum
with a peak rate of 20%, in another 2 years most non-tariff barriers have been dismantled by march
2002, including almost all quantitative restrictions.

India is Global:
The liberalisation of the domestic economy and the increasing integration of India with the global economy
have helped step up GDP growth rates, which picked up from 5.6% in 1990-91 to a peak level of 77.8% in
1996-97. Growth rates have slowed down since the country has still bee able to achieve 5-6% growth rate
in three of the last six years. Though growth rates has slumped to the lowest level 4.3% in 2002-03
mainly because of the worst droughts in two decades the growth rates are expected to go up close to 70%
in 2003-04. A Global comparison shows that India is now the fastest growing just after China.

This is major improvement given that India is growth rate in the 1970's was very low at 3% and GDP
growth in countries like Brazil, Indonesia, Korea, and Mexico was more than twice that of India. Though
India's 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 India's global
position. Consequently India's 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.

Globalisation and Poverty:

Globalisation in the form of increased integration though trade and investment is an important reason why
much progress has been made in reducing poverty and global inequality over recent decades. But it is not
the only reason for this often unrecognised progress, good national polices , sound institutions and
domestic political stability also matter.

Despite this progress, poverty remains one of the most serious international challenges we face up to 1.2
billion of the developing world 4.8 billion people still live in extreme poverty.

But the proportion of the world population living in poverty has been steadily declining and since 1980 the
absolute number of poor people has stopped rising and appears to have fallen in recent years despite
strong population growth in poor countries. If the proportion living in poverty had not fallen since 1987
alone a further 215million people would be living in extreme poverty today.

India has to concentrate on five important areas or things to follow to achieve this goal. The areas like
technological entrepreneurship, new business openings for small and medium enterprises, importance of
quality management, new prospects in rural areas and privatisation of financial institutions. The
manufacturing of technology and management of technology are two different significant areas in the
country.

There will be new prospects in rural India. The growth of Indian economy very much depends upon rural
participation in the global race. After implementing the new economic policy the role of villages got its own
significance because of its unique outlook and branding methods. For example food processing and
packaging are the one of the area where new entrepreneurs can enter into a big way. It may be organised
in a collective way with the help of co-operatives to meet the global demand.

Understanding the current status of globalisation is necessary for setting course for future. For all nations
to reap the full benefits of globalisation it is essential to create a level playing field. President Bush's
recent proposal to eliminate all tariffs on all manufactured goods by 2015 will do it. In fact it may
exacerbate the prevalent inequalities. According to this proposal, tariffs of 5% or less on all manufactured
goods will be eliminated by 2005 and higher than 5% will be lowered to 8%. Starting 2010 the 8% tariffs
will be lowered each year until they are eliminated by 2015.

GDP Growth rate:

The Indian economy is passing through a difficult phase caused by several unfavourable domestic and
external developments; Domestic output and Demand conditions were adversely affected by poor
performance in agriculture in the past two years. The global economy experienced an overall deceleration
and recorded an output growth of 2.4% during the past year growth in real GDP in 2001-02 was 5.4% as
per the Economic Survey in 2000-01. The performance in the first quarter of the financial year is5.8% and
second quarter is 6.1%.

Export and Import:

India's Export and Import in the year 2001-02 was to the extent of 32,572 and 38,362 million
respectively. Many Indian companies have started becoming respectable players in the International
scene. Agriculture exports account for about 13 to 18% of total annual of annual export of the country. In
2000-01 Agricultural products valued at more than US $ 6million were exported from the country 23% of
which was contributed by the marine products alone. Marine products in recent years have emerged as
the single largest contributor to the total agricultural export from the country accounting for over one fifth
of the total agricultural exports. Cereals (mostly basmati rice and non-basmati rice), oil seeds, tea and
coffee are the other prominent products each of which accounts fro nearly 5 to 10% of the countries total
agricultural exports.

Where does Indian stand in terms of Global Integration?

India clearly lags in globalisation. Number of countries have a clear lead among them China, large part of
east and far east Asia and eastern Europe. Lets look at a few indicators how much we lag.

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 pat 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 labour cost
 advantages.

It is interesting to note the remark made last year by Mr. Bimal Jalan, Governor of RBI. Despite all the
talk, we are now where ever close being globalised in terms of any commonly used indicator of
globalisation. In fact we are one of the least globalised among the major countries - however we look at it.

As Amartya Sen and many other have pointed out that India, as a geographical, politico-cultural entity
has been interacting with the outside world throughout history and still continues to do so. It has to adapt,
assimilate and contribute. This goes without saying even as we move into what is called a globalised world
which is distinguished from previous eras from by faster travel and communication, greater trade linkages,
denting of political and economic sovereignty and greater acceptance of democracy as a way of life.

Consequences:

The implications of globalisation for a national economy are many. Globalisation has intensified
interdependence and competition between economies in the world market. This is reflected in
Interdependence in regard to trading in goods and services and in movement of capital. As a result
domestic economic developments are not determined entirely by domestic policies and market conditions.
Rather, they are influenced by both domestic and international policies and economic conditions. It is thus
clear that a globalising economy, while formulating and evaluating its domestic policy cannot afford to
ignore the possible actions and reactions of policies and developments in the rest of the world. This
constrained the policy option available to the government which implies loss of policy autonomy to some
extent, in decision-making at the national level

Globalization- Opportunities And Challenges

(with impact on Indian Economy)

Indian economy had experienced major policy changes in early 1990s. The new economic reform,
popularly known as, Liberalization, Privatization and Globalization (LPG model) aimed at making the
Indian economy as fastest growing economy and globally competitive. The series of reforms undertaken
with respect to industrial sector, trade as well as financial sector aimed at making the economy more
efficient.

Globalization has many meanings depending on the context. In context to India, this implies opening up
the economy to foreign direct investment by providing facilities to foreign companies to invest in different
fields of economic activity in India, removing constraints and obstacles to the entry of MNCs in India,
allowing Indian companies to enter into foreign collaborations and also encouraging them to set up joint
ventures abroad; carrying out massive import liberalization programs by switching over from quantitative
restrictions to tariffs and import duties, therefore globalization has been identified with the policy reforms
of 1991 in India.
Impact of Globalization of Indian Economy
At the present, we can say about the tale of two Indias: We have the best of times; we have the worst of
times. There is sparkling prosperity, there is stinking poverty. We have dazzling five star hotels side by
side with darkened ill-starred hovels. We have everything by globalization, we have nothing by
globalization. Though some economic reforms were introduced by the Rajiv Gandhi government (1985-
89), it was the Narasimha Rao Government that gave a definite shape and start to the new economic
reforms of globalization in India. Presenting the 1991-92 Budget, Finance Minister Manmohan Singh said:
After four decades of planning for industrialization, we have now reached a stage where we should
welcome, rather fear, foreign investment. Direct foreign investment would provide access to capital,
technology and market.

In the Memorandum of Economic Policies dated August 27, 1991 to the IMF, the Finance Minister
submitted in the concluding paragraph: The Government of India believes that the policies set forth in the
Memorandum are adequate to achieve the objectives of the program, but will take any additional
measures appropriate for this purpose. In addition, the Government will consult with the Fund on the
adoption of any measures that may be appropriate in accordance with the policies of the Fund on such
consultations.

The Government of India affirmed to implement the economic reforms in consultation with the
international bank and in accordance of its policies. Successive coalition governments from 1996 to 2004,
led by the Janata Dal and BJP, adopted faithfully the economic policy of liberalization. With Manmohan
Singh returned to power as the Prime Minister in 2004, the economic policy initiated by him has become
the lodestar of the fiscal outlook of the government.

The Bright Side of Globalization

The rate of growth of the Gross Domestic Product of India has been on the increase from 5.6 per cent
during 1980-90 to seven per cent in the 1993-2001 period. In the last four years, the annual growth rate
of the GDP was impressive at 7.5% (2003-04), 8.5% (2004-05), 9% (2005-06) and 9.2%(2006-07).
Prime Minister Manmohan Singh is confident of having a 10% growth in the GDP in the Eleventh Five Year
Plan period.

The foreign exchange reserves (as at the end of the financial year) were $ 39 bn (2000-01), $ 107 bn
(2003-04), $ 145 bn (2005-06) and $ 180 bn (in February 2007). It is expected that India will cross the $
200 bn mark soon.

The cumulative FDI inflows from 1991 to September 2006 were Rs.1, 81,566 crores (US $ 43.29 bn). The
sectors attracting highest FDI inflows are electrical equipments including computer software and
electronics (18 per cent), service sector (13 per cent), telecommunications (10 per cent), transportation
industry (nine per cent), etc. In the inflow of FDI, India has surpassed South Korea to become the fourth
largest recipient.

India controls at the present 45% of the global outsourcing market with an estimated income of $ 50 bn.

In respect of market capitalization (which takes into account the market value of a quoted company by
multiplying its current share price by the number of shares in issue), India is in the fourth position with $
894 bn after the US ($ 17,000 bn), Japan ($ 4800 bn) and China ($ 1000bn). India is expected to soon
cross the trillion dollar mark.

As per the Forbes list for 2007, the number of billionaires of India has risen to 40 (from 36 last year)more
than those of Japan (24), China (17), France (14) and Italy (14) this year. A press report was jubilant:
This is the richest year for India. The combined wealth of the Indian billionaires marked an increase of 60
per cent from $ 106 bn in 2006 to $ 170 bn in 2007. The 40 Indian billionaires have assets worth about
Rs. 7.50lakh crores whereas the cumulative investment in the 91 Public Sector Undertakings by the
Central Government of India is Rs. 3.93 lakh crores only.

The Dark Side of Globalization

On the other side of the medal, there is a long list of the worst of the times, the foremost casualty being
the agriculture sector. Agriculture has been and still remains the backbone of the Indian economy. It plays
a vital role not only in providing food and nutrition to the people, but also in the supply of raw material to
industries and to export trade. In 1951, agriculture provided employment to 72% of the population and
contributed 59% of the gross domestic product. However, by 2001 the population depending upon
agriculture came to 58% whereas the share of agriculture in the GDP went down drastically to 24 per cent
and further to 22% in 2006-07. This has resulted in a lowering the per capita income of the farmers and
increasing the rural indebtedness.

The agricultural growth of 3.2% observed from 1980 to 1997 decelerated to two per cent subsequently.
The Approach to the Eleventh Five Year Plan released in December 2006 stated that the growth rate of
agricultural GDP including forestry and fishing is likely to be below two per cent in the Tenth Plan period.
The reasons for the deceleration of the growth of agriculture are given in the Economic Survey 2006-07:
Low investment, imbalance in fertilizer use, low seeds replacement rate, a distorted incentive system and
lo post-harvest value addition continued to be a drag on the sectors performance. With more than half the
population directly depending on this sector, low agricultural growth has serious implications for the
inclusiveness of growth.

The number of rural landless families increased from 35 %in 1987 to 45 % in 1999, further to 55% in
2005. The farmers are destined to die of starvation or suicide. Replying to the Short Duration Discussion
on Import of Wheat and Agrarian Distress on May 18, 2006, Agriculture Minister Sharad Pawar informed
the Rajya Sabha that roughly 1, 00,000 farmers committed suicide during the period 1993-2003 mainly
due to indebtedness.

In his interview to The Indian Express on November 15, 2005, Sharad Pawar said: The farming
community has been ignored in this country and especially so over the last eight to ten years. The total
investment in the agriculture sector is going down. In the last few years, the average budgetary provision
from the Indian Government for irrigation is less than 0.35%.

During the post-reform period, India has been shining brilliantly with a growing number of billionaires.
Nobody has taken note of the sufferings of the family members of those unfortunate hundred thousand
farmers.

Further, the proportion of people depending in India on agriculture is about 60 % whereas the same for
the UK is 2 %, USA 2 %and Japan 3 %. The developed countries, having a low proportion of population in
agriculture, have readily adopted globalization which favors more the growth of the manufacturing and
service sectors.

About the impact of globalization, in particular on the development of India, the ILO Report (2004) stated:
In India, there had been winners and losers. The lives of the educated and the rich had been enriched by
globalization. The information technology (IT) sector was a particular beneficiary. But the benefits had not
yet reached the majority, and new risks had cropped up for the losersthe socially deprived and the rural
poor. Significant numbers of non-perennial poor, who had worked hard to escape poverty, were finding
their gains reversed. Power was shifting from elected local institutions to unaccountable trans-national
bodies. Western perceptions, which dominated the globe media, were not aligned with local perspectives;
they encouraged consumerism in the midst of extreme poverty and posed a threat to cultural and
linguistic diversity.
Social Services: About the quality of education given to children, the Approach to the Eleventh Five Year
Plan stated: A recent study has found that 38 per cent of the children who have completed four years of
schooling cannot read a small paragraph with short sentences meant to be read by a student of Class II.
About 55 per cent of such children cannot divide a three digit number by a one digit number. These are
indicators of serious learning problems which must be addressed. The less said about the achievements in
health the better. The Approach to the Eleventh Plan concedes that progress implementing the objectives
of health have been slow. The Report gave the particulars of the rates of infant mortality (per 1000 live
births) for India as 60 against Sri Lanka (13), China (30) and Vietnam (19). The rate of maternal mortality
(per 1, 00,000 deliveries) of India is 407 against Sri Lanka (92), China (56) and Vietnam (130).

Growth of Slum Capitals: In his 2007-08 Budget Speech, Finance Minister Chidambaram put forth a
proposal to promote Mumbai as a world class financial centre and to make financial services the next
growth engine of India. Of its 13 million population, Mumbai city has 54 per cent in slums. It is estimated
that 100 to 300 new families come to Mumbai every day and most land up in a slum colony.

The cumulative FDI inflows (until September 2006) to the New Delhi region were of Rs. 27,369 crores and
to Mumbai Rs. 24,545 crores. The two spots of New Delhi and Mumbai received 46 per cent of the total
FDI inflows into India. The FDI inflows have in no way assisted in improving the health and environment
conditions of the people. On the other hand, the financial capital of India and the political capital of India
are set to become the topmost slum cities of the world.

To make Globalization Work

Under the phenomenal growth of information technology which has shrunk space and time and reduced
the cost of moving information, goods and capital across the globe, the globalization has brought
unprecedented opportunities for human development for all, in developing as well as developed countries.
Under the commercial marketing forces, globalization has been used more to promote economic growth to
yield profits to some countries and to some groups within a country.
India should pay immediate attention to ensure rapid development in education, health, water and
sanitation, labor and employment so that under time-bound programmes the targets are completed
without delay. A strong foundation of human development of all people is essential for the social, political
and economic development of the country.

Though at present India appears to be dominant in some fields of development as in IT-ITES, this
prosperity may be challenged by other competing countries which are equipping themselves with better
standards of higher education. As detailed earlier, our progress in education has been slow and superficial,
without depth and quality, to compete the international standards.

The government should take immediate steps to increase agricultural production and create additional
employment opportunities in the rural parts, to reduce the growing inequality between urban and rural
areas and to decentralize powers and resources to the panchayati raj institutions for implementing all
works of rural development. Steps should be taken for early linking of the rivers, especially in the south-
bound ones, for supply of the much-needed water for irrigation.

It should be remembered that without a sustainable and productive growth of the agricultural sector, the
other types of development in any sphere will be unstable and illusory. Despite the concerted
development in manufacturing and service sectors, despite the remarkable inflow and overflow of foreign
reserves, agriculture is still the largest industry providing employment to about 60 per cent of the
workforce in the country.

Mere growth of the GDP and others at the macro level in billions does not solve the chronic poverty and
backward level of living norms of the people at the micro level. The growth should be sustainable with
human development and decent employment potential. The welfare of a country does not percolate from
the top, but should be built upon development from the bottom

India Globalization Capital, Inc. - Financial and Strategic Analysis Review

Summary

India globalization capital, Inc. (IGC) is a blank check company engaged in acquiring operating businesses
located in India within heavy construction, mining and quarrying and civil construction and engineering of
high temperature plant sectors. The company carries out its operations through its wholly owned
subsidiary India Globalization Capital, Mauritius, Limited (IGC-M). The company operates in India, the U.S.
and Mauritius. IGC is headquartered at Maryland, the U.S.

Global Markets Direct, the leading business information provider, presents an in-depth business, strategic
and financial analysis of India Globalization Capital, Inc.. The report provides a comprehensive insight into
the company, including business structure and operations, executive biographies and key competitors. The
hallmark of the report is the detailed strategic analysis and Global Markets Direct’s views on the company.

Scope

• The company’s strengths and weaknesses and areas of development or decline are analyzed. Financial,
strategic and operational factors are considered.
• The opportunities open to the company are considered and its growth potential assessed. Competitive or
technological threats are highlighted.
• The report contains critical company information – business structure and operations, the company
history, major products and services, key competitors, key employees and executive biographies, different
locations and important subsidiaries.
• It provides detailed financial ratios for the past five years as well as interim ratios for the last four
quarters.
• Financial ratios include profitability, margins and returns, liquidity and leverage, financial position and
efficiency ratios.

Why India is “Cautiously Confident” About Globalization

Published: October 24, 2001 in Knowledge@Emory
The past 10 years of economic transformation in India suggest that globalization is not hazardous to the
health of developing countries, says Montek Singh Ahluwalia, a former finance official in the Indian
government and one of the architects of India’s current economic policy.

Speaking last week at Emory University’s Goizueta Business School, Ahluwalia, who is a director at the
Independent Evaluation Office of the International Monetary Fund, detailed the challenges of opening
India’s markets amid internal and external dynamics. In addition to the Goizueta Business School, the
Claus M. Halle Institute for Global Learning and the Asian Studies department of Emory University co-
sponsored the lecture.

Ahluwalia spent nearly 20 years in the Indian government as an economic advisor to the Prime Minister
and a secretary in the Ministry of Finance. During that time, India went from being a relatively closed
economic system to an open one able to compete in a globalized world market. India began aggressively
to open its economy after a severe foreign exchange crunch during the early 1990s. In the process,
according to Ahluwalia, India’s gross domestic product (GDP) and per capita income growth nearly
doubled. Ahluwalia believes that if the Indian government follows the path of the last 10 years and
implements more reforms, GDP growth could grow to 8% or more.

On the other hand, Ahluwalia noted, the signs of a backlash against globalization – the riots in Seattle,
Washington and Genoa as well as continuing protests against new world trade accords – could make it
difficult for Indian politicians to make the case for continuing to open India’s economy. "It has been a
painful debate in many developing countries to participate in globalization, so it is puzzling to see protests
coming from developed countries that many believe are the ones that have benefited most from
globalization," Ahluwalia said. "I think it is extremely unfortunate.

"But I think the attitude in India toward globalization is cautiously confident and the perception is that
economic reforms have worked but could have done better. I believe we can move faster. Enough people
have seen what is to be gained. Barring unexpected changes, there is a good chance India will continue
down this path and do better," Ahluwalia said, noting that the government has recently increased GDP
growth targets to 8%.

The roots of the economic crisis that struck India in the early 1990s lie in decisions the country made
more than 50 years ago after it gained independence from Britain. Convinced that unfettered capitalism
would not work in a country where poverty abounded, India’s leaders emphasized a mixed economy
where private enterprise existed but was heavily regulated by government. The public sector dominated
economic decisionmaking. Foreign investment was allowed but viewed with suspicion, trade was
discouraged through mechanisms like import licenses and the central government attempted to direct all
domestic private investment. The results were pitiful, with per capital income growth of less than 1.5%
annually and GDP growth barely edging over 3.5%, leaving India lagging behind other developing
countries.

In contrast, neighbors like China were growing GDP at an 8% clip or better. Even East Asian economies
like Malaysia, Indonesia and Thailand were growing faster. No longer could India make excuses. "It was a
very important globalizing influence," Ahluwalia observed. "We didn’t contemplate our navel, we looked
around and saw what was happening."

During the 1980s, Ahluwalia said, a wide-ranging debate inside the Indian government produced a
consensus that an overhaul was necessary along the lines of what other, more successful, developing
countries were doing. "We don’t deserve any great intellectual credit for having come to this conclusion. It
was not India that changed its mind; it was the whole world that changed its mind," Ahluwalia said.
Countries from Latin America to Europe had begun to rid themselves of their state-led economic systems
during the late 1980s and were being rewarded with faster growth rates.

Matters came to a head after the end of the Gulf War in 1991, a time of economic crisis for India. The
country’s foreign exchange reserves dropped so sharply that they could have barely paid for a few months
of imports. P.V. Narasimha Rao, India’s prime minister at that time, argued that major changes in
economic policy would be needed to steer the country out of the crisis. The previous years of discussion
had produced a consensus about what needed to be done – and the collapse of the Soviet Union had
widely demonstrated the weakness of socialist planning models. India began to embrace capitalist policies
with vigor. Over the next 10 years, import licenses were dropped and tariffs were reduced to the level of
India’s East Asian neighbors. Foreign investment was actively wooed. Government controls on domestic
investment were largely abolished and it was agreed that the public sector needed to stay out of any
endeavor that could be accomplished by private firms.

In Ahluwalia’s opinion, the economic reforms of the 1990s could have been accomplished far quicker were
it not for the messy realities of Indian democracy. "What was done in 10 years could have been done in
five with no damage to the economy if we hadn’t had to deal with adversarial politics."

But he noted the slower pace also had some political advantages. Because of India’s penchant for
periodically throwing out its governments, the economic reforms of the 1990s took place during three
separate governments that spanned the entire Indian political spectrum. Even though opposition parties
dutifully criticized whatever the party in power was doing, once in power themselves they often continued
and extended the same policies.

"I think this is very healthy," Ahluwalia said. "It shows we can have politics but still respect a professional
consensus."

According to Ahluwalia, plenty of work remains to be done. India, he says, is only three-quarters of the
way to fully liberalized trade. Foreign investment is up – from $100 million in 1991 to $3 billion in 1999 –
but hasn’t approached the level achieved by much smaller Asian competitors. The financial sector is only
partly liberalized, with much of the banking system still controlled by the government. The privatization of
public enterprises has so far been limited.

In particular, India has had trouble improving its infrastructure. In this area, Ahluwalia said, the public
sector must continue to play a large role, but it also has to perform better. The modernization of the
telecommunications system has gone well and Indian industries that use it have become competitive on
the world stage. On the other hand, the country’s power grid needs major improvement.

Will India be able to maintain its momentum toward globalization? It depends on how several trends play
out, Ahluwalia said. The Indian public must be convinced that globalization is reducing poverty in the
country. Ahluwalia says the data clearly indicates poverty rates have gone down, but not as fast as the
government would like. In addition the nature of poverty in India is changing, from concern about whether
there is enough to eat to whether there is enough decent health care. "To me," said Ahluwalia, "this is a
success. The target gets set higher as your capacity improves."

Not all the states of India are benefiting equally either. Some states are prospering, others are stagnant.
That produces a creative tension, something Ahluwalia also views as a positive. "Will the incentive to
emulate success overwhelm the frustration of not getting anywhere? In my judgment it will."

Ahluwalia cited one sobering statistic that suggests how far India has yet to go. In 1950, India’s share of
world trade was 2%. By 1990, its share had fallen to 0.4%. "That’s what the old economic model did to
us," Ahluwalia said. "Economic reform has improved that number to 0.6%, but if it took 40 years to come
down, it may take 40 years to get back up. We may never reach 2% again, but clearly we are not being
squeezed out of the world market anymore."

1. Since its foundation in 1980, Syntel becomes a global provider of Information Technology (IT) and
Knowledge Process Outsourcing (KPO) solutions, with global development centers in India and US.
What is your vision for the next five years?

Ans: Globalization of services is an irreversible mega-trend. Our vision over the next five years is
to leverage this trend by helping our clients become more competitive in their respective
marketplaces. This would include helping our clients to reduce costs, focus on core competencies,
leverage technology for competitive advantage, and provide thought leadership as a strategic
partner. We believe our size, flexibility and deep experience uniquely position us to be this partner
and work closely with our clients to provide customized solutions.

2. How do you see India as a growth indicator? What distinguishes India from other emerging
economies as it is the fastest growing region in the world?

Ans: India is distinguished by its availability of a robust infrastructure (telecom, power and roads).
Telecom facilities and regular, reliable power availability are important prerequisites to support
economic growth. In addition, roads and highways must be able to support transportation growth
to enable commerce.
These differentiators are driven by the Indian Government, which understands the importance of
infrastructure to industries such as IT and has created an environment to facilitate its development
and expansion.
3. Please discuss some of the sectors or industries to which Syntel serves. How do you define your
relevance to KPO industry?

Ans: Syntel has a deep vertical profile, delivering domain expertise with differentiated services
addressing industry challenges head on. These targeted solutions are in addition to our core
offerings of application development, maintenance, migration, and testing. We have dedicated
vertical practices in Banking & Financial Services (including specialized units for cards & payments
and capital markets), Insurance, Healthcare & Life Sciences (including specialized units for
providers, payers, and pharma), Retail, Logistics, Manufacturing, and Telecom.

Our intimate understanding of the vertical business and how technology drives processes makes
Syntel extremely relevant to the KPO industry as we integrate and optimize the applications that
make business run.

4. Please shed some light on Syntel's Global Delivery Service approach, which enables the
company to drive speed-to-market, with the best technology at a very competitive price point.

Ans: With mature processes to execute Global Delivery better than anyone, Syntel marries the
inherent time-to-market and economic efficiencies with an array of other benefits that bring with
them long-term value.

FLEXIBILITY: Syntel deploys a custom hybrid delivery model that fits your business goals.
Decisions on how and where solutions are delivered are made based on what is best for your
business objectives and culture. A "stepped" approach can be deployed for organizations new to
global delivery. A proprietary knowledge transfer methodology guarantees knowledge continuity.
The Syntel team is "on-site-centric," working beside you and with you, day after day, learning your
business and reaching your goals. And each project involves the best combination of Syntel's
resources-on-site and offshore - to form a seamless extension of your own IT operations. The pool
of India resources created by Syntel with its ongoing US Healthcare University focus enables rapid,
flexible transitioning and ramp up of projects and processes.

RELIABILITY: The effectiveness of Syntel's Project Managers is built on a unique, rock-solid

infrastructure and reflected in our customers' abilities to sleep well at night. Global Development
Centers are outfitted with robust, secure, data communications networks, enabling project teams
to pass complex information between centers across the globe - securely and seamlessly. Of
course, the processes at the Centers themselves conform to SEI CMMi Level 5 for application
development, maintenance, and production support as well as ISO 27001 certification.

LEADERSHIP: When you bring projects to Syntel, you are not "throwing them over the wall," you
are bringing valuable intellectual capital and skills into your business, along with a set of processes
that ensure a non-disruptive transition to the outsourcing model. Syntel helps manage the change
and its complexities with proven tools, approaches, and models, taking the entire ecosystem into
account. Factors such as business user education and comfort, cultural training, clear roles and
responsibilities, and rules of engagement are considered in developing a customized, balanced
program for you. For example, our customers regularly leverage our healthcare leadership in terms
of U.S. regulatory updates affecting payers, providers and life sciences. This accelerates
compliance since customers don't have to start from scratch since they can leverage Syntel's
existing re-usable assets.

Other firms have attempted to mimic Syntel's approach to Global Delivery, but no other company
has the ability to execute it like Syntel does.
 5. What are your different products available for the SMBs and what are the benefits of your
product range over the competitors?

Ans: SMBs can leverage the full range of Syntel's capabilities - from architecture to development to
testing. The strength of every Syntel service is in its customization. While Syntel provides an
extensive range of services for our customers, there are no cookie cutter solutions. Every solution
is tailored to our customers' business challenges and objectives. That is the key advantage of
working with Syntel - our consultative solution development. We deliver repeatable, quality
processes and output, but each engagement is delivered a unique solution in tune with the
customer priorities.

6. What are the various programs that enable your partners' growth?

Ans: Syntel offers cost-savings solutions like technology consumption management, testing
automation, and portfolio rationalization as well as targeted business solutions in alignment with
the indicators of success in their vertical industry that will lead to market leadership and growth

SHIMOGA: Former ambassador to India, the Philippines and Australia, and Professor Emeritus at the
Xavier Institute of Management and Entrepreneurship, Bangalore, CP Ravindranath, said Friday pointed
out, however, that the growth prospects in India and the cycle of globalization Considerably.

“But to put it into reality requires a combination of measures, institution building and good governance on
the part of government, strategic thinking and a high level of competitiveness on the part of a sustainable
economy and industry and improving the quality on the part of our education system, “he said.

He gave the floor to the programming of the national conference on “New growth cycle in the context of
globalization: Lessons for India Inc Organized by the Division of management studies Jawaharlal Nehru
National College of Engineering (JNNCE ).

He said: “For the economy as a whole around to see the most of the growth cycle, these are the words of
economist Dani Rodik, the combination of the opportunities offered by global markets, with a domestic
investment and the establishment of institutions such as the National Strategy for the Advancement of
animals ghosts of the entrepreneur. ”

Mr. Ravindranath said that in the historical perspective, globalization can be seen as the last phase in the
evolution of the world by the Industrial Revolution.

The history of globalization, wrote today in two colours: a color of the technological developments in
transportation and communication, and secondly, by government measures, the nature and the way in
which governments have intervened the reduction of barriers to trade and investment flows around the
world.

He asked: “Now, with all this in perspective, what are the missions of India Inc see how we the
opportunities and challenges of globalization?” He said, “As India Inc` Includes Government Our political
class and the industry, including workers, answer to this question, a wide range of opinions. however, it
should be possible to project some ideas on how we should react approach to globalization and what is the
best and what he asks. ”

Mr. Ravindranath said the GDP of India, which has stagnated at 3.5 per cent in the first three decades of
planning and rose to 5.5 percent in 1980, took an average of 6 percent in 1992 -93, may be due for
reforms. “But the logic of globalization dictates the continuation of reforms in several areas, the markets
of the element for the public sector and financial sector restructuring and tax reform,” he said.

He said, without radical economic reforms of the increase in the annual growth rate of 9 percent to 10
percent and to eradicate poverty and to achieve developed country status by the year 2020 has not been
possible.

“Well, it is a major challenge for India Inc” In a “globalization” of the world, our will and capacity to
implement the part of the basis of economic reform, “he added.

The fact that the repeal of the economic performance of our hinge, except for more economic reforms, the
marked improvement of infrastructure, attracting more foreign direct investment and better governance ,
he said, it is also an overview of the prospects for India in the sharing of knowledge and sectors of
manufacturing to a “global economy” is the general assessment that the country, the potential of force is
the capacity scalability. ”

The Rector of the University of Kuvempu, K. Chidananda Gowda, who opened the conference, spoke in
detail of India on the strengths, weaknesses, opportunities and risks associated with economic
globalization. He said that India was opened by the third phase of globalisation, and added that, while

India has also in the first phase of globalization during the first century after Christ about their economic
contacts with Rome with the Kerala is a major trading centre, it is not much work to do, the second phase
of globalization, between 1870 1914, when, after the British Regime.

However, it is appropriate to ponder India on the question whether it the necessary political will to take
the opportunities of globalization threw overcome its threats and vulnerabilities to attain, the greater the
economic growth, he said

The former ambassador to India and Australia, the Philippines and professor of management, CP
Ravindranath, provide the address to the national conference on the theme "New growth cycle in the
context of globalization: lessons for India Inc Shimoga to Friday. SHIMOGA: Former ambassador to India
and Australia, the Philippines and professor emeritus at the Xavier Institute of Management and
Entrepreneurship, Bangalore, CP Ravindranath said Friday that prospects for India in the growth cycle
arising of globalization are considerable. "But to implement requires a mixture of politics, institution
building and good governance from the government, strategic thinking and a high degree of
competitiveness

Accomplishing management training

In line with its service to the cause of management training and its overall goal of a real school, Xavier
Institute of Management and Entrepreneurship (XIME), Bangalore, is organising an international
conference on "Managing the Education - Land prospects in a Globalisierenden World, "" In collaboration
with the Association of Indian Management Schools. The Hindu and The Hindu Business Line, the media
are partners in the Conference, the third of the series on XIME is hosted since 2005. Globalization has
launched management training, more than any other field of higher education. The theme of this
conference is that the management of training

To be or not to be an entrepreneur

How are final year students of MBA from the contractor? While most of them hard and continue to dare
the absence of a single window clearance and financial support limited their prospects. The government is
ready to create a favourable climate for businesses? Looking for a job or work-Provider ": students of the
Bharathidasan Institute of Management to discuss the options before them. -- Photos: M. Moorthy
Bharathidasan students at the Institute of Management (BIM), a leading Business School, very interested,
take the jump as entrepreneurs compete in the global market for small industries, if the

Malkani demand for the positive attitude

October 18 The Pondicherry Lt Governor, KR Malkani, brushed today, next to the negative evaluation by
the pessimists in the country, achievements and said it had made rapid progress in the industry, '
Agriculture and animal protection. An opening three-day annual Institute of industry interface of the
School of Management at the University of Pondicherry, under the banner of "synapse 2002" on the
campus of the University, he said, the country n is not the opening of too much and too quickly in the
globalization process. It should not be comparisons between India and other countries such as China, as

Careers, trends and alternative options

Some of us are somewhat confused, according to the study, as well as many opportunities, "said a public
asset, when two weeks, I have three hours over a career to speak before a group composed of hundreds
of students and parents. It was a presentation aimed to shed light on the many possibilities with regard to
academic programs and more than two careers. At the beginning, not the public knew that something
there of engineering, medicine, civil services and law was possible. An effort has been made for nearly 50
with career options and courses that lead them. As usual, there were many

Definition Globalization
A new lease of securitization.

Globalization has highlighted the need for greater liquidity and the granularity of investment in the real
estate market. Securitization - transformation of society assets and prospects in the securities market -
has become an important element of finance and insurance, banks, the possibility of extending their
services and an increase in lending . UNDER the wealth of investment options, real estate, a strong
position of command. However, they are of great disadvantage is the poor liquidity. Globalization has
highlighted the need for greater liquidity and the granularity of investment in the real estate market. The
need for higher revenues and lower

GE Chief Executive globalism talks with the Indian authorities ancient technology

Chairman and CEO of General Electric Jeffrey Immelt only provided a remarkable speech on the promise
and perils of globalization, several thousand graduates of the elite technology schools in India, the Indian
Institute of Technology (IIT), Santa Clara reunion for former event. Let me your blog some of his
comments, before I walk around more substance to a story of newspaper Saturday. "I am here today
because I am a big consumer of this product you," said GE chieftan with laughter and applause. Read
notes, but appear willing to facilitate, Immelt said GE employs around 1500 100000 people India were of

NZ finger Indians

Make sure before it, follows a course in India and at the end of the academic year, you get a conclusion
foreigners. Voila, it opens up new prospects and means employment opportunities abroad. On the
sidelines of the Asian Development Bank currently meet here, the economic development of New Zealand,
Trevor Mallard, the minister presented Thursday his country for training and research efficiency.
Hyderabad was the last station. Having already turned Chandigarh, Delhi and Bangalore, his team once
again their attention on the two cities to come tie-ups with the University of Hyderabad (HCU) and India
School of Business. In an interview with

Economy has huge growth prospects.

CHENNAI, June 12 The Indian economy has huge prospects for growth, according to Mr S.
Venkitaramanan, former Governor of the Reserve Bank of India. Delivering the keynote address at a
function to release a book containing articles written by him and organised by ICFAI Business School,
Chennai on Thursday, he said, "I am not an economist but I am certainly a keen student of economics.
The Indian economy is growing at 5-6 percent per annum ". The two-volume book, Indian Economy:
Commentaries and Reviews, comprising articles written by him in various dailies, was released by Dr. Raj
C Besant, Chairman of ICFAI. Mr

The economy has made enormous growth prospects

Chennai, June 12. The Indian economy has made tremendous growth prospects, says P. Venkitaramanan,
former Governor of the Reserve Bank of India. Speaking time a function of sharing a book with articles,
organized by him and by ICFAI Business School, Chennai, on Thursday, he said: "I am not an economist,
but I am certainly a great science student economic. Indian economy is growing at 5-6 percent per year. "
The two-volume book, the Indian economy: criticisms and comments, made to articles in various
newspapers, was created by Dr. Besant C Raj, chairman of the ICFAI. Mr. Venkitaramanan is known for
gold from the

Fine prospects await artists

I am a Plus Two (arts) student and would like to pursue a career in fine arts. Please advise. Shalini To
apply for the five-year integrated bachelor of fine arts (BFA) programme, you have to clear the
Intermediate Grade Drawing Exam. This course offers excellent employment prospects. With media
spending increasing by the day of late, ad agencies are always on the lookout for creative people. Some of
the reputed schools offering BFA are J.J School of Arts, Mumbai; Faculty of Fine Arts, M.S. University,
Baroda; College of Art, New Delhi; J.J. Institute of Applied Arts, Mumbai; Government College of

Exports on the back foot: Montek

Member of the Planning Commission Montek Singh Ahluwalia asked today, completes the modernization of
export procedures in the country, described as one of the priorities of field, the country should be. On the
occasion of the celebration of convening a symbiosis between the Institute of Foreign Trade, the former
secretary of finance complained that in recent years, exports have been disappointing. `` All this
happened because we are focusing our efforts on exports of before,''he said and added that the
procedures of exports was archaic and are not adapted to modern times. He said, `` we have a great look
at the whole

Hands-on feast Manager

The fourth Globsyn Business School, Serendipity'07, was a feast of fun-filled, presented to the
management skills and creative abilities of the young B-students. What is outside the campus routine
customs lies in the fact that students, regardless of the responsibility of the entire event. From market to
develop and host the event, Serendipity was the idea of Globsyn students in the Business School. This
year's celebration took place at a complex in Salt Lake Bharatiyam, 6 And on Jan. 7. The eclectic mix of
forms of appearance started with a summit of the League, the stranglehold that illustrious trends in the
rapidly

Prescribe expert strategy for growth

BANGALORE Dec. 16. Technological progress associated with the utilization of human resources can make
India an economic superpower in the new world order, said experts attending a seminar on "Globalization
- The challenges and opportunities for Germany" here Tuesday . Abid Hussain, Vice-Chancellor, University
Rai, Chhattisgarh, R. Natarajan, Chairman, All India Council for Technical Education, V. Bala
Balachandran, JL Kellogg Distinguished Professor of Information and Accounts Management, Northwestern
University, Evanston, Illinois, USA, Sarosh And J. Gandhy, chairman of the Board of Directors, Xavier
Institute of Management Entrepreneurship (XIME), spoke at the seminar. Mr. Hussain said, dass, it is not
necessary for India

The tsunami of the global economic downturn continues to impact the foundation of the outsourcing
industry both near and long-term. Service providers are already feeling the effects of decreased margins
and employee downsizing, while service buyers are reducing IT budget allocations for outsourcing
engagements. This in turn has caused a cascading effect across the industry — evidenced by drying
pipelines, cancelled bookings and increased pressure to deliver value beyond cost.

Decreasing margins and headcount will push providers to better utilize existing resources. Service
providers need to implement new technologies in a more efficient manner to differentiate themselves and
improve service delivery processes. Clients, with reduced IT budgets, will be forced to be more selective —
demanding far more stringent Service Level Agreements, greater contractual flexibility and output/result
based payment schemes.

These shifts will significantly induce a high degree of consolidation that will be felt across the outsourcing
ecosystem.

Paul Santos, Managing Director at Tholons Capital says: “It's an opportune time for the larger players to
continue their string of strategic, niche acquisitions. In an increasingly competitive market, and
improbable economic state, the mantra of only the strong will survive has never been more relevant.”
Smaller and less efficient providers may face difficulties in tapping new revenue streams and will be prone
to acquisition or outright dissolution.

Undeniably, 2008 was a tumultuous year for outsourcing, and though we continue to advise clients to
remain cautious in the year ahead, we do not discount the opportunities and potential still very much
evident in the market. We consider the current struggles of the industry as a driver for positive change
and expect the outsourcing industry to develop in the coming years, becoming more mature, efficient,
dynamic, and ultimately more resilient. With prudence, heightened focus and a more adaptive approach
towards outsourcing in 2009 can in fact be a watershed moment for the global outsourcing industry.

These Tholons Top Ten Trends in Services Globalization — 2009 will have a significant impact on Global
Outsourcing for buyers, investors, providers and on emerging centers of excellence:

1. The market downturn will impact revenues during the first 2-3 quarters.

There are strong headwinds for vendors in the outsourcing space. We expect the worldwide market
downturn to impact growth and margins for the first 2-3 quarters of 2009 before picking up and ending
the year on a stronger note as clients seek to cut costs and generate more revenues. During this period,
we see a reduced number of start-ups in the services sector as the focus shifts on sponsoring hard asset-
intensive businesses. Moreover, it has become increasingly clear that the downturn is impacting revenues
and we expect most large firms will see a decline in Quarter over Quarter earnings.

2. Focus on domestic market to increase.

As Western economies continue to hurt, service providers will shift focus to domestic markets for growth.
We are already seeing increased focus by vendors towards large (and growing) domestic markets such as
found in India, China, Argentina and Brazil. Fulfillment of customer support and back office services
targeted for retail, Telco, and Financial Services verticals will be among the hot spots for providers looking
to tap the surging local demand of outsourced services.

3. Global economic downturn and financial sector consolidation will lead to increased outsourcing in
Healthcare, Education, Retail, Telecom and Legal Process Outsourcing (LPO).

Global economic downturn is motivating service providers to focus on recession-proof industries like
Healthcare and education. Other sectors like manufacturing, retail and telecom will have to make a
significant shift and reduce cost drastically to survive. These sectors will be attractive industries as they
look for opportunities to cut cost. It is more a question of survival than being just competitive in such
turbulent times.

Consolidation in the financial sector is inevitable due to the global financial crisis. This will create M&A
opportunities which will generate further business for LPO firms. We expect strong growth for LPO firms.
Increased M&A activity in the financial sector would also mean that merging companies would want to
integrate their existing outsourced services — leading to increased spending for integration projects. The
processes will revolve around integration of software applications, data center consolidation and tighter
integration of other operational platforms.

With financial institutions such as Lloyds TSB/HBOS and Bank of America/Merrill Lynch merging, service
providers will also find themselves bidding against incumbent transnational rivals like IBM, Accenture and
HPEDS for several large-scale integration contracts (valued anywhere between US$500 million and US$1
Billion over 5 years).
 4. Governments to take special initiatives in promoting destinations.

Emerging outsourcing destinations still trying to establish their brands will find the going tough, as clients
look for “safer” choices.

Cebu City, Shanghai, Beijing, Ho Chi Minh City and Krakow make up the top five spots in the recent
Tholons study of Top 50 emerging global outsourcing cities. We see significant government and industry
support for these cities along with some other more popular emerging destinations like Cairo, Sao Paulo,
Buenos Aires and Dalian.

5. Clients will increase geographic diversity in their service delivery locations.

Newer service delivery geographies are emerging with niche capabilities. The Philippines has exhibited
spectacular growth, with BPO export value aggregating close to 50% of India's Business Process
Outsourcing (BPO) export.

Similarly, Vietnam has emerged as a solid alternative to India on the IT side, and we are seeing
aggressive strategies from Vietnam-based players to increase traction in the global market. In the coming
year, we will see more clients asking for alternatives to India to de-risk their service delivery models that
are otherwise geographically limited.

Nearshoring as a low cost alternative to domestic sourcing will assume greater importance for processes
requiring the same time zone presence. Latin America with superior cost dynamics will emerge as a near
time zone alternative to Europe/US business adding Spanish language capability. In the near-term, the
top Indian firms are predicted to expand global footprints and open delivery centers in China, Latin
America, Eastern Europe and North America.

6. Pricing pressures will result in reduced rates and new measures to achieve cost savings and higher
productivity.

Pricing pressures will kick in as suppliers scramble to meet their quarterly targets through the year. We
will see clients negotiating hard with suppliers to reduce costs, while suppliers will try to protect rates but
offer more value added services.

Large providers are expected to see EBITDA margins plunge below 20% over the next three years, as they
move more IT projects offshore — mostly to India — and struggle to balance operations with rising wages.
The situation could aggravate if the Rupee continues to appreciate during this period.

On the delivery front, supplier movement from high onsite to low onsite deployment will be visible and
new tactical measures for cost savings and higher productivity towards clients and internal operations will
mark new industry standards.

7. Consolidation imminent for small players — focus away from large deals.

On the M&A front, large deals will slow due to a more tepid market. Challenges related to integration and
maintaining liquidity (as opposed to acquisition), will also be primary concerns for 2009.

Cross-border, inorganic investments are expected to increase in Japan and China with increased market
consolidation seeing small to medium players being likely targets. We also see difficult times for small,
non-differentiated players over the next 12 months. As clients look to reduce spends and rationalize costs,
new business generation will be very difficult. Also, some of the existing engagements may come up for
re-negotiation as clients look to vendor consolidation for better pricing and reduced program management
costs.

With Tier One firms witnessing flat to negative Quarter over Quarter revenue numbers, smaller players will
find the going tougher, and will be more open to mergers or takeovers to survive. We believe a large
proportion of sub-1,000 (employee) companies will either close shop or be acquired.

8. Outsourcing revival by 2009 end — driven by small to mid sized (SME) clients.

The fundamental motivation for offshoring has not diminished — in fact it has actually become stronger.
We expect to see a revival in outsourcing, and we are already seeing an uptick in outsourcing related
activity for engagements that will come to fruition in 9-12 months.

The mid-market swing will also be aided by providers developing market specific, full service solutions
catering to this space.

9. Strong focus on innovation, R&D and technology adoption will be key differentiators for providers.

We expect increased pressure to differentiate one's service offerings. Companies that focus on solution-
based selling will weather the storm. Companies that do not innovate will lose market share.

Otherwise, they run the risk of being an also ran compared to larger, feature-rich Multi-National Company
(MNC) vendors.

10. Sourcing deal sizes will increase for large clients.

Large clients will move towards single vendor sourcing to get volume based price discounts, as opposed to
the best of breed solutions for specific sourcing requirements, which tend to cost more, and carry a higher
program management overhead.

They will also look for opportunities to group an asset sale with a sourcing contract, as vendors show
readiness to use their balance sheet strength for top line gains. As a result, we anticipate the average deal
sizes to go up, even as the overall deal volumes remain depressed.

Globalization, Poverty, and Inequality since 1980

David Dollar

David Dollar is country director for China and Mongolia at the World Bank; his email address is
ddollar@worldbank.org .

One of the most contentious issues of globalization is the effect of global economic integration on
inequality and poverty. This article documents five trends in the modern era of globalization, starting
around 1980. The first trend is that growth rates in poor economies have accelerated and are higher than
growth rates in rich countries for the first time in modern history. Developing countries’ per capita incomes
grew more than 3.5 percent a year in the 1990s. Second, the number of extremely poor people in the
world has declined significantly—by 375 million people since 1981—for the time in history. The share of
people in developing economies living on less than $1 a day has been cut in half since 1981, though the
decline in the share living on less than $2 per day was much less dramatic. Third, global inequality has
declined modestly, reversing a 200-year trend toward higher inequality. Fourth, within-country inequality
in general is not growing, though it has risen in several populous countries (China, India, the United
States). Fifth, wage inequality is rising worldwide. This may seem to contradict the fourth trend, but it
does not because there is no simple link between wage inequality and household income inequality.
Furthermore, the trends toward faster growth and poverty reduction are strongest in developing
economies that have integrated with the global economy most rapidly, which supports the view that
integration has been a positive force for improving the lives of people in developing areas.

GLOBALISATION OF THE ECONOMY

A disaster for India and other developing countries
by Acharya Krtashivananda Avadhuta

Supporters of capitalism make vociferous campaigns in favour of

globalisation of the economy. Multinational corporations (MNCs), with the
collaboration of Bretton Woods institutions (World Bank, International
Monetary Fund) and the World Trade Organisation (WTO) have imposed their
strategic plan through the General Agreement on Tariffs and Trade (GATT).
The strategy is to allow MNCs free access to all countries, removing all
trade restrictions. The similarities amongst the "standard menus" of all
these institutions is obvious:

STANDARD GLOBALISATION MENUS

IMF AND World Bank

* Reduction of budgetary subsidies
* Removal of subsidies for agricultural inputs
* Removal of food subsidies
* Pursuance of liberal economic policies
* Promotion of foreign investment
* Import liberalisation
* Privatisation of the banking sector

WTO
* Reduction of subsidies
* Reduction of support for domestic agriculture
* Removal of PDS (food subsidies)
* Pursuance of free trade by developing countries
* Removal of restrictions on MNCs in utilities industries
* Removal of barriers on imports
* Lifting restrictions on entry of foreign investors

In his speech as outgoing chairman of the Group of 77, Luis Ferdinand

Jaramillo of Colombia presented a sweeping critique of North-South
relations. He traced the decline of the U.N., multilateral programmes and
the Third World in global affairs to the rising power of Bretton Woods
institutions, which are under the control of Northern countries. He commented,

"The Bretton Woods institutions for their part continue to be made the
centre of gravity for the principle economic decisions that affect the
developing countries. We have all been witness to the conditionalities of
the WB and IMF. We all know the nature of the decision making system in
such institutions. Their undemocratic character, their lack of
transparency, their dogmatic principles, their lack of purism in the debate
of ideas and their impotence to influence the policies of the
industrialised nations. We all know the way structural changes are imposed
and how projects are formulated. And how subsequently, when many of those
policies and projects fail their authors disappear from the facilities of
Pennsylvania Avenue. Nobody is then accountable for anything...."

Dubious Benefits
The question may arise whether globalisation is justifiable for countries
like India.

An audit of the performance of the Indian economy after reforms were

initiated in July 1991 fails to reveal any spectacular achievements. The
opening of the economy to foreign capital has not succeeded in attracting a
significant flow of capital or technology into the country, especially into
the productive sector. Exports have picked up, partly as a result of
devaluation of the rupee and partly because of general improvement in
world trade.

But after an initial slump, imports have grown rapidly, and present
indications are that there is likely to be a huge trade deficit by the end
of the present financial year. Foreign debt has increased significantly and
the WB has cautioned that the servicing of the debt and repayment
obligations may begin to exert pressure on the international balance of
payments in 1996-97 and beyond.

It may be asked whether an increase in foreign investment will lead to a

higher growth rate and better absorption of rural labour in
non-agricultural employment. Employment in the private industrial sector,
which stood at 7.55 million in 1982-83, was only 7.67 million in 1990-91 -
that is, after nine years. This is only a 1.5 percent increase. At the same
time, gross capital formation at current prices rose by four times - 400 percent.

Modern industry is knowledge intensive. It may result in jobs for the

highly educated, but it is unlikely that jobs will be generated for the
poor, especially the surplus agricultural force of rural India, even when
the growth rate of investment is high in the private sector.

Majority Unbenefitted
The failure of the reform process is evident from the speech of G.V.
Ramakrsna, member of the Central Planning Commission, for the Garg Memorial
Lecture at the Institute of Naval Architects, New Delhi in April 1995:
"Where are we now and how far have we come in the reform process....? After
three years, different people are looking at the reforms from their own
perspectives. They have more colour TVs, more channels on cable, more
imported goods, and so on. Nobody is any longer ashamed of conspicuous
consumption. Then we have the middle class, which is seeing this as an
opportunity for its advancement to the upper class. Many feel making money
one way or the other will get them into the high consumption category. Then
we have the lower class. They are worried as they ask: 'What is there in
this for us? We don't know what liberalisation is. We don't know what the
capital market is. What is our net gain in the package? We want jobs, less
inflation,' and they ask, have we got any of these?"

Even former Prime Minister P.V. Narasimha Rao, while speaking to his party
workers in July 1995, attempted a similar audit of the reforms. The report
said: "He began by delineating the social structure's three segments. The
crust according to him consists of about 60 million people (6.5 percent),
who do not need to be canvassed about the economic reforms.

"The next layers he believes contain about 250 to 300 million people (27 to
33 percent) belonging to the middle class, who are beginning to appreciate
the benefit of liberalisation.... It is the next segment, of 550 to 650
million (60 to 71 percent) of lower income and poor people who remain
unappreciative of the changes in the economy." (The Hindu Standard)

Amongst these lower income groups the largest consists of agricultural

labourers, who constitute 26 percent of the labour force. It is a sad commentary
on economic and political policies that almost half a century after Indian
independence more than half of her people are in that kind of plight.

To allow globalisation of the economy via financial markets, without an

appreciation or analysis of its implications, is bound to be disastrous.

Preparation Required
One can cite the example of Taiwan, which has recently opened up its
markets to imports, as proof of the merit of following reforms like
India's. But that country prepared for this for over 30 years. The same is
the case of Japan and South Korea. India needs to modernise its financial
institutions gradually before she throws the system open. It must be
realised that by this measure, India will lose control over her domestic
interest rate policy. In a primarily agricultural country, opening the
economy to large inflows and outflows of "hot money" moved around to take
advantage of quarter percentage point interest rate gains would be disastrous.

Also, Taiwan has an annual trade surplus of approximately US$40 bn and

sound foreign exchange reserves. India has a trade deficit, weak foreign
exchange reserves and huge debts (about $70 bn). Its industrial base is
also weak. Is it judicious at this moment to open up the stock exchange to
international capital movements? Before embarking on globalisation, India
should strengthen its village economy on a decentralised basis, modernise
its entire economic and financial system and strengthen her international
competitiveness.
It has been claimed that allocation of resources is best when done under a
free market system. Unfortunately, with the present distribution of income
and wealth, there is no such thing as a free market in India. The
globalisation of India's financial sector would put the bulk of it into the
clutches of money lenders.

India at present needs to expand and strengthen its basic industrial

sector. Small scale industries, artisans, farmers, handloom weavers and
cottage industries should be encouraged through decentralised planning,
just allocation of resources and increasing credit facilities and training.

Without basic preparation, the introduction of so-called globalisation is

passing economic control on to MNCs, and whatever basic economic
infrastructure exists will be ruined instead of enhanced.

General mass reaction to such policies has thrown the previous Congress
government out of power. In the present "rainbow" coalition, Finance
Minister Cidambaram and Industry Minister Murasoli Maran are advocating
policies recommended by Harvard economist Michael Porter.

Chidambaram is a former Harvard scholar, and was Commerce Minister in the

previous Congress Party government. He is a strong supporter of the free
market and liberalization of the economy. There is no reason to believe
that he has radically changed his ideas and policies. The present
quasi-nationalistic coining of words - done at the insistence of his
communist colleagues in the present government - is only to camouflage the
real policies, which indiscriminately open India to the international economy.

Porter has show in his book Competitive Advantage of Nations that the
competitive edge acquired by specific industries in various countries in
global markets has not come from mere "laissez faire". Advantage is rather
the outcome of deliberate policies of governments that develop those
specific industries in a competitive way.

But this policy does not at all address the basic problems of strengthening
the village economy, decentralisation of industrial development and
streamlining of financial institutions. It is incorrect to say that present
government policy is radically different from that of the previous
goverment. In addition, it is also similar to policy followed in the
1980s. Capital formation is not the only criteria to be considered for
India's economic recovery. As mentioned, just allocation of resources
considering the economic future of the poorest people should be the
priority. This has been utterly neglected by all governments, including the
present one. The centralised character of the Indian economy must be
dissolved, or the people will revolt again.
Managing Globalization: If it's here to stay, what do we do now?

By Daniel Altman
Published: International Herald Tribune (www.iht.com) WEDNESDAY, FEBRUARY 8, 2006

This is a new kind of column on globalization. Its purpose is not to argue whether the spread of market
forces around the globe is good or bad, or whether it should be allowed to proceed or stopped in its
tracks. Rather, it takes as a given that globalization is here to stay and moves on to the more pressing
question of how to manage the transition to a more integrated world economy.

Two decades have passed since the word "globalization" started showing up with any frequency in
discussions of business and economics. At first, the focus was on Western companies' trying to compete
with cheaper, sometimes better imports from Japan, South Korea, China and other countries. It was a
straight fight: The battle lines were drawn along each country's borders.

Later on, things became more complex. Asian companies started designing and assembling products in
the West. Western companies opened up new fronts by sending jobs abroad - not just in manufacturing
but in service industries as well.

At the turn of the millennium, there was a lot of talk about whether globalization was a Good Thing or a
Bad Thing. One side argued that it allowed big, multinational corporations to exploit workers in poor
countries to pad their profit margins. The other side retorted that the expansion of these corporations into
the developing world offered the best hope for raising living standards. One side complained that
globalization was creating and destroying industries too quickly for the labor force to adjust. The other
side answered that these shifts were rapidly improving the world's ability to use its resources efficiently.
Now it's pretty clear that globalization, be it good or bad, is an Unavoidable Thing. Rather than dealing
with the problems of globalization head-on, it can be tempting to try to slow the process. Yet that's likely
to postpone the problems, not solve them. Unless every country simultaneously decides to close its
borders to commerce, migration and financial transactions, globalization will continue. Tariffs exist, of
course, as do restrictions on foreign workers and foreign investment. But as technology for moving goods,
people and information improves, globalization will accelerate.

How and why this is happening is well-trodden territory. Moreover, arguing about whether it's good or bad
has become something of a simplistic activity. There are clearly winners and losers, and they're identified
every day through layoffs, profit figures and the cash registers of retail stores carrying ever-wider
selections at ever-lower prices.
The more relevant question now is how to manage the transition to a more globalized world.In theory, the
gains of the winners in trade always outweigh the costs to the losers. So how can those gains be
distributed so that everybody wins, at least a little bit?
To some, the answer is coordination and regulation.

"The biggest challenge to the transition to a more globalized world economy is to keep it human and fair,
that is to agree on values, rules and procedures which should allow us to set up the necessary
governance," said Pascal Lamy, the director general of the World Trade Organization."That is why
organizations like the WTO, where international trade rules are agreed by consensus of all the members,
must be improved and reinforced."
But others see a need for greater regulation to protect workers and prevent all the gains of globalization
from accruing to investors alone.

"Markets inevitably exert pressure downwards," said Ron Oswald, general secretary of the International
Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers' Associations, a global
trade union federation with about 11 million members in 135 countries.
In comments delivered through a spokesman, Oswald continued, "The greatest challenge facing workers
and the organizations that they create to defend them is to resist that downward pressure, which operates
both on wages and living standards, but also in terms of rights."

These opinions form the context for what happens on the ground, like a bird's-eye view of a battlefield. At
the level of a single company or worker, though, the challenge is more like hand-to-hand combat.

"As the global economy becomes more integrated, you discover that your potential customers, partners,
suppliers and competitors can emerge from literally any country in the world," said Phillip Overmyer,
executive director of the Singapore International Chamber of Commerce. "The challenge is to be able to
clearly and thoroughly understand the needs, drivers and characteristics of these many different players,
so you can develop your own strategy."

People are making decisions every day that change the impact of globalization on their lives. Parents
choose whether to pay for extra language lessons for their children. The chief executive in a dying
industry weighs how much his company should invest in researching new products. A government minister
tries to figure out how to keep her country's brightest scientists from moving overseas.

Yet it's not easy to plan for the future without knowing what the future will look like. Back in the 1980s,
Americans were encouraging their children to learn Japanese. Now, Chinese is the language of choice.
Solar-powered cars were all the rage, then electrical hybrids. In the next decade, fuel cells may take over.
Though India still watches as hundreds of its brightest graduates head to the United States every year,
more and more are staying home to start their own businesses.

The ground-level challenges require flexible solutions.Developing specific skills, inventing specific
technologies or passing specific laws to fit the circumstances of the moment may not be enough.

It may be more important to develop skills that help you to pick up more skills, to invent technologies that
set the stage for generations of innovation, and to pass laws that open the door to several different kinds
of regulation - in other words, to create a platform for flexible decision-making in the midst of rapid
changes.

Education, pension rules, intellectual property laws, tax policy, research spending, job training and the
financial system - all of these areas are feeling the effects of globalization.
The integration of the global economy is making every single topic more complex. But each one is also
involved in the solutions to those big challenges.

With that knowledge in hand, a few more winners may appear on the battlefield of the global economy.
This column will tell their stories, one week at a time.
Daniel Altman, the IHT's global economics correspondent, is writing a book about how the global economy
works behind the scenes.

Lessons from History: Globalization Then and Now

Harold James
YaleGlobal , 5 February 2003
The Great Depression brought increasing restrictions on immigration to the US
PRINCETON: Many people wish that globalization would simply stop. After September 11, some critics of
globalization, such as the British philosopher, John Gray, thought that the process they detested so much
had indeed come to an apocalyptic end. This view fails to specify what has replaced globalization; it is also
wrong. The world is still very interdependent, though that interdependence makes for a great
vulnerability.
Since September 11, the debate about globalization has changed in two significant ways. The first is a
direct product of the terrorist attack. Every part of the package that had previously produced such
unprecedented economic growth in many countries - the increased flow of people, goods, and capital -
now seemed to contain obvious threats to security. Students and visitors from poor and especially from
Islamic countries might be "sleeper" terrorists; or they might become radicalized through their experience
of western liberalism, permissiveness, or the arbitrariness of the market economy. It soon became
apparent that customs agencies scarcely controlled the shipment of goods any longer, and that explosives,
or even ABC (atomic, biological, chemical) weapons might easily be smuggled. The free flow of capital,
and complex bank transactions, might be used to launder money and to supply funding for terrorist
operations.
It is natural and legitimate to suggest that all these areas should be subject to more intense controls. But
every sort of control also offers a possibility for abuse by people who want controls for other reasons:
because skilled immigrant workers provide "unfair" competition, because too many goods are imported
from cheap labor countries; or because capital movements are believed to be destabilizing, producing
severe and contagious financial crises. A new debate about the security challenge offered the chance to
present older demands for the protection of particular interests in a much more dramatic and compelling
way. Protectionists of all sorts suddenly had a good story.
The demand for more controls - almost always dressed up as a concern for national security - was
characteristic of past eras in which globalization broke down. The most chilling experience of the
intensification of controls during the last century was in the Great Depression. Many of the policies
implemented in the 1920s and 1930s (immigration restriction; or trade control) were not fundamentally
novel, but they could be dressed up in a new way as answers to the security issues raised by the First
World War. They were more extreme versions of ideas developed in the nineteenth century as protective
shields from the fierce winds of international competition. As the world economy looked more disorderly
and threatening in the aftermath of the First World War, such solutions appeared even more attractive.
What had before 1914 been safety nets against excessive globalization became after the World War
gigantic snares which now strangled the world economy. Capital controls were introduced to combat
speculative exchange movements, quotas to supplement tariffs in restricting unwelcome trade.
People who might move capital (because they thought that regimes were unstable) were now depicted as
national traitors. In Central Europe, against a background of ferocious anti-Semitism, capital control
legislation was used in particular to penalize Jews. In a recent analogy, during the Asian crisis of 1997-8,
in many ethnically diverse states, such as Indonesia or Malaysia, it was claimed that the Chinese
population saw itself as belonging to a greater China, and was particularly liable to move funds, and hence
was a security risk. Today, with increased uncertainty and a high likelihood of war in the Middle East or
the Gulf, it is easy to think that Arab or Islamic transactions will be looked at as subversive of security.
Terror has helped to create a new mood of suspicion, of polarization, and of a search for enemies - and
that indeed was one of its purposes. In this way it has inevitably enhanced the vulnerability of the world
to new economic shocks.

The second new development looks as if it is independent of the terror issue, although it too revolves
around the discussion of America's role in the world. Paul Krugman quickly concluded that the impact of
Enron would be more dramatic than the damage done by September 11. The combination of worldwide
stock price declines with the revelation of some major cases of accounting fraud in the United States has
produced a moral crisis of capitalism. Particularly outside the United States, countries, politicians and
business leaders who previously listened to Americans proclaiming the superiority of the American way of
life, now have a quite acute Schadenfreude. Enron was the banana skin on which American capitalism
slipped. Prominent European business executives, like Jean-Marie Messier, Ron Sommer, and Thomas
Middelhoff, are blamed and sacked for being too Americanized. In many countries, a fierce debate started
about the pay and compensation of senior business figures.

Martin Luther and Savonarola fulminated against luxury and long distance trade
Again, there are historical parallels for such a response. In previous periods, as today, greater market
integration, and increased long distance trade, created new opportunities and new riches. But in the past,
many people felt that there was something illegitimate about the great gains and the resulting large
inequalities. The Renaissance and the great age of European explorations was also a period of great
poverty (because of the population growth rather than because of the dynamism of the economy).
Moralists such as the fiery Florentine friar Savonarola or the dyspeptic German Martin Luther fulminated
against luxury and long distance trade. Luther believed that "foreign trade, which brings from Calcutta and
India and such places wares like costly silks, articles of gold, and spices - which minister only to
ostentation but serve no useful purpose, and which drain away the money of land and people - would not
be permitted if we had proper government and princes." In the late nineteenth century, Karl Marx and
Richard Wagner and many others excoriated the ills of luxurious and sinful capitalism. The expansion of
trade had often been associated with new opportunities for greed, corruption, and self-enrichment; and
many commentators rapidly reached the conclusion that this was all there was to the new developments.
Most of the protesters then thought in terms of some simple moral alternative, theological or quasi-
theological. In the mid-twentieth century, there were apparently simple and appealing alternative models
- offered by leaders who saw it as their mission to formulate a new philosophy for the state, Mussolini,
Hitler, or Stalin.
Today's globalization, apparently driven by financial flows and financial institutions, offers many examples
analogous to the scandals of the past. Enron looks as if it will be the starting point of a new debate; but it
is quite unclear what will be the outcome of that debate. An immediate response is to call for more
regulation, but regulation is always designed to do something. What should the goals of a new regulation
be?

In the twentieth century, the regulatory traditions reflected one of two opposed social philosophies: one
conservative, designed to stop new developments that might be disequilibrating or disturbing; and the
other social democratic, designed to provide compensation for the victims of change and innovation. But
today these old political movements of the twentieth century are largely exhausted. Classic conservatism
is dead because the world is changing too rapidly for conservatism as stasis to be coherent or appealing
any more. Classic socialism has also largely disappeared politically, because the rapidity of change and the
mobility of factors of production across national frontiers erodes traditional labor positions in exactly the
same way. The bankruptcy of these two very respectable but now quite out-moded positions leaves the
path open for a new populism, based on an anti-globalization groundswell, that is inward-looking and likes
the idea of the revival of the nation as a protective bulwark against foreign goods and foreign migrants
and foreign ownership. The populist reformulations are fundamentally at odds with the universal values
which still form a core of western political traditions.
The alternatives that at the moment command more electoral sympathy are anti-corruption (in practice
anti-incumbent) movements, and consumer-interest advocacy. Politics in advanced industrial countries
have become in the post-Cold War, new globalization era, increasingly centered around this twin set of
issues, which do not raise either classical redistributional themes, nor fundamentally challenge the process
and progress of globalization. All of these developments had become quite apparent before the stock
market collapses and the corporate scandals.
Sometimes it is claimed that this transition is due simply to the end of the Cold War, which in providing
convenient external enemies held politics frozen in place. This thesis is true to the extent that no other
compelling and over-arching issue replaced the Cold War. Then more or less simultaneously, the Italian
Christian Democrats disintegrated, the British Conservative Party suffered from a succession of "sleaze"
cases, France's political parties competed in trading revelations and allegations about François Mitterrand's
corruption on the one hand and the affairs of Jacques Chirac's Gaullists on the other, the funding practices
of Helmut Kohl's "system" were exposed, and President Bill Clinton moved from one fund-raising and
campaign finance scandal to another. Enron and Halliburton appear to offer another type of link between
business and political corruption.
Exposure of corruption as the major form of domestic politics in every industrial country has brought a
politics of negativity. A more positive modern political direction is concerned with the protection of
consumer interests: the restriction of tobacco advertising, automobile safety, and - for Europe - most
importantly, food safety in the face of a succession of scares about disease and infection.
Almost always these new political issues are attached to the globalization debate. It is the products from
far away that pose a threat. For a long time, before the eruption of the BSE and then the foot and mouth
disease problems, the European food safety obsession focused on the alleged (and undemonstrated) perils
of U.S. hormonally fed beef, and then on the possible dangers of genetic engineering. Then BSE and foot
and mouth seemed new cases of the perils of trade in foodstuffs that went across national borders.
Continental Europe saw them as cases of British lack of hygiene and recklessness, while Britain blamed
foot and mouth on waste products imported from China.
Disgust at traditional politics, revulsion against the immorality of the market, and the search for home
grown answers to the moral crisis: these were and are the characteristics of the downward phase of the
cycles of integration and disintegration which the world has repeatedly seen. But at the moment there is
no simple and coherent ideological solution to the challenge posed by globalization, unless it is the very
radical one of some versions of Islamic fundamentalism

Flat World? Globalization? It's Far More than That!

Print Email/Share
Flat World? Globalization? It's Far More than That!
Everyone’s talking about “Globalization.” It’s a “flat world,” we’re told, a level playing field. “Outsourcing”
of jobs is the big worry. Why pay an American $150 an hour for work... continue
Understanding our Moment in History
A presentation to the Kendal Forum, Kennett Square, PA -- Tonight I want to step back from the
immediate issues that dominate the news, and consider two basic topics: First,... continue

Everyone’s talking about “Globalization.” It’s a “flat world,” we’re told, a level playing field. “Outsourcing”
of jobs is the big worry. Why pay an American $150 an hour for work that can be done in India for $25 an
hour? So we end up phoning customer service about a computer problem, and the techies we’re talking
with are in the Philippines or India.

What’s happening, and what does it mean?

What’s happening is that for the first time in human history, the world is forging an awareness of our
existence as a single entity. Nations are incorporating the planetary dimensions of life into the fabric of
our economics, politics, culture and international relations. Due to our electronic global information
system, peoples of totally different psychological and cultural expressions—whether Silicon Valley
computer programmer, Bolivian tin miner or Russian worker on the Siberian oil rigs—are being forced into
a single, globalized technological context. Globalization is only the shorthand for this.

Globalization is generally thought of as the worldwide integration of economic, financial and political
factors. When we think globalization, we think of the IMF, the World Bank or the United Nations. For the
first time in history, nations can no longer develop economically and technically on their own. A nation
has to be part of the global development system if it wants to prosper.

Part of globalization is the increasing adoption of some form of free market economic system, as well as a
democratic political system, as these are the systems that have proven to work best in enabling easy
transfer of goods, money and jobs around the world. But these systems cannot be put on like a new suit
of clothes. To work well, an economic or political system must be rooted in the culture and psychology of
the nation that uses them. And that takes time.

At its deepest level, globalization is the gradual process of the world shrinking as people of different
nations, cultures and religions come to know more about each other. Part of this process is that many
Western ideas and modes of living are gradually seeping into the fabric of the world.

At the same time, everyone on earth has to adjust to Western information technology, for no nation can
globalize without becoming part of the electronic global information system. As this happens, existing
cultures, traditions, institutions and historic relationships are threatened, and in some cases, even
disappearing. In essence, globalization is about identity. It goes to the very psychological foundations of
a people. Globalization is the expansion of a people’s worldview. It is the process of coming to realize
that wherever we come from, we are now one people with a common destiny.

If pursued wisely and cooperatively, globalization represents the world’s best chance to enrich the lives of
the greatest number of people. One need only look at India to see a prime example of how globalization
can benefit a nation.

How long has globalization been going on?

Globalization—in terms of elemental merging of economies—started in the 15th century when the Spanish,
Portuguese and Dutch began developing settlements in Asia, South America and Africa. It wasn’t called
globalization then. It was first called exploration, and then colonialization. That was when the natural
resources from other parts of the world began to be important to the economies of Europe. Before that,
there was such a small degree of trade between Europe and other parts of the world that it was not a
major part of Europe’s economy. But after the 16th century, other parts of the world became vital to
economic development in Europe. At the same time, European ideas— especially civil administration,
science and Christianity—began to penetrate Asia, Africa and South America.

Thus the different parts of the world that had been relatively ignorant of each other began a process of
communication and integration that would increase over the next five centuries. The world began to
shrink, and peoples of different cultures began to know more about each other.

This process proceeded relatively slowly until the 18th and 19th centuries when new technologies were
developed. It was just after the French Revolution that the first telegraph message was sent. Thus the
birth of the first electronic information technology. The first practical steam locomotive was invented in
1814, which meant that a train could carry people and goods across a continent faster than the speed of a
horse (35 mph) for the first time in history. The first steamship crossed the Atlantic Ocean in 1818,
vastly reducing the time from London to New York.

As new technologies came along, economies became increasingly integrated. In 1848 Karl Marx observed,
“modern industry has established the world market, which has given immense development to commerce,
to navigation and to communication by land.”

An accelerated pace

By the beginning of the twentieth century, the pace of globalization was speeding up. The first
transatlantic radio transmission was sent in 1901; the first TV transmission in 1925; the first commercial
airline (KLM) in 1929. So the centuries-old communication and information systems were being totally
transformed.

And we know the story of the explosion of technology during the second half of the 20th century. Three
technologies are worth particular mention.

First, television. The explosion of global TV in the 1950s gave the world a new way of thinking about life.
In 1948, 172,000 American homes had TV. Four years later, that had jumped to 15.3 million homes. TV
drew everyone into the same global living room. We began seeing the same events together. In 1969,
the whole world watched as the first humans set foot on the Moon. TV changed the character of politics.
Image became more important than substance. “Spin” became king.

With the arrival of television, parents began to lose control of the information environment within which
their children grew up, a loss that was finalized with the arrival of the Internet. Loss of that control is a
major factor contributing to what Neil Postman calls “the end of childhood” as a distinct category of
growth to adulthood. Finally, TV advertising began developing a worldwide consumer appetite. Gradually,
TV became a de facto global branch of the advertising industry.

Second, the space program—more particularly, the arrival of humans on the moon. The TV picture we
saw of Earth from the Moon is one of the most significant events in history. It is as the astronomer Sir
Fred Hoyle predicted in the 1940s: “Once a photograph of the Earth, taken from the outside, is available,
a new idea, as powerful as any in history, will be let loose.” All of a sudden, what the poets and
philosophers had talked about for centuries—that we are one species, one human family—was right there
for everyone to see on their TV screen. Suddenly we saw that the boundaries we draw between people—
boundaries of nation, race, class or religion—are all in our minds. Seeing Earth from the Moon probably
has been the greatest single psychological impetus for globalization.

Third, the Internet. Dr. Philip Tobias, the world-famous anthropologist, has described the Internet as “the
most significant social development since the advent of language.” Two results are especially important.
First, instant communication with anyone anywhere in the world. As far as communication goes, time has
been virtually eliminated. We now have what some people call “world time.” This elimination of time has
vastly accelerated the pace of life. Second, everyone now has access to all information, all social and
political theories, all daily news, and all religious and philosophical beliefs. Thus, all knowledge becomes
democratized, enabling people to form opinions on subjects they never could have considered in earlier
times.

I was once at a dinner given for Alvin Toffler, the man who coined the term “future shock,” and one of the
world’s foremost “futurists.” I asked him what he sees as the consequences of all knowledge and
viewpoints being available at the mere press of a computer button. He replied simply, “It’s the end of
truth.”

What Toffler was talking about is the fragmenting effect of information technology. He wasn’t saying truth
doesn’t exist, but that fragmentation of massive amounts of information makes it ever more difficult to
have some central operating set of convictions around which nations can cohere. Fragmentation raises
the question of whose truth are we talking about? Are we talking about the truth of the forty-six million
American fundamentalists who, according to Time magazine believe the world will literally come to an end
in their lifetime? Or the postmodernists who believe there’s no realty; that life is but a social construct?
Or those scientists who assert we’ve reached the end of the Homo sapiens epoch and are entering the
“Post-human” era?

One problem becomes clear. The founders of the U.S. held certain truths to be “self-evident.” But the
overload of information, the inundation of countless different points of view, means it’s far harder to know
exactly what truths are self-evident, or at least accepted as self-evident by the body politic. It makes
achieving a governing consensus much more difficult.

But another effect of globalization—especially as a result of global TV, the Internet and massive migration
—is the crisis of identity the world is facing. All of a sudden we see the earth from the Moon, and, in
reality, there are no “national borders.” Such borders are, we discover, simply human unconscious
projections, and these projections are rapidly eroding. Increasingly, we see the world as a whole, and our
consciousness is gradually being forced to absorb this reality.

The spiritual dimension

Equally important as the integration of economies that was taking place over the centuries was the effect
of globalization on religion.

For the first several thousand years of what we might call the human journey, peoples, cultures and
religions developed in isolation and at their own pace. The world population today is just over six billion.
But the world’s religions evolved when the world population was estimated to be around 300 million..

People of different cultures and religions were spread across the globe, and there was relatively little
contact between them. So religions developed in isolation according to different environments,
experiences and cultures. Eventually, Christians and Muslims learned more about each other when the
Muslims invaded Spain and, later, the Europeans invaded what is now Israel and Palestine. But on the
whole, the average person was totally ignorant of other religions until the Europeans took Christianity to
various parts of the world after the 16th century.

Then in 1801, the Upanishads, the mystical scriptures of India, first reached Europe and were translated
into Latin. This opened up the first study in the West of the Hindu religion. In 1929, the Chinese I Ching,
or Book of Changes, was translated into German, and it soon made its way into English. During the 1930s
and ‘40s, many Americans began reading Lao Tzu’s Tao de Ching, as well as books on Buddhism.

This has been a significant part of globalization. What it has done is to cause people in all parts of the
world to realize there are different interpretations of spiritual truth; that my particular belief is not the
only understanding of spiritual reality. This realization is at the very core of a spiritual and psychological
search taking place in most nations today.

Challenges and contradictions everywhere

But we know globalization is not without its difficulties. On the one hand, it represents a shrinking of the
globe that requires us to expand our worldview and sense of identity.
In the United States, such an expansion of outlook happened once before. At the time of the American
Revolution, most people found their identity in relation to the state they lived in—Georgia, Virginia or
Massachusetts, but not with something called the United States (there was no United States). Even after
independence, it wasn’t until after the Civil War that a distinctly American identity emerged. In terms of
our culture, it was fifty years after the Revolution before a uniquely American culture—starting with James
Fenimore Cooper— became apparent. So we’ve experienced this expanding process before.

The world is going through a similar process today. Easy travel, television, the computer and Internet—
and especially seeing our globe from the perspective of the moon—have taken this expansion of
awareness to a wholly new dimension. We’re being forced to identify not simply with our nation, but also
with other races, cultures and nations. We could be experiencing the fledgling beginnings of what might
be called a global awareness or identity.

And of course, there’s a reaction. That’s to be expected. Such an epochal change doesn’t come easily.
We feel a threat to an older and more normal identity. This threat tends to force us backward to more
familiar patterns of the past. It’s uncomfortable to move forward into unknown territory. In a time of
upheaval and reorientation, we reach inward for the security of past certainties, both spiritually and
politically. In the process, life-giving themes that once resonated in the souls of our ancestors become
hollow clichés. Yes, we know it’s all “true,” but it doesn’t really excite us. We hear the old jargon from
our politicians all the time. But somehow it doesn’t have the ring of a compelling truth, a truth for a
totally fresh period of history. It’s not like it must have been in hearing Jefferson read the Declaration of
Independence for the first time. It’s happening across the world as exponential change overwhelms all
tradition and belief. This reaction—this reaching back for thought-patterns of an earlier period—
undergirds the fundamentalist sentiment, whether in America, India, or the Middle East. From a
psychological viewpoint, it’s regressive.

So we’re confronted not only with a crisis between civilizations, but also a crisis within civilizations. It’s a
monumental crisis of identity and worldview. None of the categories of the past—social status, religion,
ethnicity, culture, heritage, region, nation—in and of themselves alone—is an adequate context of thought
and action in an era that is rapidly becoming global.

Every nation on earth faces this challenge. This challenge within nations is part of what’s been going on in
the Middle East for decades. Everything about an emerging global civilization appears to threaten the
identity, social fabric, and even the existence of Islam, which comprises a billion people. So some people
lash out at what they see as the generator of globalization. And while we must deal forcefully with threats
to life and safety, we must do it with the realization that, in the broader context, and in our different
ways, America and the peoples of the Arab world face the same challenge. That challenge is how to adapt
past traditions and institutions to radically new conditions; in essence, how to adjust our worldview for a
new period of world development. Maintaining world order and stability under such uncertain conditions is
the critical test confronting all nations, especially America and Europe.

In the end, the test of globalization is not simply a mechanical—an economic and financial—process. Is
must also be a human process, a psychological process, a spiritual process, a broadening of our
consciousness, a greater sensitivity to other people and cultures, and a deepening sense of wholeness.
For common sense suggests that a unified world, which is the next stage of human history and is the
unarticulated objective of globalization, must be built on a unified self in each of us.

Globalization is a challenge to every one of us—to move past the limiting parameters of past categories as
the primary form of identity, and assume a new worldwide perspective. Our historic sense of family,
class, race, religion and nation will always be a part of who we are, part of our roots and identity. But
we’re now at a point in world development—due to our own inventiveness—where our sense of identity is
being forced to widen and include aspects of life that are unfamiliar to us. It’s not easy, and it’s not
something we can leave up to our so-called “leaders.” This is a challenge every human being faces in one
way or the other.

As the historian Arnold Toynbee suggested long ago, “Technology can bring strangers physically face-to-
face with one another in an instant, but it may take generations for their minds, and centuries for their
hearts, to grow together. Physical proximity,” he concluded, “not accompanied by simultaneous mutual
understanding and sympathy, is apt to produce antipathy, not affection, and consequently discord, not
harmony.” Therein lies the human challenge of globalization. To be legitimate, globalization must
validate itself in terms of equitable benefits for all nations, and sensitivity to other nations’ need for social
and political stability.