Project submitted in partial fulfillment of the requirements of the degree of

LLB at Jamia Millia Islamia

Globalization in
India
TO: MS. AAKRITI MATHUR
BY: SHUJA HAIDER RIZVI
VTH SEMESTER

ACKNOWLEDGEMENT
I have made my project for International Trade & Finance on Globalization in India I
would, therefore, express my gratitude to our International Trade & Finance teacher, Ms.
Aakriti Mathur, without whose support and guidance, the completion of this project was
not possible. It is my pious duty to express my deep obligation towards my reputed teacher
for her kindness and many sided benevolence.
I should not forget to appreciate to the administrative staff and library staff of the Faculty
of Law, Jamia Millia Islamia for their untired cooperation to complete this project.

Globalization is a process that encompasses the causes, course, and

consequences of transnational and transcultural integration of human and
non-human activities.

CONTENT

Introduction
Definitions
India Pre Globalization
The Important Reform Measures
Impact of Globalization on Indian Economy
Negative Impacts of Globalization in India
Conclusion

INTRODUCTION
Globalization is not a single concept that can be defined and covered within a set time

frame, nor is it a process that can be defined clearly with a beginning and an end.
Furthermore, it cannot be explained upon with certainty and be applicable to all people
and in all situations. Globalization involves economic integration; the transfer of policies
across borders; the transmission of knowledge; cultural stability; the reproduction,
relations, and discourses of power; it is a global process, a concept, a revolution, and an
establishment of the global market free from sociopolitical control. 1 Globalization
encompasses all of these things. It is a concept that has been defined variously over the
years, with some undertones referring to progress, development and stability, integration
and cooperation, and others referring to regression, colonialism, and destabilization.
Despite these challenges, this term brings with it a multitude of hidden agendas. An
individuals political ideology, geographic location, social status, cultural background, and
ethnic and religious affiliation provide the background that determines how globalization
is interpreted. In 1995, Martin Khor, President of the Third World Network 2 in Malaysia,
referred to globalization as colonization. Concurrently, Swedish journalist Thomas
Larsson, in his book The Race to the Top: The Real Story of Globalization (2001), stated
that globalization:

is the process of world shrinkage, of distances getting shorter,

things moving closer. It pertains to the increasing ease with
which somebody on one side of the world can interact, to
mutual benefit, with somebody on the other side of the world.3

1 P. V. Nikitin and J. E. Elliott, Freedom and the Market (An Analysis of the Anti-globalisation Movement
from the Perspective of the Theoretical Foundation of the Evaluation of the Dynamics of Capitalism by
Palanyi, Hayek and Keynes), The Forum for Social Economics, Fall 2000, pp. 1-16, p. 14, as cited in G.
Gaburro and E. OBoyle, Norms for Evaluating Economic Globalization, International Journal of Social
Economics, Vol. 30, No. 1/2, 2003, pp. 95118, p. 115.
2 See http://www.twnside.org.sg/
3 T. Larsson, The Race to the Top: The Real Story of Globalization (U.S.: Cato Institute, 2001), p. 9

Anthony McGrews says:

Globalization [is] a process which generates flows and connections, not

simply across nation-states and national territorial boundaries, but between
global regions, continents and civilizations. This invites a definition of
globalization as: an historical process which engenders a significant shift in
the spatial reach of networks and systems of social relations to transcontinental
or interregional patterns of human organization, activity and the exercise of
power.4

DEFINITIONS
Immanuel Wallerstein
globalization represents the triumph of a capitalist world economy tied together by a
global division of labour.5
Martin Albrow
all those processes by which the peoples of the world are incorporated into a single
world society.6

4 Anthony G. McGrew, Global Legal Interaction and Present-Day Patterns of Globalization, in V. Gessner
and A. C. Budak (eds.), Emerging Legal Certainty: Empirical Studies on the Globalization of Law (Ashgate:
Dartmouth Publishing Company, 1998), p. 327, as cited in V. S. A. Kumar, A Critical Methodology of
Globalization: Politics of the 21 st Century?, Indiana Journal of Global Legal Studies, Vol. 10, Issue 2,
2003, pp. 87-111, p. 98
5 The Modern World System: Capitalist Agriculture and the Origins of the European World-Economy in the
Sixteenth Century (New York: Academic Press, 1974), as cited in R. J. Holton, Globalization and the
Nation-State (London: Macmillan Press, 1998), p. 11.

Anthony Giddens
Globalization can thus be defined as the intensification of worldwide social relations
which link distant localities in such a way that local happenings are shaped by events
occurring many miles away and vice versa.7
Peter Dicken,
globalization is qualitatively different from internationalization it represents a
more advanced and complex form of internationalization which implies a degree of
functional integration between internationally dispersed economic activities.8
Kenichi Ohmae
globalization means the onset of the borderless world9
Mike Featherstone
The process of globalization suggests simultaneously two images of culture. The first
image entails the extension outwards of a particular culture to its limit, the globe.
6 , Introduction, in M. Albrow and E. King (eds.), Globalization, Knowledge and Society (London: Sage,
1990), p. 8, as cited in R. J. Holton, Globalization and the Nation-State (London: Macmillan Press, 1998), p.

7 The Consequences of Modernity (Cambridge: Polity Press, 1990), p. 64

8 Global Shift: The Internationalization of Economic Activity (London: Guilford Press, 1992), p. 1, p. 87, as
cited in I. Clark, Globalization and International Relations Theory (New York: Oxford University Press,
1999), p. 38.

9 The Borderless World: Power and Strategy in the Global Marketplace (London: HarperCollins, 1992), as
cited in RAWOO Netherlands Development Assistance Research Council, Coping with Globalization: The
Need for Research Concerning the Local Response to Globalization in Developing Countries, Publication
No. 20, 2000, p. 14.

Heterogeneous cultures become incorporated and integrated into a dominant culture

which eventually covers the whole world. The second image points to the compression of
cultures. Things formerly held apart are now brought into contact and juxtaposition.10
Robert Cox
The characteristics of the globalization trend include the internationalizing of
production, the new international division of labor, new migratory movements from South
to North, the new competitive environment that accelerates these processes, and the
internationalizing of the statemaking states into agencies of the globalizing world.11

India Pre Globalization

From independence till the later part of the 1980s, India economic approach was mainly
based on government control and a centrally operated market. The country did not have a
proper consumer oriented market and foreign investments were also not coming in. This
did not do anything good to the economic condition of the country and as such the
standard of living did not go up. In the 1980s, stress has given on globalization of the
market by the Congress government under Rajiv Gandhi. In his government tenure, plenty
of restrictions were abolished on a number of sectors and the regulations on pricing were
also put off. Effort was also put to increase the condition of the GDP of the country and to
increase exports.12
Even if the economic liberalization policies were undertaken, it did not find much support
and the country remained in its backward economic state. The imports started exceeding the
10 Undoing Culture, Globalization, Postmodernism and Identity (London: Sage, 1995), pp. 6-7, as cited in
Culture Communities: Some Other Viewpoints, Issues in Global Education, Newsletter of the American
Forum for Global Education, Issue No. 158, 2000.
11 Multilateralism and the Democratization of World Order, paper for the International Symposium on
Sources of Innovation in Multilateralism, Lausanne, May 26-28, 1994, as cited in J. A. Scholte, The
Globalization of World Politics, in J. Baylis and S. Smith (eds.), The Globalization of World Politics, An
Introduction to International Relations (New York: Oxford University Press, 1999), p. 15.

exports and the India suffered huge balance of payment problems. The International
Monetary Fund (IMF) asked the country for the bailout loan. The fall of the Soviet Union, a
main overseas business market of India, also aggravated the problem. The country at this
stage was in need of an immediate economic reform.13

The Important Reform Measures

Indian economy was in deep crisis in July 1991, when foreign currency reserves had
dropped to almost billion inflation had boomed to an annual rate of 17 percent; fiscal
deficit was very high and had become unsustainable; foreign investors and NRIs had lost
confidence in Indian economy. Capital was flying out of the country and we were close to
defaulting on loans. Along with these jams at home, many unforeseeable changes swept
the economies of nations in Western and Eastern Europe, South East Asia, Latin America
and elsewhere, around the same time. These were the economic compulsions at home and
abroad that called for a complete overhauling of our economic policies and compulsions at
home and abroad that called for a complete overhauling of our economic policies and
programs. Major measures initiated as a part of the liberalization and globalization
strategy in the early nineties included the following.
Devaluation: the first step towards globalization was taken with the announcement
of the devaluation of Indian currency by 18-19 percent against major currencies in the
international foreign exchange market. In fact this measure was taken in order to
resolve the BOP crisis.
Disinvestment - In order to make the process of globalization smooth, privatization
and liberalization policies are moving along as well. Under the privatization scheme,
most of the public sector undertaking have been are being sold to private sector.
12 Narula, Rajneesh (Ed.), Trade and Investment in a Globalizing World, Series in International Business
and Economics, Elsevier Science Ltd., 2001.
13 Saha, Biswatosh, Foreign Investment, Financial Markets and Industry: India in the 1990s, Unpublished
Doctoral Dissertation, mimeo. Indian Institute of Management, Calcutta, May 2001.

Undoing of the industrial Licensing Regime At present, only six industries are
under compulsory licensing mainly on accounting of environmental safety and
strategic considerations. A significantly amended locational policy in tune with the
liberalized licensing policy is in place. No industrial approval is required from the
government for locations not falling within 25kms of the periphery of cities having a
population of more than one million.
Allowing foreign Direct Investment (FDI) across a wide range of industries and
encouraging non-debt flows. The department has put in place a liberal and transparent
foreign investment regime where most activities are opened to foreign investment on
automatic route without any limit on the extent of foreign ownership. Some of the
recent initiatives taken to further liberalize the FDI regime, inter alias, include opening
up of sectors such as Insurance (upto 26%) development of integrated townships
(upto 100%) defense industry (upto 26%) tea plantation (upto100%) subject to
divestment of 26% within five years to FDI ) enhancement of FDI limits in private
sector banking, allowing FDI up to 100% under the automatic route for most
manufacturing activities in SEZs; opining up B2B e-commerce; Internet service
providers (ISPs) without gateways; electronic mail and voice mail to 100% foreign
investment subject to 26% divestment condition; etc.
strengthened

investment

facilitation

measures

The department has also

through

foreign

investment

implementation Authority (FIIA)

Non Resident Indian Scheme the general policy and facilities for foreign direct
investment as available to foreign investors / Companies are fully applicable to NRIs
as well. In addition Government has extended some concessions especially for NRIs
and overseas corporate bodies having more than 60% stake by NRIs.

Hurling open industries reserved for the public sector to private participation.

Now there are only three industries reserved for the public sector
Abolition of the (MRTP) Act, which necessitated prior approval for capacity
expansion

10

The decrease of the peak customs tariff from over 300 per cent prior to the 30 per
cent rate that applies now.

Impact of Globalization on Indian Economy

Now the concept of localization is totally changed its converted into globalization. Go
globally and think globally is the chant of present era. Right from Manufacturing to
services, thrust is on globalization. For example, Mazdas sport car MX-5 Miata, was
designed in California, its proto type product is created in England, assembled in
Michigan and Mexico using advanced electronic components which are invented in New
Jersey, fabricated in Japan by sourcing the finance from Tokyo and New York and
marketed worldwide.14
Globalization has greatly influenced the Indian economy and made it a huge consumer
market. Today, most of the economic changes in the country are based on the demand
supply cycle and other economic factors. Today, India is the worlds 12th largest economy
in terms of market exchange rate and 4th largest in terms of the Purchasing Power Parity.
According to a report by the World Bank, the Indian market is expected to grow at around
8 per cent in the year 2015.15
Globalization has also made a positive impact on various important economic sections.
Today, the service sectors, industrial sectors and the agriculture sector have really grown
to a great extent. Around 54 per cent of the annual Gross Domestic Product (GDP) of
India comes from the service industry while the industrial and agriculture sector
contributes around 29 per cent and 17 per cent respectively.16 With the improvement of the
market, more and more new sectors are coming up and reaping profits such as IT services,
chemical, textiles, cement industry and so on. With the increase in the supply level, the
rate of employment is also increasing considerably.

14 The Indian Economic Summit Report-2005

15 World Bank Annual Report, 2014, New York.
16 Economic Survey of India, 2010-11. Ministry of Finance, Government of India, New Delhi.

11

There has been an improvement in the manufacturing sector as well which grew from 8.98
per cent in 2005 to around 12 per cent. The communication segment has grown up to
around 16.64 per cent. The condition is expected to improve further with more demand
and increase in customer base. The yearly growth of the industrial sector has been around
6.8 per cent which will rise more in the future. India is one of the well-known industrial
markets in the Asia-Pacific region.17
India, an emerging economy, has witnessed unprecedented levels of economic expansion,
along with countries like China, Russia, Mexico and Brazil. India, being a cost effective
and labor intensive economy, has benefited hugely from outsourcing of work from
developed countries, and a strong manufacturing and export oriented industrial
framework. With the economic pace picking up, global commodity prices have staged a
comeback from their lows and global trade has also seen healthy growth over the last two
years.
Due to the strong position of liquidity in the market, large corporations now have access to
capital in the corporate credit markets. Globalization has many positive, innovative and
dynamic aspects, all related to the increased market access, increased access to capital,
and increased access to technology and information which have led to greater income and
employment opportunities.18 There is no shortage of examples: The world as a whole is
definitely more prosperous and healthier, with average per capita incomes tripling in the
last fifty years, child mortality rates halving and life expectancy increasing by ten years
since 1965. Trade flows also increased 12-fold in the past fifty years as a result of the
removal of natural and artificial barriers.

Negative Impacts of Globalization in India

While the world as a whole has benefited from globalization, there are negative and
marginalizing aspects of globalization. These are what have led to a backlash, as reflected
to a certain extent in the demonstrations by civil society accompanying recent
17 Globalization and Indias Business prospective Lecture Ravi Kastia.
18 Globalization and Liberalization Prospects of New World Order Dr.A.K.Ojha.

12

international conferences, and by increasing expressions of dissatisfaction at the

governmental level.
1. Agriculture sector: - 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 per cent of the population
and contributed 59 per cent of the gross domestic product. However, by 2001 the
population depending upon agriculture came to 58 per cent whereas the share of
agriculture in the GDP went down drastically to 24 per cent and further to 22 per cent in
2005-10. This has resulted in a lowering the per capita income of the farmers and
increasing the rural indebtedness. The agricultural growth of 3.2 per cent 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.
2. Unstable distribution of benefits: The second negative aspect of globalization is that its
gains are not equally distributed, both between and within countries. The benefits of
globalization are also badly skewed within countries, both developing and developed.
Income inequality is rising in many countries, particularly in the OECD countries. Worse, job
and income insecurity is increasing, particularly for unskilled labor, although corporate
restructuring has also meant job insecurity for professionals. Within developing countries,
the increased world agricultural prices expected to result from the Uruguay Round should
benefit those in agriculture. The urban poor will suffer when food prices rise, but will gain
from employment in new export industries. Young women hired by multinationals are likely
to benefit most their incomes increase, with a associated increase in their household status.

13

Consumers also gain from the reduction in local prices due to increased competition from
abroad. 19
3. Financial Instability: Unbalanced benefit flows are not the only negative aspects of
globalization. Globally integrated markets have financial volatility as a permanent feature,
the frequency of financial crises increasing with the growth in international capital flows.
The human costs of such financial instability can be very high, as shown by the effects of the
Asian crisis bankruptcies, poverty increase, rising unemployment, reduced schooling,
reduced public services, and increased social stress and fragmentation in short, a reversal in
human development.
4. Contagion: The closer linkages that characterize globalization also allow for contagion and
worldwide recession, or at least slowdown. The Asian crisis had repercussions everywhere -in South America, Russia, Africa, the Middle East which were affected either directly or
indirectly.
5. More human insecurity: Crime, disease, and loss of cultural identity. Unfortunately, the
many opportunities opened up by the widening and deepening of information flows and
contacts among the worlds people also include increasing opportunities for crime
(trafficking in drugs, weapons, women, international syndicates), for the spread of
HIV/AIDS as well as ideas, and for the flow of culture and cultural products which may lead
to cultural homogenization, which, while considered enriching by some, is considered as a
loss of cultural identity by others.
6. 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 improved 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 losers the socially deprived and the rural poor. Significant numbers of
non-perennial poor, who had worked hard to escape poverty, were finding their gains
19 Globalization and Poverty: Centre for International Economics, Australia. Globalization Trend and Issues
T.K.Velayudham,

14

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.20

CONCLUSION:
During last decade the volume of world trade has increased and the high and middle
income countries have managed to increase their share in world trade. This has happened
mainly because of opening up of economies and globalization. Moreover, the middle
income countries have invited more Foreign Direct Investment during the period. In
contrast with this, the per capita GDP of the low income countries has marginally
increased. The economic inequality has widened between different income groups.
Therefore one may be tempted to conclude that the globalization has not trickled down to
the low income countries. In other words globalization has been confined to developed
countries and developing countries have been able to participate in the process. However,
globalization should not be accused for loosing share of the low income countries. These
countries suffer from internal problems like rapid rise in population, infrastructure bottle
necks, and weak financial markets and so on. More access to globalization and its benefits
demand that developing countries first put in place a conducive environment necessary to
ensure higher returns and larger markets for foreign investors. To get a share of global
capital, technology and output, developing countries have to upgrade their social and
economic institutions through administrative, legislative and legal reforms.
Globalization should not be thought of as a solution to everything. It merely provides
opportunities. Those who take advantage, they flourish and those who do not they sink.
Globalization is not supposed to produce equality of outcome but it produces equality of
opportunity for those with right mindset. Hence the developing countries have to focus on
economic restructuring building market supporting institutions and creating efficient
regulatory mechanisms. Left to themselves the low income countries cannot travel long.
What in fact needed is the international assistance and a support mechanism so as to
20 Globalization: Imperatives, Challenges and the Strategies. The ILO Report (2004)

15

facilitate their participation in the process of globalization. The challenge of the hour is to
make globalization work towards global prosperity through disaggregate development.
The critically necessity in this context are the collective and cooperative actions which
should be realized by all countries of the world and particularly the developed ones.
Attempts to improve the economic conditions through globalization have been made in
our country and globalization has also paved the way to achieve maximum output, quality
and value products but regionalism, communalism and political discretion are the main
obstacles in the way to good governance. So the world politics is thinking about
globalization retreat. The principles of globalization need to be observed by Indian
administration to face the challenges of globalization and to maintain its status and
significance in our society. A country must carefully choose a combination of policies that
best enables it to take the opportunity while avoiding the pitfalls. For over a century the
United States has been the largest economy in the world but major developments have
taken place in the world economy since then, leading to the shift of focus from the US and
the rich countries of Europe to the two Asian giants- India and China. Economics experts
and various studies conducted across the globe envisage India and China to rule the world
in the 21st Century. India, which is now the fourth largest economy in terms of purchasing
power parity, may overtake Japan and becomes third major economic power within 10
years.

16

References

G. Gaburro and E. OBoyle, Norms for Evaluating Economic Globalization

Anthony G. McGrew, Global Legal Interaction and Present-Day Patterns of

Globalization

V. S. A. Kumar, A Critical Methodology of Globalization: Politics of the 21st

Century

M. Albrow and E. King, Globalization, Knowledge and Society

J. Baylis and S. Smith, The Globalization of World Politics, An Introduction to

International Relations

17

Globalisation and Liberalisation Prospects of New World Order Dr.A.K.Ojha, Third

Concept An International Journal of Ideas, Aug 2002

Globalization and Poverty: Centre for International Economics, Australia.

Globalization Trend and Issues by T.K.Velayudham

World Bank Annual Report, 2014, New York

Economic Survey of India, 2010-11. Ministry of Finance, Government of India, New

Delhi