Padmashree Dr.D.Y.

Patil University
Department of Business
Management

Subject- International Business

Globalisation
Submitted to
Mrs. Surya Bhamre

Submitted by
Sreelaxmi Iyer (MBA-BT- 09012)

Date: 6th January 2011

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 Index

Sr. No. Topic Page No.

1. What Is Globalization? 3

2. Globalization due to 4
Policies and Technology
3. 5-9
Globalization in India
3.1 India is Global 6
3.2 Globalisation and Poverty 6
3.3 GDP Growth rate 7
3.4 Export and Import 7
3.5 Where does Indian stand in 8
terms of Global
Integration?
4. 10
Padding up: Indian
entrepreneurs helping India
going Global

5. Conclusion 11

What Is Globalization?
Globalization is a process of interaction and integration among the people, companies, and
governments of different nations, a process driven by international trade and investment and
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aided by information technology. This process has effects on the environment, on culture, on
political systems, on economic development and prosperity, and on human physical well-being
in societies around the world.

Stephen Gill: defines globalisation as the reduction of transaction cost of trans-border

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.
Globalization is not new. For thousands of years, people and, later, corporations have been
buying from and selling to each other in lands at great distances, such as through the famed
Silk Road across Central Asia that connected China and Europe during the Middle Ages.
Likewise, for centuries, people and corporations have invested in enterprises in other countries.
In fact, many of the features of the current wave of globalization are similar to those prevailing
before the outbreak of the First World War in 1914.
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

Globalization due to Policies and Technology

Policy and technological developments of the past few decades have spurred increases in cross-
border trade, investment, and migration so large that many observers believe the world has
entered a qualitatively new phase in its economic development.
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Since 1950, for example, the volume of world trade has increased by 20 times, and from just
1997 to 1999 flows of foreign investment nearly doubled, from $468 billion to $827 billion.
Distinguishing this current wave of globalization from earlier ones, author Thomas Friedman
has said that today globalization is “farther, faster, cheaper, and deeper.”
This current wave of globalization has been driven by policies that have opened economies
domestically and internationally. In the years since the Second World War, and especially
during the past two decades, many governments have adopted free-market economic systems,
vastly increasing their own productive potential and creating myriad new opportunities for
international trade and investment. Governments also have negotiated dramatic reductions in
barriers to commerce and have established international agreements to promote trade in goods,
services, and investment. Taking advantage of new opportunities in foreign markets,
corporations have built foreign factories and established production and marketing
arrangements with foreign partners. A defining feature of globalization, therefore, is an
international, industrial and financial business structure.
Technology has been the other principal driver of globalization. Advances in information
technology, in particular, have dramatically transformed economic life. Information
technologies have given all sorts of individual economic actors—consumers, investors,
businesses—valuable new tools for identifying and pursuing economic opportunities, including
faster and more informed analysis of economic trends around the world, easy transfers of
assets, and collaboration with far-flung partners.

Globalization in India
Globalization in India has allowed companies to increase their base of operations, expand
their workforce with minimal investments, and provide new services to a broad range of
consumers.

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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 a more 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.
One of the major forces of globalization in India has been in the growth of outsourced IT and
business process outsourcing (BPO) services. The last few years have seen an increase in the
number of skilled professionals in India employed by both local and foreign companies to
service customers in the US and Europe in particular. Taking advantage of India’s lower cost
but educated and English-speaking work force, and utilizing global communications
technologies such as voice-over IP (VOIP), email and the internet, international enterprises
have been able to lower their cost base by establishing outsourced knowledge-worker
operations in India.
As a new Indian middle class has developed around the wealth that the IT and BPO industries
have brought to the country, a new consumer base has developed. International companies are
also expanding their operations in India to service this massive growth opportunity.
Notable examples of international companies that have done well in India in the recent years
include Pepsi, Coca-Cola, McDonald’s, and Kentucky Fried Chicken, whose products have
been well accepted by Indians at large.
Globalization in India has been advantageous for companies that have ventured in the Indian
market. By simply increasing their base of operations, expanding their workforce with minimal
investments, and providing services to a broad range of consumers, large companies entering
the Indian market have opened up many profitable opportunities.
Indian companies are rapidly gaining confidence and are themselves now major players in
globalization through international expansion. From steel to Bollywood, from cars to IT, Indian
companies are setting themselves up as powerhouses of tomorrow’s global economy.
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
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to a peak level of 77.8% in 1996-97. Growth rates have slowed down since the country has still
be 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. However India GDP surges 8.9% in
the Third Quarter.
This is major improvement given that India's 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 pace 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). And now also in 2010 its position is 4th.
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
policies, 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

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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 is 5.8% and second quarter is 6.1%. Now,
in 2010 GDP had surged up to 8.9% in the September quarter.

http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Symbol=INR

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 from nearly 5 to 10% of the country’s total agricultural
exports.
Where does Indian stand in terms of Global Integration?
Asia continues to lead the global recovery and India, the second fastest growing major
economy in the world, has remained in the vanguard. In the International Monetary Fund’s
recently released Asia-Pacific Regional Economic Outlook, we predict that, on average, Asia
will grow by 8% in 2010. While economic activity in the region has moderated towards a more
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sustainable pace in recent months, it remains robust. We are, therefore, projecting Asia as a
whole to grow by 7% next year, compared with global growth of about 4%.
During the calendar year 2011, we project that India will remain above the regional average,
growing by 8.5% (gross domestic product, or GDP, at market prices), which translates to about
8% at factor costs (the headline measure in India) for the Indian 2011-12 fiscal year.
Notwithstanding India’s higher growth rate, it has several similarities with others in the region.
The strength of private domestic demand has been a key part of the story this year all over
Asia, including India. Spending on consumer durables has been robust here, while investment
has also been buoyant, with infrastructure investment playing a particularly important role in
the past year. Impressive export growth and strong, but somewhat volatile, capital inflows have
been other common themes that India has shared with the other countries in the region. And,
although the recovery started earlier in India, the growth cycles have been broadly synchronous
since then: Forward-looking indicators such as purchasing manager surveys suggest that
growth in India likely peaked recently, as it did in the rest of the region.
Common economic positions imply some common risks. A deterioration of the external
environment represents the most significant risk to the region. A weaker-than-expected
recovery of final demand and an exacerbation in sovereign and banking vulnerabilities in
advanced economies would adversely affect Asia, including India, through the real, financial,
and confidence channels. It is important to note that while India’s gross exposure to external
demand is less than that in many other Asian countries, its integration with the global economy
has been especially rapid in recent years, raising external risks in proportion.
The main short-term policy challenge for Asian policymakers is to manage the exit from policy
stimulus now that a recovery is under way across the region. Closing output gaps—actual
growth is fast nearing or, in some instances, exceeding the economy’s potential growth—and
emerging pressures in both goods and asset prices suggest that the time has come to normalize
fiscal and monetary policy stances in most of Asia (outside of Japan). Monetary policy stances,
however, still remain generally accommodative, although several countries have started taking
steps to normalize them. And, normalizing the fiscal stance now would allow governments to
create policy space to cope with adverse shocks in future.
On this front, India has started ahead of the rest of Asia. Reflecting its earlier recovery from the
crisis, India began the exit—in particular on the monetary front—before other countries.
Inflation has posed a particular challenge for India, where it picked up earlier and has been
significantly higher. Our analysis suggests that both supply and demand conditions have
affected inflation in India. In particular, food prices tend to transmit to generalized inflation in
developing countries such as India faster than in more advanced economies.
Further, our analysis also suggests that the closing output gap has adversely affected core
inflation— minus food and fuel—in India. With inflation inertia also especially high in India, it
was appropriate for the Reserve Bank of India to start tightening early and in a consistent but
gradual fashion.
Somewhat higher inflation is not the only feature that sets India apart from many other Asian
countries. India also has twin deficits—one on the external current account and the second, a
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fiscal one. The external deficit (which measures India’s excess of investment over savings) has
widened mainly because of increases in investment, especially in much-needed infrastructure.
A large share of the deficit remains financed through equity capital inflows. This, however,
underscores the importance of proceeding apace with financial sector reforms to create deep
and resilient domestic capital markets and to help direct capital inflows to their most productive
uses: India’s increase in the foreign investment limits in long-term local bonds last month is an
example of such measures.
In addition, India’s exchange rate has become increasingly flexible, which provides an
adjustment mechanism to the current account deficit and to manage capital flows. As for the
stance, the multi-year commitments spelt out in the 2010 Budget to reduce the deficit—by
trimming subsidies, for instance—are key to ensuring the continuation of high levels of
investor confidence.
It’s clear not just that Asia is well placed to continue to lead global growth but also that India
will remain among the leaders in Asia. Despite some of the differences and unique
macroeconomic challenges India faces, it shares with Asia the common theme of continued
economic integration with the rest of the world—something that brings both sizeable benefits
and some risks. That’s why prudent monetary and fiscal policies, combined with structural
reforms, remain key.

Padding up: Indian entrepreneurs helping India going Global

With a mix of confidence, chutzpah, and strategic nous, Indian entrepreneurs, previously
shackled by the lack of cash, vision, and necessity, have made overseas acquisitions worth
nearly $70 billion in the last 10 years.

➢Today, Laxmi Mittal’s Arcelor-Mittal, the world's largest steelmaker, is a truly global
powerhouse with only a marginal presence in India;

➢Ratan Tata set the pace at the turn of the century buying Tetley, the UK tea giant for a then
record $430 million, he audaciously purchased the Anglo-Dutch steel maker Corus , five times
the size of Tata Steel for more than $12-billion, and gambled a further $2 billion on iconic yet
ailing British car Marques Jaguar and Land Rover;

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➢Vijay Mallya broke the European-American monopoly over high-end Scotch distilleries and
winemaking by snapping up White and Mackay and Taittinger;

➢Aditya Birla Group's Hindalco forked out $6 billion for Atlanta-based aluminium sheet maker
Novelis;

➢Bharti-Airtel moved into Africa acquiring Zain group's telecoms operations in a clutch of
countries in the continent for more than $10 billion; and

➢IT companies including Infosys and Wipro spent several billions of dollars to acquire a global
footprint.

The growing list of foreign buys has had a profound impact not only on Indian business but
also the global economy. Ironically enough, Indian entrepreneurs are increasingly forced to
remind Western governments, policymakers and citizens some of the tenets of globalization,
and often assure them that they aren't invaders intent on shipping jobs back to India.

“The availability of value buys, in slow-growing Western economies was a big factor in India
Inc's global shopping spree. Also, they've never had such access to capital. It was a case of
Western capital that came into India, via our stock markets, and being redeployed in the West,
in the form of Eastern capital,” said Vishesh Chandiok , national managing partner, Grant
Thornton, a consultancy firm.

The compulsions to acquire global firms were varied. For Reliance Industries, access to a
potentially game changing natural resource was the key in acquiring shale gas firms in the US,
while JLR gave Tata Motors the twin benefits of the ability to move up the product value chain
and also get access to technology that could help in the Indian market.

With the telecom market in Indian showing signs of tapering off, Bharti's quest for patches of
Blue Ocean led the company to Africa.

Conclusion
Globalization is deeply controversial, however. Proponents of globalization argue that it allows
poor countries and their citizens to develop economically and raise their standards of living,
while opponents of globalization claim that the creation of an unfettered international free
market has benefited multinational corporations in the Western world at the expense of local
enterprises, local cultures, and common people. Resistance to globalization has therefore taken
shape both at a popular and at a governmental level as people and governments try to manage
the flow of capital, labor, goods, and ideas that constitute the current wave of globalization.

Advantages of Globalization

➢ Goods and people are transported with more easiness and speed
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 ➢ The possibility of war between the developed countries decreases
➢ Free trade between countries increases
➢ Global mass media connects all the people in the world
➢ As the cultural barriers reduce, the global village dream becomes more realistic
➢ There is a propagation of democratic ideals
➢ The interdependence of the nation-states increases
➢ As the liquidity of capital increases, developed countries can invest in developing ones
➢ The flexibility of corporations to operate across borders increases
➢ The communication between the individuals and corporations in the world increases
➢ Environmental protection in developed countries increases
Effects of globalization
➢ Enhancement in the information flow between geographically remote locations
➢ The global common market has a freedom of exchange of goods and capital
➢ There is a broad access to a range of goods for consumers and companies
➢ Worldwide production markets emerge
➢ Free circulation of people of different nations leads to social benefits
➢ Global environmental problems like cross-boundary pollution, over fishing on oceans,
climate changes are solved by discussions
➢ More trans-border data flow using communication satellites, the Internet, wireless
telephones etc.
➢ International criminal courts and international justice movements are launched
➢ The standards applied globally like patents, copyright laws and world trade agreements
increase
➢ Corporate, national and sub-national borrowers have a better access to external finance
➢ Worldwide financial markets emerge
➢ Multiculturalism spreads as there is individual access to cultural diversity. This diversity
decreases due to hybridization or assimilation
➢ International travel and tourism increases
➢ Worldwide sporting events like the Olympic Games and the FIFA World Cup are held
➢ Enhancement in worldwide fads and pop culture
➢ Local consumer products are exported to other countries
➢ Immigration between countries increases
➢ Cross-cultural contacts grow and cultural diffusion takes place
➢ There is an increase in the desire to use foreign ideas and products, adopt new practices
and technologies and be a part of world culture
➢ Free trade zones are formed having less or no tariffs
➢ Due to development of containerization for ocean shipping, the transportation costs are
reduced
➢ Subsidies for local businesses decrease
➢ Capital controls reduce or vanquish
➢ There is supranational recognition of intellectual property restrictions i.e. patents
authorized by one country are recognized in another
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References
http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Symbol=INR
file:///D:/Documents/ib/globalization/Where-India-stands-in-Asia.html
http://en.wikipedia.org/wiki/Globalization
http://www.dare.co.in/strategy/going-global/doing-business-in-south-africa.htm
http://www.scribd.com/doc/6987477/Indian-Entrepreneurs

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