Advantages of Globalization

o Goods and people are transported with more easiness and speed
o the possibility of war between the developed countries decreases
o free trade between countries increases
o global mass media connects all the people in the world
o as the cultural barriers reduce, the global village dream becomes more realistic
o there is a propagation of democratic ideals
o the interdependence of the nation-states increases
o as the liquidity of capital increases, developed countries can invest in developing ones
o the flexibility of corporations to operate across borders increases
o the communication between the individuals and corporations in the world increases
o environmental protection in developed countries increases

Effects of globalization

o enhancement in the information flow between geographically remote locations

o the global common market has a freedom of exchange of goods and capital
o there is a broad access to a range of goods for consumers and companies
o worldwide production markets emerge
o free circulation of people of different nations leads to social benefits
o global environmental problems like cross-boundary pollution, over fishing on oceans,
climate changes are solved by discussions
o more transborder data flow using communication satellites, the Internet, wireless
telephones etc.
o international criminal courts and international justice movements are launched
o the standards applied globally like patents, copyright laws and world trade agreements
increase
o corporate, national and subnational borrowers have a better access to external finance
o worldwide financial markets emerge
o multiculturalism spreads as there is individual access to cultural diversity. This diversity
decreases due to hybridization or assimilation
o international travel and tourism increases
o worldwide sporting events like the Olympic Games and the FIFA World Cup are held
o enhancement in worldwide fads and pop culture
o local consumer products are exported to other countries
o immigration between countries increases
o cross-cultural contacts grow and cultural diffusion takes place
o 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
o free trade zones are formed having less or no tariffs
o due to development of containerization for ocean shipping, the transportation costs are
reduced
o subsidies for local businesses decrease
o capital controls reduce or vanquish
o there is supranational recognition of intellectual property restrictions i.e. patents
authorized by one country are recognized in another

Advantages of globalization in the developing world

It is claimed that globalization increases the economic prosperity and opportunity in the
developing world. The civil liberties are enhanced and there is a more efficient use of resources.
All the countries involved in the free trade are at a profit. As a result, there are lower prices, more
employment and a better standard of life in these developing nations. It is feared that some
developing regions progress at the expense of other developed regions. However, such doubts
are futile as globalization is a positive-sum chance in which the skills and technologies enable to
increase the living standards throughout the world. Liberals look at globalization as an efficient
tool to eliminate penury and allow the poor people a firm foothold in the global economy. In two
decades from 1981 to 2001, the number of people surviving on $1 or less per day decreased
from 1.5 billion to 1.1 billion. Simultaneously, the world population also increased. Thus, the
percentage of such people decreased from 40% to 20% in such developing countries.

How many phenomenons have a global impact? If you are to count, they could be counted on
your finger tips. Globalization is one of them. So before going to the advantages and
disadvantages of globalization, lets us try to grasp this concept first. Simply put, globalization is an
ongoing process of integration of regional economies into global network of communication and
execution. Let me explain this a bit. Assume that you are a mango farmer in India and you grow
very good quality mangoes over there. Obviously, your fruit is highly appreciated in India, but you
also know that you shall get a better value in US. So the network of communication and execution
that allows you to sell your fruit in US is basically, the phenomenon of globalization. (At least the
Indian farmer is happy about advantages of globalization in India, he is earning a quick buck.)
The advantages and disadvantages of globalization in India and other developing countries are
very profound. Read more on advantages of globalization.

Globalization: Advantages and Disadvantages

Instead of giving a few pointers here and a few pointers there, explanation on these concepts
should do more justice to the subject. Have a look at the following

Advantages and Disadvantages of Global Marketing

There has to be operational differences between various companies in different countries. What I
mean to say is, a car manufacturer of UK will manufacture a car with a different operation than a
car manufacturer in Italy (for example Jaguar and Ferrari). Both are trying to take advantage of
the operational difference that they have between them. And both companies are trying to sell a
car in America for a greater value. So if you want your product to have an appeal on a global
scale, then obviously, marketing on a global scale is required.

Advantages of Global Marketing

• Lower Marketing Costs: If you are to consider lump-some cost then, yes, it is high, but
the same cost even goes even higher if the company has to market a product differently
in every country that it is selling.
• Global Scope: Scope of this kind of marketing is so large that it becomes a unique
experience.
• Brand image Consistency: Global marketing allows you to have a consistent image in
every region that you choose to market.
• Quick and Efficient Use of Ideas: A global entity is able to use a marketing idea and
mould it into a strategy to implement on a global scale.
• Uniformity in Marketing Practices: A global entity can keep some degree of uniformity in
marketing through out the world.

Disadvantages of Global Marketing

• Inconsistency in Consumer Needs: American consumer will be different from the South
African. Global marketing should be able to address that.
• Consumer Response Inconsistency: Consumer in one country may react differently than
a consumer in another country.
 • Country Specific Brand and Product: A Japanese might like a product to have a
traditional touch, where as an American might like to add a retro modern look to it. In this
case, a global strategy is difficult to device.
• The Laws of the Land Have to be Considered: Original company policies may be
according to the laws of home countries. The overseas laws may be conflicting in these
policies.
• Infrastructural Differences: Infrastructure may be hampering the process in one country
and accelerating in another. Global strategy cannot be consistent in such a scenario.

Advantages and Disadvantages of Globalization in Developing Countries

Overall globalization has been a big boon for the developing countries, but there are a few who say
that it has been a curse. Let us take a look at both these aspects of globalization.

The Advantages

• GDP Increase: If the statistics are any indication, GDP of the developing countries have
increased twice as much as before.
• Percapita Income Increase: The wealth has had a trickling effect on the poor. The
average income has increased to thrice as much.
• Unemployment is Reduced: This fact is quite evident when you look at countries like
India and China.
• Education has Increased: Globalization has been a catalyst to the jobs that require higher
skill set. This demand allowed people to gain higher education.
• Competition on Even Platform: The companies all around the world are competing on a
single global platform. This allows better options to consumers.

The Disadvantages

• Uneven Distribution of Wealth: Wealth is still concentrated in the hands of a few

individuals and a common man in a developing country is yet to see any major benefits of
globalization.
• Income Gap Between Developed and Developing Countries: Wealth of developed
countries continues to grow twice as much as the developing world.
• Different Wage Standards for Developing Countries: A technology worker may get more
value for his work in a developed country than a worker in a developing country.
• Reversal of Globalization: In future, factors such as war may demand the reversal of the
globalization (as evident in inter world war years), current process of globalization may
just be impossible to reverse. You can also like to read more on pros and cons of
globalization.

Culture and globalization have really become interwoven aspects in modern lives, but one must
remember the negative effects of globalization as well. I hope the above comparison of advantages
and disadvantages of globalization are satisfactory to the reader.

New
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

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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 and the Indian Economy

Indian markets have been transformed relatively as there is addition of wide range of goods in
the recent years. These rapid transformations can be understood by analyzing the various
aspects like:-

1) Production across countries: Before the middle of the twentieth century, production was
largely organized within countries. Raw materials, food stuff and finished products were
crossing the boundaries. Trade was the main channel connecting distant countries. This was
before large companies called multinational corporations emerged pm the scene. Whence the
goods and services are produced globally and production is organized in increasingly complex
ways. The production process is divided into small parts and spread out across the globe. The
advantages o f spreading out production across the borders to the multinationals can be truly
immense.

2) Interlinking production across countries: Almost all MNC’s set up production where it is
close to the markets; where there is skilled and unskilled labour available at low costs; and
where the availability of other factors of production is assured. The money that is spent to buy
assets such as land, building, machines and other equipment is called investment. Investment
made by MNC’s is called foreign investment. At times, MNC’s set up production jointly with
some of the local companies of these countries. MNC’s provide money for additional
investments like buying new machines for faster production and they might bring with them
the latest technology for production. As a result, production in these widely dispersed locations
is getting interlinked.

3) Foreign trade and integration of markets Foreign trade has been the main channel for
connecting countries. It is an opportunity for the producers to reach beyond the domestic
markets. Producers can sell their produce not only in markets located within the country but
can also compete in markets located in other countries of the world. Similarly, for the buyers,
import of goods produced in another country is one way of expanding the choice of goods
beyond what is domestically produced. Therefore, foreign trade results in connecting the
markets of integration of markets in different countries.

4) By understanding the meaning of globalization: Globalization means integrating the Indian

economy with the world economy. In the process India becomes economically interdependent
with other countries at the global or international level. It seeks removal of trade barriers.
There are various features of globalization they are:

1. Many producers from other countries can sell their goods and services in India.
2. India can also sell its goods and services in other countries.
3. Businessmen of other countries can establish their enterprises in India, produce goods for
sale within the country or to other countries as export.
4. In the same way entrepreneurs from India can also invest in other countries.
5. Globalization includes not only movement of capital and goods but also allows exchange of
technology experience and laborers from one country to other and
6. In pursuance of this policy government of India has removed restrictions on imports of
goods, reduced taxes

5) Factors enabled globalization: Rapid improvement in technology has been one major factor
that has stimulated the globalization process. This has made much faster delivery of goods
across long distances possible at lower costs. There have been remarkable developments in
information and communication technology. Information and communication technology has
played a major role in spreading out production of services across countries. Removing
barriers or restrictions set by the government is what is known as liberalization. The
government imposes much less restrictions than before and is therefore said to be more
liberal.

6) WTO – meaning and its functions: It was set up in 1995 by the member countries of the
United Nation to promote trade among countries. Headquarter is located in Geneva. It has
influenced the liberalization and globalization processes in most of the developing countries,
including India. It aims at conducting international trade among countries of the world in an
open uniform and non-discriminating manner. WTO allows free trade to all, in practice, in
developed countries. On the other hand, it rules have forced the developing countries to
remove trade barriers.
7) Impact of Globalization in India: Globalization has taken an important place in the Indian
economy for the last fifteen years. Globalization in combination with greater competition
among producers – internal as well as external, has been of greater advantage to consumers,
particularly the well-off sections in the urban areas. Although the impact of globalization has
not been uniform, because, MNC have increased their investments in India during the last
fifteen years, which has proved to be beneficial to India. Mushrooming of industries like cell
phones, automobiles electronics, soft drinks, fast food or services, via MNCs have created new
avenues. It has given an opportunity to the raw material suppliers to prosper too. On the
other hand, the top Indian companies have been able to benefit from the increased
competition by investing in new technology and production methods and raised their
production standards. Moreover, globalization has enabled some large Indian companies to
emerge as multinationals themselves! Some of the Indian companies which are spreading
their operations world-wide are Tata-Motors (automobiles), Infosys (IT), Ranbaxy (Medicines),
Asian Paints (Paints). It has created new opportunities for companies providing services,
particularly those involving IT. But for a large number of small producers and workers,
globalization has posed major challenges. Globalization and the pressure have also posed a
threat to the worker’s jobs, as they are not secure any more. Workers are low and workers are
forced to work overtime to make both ends meet. The workers are sometimes denied their fair
share of benefits which is brought about by globalization.

8) The struggle for a fair globalization: Globalization has not benefited everyone by way of not
giving the best of the new opportunities and have not shared the proper benefits. Fair
globalization would create opportunities for all and ensure the benefits of globalization are
shared better. It is possible if government takes major steps in this respect. The policies
should be framed to protect the interests of all the people in the country, such as labour laws
are properly implemented and thus the workers get their rights. By supporting small producers
to improve their performance till the time they become strong enough to compete.