Globalization And Its Advantages & Disadvantages

Globalization may be defined as a process associated with increasing openness, growing economic interdependence and deepening economic integration in the world economy.

Globalization means integrating the economy of a country with the economies of other countries under conditions of free flow of trade and capital across borders.

Economic reforms aim at integrating the Indian economy with the global economy.

As a result, there will be unrestricted flow of goods and services, technology and expertise between India and rest of the world.

Particularly, it is expected that capital and technology will flow from the developed countries of the world towards India.

Impact of Globalization on Indian Economy

The impact of Globalization can be understood from below. As we know, Globalization has multiple components like:

1.Economic

2.Cultural

3.Social

4.Political

1. Economic effect: As the super market structure arrived in India, it is very difficult for the farmers to sustain. Due to cheap import, small traders are really suffering. On the other hand, globalization has given chance to expand Indian IT sector + Pharma sector + Agricultural proceed material.

But the economy gets foreign currency, hence  to get more foreign reserves all are keeping quiet. It is also true that foreign currency gives us chance to have more development activities.

2. Cultural effect: More and more people are getting attracted towards western Lifestyle because of globalization. We can see significant changes in the expenditure pattern of  public nowadays. Consumption is more as compared to savings.

They are eager to buy branded and imported goods which ultimately results in the increase in current account deficit or causes a trade deficit.

3. Social aspect: Nuclear families are coming more in picture due to globalization and 30 are set up in metro cities a small town guys get job in the company and take a house on rent then after sometime get married now this foreign deputation is of high value with youth cannot resist.

Nuclear families are more based on utilitarianism, therefore, in case of any dispute relations ends.

4. Political aspect: International Organisations such as World Bank, IMF and WTO are  interfering in internal matters of a democratic country, which is not always positive.

A global accident can affect internal politics. A rise in right-wing  leads to formation of government. This is a global Trend.

Advantages of Globalization

1. Globalization help to boost the long-run average growth rate of the economy of the country through:

  • Improvement in the allocative efficiency of resources;
  • Increase in labor productivity;
  • Reduction in capital-output ratio.

2. Globalization paves the way for removing inefficiency in production system. Prolonged protective scenario in the absence of globalization makes the production system careless about cost effectiveness which can be attained by following the Policy of globalization.

3. Globalization attracts entry of foreign capital along with foreign updated technology which improves the quality of production.

4. Globalization usually restructure production and trade pattern favoring labour –  intensive goods and labor-intensive techniques as well as expansion of trade in services.

5. Globalization discourages  uneconomic import substitution and favor cheaper imports of capital goods which reduces capital output ratio in manufacturing industries. Cost effectiveness and price reduction of manufactured commodities will improve the terms of trade in favor of agriculture.

6. Globalization facilitates consumer good industries to expand faster to meet growing demand for these the consumer good which would result faster expansion of employment opportunities over a period of time.

7. Globalization enhances the efficiency of the banking Insurance and financial sectors with the opening up to those areas to foreign capital, foreign banks and insurance companies.

Disadvantages of Globalization

1. Globalization paves the way for redistribution of economic power at the world level leading to domination by economically powerful nations over the poor nations.

2. Globalization usually results greater increase in imports than increase in exports leading to growing trade deficit and balance of payments problem.

3. Although globalization promote the idea that  technological change and increase in productivity would lead to more jobs and higher wages but during the last few years, such technological changes occurring in some developing countries have resulted more loss of jobs than they have created leading to fall in employment growth rates.

4. Globalization has altered the village and small scale industry and sounded death knell to it as they cannot withstand the competition arising from well organized MNC’s.

5. Globalization has been showing down the process to poverty reduction in some developing and underdeveloped countries of the world and thereby enhances the problem of inequality.

6. Globalization also posing as a threat to agriculture in developing and underdeveloped countries of the world. As with the WTO trading provisions, agricultural commodities market of poor and developing countries will be flooded farm goods from countries at a rate much lower than that indigenous farm products leading to a death-blow too many farmers.

7. Implementation of globalization principle becoming harder in many industrially developed democratic countries to ask its people to bear  the pains and uncertainties  of structural adjustment with the hope of getting benefits in future.

Policy Strategies Promoting Globalization of the Indian Economy

1. Increase in Equity limit of Foreign Investment: Equity limit of foreign capital investment has been raised from the initial 40%. It in our range is between 51 to 100%. In 47 high priority Industries, foreign direct investment to the extent of 100% has been allowed without any restriction and red tapism.

Export trading houses have also been allowed foreign capital investment of to 100%.

However, Foreign Exchange Management Act (FEMA)  has been enforced.  Compliance to FEMA has been accorded high priority.

2. Partial Convertibility: To achieve the objective of globalization partial convertibility of Indian Rupees has been allowed for the following transactions:

  • Import and export of goods and services
  • Payment of interest or dividend on investment
  • Remittances to meet family expenses. It is called partial convertibility because it does not cover capital transactions.

3. Long-term Trade Policy: In conformity with economic reforms, foreign trade policy is enforced for a longer duration nearly five years. Implying that it is a liberal Policy.

Under this policy, all restrictions and controls on foreign trade have been removed. Open competition is encouraged. Barring some specific goods most goods are traded free of restrictions.

4. Reduction in Tariffs: In order to encourage competitiveness, tariff barriers have been withdrawn on most goods traded between India and rest of the world.


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