Ovie Nelson-Twakor
The purpose of this paper is to identify the effects of globalisation on the development policies in India as the nation attempts to embed western style capitalist structure and technologies on to traditional way of life, and to find out how India is responding to these challenges in its drive towards economic development.
What is globalisation?
Globalisation is the shift toward a more integrated and interdependent world economy. This is largely the result of planning by politicians and business organisations to breakdown borders hampering trade to increase prosperity and interdependent thereby decreasing the chance of future wars. Globalisation is not a new concept, the potential effects of globalization, positive and negative were recognized 150 years ago by the political philosophers Marx and Engels. They did not use the word “globalisation”, but their themes and concepts sound remarkably similar to our world in 2008 (Marx and Engels 1996, pp.98-137). The merging of historically distinct and separate national markets into one huge global marketplace, falling barriers to cross-border trade have made it easier to sell internationally. Also the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (such as labour, energy, land and capital). The development of communication technologies and cheaper means of transportation has taken globalisation to areas that were not communicable with previously (Hill2009, p.6-7). However, globalisation has also thrown up new challenges to developing countries like volatility in financial market, abuse of labour, environmental degradations etc. (emeraldinsight). Organisations like the World Bank, International Monetary Fund (IMF), and World Trade Organisation (WTO) have been created to monitor international trade.
Globalisation and India
After World War II, India rapidly decolonised. The political figures of the time set India on a path which they hoped would return it to cultural authenticity and self-assured identity. Rather than bringing benefits, this policy led the nation to adopting inward looking trade and investment strategies in the 1960s and 1970s emphasised economic self-sufficiency in terms of industrial production. This caused sluggish economic growth with exports and income growing without enhancing living standards. This rush to industrial self-sufficiency was so beyound the capacity of the state that it led to a neglect and subsequent decline of key non-industrial sectors as agriculture. This resulted in dependence on foreign food aid and foreign intervention in economic decision making culmination in the IMF imposing a structural adjustment programme in 1991. It opened the Indian economy to foreign capital flows and allowed seepage of sovereignty as multinational corporations moved in and tariff barriers came down. Throughout the liberalisation of the economy, the government maintained controls on currency flows in and out of the country and this spared India from the Asian financial crisis of the late 1990s. (emeraldinsight)
The present and the future
This whirlwind of economic activity has brought many benefits and wealth to many people. Strong economic growth accompanied by a revolution in information technology has allowed the government to undertake big spending programmes at the same time as it has reduced the fiscal deficit from 6% of GDP in fiscal year 2000/01 (April-March) to 2.8% of GDP in 2007/08. However, further progress on narrowing the deficit is unlikely, given major government spending initiatives and the ongoing slowdown in economic growth. The fallout from the global financial crisis has had an increasingly severe impact on India, causing the stockmarket and currency to slump and the banking sector to experience a sudden liquidity crisis. India's trade deficit widened to US$79.1bn in 2007 in balance-of-payments terms, from US$62.1bn in 2006. Exports performed strongly, rising by 23% to US$151bn, but imports jumped by 25% to US$231bn, largely owing to higher international oil prices and demand for industrial inputs and consumer goods. China overtook the US as India's largest trade partner in 2007/08. (Economist Intelligence Unit 2008)
