In this essay we will discuss about Globalisation. After reading this essay you will learn about: 1. Meaning of Globalisation 2. Characteristics of Globalisation 3. Advantages 4. Disadvantages  5. Globalisation of Indian Economy 6. Impacts.  

Contents:

  1. Essay on the Meaning of Globalisation
  2. Essay on the Characteristics of Globalisation
  3. Essay on the Advantages of Globalisation
  4. Essay on the Disadvantages of Globalisation
  5. Essay on the Globalisation of Indian Economy
  6. Essay on the Globalisation and Its Impacts

Essay # 1. Meaning of Globalisation:

By the term globalisation we mean opening up of the economy for world market by attaining international competitiveness. Thus the globalisation of the economy simply indicates interaction of the country relating to production, trading and financial transactions with the developed industrialized countries of the world.

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Accordingly, the term, globalisation has four parameters:

(a) Permitting free flow of goods by removing or reducing trade barriers between the countries,

(b) Creating environment for flow of capital between the countries,

(c) Allowing free flow in technology transfer and

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(d) Creating environment for free movement of labour between the countries of the world. Thus taking the entire world as global village, all the four components are equally important for attaining a smooth path for globalisation.

The concept of Globalisation by integrating nation states within the theme work of World Trade Organisation (WTO) is an alternative version of the ‘Theory of Comparative Cost Advantage’ propagated by the classical economists for assuming unrestricted flow of goods between the countries for mutual benefit, especially from Great Britain to other less developed countries or to their colonies. In this way, the imperialist nations gained much at the cost of the colonial countries who had to suffer from the scar of stagnation and poverty.

However, the advocates of globalisation, especially from the developed countries purposely limit the definition of globalisation to only three components, i.e., unrestricted trade flows, capital flows and technology flows. They do not want to include the free flow labour within the parameter of globalisation set by them.

According to Stieglitz, Nobel Prize Winner for Economics (2001) and former Chief Economists of the World Bank, “Globalisation is the closer integration of the countries and peoples of the world which has been brought about by the enormous reduction of costs of transportation and communications, and the breaking down of artificial barriers to the flow of goods and services, capital, knowledge, and (to a lesser extent) people across borders.”

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Stieglitz is a powerful critique of globalisation and thus clearly pointed out the non-inclusion of fourth parameter of globalisation, i.e., free flow of labour in the present format of globalisation advocated by developed countries.

The World Commission on the Social Dimension of Globalisation (WCSDG) set up by ILO has also made some important observations on globalisation. The Commission observed. “The current path of globalisation must change. Too few share in its benefits. Too many have no voice in its design and no influence on its course.”

“We wish to make globalisation a means to expand human well being and freedom, and to bring democracy and development to local communities where people live.” But the advocates of the policy of globalisation argue that globalisation would help the underdeveloped, and developing countries to improve their competitive strength and attain higher growth rates. Now it is to be seen how far the developing countries would gain by adopting the path of globalisation in future.

In the mean time, various countries of the world have adopted the policy of globalisation. Following the same path India had also adopted the same policy since 1991 and started the process of dismantling trade barriers along with abolishing quantitative restrictions (QRs) phase-wise.

Accordingly, the Government of India has been reducing the peak rate of customs duty in its subsequent budgets and removed QRs on the remaining 715 items in the EXIM Policy 2001-2002. All these have resulted in open access to new markets and new technology for the country.

Essay # 2. Characteristics of Globalisation:

Main features of globalisation are as follows:

(i) Liberalisation:

Globalisation makes way for the freedom of the industrialist/businessman to establish industry, trade or commerce either in his country or abroad; free exchange of capital goods, service and technologies between countries.

(ii) Globalization of Economic activities:

Another characteristic of globalisation is the control of economic activities by domestic market and international market. It also established coordination among the national economy and world economy.

(iii) Free Trade:

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One of the important characteristics of globalisation is free trade between counties. It also means absence of excessive governmental control over trade.

(iv) Connectivity:

Under globalisation, localities being connected with the world by breaking national boundaries; forging of links between one society and another and between one country and another through international transmission of knowledge, technology, ideas, information, literature and culture.

(v) Borderless Globe:

Globalisation makes way for establishing ‘borderless globe’, the ideal of which was articulated by Kemichi Ohmae. It results breaking of national barriers and creation of inter-connectedness.

(vi) A Composite Process:

Globalisation is a composite process through which integration of nation-states across the world can be made by common economic, commercial, political, cultural and technological ties. It also leads to creation of a new world order with no national boundaries.

(vii) A Multi-dimensional Process:

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Globalisation is a multi-dimensional process. Economically, it simply means opening up of national market, free trade and commerce among nations, free flow of labour, capital and technology, and integration of national economies with the world economy.

Politically, it means limited powers and functions of state, more rights and freedoms granted to the individual and empowerment of the private sector culturally it means exchange of cultural values between societies and between nations; and ideologically, it means the promotion and spread of liberalism and capitalism.

(viii) A Top-down Process:

Globalisation originates from developed countries and MNCs based in those countries. Technologies, capital, products and services are allowed to enter from developed countries to developing countries. It is the developing countries which needs to be adapted with the changing situations and to accept those new ideas for attaining higher level of socio-economic development.

The above characteristics of globalisation simply suggests that there is a great need for global integration under the present global economic scenario. In view of the current global recession and financial crisis, there is a paramount importance of global integration.

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Essay # 3. Advantages of Globalisation:

Following are some of the important advantages of globalisation for a developing country like India:

(i) Globalisation helps to boost the long run average growth rate of the economy of the country through:

(a) Improvement in the allocative efficiency of resources;

(b) Increase in labour productivity; and

(c) Reduction in capital-output ratio.

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(ii) Globalisation paves the way for removing inefficiency in production system. Prolonged protective scenario in the absence of globalisation makes the production system careless about cost effectiveness which can be attained by following the policy of globalisation.

(iii) Globalisation attracts entry of foreign capital along with foreign updated technology which improves the quality of production.

(iv) Globalisation usually restructures production and trade pattern favouring labour-intensive goods and labour intensive techniques as well as expansion of trade in services.

(v) Globalisation makes domestic industries of developing countries to become conscious about price reduction and quality improvement to their products so as to face foreign competition.

(vi) Globalisation discourages uneconomic import substitution and favour 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 favour of agriculture.

(vii) Globalisation facilitates consumer goods industries to expand faster to meet growing demand for these consumer goods which would result faster expansion of employment opportunities over a period of time. This would result trickle-down effect to reduce the proportion of population living below the poverty line.

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(viii) Globalisation 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.

Essay # 4. Disadvantages of Globalisation:

Globalisation also has many disadvantages also. Following are some of these disadvantages:

(i) Globalisation paves the way for redistribution of economic power at the world level leading to domination by economically powerful nations over the poor nations.

(ii) Globalisation usually results greater increase in imports than increase in exports leading to growing trade deficit and balance of payments problem.

(iii) Although globalisation promotes 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.

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(iv) Globalisation has alerted the village and small scale industries and sounded death-knell to it as they cannot withstand the competition arising from well organised MNCs.

(v) Globalisation has been slowing down the process to poverty reduction in some developing and under developed countries of the world and thereby enhances the problem of inequality.

(vi) Globalisation is 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 to many farmers.

(vii) Implementation of globalisation 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. Thus, the human and social costs of globalisation usually multiply to such an extent that may tests the social fabric of the democracies in an unprecedented manner.

Essay # 5. Globalisation of Indian Economy:

While introducing economic reforms, Indian economy has been proceeding in the path of globalisation in a serious manner.

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Following are some of the measures taken by the Government of India towards globalisation:

(i) Automatic approval for foreign direct investment has been raised from the earlier level of 40 per cent to 51 per cent foreign equity ownerships covering a wide range of industries.

(ii) In order to provide access to international markets, majority foreign equity holdings up to 51 per cent equity would be allowed specifically for trading companies which are primarily engaged in export oriented activities.

(iii) Government decided to give automatic permission for foreign technology agreements for royalty payments up to 5 per cent of domestic sales or 8 per cent of export sales or lump sum payment of Rs 10 million. Automatic approval will also given for all other royalty payments to those projects which can generate internally the foreign exchange so required.

(iv) The government has followed a shift in policy orientation from import substitution to export promotion, reduced tariff rates and removed quantitative controls. Moreover, quantitative restrictions were replaced by price-based system.

Other measures introduced in this direction include setting up of special economic zones (SEZs), full filling WTO norms and aligning EXIM procedures, removal of disincentives, export promotion through import entitlement.

Following the strategy of export-led growth during the last 20 years, Indian economy experiences lot of changes in its condition. As a result, Indian exports as a percentage of GDP have increased from 5.8 per cent in 1990-91 to 11.1 per cent in 2004-05 and then to 15.2 per cent in 2007-08. Simultaneously, Indian imports have also increased considerably from 8.8 per cent of GDP to 13.8 per cent and then finally to 23.5 per cent during the same period.

Moreover, foreign direct investment flows which were a mere amount of $ 97 million in 1990-91 increased to $ 46.55 billion in 2011-12. It is also important to look at another major benefit of globalisation, i.e., in terms of sharp increase in the export of invisible items, especially software exports.

A notable achievement of globalisation is the increase in net software export earnings in India to a level to $ 23.41 billion in 2003-04. The volume of software and ITES exports from India grew from Rs 28,350 crore in 2000-01 to Rs 58,240 crore in 2003-04 and then to Rs 1,03,200 crore in 2005-06 showing a growth of 32 per cent over the previous year.

The software export sector has also been able to recruit 3.45 lakh IT professional in 2004-05 as compared to 2.70 lakh professional in 2003-04. Thus as a result of globalisation India has taken a strategy to reach international standards in productivity and thereby competing in the global market effectively with reputation.

Moreover, the structure of Indian economy has also undergone considerable change in the last decade. These include increasing importance of external trade and of external capital flows. The services sector has become a major part of the economy with GDP share of over 50 per cent and the country becoming an important hub for exporting IT services.

The share of merchandise trade to GDP increased considerable to over 35 per cent in 2007-08 from 23.7 per cent recorded in 2003-04. If the trade in services is included the trade ratio is 47 per cent of GDP for 2007-08. Again, the rapid, growth of Indian economy during the period 2003-04 to 2007-08 also made India an attractive destination for foreign capital inflows and net capital inflows that were 1.9 per cent in 2007-08.

Foreign portfolio investment also added buoyancy to the Indian capital markets and Indian corporate began aggressive acquisition spree overseas, which was reflected in high volume of outbound direct investment flows.

Another important dimension of globalisation has been the high degree of external dependence on imported energy sources, especially crude oil with the share of imported crude in domestic consumption exceeding 75 per cent.

Therefore, a major change in international crude prices is bound to impact the Indian economy extensively as happened in early 2008-09 and in early 2013-14. Thus the present trend in globalization in Indian economy has to he analysed seriously from all angles for determining its future policy directions in a most rational manner.

Essay # 6. Globalisation and its Impacts:

The adoption of the policy of globalisation in India has resulted initially the following mixed impacts on its economy:

(i) Competition:

As a result of globalisation, Indian companies started to face growing competition from free flow of products produced by multi-national companies (MNCs). Unequal competition between the domestic companies and mighty MNCs has resulted closure of weak industrial units both under large, medium and small scale categories.

(ii) Mergers:

Globalisation has resulted growing number of mergers and collaborations of Indian companies with MNCs or TNCs.

(iii) Exports:

India’s share of World exports has been increasing slowly from 0.55 per cent in 1990 to 0.75 per cent in 1999 and then to 1.1 per cent in 2005. In the current EXIM Policy (2001-2002), the Government has set an ambitious export target of $ 75 billion by 2004-2005 up from the existing level of $ 43 billion in order to capture 1 per cent of the global trade. This would, however, require the exports to grow at the rate of 18 per cent per annum.

(iv) Trade in Services:

As a result of globalisation India has been able to gain in respect of trade in services, especially in respect of Information Technology industry. Indian software professionals have created a brand image in the global market.

As per the NASSOCAM (National Association of Software and Service Companies) Survey, more than 185 of the Fortune 500 Companies, i.e., almost two out of every five global giants outsource their software requirements from India.

The capability of Indian Software Industry is reflected in the very high capitalisation with a Market Cap of listed Software Companies in India estimated at US $ 55 billion as on 30th June 2000. There is also increasing demand for Indian IT professional from other countries like USA, Germany, Japan and Australia.

Moreover, India’s Software Industry has earned the distinction for providing quality services. As on December 1999, 170 Indian Software Companies have acquired international quality certification. Majority of the Multi-national companies operating in the area of information technology have either Software Development Centres or Research and Development Centres located in India.

Further, 30 per cent of the E-commerce starts up during the year 1999 in Silicon Valley, USA were initiated by Indians. Around 500 portals are being launched in India every month.

In export as well as domestic sector, Computer Software is a thrust area and its fastest growing sector. Software exports from India jumped from Rs 10,940 crore in 1998-99 to Rs 36,500 crore in 2001-2002, showing a growth rate of about 233.6 per cent. The domestic software industry has also increased its business from Rs 4,950 crore in 1998-99 to Rs 11,634 crore in 2001-02.

(v) Trade Conditions:

Globalisation has been creating an improved condition of trade for agricultural commodities and textiles, especially cotton textiles produced in India.

(vi) India’s Share in World Export of Goods and Services:

It would be better to study the India’s share in World merchandise exports and world service exports separately. Table 15.13 will clarify the position.

Exports of Selected Countries of the World

It is observed that during the 13-year period, i.e., during 1990 to 2003, merchandise exports of India increased from $ 17.97 billion to $ 55.98 billion, i.e., at the annual growth rate of 9.1 per cent as compared to that of much higher 16.2 per cent of China, 11.4 per cent of Mexico and only 6.1 per cent of the whole world.

Although India could realise some increase in its export growth rate from globalisation but the share of India in world merchandise exports could increase only marginally from 0.51 per cent in 1990 to 0.73 per cent in 2003.

However, the performance of India in respect of service sector exports was comparatively better during the same period. Accordingly, India’s service sector exports increased considerably from $ 4.6 billion in 1990 to $ 37.7 billion in 2003 recording an annual average growth rate of 17.5 per cent as compared to that of 17.4 per cent growth rate attained by China.

However, major position of the increase in services exports was realised from software exports. Thus the share of software exports out of total services exports of India increased from 42.7 per cent in 1990 to 75.9 per cent in 2003.

Again if we add together merchandise and services exports the total exports of India’s goods and services increased from $22.58 billion in 1990 to $ 93.7 billion in 2003 showing an annual average growth rate of 11.6 per cent. But if we compare the export performance of India with that of China, South Korea and even Mexico, the achievement attained by India cannot be considered significant.

Table 15.13 reveals that the share of China in World exports increased from 1.59 per cent in 1990 to 5.20 per cent in 2003 as a result of rise in the volume of its exports by 714 per cent. Similarly, South Korea and Mexico had also shown significant improvement in its share of World exports from 1.74 per cent to 2.42 per cent and from 1.13 per cent to 1.91 per cent respectively during the period 1990-03. But the India’s share of World export shown a marginal improvement from 0.53 per cent to 1.01 per cent during the same period.

Thus we find that India’s export performance was lagging far behind that of China.

Under the present context, a question that arises is that why India’s share of world exports failed to increase at a sharp rate? While answering this question we could observe that in absolute terms Indian export effort yielded some positive result and accordingly Indian exports have increased from US $ 18.1 billion in 1990-91 to US $ 26.3 billion in 1994-95 and then to US $ 35.0 billion in 1997-98 and finally to US $ 43.8 billion in 2001-2002.

But, the total value of Indian exports (both merchandise and services) increased from US $ 22.5 billion in 1990 to US $ 93.7 billion in 2003. But the export performance of the country would have been improved further if the globalizers did not followed the policy of protection on some cheap pretext like declaring Indian skirts as inflammable by USA, banning of azo dyes, imposition of anti-dumping duties etc. Thus such act of protectionism has been hitting our textile industry considerably.

Moreover, linking of labour standards with trade by the developed countries like USA on the pretext of use of child labour has also compounded the problem of exports in India. Unable to face competition from Indian products, developed countries have adopted a new term “social clause” to beat India’s claim. But multinational companies (MNCs), especially from USA, having been in advantageous position in telecommunications, insurance sector etc. are arguing for opening up the domestic market of the country for their smooth entry.

(vii) Greater Increase in Imports than Increase in Exports:

Globalizers were of the view that Indian exports would increase at faster rate than that of imports. Unfortunately, things are not moving in that direction. Indian exports which was 7.3 per cent of GDP in 1991-92 rose to 9.1 per cent of GDP in 1995- 96, declined to 8.4 per cent of GDP in 1999-2000 and reached the level of 15.0 per cent of GDP in 2006- 07.

But the volume of imports in India as percentage of GDP rose from 8.3 per cent in 1991-92 to 12.3 per cent in 1995-96 and then to 22.2 per cent in 2006-07. This shows how the access to foreign markets by Indians is growing slowly as compared to the entry of foreigners in our domestic market.

It is also observed that India’s trade deficit during the period 1996-97 to 2000-01 ranged between 3.1 per cent to 4.0 per cent of GDP. But the same deficit declined to 2.6 per cent and 2.5 per cent of GDP during 2001-02 and 2002-03 respectively. But in 2004-05, the same trade deficit increased considerably to 5.3 per cent of GDP. This simply shows that the access of Indian markets by the foreign producers has been increasing.

(viii) Slower GDP Growth Rates:

In-spite of high expectation that globalisation would facilitate attaining of higher GDP growth rate through export-led growth but that expectation has failed to materialize. Although in the initial years of globalisation, the GDP growth rates gradually rose from 5.2 per cent in 1992- 93 to 8.2 per cent in 1996-97 hut since then it gradually declined to 4.6 per cent in 1997-98, 6.2 per cent in 1999-2000 and again declined to 4.2 per cent in 2000-01 and 6.2 per cent in 2001-02 and finally to 3.5 per cent in 2002-03.

Thus the sluggish GDP growth rates experienced by Indian economy has reflected the failure of the policy of globalisation introduced in the country in raising its GDP growth rates and also raised its dependency burden on world economy. However, the GDP growth rates in India started to show an increasing trend in recent years, i.e., from 8.8 per cent in 2003-04 to 9.1 in 2005-06 and then to 9.2 per cent in 2006-07.

(ix) Foreign Investment Flows:

The advocates of globalisation has been claiming that globalisation would pave the way for greater inflow of foreign investment. But things are not moving in a right direction. Foreign investment usually enters in two forms—Foreign direct investment and Foreign Portfolio investment.

However, the FDI enhances the productive capacity and investment of the country but the portfolio investment encourages speculation activities.

During the period 1990-91 to 1994-95, the share of FDI was 24.2 per cent and that of Portfolio (FPI) investment was as high as 75.8 per cent. During the subsequent period, i.e., during 1995-96 to 1999-00, the share of Portfolio investment has declined to 45.2 per cent and the share of FDI has increased to 54.8 per cent.

Again during the period 2000-01 to 2005-06 the share of FDI has again declined to 46.1 per cent and the share of FPI has increased to 53.9 per cent. During the next 6 – year period, i.e., from 2000-01 to 2005-06, the share of FDI again declined to 46.1 per cent and the share of FPI further increased to 53.9 per cent.

Moreover, from the year-wise data of foreign investment as shown in table no. 15.11(a) reveals that the fluctuation in the flow of foreign portfolio investment is much sharper than foreign direct investment. It is observed from Table 15.14 that FPI flow to India declined from $ 3,824 million in 1994-95 to a negative level of (-) $ 61 million in 1998-99 and then again increased to $ 3026 million in 1999-00.

The flow of FPI again declines to $ 979 million (16.3 per cent) in 2002-03 and then again increased to $ 11,377 million (72.5 per cent) in 2003-04 and then to $ 12,492 million (61.8 per cent) in 2005-06. Thus the flow of FPI shows an erratic behaviour.

On the other hand, the flow of FDI shows a slow but gradual, upward growth from $ 97 million in 1990-91 to $ 3,557 million in’1997-98 and then to $ 6,130 million in 2001-02 and then finally to $ 7,722 million in 2005-06. Accordingly, total flow of foreign investment into India increased from $ 133 million in 1991-92 to $ 6,133 million in 1996-97 and then fell to $ 2,401 million in 1998-99 and then gradually increased to $ 6,014 million in 2002-03 and then to $ 20,214 million in 2005-06.

Thus in recent years, the proportion of FPI in total foreign investment is still very high. Again total average inflow of foreign investment into India during 1995-96 to 2000-01 was only $ 4.85 billion as against its target of $ 10 billion. Thus the expectation of the country in respect of entry of foreign investment as a result of globalisation has not been fulfilled.

Moreover, there is a peculiar tendency where there remains a wide gap between the level of foreign investment approved and its actual inflow.

Foreign Investment Inflows in India from different countries

(x) Slowing Down of the Process of Poverty Reduction and Growing Inequality:

Reduction of poverty is one of the important objectives of development. But in modern times the pace of poverty reduction is gradually slowing down. A World Bank paper prepared by Gaurav Dutt, Valerie Kozel and Martin Ravallion entitled “A Model-Based Assessment of India’s Progress in Reducing Poverty in the 1990s” observed that the key determinants of the poverty reduction rates at the state level are agricultural yields, growth of non-farm sector, development expenditure and the rate of inflation.

The main findings of this model is that the rate of poverty reduction in the 1990s is slightly less than that of 1980s. The reason behind this slow pace of poverty reduction is the pattern of growth that has been achieved following the policy liberalisation, privatisation and globalisation.

Such a growth pattern has affected geographical distribution. The globalisation has helped the industrially advanced states much more than the less industrialised states and also neglected agricultural sector leading to a skewed pattern of distribution in this post-reform period.

Thus the paradox of attaining higher growth rate of GDP and lower rate of poverty reduction is mostly resulted from unequal distribution of income between the richer section and the marginalized section of the population. Besides, this slow decline in poverty reduction is mostly resulted from the geographical pattern of growth promoted by the policies of liberalisation, privatisation and globalisation.

As a result of globalisation industrialised states are getting more benefit as compared to that of less industrialised and agriculturally based states leading to a geographical skewed pattern of growth attained during this post-globalisation period.

Moreover, globalisation has also resulted in a significant rise in rural-urban inequalities throughout the country and a sharp increase in the differences in wage/salary incomes between the urban and the rural sector. Thus globalisation has been resulting in widening inequality, growing concentration of wealth and slowing down rate of poverty reduction in the country.

(xi) Fall in Employment Growth Rates:

Globalisation has resulted in a fall in the employment growth rates. The annual growth rate of employment which was 2.04 per cent during the period 1983-94, but the same rate declined to a mere 0.98 per cent during the period 1994-2000.

As a result, the unemployment growth rates increased from 5.99 per cent in 1993-94 to 7.32 per cent in 1999-2000. This was despite the fall in the growth rate of labour force from 2.43 per cent during 1983-1994 to 1.31 per cent during 1993-2000.

Such a situation is mostly resulted from the deceleration in employment growth rates in agriculture and community and personal services. These two sectors contributed jointly around 70 per cent of total employment generated but they virtually failed to record any growth in employment.

Thus after making a review of performance of the economy for a decade after the introduction of globalisation, it is observed that the policy of globalisation has not been able to bring the required benefits to the people in general in terms of basic macro indicators such as GDP growth rates, employment generation, reduction of poverty, hike in investment, boost in merchandise exports.

It is only in respect of services export India has been able to record marginal gain due to its cheaper manpower resources.

Moreover as a result of globalisation, a good number of small and medium scale enterprises had to face closure due to unequal competition leading to loss of employment to a good number of workers engaged in these industrial units.

World Commission on Social Dimension of Globalisation (2004) unambiguously observed, “The goal of full employment and achieving decent work for all receives low priority in current international policies.”……… “There is no point to a globalisation that reduces the price of child’s shoes but costs the father his job.”

Thus globalisation has also failed to look fairly at the small enterprises, rural and informal sectors from where majority of people earn their livelihood. Thus under the present scenario, important steps need to be taken for integrating the growth objective with that of employment objective.

(xii) Growth of Trans-National Corporations (TNCs):

In its study on the progress of the corporate sector in recent years, the Institute for Studies of Industrial Development (ISID) has reported the impact of growth of 100 (top) TNCs in the post-reform period. It is further observed that the annual growth rate of profits before tax of these top 100 TNCs during the period 1991-92 to 1995-96 was 23.8 per cent.

Such enormous profits earned by TNCs will create an adverse impact on the balance of payments. While the exports to turn over ratio of these companies grow slowly from 8.1 per cent to 8.6 per cent during the period under reference but the import to turn-over ratio of these TNCs increase considerably from 6.9 per cent to, 12.9 per cent during the same period.

Accordingly, such workings of the TNCs has converted a net export position of Rs 270 crore in 1991-92 to a net import position of Rs 1,587 crore in 1995-96.

(xiii) Globalisation and its Threat to Indian Agriculture and Industry:

In respect of agriculture, there is also a threat to the Indian farmers from the trading provisions of WTO. Here the main fear is that with the implementation of WTO agreement and trading provisions, Indian market will be flooded with different farm goods from foreign countries at a rate much lower than that indigenous farm products leading to a death-blow to Indian farmers. Here the apprehension of Indian farmers cannot be ignored.

Countries like Australia, Canada, USA and New Zealand which have a large farm potential along with necessary resources to provide subsidies and improved farm management, will be in a advantageous position to market their farm products in a developing country like India, which are maintaining lesser efficiency and lower productivity at their farm activities.

This would naturally result unequal competition for the Indian farmers in respect of both price and quality. The other area of concern of farmers related to patenting and sale of seeds and conditionality of self- grown seeds are met satisfactorily. Accordingly, plant breeders’ right, farmers’ privilege and researchers’ privileges are also adequately safeguarded under the system of ‘Sui generis’ form of protection adopted by the Government of India.

We have seen that there are still some active threats to Indian agriculture and indigenous industrial units from the WTO commitments implemented by the Government.

In this connection, Mr. S. Venkatesh has rightly observed, “It would be unrealistic to say that opening up almost the entire Indian economy to global competition would not have an adverse impact on indigenous enterprises. Obviously, competition between a developing country and developed countries can hardly be on a level-playing field, whatever the so called safeguards and assurances. How much damage will be caused and the consequences of global competition will be known when all the provisions of the treaty obligations are fulfilled.”

Moreover, as a part of their combined strategy, the OECD countries and the USA recently have devised the Multilateral Agreement on Investment (MAI) and are trying to get the MAI incorporated in WTO provision. But adoption of MAI by WTO will provide unrestricted power to MNCs for exploiting resources of developing countries so as to extend their hegemony in various developing countries.

They also want to invade the economies of developing countries by adopting the path of globalisation. Thus such draft on MAI completely demolishes the concept of economic sovereignty of nations and extended the concept of neo-imperialism.

In this connection, Romesh Diwan observed, “Capital’s need is to move towards exploitable resources now available in materially poor countries. The ruling RNI type elite are already mesmerized by the “necessity and efficiency of foreign capital and the global markets”. The road to colonisation is paved with such ‘progress’. If MAI comes, can colonialism be far behind”.

Considering the present trend of threat appearing out of globalisation, Indian industrial firms, who initially welcomed the multi-nationals, have now started to develop second thoughts on unrestricted entry of foreign capital. The CII and ASSOCHAM have also become worried about the activities of multinationals in swallowing up Indian firms on some pretext.

Thus a consensus is now being emerged that free and whole sale globalisation should be replaced by a selective path of globalisation, giving due weightage to the national interest.

In this connection, former Prime Minister I.K. Gujaral while speaking at a Conference of Confederation of Indian Industry (CII) held on 16th August, 1997 observed, “The days of 19th century capitalism where any outsider could come and overwhelm you are over. Outsiders are welcome. But they will not be allowed to drown us and take over Indian Companies. They will be allowed to invest in sectors where we need them…….. Indian trade and industry will get all benefits of paternity and it will not be allowed to face unfair competition”.