class-3
GLOBALISATION:
Meaning: Integration of the economy of the country with the world economy
Characteristics:
- Outcome of the set of policies that are aimed at transforming the world towards greater interdependence and integration.
- It involves creation of networks and activities transcending economic, social and geographical boundaries.
- It attempts to establish links which influences worldwide.
- turning the world into one whole or creating a borderless world.
Outcomes of Globalisation:
OUTSOURCING-a new employment opportunity in big cities
- A method in which a company hires regular service (legal advice, computer service, advertisement, security) from external sources (foreign normally).
- It could be possible because: Intensifying presently; fast modes of communication, growth of IT, modern telecommunication links; text, voice and visual data could be digitised and transmitted in real time.
- Sectors- Foreign outsourcing from India; BPO, KPO, accountancy/banking services, music recording, film editing, book transcription, clinical advice or even teaching etc
- Benefits: Low cost, Skilled labour, accuracy etc.
GLOBAL FOOTPRINT
Expansion of Companiesto many other countries.
- Rapid growth in GDP on a continual basis for two decades Because growth in the service sector.
- Agriculture has declined, industrial sector – fluctuation, service sector- Up.
- During 2012-15; setback in the growth rates.
Agriculture: 2013-14 high but subsequently -ve, service: High (More than GDP); industrial: steep decline (Decline than +)
IMPECT ON FI(FDI + FII) & FOREIGN RESERVE (FER):
FI Rapid increase: 1990-91: $100 million to $ 30 billion (2017-18)
FER
1990-91: $ 6 billion to $ 413 billion (2018-19), 4th largest FER holder.
In reform period India established himself as:
- Successful exporter of: auto parts, engineering goods, IT software and textiles.
- Inflation under control.
- Fiscal Policy and Reforms: Economic reforms have placed limits on the growth of public expenditure, especially in social sectors.
- The tax reductions in the reform period, aimed at yielding larger revenue and to curb tax evasion, have not resulted in increase in tax revenue for the government.
- The reform policies involving tariff reduction have reduced the scope for raising revenue through custom duties.
- Tax incentives provided to foreign investors to attract foreign investment, has further reduced the scope for raising tax revenues.
This has a negative impact on developmental and welfare expenditure
Effect of reforms on welfare and social justice:
- It has increased the income and quality of consumption of only high- income groups and the growth and employment has been concentrated only in some select areas in the services sector such as telecommunication, information technology, finance, entertainment rather than vital sectors such as agriculture and industry, which provide livelihoods to millions of people in the country.
- It has adversely affected the agricultural sector incomes due to removal of subsidies and import duties.
- Due to export oriented agricultural strategies and shift towards cash crops, there has been a rise in price of food grains affecting the lower income groups adversely.
- It has resulted in the wiping out of small manufacturing and retail outlets because of cheap imports.
- Globalisation has increased the inequalities of income and wealth between the rich skilled and the poor unskilled population.
INDIAN ECONOMY DURING REFORMS: AN ASSESSMENT:
POSITIVE EFFECTS OF REFORMS:
- The growth of GDP increased from 5.6% during 1980-91 to 8.2 % during 2007-12. During the reform period, the growth of agriculture has declined, while the industrial sector reported fluctuations, the growth of the service sector has gone up. This indicates that this growth is mainly driven by growth in the service sector.
- The foreign investment, which includes foreign direct investment (FDI) and foreign institutional investment (FII) has increased from about US $100 million in 1990-91 to US $ 36 billion in 2016- 17.
- There has been an increase in the foreign exchange reserves from about US $ 6 billion in 1990-91 to about US $ 321 billion in 2014-15. India is one of the largest foreign exchange reserve holders in the world.
- India is seen as a successful exporter of auto parts, engineering goods, IT software and textiles in the reform period.
- Rising prices have also been kept under control.
NEGATIVE EFFECTS OF REFORMS:
The NEP has been widely criticised for not being able to address some of the basic problems facing our economy especially in the areas of employment, agriculture, industry, infrastructure development and fiscal management.
- Growth and Employment – Though the GDP growth rate has increased in the reform period, scholars point out that the reform led growth has not generated sufficient employment opportunities in the country other than the service sector. This is known as ‘Jobless growth’.
- Reforms in Agriculture – Reforms have not been able to benefit agriculture. The growth rate in the agriculture sector has been decelerating in the reform period because:
- Public investment in agriculture sector especially in infrastructure, which includes irrigation, power, roads, market linkages and research and extension has fallen in the reform period.
- The removal of fertiliser subsidy has led to increase in the cost of production, which has severely affected small and marginal farmers.
- A number of policy changes such as reduction in import duties on agricultural products, removal of minimum support price and lifting of quantitative restrictions on agricultural products have adversely affected Indian farmers as they have to face increased international competition.
- The export-oriented policy strategies in agriculture have resulted in a shift from production of food grains for the domestic market towards production of cash crops for exports thereby putting immense pressure on prices of food grains.