Globalization & Challenges before India

By: Ms. Anurika Vaish

Program Coordinator, MBA-IT, IIITA

As the world moves into the new century & the new millennium, a country like India with continental dimensions has to reckon with changes that are occurring in the rest of the world. The changes occurring should not only be recognized internally but globally, keeping abreast with the external environments. It is this external environment which is undergoing a transformation worldwide and which we have come to understand as globalization.

Defining Globalization The word globalization and its extent were always debatable. Effect of globalization whether good or bad depends crucially on the sense in which the word is used. In general parlance, it may be understood as "a shrinkage" of distance among the nations particularly because of technological changes in transport, communication & closer integration of products & financial markets across the world. While, in other words it may be viewed as "the changes measured between different countries or group of countries that may be developed and developing. In yet, another sense it can be understood as "introduction of new structures without altogether displacing older patterns." But to my perception, "Globalization is an economic phenomenon in the changing environment primarily brought about by one of its factors called external factors, with the penetration of technology. To be explicit, some 20 years ago what an economist called "comparative advantage" has now been replaced by technological revolution. Comparative advantage was determined by "factor endowment" i.e. land, labour& capital way back in 1980's. But today, it is almost insignificant except for USA; countries accounting for predominant share of the world GDP have a relatively small share of global land areas.

 Looking at the changes brought about by globalization, one can say that the primary sources of competitive advantage today for India are its skills and ability to adapt and change. That way we can combat with a transition from a closed to a vibrant, open & more globally dominant economy.

Some of the developments, which provide opportunity for India to cope with globalization in terms of skills and to adapt to changes are:

• India has a competitive edge over the supply of knowledge based services like professional and technical services as it has a developed structure of technological & educational institutions & lower labour cost.

• India's geographical distance from several important industrial markets has fallen dramatically and therefore no longer remains an important element in the cost structure of skill based services.

• India has now attained a leading position in the software industries e.g. software or music which is one of the spheres of technological advancement and may be a source to overcome rapid changes brought about by technology.

Keeping the above opportunity in mind can assist a country like India to manage the effect of globalization. To be forewarned is to be forearmed.

Issues in managing the challenges of globalization

• Moving from a closed to a vibrant open economy. India needs to modernize its financial institutions gradually.

• Strengthening her rural economy on a decentralized basis, modernizing her entire economic and financial system, thereby strengthening her international competitiveness before embarking upon globalization, as India has a trade deficit, weak foreign exchange reserves and huge debts (approx. 75 billion).

• Free market in real sense does not persist in India and at the same time distribution of income and wealth is also not equitable. Thus, the need to go for free market is desirable. "

• Strengthening her basic industrial sector through decentralized planning, optimum allocation of resources and increasing credit facilities and training. "

• Stabilizing reasonable balance on the fiscal & external accounts, India should maintain a competitive environment domestically to take full advantage of wider market access. "

• Making best utilization of extended time in the hands of developing nations, to dismantle trade barriers, at the same time making effective use of the new patent right by development of complementary institutions and to maximize the benefits that can be reaped from international trade and investment.

Transformation will certainly take sometime but will not remain painful forever. India has enormous potential to face the challenges ahead, but the time to identify and understand the gains and losses, the benefits as well as the dangers that globalization can bring, is really running out. Globalization is being opined differently by different groups. One view is that it will shake our economy while in others vision, it has enormous opportunities.

India needs to undergo a preparatory work in order to combat with globalization. It is not a threat but a time to cover an extra mile.

An eminent critic has rightly said:

The world cannot marginalize India. But India, if it chooses can marginalize itself. It's time to guard ourselves against this danger by defining characteristics of the new century and the new millennium.