Globalisation and the Indian Economy | UPSC Notes

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Globalisation and the Indian Economy

Quote Prof. Yuval Noah Harari 

  • Global Problems vs. Nationalistic Identities 
  • Global Issues need Global Efforts to tackle them. 
  • Global Economy, Global Climatic Change, National Politics 
  • Globalisation induces competition, not just in trade but also in innovation and technology. Now no country can remain calm if the other country discovered/invented a new technology. 
  • Black Hole Image – a great example of Global Collaboration and Synergy. 

Fodder Points — 

  • World Wars and rise of US | shift from English Hegemony to American Hegemony 
  • 1991 reforms in India 
  • Fall of USSR and consequently that of Communism. 
  • Rise of China and its model of development 
  • IT Boom | Social Media 
  • Shift of leadership — to fill the vacuum left by the US — filled by China 
  • Chinese Strings of Pearls and BRI — right timing 
  • The real globalisation in the form of free trade was initiated in the 19th century after the industrial revolution by the repeal of the Corn Laws in England in 1840s and corn was allowed to be imported into Britain to overcome a shortage.
  • Over 2003-2013, the global median level of real income nearly doubled. This was essentially an Asian effect, the only region to experience sustained productivity growth and catch-up this century. 
  • China is likely to overtake the United States soon as the world’s largest economy and the World Economic Forum predicts that India will become the world’s third-largest economy by 2030.
  • 2000s — Period of Hyper-Globalisation and then 2008 GFC happened!
  • Asian Economies and the Reshaping of Global Finance? 
  • Post-Crisis — globalisation took a plunge and all the major economies, except India, slowed down.
  • More fundamentally, developments since the GFC have challenged assumptions of ever-growing globalisation.
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Blocs being developed — 

From Bretten-woods twins to regional blocs — 

  • RCEP 
  • BRICS and SCO
  • BRI
  • TPP-Plus
  • EU and its problems with expansion 

How Globalisation is helping keeping a check over the functioning of national governments — 

  • The International Agencies, from time to time, publish reports over various issues — these reports can serve as a good benchmark to judge the working of the governments.
  • Recent example — Swiss Bank releasing the report revealing that the Indian money has increased by 50% — this has put the work done against black money by the government at the back-foot. This has again open up the debate over this issue. 
  • WB and IMF reports over the performance and prospects of functioning of economy also serves as a good indicator and policy making instrument.

Pros — 

  1. Technological Exchange 
  2. Cheap Labourers and push to manufacturing 
  3. Exchange of ideas | People-to-people connection
  4. Sense of competitiveness 
  5. Strengthen the global trade — benefits of hyper-globalisation boom reaped by all.
  6. Better connectivity | Global Village 
  7. Global consensus on imp issues — terrorism and environment 
  8. Push to Urbanisation 
  9. Inflow of FDI, FPI, cheap capital etc  — developmental works 
  10. Global Health issues | Human Rights 
  11. Rise of Asian Hegemony — Sino-Indian 
  12. Development of ASEAN 
  13. Technological boom!
  14. Free Trade Agreements — NAFTA 
  15. New markets are to be explored — the untapped African Market

Problems — 

  1. Rising Inequalities | Stratified society | unequal distribution 
  2. Lower wages to labourers | Stagnancy 
  3. Illegal migration and refugee crisis — havoc in the US and EU — BREXIT 
  4. Financial Crisis and problems 
  5. Westernisation of the Eastern world 
  6. Rise of Consumerism 
  7. Trade wars — recently, as a response 
  8. Winners and losers — the great divide of haves and have-not 
  9. WTO — just a ‘mock’ institute 
  10. UN and IMF — pocketed by the US 
  11. Extremism and Protectionism 
  12. Financial crimes — new forms 
  13. Tax Havens 
  14. Rise of regionalism as a counter to globalism 
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India’s Case — 

  • India is somehow blessed by its huge size and resources which means a big domestic market and a growing prosperous middle class.
  • Globalisation has increased growth no doubt and added variety to most Indians’ everyday life and consumption pattern, but there are many  who have not been votaries of globalisation like the Bombay Club in the past.
  • But now most industrialists concede that globalisation has enhanced competitiveness and have led to the improvement in the quality of their products.
  • India is also undertaking foreign investments in other countries. Outgoing FDI is important for many Indian companies. 
  • Rise of Remittence to India — largest in the world.
  • Rising Inequalities among the public
  • Need of private investment to fill up this inequality gap. Private investment more foreign and domestic capital — thus growth of globalisation.
  • Since attracting FDI seems to be a focal point, it can be targeted to industries that are labour intensive. This may lead to job creation for the unskilled. 
  • India’s manufacturing sector is small (16 percent of the GDP) as compared to China — Push to development of manufacturing sector — more job creation and regional balance 
  • India’s global trade — promotion to exports — India accounts for only two percent of the global trade. India can look towards Africa, South Asia and Latin America as export destinations because as long as the world remains full of poor people, there will always be demand for labour intensive cheap consumer goods, electronics, chemicals, machinery and pharmaceuticals– India can fill the gap which China is likely to vacate.

On the whole globalisation is likely to continue in a different and perhaps more beneficial form. China and India can play important roles even as US wishes to behave more protectionist and retreats behind tariffs and walls and move towards the Asian century.

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China + India >> USA