What is Globalization?
Globalization is the integration of the economy of a country with the world economy. It aims to encourage foreign trade and private and institutional foreign investment. It creates various policies which try to turn the world into one. In this article, we have discussed the Positive and negative effects of globalization on the Indian Economy
Positive Effects of Globalization on the Indian Economy
- Increased investments in Indian markets by MNCs have led to the growth of the Indian economy. In many fields such as automobiles, smartphones, soft drinks, fast foods and garments, MNCs have created a vast choice of products for consumers.
- Local companies supplying raw materials to MNCs have developed and prospered. Many Indian companies such as Tata Motors and Ranbaxy have become multinational companies themselves.
- Globalisation has opened many new opportunities for companies in the service sector, especially IT companies. These companies offer their cheap but efficient consulting services to many nations. This has also created millions of jobs in India.
- Technology has been transferred to developing countries. It has enabled the production of quality goods in the international market. During the post-reform period, Indian export share in the international market has increased from 0.5% to 1%. Because of the flow of MNCs’ capital in foreign currency, the availability of foreign exchange increased to a great extent. Foreign investment has increased from US $6 billion in 1990–91 to US $125 billion in 2004–05.
- Outsourcing is the major outcome of the globalisation process. A company hires regular services mostly from outside the country or within the country such as BPOs or call centres, banking services, teaching and maintenance of accounts. Many multinational corporations are outsourcing their services to India at cheaper rates. In the post-reform period, India has provided global outsourcing with the availability of skilled manpower at low wage rates. In India, outsourcing has generated new employment opportunities which lead to a growth in the GDP and increased the foreign reserve in our economy.
Negative Effects of Globalization on the Indian Economy
- Growth has been witnessed only in few selected areas in the service sector such as hospital services, information and technology, and telecommunication.
- To earn maximum profits, MNCs employed Indian workers at extremely low wages. Only in urban areas, the standard of living has improved. Their income and the quality of consumption also increased. This has led to inequalities of income in the country.
- To deal with the pressure of competition from MNCs, many Indian companies have begun to employ workers on a temporary basis so that they do not have to pay the workers for all 12 months of a year. This has resulted in companies making large profits, but workers not getting their share of benefits.