Project on The Comparative Study of India & South Korea with respect to Globalization

Prepared by: HITESH SUTHAR Supervised by:

Submitted on: June 6th 2009

Acknowledgments:

My first and foremost thanks go to the Almighty God for his protection and granting me wisdom for the completion of this Project. This project would not have been completed without the help of these people: First of all, we would like to thank to Prof. Sai Baba for his guidance and direction throughout this work. I would like to thank my family for their support and advice while working on this Project.

Abstract:

The Project looks at how the globalization impact on developing country like India and the developed country like South Korea. Through a detailed literature search looking at the economies of India and South Korea following questions were addressed:

What is the impact of Globalization on businesses and trade?

What are the pros and cons of the Globalization?

Do is it really necessary to be globalize?

Table of Contents
Introduction ..................................................................................................................................... 5 Background ................................................................................................................................. 5 Problem ....................................................................................................................................... 6 Objective ..................................................................................................................................... 6 Relevance .................................................................................................................................... 7 Outline......................................................................................................................................... 7 Globalization ................................................................................................................................... 8 Effects of globalization ............................................................................................................... 8 Economy of South Korea .............................................................................................................. 10 Globalization in India ............................................................................................................... 11 Globalization: South Korea.......................................................................................................... 12 Why Invest in India ....................................................................................................................... 15 Impact on India: ............................................................................................................................ 16 India is Global: .......................................................................................................................... 17 Globalization and Poverty: ....................................................................................................... 18 GDP Growth rate: ..................................................................................................................... 19 Export and Import: .................................................................................................................... 19 Where does Indian stand in terms of Global Integration? ........................................................ 19 Consequences:........................................................................................................................... 20

Introduction
Background
International business is a term used to collectively describe topics relating to the operations of firms with interests in multiple countries. Such firms are sometimes called multinational corporations (MNC's). Well known MNCs include fast food companies McDonald's and Yum Brands, vehicle manufacturers such as General Motors and Toyota, consumer electronics companies like Samsung, LG and Sony, and energy companies such as ExxonMobil and BP. Most of the largest corporations operate in multiple national markets. Areas of study within this topic include differences in legal systems, political systems, economic policy, language, accounting standards, labor standards, living standards, environmental standards, local culture, corporate culture, foreign exchange, tariffs, import and export regulations, trade agreements, climate, education and many more topics. Each of these factors requires significant changes in how individual business units operate from one country to the next. MNCs typically have subsidiaries or joint-ventures in each national market. How these companies are organized, how they operate, and their lines of business are heavily influenced by socio-cultural, political, global, economic and legal environments of each country a firm does business in. The management of the parent company typically must incorporate all the legal restrictions of the home company into the management of companies in based in very different legal and cultural frameworks. International treaties, such as the Basel Accords, the World Trade Organization, and the Kyoto Protocol often seek to provide a uniform framework for how business should be influenced between signatory states. International business by its nature is a primary determinant of international trade, one of the results on the increasing success of international business ventures is globalization. Trade helps to prevent conflict. International business essentially is about trade, and when people trade they are in contact with one another. As a result, there is less isolation that countries can do. When countries begin to interact through trade, they are less likely to fight. This is also linked to the theory that democratic states are less likely to go to war with one another because they are interconnected and dependent on each others success. Globalization (globalization) in its literal sense is the process of transformation of local or regional phenomena into global ones. It can be described as a process by which the people of the world are unified into a single society and function together.

This process is a combination of economic, technological, socio-cultural and political forces. Globalization is often used to refer to economic globalization, that is, integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, and the spread of technology. Saskia Sassen writes that "a good part of globalization consists of an enormous variety of micro-processes that begin to denationalize what had been constructed as national - whether policies, capital, political subjectivities, urban spaces, temporal frames, or any other of a variety of dynamics and domains."

According to C.K. Prahalad & S. Hart,2002, The fortune at the bottom of the pyramid, Strategy & Business, 26: 54-67, and (2) S.Hart, 2005, Capitalism at the Crossroads (p.111), Philadelphia: Wharton School Publishing. Top Tier: Per capita GDP/GNI > $20,000 approximately one billion people Second Tier: Per capita GDP/GNI $2,000-$20,000 approximately one billion people Base of the Pyramid Per capita GDP/GNI < $2,000 Approximately four billion people

Problem
The purpose of this Project is to examine the impact of Globalization on businesses. We will study the impact of globalization on businesses and international trade by doing an analysis on South Korea (a developing economy) and India (a developing economy).

Objective
This study is interested in how globalization affects national income (GDP). This paper will also investigate the influence of national income (GDP) on globalization.

Over the course of this Project we hope to answer the following:

What is the impact of globalization on businesses and trade? The reasons that makes them to go for globalization and. What is the effect on businesses that depend mostly on imported raw material for production?

Relevance
Companies depend on borrowing to expand their business, the goal of this study is to establish the relationship between globalization and interest rate this will allow businesses to better plan. Also as some businesses depend on imported raw materials for their production and some businesses export many of their products, the correlation of globalization and floating exchange rate will help them to make good decisions.

Outline
The study will be structured as follows.

The first section concentrates on the introduction; dealing with the background of the study, the objective of the study and the relevance of the study.

Section two introduces globalization theory, the theoretical impacts of globalization and briefly reviews the advantages and disadvantages of it.

Section three provides details on the economies of South Korea & India.

Section four will discuss.

Section five addresses the.

The last sections will concentrate on findings of the study, analysis and the conclusions drawn.

Globalization
The term globalization means International Integration. Globalization is a process through which the diverse world is unified into a single society. The rapid industrial development, opening up of economies and the rapid progress of science and technology has reduced the world into a global village. Though the term globalization has been used by the economists since 1980's, but the concept became popular only in the later half of 1980's and 90's. The formation of General Agreement on Tariffs and Trade (GATT), International Monetary Fund and the concept of free trade has boosted globalization.

Effects of globalization
Globalization has various aspects which affect the world in several different ways such as: Industrial: Emergence of worldwide production markets and broader access to a range of foreign products for consumers and companies, particularly movement of material and goods between and within national boundaries. Financial - Emergence of worldwide financial markets and better access to external financing for borrowers, as these worldwide structures grew more quickly than any transnational regulatory regime, the instability of the global financial infrastructure dramatically increased, as evidenced by the financial crises of late 2008. Economic: Realization of a global common market, based on the freedom of exchange of goods and capital. The interconnectedness of this market however meant that an economic collapse in any one given country could not be contained. Political: Some use "globalization" to mean the creation of a world government which regulates the relationships among governments and guarantees the rights arising from social and economic globalization. Politically, the United States has enjoyed a position of power among the world powers; in part because of its strong and wealthy economy. With the influence of globalization and with the help of The United States own economy, the People's Republic of China has experienced some tremendous growth within the past decade. If China continues to grow at the rate projected by the trends, then it is very likely that in the next twenty years, there will be a major reallocation of power among the world leaders. China will have

enough wealth, industry, and technology to rival the United States for the position of leading world power. Informational - increase in information flows between geographically remote locations. Arguably this is a technological change with the advent of fiber optic communications, satellites, and increased availability of telephone and Internet.

Language - the most popular language is English. About 35% of the world's mail, telexes, and cables are in English. Approximately 40% of the world's radio programs are in English. About 50% of all Internet traffic uses English.

Competition - Survival in the new global business market calls for improved productivity and increased competition. Due to the market becoming worldwide, companies in various industries have to upgrade their products and use technology skillfully in order to face increased competition. Ecological - The advent of global environmental challenges that might be solved with international cooperation, such as climate change, cross-boundary water and air pollution, over-fishing of the ocean, and the spread of invasive species. Since many factories are built in developing countries with less environmental regulation, globalism and free trade may increase pollution. On the other hand, economic development historically required a "dirty" industrial stage, and it is argued that developing countries should not, via regulation, be prohibited from increasing their standard of living. Cultural - growth of cross-cultural contacts; advent of new categories of consciousness and identities which embodies cultural diffusion, the desire to increase one's standard of living and enjoy foreign products and ideas, adopt new technology and practices, and participate in a "world culture". Some bemoan the resulting consumerism and loss of languages. Also see Transformation of culture. Spreading of multiculturalism, and better individual access to cultural diversity (e.g. through the export of Hollywood and Bollywood movies). Some consider such "imported" culture a danger, since it may supplant the local culture, causing reduction in diversity or even assimilation. Others consider multiculturalism to promote peace and understanding between peoples. Greater international travel and tourism. WHO estimates that up to 500,000 people are on planes at any time. Greater immigration, including illegal immigration.

Spread of local consumer products (e.g. food) to other countries (often adapted to their culture). Worldwide fads and pop culture such as Pokmon, Sudoku, Numa Numa, Origami, Idol series, YouTube, Orkut, Facebook, and MySpace. Accessible to those who have Internet or Television, leaving out a substantial segment of the Earth's population. Worldwide sporting events such as FIFA World Cup and the Olympic Games. Incorporation of multinational corporations in to new media. As the sponsors of the All-Blacks rugby team, Adidas had created a parallel website with a downloadable interactive rugby game for its fans to play and compete.

Social - development of the system of non-governmental organizations as main agents of global public policy, including humanitarian aid and developmental efforts. Technical Development of a global telecommunications infrastructure and greater transborder data flow, using such technologies as the Internet, communication satellites, submarine fiber optic cable, and wireless telephones. Increase in the number of standards applied globally; e.g. copyright laws, patents and world trade agreements.

Legal/Ethical The creation of the international criminal court and international justice movements. Crime importation and raising awareness of global crime-fighting efforts and cooperation. The emergence of Global administrative law.

Economy of South Korea

The economy of South Korea is a highly developed trillion dollar free-market economy that is the fourth largest in Asia and 13th largest in the world. South Korea's overnight transformation to a wealthy developed country in less than half a

century is often called the Miracle on the Han River and earned the distinctive reputation of "Asian Tiger" in the international community. Today, South Korea is classified as a high income economy by the World Bank and an advanced economy by the IMF and CIA. Its capital, Seoul, is a major global city and a leading international financial centre in Asia. South Koreans enjoy one of the highest living standards in the world and have high life expectancy and a high level of economic freedom. An extremely competitive education system and a highly skilled and motivated workforce are two key factors driving this knowledge economy that has the world's highest scientific literacy and second highest mathematical literacy. It boasts the world's highest broadband internet access per capita and is the most wired country in the world. In 2007, the Economist Intelligence Unit ranked South Korea's IT Industry Competitiveness among the top three in the world. South Korea's economy relies heavily on exports and it is among the world's top exporters. It is home to many well known global conglomerates such as Samsung, Hyundai-Kia, LG and SK. In 2007, the Hyundai Kia Automotive Group became Asia's second largest car company and one of the top five automakers in the world. As the global financial crisis of 2008 has led to a financial collapse and economic decline in the G7 and European economies, Korea has also been hit by the crisis. As of early February 2009 the Korean Won has fallen 31% in value vs. the US dollar in the past year. The Korean economy shrank 3.4% year over year in the fourth quarter of 2008, and the benchmark stock index lost almost 41% of its value for 2008.

Globalization in India
India too is no exception to globalization. The Indian economy witnessed major changes in the 90's. The new economic reform was known as Liberalization, Privatizations and Globalization (LPG model). The main aim was the rapid growth of

Indian economy and to make it globally competitive. The period of economic transition had major impact on the economic development in all the major sectors. The Indian economy was in major crisis in 1991 when foreign currency reserves went down to $1 billion and inflation was as high as 17%. Fiscal deficit was also high and NRI's were not interested in investing in India. Then the following measures were taken to liberalize and globalize the economy. Steps Taken to Globalize Indian Economy Some of the steps taken to liberalize and globalize our economy were: 1. Devaluation: To solve the balance of payment problem Indian currency were devaluated by 18 to 19%. 2. Disinvestment: To make the LPG model smooth many of the public sectors were sold to the private sector. 3. Allowing Foreign Direct Investment (FDI): FDI was allowed in a wide range of sectors such as Insurance (26%), defense industries (26%) etc. 4. NRI Scheme: The facilities which were available to foreign investors were also given to NRI's.

Globalization: South Korea

Globalization, an important characteristic within the contemporary economic environment, has resulted in significant changes to individual nations in terms of economic development strategies undertaken by national governments. The term Globalization refers to the integration of local and international economies into a globally unified political, economic and cultural order. Globalization is not a singular phenomenon however, but a term to describe the forces that transform an economy into one characterized by the embracement of the freer movement of capital, labor, technology, and financial ows.

It is often difficult to determine or categorize and economy as being globalised, yet there are several key indicators that suggest economic management decisions of an economy have in fact been undertaken as a result of Globalization. The main evidence that suggests the burgeoning existence of Globalization is resource use patterns, and the establishment of intergovernmental agreements, as well as

transnational corporations. Globalization has essentially been driven by the breaking of economic barriers between different nations over the last half-century. The global markets have experienced economic liberalization, resulting from the global drive for the deregulation and micro-economic reform of national economies. These measures have translated into a reduction in the restriction on trade, capital ows, and nancial investment. In addition, this economic liberalization has in part been determined by the current state of technological advancement. As a result of this technology growth, transport costs have reduced dramatically, making trade more cost efficient. Communication costs have also reduced due to telecommunication advances, and also, international nance movements have been escalated due to the innovations such the Internet for e-commerce. Therefore there is an evident interactive relationship between economic liberalization and technological advancement in the process of globalization.

Since World War II, a number of East-Asian nations have experienced signicant economic growth, and the rapid nature of this growth rate has allowed them to be classied as Newly Industrialized Countries (NICs). South Korea is a prime example, and major NIC, as since the 1960s, Korea has experienced per annum GDP growth of well over 9%. This exceptional performance is attributable mainly the high-quality labor supply and careful government planning, has resulted from the emergence of Globalization. Gross world production, the total output by every nation, totals each individual nations GDP gures, and currently, South Korea is the 14th largest economy in the world, at almost US$600 billion, accounting for 1.6% of total world output, which highlights the phenomenal turn around for South Korea, from an underdeveloped third-world nation, to becoming a high-tech and rich manufacturing economy. A key factor that has propelled South Koreas growth has been its strong export emphasis since the 1960s, where growth of exports climbed 21% annually. Emphasis has been placed upon the more skill-intensive, high-quality industries such as the motor vehicle industry and electronics manufactures. This has translated into South Korea presently having the sixth largest motor vehicle industry in the world, and is now also the fourth largest manufacturer of electronics goods.

Koreas emphasis towards stronger education has directly contributed to its strong growth period by resulting in an extremely highly educated workforce. Currently, Koreas devotes 14% of GDP towards educating the young. Another key factor in

Koreas growth has been the rise of transnational business conglomerates or Chaebol in Korean. During 1998, the four largest Chaebol LG, Daewoo, Samsung, and Hyundai constituted a massive 60% of total GDP, proving their signicance towards an expanding Korean economy. As a result of the Globalization of these rms, names such as LG and Hyundai are commonly known throughout Australia. The Chaebol operate many different industries, and the increasing competition in the world export markets due to the removals of restrictions, and market restructuring, have produced incentive for these businesses to become global and establish foreign subsidiaries. These rms then attempt to reduce costs of production by, ironically, using cheap foreign labor from its Southeast Asian neighbors, and using the foreign raw materials of the host country.

The global economy is, by denition, subject to the ups and downs of the business cycle, caused by changes in production within the major economies of the world, such as South Korea. For that reason, the Korean government attempts to limit the uncertainty of inter-national business through an extensive policy mix. The pervasive inuence of the government is one of the trademarks of the Korean economy. Since Korea is poor in natural resources, the government direction was inevitable for growth to occur. Prior to 1960, Korea was an impoverished nation, yet today, it is one of the most urbanized nations in the world, with rates of over 75%, compared with 35% urbanization prior to 1960. More recently, in 1993, the government began to implement five year FDI plans to promote economic improvements. Additionally, government deregulation has aided the global integration process through the reduction of protective industries such as tariffs, from 12% to 8% in the space of four years during the mid 1990s.

As South Korea has risen as an NIC, it has become actively involved in most of the worlds important trade blocs and agreements. Korea has been a member of APEC, and it has with the other Asian Tiger economies, remained one of the fastest growing economies in the world despite the recent Asian nancial crisis in 1997/98, thanks in part to the cooperation of nations that the APEC provides for struggling nations. However, at the height of the Asian nancial crisis, Korea was hit hard, where, after long periods of sustained economic growth, the economy came to an abrupt halt. In November of 1997, Koreas economic situation deteriorated to the point where the Korean government requested a US$ 50 billion loan from the International

Monetary Fund (IMF) to bail out its ailing economy out of recession, while forcing continual deregulations and relaxing its tight laws on foreign takeovers. Nevertheless, the Asian recovery of 1999 saw the South Korean economy come roaring back, due to a surge in private consumption expenditure and net foreign exports. Statistics show that Korea has recovered faster than any of the crisis-hit nations, and the sure sign of economic revival was that major rms resumed investment within Korea, with gures indicating a 13% increase in the rst quarter of 1999, compared with a 27% plunge the previous quarter. With the advent of Globalization however, an opportunity cost exists between economic growth and environmental management, and is sometimes referred to as equity vs. efficiency. In relation to South Korea, economic growth has led to a general degradation of its natural environment, especially with the pollution of its major rivers of Han and Nakdong. As little priority is currently being given to the Korean environment, the inevitable outcome is that global pollution levels would increase and quality of life would decrease as a result. In order to maintain ecologically sustainable development for the future, governments must accept some trade off of growth to accommodate environmental protection. As the world moves into the 21st century, the Globalization of nations has become the forefront of economic discussion and planning. The move towards market-based systems characterized by open market trade, nancial transfers and technological advancements has become increasingly signicant as organizations such as the WTO become more inuential. South Korea is a perfect example of a globalised nation through it shifting emphasis towards rapid industrialization, technological innovation and aggressive exporting through comparative advantage, along with a more relaxed government influence are the keys toward South Koreas maximization of sustainable economic growth.

Why Invest in India

Since the inception of a liberalized economy in India, the doors of India have been open to the other countries of the world. This vast land of diversity is surging ahead on the world economic map with a pace that has left behind many of the free economies. With the changing investment climate India is a brilliant economic zone to invest in. The vast stretch of the land rich in natural resources and one of the richest countries in the world in terms of human resource India is a great country for investment. There are several fine reasons for investing in India.

India is one of the largest economies in the world.

It is strategically located and is easily accessible to the vast domestic and South Asian market. India is a large and rapidly growing consumer market constituting up to 300 million people for branded consumer goods. This market is estimated to be growing at 8% per annum. Demand for several consumer products is growing at over 12% per annum. Skilled human resource and professional managers are available at viable cost. One of the largest manufacturing sectors in the world, spanning almost all areas of manufacturing activities. One of the largest pools of scientists, engineers, technicians and managers in the world. Foreign investment is readily welcome in India; approval is required but is automatically granted in sixty categories of Industries. Rich base of mineral and agricultural resources. India has a long history of market economy infrastructure We have a well developed and sophisticated financial sector. A vibrant capital market with over 9,000 listed companies and market capitalization of US$ 154 billion (March,1996) Well developed Research & Development infrastructure and technical and marketing services. India enjoys a policy environment that provides freedom of entry, investment, location, choice of technology, production, import and export. Unprejudiced package of fiscal incentives. A sophisticated and modern legal and accounting system. Language is no barrier as English is widely spoken and understood. Rupee is easily convertible on Current Account at market determined rate. Free and full repatriation of capital, technical fee, royalty and dividends is available in the country. Foreign brand names have arrived in the country and are freely used. No income tax on profits derived from export of goods. One can avail complete exemption from Customs Duty on industrial inputs and Corporate Tax Holiday for five years for 100 per cent Export Oriented units and units in Export Processing Zones. India has long history of stable parliamentary democracy and is not really affected by political turmoil, making investment viable.

Impact on India:
India opened up the economy in the early nineties following a major crisis that led by a foreign exchange crunch that dragged the economy close to defaulting on

loans. The response was a slew of Domestic and external sector policy measures partly prompted by the immediate needs and partly by the demand of the multilateral organisations. The new policy regime radically pushed forward in favour of amore open and market oriented economy. Major measures initiated as a part of the liberalisation and Globalization strategy in the early nineties included scrapping of the industrial licensing regime, reduction in the number of areas reserved for the public sector, amendment of the monopolies and the restrictive trade practices act, start of the privatisation programme, reduction in tariff rates and change over to market determined exchange rates. Over the years there has been a steady liberalisation of the current account transactions, more and more sectors opened up for foreign direct investments and portfolio investments facilitating entry of foreign investors in telecom, roads, ports, airports, insurance and other major sectors. The Indian tariff rates reduced sharply over the decade from a weighted average of 72.5% in 1991-92 to 24.6 in 1996-97.Though tariff rates went up slowly in the late nineties it touched 35.1% in 2001-02. India is committed to reduced tariff rates. Peak tariff rates are to be reduced to be reduced to the minimum with a peak rate of 20%, in another 2 years most non-tariff barriers have been dismantled by March 2002, including almost all quantitative restrictions.

India is Global:
The liberalisation of the domestic economy and the increasing integration of India with the global economy have helped step up GDP growth rates, which picked up from 5.6% in 1990-91 to a peak level of 77.8% in 1996-97. Growth rates have slowed down since the country has still bee able to achieve 5-6% growth rate in three of the last six years. Though growth rates has slumped to the lowest level 4.3% in 2002-03 mainly because of the worst droughts in two decades the growth rates are expected to go up close to 70% in 2003-04. A Global comparison shows that India is now the fastest growing just after China. This is major improvement given that India is growth rate in the 1970's was very low at 3% and GDP growth in countries like Brazil, Indonesia, Korea, and Mexico was more than twice that of India. Though India's average annual growth rate almost doubled in the eighties to 5.9% it was still lower than the growth rate in China, Korea and Indonesia. The pick up in GDP growth has helped improve India's global position. Consequently India's position in the global economy has improved from the 8th position in 1991 to 4th place in 2001; When GDP is calculated on a purchasing power parity basis.

Globalization and Poverty:

Globalization in the form of increased integration though trade and investment is an important reason why much progress has been made in reducing poverty and global inequality over recent decades. But it is not the only reason for this often unrecognised progress, good national polices, sound institutions and domestic political stability also matter. Despite this progress, poverty remains one of the most serious international challenges we face up to 1.2 billion of the developing world 4.8 billion people still live in extreme poverty. But the proportion of the world population living in poverty has been steadily declining and since 1980 the absolute number of poor people has stopped rising and appears to have fallen in recent years despite strong population growth in poor countries. If the proportion living in poverty had not fallen since 1987 alone a further 215million people would be living in extreme poverty today. India has to concentrate on five important areas or things to follow to achieve this goal. The areas like technological entrepreneurship, new business openings for small and medium enterprises, importance of quality management, new prospects in rural areas and privatisation of financial institutions. The manufacturing of technology and management of technology are two different significant areas in the country. There will be new prospects in rural India. The growth of Indian economy very much depends upon rural participation in the global race. After implementing the new economic policy the role of villages got its own significance because of its unique outlook and branding methods. For example food processing and packaging are the one of the area where new entrepreneurs can enter into a big way. It may be organised in a collective way with the help of co-operatives to meet the global demand. Understanding the current status of Globalization is necessary for setting course for future. For all nations to reap the full benefits of Globalization it is essential to create a level playing field. President Bush's recent proposal to eliminate all tariffs on all manufactured goods by 2015 will do it. In fact it may exacerbate the prevalent inequalities. According to this proposal, tariffs of 5% or less on all manufactured goods will be eliminated by 2005 and higher than 5% will be lowered to 8%. Starting 2010 the 8% tariffs will be lowered each year until they are eliminated by 2015.

GDP Growth rate:

The Indian economy is passing through a difficult phase caused by several unfavourable domestic and external developments; Domestic output and Demand conditions were adversely affected by poor performance in agriculture in the past two years. The global economy experienced an overall deceleration and recorded an output growth of 2.4% during the past year growth in real GDP in 2001-02 was 5.4% as per the Economic Survey in 2000-01. The performance in the first quarter of the financial year is5.8% and second quarter is 6.1%.

Export and Import:

India's Export and Import in the year 2007-08 was to the extent of 32,572 and 38,362 million respectively. Many Indian companies have started becoming respectable players in the International scene. Agriculture exports account for about 13 to 18% of total annual of annual export of the country. In 2006-07 Agricultural products valued at more than US $9million were exported from the country 21% of which was contributed by the marine products alone. Marine products in recent years have emerged as the single largest contributor to the total agricultural export from the country accounting for over one fifth of the total agricultural exports. Cereals (mostly basmati rice and non-basmati rice), oil seeds, tea and coffee are the other prominent products each of which accounts fro nearly 5 to 10% of the countries total agricultural exports.

Where does Indian stand in terms of Global Integration?

India clearly lags in Globalization. Numbers of countries have a clear lead among them China, large part of east and far east Asia and Eastern Europe. Lets look at a few indicators how much we lag. Over the past decade FDI flows into India have averaged around 0.5% of GDP against 5% for China 5.5% for Brazil. Whereas FDI inflows into China now exceeds US $ 50 billion annually. It is only US $ 4billion in the case of India. Consider global trade - India's share of world merchandise exports increased from .05% to .07% over the pat 20 years. Over the same period China's share has tripled to almost 4%.

India's share of global trade is similar to that of the Philippines an economy 6 times smaller according to IMF estimates. India under trades by 70-80% given its size, proximity to markets and labour cost advantages. It is interesting to note the remark made last year by Mr. Bimal Jalan, Governor of RBI. Despite all the talk, we are now where ever close being globalised in terms of any commonly used indicator of Globalization. In fact we are one of the least globalised among the major countries - however we look at it.

As Amartya Sen and many other have pointed out that India, as a geographical, politico-cultural entity has been interacting with the outside world throughout history and still continues to do so. It has to adapt, assimilate and contribute. This goes without saying even as we move into what is called a globalised world which is distinguished from previous eras from by faster travel and communication, greater trade linkages, denting of political and economic sovereignty and greater acceptance of democracy as a way of life.

Consequences:
The implications of Globalization for a national economy are many. Globalization has intensified interdependence and competition between economies in the world market. This is reflected in Interdependence in regard to trading in goods and services and in movement of capital. As a result domestic economic developments are not determined entirely by domestic policies and market conditions. Rather, they are influenced by both domestic and international policies and economic conditions. It is thus clear that a globalising economy, while formulating and evaluating its domestic policy cannot afford to ignore the possible actions and reactions of policies and developments in the rest of the world. This constrained the policy option available to the government which implies loss of policy autonomy to some extent, in decision-making at the national level.

References:

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