Globalisation

Globalization (or globalisation) is the process of international integration arising from the
interchange of world views, products, ideas, and other aspects of culture. Advances in
transportation and telecommunications infrastructure, including the rise of the telegraph and
its posterity the Internet, are major factors in globalization, generating further
interdependence of economic and cultural activities.
G!"#A!I$A%I"&' has become the buzzword of the last two decades. %he sudden increase
in the e(change of )nowledge, trade and capital around the world, driven by technological
innovation, from the internet to shipping containers, thrust the term into the limelight.
Globalisation also refers to the trend for people, firms and governments around the world to
become increasingly dependent on and integrated with each other. %his can be a source of
tremendous opportunity, as new mar)ets, wor)ers, business partners, goods and services and
jobs become available, but also of competitive threat, which may undermine economic
activities that were viable before globalisation. %herefore some see globalisation as a good
thing. According to Amartya $en, a &obel*+rize winning economist, globalisation has
enriched the world scientifically and culturally, and benefited many people economically as
well'. %he ,nited &ations has even predicted that the forces of globalisation may have the
power to eradicate poverty in the -.st century while some hold the view as for perpetuating
ine/uality in the world rather than reducing it. $ome agree that they may have a point. %he
International 0onetary 1und admitted in -223 that ine/uality levels may have been increased
by the introduction of new technology and the investment of foreign capital in developing
countries. "thers, in developed nations, distrust globalisation as well. %hey fear that it often
allows employers to move jobs away to cheaper places.
Advantages of globalisation
4mployment5 "ne of the crucial advantage, globalization has led to the generation of
numerous employment opportunities.
+roduct 6uality and price5 %he "nset of international trade has given rise to intense
competition in the mar)ets for reducing price and increasing /uality.
7ommunication and %ransportation5 7onsidered as the wheel of every business
organization, connectivity to various parts of the world is no more a serious problem.
1ree 0ovement of 7apital5 %his leads to 1oreign 8irect Investment, which helps in
promoting economic growth in the host country.
Disadvantages of globalisation
,neven wealth distribution5 %he rich are getting richer while poor are getting
poorer.
9ealth issues5 9uman, animal and plant diseases can spread more /uic)ly through
globalization.
4nvironment 8egradation5 Industries are using natural resources by means of
mining, drilling, etc. which puts a burden on the environment.
!oss of 7ulture5 7onventionally, people of a particular country follow its culture
and traditions from time immemorial.
0onopoly5 s. It is possible that when a product is the leader in its field, the
company may begin to e(ploit the consumers
What is so important about globalisation in India?
Globalisation is the new buzzword that has come to dominate the world since the nineties of
the last century with the end of the cold war and the brea)*up of the former $oviet ,nion and
the global trend towards the rolling ball. %he frontiers of the state with increased reliance on
the mar)et economy and renewed faith in the private capital and resources, a process of
structural adjustment spurred by the studies and influences of the :orld #an) and other
International organisations have started in many of the developing countries. Also
Globalisation has brought in new opportunities to developing countries. Greater access to
developed country mar)ets and technology transfer hold out promise improved productivity
and higher living standard. #ut globalisation has also thrown up new challenges li)e growing
ine/uality across and within nations, volatility in financial mar)et and environmental
deteriorations. Another negative aspect of globalisation is that a great majority of developing
countries remain removed from the process. %ill the nineties the process of globalisation of
the Indian economy was constrained by the barriers to trade and investment liberalisation of
trade, investment and financial flows initiated in the nineties has progressively lowered the
barriers to competition and hastened the pace of globalisation.
Impact on India
India opened up the economy in the early nineties following a major crisis that led by a
foreign e(change crunch that dragged the economy close to defaulting on loans. %he response
was a slew of 8omestic and e(ternal sector policy measures partly prompted by the
immediate needs and partly by the demand of the multilateral organisations. %he new policy
regime radically pushed forward in favour of a more open and mar)et oriented economy.
0ajor measures initiated as a part of the liberalisation and globalisation 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
mar)et determined e(change rates.
"ver 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. %he Indian tariff rates reduced sharply over the decade from a weighted
average of 3-.;< in .==.*=- to ->.? in .==?*=3.%hough tariff rates went up slowly in the late
nineties it touched @;..< in -22.*2-. India is committed to reduced tariff rates. +ea) tariff
rates are to be reduced to be reduced to the minimum with a pea) rate of -2<, in another -
years most non*tariff barriers have been dismantled by march -22-, including almost all
/uantitative restrictions.
India is Global
%he liberalisation of the domestic economy and the increasing integration of India with the
global economy have helped step up G8+ growth rates, which pic)ed up from ;.?< in .==2*
=. to a pea) level of 33.A< in .==?*=3. Growth rates have slowed down since the country
has still bee able to achieve ;*?< growth rate in three of the last si( years. %hough growth
rates has slumped to the lowest level >.@< in -22-*2@ mainly because of the worst droughts
in two decades the growth rates are e(pected to go up close to 32< in -22@*2>. A Global
comparison shows that India is now the fastest growing just after 7hina.
%his is major improvement given that India is growth rate in the .=32Bs was very low at @<
and G8+ growth in countries li)e #razil, Indonesia, Corea, and 0e(ico was more than twice
that of India. %hough IndiaBs average annual growth rate almost doubled in the eighties to
;.=< it was still lower than the growth rate in 7hina, Corea and Indonesia. %he pic)up in
G8+ growth has helped improve IndiaBs global position. 7onse/uently IndiaBs position in the
global economy has improved from the Ath position in .==. to >th place in -22.. :hen G8+
is calculated on a purchasing power parity basis.
Globalisation and Poverty
Globalisation 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
ine/uality over recent decades. #ut it is not the only reason for this often unrecognised
progress, good national polices, sound institutions and domestic political stability also matter.
8espite this progress, poverty remains one of the most serious international challenges we
face up to ..- billion of the developing world >.A billion people still live in e(treme poverty.
GDP Growth rate
%he Indian economy is passing through a difficult phase caused by several unfavourable
domestic and e(ternal developmentsD 8omestic output and 8emand conditions were
adversely affected by poor performance in agriculture in the past two years. %he global
economy e(perienced an overall deceleration and recorded an output growth of -.>< during
the past year growth in real G8+ in -22.*2- was ;.>< as per the 4conomic $urvey in -222*
2.. %he performance in the first /uarter of the financial year is ;.A< and second /uarter is
?..<.
India currently accounts for ..-< of :orld trade as of -22? according to the :orld %rade
"rganisation (:%"). ,ntil the liberalisation of .==., India was largely and intentionally
isolated from the world mar)ets, to protect its fledgling economy and to achieve self*reliance.
1oreign trade was subject to import tariffs, e(port ta(es and /uantitative restrictions, while
foreign direct investment was restricted by upper*limit e/uity participation, restrictions on
technology transfer, e(port obligations and government approvalsD these approvals were
needed for nearly ?2< of new 18I in the industrial sector. %he restrictions ensured that 18I
averaged only around E-220 annually between .=A; and .==.D a large percentage of the
capital flows consisted of foreign aid, commercial borrowing and deposits of non*resident
Indians.
Consequences
%he implications of globalisation for a national economy are many. Globalisation has
intensified interdependence and competition between economies in the world mar)et. %his 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 mar)et conditions. Father, 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. %his constrained
the policy option available to the government which implies loss of policy autonomy to some
e(tent, in decision*ma)ing at the national level.
ffects of Globalisation on Indian Automobile !ector
Globalization is an economic phenomenon, involving the increasing interaction, or
integration, of national economic systems through the growth in international trade,
investment and capital flows. Globalization has influenced every aspect of human life and it
offers certain opportunities and threats to each aspect of business. %he Auto industry in India
is not un touched by the effects of globalization. %he Indian Auto Industry and the Auto
component industry is suddenly e(posed to the vast international mar)et as an opportunity
and to Global competition in large scale. %he industry has opportunities in terms of business
opportunity worldwide and the threats from 0ega suppliers who are more e/uipped to
compete.
%he Auto component Industry in India has come of age and is poised to become a major
revenue earner for the country. At this stage when the industry is undergoing restructuring
and itemisation it is important to )now the strengths and wea)ness of the Industry and the
environment in which it operates. India being a cheap destination for parts, is a favoured
destinations for multinational to source its parts and achieve overall global competitiveness.
%he Industry needs to gear itself to ta)e advantage of its strengths and the various
opportunities available globally by identifying its wea)nesses.
%here are immense opportunities being offered by the global mar)et and there is a need to
loo) inwards and draw up a strategy to e(ploit the opportunities offered by globalization.
Chronology and typology of India"s automotive growth
Indian automotive industryGs building up characteristics from the pre*independence period till
date shows distinct phases. It all started in .=>2s for the first embryonic automotive industry
to emerge in the pre*independent India. Almost after a decade and a half since then, leading
entrepreneurs and the government in the independent India have e(tended efforts to create a
manufacturing industry to supply the automotive industry with components in .=;@. %his was
the beginning of the ta)e*off phase of Indian economy. In the ne(t three decades, the growth
in the automotive industry did not really )ic)*start as the national economic growth was
constantly following the 9indu rate of growth H an annual growth that stagnated between @.;
percent over .=;2*.=A2. 8espite the sluggish growth of the economy during that time, the
automotive industry began to witness a relatively fast growth during .=32*.=A2 mainly due
to the leading production role of %elso, Asho) !eylands, 0ahindra I 0ahindra, 9industan
0otors, +remier Automobiles, and #ajaj Auto.
$ince -222, significant trade and investment restrictions were removed to speed up the
momentum of liberalization of the automotive industry. Indigenous production of cars started
since then with an eye to the domestic and international mar)et needs. Increasing efficiency
was achieved with growing investment in research and development while satisfying the
strictest environmental standards. As a result, an influ( of overseas technology )now*how has
improved the impetus for improvements in /uality and productivity, to a point where many
global companies now view India more favorably than 7hina as a source point for
components. It seems that global %ier .s are increasingly confident about IndiaBs ability to
build more comple( parts, and are relocating more complicated systems wor) to India rather
than simply building basic parts there.
Growth Dynamics of Automotive !egment# Past and $ecent %rends
%he automobile industry in India has long been recognized as a core manufacturing sector
with the potential to drive national economic growth and foster the development of
technological capabilities through its powerful bac)ward and forward lin)ages, and the
localization of high value added manufacturing processes within domestic economies. In
recent years, for instance, the contribution of the automotive industry to G8+ has risen
noticeably * from -.33 percent in .==-*=@ to > percent in -22@*-22>.
i

%he automotive industry in India comprises of all vehicles, including -*@ wheelers, passenger
cars and multi*utility vehicles, light and heavy commercial vehicles, and agricultural tractors
and other earth moving machineries. %o mention, India ran)s as the largest manufacturer of
motorcycles and second largest in manufacturing of scooters in the world. In tractor
manufacturing also India is the second largest producer in the world. %he production
accelerated after .=A2s when partial decontrol was introduced. %he result is notable H from a
modest . million during .=A2s it became three fold in .==.. %he effect of complete decontrol
too) time to e(ert an all*round impact on the economy as it shows there was a short
recessionary period .==.H.==>, after which there was sign of revival. %owards .==A*==, the
industry again showed an upward trend reaching a record high in -22-.
Automobile Industry# $ecent Performance Indicators
%he transition of the automotive industry to a relatively Jhigh*valueG industry towards the
.==2s has significantly affected the structure of the auto component sector too. :ith
liberalization fast generating momentum in the economy, urban income growth has also
e(perienced a turnaround leading to high demand growth for -*@ wheelers and >*
wheelers. 7onse/uent upon this, as we elaborated before, there has been rapid growth
of the vehicle production in the recent years. &ot surprisingly, component industry also
grew by more than -2< on the average per annum during .==.*-22..
1) %rends in production: %o cater to the e(isting and new vehicle manufacturersG
re/uirements a continuous e(pansion of the automotive components sector has been
occurring after .=A2s. :ith the opening up of the economy and a renewed optimism
of mar)et growth prospects inspired higher investment and output in this sector. In
.==?*=3, the investment in the component sector mar)ed a little above .;22 million
dollar but in -22.*-22-, the investment rose to -@22 million dollar.
2) %rends in &ports and Imports: 8espite the relatively small share of in the world
e(ports, the industry has been managing to tot up the numbers in recent years. 4(ports
of auto components from India have grown at a compounded growth rate of .= per
cent over the past si( years. 8uring the fiscal year -22>, the industry achieved a
milestone of ,$E . billion worth of e(ports. Going by the current trends, the auto
component industry is observed to e(port more than .2 percent of its output every
year. "ver the past .; years, the e(ports in this sector have been growing steadily at
about .- per cent per annum.
3) Inflow of foreign direct investment '(DI) and rise in foreign collaborations#
4ndowed with the potential of low*cost manufacturing along with high engineering
s)ills wor)force, India edges over other developing countries with respect to
component manufacturing. 0any international component manufacturers such as
8elphi, !ucas*%K$, and 8enso followed their customers (global car manufacturers)
and started their manufacturing in India. %his brought about a large inflow of 18I into
the sector. %hus, entry of global "40s and demand for high /ualityLtechnology
components encouraged Indian auto component companies to enter into several
foreign collaborations. At present, there are over >;2 collaborations with foreign
partners from around the world
APPENDIX