GLOBALISATION

-DEEPANSHI NIGAM KAPIL GUPTA RAHUL GARG

WHAT IS GLOBALISATION? Process of economic, social, political and cultural

integration of nation-states into a global market/community/standard, with much increased inter-dependence

Globalization is the result of a number of interrelated developments including:

 The internationalization of financial markets. Deregulation and liberalization. Privatization of public sector servicesIt refers to the rapid increase in the share of economic activity

taking place across national boundaries.

FEATURES OF GLOBALIASTION•Rapid expansion of international trade • Internationalization of products and services by large firms • Growing importance of multinational corporations • Increase in capital transfers across national borders • Globalization of technology • Shifts in production from country to country • Increased freedom and capacity and firms to undertake economic transactions across national boundaries • Fusing of national markets •Economic integration•Global economic interdependence

KEY PLAYER OF GLOBALISATION

1.  Multinational enterprises that carry out business across national boundaries. LIKE WAL-MART,GE ETC.

2.  The WTO through which international trade agreements are negotiated and enforced.

3.  The World Bank and the (IMF) which are meant to assist governments in achieving development aims through the provision of loans and technical assistance.

4.  National governments, who together with these international institutions, are instrumental in determining the outcomes of globalization.

Factors in Increased Globalization

1. Increase in and expansion of technology

2. Liberalization of cross-border trade and resource movements

3. Development of services that support international business

4. Growing consumer pressures

5. Increased global competition

6. Changing political situations

7. Expanded cross-national cooperation

Globalization of ProductionIndividual MNCs disperse different parts of their

operations to narrow set of locations around the world because of:National advantages in factors of production key to the

“where to produce?” decision Labor, land, capital, energy, expertise

Global web of suppliersStake of foreign governments in MNC operationsQuid pro quo (help local industries)

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IMPACT OF GLOBALISATIONThe Indian economy is the 12th largest in USD

exchange rate terms. India is the second fastest growing economy in the

world. India’s GDP has touched US$1.25 trillionIndia has made remarkable progress in IT, high end

services and BPO/KPO.Indian railways started running in profits.

•The value of trade (goods and services) as a percentage of world GDP increased from 42.1 percent in 1980 to 62.1 percent in 2007.•Foreign direct investment increased from 6.5 percent of world GDP in 1980 to 31 percent in 2006.•The stock of international claims (primarily bank loans), as a percentage of world GDP, increased from roughly 10 percent in 1980 to 48 percent in 2006

THERE ARE COUNTLESS INDICATORS THAT INDICATE HOW GOODS,CAPITAL AND PEOPLE HAVE BECOME MORE GLOBALISED :

•The number of minutes spent on cross-border telephone calls, on a per-capita basis,increased from 7.3 in 1991 to 28.8 in 2006.2•The number of foreign workers has increased from 78 million people (2.4 percent ofthe world population) in 1965 to 191 million people (3.0 percent of the worldpopulation) in 2005.

CONTINUED…

CHANGE IN FDI POLICIES

Up to 100 per cent equity is allowed in the following sectors34 High Priority Industry Groups Export Trading Companies Hotels and Tourism-related Projects Hospitals, Diagnostic Centers Shipping Deep Sea Fishing Oil Exploration Power

INDIA GDP GROWTH

•1980 •1985 •1990 •1995 •2000 •2005 •20100

2

4

6

8

10

12

3.64.8

5.6

7.3

4.4

9.19.6

GDP IN %

GDP

YEAR

%

32%

27%

41%

GROWTH IN 1990-91(SECTORS)

AGRIINDUSTRYSERVICE

17%

29%

54%

GROWTH IN 2007-08

AGRIINDUSTRYSERVICE

MULTINATIONAL VS TRANSNATIONAL CORPORATION

MNC - manages production or delivers services in more than one country.

The International Labour Organization (ILO) has defined an MNC as a corporation that has its management headquarters in one country, known as the home country, and operates in several other countries, known as host countries.

The Dutch East India Company was the first multinational corporation in the world and the first company to issue stock

TRANSACTIONAL CORPORATIONA Transnational Corporation (TNC) differs from a traditional

MNC in that it does not identify itself with one national home. Whilst traditional MNCs are national companies with foreign

subsidiaries, TNCs spread out their operations in many countries sustaining high levels of local responsiveness.

An example of a TNC is Nestlé who employ senior executives from many countries and try to make decisions from a global perspective rather than from one centralized headquarters.

However, the terms TNC and MNC are often used interchangeably.

Advantages of GlobalizationIncreased free trade between nationsIncreased liquidity of capital allowing

investors in developed nations to invest in developing nations

Corporations have greater flexibility to operate across borders

Global mass media ties the world togetherIncreased flow of communications allows vital

information to be shared between individuals and corporations around the world

•Reduction of cultural barriers increases the global village effect•Greater ease and speed of transportation for goods and people•Spread of democratic ideals to developed nations•Greater interdependence of nation-states•Reduction of likelihood of war between developed nations•Increases in environmental protection in developed nations

Disadvantages of GlobalizationIncreased flow of skilled and non-skilled jobs from developed

to developing nations as corporations seek out the cheapest labor.

Increased likelihood of economic disruptions in one nation effecting all nations.

Corporate influence of nation-states far exceeds that of civil society organizations and average individuals .

Threat that control of world media by a handful of corporations will limit cultural expression.

Greater chance of reactions for globalization being violent in an attempt to preserve cultural heritage.

Spread of a materialistic lifestyle and attitude that sees consumption as the path to prosperity.

International bodies like the World Trade Organization infringe on national and individual sovereignty.

Increase in the chances of civil war within developing countries and open war between developing countries as they vie for resources.

Decreases in environmental integrity as polluting corporations take advantage of weak regulatory rules in developing countries

Greater risk of diseases being transported unintentionally between nations