The term 'Globalization' means the integration of the economy of each country with the world economy. The essence of globalization is the increasing degree of openness in respect of international trade, international investment and international finance. In other words, globalization is the process of transformation of the world into a single integrated economic unit. In a global economy, all the barriers on the flow of trade in goods and services and investment across the national frontiers are removed.
According to Guy Brainbant, the process of globalisation not only includes opening up of world trade, development of advanced means of communication, internationalisation of financial markets, growing importance of MNC's, population migrations and more generally increased mobility of persons, goods, capital, data and ideas but also infections, diseases and pollution.
The process of globalization underlie following trends.
Spread of international trade.
Increasing migration of people.
Increasing flow of money or means of payments.
More capital flows.
Increased flow of finance capital.
Emergence of more and more transnational companies and multi national companies.
Increasing trade of technology between different countries.
Rapid spread of print, electronic and communication media.
Growth in trade and production of services of all kinds - including education.
India opened up the economy during early 1991 following a major crisis that led by a foreign exchange crunch with reserves which could hardly finance inputs for two weeks in India. The crisis has dragged the economy close to defaulting on loans. The credit rating of India had gone down and non-resident Indians (NRIs) had started withdrawing their deposits in foreign currency and the country was on the verge of default with regard to the payments of short -term credits incurred from foreign financial institutions.
Hence, drastic policy measures were introduced on the domestic and external sectors to address all these issues. All these policy measures were partly prompted by the immediate needs and partly by the demand of the multilateral organisations like World Bank and International Monetary Fund (IMF). The liberalised policy regime rapidly pushed forward in favour of a more open and market oriented economy.
Major policy measures have been launched as a part of the liberalisation, privatisation and globalisation (LPG) programmes. The government announced the devaluation of rupee by about 20% in July 1991, new industrial policy, new trade policy in 1991, and a new export and import policy were also announced. Other measures followed are 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, withdrawal of many governmental controls, start of the privatisation programme, sharp reduction in tariff rates, change over to market determined exchange rates, many fiscal and financial sector reforms. All these measures have been grouped together under 'New Economic Policy' (NEP).
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.
Liberalisation, privatisation and globalisation in the form of increased integration of India with the global economy through trade and investment since early nineties are some of the major reasons for the high level of economic growth in recent years. Despite this progress, unemployment, poverty, inequality and low level of human development still remains to be the most serious development challenges to be reckoned with.
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