Globalisation: Meaning, Advantages, Disadvantages and Types

What is Globalisation?

Globalisation is the process of integrating a country’s economy with the global economy by removing restrictions on trade and capital flows. Simply put, globalisation is the process of interaction and union of individuals, organisations, and governments on a worldwide scale. It entails the formation of networks and initiatives aimed at breaking down social, economic, and geographical barriers. Globalisation aims to create interactions between events such that those happening far away can influence those happening in India. It has a variety of aspects and is the outcome of the combination of several strategies intended to change the world to make it more interdependent and integrated. In other words, the primary objective of globalisation is to eliminate borders. 

The integration of a nation’s economy with the global economy is commonly defined as globalisation.

Changes brought about by the Indian economy’s globalisation

1. The New Economic Policy identified a list of high-tech and high-investment priority industries, which give automatic permission to foreign direct investment up to 51% of foreign equity. 
2. Automatic approval is given for foreign technology agreements in high-priority industries up to a maximum of ₹1 crore. It is no longer necessary to obtain approval to hire foreign technicians or test locally developed technology abroad.
3. The rupee was devalued by around 20% in July 1991 to adjust the value of the Indian currency on a global scale. It increased the inflow of foreign capital, encouraged exports, and discouraged imports.
4. To further connect the Indian economy with the global economy, the Indian rupee was declared partially convertible in the Union Budget of 1992–1993 and then fully convertible in the 1993-1994 budget.
5. The government has launched a new export-import policy that would last for five years to set up the foundation for India’s international commerce to become more globally oriented. The strategy eliminated all limitations and constraints on international trade and gave the market more power over exports and imports.
6. The government has significantly changed the customs tariff to push the Indian economy into the arena of international competition. As a result, the budget for 2007–2008 reduced the peak rate of customs duty from 250 percent to 10 percent.

Causes of Globalisation

The following are the primary causes of globalisation:

1. Facilitating international travel with better transportation.
2. Making communication and information sharing easy through advances in technology.
3. Reduction of tariff barriers and promoting world trade.
4. Expanding the world’s media.

Advantages of Globalisation

1. Employment Growth: 

The creation of Special Economic Zones (SEZs) has increased the number of new jobs that are available. It is highly beneficial to include the export processing zones (EPZs) center in India in order to employ lakhs of people. India’s affordable labour is an additional element. As a result, large corporations hire workers from other areas, which leads to an increase in employment.

2. Increase in Compensation: 

As a result of globalisation, international corporations now offer more skill and expertise than domestic companies, which has led to an increase in compensation. This opportunity also caused changes to the managerial structure.

3. High Level of Living: 

With globalisation, both the Indian economy and the average person’s standard of living have improved. This shift is visible in a person’s purchasing habits, particularly among those who work for overseas corporations. Thus, a higher standard of life and business development is occurring in many places.

4. Encourages Mutual Understanding across Cultures:

It improves accessibility to travel and encountering diverse cultures as a good aspect of globalisation that can foster cooperation and peace on a global scale.

5. Encourages Economic Growth:

Theoretically, globalisation provides less developed nations with access to capital and technology from abroad that they would not otherwise have. Foreign investment can raise the living standards of those countries’ populations.

Disadvantages of Globalisation

1. Instability in the Market:

The removal of trade restrictions and increased freedom of movement are cited as reasons why national policies and regional cultures are being undermined by proponents of globalisation. Labour markets are impacted when people cross borders in quest of higher-paying jobs or when businesses outsource work and positions to cheaper labour markets.

What is Outsourcing?

One of the significant effects of globalisation is outsourcing. Outsourcing is the practice of contracting out third-party activities that were previously handled by the organisation. For instance, many businesses now contract with other organisations to provide security services. Due to the development of faster methods of communication, especially the development of information technology, it has become more intense in recent times. Modern telecommunication systems allow digitized text, speech, and visual information related to these services to be transmitted in real-time across continents and national boundaries.

2. Causes Environmental Damage:

Transporting products and people across borders releases greenhouse gases and has a negative impact on the environment. Industries like fishing and logging frequently relocate to areas with the best economic opportunities or rules, which has led to overfishing and deforestation in some regions of the world.

3. Encourages Worldwide Economic Recessions:

A greater likelihood of global recessions exists in tightly integrated global markets. A good illustration of how interconnected global markets are and how financial issues in one country or region can quickly influence other parts of the world is the 2007–2009 financial crisis and the Great Recession. The ability of individual countries to effectively use monetary and fiscal policy to govern the national economy is diminished by globalisation.

Types of Globalisation

Globalisation can be classified into three types:

1. Economic Globalisation :

The emphasis here is on the integration of international financial markets and the coordination of financial trade. Economic globalisation is represented through free trade agreements like the Trans-Pacific Partnership and the North American Free Trade Agreement. Economic globalisation is greatly influenced by multinational firms, which have business in two or more nations.

2. Political Globalisation: 

This type of globalisation includes policies made by the government that encourages and foster international cooperation on a political, economic, and cultural level. The UN and NATO, for example, are involved in the political globalisation process.

3. Cultural Globalisation:

This element of globalisation mainly focuses on the sociological and technological elements that are generating cultural integration. These include improved communication, widespread use of social media, and access to better and faster transportation.