Globalization of Indian economy
Indian society is changing drastically after urbanisation and globalisation. The economic policies have had a direct influence in forming the basic framework of the economy.
Economic policies established and administered by the government also performed an essential role in planning levels of savings, employment, income, and investments in the society. Cross country culture is one of the critical impacts of globalization on Indian society. It has significantly changed several aspects of the country, including cultural, social, political, and economical.
However, economic unification is the main factor that contributes maximum to a country’s economy into an international economy.
Advantages of Globalization in India
- More Employment Opportunities: The introduction of globalisation brought an influx of foreign investments and the favourable policies of the Indian government also helped companies to set up units in this country. This has resulted in new employment opportunities. Also, access to low-cost labour prompted foreign businesses to outsource work to companies operating here.
- In a nutshell, the employment opportunities in this country rapidly progressed after globalization.
- Increase in employment: With the opportunity of special economic zones (SEZ), there is an increase in the number of new jobs available. Including the export processing zones (EPZ) center in India is very useful in employing thousands of people.
- Another additional factor in India is cheap labour. This feature motivates the big companies in the west to outsource employees from other regions and cause more employment.
- Increase in compensation: After globalization, the level of compensation has increased as compared to the domestic companies due to the skill and knowledge a foreign company offers. This opportunity also emerged as an alteration of the management structure.
- High standard of living: With the outbreak of globalization, the Indian economy and the standard of living of an individual has increased. This change is notified with the purchasing behavior of a person, especially with those who are associated with foreign companies. Hence, many cities are undergoing a better standard of living along with business development.
- Increase in per-capita Income: As a direct effect of more employment opportunities, the per-capita income of Indian households also increased after globalization.
- Resultantly, it altered their standard of living and improved the purchasing power of an average Indian. This gave birth to a new middle-class and recorded an increase in demand for consumer products in this country.
- More Choices for Consumers: Globalization and the Indian economy provided Indian consumers with a plethora of choices. Indian, as well as foreign manufacturers, brought various products of the same kind, and consumers got a chance to select their preferred one.
- This increase in competition prompted manufacturers to create better products at a much lower price point.
- Access to Untapped Markets: A noticeable benefit of globalisation is that it provides access to many untapped markets with huge potential. The globalisation of Indian economy means it allowed foreign companies to operate in the Indian market. Also, Indian businesses got an opportunity to operate on a global scale. As a result, the import-export sector in Indian saw an astonishing rise after 1991.
Impact of Globalization
Positive impacts:
- During this discussion of globalisation and Indian economy, a name that deserves special mention is former Finance Minister of India Dr. Manmohan Singh. He was at the forefront of this movement and ensured a successful implementation of it. He also drafted the economic liberalisation proposal. Here are some quick statistics that will reflect the immediate effect of globalisation on the Indian economy –
- After 1992, the average annual growth rate of GDP was 6.1%.
- In 1993-94, the export of India recorded an exponential growth of 20%. Also, in the following financial year, it was at a healthy 18.4%.
- In 1995, the total export value of computer services was about ＄11 billion, and in 2015 it recorded around ＄110 billion.
- These statistics prove globalisation and the Indian economy brought positive changes and fast-tracked India’s economic growth.
- Outsourcing: This is one of the principal results of the globalization method. In outsourcing, a company recruits regular service from the outside sources, often from other nations, that was earlier implemented internally or from within the nation (like computer service, legal advice, security, each presented by individual departments of the corporation, and advertisement).
- As a kind of economic venture, outsourcing has increased, in recent times, because of the increase in quick methods of communication, especially the growth of information technology (IT).
- Many of the services such as voice-based business processes (commonly known as BPS, BPO, or call centres), accountancy, record keeping, music recording, banking services, book transcription, film editing, clinical advice, or teachers are being outsourced by the companies from the advanced countries to India.
- Indian companies gained from successful collaborations with foreign companies. Ex: Tata Motors, Infosys.
- With big Indian MNCs contributing to world trade, India can raise its voice for fairer trade rules at WTO.
- Consumers have an option to choose from a wide range of products- they can have cheapest, best thing.
- We can export what we produce in excess. So, less wastage and we can import what we produce in deficient. In agricultural sphere, Globalization promotes contract farming which increases the earning capacities of farmers.
Negative impacts:
- Trade deficit (as in case of India) which hurt most in case of under-developed and developing economies and widen the gap between the developed & not so developed economies.
- Outsourcing of jobs from developed countries to developing countries. It has led to loss of jobs in developed countries and subsequent protectionist measures as recently in USA and Saudi Arabia.
- As the economies are interlinked any financial crisis in one country, especially developed countries will result in slow down in developing economies. Eg-crisis in COVID 19 times
- Agriculture sector not improved as much as services and manufacturing sector
- Neo-colonialism in smaller developing countries .
- MNC’s ruling the globe and exercising a great political control all over the world & wider economic inequalities.
- Not sustainable growth, development on growing negligence of environment, forests, wildlife etc.
- Destruction of traditional service providers. For example, old restaurants, parathas and lassi are replaced by Mc. Donald’s, Chinese restaurants, etc.
- Advent of a consumer credit society. A person can now buy goods and services even if he does not have sufficient purchasing power at his disposal.
Recent Posts
Petrol in India is cheaper than in countries like Hong Kong, Germany and the UK but costlier than in China, Brazil, Japan, the US, Russia, Pakistan and Sri Lanka, a Bank of Baroda Economics Research report showed.
Rising fuel prices in India have led to considerable debate on which government, state or central, should be lowering their taxes to keep prices under control.
The rise in fuel prices is mainly due to the global price of crude oil (raw material for making petrol and diesel) going up. Further, a stronger dollar has added to the cost of crude oil.
Amongst comparable countries (per capita wise), prices in India are higher than those in Vietnam, Kenya, Ukraine, Bangladesh, Nepal, Pakistan, Sri Lanka, and Venezuela. Countries that are major oil producers have much lower prices.
In the report, the Philippines has a comparable petrol price but has a per capita income higher than India by over 50 per cent.
Countries which have a lower per capita income like Kenya, Bangladesh, Nepal, Pakistan, and Venezuela have much lower prices of petrol and hence are impacted less than India.
“Therefore there is still a strong case for the government to consider lowering the taxes on fuel to protect the interest of the people,” the report argued.
India is the world’s third-biggest oil consuming and importing nation. It imports 85 per cent of its oil needs and so prices retail fuel at import parity rates.
With the global surge in energy prices, the cost of producing petrol, diesel and other petroleum products also went up for oil companies in India.
They raised petrol and diesel prices by Rs 10 a litre in just over a fortnight beginning March 22 but hit a pause button soon after as the move faced criticism and the opposition parties asked the government to cut taxes instead.
India imports most of its oil from a group of countries called the ‘OPEC +’ (i.e, Iran, Iraq, Saudi Arabia, Venezuela, Kuwait, United Arab Emirates, Russia, etc), which produces 40% of the world’s crude oil.
As they have the power to dictate fuel supply and prices, their decision of limiting the global supply reduces supply in India, thus raising prices
The government charges about 167% tax (excise) on petrol and 129% on diesel as compared to US (20%), UK (62%), Italy and Germany (65%).
The abominable excise duty is 2/3rd of the cost, and the base price, dealer commission and freight form the rest.
Here is an approximate break-up (in Rs):
a)Base Price | 39 |
b)Freight | 0.34 |
c) Price Charged to Dealers = (a+b) | 39.34 |
d) Excise Duty | 40.17 |
e) Dealer Commission | 4.68 |
f) VAT | 25.35 |
g) Retail Selling Price | 109.54 |
Looked closely, much of the cost of petrol and diesel is due to higher tax rate by govt, specifically excise duty.
So the question is why government is not reducing the prices ?
India, being a developing country, it does require gigantic amount of funding for its infrastructure projects as well as welfare schemes.
However, we as a society is yet to be tax-compliant. Many people evade the direct tax and that’s the reason why govt’s hands are tied. Govt. needs the money to fund various programs and at the same time it is not generating enough revenue from direct taxes.
That’s the reason why, govt is bumping up its revenue through higher indirect taxes such as GST or excise duty as in the case of petrol and diesel.
Direct taxes are progressive as it taxes according to an individuals’ income however indirect tax such as excise duty or GST are regressive in the sense that the poorest of the poor and richest of the rich have to pay the same amount.
Does not matter, if you are an auto-driver or owner of a Mercedes, end of the day both pay the same price for petrol/diesel-that’s why it is regressive in nature.
But unlike direct tax where tax evasion is rampant, indirect tax can not be evaded due to their very nature and as long as huge no of Indians keep evading direct taxes, indirect tax such as excise duty will be difficult for the govt to reduce, because it may reduce the revenue and hamper may programs of the govt.
Globally, around 80% of wastewater flows back into the ecosystem without being treated or reused, according to the United Nations.
This can pose a significant environmental and health threat.
In the absence of cost-effective, sustainable, disruptive water management solutions, about 70% of sewage is discharged untreated into India’s water bodies.
A staggering 21% of diseases are caused by contaminated water in India, according to the World Bank, and one in five children die before their fifth birthday because of poor sanitation and hygiene conditions, according to Startup India.
As we confront these public health challenges emerging out of environmental concerns, expanding the scope of public health/environmental engineering science becomes pivotal.
For India to achieve its sustainable development goals of clean water and sanitation and to address the growing demands for water consumption and preservation of both surface water bodies and groundwater resources, it is essential to find and implement innovative ways of treating wastewater.
It is in this context why the specialised cadre of public health engineers, also known as sanitation engineers or environmental engineers, is best suited to provide the growing urban and rural water supply and to manage solid waste and wastewater.
Traditionally, engineering and public health have been understood as different fields.
Currently in India, civil engineering incorporates a course or two on environmental engineering for students to learn about wastewater management as a part of their pre-service and in-service training.
Most often, civil engineers do not have adequate skills to address public health problems. And public health professionals do not have adequate engineering skills.
India aims to supply 55 litres of water per person per day by 2024 under its Jal Jeevan Mission to install functional household tap connections.
The goal of reaching every rural household with functional tap water can be achieved in a sustainable and resilient manner only if the cadre of public health engineers is expanded and strengthened.
In India, public health engineering is executed by the Public Works Department or by health officials.
This differs from international trends. To manage a wastewater treatment plant in Europe, for example, a candidate must specialise in wastewater engineering.
Furthermore, public health engineering should be developed as an interdisciplinary field. Engineers can significantly contribute to public health in defining what is possible, identifying limitations, and shaping workable solutions with a problem-solving approach.
Similarly, public health professionals can contribute to engineering through well-researched understanding of health issues, measured risks and how course correction can be initiated.
Once both meet, a public health engineer can identify a health risk, work on developing concrete solutions such as new health and safety practices or specialised equipment, in order to correct the safety concern..
There is no doubt that the majority of diseases are water-related, transmitted through consumption of contaminated water, vectors breeding in stagnated water, or lack of adequate quantity of good quality water for proper personal hygiene.
Diseases cannot be contained unless we provide good quality and adequate quantity of water. Most of the world’s diseases can be prevented by considering this.
Training our young minds towards creating sustainable water management systems would be the first step.
Currently, institutions like the Indian Institute of Technology, Madras (IIT-M) are considering initiating public health engineering as a separate discipline.
To leverage this opportunity even further, India needs to scale up in the same direction.