Relevance: GS-3: Effects of Globalisation on the economy, changes in industrial policy and their effects on industrial growth.

Key Phrases: International trade, Globalisation, Regional economies, Standard of living, Infrastructure, Economic Growth, Authoritarianism, Transport and communication, MNCs, Global protectionist pressures, Trading partner.

Why in News?

• As countries chalk out paths of post- pandemic recovery, the complex task of opening up cross-border markets for the movement of people, goods, services and capital flows, and getting back to pre-pandemic levels of international trade, will play an important role in a broad economic revival to complement and reinforce domestic recoveries.

What is Globalisation ?

• Globalization is a process by which regional economies, societies, and cultures have become integrated through a global network of communication, transportation, and trade.
• Globalization envisages a borderless world or seeks the world as a global village. It may be attributed to the accelerated flow of goods, people, capital, information, and energy across borders, often enabled by technological developments.

Advantages of Globalisation:

• Increase in employment:
  • 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.
  • 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.
• High standard of living:
  • As a direct effect of more employment opportunities, the per-capita income of Indian households also increased after globalisation. This change is notified with the purchasing behaviour 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.
• Development of Infrastructure:
  • Due to the technological advancement and its transfer throughout the globe helps to improve country’s infrastructure.
  • Countries are more enabling to deliver their services to the people. Development of infrastructure means overall development of respective countries.
• Economic Growth:
  • Globalization entails to optimum utilization of resources wherein deficit resources are procured and surplus resources are exported to other countries.

Anti-Globalization trends:

• Rise of Authoritarianism:
  • The world has recently seen the rise of authoritarian rulers in many countries. For ex. China has abandoned the ‘one country two systems’ policy, stripping Hong Kong of its freedom and inviting international opprobrium.
• Transport and communication:
  • Huge impact of transport and communication (in particular, advent of wide-bodied jets and container ships, and the cost-less global flow of information due to Internet and IT revolution) has reduced information asymmetry.
  • The scope for global consensus, after many rounds of multilateral talks under the auspices of GATT/WTO, is getting narrower.
• MNCs vs Local companies:
  • Multinational companies spreading their operations by building an intricate web of global supply chains spread over distant parts of the globe are finding it harder to compete with quick-learning local competitors often enjoying state patronage in various forms.
• Growing dissatisfaction against globalisation:
  • The risks of financial globalisation have come to the surface in the form of periodic bouts of financial crises in many countries.
  • Even if analysts may hold technological changes, rather than trade, to be the major culprit here - that globalisation was causing loss of jobs, especially low-skill jobs.
  • Contributing to sharply increasing inequality of income distribution in many countries( Oxfam report).
  • The popular dissatisfaction with globalisation was further fuelled by the growth of international tax havens enabling the super-rich to evade taxes.
  • Populist political leaders (like Trump in the US and pro-Brexit leaders in the UK) increasingly played on the theme of globalisation (including foreign workers) causing misery of the national working class and won elections.
  • Global warming at an alarming pace is further discouraging long-distance transportation of goods by burning fossil fuels.
• Geopolitical issues:
  • The fear in the western world of the rising economic power of China (first taking away manufacturing jobs and then increasingly treading into high-tech strategic areas).
  • Russia (specially as a competing exporter of sophisticated military hardware and a major supplier of natural gas to Western Europe) further strengthened the forces of anti-globalisation in the developed world.

India’s role as a new champion of globalization:

India can potentially play a critical role as a new champion of globalization for following reasons:

• Increased weight of Asia in global economic growth, globalization needs a new Asian champion.
• China, which positioned itself as a major pivot of global trade supply chains over the past 30 years, may find it difficult to sustain that role.
• Worldwide, concerns over China’s supply chain dominance in the context of territorial conflict risks in Asia, as well as growing worries of debt sustainability in some countries on account of Beijing’s Belt and Road Initiative, may push other Asian economies to decouple their economic interests from China’s.
• Faced with global protectionist pressures worsened by covid, inflation, supply chain disruptions and changing geo-political equations, India has sought to navigate these shoals by striking bilateral trade agreements with developed countries and blocs without preferences.
• The recent courting of India by the US, UK and EU countries in the shadow of the Ukrainian conflict and India’s neutral stance makes these hitherto distant trade prospects seem more tangible.
• Prospective trade-deal partners could view India as a neutral trading partner (for both imports and exports), with such ties with New Delhi considered in some cases to be a part of their broader agenda to play a bigger role in the Indo-Pacific region.
• Production Linked Incentive (PLI) schemes are making the Indian industry competitive by bringing in economies of scale and thus helping create global champions.
• One of the biggest beneficiaries of hard work during the pandemic was the services sector which grew by leaps and bounds, with USD 250 billion export of services . This was achieved despite travel, tourism and hospitality being severely affected due to Covid-19
• One of the reasons it was made possible was the adaptability and speed with which India reconfigured its processes and rules, facilitated working from home, ensured that people could move equipment and secured broadband access to all.

Way forward:

• In the Corona era, where the entire world was in a survival situation, India made vaccine Maitri for the whole world by making its country self-sufficient. India has contributed significantly to the protection of humanity through its cultural, scientific, and diplomacy at difficult times. Although there are some challenges before India, India is moving beyond these challenges to a global leader.

Source: Live-Mint

Mains Question:

Q. “After reinvention of globalization, India can potentially play a critical role as a new champion of globalization”. Discuss the statement.