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Impact of Globalization in Indian Business and Culture
Dr. A. Seilan, Assistant Professor of Economics, Scott Christian College
(Autonomous), Nagercoil, India
Published in Conference proceedings “Business Horizon” in the year 2010,
Virudhunagar Hindu Nadars’ Sentikumara Nadar College, Virudhunagar, India ,
Page Nos. 353-356 ISBN No. 978-81-910426-3-4
Introduction
Globalisation is the process of international integration of products,
technologies, human resources, capital, information and cultures. It is characterised by
increasing social and economic openness and growing interdependence between the
countries of the world. As globalisation progresses, economic, social and political
systems of different countries more freely interact with one another and adapt to promote
further interaction.
Globalization of business is a business philosophy of viewing one’s business in a
global perspective in terms of a global outlook, using globally viable technology, offering
the products or services which can better satisfy the customer needs in a global
environment, maintaining a quality in adherence to global standards an identity of global
corporate citizenship, and ultimately fostering a global organizational and business
culture.
The International Monetary Fund defines globalization as “the growing economic
interdependence of countries worldwide through increasing volume and variety of cross-
border transactions in goods and services, free international capital flows, and more rapid
and widespread diffusion of technology”.
Globalisation involves:
• The opening up of trade that allows goods and services to travel across the world
more freely.
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• An increase in foreign investment –companies investing overseas by building
plants, contracting subsidiaries or buying stock in foreign countries.
• The opening up of capital markets which increases the flow of money across the
world.
• Improved access to communication-from the development of new technology like
the internet to cheaper plane tickets.
Globalization is caused by four fundamental forms of capital movement
throughout the global economy. The four important capital flows are:
• Human Capital (i.e. Immigration, Migration, Emigration, Deportation, etc.)
• Financial Capital (i.e. Aid, Equity, Debt, Credit & Lending, etc.)
• Resource Capital (i.e. Energy, Metals, Minerals, Lumber, etc.)
• Power Capital (i.e. Security Forces, Alliances, Armed Forces, etc.)
Factors Motivating Globalisation
There are several answers to the question “why firms want to be global’. The
factors, which motivate or provoke firms to go international, may be divided into two
groups; the pull factors and push factors. The pull factors are those forces of attraction of
foreign market due to which companies are motivated to internationalise such
attractiveness includes, broadly, the relative profitability and growth opportunities. Push
factors refer to the compulsion of the domestic market which prompt companies to
internationalise. These include mainly domestic market constraints, competition,
Government policies and regulations, strategic vision etc.
Globalisation and Indian Economy
India opened up the economy in the early nineties following a major crisis that led
by a foreign exchange crunch that dragged the economy close to defaulting on loans. The
response was a slew of domestic and external sector policy measures partly prompted by
the immediate needs and partly by the demand of the multilateral organisations. The new
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policy regime radically pushed forward in favour of amore open and market oriented
economy.
Major measures initiated as a part of the liberalisation and globalisation strategy
in the early nineties included 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, start of the privatisation programme, reduction in tariff
rates and change over to market determined exchange rates.
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. The Indian tariff rates reduced sharply.
As far as the Indian economy is concerned the impact of globalisation has been highly
positive in al most all spheres of economic and social life and virtually no negative effect.
It is only because of opening of the hitherto closed, govt.-oppressed and controlled
economy to the process of globalisation that has helped Indian economy to grow rapidly.
In the last 10-12 years, India has become progressively vibrant and internationally
competititive. Indian companies are setting up companies abroad, India has better
technological development for the benefit of the common man ( mobiles phones, road
transport, cheap clothes, etc., ) - only because of globalization.
Industrial growth has been very high and strong during the past decade because of
globalisation. Indian industries are also expanding abroad. Foreign companies have
substantially increased their investments in Indian industries. Wages of industrial labour
has increased substantially as they have become very productive. Lock out and strikes
have declined to insignificantly low levels because industrial labor is happy. . Talented
and merited labor is commanding premium compensation in the labor market. Several
new type of industries have also come up. Small scale industries of the past, has grown
into medium scale companies. Incidence of industrial sickness has gone done drastically.
Globalisation has transformed the services sector with the most rapid growth in
telecommunications, internet, mobile telephone, ATMs, insurance, capital markets,
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retailing, airlines, and the software and BPO services industry and entertainment industry
creating wealth, income and employment opportunities. If there was no globalisation,
most of these activities would have remained dormant and inefficient under govt.
monopolies or private oligopolies.
India entered into BPO business during the late 1990s and became the leader in
the current decade especially in the information technology (IT) and information
technology enabled services (ITES) industry. India offers a wide range of quality, cost
effective outsourced services in various fields such as finance and accounting, human
resource management and training, customer care, health care, creative services,
engineering services, web analytic services, e-learning services, knowledge process
outsourcing services (KPO), and other additional services. It is now a proven
management strategy helping business service and thrives in the boundary-less global
economy. he Indian BPO industry is growing at a phenomenal pace. BPO export in
2004-05 was 5.2 billion dollars and it was 7.3 billion dollars in 2005-06. The employee
base grows at a compounded annual growth rate of 52.6 percent.
The exports from India have grown tremendously after India slowly started
opening up to globalisation. India’s Export and Import in the year 2001-02 was to the
extent of 32,572 and 38,362 million respectively. Many Indian companies have started
becoming respectable players in the International scene. Agriculture exports account for
about 13 to 18% of total annual of annual export of the country. In 2000-01 Agricultural
products valued at more than US $ 6million were exported from the country 23% of
which was contributed by the marine products alone. Marine products in recent years
have emerged as the single largest contributor to the total agricultural export from the
country accounting for over one fifth of the total agricultural exports. Cereals (mostly
basmati rice and non-basmati rice), oil seeds, tea and coffee are the other prominent
products each of which accounts fro nearly 5 to 10% of the countries total agricultural
exports.
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Table : 1
Alternative measures of India’s Globalisation, 1991 – 2002
Sl. No Indicator 1990 – 91 1995 – 96 2001 - 02
A. Absolute measures ( $ Billions )
1. Foreign trade size 46.4 76.0 104.2
2. Current account size 61.6 105.9 161.3
3. Capital account size 33.0 39.3 90.3
4. Total BOP size 48.2 69.2 147.4
5. Outstanding external debt 83.8 93.7 99.6
B. Relative Measures ( % )
6. Foreign trade orientation 14.6 21.4 22.8
7. Current account size / GNP ratio 22.0 33.5 39.3
8. Capital transactions / investment ratio 39.6 41.4 82.4
9. BOP transaction / GNP ratio
(external orientation) 9.6 6.5 7.8
10. External debt service / GNP ratio 2.8 3.4 2.9
Source : compiled from various RBI Reports
The picture of globalization of the economy is more comprehensive presented by
the total receipts and payments in foreign exchange as seen in its balance of payments.
The magnitude of aggregate bop flows (receipts plus payments) rose from $48.2 in 1990
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– 91 to $147.6 b in 2000 – 01, a jump by about more than three times. These magnitudes
when seen in relation to national income provide, what may be called, the external
orientation of economy. Aggregate BOP flow as percentage of national income (gross
national product at factor cost) which was 9.6 percent in 1990 – 91 fell to 6.5 percent in
rose to 7.8 percent in 2000 – 01. On this criterion, the money has receded back on the
globalisation scale.
Where does Indian stand ?
India clearly lags in globalisation which can be seen through the following
indicators.
• Over the past decade FDI flows into India have averaged around 0.5% of GDP
against 5% for China 5.5% for Brazil. Whereas FDI inflows into China now
exceeds US $ 50 billion annually. It is only US $ 4billion in the case of India
• Consider global trade – India’s share of world merchandise exports increased
from .05% to .07% over the pat 20 years. Over the same period China’s share has
tripled to almost 4%.
• India’s share of global trade is similar to that of the Philippines an economy 6
times smaller according to IMF estimates. India under trades by 70-80% given its
size, proximity to markets and labour cost advantages.
Impact in the Culture of Consumers
Culture refers to the patterns of thought and behaviour of people. It includes
values, beliefs, rules of conduct, and patterns of social, political and economic
organisation. These are passed on from one generation to the next by formal as well as
informal processes. Culture consists of the ways in which we think and act as members of
a society. Thus, all the achievements of group life are collectively called culture.
Globalisation has brought in lot of changes in various dimensions in Indian
culture, especially in the field of consumer behaviour. They are moving rapidly towards
Western culture. The marketers play a major role in bringing in such culture by educating
the consumers with the help of mass media. The impact of this global cultural change has
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transformed the face of the Indian cities. Temping advertisement, fancy shops, new
foreign-brand cars, televised soap operas, luxury goods, foreign fast-food restaurants and
still more visible youth culture with crude foreign imitation proliferated. The consumer’s
adaptability pace is also very high. The following are some of the dimensions which
show the impact of globalisation on consumers.
i. Life Style - Globalisation has brought in drastic change in working pattern.
“Work more, Earn more, Enjoy more” has become the order of the day.
ii. Brand Loyalty - Before globalisation, the number of class brands were less, so
consumers were sticking to a specific suitable brand. This has a big impact on
consumer market, because of entry of multinationals in a big way that increases
the competition of the consumer products. After globalisation, consumers have a
wide range of choice in every product with world class. So there is no question of
brand loyalty today.
iii. Value for Money - The consumers expect value from their products.
iv. Increase of Credit Purchasers - Tempting strategies adopted by marketers have
paved the way to make credit purchases. The strategies include availability of
easy installment schemes, etc.
v. Family Shopping - As a result of entry of huge companies in retail business,
there is a development of huge malls where all products are available under one
roof. The new concept called family shopping has emerged. Now-a-days the
consumers allot time exclusively for shopping. This has become a fashion.
CONCLUSION
India is a developing country having more than 100 crores of people. Hence, the
developed countries, try to sell their products in India. In the short run the people of India
can benefit of getting foreign products at lower rate due to globalisation and the
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overnment can get more revenues. But in the long run the domestic industries and small
scale industries may have to be closed. It will lead to unemployment problems.
Globalisation will gradually make our country to depend on developed countries. Though
some benefits are available from globalisation finally it may affect the developing
countries.
As discussed above, there is drastic change in the consumption pattern, life style
and culture of the consumers in total. If change takes place at this pace the uniqueness of
Indian culture will lose its identity. This scenario is not only in India but throughout the
world. In future the world is going to visualize single globalised culture.
Reference
1. Chandran Sengupta, Conceptualising Globalisation, Economic and Political
Weekly, Vol. XXXIII No.33, August 18, 2000, pp.3137-43.
2. Nelam Jain, Globalisation : Indian Business Scenario, Southern Economist,
Vol.40, May 1, 2001, pp.15-17.
3. H. Raman, Globalisation : Impact on Eco-development Strategy of India,
Southern Economist, Vol.39, May 5, 2001, pp.7-9.
4. Tessy Kurran, Rethinking on Globalisation and Development – A View,
Southern Economist, May 1, 2001, pp.18-20.