Globalisation of Indian Economy and Its Impact on Environment - Essay Example

The Effects of Globalisation on People and the Environment in India Name: Tutor: Course: Date: Introduction Over the past few decades, the growing integration of societies and economies all over the world, also known as globalisation, has taken the centre stage among other hotly-debated topics in the international economics. Poverty reduction and rapid growth of economies in the rapidly industrializing countries such as India, China and others that were poor a few years ago are some of the positive aspects of globalisation. Specifically, the process of globalisation has allowed greater interaction among countries, persons and businesses around the world, leading to increased development of national economies characterised by increased political, social, cultural and technological integration of individuals, societies and economies all over the world, (Boudreaux 2008). Among other benefits, globalisation led to liberalisation of economic policies leading to reduction in the levels of poverty due to the associated wider market for local goods and services. But as Goyal, (2006) points out, Liberalization Privatisation and Globalisation (LPG) has also led to significant negative effects such as increased inequality and environmental degradation. Precisely, the costs of globalisation are usually experienced more among the rapidly developing nations than in developed nations. In addition, developing countries gain the least share of the benefits of globalisation. Globalisation has significant effects on the environment, which are largely negative (Goyal, (2006). In this regard, this paper discusses the effects of globalisation on people and environment, giving special specific reference to India. But before this, it will be prudent to briefly examine the meaning of the term ‘globalisation’ and the recent reforms in India sparked by globalisation. Definition of globalisation The term ‘globalisation’ has many different meanings depending on the context of focus. Though there is no clear-cut definition of globalisation, it will be appropriate to adopt the definition advanced by Guy Brainbant for the purpose of this discussion. According to Guy Brainbant (as cited in Goyal, 2006), “globalisation includes opening up of world trade, development of advanced means of communication, internationalisation of financial markets, growing importance of multinational companies, population migrations and more generally, increased mobility of persons, goods, data, ideas, infections, diseases and pollution.” Thus, in essence, globalisation connotes the increased possibility for accomplishments between and among people irrespective of geographical constraints. As a result, the world is more interdependent now than ever. As Malhan and Rao (2007) points out, globalisation has enabled multinational and international companies to produce goods across many nations and sell them to consumers across the globe. Technology, raw materials and money have broken international barriers. According to Malhan, & Rao, this is brought about by the linearization of international trade, hence paving way for corporations to pursue larger markets. It implies that all actors around the world are able to participate in global relations under common rules. Several agreements including the World Trade Organization (WTO) agreements provide rules for trade, labour relations, environmental care, sanitary and food safety compliance among others. When a government signs them, it is ruled by the agreements. In many cases, it becomes inevitable for countries to revise already laid national policies so as to conform to the requirements of globalisation (Malhan & Rao, 2007). Globalisation has seen the Indian economy experience dramatic policy changes in the last two decades. India initiated reforms with regard the trade, social and industrial policies and these have enhanced the integration of the Indian economy with the global economy. According to Gupta, Basu and Chattarji (2010), India has recently adopted a new economic model called Liberalization, Privatization and Globalisation in India (LPG). One of these changes was the devaluation of Indian currency by 18% to 19% in order to solve the balance of payment problem that led to a major crisis in economic performance in 1991. Further, to achieve the objectives of the LPG model, many of the public sectors in India were sold to the private sector. In addition, foreign direct investment was allowed in a wide range of sectors in the country. According to Gupta et al (2010), the key objective of adopting this model has been to make Indian economy one of the fastest growing economies in the world. This has had enormous consequences to people and to the environment in India. Impacts of globalisation on people Globalisation has far reaching effects on people, both positive and negative. To start with, globalisation leads to a model of allocation of resources that is inconsistent with comparative advantage (Rangarajan, 2006). As a result, it leads to specialisation which enhances productivity. In India, it is generally held that international trade is beneficial and that restricting trade impedes overall growth. As such, India which is currently ranked as a rapidly industrialising nation and which initially applied the growth model of import substitution but has recently adopted a policy of outward orientation. Consequently, Indian companies which have performed well, both locally and in foreign nations, have been able to attract a lot of foreign investment, hence pushing up the foreign exchange reserve available in countries such as Saudi Arabia (Rangarajan, 2006). Further, globalisation has led to increased capital flow across countries. According to Rangarajan, this has played a significant role in enhancing production base. Rangarajan notes that “capital mobility enables the total savings of the world to be distributed among countries which have the highest investment potential.” This implies that the growth of one country is not constrained by its own domestic savings. According to Rangarajan, the inflow of foreign capital has played an important role in the development of the Indian economy recently. A lot of foreign companies have been invested in India through establishment of branches. According to Rangarajan (2006), this has increased productivity at the national level and led to a significant growth of Indian economy. The result of this has been a reduction in poverty levels due to the increased income per capita in India. Globalisation also enhances the spread of culture. According to Hauss (2008), globalisation enables different cultures in the world to come together. People realise the flaws existing in their culture by observing the cultures of other people, they pick up the ‘more correct practices’ and tune with times. In India, globalisation has seen an increase in number of people accessing television from 10% in 1991 to 78% in 2005 (Hauss, 2008). Further, cable television and foreign movies have become available for the first time, aiding in breaking the barriers to cultural boundaries. As Hauss (2008) points out, this has greatly changed the perceptions of the ordinary people in India. Another powerful impact of globalisation is the spread of education. In the contemporary world, one can move in search of the best educational facility in the world without many difficulties. A person living in India can move to another continent in search some courses in education which are not available in the home country or in search of new experience (Hauss, 2008). According to Kelly et al (2006), globalisation leads to increased rates of either employment or unemployment. The same authors note that globalisation has enabled multinational companies to invest in the developing countries and hence generate employment opportunities for them. However, this may negatively impact on the development of local companies in developing nations, which often lack capital, leading to increased levels of unemployment. Though India has witnessed high rates of economic growth in the 1990s, it has attained a negative growth in the rate of employment. According to Kelly et al (2006), this has been so due to outsourcing and downsizing by firms, including industries in the public sector, so as to be competitive in the new globalised environment. Any improvement in job expansion has been attributed to the IT-related and service sectors, thus benefiting individuals with the knowledge and skills required in these sectors. Data collected by the National Sample Survey Organization (NSSO) in India in 1993 indicated that the rate of unemployment was at 3.6% while 2000 data showed that unemployment rate had risen to 4.4% (Malhan & Rao, 2007). Globalisation has led to advancement in communication technology across the globe. This has greatly increased communication among people from different parts of the world on a more permanent basis and at much low costs (Malhan & Rao, 2007). In India for instance, improvement in Information Communication Technology has led to increased communication through internet services, leading to stronger personal and corporate relations. This has enabled individuals and corporations to advertise products and services, to acquire knowledge and obtain entertainment among other benefits. Further, as a result of development of new technology in India, financial transactions are carried out more quickly with much less charges. Importantly, newer technology in research, IT and production has led to a reduction in the costs of production and has increased levels of sales. Globalisation has also seen an increase in the level of skills possessed by the labour force (Malhan & Rao, 2007). Apart from the above positive impacts, globalisation has some costs. According to Nayar (2006), globalisation leads to unequal distribution of income within and among nations. Globalisation emphasises efficiency and hence, benefits usually accrue to countries which are favourably endowed with human and natural resources. The developed countries have a head start over the developing countries by far. They have a technological base which is both wide and sophisticated. Thus, while international trade is meant to benefit all countries, greater benefits accrue to the developed and advanced nations. As a result, developing nations become poorer. Further, globalisation can also lead to widening of income gaps within countries. As Nayar (2006) explains, globalisation usually benefits people who have knowledge and skills to cope with the advanced technology. This means that the higher growth rate of a country’s economy may be at the expense of incomes of the people who lack the relevant knowledge and skills. Another cost of globalisation is that it leads to loss of a country’s sovereignty. Precisely, as Malhan and Rao (2007) point out, globalisation leads to loss of autonomy in the pursuit of economic policies of a nation. A country cannot pursue policies which are in contrast with worldwide trends due to the high integrated world economy. Usually, capital and technology move to where there are greater benefits. As countries come together, whether in the social, political or economic arena, they inevitably sacrifice some sovereignty. According to Malhan and Rao (2007) globalisation has also led to displacement of farmers in India. There have been policy initiatives that promote takeover of natural resources, take over of farm land and moving farmers out of agricultural land. In addition, globalisation has greatly affected many of the illiterate poor farmers especially in rural areas with small land holdings. According to Malhan and Rao, many of them lack information and facilities that can assist them to improve their productivity, their income and living conditions as well as their participation in economic development. Malhan and Rao notes that in spite of improvements in agricultural production that are associated with globalisation, poverty alleviation programmes have not been able to make a substantial headway in India. For instance, floods, hailstorms and drought conditions in some places in India cause loss of crops. As well, as a result of globalisation, there has been a significant drop in the prices of agricultural products. Impact of globalisation on environment Globalisation has profound effects on environment, which are largely negative. According to Birundha (2008), globalism has seen an increase in the rate of transportation of materials over long distances in the atmosphere as well as establishment of new industries, leading to emissions of chemical substances that affect the environment and human health. Further, the increased global inequality has paved way for increased environmental externalities such as protection of the ozone layer, climate change, desertification and bio-diversity. As noted earlier, public production of goods in India was de-licensed to allow foreign firms and the private sector to produce them in India. The CPCB Annual Report released in 2003 classified the majority of industries in these sectors as the most polluting industries. This included industries such as chemical industries, mining, power production industries and others, all of which produce dirty emissions. According to Reddys (2006) between 1991 and 2000, the share of local industries releasing harmful emissions amounted to 51% in India, of these, 4.5 percent was in chemicals, 27.4 percent energy, 5.5 percent Metallurgy, 7.5 percent transport and 3.5 percent in food processing. Though the National Environmental Programme (NEP) in India suggests that foreign firms should obtain licenses, it does not prevent them from establishing industries that produce hazardous emissions in India. For instance, Unilever, which is a US-Dutch company, established a branch in India called Hindustan Lever Limited which specialises in producing mercury for thermometer factories. The company produced these products mainly for export. Consequently, the level of mercury poisoning in the surrounding environs of Kodaikanal, where the industry was located rose to approximately 250 times of the permitted limits in the region and this adversely affected the environment (Reddys, 2006). Equally alarming is the recent trend of Coca-Cola Company through pollution of land and ground water in India. A Coca-Cola plant located in Mehdiganj has been indiscriminately discharging its waste in the surrounding fields, poisoning land, water and soils as well as rendering the underground water unfit for consumption (Birundha, 2008). In addition, this plant has two tubes that draw thousands of litres of underground water, lowering the water level from 15 feet to approximately 40 feet below the surface. In Kerala area, Coca-Cola was distributing its solid wastes as fertilizer to farmers. When the waste was tested, it was found to contain extremely high concentrations of heavy metals such cadmium and lead (Birundha, 2008). The aforementioned changes in the environment amidst globalisation have had a great adverse impact on the atmosphere, leading to increases in temperatures. A recent study by Dinda (2009) demonstrated how temperature changes have already hit the global economy with a 30% drop in agricultural production India between 1981 and 2000. Reddys (2009) notes that as a result, production of maize, wheat, and barley in India has hit the maximum due to temperature rise and this is threatening to kill India’s agrarian economy Conclusion In conclusion, globalisation has had a huge impact on people and the environment. As demonstrated with the Indian economy, globalisation leads to increased productivity of and growth of economies and this aid in reduction of poverty among citizens. Further, globalisation leads to the spread of different cultures across the globe, with people adopting new cultures that suit them. Globalisation also enhances the spread of education, which gives an opportunity for people to move in search of knowledge and new experiences in foreign countries. As noted in this discussion, globalisation may lead to an increase in employment or unemployment of people in a country. Advancement in technology leads to increased communication and reduction in the cost of communication among other benefits. One negative impact of globalisation on people is that it leads to unequal distribution of income within and among nations. Further, it leads to loss of a country’s sovereignty. In India, the impact of globalisation has negatively affected farmers and hence, the level of agricultural production has dropped significantly. The impact of globalisation on the environment is huge and largely negative. The increased rate of transportation of materials over long distances in the atmosphere as well as the establishment of new industries has led to emissions of chemical substances that have an impact on the environment and human health. The emissions have led to a rise in temperatures and this has indirectly affected agricultural performance as demonstrated by Indian agricultural sector. References Birundha, V. D. (2009). “Globalisation of Indian Economy and its Impact on Environment.” Retrieved 19 October 2011, from http://akson.sgh.waw.pl/~trusek/gee/papers/paperBirundha.pdf Boudreaux D. J. (2008). Globalisation: Yesterday and Today. New York: Greenwood Dinda, S. (2009). “Globalisation and Environment: Can Pollution Haven Hypothesis alone explain the impact of Globalisation on Environment?” Retrieved 18 October 2011, from http://www.isid.ac.in/~planning/Soumyananda.pdf Goyal, K. A. (2002). “Impact of Globalisation on Developing Countries (With Special Reference to India).” International Research Journal of Finance and Economics, 5: 165-171. Gupta, Basu & Chattarji (2010). Globalisation in India: Contents and Discontents. New Delhi: Pearson Education India. Hauss, C. (2008). Comparative Politics: Domestic Responses to Global Challenge. Belmont: Cengage Learning. Kelly, D. A. Rajan, R. S. & Gillian H., Goh, G. H. L. (2006). Managing globalisation: Lessons from China and India: Inaugural conference of the Lee Kuan Yew School of Public Policy. London: World Scientific. Malhan, I. V., & Rao, S. (2007). “The impact of globalisation and emerging information communication technologies on agricultural knowledge transfer to small farmers in India” Retrieved 19 October 2011, from http://archive.ifla.org/IV/ifla73/papers/120-Malhan_Rao-en.pdf Nayar, B. R, (2006). India’s globalisation: Evaluating economic consequences. Washington: East-Western Centre. Rangarajan, C. (2006). Responding to globalisation: India’s answer. New Delhi: Economic Advisory Council of India. Reddy, M. S. (2006). Globalisation and Manpower Planning. New Delhi: Discovery Publishing House Read More