Globalization in India and Brazil - Essay Example

Globalization in India and Brazil INTRODUCTION “From the 1980s to the present day, there has been an increasingly rapid globalization of the world economy. Globalization may be defined as the increased integration of national economies into global, rather than national markets, prompted by liberalized capital flows, liberalized trade flows, significant advances in information technology, and marked decreases in the costs of international transport” (Blink, 2007) It can be observed that more and more countries are in the path to globalization and it has changed the way in which businesses carry on their operations. the experiences of two countries, Viz., India and Brazil are discussed in this essay. Globalization in India After independence from the British India followed the mixed economy pattern. The economy of India has the features of both socialistic and capitalistic economy. The economy was stratified into sectors entirely reserved fro the government and sectors reserved for the private. The government had a strict control over the business community through the licensing and reservations. The economy of India in 1980s was mostly dependent on the foreign borrowings. “In June 1991 India's condition on foreign exchange reserves was poor and precarious. India made a proposal for a loan of US$ 2.26 billion from the IMF. In view of the destitution that the country was in, it had no alternative than to succumb to the World Bank-IMF prescription in embarking on the so-called stabilization and structural adjustment programmes as a precondition to loan. The World Bank was ready with its proposed 'Strategy for Trade Reform'. As a result, thus, India introduced the New Economic Policy (NEP) in 1991” (Mishra, 2006). India started its trade liberalization and globalization hand in hand out of compulsion to survive. As a result, the major reforms that were introduced were: 1. Relaxation of export and import rules and regulations 2. Changes in the Foreign exchange regulations 3. Private sector allowed in industries dominated by the government 4. Removal of the license system to export and import 5. Invitation to foreign investors The above mentioned measures were some of the prominent introduced by the government. But these measures were heavily criticized by the conservative leftist parties. It was predicted that India would be flooded by foreign made goods and the local industry would be crushed. Among emerging market economies, India is considered as a location of consequence for foreign firms because of prospective opportunities that arise for reasons such as the market size referred to and human resources. The high talent and relative low cost of Indian managers can make the transfer of capabilities easier to Indian subsidiaries, reducing the need for expatriate staff and increasing the feasibility of using Indian subsidiaries as an export platform (Cable, 1995). Though globalization in India had its bumps, the economy is now reaping the benefits of globalization. The economy has become stronger and Indian companies have started to set up operations bases out of India( Chibber, 1999). Though globalization was able to give the much needed boost to the docile economy, the benefits of the process is mostly enjoyed byt the urban mass and there is very little benefits enjoyed by the rural India. Globalization in Brazil Brazil is a growing economy in its path of development through its effective globalization initiatives. According to Richard L. Harris, in order for globalization to occur, a country must partake in a global process of cross-borders flows of products, services, capital, people and information(Harris, 2005). The three most prominent areas of change in the Brazilian economy are the agricultural changes, military weapons development and overseas construction. (Sanchez, 2005). Before globalization Brazil was concentrating on its only cash crop, Sugar. But due to the availability of modern technology, the land area available for agriculture has increased and Brazil has become one of the agricultural superpower with regard to oranges and alcohol exports. Another area that has been affected through globalization is the military weapon development. Though Brazil was one of the major exporter of military weapons after the globalization, Brazil’s export of military weapons has declined. The weapons exported by brazil are mostly used by the middle east countries and its south American neighbors. The weapons exported by Brazil is mostly conventional type not the sophisticated models. Also Brazil has seen a considerable development in overseas constructions because of globalization. Brazil has construction companies which have developed projects in Latin American countries, Europe and Africa. Also there are Brazilian supermarket chain stores in African countries, which are all examples of the effective ways in which the Brazilian economy has contributed int the flow of goods and capital across the world. “After the crisis of 1999, Brazil had a sudden spurt of exports. Brazilian business saw that exports were really not only a way to survive, but to thrive. For the first time in quite a long time, Brazilian political leadership got the notion that Brazil’s ability to compete internationally may be the defining element of the strategy of economic development.”(Sachs, 2003). The effects of globalization in the recent years are felt in the changes made in the financial markets. Brazil forms an ideal market for purchase of cheap assets. The opening up of the financial markets has helped in the flow of foreign direct investment and foreign loans. “The efforts of the government have concentrated on consolidating the country’s position as a provider of cheap assets and as an international platform for financial valorization. This trend becomes clear if we follow the evolution of interest payments in the foreign payments balance sheet: from less than $12 billion in 1990, to $21 billion in 2002 (Cardoso’s last year in office) and $29 billion in 2005, perhaps reaching $35 billion in 2006” (Prates, 2007). Though the financial globalization has benefitted the country, Brazil has to concentrate more on increasing its industrialization and its improvement of efficiency in its operations. Brazil has a very vast potential to become a powerful economy, but the government polices should include the vision for the future not mere taking advantage of sort term opportunities created by globalization. “That process has resulted in a regressive specialization of Brazil’s industry, a loss of important capital and technology intensive sectors, and simultaneously a diversification and growth of traditional sectors, based on natural resources and labor”. (Prates, 2007) REFERENCES 1. Cable, V. (1995) “Indian liberalization and the private sector” In R. Cassen and V. Joshi, Eds. India: The Future of Economic Reform, New Delhi, Oxford University Press 2. Chhibber, P. K. and Majumdar, S. K (November, 1999) "Foreign Ownership Rules and Domestic Firm Globalization in India". Available at SSRN: http://ssrn.com/abstract=284186 3. Harris, Richard (Nov, 2002) “Introduction: Globalization and Globalism in Latin America: Contending Perspective.” Latin American Perspectives, Vol. 29,  No. 6. pp. 5-23. March 8, 2006. March 2006 Jstor.> Read More