Report Macroeconomic

8/12/2019 Report Macroeconomic

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Globalisation

Globalization (or globalisation) is the process of international integration arising from theinterchange of world views, products, ideas, and other aspects of culture. Advances in

transportation and telecommunications infrastructure, including the rise of the telegraph and

its posterity the Internet, are major factors in globalization, generating further

interdependence of economic and cultural activities.

G!"#A!I$A%I"&' has become the buzzword of the last two decades. %he sudden increase

in the echange of nowledge, trade and capital around the world, driven by technological

innovation, from the internet to shipping containers, thrust the term into the limelight.

Globalisation also refers to the trend for people, firms and governments around the world to

become increasingly dependent on and integrated with each other. %his can be a source of

tremendous opportunity, as new marets, worers, business partners, goods and services and

jobs become available, but also of competitive threat, which may undermine economic

activities that were viable before globalisation. %herefore some see globalisation as a good

thing. According to Amartya $en, a &obel*+rize winning economist, globalisation has

enriched the world scientifically and culturally, and benefited many people economically as

well'. %he nited &ations has even predicted that the forces of globalisation may have the

power to eradicate poverty in the -st century while some hold the view as for perpetuating

ine/uality in the world rather than reducing it. $ome agree that they may have a point. %he

International 0onetary 1und admitted in -223 that ine/uality levels may have been increased

by the introduction of new technology and the investment of foreign capital in developing

countries. "thers, in developed nations, distrust globalisation as well. %hey fear that it often

allows employers to move jobs away to cheaper places.

Advantages of globalisation

4mployment5 "ne of the crucial advantage, globalization has led to the generation of

numerous employment opportunities.

+roduct 6uality and price5 %he "nset of international trade has given rise to intense

competition in the marets for reducing price and increasing /uality.


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7ommunication and %ransportation5 7onsidered as the wheel of every business

organization, connectivity to various parts of the world is no more a serious problem.

1ree 0ovement of 7apital5 %his leads to 1oreign 8irect Investment, which helps in

promoting economic growth in the host country.

Disadvantages of globalisation

neven wealth distribution5 %he rich are getting richer while poor are getting

poorer.

9ealth issues5 9uman, animal and plant diseases can spread more /uicly through

globalization.

4nvironment 8egradation5 Industries are using natural resources by means of

mining, drilling, etc. which puts a burden on the environment.

!oss of 7ulture5 7onventionally, people of a particular country follow its culture

and traditions from time immemorial.

0onopoly5 s. It is possible that when a product is the leader in its field, the

company may begin to eploit the consumers

What is so important about globalisation in India?

Globalisation is the new buzzword that has come to dominate the world since the nineties of

the last century with the end of the cold war and the brea*up of the former $oviet nion and

the global trend towards the rolling ball. %he frontiers of the state with increased reliance on

the maret economy and renewed faith in the private capital and resources, a process of

structural adjustment spurred by the studies and influences of the :orld #an and other

International organisations have started in many of the developing countries. AlsoGlobalisation has brought in new opportunities to developing countries. Greater access to

developed country marets and technology transfer hold out promise improved productivity

and higher living standard. #ut globalisation has also thrown up new challenges lie growing

ine/uality across and within nations, volatility in financial maret and environmental

deteriorations. Another negative aspect of globalisation is that a great majority of developing

countries remain removed from the process. %ill the nineties the process of globalisation of

the Indian economy was constrained by the barriers to trade and investment liberalisation of


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trade, investment and financial flows initiated in the nineties has progressively lowered the

barriers to competition and hastened the pace of globalisation.

Impact on India

India opened up the economy in the early nineties following a major crisis that led by a

foreign echange crunch that dragged the economy close to defaulting on loans. %he response

was a slew of 8omestic and eternal sector policy measures partly prompted by the

immediate needs and partly by the demand of the multilateral organisations. %he new policy

regime radically pushed forward in favour of a more open and maret oriented economy.

0ajor 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

maret determined echange rates.

"ver 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. %he Indian tariff rates reduced sharply over the decade from a weighted

average of 3-.;< in ==*=- to ->.? in ==?*=3.%hough tariff rates went up slowly in the late

nineties it touched @;.< in -22*2-. India is committed to reduced tariff rates. +ea tariff

rates are to be reduced to be reduced to the minimum with a pea rate of -2.@< in -22-*2@ mainly because of the worst droughts

in two decades the growth rates are epected to go up close to 32< in -22@*2>. A Global

comparison shows that India is now the fastest growing just after 7hina.


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Consequences

%he implications of globalisation for a national economy are many. Globalisation has

intensified interdependence and competition between economies in the world maret. %his is

reflected in Interdependence in regard to trading in goods and services and in movement of

capital. As a result domestic economic developments are not determined entirely by domestic

policies and maret conditions. Father, they are influenced by both domestic and

international policies and economic conditions. It is thus clear that a globalising economy,

while formulating and evaluating its domestic policy cannot afford to ignore the possible

actions and reactions of policies and developments in the rest of the world. %his constrained

the policy option available to the government which implies loss of policy autonomy to some

etent, in decision*maing at the national level.

ffects of Globalisation on Indian Automobile !ector

Globalization is an economic phenomenon, involving the increasing interaction, or

integration, of national economic systems through the growth in international trade,

investment and capital flows. Globalization has influenced every aspect of human life and it

offers certain opportunities and threats to each aspect of business. %he Auto industry in India

is not un touched by the effects of globalization. %he Indian Auto Industry and the Auto

component industry is suddenly eposed to the vast international maret as an opportunity

and to Global competition in large scale. %he industry has opportunities in terms of business

opportunity worldwide and the threats from 0ega suppliers who are more e/uipped to

compete.

%he Auto component Industry in India has come of age and is poised to become a major

revenue earner for the country. At this stage when the industry is undergoing restructuring

and itemisation it is important to now the strengths and weaness of the Industry and the

environment in which it operates. India being a cheap destination for parts, is a favoured

destinations for multinational to source its parts and achieve overall global competitiveness.

%he Industry needs to gear itself to tae advantage of its strengths and the various

opportunities available globally by identifying its weanesses.

%here are immense opportunities being offered by the global maret and there is a need to

loo inwards and draw up a strategy to eploit the opportunities offered by globalization.

Chronology and typology of India"s automotive growth


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motorcycles and second largest in manufacturing of scooters in the world. In tractor

manufacturing also India is the second largest producer in the world. %he production

accelerated after =2s when partial decontrol was introduced. %he result is notable H from a

modest million during =2s it became three fold in ==. %he effect of complete decontrol

too time to eert an all*round impact on the economy as it shows there was a short

recessionary period ==H==>, after which there was sign of revival. %owards ==*==, the

industry again showed an upward trend reaching a record high in -22-.

Automobile Industry# $ecent Performance Indicators

%he transition of the automotive industry to a relatively Jhigh*value industry towards the

==2s has significantly affected the structure of the auto component sector too. :ithliberalization fast generating momentum in the economy, urban income growth has also

eperienced a turnaround leading to high demand growth for -*@ wheelers and >*

wheelers. 7onse/uent upon this, as we elaborated before, there has been rapid growth

of the vehicle production in the recent years. &ot surprisingly, component industry also

grew by more than -2< on the average per annum during ==*-22.

1) %rends in production: %o cater to the eisting and new vehicle manufacturers

re/uirements a continuous epansion of the automotive components sector has beenoccurring after =2s. :ith the opening up of the economy and a renewed optimism

of maret growth prospects inspired higher investment and output in this sector. In

==?*=3, the investment in the component sector mared a little above ;22 million

dollar but in -22*-22-, the investment rose to -@22 million dollar.

2) %rends in &ports and Imports: 8espite the relatively small share of in the world

eports, the industry has been managing to tot up the numbers in recent years. 4ports

of auto components from India have grown at a compounded growth rate of = per

cent over the past si years. 8uring the fiscal year -22>, the industry achieved a

milestone of $E billion worth of eports. Going by the current trends, the auto

component industry is observed to eport more than 2 percent of its output every

year. "ver the past ; years, the eports in this sector have been growing steadily at

about - per cent per annum.

3) Inflow of foreign direct investment '(DI) and rise in foreign collaborations#

4ndowed with the potential of low*cost manufacturing along with high engineering

sills worforce, India edges over other developing countries with respect to


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APPENDIX


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Report Macroeconomic

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