GLOBALISATION
 The term ‘globalization’ means
integration of economies and
societies through cross country flows
of information, ideas, technologies,
goods, services, capital, finance and
people

PHENOMENON OF GLOBALISATION :
 Proximity
 Location
 Attitude

Historical Development
Globalization has been a historical process with
ebbs and flows. During the Pre-World War I period
of 1870 to 1914, there was rapid integration of the
economies in terms of trade flows, movement of
capital and migration of people.
The growth of globalization was mainly led by the technological
forces in the fields of transport and communication. There were
less barriers to flow of trade and people across the
geographical boundaries.

ADVANTAGES of Globalization
1. Cost reduction
2. Global learning
3. Rapid industrialization
4. Better allocation of resources
5. Reduction in poverty
6. Employment generation
7. Balanced development
8. Better quality of life
9. Human development

A coca- cola stall outside
the Grand Gateway
66 shopping mall
in Xujiahui , Shanghai
About 85% of Dubai's
population consists
of migrant workers, a
majority of whom
are from India

DISADVANTAGES of globalization
1. THREAT TO DOMESTIC INDUSTRIES
2. UNEMPLOYEMENT
3. EXPLOIATATION OF LABOUR
4. WIDENING GAP BETWEEN RICH AND
POOR
5. OVERUSE OF NATURAL RESOURCES
6. THREAT TO NATIONS SOVEREIGNTY

We have everything by
globalization, we have
nothing by globalization

Stages of Globalization
Domestic firm
exports Domestic firm
Domestic firm
through exports
sets up units
dealers directly
Becomes a
global firm by Domestic firm
serving the establishes a
needs of the subsidiary
customers

The Dimensions of Globalisation

Factors Causing Globalization
Technological
Factors
Political Globalization
Social
Factors Factors
Competitive
Factors

Impact of Globalization on
International Business
 Globalization of Markets
 Globalization on production
 Globalization on Investment
 Globalization of Technology

India before LPG (prior to 1991)
 Most banks were state-owned
 Banks, pension funds and
insurance companies were
forced to buy State Issued
bonds - primary investment.
 Bombay Stock Exchange was
closed market. Run by Brokers
for the benefit of its members.
There was no right governance
and regulation.
 There was no single derivative
market.
 All financial transactions were
controlled by the RBI and
Ministry of Finance

Pre-LPG period (prior to 1991)
Socialistic Model Weapons
 Strict entry barriers in every sub-
industry. Big Villains were
 Difficult to start a bank, a mutual  MRTP act, 1969
fund, a brokerage firm, an
insurance company, a pension
 The Capital Issues (control)
fund, a securities exchange or sub- act, 1947
broking firm.  Indian Companies Act, 1956
 Foreign firms were restricted to
touch any one of these parts
 Industries Act, 1956
 Comprehensive capital control and  Foreign Exchange
restrictive legislations Regulation Act, 1973

Globalization and India
 Globalize its economy in 1991
 Mounting problems- huge fiscal deficits, BoP crisis
and foreign exchange crisis
 Foreign investors and NRIs had lost confidence in Indian
economy

Major measures as a part of the
Globalization strategy
 Devaluation of Currency
 Disinvestment
 Dismantling of The Industrial Licensing
Regime
 Abolition of the MRTP Act
 Allowing Foreign Direct Investment
 Wide-ranging financial sector reforms

IMPACT
India’s growth rate in the 1970’s was very low at 3% and
GDP growth in countries like Brazil, Indonesia, Korea, and
Mexico was more than twice that of India.
Though India’s average annual growth rate almost doubled
in the eighties to 5.9%, it was still lower than the growth rate
in China, Korea and Indonesia. The pick up in GDP growth
has helped improve India’s global position.
India’s position in the global economy has improved from
the 8th position in 1991 to 4th place in 2001; when GDP is
calculated on a purchasing power parity basis.

GDP growth rate before and after 1991
GDP growth rate %
12
10
8
GDP
6 growth
rate %
4
2
0
1989 1990 1991 1992 1993 1995 1996 2004 2005 2006 2007

Large Number of Multinationals Have Moved to India Post
Globalization (Strategy 100%
Equity, Collaboration, Franchise, Importing, Manufacturing)
Beverages (Coke, Pepsi)
Fast Foods (McDonalds, Pizza Hut, KFC)
Coffee (Barista, Café Coffee Day)
Sports Wear & Goods (Nike, Adidas)
Apparels & Garments (Levis, Reid & Taylor)
Cosmetics (Revlon, Oriflamme, Maybellene)
Two/Four Wheelers (Honda, Toyota, Suzuki, Hyundai, General
Motors, Ford, Mercedes)
Computers (Dell, HP, IBM, Samsung, Sony)
Construction
Engineering Companies
Pharmaceuticals (US, Europe, Britain)
Music (Sony, BMG, Warner)
Entertainment Channels (Star, National Geographic, Discovery, Sony)

Globalization in the context of
the financial services sector

A Framework for Understanding
the Impact of Globalization on the
Financial Services Sector
 Change in Structure
 Change in Function

Reforms relating to the banking
system
 Capital base of the banks were strengthened by recapitalization, public
equity issues and subordinated debt.
 Prudential norms were introduced and progressively tightened for income
recognition, classification of assets, provisioning of bad debts, marking to
market of investments.
 Pre-emption of bank resources by the government was reduced sharply.
 New private sector banks were licensed and branch licensing restrictions
were relaxed.
 At the same time, several operational reforms were introduced in the realm
of credit policy:
 Detailed regulations relating to Maximum Permissible Bank Finance were
abolished
 Consortium regulations were relaxed substantially
 Credit delivery was shifted away from cash credit to loan method

Exchange Control and Convertibility
 Exchange controls on current account transactions were progressively
relaxed culminating in current account convertibility.
 Foreign Institutional Investors were allowed to invest in Indian equities
subject to restrictions on maximum holdings in individual companies.
 Restrictions remain on investment in debt, but these too have been
progressively relaxed.
 Indian companies were allowed to raise equity in international markets
subject to various restrictions.
 Indian companies were allowed to borrow in international markets subject to
a minimum maturity, a ceiling on the maximum interest rate, and annual caps
on aggregate external commercial borrowings by all entities put together.
 Indian mutual funds were allowed to invest a small portion of their assets
abroad.
 Indian companies were given access to long dated forward contracts and to
cross currency options.(Derivatives)

Reforms in the capital market
 SEBI- the apex regulator of the Indian capital
markets
 Regulations were framed for insider trading
 Abolition of capital issues control
 Introduction of free pricing of equity issues
 On-line trading was introduced at all stock
exchanges

Where does Indian stand in terms of
Global Integration?
 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 past 20 years. Over the same period
China's share has tripled to almost 4%.

Contd.
 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 labor cost
advantages.

Conclusion
A country must carefully choose a combination of
policies that best enables it to take the opportunity while
avoiding the pitfalls and utilizing globalization to the
fullest extent possible.

 Don’t ask too many questions
 Use your analytical skills to develop your thinking
ability
 GOD HELP THOSE WHO HELP THEMSELVES
Thank you