Prof. R K Gupta
Aravali Institute of Management

Globalization is the buzzword, and there are high hopes for India regarding its role in Global Economy. As India enters 21st century after 12 years of Creation of New World economic & Trade regime under WTO, several important issues need attention of policy makers, Businessmen and academicians to critically examine the issues involved in Concept of Globalization and the role India has to play in New World Economic order. Can India secure for itself better quality of life and a larger share of the World Trade pie? How?

Should India take leadership role to represent third world countries, especially poorer countries to safeguard their interests against developed countries and growing regional cooperation forums across the world?

There are several issues involved with globalization that have to be answered and clear cut policy decisions to be taken.

Two Claims have been made in India. One by Corporate lobby that demands dilution of Labor laws and labor standards, as these are perceived to be obstruction to globalization and world competitiveness, and the other made chiefly by Mainstream Left parties and trade unions, who allege dilution of labor standards and attack on workers' rights through the agency of transnational corporations, world bank, IMF and WTO.

The attachment of Child Labor and environmental conditions to NAFTA is another major concern to India and developing countries.

While employment conditions in informal sector, could not have been worse as these stand today, in the formal sector too, which was characterized by job security, union density and collective bargaining up to 1970s there is catastrophic erosion of job security and loss of jobs. Even Bombay textile sector alone has seen total job losses of 1 lac jobs by end of 1990s.

It is also interesting to observe that National Governments in many countries, both developed and developing, while yielding to domestic lobbies, try to protect their economies through tariff and non tariff barriers, on the other hand they clamor for opening of economies and lower tariffs in importing countries of their own produce.

The unwillingness of EU block countries in reducing Agricultural subsidies and relaxing the trade barriers is also a point in the case.

How successful has the strategy of attempting to compete in the world market on the basis of cheap labor could be?. It is still very early to tell. But a look at the experience of textiles and garments, do not support this thinking. The exports first rose and then fell sharply. Not only the exports decline as a result of stiff competition from cheaper and /or better quality products from other third world countries, but even the domestic market began to be invaded by these more competitive products, some of them from countries like Taiwan and South Korea, with considerably higher labor standards than in India.

It became evident that cheap labor alone could not ensure a secure market position.

What perhaps is required is technological upgrading to increase productivity and produce higher-quality products with a well paid, educated and skilled work force.

A recent survey of over 1000 top international companies showed that the two major attractions of India were (1) the potentially huge size of Indian market, and (2) the availability of an educated, skilled, English speaking labor force at competitive wages (Global policy Council 2001). As far as market size is concerned, china scores the point. Bureaucracy topped the list of negative features for India.

Also, the global economy at present is still really a game of two-and-a-half players; European Free Trade Zone, NAFTA and Japan. To make cruel point; in 1914 there were eight great powers, now there is the G8. The difference is that now the Russians turn up as poor guests and Austro -Hungary has been replaced by Canada.

Economic activity is centered around a few rich nations. The wealth distribution is asymmetrical and number of persons earning lesser than a dollar a day in poor countries is increasing phenomenally.

Another issue is, will liberalization and relaxing of financial and capital markets mean higher FDI inflows? Well, the answer is No.

Their industrious peasantry, higher domestic savings rate and industrialization behind the tariff barriers built great countries like Taiwan and South Korea.

We must link the progressive implementation of free trade with efforts to reduce the economic vulnerability of the poorest countries by eliminating Debt, reversing the outflow of net capital assets from South to North, and creating new facilities at organizations like World bank, IMF and UN for developing purposes. The new money has to go towards funding global governance issues, towards creating and investing in SOCIAL infrastructure of poor countries. Particularly, the physical infrastructure, education, primary healthcare and rural and drinking water schemes, need investment. India will have to take lead role in this as also in projecting Food and Livelihood as 'non Trade concerns'. It should also play a productive role in Cairns group and help to change the current distortions in global agricultural trade, where India stands to gain maximum. To maintain GDP growth rate of 8 %, India will have to increase exports substantially touching 100 Billion dollars per annum by end of year 2007. And that will require major realignment of its internal and external competencies. Major reforms in financial markets, legal systems and administrative models are required, that are investor friendly. India would do well to focus on "made In India " Brand promotion. And substantially invest in Human resource quality up gradation and R&D infrastructure. Particularly IT, agriculture, space research, pharmaceuticals and bio genetics, have great scope to penetrate world markets. Information technology enabled industry is one area where India can take major leap, due to its inherent strength of English-speaking technocrats base.

Regional cooperation, like SAARC, ASEAN and even alignment with China would definitely give strategic advantage in Global market place both as suppliers and buyers.

It is absolutely clear that India with its current policies and internal structure is not in a position to take advantage of globalization, so also most of developing countries. Clear cut decisions regarding, labor policy, financial and legal reforms and  concerted efforts in setting up world class technology and organizations with sustainable indigenous research base is must for long term benefits to Indian economy.

Prof. R K Gupta
Aravali Institute of Management

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