PRESTIGE INSTITUTE OF MANAGEMENT AND RESEARCH SUBJECT: MANAGERIAL ECONOMICS ASSIGNMENT NO.

1 GLOBALISATION: Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology. This process has effects on the environment, on culture, on political systems, on economic development and prosperity, and on human physical well-being in societies around the world. IMPACT OF GLOBALISATION The impact of globalisation has been highly positive in almost all spheres of economic and social life and virtually no negative effect. Indias economic growth has been high, exports have boomed, incidence of poverty has been reduced, employment has surged, begging of India for economic aid has stopped, long-term inflation rate has gone down, scarcity of goods have disappeared, the quality of products available have improved substantially and overall India has become progressively vibrant and internationally competitive. Service sector is the lifeline for the social economic growth of a country. The real reason for the growth of the service sector is due to the increase in urbanization, privatization and more demand for intermediate and final consumer services. In advanced economies the growth in the primary and secondary sectors are directly dependent on the growth of services like banking, insurance, trade, commerce, entertainment, etc. Globalisation is the outcome of the policies of liberalisation and privatisation. Globalisation means integrating the economy of a country with the world economy. In India, the process of globalisation picked up with the policy reforms of 1991. Globalisation refers to growing economic interdependence among countries in the world with regard to technology, capital, information, goods, services, etc. The term globalisation has four parameters: 1. Reduction of trade barriers to permit free flow of goods and services across national frontiers. 2. Creation of an environment in which free flow of capital can take place. Transfer of wealth across national boundaries, particularly financial transfers, is made possible by large organisational network and new electronic technologies. 3. Creation of an environment to allow free flow of technology among the nation states. 4. Creation of an environment in which free movement of labour can take place in different countries of the world.

The advocates of globalisation, especially from developed countries, limit the definition of globalisation to only three parameters, namely, free trade flows, capital flows, and technology flows. They insist upon developing countries to accept their definition of globalisation. However, several economists in the developing world believe that this definition in incomplete and in case the globalisers ultimate aim is to look upon the world as a global village, then unrestricted movement of labour cannot be left out. But the entire issue, whether debated at the World Trade Organisation (WTO) or at other forums, avoids and ignores labour flow as an essential parameter of globalisation. However, the process of globalisation has started and it is irreversible since borders cannot be closed, flows cannot be stopped and ideas cannot be prevented from motivating people.

CASES IN FAVOUR OF GLOBALISATION: Global economic integration is one of the most pronounced development of the late twentieth century. Advocates of globalisation justify it on following grounds: 1. 2. 3. 4. 5. 6. 7. 8. Adoption of new, flexible production methods. Restructure of production and trade patterns. Raise foreign capital. Quality improvement Rise in employment. Rise in banking and foreign sector efficiency. Creation of new world order. Accelerate human development GLOBALISATION AND TRADE According to the standard theory, international trade leads to allocation of resources that is consistent with comparative advantage. This results in specialization which enhances productivity. It is accepted that international trade, in general, is beneficial and that restrictive trade practices impede growth. That is the reason why many of the emerging economies, which originally depended on a growth model of import substitution, have moved over to a policy of outward orientation. However, in relation to trade in goods and services, there is one major concern. Emerging economies will reap the benefits of international trade only if they reach the full potential of their resource availability. This will probably require time. That is why international trade agreements make exceptions by allowing longer time to developing economies in terms of reduction in tariff and non-tariff barriers. Special and differentiated treatment, as it is very often called has become an accepted principle. Emergence of worldwide production markets and broader access to a range of foreign products for consumers and companies, particularly movement of material and goods between and within national boundaries. International trade in manufactured goods has increased more than 100 times (from $95 billion to $12 trillion) since 1955. China's trade with Africa rose sevenfold during 200007 alone. The global trade has been since times immemorial and has some inherent advantages which are elaborated as under:1) Increased free trade between nations. 2) Corporations have greater flexibility to operate across borders. 3) Greater ease & speed of transportation for goods & people. 4) Greater independence of nation states. International trade is exchange of capital, goods, and services across international borders or territories. In most countries, it represents a significant share of gross domestic product (GDP). While international trade has been present throughout much of history .International trade is in principle not different from domestic trade as the motivation and the behavior of parties involved in a trade do not change fundamentally regardless of whether trade is across

a border or not. The main difference is that international trade is typically more costly than domestic trade. The reason is that a border typically imposes additional costs such as tariffs, time costs due to border delays and costs associated with country differences such as language, the legal system or culture. ADVANTAGES OF GLOBAL TRADE Some of the prominent advantages of countries deploying the tool of global trade have been stated as under:1) Country can import goods that make intensive use of the factor of production and are thus embodying the respective factor of production. 2) Without international trade, nations would be limited to the goods and services produced within their own borders. 3) If the global trade is supported by the govt. of that particular country then the consumers stand to gain. DISADVANTAGES OF GLOBAL TRADE Its said every coin has two sides the one which you see is the side for you. so here are some of the disadvantages of globalization which rose soon the roots of globalization were deep into the World Economy 1) Increased flow of skilled and unskilled jobs from developed to developing nations as corporations seek out the cheapest labour. 2) Greater risks of diseases being transporters between nations unintensionally. 3) Increased likelihood of economic disruptions in one nation affecting all nations.

GLOBALISATION AND SERVICE International businesses earn money in the form of fees for services rendered. This is particularly true in banking, insurance, rentals, engineering, management service and the like. Turnkey operations are typical modes for earning such fees. Here, the company contracts with a foreign entity to design and build an entire operation. On completion, the operation is turned over to owner who can use the facilities straight away. The Italian company, Fiat, for example constructed a complete automobile plant in the erstwhile Soviet Union under this type of arrangement. Tata consulting engineers, India, are specialists in executing turnkey projects. Some of the major projects executed by them are: erection of 5*50 MW gas turbogenerators at Shuwaik Power Station. TURNKEY PROJECTS: In a turnkey business transaction different entities are responsible for setting up a plant or a part of it. A complex project involving infrastructure facility, a chemical plant, a packing line or a refinery demands expertise which is not available with a single firm. The owner organizes the overall project with a turnkey firm and 'receives' the project on its completion and can then start to operate it. The 'agents' of the owner are: the principal engineering firm, the licensor (if any), service subcontractors (e.g. electrical contractor) and the suppliers. There may be several contracts drawn up by the principal engineering firm but they only identify the latter as the recipient of the services. The principal contract is the one that binds the owner and principal engineering firm. A turnkey business is a business that includes everything you need to immediately start running the business. A business that is being sold as a turnkey business would include tangibles such as inventory and equipment through intangibles such as a previously established reputation and goodwill. The most common type of business sold as a turnkey business is a franchise. In the case of franchises, a turnkey business often includes a building that has been constructed to the franchise's specifications, and an exclusive territory. Entrepreneurs considering buying a turnkey business should always do their due diligence and be sure they know exactly what a particular turnkey operation includes; not all turnkey businesses are created equal. Globalisation helps the promotion of turn-key projects which helps in the growth in the business of services.

GLOBALISATION AND MANUFACTURING Manufacturers are globalizing rapidly against a background of exceptionally fast growth in world trade. While the market opportunities are enormous, they are likely to face intense competition both in their home markets and in the foreign markets into which they need to expand. This study from the EIU reveals, however, that the nature of these challenges may not what conventional wisdom assumes it is not all about low-cost manufacturing. While low-cost labour has a role to play, many manufacturers are going global to access a range of opportunities and resources available indifferent international markets.

A truly global business global in

terms of customers and global in terms of development and manufacturing and R&D Joseph T. Lower, VP Corporate Development, Boeing Companies are making use of globalization to produce where it is most cost-effective. For example, Philips has kept its high-tech lighting factories, which it considers an asset and a competitive advantage, in Western Europe, and has no plans to relocate this production. However, the company has moved its consumer electronics manufacturing, which Mr Ruizendaal describes as low end commodity, to China. Indeed, according to Robin Beran, Director of Corporate Tax at the U.S.-based construction equipment manufacturers, Caterpillar, Manufacturing in China is only fully cost-effective if you are able to source some high value-added components in China. Manufacturing sector-also called as the secondary sector in Indian economy. It said that if a country's largest proportion of GDP is generated from the tertiary sector (also called as service sector) then the country is said to be developed. But there is an exception to this,the upcoming country, China resorted to large scale manufacturing to cut its cost and the result is in front of our eyes. We find so many Chinese mobiles, Chinese toys, Chinese clothes at dirt cheap rate ( very cheap ). But they done last long . There is also a saying in our city Indore: China ki cheez hai chale to chand tak ( forever ) nahi to saanjh tak( by evening ). What matters most is the GDP and not the quality this is the ideology of Chinese markets. Coming back to India, almost all countries dump their products into our country. So we would look upon the effects of globalization into the field of manufacturing both in negative as well as positive aspects. ADVANTAGES OF GLOBAL MANUFACTURING 1) Since the consumer has the globe as its market, he has wide quality of products to choose from.

2) The home industries in a view to provide satisfaction to its customers and maintain its competitive edge formulate policies to increase the quality of its product as well as the goodwill of its brand. 3) Lastly the age old principle of-" SURVIVAL OF THE FITTEST" applies to all the brands both local as well as foreign and at the end of the day its the consumers who stand to gain. DISADVANTAGES OF GLOBAL MANUFACTURING 1) The MNC's make use of upgraded technology which the small scale industries cannot afford to purchase so they meanwhile shut down their industries and are rendered unemployed. 2) Generally its the foreign country's industry which set up its branch in developing country( like Vodafone ltd. establishing in India) (Or the McDonalds co.) So the home industry has to face cut throat competition from them. 3) Also the income generated by the foreign company in our country would be added to their GDP and not ours so, at the end of the day we stand to lose.

GLOBALISATION AND CONSTRUCTION Construction industry contributes significantly in terms of scale and share in the development process for both developed and developing countries. The construction products provides the necessary public infrastructure and private physical structures for many productive activities such as services, commerce, utilities and other industries. The industry is not only important for its finished product, but it also employs a large number of people (directly and indirectly) and therefore has an effect on the economy of a country/region during the actual construction process. Construction in any country is a complex sector of the economy, which involves a broad range of stakeholders and has wide ranging linkages with other areas of activity such as manufacturing and the use of materials, energy, finance, labor and equipment (Hillebrandt, 1985). The contribution of construction industry in the aggregate economy of a country has been addressed by a number of researchers and valuable literature available on the linkage between construction sector and other sectors of the economy. Several researchers conclude that the construction sector has strong linkages with other sectors of the national economy. Globalisation has helped India to have access to the modern technologies required in the construction business to build a strong and competent India which bridges the gap between developing and developed. Construction in a laymens language means building of something typically very large, such activity is generally considered as an industry. In the fields of architecture and civil engineering, construction is a process that consists of the building or assembling of infrastructure. Far from being a single activity, large scale construction is a feat of human multitasking. But nowadays big industrialists hire constructors from all over the world to build high end structures. By now globalization has become the talk of the town and it has laid its foundation everywhere even in the field of construction. IT brings with it various advantages and disadvantages which are discussed below. FOR EXAMPLE: today we can see that every old building is demolished in our state to create townships ADVANTAGES OF GLOBAL CONSTRUCTION 1) When a foreign company sets up its unit in an area for construction, the local people stand to gain as for a particular period of time they get employment. 2) Also after the construction gets over the industry set up has to employ professionals which give a boost to country's GDP. 3) Also if a residential area is set up, the already existing business of the localities increase which in turn raise the lifestyle of a country's citizen.

DISADVANTAGES OF GLOBAL CONSTRUCTION 1) If an industry is set up in a residential area then the quality of life of the residents deteriorates if there is no proper waste management. 2) The land available for use is limited so, the land available for pastures or farming purposes is used for making new buildings which in turn disturbs the global eco system. 3) Also once the industry gets set up or the construction is started it needs the resources which are again scarce.

GLOBALISATION AND AGRICULTURE

The Oxford dictionary gives the meaning of agriculture as the practice of farming, that is the cultivation of land for growing crops and also rearing of animals. AGRICULTURE GOES GLOBAL In 1961 India was on the brink of mass famine. Borlaug was invited to India by the adviser to the Indian minister of agriculture M. S. Swaminathan. Despite bureaucratic hurdles imposed by India's grain monopolies, the Ford Foundation and Indian government collaborated to import wheat seed from CIMMYT.Punjab was selected by the Indian government to be the first site to try the new crops because of its reliable water supply and a history of agricultural success. India began its own Green Revolution program of plant breeding, irrigation development, and financing of agrochemicals. ADVANTAGES OF GLOBAL AGRICULTURE After the Green Revolution the concept of fertilizers was introduced due to which inorganic farming was brought into the books. 1) With the economy gone global the farmers can cater to the world as a consumer which has enhanced their values. 2) With the global agriculture cross breeding came into being and this boosted the production capacity and thus increasing the country's GDP. 3) With the advent of technology available to farmers across the globe, land can be used in a better way in two or three crop pattern. DISADVANTAGES OF GLOBAL AGRICULTURE 1) Due to heavy chemical fertilizer inputs available at ease land has become hard and carbon material has gone down. 2) Since the time agriculture has gone global, the demand has been spiralling and so we dont give the land its time to rest which leads to the increase in weeds 3) Also after the globalization in this sector, the trend of inorganic farming is setting in the Indian economy, and thus, the danger of various diseases is increasing.

GLOBALISATION AND INFRASTRUCTURE Infrastructure is the basic physical and organisational structures needed for the operation of a society or enterprises or the services and facilities necessary for an economy to function. Infrastructure facilitates the production of goods and services, and also the distribution of finished products to markets, as well as basic social services such as schools and hospitals; for example, roads enable the transport of raw materials to a factory. In military parlance, the term refers to the buildings and permanent installations necessary for the support, redeployment, and operation of military forces. ADVANTAGES OF GLOBAL INFRASTRUCTURE 1) Infrastructure to a large extent depends upon the technology adopted in the country. So the developed nations stand to gain as they extend their support to the developing ones in enhancing their capabilities. 2) The recent example of global infrastructure is the GOLDEN QUADRILATERAL project initiated by a foreign company on a BOT (Built Operate Transfer) agreement. 3) The Physical infrastructure is enhanced which is essential for the smooth and costeffective flow of goods and services within the economy and across borders. DISADVANTAGES OF GLOBAL INFRASTRUCTURE 1) The sharp growth expected in infrastructure development may lead to a shortage of qualified project management talent and of sufficiently experienced firms. 2) Corruption further undermines effective spending. Money meant for development projects such as infrastructure are often embezzled by corrupt official who go unpunished. 3)When the infrastructure development takes place only in towns and cities then the rural economy is in a pitiful state, and the rich becomes richer and the poor becomes poorer.