IMPACT OF FDI ON DIFFRENT SECTORS

India is a country that has been able to restore investor confidence in its markets, even during the toughest of times. Increase in capital inflows, foreign direct investments (FDI) and overseas entities participation reflect the fact that Indian markets have fared well in recent times. Moreover, foreign companies are viewing the South-Asian nation as a strategic hub for their operations and investments owing to investor-friendly policy environment, positive eco-system and huge potential for growth. India Incs increasing presence over the global canvas and Indian governments consistent support to the FDI space have facilitated remarkable developments and investments from overseas partners. Key Statistics FDI inflows rose by 36 per cent to US$ 23.69 billion during January-October 2011, while the cumulative amount of FDI equity inflows from April 2000 to October 2011 stood at US$ 226.05 billion, according to the latest data released by the Department of Industrial Policy and Promotion (DIPP). The services (including financial and non-financial) sectors attracted highest FDI equity inflows during April-October 2011-12 at US$ 3.43 billion. India received maximum FDI from countries like Mauritius, Singapore, and the US at US$ 61.2 billion, US$ 15.2 billion and US$ 10 billion, respectively, during April 2000-October 2011. Important Developments The government of India is continuously working towards increasing FDI flows into the country. FDI rose by an impressive 56 per cent to US$ 2.53 billion in November 2011. The cumulative flows of for April-November 2011 aggregated to US$ 22.83 billion, exceeding the total FDI of US$ 19.43 billion for 2010-11 fiscal. Recently, the Government has approved 20 FDI proposals worth Rs 1,935.24 crore (US$ 384.5 million). The approved major investments, that were consulted with Foreign Investment Promotion Board (FIPB) as well, are enlisted below:

The Impact of FDI on Indias Manufacturing Sector

Approximately 50 sectors in Indias domestic manufacturing sector grew by 39 percent during the April December 2010 period, achieving the excellent growth category. These segments are air conditioners, natural gas, tractors, nitrogen fertilizers, ball bearings, electrical and cable wires, auto components, construction equipment, electric fans and the tire industry. Exports from Indian SEZs grew by over 68 percent (to US$12.55 billion) as compared to the corresponding period of 2009-10. Floating by Indias reaction to its super-machines, iconic American superbike maker Harley Davidson is setting up an assemblage unit at Bawal, Haryana.

Government is also planning to set up National Manufacturing and Investment Zones (NMIZs). Main objectives of these NMIZs are: To promote investments in the manufacturing sector and make the country a hub for both domestic and international markets To increase the sectoral share of manufacturing in GDP to 25 percent by 2022 To double the current employment level in the sector To enhance global competitiveness of the sector Beneficial effects of FDI in retail The main driver for this policy seems to be the recognition that the Indian economy faces serious supply-side constraints, particularly in the food-related retail chains The government recently came out with a concept note on foreign direct investment (FDI) in multi-brand retail trading. This is an emotional issue, and has been placed on the back burner by successive governments in response to fears about its impact on small retailers, who are large generators of employment. This fear is worthy of examination. Trade constitutes around 15% of our gross domestic product, of which retail trade makes up at least half. The retail sector is the second largest employer after agriculture, providing job opportunities to at least 33 million people. Few can underestimate the importance of being circumspect with regard to any legislation that will affect so many jobs. The main driver for this policy seems to be the recognition that the Indian economy faces serious supply-side constraints, particularly in the food-related retail chains. The government would like to improve back-end infrastructure, and ultimately reduce post-harvest losses and other wastage. There is also a general concern, highlighted by the persistence of food inflation, that intermediaries obtain a disproportionate share of value in this chain and farmers receive only 15% of the end consumer price. In its concept note, the government has asked 12 questions, which relate to the regulatory framework that ought to be in place to protect farmers and small retailers. The intent of this article is to ask a few more questions that may in turn enable a response to those 12. A crucial argument against foreign investment in retail is the belief that small retailers will suffer. This, in some sense, suggests that low price is all that counts in the retailing industry. Small retailers offer of personalized service, home delivery and credit seems to have been given little importance. One question is whether customers, used to these services for long, will give them up easily. Second, large retail has typically succeeded where consumers have been willing to buy in large quantities to avail volume-related discounts. In a country where the marketing ethos has been dominated by the paisa pack, and marketers obsess about the fact that the unit outlay for a commodity must be small for it to be attractive, another question is whether there is a willingness to make large outlays. There is also the so-called car problem in retail: Only if large parts of the population own cars would they be able to carry 24 cartons of orange juice and 2kg tubs of ice cream conveniently. If only car owners are targeted by big retail, one wonders if there would be a material impact on the small store. Undoubtedly, lower prices psychologically propel buyers to spend more than they otherwise would. The resulting growth in private consumption creates jobs. It is not clear if this aspect has been considered. What we must avoid is a situation similar

to the one in the US, where increased consumption does take place, but actually creates jobs in China. If we can ensure that procurement from large-format retail takes place within India, it may have a beneficial impact on jobs. India has had several retailers with deep pockets and access to skills. That they have not been able to swamp the domestic small retailer says something about consumer behavior and small retails resilience. Answers to these questions will suggest that FDI in retail could have a profound impact, but not necessarily on small retailers. One should also examine whether greater benefits to farmers due to greater consumption, and the consequent impetus to manufacturing, can offset a marginal impact on the small retailer. Most importantly, we should not write off the inherent entrepreneurship of small retail in India. Hence, it should be possible for the government to manage this FDI in a calibrated manner, ensuring that its benefitsthrough development of infrastructure, provision of rural employment, and support for local sourcing balance potential risks to the retail trade IMPACT OF FOREIGN DIRECT INVESTMENT ON INDIAS AUTOMOBILE SECTOR-WITH REFERENCE TO PASSENGER CAR SEGMENT Abstract FDI Inflows to Automobile Industry have been at an increasing rate as India has witnessed a major economic liberalization over the years in terms of various industries. The automobile sector in India is growing by 18 percent per year. The basic advantages provided by India in the automobile sector include, advanced technology, cost-effectiveness, and efficient manpower. Besides, India has a welldeveloped and competent Auto Ancillary Industry along with automobile testing and R&D centers. The automobile sector in India ranks third in manufacturing three wheelers and second in manufacturing of two wheelers. . The major investing countries are Mauritius (mainly routed from developed countries), USA, Japan, UK, Germany, the Netherlands and South Korea. 24. India needs to worry on the foreign direct investment (FDI) front. According to the statistics released by Indias Ministry of Commerce and Industry, the country has received only $18.35 billion in FDI in the first 11 months (April-February) of the financial year 2010-2011, compared to $63 billion that came in the 11 months of the previous financial year. Future prospect of Indian Automotive Sector is looking bright. Indigenous automobile companies are replacing foreign multinational companies in terms of consumer satisfaction. Since 2002, automotive sector has much to deliver in the years to come. Direct Investment Inflows in IndiaOpportunities and Benefits, Important Aspects of FDI in Automobile Industry, Recent FDI Trends in India, The major foreign players who have a significant role in the development of Indian automobile industry, were discussed and the passenger car segment growth, Production, sales and Investment were analyzed.. Here the researcher using three statistical tool for analyzing the study, ARIMA, Linear & Compound Model for analysis purpose to measure future prediction using time series analysis. Hence this study necessitated the causes and impact of FDI flows in automobiles sector and also policy regulation, FDI flows in passenger car segment and recent FDI trend in this sector were discussed.

Indian retail sector today is valued at $450 billion, and is increasing day by day due to its increasing middle class population and their spending power. Indian retail sector has two parts: organized and unorganized sector. Organized sector which forms around 20 -30 % in other countries , here in India it forms only about 6% while rest is all unorganized consisting of small retailers called as kirana shops, paan/beedi wala, convenience stores, departmental stores, pavement vendors etc. Organized retail consists of supermarkets, hypermarkets and modern retail outlets, malls, exclusive brand outlets etc which are located in urban areas or metros.

FDI in retail sector is not allowed, it is only allowed up to 51 % in single brand and government is still considering the opinion of allowing FDI in multi brand segment.100% FDI is allowed in cash and carry wholesale and export trading, both wall mart and Carrefour have already entered in India in this segment. Many big giants like Wall mart, Carrefour are waiting to earn their fortune in continuously growing market.FDI in retail sector will have both positive and negative effect if allowed. Both organized and unorganized sector will face adverse competition from global players. Wal-Mart has a turnover of $256 billion and growing at an average of 12 -13 % annually. Average size of its stores is 85000sq ft and average turnover is $51 million. Organized sector retail outlets in India like pantaloons, reliance cannot compare with the giant let alone the small retailers. Indian government still fears that if FDI is allowed in retail then unorganized sector will be affected very badly and it will result in a large lot of unemployed retailers and other youth which is employed in the supply chain, this unemployed lot cant be absorbed in manufacturing or service sector which can ultimately push a large chunk of population below poverty line. In India unorganized retail is a forced employment sector, there are large number of retail outlets because when youth dose not find enough employment opportunities or is not educated enough then the easiest resort to earn decent money is to save money or get a loan to set up a shop. On an average a retailer earns Rs.186075 annually and

only 4% of 12 million retail outlets have area more than 500 square ft. Now if FDI is allowed in such an unorganized sector than many changes can happen which can be positive or negative. Talking about the organized sector, which consists of big Indian players who have entered in retail sector just to take advantage of diversification and expand their business, they will also be affected but from different prospects. Major challenges that lie ahead are: Economies of scale: the global players have economies of scale and are perfect in cost cutting and providing the consumer the best at lowest price which still is a major challenge for Indian retail firms. The way they perform their process itself builds an entry barrier for other new firms. Brand name: They bring with them world class products which have high quality and a highly valued brand name. The domestic brands dont have that charm and attracting power as of global brands. Technology: Global players are highly advanced in technology. The tools, equipments, kind of warehouses they use, their way of performing processes are highly advanced and cannot be compared with those used by Indian retail firms, which in turn provides better services and better quality products even in categories like perishable food etc. Attract skilled employees: The work culture of global players is quite different from those of Indian players. They believe in earning profits by cutting costs as much as possible and at the same time are conscious towards career of their employees. Their approach is more oriented towards achieving ends rather than means. Attractive salary and high incentives can also attract skilled employees towards global players which is also a threat for big Indian retail firms. Better infrastructure: Better storage facilities, better transportation medium and high investment can pose another threat to Indian retail firms which can hardly match the capabilities of giants on their own. Joint ventures: Global players may not prefer to enter into joint ventures with Indian firms and may also close down the existing ventures in wholesale and single brand which may adversely affect the Indian firms. This is possible when 100% FDI is allowed in multi-brand retail.

FDI in Retail sector in India: How does this affect you? 4:00 pm in Lifestyle by Editor
Retailing defines the direct interface between the manufacturers and the end users who are basically individual consumers. The retail business owners stock up all goods after purchasing it directly from the manufacturers and then sell it to individual customers keeping a profit margin for themselves. Of late the retailing industry in India has bloomed with much coveted success causing positive impact on the national economy. As per the recent revelations by the popular International

Management Consultancy AT Kearney, India has been considered the second most lucrative destinations of the world for retail business. In India, retailing industry is segregated into two classes- organized retailing and unorganized retailing. Organized retailing entails trading conducted by licensed retailers and unorganized retailing includes all types of low cost trading like local shops, small roadside stores and temporary shops or door to door selling of various goods.Until now, according to the Indian retailing laws, Foreign Direct Investment in multi-brand retail market was prohibited. But government is thinking to open the FDI in retail in India which implies that foreign investment in retailing is possible up to 51%. Now the announcement of retail FDI in India has triggered a series of debates on both positive and negative notes and become political issue. So lets discuss these things, what all this means to you through advantages and disadvantages:

Advantages of FDI in retail sector in India: Growth in economy: Due to coming of foreign companies new infrastructure will be
build, thus real estate sector will grow consequently banking sector, as money need to be required to build infrastructure would be provided by banks.

Job opportunities: Estimates shows that this will create about 80Lakh jobs. These career opportunities will be created mostly in retail, real estate. But it will create positive impact on others sectors as well. Read about career options in Retail sector.. Benefits to farmers: In most cases, in the retailing business, the intermediaries have
dominated the interface between the manufacturers or producers and the consumers. Hence the farmers and manufacturers lose their actual share of profit margin as the lions share is eaten up by the middle men. This issue can be resolved by FDI, as farmers might get contract farming where they will supply to a retailer based upon demand and will get good cash for that, they need not to search for buyers.

Benefits to consumers: Consumer will get variety of products at low prices compared
to market rates, and will have more choice to get international brands at one place. Lack of infrastructure in the retailing chain has been one of the common issues in India for years which has led the process to an incompetent market mechanism. For example, in spite of India being one of the largest producers of vegetables and fruits, lack of proper count of cold storages has significantly affected the selling of these perishable items. FDI might help India overcome such issues by channelizing the resources in the right manner. In the last years, the Public distribution system is proved to be significantly ineffective. In spite of the fact that the government arranged for subsidies, the food inflation has caused its negative impact continuously and it can be handled by FDI.

Disadvantages of FDI in retail sector in India:

According to the non-government cult, FDI will drain out the countrys share of revenue to foreign countries which may cause negative impact on Indias overall economy.

The domestic organized retail sector might not be competitive enough to tackle international players and might loose its market share. Many of the small business owners and workers from other functional areas may lose their jobs, as lot of people are into unorganized retail business such as small shops Negative Impact of FDI in retail sector in India The most important factor which is against allowing FDI in retail sector is that small traders will not able to compete with the big players and thus cease to exist. These traders dont have the capital and expertise to compete with big retail chains. They will not be able to buy goods at a lower price from suppliers while big players who have a strong supply chain network across the world which gives them a high bargaining power to buy goods at the lowest price. The big chains also have a capacity to sustain losses for a longer period therefore able to undercut prices of goods which will lead to desertion of small traders. It is assumed that initially foreign stores would keep the prices of their products low in order to attract their customers & eliminate their competitors. But with the time they would establish their monopoly in Indian markets & hence quality and price of products would be compromised. It would be like Bringing back East India Company. Also in a country like India where millions of people are semi-skilled, it is the retail sector which offers them source of earning as one can easily open a small shop with a little capital. The government should understand that before approving any policy reform in the retail sector it must create jobs in other sectors which can accommodate these people. Only 1 employee is recruited in 400 yards of a Wall-Marts showroom. So it is estimated that on an average only 1 will be able to get job in Multi-brand stores while at least 10 people would be losing their jobs due to FDI.If foreign stores are able to set up their monopoly, then even farmers would have no other option than selling their crops to Multi-brand stores at low prices. This would exploit farmers. Some economist give the argument that policies of Globalization & Open Trade across the border initiated by Dr. Manmohan Singh during 1990s has not been so effective in controlling inflation & price rise . Moreover the problem of unemployment still persists in India. Opening of Multi-brand stores , setting up of infrastructure , recruitment of staff & maintenance of quality of products during initial stages would force the foreign retailers to sell their products at higher price. So Governments plea ,that Inflation would be controlled to a larger extent, does not convince majority of Indians. Advocates of FDI in retail give China has an example, which witnessed enormous growth in retail sector after allowing FDI. But they dont inform that China allowed a gradual increase in FDI in retail it allowed an FDI of up to 26 per cent in 1992 and increased it to 49 per cent in 2002 and allowed 100 per cent in 2004. It is also not justifiable to compare India with China: China is a communist country where job market is regulated in contrast India is a democratic country where people have an option to start their own business. In China, manufacturing sector offers numerous

employment opportunities but this is not the case with India.

Alternative steps to counter negative impact of FDI Change in Economic policies has become a necessity now. There must be a proper survey regarding actual position of demand & supply ration in India. Although by allowing FDI in retail the biggest gainer will be the consumer who will get more choices at attractive prices, if this is achieved by rendering millions unemployed and denying them their livelihood, then such benefit are worthless. The government should realize that its prime responsibility is to create more jobs for unemployed people. It would make sense that any policy which leads to reduction in jobs should be put on hold until new sources of employment are created. Instead of opening the sector for FDI in urgency, the government should invest in training of small retailers and traders to guide them on the subject of storing, grading, and refrigerating of perishable goods. Institutes like ITIs and NGOs can be very helpful for implementation of such schemes. Infrastructure of local mandis also need to be upgraded and all kind of facilities and training should be provided to the management of local mandis to reduce the wastage of goods and increase efficiency. Proper Land Acquisition policies,socio-economic facilities to farmers & proper infrastructure for cold storage & transportation of grains should be on main agenda of Government. Strengthening of Public Distribution System (PDS) would allow a proper chain of demand & supply.

Conclusion The case is made for allowing FDI in retail on the basis of the need to develop better supply-chain network for supporting activities like warehousing, cold storage, transportation and logistics services. It is said that about 40 per cent of fruits and vegetables rot before they can be sold due to lack of cold storage facilities and poor infrastructure. While the facts may be true and infrastructure and development

needs are also undeniable, the belief that it can be developed only by allowing FDI is unfounded. It is the failure of all governments since the last green revolution that they are not able to provide any major reform in agriculture and related sectors. Now to hide their failure and inability to provide better infrastructure they are taking the help of foreign players whose very existence is based on making profit for their shareholders. Studies suggest that wherever these retail chains have opened the growth of nearby areas have come down compared to the average growth of the region. So the government should be more cautious to open the retail sector for FDI as the odds of losing is much higher. This entry was posted in Miscellaneous and tagged FDI, Negative impact of FDI, Retail sector in India byAbhishek. Bookmark the permalink.

Impact of Globalization on Developing Countries and India Impact of Globalizations on Developing Countries and India by Chandrasekaran Balakrishnan Chandrasekaran Balakrishnan for The 2004 Moffatt Prize in Economics

Introduction: 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 break-up of the former Soviet Union and the global trend towards the rolling ball. The frontiers of the state with increased reliance on the market economy and renewed faith in the private capital and resources, a process of structural adjustment spurred by the studies and influences of the World Bank and other International organisations have started in many of the developing countries. Also Globalisation has brought in new opportunities to developing countries. Greater access to developed country markets and technology transfer hold out promise improved productivity and higher living standard. But globalisation has also thrown up new challenges like growing inequality across and within nations, volatility in financial market and environmental deteriorations. Another negative aspect of globalisation is that a great majority of developing countries remain removed from the process. Till the nineties the process of globalisation of the Indian economy was constrained by the barriers to trade and investment liberalisation of trade, investment and financial flows initiated in the nineties has progressively lowered the barriers to competition and hastened the pace of globalisation

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Definition: Globalised World - What does it mean? Does it mean the fast movement of people which results in greater interaction? Does it mean that because of IT revolution people can be in touch with each other in any part of the world? Does it mean trade and economy of each country is open in Non-Intrusive way so that all varieties are available to consumer of his choice?

Does it mean that mankind has achieved emancipation to a level of where we can say it means a social, economic and political globalisation? Though the precise definition of globalisation is still unavailable a few definitions worth viewing, Stephen Gill: defines globalisation as the reduction of transaction cost of transborder movements of capital and goods thus of factors of production and goods. Guy Brainbant: says that the process of globalisation not only includes opening up of world trade, development of advanced means of communication, internationalisation of financial markets, growing importance of MNC's, population migrations and more generally increased mobility of persons, goods, capital, data and ideas but also infections, diseases and pollution Impact on India: India opened up the economy in the early nineties following a major crisis that led by a foreign exchange crunch that dragged the economy close to defaulting on loans. The response was a slew of Domestic and external sector policy measures partly prompted by the immediate needs and partly by the demand of the multilateral organisations. The new policy regime radically pushed forward in favour of a more open and market oriented economy. Major 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 market determined exchange rates. Over 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. The Indian tariff rates reduced sharply over the decade from a weighted average of 72.5% in 1991-92 to 24.6 in 1996-97.Though tariff rates went up slowly in the late nineties it touched 35.1% in 2001-02. India is committed to reduced tariff rates. Peak tariff rates are to be reduced to be reduced to the minimum with a peak rate of 20%, in another 2 years most non-tariff barriers have been dismantled by march 2002, including almost all quantitative restrictions. India is Global: The liberalisation of the domestic economy and the increasing integration of India with the global economy have helped step up GDP growth rates, which picked up from 5.6% in 1990-91 to a peak level of 77.8% in 1996-97. Growth rates have slowed down since the country has still be able to achieve 5-6% growth rate in three of the last six years. Though growth rates has slumped to the lowest level 4.3% in 2002-03 mainly because of the worst droughts in two decades the growth rates are expected to go up close to 70% in 2003-04. A Global comparison shows that India is now the fastest growing just after China. This is major improvement given that India is 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 pickup in GDP growth has helped improve India's global position. Consequently 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. Globalisation and Poverty:

Globalisation in the form of increased integration though trade and investment is an important reason why much progress has been made in reducing poverty and global inequality over recent decades. But it is not the only reason for this often unrecognised progress, good national polices, sound institutions and domestic political stability also matter. Despite this progress, poverty remains one of the most serious international challenges we face up to 1.2 billion of the developing world 4.8 billion people still live in extreme poverty. But the proportion of the world population living in poverty has been steadily declining and since 1980 the absolute number of poor people has stopped rising and appears to have fallen in recent years despite strong population growth in poor countries. If the proportion living in poverty had not fallen since 1987 alone a further 215million people would be living in extreme poverty today. India has to concentrate on five important areas or things to follow to achieve this goal. The areas like technological entrepreneurship, new business openings for small and medium enterprises, importance of quality management, new prospects in rural areas and privatisation of financial institutions. The manufacturing of technology and management of technology are two different significant areas in the country. There will be new prospects in rural India. The growth of Indian economy very much depends upon rural participation in the global race. After implementing the new economic policy the role of villages got its own significance because of its unique outlook and branding methods. For example food processing and packaging are the one of the area where new entrepreneurs can enter into a big way. It may be organised in a collective way with the help of co-operatives to meet the global demand. Understanding the current status of globalisation is necessary for setting course for future. For all nations to reap the full benefits of globalisation it is essential to create a level playing field. President Bush's recent proposal to eliminate all tariffs on all manufactured goods by 2015 will do it. In fact it may exacerbate the prevalent inequalities. According to this proposal, tariffs of 5% or less on all manufactured goods will be eliminated by 2005 and higher than 5% will be lowered to 8%. Starting 2010 the 8% tariffs will be lowered each year until they are eliminated by 2015. GDP Growth rate: The Indian economy is passing through a difficult phase caused by several unfavourable domestic and external developments; Domestic output and Demand conditions were adversely affected by poor performance in agriculture in the past two years. The global economy experienced an overall deceleration and recorded an output growth of 2.4% during the past year growth in real GDP in 2001-02 was 5.4% as per the Economic Survey in 2000-01. The performance in the first quarter of the financial year is5.8% and second quarter is 6.1%. Export and Import: India's Export and Import in the year 2001-02 was to the extent of 32,572 and 38,362 million respectively. Many Indian companies have started becoming respectable players in the International scene. Agriculture exports account for about 13 to 18% of total annual of annual export of the country. In 2000-01 Agricultural products valued at more than US $ 6million were exported from the country 23% of which was contributed by the marine products alone. Marine products in recent years have emerged as the single largest contributor to the total agricultural export

from the country accounting for over one fifth of the total agricultural exports. Cereals (mostly basmati rice and non-basmati rice), oil seeds, tea and coffee are the other prominent products each of which accounts fro nearly 5 to 10% of the countrys total agricultural exports. Where does Indian stand in terms of Global Integration? India clearly lags in globalisation. Number of countries has a clear lead among them China, large part of east and far east Asia and eastern Europe. Lets look at a few indicators how much we lag. 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%. 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 labour cost advantages. It is interesting to note the remark made last year by Mr. Bimal Jalan, Governor of RBI. Despite all the talk, we are now where ever close being globalised in terms of any commonly used indicator of globalisation. In fact we are one of the least globalised among the major countries - however we look at it. As Amartya Sen and many other have pointed out that India, as a geographical, politico-cultural entity has been interacting with the outside world throughout history and still continues to do so. It has to adapt, assimilate and contribute. This goes without saying even as we move into what is called a globalised world which is distinguished from previous eras from by faster travel and communication, greater trade linkages, denting of political and economic sovereignty and greater acceptance of democracy as a way of life. Consequences: The implications of globalisation for a national economy are many. Globalisation has intensified interdependence and competition between economies in the world market. This 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 market conditions. Rather, 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. This constrained the policy option available to the government which implies loss of policy autonomy to some extent, in decision-making at the national level. ~ References: Globalisation and Poverty: Centre for International Economics, Australia. WIDER ANNUAL LECTURE 6: Winners and Losers over two centuries of Globalisation: Jeffery G. Williamson. This was an entry for The 2004 Moffatt Prize in Economics. See the contest rules for more information. If you'd like to leave comments about this entry, use the contest feedback form. Make sure to indicate that you are commenting on Chandrasekaran Balakrishnan's "Impact of Globalisation on Developing Countries and

India". Related Articles

FDI brought in large-scale surface mining activities

Over the past decade, there has been a gold rush in Ghana. The mineral sector has attracted over U$2 billion investment in the form of FDI representing over 56%, total FDI to Ghana over the same period for mine expansion and rehabilitation, mineral exploration and mines development, with over 80% of the investment going to the gold mining sector. Over thirteen large-scale gold mines quickly got established, employing cyanide heap-leach processing method and capital intensive machinery with minimal labour requirement. The now privatised state-owned gold mining companies were also bought by the foreigners. It is important to identify the major players, their geographic locations and sources of funding for the mining sector in order to appropriately identify advocacy targets and strategies. Foreign multinational companies coming from diverse national origins including Australian, Canadian, South African, UK and US own the mines and control an average of about 70% shares in these mines with the Ghana government holding 10% free share in each mine with an option to acquire additional

20%. In addition, some of the mining companies in the country have their investments promoted and guaranteed and protected by the World Bank. For examples, the IFC has been among the funding source for large-scale mining industries like Ashanti Goldfields Company expansion, Bogosso Gold Limited (BGL) and Ghana Australian Gold Ltd. (GAG). The table below shows the major mining companies in Ghana, the commodity mined and their ownership.

mpact of FDI on banking Indias financial system has very little exposure to foreign assets and their derivative products and it is this feature that is likely to prove an antidote to the financial sector ills that have plagued many other emerging economies. The global banking industry weathered turbulent times in 2007 and 2008. The impact of the economic slowdown on the banking sector in India has so far been moderate. Owing to at least a decade of reforms, the banking sector in India has seen remarkable improvement in financial health and in providing jobs. Even in the wake of a severe economic downturn, the banking sector continues to be a very dominant sector of the financial system. The aggregate foreign investment in a private bank from all sources is allowed to reach as much as 74% under Indian regulations. The third quarter of 2008 saw the beginning of negative net capital inflows into the country. Notwithstanding this bleak scenario, the investment pattern with regard to foreign direct investment (FDI) and inflows from non-resident Indians remains resilient and FDI inflows into the country grew by an impressive 145% between fiscal 2006 and 2007 and by a respectable 46.6% between fiscal 2007 and 2008. However, owing to the economic downturn, the growth in FDI inflows in fiscal 2009 slowed to 18.6% from the previous fiscal. Despite the surge in investments, the stringent regulatory framework governing FDI has proved to be a significant hindrance. However, FDI norms have been relaxed to a considerable extent with respect to certain sectors. Private banks, for instance. Foreign investment, in addition to technological innovation and expertise, brings with it a plethora of risks. An unwarranted increase in the size of foreign holding in the banking sector will inevitably expose the country to risks not commensurate with those that an emerging market economy such as ours is equipped to grapple with. At the same time, it is important to recognize that FDI in banking can address several issues pertaining to the sector such as encouraging development of innovative financial products, improving the efficiency of the banking sector, better capitalization of banks and better ability to adapt to changing financial market conditions.

The Reserve Bank of India (RBI), has allowed foreign players to set up branches in rural India and take over weak banks with an investment of up to 74 per cent, and further relaxations are on the anvil by 2010, with the second phase of opening expected to com-mence in April 2009. Some of the biggest names in global financial services and banks like Credit Suisse, Rabo Group and ANZ are seeking a banking license in India. The RBI has, in recent months, given fresh banking licenses to UBS - Switzerland's largest bank, Dresdner Bank and United Overseas Bank. ANZ and Rabobank Group, the Dutch Group, is now in the process acquiring a banking license. The Rabobank Group already holds 18.2 per cent stake in another local private bank YES Bank. Some of the existing players such as StanChart, Citi and HSBC, hold India as one of their top markets.
Due to current Global crisis, we expect the deadline for second phase i.e. April 2009 to be extended further. However, banking authorities has not announced about the extension of the phase.