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International Journal of Management and Social Sciences Research (IJMSSR) ISSN: 2319-4421 Volume 4, No. 6, June 2015

i-Explore International Research Journal Consortium www.irjcjournals.org

83

Globalization and Liberalization - Emerging Issues and

Challenges

Sonika, Assistant Professor, Om Institute of Technology and Management, Hisar, Haryana

Anu Rani, Assistant Professor, Govt. P. G. College, Bhiwani, Haryana

ABSTRACT Globalization can be seen as one of the most important

force impacting on the economyGlobalization means

economic Globalization of economy of a country and it

exert pressure on the government to become more publicly

accountable, competitive and responsive to citizens. The

UN document defines Globalization as increased and

intensified flows between countries‟. These flows are of

goods, services, capital, ideas, information and people,

which produce national cross-border integration of a

number of economic, social and cultural activities. The

primary objective of liberalization is to free from the

restrictions on production, expansion and following of

rigid rules and regulations. This paper attempts to

examine the issues and challenges of Globalization and

liberalization on Indian economic growth and

development. The increase of multinational companies is

one of essential features of economic Globalization; a part

of the document is devoted to the consideration of their

role in this process. At the end this document, the expected

future challenges in that process are presented.

Keywords Globalization, global economy, aspects of Globalization,

effects of Globalization, dilemmas and challenges.

1. INTRODUCTION

The process of liberalization and globalization has

become a driving force for modern economic development

throughout the world. Both the developed and the

developing economies have been initiating suitable reform

measures in order to make their economies more vibrant

and strategically competitive.With regard to

Globalization, we can simply say that today Globalization

is everything, and everything is Globalization. The current

issue of our times is so controversial, and everything

about it becomes a subject of great polarization and

conflict of rival views.

However, most authors agree that Globalization is nothing

new, that it refers to an old process that began more than

100 years ago (Hirst and Thompson, 1999). The beginning

of these processes can be related to the second half of the

nineteenth century, when thanks to technical and

technological innovation, industrial revolution, the

importance of transportation, costs were drastically

reduced and when it came to the first major trade

liberalization. If we compare this period to the present

day, we can find much similarity. The first phase of

Globalization continued until the beginning of World War

II. Between the two world wars, which marked a major

economic crisis, the Globalizationprocess was terminated;

international flow of goods and capital were reduced due

to the strengthening of protectionism.

After World War II, the Globalization process was again

revived, with institutions like the IMF and the GATT on

the front, acting in the direction of removing trade

barriers and early use of information technologies. Two

sources of Globalization accelerated cross-border flow of

goods and capital. One of them was technological

progress, which reduced communication costs and

barriers of time and space that separated national

markets, and other sources of liberalization.

2. OBJECTIVES

1) To know about the Globalization and liberalization .

2) To know the process of Globalization and

liberalization .

3) To know the impact of Globalization in Indian

economy .

4) To know the impact of liberalization on the Indian

economy .

5) To know about the advantages of Globalization and

liberalization .

6) To provide information about the issue and

challenges of Globalization and liberalization.

3. RESEARCH METHODOLOGY

The data are collected from various sources such as a

website ,books,magazines, newspaper and other relevant

publications to know more about the Globalization and

Liberalization - issues and challenges.

4. GLOBALIZATION

Globalization means linking the national economy with

world economy as an outcome of new economic policy

which has been adopted in 1991, to accelerate the rate of



84

economic growth .The globalization emphasized the

removal of restrictions of licensing, quota and tariffs on

the export and import of goods across the country. It has

brought with it new technologies, quality and quantity of

goods, improved and advanced methods of production and

increased scope of private sectors, especially the

multinational corporations in the country, competitive

environment in the national economy as a mean to

improve the productivity and efficiency of the system. It

has encouraged free mobility of the capital and labour with

increase in the openness, growing economic

interdependence, deepening economic integration in the

world economy.

5. DEFINITION OF GLOBALIZATION

According to BrittanGlobalization is viewed “as a

whirlwind of relentless and disruptive change which

leaves governments helpless and leaves a trail of

economic, social cultural and environmental problems in

its wake.”

The process of Globalization has given rise to greater

competition towards markets and investments. Changes

that are sweeping rapidly across the business world have

forced businesses and nations to adapt by striving to

change old economic behaviours and traditional practices.

The process of Globalization has both positive and

negative effects to different category of economies of the

world. Competition among firms to get a good share of

the large world market leads to; specialization and

efficiency; better quality products at reduced prices;

economies of scale in production; technological and

managerial improvements.

Developed economies are the main actors of globalization

since it is about the expansion of markets for goods and

services.

As an outcome of globalization, the Government of India

has to minimize the controls over the flow of foreign

goods, services, capital, and technology investments and

has to adopt liberal policies for adjustment of investment.

The governmental interference in economic activities has

been declining. The integration of the world market and

rapid technological change led to efficiency gains and

growth. These in turn increased competition through lower

cost and higher market efficiency, higher productivity,

lower barriers to entry and new investment opportunities

in public sector. The importance of transparency in the

governance has been realized and the measures have been

taken to ensure the participation of masses in

developmental processes. Globalization provides a useful

mean to develop technologies necessary for the production

of goods services that improve the well being of the

masses.

World order is rapidly changing due to global structure of

production, trade and communication. Indian

administration is facing structural changes due to

revolution in telecommunication, transportation and

formation of global financial markets.

Modern management processes to increase the efficiency

of the administration have been emphasized. The principle

of hierarchy has been losing its length and got flattened

and downsized, and has been eliminating the need for

levels of bureaucracy and long chain of commands. The

number of employees has been reducing. Traditional

administrative processes of file keeping and pushing,

secrecy in official work, long durations for completion of

work delays, lengthy processes have been replaced with

data processing, automation, transparency, speedy services

with the use of data communication networks. Easy access

of information about administration helps the people to

express their views and opinions. Excessive controls on

administrative activities have been replaced with self

controls and deregulations. Globalization has introduced

structural adjustment programmes, government controls

have been removed over the flow of goods, services,

capital, technology and investments. As a result,

government interference in the economic activities has

been reducing.

The public choice theory has been emerging as most

suitable as against the classical and bureaucratic theories

as up to some extent now people are free to choose the

alternatives to get the services either from public sector or

from private sector. The public –private collaboration is

proving today more beneficial in many sectors. Many

functions of public sectors are being contracted out and

privatized to provide easy and quick services to common

masses. Many functions of the bureaucracy are being

performed by the private and non governmental

organizations and government is concentrating on

developmental functions for the underprivileged.

6. MANAGEMENT PERSPECTIVE OF

GLOBALIZATION

Globalization has led to the practice of management across

culture. Modern business organizations have adopted

Global management practices. Efforts are being made by

India to understand Japanese, Chinese style of

management, Issues in Motivation, communication across

culture has gained significance. Every functional area of

management is being studied with a global perspective.

E.g.: International HRM, International Financial

management, International marketing etc.

7. LIBERALISATION



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Liberalization and deregulation connote different things to

different scholars even in the same group. To some it is

just another name of privatization. To other it meant a

dilution of Reserve Bank or Finance Ministry control. In

fact, liberalization involves freeing prizes, trade and entry

from state controls. Further, free markets do not mean a

complete way to markets. The degree to which an

economy is free can be defined by the scope of state

involvement, either directly by ownership or indirectly by

regulation, in markets for products or services.

Liberalization does not mean that each and every player

should establish offices elsewhere. This is not

liberalization. In fact, liberalization is a mental attitude.

Liberalization is a process by which the economy is

opened up and stringent regulatory measures are relaxed to

a large extent. Earlier no player ever thought of opening a

branch in other countries market as there was absolutely

no role to play in any of those markets. Now everyone has

acquired a global perspective.

Liberalization is not simply allowing the foreigners to

access the vast potential of the Indian market. Actually it

is concerned with opening of the markets which have

immense potential, but this perspective is a limited

perspective and we should go beyond it. We should not

look at liberalization from that limited perspective, viz.

opening up the markets.

Presently in the case of PSBs, there is low productivity,

low profitability and low morale and it is not possible for

PSBs to enter the international market and think in the

terms of doing business internationally. Only by

improving their functioning PSBs can really equate

themselves with any international bank and think in terms

of competing with them in the international market place.

If they do not change their working style, they cannot

operate even in their own country as they will be

swallowed by some strong international banking

institution in the near future.

Various drastic changes are taking place the world-over

and attention has been focused on liberalization and

deregulation.

8. OBJECTIVE OF LIBERALISATION

The main objective is to give a greater role to market

forces in improving a locative efficiency, removing

distortions caused by unrealistic pricing, strengthening the

viability of financial institutions to enable them to

compete and withstand disintermediation and to create,

competitive environment conducive to innovation and

growth. With the lowering of trade barriers and growing

cross-border flows, markets are becoming global, and

profitability and productivity have become the corner

stones.

After a survey of experiences of financial sector reform in

nine Asian countries, Tseng and Corker concluded that

overall financial liberalization and monitory policy reform

have contributed to more efficient financial systems and

have enhanced the effectiveness and flexibility of

monitory policy.

In India, with a view to gaining the twin goals of

macroeconomic stabilization and structural adjustments,

the process of reforms – fiscal, financial, monetary and

industrial – was set in motion with great zeal in mid-1991.

Owing to these reforms the entire competitive structure of

the economic system has witnessed a major change.

9. IMPACT OF GLOBALIZATION

Public-Private partnership

Competition in public sector

Efficiency

Effectiveness

Transparency

Responsiveness

Accountability

People participation

Business principles

Specialization

Use of IT

Increase in productivity

Decrease in number of employees

10. IMPACT OF LIBERALIZATION Flexibility in policies

Increase in production

Lessen burden of work on administration

Increase in creativity

New experiments

Loosen the control of administration on economic

and commercial activities

11. ADVANTAGES OF GLOBALIZATION

1) The growth of international integration of markets

of goods, services and capital, which is achieved

due to the unprecedented scope and intensity of

world trade, global financial flows and the

production of transnational corporations (Held and

McGrew, 2000)

2) The encouragement of a new global division of

labour, which is due to a number of manufacturing

processes to reallocate global scale (Dicken, 1998)

3) Greater freedom of movement of goods (lowering

barriers to international flows of goods and

services, which resulted in increased interest in

international specialization and has led to rapid

expansion of international economic transactions)



86

4) Strengthening the intensity of international

competition, radical reduction of transport and

communication costs (Strange, 1996) due to

significant investments in infrastructure (road

networks, ports and airports, warehouses, modern

equipment and technology, etc.)

5) The efficient allocation of savings, and greater

mobilization of savings through a more open

approach to the increasing number of financial

instruments in different markets - financial

Globalization (International Economy, 2011; Singh,

2012)

6) Easy access to foreign products allows opting

between wide quality range at lower cost; the strong

integration of national economies into the world

economy through trade; higher education level

(Hickman and Olney, 2011; Koirala-Azad and

Blundell, 2011).

12. ADVANTAGES OF LIBERALISATION

Liberalization can well be considered an investment in the

future financial well being of a nation. It helps the banking

industry as a whole by providing:

1) Increased financial flexibilities of firms.

2) Reduced transaction costs.

3) Improved allocation efficiency.

4) Attraction of new capital to financial

intermediaries.

5) Stronger and more competitive banking institutions.

6) Better and diversified portfolios.

7) More effective conduct of monetary policy.

8) Meaningful competition in banking services by

allowing greater role to private sector and foreign

banks.

9) Technological up-gradation of banks through wide

use of computers and modern communication

systems.

10) Removing major regulatory impediments to

profitable working of banks.

11) Relaxation in the regulations covering foreign

investment and foreign exchange.

12) Easy access to foreign capital.

13. THE CHALLENGES AND

OPPORTUNITIES OF TRADE

LIBERALIZATION AND

GLOBALIZATION

Before being able to assess the appropriateness and

adequacy of the regional response, it is necessary to be

clear about the nature of the challenges posed by trade

liberalization and Globalization. These arepresented in

summary form below:

1) Increased economic competition as a result of the

dismantling of trade.

2) Preferences of some of the Region’s major export

commodities and the general lowering of trade

barriers.

3) Additional trade liberalization initiatives in the not

too distant future (WTO,FTAA, EPA).

4) Pressure on external sector performance as a result

of contributing to increased external borrowing,

higher external debt.

5) As a result of stagnation, decline andsignificant

economic adjustment in some industries – bananas,

sugar, manufacturing.

6) Reduced real income growth as a result of the

inability to compete.

7) Reduced employment, increasing poverty and

income inequality against a background of

substantial poverty in some countries.

8) Increased pace of economic change forced by the

acceleration of technological development.

9) Reduced policy flexibility as a result of the new

international norms of good governance (essentially

the rules of the Washington Consensus).

10) The foregoing list is by no means exhaustive but

purpose to capture the major challenges presented

to the Region by the processes of trade

liberalization and Globalization.

11) While the foregoing list attests to the difficulties

arising from trade liberalization and Globalization,

it is important at the same time to remember that

the new international regime also offers substantial

opportunities which the Region should prepare

itself to take advantage of. These include:

Substantially increased opportunities for trade

growth, commodity and market diversification as a

result of trade liberalization.

12) The potential for substantially increased private

sector inflows if the appropriate policies and

safeguards are in place, a very important

opportunity, given the decline in donor inflows in

recent years.

13) Expanded opportunities for the exploitation of scale

economies.

14) Increased opportunities for technological

development and productivity enhancements

especially through application of ICT technologies

(e-government, e-commerce etc.)

15) The potential for significantly increased growth and

poverty reduction.

CONCLUSIONS

Attempts to improve the economic conditions through

globalization have been made in our country and

liberalization has also paved the way to achieve maximum

output, quality and value products but regionalism,

communalism and political discretion are the main



87

obstacles in the way to good governance. So the world

politics is thinking about globalization retreat. The

principles of liberalization need to be observed by Indian

administration to face the challenges of globalization and

to maintain its status and significance in our society.

Globalization has become a usual topic in analyses of

contemporary social processes. Upon treating it many

“fall” into a trap due to the fact that Globalization is a

“magic wand” that is a cure for many diseases and

problems. However, it is true that Globalization and

economic liberalization bring some positive effects, but

also certain social and political issues that are the

result of the global functioning of the world economy.

What is absolutely true is that Globalization cannot be

stopped.

Globalization itself is neither good nor bad, neither fair,

nor unfair, it is simply there, present in all spheres of our

lives, whether we like it or not. It is far from being a

perfect solution, but if you look at its alternatives -

isolationism and protectionism, it is not even the worst

solution. Again, Globalization has brought us general

liberalization of trade and financial activities, general

deregulation in terms of minimizing the activities of the

state, the emergence of new actors on the international

scene with an ever-growing influence on international

economic relations (among them, the International

Monetary Fund, the World Trade Organization,

transnational companies). Globalization should not be

considered as a uniform process that reduces all the people

and the environment on the same design and behaviour.

Pessimistic view of Globalization would be that it

destroyed the local culture, and brought wider global

inequalities and greatly worsened the lives of the poor.

Like any other process, Globalization certainly has both

positive and negative effects. Regardless of what some

theorists are inclined to state with regard to a preference of

one or another effect

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m

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