Let us make an in-depth study of the Globalisation:- 1. Meaning of Globalisation 2. Arguments in Favour of Globalisation 3. Arguments Against Globalisation.

Meaning of Globalisation:

Globalisation is a process of increasing integration and growing economic ‘interdependence’ of countries worldwide.

It refers to “the expansion of economic activities across political boundaries of nation states.”

Its important attribute is its increasing degree of openness of domestic economies.


It is associated not only with the increasing cross-border movement of goods and services, capital and technology, information and people but also with an organisation of economic activities which straddles national boundaries. Its three broad dimensions are international trade, international investment, and international finance.

Thus, globalisation brings about changes through these three channels that impart dynamism in the economy.

First is the export earnings. Through liberalisation of tariff and trade, export-oriented industries are required to be developed.

Second is the foreign capital flow, mainly via multinational corporations (MNCs) that bring technology.


Third is the deregulation of financial sector so that cross border mobility of resources gets momentum. In addition, trade policy, exchange rate policy, industrial policy, etc. are all relaxed. As the process of globalisation strengthens, all producers depend on global networks which establish links from the stage of raw materials to the final stage of delivery and marketing.

Globalisation also refers to the adoption of market-friendly approach, thereby making the economy more open and competitive. It is to be kept in mind that globalisation does not remove planning or state authority in regulation and control of the economy.

Arguments in Favour of Globalisation:

At the outset, one must say that globalisation is a controversial issue because it impinges both gains and pains. We will first put forward the arguments favouring globalisation.

i. Globalisation is expected to promote efficiency, productivity and, hence, higher economic growth rate. In a controlled and regulated economy, there is no inducement to the industries to become efficient and self-reliant as these are protected from foreign competition through import restrictions and from domestic competition through industrial licensing. Globalisation has one pillar of liberalisation. Liberalisation and the market principles improve the allocative efficiency of resources. This will increase export earnings, allow the inflow of foreign capital and technology. Industries and farm sector, banking and financial sectors are then exposed to international competition. Competition enhances efficiency, productivity and ultimately a better economic growth rate is likely to be achieved.


ii. As far as consumers are concerned, quality goods at the right price will be delivered. This helps to bring down prices. Quality improvement and price reduction will then be enjoyed.

iii. Foreign capital is attracted. It augurs the advent of multinational enterprises (MNEs) who bring modern up-to-date technology in less developed countries. Not only MNCs bring with them modern technology but also it brings investment funds, organisational structure, managerial culture, distribution network, etc. All these create income and employment in the country.

Arguments Against Globalisation:

Critics argue that globalisation cannot make any dent on poverty reduction, employment generation, export promotion, foreign direct investment and growth rates of the economy. Critics perceive threat of the global market manifested in terms of falling rate of growth, industrial recession especially in America and some major industrial countries and poor rate of growth of export.

i. It is feared that globalisation will promote fierce and unhealthy competition. Instead of competition and cooperation, one may argue that MNCs will swallow the domestic producers of poor backward countries overtime. Ultimately, this will cause concentration of economic and political power into the hands of the foreign business enterprises.

ii. Merely opening up the domestic economy without reaching out to foreign markets or helping industries to meet the global challenges has limited the benefits of globalisation without reducing its costs.

iii. The apparent increase in export earnings of the less developed countries as a consequence of globalisation is not expected to provide great benefits, particularly those in the lower income brackets. Further, modern technologies used by the MNCs have the potentiality of making the unemployment situation worse.

This widens inequalities in the distribution of income and wealth. In India, food, employment and health scenarios have been adversely affected for the poor people as a consequence of new economic policy reforms introduced in the 1990s. Above all, integration of the domestic economy into the world economy provides larger benefits to the developed countries than to the LDCs.

iv. Foreign capital is not interested in producing goods that an underdeveloped country requires. Globalisation then distorts production structure of an economy.

Thus, the policy of globalisation should be pursued with caution since there is no escape from globalisation in today’s interconnected and interdependent world. It is necessary that economies must open up much more. But, this should be done much more critically. Globalisa­tion is not the panacea for all the ills from which an economy suffers. There are other measures too that can hardly be bypassed to achieve a higher growth rate.