CA Foundation Business & Commercial Knowledge Study Material Chapter 4 Government Policies for Business – Meaning of Globalization

Meaning of Globalization

Globalization means reduction or removal of Government restrictions on the movement of goods and services, capital, technology and talent across national borders. It is the process of increasing economic interdependence between countries and their economic integration in the form of world economy. Markets become international and global firms consider the whole world as one market.

Globalization in India – Trends and Issues

The process of globalization of Indian economy began largely in 1991 due to the unprecedented balance of payments crisis. Since then the pace of globalization has gained momentum:

  • Foreign Direct Investment upto 100 per cent is now permitted in specified sectors.
  • Foreign investors can invest in Indian companies through GDRs without any lock-in period.
  • Indian companies are allowed to get themselves listed on overseas stock exchanges.
  • Guidelines for Euro issues were liberalised.
  • The Foreign Exchange Management Act (FEMA) has replaced the Foreign Exchange Regulations Act (FERA).

Impact of Globalization of Indian Economy

Globalization has made India a huge consumer market. There has been rapid increase in GDP and India’s exports. India has emerged as one of the fastest growing economies in the world. Our foreign exchange reserves are now huge and there has been rapid increase in foreign direct investment (FDI).


Positive Effects

  • Expansion of market
  • Growth of independent money market
  • Free flow of resources
  • Advancements in technology
  • Equilibrium in balance of payments
  • Development of infrastructure
  • Fligher living standards
  • International cooperation

Negative Effects

  • Cut-throat competition
  • Rise in monopoly
  • Increase in inequalities
  • Takeover of domestic firms
  • Removal of protection to domestic firms
  • Affect on national sovereignty