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Impact of Globalization on Poverty: Focus on India


INTRODUCTION

The beginning of globalization in India started in 1991 in order to give a push to the output growth rate and to help recover the Indian economy from the fiscal imbalances and foreign exchange crisis. These reforms brought benefits to the Indian economy in terms of rise in incomes which as expected by scholars did not reach to each section of the economy equally. It is seen that the poor section of the society gets the benefits of globalization in indirect ways unlike the rich class of people. India has gradually grown over time, and now India is one of the fastest growing economies around the world. In terms of the purchasing power parity India became the 4th largest economy in the world.

There can be seen a rapid progress in the civic amenities, because of the high economic growth India is able to achieve. The standard of living of the masses improved because of the increasing per capita income which can be observed post globalization.

Poverty has been a main concern in developed, developing and underdeveloped countries across the globe. Poverty reduction in any country is largely affected by the economic growth of that country. Post globalization India can be seen in a favorable condition for poverty reduction due to an uplift in economic conditions prevailing in the Indian Economy.


DEFINITIONS


Globalization

Author Definition Limitations Rama, 2003 Globalization is simply the combination of changes (in domestic factors of production such as labour and capital) in the way such that the developing countries are able to interact with the rest of the world. The focus is more on the internal factors that are an active participant of globalization. The external factors are not given importance in the definition. The act of government in globalization is also missing. Lalima Singh, 2013 The term globalization refers to the integration of economies of the world through uninhibited trade and financial flows, as also through mutual exchange of technology and knowledge. The major limitation in this definition is that it is a general definition which mainly focuses on trade and exchange of commodities. It is unable to give a complete picture of globalization. Luke Martell, 2017 Globalization is the integration of poor countries into a world economy of open competition. The main concern of the author is with the poor nations, it does not take into account various other factors which directly or indirectly affect every nation in the integrated global village. C. Rangarajan, 2003 Globalization means integration of economies and societies through cross country flow of information, ideas, technologies, goods, a broad sense is services, capital, finance, and the people. The essence of globalization in connectivity in all aspects of human life. Cross border integration can have several dimensions- cultural, social, political, and economic. This definition covers many aspects of Globalization except the financial part.

Thus, incorporating all the above existing definitions of Globalization from another author’s work my own definition for Globalization will be: -

“Globalization includes increased export sales, competition in services, import penetration, foreign direct investment, and fluctuations in exchange rate caused by international capital movements.”

The definition incorporates all the necessary points of functioning, objectives and usage of Globalization.

From this definition it is important to understand that Globalization is a strategic move by countries all around the globe to help boost their economic development and help create an integrated global village.





Poverty


Definition Limitations It was based on a minimum daily requirement of 2,400 and 2,100 calories for an adult in rural and urban areas, respectively. (1970) This definition consists of a bit of a qualitative element, but it is very hard to calculate the population living in adverse poverty or below poverty line. the poverty line for a person was fixed at Rs 328 per month for the rural areas and Rs 454 for the urban areas. (2000) This definition consists of just the quantitative part of poverty. The qualitative part is missing. India's poverty line was Rs 446.68 per capita per month in rural areas and Rs 578.80 per capita per month in urban areas in 2004-05. (Tendulkar Committee) This definition consists of just the quantitative part of poverty. The qualitative part is missing.

Thus, incorporating all the above existing definitions of Poverty from Govt. sources, my own definition for Poverty will be: -

“Poverty is a condition of lack of money. Life meets the basic needs of sustenance. One of the major reasons is unemployment.”

The definition incorporates all the necessary points of Poverty.

From this definition it is important to understand that poverty is the inability of a person to afford 4 essential needs of sustenance of a human. They are as follows:

  • Food

  • Shelter

  • clothing

  • Education

STATEMENT OF PROBLEM

For a long period of time there has been an ongoing debate about the effect of globalization on the poverty level of India. According to a few scholars after 1991 globalization has been one of the key factors in boosting the economic growth in India. The standard of living has improved considerably in the last two decades due to a favorable condition that arises after Globalization. But a few scholars argue that the impact of Globalization on poverty is significantly very low and the credits can not be given to Globalization for the reduction in poverty for the last two decades. Thus this paper will explore different aspects of Globalization and poverty and the impact of globalization as an effective tool to reduce poverty.

Literature review

Globalization, growth, and poverty

Globalization in the Indian context has yielded promising results. After 1991 when the economy opened up its doors to the world, growth has been quite remarkable.

India’s position as an economy has largely improved to the 7th largest in 2019. The country’s GDP in the purchasing power parity terminology grew by around 1% throughout the 1990s. But the Nominal GDP grew at a positive rate averaging 6% in this time. A rate of growth of higher than 8 May 1945 was an accomplishment by the Indian economy in the year 2003-04. Still there lies a fundamental problem every developing country faces that is Poverty, and also the surest route to sustained poverty reduction is economic growth in conjunction with well-meant and inscribed distribution policies. This clearly supports the need of carefully implemented efficient policy frameworks that would bring in globalization but also restrict poverty. The globalization process puts obligations on 3 major groups which are in constant attempt to interlink global systems. They are –

  • The rich and prosperous Governments of the Rich and Powerful nations

  • The People who confirm the intellectual climate, which incorporates this audience however additionally government and nongovernment organizations and individuals

  • The poor governments of Developing and underdeveloped nations. Here namely the WHO exercises a lot of diplomatic power in nation policy formation.

(Lalima Singh, 2013)

As part of India’s new Liberalization, Privatization & Globalization Policy, the Planning Commission had taken some Relentless policies which became an obstruction in the path of Growth & Development. Majorly the Industrial Sector was heavily Regularized post 1991 with the Government shrinking its complete authority in only 3 Sectors. The main focus has shifted from Equitable production to only growth. The government over the years have started disinvesting in its Companies or has started to allow private production. All this is done to provide efficiency to the Secondary Industrial sector. The government further has reduced trade restrictions in foreign Trade to ramp up economic growth. The incidence of poverty in rural India declined from 45.61 per cent in 1984 to 37.27 per cent in 1995. Between 1993 and 2000, it declined by 10.18 percentage points, the extent of fall being larger than within the previous amount. This trend is equivalent even in urban India. The decline in poverty has been accompanied by a rise within the average per capita consumption expenditure, which rose by 17.8 % and 11.7% per cent (in constant prices) over 1984 through 1994 and 1994 through 2000 respectively. Gross Domestic Product per capita were pushed up to 26.5% and

26.3% over identical periods. All this has been accompanied with rapid

Urbanization, that is the number of people living in urban areas to total population. Workforce participation rate, that is defined as the principal plus subsidiary standing employee as a percentage of total population, remained more or less identical in the rural areas within the initial subperiod, whereas it declined by almost 2.5 % within the second subperiod. On the opposite hand, within the urban areas, it inflated marginally by 0.5 decimal point in initial period and fell afterwards by almost 1% throughout the exercise. (A. Mitra, 2006)