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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)

Globalization, Foreign investment, trade, and poverty

“Globalization gives rise to the creation, production, distribution and consumption of goods and services on an unprecedented scale. That process is meant to increase economic activity for people, enterprises and countries through free international trade, direct foreign investment, and capital market flows”. For a developing nation on the path of stable economic growth, opening up avenues of investment and flow of capital into unutilized natural resources can be both rewarding or exploitative in nature. There is evidence and arguments that economic integration and easy capital flow has enormous gains in styles of risk sharing opportunities in corporations, complimentary issue endowments and encouragement to savings, investments, and innovations. We all are aware how the South East Asian Tigers enjoyed massive economic growth due to the advantages of Free movement of Capital and Economic Integration in the 1980's. Later China and then India too achieved high growth rates despite somewhat restricted and relative capital account liberalization. Free trade and Easy Inflow of Foreign capital and investments have reduced poverty remarkably. Poverty has fallen in regions wherever SEZs for exports or foreign investments have taken place. In India, opening itself up to foreign investment has resulted in a fair decline in poverty. The fast development of the capital market has been one amongst the important features in today’s Integrated Economic Frameworks.

(Lalima Singh, 2013)

It is noteworthy that the terms and Conditions hooked up to the flow of foreign capital in India and therefore the spheres within which it's being invested with aren't per our national priorities, wants and goals, namely, the wipeout of poverty, employment generation, improvement in social infrastructure about education, health, potable water and equitable distribution of the fruits of the event. On the contrary the only aim of foreign capital is to capture our economy. Throughout the process of globalization, India mustn't lose its important national interests, priorities and additionally the manipulations of foreign investors. Economic reforms while not human face under the pressure of the method of globalization can ruin us. In conjunction with the economic impact, the reform programmed under the method of globalization have additionally affected the social and cultural lifetime of the folks in many countries together with India. Meticulous caution and care ought to be taken in integrating the Indian economy with the international economy. Globalization ought to be addressed to the advantage of the country. In response to the challenges of globalization, liberalization and privatization within the 21st century, the social scientists, political leaders, business tycoons, natural scientists, bureaucrats and investors of capital on worldwide level ought to close and examine the substantive implications for the profit of the entire human kind.

(Gurappa Naidu, 2006)

Globalization, employment and rural to urban movement

Among many challenges one of the major ones is Population Mobility which is influenced greatly by Economic growth. The economic disparity between the Urban and Rural centers is one of the major reasons Migration takes place. This is because people move into Urban Centers due to access to better facilities and greater employment prospects. Total poverty can be calculated as the weighted average of both rural and urban areas. Also, there are specific poverty ratios, the net result of population mobility on poverty depends on the changes in its rural and urban elements. Since the benefits of the Economic Reforms are deeply concentrated in urban centers, the comprehensive composition of growth is very different. This leads to a migration of people from rural to urban areas. The decline within the incidence of poverty (rural and urban combined) depends on whether or not urban employment opportunities are vast in number so as to ensure that there are enough to soak up the increasing strain of labour from rural India. A large number of empirical studies prove that rural migrants are able to escape poverty, although they may not promote themselves into the urban formal sector (Banerjee 1986; Mitra 1994, 2003; Papola 1981). Even when the incidence of urban poverty rises thanks to rural-urban migration, the decline within overall poverty is also evident with a decline in rural poverty incidence occurring in response to emigration.

(N. R. Bhanumurthy and A. Mitra, 2006)

A huge chunk relating to the overall Economic reforms has been the Industrial Sector. Numerous activities that were once part of a huge comprehensive industrial outlay are now being outsourced. Leading to new participation and formation of the Tertiary Sector. This would, therefore, concern a careful interpretation of the tertiary sector instead of treating it strictly as redundant. In alternative words, the Service sector of value added goods and services may additionally play a major role in poverty reduction because it will generate employment and at the same time enhance real financial gain. Alternatively, within the context of poverty reduction, the dynamic composition of growth doesn't imply an increase solely within the share of industry, but both the Industrial and Service sector that has shrunk the importance of the Primary Sector.

(Ravallion and Datt 1996)

As far as the labor market is concerned, the impact of globalization on Indian economy is deteriorating. Here, the question is extremely clear that once globalization was directly or indirectly meant to extend the welfare of the people, then why is 29.5% of the population still poor? Furthermore, the share of the poor might be exaggerated, if multidimensional poverty is taken into consideration. The estimates of the multidimensional poverty index show that around 55.3% of India’s population suffers from multidimensional poverty. Growth mustn't come about at the stake of employment of the people. As Marx noted, capitalist economy continually contains a negative implication on the labour category. This is often what's happening under globalization. Capitalism-led competition has resulted in a capital deepening technique of production. Moreover, oversupply of labour has forced the wages down and raised the casualization of manpower. The concept of pro-poor growth envisages acceleration in economic growth with concomitant growth in a job opportunity for the poor. This will be achieved once productivity growth, employment growth, and rise in real wages come about at the same time and at a fast pace.

(Jasbir Singh, 2017).

The Highly educated workforce is shifting to the high valued and efficient entities in the economy, notably within the Industrial and Service sector. Recently, economists have started observing the rising role of education in economic outcomes. The extremely educated, and solely them, are enjoying additional job opportunities and higher incomes. Competition for educated and skilled employees in the Formal Sector often spills over to the Unorganized Sector thus raising incomes there, raising incomes within the high-value-added parts of that sector. However, with fewer jobs within the lower-value-added a part of the formal sector, competition for similar jobs within the non-tradable sector is increasing. This, in turn, further depresses financial gain growth within the lower-value-added part of the non tradable sector. Thus, the evolving structure of a globalized economy has numerous implications for different groups of individuals. Opportunities are increasing for the highly educated throughout the economy. It is said that through higher economic growth and development there will be an overall increase in employment opportunities on both the formal and informal sectors of the economy. However, opportunities are shrinking for the less educated unemployed workers. (Michael Spence,2011)

Globalization, rural poverty, and Agricultural sector

Alongside overall growth, composition of growth is also important for poverty reduction. If the rural poor people are focused completely within the agricultural sector, it's natural that poverty will reduce due to agriculture led growth. However, as Kuznets (1966) points out, in the process of developing the economy, both the value-added mix and work force structure shift off significantly from agriculture.

Therefore, advising a growth led by agriculture could also be counter intuitive. Therefore, one may recommend that the development and expansion of economic sectors or that of the overall commodity-producing sector plays a very important role in uplifting those living under poverty. (N. R. Bhanumurthy and A. Mitra, 2006)

Agricultural Sector is the main source of income for rural Indian economy around which socio-economic deprivations and privileges revolve and any change in its structure is likely to have an influence on the social equity pattern which exists in the society. The concept of globalization was introduced in Indian Economy in 1991 when India was at the brink of a dangerous Economic Crisis. The IMF was ready to Give India a ‘Structural Adjustment Loan’ which is defined to be a loan hooked with few conditions enforcing structural change in the economy. The reforms were basically Liberalization, Privatization, Globalization.



Research Gap

From the above literature review it can be evidently seen that the impact of Globalization on poverty is indirect in nature. This paper aims to identify the direct impacts of Globalization in poverty in India and the various direct implications of

it to help eradicate the problem of poverty prevailing in the nation.

CONCLUSION

This paper concludes to a positive relation between Globalization and poverty. Indian Economy consists of a lot of unskilled workers, and people living under poverty. The integration of the global economy has raised the demand of educated skilled workers. Poverty and education being two of the primary issues prevailing in India are the reasons for hindering growth in the state. For the impact of globalization to be felt by the lower class, they must participate in the global economy through proper skill and education. In this way we can have our dream of poverty free India soon.


REFRENCES Lalima Singh (2013), GLOBALIZATION AND POVERTY IN INDIA • JULIA HEINZE (2020), The Impact of Globalisation on Poverty and Inequality in the Global South • Michael Spence (2011), The Impact of Globalization on Income and Employment: The Downside of Integrating Markets • Jasbir Singh (2017), Employment Generation under Globalization in India: Adverse Implications of Capitalism • Melinda Mills (2009), Globalization and Inequality • Y. Gurappa Naidu (2006), GLOBALISATION AND ITS IMPACT ON INDIAN SOCIETY • Ruddar Datt (2005), FROM UNFAIR TO FAIR GLOBALIZATION: FOCUS ON INDIA • Krishn A Goyal (2006), Impact of Globalization on Developing Countries • N. R. Bhanumurthy and A. Mitra (2006), Globalization, Growth and Poverty in India • Rama M. (2003), Globalization and Workers in Developing Countries • Globalization and its impact on Indian Economy: Developments and Challenges • Rijo M. John and Rohit Mutatkar (2005), Statewise Estimates of Poverty among Religious Groups in India•

BY: NANCY SINGH SURYAVANSHI

COLLEGE: NARSEE MONJEE INSTITUTE OF MANAGEMENT STUDIES

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