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Transcript

Hello!! Friends in our previous class we were discussing about the economic and legal institutions and their impact on the development of entrepreneurship and various issues associated with the social and political risks were also discussed in our earlier classes. With the background of all those implications in this class we will be discussing about the Globalization and the emerging business or the entrepreneurial environment.

What do you mean by Globalization?

This is the most discussed…we can say. Everybody talks about Globalization but what does it mean?

Globalization is the process of Integration of economies and societies through cross country flow of information, ideas, technologies, goods, services, capital, finance and people. Before the implementation or the acceptance of this globalization so there were good number of restrictions between the countries for regarding the moment of the information, regarding the moment of ideas, technologies, goods, services, even for the moment of the human beings or the individuals. So these restrictions limited the growth of that particular country in contrast to various other countries. So, hence it was thought that let us have a common minimum understanding between various countries which emerged as the process of Globalization. So now there are good numbers of implications of this globalization. There are good numbers of positive aspects of this as well as there are good numbers on negative aspects of this. So understanding the positive as well as the negative aspect of the implications of this globalization helps to develop entrepreneurship among the people. So, why we need to understand the positive aspects because there are good numbers of gains. It may be in terms of the moment of the people or the function or the ideas or the information or technologies or the services or in the terms of capital or there are some negative aspects if the concept is not accepted in its realistic sense so there may be danger of emerging good number of negative aspects of that and that needs to be understood. So that is what we will be discussing in this particular class.

The first issue associated with the globalization is the trade in Goods and Services. According to these standard theories the international trade leads to the allocation of resources that is consistent with the comparative advantage. So a particular country may be rich in resource but they are not having appropriate technology to process it. So that becomes a hindering factor. So hence so if technology is provided to that country so then there will be efficient utilization of that resources so that is how the trade in goods and services are going to be improved. This results in the specialization which enhances the productivity of an individual. The moment you start processing the resources on your on whatever you have it, may be a mineral resource or a human resource or whatever it is so you are enhancing your own productivity so that is what is the things that is accepted from the globalization. Then it is accepted that the international in general is beneficial and restrictive trade practices impede growth. This was the situation prior to 1990s in most of the countries. That the kid of 1990s influenced all the countries to accept this globalization aspect to open it and be part of the development process.

The second issue associated with this is globalization is the moment of capital. Capital mobility enables the total savings of the world to be distributed among the countries which have the highest investment potential. It means a particular geographical location is having the highest investment potential but it’s lacking the resources and globalization is the solution so many people come over there and invest. The inflow of foreign capital will play a significant role in the development. It has already been witnessed in case of many of the countries were there was lack of capital due to the globalization there is increase in capital and those countries also coming under net of development so that’s what is an opportunity for an entrepreneur also. The capital flows can take the form of the foreign direct investment and that is how the current prime minister as well as the previous all leaders of the country have made significant efforts to invite foreign direct investment and there are good number of results also that we have before earned as an effort of all those political leaders in terms of inviting the foreign direct investment to develop the country and to develop the infrastructure so that we can overcome the problems related to infrastructure requested. For developing countries the preferred alternative is foreign direct investment only. Until and unless we invite the investment from various other countries because these developing and the underdeveloped countries are rich with the natural resources. They have enough natural resources but they don’t have appropriate methodology, they don’t have appropriate technology, they don’t have appropriate human resource to make use of that available resources to develop in the form of development and that is how the globalization may help in that direction.

The financial flow is the third aspect associated with the globalization. The rapid movement of the capital market, which is an important feature of the globalization because if you start moving the resources, if you start moving the technologies, if you start moving the ideas, innovations, processes even the individuals so it leads to financial flows from one place to another, so these exchange of the financial inputs from different places so that is lead to development. Growth in capital and foreign exchange markets have facilitated the transfer of resources across the borders, the gross turnover in foreign exchange markets has been extremely large. So, this is how the benefits of globalization can be visualized. With this brief background, so now coming to the implications or the impact of this globalization in Indian context compared to rest of the world.

There are as I have already said, there are positive aspects as well as there are certain negative aspects. So, first let us emphasize on the positive aspect of this globalization. So, when we count the number of richest people or the billionaires in the entire world, so if we take an account of the highest number of billionaires in any country so that is India. So, we live about the so called the most developed nations but the number of billionaires in India is highest compared to any of the other countries, it is 44. When we compare it with the developed nations like the Japan which is having only 24, China 17, France 14, Italy 14. So, how this 44 billionaires are contributing for the development of the nation. So let us look into the original scenario. These 44 billionaires are having the assets worth their cumulative worth is of Rs 7.50 lakh crores. On the contrary what we are talking of the socialistic economy or the Government or the Public sector economy the 91 public sector undertakings owned by the Government of India, if we accumulate their total asset which comes to be around 3.93 lakh crores. When we look into the number of units it is almost half the private sector and when we look into the accumulation of the amount it is almost double. So this is what is the efficiency that we think of the private sector and the impact of globalization on the development.

Now after this positive aspect coming to the negative aspect of the globalization. How it is influencing India in general and agriculture in particular? So let us start with the average – farm holding. The size of the average land is decreasing over a period of time which is coming to around 1.16 hectares in the year 2010-11 earlier it was 1.23 hectares in 2005-06, and 2.28 hectares in 1970-71. It means over a period of time there is constant decline in the average amount of land that is being owned by. So, this is due to land fragmentation as we have already discussed. So as an impact of globalization the person who was rich is becoming richer and developing as billionaire in the world market and the person who was poor is becoming poorer over the period of time so this is another drawback or the dark side of the negative effect of the globalization that we can say.

The acreage remains same in the last 40 years to around 140 million hectare which is the arable land or the cultivable land but the number of farmers has gone to 7 crore to 14 crores over the period of times in the period of 40 years. So it means the pressure on the same piece of land is increasing. Then another important issue is there is more iniquitous distribution of income among the countries as well as within the countries. This we have already seen in case of the number of billionaires. As an outcome of the globalization the person who is getting an opportunity is becoming more richer so that is how we said that there is unequal distribution of income among the countries as well as within the countries. The rich countries are becoming richer, the rich individuals are becoming richer and the poor countries are becoming more poorer and poor individuals are becoming more poorer. So this is what is another impact of globalization. So may be the reason behind this particular thing is opportunities are equal for the rich country as well as the poor country as a part of the globalization but the rich countries or the resourceful people are perceiving and are accepting the opportunities in advance compared to poorer countries because of lack of resources and because they are lacking good number of opportunities to catch hold of those enterprising options which are prevalent in the environment. This particular situation leads to the loss of national sovereignty also and the countries are finding it difficult to follow independent domestic policies. As a part of the globalization we are all bound by certain sets of rules and regulation which are imposed by the international community wherein we are also a signatory. It does not mean that we are out of that particular process and international countries imposing on us, NO. We are all party to that process of globalization because we are party to that and the set of rules and regulation to be followed, so that is making us to lose our national sovereignty and we cannot even form our own rules and regulations in our own country because we are bound by the international framework. And because of that poor countries are facing good number of problem but this problem can be overcome by motivating people to be a successful entrepreneur so that they can move around the world and the can accept these entrepreneur opportunities which are available within the country as well as outside the country wherein the other countries also signatory they are going to provide you equal options and accordingly you can come out of this particular negative aspect. So, another important implication of this globalization is the domestic subsidy as far as the agriculture is considered. There is constant pressure on the international community to reduce the subsidy on agriculture. Obviously, as we have said the number of people dependent on agriculture in India is comparative higher.

Study which reveals that “The average European cow gets a subsidy of $2 per day” . The same study also indicates that majority of the population, more than half of the population in most of the developing nations is making their livelihood less than $2 per day. So, when we look into this particular situation obviously the question remains is it is better to be a cow in the European country than a human being in under developing or the developing nations. So, this is what is the status of subsidy. So, the situation has arised because of increased number of people dependent on that particular profession, but when we look into the situation in case of Europe less than 2% of people who are dependent on agriculture in general and animal husbandry the number is still less. So that is how the amount of subsidy that they are getting is comparatively higher. The same amount when we distribute among large number of farmers is going to be a meager amount. With all these positive aspects of highest numbers of billionaires and there is growth of 7 or 8 percent of GDP and impressive growth and all these things. Where exactly India stands in terms of globalization compare to the other similar economies which were comparable to the Indian economy.

The FDI flows in India when we take the foreign direct investment flows in India. It is average to 0.5% of the GDP against 5% in case of China and 5.5% in case of Brazil. It means the opportunities were equal for all these three countries. But some countries grabbed those opportunities in a more competent manner compared to India which could reach only the 5.5% of the GDP. So, this is one of the important factors wherein we are losing many things by accepting the globalization. The foreign direct investment flow into China now exceeds over US $ 50 billion annually. But when we look into the Indian context it is coming to only US $ 4 billion. So, there is a huge difference between India and China as far as the flow of the foreign direct investment is considered. Again we are losing in terms of the investment opportunities in Indian context. India’s share of world merchandise exports increased from .05% to .07% over the past 20 years. In the same period the China has increased its share to almost 4%. You see the difference .7% and 4% increase. So the increase in case of Indian context is marginal compared to other developing and the just developed nations. So it means again we are losing opportunities of globalization or the global integration. Why we are having such dismal performance in case of the international scenario. According to the study conducted by the international monetary fund which estimates that India is under trading by 70-80% of given size. It means so whatever the issues what we are facing so it is because of our inefficiency only because we are under trading to the extent of 70 to 80 % of our potential and this is what is the reason behind. So under such circumstances development of entrepreneurship becomes the most viable alternative so that we can overcome the situations.

So to conclude globalization has intensified the interdependence and competition between economies in the world market. So, this is reflected in interdependence in regard to trading goods and services and in movement of capital. As a result domestic economic developments are not determined entirely by the domestic policies and market conditions. Even though there is international influence as we are also party to that and we can also have the power of influencing the policies of the other countries with our own interventions. So, that type of moment is there but when we look into the gains and the losses as on date India is losing to the maximum extent compared to its gains. Yes, obviously there are gains but the losing part is comparatively higher that can be overcome by the development of entrepnuership abilities among the youth, among the farmers and various sections of the society.

So, in the next class we will be discussing about the concept of the entrepnuer and we will try to understand what exactly the entrepreneur means and what the difference between entrepreneurship and the entrepunuer behavior is.

Thank You”>