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Characteristics:Globalization /

internationalisation hasbecome identified with anumber of trends, most of which may have developedsince World War II. These

include greater internationalmovement of commodities,money, information, andpeople; and the developmentof technology, organizations,

legal systems, andinfrastructures to allow thismovement. The actualexistence of some of thesetrends is debated.

• Economically o Increase in international

trade at a much faster rate

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than the growth in theworld economy 

o

Increase in internationalflow of capital includingforeign direct investment 

o Creation of internationalagreements leading to

organizations like the WTO and OPEC 

o Development of globalfinancial systems 

o Increased role of 

international organizationssuch as WTO, WIPO, IMF that deal with internationaltransactions 

o Increase of economic

practices like outsourcing,by multinationalcorporations 

• Culturally 

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o Greater internationalcultural exchange, 

o

Spreading of multiculturalism, andbetter individual access tocultural diversity, forexample through the

export of Hollywood andBollywood movies.However, the importedculture can easily supplantthe local culture, causing

reduction in diversitythrough hybridization oreven assimilation. Themost prominent form of this is Westernization, but

Sinicization of cultures alsotakes place. o Greater international travel 

and tourism 

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o Greater immigration,including illegal

immigration o Spread of local foods such

as pizza, Chinese andIndian food/Pakistani Foodto other countries (often

adapted to local taste) o World-wide Fads and Pop

Culture such as Pokemon,Sudoku, Numa Numa,Origami, Idol series,

 YouTube, MySpace, andmany others. o Increasing usage of foriegn

phrases. Example..."Amigo" and "Adios" are

Spanish terms many non-speaking spanish people inthe US understand, MostAmericans understand

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some French, Spanish or Japanese without actually

knowing the language. • Development of a greater

transborder data flow, usingsuch technologies as theInternet, communication

satellites and telephones • Increase in the number of 

standards applied globally;e.g. copyright laws andpatents 

•

Formation or development of a set of universal values •  The push by many advocates

for an international criminalcourt and international justice

movements 

Barriers to international tradehave been considerably lowered

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since World War II throughinternational agreements such

as the General Agreement on Tariffs and Trade (GATT).Particular initiatives carried outas a result of GATT and theWTO, for which GATT is the

foundation, have included:• Promotion of free trade 

o Of goods:  Reduction or elimination

of tariffs; construction of 

free trade zones withsmall or no tariffs 

Reduced transportationcosts, especially fromdevelopment of 

containerization forocean shipping.

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o Of capital: reduction orelimination of capital

controls o Reduction, elimination, or

harmonization of subsidies for local businesses 

• Intellectual property

restrictions o Harmonization of 

intellectual property lawsacross nations (generallyspeaking, with more

restrictions)o Supranational recognition

of intellectual propertyrestrictions (e.g. patents granted by China would be

recognized in the US) 

Anti-globalization:Critics of the economic aspects of 

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globalization contend that it isnot, as its proponents tend to

imply, an inexorable process thatflows naturally from theeconomic needs of everyone. Thecritics typically emphasize thatglobalization is a process that is

mediated according to eliteimperatives, and typically raisethe possibility of alternativeglobal institutions and policies,which they believe address the

moral claims of poor and workingclasses throughout the globe, aswell as environmental concernsin a more equitable way. In termsof the controversial global

migration issue, disputes revolvearound both its causes, whetherand to what extent it is voluntaryor involuntary, necessary or

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unnecessary Increase ininternational flow of capital

including foreign directinvestment Critics of theeconomic aspects of globalizationcontend that it is not, as itsproponents tend to imply, an

inexorable process that flowsnaturally from the economicneeds of everyone. The criticstypically emphasize thatglobalization is a process that is

mediated according to eliteimperatives, and typically raisethe possibility of alternativeglobal institutions and policies,which they believe address the

moral claims of poor and workingclasses throughout the globe, aswell as environmental concernsin a more equitable way. In terms

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of the controversial globalmigration issue, disputes revolve

around both its causes, whetherand to what extent it is voluntaryor involuntary, necessary orunnecessary; and its effects,whether beneficial, or socially

and environmentally costly.Proponents tend to see migrationsimply as a process wherebywhite and blue collar workersmay go from one country to

another to provide their services,while critics tend to emphasizenegative causes such aseconomic, political, andenvironmental insecurity, and

cite as one notable effect, thelink between migration and theenormous growth of urban slumsin developing countries.

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According to "The Challenge of Slums," a 2003 UN-Habitat

report, "the cyclical nature of capitalism, increased demand forskilled versus unskilled labour,and the negative effects of globalisation "in particular, global

economic booms and busts thatratchet up inequality anddistribute new wealth unevenly"contribute to the enormousgrowth of slums.

Various aspects of globalizationare seen as harmful by public-interest activists as well asstrong state nationalists. Thismovement has no unified name.

"Anti-globalization" is themedia's preferred term; it canlead to some confusion, as

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activists typically oppose certainaspects or forms of 

globalization, not globalizationper se. Activists themselves, forexample Noam Chomsky, havesaid that this name ismeaningless as the aim of the

movement is to globalize justice.Indeed, the global justicemovement is a common name.Many activists also unite underthe slogan "another world is

possible", which has given riseto names such asaltermondialisme in French.

Economic arguments by fairtrade theorists claim that

unrestricted free trade benefitsthose with more financialleverage (i.e. the rich) at the

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expense of the poor. Many "anti-globalization" activists see

globalization as the promotion of a corporatist agenda, which isintent on constricting thefreedoms of individuals in thename of profit. Some "anti-

globalization" groups argue thatglobalization is necessarilyimperialistic, is one of thedriving reasons behind the Iraqwar and is forcing savings to

flow into the United Statesrather than developing nations;it can therefore be said that"globalization" is another termfor a form of Americanization, as

it is believed by some observersthat the United States could beone of the few countries (if not

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the only one) to truly profit fromglobalization.

Some argue that globalizationimposes credit-basedeconomics, resulting inunsustainable growth of debt and debt crises. The financial

crises in Southeast Asia, thatbegan in the relatively small,debt-ridden economy of  Thailand but quickly spread toMalaysia, Indonesia, South Korea 

and eventually was felt allaround the world, demonstratedthe new risks and volatility inrapidly changing globalizedmarkets. The IMF's subsequent

'bailout' money came withconditions of political change(i.e. government spending

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limits) attached and came to beviewed by critics as undermining

national sovereignty in neo-colonialist  fashion. Anti-Globalization activists pointed tothe meltdowns as proof of thehigh human cost of the

indiscriminate global economy. The main opposition is tounfettered  globalization(neoliberal; laissez-fairecapitalism), guided by

governments and what areclaimed to be quasi-governments (such as theInternational Monetary Fund andthe World Bank) that are

supposedly not held responsibleto the populations that theygovern and instead respond

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mostly to the interests of corporations. Many conferences

between trade and financeministers of the core globalizingnations have been met withlarge, and occasionally violent,protests from opponents of 

"corporate globalism".Some "anti-globalization"activists object to the fact thatthe current "globalization"globalizes money and

corporations, but not people andunions. This can be seen in thestrict immigration controls innearly all countries, and the lackof labour rights in many

countries in the developingworld.

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Another more conservativecamp opposed to globalization is

state-centric nationalists whofear globalization is displacingthe role of nations in globalpolitics and point to NGOs asencroaching upon the power of 

individual nations. Someadvocates of this warrant foranti-globalization are PatBuchanan and Jean-Marie LePen.

 The movement is very broad,including church groups,national liberation factions, left-wing parties, environmentalists,peasant unionists, anti-racism 

groups, anarchists, those insupport of relocalization andothers. Most are reformist,

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(arguing for a more humaneform of capitalism) while others

are more revolutionary (arguingfor a more humane system thancapitalism). Many have decriedthe lack of unity and direction inthe movement, but some such

as Noam Chomsky have claimedthat this lack of centralizationmay in fact be a strength.

Protests by the global justicemovement have forced high-

level international meetingsaway from the major citieswhere they used to be held, intoremote locations where protestis impractical.

Pro-globalization(globalism):Supporters of democratic

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globalization can be labelledpro-globalists. They consider

that the first phase of globalization, which wasmarket-oriented, should becompleted by a phase of building global political

institutions representing thewill of world citizens. Thedifference with otherglobalists is that they do notdefine in advance any

ideology to orient this will,which should be left to thefree choice of those citizensvia a democratic process.

Supporters of free trade point

out that economic theories of comparative advantage suggestthat free trade leads to a more

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efficient allocation of resources,with all countries involved in the

trade benefiting. In general, thisleads to lower prices, moreemployment and higher output.

Libertarians and otherproponents of laissez-faire

capitalism say higher degrees of political and economic freedomin the form of democracy andcapitalism in the developedworld are both ends in

themselves and also producehigher levels of material wealth. They see globalization as thebeneficial spread of liberty andcapitalism.

Critics argue that the anti-globalization movement usesanecdotal evidence to support

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their view and that worldwidestatistics instead strongly

support globalization:• the percentage of people in

developing countries livingbelow US$1 (adjusted forinflation and purchasing

power) per day has halved inonly twenty years, althoughsome critics argue that moredetailed variables measuringpoverty should instead be

studied. • Life expectancy has almost

doubled in the developingworld since WWII and is

starting to close the gap tothe developed world wherethe improvement has beensmaller. Child mortality has

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decreased in everydeveloping region of the

world. Income inequality forthe world as a whole isdiminishing. 

• Democracy has increaseddramatically from almost no

nation with universal suffrage in 1900 to 62.5% of allnations in 2000. 

•  The proportion of the world's

population living in countrieswhere per-capita foodsupplies are less than 2,200calories (9,200 kilojoules) perday decreased from 56% in

the mid-1960s to below 10%by the 1990s. • Between 1950 and 1999,

global literacy increased from

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52% to 81% of the world.Women made up much of the

gap: Female literacy as apercentage of male literacyhas increased from 59% in1970 to 80% in 2000. 

•  The percentage of children in

the labor force has fallen from24% in 1960 to 10% in 2000. 

•  There are similar trends forelectric power, cars, radios,

and telephones per capita, aswell as the proportion of thepopulation with access toclean water. 

However, some of these

improvements may not be dueto globalization, or may bepossible without the currentform of globalization or its

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negative consequences, towhich the global justice

movement objects.Some pro-capitalists are alsocritical of the World Bank andthe IMF, arguing that they arecorrupt bureaucracies controlled

and financed by states, notcorporations. Many loans havebeen given to dictators whonever carried out promisedreforms, instead leaving the

common people to pay thedebts later. They thus see toolittle capitalism, not too much. They also note that some of theresistance to globalization

comes from special interestgroups with conflicting interests,like Western world unions.

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However, there are also manyanti-capitalist who are against

the World Bank and the IMFbecause they believe they aretoo capitalist and only ininterests for profit.

Others, such as Senator Douglas

Roche, O.C., simply viewglobalization as inevitable andadvocate creating institutionssuch as a directly-elected UnitedNations Parliamentary Assembly 

to exercise oversight overunelected international bodies.

Other uses:"Globalization" can mean:

• Globalism, if the concept isreduced to its economicaspects, can be said tocontrast with economic

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nationalism andprotectionism. It is related to

laissez-faire capitalism andneoliberalism. 

• It shares a number of characteristics withinternationalization and is

often used interchangeably,although some prefer to useglobalization to emphasizethe erosion of the nation-state or national boundaries. 

•

Making connections betweenplaces on a global scale. Today, more and more placesaround the world areconnected to each other in

ways that were previouslyunimaginable. In geography,this process is known ascomplex connectivity, where

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more and more places arebeing connected in more and

more ways. Arjun Appadurai identified five types of globalconnectivity: 

o Ethnoscapes: movementsof people, including

tourists, immigrants,refugees, and businesstravellers.

o Financescapes: globalflows of money, often

driven by interconnectedcurrency markets, stockexchanges, andcommodity markets. 

o Ideoscapes: the global

spread of ideas andpolitical ideologies. Forexample, Green Peace has

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become a worldwideenvironmental movement. 

o

Mediascapes: the globaldistribution of mediaimages that appear on ourcomputer screens, innewspapers, television,

and radio. o  Technoscapes: the

movement of technologiesaround the globe. Forexample, the Green

Revolution in ricecultivation introducedwestern farming practicesinto many developingcountries. 

Although Appadurai'staxonomy is highlycontestable, it does serve to

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show that globalization ismuch more than economics

on a global scale.• In its cultural form,

globalization has been a labelused to identify attempts toerode the national cultures of 

Europe, and subsume theminto a global culture whosemembers will be much easierto manipulate through massmedia and controlled

governments. In this context,massive legal or illegalimmigration has beenallowed, mainly in Europeancountries. 

•  The formation of a globalvillage closer contactbetween different parts of the

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world, with increasingpossibilities of personal

exchange, mutualunderstanding and friendshipbetween "world citizens", andcreation of a globalcivilization. 

•

Economic globalization thereare four aspects to economicglobalization, referring to fourdifferent flows acrossboundaries, namely flows of 

goods/services, i.e. 'freetrade' (or at least freer trade),flows of people (migration), of capital, and of technology. Aconsequence of economic

globalization is increasingrelations among members of an industry in different partsof the world (globalization of 

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an industry), with acorresponding erosion of 

national sovereignty in theeconomic sphere. The IMF defines globalization as thegrowing economicinterdependence of countries

worldwide through increasingvolume and variety of cross-border transactions in goodsand services, freerinternational capital flows,

and more rapid andwidespread diffusion of technology (IMF, WorldEconomic Outlook, May,1997). The World Bank 

defines globalization as the"Freedom and ability of individuals and firms toinitiate voluntary economic

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transactions with residents of other countries". 

•

In the field of management,globalization is a marketing orstrategy term that refers tothe emergence of international markets for

consumer goodscharacterized by similarcustomer needs and tastesenabling, for example, sellingthe same cars or soaps or

foods with similar adcampaigns to people indifferent cultures. This usageis contrasted withinternationalization which

describes the activities of multinational companiesdealing across borders ineither financial instruments,

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commodities, or products thatare extensively tailored to

local markets. Globalizationalso means cross-bordermanagement activities ordevelopment processes toadapt to the emergence of a

globalized market or to seekand realize benefit fromeconomies of scale or scopeor from cross-border learningamong different country-

based organizations. • In the field of software,

globalization is a technicalterm that combines thedevelopment processes of 

internationalization andlocalization. • Many, such as participants in

the World Social Forum, use

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the term "corporateglobalization" or "global

corporatization" to highlightthe impact of multinationalcorporations and the use of legal and financial means tocircumvent local laws and

standards, in order toleverage the labor andservices of unequally-developed regions againsteach other. 

•

 The spread of capitalism fromdeveloped to developingnations. 

• "The concept of globalisationrefers both to the

compression of the world andthe intensification of consciousness of the world as

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a whole" - BenediktKiesenhofer 

Measurement of globalization: To what extent a nation-stateor culture is globalized in aparticular year has until most

recently been measuredemploying simple proxies likeflows of trade, migration, orforeign direct investment. Amore sophisticated approach

to measuring globalization isthe recent index calculated bythe Swiss think tank KOF. Theindex measures the threemain dimensions of 

globalization: economic,social, and political. Inaddition to three indices

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measuring these dimensions,an overall index of 

globalization and sub-indicesreferring to actual economicflows, economic restrictions,data on personal contact, dataon information flows, and data

on cultural proximity iscalculated. Data are availableon a yearly basis for 122countries. According to theindex, the world's most

globalized country is the USA,followed by Sweden,Canada, the UnitedKingdom, and Luxembourg. The least globalized countries

according to the KOF-indexare Togo, Chad and theCentral African Republic.

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Global Falsehoods: How theWorld Bank and the UNDP

Distort the Figures on GlobalPoverty:

According to Professor MichelChossudovsky ,until the 1998financial meltdown ("black

September" 1998), the Worldeconomy was said to bebooming under the impetus of the "free market" reforms.Without debate or discussion,

so-called "sound macro-economic policies" (meaning thegamut of budgetary austerity,deregulation, downsizing andprivatisation) continue to be

heralded as the key to economicsuccess and poverty alleviation.In turn, both the World Bank and

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the United Nations DevelopmentProgramme (UNDP) have

asserted authoritatively thateconomic growth in the late20th Century has contributed toa reduction in the levels of World poverty. According to the

UNDP, "the progress in reducingpoverty over the 20th century isremarkable andunprecedented... The keyindicators of human

development have advancedstrongly."

The Devastating Impacts of Macro-economic Reform arecasually denied:

 The increasing levels of globalpoverty resulting from macro-economic reform are casually

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denied by G7 governments andinternational institutions

(including the World Bank andthe IMF); social realities areconcealed, official statistics aremanipulated, economic conceptsare turned upside down.

 The World Bank frameworkdeliberately departs from allestablished concepts andprocedures (eg. by the USBureau of Census or the United

Nations) for measuring poverty.It consists in arbitrarily setting a"poverty threshold" at one dollara day per capita. It thenproceeds (without even

measuring) to deciding thatpopulation groups with a per

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capita income "above one dollara day" are "non-poor".

 The World Bank "methodology"conveniently reduces recordedpoverty without the need forcollecting country-level data. This "subjective" and biased

assessment is carried outirrespective of actual conditionsat the country level. The onedollar a day procedure is absurd:the evidence amply confirms

that population groups with percapita incomes of 2, 3 or even 5dollars a day remain povertystricken (ie. unable to meetbasic expenditures of food,

clothing, shelter, health andeducation).

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Authoritative" World Bank Numbers:

 These authoritative World Banknumbers are those whicheverybody quotes, --ie. 1.3billion people below the povertyline. But nobody seems to have

bothered to examine how theWorld Bank arrives at thesefigures.

 The data is then tabulated inglossy tables with "forecasts" of 

declining levels of global povertyinto the 21st Century. TheseWorld Bank "forecasts" of poverty are based on anassumed rate of growth of per

capita income, --ie. growth of the latter implies pari passu acorresponding lowering of the

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levels of poverty. Its a numericalgame!

The UNDP Framework:While the UNDP HumanDevelopment Group has inprevious years provided theinternational community with a

critical assessment of key issuesof global development, the 1997Human Development Reportdevoted to the eradication of poverty broadly conveys a

similar viewpoint to thatheralded by the Bretton Woodsinstitutions. The UNDP's "humanpoverty index" (HPI) is based on"the most basic dimensions of 

deprivation: a short life span,lack of basic education and lack

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of access to public and privateresources".

Based on the above criteria, theUNDP Human DevelopmentGroup comes up with estimatesof human poverty which aretotally inconsistent with country-

level realties. The HPI forColombia, Mexico or Thailand,for instance, is of order of 10-11percent (see Table 1). The UNDPmeasurements point to

"achievements" in povertyreduction in Sub-Saharan Africa,the Middle East and India whichare totally at odds with country-level data.

 The human poverty estimatesput forth by the UNDP portray aneven more distorted and

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misleading pattern than those of the World Bank). For instance,

only 10.9 percent of Mexico'spopulation are categorised bythe UNDP as "poor". Yet thisestimate contradicts thesituation observed in Mexico

since the mid-1980s: collapse insocial services, impoverishmentof small farmers and themassive decline in real earningstriggered by successive currency

devaluations. A recent OECDstudy confirms unequivocallythe mounting tide of poverty inMexico since the signing of theNorth American Free Trade

Agreement (NAFTA).Double Standards in the"Scientific" Measurement of 

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Poverty:"Double standards" prevail in

the measurement of poverty:the World Bank's one dollar aday criterion applies only to the"developing countries". Both theBank and the UNDP fail to

acknowledge the existence of poverty in Western Europe andNorth America. Moreover, theone dollar a day criterion is inovert contradiction with

established methodologies usedby Western governments andintergovernmental organisationsto define and measure povertyin the "developed countries".

In the West, the methods formeasuring poverty have beenbased on minimum levels of 

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household spending required tomeet essential expenditures on

food, clothing, shelter, healthand education. In the UnitedStates, for instance, the SocialSecurity Administration (SSA) inthe 1960s had set a "poverty

threshold " which consisted of "the cost of a minimumadequate diet multiplied bythree to allow for otherexpenses". This measurement

was based on a broad consensuswithin the US Administration.

Conversely, if the US Bureau of Census methodology (based onthe cost of meeting a minimum

diet) were applied to thedeveloping countries, theoverwhelming majority of the

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population would be categorisedas "poor". While this exercise of 

using "Western standards" anddefinitions has not been appliedin a systematic fashion, it shouldbe noted that with thederegulation of commodity

markets, retail prices of essential consumer goods arenot appreciably lower than inthe US or Western Europe. Thecost of living in many Third

World cities is higher than in theUnited States.

Moreover, household budgetsurveys for several LatinAmerican countries suggest that

at least sixty percent of thepopulation the region does notmeet minimum calorie and

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protein requirements. In Peru,for instance, following the 1990

IMF sponsored "Fujishock", 83percent of the Peruvianpopulation according tohousehold census data wereunable to meet minimum daily

calorie and proteinrequirements. The prevailingsituation in Sub-Saharan Africaand South Asia is more seriouswhere a majority of the

population suffer from chronicundernourishment.

 The investigation on poverty byboth organizations take officialstatistics at face value. It is

largely an "office basedexercise" conducted inWashington and New York with

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few insights or awareness of "what is happening in the field".

 The 1997 UNDP Report points toa decline of one third to a half inchild mortality in selectedcountries of Sub-Saharandespite the slide in State

expenditures and income levels.What it fails to mention,however, is that the closingdown of health clinics and themassive lay-offs of health

professionals (often replaced bysemi-illiterate health volunteers)responsible for compilingmortality data has resulted in ade facto decline in recorded

mortality. The IMF-World Banksponsored macro-economicreforms have also led to a

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collapse in the process of datacollection.

Table 1

SELECT SPEECHES India and Globalisation

This is a truly momentousoccasion in the life of thisInstitute, its students, itsteachers, and its friends. Let mebegin by conveying my heartiest

congratulations to the studentswho are receiving their degreestoday. For all of them, it is aculmination of years of hardwork, and a recognition of their

high academic merit. All the teachers of this greatInstitute, who have put in so

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much time and effort to makethis day possible, also deserve

our gratitude. I would like to specially welcomethe parents of the students, whoare present at this Convocation.

Without some sacrifice and agood deal of support, successfulcompletion of higher studies byyoung men and women, who arehere today, would not have

been possible.I am personally grateful to thePresident of the IndianStatistical Institute, Prof.M.G.K.Menon and Director, Prof.K.B.Sinha, for inviting me to bea part of this occasion. Ascientist, a scholar and a public

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figure, Prof. Menon has led thisInstitute with great distinction.

He has been a source of inspiration for all thoseconnected with ISI and itsteachers and students. It is aparticular privilege and honour

to deliver this address in hisesteemed presence.

On this important occasion, Iwould also like to pay homage

to the memory of ProfessorP.C.Mahalanobis, founder of theISI and the builder of themodern statistical system inIndia. His technical contribution

to the development of statisticsas a science are fundamentaland well known all over theworld. What was even more

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remarkable, in a developingcountry context, was his desire

to use statistical methodsincluding sample surveys tounderstand and solve theproblems of an underdevelopedeconomy, including low

productivity agriculture. The high quality, the depth, andthe breadth of research andteaching in statistics and other

inter-related subjects at thisInstitute are tributes to thevision of Prof. Mahalanobis andhis confidence in our country’sfuture.

While I am thankful for beinghere on this occasion, I am alsoa little daunted by the task of 

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having to say something usefulwhich may be of interest to this

varied audience from so manydifferent walks of life. Aftersome reflection, I have chosento speak to you on "India andGlobalisation", or how we in

India should look at the processof so-called "globalisation" thatthe world has been passingthrough in recent years. I hadan occasion to speak on this

subject at Mumbai UniversityConvocation a couple of weeksago. This is a matter of considerable contemporarydebate, and I thought somereflection on this may also be of interest here in Kolkata. 

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There is a debate not only inIndia but all over the globe

about the pros and cons of "globalisation". There is hardlyany important global meetingwhich does not witness vigorousprotest marches or picketing by

the opponents of theglobalisation process. Equally, on the opposite side,there are those who regard it as

panacea for all the world’sproblems and key to unmixedprosperity and well being for allthe countries and all the people.If you take a poll in any

assembly, including I am surethis one, you will find some arestrongly for and some arestrongly against globalisation. 

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To my mind, neither view – foror against – is correct. The only

rational view is to accept it asan emerging and powerful globalreality which has a momentumof its own. Our job as anindependent nation / state is to

ensure that we maximise theadvantage for our country andminimise the risks. It has bothpluses and minuses like anyother major global economic

change – say, the industrialrevolution of the 18th century.Some countries gained, somelost – partly because of the thenprevailing politicalcircumstances. India, forexample, lost because of colonialism and fragmented

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nature of our polity. U.K.,Europe, U.S. – and later Japan

prospered. Same is the casewith globalisation. One bigdifference, however, is thatunlike the olden days, today ourdestiny is in our own hands.

Before we look at ouropportunities and challengesfrom globalisation, it is good tobe certain of facts – where

exactly India is in terms of globalisation. If we look at someof our own debate, it wouldseem as if we were already wellon the way to globalisation,

which was shaking up oureconomy. A most commonmeasure of globalisation isopenness to trade and a

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country’s participation in trade.By this measure, the extent of 

India’s globalisation isinsignificant – it is one of thelowest in the world. India’sshare in world trade is a meagre0.7 per cent or so. If a map of 

the world were drawn on thescale of a country’s participationin trade, India with a populationof more than 1,000 million willoccupy a smaller area than

Singapore with a population of only 3 million. You would need amagnifying glass to locate Indiaon that map! A second commonly usedmeasure of globalisation is acountry’s participation ininternational capital flows,

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particularly Foreign DirectInvestment (FDI). As you know,

annual flow of FDI across theglobe is more than $ 1 trillion,i.e., $ 1,000 billion. Annual FDIinflows into India is $ 3 – 4billion only or 0.3 – 0.4 per cent

of the total – that is all. Same istrue of Foreign InstitutionalInvestment (FII). Therefore, the first point that I

would like to emphasise is thatdespite all the talk, we arenowhere even close to beingglobalised in terms of anycommonly used indicator of 

globalisation. In fact, we are stillone of the least globalisedamong major countries –however we look at it. 

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An equally important point isthat whether the so-called

globalisation is considered to begood or bad for a countrydepends crucially on the sensein which the word is used. Theword may be used in a purely

descriptive sense to describe a"shrinkage" of distance amongnation states due totechnological changes intransport and communication

and closer integration of productand financial markets across theworld.

Another sense in which the word

may be used is the effect of such changes on differentcountries or groups of countries,such as, developed and

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developing. In yet anothersense, the word may also

represent a "globalisation of ideas or ideology" and may beused as a synonym for triumphof capitalism or dominance of unfettered markets. In discussing the issue of globalisation in the Indiancontext, I propose to confinemyself largely to the factual and

descriptive sense in which theword is used, i.e. thetechnological changes, andassociated policy changes, thathave brought the world

economies closer and madethem more integrated with eachother. 

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In this particular sense, I believethat the changes that have

occurred in the patterns of tradeand capital flows in recent yearsare to India’s advantage –although, unfortunately, so farwe have not made much use of 

it. Today, in terms of thepotential benefits of globalisation, India is in a verydifferent position than wouldhave been the case 50 or even

20 years ago. This is because the sources of what economists call"comparative advantage" have

changed dramatically in India’sfavour in the 1990s because of the technological revolution. Inthe old days, comparative

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advantage was largelydetermined by "factor

endowments", i.e. land, labourand capital. Geographicallocation and early starts inindustry also conferred greateradvantages.

Thus, at one time, a country’strade pattern, was determinedby its natural resources and theproductivity of its land. Leaving

aside political and institutionalfactors, a country’s level of income was also largelydetermined by the globaldemand for its natural resources

and its relative efficiency inexploiting them. The importanceof land as a source of comparative advantage,

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however, changed dramaticallyafter the industrial revolution.

Today, it is almost insignificant.Thus, except for the UnitedStates, countries accounting fora predominant share of theworld GDP have a relatively

small share of global land area.

After the industrial revolution,the availability of "capital" orinvestible resources became the

most dominant source of comparative advantage. At thisInstitute, established by thegreat Prof. P.C.Mahalonobis, Ihardly need to elaborate on the

importance that was attached todomestic capital accumulation inearly development economics.In fact, scarcity of capital and

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low domestic savings wereconsidered to be, and rightly so,

as principal causes of acountry’s underdevelopment. Today, availability of capital andproductivity are still crucial in

determining a country’s growthrate. However, there has been adramatic change in the globalmobility of capital, and nationalboundaries are no longer

important determinants of sources and uses of capital. Adramatic illustration of this isthe fact that the most developedcountry in the world, which

enjoyed unprecedented growthduring the 1990s, is actually acapital-importing country, i.e.

the United States. Similarly, the

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fastest growing developingcountry, i.e. China, is one of the

largest recipients of capital fromoutside. Similary, labour is no longer animportant element in cost of 

production and in determining acountry’s comparativeadvantage. In mostmanufacturing industries in theworld, it is no higher than 1/8th

of total costs. In India, it maybe somewhat higher because of our domestic laws, but theimportant fact to note is thatIndia no longer needs to

specialise only in the productionof labour-intensive plantationcrops or primary commodities. 

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A related development which islinked to the above changes, is

the "Services Revolution". Thefocus of attention inconventional economics, was onproduction of goods –manufactured products and

agricultural commodities. It was,of course, recognised that theservices sector (which includestransport, communication,trade, banking, construction and

public administration, etc.) wasan important source of incomeand employment in mosteconomies. However, overall,the growth of services wasperceived at best as a by-product of developments in theprimary and secondary sectors,

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and at worst as a drag on theprospects for long-term

economic growth. In the last few years, there hasbeen a phenomenal change inthe conventional view of 

services and their role in theeconomy. This change has beenfacilitated by unprecedented andunforeseen advances incomputer and communication

technology. As a result, thedevelopment of certain servicesis now regarded as one of thepreconditions of economicgrowth, and not as one of its

consequences. The boundary between goodsand services is also

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disappearing. Many industrialproducts are not only

manufactured, but they are alsoresearched, designed,marketed, advertised,distributed, leased and serviced.

An important aspect of the"services revolution" is thatgeography and levels of industrialisation are no longerthe primary determinants of the

location of facilities forproduction of services. As aresult, the traditional role of developing countries is alsochanging – from mere recipients

to important providers of long-distance and high valueservices.

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From India’s point of view, thesedevelopments provide

opportunities for substantialgrowth. For example:

• The fastest growing segmentof services is the rapid

expansion of knowledge-based services, such as,professional and technicalservices. India has atremendous advantage in the

supply of such servicesbecause of a developedstructure of technological andeducational institutions, suchas this one, and lower labour

costs. • Unlike most other prices,world prices of transport andcommunication services have

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fallen dramatically. By 1960,sea transport costs were less

than a third of their 1920level, and they havecontinued to fall. The cost of a telephone call fell morethan ten-fold between 1970

and 2000. Moreover, the costof communication is alsobecoming independent of distance. The most dramaticexample in this area is, of 

course, provided by the"Internet". India’sgeographical distance fromseveral important industrialmarkets (for instance, NorthAmerica) is no longer animportant element in the cost

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structure of skill-basedservices. 

• It is now feasible to"unbundle" production of different types of goods andservices. India does notnecessarily have to be a low-

cost producer of certain typesof goods (e.g., computers ordiscs) before it can becomean efficient supplier of services embodied in them

(e.g., software or music). At the same time, it must berecognised that the "death of distance" and the growing

integration of global product,services and financial markets inrecent years have alsopresented new challenges for

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management of the nationaleconomy – not only in India but

all over the world. The trendtowards integration of markets,particularly financial markets, isby no means an unmixedblessing. Unlike the old days, a

heavy price may have to be paidby national economies forsomnolence, sloth and non-conformity to generally acceptedinternational norms and

standards of macro-economicmanagement, disclosure,transparency and financialaccountability. Another consequence of recentglobal trends is the greatervulnerability of nationaleconomies to developments

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outside their own borders. Acrisis in any one or a group of 

countries, can be transmitted toother countries – includingcountries which may not haveany strong economic linkageswith crisis-affected countries.

Thus, the ’nineties have beenmarked by a large number of currency crises (for example, inMexico, Russia, East Asia andBrazil – and currently Argentina

and Turkey); substantial swingsin exchange rates (including theexchange rate of three leadingcurrencies – the dollar, the Euroand the Yen); and run ups inasset prices followed by sharpcollapse (for example in Japanand East Asia earlier and the

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United States last year). Whilethe crises initially occur in one

or two specific countries, theiradverse effects are felt acrossthe world.

While we must be careful, on

the whole, in my view, – thedeath of distance, the servicesrevolution, and the mobility of capital – which characteriseglobalisation – present

unprecedented opportunities forIndia. The primary source of comparative advantages todayare : skills and ability to adaptand change. And, India has the

advantage – of skills, of entrepreneurship and of managerial competence in

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taking advantage of thesechanges.

If what I have said is correct,then, why are we not jumpingwith joy and optimism? Why arewe so "unglobalised" in terms of 

our share in trade, investmentor communication?

Transition from a closed to avibrant, open and a moreglobally dominant economy will

certainly take time and will notbe painless. As of now, we also have muchgreater tolerance for waste,

non-work and survival of theinefficient, and the self-seekingthan other fast growingcountries. Somehow to make

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this transition – from a lessproductive and less challenging

economy to a more work-oriented and competitiveeconomy – is the real challengeof globalisation.

If we continue in our old ways, Isee real social problems andinequalities emerging in oursociety. We will have islands of prosperity and excellence – IT,

beauty parades and mediaentertainment amidst growingdisparity, rising unemploymentand immiserisation. And as hashappened in several countries in

the 1990s, including Turkey andArgentina - just now, those whoare with us today will be thefirst to leave. 

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The principal lesson of recenteconomic and technological

developments, and growingtensions and inequalities withinand across countries, is that ourfate is in our hands. Our publicpolicies have to respond to our

own requirements rather than toany fixed global ideology or apre-determined andinternationally prescribed modelof economic progress. In my

view, this is the real lesson of the 1990s.

My fervent hope is that as you –the best and the brightest of our

country – go out and face a"globalising" world, you willkeep India’s interest, itsintegrity, its indivisibility and its

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future potential close to yourhearts and your minds. I have

no doubt that, with your help,India of 2025 will be a verydifferent place, and a muchmore dominant force in theworld economy, than was the

case twenty five years ago or atthe beginning of the newmillennium.

Thank you.