Globalization and Foreign Trade
In general sense, the term Foreign Trade means establishment of the export-import relationship with other countries of the world. But the scope of the globalization of the foreign trade or activities towards the outer world is wider. It should be remembered that India’s share in the total amount of trade in the world is only around 1%. Hence to increase this negligible share of India in the world’s total volume of trade as well as to extend the scope of her foreign trade, it is necessary to make her foreign trade more competitive.
So to attain this objective of Globalization and Foreign Trade, the Government of India has loosened the rigidity of her import policy on one hand and on the other, to increase the volume of her export has devalued the standard of her money in exchange of American dollar and arranged the full convertibility of its Rupee.
Since India is a member of the World Trade Organization, India has withdrawn the quantitative restrictions that so long existed on the import of goods. India has already decreased the import tariff on an average of 20% and in many cases has withdrawn the import duty. Moreover, the subsidy on export has also been withdrawn.
In order to effect globalization of the foreign trade the other measures already taken by her includes encouraging direct foreign investment within the land, to increase the scope of participating in the equity capital by the foreign investors up to 51% and to invite the multinational corporations to expand their trade in India. Scopes have been provided for foreign equity up to 74% at present in the field of private banks, telecommunication and insurance services. In the present state of market economy, as the interaction of demand and supply in the commodity market and production market plays significant role, likewise in the foreign market as well, the interaction of demand and supply changes the volume of import and export of a country. One of the main policies of the world made organization is to relax the import policy and to abolish the restrictions from the trade and commerce while providing India loans for her structural adjustment the World Bank also imposed the condition for globalization of her foreign trade. As a consequence of this condition India had to take all necessary measures to pave the ground for the globalization of her foreign trade.
As an impact of this globalization process, the information and technology of India has made significant progress. Especially India has made remarkable progress in her software industry. India is now even exporting software to other countries of the world. Now India can keep constant link with the rest of the world through internet system and the credit for this should be given to the demand of globalization. Many major Indian Information Technology companies such as HCL Technologies, Infosys have made many foreign acquisitions.
Due to the influence of this globalization again the telecommunication industry of India has also improved. BSNL, Bharati Airtel and Vodafone are leading telecommunication and internet companies in India.
Indian corporates are aiming to become Global companies. Many Indian companies have made large international acquisitions. For example, Tata Steel acquired Corus in a multi-billion dollar deal. Bharati airtel made a large telecom takeover by acquiring the African business of Zain Telecom. Tata Motors took the bold step by acquiring Jaguar and Land Rover. The acquisition of Jaguar and Land Rover has proved to be very profitable for Tata Motors.
However, it is true that globalization of this foreign trade has not been proved beneficial for India in every respect. However, it should be remembered that in the present state of affairs of the open world system India is left with no other alternative policy but to follow the policy of globalization. To achieve this object of globalization India is acting a significant role as an important member of the South Asian Free Trade Area (S.A.F.T.A.) and also trying to play equally significant role in extending her trade relation with the countries of the Association of South East Asian Nations (A.S.E.A.N). She has also extended her trade with China, Japan and South Korea.