EFFECTS OF GLOBALISATION

Globalization of the economy and the resultant liberalization within the economic system of the country cannot any longer be reversed. These forces have emerged due to the complex nature of the interaction between the growth of economies of most countries, the resultant trade and market patterns which are unfolding. Both of these (i.e. economic growth and trade and market patterns) which, to a great extent, have been shaped by the nature of scientific and technological changes. Increasingly in all the products and services, the scientific and technological intensity will continue to increase and the rate of change will be such that the elements of scientific and technological contents will continue to change. This means more and more investments in technological innovation and the market processes. Which, in turn, means that within a short period, business organizations have to reap the benefits of their investments as otherwise the technological changes introduced by the competitors would displace them out of market and therefore business. Therefore their aim is: More and more investments in technology and innovation in shorter and shorter periods and reaping the benefits within the shorter product cycles. This process necessitates a much larger market size than what business organizations use to be content with in earlier years. In other words, every firm in the world has to think in terms of reaching a global market even though it may be producing only a part of a product or a service. This is what is called an integration of the production process.

Figure 1 in this paper describes how globalisation and market forces are linked to rural sector in India. The right hand side of the figure shows the global market which transacts business through export and import. It involves most of the people of the developed countries, and most of firms and business houses of developed countries, as well as a part of people from many other developing countries and firms and business entities which deal with export and imports form these developing countries.

The green circle with right hand end of Figure 1 (in side there are few dots representing rich Indians) represents the global market. A few rich Indians have already fully integrated themselves with global market because their day-to-day consumption material including cloth, food and even drinks let alone the equipment/machinery/technology for their businesses come from abroad. Given the "free foreign exchange" situation now, their transactions with the global markets are highly simplified. (Even in the earlier times, it is used to be through various forms of legal and not so legal methods.)

The rich Indians controls many businesses in the cities and metropolis. Some have investments in foreign countries as well. From the lower economic levels of India, they get labour, raw material, space to operate etc. going towards the left side of the figure, one can note that the reach of the global market as connection within the country is with the bulk of the upper and lower middle class through the business operations in the city and urban nuclei which include the metropolis and other big cities not so declared still (about 10 to 12 of them still qualified to be called as big metropolis such as Bangalore, Hyderabad etc.) and many smaller cities and towns. All these will number to above 5000 in all. The business operations in metropolis, big cities and big towns receive imported materials equipment and services; they also export goods abroad. Many foreigners come to these cities stay in the hotels and also transact business. There is a reasonable tow way flow between global markets and these city nuclei through many of them feel the competitive pressure – loss of jobs, closure of inefficient businesses etc. Other small towns compete to do business and get integrated with these market forces by offering cost advantages such as low cost labour, lesser rentals for office spaces etc. In the IT fields and for some manufacturing sectors, this is particularly relevant. These small towns etc. make at least some low value added items to be consumed in Indian cities (thus providing them cost competitive inputs) which in turn maintain the link with the global markets. Such linkages with these smaller towns (with the low value addition to products & services) help to maintain a large workforce in the cities and the metropolis thus helping them to continue with their competitive advantages in the global market through cheap labour content and therefore lower costs. Thus people in smaller towns and rural areas (we will expand on this later) still " subsidise" Indian cities with cheap inputs. A part of this "cheapness" of the Indian labour and Indian cities and the resultant cost advantages to Indian business in big cities comes by virtue of the fact the urban slums absorb a large amount of human misery about which we have discussed before. They supply the very cheap labour force in terms of house servants, hawkers, cleaners, casual workers etc. who in turn maintain the "competitive advantages" of the work force of bigger businesses and the firms to face onslaught of global markets. We need to recognize the fact that since the technological sophistication of Indian industry in general (though there may be a few exceptions) is still poor, much of the competitive advantages in the global market are coming from very low wages of Indian people. How long such a situation can be sustained is a serious question. The author has addressed these in his book noted as Ref.3 and also in the book Ref.5 "India 2020: Vision for the Millennium" by A.P.J. Abdul Kalam with the author. In the Figure 1 under discussion, the global markets and the urban integration with the global market are now largely sustained by urban poor, smaller towns and the misery of the rural poor.

Now comes the question of what happens to the poorly connected villages shown in the Figure 1. At the left end, which are about 600,000 in number. Mostly people in these poorly connected villages live on a low productivity agriculture, cattle rearing , and related casual work. These are more or less primary products which find their one way to smaller towns and cities going as more of less as a very low value added commodity items. Paddy is collected and milled in towns; in cities higher value addition takes place. Honey is collected in villages and moved to bigger towns in villages and cities where it is bottled and marketed. Low value artisanal goods are purchased in villages and marketed in towns/cities as value added products. Same with milk. Thus most of the villages are always at subsistence levels. Poor people in villages do not have the capacity to hold their products to get better returns. They often do distress sale. Of course, there are a few rural rich farmers who can afford to hold their produce; they have in many ways integrated themselves with towns and cities. Many such rich farmers have now started to live in towns or are having at least second homes in towns or cities. Some of these rural rich farmers are themselves under economic pressure which are exerted on agriculture by the global economy. They are trying to get out of agriculture and get into other businesses as is happening in Punjab, Andhra Pradesh etc. But bulk of the rural poor, and the marginal farmers cannot afford this alternative. They continue to struggle in the villages and get whatever seeds or fertilizers, they can get access to within the constraints, and produce whatever they can and sell the produce on whatever prices are offered to them by the markets of the small towns or the middlemen. The same applies to artisans who produce crafts and other products from villages. The situation of landless labour in villages is still worse. Many of them tend to migrate to cities as unskilled work force. Occasionally a few tourists may go to some of the villages which have some tourists’ attraction or have some other forms of archaeological and historical importance. Again at these places tourist industry develops. But they mostly thrive on products produced in cities: potato chips, beverages, every food products and bottled water come from cities. Occasionally some tender coconut may be bought from these villagers! Of course a few villagers get jobs selling their products as hawkers. Some small shops may come up which sell these products and may have a clientele from low income Indian tourists. But by and large these trickle down effects to villages to villages are very minimum.

To recapitulate Figure 1 the global markets are exerting the pressure for economic efficiency on businesses and operations in the city and urban nuclei. They can face these pressures only with high intake of science and technology; either they have to generate them themselves or allow a foreign investor to be a partner or buy from foreign technology suppliers. In this way ( i.e. by technological inputs thus obtained) they can maintain their position in economic competition or even improve themselves. A few 100 million Indians perhaps around 300 million Indians can some how find their way to survive or even flourish against these competitive pressures or even take advantage of global opportunities by learning to live through this competition. On the longer term, though, they themselves may be endangered if Indian S&T systems and Indian firms do not become technologically & organizationally sophisticated, with at least some of their own internal S&T strengths and organizational strengths. A perennial dependence on foreign technology through purchase or through investment partners would erode their competitive business advantages. In such a case (of perennial dependence) only a few rich Indians (may be about 50 million) may be able to survive global competition because of the strength of their financial capital and trade linkages. And to a certain extent in the educational system which will tend to produce young boys and girls form India to serve foreign markets and some of these surviving businesses, there could be some vitality. But most persons in the city who are now able to survive global competition, may not be able to sustain with S&T and other organizational strengths.

As far as the villages are concerned they are poorly connected even now. They are one way source of cheap primary products, crafts etc. on which further value addition is done in town and cities to get some export earnings to survive global competition. (Note that agricultural products and crafts still are good net foreign exchange earners.) So what will happen to the villages if this process of exertion of global pressure continues for sometime and the drive for economic efficiency through market forces aiming at international standards continue. It may mean complete depression of villages because at some point of time, it may even be difficult for villages to produce agricultural products and crafts to meet the international / global standards of phyto sanitary conditions or designs in crafts etc. World is not static. Countries like China, a number of countries from south east Asia, central Asian countries etc. may produce products which will sell in India (already happening). Then there may be a few corporates who may buy their (i.e. poor farmers’) lands in the villages and introduce modern farming. Then only a few of them may be employed at economically efficient levels to produce competitive products. Similarly, many of the traditional crafts with "new look" may be produced by investors from cities or foreign countries with more knowledge, skill and investment. Again only a few villagers may be employed. All these employments and payments will be driven purely by market forces. What happens of the residue of the Indians whose number will not be small. If now in villages and towns / cities there are 700 million with poor conditions, with population increase to say 1.4 billion by 2020 and with cities not able to absorb more than 300 – 400 million for reasons described before, they will be about 1 billion who will suffer; or it may be 700 million. It is still large number. (See Reference 6 as to why I state that there are 700 million Indians who are in poor conditions now and not the official figure of 26%)

Thus it is very clear that the villages and the people there cannot be left to the forces of global market forces and the resultant internal market forces through liberalization and economic reforms. In fact even for the city people (middle & lower middle class and urban poor) there is a case that they cannot be left to these forces alone and large focused efforts need to be done to empower them and Indian industries with S&T strengths and the necessary organizational and business management skills. But for rural India which already suffers from severe poverty, situation is already serious. Also their expectations through TV and other media are going to go up and they can legitimately aspire for more. It is a human volcano getting ready. Such a strong language is used to draw attention to the serious situation.

In order not have such serious outcome, the solution is to generate linkages of knowledge and skills and investments into the villages not merely as small doles or as something which is given in the name of appropriate technology keeping them in subsistence level, but in substantial manner with a new approach so that larger value addition even within the limited investment level affordable by them is done at villages themselves. Such activities need not be connected with agriculture or their traditional activities alone. They should be value adding and sustainable economically. Our villagers are very quick to adapt to new skills. Today, such linkages are absent or very minimal as shown as red arrow in the figure. Providing such two way linkages cannot happens in a vacuum. It will require initial public investment in terms of economic connectivity and also in terms of knowledge and skills which are described in Ref. 2, 3, 4 and 5. If this is done with a strong will and steadily over a period of 10 years then the economic levels of the villagers will grow to a good level. Then they will not be merely people eking out an existence at subsistence levels (i.e. "drawers of water and hewers of wood") but will be those who can produce products and services of good competitive quality with each one having their own niche in a global chain of production but without being at a disadvantaged position of one way extraction currently in vogue. In other words, they can master the market forces of liberalization and globalization with adequate tools with them to participate as equal partners. The win-win situation which is being talked in general terms for others in the global forums should also include these people rapidly. It cannot be win-win for others at the cost of these large number of poor people. To equip these people with the tools briefly described above becomes at essential necessity for India to become as a developed country. They will be crippled in economic terms if the present approach that is "to extract cheap labour / goods when available and to dump them at difficult times" with occasional populist doles thrown in to win votes. How to do this i.e. equipping rural areas with necessary tools with minimum necessary public investment are described here with a few examples from the TIFAC.

It is also important to point out that equipping people with these tools and related investment is far more crucial than the political and legal initiatives of the Panchayati Raj for villages. The rates of changes due to globalisation are fast. And time periods between opening and closing of windows of new opportunities are small. Therefore actions of equipping people with tools and investments have to be done speedily. Otherwise there may be irreversible damages.