7.3.1. Meaning of Globalisation

Globalisation is a process of integrating the economy of the country with other economies of the world through trade, capital flow, and technology. It means opening up the economy to the other economies of the world. The main channels through which globalisation takes place are as follows:

a) The first channel of globalisation is opening up of the world trade. This requires liberalisation in trade of goods and services. In order to expand the world trade, there is a need for introducing import liberalisation programmes, removing the quantitative restrictions, and reducing the import duties. Globalisation implies removal of the barriers to international trade so as to allow free flow of goods and services between countries.

b) Globalisation also requires the removal of barriers to international investment. Liberalisation of foreign investment would lead to a large increase in international investment. It is particularly important to open up the economy to foreign direct investment (FDI). Foreign companies, including multinational corporations (MNCs), need to be encouraged to undertake investment in the country. Facilities should be provided to the foreign companies and restrictions on the entry of MNCs should be removed in order to encourage international investment.

c) Globalisation can effectively take place through free flow of technology between countries. Transfer of technology from advanced countries is needed to promote economic development of developing countries such as India.