CHAPTER VI GLOBALIZATION OF AYURVEDA AND AYURVEDICMEDICINES 6.1 Introduction Globalization is the new buzzword that has come to dominate the world since the nineties of the last century with the end of the cold war and the break-up of the former Soviet Union and the global trend towards the rolling ball(Balkrishnan,2004).The frontiers of the state with increased reliance on the market economy and the renewed faith in the private capital and resources, a process of structural adjustment spurred by the studies and the influences of world bank and other international organizations have started in many of the developing countries. Globalization has brought many new opportunities to developing countries like greater access to developed country markets and technology transfer which has resulted in improved productivity and higher standard of living. Globalization has also thrown up new challenges like growing inequality across and within nations, volatility in financial markets and environmental deteriorations. Another negative aspect of globalization is that many developing countries are deprived of the benefits of the process of globalization. Till nineties the process of globalization of the Indian economy was constrained by the barriers to trade and investment liberalization of trade. Investment liberalization of trade, investment and financial flows initiated in nineties have progressively lowered the barriers to competition and accelerated the pace of globalization. According to Stephen Gill globalization is the reduction of transaction cost of transborder movements of capital and goods thus of factors of production and goods (Ibid).Guy Brainbant says that the process of globalizationnot only includes opening up of world trade development of advanced means of consumption internalization of financial markets, growing importance of MNCs, population migration and more generally increased mobility of persons, goods,capital,data and ideas but also infections, diseases and pollution. The term globalization refers to the integration of economies of the
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CHAPTER VI
GLOBALIZATION OF AYURVEDA AND
AYURVEDICMEDICINES
6.1 Introduction
Globalization is the new buzzword that has come to dominate the world since
the nineties of the last century with the end of the cold war and the break-up
of the former Soviet Union and the global trend towards the rolling
ball(Balkrishnan,2004).The frontiers of the state with increased reliance on
the market economy and the renewed faith in the private capital and resources,
a process of structural adjustment spurred by the studies and the influences of
world bank and other international organizations have started in many of the
developing countries. Globalization has brought many new opportunities to
developing countries like greater access to developed country markets and
technology transfer which has resulted in improved productivity and higher
standard of living. Globalization has also thrown up new challenges like
growing inequality across and within nations, volatility in financial markets
and environmental deteriorations. Another negative aspect of globalization is
that many developing countries are deprived of the benefits of the process of
globalization. Till nineties the process of globalization of the Indian economy
was constrained by the barriers to trade and investment liberalization of trade.
Investment liberalization of trade, investment and financial flows initiated in
nineties have progressively lowered the barriers to competition and
accelerated the pace of globalization.
According to Stephen Gill globalization is the reduction of transaction cost of
transborder movements of capital and goods thus of factors of production and
goods (Ibid).Guy Brainbant says that the process of globalizationnot only
includes opening up of world trade development of advanced means of
consumption internalization of financial markets, growing importance of
MNCs, population migration and more generally increased mobility of
persons, goods,capital,data and ideas but also infections, diseases and
pollution. The term globalization refers to the integration of economies of the
world through uninhibited trade and financial flows as also through mutual
exchange of technology and knowledge (Goyal, 2006:166). It also contains
free inter country movement of labor. Globalization in its literal sense is the
process of globalizing, transformation of some things or phenomena into
global ones. It can be described as a process by which the people of the world
are unified into a single society and function together. This process is a
combination of economic, technological,socio-cultural and political forces.
Globalization is very often used to refer to economic globalization that is
integration of national economies into the international economy through
trade, foreign direct investment, capital flows, migration, and the spread of
technology (Dave, 2007).Herman E. Daly argues that sometimes the terms
internalization and globalization are used interchangeably but there is a slight
formal difference. The term internalization refers to the importance of internal
trade, relations, treaties etc.International means between or among nations.
Globalization means erasure of national boundaries for economic purposes.
International trade becomes interregional trade.In the context of India this
implies opening up the economy to foreign direct investment by providing
facilities to foreign companies to invest in different fields of economic activity
in India; removing constraints and obstacles to the entry of MNCs in India,
allowing Indian companies to enter into foreign collaborations and also
encouraging them to set up joint ventures abroad, carrying out massive import
liberalization programmes by switching over from quantitative restrictions to
tariffs and import duties.
History of Globalization
The word globalization has been used by economists since 1981, however this
concept did not become popular until the later half of the 1980s and
1990s.Globalisation began a bit before the turn of the 16th
century in Portugal.
The country’s global explorations in the 16th
century linked continents,
economies and cultures as never before.
Globalization is viewed as a century’s long process, tracking the expansion of
human population and the growth of civilization that has accelerated
dramatically in the past fifty years. Early forms of globalization existed during
the Roman Empire. The Islamic golden age is also an example, when Muslim
traders and explorers established an early global economy across the old
world resulting in a globalization of crops, trade, knowledge and technology
(Webster’s Dictionary)
In the 17th
century, globalization became a business phenomenon when the
Dutch East India Company, which is often described as the first multinational
corporation, was established. Due to high risks involved in international trade,
the Dutch East India Company became the first company in the world to share
and enable joint ownership through the issuing of shares: an important drive
for globalization. In the 19th
century it was sometimes called “The First Era of
Globalization” a period characterized by rapid growth in international trade
and investment, between the European imperial powers, their colonies, and
later United States. It was in this period that areas of sub-Saharan Africa and
the Island Pacific were incorporated into the world system. During the pre-
world war I period of 1870 to 1914, there was rapid integration of the
economies in terms of trade flows, movement of capital and migration of
people. The growth of globalization was mainly led by the technological
forces in the fields of transport and communication. There were fewer barriers
to flow of trade and people across the geographical boundaries. There were no
passport and visa requirements. The pace of globalization decelerated between
the First and the Second World War. The inter-war period witnessed the
erection of various barriers to restrict free movement of goods and services.
The “First Era of Globalization” began to break down at the beginning of the
First World War, and later collapsed during the gold standard crisis in the late
1920s and early 1930s.
After World War II, all the leading countries resolved not to repeat the
mistakes they had committed previously by opting for isolation (Rangarajan,
2006). Although after 1945, there was a drive to increased integration; it took
a long time to reach the pre-world war I level. Most of the developing
countries which gained independence from the colonial rule in the immediate
post-world war II period followed an import substitution industrialization
regime. The Soviet bloc countries were also shielded from the process of
global economic integration. However in the last two decades the process of
globalization gathered the momentum. The former Soviet bloc countries are
getting integrated with the global economy. More and more developing
countries are turning towards outward oriented policy of growth. Rapid pace
of globalization observed today is an outcome of new information technology
which has influenced market integration, efficiency and industrial
organization. Globalization of financial markets has far outpaced the
integration of product markets.
Modern Globalization
Globalization in the era since World War II was first the result of planning by
economists, business interests, and politicians who recognized the costs
associated with protectionism and declining international economic
integration. International institutions like World Bank and International
Monetary Fund were founded with the intention of promoting growth and
managing the adverse effects of globalization. Globalization was facilitated by
advances in technology which have reduced the costs of trade, and trade
negotiation rounds, originally under the auspices of GATT, which led to a
series of agreements to remove restrictions on free trade.
Since World War II, barriers to international trade have been considerably
lowered through international agreements- General Agreement on Trade and
Tariff (GATT). Particular initiatives carried out as a result of GATT and the
World Trade Organization (WTO) has included the following:
Promotion of Free Trade:
Reduced transportation costs especially from development.
Reduction or elimination of tariffs; construction of free trade zones
with small or no tariffs
Reduction or elimination of capital controls
Reduction, elimination, or harmonization of subsidies for local
businesses
Restriction of Free Trade
Harmonization of intellectual property laws across the majority of
states, with more restrictions.
Supranational recognition of intellectual property restrictions (e. g.
patents granted by China would be recognized in the United States)
The Uruguay Round (1984 to 1995) led to treaty to create the World Trade
Organization (WTO), to mediate trade disputes and set up a uniform platform
of trading. Other bi-and multilateral trade agreements, including sections of
Europe’s Maastricht Treaty and the North American Trade Agreement
(NAFTA) have also been signed in pursuit of the goal of reducing tariffs and
barriers to trade.
World exports increased from 8.55% of gross world product in 1970 to 16%
of gross world product in 2001.
6.2 Measuring Globalization
Looking specifically at economic globalization, it can be measured in
different ways. These four ways are four economic flows that characterize
globalization:
a) Goods centreand services, e.g. exports plus imports as a proportion of
national income or per capita of population.
b) Labour/people, e.g. net migration rate, inward or outward migration flows,
weighted by population.
c) Capital, e.g. inward or outward direct investment as a proportion of national
income or per head of population
d) Technology populations, e.g. international research and development flows,
proportion of using particular invention.
Since globalization is not only an economic phenomenon, a multivariate
approach to measure globalization is the recent index calculated by the Swiss
think tank KOF. This index measures the three main dimensions of
globalization, economic, social and political. In addition to three indices
measuring these dimensions, an overall index of globalization and sub indices
referring to actual economic flows, economic restrictions, data on personal
contacts, data on information flows, and data on cultural proximity is
calculated.Data is available on yearly basis for 122 countries. According to
the index the world’s most globalised country is Belgium, followed by
Austria, Sweden, the United Kingdom and the Netherlands. The least
globalisedcountries according to the KOF-index are Haiti, Myanmar, the
Central African Republic and Burundi. Other measures
conceptualizeglobalization as diffusion and develop interactive procedure to
capture the degree of its impact.
According to another globalization index, published in 2006, Singapore,
Ireland, Switzerland, the U.S.,the Netherlands, Canada and Denmark are the
most globalised, while Egypt, Indonesia, India and Iran are the least
globalised among listed.
Globalization has been identified with the policy reforms of 1991 in India
(Goyal, 2006:167).
6.3 The Important Reform Measures (Step towards Globalization)
Indian economy faced major crisis in July 1991, when the stock of foreign
currency was approximately $ 1 billion. Inflation increased to an annual rate
of 17 percent; fiscal deficit was also quite high and foreign investors and NRI
lost confidence in Indian economy. Along with this domestic crisis, many
unpredictable changes swept the economies of nations in Western and Eastern
Europe, South East Asia,Latin America and elsewhere, around the same time.
These economic changes at home and abroad made it mandatory to bring total
change in our economic policies and programmes. Major measures as apart of
the liberalization and globalization strategy in the early nineties included the
following:
Devaluation: The first step towards globalization was the devaluation
of Indian currency by 18 to 19 percent against major currencies in the
international foreign exchange market. This measure intended to
resolve acute BOP crisis.
Disinvestment: In order to make the process of globalization smooth,
privatization and liberalization policies are moving along as well.
Under the privatization scheme, most of the public sector undertakings
have been/ are sold to private sector.
Dismantling of industrial licensing regime: At present only six
industries are under compulsory licensing mainly due to environmental
safety and strategic considerations. As a result of liberalized licensing
policy locational policy is significantly amended. Now no industrial
approval is necessary for locations not falling within 25 kms. Of the
periphery of cities having a population of more than one million.
Allowing foreign direct investment (FDI): Foreign direct investment
across a wide spectrum of industries facilitated non-debt flows for
these industries. Under a liberal and transparent foreign investment
regime most activities are open to foreign investment on automatic
route without any limit on extent of foreign ownership. Some of the
recent initiatives taken to further liberalize the FDI regime includes
opening up of sectors such as Insurance (up to 26%); development of
integrated township (up to 100%); defence industry (up to 26%);tea
plantation (up to 100% subject to disinvestment of 26% within five
years to FDI); enhancement of FDI limit in private sector banking,
allowing FDI up to 100% under the automatic route for most
manufacturing activities in SEZs. Investment facilitation measures are
strengthened through Foreign Investment Implementation Authority.
Non Resident Indian Schemes: General policy and facilities for foreign
direct investment as available to foreign investors/companies are fully
applicable to NRIs as well. In addition to this the Government has
extended some concessions especially for NRIs and overseas corporate
bodies having more than 60% stake by NRIs.
Throwing open industries reserved for the public sector to private
participation- Now only three industries are reserved for the public
sector.
Abolition of the MRTP Act, which necessitated prior approval for
capacity expansion.
The removal of quantitative restrictions on imports.
The reduction of the peak customs tariff from over 300 percent prior to
30 percent rate that applies now.
Severe restrictions on short-term debt and allowing external
commercial borrowings based on external debt sustainability.
Wide- ranging financial sector reforms in the banking, capital markets,
ad insurance sectors, including the deregulation of interest rates, strong
regulation and supervisory systems, and the introduction of
foreign/private sector competition.
Globalization is a process of increasing the connectivity and interdependence
of the world’s markets and businesses. This process seems to be accelerated in
the last two decades as technological advances make it easier for people to
travel, communicate and do business internationally. Two major recent
driving forces are advances in telecommunications, infrastructure and the rise
of the internet. When different economies are connected theopportunities as
well as competition increase.Globalization offers opportunities on one side
and challenges on the other. It has offered opportunities in the area of
investment, industrial growth, technology and competition and on the other
hand it has created threats in the area of small industries, traditional industries
competition, poverty and environment.
6.4 Opportunities offered by globalization
Globalization has created tremendous opportunities as far as the following
areas are concerned.
Globalization and Investment
Indian economy is interacting with the rest of the world with the growth of
globalization and economic liberalization. Foreign direct investment in India
between 1992 and 2005 was recorded as Rs.3, 25,000 crore. FDI may be made
through the acquisition of an existing entity or the establishment of new
enterprise. Mergers and acquisitions are very important for market entry and
are supposed to be an important growth strategy. It may be used to acquire a
new technology. It may also help in reducing cost and competition. One
important advantage of mergers and acquisitions is that it provides instant
access to markets and distribution network (Dave, 2007:6).
Globalization and Industrial Growth
Globalization creates opportunities if it is genuinely free. India’s labour
intensive products can find markets abroad. This in turn can create new job
opportunities in India. Globalization boosted industrial production and
promoted exports. The information technology is one of the areas of industrial
growth. IT industry’s basic input is skilled man power. India has the largest
pool of skilled and semi-skilled work force which is utilized effectively in IT
industry.
Globalization and Technology
Organizational and technological innovations, superior product quality and
customer satisfaction are major determinants of firm level competitiveness in
the global market place. Global entrepreneurship with innovative outlook
always searches for changes, responds to it and exploits as an opportunity.
They are the ones who can make a difference, while ordinary managers are
effective only in managing stable, routine and cost efficient business. Global
entrepreneurs are high achievers. They possess an idea or a distinct way of
doing things.
Challenges of Globalization
Globalization involves some risks. The major economic challenges faced by
Globalization are as follows:
1. The benefits of economic integration have primarily extended to the
industrialized countries in the last 10 to 20 years along with a group of
developing countries, encompassing three Billion inhabitants. According
to World Bank classification, a similar number of people live on less than
$ 2 a day. Such poverty is the greatest challenge for stability and peace in
21st century.
2. Globalization of financial markets has been accompanied by disturbing
financial crises in emerging market economies. The causes of these crises
are complex. However a common feature has often been over
indebtedness and massive rehearsals in capital flows, leading to severe
recession accompanied by a sharp rise in unemployment.
3. Globalization exerts pressure on the environment. Domestic
environmental protection policies alone are not sufficient to deal with
this pressure. Globalization has to face this challenge because the
favourable environment has become global public good (Kohler, 2003).
Making of the Global Entrepreneur- Implications
The making of the global entrepreneur has its implications at four levels namely
firm, industry, policy and management and technological education.
At the firm level: The global entrepreneur must get the desired challenges.
He must be able to stretch himself and upgrade his skills by in house
training.
At industry level: Several chambers of commerce, trade associations and
representative industry groups will have to adopt a strategic approach in
order to ensure that Indian firm’s bench mark beyond what exists. They
should be able to set the standard for the rest of the world.
At the policy level: The general environment now is gradually becoming
supportive to well qualified and competent entrepreneurs.
Educational and research institutions act as nurseries for proving world
class engineers,scientists and managers.
6.5 Effects of Globalization on the World
Globalization has various aspects which bring positive and negative effects for the
world in different ways.
Positive Effects
Industrial - emergence of worldwide production markets and broader access to a
range of foreign products for consumers and companies. Particularly movement
of material and goods between and within transnationalcorporations and access to
goods by wealthier nations and individuals at the expense of poorer nations and
individuals who supply thelabour.
Financial – emergence of worldwide financial markets and better access to
external financing for corporate, national and sub national borrowers. The
emergence of under or unregulated foreign exchange and speculative markets led
to inflated wealth of investors and artificial inflation of commodities.
Economic- realization of global common market,based on the freedom of
exchange of goods and capital
.Political- political globalization is the creation of a world government which
regulates the relationships among nations and guarantees the rights arising from
social and economic globalization. Politically the United States has enjoyed the
position of power among the world powers; in part due to its strong and wealthy
economy. China has experienced tremendous growth in the last decade as a result
of globalization and the help of the United State’s own economy. If China
continues to grow at the projected rate then it will have enough wealth, industry
and technology to compete with the United States for the position of leading
world power. The European Union, Russian Federation and India are among the
other already established world powers which may have the capacity to influence
future world politics.
Informational – increase in information flows between geographically remote
locations is a technological change observed in the process of globalization.
Advent of fiber optic communications,satellites, and increased availability of
internet facilitated the revolution in information and communication technology.
Cultural – growth of cross cultural contacts, advent of new categories of
consciousness and identities such as globalism, which embodies cultural
diffusion, the desire to consume and enjoy foreign products and ideas and adopt
new technology and practices.
Ecological-globalization leads to environmental challenges like climate change,
cross boundary water and air pollution, over-fishing of the ocean, and the spread
of invasive species, which cannot be solved without international cooperation.
Many factories are built in developing countries where thy can pollute freely.
Poorer countries have to suffer in this process whereas the wealthier countries are
at the benefit.
Social-Globalization facilitated increased circulation of people of all nations with
fewer restrictions. But only the people of wealthier nations can afford
international travel due to of rising costs of fuel and transport.
Transportation- Technological advancement decreased the traveling time, but
again it is accessible to few rather than many. Globalization resulted in
disproportionate inequitable distribution of resources rather than a benefit to
overall humanity.
International Cultural Exchange- Globalization has spread multiculturalism
and provided better individual access to cultural diversity. The imported culture
can easily supplant the local culture causing reduction in diversity through
hybridization. The most prominent form of this is westernization.Globalization
facilitated greater international travel and tourism for those who can afford
international travel and tourism.Globalization has resulted in greater immigration
including illegal immigration except for the countries like U.K., Canada and the
U.S.A. who have accelerated the process of removing illegal migrants through
modification in laws.Local consumer products and genetically modified
organisms can be easily supplied to other countries.World-wide sporting events
can be organized such as FIFA World cup and the Olympic Games. A set of
universal values can be formed now which shows homogenization of culture.
Technical- Globalization has led to technical development in the form of
development of global communication infrastructure, communication satellites,
internet, submarine fiber optic cable and wireless telephones.
Legal/ Ethical -Globalization has brought the following worldwide legal/ethical
changes such as the creation of the international criminal court and international
justice movements,crime importation and raising awareness of global crime-
fighting efforts and cooperation.
Sexual Awareness-It is very easy to focus on economic aspects of globalization.
Globalization may also have social effects such as changes in sexual inequality
and greater awareness about different types of gender discrimination throughout
the world.
As far as developing countries are concerned, globalization has resulted in rising
share of these countries in aggregate world output and aggregate world exports.
The share of developing countries in aggregate world output has increased from
17.9 percent in 1988-90 to 40.4 percent in 2000. Their share in aggregate world
exports increased from 20.6 percent in 1988-90 to 29.9 percent in 2000. The
growth rate of developing countries both in terms of GDP and per capita GDP has
been higher than those of the industrial countries.
Negative Effects
Though the world as a whole is benefitted from globalization still there are some
negative and marginalizing effects of globalization.
Globalization leads to a more inequitable distribution of income among countries
and within countries.Globalization leads to inequality because globalization
emphasizes efficiency and gains accrue to those countries which are favourably
endowed with natural and human resources. Technological base of these countries
is not only wide but highly sophisticated. Examples of the badly skewed
distribution among countries of the benefits of globalization can be shown from
the following data from the period 1980 to 1997. While world per capita income
increased, per capita income contracted in fifty nine countries, widening income
disparities. Exports of goods and services increased at less than 5 percent annually
in forty six countries and at less than 1 percent a year in nine countries.
As far as financial flows are concerned, the majority (58%) of flows of Foreign
Direct Investment in the ‘90’s went to developed countries. 85% of the FDI that
went to developing economies, went to only 20 countries, with the bottom sixteen
of these receiving less than what the top two got, and for the nine countries the
flows have been negative.
The benefits from the Uruguay round are also expected to be unbalanced, with
70% accruing to the developed countries and 30% to the developing countries.
The information and communication technology has created a gap of its own. The
exponential growth of internet also reveals disparity. In 1998, industrial countries
accounting for 15% of the world population had 88 percent of internet users and
South Asia having 20 percent of the world population had less than one percent of
the internet users.
While trade benefits all countries, greater gains accrue to industrially advanced
countries. However there are two changes with respect to international trade
which may work to the advantage of the developing countries.
First, the industrially advanced countries are leaving certain areas of production
free which can be filled in by developing countries.
Second, international trade is no longer determined by the distribution of natural
resources. On the contrary human resources have emerged as more important due
to the improvement in information technology. Productive activities are becoming
“knowledge intensive” rather than “resource intensive.” A globalised economy
with increased specialization can lead to improved productivity and faster growth.
Apart from the possible inequality in income distribution among the countries,
globalization leads to widening income gaps within the countries as well. This is
true for developed as well as developing countries. Globalizationmay benefit even
within a country, those who have the skills and the technology. The higher growth
rate achieved by an economy can be at the expense of declining incomes of the
people. Income inequality is rising in many countries.There is increase in job and
income insecurity especially for unskilled labor.
Within developing countries, the increased world agricultural prices expected to
result from Uruguay Round should benefit those in agriculture. The urban poor
will suffer when food prices rise, but will gain from employment in new export
industries.
Another negative aspect of globalization is that globally integrated markets have
financial volatility as a permanent feature. Human cost of such financial volatility
is very high and it may reverse the process of human development
Globalization results in the loss of autonomy while pursuing the economic
policies. In a highly integrated world economy it is true that one country cannot
pursue policies which are not in consonance with the worldwide trends. As the
nations come together whether, it is in the political, social or economic arena,
some sacrifice of sovereignty is inevitable.
Globalization establishes a closer linkage between different countries so the
problems arisingin one country easily get spread in other countries and thus the
problems specific to one country become global ultimately.
Globalization results in spread of diseases, increasing opportunities for crime,
drug trafficking and loss of cultural identity.
Women are also among the first to lose their employment when economic
crunches occur, such as those resulting from financial volatility. Women also
predominate in informal subcontracting, which is on the rise under globalization.
6.6 Impact of Globalization on Indian Economy
India opened up the economy as a result of major crisis due to foreign exchange
crunch. Major measures initiated as a part of the liberalization and globalization
strategy in the early nineties included scrapping of the industrial regime, reduction
in the number of areas reserved for the public sector, amendment of monopoly
and restrictive trade practices act, start of the privatization programme, reduction
in tariff rates and change over to market determined exchange rates. Over the
years there has been steady liberalization of the current account transactions, more
and more sectors opened up for foreign direct investments and portfolio
investments facilitating entry of investors in telecom, roads , ports, airports,
insurance and other major sectors.
Globalization has intensified interdependence and competition between
economies in the world market. Economic reforms experienced by India brought
the following significant benefits for the county along with globalization.
Globalization and Poverty
Globalization in the form of increased integration through trade and investment is
an important reason why much progress has been made in reducing poverty and
global inequality over recent decades. The proportion of world population living
in poverty has been steadily declining and in recent years the absolute number of
poor has fallen despite strong population growth in poor countries
Growth of the Economy
The liberalization of the domestic economy and the increasing integration of India
with the global economy have helped step up GDP growth rate, which was just
3% in1970 and GDP growth in countries like Brazil, Indonesia, Korea, and
Mexico was more than twice that of India. Though India’s average annual growth
rate doubled in eighties and reached upto 5.9%, it was still lower than the growth
rate in China, Korea and Indonesia.Growth of GDP improved India’s global
position from eighth in 1991 to fourth in 2001. During 1991-92, the first year of
economic reform, Indian economy grew by 0.9% only, however the GDP growth
accelerated to 5.3% in 1992-93 and 6.2% in 1993-94. In 2003-04 India achieved a
growth rate of more than 8%.
Structure of the Economy
Due to globalization not only GDP has increased but the direction of growth in
the sectors has also been changed. Earlier the maximum part of the GDP in the
economy was generated from the primary sector, but now the service sector
contributes the maximum part of GDP. It contributes more than 57% of GDP.
India ranks eighteenth among the world’s leading exporter of services with a
share of 1.3% in world exports. The service sector is expected to benefit from the
ongoing liberalization of the foreign investment in the sector. Software and BPO
sectors have recorded an exponential growth in recent years. Growth rate of GDP
from the major sectors can be seen from the following table.
Table 6.1: Structure of the economy (Percentage)
% of GDP 1984-85 2002-03 2003-04 2004-05
Agriculture 35.2 26.5 21.7 20.5
Industry 26.1 22.1 21.6 21.9
Services 38.7 51.4 56.7 57.6
Source: Economic Survey 2000 and 2005
Foreign Direct Investment Inflows
FDI increased from around US $ 100 million in 1990-91 to US $ 5536 million in
2004-05.
Features of FDI Inflows
The current account deficit has hovered at less than 1% of GDP in recent years.
External sector of Indian economy has become stronger which is evident from the
sizable accumulation of India’s foreign exchange reserves comprising foreign
currency assets, gold, SDRs and the reserve position with the IMF which touched
US $ 141.5 billion as on March 31st 2005. These were about US $ 1 billion during
1990-91 balance of payment crisis.
The composition of debt is also favourable. Short term debt amounts to 3.5 per
cent of external debt and concessional debt amounts to 36.5 per cent of total debt.
The external debt looks sustainable according to a range of measures of
indebtedness. Both debt service payments as a proportion of current receipts, and
the external debt to GDP ratio have been falling steadily during 1990s, and
currently stand at around 17 per cent and 22 per cent, respectively.
Foreign Trade (Exports and Imports)
India’s imports in 2004-05 stood at US $ 107 billion recording an increase of
35.62 per cent compared to US $ 79 billion in the previous year(Goyal,2006).
Exports also increased by 24 per cent as compared to previous year. It stood at US
$ 79 billion in 2004-05 compared to US $ 63 billion in the previous year. Oil
imports increased by 19 per cent and non-oil imports increased by 33.62 per cent
during the same period.
Table 6.2: Foreign Trade (US $ Million)
Trade 1990-91 2002-03 2003-04 2004-05
Total
exports
18477 52719 63843 79247
Total
imports
27915 61412 79149 107066
Total
balance
-9438 -8693 -14307 -27819
Source-Reserve Bank of India Annual Report 2004-05
Tariff Rates
The Indian tariff rates reduced sharply over the decade from a weighted average
of 72.5% in1991-92 to 24.6% in 1996-97. Though tariff rates went up slowly in
the late nineties it touched 35.1% in 2001-02. India is committed to reduce tariff
rate. Most non-tariff barriers have been dismantled by March 2002, including
almost all quantitative restrictions
Economic reforms in the Indian economy initiated since July 1991 have led to
fiscal consolidation, control of inflation to some extent, increase in foreign
exchange reserves and greater foreign investment and technology towards India.
This has helped the Indian economy to grow at a faster rate.
Comparison with other Developing Countries
India’s share of world merchandise exports increased from 0.05per cent to
0.07per cent over the past 20 years. Over the same period China’s share
has tripled to almost 4 per cent.
India’s share of global trade is similar to that of the Philippines, an economy six
times smaller according to IMF estimates.
Over the past decade FDI flows into India have averaged around 0.5 per
cent of GDP against 5 per cent for China and 5.5 per cent for Brazil. FDI
inflows to China now exceed US $ 50 billion annually. It is only US $ 4
billion in case of India.
6.7 Globalization and Indian Health Systems
Traditional medicines and healthcare systems have been in existence all over the
world since many centuries. World Health Organization (WHO) research in
developing countries has shown that costs of allopathic system of medicine for
curing diseases are quite high compared to traditional medicines and are beyond
the reach of the common man. People in developed countries are now aware about
the adverse effects of chemical drugs and they have also started showing
preference for traditional medicines.Indigenous medicines of most of the
countries across the globe remained unutilized for several years. However over
the last few decades intense efforts have been made by various governments,
international agencies, non-government organizations and other such stakeholders
to explore their scientific base for the betterment of human life. India, having one
of the richest and most diverse heritages in the world is not an exception to this
global trend. Traditional medicines, now covered under Indian systems of
medicines are embodied in Ayurveda, Siddha and Unani systems. These systems
of medicines are based on not only herbs but also animal substances, minerals and
other natural resources. There has been a renewal of focus on systems of
medicines that are nature friendly.
Traditional medicines and healthcare systems have been in existence for
manycenturies, having been developed in several communities as a response to
the objectives of maintaining health in a conventional as well as holistic way.
World Health Organization defines traditional medicines as including diverse
health practices, approaches,knowledge and beliefs incorporating plant,animal
and /or mineral based medicines,spiritual therapies,manual techniques and
exercises applied singularly or in combination to maintain wellbeing,as well as to
treat, diagnose or prevent illness (Ayush, 2005).
WHO research in developing countries has shown that costs of allopathic system
of medicines for curing diseases, unlike traditional medicines are very high and
are beyond the reach of the common man. Similarly, concern about the adverse
effects of chemical drugs and changing perspectives about the effects of modern
medicines and their usage, are now manifesting themselves in the form of
increased application of traditional medicines, even in developed country markets.
Over the last few decades governments, international agencies, non government
organizations have been taking efforts to disclose the mysteries of traditional
medicines and also explore their scientific base for the betterment of humanity.
Some of the forms of traditional medicine are the traditional Chinese medicine,
Indian Ayurveda and Arabic Unani medicine. A wide range of indigenous
traditional medicines has also been developed throughout developing and
developed economies and other cultures.
These forms of medicines are influenced by factors such as history, personal
attitudes and philosophy;their practice may vary greatly from country to country
and from region to region. Their theory and application differ significantly from
those of allopathic medicines.
Ayurveda, Yoga and naturopathy, Unani, Siddha and Homeopathy or AYUSH as
they are generally called are the most prevalent forms of Traditional Medicine
(TM). These medicinal systems originated in India as well as outside but got
adopted here in the course of the time. These systems of traditional medicines are
popular in large number of states in the country as follows: