While globalization does provide for means of betterment for economies, it has some inherent challenges which will have to be addressed:
- While decisive thrust on exports is required, there would be pressures for liberal imports which could create issues in the domestic sector by making imported goods cheaper threatening domestic goods. Already, the Indian market has a large number of low-priced Chinese goods.
- With easing of restrictions on inflows there could be a surge on foreign funds which could have an adverse impact like appreciating home currency and hurting exports especially for a country like India.
- It could lead to increase conspicuous consumption or ‘consumerism’ leading India into a consumption-driven from investment-driven economy. This can lead to lopsided development neglecting the interests of the masses. Greater production of goods demanded and lesser production of those which are less-demanded. Any consumerism also leads to lower savings in the economy.
- The biggest challenge of globalization would be in making the domestic sector globally competitive, ability to withstand global competition and make inroads into global markets.
- The performance gap between exports of services and manufacturing suggests that some constraints are particularly binding for labour-intensive manufacturing firms, and less so for services.
- The quality of infrastructure is a key determinant of countries’ participation in global value chains. As exports of goods tend to be more intensive in energy and transport than services, they suffer more from infrastructure bottlenecks. In India, the government has made laudable progress in increasing electricity generation and transmission capacities, in particular from renewable sources, to fulfil its commitment to provide electricity for all.