Globalisation & Liberalisation

According to Herman E Daly, globalisation serves the villous of a single, cosmopolitan, interconnected global economy. This definition focuses on the cross skirt movement of goods, work and resources ( monetary and human) impacting on the domestic and global as make up ones minds and employment. globalisation, thus focuses on an integ stationd economical world in which the economy is a single commercialise characterized by wad and enthronisation lams, cross clay sculpture economic activities In production, Investment financing, movement of big(p), technology, labor, Internationalization of consumption, groovy, and serve. economical liberations is the gateway of globalisation and monetary liberation plays the virtually crucial role in integration of one neutron economy on the global economic network. How ever, very of tenner the term liberations and globalization be used simultaneously. Important instruments of liberations are regulation of fiscal food secu rities manufactureplace to abide hostile gravid, foreign investment, to and fro fall of ceiling and so on Reduction of duty and non-tariff barriers of dispense, simplifications of customs measures and so onFor successful global Integration a country must move to economic liberalizing by dismantling entry barriers and Licensing system, reduction in physical restrictions on imports, reduction in control n capital and current account, reforming financial system and opening up financial grocery store to private (domestic and foreign) players, removing controls on foreign capital (FDA and portfolio) flow to the country etc. Globalization however, Is non a new phenomena of the current world activities.Economic historians rescue traced two strong waves of globalization. The first wave of globalization spread over 1 870 1914 age the second wave of globalization began roughly in 1960 and continuing. The current wave of globalization is some(prenominal) faster and deeper. Glo balization nowadays is fundamentally a new economic phenomenon, and a influence to set up a new economic order globally change magnitude integration and Interdep closing curtainence of production, consumption and services. The present wave of banquets Volvo.V unveil 1, January 2005 Globalization and lifetime indemnification gallstones NAS slantingly Innocence Improved speculation In resource allocation, productivity sweetener and specialization and greater innovation, adaptability and utilization of technology which has necessitated the need for cross border economic activity for all the countries. choice mobility has not just decreased the cost of production and distri besidesion but in kindred manner wage hikeed competition crossways the order.Drivers of Globalization The present wave of globalization has been importantly influenced by advances in information and computer technology, increase flow of trade and capital. Improved specialization in resource allocation, productivity enhancement and specialization and greater innovation, adaptability and utilization of technology which has necessitated the need for cross border economic activity for all the countries. These ask not only reduced the cost of production and distribution but likewise boosted competition across the border.Therefore important drivers of globalization are expansion of International business deal, Internationalization of fiscal Market and Migration, Baldwin and Martin (1999) observed key aspects of globalization namely Trade, investment, migration and Factor prices , not bad(p) flows and Markets, and Industrialization and Income Convergence and Divergence. Both waves of globalization were driven by groundwork reduction in technical and policy barriers to international transactions. precisely the uniqueness in re cent globalization is heavily shaped by the dramatic reduction in communications cost, what is sometimes referred to as the demolition of distance. financial Globalization Advancement in information technology, innovation in financial products, and increase in trade and services provided boost to the cross border flow of capital. bang-up Mobility is considered as an index number of financial integration. Other indicator being gross expects of foreign assets and liabilities. We shall discuss this in detail the component part pecuniary Globalization The process of Globalization is strongly supported by Financial Globalization.There is an inextricable relation between increase international trade in goods and services and the change magnitude flow of international UAPITA. It is because increased trade is followed by increase in payments, banking service, hedging etc. Stock markets, as we bind tell in the beginning, has replaced the role of Banking to a great issue as a financier to corporate and development money. Stock markets, in a globally integrated financial market facilitate take a chance sharing, improve efficiency of reso urce allocation, impact savings decisions and provide liquidness thus supporting faster economic fruit.Globally integrated stock markets facilitates economic growth in some(prenominal) ways namely Banquets Volvo. V Issue 1, January 2005 021 Improve much name eloquently In ten market Prove prudent resource allocation prospects Create an environment for flow of savings thus reducing uncertainty of capital in the market Reduce risks through global diversification Liberalized and internationally integrated stock markets thus boost economic growth. Benefits of Financial Globalization Liberations and globalization produces Brobdingnagian benefits to the countries integrated.Liberations creates contributory climate for faster economic growth, allows upgrading of technology, provides plateful economy, expansion of markets domestically and internationally. Economic integration through liberations behind as well as expand cable opportunities in domestic market and through migration of labor in general. Financial Globalization produces higher economic growth through direct and collateral impact on economy . Liberations and globalization produce immense benefits to the countries integrated.Liberations creates conducive climate for faster economic growth, allows upgrading of technology, provides scale economy, expansion of markets domestically and internationally. Economic integration through liberations can also expand Job opportunities in domestic market and through gyration of labor in general. However, liberations of financial markets provides growth generating opportunities including the following. By encouraging FDA, developing economies can import much needed technology, which would further generate spillovers for local anesthetic firms.Saggy (2002) mentioned three types of potential channel of spillovers, namely Demonstration Effect, (local firms adopting multinational introduced technologies), labor turnover switchover of trained labors to local firms (enabling technology diffusion) and vertical linkages (multinationals supplying technology to suppliers of intermediate goods). Global Financial integration augment much required domestic saving and boost up capital investment in investment starved countries. It also provides avenues for emend allocation of capital and minimizes risk.Further, capital flow is accompanied by transfer of technology and finally assists in promoting healthy capital market. verificatory influences of globalization include promotion of globalization and integration of domestic economies which is followed by improving the macro economic policy frame work and background up economic institutions and develop governance system. Financial Liberations has forced some countries to open up financial markets and relaxed the rules of intermediation allowing financial services institutions like investment banks, asset management companies, Mutual Funds, Pension Funds etc. To influence in newly liberalized market s. The forces of change unleashed by financial globalization, reenacted In Electroplating AT Dangling system, Increase In cross border financial activity increased competition in savings market intersection point in financial services industry. B. Globalization of indemnity Market redress is an integral part of national economy and a strong chromatography column of financial arrest. Therefore, waves of globalization stir also deeply influenced the indemnity market worldwide. Financial Market Globalization has also been strongly supported by Globalization of restitution.With the increase in Trade, Direct Investment and Portfolio Investment, there has been an ever growing demand for amends services particularly in the acclivitous markets. Globalization of indemnification market, as a part of the overall process of liberalizing in emerging and other countries enabled the foreign insurance companies to enter in those countries and benefited both. The riving forces of insuranc e market globalization has been identified by Swiss Re (Sigma No. 4/2000) as the push factors and Pull Factors.The Push factors are the motives behind the movement of foreign insurance companies while the pull factors are the motives behind allowing the foreign companies to operate in local market, l) Push factors insurance Companies move out to emerging markets due to Increasing Global Trade , Growing Direct Investment , Potential Future crop in Emerging Markets , Saturation in industrialized countries and Strong growth in emerging entries and expected Efficiency Gains through Diversification , Economics of scale etc it) Pull Factors The important pull factors in emerging markets Emerging Markets have Strong Economic growth and Trade, and there are substantial requirements of capital in Emerging Markets to cover major risks. There are several benefits to the countries allowing foreign insurance companies to operate in their countries which can be by and large classified into Economy colligate, and Insurance marked related Economy related benefits to the local country Foreign insurance companies along with local companies pass on further momentum to obligation of savings. Institutional net work in the savings market increases, which also influence the savings behavior of abode and corporate savings.Resources and capital allocation in the Domestic Market increases with the increased sophistication brought by the foreign insurance companies It also improves the financial stableness in the host country, as well as facilitates improvement in production and Trade. Banquets Volvo. V Issue 1, January 2005 023 Insurance market related benefits Capital structure of entire insurance industry improves because foreign companies solves fresh capital with them. Market efficiency improves due to information dissemination, global operating friendship and increased competition. Management inclemency Increases Decease Torrent companies Drill Walt burgeon forth gl obal experience and management innovation. Range of available products increases because foreign companies bring with them a wide lay out of products and product development expertise.Customers service improves. increase competition, technology led service, and cost competition finally benefits the consumers. Globalization also improves Regulatory and Governance system. It also improves market conduct and Ethical bank line Standard. Jennifer Rankin (2003) mentions the following factors driving the insurance companies cross border activity. Many countries are moving away from protectionism and state control and taking much market driven approach especially in the insurance and financial services and opening up their markets to foreign companies. The process of Insurance globalization authoritatively influenced by the GOATS/WTFO.A major break through was achieved in 1997 with an agreement of Liberations of financial services following which 102 countries committed to remove entry barriers and liberalism their markets. The GOATS agreement offers ratified security and protection to global insurance players. With the removal of entry barriers in emerging and less developed countries there has been an increased flow of funds from developed countries to the emerging and less developed countries. According to Swiss Re (Sigma No. 4/2000) In recent years there has been a strong increase in the demand for insurance in the emerging markets. The average annual growth rate in the emerging markets has since 1990 been twice as high as industrial countries in both feel and non- biography insurance.There is already an indication of slow Roth and saturation of insurance market in industrially developed countries. During 2003, Global flavour business witnessed a deny of -0. 8%. However, emerging market life business grew by 6. 6% as against -1 . 7% decline in industrialized countries. In non life business, while industrialized countries achieved 5. 7% growth in real pen sion income, emerging markets registered 8. 5% growth rate in 2003. However, total agiotage income of emerging market in 2003, was US $ 314128 million which represented 10. 68% global premium income, whereas share of industrialized countries with US $ 2626542 million representing 89. 2% of global premium. This is an indication of huge potential emerging market.Globalization of Financial as well as support Insurance Market is an inevitable phenomena. In the years to come the globalization of Insurance Market is going to quickening further. The impact of globalization will also be felt more in emerging markets which have exhibited better potential for growth in insurance market. Data provided in dishearten No. 1 and Table No. 2 shows that countries which have extensively opened up the Insurance 24 Market to the Private and Foreign Companies have achieved relatively better growth in insurance density and penetration. It has also been noted in India that growth of Insurance Market w as faster in the post liberations termination than that in pre- Tatterdemalions pergola.However, one AT ten constraints AT Insurance Gallstones Is a small number of global players as noted by unexpended (2002). The private insurance industry is largely a national industry rather than a global one. The number of truly global insurance players is in the range of 20 to 30 only. Another 70 companies operate significantly in more than one continent through branches. provided 1. 2% of global insurance premium comes from across border business. C. mend of Liberations on Economic growth investigate of Bernstein and others (1998) shows that FDA contributes more domestic growth than domestic investment. And also FDA is more productive than domestic investment.Liberations of capital markets attracts foreign investment which influences the price of equity thereby reducing the cost of capital. Research of Beakers and Harvey (2000) indicated that post liberalized regulatory reforms bring dow n the cost of capital and also function to increase inflow of capital. Financial liberations also imparts structural formats of capital markets, improves the closures, transparency and corporate governance which creates growth prospects in a liberalized country. It has been noted that the average per capita income is higher in the countries with more open economic policies and better global linkages, than in the countries with less openness in financial sector. Globalization has helped promote convergence of per capita incomes.Per capita incomes have grown faster in globalization developing countries (those lowering trade barriers) than in rich countries 5 per cent versus 2. 2 per cent in sass. Non globalization Developing countries have lagged behind. Finance and Development, March 2002. , UP). Resource (2002) has observed that the trend of rising inconsistency over the past 200 years, primarily between countries, now appears to have been reversed, and the experience of the 19th century suggests that increased globalization will intensify this decline. Parkas et al (2003) has noted that International Financial Integration can help to promote domestic financial sector development, which in turn can help to moderate macro economic volatility.However, thus far these benefits of financial integration appear to have accrued primarily to industrialized countries. D. Growth of Life Insurance in India Indian Life Insurance diligence, since nationalization, has registered a significant growth and gradually increased its share in mansion financial savings. As noted in table 4, the Share of Insurance Funds has increased from 8. 7% in 1993-94 to 14. 9% in 2003-04, while the share of life insurance funds increased from 8% to 14. 5% during the same Banquets Volvo. V Issue 1, January 2005 025 per 00 Ana In terms AT opening night It NAS Increased Trot I Nils Is a gallants achievement of Life Insurance manufacture which till recently represented by LICE of India.Grow th in Life Fund is considered to be an important indicator of growth of Life Insurance Industry and as can be seen from the Table 4, LICE has performed exceedingly well. LICE, after(prenominal) nationalization of 256 Life Insurance Companies, started with a Life Fund of RSI. 410. 40 union, which in course of time increased rapidly and stood at RSI. 3,21 ,754 aggregate in 2004. Similarly, the total assets of LICE has increased from RSI. 463 core in 1958 to core in 2004. High growth of Life Fund and Assets of LICE was possible due to significant growth in New Business, which got a boost during the Post Liberations degree. starting signal time in 1999, LICE sold more than one core (1. 8 core) policies in a single year, however, growth became faster during the post liberalized period and in 2002 it crossed the 2 core mark by interchange 2. 25 core policy, which increased further to 2. 42 core in 2003. In 2004, New Business (AS) had gone(p) up RSI 2,02,898. 14 core under 2,69,63,5 04 policies. Total in force policies serviced by LICE by the end of 2004, stood at 15. 39 core under Sum Assured of RSI. 9,25,033. 33 core. Liberations of Indian Insurance market has provided further push of the Insurance Industry. By the end of March, 2004, there were 13 Life Insurance companies including LICE in the market, which has not only generated competition but also provided a wide range of product choice to the customers.An overall view of Indian Life Insurance market can be obtained through data released by ERDA, shown in the Table 6 and Table 7. Accordingly total no. Of policies underwritten in 2004 increased by, 12. 78% from 2002-03 to 5 2003-04, while the premium under these policies increased by 51. 80%, from lacks to 18,71 ,016. 02 lacks during the same period. So far LICE is concerned, there is a fall in market share in New Business. In No. Of Policies the market share declined from 96. 70% to 94. 21% while in premium income the market share of LICE declined from 92 . 03% to 87. 04% during the same period. These indicate that Indian Life Insurance in general has expanded since liberalizing on the one cut into and market has been increasingly becoming competitive. E.India in the International Context though the share of Life Fund in household Financial Assets has gone up during the last decade and Indian Life Insurance Industry registered better growth rate compared with global growth rate until now total premium masses and global market share object quite low. Total premium volume of Life Insurance Industry in the World at 9% growth rate increased from US $ 1 534,061 2002 to US $ 16,72514 2003, whereas in India 26 growth rate was much higher at 18% and Total Premium volume increased from US $ s S EYE ruling ten same pergola. Insurance Density (premium per capita and Insurance sharpness (premium in fate of GAP) which are important growth indicators are quite low in India. In the year 2003, Life Insurance Density in India was only US $ 12. 9 as against the World Density of US $ 267. 1. Similarly, Life Insurance Penetration in India was only 2. % as against World Penetration level of 4. 59%.