Thursday, October 28, 2010

Globalization in Third World Countries

Globalization requires constant reduction in costs through research and its application, as well as constantly declining transaction costs through constantly increasing investment in rural infrastructure. Without these a nation like India or other third world countries cannot compete. The increased competition from international markets put pressure on the government to remove protectionist instruments. Some of the effects of globalization in third word countries, on agro industries are –
  1. Opening up of the economy to trade and market forces - The benefits of globalization flow from trade. Exports require imports, but trade restrictions tend to drive up the cost of exports through higher costs of vital inputs and technology. Customs inefficiencies, corruption and a myriad other bureaucratic constraints common in third world countries are just as stifling as tariffs and all need to be strictly dealt with.
  2. Investing in agricultural research and dissemination of information – The new research should help in increasing productivity of the required commodity at the lowest possible cost. The most competitively priced product commands the highest demand in the market.
  3. Investing in rural infrastructure – This is important, as lack of such investment gradually shifts comparative advantage back towards subsistence production at very low-income and little multiplier to the rural non-farm sector.
  4. Facilitating private sector activity - Private sector investors tend to search for quick turnover, particularly in trade. Initially, governments have to play a role in assisting the private sector by participating in the costs of market analysis, assisting in the development of trade associations, meeting health regulations of high-income importers and so on. Later on, private agro industries can start making profits on their own.
  5. Quality of produce – Agro industrialists need to pay attention to the quality of produce and products both for the domestic and the foreign markets. Production must be tuned to the rapidly changing product demand and varying trends. Agro businesses have set up global standards of research to keep up with the latest in the market.
At present only 23.30 per cent of farmers in third world countries are able to derive benefits of extension services provided by various government agencies. Every year around 30 per cent of fruits, vegetables and other agro industry products are lost due to mishandling, spillage, floods, droughts and pests and diseases. Agro industry areas such as horticulture, floriculture, organic farming, genetic engineering, food processing, branding and packaging have high potentials for growth.

Development of rural infrastructure, rural extension services, agro-based and food processing industries are essential for generating employment and reducing poverty in India and other third world countries. It will also help in promoting globalization by making Indian agro industry products more competitive both nationally and internationally.

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