After the globalization, the whole world has become a
small village and the economic growth and slow down of one country affects all
over the world. A decision taken by the government of one nation affects the
business of all over the world.
According to the data, IMF shaved its 2013 forecast for
global economic growth to 3.9% from 4.1% it projected in April. As euro zone
crisis affected the whole world’s manufacturing and service sector growth.
Now, euro zone nations are trying to come out from this
debt crisis and they are also busy in making the reform policy for their
country. So that, they would become able to reduce their debt burden and
increase the growth of their country. We can take the example of Spain where
government is planning to raise 56.4 b Euro from deducing the spending,
increase in the tax rate and adding new power and environment tax. As these
steps are very much required for the country to take out itself from the burden
of debt. But, when the tax rate will be increased and the government will cut
the job then the demand for good and services will be reduced by the people and
it will affect the whole world. Such as if the US has export goods and services
to Spain then the demand of US goods and services will be automatically
decreased.
We can take another example i.e. related to India.
As India has allowed 100% FDI investment in single brand
retail but it has put a lot of restriction such as the company which will
entered into the market has to mandatory sourcing minimum 30% of their goods
from local small and medium sized enterprise. Now many companies want to enter into the Indian retail market
but they require some liberalization on this law.
This type of decision affects the growth of both countries,
firstly from where the FDI is coming and secondly where these investors want to
invest. As every FDI investment increase the employment in both foreign and
Home country.
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