unit 4  (c) Reduction in capital-output ratio.

1. Explain the meaning and definition of

globalisation 2. Globalisation paves the way for removing
2. Explain the significance of globalisation inefficiency in production system. Prolonged
3. Analyse the advantages and disadvantages of protective scenario in the absence of
globalisation. globalisation makes the production system
4. Explain the factors driving globalisation and careless about cost effectiveness which can be
its impact in India. attained by following the policy of globalisation.

3. Globalisation attracts entry of foreign capital

along with foreign updated technology which
improves the quality of production.

4. Globalisation usually restructure production

MNC -
and trade pattern favouring labour-intensive
goods and labour-intensive techniques as well
https://university.aituedu.org/upload/courses/
as expansion of trade in services.
23/images/matrials/XuczRrnPTh.pdf - SUBBA
RAO TEXT BOOK
Advantages of Globalisation
What is Globalisation?
5. In a globalized scenario, domestic industries
 The meaning of Globalisation is usually
of developing country become conscious about
interpreted to indicate the integration of the
price reduction and quality improvement to
economy of the nation with the world economy,
their products so as to face foreign competition.
it is a multifaceted aspect.
6. Globalisation discourages uneconomic import
 It is a result of the collection of multiple
substitution and favour cheaper imports of
strategies that are directed at transforming the
capital goods which reduces capital-output ratio
world towards greater interdependence and
in manufacturing industries. Cost effectiveness
integration.
and price reduction of manufactured
 It includes the creation of networks and
commodities will improve the terms of trade in
pursuits transforming social, economic and
favour of agriculture.
geographical barriers. Globalisation tries to
7. Globalisation facilitates consumer goods
build links in such a way that the events in India
industries to expand faster to meet growing
can be determined by events happening
demand for these consumer goods which would
distances away.
result faster expansion of employment
 In other words, Globalisation is the method of
opportunities over a period of time. This would
interaction and union among people,
result trickle down effect to reduce the
corporations and governments universally.
proportion of population living below the
DEFINATION OF GLOBALISATION:
poverty line
UNESCO:
8. Globalisation enhances the efficiency of the
UNESCO characterizes globalization as a set of
banking insurance and financial sectors with the
economic, social, technological, political, and
opening up to those areas to foreign capital,
cultural structures and processes arising from
foreign banks and insurance companies
the changing character of production,
consumption, and trade of goods and assets
Features of globalisation.
that comprise the base of the international
1. Rapid expansion of international trade.
political economy
2. Nationalisation of products and services by
large.
Advantages of Globalisation
3. Growing importance of multi national
 The following are some of the important
corporations.
advantages of globalisation for a developing
4. Increase in capital transfers.
country like India:
5. Globalisation of technology.
1. Globalisation helps to boost the long run
6. SHIFTS IN production from country to
average growth rate of the economy of the
country.
country through:
7. Increased freedom and capacity and firms to
 (a) Improvement in the allocative efficiency of
undertake economic transactions across
resources;  (b) Increase in labour productivity;
national boundaries.
and
8. Fusing of national markets.
 9. Economic integration. Global Value Chains (GVCs): Products often
10. Global economic interdependence. involve components or services from multiple
countries. GVCs allow specialization and cost-
effective production.

Outsourcing: Companies outsource certain

tasks (e.g., manufacturing, customer support)
to countries with cost advantages. This
benefits both parties.

Emerging Markets and Changing Trade

Patterns:

Rise of Emerging Economies: Globalization

has opened up markets in countries like
China, India, and Brazil. These nations are
now major players in international trade.
Trade Liberalization and Reduced Barriers:
Shift in Consumer Demand: As living
1. Imports and Exports: Globalization has standards improve globally, demand for
facilitated the exchange of goods and services goods and services increases. Exporters can
across borders. Countries can import tap into these growing markets.
products they lack or export their surplus
goods to other markets. Diversification of Trade Partners: Businesses
can reduce risk by diversifying their customer
Trade with Many Countries: As trade barriers base across different countries.
decrease, countries can engage in commerce with
a broader range of nations. This diversification Lower Business Costs:
enhances economic opportunities.
Economies of Scale: Globalization allows
Trade Agreements Help Exporters: Bilateral and companies to produce at larger scales,
multilateral trade agreements promote exports by reducing per-unit costs.
reducing tariffs, quotas, and other restrictions.
These agreements create a more predictable
Access to Cheaper Inputs: Businesses can
trading environment for exporters.
source raw materials, labor, and services from
countries with cost advantages.
Technological Advancements and Digital
Transformation:
Competition and Innovation: Global markets
encourage competition, driving innovation and
Efficient Communication and Logistics: efficiency.
Technology enables real-time communication,
efficient supply chains, and streamlined logistics.
GLOBAL MIGRATION:
This has accelerated trade processes.
Increased Mobility:
E-Commerce: Online platforms allow businesses
to reach global consumers directly, boosting
People Moving to Other Countries: Globalization
cross-border sales.
has made it easier for individuals to relocate to
different countries. Improved transportation,
AAutomation and Productivity: Automation in
communication, and reduced barriers have
manufacturing and services enhances
encouraged migration.
productivity, making exports more competitive.
Working Overseas: Job opportunities in foreign
Global Value Chains and Outsourcing:
countries attract skilled workers. Globalization has
created a global labor market, allowing drain” as skilled individuals leave for better
professionals to seek employment abroad. opportunities elsewhere.

International Tourism: Social Dislocation: Rapid migration can strain

social structures and create tensions between
Easier Travel: Globalization has led to cheaper migrants and host communities.
flights, efficient transportation, and simplified visa
processes. As a result, more people travel IMPACT OF GLOBALISATION
internationally for leisure, business, or education.
Effects of Globalisation: India
Cultural Exchange: Tourism promotes cultural
understanding and appreciation. People Globalisation is the intensification of world
experience diverse traditions, languages, and relations. It is the free movement of trade,
cuisines, enriching their perspectives. capital, technology, people and culture across
the globe. With Globalisation, there is a sharp
Economic Factors: increase in the level of Indian integration into
the world relations after the structural
Remittances: Migrants working overseas often adjustment program that began in the 1990’s.
send money back to their home countries. These Globalisation has varied impact across all
remittances contribute significantly to the class groupings in India. While it is said to
economies of their countries of origin. have a highly positive impact on the industrial
class, entrepreneurial class and the
Labor Shortages: Globalization allows countries to professional class, the impact on the working
address labor shortages by recruiting skilled class has been varied.
workers from other nations.
We are living in an increasingly connected
Social Networks and Diasporas: world. The imprints of other cultures,
societies and economies are encountered in
Migrant Networks: Expatriates form networks our daily lives. The smartphones we use
that connect their home countries with their host might be assembled in China, the clothes we
countries. These networks facilitate trade, wear might be manufactured in a factory in
investment, and knowledge transfer. Bangladesh or South-East Asia and the
company we are working for might be a
Diaspora Engagement: Home countries multinational corporation. Globalisation has
recognize the value of their external been taking place for centuries albeit at a
populations. They develop policies to engage slow pace.
diasporas, harnessing their skills and
resources. Globalisation means different things to
different people. Economists consider it as a
Education and Research Opportunities: step towards a fully integrated world market .
The sovereignty of the state is challenged
with the emergence of non-governmental
Student Mobility: Globalization enables
power players in the world order .
students to study abroad, gaining exposure to
Globalisation is not an event, rather a process
different educational systems and cultures.
which originated with the liberalization and
privatization of the economic sectors. It aims
Research Collaboration: Scholars collaborate
for the establishment of a borderless world. It
across borders, advancing scientific
talks of Vasudhiva Kutumbakam- the world is
knowledge and innovation.
my family.

Challenges and Contradictions:

Factors aiding Globalisation are: Technology,
Faster Transportation, Improved mobility of
Brain Drain: While globalization benefits capital, Rise of MNCs.
some countries, others experience “brain
Globalisation has a huge impact on the Indian led to increase in gap between rural and
society and has led to the transformation of urban sectors with respect to standard of
the society from various perspectives: living which also influences migration.

Political The social movements with respect to women

safety, dalit movements, farmers’
Globalisation has changed the nature of movements, environment safeguards and
governance and policy dimensions in the others have been intensified and been
country. It gave a specific political and affected by Globalisation. The gender
economic approach to the economic policies. dynamics is also changing due to the impact
There has been rise in Non-Government of Globalisation.
organizations and their special role in the
governance of the country. The concept of Four stages of globalization
good governance has been strengthened due
to increasing Globalisation. 1.Domestic Stage–

The role of government has transformed in Market potential is limited to the home
more significant ways as the focus has moved country–Production and marketing facilities
towards empowerment from welfare. This
has led to a policy change towards a rights located at home
based approach to governance.
2. International Stage
Economic
Exports increase, and the company usually
Liberalization and privatization are seen to be adopts a multi-domestic approach.–Product
offshoots of Globalisation which has changed design, marketing, and advertising are
the outlook of Indian economy. It has led to adapted to thespecific needs of each country,
the Liberalization, Privatization and requiring a high level ofsensitivity to local
Globablization (LPG) era since 1991 which has values and interests.
completely transformed the economic policy
of the country. Increase in foreign 3.Multinational Stage
investments and adoption of technology in
sectors like media, communication, defence The company has marketing and production
and insurance have helped in improving the facilities located inmany countries, with more
forex reserves of the country. than one third of its sales is outsidethe
country of origin.– Product design, marketing
Liberalization is a term which comes from the and advertising strategies arestandardized
philosophy of liberalism which advocates for around the world.
greatest freedom for private individuals and
least interference by state in private affairs. 4. Global (or stateless) Stage

Privatization is generally referred to induction These corporations operate in true global

of private ownership in publically owned fashion, making salesand acquiring resources
enterprises or organization. in whatever country offers the
bestopportunities and lower cost.
Social
Disadvantages of Globalisation:
There have been debates of homogenization
versus Globalisation of culture. Globalisation Globalization has its disadvantages also.
has transformed the social dimensions as
well. It has influenced migration and has a
The following are some of these
huge impact on urbanization. It has drastically
disadvantages:
increased the pace of urbanization and has
(i) Globalisation paves the way for Globalization is driven by various new
redistribution of economic power at the development and gradual changes in the
world level leading to domination by world economy.
economically powerful nations over the poor
nations. Generally, organizations go global for
expanding their markets and increasing their
(ii) Globalisation usually results greater sales and profits. One of the major forces of
increase in imports than increase in exports globalization is the expansion of
leading to growing trade deficit and balance communication systems.In the present era, it
of payments problem. has become easy to distribute information to
any part of the world through the Internet.
(iii) Although globalisation promote the idea
that technological change and increase in Some of the important forces behind
productivity would lead to more jobs and globalization are shown in Figure-1:
higher wages but during the last few years,
such technological changes occurring in some Globalisation Force
developing countries have resulted more loss
of jobs The different forces (as shown in Figure-1) are
explained as follows:
than they have created leading to fall in
employment growth rates. (a) Advancement of Technologies:

(iv) Globalisation has alerted the village and Refers to one of the crucial factors of
small scale industries and sounded death- globalization. Since 1990s, enhancement in
knell to it as they cannot withstand the telecommunications and Information
competition arising from well organized Technology (IT) has marked remarkable
MNCs. improvements in access of information and
increase in economic activities. This
(v) Globalisation has been showing down the advancement in technologies has led to the
process to poverty reduction in some growth of various sectors of economies
developing and underdeveloped countries of throughout the world.
the world and thereby enhances the problem
of inequality. Apart from this, the advancement in
technology and improved communication
(vi) Globalisation is also posing as a threat to network has facilitated the exchange of goods
agriculture in developing and and services, resources, and ideas,
underdeveloped countries of the world. As irrespective of geographical location. In this
with the WTO trading provisions, agricultural way, advanced technologies have led to
commodities market of poor and developing economic globalization.
countries will be flooded farm goods from
countries at a rate much lower than that (b) Reduction in Cross-trade Barriers:
indigenous farm products leading to a death-
blow to many farmers. Refer to one of the critical forces of
globalization. Every- country restricts the
(vii) Implementation of globalisation principle movement of goods and services across its
becoming harder in many industrially border. It imposes tariffs and quotas on the
developed democratic countries to ask its goods and services imported in its country. In
people to bear the pains and uncertainties of addition, the random changes in the
structural adjustment with the hope of regulations create a chaos in global business
getting benefits in future. environment.

Forces Behind Globalization (With Diagram) Such practices impose limits on international
business activities. However, gradual relief in
the cross-border trade restrictions by most due to e-commerce and electronic banking:
governments induces free trade, which, in the digital revolution enables initiation and
turn, increases the growth rate of an completion of transactions globally.
economy.
With social media, every seller can ‘advertise’
(c) Increase in Consumer Demand: his/her goods and services, for example,
showing photos and videos on Facebook at
Acts as a main driver to facilitate negligible cost. This implies that social media
globalization. Over the years, with increase in has compressed the world into a global village
the level of income and standard of living, the since within seconds, people can initiate and
demand of consumers for various products complete transactions online. When the
has also increased. Apart from this, potential buyer seeks the product on social
nowadays, consumers are well aware about media, he/she can place an order for the
products and services available in other product immediately. Certain payments can
countries, which impel many organizations to be made through the sellers’ website or
work in association with foreign players for direct to his/her phone using mobile money.
catering to the needs of the domestic market. Such global and online funds transfers have
seen growth of intermediaries such as
(d) High Competition: Western Union and WorldRemit.

Constitutes an important driver for bringing International economic integration. Several

about globalization. An organization generally trade blocs have made national borders
strives hard to grain competitive edge in the porous as barriers to trade are
market. The frequent increase in competition reduced/removed among member countries.
in the domestic market compels organizations Examples of such trade blocs include: NAFTA
to go global. Thus, various organizations enter for the US, Mexico and Canada; and EAC for
other countries (for selling goods and East African countries. Such trade blocs
services) to expand their market share. increase competition among firms in member
countries as flow of goods and services is
They export goods in foreign markets where facilitated across national borders. Whereas
the price of goods and services are relatively there is no complete deregulation of markets
high. Many organizations have achieved among member states, there is a move
larger global market shares through mergers towards that direction even if protectionism
and acquisitions, strategic alliances, and joint tendencies are still experienced in some blocs
ventures. So, these are the major factors that such as that of East Africa. For example, some
have contributed a lot in globalization and the countries still encourage the population to
growth of global economy. buy homemade products instead of
encouraging them to buy regional products
The digital revolution. The internet has made from members of the trade bloc. Such
it easy to access goods and services produced protectionism still works counter to the aims
from anywhere in the world. It is now easy to of economic integration.
purchase goods such as mobile phones and
books online. A good example is Amazon Socio-cultural convergence. Due to access to
which has an online store for books and other information through online newspapers and
products. Potential customers can search for social media, people are losing ‘cultural
titles, check for prices, make orders and pay identity’. For example, what used to look
online. The purchased books (and other ‘unAfrican’ is now looking normal such as
products) are then shipped to the customers wearing mini-skirts. This is due to exposure to
worldwide. This implies that customers are cultures in which wearing mini-skirts is not
able to compare prices online and determine seen as a taboo. As a result, producers of
which transactions will make them incur the mini-skirts have a global clientele due to
lowest costs. Therefore, technology has made convergence of cultural values, traditions and
it easy to carry out borderless transactions beliefs. What used to be a national/regional
product is now a global product. Firms can
now sell their products worldwide without such as the US dollar and British Pound. This
customising them to meet the tastes of has made it easy to purchase goods and
particular countries. services globally. For example, it is easy to
pay tuition fees while in Africa for an online
Global education providers. With the academic course in UK through online
popularity of online learning increasing, there payments. This is possible because of the
are institutions which offer education courses ease of exchanging money from one’s
to a global audience. We have seen currency to US dollars or British pounds. This
universities and colleges offering a blend of has led to financial globalisation which is
on-campus, distance, and purely online facilitated by companies like PayPal which
programmes. The global education providers operate innovative online payments system
enable students to access globally accepted thus transferring money globally.
academic qualifications while residing in their
home countries. As a result, the students Intense competition. With intense
enter the job market with diverse skills and competition among firms, firms are looking
exposure to diverse cultures. This enables for new markets across borders. In some
them to work for companies dispersed sectors such as news media, there is
globally especially using online platforms to competition from any corner of the world.
write articles and tutor learners. Therefore, Information is readily accessible from both
there is increasing number of people who can local and foreign news firms thus forcing
offer services across borders using online firms to keep innovating in order to remain
platforms after attaining ‘global education’ competitive and/or survive. Due to intense
thus constituting ‘global human capital’. competition, firms are now searching for
foreign markets. The search for foreign
Cross-border political influence. Governments markets has been facilitated by increase in
have formulated polices that facilitate cross- foreign direct investment (FDI). FDI involves
border trade and influence. For example, transactions in which a foreign investor avails
there is growing influence of China especially capital to a firm for use in its operations. Such
in Africa where China is offering long-term transactions have increased capital mobility
loans to countries. Zambia is a key example and facilitated global economic integration as
where China virtually took over operations at firms enter international strategic alliances.
the international airport. This shows that
developed countries are positioning Increased international business and trade.
themselves to influence political and Some firms are involved in importing and
economic developments in developing exporting goods and services across national
countries. This was also clear when borders. Other firms are using joint ventures,
supporters of Brexit were popularising it that licensing and franchising as alternatives to
a ‘global Britain’ is far much better than importing and exporting while making their
remaining an EU member. This shows that products reach a global clientele. This has
there is competition among developed enabled firms to meet customer needs across
countries to influence what takes place in borders without necessarily customising
developing countries. This makes countries products as products now have a global
bundled up by developed countries, for appeal due to convergence of cultures
example, some countries are seen as allies of (already discussed) leading to uniform
China and Russia while others are seen as markets. For example, Coca-Cola products
allies of the US/Israel and Britain. Such have become global brands sold in every
bundling makes national borders porous as country. Such cross-border trade has been
the countries trade as members of the loose facilitated by reduction in transaction costs as
grouping. more efficient and effective means of
payments and communication are enabled by
Financial liberalisation. There is increasing technology.
interconnection of countries due to
deregulation of financial markets. It is now Need for economies of scale. As competition
easy to exchange money to ‘global currencies’ intensifies, firms are looking for ways of
obtaining and enjoying cost savings. This can
be achieved through economies of scales
when firms produce the same product for a
huge market. This necessitates firms to have
huge investments in promoting products
globally. A key example is PepsiCo which sells
its drinks globally.