GLOBALISATION AND THE INDIAN ECONOMY

01. PRODUCTION ACROSS COUNTRIES:

06 Foreign trade results in connecting the markets or integration of markets in different countries.

Until the middle of the 20th century, production was largely organised within countries.
04. WHAT IS GLOBALISATION?
India exported raw materials and food stuff and imported finished goods. Trade was the main channel
connecting distant countries. This was before large companies called Multinational corporations (MNCs)
emerged on the scene.
An MNC is a company that owns or controls production in more than one nation.
MNCs are playing a Besides the movements of
MNCs set up offices and factories for production in regions where they can get cheap labour and other major role in the
Globalisation is the goods, services, investments
resources so that the company can earn greater profits. process of rapid globalisation process. and technology, there is one
MNCs are not only selling its finished products globally but more important, the goods and services are integration or More and more goods more way in which the
interconnection and services, investments countries can be connected.
produced globally. and technology are
between countries. This is through the movement
China provides the advantage of being a cheap manufacturing location. moving between of people between countries
countries.
Mexico and Eastern Europe are useful for their closeness to the markets in the US and Europe.
India has highly skilled engineers who can understand the technical aspects of production. It also has
educated English speaking youth who can provide customer care services
Factors that have enabled Globalisation

02. INTERLINKING PRODUCTION ACROSS COUNTRIES Technology

* Rapid improvement in technology has been one major factor that has stimulated the globalisation process.
MNCs set up production where it is close to the markets; where there is skilled and unskilled labour * This has made possible much faster delivery of goods across long distances at lower costs.
available at low costs; and where the availability of other factories of production is assured * Even more remarkable have been the development of information and communication technology.
* Technologies in the areas of telecommunications, computers, and internet have been changing rapidly.
The money that is spent to buy assets such as land, building, machines and other equipment is called
investment.
Liberalisation of Foreign Trade and Foreign Investment Policy
An investment made by MNCs is called Foreign investment. MNCs are exerting a strong influence on
production at these distant locations. * Trade barriers are some restrictions that have been set up by governments.
* The government can use trade barriers to increase or decrease (regulate) foreign trade and to decide what kinds of goods and how much
An investment made by MNCs is called Foreign investment. MNCs are exerting a strong influence on of each, should come into the country. Tax on imports is an example of trade barrier.
production at these distant locations. * The Indian government, after Independence, had put barriers to foreign investment. This was considered necessary to protect the
MNCs set up production jointly with some of the local companies of these countries. The benefit to the producers within the country from foreign competition.
local company of such joint production is two-fold. First, MNCs can provide money for additional investments, * In the 1990s, changes were made to this policy in India Removing barriers or restrictions set by the government on trade, is known as
like buying new machines for faster production. Second, MNCs might bring with them the latest technology for liberalisation.
production.

05.
But the most common route for MNC investments is to buy up local companies and then to expand
production. MNCs with huge wealth can quite easily do so. WORLD TRADE ORGANISATION

03. FOREIGN TRADE AND INTEGRATION OF MARKETS It allows free

trade for all, in
practice, it is seen
It establishes rules that the developed
regarding countries have unfairly
Foreign trade creates an opportunity for the producers to reach beyond the domestic markets. international trade, retained trade barriers.
and sees that these On the other hand,
rules are obeyed. WTO rules have forced the
Producers can sell their products not only in markets located within the country but can also compete in developing countries
World
markets located in other countries of the world. to remove trade
Trade barriers.
Organisation It establishes rules
Foreign trade or international trade is the exchange (import and export) of capital, goods, and services (WTO) is one such regarding
across international borders or territories. organisation international trade,
whose aim is to and sees that these
For the buyers, import of goods produced in another country is one way of expanding the choice of goods liberalise rules are obeyed.
international
beyond what is domestically produced. With the beginning of trade, goods move from one market to
trade
another, and goods’ choice increases. Thus, the competition rises, and prices of similar goods in the two
markets become equal.
 06. Impact of Globalisation in India
The Struggle for a Fair Globalisation

* Globalisation has created greater competition among producers – both local and foreign producers.
The benefits of globalization People can also play a
* There is greater choice before these consumers who now enjoy improved quality and lower prices for are not equally distributed to significant role in the struggle
several products- As a result, these people today, enjoy much higher standards of living than was possible
earlier.
all the people. Fair globalization
would create opportunities
01. 06. for fair globalization through their
campaign and representation
and would be beneficial to all. relating to trade and WTO.
* Among producers and workers, the impact of globalisation has not been uniform:

* MNCs have been interested in industries such as cell phones, automobiles, electronics, soft drinks, fast food or
services such as banking in urban areas these products have a large number of well-off buyers. In these
industries and services, new jobs have been created. Also, local companies supplying raw materials, etc.
to these industries have prospered. The government can
play a major role in The government should
* Several of the top Indian companies have been able to benefit from the increased competition. They have make an ally with other
02.
making this possible.
05.
invested in newer technology and production methods and raised their production standards. developing countries
Its policies must protect
* Some have gained from successful collaborations with foreign companies. Moreover, globalisation has the interests, not only having the same interest
enabled some large Indian companies to emerge as multinationals themselves! Some Indian companies like of rich and the powerful but to fight against the
Tata Motors, Infosys, Ranbaxy, and Asian Paints are spreading their operations worldwide. all the people in the country. supremacy of developed
countries in the WTO.

To attract foreign investments in India, the Central and State governments

have set up Industrial zones called Special Economic Zones (SEZ). The government should The government can
Steps to
make provisions to support
small scale industries until
03. 04. use trade and investment
barriers. It can negotiate at
attract Government has also allowed Flexibility in the labour laws to attract foreign
they are ready to face the WTO for ‘fairer rules.
Foreign investment. The companies can hire workers for shorter periods when there competition with foreign
Investment is intense pressure work. companies.

SEZs are facilitated with all the amenities such as electricity, water, roads,
transport, storage, recreational and educational facilities.

Rising Competition and Uncertain Employment

The benefits of The local companies Because of growing The workers have no
globalization have not have faced huge competition and secure jobs, must work
been distributed losses and the motive to earn in long shifts without
equally to small subsequently have more profits, extra wages, and
producers and workers. shut down their employers prefer to under much pressure.
small-scale industries employ labourers
rendering many flexibly.
workers jobless.