JAC Board Class 10 Social Science Notes Economics Chapter 4 Globalisation and the Indian Economy
→ Today’s consumers have a variety of choice of goods and services. Markets have been transformed vastly in a matter of few years.
→ Production Across Countries
- Until the middle of the twentieth century, production was largely organised within countries.
- Trade wa§ the main channel connecting distant countries.
- Multinational corporations (MNCs) emerged. A MNC is a company that owns or controls production in more than one country.
- MNCs set up offices and factories for production in regions where they get cheap labour and other resources. This is done to reduce the cost of production and the MNCs can earn greater profits.
- MNCs not only sell their products globally but also produce the goods and services globally.
- Production process is spread across the world witji cost optimisation.
→ Interlinking Production Across Countries
- MNCs have set up production close to the markets; wherein skilled and unskilled labour is available at low costs and the availability of other factors of production is assured.
- The money that is spent to buy assets, such .as land, building, machines and other equipment is called investment. Any Investment made by MNCs is called foreign investment.
- At times MNCs set up production in collaboration with local companies. The benefit of the local companies is two¬fold: MNCs provide finance for additional investments. MNCs might bring with them the latest technology for production.
- The most common route for MNC investments is to buy up local companies and then to expand production. Secondly, large MNCs in developed countries place orders for production with small producers of garments, footwear, sports items, etc. The products are supplied to MNCs, which then they sell under their own brand names to the customers. These MNCs have tremendous power to determine price, quality, delivery, and labour conditions for these distant producers.
- MNCs are exerting a strong influence on production at these distant locations. Therefore, production in these widely dispersed locations is getting interlinked.
→ Foreign Trade and Integration of Markets
- For a long time foreign trade has been the main channel connecting the countries. Trade routes connected India and South Asia to markets both in East and West, and extensive trade took place along these routes.
- Foreign trade creates an opportunity for the producers to reach beyond domestic markets. Buyers have a wide option to choose from the imported goods produced in another country.
- More choices of goods in the market and prices of similar goods in the two markets tend to become equal. Producers in the two countries closely compete against each other even though they are separated by thousands of miles.
- Foreign trade, thus, integrates the markets in different countries.
→ What is Globalisation?
- Globalisation is the process of rapid integration or interconnection between countries.
- More and more goods and services, investments and technology are moving between countries. Globalisation has also encouraged movement of people between countries.
→ Factors that have Enabled Globalisation
- Rapid improvement in technology has been one rpajor factor that has boosted the globalisation process. In the past fifty years, there have been several improvements in technology which have made faster delivery of goods across long distances possible at lower costs.
- There have been huge advancements in information and communication technology. Information can be obtained and shared instantly.
- The Indian government, after Independence had put barriers to foreign trade and foreign investment to protect the producers within the country from foreign competition. Starting around 1991, government removed the trade barriers. The time had come for the producers to compete with the producers around the globe. The government thought that this would enable the producers to impro ve’ the performance and the quality of the produce.
- The goods could be imported or exported more easily and also foreign companies could set up factories and offices in India. This is known as liberalisation.
→ World Trade Organisation:
- The aim of World Trade Organisation (WTO) is to liberalise international trade. Powerful international organisations believe that barriers to foreign trade and investment are harmful. Trade between the countries should be ‘free’.
- WTO establishes rules of international trade and sees that these rules are followed. It is seen that the developed countries have unfairly retained trade barriers, while WTO has forced the developing nations to remove trade barriers.
→ Impact of Globalisation in India
- Globalisation has affected the lives of the people and the economy in both positive and negative way.
- MNCs have increased their investments in India over the past 20 years. MNCs have been interested in industries, such as cell phones, automobiles, electronics, soft drinks, fast food or service such as banking in urban areas. These products have large number of well-off buyers. In these industries, new jobs have been created. Local companies supplying raw materials, etc., to these industries have prospered.
- Top Indian companies have benifited from increased competition as they have been able to invest in newer technologies and raise their production standards. Some have gained from the collaborations with foreign companies.
- Few large Indian companies, such as Tata Motors, Infosys, Ranbaxy, Sundaram Fasteners, Asian Paints, etc., have emerged as multinationals themselves.
- Governments in India are setting up special industrial zones, known as SEZs to encourage investments by foreign companies and help them establish their offices in India. Labour laws have been made flexible. Companies are allowed to hire workers on a temporary
basis, instead of on a regular basis. This lowers the cost of production and MNCs are able to make profits.
- The jobs of workers are no longer secure. They do not have regular work. When they are employed, they have to put in long hours of work and also may have to do night shift. Their wages are low.
- A large number of small producers had to shut down their units because of stiff competition from MNCs. They have been rendered jobless. Conditions of work in the organised sector have come to resemble the unorganised sector.
→ Struggle for a Fair Globalisation
- Fair globalisation would create opportunities for all, and also ensure that the benefits of globalisation are shared better.
- The government can play a major role in making globalisation fair. Its policies should protect not only the rich but also the poor and small producers in the country. The government can ensure that the labour laws are implemented and followed, and the labourers get their rights. It can support the small producers till they become capable of competing in the market with MNCs.
- The government should ensure that the WTO rules are free and applied fairly across the world.