Class -10
Subject- Economics
Chapter 4: Globalisation and the Indian economy
Notes
Globalisation refers to the integration of
a country with the other countries.
It consists of:
1) Trade of goods
2) Trade of services
3) Spread of Technology & Knowledge
4) Foreign Investment
6) Movement of People ( for better job opportunities, Tourism, education, Medical Treatment,
etc.)
MNCs are playing a major role in the process of globalization.
MNC → Multi National Company is a company that owns as controls production in more than
one nation.
Factors that MNCs look for setting production in other countries are:
1) Cheap Labour
2) Cheap Raw Materials
3) Flexible Government Policies
4) Access to large Markets
Ways in which MNCs expand production in other countries
1) The most common route is to buy
local companies. For example- Cargill foods an american MNC, has bought over smaller Indian
companies such as Parakh foods.
2) Large MNCs in developed countries place orders for production with small producers and
then sell these under their own brand names t o the customers.
for example: Garments, footwears, sports
items, etc.
3) By setting up partnerships with local companies. For example: Collaboration of
Mahindra &Mahindra with Ford Motors.
4) By closely competing with local companies.
Factors that have enabled globalisation
1) Technology
a)Transportation
→ Improvement in transportation technology has made much faster delivery of goods across
long distances possible at lower costs.
For example:
Containers have led to huge reduction in port handling costs. The cost of a transport has fallen
enabling much greater volume of goods being transported now.
b) Information and Communication Technology:
Telecommunication facilities like telephone, telegraph, fax, etc are used to contact one another
around the world. Computers have now entered almost every field of production activity.
Examples:Video calls, E-mails, voice-mail, etc.
2) Liberalisation - Removing barriers
or restrictions set by the government is
Known as [Link] were allowed to make decisions more freely as to what to import
or export.
FOREIGN TRADE has been the main
channel connecting counties.
Benefits of foreign Trade
To Producers - Producers can sell their produce within the country but also markets of other
countries.
To Consumers → more choices of goods and services beyond what is domestically produce.
With increase in foreign Trade, prices of
similar goods in the two markets tends to become equal and producers now compete
closely with each other.
Thus, Foreign Trade results in connecting the markets of different countries.
Liberalisation - with liberalisation , businesses are allowed to make decisions more freely about
what they wish to import and export.
After Independence, the Indian government had but barriers o foreign trade & Investment,
Why?
- To protect the producers with within country from foreign competition. Industries were just
coming up, and competition from imports at that stage would not have allowed these industries to
come up.
Thus, India allowed imports
of only essential items like machinery, fertilizers, petroleum,etc.
But in 1991, Policy of liberalisation was to introduced by the Indian government.
Why does the government removed trade barriers?
It felt that time had come for Indian producers to compete with producers around the globe. This
would improve the performance of the producers within the country since they would improve their
performance. Trade Barriers are used by the government to regulate (increase or decrease)
the foreign Trade.
Types of Trade barriers are:
1. Tax on Imports
2. Import Quotas : a limit on the number of goods that can be imported.
World Trade Organisation
*It aims to liberalise International trade .Trade between countries should be free.
* It was started at the initiative of the developed countries.
* WTO establishes rules regarding international trade, and sees that these rules are followed.
*164 countries are members of WTO.
* It’s seen that the developed countries have unfairly retained trade barriers.
*Developing counties are asking developed countries -Is this free and fair trade?
POSITIVE IMPACT OF GLOBALISATION
1) Consumes now have greater choice of
of goods & services with improved quality and
lower prices.
2)Increase in foreign investment in our
country over the past 20 years.
3) Creation of New Jobs in our country especially in industries l i k e cell phones, electronics,
soft drinks, banking etc.
4) local companies supplying raw materials
to MNCs have prospered.
5) Top Indian companies have invested in newer technology and raised their production standards.
6) Some large Indian companies have emerged as MNCs themselves. Eg- Tata Motors, Infosys,
Ranbaxy, Asian Paints, etc.
7) It has created new opportunities for companies providing services l i k e I T sector o f India have
prospered.
8)Improved living standards of people of India.
NEGATIVE IMPACT OF
GLOBALISATION
1) Small local CThave been hit hard
to the competition from globalization.
2)They have suffered huge losses & shut down
their production units, Eg: Chinese Toys in India
3) Flexiblity of Labour laws - In order to attract
foreign Investment, the government made flexible
labour laws under which the MNCs can hire
workers on temporary basis. This would
help MNCs to cut down their cost of
Production but workers in India are now
exploited.
4) Workers are paid less wages, have no
job security, poor working conditions and work for extra hours to make both the ends meet.
5) Batteries, capacitors, Plastics, Toys, Tyres,
Dairy products and vegetable oil are some
examples of Industries where the small
manufactures have been hit hard due to competition.
FAIR GLOBALISATION
Fair Globalisation would create opportunities for
all, and also ensure that the benefits of globalisation are shared better.
Reality - Not everyone has benefited fair
globalisation. People with education,
skill and wealth have made best use
of the new opportunities. On the
other hand, small manufacturers
& less educated & less skilled workers have not benefited equally well from globalisation.
Role of Government to make globalisation
more fair
1) The government can ensure that the labour
laws are properly implemented and the workers
get these rights.
2)I t can support small producers to improve
their performance till the time they become strong
enough to compete.
3) I t can negotiate at the WTO for fairer rules
4) It can align with other developing countries
to fight against the domination of developed
countries in the WTO.
Role of People
Massive campaigns and representations by people’s
organizations have influenced important decisions
relating to trade and investment at the WTO.
Steps to attract foreign investment
1) Special Economic Zones (SEZs)
SEZs are Industrial Zones which have been
set up the government in India to attract the
foreign Investment.
Features of SEZs:
a) No Tax for initial 5 years.
b) World class facilities → electricity, water
roads, storage, recreational activities, etc.
2 )Flexibility of Labour Laws -
Companies in the organised sector have to follow
some rules A regulations, that protect the [Link] in recent years the government has allowed
companies to ignore many of these.
They can hire workers flexibly for short periods when
there is pressure of work. This is done to
reduce cost of labour for the company.
How can we help small producers t o compete better in the market;
1) Bettes roads, Power, raw materials, marketing facilities
and Information network.
2) Improvement and modernisation of technology.
3) Timely availability of cheap credit.