Q1. What is globalisation?

It is the process of integration of an economy with the world economy through foreign trade
and investment.

Q2. Explain the history of Globalisation.

Until the middle of the twentieth century, production was largely organised within
countries. What crossed the boundaries of these countries were raw materials,food stuff
and finished products.
Colonies such as India exported raw materials and food stuff and imported finished
products.
Trade was the main channel connecting different countries.
Q3. Explain the term “MNC”.

MNC is a large company that owns or controls production in more than one country. It is
based in one country but it operates globally ie. it opens offices and factories in countries
where labour and other raw material is cheaper.
This is done in order to keep the cost of production low and maximise profits.
For eg. A large MNC, producing industrial equipment, designs its products in research
centres in the United States, and then has the components manufactured in China.
These are then shipped to Mexico and Eastern Europe where the products are assembled
and finished products are sold all over the world.
Meanwhile the company’s customer care is carried out through its call centres located in
India.
Q4. What are the factors that determine the location of MNC production unit?

The following conditions determine where MNCs set up production:

1. Proximity or closeness to the markets.
2. Availability of cheap, skilled and unskilled labour.
3. Availability of other factors of production.
4. Favourable government policies.

Q5. what is “investment”?

Money that is spent to buy assets such as land, building,machines and other
equipment is called Investment.
Investment made by MNCs is called FOREIGN INVESTMENT.
[Link] are the various ways in which MNCs set up ,or control production in other countries?

There are various ways in which MNCs make investment and affect production in different countries
[Link] set up for joint production or partnership along with some local company.
The local company benefits by
1. gaining access to additional money for investment
2. latest technology
[Link] most common way is for MNCs to buy up local company. This enables the MNCs to make use of the
local companies brand name and marketing network to expand production.
for example when the multinational Coca Cola entered India it bought the local favourite thums up. Also
Cargill foods a very large American MNC has bought smaller Indian company such as Parakh foods..
[Link] MNC place orders for production with small producers.
They supply the product to the MNC which then sell these under their
own brand name to the customers.
These MNCs have the power to determine prices, quality, delivery and
Labour conditions for these distant producers.
For example shoe producers like Nike, Reebok get their shoes
manufactured by local producers in India and then put their own label
on them after a quality check.
All these lead to an interlinking of production all over the world.
Q7. What are the advantages of foreign trade?

Foreign trade has the following advantages:

1. It creates an opportunity for producers to reach beyond the domestic market. That is
they can now sell that produce not only in the local markets but also in the market
located in other countries.
2. Similarly foreign trade also expands the consumer choice beyond domestically
produced goods. they can buy better quality goods at cheap rates.
3. Foreign trade leads to the movement of goods from one market to another. As a
result prices of several goods tend to become equal and start falling as producers in
different countries start competing against each other.

Foreign trade thus results in integration of markets in different countries.

[Link] is globalisation?

The result of Greater foreign investment and foreign trade is Greater

integration of production and Markets across countries. Thus economies of
different countries are rapidly getting interconnected with each other.
This process of integration of an economy with the world economy through
foreign trade and foreign investment is called globalisation.
MNCs play an important role in the process.
Due to globalisation there is an increased movement of goods and services,
investments, technology and people across countries.
Q9. What are the factors facilitating globalisation?

Globalisation has been facilitated by the following factors:

1. Rapid improvement in technology.

2. liberalisation of trade.
3. International bodies such as World Trade Organisation(WTO).
 1. Technology :

Technology has stimulated the process of globalisation in the following ways:

a. Transportation technology:

Past 50 years have seen several improvements in transportation Technology. This has
made much faster delivery of goods across long distances possible at lower costs.
Goods are placed in containers that can be loaded intact on to ships, Railways, planes and
trucks.
Containers have led to huge reduction in Port handling costs and increased the speed with
which exports can reach markets.
similarly the cost of air transport Has Fallen. This has enabled much greater volume of
goods being transported.
b. The development Information and Communication Technology :
In recent times technology in the areas of telecommunications, computers,
internet has been changing rapidly.
Telecommunication facilities like Telegraph, telephone including mobile
phones, fax etc are used to contact one another around the world, to access
information instantly, and to communicate from remote areas.
This has been facilitated by satellite communication devices through
email, eCommerce, e banking etc.
This has made it possible to access information and Exchange Services
across countries:
 for example a news magazine published for readers in London can be
design and printed in Delhi. the text of a magazine is sent through
internet to the Delhi office. the designers in the Delhi office get orders
on how to design the magazine from the office in London using
telecommunications facilities. the designing is done on a computer.
after printing the magazines are sent by air to London. even the
payment of money for designing and printing from a bank in London
to a bank in Delhi is done instantly through the internet that is e
banking.
2. Liberalisation
After independence the Indian government regulated foreign trade and foreign investment by setting up
barriers to trade. This was done to protect Indian industries from foreign competition.
Indian industries was just getting established in 1950s and 1960s and competition from imports at that
stage would have hampered their growth.
imports of only essential goods were allowed such as petroleum, machinery, Fertilizer and food grains.
this practice has been followed by all developed countries during the early stages of development.
These trade barriers were of two types:
a. tax on import or custom duty or tariff:
these work by increasing the prices of imports thereby making the domestic goods more attractive to
the consumers. for example the tax on the import of Chinese toys in India would make them more
expensive and less attractive.
b. Quotas:
these work by placing a restriction on the number or quantity of goods to be imported.
 ● Reasons for removing barriers to foreign trade and foreign investment:
In 1991 the government decided to remove most of the barriers to foreign trade and
foreign investment.
it was felt that the time had come for Indian producers to compete with foreign
producers as this competition would result in a better performance and quality on the
part of Indian produces.
this decision was supported by powerful International organisations such as the
WTO, World Bank etc.
the removal of these barriers meant that goods and services to be imported and
exported easily and foreign companies could set up their factories and offices in India.

● Liberalisation means removal or restriction of barriers to foreign trade and

foreign Investments
 ● Steps taken by the government to attract foreign investment in India:

[Link] Economic Zone:

these are industrial areas which offer world class infrastructural facilities such as power,
water, transportation, storage, education and recreational facilities.
Companies in SEZs also enjoy a tax holiday, that is they do not have to pay any taxes for
an initial period of 5 years.

[Link] in labour laws:

Companies in the organised sector are required to follow certain rules and regulations in
order to protect the rights of workers. the government has Now allowed foreign companies to
ignore many of these laws. workers are now hired flexibly for short period when there is intense
pressure of work. this is done to reduce the cost of labour for the company.
[Link] Trade Organisation:

The World Trade Organisation was set up in 1995 with the aim of liberalizing
International trade.
WTO establishes rules regarding international trade and ensures that these are
followed.164 countries are members of WTO.
All though WTO is supposed to promote free trade for all, in effect, only the developing
countries have been forced to remove trade barriers, while the developed countries have
retained them.
for example American farmers are given huge subsidies so that they can sell their
produce at abnormally low prices.
This harms the interest of farmers of developing countries.
Q10. Explain the impact of globalisation in India.

Globalisation has had a mixed impact in India

Positive impact

● Effect on consumers:
Globalisation has immensely benefited consumers especially the well of sections in urban areas.
Then now have access to a larger variety of better quality products at cheap prices.
As a result they enjoy a much higher standard of living than before.

● Effect on producers and workers:

the impact of globalisation on Producers and workers has not been uniform. Some industries have
flourished while others have been adversely affected.
1. Certain industries and services such as cell phones, automobiles, electronics, soft drinks,
fast food and banking have benefited immensely from an increase in foreign
investments by MNCs. New jobs have been created.
2. local companies supplying raw materials to those companies have also prospered.
3. several top Indian companies have benefited from the increased competition by
investing in new technology and production methods or with foreign collaboration.
Some of them have even emerged as multinational themselves. for example Tata Motors
(Automobile), Infosys(IT), Ranbaxy (medicines), Asian Paints etc.
4. Globalisation has created several new opportunities for companies providing services
particularly involving IT.
for example services such as Call Centres, data entry, accounting, engineering,
teaching, clinical advice are being exported to developed countries from India.
Negative impact
Small producers
1. Very small scale manufacturers have been Hit hard by the
competition in industries such as batteries, capacitors, plastics, toys,
dairy products and vegetable oil.
Several units have closed down rendering many workers jobless. many
workers have been affected as small scale manufacturing is a second
largest employer in India next only to agriculture.
 2. Competition and uncertain unemployment :

Globalisation and growing competition have made employment uncertain, that is jobs are
no longer secure. The flexibility in labour laws means that workers are at a disadvantage.
In order to face competition to get larger orders from MNCs, Indian garment exporters try
to cut labour cost as the cost of raw material cannot be reduced.
● They may take any of the following measures:

1. They employ workers on a temporary basis so that their wages do not have to be paid
for the whole year.
2. ask workers to work very long hours and work night shift during peak season.
3. motivate workers to work overtime as their wages are low.
4. encourage workers to seek voluntary retirement where they get a lump sum.
[Link] to ensure fair globalisation?

The government can take four steps to ensure that globalisation creates more opportunities
and its benefits are shared by the people.
1. the government must ensure that labour laws are properly implemented so that
workers get their rights.
2. the government must support small producers with loans and subsidies to improve
the performance Till they become strong enough to compete.
3. use trade and investment barriers.
4. negotiate with WTO for fairer rules and align with other developing countries to
fight against the domination of developed countries in the WTO.