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I. Multinational Companies
How are certain products available throughout the world?
Multinational corporations (MNCs)
- A multinational corporation (MNC) is one that owns or controls production in more than one country.
- MNCs set up their production offices and factories in areas where labour and other resources are cheaper.
- This is done to keep production costs down and allow MNCs to make more money.
- MNCs set up their production plants near markets, where skilled and unskilled labour is readily available at low rates and where the availability of other production factors is assured.
- MNCs look for countries where government policies protect their interests.
- MNCs not only sell their final products globally, but more importantly, also manufacture their goods globally.
- MNCs make heavy investments in the countries in which they operate.
- Investment refers to the money spent on purchasing assets such as land, buildings, machinery and other equipment.
- MNC’s investment is referred to as foreign investment.
- The numerous ways in which MNCs are spreading their production and connecting with local producers around the globe are:
- Forming partnerships with local companies
- Sourcing supplies from local companies
- Competing with local companies
- Buying local companies
As a result, production in widely dispersed areas is becoming increasingly interconnected.
II. Foreign Trade
What do you mean by Foreign Trade?
What do you mean by foreign trade?
Foreign trade is the mutual exchange of services or goods across international borders. Imports and exports are the two main components of foreign trade.2 of 2
What do you mean by foreign trade?
Foreign trade and integration of markets
- Foreign trade allows producers to expand their reach beyond their home markets.
- Buyers get a greater range of commodities with imported goods added to domestic production.
- Foreign trade serves as a link between countries.
What is Globalisation and World Trade Organisation?
- Globalisation is the rapid integration or interconnectedness of countries.
- More and more goods and services, investments, and technology are being exchanged across borders.
- People too are moving across countries seeking employment and business opportunities.
- As a result, production and markets have become more integrated across borders.
- MNCs play a significant part in the globalisation process and control a major portion of overseas trade.
Globalisation and technology
- Rapid technological advancement has been a major factor in boosting the globalisation process.
- Several advances in transportation technology have enabled much faster and lower-cost delivery of commodities over great distances.
- Developments in information and communication technology (IT) have eased service delivery across countries.
- Telecommunications facilities (telegraph, telephone, mobile phones, fax) and satellite communication devices are used to communicate and access information quickly around the world.
- Through the internet, one can obtain and share information on almost any topic.
- The internet also allows us to send instant electronic mail (e-mail) and talk (voice-mail) across the world at negligible costs.
IV. Globalisation and factor affecting foreign trade and investment
- Government policies help or hinder foreign trade and globalisation.
- Import taxes are an example of a trade barrier.
- It is a barrier since the tax raises the price of the imported product and makes it less competitive against the domestic product.
- After independence, the Indian government set barriers to foreign investment to protect domestic producers from international competition.
- However, barriers to international trade and investment were abolished to a significant extent during later times.
- This meant that items could be easily imported and exported, and international firms could establish factories and offices here.
- This process is called liberalisation.
- It is the removal of government-imposed barriers or restrictions on trade.
- A government that imposes fewer restrictions is deemed to be more liberal.
World Trade Organisation (WTO)
- The World Trade Organisation (WTO) is an international trade organisation with the goal of liberalising international trade.
- The WTO was founded on the initiative of developed countries.
- The WTO creates standards for international trade and ensures that these standards and rules are followed by member countries.
- The WTO has over 165 members as of July 2016.
- Though the WTO is supposed to facilitate free trade for the benefit of all, developed countries have retained trade barriers while demanding access to the markets of underdeveloped countries.
V. Impact of Globalisation in India
What is the impact of Globalisation in India?
Overall impact of globalisation on the Indian economy
- Consumers now have more options, and they may enjoy higher quality and lower pricing on a variety of products.
- Globalisation has offered new opportunities to service providers, notably those involved in information technology (IT).
- Local businesses have prospered by supplying raw materials to overseas enterprises.
- Certain Indian corporations, such as Tata Motors, Infosys, Ranbaxy and Asian Paints, have emerged as MNCs in their own right.
Increased competition among producers
- Consumers have benefited from globalisation and increased competition among domestic and international producers.
- Consumers now have more options, thanks to higher quality and lower prices on a variety of products.
- The leading Indian companies’ services too have benefited from the increased competition.
- To maintain their competitive edge, Indian companies have invested in newer technology and production methods as well as upgraded their production standards.
Effect of globalisation on small businesses and workers
- Small industries in India employ 20 million people, second only to agriculture.
- Due to stiff competition following globalisation, many of the units have closed down, leaving many workers jobless.
- Workers who are employed no longer have stable employment.
- Workers are at the mercy of their employers and do not receive fair wages or benefits.
- This has also resulted in the growth of the unorganised sector.
Struggle for fair globalisation
- Fair globalisation would provide opportunities for all while also ensuring that the advantages of globalisation are distributed more evenly.
- Government policies must protect the interests of all citizens, not just the wealthy and powerful.
- It can help small manufacturers improve their performance until they are strong enough to compete with foreign businesses.
- The government can employ trade barriers as needed.
- Massive campaigns and representatives from people’s organisations have had an influence on WTO trade and investment decisions in recent years.
- This shows that people can play an important role in the struggle for fair globalisation.