GLOBALISATION AND THE INDIAN ECONOMY

→ Globalisation is integration between countries

through foreign
trade and foreign investment by multinational corporations
( MNCs) .

* Production across Countries :

•
Until the middle of the twentieth century , production was

largely organised within countries .

•
Raw materials , food stuff and finished products are
being
traded from long time .

•
Colonies such as India exported raw materials and
food
stuff and imported finished goods .

•
This was before large companies called multinational corporations
( MNCs) emerged on the scene .

* MNCs :

A MNC is that controls

company owns or
production in
→
a

more than one nation .

MNCs set offices and factories for production in

regions
→

up
where they can get cheap labour and other resources .

→
This is done so that the cost of production is low and
the MNCs can earn
greater profits .

→
How MNCs Spread their Production :

A
4
large MNC , producing industrial equipment , designs its
products in research centres in the United States .

The components manufactured in China .

4 These are then shipped to Mexico and Eastern Europe

where the products are assembled .

The finished products are sold all over the world .

4 Meanwhile ,
the company 's customer care is carried out
through
call centres located in India .
 In the only
A above example MNC is not
selling
its
finished products globally .

4 But more important ,

the goods and services are produced
globally .

This production
*
spreading of reduces the cost of
manufacturing significantly .

→
Thus the advantage of spreading out production across the
borders to the multinationals can be truly immense .

* Selection of Country for Production sis based upon

:

→
Where it is close to the markets .

→
Where there is skilled and unskilled labour available at
low costs .

→
Where the availability of other factors of production is
assured .

→
In addition ,
MNCs might look for government policies that
look after their interests .

*
Foreign Investment :

t The that is spent by to buy

money a
company
like investment
assets
building ,
machines and other
equipment is called .

t Investment made by MNCs is called foreign investment .

t
Any investment is made with the hope that these assets
will earn
profits .

FAT times ,
MNCs set
up production jointly with some of the
local companies of these countries .

t The benefit to the local company of such joint production

is two -

fold .

1. First MNCs can

provide for additional investments like
,
money ,

buying new machines for faster production .

2. Second ,
MNCs might bring with them the latest technology for
production .
tr But the most common route for MNC Investments is
to buy up local companies and then to expand
production .

t do
MNC with
huge wealth can quite easily to so .

*
Example :

Deangelo Foods ,
a very large American MNC ,
has brought
over smaller Indian companies such as Pamakh Foods .

Panakh Foods had built a

large marketing network in
various
parts of India ,
where its brand was well -

reputed .

4 Also ,
Tanakh foods had four oil refineries ,
whose control has
now shifted to Cargill .

Cargill is now the largest producer of edible oil in

India to
,
with a
capacity make 5 million pouches daily !

* There's another way in which MNCs control

production -

a
Large MNCs in developed countries place orders for
production with small producers .

4 Garments , footwear , sports items are examples of industries where

production is carried out by a large number of small
producers around the world .

The products are supplied to the MNCs ,

which then sell
these under their own brand names to the customers .

These large MNCs have tremendous power to determine price ,

quality , delivery ,
and labour conditions for these distant producers .

→ Thus we see that there are a

variety of ways in which
the MNCs production and
are
spreading their interacting with
local producers in various countries across the
globe .

a. By setting up partnerships with local companies .

2. By using the local companies for supplies .

By closely with the local

3.
competing companies or
buying
them up .
 -
MNCs are
exerting a strong influence on production at these
distant locations .

-
As a result , production in these widely dispersed locations is

getting interlinked .

*
Foreign Trade and integration of Markets :

For been
long time foreign trade has the main
•

channel
connecting countries .

•
In historyIndia you would have read about the trade routes
connecting and South Asia to markets both in the
East and West and the extensive trade that took place
along these routes .

* What then is the basic function of foreign

trade ?
B. To put it simply , foreign trade creates an
opportunity for
the producers to reach beyond the domestic markets ,
i.e . markets
of their own countries .

• Producers can sell their produce not only in markets located

within the country but can also compete in markets located
in other countries .

of the world .

•
Similarly , for the buyers , import of goods produced in another
country is one way of expanding the choice of goods beyond
what is
domestically produced .

* Chinese Toys in India :

•
Chinese manufacturers learn of an opportunity to export toys to
India ,
where toys are sold at a
high price .

They start exporting plastic toys to India .

Buyers in India now have the option of choosing between

Indian and the Chinese toys .

•
Because of the cheaper prices and new designs ,
Chinese toys
become more popular in the Indian markets .

•
Within a
year ,
70 -

80% of the toy shops have replaced Indian toys

with Chinese toys .
•

Toys are now cheaper in the Indian markets than earlier .

•
In the competition between Indian •
Indian
buyers have a

and Chinese toys ,

Chinese toys prove greater choice of toys and
better . at lower prices .

• for the Chinese toy makers , •

The opposite is true foe Indian
this provides an opportunity to toy makers .

expand They losses their toys

business
face as
-

.
,

are
selling much less .

* What is Globalisation ?
→
It is a
process of rapid integration or interconnection between
countries .

* Factors that have enabled Globalisation :

A) Technology :

•
Rapid improvement in
technology has been one major factor
that has stimulated the globalisation process .

This has faster delivery goods long

•
made much of across

distance possible at lower costs .

•
The due to
major changes were -

9) Internet -

It has helped us to send and relieve data

instantly .

) Mobile
ii Service To
facilitate communication on the
go
-

iii ) Satellite -

To link connections from any parts of the

world .

B) Liberalisation of Foreign trade and foreign investment policy :

•
Trade barriers are
necessary after independence to protect the
producers within the country from foreign competition .

• Around 9999 ,
Indian government accepted the liberalisation
policy .
• The government can use trade boonies to increase or decrease
(regulate) foreign trade and to decide what kinds of goods and
of each , should
how much come into the
country .

•
Tax on imports is an
example of TRADE BARRIER .

•
Removing barriers or restrictions set by the government on trade is
known as LIBERALISATION .

• When the government imposes less restrictions than before ,

it is

said to be more liberal .

* World Trade Organisation [WTO] :

→
An organisation whose aim is to liberate.se international trade .

→
Nearly 964 countries of the world are
currently members of the
WTO .

→ It 's main aim is making rules regarding international trade ,

and
sees that these rules are obeyed .

- Problems with WTO :

Though WTO is supposed to allow free trade for all ,

in practice ,

it is seen that the developed countries have unfairly retained

trade barriers .

•
On the other hand ,
WTO rules have forced the developing countries
to remove trade barriers .

* Impact of Globalisation in India :

i For
] Consumers :

•
Globalisation and greater competition among producers -
both local and
foreign producers
-
has been of advantage to consumers ,
particularly the
well -

off sections in the urban areas .

•
There is a greater choice before these consumers who now
enjoy
improved quality and lower for several products
prices .

•
As a result ,
these people today , enjoy much higher standards of
living than was
possible earlier .
it For Producer :

Foreign Investment increased in India .

Employment opportunities increased .

•
Rise to big MNCs .

•
Latest technology and production methods are within our grab .

→
Moreover , globalisation has enabled some
large Indian companies to
as multinational themselves !
emerge
•
Some of the Indian multinational companies such as Tata Motors ,

Asian Paints benefited globalisation

Infosys Ranbang
, ,
with the as
they
have spread their operations worldwide .

•
There are
enough opportunities for skilled workers but unskilled
workers remained poor .

%) For Small Producers :

•
Small producers face close competition with such a well established
firms .

bear small loses but small producers cannot bear

-

Big companies
such loss and ultimately end up selling their to
company
MNCs .

Eg . Batteries , capacitors toys plastic

, , , tyres are some examples of industries
where small manufacturers hit hard due to competition .

it For Workers :

9) No job security : with growing market competition among industries

employers prefers to hire the worker as per
need .

Thus fire
-

they can the worker

anytime ,
and there
is no job security for the workers .

) Very
ii long working hours : Worker has to work for long
hours to meet the demands .

They will have no choice than listening

to their employer .
 Low wages
: Tof opportunities are limited and number of
workers are far more than the opportunities .

-
Thus producers easily get cheap labour and workers
are ready to work at low wages .

The Struggle Globalisation

*
for a
fair :

The above evidence indicates that not has benefitted

everyone
from globalisation .

4
People with education ,
skill and wealth have made the best
use
of the new opportunities .

4 On the other hand , there are

people who have not
many
shared the
benefits .

→ Fair globalisation would create opportunities for all , and also

ensure that the benefits of globalisation are shared better .

The government role this

can play major in
making
→
a

possible .

→ Its policies must protect the interests ,

not
only of the rich
and the powerful ,
but all the people in the country .

*
Steps Government can take :

1 It can insure that labour laws are

properly implemented
and the workers get their
rights .

1 It can support small producers to improve their performance

till the time they become to
strong enough compete .

1
If necessary ,
the government can use trade and investment
barriers .

'
-
It can
negotiate at the WTO for fairer rules :

4 It can also
align with each other
developing countries with
similar interests to fight against the domination of developed
countries in the WTO .

* Role of People :

→
In the past few years massive , campaigns and representation by people 's
organisations have influenced important decisions
relating to trade and
investments at the WTO .

→
This has demonstrated that people also can
play an important
role in the struggle for fair globalisation .