Study Notes of Globalisation and the Indian Economy

Globalisation is the process of countries coming together through international trade and capital flows by multinational corporations (MNCs). India’s marketplaces have changed dramatically in recent years as a result of globalization.

Production Across Countries

A multinational corporation (MNC) is a corporation that owns or controls production in more than one country. MNCs locate their headquarters and manufacturing facilities in regions where they can find inexpensive labour and other resources, allowing them to reduce costs while increasing profits.

They sell their finished products all over the world, and they also manufacture the goods and provide the services all over the world. The manufacturing process is divided into small parts that are dispersed throughout the world’s factories.

Multinational Corporations (MNCs)

A multinational corporation (MNC) is a corporation that owns or controls production in more than one jurisdiction. MNCs locate their headquarters and manufacturing facilities in areas where they can find cheap labour and other resources, allowing them to reduce costs while increasing profits.

In addition to selling their finished goods internationally, they produce goods and provide services worldwide. A large part of the manufacturing process is broken down into smaller parts and distributed throughout the world.

Advantage of Spreading Out

By distributing production across multiple countries, multinational corporations (MNCs) are able to obtain the highest-quality resources at the most competitive prices. As a result, their profit increases.

The multinational corporations (MNCs) create employment opportunities in developing countries by expanding their manufacturing operations.Interlinking Production Across Countries

Interlinking Production Across Countries

Some ways of interlinking production across countries are

  • Foreign Direct Investment (FDI) : One way to connect production across countries is through foreign direct investment (FDI). It refers to a financial investment made in a company based in another country by a company based in one country (usually a multinational corporation). MNCs establish factories or offices in other countries to set up production units.
  •  Partnerships/Joint Venture : MNCs and local companies have merged on occasion to produce jointly. MNCs can use this money to make additional investments, such as buying new machines for faster production and bringing in cutting-edge technology.
  • Local Companies/Mergers/ Takeover :MNCs buy local production units or merge with local companies to expand production. For example, Cargill Foods of the United States recently acquired Parakh Foods in India, making it the country’s largest producer of edible oil.
  • Contracts to Local Companies : MNCs also place orders with small producers for production. The MNC sets the price, quality, delivery, and labour conditions for these far-flung producers, among other things.

Foreign Trade And Integration Of Markets

Foreign trade is the exchange of goods and services among nations. International trade, external trade, and inter-regional trade are all terms used to describe this type of activity. Imports and exports make up the bulk of the economy.

In the following ways, foreign trade contributes to market integration (connection):

  1. Facilitate cross-border movement of goods and services.
  2. Allow people, ideas, and technology to flow freely.
  3. Allows producers to sell their products outside of their local/domestic markets.
  4. Buyers have a larger selection of goods to choose from.
  5. Increased competition among producers, resulting in higher-quality goods and services.

In India, one example of foreign trade is how Chinese toys replaced Indian toys because they were cheaper and of higher quality.

Globalisation

Globalisation is the process of countries becoming more integrated or interconnected as a result of increased foreign investment and trade. Markets and production centres are linked because of these two factors.

MNCs have a significant role to play in the globalisation process. More goods and services, as well as investments and technology, are moving between countries around the world.

Globalisation And-Migration

Countries are linked not only by the movement of goods, services, investments, and technology, but also by the movement of people, i.e. migration.

People typically relocate to another country in search of a better life, higher income, better jobs, or better education. This has been going on for centuries, but due to various restrictions imposed by many countries, it has slowed down recently.

Technology

Faster delivery of goods across long distances at lower costs has resulted from rapid technological advancements over the last 50 years, such as improvements in transportation technology.

Role Of It In Globalisation

The spread of service production across the globe has been revolutionised by information and communication technology (ICT or IT). Telecommunications (telegraph, telephone, mobile phones, fax) and satellite communication devices are used to connect people all over the world, access information instantly, and communicate from remote locations.

A news magazine published for London readers that is designed and printed in Delhi is an example of this. The magazine’s text is sent to the Delhi office via the internet from London.

Using telecommunications, the designers in the Delhi office receive orders from the London office on how to design the magazine, and magazines are then printed and sent to London.

Technology

Faster delivery of goods across long distances at lower costs has resulted from rapid technological advancements over the last 50 years, such as improvements in transportation technology.

Foreign Investment Policy

To protect local entrepreneurs from competition, the government of a country put certain barriers to restrict the entry of foreign goods. These are discussed as follows

Trade Barrier

It is a barrier to the free flow of goods and services across international borders. A trade barrier is a tax on imports (also known as import duty). It’s called a barrier because there’s a restriction in place.

Trade barriers are used by governments to regulate foreign trade and to determine what types of goods and how much of each should be allowed into the country. Quotas, on the other hand, are a way of limiting the volume or quantity of goods that can be imported or exported.

Restrictions On Foreign Trade

Following independence, the Indian government erected barriers to foreign trade and investment in order to protect domestic producers from foreign competition, as the industries were still developing in the 1950s and 1960s. India only allowed essential imports at the time, such as machinery, fertilisers, and petroleum.

New Economic Policy 1991

Around 1991, it was thought that Indian producers needed to compete with global producers in order to improve their production and product quality.

As a result, the Indian government made significant changes to its foreign investment policy in 1991. One such change was liberalisation. The World Trade Organization and other powerful international organisations backed this decision (WTO).

Liberalisation

Liberalisation is the process of removing government-imposed barriers or restrictions on foreign trade. In India, it refers to the Government of India’s decision in 1991 to relax import restrictions.

Businesses can make their own decisions about what they want to import or export thanks to trade liberalisation. The government now imposes fewer restrictions than before, and is thus regarded as more liberal.

Role Of It In Globalisation

The spread of service production across the globe has been revolutionised by information and communication technology (ICT or IT). Telecommunications (telegraph, telephone, mobile phones, fax) and satellite communication devices are used to connect people all over the world, access information instantly, and communicate from remote locations.

A news magazine published for London readers that is designed and printed in Delhi is an example of this. The magazine’s text is sent to the Delhi office via the internet from London.

Using telecommunications, the designers in the Delhi office receive orders from the London office on how to design the magazine, and magazines are then printed and sent to London.

World Trade Organisation (Who)

It is an international organisation that deals with international trade rules. Its main goal is to keep trade flowing as smoothly, predictably, and freely as possible. It backed India’s liberalisation of foreign trade and investment.

The World Trade Organization (WTO) was founded on the initiative of developed countries. Its goal is to liberalise international trade while also ensuring that its members follow its rules. Though the WTO is supposed to allow all countries to trade freely, it has been discovered that developed countries have unfairly applied some rules.

They have compelled developing countries to remove barriers in their respective countries. Simultaneously, they have imposed import restrictions in their own countries or used unfair trade practises to manipulate the market.

The trade in agricultural products is an example of this. Agriculturists in the United States are heavily subsidised by their government, allowing them to export products such as wheat and cotton to developing countries at very low prices. This increases competition, which has a negative impact on farmers in these countries.

Impact Of Globalisation In India

  1. More producers competed as a result of globalisation (both local and foreign). It provides a larger selection of higher-quality goods at lower prices.
  2. MNCs have increased their investments in India in areas such as mobile phones, automobiles, electronics, soft drinks, fast food, and urban services such as banking.
  3. Many new jobs have been created, and local businesses that supply these industries with raw materials and services have thrived.
  4. Globalisation introduces new and improved technology, which benefits both domestic and international businesses.
  5. Infosys, Tata Motors, Asian Paints, Ranbaxy Infosys (IT), and Sundaram Fasteners are examples of large Indian companies that have become multinational corporations and established subsidiaries in other countries.
  6. There have been new businesses established that provide call centres, IT services, accounting, and administrative jobs.
  7. Small producers have been put at risk as a result of globalisation, as their output has plummeted. Competition has an impact on small-scale manufacturers of batteries, capacitors, plastic toys, tyres, dairy products, and vegetable oil.

The Struggle For A Fair Globalisation

People with education, skill, and wealth have taken advantage of the new opportunities that have arisen as a result of globalisation.

To make it more ‘fair’, government plays a major role which is

  • Policies such as labour laws are abided to to the letter by the organisation.
  • Small producers are supported and protected from global competition, and their performance is improved.
  • With the WTO, it works to ensure that developing countries receive equitable rules and concessions.
  • Trade and investment barriers can also be used by the government to protect the interests of domestically produced goods and commodities.
  • Government can also align with other developing countries with similar interests to fight against the authority of developed countries in the WTO.

NCERT Question Answers for Class 10 Social Science (Economics) Chapter 4 – Globalisation and the Indian Economy

Q1. What do you understand about globalization? Explain in your own words.

Answer: Globalization is the process of countries becoming more connected through overseas trade and the activities of multinational companies.

  • It means tying our economy to the global economy.
  • At the global or international level, globalisation makes countries’ economies interdependent.
  • This happens on a number of levels.
  • Producers from other countries can come to India to sell their goods and services, and Indian goods and services can also be sold in other places.

Q2. What were the reasons for putting barriers to foreign trade and foreign investment by the Indian government? Why did it wish to remove these barriers?

Answer: 

The Indian government has put up barriers to foreign trade and foreign investment for the following reasons:

  • To protect domestic manufacturers from foreign competition.
  • Importers’ competition would have killed India’s young industry. In this case, only items that were absolutely necessary, like machinery, fertilizers, gasoline, and so on, were allowed to be brought in.
  • In the 1950s and 1960s, import competition killed India’s growing industries. As a result, India only allowed imports of things they needed.
  • Later in the 1990s, the government wanted to get rid of these problems because it thought that domestic producers were ready to compete with foreign industries. 
  • People also thought that foreign competition would improve the quality of the goods made by Indian industry. 
  • Powerful foreign groups also agreed with this decision. In response, the government decided that it was time for Indian producers to step up.

Q3. How would flexibility in labor laws help companies?

Answer:

  • Labor law flexibility helped companies, especially multinational corporations. 
  • The government of India has done a number of things to get big companies to invest in India. 
  • Companies in the organised sector have to follow certain rules to protect the rights of their workers. 
  • But the government has let a lot of businesses break a lot of these rules. 
  • Because of this, businesses only hire workers for short periods of time when they are in a pinch. It would help the company lower the cost of its workers.

Q4. What are the various ways in which MNCs set up or control production in other countries? Or How are Multinational Corporations (MNCs) controlling and spreading their productions across the world? Explain.

Answer: Multinational corporations (MNCs) usually put their factories near markets, where skilled and unskilled labour is easy to find and cheap and where they can be sure to find all the other things they need to make their products. MNCs could also ask the government to take steps to protect their interests.

MNCs control manufacturing in other countries in many ways:

  • By forming partnerships with local businesses – MNCs sometimes work with local businesses to make goods. 
  • The value of this kind of cooperative production to the local company is twofold. 
  • First, MNCs can give money to these local businesses to help them make additional purchases, like buying new machines to speed up production. 
  • Second, MNCs may bring cutting-edge manufacturing technologies with them.
  • By directly competing with or buying local businesses. The most common way for MNCs to invest is to buy local businesses and expand production.
  • They can easily do it because they have so much money.
  • By buying supplies from local businesses.
  • Large multinational corporations (MNCs) in developed countries place orders for clothes, shoes, sports equipment, and other goods from local producers. 
  • MNCs get the products, which they then resell to clients under their own brand names. 
  • These huge multinational corporations have a lot of power over the prices, quality, delivery, and working conditions of these much further producers.

Q5. Why do developed countries want developing countries to liberalize their trade and investment? What do you think the developing countries should demand in return?

Answer: Developed countries want developing countries to open up trade and investment so that their multinational corporations (MNCs) can build factories in less-expensive developing countries and make more money by lowering manufacturing costs and selling for a higher price. In exchange, I think emerging countries should try to find a way to protect their own producers from competition from imports. Multinational companies that want to do business in poor countries should also have to pay fees.

Q6. “The impact of globalization has not been uniform.” Explain this statement.

Answer:

  • While top Indian businesses have benefited from globalisation, workers have lost out.
  • The best Indian companies have raised the quality of their products by investing in new technology and ways of making things. Some have benefited from good relationships with international businesses. Because of globalisation, a lot of big Indian companies have become multinationals. For example, Tata Motors makes cars, Infosys works with computers, and so on.
  • However, globalisation has made a lot of small producers and workers face big problems. They have been hurt a lot because of competition. Because of the closing of several units, a lot of people have lost their jobs.
  • Because of this, we could say that globalisation has had a mixed effect.

Q7. How has liberalization of trade and investment policies helped the globalization 

process?

Answer:  

(i) Liberalizing trade and investment policies has helped the process of globalisation by making international trade and investment easier.

(ii) As a result, the economies of different countries have become more like a single whole.

iii. It is now easy to bring goods into and out of a country. Companies from other countries can set up factories and offices in India.

Q8. How does foreign trade lead to integration of markets across countries? Explain with an example other than those given here.

Answer: 

  • Through international trade, people can sell their goods in different parts of the world. Producers can sell their goods not just in their local or national markets, but also in markets around the world.
  • Regular people benefit from foreign trade because the best brands of different products are made all over the world. Their product selection is growing like crazy.
  • One way for buyers to have more choices than what is made in their own country is to import items made in another country.
  • Foreign trade lets businesses in two different countries compete with each other even though they are in different places.
  • This is how international trade helps make markets work better together. Electrical goods from Japan, for example, are shipped to India and have shown to be a tough competitor for businesses with less advanced technology.

Q9. Globalization will continue in the future. Can you imagine what the world would be 

like twenty years from now? Give reasons for your answer.

Answer: In the future, globalization will continue. If this process continues on a fair and equitable basis, the world will be increasingly globally connected and integrated into one worldwide economy in twenty years. Along with labor mobility, trade and capital flows will expand. This will happen as a result of increased liberalization, and MNCs will converge with other enterprises producing the same items.

Q10. Suppose you find two people arguing: One is saying globalization has hurt our country’s development. The other is telling, globalization is helping India develop. How would you respond to these arguments?

Answer: In some ways, both sides are right. Globalization has both hurt and helped the progress of our country. In other words, we could say that globalisation has both good and bad effects on how our country grows. 

India has gotten better because of globalisation.

  • There are a lot of different things to choose from, and consumers can get better quality and lower prices on a lot of different things.
  • As a result, people were able to live better.
  • More money coming from outside the country.
  • The creation of jobs in certain fields.
  • Top Indian companies have done well by investing in new technology and production methods and by working well with foreign companies.
  • As a result of globalisation, a number of large Indian companies have become multinationals. Take Tata Motors, Infosys, and Ranbaxy as examples.
  • Made it possible for a number of large Indian companies to go global.
  • Gave service providers, especially those in the IT industry, new opportunities.

Globalization’s negative impact on India-

  • Small producers couldn’t compete, so they went out of business. Due to more competition, many businesses have gone out of business. People lost a lot of jobs. Businesses have been hurt by fierce competition in many ways, like with batteries, capacitors, plastics, toys, dairy products, and vegetable oils, to name a few.
  • The pressures of competition and globalisation have had a big effect on the lives of employees. As competition grows, most companies now prefer to hire staff on a “flexible” basis. Because of this, workers’ jobs are no longer safe.

Q11. Fill in the blanks. 

Indian buyers have a greater choice of goods than they did two decades back. This is closely associated with the process of (a), Markets in India are selling goods produced in many other countries. This means there is an increase (b), with other countries. Moreover, the rising number of brands that we see in the markets might be produced by MNCs in India. MNCs are investing in India because (c), While consumers have more choices in the market, the effect of rising (d), and (e), has meant greater (f), among the producers. 

Answer: 

(a) globalization

(b) trade 

(c) production costs here are cheaper 

(d) demand 

(e) purchasing power 

(f) competition. 

Q12. Match the following: 

(i) MNCs buy at cheap rates from (a) Automobiles small producers 
(ii) Quotas and taxes on imports are(b) Garments, footwear, sports items used to regulate trade 
(iii) Indian companies who have invested (c) Call centers abroad 
(iv) IT has helped in spreading of (d) Tata Motors, Infosys, Ranbaxy production of services 
(v) Several MNCs have invested in (e) Trade barriers setting up factories in India for production 

 

Answer: (1)-(b) (ii)-(e) (iii)-(d) (iv)-(c) (v)-(a). 

 

Q13. Choose the most appropriate option. 

(i) The past two decades of globalization has seen rapid movements in 

(a) goods, services and people between countries.

(b) goods, services and investments between countries.

(c) goods, investments and people between countries.

(ii) The most common route for investments by MNCs in countries around the world is to 

(a) set up new factories.

(b) buy existing local companies.

(c) form partnerships with local companies.

(iii) Globalization has led to improvement in living conditions 

(a) of all the people

(b) of people in the developed countries

(c) of workers in the developing countries

(d) None of the above

Answer: (i)-(a) (ii)-(b) (iii)-(c).


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