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Understanding Economic Development

Class: X Social Science

Prepared By:

V. Sridhar,

PGT(Economics)

JNV – Chittoor

Andhra Pradesh

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CHAPTER 4 : GLOBALISATION AND THE INDIAN ECONOMY

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Contents

Objectives
Production across countries.
Spreading of production by an MNC
Interlinking production across countries
Foreign Trade and Integration of Market.
Definition of Globalisation
Factors that have enabled Globalisation
Liberalization of Foreign Trade and Investment.
WTO
Impact of Globalisation in India
Steps to attract Foreign Investment
The struggle for a fair globalisation.

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Objectives

After studying this chapter, the learners will

Will be acquainted with the concepts of, MNCs, Globalisation, Liberatisation,Investment, etc.
comprehend the process of globalisation and its implications for India.
be aware of the impact of the reform process.
Understand the impact of Globalisation on the Indian economy

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consumers in today’s world have a wide choice of goods and services

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Variety of brands can be seen for many other goods: from shirts to televisions to processed fruit juices.

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The latest models of digital cameras, mobile phones and televisions made by the leading manufacturers of the world are within our reach.

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Every season, new models of automobiles can be seen on Indian roads. Today, Indians are buying cars produced by nearly all the top companies in the world.

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Such wide-ranging choice of goods in our markets is a relatively recent phenomenon.

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Production across countries.

Until the middle of the 20^th century production was largely organised with in the country.
What crossed the boundaries of these countries were raw materials, food stuff and finished products.
Trade was the main channel connecting distant countries.
Now the MNCs organising the production across the countries

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Spreading of production by an MNC.

Assembling in

Mexico and

Eastern Europe

A MNC (multinational corporations) is a company that owns or controls production in more than one nation.

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Advantages of Spreading of production by an MNC.

The MNC is not only selling its finished products globally, but more important, the goods and services are produced globally.

The production process is divided into small parts and spread out across the

globe.

China cheap manufacturing location.

Mexico and Eastern Europe close to the markets in the US and Europe. India skilled, educated English speaking youth who can

provide customer care services.

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INVESTMENT

= the money that is spent on to buy assets such as,

LAND, BUILDING, MACHINES

AND ON OTHER EQUIPMENTS

= made in the hope of earning

profits.

- MADE BY MNCs is called

FOREIGN INVESTMENTS.

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Interlinking production across countries

Ways of interlinking production across the countries:

MNCs directly set up production
MNCs set up production jointly with some of the local companies of

these countries.

The most common route for MNCs investment is to buy up local companies.
By placing orders for production with small producers.

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Foreign Trade and Integration of Market.

Trade between the countries is known as foreign trade.
It create opportunities for producers to reach beyond the domestic market.
Expanding the choice of goods beyond what is domestically produced.
Price of similar goods in two markets tends to become equal.
Producers in two countries now closely compete against each other.
In this way foreign trade connecting the markets or integration of markets in different countries.

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What is Globalisation?

It is the process of rapid integration or interconnection between countries.
MNCs are playing a major role in the globalisation.

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Factors that have enabled Globalisation.

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

Due to technology there has been improvements in various fields as in :

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Factors enabled the globalisation ….

1.TRANSPORTATION TECHNOLOGY.

In past fifty years this technological improvements has led to faster delivery of goods across long distances at lower cost.

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Containers for transport of goods: have led to huge reduction in port handling costs, increased the speed with which goods can reach markets.

Airlines: the cost of air transport has fallen, this has enabled much greater volumes of goods being transported by airlines.

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2.INFORMATION AND COMMUNICATION TECHNOLOGY:

IT, has played a major role in spreading out production of services across countries. Remarkable improvements have in the areas of telecommunications, computers &internet.

Telecommunications: facilitated by the satellite communication devices, facilites such as telegraph, telephone including mobiles, fax are used to contact around the world, to access the information instantly,& to communicate in the remote areas.

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Computer and internet:

computers have entered in almost all the fields.

Internet allows one to share information on almost every thing, we can send instant email and talk through voice-mail across the world at almost negligible cost.

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Factors enabled the globalisation ….

3.Liberalisation of Foreign Trade and Investment.

Liberalisation:

It is the process of removing barriers or restrictions set by the government earlier on trade or investment. It means allowing foreign companies to start their business as government restrictions are removed.

Trade Bariers:

Some restriction on foreign goods like tax on imports. Government can use trade barriers to increase or decrease foreign trade and to decide what kinds of goods and how much of each, should come into the country.

Example: Tariffs, Quotas

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The Indian government, after independence, had put barriers to foreign investment
This was considered necessary to protect the producer within the country from foreign competition.

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In 1991, the government decided that time had come for Indian producers to compete with producers around the globe.

It felt that competition would improve the performance of producers within the country since they would have to improve their quality.

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Barriers to foreign trade and foreign investment were removed to a large extent.

Removing of these restrictions/ barriers set by the government was termed as liberalization

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Factors enabled the globalisation ….

It is an international organisation form by the initiative of some developed countries and now it has 160 member countries worldwide till June 2014

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OBJECTIVE OF WTO:

The main aim of WTO is to liberalise the international trade.
The trade between the countries should be free all countries in the world should liberalise their policies.

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Though WTO is supposed to allow a free trade to 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 the trade barriers.

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Debate on Free Trade

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Impact of Globalisation in India.

Positive impacts:

Create a greater competition among producers, both local and foreign producers. This has been advantage to the consumers.

Greater choice to the consumers

Globalization lead to improve quality and lower the price of products.

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Due to high quality and lower price the cost of living decreased and standard of living increased.

Globalization created good opportunity to local companies particularly IT sector to provide services to MNCs.

Impact of Globalisation in India…...

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Negative Impacts:�

MNCs have been interested in industries such as cell phones, automobiles, electronics, soft drinks, fast food or services such as banking in urban areas only. Well of sections got benefit out of it but rural poor are neglected.

Only very few industries got benefit by providing services to MNCs. but not all industries.

Several top Indian companies have been able to benefit from increased competition but not small and medium scale industries.

Impact of Globalisation in India…...

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Globalization has enabled some large Indian companies to emerge as MNCs.(Tata Motors, Infosys, Ranbaxy, Asian Paints Etc.)

Globalization support the developed countries rather than developing countries.

People with education skin and wealth have made the best use of new opportunities.

Impact of Globalisation in India…...

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Steps to attract Foreign Investment.

Flexibility in labour laws
Setting up of special economic zones.(SEZs)

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The struggle for a fair globalisation.

Government policy must protect the interest of not only rich and powerful but also other people in the country.

Ex: Govt. properly implements labour laws and worker get their rights.

Government policy should support small producers to improve their performance till they compete with MNCs.

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If necessary Government can use trade barriers to protect the small industries.

Government negotiate with WTO for fair rules.

Government should align with other developing countries to fight against the dominance of developed countries in the WTO.

People should play important role in the struggle for fair Globalization.

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