Social Science

GLOBALISATION AND THE INDIAN ECONOMY

Production across countries

Multinational Corporations - A company that owns or controls production in more than one nation. The goods
and services are produced globally. Production is organized in increasingly complex ways.

Interlinking production across countries

MNCs set up production where it is close to the markets ; where there is skilled and unskilled labour available at
low costs; and where the availability is assured. MNCs might look for government policies that look after their
interests.

Ways in which the MNCs spread their production across the globe -

Joint production with local companies

Buy up local companies

Place orders for production with small producers

Foreign trade and integration of markets

Foreign trade creates an opportunity for the

Producers to each beyond the domestic markets

For buyers, expanding the choice of goods beyond what is domestically produced

Prices of similar goods in the two markets tend to become equal. Producers in two countries closely compete
against each other even though they are separated by thousands of miles.

What is Globalisation?
Globalisation is the process of rapid integration or interconnection between countries.

More and more goods and services, investments and technology are moving between countries.

People usually move from one country to another in search to better income, better jobs or better education.

Factors that have enabled Globalisation

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

Even more remarkable have been the developments in information and communication technology.

Liberalisation of foreign trade and foreign investment policy

Trade Barrier - Restrictions on export and import. Governments can use trade barrier to increase or decrease
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foreign trade and to decide what kinds of goods and how much of each should come into the country. After
independence, the Indian government had put barriers to protect the Indian producers from international
competition. Starting around 1991, the government decided that the time had come for Indian producers to
compete with producers around the globe. Thus barriers on foreign trade and foreign investment were removed
to large extent. Removing barriers or restrictions set by the government is what is known as liberalisation.

World Trade Organisation

A group of 149 countries (2006), this organisation say that all the barriers to foreign trade and investment are
harmful. There should be no barriers. Trade between countries should be free. All countries in the world should
liberalise their policies.

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Impact of Globalisation on India

Positive Impacts

MNCs have increased their investments in India, new jobs have been created. Local companies supplying
raw materials, etc, to these industries have prospered.

Several of the top Indian companies have been able to benefit from the increased competition.

Globalisation has enabled some large Indian companies to emerge as multinationals themselves.

Created new opportunities for companies providing services, particularly those involving IT.

Negative Impacts

Small producers : Compete or perish

Competition and uncertain employment

The struggle for a fair Globalisation

Not everyone has benefited from globalisation. People with education, skill wealth have made the best use of
the new opportunities. On the other hand, there are many people who have not shared the benefits.

Steps that can be taken by the Government to ensure fa fair globalisation:

Policies to protect the interests of all the people in the country.

proper implementation of labour laws.

Support to small producers, use of trade and investmentbarries.

Negotiation at the WTO for ‘fairer rules’.

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GLOBALISATION AND THE INDIAN ECONOMY EXERCISE

1. What does WTO stand for? 8. In general, where does MNC prefer to set up
(1) World Telecommunication Organisation production units?
(1) Where tax rate is high
(2) World Toll Organisation
(2) Where labour is available at low costs
(3) World Trade Organisation
(3) Where other MNC’s exist
(4) World Trade Orientation
(4) In countries who are member of SAARC
2. How is an MNC defined?
9. By which of the following ways consumers get benefit
(1) Company that owns production unit in more from globalisation?
than one district in a country
(1) Great variety
(2) Company that owns production unit in more (2) Improved quality
than one state in a country
(3) Low price
(3) Company that owns production unit in more
(4) All of these
than one nation
10. Liberalisation means
(4) Company that owns production unit in one state
(1) removing trade barriers
of a country
(2) adding more trade barriers
3. Which of the following is an MNC dealing in
(3) protecting domestic industries
medicines?
(4) closing domestic economy
(1) Ranbaxy (2) Asian Paints
11. Cargill Foods, an American MNC, had bought
(3) Tata Motors (4) Infosys smaller Indian companies such as
4. What is Globalisation? (1) Pillsbury Foods (2) Parakh Foods
(1) Process of rapid integration between countries (3) Ashirwad Foods (4) MTR Foods
(2) Process of rapid integration of various states 12. Indian government has put barriers to foreign trade
of a country and foreign investment known as
(3) Rapid integration of people of various towns (1) trade restrictions (2) trade barriers
only (3) trade transactions (4) trade deficit
(4) Integration of technologies of different states 13. Investment made by MNCs is called
only (1) foreign investment (2) direct investment
5. What is the basic function of foreign trade? (3) indirect investment (4) domestic investment
(1) Connects markets of two countries only 14. Government has set trade barriers
(2) Creates opportunity for only the buyer to (1) to increase foreign trade
approach foreigh goods (2) to protect international companies
(3) Connects markets of different countries (3) to regulate foreign trade
(4) Connects developed countries only (4) to increase the production of wheat
6. ‘SAPTA’ is an agreement on Trade among the 15. Which one among the following is a far reaching
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SAARC Nations. The expansion of SAPTA is one
of the following –
(1) South Asian Protection of Trade Agreement
(2) South Asian Partial Trade Agreement
(3) South Asian Preferential Trade Agreement
(4) South Asian Pacific Trade Agreement
7. Who are the most affected from WTO rules?
(1) Indian farmers (2) Farmers of USA
(3) Industrialist in India (4) Industrialist in China
change in the policy made in India in 1991?
(1) Removing barriers or restrictions set by the gov-
ernment which is known as liberalisation.
(2) Put barriers to foreign trade and foreign invest-
ments.
(3) Restrictions set by the government to protect
the producers within the country from foreign
competition.
(4) By giving protection to domestic producers
through a variety of means.

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16. Which one of the following is not true regarding 19. Taxes on imports is an example of :
impact of globalisation on India?
(1) terms of trade
(1) It has created jobs in the service sector.
(2) collateral
(2) People with education, skill and wealth have
not been benefited. (3) trade barriers

(3) Benefits of globalisation are not shared equally. (4) foreign trade
(4) Labour laws are not implemented properly and 20. Which of the following organisations lays stress on
workers are denied their rights. liberalisation of foreign trade and foreign invest-
17. Globlisation shall result in : ment?
(1) lesser competition among producers (1) International Labour Organisation
(2) greater competition among producers
(2) World Health Organisation
(3) no change in competition among producers
(3) International Monetary Fund
(4) destruction of large scale producers
(4) World Trade Organisation
18. Rapid integration or inter connection between coun-
tries is known as :
(1) Privatisation (2) Globalisation
(3) Liberalisation (4) Socialisation

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ANSWER KEY
Que. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Ans. 3 3 1 1 3 3 1 2 3 1 2 2 1 3 1 2 2 2 3 4