GLOBALISATION

AND THE INDIAN

ECONOMY
As consumers in today’s world, some of
us have a wide choice of goods and
services before us.

Gone are the days when Ambassador

and Fiat were the only cars on Indian
roads.

Today, Indians are buying cars produced

by nearly all the top companies in the
world.
PRODUCTION ACROSS
COUNTRIES
 Situation before emergence of MNCs

Colonies such as India exported raw materials

& food stuff and imported finished goods.
Till mid-twentieth
century, production was
largely organised within
The main channel connecting distant
countries.
countries- Trade.
 WHAT ARE MNCs?

Multinational Corporation or
MNC is a company that owns
or controls production in
more than one nation.

Set up offices & factories for

production in regions where
they can get cheap labour &
other resources.

Aim- Low cost of production &

greater profits.
 Spreading of Production by an MNC

1. Product 2. Components
designings in USA. manufactured in
China.

4. Products
assembled- Mexico
3. Skilled
& Eastern Europe, &
Engineers-
final product ready
India.
to be sold all over
the world.
CONDITIONS REQUIRED TO SET UP MNCs

Closeness to Market

Cheap skilled &

unskilled labour

Favourable
government policies

Having assured themselves of these

conditions, MNCs set up factories and
offices for production.
 signed the document did not take
this decision.

He was only
❏ ❏ Investment- Theexecuting the is
money that policy
spent
to decision taken
buy assets suchbyas
someone else. We
land, building,
noted the
machines role
and of the
other Prime Minister
equipment.
in taking that decision.
❏ Foreign Investment- Investment made
❏ byBut we also know that he could not
MNCs.
have taken that decision if he did not
❏ Any have support is
investment from
madethewith
Lokthe
Sabha.
hope
that these assets will earn profits.
❏ In that sense he was only executing
the wishes of the Parliament.
 Sometimes, MNCs set
up production jointly
with some of the local
companies of a country.
Benefit to local companies of joint
production

MNCs provide money

for additional
investments, like
buying new machines
for faster
production.

MNCs might bring

with them the latest
technology for
production.
Most Common Route for MNC
Investment is to buy up local
companies & expand
production.

Wealthy MNCs can do this

easily.
 EXAMPLE

➔ Parakh Foods- small company bought

over by a large American Company —
Cargill Foods.

➔ Parakh food built large marketing

network in India & owned 4 oil
refineries, whose control has now
shifted to Cargill.

➔ Cargill is now the largest

manufacturer of edible oil in India
making five million pouches daily.
Another way in which MNCs control
production

Large MNCs place

their orders for
productions with
small producers &
sell them under their
brand name.

These MNCs have

tremendous power to
determine price,
quality, delivery, &
labour conditions for
these distant
producers.
 CONCLUSION

1. Variety of ways through which MNCs

spread their production & interact with
local producers in various countries.

2. By setting up partnerships with local

companies, by using the local companies
for supplies, by closely competing with
the local companies or buying them up.

3. MNCs are exerting a strong influence on

production at these distant locations.

4. Result- production in these widely

dispersed locations is getting interlinked.
 EXAMPLE
➔ Ford Motors, an American company, is one of
the world’s largest automobile manufacturers
with production spread over 26 countries of
the world.

➔ 1995- it came to India & spent Rs. 1700 crore to

set up a large plant in Chennai.

➔ Done in collaboration with- Mahindra and

Mahindra ( major Indian manufacturer of
jeeps and trucks).

➔ By 2017, Ford Motors was selling 88,000 cars-

India & another 1,81,000 cars were exported.

➔ The company wants to develop Ford India as a

component supplying base for its other plants
across the globe.
 FOREIGN TRADE &
INTEGRATION OF MARKETS
 FOREIGN TRADE

It is the exchange of
capital, goods, and
services across
international borders or
territories.
 BASIC FUNCTIONS OF FOREIGN TRADE

Provides
vast market
to
Producers.

For buyers,
import of
goods
produced in
another
country is one
way of
expanding
the choice of
goods.
 Conclusion

● With the opening of trade, goods travel

from one market to another.

● Choice of goods in the markets rises.

● Prices of similar goods in the two

markets tend to become equal.

● Increased competition between

producers of two different countries.
 EXAMPLE
➔ Chinese manufacturers exports toys to
India, where toys are sold at a high price.

➔ They start exporting plastic toys to India.

➔ Buyers in India now have more options to

choose from.

➔ Chinese toys being cheap & latest in

design became more popular in Indian
market.

➔ Within a year 70-80% of toys replaced with

Chinese toys.
Foreign trade
thus results in
connecting the
markets or
integration of
markets in
different
countries.
● Globalisation is this process of rapid
integration or interconnection between
countries.

● MNCs play major role in the globalisation

process.

● More & more goods & services, investments

& technology are moving between
countries.

● Large part of foreign trade controlled by

MNCs.

● Result- greater integration of production &

markets across countries.
There is another way
in which countries
can be connected.
This is through
movement of people.

However, due to
various restrictions
there has not been
much increase in the
movement of people
between countries.
 FACTORS THAT HAVE
ENABLED GLOBALISATION
 TWO MAJOR FACTORS

Technology

Liberalisation of Foreign
Trade & Foreign
Investment Policy
 Technology

Rapid improvement in technology has been one

major factor that has stimulated the
globalisation process.

Example- the past 50 years have seen several

improvements in transportation technology.

This has made much faster delivery of goods

across long distances possible at lower costs.

Remarkable developments in information &

communication technology have made
communication accessible even in remote areas
of world.
 Information and
communication technology (or
IT in short) has played a major
role in spreading out
production of services across
countries.
 Using IT in Globalisation
➔ Magazine for London readers, designed &
published in Delhi.

➔ Text of magazine sent through internet to

Delhi office.

➔ Designers get order on how to design the

magazine from the office in London using
telecommunication facilities.

➔ Designing done from computer. After

printing, magazine sent to London by air.

➔ Payment for the whole process is done

through e-banking.
 LIBERALISATION OF FOREIGN TRADE &
FOREIGN INVESTMENT POLICY

Trade barrier- government-induced

restrictions on international trade, eg. tax
on imports.

It is called a barrier because some

restriction has been set up.

Governments can use trade barriers to

regulate foreign trade & to decide what kinds
of goods & how much of each, should come
into the country.
1. After
independence, 2. Considered
Indian government necessary- to protect
had to put barriers the producers within
on foreign trade & the country from
foreign investment. foreign competition.

4. Thus, India allowed

3. Industries were just imports of only
coming up in the 1950s essential items such
& 1960s & competition as machinery,
from imports at that petroleum, fertilizers,
stage would not have etc.
allowed these
industries to come up.
Far reaching changes in Trade Policy-
India around 1991

Government decided the time had come for

Indian producers to compete with producers
around the globe.

Competition would improve the performance

of producers within the country.

Producers within the country would have to

improve the quality of the products.

Decision supported by powerful

international organisations.

Thus, trade barriers were removed to a large

extend.
 LIBERALISATION

Removing barriers or restrictions set by the

government.

Trade, businesses are allowed to make decisions

freely about what they wish to import or export.

When the government imposes less restrictions

than before, it is said to be more liberal.
What is the another way in which countries can be
connected?

(a) Embassy

(b) Movement of goods

(c) Movement of people

(d) All of the above

Importing or exporting the products across the native
country boundary is called:

(a) Foreign Activity

(b) Foreign Trade

(c) Foreign investment

(d) None of the above

As consumers in today’s world, some of
us have a wide choice of goods and
services before us.

Gone are the days when Ambassador

and Fiat were the only cars on Indian
roads.

Today, Indians are buying cars

produced by nearly all the top
companies in the world.
 A similar explosion
of brands can be
seen for many other
goods: from shirts to
televisions to
processed fruit
juices.

Such wide-ranging
choice of goods in our
markets is a relatively
recent phenomenon.
PRODUCTION ACROSS
COUNTRIES
 Situation before emergence of MNCs

Till mid-twentieth century, production was

largely organised within countries.

Colonies such as India exported raw materials

& food stuff and imported finished goods.

The main channel connecting distant

countries- Trade.
 WHAT ARE MNCs?

Multinational Corporation or MNC is a

company that owns or controls production in
more than one nation.

Set up offices & factories for production in

regions where they can get cheap labour &
other resources.

Aim- Low cost of production & greater profits.

 Spreading of Production by an MNC

1. Product 2. Components
designings in USA. manufactured in
China.

4. Products
assembled- Mexico
3. Skilled
& Eastern Europe, &
Engineers-
final product ready
India.
to be sold all over
the world.
 INTERLINKING
PRODUCTION ACROSS
COUNTRIES
CONDITIONS REQUIRED TO SET UP MNCs

Closeness to Market

Cheap skilled &

unskilled labour

Favourable
government policies

Having assured themselves of these

conditions, MNCs set up factories and
offices for production.
 ❏ We found out that the person who
signed the document did not take
this decision.

❏ He was only executing the policy

❏ Investment- The money that is spent
decision taken by someone else. We
to buy assets such as land, building,
noted the role of the Prime Minister
machines and other equipment.
in taking that decision.
❏ Foreign Investment- Investment made
❏ But we also know that he could not
by MNCs.
have taken that decision if he did not
have support from the Lok Sabha.
❏ Any investment is made with the hope
that these assets will earn profits.
❏ In that sense he was only executing
the wishes of the Parliament.
 Sometimes, MNCs set
up production jointly
with some of the local
companies of a country.
Benefit to local companies of joint
production

MNCs provide money

for additional
investments, like
buying new machines
for faster
production.

MNCs might bring

with them the latest
technology for
production.
 Most Common Route for MNC
Investment is to buy up local
companies & expand production.

Wealthy MNCs can do this

easily.
 EXAMPLE

➔ Parakh Foods- small company bought

over by a large American Company —
Cargill Foods.

➔ Parakh food built large marketing

network in India & owned 4 oil
refineries, whose control has now
shifted to Cargill.

➔ Cargill is now the largest

manufacturer of edible oil in India
making five million pouches daily.
Another way in which MNCs control
production

Large MNCs place

their orders for
productions with
small producers &
sell them under their
brand name.

These MNCs have

tremendous power to
determine price,
quality, delivery, &
labour conditions for
these distant
producers.
 CONCLUSION

1. Variety of ways through which MNCs

spread their production & interact with
local producers in various countries.

2. By setting up partnerships with local

companies, by using the local companies
for supplies, by closely competing with
the local companies or buying them up.

3. MNCs are exerting a strong influence on

production at these distant locations.

4. Result- production in these widely

dispersed locations is getting interlinked.
 EXAMPLE
➔ Ford Motors, an American company, is one of
the world’s largest automobile manufacturers
with production spread over 26 countries of
the world.

➔ 1995- it came to India & spent Rs. 1700 crore to

set up a large plant in Chennai.

➔ Done in collaboration with- Mahindra and

Mahindra ( major Indian manufacturer of
jeeps and trucks).

➔ By 2017, Ford Motors was selling 88,000 cars-

India & another 1,81,000 cars were exported.

➔ The company wants to develop Ford India as a

component supplying base for its other plants
across the globe.
 FOREIGN TRADE &
INTEGRATION OF MARKETS
 FOREIGN TRADE

It is the exchange of
capital, goods, and
services across
international borders or
territories.
BASIC FUNCTIONS OF FOREIGN TRADE

Provides vast
market to
Producers.

For buyers, import

of goods produced
in another country
is one way of
expanding the
choice of goods.
 Conclusion

● With the opening of trade, goods travel

from one market to another.

● Choice of goods in the markets rises.

● Prices of similar goods in the two

markets tend to become equal.

● Increased competition between

producers of two different countries.
 EXAMPLE
➔ Chinese manufacturers exports toys to
India, where toys are sold at a high price.

➔ They start exporting plastic toys to India.

➔ Buyers in India now have more options to

choose from.

➔ Chinese toys being cheap & latest in

design became more popular in Indian
market.

➔ Within a year 70-80% of toys replaced with

Chinese toys.
Foreign trade
thus results in
connecting the
markets or
integration of
markets in
different
countries.
● Globalisation is this process of rapid
integration or interconnection between
countries.

● MNCs play major role in the globalisation

process.

● More & more goods & services, investments

& technology are moving between
countries.

● Large part of foreign trade controlled by

MNCs.

● Result- greater integration of production &

markets across countries.
There is another way
in which countries
can be connected.
This is through
movement of people.

However, due to
various restrictions
there has not been
much increase in the
movement of people
between countries.
 FACTORS THAT HAVE
ENABLED GLOBALISATION
TWO MAJOR FACTORS

Technology

Liberalisation of
Foreign Trade &
Foreign Investment
Policy
 Technology

Rapid improvement in technology has been one

major factor that has stimulated the
globalisation process.

Example- the past 50 years have seen several

improvements in transportation technology.

This has made much faster delivery of goods

across long distances possible at lower costs.

Remarkable developments in information &

communication technology have made
communication accessible even in remote areas
of world.
Information and communication
technology (or IT in short) has
played a major role in spreading
out production of services across
countries.
 Using IT in Globalisation
➔ Magazine for London readers, designed &
published in Delhi.

➔ Text of magazine sent through internet to

Delhi office.

➔ Designers get order on how to design the

magazine from the office in London using
telecommunication facilities.

➔ Designing done from computer. After

printing, magazine sent to London by air.

➔ Payment for the whole process is done

through e-banking.
 LIBERALISATION OF FOREIGN TRADE &
FOREIGN INVESTMENT POLICY

Trade barrier- government-induced

restrictions on international trade, eg. tax
on imports.

It is called a barrier because some

restriction has been set up.

Governments can use trade barriers to

regulate foreign trade & to decide what kinds
of goods & how much of each, should come
into the country.
1. After
independence, 2. Considered
Indian government necessary- to protect
had to put barriers the producers within
on foreign trade & the country from
foreign investment. foreign competition.

4. Thus, India allowed

3. Industries were just imports of only
coming up in the 1950s essential items such
& 1960s & competition as machinery,
from imports at that petroleum, fertilizers,
stage would not have etc.
allowed these
industries to come up.
Far reaching changes in Trade Policy- India
around 1991

Government decided the time had come for

Indian producers to compete with producers
around the globe.

Competition would improve the performance

of producers within the country.

Producers within the country would have to

improve the quality of the products.

Decision supported by powerful

international organisations.

Thus, trade barriers were removed to a large

extend.
 LIBERALISATION

Removing barriers or restrictions set by the

government.

Trade, businesses are allowed to make decisions

freely about what they wish to import or export.

When the government imposes less restrictions

than before, it is said to be more liberal.
❏ We have seen that the liberalisation of
We found
❏ foreign out
trade that
and the person
investment in who
India
signed the document did not take this
was supported by some very powerful
decision.
international organisations.

He was
❏❏ These only executing
organisations saythe
thatpolicy
all
decision taken by someone
barriers to foreign trade and else. We
noted the role of the
investment are harmful. Prime Minister in
taking that decision.
❏ There should be no barriers.
❏ But we also know that he could not have
Tradetaken thatcountries
between decision ifshould
he didbe
not have
‘free’.
support from the Lok Sabha.
❏ All countries in the world should
In that sense
❏ liberalise he was only executing the
their policies.
wishes of the Parliament.
WTO- is an organisation whose aim is to liberalise
international trade.

Who started WTO?

Developed countries in 1 January 1995

WTO establishes- rules regarding international

trade, & sees that these rules are obeyed.

Total number of member countries- 164

India joined WTO- 1 January 1995.

World Trade Organisation
(WTO) is committed to
allow free trade among its
member countries.
However, its functioning
has been criticised.
 Free Trade benefits
developed countries
more than developing
countries.

On the other hand, WTO

rules have forced the
developing countries to
remove trade barriers.
IMPACT OF GLOBALISATION
IN INDIA
It has been 20 years since the
globalisation in India has
progressed. What has been its
effect on the lives of people?
 Consumers

Globalisation & competition among

producers, local & foreign has been
advantageous for consumers.

They have greater choice of products

with improved quality & lower prices.

Resultantly, people enjoy high standard

of living that was not possible before.
Among producers and
workers, the impact of
globalisation has not
been uniform.
 MNCs Impact

1. Increased their
2. Invested in industries
investment in India
such as automobiles,
over the past 20
electronics, etc. or
years. Meaningly,
services such as
investing in India is
banking in urban
beneficial for them.
areas.

3. In these
4. Local companies
industries and
supplying raw
services new jobs
materials have also
have been created
prospered.
in these industries.
Steps to Attract Foreign Investment

Indian govt. in order to attract foreign

investments has set up industrial zones
called Special Economic Zones (SEZs)

SEZs are to have world class facilities:

electricity, water, roads, transport, storage,
recreational & educational facilities.

Companies which are set up in SEZ area will

do not have to pay taxes of initial period of 5
years.

Govt. has allowed flexibility in labour laws

such as “short duration” hiring of workers
due to work pressure instead of regular
basis to reduce cost of companies.
Several Indian companies have been able to
benefit from the increased competition.

They have invested in newer technologies &

raised their production standards. Some
have gained from successful collaborations
with foreign companies.

Example: Tata motors, Infosys, Ranbaxy,

Asian Paints, Sundaram Fasteners (nuts &
bolt) are spreading worldwide.
1. Globalisation has created new
opportunities for service companies
particularly IT industries.

2. E.g., call centres, Indian company

producing magazine for London
based company.

3. Services like data entry, accounting,

administrative tasks, engineering are
done cheaply in India & exported to
the developed countries.
 Globalisation & Small Producers

For small producers globalisation pose serious

challenge of either to compete or perish.

Industries like batteries, plastics, toys, dairy

products & vegetable oil are some examples which
have been hit hard due to competition.

Many have shut down making workers jobless.

Notably, small industries in India employ the largest

number of workers (20 million) in the country, next
to agriculture.
Competition and Uncertain
Employment

➔ Globalisation have substantially

impacted the workers life.

➔ No job security- Now workers are

employed flexibly.

➔ Large MNCs in the garment industry in

Europe order their products from
Indian exporters.

➔ These MNCs look for cheapest goods

to maximise their profit.

➔ E.g.- to get bulky orders, Indian

garment exporters try hard to cut the
cost.
 Competition and Uncertain Employment

Exporters try to cut labour cost- since cost

of raw materials cannot be cut.

Hire labour on temporary basis to avoid

giving them wages for full year.

Workers are made to work long hours than

usual such as night shifts on regular basis
during the peak season.
 Competition and Uncertain Employment

To meet both ends workers work overtime in

low wages.

While MNCs make huge profits, workers are

denied their fair share and job security.

The condition of organised sector has

started resembling to that of unorganised
sector due to hardship faced by workers in
industrial and service sector.
THE STRUGGLE FOR A FAIR
GLOBALISATION
➔ It is visible that not everyone has
benefited from globalisation.

➔ The rich, powerful and educated

have benefited the most while the
poor and less educated have not.

➔ To ensure that everyone get their fair

share of benefits, Govt. can play huge
role in policy making.
 Some possible steps that
government can take:

1. It can ensure that labour laws are properly

implemented and workers get their right.

2. It can support small producers initially to

expand their business till they get in
competing stage.

3. Trade and investment barriers can be used

to create a check.

4. It can negotiate at WTO for fairer rules.

Govt. can collaborate with other developing
countries to tackle dominated of developed
countries in WTO.
In last few years, massive
campaigns and
representation have
influenced decisions
relating to trade and
investments at WTO.

Thus, people can bring

about change to achieve
fair globalisation.
CONCLUSION
➔ In nutshell, we studied present phase
of globalisation. It is the process of
rapid integration of countries through
foreign trade and foreign investment.

➔ Major role played by: MNCs and IT

technology.

➔ Liberalisation of trade & investment:

facilitated globalisation.

➔ International level, WTO has put a

pressure on developing countries to
liberalise their trade & investment.
➔ Globalisation has benefited-
Consumers & Producers.

➔ But, small producers & workers have

suffered loss.

What is needed?

➔ Fair globalisation to ensure shared

benefits & increased opportunities for
all.
When did India join WTO?

(a) 1 January 1995

(b) 1 December 1995

(c) 11 January 1994

(d) 1 January 1996