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.
 Objectives
After studying this chapter, the learners will

• Will be acquainted with the concepts of Investment,

MNCs, Globalisation, Liberatisation, 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
consumers in today’s world have a wide choice of
goods and services
Variety of brands can

be seen for many other

goods: from shirts to

televisions to

processed fruit juices.

The latest models of digital cameras,
mobile phones and televisions made by the
leading manufacturers of the world are
within our reach.
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.
Such wide-ranging choice of goods in our markets is a
relatively recent phenomenon.
 Production across countries.
• Until the middle of the 20th 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
 Spreading of production by an MNC.
A MNC (multinational corporations) is a company that
owns or controls production in more than one nation.

Assembling in
Mexico and
Eastern Europe
 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.
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.
 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.
 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.
 What is Globalisation?
• It is the process of rapid integration or interconnection between countries.
• MNCs are playing a major role in the globalisation.
 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 :
 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.
 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.
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.

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.
 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

 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.

 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.
 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
 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
 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.

 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.
Debate on Free Trade
 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.
 Impact of Globalisation in India…...

 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…...
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…...

 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.
 Steps to attract Foreign Investment.
• Flexibility in labour laws
• Setting up of special economic zones.(SEZs)
 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.
 
 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.
Does globalisation promote
sustainable development?