GLOBALIZATION AND THE INDIAN

ECONOMY
 Multinational corporations
 Interlinking production across countries
 Foreign trade and integration of markets
 Globalization
 Factors boosting globalization
 World Trade Organisation
 Impact of globalization
 The struggle for fair globalization
 MULTINATIONAL CORPORATIONS
• An MNC is a company that owns or controls
production in more than one country.
• MNCs set up offices and factories for production in
regions where they can get cheap labour and other
resources, to minimise cost and maximise profit.
• They sell their finished products globally and also
produce the goods and services globally.
• The production process is divided into small parts
and spread out across the globe.
 INTERLINKING PRODUCTION ACROSS
COUNTRIES
 Foreign Direct Investment
 By entering into partnership/joint
venture
 Buying out local
companies/merges/takeover
 By giving orders/contacts to local
companies for supplies
 FOREIGN TRADE AND INTEGRATION OF
MARKETS
 Foreign trade is a trade between the different
countries of the world. It consists of imports, exports
and re-exportation (entrepot).
 Integration of markets occurs through foreign trade,
when goods from the market in one country travel to
the market in another country, thus connecting them.
 Foreign trade creates an opportunity for producers to
reach beyond the domestic markets and compete in
markets located in other countries of the world.
 GLOBALIZATION
 It is the process of rapid integration or
interconnection between countries.
 Globalization enables:
a) movement of people across the world
b) movement of goods across the world
c) movement of capital across the world
d) movement of services across the world
e) movement of technology across the world
 FACTORS BOOSTING GLOBALIZATION

 Improvement in technology
 Liberalisation of foreign trade and foreign
investment policy
 Development of transport and
communication
 Government policy
 Role of WTO
 WORLD TRADE ORGANISATION
• It is an international organisation which came
into existence on 1st January 1995.
• Its aim is to liberalise international trade.
• It frames rules for international trade.
• It ensures that the rules are followed.
• It promotes removal of restrictions on trade
barriers.
• It solves disputes among countries related to
trade.
 IMPACT OF GLOBALIZATION
Positive impact Negative impact
• Increase in foreign investment • Increase in unemployment
• Increase in production • Imbalanced development
• Technological advancement
• Closure of small companies
• Increase in GDP
• Increase in poverty
• Variety of products
• Quality of goods at reasonable • Suffering of workers
rate • Heavy competition
• Beneficial for small companies • Loss to local handicrafts
• Emergence of Indian companies • Environmental degradation
as MNCs
• Growth of service providing
• Creation of SEZs
companies
 THE STRUGGLE FOR FAIR GLOBALIZATION

• Proper implementation of labour laws

• Supporting small producers to improve their
performance
• Imposition of trade barriers to protect the
interests of domestic products.
• Negotiating with the WTO for ‘fairer rules’.
• Forming groups with other countries to fight
against domination of developed countries.
• Creation of unified national market
• Developing human resource
 QUESTION BANK
1. How are MNCs spreading their production units across the globe?
2. What factors are kept in mind by the MNCs while setting up their production units?
3. Distinguish between foreign trade and foreign investment.
4. What is trade barrier? Why did the Indian government put up trade barrier after
independence? Explain.
5. How are local companies benefitted by collaborating with multinational
companies?
6. What are the functions of the WTO?
7. Why did the government of India remove trade barriers? Explain.
8. What is globalization? Explain its merits and demerits.
9. Explain the relation between liberalisation of foreign trade and trade barriers.
10. Explain in what ways has competition affected workers, Indian exporters and
consumers.
11. What are SEZs? Why have they been set up?
12. How can government play a major role in making globalization fair?
13. How has globalization benefitted India? Explain.
14. In what ways an MNC different from other companies?