Globalization and

the Indian
Economy
SOCIAL SCIENCE (ECONOMIC DEVELOPMENT),
CHAPTER4,
CLASS 10
Subtopics
Introduction
Production Across Countries
Interlinking Production Across Countries
Foreign Trade And Integration Of Markets
What Is Globalisation?
Factories That Have Enabled Globalization
World Trade Organisation
Impact Of Globalization In India
The Struggle For A Fair Globalization
Introduction
As consumers in today’s world, some of us have
a wide choice of goods and services before us.
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.
Such wide-ranging choice of goods in our
markets is a relatively recent phenomenon.
You wouldn’t have found such a wide variety of
goods in Indian markets even two decades back.
In a matter of years, our markets have been
transformed.
PRODUCTION ACROSS
COUNTRIES
Until the middle of the twentieth century, production was largely organized within countries.
Colonies such as India export the raw materials and food stuff and imported finished goods.
Trade was the main channel connecting distant countries. This was done before large
companies called multinational corporation (MNCs) emerged on the scene.
An MNC is a company that owns or controls production in more than one nation. MNCs set up
offices and factories for production in regions where they can get cheap labour and other
resources.
MNCs are not only selling its finished products globally but more important, the goods and
services are produced globally. As a result, production is organized in increasingly complex
ways.
INTERLINKING PRODUCTION
ACROSS COUNTRIES
In general, 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 of other factories of
production is assured.
The money that is spent to buy assets such as
land, building, machines and other equipment
is called investment.
MNC’s
The investment made by the MNCs is called foreign investment. The benefit to the local
company of such joint production is two-fold.
◦ (i) MNCs can provide money for additional investments, like buying new machines for faster production.
◦ (ii) MNCs might bring with them the latest technology for production. But the most common route for
MNC investments is to buy up local companies and then to expand production.
FOREIGN TRADE AND
INTEGRATION OF MARKETS
Foreign trade creates an opportunity for the producers to reach beyond the domestic markets
i.e., markets of their own countries.
For the buyers, import of goods produced in another country is one way of expanding the
choice of goods beyond what is domestically produced. In general, with the opening of trade,
goods travel from one market to another.
Foreign trade thus results in connecting the markets or integration of markets in different
countries.
WHAT IS GLOBALISATION?
A large part of the foreign trade is also controlled by MNCs.
A result of greater foreign trade has been greater foreign trade has been greater integration of
production and markets across countries.
Globalization is this process of rapid integration or interconnection between countries. MNCs
are playing a major role in the globalization process.
More and more goods and services, investments and technology are moving between countries.
FACTORIES THAT HAVE
ENABLED GLOBALISATION
Rapid improvement in technology has been on a major factor that has stimulated the
globalization process.
Even more remarkable have been the development of information and communication
technology.
Technologies in the areas of telecommunications, computers, and internet have been changing
rapidly.
Liberalization of foreign trade
and foreign investment policy
Tax on imports is an example of trade barrier. It
is called a barrier because some restriction has
been set up.
The government can use trade barriers to
increase or decrease foreign trade and to decide
what kind of goods and how much of each,
should come into the country.
The Indian government, after Independence, had
put barriers to foreign investment. This was
considered necessary to protect the producers
within the country from foreign competition.
Barriers to foreign trade and foreign investment
were removed to a large extent. This meant that
goods could be imported and exported easily and
also foreign companies could set up factories and
offices here.
WORLD TRADE ORGANISATION
We have seen that the liberalization of foreign trade and investment in India was supported by
some very powerful international organization.
These organizations say that all barriers to foreign trade and investment that are harmful. There
should be no barriers.
World Trade Organization (WTO) is one such organization whose aim is to liberalize
international trade.
Though WTO is supposed to allow a free trade for 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.
IMPACT OF GLOBALISATION IN
INDIA
In the last twenty years, globalization of the Indian economy has
come a long way.
Globalization and greater competition among producers – both
local and foreign producers – has been of advantage to consumers,
particularly the well-off sections in the urban areas.
As a result, these people today, enjoy much higher standards of
living than was possible earlier.
MNCs have increased their investments in India over the past 20
years, which means investing in India has been beneficial for them.
Several of the top Indian companies have been able to benefit
from the increased competition.
Moreover, globalization has enabled some large Indian companies
to emerge as multinationals themselves! Globalization has also
created new opportunities for companies providing services,
particularly those involving IT.
THE STRUGGLE FOR A FAIR
GLOBALISATION
People with education skill and wealth have made the best use of new opportunities. On the other
hand, there are many people who have not shared the benefits.
Fair globalization would create opportunities for all and also ensure that the benefits of globalization
are shared better.
The government can play a major role in making this possible.
Its policies must protect the interests, not only of rich and the powerful but all the people in the
country.
It can support small producers to improve their performance till the time they become strong enough
to compete.
If necessary, the government can use trade and barriers. In the past few years, massive campaigns
and representatives by people’s organizations have influenced important decisions relating to trade
and investments at the WTO.
This has demonstrated that people also can play an important role in the struggle for fair
globalization.
Thank You