Globalisation & the Indian Economy Chapter Notes - Social Studies (SST) Class 10

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. In a matter of years, our markets have been transformed! 

Production Across Countries

Companies crossed the native country boundary in search of raw materials, cheap labour and other resources to reduce the production cost and earn maximum profits.

Across Countries 

• Sometimes such businesses will look for government policies that look after their interests.
• An MNC is a company that owns or controls production in more than one nation.
• These companies produce and market goods and services all over the world. e.g. Coca-Cola, Pepsi, Honda, Nokia.
• The production process is divided into parts and spread out across the globe as per resource availability.
• Example: India – raw material, China – cheap labour, India-highly qualified people to handle customers' technical queries.

Interlinking Production Across Countries

The money that is spent to buy assets such as land, building, machines and other equipment is called investment. An investment made by MNCs is called a foreign investment. MNCs are exerting a strong influence on production at these distant locations. 

What are MNC's

• As a result, production in these widely dispersed locations is getting interlinked.
• There are a variety of ways as mentioned below, in which MNCs are spreading their production and interacting with local producers in various countries across the globe.

1. By setting up partnerships with local companies
2. By using the local companies for supplies
3. By closely competing with local companies or buying them up

MNCs set up production jointly with local companies which benefits local companies in the following ways:

1. First, MNCs can provide money for additional investments, like buying new machines for faster production.
2. Second, MNCs might bring with them the latest technology for production.

Foreign Trade and Integration of Markets 

• Foreign trade creates an opportunity to sell goods and competes with producers from other countries.
• It also enables a buyer to take advantage of a variety of choices by importing the goods.
• Each producer can compete closely with the competitor even if they are a very long distance away.
• Example: Effect of Chinese toy manufacturers over Indian toy manufacturers. Indian toy manufacturers sold toys at high rates. 
• Chinese manufacturers found the opportunity to sell plastic toys at low rates hence gaining the market for their products. 
• This has led to decreased sales for Indian toy manufacturers.

What is Globalisation?

The way in which the world economy is integrated with the modern world is globalization.

Globalisation

• Take the example of Microsoft. Microsoft is having its headquarters in the USA. 
• This company is getting part of its software developed in India and several other countries. And Microsoft’s software is being used across the world. 
• Another example can be Ford Motors based in the USA.
• Ford is having manufacturing plants in Chennai and cars manufactured in Chennai go for sale in other countries. 
• Moreover, the company may be getting gearboxes produced in some other country, seat belts from a different country, lights, and rearview mirrors from some other nation by some other company. 
• Almost all the components get supplied by various vendors to the Ford motor, which assembles them to make the car.
• All these activities help in generating employment opportunities across the world. This in turn affects the world economy. 
• You can think of various activities in the step of final production of a product or a service that take place around the world at different locations. This results in the interdependence of national economies around the world.

Factors that have Enabled Globalisation

Globalization, the process of increasing interconnectedness and integration of economies, societies, and cultures on a global scale, has been facilitated by several key factors. These factors have played a significant role in enabling globalization and shaping its trajectory. Here are some of the most important factors:

Fators enabling globalisation

1. Advancement in Technology

• Rapid improvement in technology has been one major factor that has stimulated the globalisation process. 
• This has made possible much faster delivery of goods across long distances at lower costs. 
• The developments in information and communication technology have made information instantly accessible.

2. Liberalisation of Foreign Trade and Foreign Investment Policy

• Trade barriers are some restrictions that have been set up by governments. 
• The government can use trade barriers to increase or decrease (regulate) foreign trade and to decide what kinds of goods and how much of each, should come into the country. 
• Tax on imports is an example of a trade barrier. 
• Removing barriers or restrictions set by the government on trade is known as liberalisation. When the government imposes fewer restrictions than before, it is said to be more liberal.

World Trade Organisation (WTO) 

This organisation aims to liberalise international trade. This organisation says that all countries in the world should liberalise their policies.

• This organisation established the rules regarding international trade and sees that these rules are obeyed.
• Currently, 161 countries are members of the WTO. India joined WTO on 1 January 1995.
• The rules are supposed to be obeyed by all countries but currently developed countries have unfairly retained trade barriers. 
• On the other hand, WTO rules forced developing countries to remove trade barriers. 
• As an example, the US government provide a huge amount of money to their farmers for production and export to other countries. 
• US farmers now can sell farm products in other country markets at abnormally low prices adversely
  affecting the farmers in these countries.

Impact of Globalisation in India

Globalization has had a significant impact on India across various sectors, transforming its economy, society, and culture. Here are some of the key impacts of globalization in India:

Impact of Globalisation

1. For Consumers

• Globalisation enabled greater competition among producers forcing them to produce a quality product at a lower price. 
• Consumers today can take advantage of this competition to get a quality product at a reasonable price. 
• This lead to higher standards of living. 
• These products are easily available in urban areas and not in rural areas hence reach of these products is limited thus the rural people are not having the same lifestyle as urban people.

2. For MNCs

Large MNCs order their products from Indian exporters.

• With globalisation, MNCs have prospered a lot. 
• Large MNCs order their products from Indian exporters.
• They have increased their investment in India indicating that they are benefitting from the investment. 
• Recognising the opportunities in an urban area MNCs are now interested in industries such as cell phones, automobiles, electronics, soft drinks, fast food and banking services.
• MNCs can now shift to another country to lower production costs and gain higher profits. 
• But this shift creates adverse effects on the workers of the companies. They will get cheap qualified labour at low wages.
• Producers will have the choice to outsource the work from a different country where there is cheap labour and production cost.

3. For Workers

• No Job Security – With growing market competition among industries employers prefers to hire a worker as per need. 
• Thus they can fire the worker at any time. 
• Thus there is no job security for the workers. very long working hours – Worker has to work for long hours to meet the demands. They will have no choice than listening to their employer.
• Low wages – Job opportunities are limited and the number of workers is far more than the opportunities. Thus producers easily get cheap labour and workers are ready to work at less wages.

4. For Small Producers

• Small producers face close competition with such well-established firms. 
• They can bear small losses but small producers can not bear such losses and ultimately end up selling their companies to MNCs. Example: Batteries, capacitors, plastics, toys, tyres, dairy products and vegetable oil are some examples of industries where small manufacturers are hit hard due to competition.
• Some of the Indian multinational companies such as Tata Motors, Infosys, Ranbaxy, Asian Paints, and Sundram Fasteners benefited from globalisation as they have spread their operations worldwide.
• There are enough opportunities for skilled workers but unskilled workers remained poor.

 Steps to Attract Foreign Investment

• The government of India set up Special Economic Zones to attract foreign Investors.
• SEZs are the Industrial zones where Industries get world-class facilities such as electricity, water, roads, transport, storage, recreational and educational facilities.
• Companies that are set up in SEZ areas will do not have to pay taxes for an initial period of five years.
• The government also allows these companies to ignore some of the labour laws such as instead of hiring regularly these companies are allowed to hire workers for short periods i.e. whenever required.

The struggle for a fair globalisation 

• Fair globalisation creates equal opportunities for all and thus ensures that the benefits of globalisation are shared better.
• Government policies must take care of all people in the country equally.
• Government should ensure that labour laws are properly implemented and workers get their rights.
• Government should support small producers to improve their performance till they become strong enough to compete. 
• Government can use trade barriers and investment barriers to protect small producers.
• Government can negotiate at the WTO for ‘fairer rules’. Government should fight with other developing countries to reduce the domination of the developed countries.

Results of Globalisation

1. Better Employment Opportunities
At present India is the leader in the BPO sector. BPOs provide back-office support to many MNCs. A customer calling in the USA to sort out his problem may be talking to a call centre employee in Gurgaon. 
Because of growing economic activities, many new centres of economic activity have developed in India. These are Gurgaon, Chandigarh, Bangalore, Hyderabad and Meerut. Earlier Mumbai, Chennai, Kolkata and Delhi used to be major economic centres.

2. Change in Lifestyle:
Eating habits have changed dramatically. Now you may be eating Kellog’s cornflakes for breakfast and Aloo Tikki Burger for lunch. You may be wearing Levi’s jeans and if you are having a BPO employee as a neighbour then you may have listened to his accented English.

3. Uneven Benefits of Development:

4. Unfair Means Adopted by Developed Countries:

Summing Up

Globalisation is a reality that is here to stay. Globalisation has given more benefits than problems. Economists and policymakers of the world need to fine-tune their strategies so that the benefits of globalization can reach the masses. 
The ultimate success of globalization can only be realized when it helps achieve all the parameters of development. These parameters or goals of development are not only about monetary income but also about better healthcare, education, security and overall quality of life for all.

FAQs

Q.1. How has globalisation transformed the markets?

Globalization has transformed markets in several ways:

• Increased Competition: Globalization has led to increased competition as companies from different countries are able to participate in the same market, resulting in a wider range of products and services for consumers to choose from.
• More Accessible Products: Consumers now have access to products and services that were previously only available in other countries.
• Greater Efficiency: Globalization has made it possible for companies to be more efficient by sourcing materials and labor from different parts of the world, resulting in lower costs and higher profits.
• Greater Economic Interdependence: Globalization has created a more interconnected world economy, where the actions of one country can have a ripple effect on others.
• Increased Foreign Direct Investment: Companies can invest in other countries to expand their operations and increase their profits.
• Standardization of Products and Services: Globalization has led to a standardization of products and services across different countries, making it easier for companies to operate globally.

Overall, globalization has led to a more interconnected world economy with greater competition, access to products, and economic efficiency.

Q.2. What are the changes that led to the dense interlinkages across markets present in the world today?

Globalisation has led to dense interlinkages across markets due to several factors. One of the key elements is rapid technological improvement, which has made distribution of goods over long distances faster and more cost-effective. Another factor is trade liberalisation, which has reduced trade barriers and enabled countries to produce in one location and sell in multiple locations. Additionally, foreign investment policies have played a significant role in globalisation, allowing companies to invest in foreign enterprises, expand their territories, and start businesses in other countries.

Q.3. What are Special Economic Zones? 

Special Economic Zones (SEZs) are designated geographical areas within a country that offer special economic regulations, tax incentives, and other benefits to attract foreign investment and promote economic growth. These zones typically have streamlined customs procedures, relaxed labor laws, and simplified regulations to encourage the establishment of export-oriented industries. The aim is to create a business-friendly environment that promotes international trade and investment, generates employment opportunities, and boosts economic activity in the region. SEZs have been implemented in many countries around the world and have been successful in attracting foreign investment and stimulating economic development in the designated areas.

Q.4. List different factors which affect the choice of location by MNCs.

Multinational corporations (MNCs) consider several factors when deciding on a location for their operations. Some of these factors include:

• Access to markets: MNCs may choose locations where they can easily reach their target markets, whether it is through direct sales or distribution channels.
• Cost of labor: Labor costs can significantly impact a company's profitability, so MNCs may seek locations with low labor costs to reduce production expenses.
• Infrastructure: Adequate infrastructure is vital for MNCs, as it facilitates the smooth functioning of their operations. They may prefer locations with well-developed transportation systems, communication networks, and utilities.
• Political stability: MNCs prefer locations that are politically stable, with predictable regulations and laws. They may also consider the country's attitude towards foreign investment.
• Availability of resources: MNCs may look for locations with an abundant supply of natural resources or raw materials, depending on their industry.
• Taxation: MNCs may consider tax incentives and exemptions provided by different countries when deciding on a location for their operations.
• Cultural and social factors: Cultural and social factors, such as language barriers, social customs, and lifestyle preferences, may also influence the choice of location for MNCs.