NCERT Textbook - Globalisation and the Indian Economy Class 10 Notes | EduRev

Economy and Indian Economy (Prelims) by Shahid Ali

Created by: C K Academy

Class 10 : NCERT Textbook - Globalisation and the Indian Economy Class 10 Notes | EduRev

 Page 1


NOTES FOR THE TEACHER
Most regions of the world are getting increasingly
interconnected. While this interconnectedness
across countries has many dimensions —
cultural, political, social and economic — this
chapter looks at globalisation in a more limited
sense. It defines globalisation as the integration
between countries through foreign trade and
foreign investments by multinational
corporations (MNCs). As you will notice, the more
complex issues of portfolio investment have been
left out.
If we look at the past thirty years or so, we
find that MNCs have been a major force in the
globalisation process connecting distant regions
of the world. Why are the MNCs spreading their
production to other countries and what are the
ways in which they are doing so? The first part
of the chapter discusses this. Rather than
relying on quantitative estimates, the rapid rise
and influence of the MNCs has been shown
through a variety of examples, mainly drawn
from the Indian context. Note that the examples
are an aid to explain a more general point. While
teaching, the emphasis should be on the ideas
and examples are to be used as illustrations.
You can also creatively use comprehension
passages like the one given after Section II to
test and reinforce new concepts.
Integration of production and integration of
markets is a key idea behind understanding the
process of globalisation and its impact. This has
been dealt with at length in this chapter,
highlighting the role of MNCs in the process.  You
have to ensure that the students grasp this idea
with sufficient clarity, before moving on to the
next topic.
Globalisation has been facilitated by several
factors. Three of these have been highlighted:
rapid improvements in technology, liberalisation
of trade and investment policies and, pressures
from international organisations such as the
WTO. Improvement in technology is a fascinating
area for students and you may, with a few
directions, encourage them to do their own
explorations. While discussing liberalisation, you
have to keep in mind that the students are
unaware of what India was like in the
pre-liberalisation era. A role-play could be
conceived to compare and contrast the pre and
post-liberalisation era. Similarly, international
negotiations under WTO and the uneven
balances in power are interesting subjects that
can be covered in a discussion mode rather than
as lectures.
The final section covers the impact of
globalisation. To what extent has globalisation
contributed to the development process? This
section draws on the topics covered in Chapters
1 and 2 (for example, what is a fair development
goal), which you can refer to. Also, examples and
activities drawn from the local environment are
a must while discussing this section. This might
include contexts that have not been covered in
the chapter, such as the impact of imports on
local farmers, etc. Collective brainstorming
sessions can be conducted to analyse such
situations.
Sources for Information
The call for a fairer globalisation has been given,
among others, by the International Labour
Organisation — www.ilo.org. Another interesting
resource is the WTO website http://www.wto.org.
It gives access to the variety of agreements that
are being negotiated at the WTO.  For company
related information, most MNCs have their own
websites.  If you want to critically look at
the MNCs, one recommended website is
www.corporatewatch.org.uk.
CHAPTER 4 : GLOBALISATION AND THE INDIAN ECONOMY
54 54 54 54 54 U U U U UNDERST NDERST NDERST NDERST NDERSTANDING ANDING ANDING ANDING ANDING E E E E ECONOMIC CONOMIC CONOMIC CONOMIC CONOMIC D D D D DEVEL EVEL EVEL EVEL EVELOPMENT OPMENT OPMENT OPMENT OPMENT
2015-2016
Page 2


NOTES FOR THE TEACHER
Most regions of the world are getting increasingly
interconnected. While this interconnectedness
across countries has many dimensions —
cultural, political, social and economic — this
chapter looks at globalisation in a more limited
sense. It defines globalisation as the integration
between countries through foreign trade and
foreign investments by multinational
corporations (MNCs). As you will notice, the more
complex issues of portfolio investment have been
left out.
If we look at the past thirty years or so, we
find that MNCs have been a major force in the
globalisation process connecting distant regions
of the world. Why are the MNCs spreading their
production to other countries and what are the
ways in which they are doing so? The first part
of the chapter discusses this. Rather than
relying on quantitative estimates, the rapid rise
and influence of the MNCs has been shown
through a variety of examples, mainly drawn
from the Indian context. Note that the examples
are an aid to explain a more general point. While
teaching, the emphasis should be on the ideas
and examples are to be used as illustrations.
You can also creatively use comprehension
passages like the one given after Section II to
test and reinforce new concepts.
Integration of production and integration of
markets is a key idea behind understanding the
process of globalisation and its impact. This has
been dealt with at length in this chapter,
highlighting the role of MNCs in the process.  You
have to ensure that the students grasp this idea
with sufficient clarity, before moving on to the
next topic.
Globalisation has been facilitated by several
factors. Three of these have been highlighted:
rapid improvements in technology, liberalisation
of trade and investment policies and, pressures
from international organisations such as the
WTO. Improvement in technology is a fascinating
area for students and you may, with a few
directions, encourage them to do their own
explorations. While discussing liberalisation, you
have to keep in mind that the students are
unaware of what India was like in the
pre-liberalisation era. A role-play could be
conceived to compare and contrast the pre and
post-liberalisation era. Similarly, international
negotiations under WTO and the uneven
balances in power are interesting subjects that
can be covered in a discussion mode rather than
as lectures.
The final section covers the impact of
globalisation. To what extent has globalisation
contributed to the development process? This
section draws on the topics covered in Chapters
1 and 2 (for example, what is a fair development
goal), which you can refer to. Also, examples and
activities drawn from the local environment are
a must while discussing this section. This might
include contexts that have not been covered in
the chapter, such as the impact of imports on
local farmers, etc. Collective brainstorming
sessions can be conducted to analyse such
situations.
Sources for Information
The call for a fairer globalisation has been given,
among others, by the International Labour
Organisation — www.ilo.org. Another interesting
resource is the WTO website http://www.wto.org.
It gives access to the variety of agreements that
are being negotiated at the WTO.  For company
related information, most MNCs have their own
websites.  If you want to critically look at
the MNCs, one recommended website is
www.corporatewatch.org.uk.
CHAPTER 4 : GLOBALISATION AND THE INDIAN ECONOMY
54 54 54 54 54 U U U U UNDERST NDERST NDERST NDERST NDERSTANDING ANDING ANDING ANDING ANDING E E E E ECONOMIC CONOMIC CONOMIC CONOMIC CONOMIC D D D D DEVEL EVEL EVEL EVEL EVELOPMENT OPMENT OPMENT OPMENT OPMENT
2015-2016
G G G G GL L L L LOBALISA OBALISA OBALISA OBALISA OBALISATION TION TION TION TION     AND AND AND AND AND     THE THE THE THE THE I I I I INDIAN NDIAN NDIAN NDIAN NDIAN E E E E ECONOMY CONOMY CONOMY CONOMY CONOMY 55 55 55 55 55
GLOBALISA GLOBALISA
GLOBALISA GLOBALISA GLOBALISATION TION
TION TION TION
AND THE INDIAN ECONOMY AND THE INDIAN ECONOMY AND THE INDIAN ECONOMY AND THE INDIAN ECONOMY AND THE INDIAN ECONOMY
CHAPTER 4
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. 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. 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!
How do we understand these
rapid transformations? What are the
factors that are bringing about these
changes? And, how are these changes
affecting the lives of the people?
We shall dwell on these questions in
this chapter.
2015-2016
Page 3


NOTES FOR THE TEACHER
Most regions of the world are getting increasingly
interconnected. While this interconnectedness
across countries has many dimensions —
cultural, political, social and economic — this
chapter looks at globalisation in a more limited
sense. It defines globalisation as the integration
between countries through foreign trade and
foreign investments by multinational
corporations (MNCs). As you will notice, the more
complex issues of portfolio investment have been
left out.
If we look at the past thirty years or so, we
find that MNCs have been a major force in the
globalisation process connecting distant regions
of the world. Why are the MNCs spreading their
production to other countries and what are the
ways in which they are doing so? The first part
of the chapter discusses this. Rather than
relying on quantitative estimates, the rapid rise
and influence of the MNCs has been shown
through a variety of examples, mainly drawn
from the Indian context. Note that the examples
are an aid to explain a more general point. While
teaching, the emphasis should be on the ideas
and examples are to be used as illustrations.
You can also creatively use comprehension
passages like the one given after Section II to
test and reinforce new concepts.
Integration of production and integration of
markets is a key idea behind understanding the
process of globalisation and its impact. This has
been dealt with at length in this chapter,
highlighting the role of MNCs in the process.  You
have to ensure that the students grasp this idea
with sufficient clarity, before moving on to the
next topic.
Globalisation has been facilitated by several
factors. Three of these have been highlighted:
rapid improvements in technology, liberalisation
of trade and investment policies and, pressures
from international organisations such as the
WTO. Improvement in technology is a fascinating
area for students and you may, with a few
directions, encourage them to do their own
explorations. While discussing liberalisation, you
have to keep in mind that the students are
unaware of what India was like in the
pre-liberalisation era. A role-play could be
conceived to compare and contrast the pre and
post-liberalisation era. Similarly, international
negotiations under WTO and the uneven
balances in power are interesting subjects that
can be covered in a discussion mode rather than
as lectures.
The final section covers the impact of
globalisation. To what extent has globalisation
contributed to the development process? This
section draws on the topics covered in Chapters
1 and 2 (for example, what is a fair development
goal), which you can refer to. Also, examples and
activities drawn from the local environment are
a must while discussing this section. This might
include contexts that have not been covered in
the chapter, such as the impact of imports on
local farmers, etc. Collective brainstorming
sessions can be conducted to analyse such
situations.
Sources for Information
The call for a fairer globalisation has been given,
among others, by the International Labour
Organisation — www.ilo.org. Another interesting
resource is the WTO website http://www.wto.org.
It gives access to the variety of agreements that
are being negotiated at the WTO.  For company
related information, most MNCs have their own
websites.  If you want to critically look at
the MNCs, one recommended website is
www.corporatewatch.org.uk.
CHAPTER 4 : GLOBALISATION AND THE INDIAN ECONOMY
54 54 54 54 54 U U U U UNDERST NDERST NDERST NDERST NDERSTANDING ANDING ANDING ANDING ANDING E E E E ECONOMIC CONOMIC CONOMIC CONOMIC CONOMIC D D D D DEVEL EVEL EVEL EVEL EVELOPMENT OPMENT OPMENT OPMENT OPMENT
2015-2016
G G G G GL L L L LOBALISA OBALISA OBALISA OBALISA OBALISATION TION TION TION TION     AND AND AND AND AND     THE THE THE THE THE I I I I INDIAN NDIAN NDIAN NDIAN NDIAN E E E E ECONOMY CONOMY CONOMY CONOMY CONOMY 55 55 55 55 55
GLOBALISA GLOBALISA
GLOBALISA GLOBALISA GLOBALISATION TION
TION TION TION
AND THE INDIAN ECONOMY AND THE INDIAN ECONOMY AND THE INDIAN ECONOMY AND THE INDIAN ECONOMY AND THE INDIAN ECONOMY
CHAPTER 4
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. 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. 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!
How do we understand these
rapid transformations? What are the
factors that are bringing about these
changes? And, how are these changes
affecting the lives of the people?
We shall dwell on these questions in
this chapter.
2015-2016
56 56 56 56 56 U U U U UNDERST NDERST NDERST NDERST NDERSTANDING ANDING ANDING ANDING ANDING E E E E ECONOMIC CONOMIC CONOMIC CONOMIC CONOMIC D D D D DEVEL EVEL EVEL EVEL EVELOPMENT OPMENT OPMENT OPMENT OPMENT
Until the middle of the twentieth
century, production was largely
organised within countries.  What
crossed the boundaries of these
countries were raw materials, food
stuff and finished products. Colonies
such as India exported raw materials
and food stuff and imported finished
goods. Trade was the main channel
connecting distant countries. This was
before large companies called
Spreading  of Production Spreading  of Production Spreading  of Production Spreading  of Production Spreading  of Production
by an MNC by an MNC by an MNC by an MNC by an MNC
A large MNC, producing industrial equipment, designs its
products in research centres in the United States, and then
has the components manufactured in China. These are then
shipped to Mexico and Eastern Europe where the products
are assembled and the finished products are sold all over the
world. Meanwhile, the company’s customer care is carried out
through call centres located in India.
PRODUCTION ACROSS COUNTRIES
multinational corporations (MNCs)
emerged on the scene. A 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.
This is done so that the cost of
production is low and the MNCs can
earn greater profits. Consider the
following example.
This is a call centre in Bangalore, equipped with telecom facilities and access to
Internet to provide information and support to customers abroad.
2015-2016
Page 4


NOTES FOR THE TEACHER
Most regions of the world are getting increasingly
interconnected. While this interconnectedness
across countries has many dimensions —
cultural, political, social and economic — this
chapter looks at globalisation in a more limited
sense. It defines globalisation as the integration
between countries through foreign trade and
foreign investments by multinational
corporations (MNCs). As you will notice, the more
complex issues of portfolio investment have been
left out.
If we look at the past thirty years or so, we
find that MNCs have been a major force in the
globalisation process connecting distant regions
of the world. Why are the MNCs spreading their
production to other countries and what are the
ways in which they are doing so? The first part
of the chapter discusses this. Rather than
relying on quantitative estimates, the rapid rise
and influence of the MNCs has been shown
through a variety of examples, mainly drawn
from the Indian context. Note that the examples
are an aid to explain a more general point. While
teaching, the emphasis should be on the ideas
and examples are to be used as illustrations.
You can also creatively use comprehension
passages like the one given after Section II to
test and reinforce new concepts.
Integration of production and integration of
markets is a key idea behind understanding the
process of globalisation and its impact. This has
been dealt with at length in this chapter,
highlighting the role of MNCs in the process.  You
have to ensure that the students grasp this idea
with sufficient clarity, before moving on to the
next topic.
Globalisation has been facilitated by several
factors. Three of these have been highlighted:
rapid improvements in technology, liberalisation
of trade and investment policies and, pressures
from international organisations such as the
WTO. Improvement in technology is a fascinating
area for students and you may, with a few
directions, encourage them to do their own
explorations. While discussing liberalisation, you
have to keep in mind that the students are
unaware of what India was like in the
pre-liberalisation era. A role-play could be
conceived to compare and contrast the pre and
post-liberalisation era. Similarly, international
negotiations under WTO and the uneven
balances in power are interesting subjects that
can be covered in a discussion mode rather than
as lectures.
The final section covers the impact of
globalisation. To what extent has globalisation
contributed to the development process? This
section draws on the topics covered in Chapters
1 and 2 (for example, what is a fair development
goal), which you can refer to. Also, examples and
activities drawn from the local environment are
a must while discussing this section. This might
include contexts that have not been covered in
the chapter, such as the impact of imports on
local farmers, etc. Collective brainstorming
sessions can be conducted to analyse such
situations.
Sources for Information
The call for a fairer globalisation has been given,
among others, by the International Labour
Organisation — www.ilo.org. Another interesting
resource is the WTO website http://www.wto.org.
It gives access to the variety of agreements that
are being negotiated at the WTO.  For company
related information, most MNCs have their own
websites.  If you want to critically look at
the MNCs, one recommended website is
www.corporatewatch.org.uk.
CHAPTER 4 : GLOBALISATION AND THE INDIAN ECONOMY
54 54 54 54 54 U U U U UNDERST NDERST NDERST NDERST NDERSTANDING ANDING ANDING ANDING ANDING E E E E ECONOMIC CONOMIC CONOMIC CONOMIC CONOMIC D D D D DEVEL EVEL EVEL EVEL EVELOPMENT OPMENT OPMENT OPMENT OPMENT
2015-2016
G G G G GL L L L LOBALISA OBALISA OBALISA OBALISA OBALISATION TION TION TION TION     AND AND AND AND AND     THE THE THE THE THE I I I I INDIAN NDIAN NDIAN NDIAN NDIAN E E E E ECONOMY CONOMY CONOMY CONOMY CONOMY 55 55 55 55 55
GLOBALISA GLOBALISA
GLOBALISA GLOBALISA GLOBALISATION TION
TION TION TION
AND THE INDIAN ECONOMY AND THE INDIAN ECONOMY AND THE INDIAN ECONOMY AND THE INDIAN ECONOMY AND THE INDIAN ECONOMY
CHAPTER 4
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. 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. 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!
How do we understand these
rapid transformations? What are the
factors that are bringing about these
changes? And, how are these changes
affecting the lives of the people?
We shall dwell on these questions in
this chapter.
2015-2016
56 56 56 56 56 U U U U UNDERST NDERST NDERST NDERST NDERSTANDING ANDING ANDING ANDING ANDING E E E E ECONOMIC CONOMIC CONOMIC CONOMIC CONOMIC D D D D DEVEL EVEL EVEL EVEL EVELOPMENT OPMENT OPMENT OPMENT OPMENT
Until the middle of the twentieth
century, production was largely
organised within countries.  What
crossed the boundaries of these
countries were raw materials, food
stuff and finished products. Colonies
such as India exported raw materials
and food stuff and imported finished
goods. Trade was the main channel
connecting distant countries. This was
before large companies called
Spreading  of Production Spreading  of Production Spreading  of Production Spreading  of Production Spreading  of Production
by an MNC by an MNC by an MNC by an MNC by an MNC
A large MNC, producing industrial equipment, designs its
products in research centres in the United States, and then
has the components manufactured in China. These are then
shipped to Mexico and Eastern Europe where the products
are assembled and the finished products are sold all over the
world. Meanwhile, the company’s customer care is carried out
through call centres located in India.
PRODUCTION ACROSS COUNTRIES
multinational corporations (MNCs)
emerged on the scene. A 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.
This is done so that the cost of
production is low and the MNCs can
earn greater profits. Consider the
following example.
This is a call centre in Bangalore, equipped with telecom facilities and access to
Internet to provide information and support to customers abroad.
2015-2016
G G G G GL L L L LOBALISA OBALISA OBALISA OBALISA OBALISATION TION TION TION TION     AND AND AND AND AND     THE THE THE THE THE I I I I INDIAN NDIAN NDIAN NDIAN NDIAN E E E E ECONOMY CONOMY CONOMY CONOMY CONOMY 57 57 57 57 57
Complete the following statement to show how the production process in the garment
industry is spread across countries.
The brand tag says ‘Made in Thailand’ but they are not Thai products. We dissect
the manufacturing process and look for the best solution at each step. We are
doing it globally. In making garments, the company may, for example, get cotton
fibre from Korea, ........
LET’S WORK THIS OUT
In this example the MNC is not only
selling its finished products globally,
but more important, the goods and
services are produced globally. As
a result, production is organised in
increasingly complex ways.  The
production process is divided into
small parts and spread out across the
globe. In the above example, China
provides the advantage of being a
cheap manufacturing location.
Mexico and Eastern Europe are useful
for their closeness to the markets
in the US and Europe. India has
highly skilled engineers who can
understand the technical aspects of
production. It also has educated
English speaking youth who can
provide customer care services. And
all this probably can mean 50-60 per
cent cost-savings for the MNC!
The advantage of spreading out
production across the borders to the
multinationals can be truly immense.
INTERLINKING PRODUCTION ACROSS
COUNTRIES
At times, MNCs set up production
jointly with some of the local
companies of these countries. The
benefit to the local company of such
joint production is two-fold. First,
MNCs can provide money for
additional investments, like buying
new machines for faster production.
Second, MNCs might bring with them
the latest technology for production.
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 factors of
production is assured. In addition,
MNCs might look for government
policies that look after their interests.
You will read more about the policies
later in the chapter.
Having assured themselves of these
conditions, MNCs set up factories and
offices for production. The money that
is spent to buy assets such as land,
building, machines and other
equipment is called investment.
Investment made by MNCs is called
foreign investment. Any investment
is made with the hope that these
assets will earn profits.
WE WILL SHIFT
THIS FACTORY TO
ANOTHER COUNTRY.
IT HAS BECOME
EXPENSIVE HERE!
2015-2016
Page 5


NOTES FOR THE TEACHER
Most regions of the world are getting increasingly
interconnected. While this interconnectedness
across countries has many dimensions —
cultural, political, social and economic — this
chapter looks at globalisation in a more limited
sense. It defines globalisation as the integration
between countries through foreign trade and
foreign investments by multinational
corporations (MNCs). As you will notice, the more
complex issues of portfolio investment have been
left out.
If we look at the past thirty years or so, we
find that MNCs have been a major force in the
globalisation process connecting distant regions
of the world. Why are the MNCs spreading their
production to other countries and what are the
ways in which they are doing so? The first part
of the chapter discusses this. Rather than
relying on quantitative estimates, the rapid rise
and influence of the MNCs has been shown
through a variety of examples, mainly drawn
from the Indian context. Note that the examples
are an aid to explain a more general point. While
teaching, the emphasis should be on the ideas
and examples are to be used as illustrations.
You can also creatively use comprehension
passages like the one given after Section II to
test and reinforce new concepts.
Integration of production and integration of
markets is a key idea behind understanding the
process of globalisation and its impact. This has
been dealt with at length in this chapter,
highlighting the role of MNCs in the process.  You
have to ensure that the students grasp this idea
with sufficient clarity, before moving on to the
next topic.
Globalisation has been facilitated by several
factors. Three of these have been highlighted:
rapid improvements in technology, liberalisation
of trade and investment policies and, pressures
from international organisations such as the
WTO. Improvement in technology is a fascinating
area for students and you may, with a few
directions, encourage them to do their own
explorations. While discussing liberalisation, you
have to keep in mind that the students are
unaware of what India was like in the
pre-liberalisation era. A role-play could be
conceived to compare and contrast the pre and
post-liberalisation era. Similarly, international
negotiations under WTO and the uneven
balances in power are interesting subjects that
can be covered in a discussion mode rather than
as lectures.
The final section covers the impact of
globalisation. To what extent has globalisation
contributed to the development process? This
section draws on the topics covered in Chapters
1 and 2 (for example, what is a fair development
goal), which you can refer to. Also, examples and
activities drawn from the local environment are
a must while discussing this section. This might
include contexts that have not been covered in
the chapter, such as the impact of imports on
local farmers, etc. Collective brainstorming
sessions can be conducted to analyse such
situations.
Sources for Information
The call for a fairer globalisation has been given,
among others, by the International Labour
Organisation — www.ilo.org. Another interesting
resource is the WTO website http://www.wto.org.
It gives access to the variety of agreements that
are being negotiated at the WTO.  For company
related information, most MNCs have their own
websites.  If you want to critically look at
the MNCs, one recommended website is
www.corporatewatch.org.uk.
CHAPTER 4 : GLOBALISATION AND THE INDIAN ECONOMY
54 54 54 54 54 U U U U UNDERST NDERST NDERST NDERST NDERSTANDING ANDING ANDING ANDING ANDING E E E E ECONOMIC CONOMIC CONOMIC CONOMIC CONOMIC D D D D DEVEL EVEL EVEL EVEL EVELOPMENT OPMENT OPMENT OPMENT OPMENT
2015-2016
G G G G GL L L L LOBALISA OBALISA OBALISA OBALISA OBALISATION TION TION TION TION     AND AND AND AND AND     THE THE THE THE THE I I I I INDIAN NDIAN NDIAN NDIAN NDIAN E E E E ECONOMY CONOMY CONOMY CONOMY CONOMY 55 55 55 55 55
GLOBALISA GLOBALISA
GLOBALISA GLOBALISA GLOBALISATION TION
TION TION TION
AND THE INDIAN ECONOMY AND THE INDIAN ECONOMY AND THE INDIAN ECONOMY AND THE INDIAN ECONOMY AND THE INDIAN ECONOMY
CHAPTER 4
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. 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. 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!
How do we understand these
rapid transformations? What are the
factors that are bringing about these
changes? And, how are these changes
affecting the lives of the people?
We shall dwell on these questions in
this chapter.
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Until the middle of the twentieth
century, production was largely
organised within countries.  What
crossed the boundaries of these
countries were raw materials, food
stuff and finished products. Colonies
such as India exported raw materials
and food stuff and imported finished
goods. Trade was the main channel
connecting distant countries. This was
before large companies called
Spreading  of Production Spreading  of Production Spreading  of Production Spreading  of Production Spreading  of Production
by an MNC by an MNC by an MNC by an MNC by an MNC
A large MNC, producing industrial equipment, designs its
products in research centres in the United States, and then
has the components manufactured in China. These are then
shipped to Mexico and Eastern Europe where the products
are assembled and the finished products are sold all over the
world. Meanwhile, the company’s customer care is carried out
through call centres located in India.
PRODUCTION ACROSS COUNTRIES
multinational corporations (MNCs)
emerged on the scene. A 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.
This is done so that the cost of
production is low and the MNCs can
earn greater profits. Consider the
following example.
This is a call centre in Bangalore, equipped with telecom facilities and access to
Internet to provide information and support to customers abroad.
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Complete the following statement to show how the production process in the garment
industry is spread across countries.
The brand tag says ‘Made in Thailand’ but they are not Thai products. We dissect
the manufacturing process and look for the best solution at each step. We are
doing it globally. In making garments, the company may, for example, get cotton
fibre from Korea, ........
LET’S WORK THIS OUT
In this example the MNC is not only
selling its finished products globally,
but more important, the goods and
services are produced globally. As
a result, production is organised in
increasingly complex ways.  The
production process is divided into
small parts and spread out across the
globe. In the above example, China
provides the advantage of being a
cheap manufacturing location.
Mexico and Eastern Europe are useful
for their closeness to the markets
in the US and Europe. India has
highly skilled engineers who can
understand the technical aspects of
production. It also has educated
English speaking youth who can
provide customer care services. And
all this probably can mean 50-60 per
cent cost-savings for the MNC!
The advantage of spreading out
production across the borders to the
multinationals can be truly immense.
INTERLINKING PRODUCTION ACROSS
COUNTRIES
At times, MNCs set up production
jointly with some of the local
companies of these countries. The
benefit to the local company of such
joint production is two-fold. First,
MNCs can provide money for
additional investments, like buying
new machines for faster production.
Second, MNCs might bring with them
the latest technology for production.
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 factors of
production is assured. In addition,
MNCs might look for government
policies that look after their interests.
You will read more about the policies
later in the chapter.
Having assured themselves of these
conditions, MNCs set up factories and
offices for production. The money that
is spent to buy assets such as land,
building, machines and other
equipment is called investment.
Investment made by MNCs is called
foreign investment. Any investment
is made with the hope that these
assets will earn profits.
WE WILL SHIFT
THIS FACTORY TO
ANOTHER COUNTRY.
IT HAS BECOME
EXPENSIVE HERE!
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But the most common route for
MNC investments is to buy up local
companies and then to expand
production. MNCs with huge wealth
can quite easily do so. To take an
example, Cargill Foods, a very large
American MNC, has bought over
smaller Indian companies such as
Parakh Foods. Parakh Foods had
built a large marketing network in
various parts of India, where its brand
was well-reputed. Also, Parakh Foods
had four oil refineries, whose control
has now shifted to Cargill. Cargill is
now the largest producer of edible oil
in India, with a capacity to make 5
million pouches daily!
In fact, many of the top MNCs
have wealth exceeding the entire
budgets of the developing country
governments. With such enormous
wealth, imagine the power and
influence of these MNCs!
There’s another way in which
MNCs control production. Large
MNCs in developed countries place
orders for production with small
producers. Garments, footwear,
sports items are examples of
industries where production is
carried out by a large number of
small producers around the world.
The products are supplied to the
MNCs, which then sell these under
their own brand names to the
customers. These large MNCs have
tremendous power to determine price,
quality, delivery, and labour
conditions for these distant
producers.
Thus, we see that there are a
variety of ways in which the MNCs are
spreading their production and
interacting with local producers in
various countries across the globe. 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, MNCs are exerting
a strong influence on production
at these distant locations. As a
result, production in these widely
dispersed locations is getting
interlinked.
Women at home in Ludhiana making footballs for large MNCs
Jeans produced in developing countries being
sold in USA for Rs 6500 ($145)
2015-2016
Read More
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