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Globalization and the Indian Economy

Tutormate > CBSE Syllabus-Class 10th Economics > Globalization and the Indian Economy

03 Globalization and the Indian Economy

Production across Countries


  • Trade was the main channel connecting distant countries before large companies called multinational corporations (MNCs) emerged.
  • Cost of production is low and the MNCs can earn greater profits.
  • Production is organised in increasingly complex ways and the production process is divided into small parts and spread out across the globe.

Interlinking Production across Countries


  • There are a variety of ways in which the MNCs spread their production and interact with local producers in various countries across the globe:
    • They set up partnerships with local companies, by using the local companies for supplies.
    • They closely compete with the local companies or buy them up.
    • MNCs exert a strong influence on production at distant locations resulting in production in these widely dispersed locations getting interlinked.

Foreign Trade and Integration of Markets


  • With the opening of trade, goods travel from one market to another and choice of goods in the markets rises.
  • Producers can sell their produce not only in markets located within the country but can also compete in markets located in other countries of the world.
  • Similarly, import of goods produced in another country is one way of expanding the choice of goods for buyers beyond what is domestically produced.

What is Globalisation?


  • The process of rapid integration or interconnection between countries is called globalisation.
  • MNCs play a major role in the globalisation process as more goods and services, investments and technology move between countries.

Factors that have enabled Globalisation


  • The globalisation process has majorly been stimulated by rapid improvement in technology.


Liberalisation of foreign trade and foreign investment policy

  • Governments can use trade barriers to regulate foreign trade and to decide the kind of goods and quantity that would come into the country.
  • Liberalisation is removing barriers or restrictions set by the government, so that businesses are allowed to make decisions freely about what they wish to import or export.

World Trade Organisation

  • World Trade Organisation (WTO) is an organisation whose aim is to liberalise international trade.
  • Nearly 165 Countries of the world are currently members of the WTO as on July 2016.

Impact of Globalisation in India

  • The benefit is particularly to the well-off sections in the urban areas that have greater choice and enjoy improved quality and lower prices for several products.
  • The impact of globalisation has not been uniform among producers and workers.

Steps to Attract Foreign Investment

  • The central and state governments in India are recently taking special steps to attract foreign companies to invest in India by setting up industrial zones, called Special Economic Zones (SEZs).
  • Government has also allowed flexibility in the labour laws to attract foreign investment by the following:
  • Foreign companies are still not satisfied and demand more flexibility in labour laws.

Small producers: Compete or perish

  • Industries like those of batteries, capacitors, plastics, toys, tyres, dairy products, and vegetable oil are some examples where the small manufacturers have been hit hard due to competition.

Competition and Uncertain Employment

  • The lives of workers have been substantially changed globalisation and the pressure of competition leading to most employers preferring to employ workers ‘flexibly’.

The Struggle for a Fair Globalisation

  • Fair globalisation would create opportunities for everyone, and also ensure that the benefits of globalisation are shared better.
  • The government can play a major role by making policies to protect the interests of all the people in the country:
    • By ensuring that labour laws are properly implemented and the workers get their rights, it can support small producers to improve their performance till they become strong enough to compete.
    • The government can use trade and investment barriers, wherever necessary and negotiate at the WTO for ‘fairer rules’.
    • Further, it can align with other developing countries with similar interests to fight against the domination of developed countries in the WTO.
    • Massive campaigns and representation by people’s organisations have influenced important decisions relating to trade and investments at the WTO in the past few years have demonstrated the same.

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