Globalisation and the Indian Economy
1. What is Globalisation?
- Globalisation is the process of integration and interaction among countries through increased movement of goods, services, investments, technology, and people.
- It makes the world more interconnected and interdependent.
Transformed:- What ever latest version of technology introduce with time known as transformed
Production Across Countries
1. Earlier Times:- In the past, production was mainly done within one country.
2. Now: A Global Approach to Production
- Today, companies produce goods across many countries.
- Example: A mobile phone may be designed in the USA, assembled in China, with parts from Korea, Japan, and India.
- This process is called global production or global value chains.
- MNCs (Multinational Corporations): Companies that set up offices/factories in more than one country to reduce costs and increase profit.
3. Why Do Companies Produce Across Countries?
- To reduce production costs.
- To access cheap labor, raw materials, or favorable markets.
- To increase profits by using resources from multiple countries.
Interlinking Production Across Countries:- Interlinking of production means that the production process of a single good or service is spread across different countries.
How Is Production Interlinked?
- Multinational Corporations (MNCs) play a big role.
- MNCs set up factories, offices, or partnerships in various countries.
- They divide the production process and carry it out in different places.
- This helps them reduce costs and maximize profit.
Foreign Investment:- MNC 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 made by foreign investment.
Two-fold or join production:- MNC set up production jointly with some of the local companies of these countries. MNCs also partner with or buy local companies in other countries.
How Do They Maintain Control?Ways MNCs Control Production:
- By deciding what to produce, how to produce, for whom to produce, and at what price.
- They control branding, technology, raw materials, and distribution.
- Even if parts of the work are done by others, MNCs keep control over the final product.
- Setting Up Factories and Offices in Multiple Countries.
- Buying Local Companies.
- oint Ventures or Partnerships.
Foreign Trade and Integration of Markets
What is Foreign Trade?
- Foreign trade is the exchange of goods and services between countries. It includes:
- Imports – Buying goods from other countries.
- Exports – Selling goods to other countries.
How Do MNCs Help Globalisation?
Spread of Goods, Services, and Capital
- MNCs produce and sell goods across the world.
- They bring investment (money) to different countries.
- Example: A US-based car company sets up a factory in India.
Interlinking Production Across Countries
- MNCs divide production and do different tasks in different countries.
- This connects the economies of those countries.
- Example: Mobile parts from China, design from the USA, assembled in India.
Technology Transfer
- MNCs bring modern technology and advanced skills to developing countries.
- Local companies and workers learn new methods and techniques.
Creation of Jobs
- When MNCs open factories, offices, or partner with local businesses, they create jobs.
- Helps in economic development of host countries.
Connecting Global Markets
- MNCs sell products worldwide, making the same brand available in different countries.
- Example: You can find Coca-Cola, Nike, or Samsung in many parts of the world.
Encouraging Competition and Improving Quality
- Local companies compete with MNCs, which improves quality and reduces prices.
- Consumers get more choices.
. Factors that Have Enabled Globalisation:
- Technology: Improvements in transportation and communication. It also play crucial role in spreading out production of services across countries.
- Liberalisation:- Reduction in government restrictions on trade and investment.
- What is a Trade Barrier?:- A trade barrier is a restriction that a country puts on foreign trade (imports or exports). Its main purpose is to control or limit the flow of goods and services between countries.
- Why Are Trade Barriers Used?:- To protect local industries from foreign competition. To help new or small industries grow. To save jobs in the domestic economy.
- The Indian government changed its policy on trade in the year in 1991.
What Happened in 1991?:- It was time when India producers to compete with producers around the globe.
- India was facing a serious economic crisis.
- To improve the situation, the government introduced Liberalisation, Privatisation, and Globalisation (LPG) reforms.
- It started removing trade barriers to encourage foreign trade and investment.
WTO – World Trade Organization
What is WTO?
- The WTO (World Trade Organization) is an international organization.
- It was established in 1995.
- Its main aim is to promote free and fair trade among countries.
Objectives of WTO:
- Encourage free trade (i.e., trade without barriers like import taxes and quotas).
- Create rules for global trade that all member countries must follow.
- Solve trade disputes between countries.
- Help developing countries to improve their trade.
Impact of Globalisation on India
Positive Impacts of Globalisation in India:
- Economic Growth and Development
- Increased Foreign Investment
- More Job Opportunities
- Access to New Markets and Products
- Technological Advancements
Negative Impacts of Globalisation in India:
Unequal Benefits:- Globalisation has benefited big companies and urban areas more than small-scale producers and rural areas.
Farmers and small businesses in India struggle to compete with cheaper imports and large foreign companies.
Income inequality has increased, as the rich benefit more from globalisation.
Loss of Jobs in Some Sectors:- Traditional industries, such as handicrafts, small-scale manufacturing, and agriculture, have faced competition from cheaper imported goods.
This has led to job losses for many workers in these sectors.
Cultural Impact:- The spread of foreign culture (through films, food, and fashion) has affected traditional Indian culture.
There is concern that Indian values and local traditions may be overshadowed by global culture.
Environmental Concerns:-With the growth of industries and urbanization, there has been an increase in pollution and resource depletion.
More goods being produced means more waste and environmental degradation.
The Struggle for Fair Globalisation
What is Fair Globalisation? :- Fair globalisation means that the benefits of globalisation should be equally shared among all countries and people, especially the poor and disadvantaged.
The struggle for fair globalisation is about ensuring that global trade benefits everyone, especially the poor and disadvantaged.
- This involves efforts from governments, international organizations, NGOs, and MNCs to ensure:
- Better working conditions
- Fair wages
- Sustainable development
- Protection of local industries and farmers.
