Globalisation-10th

8/8/2019 Globalisation-10th

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Globalisation and the

Indian Economy



Before globalisationBefore globalisation

After globalisationAfter globalisation



What changed our choice?

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



MULTINATIONAL CORPORATIONSMULTINATIONAL CORPORATIONS

y A M.N.C. is a company that owns or

controls production in more than

one nation.

y MNCs set offices and factories for production in regions where they

can get cheap labour and other

resources.y This is done so that the cost of

production is low and the MNCs can

earn greater profits.



Locations for the set up of a MNC

yClose to the markets.

yWhere skilled and un skilled labour

is available at low costs.yWhere availability of other factors is

assured.

yMNCs may look for governmentpolicies that look after their interests.



Investment:

The money that is spent to buy assets such as

land, building, machines and other equipment.

Foreign investment Investment by MNCs is called foreign investment.



1. MNCs can provide money for

additional investments, likebuying new machines for fasterproduction.

2. MNCs might bring with them thelatest technology for production

3. They buy up local companies

and then to expand production.



Advantages of foreign trade.Advantages of foreign trade.

y Foreign trade creates an opportunity for theproducers to reach beyond the domesticmarkets.

y Producers can compete in markets locatedin other countries of the world.

y For the buyers, import of goods produced inanother country is one way of expanding thechoice of goods beyond what is domestically

produced.y Foreign trade thus results in connecting the

markets or integration of markets indifferent countries.



Globalisation

Globalisation is this process of rapid

integration or inter connections

between countries.

More and more goods and services

are ,investments and technology are

moving between countries.



Rapid improvement in technology hasstimulated the globalization process.

This has made much faster delivery of goods

across the globe at cheap rates. Telecommunication facilities are used to

contact one another around the world, to

access information instantly, and tocommunicate from remote areas.

Internet allows us to send instant electronicmail talk across the world at negligible costs.



Trade barrierTrade barrier

y Tax on imports is an example of trade

barrier.

y It is called a barrier because some

restriction had been set up.

y Governments can use trade barriers to

regulate foreign trade and to decide what

kinds of goods and how much of each,should come into the country.



Necessity and Advantages of trade

barriers.

yTo protect the producers within the

country from foreign competition.y All the developed countries, during the

early stages of development, have given

protection to domestic producersthrough a variety of means.



y India felt that competition would improve the

performance of producers within the country sincethey would have to improve their quality. Thisdecision was supported by powerful internationalorganisations.

y Thus, barriers on foreign trade foreign investment were removed to a large extent.

y Goods could be imported and exported easily and

also foreign countries could set up factories here.

Starting around 1991, some far reaching changes in

policy were made in India. The government decided that

the time had come for Indian producers to compete withproducers around the world.



Liberalisation

yRemoving barriers or restrictions set by thegovernment is what is known asliberalisation.

y With liberalisation of trade, businesses areallowed to make decisions freely about whatthey wish to export or import.

y The government imposes much lessrestrictions than before and is more liberal.



WORLD TRADEWORLD TRADE

ORGANISATIONSORGANISATIONS

y It is one of the international organisationthat supported the liberalisation of foreigntrade and investment.

y They say that all barriers are harmful.

y Trade between countries should be freeand all countries in the world shouldliberalise their policies.



WORLD TRADE ORGANISATION [WTO]

Its aim is to liberalise international trade.

Started at the initiative of the developedcountries, WTO establishes rulesregarding international trade, and seesthat these rules are obeyed .149 countriesof the world are currently members of WTO.



Though WTO is supposed to allow freetrade for all, in practice it is seen that thedeveloped countries have un fairly

retained trade barriers. WTO rules have forced the developing

countries to remove trade barriers.



Impact of globalisation in India.

Advantage to consumers particularly

the well off sections in the urban

areas.

Choice of selection of goods of

improved quality and lower prices.



Impact of globalisation has not

been uniform.1.MNCs have increased their investment in

India over past 15 years .

Investing in India is beneficial to them.The products they invest have a large number

of well of buyers.

New jobs have been created.Local companies supplying raw materials to

MNCs have prospered.



2. Several top Indian companies have been

benefited from the increased competition.

They have invested in newer technology and

production methods and raised their

production standards.

Some have gained from successful collaboration

with foreign companies.



3.Globalisation has also created new

opportunities for companies providing

services , particularly those involving IT.



Steps to attract foreign investment.

y I

ndustrial zones called Special Economic Zones(SEZ)are set up. These have all the world class facilities.

y Companies who set up production units in the SEZsdo not have to pay taxes for an initial period of 5 years.

y Government has allowed flexibility in the labour lawsto attract foreign investment.

y Instead of hiring workers on a regular basis, companieshire workers f lexibly for short periods when there is

intense pressure of work.

y This is done to reduce the cost of labour for thecompany.



Challenges of globalisation.y W hile globalisation has benefited well of consumers

and also producers with skill, education and wealth ,

many small producers have suffered as a result of therising competition.

y Fair globalisation would create opportunities for alland also ensures that the benefits of globalisation are

shared better.



Steps by the government to make a

fair globalisation.y It can ensure that labour laws are properly implementedand the workers get their rights.

y It can support small producers to improve their

performance till the time they become strong enough tocompete.

y If necessary, the government can use trade and investmentbarriers .

y It can negotiate at the W TO for fairer rules.

y It can also align with other developing countries withsimilar interests to fight against the domination of developed countries in the W TO.

Globalisation-10th

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