Notes: Globalisation and the Indian Economy
1. Globalisation — Meaning
- Globalisation is the process of rapid integration and interconnection among countries.
- It mainly takes place through foreign trade, foreign investment, technology and the activities of MNCs.
2. Multinational Corporations (MNCs)
- An MNC is a company that owns or controls production in more than one country.
- MNCs choose locations where they can obtain cheap labour, resources, skilled workers, good infrastructure and access to markets.
- They may:
- establish their own factories,
- partner with local companies,
- purchase local companies,
- place orders with small producers.
- This creates interlinking of production across countries.
3. Foreign Investment
- Money spent by an MNC on assets such as land, buildings, machinery and equipment in another country is called foreign investment.
- MNCs generally invest where they expect profitable returns.
4. Foreign Trade and Market Integration
- Foreign trade allows producers to reach markets outside their own country.
- Consumers get more variety and competitive prices.
- Competition between producers of different countries increases.
- Therefore, foreign trade connects and integrates markets across countries.
5. Factors Enabling Globalisation
- Technological development: Faster transport, containers, telecommunications, computers and the Internet have reduced the time and cost of communication and transportation.
- Liberalisation: Removal or reduction of government restrictions on foreign trade and investment.
- International organisations: The WTO promotes international trade and establishes rules for trade among member countries.
6. Liberalisation in India
- After Independence, India used trade barriers to protect developing domestic industries from foreign competition.
- From 1991, India began reducing many restrictions on foreign trade and investment.
- Liberalisation made it easier for foreign companies to establish production and for goods to move across borders.
7. Impact of Globalisation on India
Positive effects
- Consumers gained greater choice, improved quality and competitive prices.
- MNC investment created opportunities in industries such as automobiles, electronics, banking and services.
- Indian companies improved technology and production methods.
- Some Indian companies became MNCs themselves.
- IT-enabled services such as data entry, accounting, engineering and call-centre services expanded.
Unequal effects
- Benefits have not reached everyone equally.
- Small producers face strong competition from imported goods and large MNCs.
- Some small industries have reduced production or closed down.
- Workers may face temporary employment, lower wages and reduced job security because companies try to lower production costs.
8. Special Economic Zones (SEZs)
- SEZs are industrial zones created to attract investment.
- They provide facilities such as electricity, water, roads, transport and storage.
- Companies operating in SEZs receive certain tax benefits and other policy support.
9. WTO and Fair Trade
- The WTO aims to promote and regulate international trade through common rules.
- A major concern is that developed countries may continue supporting their producers while developing countries face pressure to reduce trade barriers.
- This raises the issue of whether international trade is truly fair and equal.
10. Fair Globalisation
- Fair globalisation should create opportunities for all and distribute its benefits more equally.
- The government can help by:
- protecting workers’ rights,
- supporting small producers,
- ensuring proper implementation of labour laws,
- negotiating for fairer WTO rules,
- protecting legitimate national interests.
One-line revision
Globalisation = MNCs + foreign trade + foreign investment + technology + liberalisation → greater integration, but unequal benefits.