ECONOMICS (CLASS X)

CHAPTER. 4 – GLOBALISATION AND INDIAN ECONOMY – IMP. POINTS.

NOTE: (STUDENTS ARE ADVISED TO READ THE TEXT BOOK THOROUGHLY BASED ON THESE POINTS)

INTRODUCTION

• Integrating the economies and markets of the world by sharing

the fruits of development is termed as globalization.
• Globalization was enabled due to the policy of liberalization and
privatization.
• Liberalization is an economic situation where the control and
restrictions on production, trade, export and import are loosened
and gradually removed.
• Allowing and encouraging private individuals & companies to
organize production of goods and services which are earlier
handled by public sector is known as the policy of privatization.
• The markets of the world have been transformed due to the
process of globalization.
• Products which are manufactured in different countries of the
world are available in a single shop of our surroundings. Even
the services of the international companies and institutions are
also available in our nearest town.
• Due to the development in transportation and communication,
the world has been shrunken in to a global village.
• In this chapter, we are going to learn how this transformation
took place and which factors enabled this change and how do it
affect the world.
 4.1 Production across countries.
• Till mid 20th century, production was organized within the
country. Only raw materials, food stuff, finished goods crossed
boundaries.
• Trade was the main channel connecting nations before the
emergence of MNCs.
• Multy National Companies are the companies that own and
operate production activities in more than one country or across
the world.
• Establishment and operation of a multi-national company
depends on the following factors.
a) Availability of cheap labour b) Availability of raw materials
c) Nearness of market d) Smooth supply of power.
e) Favourable govt. policies.

• MNCs not only sell products globally but make products

globally.
• Production is organized globally in a complex manner.
• Production is not in a single factory or a place but its divided in
to small units and distributed to different countries depends on
the favorable circumstances.
• For instance, China is a manufacturing location due to the
availability of cheap labour.
•

• Mexico and eastern Europe are useful for their closeness to the
markets in the US and Europe.
India has highly skilled engineers and educated English
speaking youth.
• This global arrangement helps MNCs to save 50-60% cost

4.2 Interlinking Production across countries.

• Generally, MNCs setup production where its close to market,
where there is skilled, unskilled and cheap labour is available,
where other factors of production are assures, where favorable
govt. policies exist.
• The money that is spent to buy assets such as land, building,
machines and other equipment is called investment.
• Investment made by the MNCs is called foreign investment.

• MNCs organize and control the production activities by

adopting many other methods that are given here under.
a) MNCs setup units in those countries where labour is available
at cheaper rate and has large markets to sell their products.
b) MNCs setup production jointly with some of the local
companies of the countries by providing additional
investment, buying new machines and even providing latest
technology.
 c) Sometimes, MNCs buy up local companies and then expand
the production. Ex: The Cargill Foods,a very large American
company has bought over Indian companies such as Parakh
Foods.
d) large MNCs place orders for production with small producers
and sell them under own brand names. Ex: Garments,
footwear ,sports items etc.
e) MNCs adopt accurate and systematic programmers to
determine quality, delivery, price and labour conditions.

f) 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 the distant locations.

4.3 Foreign trade and integration of markets.

• For a long time foreign trade was the main channel that connects
countries.
• India had trade relations with many countries especially South
Asian countries.
• Arrival of British East India Company to India was also for trade
purpose.

• Foreign trade creates an opportunity for the producers to reach

beyond the domestic markets.
•
• Foreign trade enables trade in the vast markets all over the
world.
• Foreign trade gives more choices and quality products to the
consumers with less price .
• Through foreign trade, products travel market to market which
creates competition among producers that ultimately improves
the quality of products and makes equal price.
Foreign trade results in connecting the markets or integration of
markets in different countries.

4.4 What is Globalization?

• Globalization is a process of rapid integration or inter

connection of foreign trade and investment between countries.
• Due to the establishments of MNCs all over the world, the
foreign trade has increased tremendously.
• Due to this, more and more goods, service, investments and
technology are moving between countries.
• Globalization also has increased the movement of people across
the world in search of better job, income and education.
• The developments in information and communication
technology is an another significant feature of globalization.
• Computers, mobile phones, internet, fax etc have strengthened
the interlink among the countries with the help of satellite
communication.
• Computers and internet have revolutionized the
interconnectedness of the world.
 Information can be obtained within no time about each and
everything by internet. It also allows us to sent e-mails, voice
mails and other data’s.

4.5 Liberalization of Foreign Trade and foreign

investment policy Trade barriers: Tax on import
is an example of trade barrier.

• Tax imposed on imported items increases the price of that

commodity that eventually diminish the demand so the
import. Tax as well as other trade barriers was used to
restrict the import and to protect the domestic production.

• During 1950s and 60s, industries were growing in India

that needs to be protected.
• After independence, Indian govt. had introduced a lot of
barriers to foreign trade and investment to save the
indigenous products from the international competition.
Liberalization: Removing all barriers and restrictions set by the
govt. on trade and foreign investment is known as liberalization.

It was in 1991, Indian govt. decided to be the part of

globalization and liberalization due to the following reasons.
a) When the world joins with global trade, India cannot stay
aloof.
 b) It was considered that the global competition would
improve the quality of indigenous products.
c) Powerful support from the international organizations.
d) The expectation that the foreign investment would boost the
national economy with income and employment.
e) Expecting lower price, choice of products and consequently
better standard of living.
Due to the liberalization policy, barriers on trade and foreign
investment were removed and goods could be imported and
exported without restrictions.

4.6 World Trade Organization .

• World organizations have the opinion that the trade restrictions
are harmful.
According to them, the trade between countries should be free
and every country should liberalise its policies.
• WTO aims liberalization of international trade.
• WTO establishes rules regarding international trade and
observe how they are practiced.
• In 2006, there were 149 members in WTO. At present there are
164 members in WTO.
• Its observed that, the developed countries have unfairly
retained trade restriction while developing countries have
completely got rid of it.
4.7 Impacts of globalization in India.
 a) Great choice of products to the consumers with better
quality.
b) Lower price of products.
c) High standard of living due to the consumption of variety of
products.
d) More employment opportunities due to the establishment of
more and more factories.
e) Improvements of local companies who supply raw
materials.
f) Top Indian companies have been benefited from the
increased competition, newer technology and methods.
g) Globalization has enabled some large Indian companies to
emerge as multi-national companies. Ex. Tata motors,
Infosys, Asian Paints. Etc.
4.8 Fair Globalization
* A concept of globalization that would create opportunities
for all and also ensure that the benefits of globalization are
shared better is called fair globalization. * To ensure fair
globalization, the govt. must take the following steps.
a) Govt. policies must protect the interest of both rich and poor so
the
workers get their rights.
b) It
can support the small farmers by putting some restrictions or
barriers.
c) It can negotiate with WTO for fairer rule.
d) It can align with other developing countries with similar interest to
fight against the domination of developed countries in USA.

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