Globalization, Globalization and Indian economy, Factors

that make globalization possible, Free trade, MNCs, Foreign

trade and integration of markets, WTO, India and

globalization etc.

Class 10 Economics Chapter 4 Globalisation and the

Indian Economy Notes

📚 Chapter = 4 📚
💠 Globalisation and the Indian Economy💠

❇️Production across Countries :-

🔹 In the earlier time, globalization involved export of raw

materials from the colonial countries and import of finished

products from developed countries of Europe and USA. The

things began to changes from the middle of the 20th

century.

🔹 Some companies began their functioning in more than

one country and became MNCS (Multinational
Corporations). This spread the economic activities to

various parts of the world.

❇️Multinational Corporation ( MNC ) :-

🔹 MNC is an enterprise operating in several countries but
managed from one country or group that derives a quarter of

its revenue from operations outside of its home country.

❇️How MNC’s can spread and get control over

productions?

🔹 MNC’s can spread and control by :-

Setting up joint production units with local companies.

To buy up local companies and expanding its production

base.

Placing orders with small producers.

By using their Brand.

❇️Advantage of MNC’s Spreading Out :-

🔹 By spreading out production across different countries,

the MNCs get the best quality resources at cheap prices.

🔹 This increases their profit. By spreading the production,

the MNCs generate employment opportunities in

underdeveloped countries.

❇️Interlinking Production across Countries :-

🔹 MNCs link the production poorest of different countries
in the following ways :-

Investment

foreign investment

Joint ventures

To take over local companies

Contracts with local Companies

🔶 Investment :- The money that is spent to buy assets

such as land , building , machines and other equipment is

called investment.

🔶 foreign investment :- Foreign Investment is when a

company or individual from one nation invests in assets or
ownership stakes of a company based in another nation.

🔶 Joint ventures :- MNCS also join hands with the local

companies and provide additional investment to buy various

assets.

🔶 To take over local companies :- MNCS buy companies

or production units to expand production companies

Example :- Cargill foods of USA has taken over Parakh

foods in India.
🔶 Contracts with local Companies :- MNCS also place
orders around the world with a large number of small

producers under its brand name. It determines prices,

quality, delivery and labour conditions for different

producers.

❇️Foreign Trade :-

🔹 Foreign trade is basically trade between two different

countries of the world. It is also known as international

trade.

❇️Foreign Trade and Integration of Markets :-

🔹 Foreign trade helps in the integration (connection) of

markets in the following ways :-
 It facilitates movement of goods and services among
different countries.

It provides more choices to consumers.

Facilitate movement of people, ideas and technology.

Gives opportunity to producers to sell their products beyond

local/domestic markets.

Buyers get more choice of goods.

It increases competition among producers which in turn

enhances the quality of the products.

❇️Globalisation :-

🔹 Globalisation is a process of international integration

arising from the interchange of world views , products ideas

and other aspects of a culture.

❇️Factors to stimulated the globalization process :-

Improvement in Transportation

Development of Information Technology

Telecommunication

Computers

Internet

❇️Factors that have enabled globalization :-

🔶 Technology :- Rapid improvement in technology is one
of the major factors that has enhanced the globalization

process by resulting in much faster delivery of goods across

long distances at lower costs.

🔶 Information and Communication Technology :-

Information and communication technology has made the

world a very small place which has revolutionised the

spreading of production of goods and services all over the

world. Telecommunication facilities are used to contact one

another around the world.

❇️How Information technology is encouraging the

Globalisation?

🔹 With Improvement in transportation technique now It

become easier to send good at distance place at lower cost.

🔹 Sending and receiving information are now become

easier.

🔹 There is rapidly increase in trade with the help of

information and Technology.

❇️Privatization :-
🔹 Privatization is the transfer of a business , industry , or
service from public to private ownership and control.

❇️Foreign Investment Policy :-

🔹 The policy of foreign investment adopted by the

government also affects globalisation to a large extent.

🔹 It restricts or encourages foreign investment seeing the

situation in the country. Trade barrier is one such foreign

investment policy.

❇️Trade Barrier :-

🔹 It is a restriction on the free international exchange of

goods or services. Tax on imports (called import duty) is an

example of a trade barrier. It is called a barrier because some

restriction has been set-up.

❇️Why Trade barriers are used by the government :-

To increase, decrease or regulate foreign trade.

To decide what kinds of goods and how much of each,

should come into the country.

To protect the producers within the country from foreign

competition.
 ❇️Restrictions on Foreign Trade :-

🔹 After independence, the Government of India had put

barriers on foreign trade and foreign investment, to protect

the domestic producers from foreign competition, as the

industries were just coming up in 1950s and 1960s.

🔹 At that time, India allowed imports of only essential

items such as machinery, fertilisers, petroleum, etc.

❇️New Economic Policy, 1991 :-

🔹 Around 1991, it was felt that Indian producers must

compete with producers around the globe, so that they can
improve their production and quality of goods and services.

🔹 Therefore, Government of India in 1991 made some

major changes in its foreign investment policy.

🔹 Liberalisation was one such change. This decision was

supported by powerful international organisations like

World Trade Organisation (WTO).

❇️liberalisation policy was gradually adopted in India

:-
 After Independence, the Indian government put barrier on
foreign trade and foreign ‘investment.

Initially, Indian Industries were just coming up after

Independence, so competition from imports wouldn’t have
allowed these industries to come up.

In 1991, the government decided that the time has come for
Indian producers to compete the producers around the globe.

❇️Liberalisation :-

🔹 Liberalisation refers to the reduction or elimination of

government regulation or restrictions on private business
and trade.

❇️Effects of liberalisation on the Indian Economy :-

 Competition would improve the performance of producers
within the country.

Barriers on foreign trade and foreign investment were

removed to large extent.

This meant that goods could be imported and exported

easily.

Foreign companies could set up factories and offices to boost

up production. It allows making decision freely.

The competition would improve the performance of

producers within the country since they have to improve
their quality.

❇️World Trade Organization :-

🔹 WTO is World Trade Organization. It is an organization

which is in favor of increasing the world trade through

globalization.

🔶 The Aim of WTO :-

To liberalize International trade by allowing free trade for

all.

To promote international trade among the countries of the

world in an open uniform and non-discriminatory manner.

Removal of both the import and export restrictions.

🔶 The Drawback of WTO :-

It is dominated by developed countries.

It is used by developed countries to support globalization in

areas that are not directly to trade.

❇️Impact of Globalisation in India :-

🔶 Positive Impacts :-

Greater choice and improved quality of goods at competitive

price and hence raises standard df living.

MNC’s have increased investment in India.

Top Indian companies emerged as multinationals.

Created new opportunities for companies providing services

like IT sector.

Collaboration with foreign companies help a lot to domestic

entrepreneurs.

🔶 Negative Impacts :-

Indian economy faced the problem of brain drain.

Globalization has failed to remove unemployment and

poverty.

Cut in farm subsidies.

Closure of small industries.

 ❇️Steps taken by government to attract foreign
investment :-

🔹 Government can take following steps to attract foreign

investment :-

They have set-up industrial zones, called Special Economic

Zones (SEZs). SEZs have world class facilities: electricity,
water, roads, transport, storage, recreational and educational
facilities.

Companies who set-up production units in the SEZS do not

have to pay taxes for an initial period of five years.

Government has also allowed flexibility in the labour laws to

attract foreign investment.

The companies in the organised sector have to obey certain

rules that aim to protect the workers’ rights.

Instead of hiring workers on a regular basis, companies hire

workers flexibly for short periods when there is intense
pressure of work. This is done to reduce the cost of labour
for the company.

❇️Special Economic Zone (SEZ) :-

🔹 SEZ is a special economic zone of a country that is

subject to unique economic regulations that differs from
other areas in the same country. These regulations tend to be

conductive to Foreign direct investment.

❇️Rising Competition and Uncertain Employment :-

🔹 Globalization and pressure of competition have changed

the lives of workers and also the local producers.

🔹 Workers are not getting the job securing and the local
producers are not able to role with the technology adopted

by the MNCS.

🔹 Many of the local producing units have been shut down

and many are supposed to be shut down in near further.

🔹 Workers are also not getting the regular work as they are
hired only on temporary basis. Workers no longer get the

protection and benefits that they enjoyed earlier.

❇️The struggle for a fair globalization :-

🔹 Globalization has not benefited all people. People with

education, skill and wealth have made the best use of the

new opportunities. On the other hand, there are many people

who have not shared the benefits.
 ❇️How Government plays a major role for To make
the globalization fair to all :-

It ensures that policies such as labour laws are strictly

followed.

It supports and protects small producers from global

competition and to improve their performance.

It negotiates with the WTO to ensure fair rules and

concessions for developing countries.

The government can also use trade and investment barriers

to protect the interest of domestic produce.

Government can also align with other developing countries

with similar interests to fight against the authority of
developed countries in the WTO.

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