Globalisation And The Indian Economy
(1) Globalization means integrating the economy of a country with the economies of other countries under conditions of free flow of trade and capital and movement of persons across borders.
(2) Integration of markets in different countries is known as foreign trade.
(3) Planning Commission in India has laid emphasis on the development of foreign trade in the five year plans due to the following reasons.
- A country can make efficient use of its natural resources :
- It can export its surplus production.
- Further, through effective regularization of foreign trade, employment, output, prices and industrialization, economic development of a country can properly accelerate.
(4) Investment made by Multinational Corporations (MNCs) is called foreign investment.
(5) MNCs are playing a major role in the process of rapid integration or interconnection between countries. Now more regions of the world are in closer contact with each other than a few decades back.
(6) MNCs play an important role in the Indian economy by setting up production jointly with some of the local companies. Example : MNCs can provide money for additional investments like buying new machines for faster production.
- Take another example – Cargil foods, a very large American MNC, has bought smaller Indian companies such as Parakh Foods.
(7) Rapid improvement in information and communication technology has been one major factor that has stimulated the globalization process. To access information instantly and to communicate from remote areas, devices such as telephones, mobiles and computers are very useful. Further, it has played a major role in spreading out production of services across countries.
(8) Impact of globalization on the country is manifold. This can be understood by these examples.
- MNCs have increased their investment over the past 15 years, which is beneficial for them as well as for Indians also. This is because these MNCs provide employment opportunities to the masses and local companies supplying raw material to these industries have prospered. But globalization has failed to solve the problem of poverty and it has widened the gap between the rich and the poor. Only skilled and educated class has benefited from globalization.
(9) Liberalization of economy means to free it from direct or physical controls imposed by the government. In other words, it implies liberating the trade and industry from unwanted government control and restrictions.
(10) Let us see the effect of foreign trade through the example of Chinese toys in the Indian market. Chinese toys have become more popular in the Indian market because of their cheaper prices and new designs. Now Indian buyers have a greater choice of toys and at lower prices. Simultaneously, Chinese toy makers get the opportunity to expand business. On the other side, Indian toy makers face losses.
(11) World Trade Organisation (WTO) was started at the initiative of developed countries. The main objective of the World Trade Organisation is to liberalize international trade. At present 149 countries are members of the WTO.
(12) At present, central and state governments in India are taking special steps to attract foreign companies to invest in India. For this, Special Economic Zones (SEZs) are being set up. Special economic zones have world class facilities – electricity, telecommunication, broadband internet, roads, transport, storage and recreational facilities – to attract investment from MNCs and other companies.
(13) Globalization and liberalization have posed major challenges for small producers and workers. Small manufacturers have been hit hard due to competition. Several of the units have shut down rendering many workers jobless. Around 20 millions of workers are employed in small industries.
(14) Because of growing competition, most employers these days prefer to employ workers flexibly. This means that workers have no secure jobs. This can be explained with the help of an example : 35 year old Sushila got a job after searching for six months. She is a temporary worker. She did not get any benefit such as provident fund, medical allowance, bonus etc. A day off from work means no wage.
(15) Competition among the garment exporters has allowed the MNCs to make large profits, but workers are denied their fair share of benefits brought about by globalization.
Globalization And The Indian Economy NCERT Book Questions
Q.4. What do you understand by globalization? Explain in your own words.
Ans. Globalization means integrating the economy of a country with the economies of other countries under conditions of free flow of trade, capital and movement of persons across borders. It includes
- Increase in foreign trade
- Export and import of techniques of production.
- Flow of capital and finance from one country to another
- Migration of people from one country to another.
Q.5. What was the reasons for putting barriers to foreign trade and foreign investment by the Indian government? Why did it wish to remove these barriers?
Ans. The Indian government had put barriers to foreign trade and foreign investment because at that time it was necessary to protect the Indian producers from the foreign competition.
In New Economic Policy in 1991, it was thought by the government to remove these barriers so that Indian producers can compete with producers around the globe. Thus competition improves the quality of their products.
Q.6. How would flexibility in labour laws help companies?
Ans. Flexibility in labour laws helps companies to cut down the cost of production. Now, instead of hiring workers on a regular basis, companies hire workers flexibly for short periods and this reduces the cost of labour for the company.
Q.7. What are the various ways in which MNCs set up or control production in other countries?
Ans. Besides the movement of goods, services, investment and technology, the movement of people from one country to another in search of better income, better job opportunities are the various ways in which countries can be linked.
Q.8. In what ways has competition affected workers, Indian exporters and foreign MNC in the garment industry?
Ans. Globalization and rising competition have changed the lives of workers. Now employers generally employ workers on a temporary basis with long working hours and at very low wages.
To get large orders from MNCs, Indian exporters try hard to cut the cost of production. As the cost of raw material cannot be reduced, exporters try to cut the labour cost. These MNCs with worldwide networks get quality goods at cheapest rates and get maximum profit.
Q.9. Why do developed countries want developing countries to liberalise their trade and investment? What do you think should the developing countries demand in return?
Ans. Developed countries feel that all barriers to foreign trade and investment are harmful for international trade. They want that trade between countries should be free. Developed countries like the USA and UK have high production capacity and latest technology.
Developing countries should demand fair globalization which ensures opportunities and benefits for all. Interest of the workers should also be taken care of.
Q.10. “The impact of globalization has not been uniform.” Explain this statement.
Ans. While globalization has benefited the well-off consumers and also producers with skill, education and wealth, many small producers and workers have suffered as a result of the rising competition.
Q.11. How has liberalization of trade and investment policies helped the globalization process?
Ans. Liberalization of trade and investment has facilitated globalization by removing barriers to trade and investment. At international level, WTO has put pressure on developing countries to liberalize trade and investment.
Q.12. How does foreign trade lead to integration of markets across countries? Explain with an example.
Ans. Foreign trade provides opportunities for both producers and buyers to reach beyond the markets of their own countries. Goods travel from one country to another.
Competition among producers of various countries as well as buyers prevails. Thus foreign trade leads to integration of markets across countries. For example, during Diwali season, buyers in India have the option of choosing between Indian and Chinese decorative lights and bulbs. So this provides an opportunity to expand business.
Q.13. Globalisation will continue in the future. Can you imagine what the world would be like twenty years from now? Give reason for your answer.
Ans. After twenty years, world would undergo a positive change which will possess the following features—healthy competition, improved productive efficiency, increased volume of output, income and employment, better living standards, greater availability of information and modern technoloy.
Reason for the views given above : These are the favourable factors for globalisation :
- Availability of human resources both quantitywise and qualitywise.
- Broad resource and industrial base of major countries.
- Growing entrepreneurship
- Growing domestic market.
Q.14. Supposing you find two people. One is saying globalisation has hurt our country’s development. The other is telling, globalisation is helping India develop. How would you respond to these arguments?
Ans. Benefits of globalisation of India :
- Increase in the volume of trade in goods and services
- Inflow of private foreign capital and export orientation of the economy.
- Increases volume of output, income and employment.
Negative Impact / Fears of Globalisation.
- It may not help in achieving sustainable growth.
- It may lead to widening of income inequalities among various countries.
- It may lead to aggravation of income inequalities within countries.
Whatever may be the fears of globalisation, I feel that it has now become a process which is catching the fancy of more and more nations. Hence we must become ready to accept globalisation with grace and also maximise economic gains from the world market.
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