Globalization and the Indian Economy
- Set up production jointly with some of the local companies. Joint production provides money for additional investment and the latest technology for production.
- To buy up local companies and then expand production.
- Place orders for production with small producers.
- By setting up partnerships with local companies, by using local companies for supplies, by closely competing with the local companies or buying them up, MNCs are exerting a strong influence on production at these distant locations. As a result, production in these widely dispersed locations is getting interlinked.
- Exchange of goods – purchase and sale – across geographical boundaries of the countries.
- Goods travel from one market to another.
- Choice of goods in the market rises.
- Prices of similar goods in the two markets tend to become equal.
- Producers in the two countries closely compete against each other even though they are separated by thousands of miles. Thus foreign trade results in connecting the markets or integration of markets in different countries.
- Various restrictions which are used by the government to increase or decrease
- Foreign Trade.
- The government uses trade barriers to increase or decrease Foreign Trade and to
- decide what kinds of goods and how much of each, should come into the
- Setting up of industrial zones by the central and state governments to attract Foreign Companies to invest in India which has world-class facilities, electricity, water, roads, transport, storage, recreational and educational facilities.
- Greater competition among producers – both local and foreign producers has
- been of advantage to consumers.
- There is the greater choice before these consumers who now enjoy the improved
- quality and lower prices for several products.
- Foreign investment has increased.
- Increased competition has encouraged top Indian Companies to invest in newer
- technology and production methods and raise their production standards.
- Globalization has enabled some large Indian Companies to emerge as Multinational.
- Created new opportunities for companies providing services particularly those
- involving Information Technology.
- The latest models of mobile phones, television, digital cameras of leading manufacturers and other well-known brands of the world are easily available in the markets.
- New models of cars and automobiles are launched every season.
- The top companies in the world have introduced their popular brands in India for various products like shirts, fruit juices, cosmetics, toys, furniture, stationery etc.
All this has been possible only due to globalization
Q. “Globalisation and greater competition among producers has been of advantageous to consumers.”
A. Globalization and greater competition among producers have been of advantage to consumers in the following ways:
There is much scope for Indian companies to emerge as MNCs. These are the companies mainly related to Information Technology (IT sector), accounting and administrative sector. It will benefit the people in the country by providing them gainful employment and further enhance their quality of life. MNCs have enormous wealth with them. They have a strong influence on production in different countries.
A. Multinational Corporations (MNCs) can set up their factories or production units close to markets where they can get the desired type of skilled or unskilled labor at low costs along with other factors of production. After ensuring these conditions MNCs set up production units in the following ways :
Foreign trade is the main channel which connects the markets of various countries. Foreign trade leads to the integration of markets across the countries as follows :
Globalization means unification or integration of the domestic economy with the world economy through trade, capital, and technology flows.
The government can ensure fair globalization to its people in the following ways :
Q. How has liberalization of trade and investment policies helped the globalization process. Explain.
A. Economic liberalization means reducing government interference in economic activities and removing trade and business barriers.
Liberalization of trade and investment policies helped the globalization process in the following ways :
A. Globalization means unification or integration of the domestic economy with the world economy through trade, capital and technological flows. Factors that supported globalization in India are as follows :
It is true that the impact of globalization has not been uniform. This can be explained through the following points :
Liberalization means removing barriers or restrictions put by the government on the businesses.
Features of liberalization are as follows :
Barriers or restrictions that are imposed by the government on free import and export activities are called trade barrier. Tax on imports is a vital trade barrier. The government can use the trade barriers in the following ways :
The investment made by MNCs is known as foreign investment. In order to attract foreign investment following steps are taken by the Indian government :
Tax on imports imposed by the government to regulate foreign trade and investment is known as a trade barrier.
The government imposed barriers on foreign trade and investment are for the following reasons :
Transportation technology: Rapid improvement in transportation technology has been one major factor that has stimulated the globalization process. There are fast trains connecting every nook and corner of a country and faster planes that cover the distance within a few hours between one country to another. Similarly, the cost of air transport has fallen.
Information and Communication Technology: In recent times communication and information technology got a boost from the invention of computers and the internet etc.
Information Technology (IT) has played a major role in spreading out production of services. For example, a news magazine published for London readers is to be designed and printed in Delhi.
A. Effect of Functioning of WTO on Indian Economy: The developing countries like India feel cheated as they are forced to open up their markets for the developed countries but are not allowed access to the markets of developed countries.
Favorable Impacts of WTO working: WTO creates an environment such as international trade among member countries in an open, uniform and non-discriminatory manner.
Unfavorable Impacts of WTO: WTO is dominated by the developed countries, especially by America, the European Union, and Japan etc. Developing and poor countries are seldom consulted until the rich nations complete their negotiations.
A. Foreign trade is the integration of markets in different countries. For example, export and import of goods and services from one country to another. But foreign investments are investments made by MNCs. For example, investment in land, machines, building etc. to earn a profit.
Role of MNCs in foreign trade and foreign investments: MNCs can provide money for additional investments like buying new machines for faster production to small companies.
MNCs can provide efficient managerial and advanced technology for faster production and efficient use of resources. So MNCs play an important role in foreign investment. MNCs facilitate movement of goods and services between various countries. Movement of people across the globe also creates better job opportunities and better income. So MNCs promote foreign trade also.
In developing countries, governments have reduced trade barriers as per WTO rules. But developed countries have ignored the rules of WTO and have continued to pay their farmers vast sums of money for production and for export to other countries.
Therefore, farmers of developed countries are able to sell farm products at abnormally low prices in foreign markets which is adversely affecting the farmers of developing countries. This is really a case of unfair trade.
The multinational corporations have spread their production and interaction with local producers in the following ways :