Chapter 4 Globalisation And The Indian Economy

Overview

This chapter explains globalisation as the integration of economies through foreign trade and investment, primarily driven by Multinational Corporations (MNCs). It details how MNCs spread production across countries by leveraging advantages like cheap labor and resources, integrating global markets. The chapter discusses the factors enabling globalisation – technological advancements, liberalisation of trade policies, and the role of international organizations like the WTO. It then analyzes the impact of globalisation on India, highlighting benefits for consumers and some producers, but also challenges faced by small-scale industries and workers due to increased competition and flexible labor policies. Finally, it discusses the struggle for fair globalisation, emphasizing the need for policies that ensure benefits are shared more equitably.

Production Across Countries

Multinational Corporations (MNCs) are companies that own or control production in more than one nation. They set up factories and offices in countries where they can benefit from lower production costs (cheap labor, resources) to maximize profits. This involves spreading production processes globally, with different stages occurring in different countries based on comparative advantages (e.g., manufacturing components in China, assembly in Mexico, customer service in India).

Interlinking Production Across Countries

MNCs often set up production through joint ventures with local companies or by buying them out. They also control production by placing orders with smaller local producers, who supply goods under the MNC's brand name. This interlinks production across diverse locations, with MNCs exerting significant influence on pricing, quality, and labor conditions.

Foreign Trade And Integration Of Markets

Foreign trade connects markets in different countries. It allows producers to sell goods beyond their domestic borders and buyers to access a wider variety of products at potentially lower prices. This competition leads to the integration of markets, where prices of similar goods tend to equalize, and producers in different countries compete directly.

What Is Globalisation?

Globalisation is the process of rapid integration and interconnection between countries, driven by increased foreign trade, foreign investment by MNCs, the movement of goods and services, technology transfer, and, to a lesser extent, the movement of people. Technology, especially in information and communication technology (ICT), has been a major catalyst, enabling faster and cheaper communication and transactions across borders.

Factors That Have Enabled Globalisation

• Technology: Rapid improvements in transportation (containerization, faster ships, cheaper air transport) and ICT (telecommunications, computers, internet) have significantly reduced costs and increased speed for moving goods, services, and information globally.
• Liberalisation of Foreign Trade and Investment Policy: Governments, influenced by international organizations, have reduced trade barriers (taxes on imports) and restrictions on foreign investment. This policy shift, starting in India around 1991, allows freer movement of goods, services, and capital across borders.
• World Trade Organisation (WTO): This international organization aims to liberalize global trade by setting rules and ensuring member countries adhere to them. While promoting free trade, it has been criticized for favoring developed countries and imposing rules that can disadvantage developing nations, particularly in agriculture.

Impact Of Globalisation In India

Globalisation has had mixed impacts on the Indian economy:

• Benefits: Consumers (especially in urban areas) have gained from wider choices, better quality, and lower prices. Well-off sections and companies with skills, education, and wealth have benefited most. Some Indian companies have also expanded globally.
• Challenges: Small producers and workers have faced intense competition, leading to the closure of many small-scale industries and job losses. Workers in the organized sector often experience precarious employment ('flexible' contracts), lower wages, and reduced benefits, mirroring conditions in the unorganised sector.
• Government Policies: Governments attract foreign investment through measures like Special Economic Zones (SEZs) offering tax breaks and labor law flexibility, which can further disadvantage workers.

The Struggle For A Fair Globalisation

Recognizing the uneven distribution of globalisation's benefits, there is a growing demand for 'fair globalisation.' This advocates for policies that create opportunities for all, ensure equitable sharing of benefits, protect the interests of small producers and workers, and regulate MNCs and trade practices. People's organizations and governments of developing countries engage in campaigns and negotiations (e.g., at the WTO) to achieve fairer rules that address issues like agricultural subsidies and labor standards.