Globalisation

CONCEPT

  1. Globalisation 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.
  4. ? A country can make efficient use of its natural resources :
  5. ? It can export its surplus production.
  6. ? Further, through effective regularisation of foreign trade, employment, output, prices and industrialisation, economic development of a country can properly accelerate.
  7.  Investment made by Multinational Corporations (MNCs) is called foreign investment.
  8.  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.
  9.  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.
  10. Take another example – Cargil foods, a very large American MNC, has bought smaller Indian companies such as Parakh Foods.
  11.  Rapid improvement in information and communication technology has been one major factor that has stimulated the globalisation 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.
  12.  Impact  of  globalisation  on  the  country  is  manifold.  This  can  be  understood  by  these examples.
  13. 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 globalisation 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 globalisation.
  14. ? There is a greater choice for consumers, with a variety of goods and at cheap prices. Now they enjoy a much higher standard of living.
  15.  Liberalisation 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.
  16.  Let us see the effect of foreign trade through the example of Chinese toys in the Indian market.
  17. 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.
  18.  World Trade Organisation (WTO) was started at the initiative of developed countries. The main objective of the World Trade Organisation is to liberalise international trade. At present 149 countries are members of the WTO.
  19.  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.
  20.  Globalisation and liberalisation have posed major challenges for small producers and workers.
  21. 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.
  22.  Because of growing competition, most employers these days prefer to employ workers flexibly.
  23. 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.
  24.  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 globalisation.

Questions and Answers

Q.1. What do you understand by globalisation? Explain in your own words.

Ans. Globalisation  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

(i) Increase in foreign trade

(ii) Export and import of techniques of production.

(iii) Flow of capital and finance from one country to another

(iv) Migration of people from one country to another.

Q.2. 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.3. 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.4. 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.5. In what ways has competition affected workers, Indian exporters and foreign MNC in the garment industry?

Ans. Globalisation 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.6. 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 globalisation which ensures opportunities and benefits for all. Interest of the workers should also be taken care of.

Q.7. “The impact of globalisation has not been uniform.” Explain this statement.

Ans. While globalisation 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.8. How  has  liberalisation  of  trade  and  investment  policies  helped  the  globalisation process?

Ans. Liberalisation of trade and investment has facilitated globalisation by removing barriers to trade and investment.  At international level, WTO has put pressure on developing countries to liberalise trade and investment.

Q.9. 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.10. Globalisation will continue in the future. Can you imagine what the world would be like twenty years from now? Give reasons 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 technology.

Reason for the views given above: These are the favourable factors for globalisation:

 (a) Availability of human resources both quantity wise and quality wise.

(b) Broad resource and industrial base of major countries. (c) Growing entrepreneurship

(d) Growing domestic market.

Q.11. Explain any three ways in which MNCs set up or control production in other countries.

Ans. Multinational Corporations (MNCs) set up their factories or production units close to markets where they can get desired type of skilled or unskilled labour at low costs along with other factors of production. After ensuring these conditions MNCs set up production units in the following ways :

(a) Jointly with some local companies of the existing country.

 (b) Buy  the  local  companies  and  then  expand  its  production  with  the  help  of  modern technology.

(c) They place orders for small producers and sell these products under their own brand name to the customers worldwide.

Q.12. How does foreign trade lead to integration of markets across the countries? Give any three examples.     

Ans. Foreign trade is the main channel which connects the markets of various countries. Foreign trade lead to integration of markets across the countries as follows :

(a) Creates  opportunities  for  the  producers  to  reach  beyond  the  domestic  markets  or  the markets of their own countries.

(b) Import of goods from various countries provides choice of goods for consumer beyond the goods that are produced domestically.

(c) Producers of different countries compete with each other although they are thousands of miles away.

Q.13. Enumerate any three features of Multinational Corporations.        

Ans. Multinational Companies (MNCs) are the companies that owns or controls the production of

their goods in more than one country. The main features of MNCs are :

(a) They set up their factories and offices in more than one country.

(b) The set up their units where the cost of production is low and higher profits can be earned. (c) They produce and sell their finished products globally.

Q.14. Why did India put barriers on foreign trade and investment after independence? Why was the policy changed in 1991? Mention any two reasons.             

Ans. Soon after independence India put barriers on foreign trade and independent to create a large industrial base which helped in increasing the industrial production. Policies were changed in

1991 because :

(a) Global competition of Indian producers will improve the quality of Indian goods.

(b) Reduce the  problems  like  unemployment,  poverty,  inflation  etc.  and  support industrialisation.

Q.15. What is globalization? How can the government ensure fair globalization to its people? Give two points.

Ans. Globalisation  means  unification  or  integration  of  the  domestic  economy  with  the  world

economy through trade, capital and technology flows.

Government can ensure fair globalization to its people in the following ways :

(a) Government needs to care about the labour laws so that workers get their rights and support small producers to improve their performance.

(b) Government can negotiate with world trade organisation for fairer rules and can align with developing countries to stand against the domination of developed countries.

Q.16. Should more Indian companies emerge as MNCs? How would it benefit the people in the country ?           

Ans. Yes, more Indian companies should emerge as MNCs. It would benefit the people in the country in the following ways

(a) New job opportunities have been created by the emergence of Indian companies as MNCs.

(b) Local companies that provide raw material and other services to these companies have prospered.

(c) Rise in production standards, improved the standard of living of the people.

Q.17. Analyse any three impacts of globalization in India.             

Ans. Impacts of globalization in India are as follows :

(a) It improves the productivity and efficiency in the use of resources through the process of competition.

(b) Growth rate of economy has gone up with the increase in foreign investment and foreign technology in India.

(c) It allows the consumers to enjoy a wider range of goods and services at a lower cost.

Q.18. Suggest any three measures to make globalisation just and fair?  

Ans. Globalisation  means  unification  or  integration  of  the  domestic  economy  with  the  world

economy through trade, capital and technology flows.

Government can ensure fair globalization to its people in the following ways :

(a) Government needs to care about the labour laws so that workers get their trade union rights and support small producers to improve their performance.

(b) Government can negotiate with world trade organisation for fairer rules and can align with developing countries to stand against the domination of developed countries.

Q.19. How has liberalisation of trade and investment policies helped the globalisation process? Explain.               

Ans. Economic liberalisation means reducing government interference in economic activities and removing trade and business barriers. Liberalisation  of  trade  and  investment  policies  helped  the  globalisation  process  in  the following ways :

(a) Businesses are free to make decisions for foreign import and export.

(b) Foreign  companies  could  easily  set  up  factories  and  industries  in  a  country  after liberalisation.

Q.20. Describe any three factors which have enabled globalisation in India.

                Ans. Globalisation  means  unification  or  integration  of  the  domestic  economy  with  the  world economy through trade, capital and technological flows. Factors that supported globalisation

in India are as follows :

(a) Reduction of trade barriers with a view to allowing free flow of goods to and from other countries.

(b) Involvement of various local producers with MNCs in various ways.

(c) Some of the large Indian companies like Tata Motors, Infosys (IT), Ranbaxy, Asian Paints etc. emerged as MNCs and start working globally.

Q.21. Describe any three ways in which Multinational Corporations (MNCs) have spread their production and interaction with local producers in other countries.

Ans. Multinational Corporations (MNCs) set up their factories or production units close to markets where they can get desired type of skilled or unskilled labour at low costs along with other

factors of production. After ensuring these counditions, MNCs set up production units in the following ways :

(a) Set up jointly with some local companies of the country.

(b) Buy the local companies and then expand its production with the help of modern technology.

(c) They place orders for small producers and sell their products under their own brand name to the customers worldwide.

Q.22. ‘‘The impact of globalization has not been uniform’’. Explain this statement.

Ans. It is true that the impact of globalisation has not been uniform. This can be explained through

following points :

(a) It has some negative impacts on employment and real wages. Ushering in of new technology, output is increasing but the employment opportunities are not much especially in rural areas where 75% of the population lives.

(b) It is mainly beneficial to large capitalists, industries and large companies. Consequently it increases the concentration of economic power and lead to inequality.

(c) In India, during 1990-91 more than 1/3rd of national product originated in agricultural sector, this share has come down to 23% in 2004-05.

Q.23. What is the meaning of liberalisation of foreign trade? What does it mean in the Indian context?

Ans. Liberalisation of foreign trade means removing barriers or restrictions put by the government on the import and export of goods.

Indian government had put barriers to foreign trade and investment after independence so that Indian small-scale and cottage industries could come up. After 1991, process of liberalisation started in India. This was done for the following reasons :

(a) To improve the quality of Indian products our products are put in competition with international products.

(b) To enhance industrialisation and foreign exchange.

Q.24.  Define liberalisation. Mention two features of liberalisation.

Ans. Liberalisation means removing barriers or restrictions put by the government on the businesses.

Features of liberalisation are as follows :

(a) Reduction of trade barriers with a view to allowing free flow of goods among the countries. (b) Allow private sector to do many of those activities which were earlier restricted to public sector.

Q.25. What is meant by trade barrier ? Why do governments use it ? Explain.     

Ans. Barriers or restrictions that are imposed by government on free import and export activities are called trade barrier. Tax on imports is a vital trade barrier. Government can use the trade

barriers in the following ways :

(a) Increase or decrease of foreign trade of the country.

(b) With the help of trade barriers government can decide what kinds of goods and how much of each, should be traded in the country.