Class 10 NCERT Solutions Economics Chapter 4 - Globalisation and The Indian Economy
Globalisation and The Indian Economy Exercise 72
Globalisation is a process in which people of the world are linked together to each other through internet and other advanced means of communication. It means the integration of the economy of the country with the world economy. It aims to encourage foreign trade, private and institutional foreign investment. It creates various policies that try to turn the world in to one.
The Indian government had put barriers on foreign trade and investments after India’s independence. It was done to protect the interests of the producers and small industrialists of our country from foreign competition. It was feared that the producers will not be able to survive the competition from the wealthy foreign companies immediately after the independence.
In 1991, the government felt that the time has come to allow the foreign companies to invest in the Indian markets. This will also force the Indian producers to improve the quality of their goods and services. Hence, the government removed the barriers on foreign trade to a large extent.
Because of the rising competition in the market, many companies prefer to have flexibility in labour laws. This means that the jobs of the workers are not secured and they can be terminated by the company during the lean period to enhance the financial condition of the company. Wages paid on daily basis would be low. It can be said that while flexibility in labour laws help the companies in reducing costs and increasing profitability, it denies the workers from their share of profits.
MNC’s set up or control the production by investing huge amount of money in a country’s economy. It sets up its producing units close to the markets and where labour is available at low cost. It may also work jointly with some local companies and enhance its production. In most of the cases, the MNC’s buy local companies and expand their production. The other way in which they control production is by placing the orders for production with small and local producers. For example, a sports goods company may give orders for producing various sports products to small producers.
Developed countries want developing countries to liberalise their economy so that their own companies may establish business units in developing countries. The cost of production, land and labour costs are much lower in developing nations. Hence, the MNC’s belonging to the developed nations when established in developing countries, earns huge profits.
Developing countries should demand the fair removal of trade barriers imposed on the developed nations, in order to protect their own industries.
The impact of globalisation has not been uniform because globalisation has benefitted the rich and developed nations of the world. The poor and developing nations of the world have still not received their fair share of the benefits of globalisation.
Big companies have been profited by globalisation while many small manufacturers with low capital have not been able to withstand the competition from the large MNC’s.
Workers have not been benefitted by globalisation. Their jobs have become insecure and they have to work on low wages as the MNC’s, in order to earn profits, employ them on meager salaries. Because of globalisation the workers have become poorer and the rich have become richer.
Liberlisation has resulted in the removal of trade barriers. Earlier, many countries had placed restrictions on import in order to protect their own industries. With the removal of trade barriers, as a result of liberlisation, many countries opened their economies for the foreign companies. They established their factories and offices in these countries leading to the process of globalisation. This also resulted in the flow of foreign investments.
The process of liberlisation led to the increase in imports and exports across the geographical boundaries of the nations. This has also helped in the process of globalisation.
Foreign trade has led to the integration of markets across the countries. Because of foreign trade, the producers are now able to compete and export their goods to the markets of other countries. The choices of the buyers have also expanded as now they get to choose products manufactured by not only the domestic companies but also by the foreign companies.
Because of the competition, the goods have also become cheaper. Producers from different countries are now able to compete with each other. For example, we find the Indian markets are flooded with designer imported handbags belonging to various foreign brands. This has benefited the consumers as large varieties of handbags are now available in India at competitive prices.
Globalisation will continue in the future. Twenty years from now, we will find further strengthening of the forces of globalisation. Trade barriers will further reduce and the prices of imported goods are also likely to come down. Markets will become more integrated with more advancement in the field of technology, transport and communication.
I will respond to these arguments in a more balanced manner. It is because while the process of globalisation has helped the country’s economy to develop, it has also resulted in the closing down of business units of the small manufacturers.
Globalisation has resulted in foreign investments and has created jobs in the country. The Indian companies in wake of the competition from the MNC’s have upgraded the quality of their products and services. Many Indian companies have themselves established business units in other countries which has helped the Indian economy to develop.
While globalisation has favoured the rich section of the society, it has created problems for small producers who have not been able to withstand competition from the wealthy MNC’s. As a result many small companies have either been closed down or have been acquired by the MNC’s. This has harmed the development of our country. Further, the conditions of the workers have deteriorated because of the exploitation by the big companies. This has widened the gap between the rich and the poor section of the Indian society.
Indian buyers have a greater choice of goods than they did two decades back. This is closely associated with the process of globalisation. Markets in India are selling goods produced in many other countries. This means there is increasing trade with other countries. Moreover, the rising number of brands that we see in the markets might be produced by MNCs in India. MNCs are investing in India because of the low cost of production. While consumers have more choices in the market, the effect of rising demand and purchasing power has meant greater competition among the producers.
(i) MNC’s buy at cheap rates from small producers.
(b) Garments, footwear, sports items
(ii) Quotas and taxes on imports are used to regulate trade
(e) Trade barriers
(iii) Indian companies who have invested abroad
(d) Tata Motors, Infosys, Ranbaxy
(iv) IT has helped in the spreading of production of services.
(c) Call centres
(v) Several MNC’s have invested in setting up factories in India for production.
Globalisation and The Indian Economy Exercise 73
(i) goods, services and investments between countries.
(ii) buy existing local companies.
(iii) none of the above