CBSE Class 10 Social Science Globalisation and the Indian Economy Notes Set 06

What is globalisation?

Globalisation is the process of rapid integration, or interconnection, between countries. It takes place mainly through foreign trade and foreign investment made by multinational corporations (MNCs). An MNC is a company that owns or controls production in more than one country. MNCs set up offices and factories where they find cheap labour and other resources, a nearby market and favourable government policies.

How MNCs spread production

1. They set up production units close to their markets or where costs are low.
2. They set up joint ventures with local companies.
3. They buy local companies and expand production.
4. They place orders with small producers, who supply goods such as garments and footwear that are then sold under the MNC brand.

In this way, production is spread across many countries, and the markets of these countries become linked.

Foreign trade and integration of markets

Foreign trade connects markets in different countries. Producers can sell their goods beyond domestic markets, and consumers get a wider choice of goods at competitive prices. Prices of similar goods in different countries tend to become equal.

Factors that enabled globalisation

1. Technology: faster transport lowered the cost of moving goods, and the computer, internet, mobile phone and telecommunication let firms coordinate work across countries and made services outsourcing possible.
2. Liberalisation of trade and investment policy: liberalisation means removing barriers or restrictions set by the government. Trade barriers such as taxes on imports and quotas had been used to protect domestic producers. In India, barriers were reduced in the early 1990s as part of economic reforms. Special Economic Zones (SEZs) were set up with world-class facilities and tax holidays to attract foreign investment.
3. Pressure from international organisations: the World Trade Organization (WTO), started at the initiative of developed countries, aims to liberalise international trade.

Impact of globalisation

Positive effects: Consumers, especially in cities, have more choice, better quality and lower prices. Foreign investment has increased. Several Indian companies such as Tata Motors, Infosys and Asian Paints have grown into MNCs, while service firms working in information technology, call centres and BPO have found new opportunities.

Negative effects: Small producers, such as those making batteries, plastics, toys and vegetable oil, found it difficult to compete and some closed down, leading to loss of jobs. Workers, especially in the unorganised sector, now often face short-term contracts, low wages and insecure conditions. Benefits have not been shared equally among all people and countries.

Making globalisation fair

The government can ensure that labour laws are implemented, support small producers by improving performance and providing credit, and use trade barriers when necessary. It can also negotiate at the WTO for fairer rules. Informed consumers and civil society groups can add to this pressure.

Worked examples

Example 1. Why do MNCs set up production in countries like India?
Answer: Labour and land are cheaper and the market is large. Government policies, including SEZs and tax concessions, also help them.

Example 2. An imported toy costs ₹ 100 and the government levies 50 per cent import duty. What is the price in India, and why is the duty imposed?
Answer: Duty = 50% of 100 = ₹ 50, so the toy costs ₹ 150. The duty makes imports costlier, which protects local toy makers from foreign competition.

Example 3. How has technology promoted globalisation?
Answer: Better transport makes goods reach distant markets quickly and cheaply. Information technology lets firms manage production and deliver services across countries.

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