CBSE Class 10 Social Science Globalisation and the Indian Economy Notes Set 07

What is globalisation?

Globalisation is the process of rapidly increasing integration or interconnection between countries through foreign trade and foreign investment. It happens mainly through multinational companies (MNCs): companies that own or control production in more than one country. MNCs set up offices and factories where cost of production is low, and sell goods across the world.

How MNCs spread production

MNCs look for locations with cheap and skilled labour, nearby markets, and favourable government policies. They invest in these places in several ways. They set up factories or offices, which is foreign investment. They buy existing local companies and expand production. They enter into joint production with local firms, providing technology and funds. They place orders with small producers, who supply goods at low prices under the MNC's brand name. As a result, production is spread over many countries and goods are made in a chain of linked locations.

Foreign trade and integration of markets

Foreign trade gives producers an opportunity to reach markets beyond their own country, and consumers a choice of goods from other countries. Prices of similar goods tend to become equal across countries. Trade thus links markets of different countries.

Factors behind globalisation

1. Technology: faster and cheaper transport and rapid improvement in information and communication technology, such as telecommunication, computers and the internet.

2. Liberalisation of trade and investment policy: liberalisation is the removal of barriers and restrictions set by the government on foreign trade and investment. Trade barriers, such as taxes on imports and quotas, had been used to protect domestic producers from foreign competition after independence. Around 1991, India removed many of these barriers.

3. Pressure from international organisations, especially the World Trade Organization (WTO), set up at the initiative of developed countries to liberalise international trade. Special Economic Zones (SEZs) with world-class facilities and tax holidays were also set up to attract foreign firms.

Impact on India

Positive effects: consumers, particularly in cities, have a wider choice of goods, better quality and lower prices. Foreign investment has increased. Some Indian companies, such as Tata Motors and Infosys, gained from new technology and have become MNCs. Services, especially IT-related, have created new opportunities.

Negative effects: small producers, for example in batteries, capacitors, plastics and vegetable oil, faced competition and some closed down, leading to job loss. Gains were uneven, and workers were often employed on short-term, low-wage contracts with poor conditions, especially in the unorganised sector. Benefits went mainly to better-off and educated people.

Making globalisation fair

Government policies should protect all sections of society, especially small producers. Labour laws must be enforced so that workers get their rights. Support should be given to small producers for improving performance. The government can use trade barriers where needed, and can negotiate at the WTO for fairer rules.

Worked examples

Example 1. How has technology helped globalisation? Faster transport lets goods travel long distances cheaply and quickly. The internet and telecommunication allow instant contact and also let services such as customer support be done from distant countries.

Example 2. Why did India use trade barriers after independence? New industries were weak, and foreign competition could have destroyed them. Barriers such as import duties protected domestic producers until they could compete.

Example 3. Why do MNCs set up production in countries like India? Labour is cheaper and skilled, markets are large, and government policies offer incentives. Setting up near the consumer also reduces costs.

Quick Check Questions