Class 10 NCERT Economics: Chapter 4 - Globalisation and the Indian Economy

Overview

This chapter examines globalisation as the integration of countries through foreign trade and investment by multinational corporations (MNCs). It explores how MNCs spread production, the role of technology, trade liberalisation, and the World Trade Organisation (WTO) in enabling globalisation, and its varied impacts on consumers, producers, and workers in India.

Production Across Countries

Globalisation has transformed production, with MNCs organizing it across multiple countries to minimize costs and maximize profits.

Role of Multinational Corporations (MNCs)

• Definition: MNCs are companies that own or control production in more than one country.
• Motivation: Set up factories/offices in regions with cheap labor, resources, and favorable government policies to reduce costs.
• Example: An MNC designs industrial equipment in the US, manufactures components in China, assembles in Mexico/Eastern Europe, and uses Indian call centers for customer care, achieving 50-60% cost savings.

Methods of MNC Production

• Joint Ventures: Collaborate with local companies, providing capital and technology (e.g., Ford Motors with Mahindra in India).
• Acquisitions: Buy local firms to expand (e.g., Cargill Foods acquired Parakh Foods, becoming India’s largest edible oil producer).
• Outsourcing: Place orders with small producers globally (e.g., garments, footwear), controlling price, quality, and labor conditions.

Foreign Trade and Integration of Markets

Foreign trade connects countries, integrating markets and expanding choices for consumers and opportunities for producers.

Role of Foreign Trade

• Function: Enables producers to sell beyond domestic markets and buyers to access foreign goods, increasing choice.
• Example: Chinese toys flood Indian markets, offering cheaper prices and new designs, capturing 70-80% of toy shops but causing losses for Indian toymakers.
• Market Integration: Trade equalizes prices of similar goods across countries, fostering competition among producers.

What is Globalisation?

Globalisation is the rapid integration of countries through increased foreign trade, investment, and technology, driven by MNCs.

• Components: Movement of goods, services, investments, technology, and (to a lesser extent) people.
• MNC Role: MNCs control significant trade and investment, producing and selling globally (e.g., Ford exports cars/components from India).
• Outcome: Greater competition among producers, connecting markets and production globally.

Factors Enabling Globalisation

Three key factors have accelerated globalisation: technology, trade liberalisation, and WTO pressures.

Technology

• Transportation: Containers and cheaper air transport reduce costs and speed up goods delivery.
• Information Technology (IT): Internet, telecommunications, and computers enable instant communication and remote service production (e.g., a London magazine designed/printed in Delhi via e-banking).

Liberalisation of Trade and Investment

• Trade Barriers: Taxes (e.g., on Chinese toys) or quotas limit imports, protecting local producers.
• Pre-1991 India: High barriers protected nascent industries from foreign competition, allowing only essential imports.
• Post-1991: Liberalisation removed barriers, enabling easier imports/exports and foreign investment, supported by international organizations.

World Trade Organisation (WTO)

• Role: Promotes free trade among 160 member countries, setting rules to reduce barriers.
• Criticism: Developed countries maintain barriers (e.g., US farm subsidies lower global prices, hurting farmers in developing countries), while forcing developing nations to liberalise.

Impact of Globalisation in India

Globalisation has had mixed effects, benefiting some while challenging others.

Benefits for Consumers

• Urban Well-Off: Greater choice, improved quality, and lower prices for goods (e.g., cars, electronics), raising living standards.
• Example: Markets now offer global brands, unlike two decades ago when only Ambassador/Fiat cars were available.

Benefits for Producers

• MNCs: Increased investments in industries like automobiles, IT, and banking, creating jobs and boosting local suppliers.
• Indian Companies: Some have adopted new technology, collaborated with MNCs, or become MNCs themselves (e.g., Tata Motors, Infosys).
• IT Services: Globalisation has spurred growth in call centers, data entry, and engineering services exported to developed countries.

Challenges for Small Producers

• increased competition Case Study - Ravi:His capacitor business in Hosur faced losses post-2001 due to cheap imported capacitors, reducing production and workforce.
• Industries Affected: Batteries, toys, dairy, and vegetable oil; small/medium industries (11 crore workers) face closures and job losses.

Challenges for Workers

• Exploitation: Companies hire temporary workers to cut costs, leading to job insecurity and low wages (e.g., garment industry workers).
• Case Study - Sushila: A garment worker in Delhi lost permanent job benefits, now works long hours as a temporary worker with no benefits.
• Trend: Organised sector conditions resemble the unorganised sector, with reduced worker protections.

Steps to Attract Foreign Investment

India has implemented policies to encourage MNC investments, but these have trade-offs.

• Special Economic Zones (SEZs): Offer tax exemptions for five years and world-class infrastructure (e.g., electricity, roads).
• Labour Law Flexibility: Allows companies to hire temporary workers, reducing costs but weakening worker rights.
• Opposition: Farmers and locals oppose SEZs due to land acquisition, displacement, and environmental concerns.

Struggle for a Fair Globalisation

Fair globalisation seeks to create opportunities for all and share benefits equitably.

• Disparities: Educated, skilled, and wealthy benefit most, while small producers and workers face challenges.
• Government Role: Enforce labour laws, support small producers, use trade barriers if needed, and negotiate fairer WTO rules with other developing countries.
• People’s Role: Campaigns and protests (e.g., 2005 Hong Kong WTO demonstration) influence trade decisions.

Key Learnings

• Globalisation integrates countries via trade and MNC investments, driven by technology, liberalisation, and WTO policies.
• MNCs spread production through joint ventures, acquisitions, and outsourcing, increasing market integration but also competition.
• Consumers and some Indian companies benefit, but small producers and workers face challenges due to imports and flexible labour policies.
• Fair globalisation requires government and public action to protect vulnerable groups and ensure equitable benefits.

Exercises

1. Globalisation is the rapid integration of countries through trade, investment, and technology, connecting markets and production globally.
2. Barriers protected Indian industries post-Independence; removed post-1991 to improve quality and competition.
3. Flexible labour laws reduce company costs by allowing temporary hiring, cutting benefits and job security.
4. MNCs set up production via joint ventures, acquisitions, or outsourcing, controlling global supply chains.
5. Developed countries seek liberalisation to access markets; developing countries should demand fair trade rules and subsidy reductions.
6. Globalisation benefits wealthy consumers and MNCs but harms small producers and workers due to competition and insecure jobs.
7. Liberalisation removes trade/investment barriers, enabling MNC operations and market integration.
8. Foreign trade integrates markets by equalizing prices and increasing choices, e.g., Indian spices exported to Europe compete with local products.
9. In 20 years, globalisation may deepen with advanced technology but face resistance if inequities persist, requiring fairer policies.
10. Globalisation aids India’s development (jobs, technology) but hurts small producers; balance needed via government support.
11. Blanks: globalisation, trade, cheap production, competition, competition.
12. Matching: (i) b, (ii) e, (iii) d, (iv) c, (v) a.
13. Choices: (i) b, (ii) b, (iii) d.