Globalization and the Indian Economy
What do you understand by globalisation? Explain in your own words.
Globalisation means integrating our economy with the world economy. This process of integration makes us economically interdependent at the global or international levels.
Many producers from outside can sell their goods and services in India. We can also produce goods and services and sell them in other countries. Globalisation also facilitates those who have capital to establish enterprises in India, produce goods for sale within the country or export them.
Similarly, entrepreneurs from India also can go and invest in other countries. Globalisation also includes movement of labourers from one country to other country.
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?
The Indian government has put barriers to foreign trade and foreign investment to protect the producers within the country from foreign competition. Industries were just coming up in the 1950s and 1960s, and competition from imports at that stage would not have allowed these industries to come up.
Around 1991, the government decided that the time had come for Indian producers to compete with producer around the globe. It felt that competition would improve the performance of producers within the country since they would have to improve their quality. So the government wished to remove these barriers.
How would flexibility in labour laws help companies?
Flexibility in labour laws would help companies by reducing the cost of labour.
What are the various ways in which MNCs set up, or control production in other countries?
What are multinational companies? How do they control production in other countries? Explain with examples. 
MNC is a company that owns or controls production in more than one nation. The MNCs set up or control production in other countries through the following measures:
(a) MNCs set up offices and factories for production in regions where they can get cheap labour at low costs and other resources.
(b) MNCs set up production jointly with some of the local companies of the different countries.
(c) MNCs invest to buy up local companies and then to expand production.
(d) Large MNCs in developed countries place orders for production with small producers. Garments, footwear, sports items, etc., are examples of industries where production is carried out by a large number of small producers around the world.
Why do developed countries want developing countries to liberalise their trade and investment? What do you think should the developing countries demand in return?
Developed countries feel that trade barriers are harmful as they hinder growth of trade and investments. These countries want their surplus produce to sell in other countries to earn large profits. So they want developing countries to liberalise their trade and investment.
Developing countries should negotiate at the WTO for fairer rules. They should demand for fair globalisation which ensures opportunities and benefits for all.
Why do developed countries want developing countries to liberalise their trade and investment? What do you think should the developing countries demand in return? 
(a) Globalisation has been of advantage to consumers — particularly the well-off sections in the urban areas. There is wide choice before consumers who now enjoy improved quality and lower prices for several products.
(b) MNCs have increased their investments in India. Consequently, new jobs have been created, benefiting local companies simultaneously.
(c) Several of the top Indian companies have been able to benefit from the increased competition. They have invested in newer technology and production methods and raised their production standards. Many large Indian companies have emerged as MNCs like Tata Motors, Infosys, Ranbaxy, etc.
(d) Globalisation has created new opportunities for companies providing services, particularly those involving IT.
(e) Globalisation has posed major challenges for small producers producing batteries, toys, tyres, etc. Even some have shut down their companies. Many workers have become unemployed or they have temporary jobs.
How has liberalisation of trade and investment policies helped the globalisation process?
Liberalisation of trade and investment policies have helped the globalisation process in the following ways :
(a) Around 1991, the Government of India began to remove barriers on foreign trade and foreign investment. This enables foreign companies to set up their factories and offices in India. In the same way, Indian companies established their factories and offices in other countries.
(b) With liberalisation of trade, businesses from India and other countries are allowed to make decisions freely about what they wish to import or export.
(c) As a consequence of liberalisation of trade and investment, industrial zones, called Special Economic Zones (SEZs], have been established by the Indian Government to attract foreign companies to invest in India.
(d) Flexibility in the labour laws was also allowed by the government to attract foreign investment and help in the process of globalisation.
How does foreign trade lead to integration of markets across countries? Explain with an example other than those given here.
Foreign trade creates an opportunity for the producers to reach beyond the domestic markets, i.e., products can compete in the world market. Input of goods expands the choice of goods beyond what is domestically produced.
Prices of similar goods in the market tend to become equal- there is competition amongst producers in various countries. Foreign trade thus results in connecting the markets or integration of markets in different countries.
For example, Indian traders export garments to different parts of the world. Also various foreign companies such as AIG have set up joint ventures in insurance sector and are selling their product in India. Such activities led to integration of markets across countries and bring them closer to each other.
Globalisation will continue in the future. Can you imagine what the world would be like twenty years from now? Give reasons for your answer.
Globalisation is the process of rapid integration of countries. This is happening through greater foreign trade and foreign investment. Liberalisation of foreign trade and foreign investment policies, rapid improvement in technology and the role of WTO have stimulated the globalisation process.
But all the people have not been benefited by the globalisation. Besides many rules of the WTO are prejudiced against the developing countries. They have forced the developing countries to remove trade barriers.
For example, in the US, the people engaged in agriculture receive massive sums of money from the US Government for production and for exports to other countries at abnormally low prices. Thus, surplus farm products are sold in other country markets at low prices, adversely affecting farmers in these countries. It is not a free and fair trade practice.
The position of developing countries will become worse if such policies will continue. However, efforts are being made to have a fair globalisation to ensure that its benefits are shared by all. It is expected that better sense will induce and the intersects of the developing countries will be protected.
At present massive campaigns and demonstrations by people’s organisations have influenced important decisions relating to trade and investment at the WTO. According to these conditions, the world after twenty years from now would undergo a positive change, i.e., all people would be benefited.
Supposing you find two people arguing. One is saying globalisation has hurt our country’s development. The other is telling, globalisation is helping India develop. How would you respond to these arguments?
The globalisation has hurt our industrial development because small industries may not be able to compete with those international enterprises and survive. In the competition between Indian and Chinese toys, Chinese toys prove better.
This provides an opportunity to expand business for Chinese toy makers. As a result of this, Indian toy makers face losses.
But on the other hand, globalisation has helped India develop. More and more MNCs have increased their investments in India. Consequently, new jobs have been created, benefitting local companies simultaneously.
Thus, both the arguments have some fact in them. However, if steps are taken to have a fair globalisation, the adverse effect may not hurt development of the country.
Fill in the blanks :
Indian buyers have a greater choice of goods than they did two decades back. This is closely associated with the process of (a) __________ Markets in India are selling goods produced in many other countries. This means there is increasing (b) __________ 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 (c) __________ While consumers have more choices in the market, the effect of rising (d) __________ and (e) __________ has meant greater (f) __________ among the producers.
(c) it has been beneficial for them
(d) foreign investment
(e) foreign trade
Match the following :
(a) – (ii)
(b) – (v)
(c) – (iv)
(d) – (iii)
(e) – (i)
Choose the most appropriate option.
(a) The past two decades of globalisation has seen rapid movements in
- goods, services and people between countries.
- goods, services and investments between countries.
- goods, investments and people between countries.
(b) The most common route for investments by MNCs in countries around the world is to
- set up new factories.
- buy existing local companies.
- from partnerships with local companies.
(c) Globalisation has led. to improvement in living conditions
- of all the people.
- of people in the developed countries.
- of workers in the developing countries.
- none of the above.