Globalisation and the Indian Economy Flashcards
What is globalisation? what is the agent of globalisation?
the process of rapid integration or interconnection between countries is called globalisation. Movement of people between countries is also called globaliation.
Foreign investments made by companies is an important agent for globalisation. Increase in foreign investment would lead to increase in foreign trade and this would lead to integration of products and markets across countries.
Describe MNCs. Describe the situation of production in a nation before the comming of MNCs.
Multinational corporations owns and controls the production in more than one nation. MNCs connect 2 different nations. By doing production in other nations, the cost reduces through cheap labor and resources.
Before the comming of MNCs -
- Production was organised within countries.
- Trade was there. Stuff like, raw material, food items and finished products were traded.
- India exported raw materials and imported finished goods.
State the different ways through which MNCs set up their production .
- MNCs buy local companies
- Through their huge wealth, MNCs easily buy up the local companies.
- eg; Cargill foods an american MNC buying up Parakh foods. - Setting up production jointly with local companies
- It is beneficial for both local companies and MNCs.
- It is beneficial f0or MNCs as they get a partner to support them in a foreign country.
- It is beneficial for local companies as MNCs provide them with money and technology. - MNCs place order for production with small producers
- Products such as garments. footwears, etc. are produced by small producers and MNCs sell them under their own brand name.
- MNCs have power to determine price , quality, delivery and labor conditions.
State the advantages of foreign trade for producer.
- He/she gets an access to multiple markets
2. Cost of production can be reduced.
State the advantages of foreign trade for consumers.
- He/she gets a large variety to choose stuff from.
2. Competition among producers increases, so, quality also increases and price decreases.
Describe the 2 main factors that have enabled globalisation.
- Technology - Improvements in transportation and information technology has played a major role in spready the production of services across countries.
- Liberalisation - Removing barriers or restriction set by government to enabled globalisation process is called liberalisation.
Why government regulates foreign trade ?
Government regulates foreign trade using trade barriers because as it leads to the growth of the particular foreign country’s economy not our own country’s if it gets more popular than the country’s domestic product.
Since when Indian government adopted liberalisation and why?
Indian government adopted liberalisation in 1991 to improve product quality by increasing competition and improving globalisation.
Describe World Trade organisation.
- Liberalisation in India was supported by powerful international organisations. They believe that all types of barriers to foreign trade and investments are harmful. They wanted to promote ‘free trade’.
- WTO’s aim is to liberalise international trade.
- WTO was developed at the initiative of developed countries.
- It establishes rules regarding international trade.
State the debate on world trade practices adopted by WTO.
There is a debate that WTO works on the favor of developed countries to developing countries, it eases the export of developed countries but does not eases the export of developing countries.
For eg; due to small number of farmers in USA, their government provides subsidy on the crops produced by them, Si, the farmers sell their crops at a really low price within and also across countries. Domestic farmers can’t even compete with their prices. So, this cannot be free and fair trade and WTO should do something about this which it has not done till now.
Describe the impact of globalisation in India.
- > Impact on consumer : Variety of choices, improved quality and lower
prices. This will lead to high standard of living/
-> Impact on producers and workers ->
- There have been both positive and negative impact on producers
and workers.
SOME POSITIVE IMPACTS ARE AS FOLLOWS ->
- As MNCs investment in India increased, employment increased and
local companies supplying raw materials have prospered.
- Top indian companies have invested in new tech and also gained
a lot from collaboration with foreign countries.
- Globalisation has enables some larger Indian companies to
emerge as MNCs themselves. eg, TCS, Infosys.
- Companies providing services got an opportunity to export their
services to developed countries. eg; Data entry, accounting,
administrative tasks, etc.
SOME NEGATIVE IMPACTS ARE AS FOLLOWS ->
- Disadvantages for small produces : people started to buy thing from MNCs which has led to decrement in the number of small producers.
- Disadvantages for workers : Because MNCs aim for only their profit, they force workers to work more and give them low wages as local industries are shut down by the dominance of MNCs.
Why are Special economic Zones [SEZs] and why will companies invest in them?
SEZs are specially created industrial zones having world class facilities like road, electricity, water. transport, etc. in order to attract foreign investments.
Companies will invest in SEZs because -
- They are attracted by the world class facilities available there.
- Government gives them excemption in the payment of taxes for the first five years.
- flexiblity in labor laws is there. Government reduces labor laws there so that MNCs have to spend less on labor and therefore, will get attracted to that place.
State the steps by which we can make globalisation fair?
- Supporting small producers so that they get strong enough to compete.
- Proper implementation of labour laws, so, that workers don’t have to suffer.
- Using trade barriers and investment barriers to regulate foreign trade.
- Government can negotiate at WTO for ‘fair rule’ as the products from some countries are at a much lower cost than others due to the subsidy provided by government on them.
- Developing countries can form groups to fight against the domination of developed countries.
- People can also play an important role in making globalisation fair through campaigns, protests, etc.
