Globalisation and the Indian Economy notes by Vibha Maam
Globalisation is the process of integration of economies of the world under conditions of free flow of trade, capital and movement of persons across borders.in this process goods and services are produced and marketed throughout the world. In this process foreign trades are increased.
Due to globalisation, there is a movement of people between countries besides the movement of goods,services, investment and technology.
Production across Countries
- Trade was the main conjunction for connecting distant countries.
- MNCs (Multinational Companies) own or control the production in more than one nation.
- They set up their production units or branches in many countries for its operations.
Interlinking production across countries
After assuring cheap labour, MNCs set up production units in the following ways:
- They operate jointly with some local companies of the existing country
- They set up their own companies and production units in a new country
- They buy the local companies and expand their production with the help of modern technology and investment
- They place orders for production with small producers and sell their products under their own brand name to the customers worldwide .
Money spent to buy the inputs like land, buildings, machines, etc. is called investment. Investment done by MNCs and foreign investor term as foreign investment.
Factors controlling MNCs production:- closeness to the market, skilled and unskilled cheap Labours, government policies, etc.
Foreign Trade and Integration of markets or Advantage of Foreign Trade
- Attract trading interest
- Exchange of goods across different countries •creates opportunity for producers and buyers to reach beyond the domestic market
- Competition among producers
- Easy availability of goods and services across Nations
- Expansion of choices for buyers
- Reduction of prices of goods and services because of competition.
Factors that have enabled Globalisation
i) Technological Development
- Developments in transport technology like different fastest means of transportation.
- Developments in information and communication technology like the internet, computer, mobile, e-mails, fax, etc.
- Removing trade barriers set by the government is called liberalisation. If the country uses the policy of liberalisation, it means that it allows other country to interact, which will lead to globalisation
iii) Trade Barrier
- Restriction set by the government to increase or decrease the foreign trade. i.e. tax, quota.
World Trade Organisation ( WTO)
- WTO was started at the initiative of developed countries
- The aim of the WTO is to liberalise International Trade.
- WTO force the developing countries to remove the trade barriers
Functions of WTO
- Establishing rules for international trade
- Ensuring that the rules are followed
- Promote removal of restrictions on trade barriers.
Impact of globalisation in India
- Creates tough competition among domestic and foreign producers
- Create greater choices before consumers
- Reduction of prices
- Increase job opportunities
- Establishment of production units
- Raise production standards of Indian companies
- Emergence of Indian multinational companies
- Creates new opportunities for services involving information technology (IT).
- Increment of foreign investment
Special Economic Zones(SEZs)
The Indian government has taken some special steps to attract foreign investors to invest in India.
- Government provides world class facilities for electricity, road, water, transport, recreational and educational facilities in SEZs.
- MNCs will not have to pay taxes for an initial period of 5 years if they set up their production units in the SEZs.
- Flexibility in Labour law – Government has given the permission to the MNCs to hire the workers flexibly on a temporary basis.
Role of the government in Fair Globalisation
- Government policies should protect both rich and the poor producers.
- The government should use trade barriers, if required .
- Government should negotiate at the WTO for fairer rules
- The government can campaign and protest regarding the unfair rules.
- Labour law should be implemented properly.
- Government should support the small producers
- The government should align with the other countries to fight against the domination of developed countries in the WTO.
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