SUPPORT MATERIAL OF SOCIAL SCIENCE FOR CLASS -X
Chapter 4 Economics- Globalisation
and the Indian Economy
Key Points of The Lesson
What is Globalisation?
Globalisation
refers to the integration of the domestic economy with the economies of the
world.
An MNC is a
company that owns and controls production in more than one nation. Foreign
Investment is investment made by MNCs.
Advantages of Foreign Trade— ‘Foreign
Trade’ has facilitated the travel of goods from one market to another. It
provides a choice of goods to the buyers. Producers of different countries have
to compete in different markets. Prices of similar goods in two markets in two
different countries become almost equal.
SEZs
or Special Economic Zones are industrial zones being set up by the Central and
State Governments in different parts of the country. SEZs are to have world
class facilities such as electricity, water, roads, transport, storage,
recreational and educational facilities. Companies who set up production units
in SEZs are exempted from taxes for an initial period of five years. SEZs thus
help to attract foreign companies to invest in India.
Reasons to put barriers to foreign trade:
The Indian government after independence had put barriers to foreign trade and
investment. This was done 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 develop and grow. Imports of only essential items such as machinery,
fertilizers, petroleum etc. was allowed.
To protect the Indian
economy from foreign infiltration in industries affecting the economic growth
of the country as planned. India wanted to move faster to catch up with the
main industries in the world market and therefore had to keep an extra watch on
its progress in international trade and give incentives to the more rapidly
growing industries through fiscal tariff and other means. Around 1991, some
changes were made in policy by the Indian government as it was decided that the
time had come for the Indian producers to compete with foreign producers. This
would not only help the Indian producers to improve their performance but also
improve their quality.
Liberalization
means the removal of barriers and restrictions set by the government on foreign
trade. Governments use trade barriers to increase or decrease (regulate)
foreign trade to protect the domestic industries from foreign competition.
Example, Tax on imports. Around 1991, government India adopted the policy of
liberalization.
World Trade Organization
(WTO) was started at the initiative of the developed
countries. Its main objective is to liberalize international trade.
Privatization means transfer of ownership of property from public sector to
private sector.
Business Process Outsourcing (BPO) is the
contracting of non-primary business activities and functions to a third-party
service provider.
Economic Reforms or New
Economic Policy is policy adopted by the Government of India since July 1991.
Globalisation’s key features
are - Liberalization, Privatisation and Globalisation (LPG).
MNCs set up production in various countries
based on the following factors: MNCs set up offices and
factories for production in regions where they can get cheap labour and other
resources; e.g., in countries like China, Bangladesh and India. At times,
MNCs set up production jointly with some of
the local companies of countries around the world. The benefit of such joint
production to the local company is two-fold-
First,
the MNCs can provide money for additional investments for faster production. Secondly,
the MNCs bring with them the latest technology for enhancing and improving
production. Some MNCs are so big that their wealth exceeds the entire budgets
of some developing countries. This is the reason why they buy up local
companies to expand production. Example, Cargill Foods, An American MNC has
bought over small Indian company such as Parakh Foods.
MNCs control production by placing orders for
production with small producers in developing nations; e.g., garments,
footwear, sports items etc. The products are supplied to these MNCs which then
sell these under their own brand name to customers.
Factors which have helped in globalization:
Technology-
Rapid improvement in technology has contributed greatly towards globalization.
Development in information and communication technology has also helped a great
deal. Telecommunication facilities — telegraph, telephone (including
mobile phones), fax are now used to contact one another quickly around the
world. Teleconferences help in saving frequent long trips across the globe.
Information technology has also played an important role in spreading out
production of services across countries. Orders are placed through internet,
designing is done on computers, even payment for designing and printing can be
arranged through internet.
Production Across
Countries Trade was the main channel connecting distant countries.
Large companies which are now called
Multinational Corporations (MNCs) play a major role in trade. An MNC is a
company that owns or controls production in more than one nation. MNCs set up
offices and factories for production in regions where they can get cheap labour
and other resources so that the company can earn greater profits.
Interlinking Production
Across Countries The money that is spent to buy assets such as land, building,
machines and other equipment is called investment. An investment made by MNCs
is called foreign investment. MNCs are exerting a strong influence on
production at these distant locations. As a result, production in these widely
dispersed locations is getting interlinked.
There are a variety of
ways as mentioned below, in which MNCs are spreading their production and
interacting with local producers in various countries across the globe-
-By
setting up partnerships with local companies
- By using the local
companies for supplies
- By closely competing
with the local companies or buying them up
The Struggle for a Fair
Globalisation Fair globalisation creates opportunities for all and also ensures
that the benefits of globalisation are shared better.
The government can play a
major role in making this possible. Some of the steps that the government take is:
1-
It can ensure that labour laws are
properly implemented and the workers get their rights.
2-
2- It can support small producers to
improve their performance. If necessary, the government can use trade and
investment barriers.
3-
It can negotiate at the WTO for fairer rules.
It can also align with other developing countries with similar interests to
fight against the domination of developed countries in the WTO.
MRS.VINEETA ARYA (TGT
S.SC)
KV DOGRA LINES MEERUT
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