Globalisation And The Indian Economy PDF 2024-25

NOTES FOR THE TEACHER CHAPTER 4 : GLOBALISATION AND THE INDIAN ECONOMY Most regions of the world are getting increasingly of trade and investment policies and, pressures interconnected. While this interconnectedness from international organisations such as the across countries...

NOTES FOR THE TEACHER CHAPTER 4 : GLOBALISATION AND THE INDIAN ECONOMY Most regions of the world are getting increasingly of trade and investment policies and, pressures interconnected. While this interconnectedness from international organisations such as the across countries has many dimensions — WTO. Improvement in technology is a fascinating cultural, political, social and economic — this area for students and you may, with a few chapter looks at globalisation in a more limited directions, encourage them to do their own sense. It defines globalisation as the integration explorations. While discussing liberalisation, you between countries through foreign trade and have to keep in mind that the students are foreign investments by multinational unaware of what India was like in the corporations (MNCs). As you will notice, the more pre-liberalisation era. A role-play could be complex issues of portfolio investment have been conceived to compare and contrast the pre and left out. post-liberalisation era. Similarly, international negotiations under WTO and the uneven If we look at the past thirty years or so, we balances in power are interesting subjects that find that MNCs have been a major force in the can be covered in a discussion mode rather than globalisation process connecting distant regions as lectures. of the world. Why are the MNCs spreading their production to other countries and what are the The final section covers the impact of ways in which they are doing so? The first part globalisation. To what extent has globalisation of the chapter discusses this. Rather than contributed to the development process? This relying on quantitative estimates, the rapid rise section draws on the topics covered in Chapters and influence of the MNCs has been shown 1 and 2 (for example, what is a fair development through a variety of examples, mainly drawn goal), which you can refer to. Also, examples and from the Indian context. Note that the examples activities drawn from the local environment are are an aid to explain a more general point. While a must while discussing this section. This might teaching, the emphasis should be on the ideas include contexts that have not been covered in and examples are to be used as illustrations. the chapter, such as the impact of imports on You can also creatively use comprehension local farmers, etc. Collective brainstorming passages like the one given after Section II to sessions can be conducted to analyse such test and reinforce new concepts. situations. Integration of production and integration of Sources for Information markets is a key idea behind understanding the process of globalisation and its impact. This has The call for a fairer globalisation has been given, been dealt with at length in this chapter, among others, by the International Labour highlighting the role of MNCs in the process. You Organisation — www.ilo.org. Another interesting have to ensure that the students grasp this idea resource is the WTO website http://www.wto.org. with sufficient clarity, before moving on to the It gives access to the variety of agreements that next topic. are being negotiated at the WTO. For company related information, most MNCs have their own Globalisation has been facilitated by several websites. If you want to critically look at factors. Three of these have been highlighted: the MNCs, one recommended website is rapid improvements in technology, liberalisation www.corporatewatch.org.uk. 54 U NDERST ANDING E CONOMIC D EVEL NDERSTANDING OPMENT EVELOPMENT 2024-25  CHAPTER 4 GLOBALISATION AND THE INDIAN ECONOMY As consumers in today’s world, some of us have a wide choice of goods and services before us. The latest models of digital cameras, mobile phones and televisions made by the leading manufacturers of the world are within our reach. Every season, new models of automobiles can be seen on Indian roads. Gone are the days when Ambassador and Fiat were the only cars on Indian roads. Today, Indians are buying cars produced by nearly all the top companies in the world. A similar explosion of brands can be seen for many other goods: from shirts to televisions to processed fruit juices. Such wide-ranging choice of goods in our markets is a relatively recent phenomenon. You wouldn’t have found such a wide variety of goods in Indian markets even two decades back. In a matter of years, our markets have been transformed! How do we understand these rapid transformations? What are the factors that are bringing about these changes? And, how are these changes affecting the lives of the people? We shall dwell on these questions in this chapter. G LOBALISA TION OBALISATION AND THE I NDIAN E CONOMY 55 2024-25  PRODUCTION ACROSS COUNTRIES Until the middle of the twentieth multinational corporations (MNCs) century, production was largely emerged on the scene. A MNC is a organised within countries. What company that owns or controls crossed the boundaries of these production in more than one nation. countries were raw material, food stuff MNCs set up offices and factories for and finished products. Colonies such production in regions where they can as India exported raw materials and get cheap labour and other resources. food stuff and imported finished This is done so that the cost of goods. Trade was the main channel production is low and the MNCs can connecting distant countries. This was earn greater profits. Consider the before large companies called following example. Spreading of Production by an MNC A large MNC, producing industrial equipment, designs its products in research centres in the United States, and then has the components manufactured in China. These are then shipped to Mexico and Eastern Europe where the products are assembled and the finished products are sold all over the world. Meanwhile, the company’s customer care is carried out through call centres located in India. This is a call centre in Bengaluru, equipped with telecom facilities and access to the Internet to provide information and support to customers abroad. 56 U NDERST ANDING E CONOMIC D EVEL NDERSTANDING OPMENT EVELOPMENT 2024-25  In this example the MNC is not only for their closeness to the markets selling its finished products globally, in the US and Europe. India has but more important, the goods and highly skilled engineers who can services are produced globally. As understand the technical aspects of a result, production is organised in production. It also has educated increasingly complex ways. The English speaking youth who can production process is divided into provide customer care services. And small parts and spread out across the all this probably can mean 50-60 per globe. In the above example, China cent cost-savings for the MNC! provides the advantage of being a The advantage of spreading out cheap manufacturing location. production across the borders to the Mexico and Eastern Europe are useful multinationals can be truly immense. LET’S WORK THIS OUT Complete the following statement to show how the production process in the garment industry is spread across countries. The brand tag says ‘Made in Thailand’ but they are not Thai products. We dissect the manufacturing process and look for the best solution at each step. We are doing it globally. In making garments, the company may, for example, get cotton fibre from Korea,........ INTERLINKING PRODUCTION ACROSS COUNTRIES In general, MNCs set up production At times, MNCs set up production where it is close to the markets; where jointly with some of the local there is skilled and unskilled labour companies of these countries. The available at low costs; and where the benefit to the local company of such availability of other factors of joint production is two-fold. First, production is assured. In addition, MNCs can provide money for MNCs might look for government additional investments, like buying policies that look after their interests. new machines for faster production. You will read more about the policies Second, MNCs might bring with them WE WILL SHIFT later in the chapter. the latest technology for production. THIS FACTORY TO ANOTHER COUNTRY. Having assured themselves of these IT HAS BECOME conditions, MNCs set up factories and EXPENSIVE HERE! offices for production. The money that is spent to buy assets such as land, building, machines and other equipment is called investment. Investment made by MNCs is called foreign investment. Any investment is made with the hope that these assets will earn profits. G LOBALISA TION OBALISATION AND THE I NDIAN E CONOMY 57 2024-25  But the most common route for MNC investments is to buy up local companies and then to expand production. MNCs with huge wealth can quite easily do so. To take an example, Cargill Foods, a very large American MNC, has bought over smaller Indian companies such as Parakh Foods. Parakh Foods had built a large marketing network in various parts of India, where its brand was well-reputed. Also, Parakh Foods had four oil refineries, whose control has now shifted to Cargill. Cargill is now the largest producer of edible oil in India, with a capacity to make 5 million pouches daily! In fact, many of the top MNCs have wealth exceeding the entire budgets of the developing country Jeans produced in developing countries being sold in USA for Rs 6500 ($145) governments. With such enormous wealth, imagine the power and influence of these MNCs! There’s another way in which The products are supplied to the MNCs control production. Large MNCs, which then sell these under MNCs in developed countries place their own brand names to the orders for production with small customers. These large MNCs have producers. Garments, footwear, tremendous power to determine price, sports items are examples of quality, delivery, and labour industries where production is conditions for these distant carried out by a large number of producers. small producers around the world. Thus, we see that there are a variety of ways in which the MNCs are Women at home in Ludhiana making footballs for large MNCs 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, MNCs are exerting a strong influence on production at these distant locations. As a result, production in these widely dispersed locations is getting interlinked. 58 U NDERST ANDING E CONOMIC D EVEL NDERSTANDING OPMENT EVELOPMENT 2024-25  LET’S WORK THESE OUT Ford Motors, an American Read the passage on the left and answer the questions. company, is one of the 1. Would you say Ford Motors is a MNC? Why? world’s largest 2. What is foreign investment? How much did Ford Motors invest in India? automobile manufacturers 3. By setting up their production plants in India, MNCs such as Ford with production spread Motors tap the advantage not only of the large markets that countries over 26 countries of the such as India provide, but also the lower costs of production. Explain world. Ford Motors came the statement. to India in 1995 and 4. Why do you think the company wants to develop India as a base for spent Rs. 1700 crore to manufacturing car components for its global operations? Discuss the set up a large plant near following factors: Chennai. This was done (a) cost of labour and other resources in India in collaboration with (b) the presence of several local manufacturers who supply auto- Mahindra and Mahindra, parts to Ford Motors a major Indian (c) closeness to a large number of buyers in India and China manufacturer of jeeps 5. In what ways will the production of cars by Ford Motors in India lead to and trucks. By the year interlinking of production? 2017, Ford Motors was 6. In what ways is a MNC different from other companies? selling 88,000 cars in the 7. Nearly all major multinationals are American, Japanese or European, Indian markets, such as Nike, Coca-Cola, Pepsi, Honda, Nokia. Can you guess why? while another 1,81,000 cars were exported from India to South Africa, Mexico, Brazil and United States of America. The company wants to develop Ford India as a component supplying base for its other plants across the globe. Cars made by Indian workers being transported to be sold abroad by MNCs. FOREIGN TRADE AND INTEGRATION OF MARKETS For a long time foreign trade has been To put it simply, foreign trade the main channel connecting creates an opportunity for the countries. In history you would have producers to reach beyond the read about the trade routes domestic markets, i.e., markets of their connecting India and South Asia to own countries. Producers can sell their markets both in the East and West produce not only in markets located and the extensive trade that took place within the country but can also along these routes. Also, you would compete in markets located in other remember that it was trading interests countries of the world. Similarly, for the which attracted various trading buyers, import of goods produced in companies such as the East India another country is one way of Company to India. What then is the expanding the choice of goods beyond basic function of foreign trade? what is domestically produced. G LOBALISA TION OBALISATION AND THE I NDIAN E CONOMY 59 2024-25  ade fect of foreign tr Let us see the ef nese toys ple of Chi through the exam arkets. in the Indian m Chinese Toys in India Chinese manufacturers learn What is happening here? As a of an opportunity to export toys result of trade, Chinese toys to India, where toys are sold at come into the Indian markets. a high price. They start In the competition between exporting plastic toys to India. Indian and Chinese toys, Buyers in India now have the Chinese toys prove better. option of choosing between Indian buyers have a greater Indian and the Chinese toys. choice of toys and at lower Because of the cheaper prices prices. For the Chinese toy and new designs, Chinese toys makers, this provides an become more popular in the opportunity to expand business. Indian markets. Within a year, The opposite is true for Indian 70 to 80 per cent of the toy toy makers. They face losses, shops have replaced Indian as their toys are selling toys with Chinese toys. Toys much less. are now cheaper in the Indian markets than earlier. 60 U NDERST ANDING E CONOMIC D EVEL NDERSTANDING OPMENT EVELOPMENT 2024-25  In general, with the opening of trade, goods travel from one market to another. Choice of goods in the markets rises. Prices of similar goods in the two markets tend to become equal. And, producers in the two countries now closely compete against each other even though they are separated by thousands of miles! Foreign trade thus results in connecting the markets or integration of markets in different countries. Small traders of readymade garments facing stiff competition from both the MNC brands and imports. LET’S WORK THESE OUT 1. What was the main channel connecting countries in the past? How is it different now? 2. Distinguish between foreign trade and foreign investment. 3. In recent years China has been importing steel from India. Explain how the import of steel by China will affect. (a) steel companies in China. (b) steel companies in India. (c) industries buying steel for production of other industrial goods in China. 4. How will the import of steel from India into the Chinese markets lead to integration of markets for steel in the two countries? Explain. WHAT IS GLOBALISATION? In the past two to three decades, more and more MNCs have been looking for locations around the world which would be cheap for their production. Foreign investment by MNCs in these BE CAREFUL! THAT’S countries has been rising. At the same OUR WORLD YOU’RE time, foreign trade between countries PLAYING WITH! SOMEDAY YOU’LL has been rising rapidly. A large part HAVE TO PAY THE of the foreign trade is also controlled PRICE! by MNCs. For instance, the car manufacturing plant of Ford Motors GLOBALISATION IS FUN! in India not only produces cars for the Indian markets, it also exports cars to other developing countries and exports car components for its many factories around the world. Likewise, activities of most MNCs involve substantial trade in goods and also services. G LOBALISA TION OBALISATION AND THE I NDIAN E CONOMY 61 2024-25  The result of greater foreign contact with each other than a few investment and greater foreign trade decades back. has been greater integration of Besides the movements of goods, production and markets across services, investments and technology, countries. Globalisation is this there is one more way in which the process of rapid integration or countries can be connected. This is interconnection between countries. through the movement of people MNCs are playing a major role in between countries. People usually the globalisation process. More move from one country to another in and more goods and services, search of better income, better jobs or investments and technology are better education. In the past few moving between countries. Most decades, however, there has not been regions of the world are in closer much increase in the movement of people between countries due to LET’S WORK THESE OUT various restrictions. 1. What is the role of MNCs in the globalisation process? 2. What are the various ways in which countries can be linked? 3. Choose the correct option. Globalisation, by connecting countries, shall result in (a) lesser competition among producers. (b) greater competition among producers. (c) no change in competition among producers....WE’VE SEEN GREAT IMPROVEMENTS IN TRANSPORTATION... FACTORS THAT HAVE ENABLED GLOBALISATION Technology Rapid improvement in technology has been one major factor that has stimulated the globalisation process. For instance, the past fifty years have seen several improvements in transportation technology. This has made much faster delivery of goods across long distances possible at lower costs. Containers for transport of goods Goods are placed in containers that can be loaded intact onto ships, railways, planes and trucks. Containers have led to huge reduction in port handling costs and increased the speed with which exports can reach markets. Similarly, the cost of air transport has fallen. This has enabled much greater volumes of goods being transported by airlines. 62 U NDERST ANDING E CONOMIC D EVEL NDERSTANDING OPMENT EVELOPMENT 2024-25  Even more remarkable have been amazing world of internet, where you the developments in information and can obtain and share information on communication technology. In almost anything you want to know. recent times, technology in the areas Internet also allows us to send instant of telecommunications, computers, electronic mail (e-mail) and talk Internet has been changing rapidly. (voice-mail) across the world at Telecommunication facilities (tele- negligible costs. graph, telephone including mobile phones, fax) are used to contact one another around the world, to access information instantly, and to...BUT WHERE communicate from remote areas. This IS THE ELECTRICITY?... has been facilitated by satellite communication devices. As you would be aware, computers have now entered almost every field of activity. You might have also ventured into the n technology d communicatio Information an ort) has played a major role in Using IT in (or IT in sh rvices spreading out pr oduction of se e how. Globalisation s. Let us se across countrie A news magazine published for London readers is to be designed and printed in Delhi. The text of the magazine is sent through Internet to the Delhi office. The designers in the Delhi office get orders on how to design the magazine from the office in London using telecommunication facilities. The designing is done on a computer. After printing, the magazines are sent by air to London. Even the payment of money for designing and printing from a bank in London to a bank in Delhi is done instantly through the Internet (e-banking)! LET’S WORK THESE OUT 1. In the above example, underline the words describing the use of technology in production. IT LOOKS LIKE A VERY NICE MAGAZINE. BUT WHY ISN’T MY 2. How is information technology TEXTBOOK PRINTED LIKE NO, MY CHILD! THIS connected with globalisation? Would THIS? I CAN HARDLY READ PRINTING PRESS IS NOT globalisation have been possible THE WORDS IN MY BOOK! FOR ORDINARY INDIANS! without expansion of IT? G LOBALISA TION OBALISATION AND THE I NDIAN E CONOMY 63 2024-25  Liberalisation of foreign trade machinery, fertilisers, petroleum and foreign investment etc. Note that all developed policy countries, during the early stages of development, have given protection to Let us return to the example of imports domestic producers through a variety of Chinese toys in India. Suppose the of means. Indian government puts a tax on import of toys. What would happen? Starting around 1991, some far- Those who wish to import these toys reaching changes in policy were made would have to pay tax on this. Because in India. The government decided that of the tax, buyers will have to pay a the time had come for Indian higher price on imported toys. Chinese producers to compete with producers toys will no longer be as cheap in the around the globe. It felt that Indian markets and imports from competition would improve the China will automatically reduce. performance of producers within the Indian toy-makers will prosper. country since they would have to improve their quality. This decision Tax on imports is an example of was supported by powerful trade barrier. It is called a barrier international organisations. because some restriction has been set up. Governments can use trade Thus, barriers on foreign trade and barriers to increase or decrease foreign investment were removed to a (regulate) foreign trade and to decide large extent. This meant that goods what kinds of goods and how much could be imported and exported of each, should come into the country. easily and also foreign companies could set up factories and offices The Indian government, after here. Independence, had put barriers to foreign trade and foreign investment. Removing barriers or restrictions This was considered necessary to set by the government is what is protect the producers within the known as liberalisation. With country from foreign competition. liberalisation of trade, businesses are Industries were just coming up in the allowed to make decisions freely 1950s and 1960s, and competition about what they wish to import or from imports at that stage would not export. The government imposes have allowed these industries to come much less restrictions than before up. Thus, India allowed imports and is therefore said to be more of only essential items such as liberal. LET’S WORK THESE OUT 1. What do you understand by liberalisation of foreign trade? 2. Tax on imports is one type of trade barrier. The government could also place a limit on the number of goods that can be imported. This is known as quotas. Can you explain, using the example of Chinese toys, how quotas can be used as trade barriers? Do you think this should be used? Discuss. 64 U NDERST ANDING E CONOMIC D EVEL NDERSTANDING OPMENT EVELOPMENT 2024-25  WORLD TRADE ORGANISATION We have seen that the liberalisation developed countries, WTO establishes of foreign trade and investment in rules regarding international trade, India was supported by some very and sees that these rules are obeyed. powerful international organisations. About 160 countries of the world are These organisations say that all currently members of the WTO. barriers to foreign trade and investment are harmful. There Though WTO is supposed to allow should be no barriers. T rade free trade for all, in practice, it is seen between countries should be ‘free’. that the developed countries have All countries in the world should unfairly retained trade barriers. On liberalise their policies. the other hand, WTO rules have forced World Trade Organisation (WTO) is the developing countries to remove one such organisation whose aim is trade barriers. An example of this is to liberalise international trade. the current debate on trade in Started at the initiative of the agricultural products. Debate on Trade Practices You have seen in Chapter 2, that the Developing countries are, therefore, asking the agriculture sector provides the bulk developed country gover nments, “We have of employment and a significant reduced trade barriers as per WTO rules. But you portion of the GDP in India. have ignored the rules of WTO and have Compare this to a developed continued to pay your farmers vast sums of country such as the US with the money. You have asked our governments to stop share of agriculture in GDP at 1% supporting our farmers, but you are doing so and its share in total employment yourselves. Is this free and fair trade? trade?” a tiny 0.5%! And yet this very small percentage of people who are engaged in A typical cotton farm in USA consists of thousands of acres owned by a huge corporation that will sell cotton abroad at lowered prices. agriculture in the US receive massive sums of money from the US gover n m e n t f o r production and for exports to other countries. Due to this massive money that they receive, US farmers can sell the far m p r oducts at abnormally low prices. The surplus farm products are sold in other country markets at low prices, adversely affecting farmers in these countries. G LOBALISA OBALISATION TION AND THE I NDIAN E CONOMY 65 2024-25  LET’S WORK THESE OUT 1. Fill in the blanks. WTO was started at the initiative of __________countries. The aim of the WTO is to ____________________. WTO establishes rules regarding ________________ for all countries, and sees that ___________________ In practice, trade between countries is not ______________________________. Developing countries like India have ___________________, whereas developed countries, in many cases, have continued to provide protection to their producers. 2. What do you think can be done so that trade between countries is more fair? 3. In the above example, we saw that the US government gives massive sums of money to farmers for production. At times, governments also give support to promote production of certain types of goods, such as those which are environmentally friendly. Discuss whether these are fair or not. IMPACT OF GLOBALISATION IN INDIA In the last twenty years, globalisation Among producers and workers, of the Indian economy has come a the impact of globalisation has not long way. What has been its effect on been uniform. the lives of people? Let us look at some of the evidence. Firstly, MNCs have increased their investments in India over the past 20 Globalisation and greater years, which means investing in India competition among producers - both has been beneficial for them. MNCs local and foreign producers - has been have been interested in industries of advantage to consumers, such as cell phones, automobiles, particularly the well-off sections in the electronics, soft drinks, fast food or urban areas. There is greater choice services such as banking in urban before these consumers who now areas. These products have a large enjoy improved quality and lower number of well-off buyers. In these prices for several products. As a result, industries and services, new jobs have these people today, enjoy much been created. Also, local companies higher standards of living than was supplying raw materials, etc. to these possible earlier. industries have prospered. 2024-25  Steps to Attract Foreign Investment In recent years, the central and state rights. In the recent years, the government governments in India are taking special has allowed companies to ignore many of steps to attract foreign companies to these. Instead of hiring workers on a invest in India. Industrial zones, called regular basis, companies hire workers Special Economic Zones (SEZs), are ‘flexibly’ for short periods when there is being set up. SEZs are to have world class intense pressure of work. This is done to facilities: electricity, water, roads, reduce the cost of labour for the company. transport, storage, recreational and However, still not satisfied, foreign educational facilities. Companies who set companies are demanding more flexibility up production units in the SEZs do not in labour laws. have to pay taxes for an initial period of NOW, WE five years. ARE READY TO INVEST! Government has also allowed flexibility in the labour laws to attract foreign investment. You have seen in Chapter 2 that the companies in the organised sector have to obey certain rules that aim to protect the workers’ Secondly, several of the top Indian are some Indian companies which companies have been able to benefit are spreading their operations from the increased competition. They worldwide. have invested in newer technology and Globalisation has also created production methods and raised their new opportunities for companies production standards. Some have providing services, particularly those gained from successful collaborations involving IT. The Indian company with foreign companies. producing a magazine for the London Moreover, globalisation has based company and call centres are enabled some large Indian companies some examples. Besides, a host of to emerge as multinationals services such as data entry, account- themselves! Tata Motors (auto- ing, administrative tasks, engineering mobiles), Infosys (IT), Ranbaxy are now being done cheaply in (medicines), Asian Paints (paints), countries such as India and are Sundaram Fasteners (nuts and bolts) exported to the developed countries. LET’S WORK THESE OUT 1. How has competition benefited people in India? 2. Should more Indian companies emerge as MNCs? How would it benefit the people in the country? 3. Why do governments try to attract more foreign investment? 4. In Chapter 1, we saw what may be development for one may be destructive for others. The setting of SEZs has been opposed by some people in India. Find out who are these people and why are they opposing it. G LOBALISA TION OBALISATION AND THE I NDIAN E CONOMY 67 2024-25  Small producers: Compete or perish For a large number of small producers and workers globalisation has posed major challenges. R is in g Co m pe ti ti on Ravi did not expect that he wo uld have use d to buy dif fer ent com to face a crisis in such a sho pon ent s rt period inc lud ing cap aci tor s in bul k of his life as industrialist. Rav for the i took a ma nu fac tur e of tel evi sio loan from the bank to start n set s. his own Ho we ver, com pet itio n from the company producing capacitors MN C in 1992 bra nds for ced the Ind ian tele in Hosur, an industrial town vis ion in Tamil com pan ies to mo ve into ass Nadu. Capacitors are used em blin g in many activities for MNCs. Even wh electronic home appliances inc en some luding of them bought capacitors, the tube lights, television etc. Wit y would hin three pre fer to imp ort as the pri ce yea rs, he wa s ab le to of the exp an d imp ort ed ite m wa s ha lf the pro du ctio n an d ha d 20 pri ce wo rke rs charged by people like Ravi. working under him. His struggle to run his compan Ravi now produces less than y started half the wh en the gov er nm ent rem capacitors that he produced in ove d the year restrictions on imports of capaci 200 0 and has onl y sev en tors as wo rke rs per its agreement at WTO in 200 working for him. Many of Ravi’s 1. His friends main clients, the television com in the same business in Hy panies, derabad and Chennai have closed the ir units. Batteries, capacitors, plastics, toys, tyres, dairy products, and vegetable oil are some examples of industries where the small manufacturers have been hit hard due to competition. Several of the units have shut down rendering many workers jobless. The small and medium industries in India employ the largest number of workers (11 crores) in the country, next only to agriculture. LET’S WORK THESE OUT 1. What are the ways in which Ravi’s small production unit was affected by rising competition? 2. Should producers such as Ravi stop production because their cost of production is higher compared to producers in other countries? What do you think? 3. Recent studies point out that small producers in India need three things to compete better in the market (a) better roads, power, water, raw materials, marketing and information network (b) improvements and modernisation of technology (c) timely availability of credit at reasonable interest rates. l Can you explain how these three things would help Indian producers? l Do you think MNCs will be interested in investing in these? Why? l Do you think the government has a role in making these facilities available? Why? l Can you think of any other step that the government could take? Discuss. 68 U NDERST ANDING E CONOMIC D EVEL NDERSTANDING OPMENT EVELOPMENT 2024-25  Competition and Uncertain Employment Globalisation and the pressure of competition have substantially changed the lives of workers. Faced with growing competition, most employers these days prefer to employ workers ‘flexibly’. This means that workers’ jobs are no longer secure. Let us see how the workers in the garment export industry in India are having to bear this pressure of competition. Factory workers folding garments for export. Though globalisation has created opportunities for paid work for women, the condition of employment shows that women are denied their fair share of benefits. Large MNCs in the garment industry in Europe and America order their products A Garment Worker many from Indian exporters. These large MNCs 35 year old Sushila has spent export with worldwide network look for the cheapest years as a worker in gar ment wa s em plo yed goods in order to maximise their profits. To industry of Delhi. She ent itle d to get these large orders, Indian garment as a ‘permanent worker’ fun d, exporters try hard to cut their own costs. As health insurance, provident dou ble rat e, wh en cost of raw materials cannot be reduced, ove rtim e at a ed in the late exporters try to cut labour costs. Where Sushila’s factory clos for earlier a factory used to employ workers on 1990s. After searching for a job 30 a permanent basis, now they employ workers six months, she finally got a job Even only on a temporary basis so that they do km. away from where she lives. s fac tor y for not have to pay workers for the whole year. aft er wo rki ng in thi tem por ary Workers also have to put in very long several years, she is a f of working hours and work night shifts on a worker and ear ns less than hal lier. regular basis during the peak season. Wages wh at she wa s ear nin g ear hou se eve ry are low and workers are forced to work Su shi la lea ves her ek at 7:3 0 overtime to make both ends meet. morning, seven days a we A day a.m. and returns at 10 p.m. While this competition among the garment me ans no wa ge. She off from work efit s she use d exporters has allowed the MNCs to make large has none of the ben er to her profits, workers are denied their fair share of to get earlier. Factories clos ers benefits brought about by globalisation. home have widely fluctuating ord and therefore pay even less. G L OBALISA TION OBALISATION AND THE I NDIAN E CONOMY 69 2024-25  The conditions of work and the hardships of the workers described above have become common to many industrial units and services in India. Most workers, today, are employed in the unorganised sector. Moreover, increasingly conditions of work in the organised sector have come to resemble the unorganised sector. Workers in the organised sector such as Sushila no longer get the protection and benefits that they enjoyed earlier. LET’S WORK THESE OUT 1. In what ways has competition affected workers, Indian exporters and foreign MNCs in the garment industry? 2. What can be done by each of the following so that the workers can get a fair share of benefits brought by globalisation? (a) government (b) employers at the exporting factories (c) MNCs (d) workers. 3. One of the present debates in India is whether companies should have flexible policies for employment. Based on what you have read in the chapter, summarise the point of view of the employers and workers. THE STRUGGLE FOR A FAIR GLOBALISATION The above evidence indicates that that labour laws are properly not everyone has benefited from implemented and the workers get globalisation. People with education, their rights. It can support small skill and wealth have made the best producers to improve their use of the new opportunities. On the performance till the time they become other hand, there are many people strong enough to compete. If who have not shared the benefits. necessary, the government can use Since globalisation is now a trade and investment barriers. It can reality, the question is how to negotiate at the WTO for ‘fairer rules’. make globalisation more ‘fair’? It can also align with other developing Fair globalisation would create countries with similar interests to opportunities for all, and also ensure fight against the domination of that the benefits of globalisation are developed countries in the WTO. shared better. In the past few years, massive The government can play a major campaigns and representation by role in making this possible. Its people’s organisations have policies must protect the interests, not influenced important decisions only of the rich and the powerful, but relating to trade and investments at all the people in the country. You have the WTO. This has demonstrated read about some of the possible steps that people also can play an that the government can take. For important role in the struggle for fair instance, the government can ensure globalisation. 70 U NDERST ANDING E CONOMIC D EVEL NDERSTANDING OPMENT EVELOPMENT 2024-25 A demonstration against WTO in Hong Kong, 2005 SUMMING UP In this chapter, we looked at the investment has facilitated present phase of globalisation. globalisation by removing Globalisation is the process of barriers to trade and rapid integration of countries. investment. At the inter - This is happening through national level, WTO has put greater foreign trade and foreign pressure on developing coun- investment. MNCs are playing a tries to liberalise trade and major role in the globalisation investment. process. More and more MNCs While globalisation has are looking for locations around benefited well-off consumers the world that are cheap for their and also producers with skill, production. As a result, education and wealth, many production is being organised small producers and workers in complex ways. have suffered as a result of the Technology, particularly IT, rising competition. Fair has played a big role in globalisation would create organising production across opportunities for all, and also countries. In addition, ensure that the benefits of liberalisation of trade and globalisation are shared better. G LOBALISA TION OBALISATION AND THE I NDIAN E CONOMY 71 2024-25  EXERCISES 1 What do you understand by globalisation? Explain in your own words. 2. What were the reasons for putting barriers to foreign trade and foreign investment by the Indian government? Why did it wish to remove these barriers? 3. How would flexibility in labour laws help companies? 4. What are the various ways in which MNCs set up, control or produce in other countries? 5. Why do developed countries want developing countries to liberalise their trade and investment? What do you think should the developing countries demand in return? 6. “The impact of globalisation has not been uniform.” Explain this statement. 7. How has liberalisation of trade and investment policies helped the globalisation process? 8. How does foreign trade lead to integration of markets across countries? Explain with an example other than those given here. 9. Globalisation will continue in the future. Can you imagine what the world would be like twenty years from now? Give reasons for your answer. 10.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? 11. 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 ______________. Markets in India are selling goods produced in many other countries. This means there is increasing ______________ 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 _____________ ___________________________________________. While consumers have more choices in the market, the effect of rising _______________ and ______________has meant greater _________________among the producers. 12.Match the following. (i) MNCs buy at cheap rates from small (a) Automobiles producers (ii) Quotas and taxes on imports are used to (b) Garments, footwear, sports regulate trade items (iii) Indian companies who have invested abroad (c) Call centres (iv) IT has helped in spreading of (d) Tata Motors, Infosys, Ranbaxy production of services (v) Several MNCs have invested in setting (e) Trade barriers up factories in India for production 72 U NDERST ANDING E CONOMIC D EVEL NDERSTANDING OPMENT EVELOPMENT 2024-25  13.Choose the most appropriate option. (i) The past two decades of globalisation has seen rapid movements in (a) goods, services and people between countries. (b) goods, services and investments between countries. (c) goods, investments and people between countries. (ii) The most common route for investments by MNCs in countries around the world is to (a) set up new factories. (b) buy existing local companies. (c) form partnerships with local companies. (iii) Globalisation has led to improvement in living conditions (a) of all the people (b) of people in the developed countries (c) of workers in the developing countries (d) none of the above ADDITIONAL ACTIVITY / PROJECT I. Take some branded products that we use everyday (soaps, toothpaste, garments, electronic goods, etc.). Check which of these are produced by MNCs. II. Take any Indian industry or service of your choice. Collect information and photographs from newspapers, magazine clippings, books, television, internet, interviews with people on the following aspects of the industry. (i) Various producers/companies in the industry (ii) Is the product exported to other countries? (iii) Are there MNCs among the producers? (iv) Competition in the industry (v) Conditions of work in the industry (vi) Has there been any major change in the industry in the past 15 years? (vii) Problems that people in the industry face. G L OBALISA TION OBALISATION AND THE I NDIAN E CONOMY 73 2024-25