Grade X CBSE (Eoconomics)

1. GLOBALIZATION AND INDIAN
ECONOMY
PRODUCTION ACROSS COUNTRIES:
Until the mid of the 20th century, production was largely organized
within countries.
What crossed the boundaries of these countries were raw
materials, food stuff and finished products.
Colonies such as India exported raw materials and food stuff and
imported finished goods. Trade was the main channel connecting distant
countries.
This was before large companies called Multinational
Corporations( MNCs) emerged on the scene.

2. Features of MNCs:
• Huge assets and turnover.
• International operations through a network of branches.
• Mighty economic power.
• Advanced and sophisticated technology.
• Aggressive advertising and marketing.
Example: Production of Nokia Mobile
Technology developed in USA. Headquarter and control
from Finland
Hardware in China Assembled in India Software by Microsoft
in India and USA

3. What are MNCs? Why MNCs set up their
offices and factories in certain areas only?
MNCs: A company that owns or controls production in more than
one nation.
Factors promoting MNCs to set up production units:(Areas where)
i) They can produce their goods at a minimum cost.
ii) The place where markets are closer.
iii) The government policies are favourable.
iv) The place where skilled and unskilled labour is available at low cost.
v) The place where other factors of production are assured.

4. Various ways in which MNCs set up or
control production in other countries:
• By buying local companies: Cargil Foods an American MNC bought
over Parakh Foods an Indian Company ( Producer of Edible Oil).
• By making partnership with local companies:
• By placing orders for production with small producers ( Garments,
Foot wear, Sports items etc.).
How do MNCs help in the growth of local companies?
1. Availability of Modern Techniques and Management.
2. Money: Provide money for additional investments like buying new
machines, raw materials etc. for fast production.

5. Important Terms:
• Investment: The money that is spent to buy assets such as
land, building, machines and other equipment is
called Investment.
• Foreign Investment: Investment made by MNCs is called
foreign investment.
• Foreign Trade: Foreign Trade is the exchange of capital, goods
and services across international borders or territories.
• Globalisation: Is the process of rapid integration or
interconnection between countries through
foreign trade and foreign investment by MNC.
• Trade Barriers: Government imposed restrictions over foreign imports and investment.
• Liberalisation: Removing barriers or restrictions set by the Government is known as liberalisation.

6. Foreign Trade and Integration of Markets
• Trading with other countries is not a new concept for India and
Indians. You have studied about trade routs connecting India and
South Asia.
• You would also remember that most of the trading companies such as
East India Company got attracted and started to trade with India.

7. How does Foreign Trade integrate markets of
different countries?
• Foreign trade creates an opportunity for the producers to reach beyond the
domestic markets.
• Producers can sell their products in the markets located in other countries.
• It helps for expanding the choice of goods beyond domestic market.
• It is the main channel connecting countries.
• Highly helpful for extensive trade. Ex: Chinese toys in India and Indian
readymade garments in other countries have resulted in connecting the
markets.
• Producers and consumers can get commodities produced in any part of the
world.

8. How can consumers and producers be
benefited from foreign trade?
i) Foreign Trade creates an opportunity for producers to reach beyond
the domestic market.
ii) Producers can sell their produce not only in markets located within
the country but can also compete in markets located in other
countries of the world .
iii) For buyers import of goods produced in other countries is one way
of expanding the choice of goods/ choice of goods in the market
rises.
iv) Prices of similar goods in the two markets tend to be equal.

9. What is Globalisation?
Factors Enabling Globalisation:
I. Transport Technology
II. II. Information and communication Technology
 Transport technology has made much faster delivery of goods across long
distances possible at lower costs.
 There are even remarkable developments in information and communication
technology.
 Telecommunication facilities are used to contact one anther around the world , to
access information instantly and to communicate from remote areas.
 Through internet one can obtain and share information on almost anything. It also
allows sending e-mail and talking across the world at negligible cost.
 Example: A new 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 London office using telecommunication facilities. The designing is done
on a computer. After printing the magazines are sent by air to London.

10. Impact of Globalisation on Indian Economy
i) Higher standard of living in urban areas.
ii) There is a greater choice before the consumers who now enjoy the
improved quality and lower prices for several products.
iii) MNCs have increased their investments in India leading to more job
opportunities.
iv) Globalisation has also created new opportunities for companies
providing services particularly those involving in IT sectors.
v) Local companies supply raw materials to foreign industries have
prospered.
vi) Globalisation has enabled some large Indian companies to emerge as
MNCs themselves like Tata Motors, Infosys, Ranbaxy, Asian Paints etc.

11. Impact of Globalisation on Small Producers
i) Globalisation encourages competition, big industries and companies
have been able to compete,, but the small producers are hit hard.
ii) They could not stand the competition and had to shut down. Some
industries like batteries, capacitors, plastics, toys, tyres, dairy
products etc have suffered lot.
iii) Due to this a lot of people lost their jobs and faced unemployment.

12. Positive and Negative Effects of
Globalisation
Positive Effects:
i) MNCs provide jobs and skills.
ii) Consumers enjoy a greater choice of goods and services at cheaper prices.
iii) it enables governments to work together to tackle global issues or respond to
events such as natural disaster or pandemic.
Negative Effects:
i) The declining of traditional industries.
ii) It is a threat to the world’s cultural diversity, threatening local traditions and
languages and making whole world more uniform to fit the western model.
iii) MNCs may drive local companies out of business and are some times more
powerful than the governments of the countries in which they invest.

13. What are Special Economic Zones(SEZs) ?
Why is the government setting up SEZs?
• SEZs/ Special Economic Zones are industrial areas with world class
facilities.
• They are set up by the Government to attract foreign investment.
Facilities available in SEZs:
• Allowing foreign companies as tax free for first 5 years in SEZs.
• SEZs are to have world class facilities such as electricity, water,
roads, transport, storage, recreational, and educational facilities.
• These industries and factories were also allowed flexibility in labour
laws.

14. Liberalisation of Foreign Trade and foreign
investment
Why the government of India put barriers to trade and investment?
i) To protect local producers from foreign competition.
ii) Industries needed protection so that they could grow and develop in
order to be ready to compete with developed countries later on.
iii) Ex: Imposed restrictions on imports of certain goods.

15. Barriers on foreign trade and investment were
removed to a large extent in India since 1991:
• Reasons for the removal of trade barriers( Liberalisation of foreign trade):
i) The government decided to remove the barriers on foreign trade and foreign
investment around 1991, as it was realised that the time had come for Indian producers
to compete with producers around the globe.
ii) The removal of barriers meant that goods could be imported as well as exported easily
and also foreign companies could set up their factories and offices in India.
iii) It was also felt that competition would improve the performance of the producers, within
India as they would have to improve their quality of services in comparison to the foreign
competition.
iv) The government imposed much fewer restriction of business activity within India who
was allowed to take decisions freely.

16. World Trade Organisation ( WTO)
• World Trade Organisation(WTO) is one such organisation whose aim is to
liberalise international trade.
• Started at the initiative of the developed countries.
• it establishes rules regarding international trade and sees that these rules are
obeyed.
• Nearly 160 countries of the world are currently members of the WTO( as on June
2014) ( 164 –members as on July 2016).
• Though WTO is supposed to allow free trade for all, in practice, it is seen that the
developed countries have unfairly retained trade barriers.
• On the other hand, WTO rules have forced the developing countries to remove
trade barriers. EX: USA farmers are supported by the govt, asking developing
countries not to support their farmers.
• Is this free and fair globalisation?

17. Struggle for a Fair Globalisation
Fair globalisation would create opportunities for all and also ensure that benefits of
globalisation are shared better.
How this could be done?
i) Government policies must protect the interest not only of rich and powerful but
of all the people of the country.
ii) Government can ensure that labour laws are properly implemented and the
workers get their rights.
iii) Government can support small producers and farmers to improve their
performance till they become strong enough to compete.
iv) If necessary the government can use trade and investment barriers.
v) it can negotiate at the WTO for fairer rules.
vi) It can also align other developing countries with similar interests to fight
against domination of developed countries in the WTO.

18. Thank You