- 1 New Terms
- 2 Important Notes
- 2.1 Multinational Corporations (MNCs)
- 2.2 Globalisation
Consumer: An individual who buys products or services for personal use and not for manufacture or resale.
Export Quotas: It means the fixing of the maximum quantity of a commodity that can be exported during a year.
Globalisation: It means integrating or interconnecting the economy of a country with the economies of other countries under conditions of free flow of trade, services, technology, capital and movement of people across international borders.
Globalisation describes a process by which national and regional economies, societies, and cultures have become integrated through the global network of trade, communication, immigration and transportation.
Import Quotas: It means fixing of the maximum quantity of a commodity that can be imported during a year.
Planning Commission: The Planning Commission was an institution in the Government of India, which formulated India’s Five-Year Plans, among other functions.
Multinational Corporation (MNC): An enterprise operating in several countries, but managed from one (home) country. Generally, any company or group that derives a quarter of its revenue from operations outside of its home country is considered a multinational corporation.
MRTPA: MRTPA stands for Monopolies and Restrictive Trade Practices Act. It was an Act following the recommendations of Monopoly Inquiry Committee and was passed in 1970.
Liberalisation of Economy: It means to free it from direct or physical controls imposed by the government.
Special Economic Zones (SEZs): It is an area in which business and trade laws are different from the rest of the country. These are located within a country’s national borders, and their aims include increased trade, increased investment, job creation and effective administration.
Tariff : A tax or duty to be paid on a particular class of imports or exports.
Labour Law : It is the body of laws, administrative rulings, and precedents which address the legal rights of, and restrictions on, working people and their organisations. It is also called employment law.
World Trade Organization (WTO): It is the only global international organisation dealing with the rules of trade between nations.
World Bank: World Bank is an international financial institution that extends financial assistance to their member countries for development purposes.
Multinational Corporations (MNCs)
Multinational Corporations (MNCs) are the companies that own or control the production of their goods in more than one country.
The main features of MNCs are :
(i) They set up their factories and offices in more than one country.
(ii) They set up their units where the cost of production is low and higher profits can be earned.
(iii) They set up their units where they can get cheap labour and other resources.
Multinational Corporations are spreading their production in different ways :
(i) By setting up a partnership with local companies.
(ii) By placing orders with local companies.
(iii) By closely competing with the local companies.
(iv) By buying local companies.
(v) By providing money for additional investment.
(ii) By bringing latest technology for production.
The various ways in which Multinational Corporations set up or control production in other countries are :
(i) MNCs set up their production units close to market.
(ii) MNCs set up production units jointly with local companies.
(iii) They set up units where there is skilled and unskilled labour available at low cost.
(iv) Large MNCs in developed countries place orders for productions with small producers.
(v) They have tremendous power to determine price, quality, delivery and labour conditions for distant producers.
(vi) By purchasing local companies and then expand its production with the help of modern technology.
(iii)They place orders for small producers and sell these products under their own brand name to the customers worldwide.
MNCs help in the growth of local companies as:
(i)MNCs are spreading their production and interacting with local producers in various countries across the globe.
(ii)By setting up partnerships with local companies.
(iii)By using the local companies for supply.
(iv)By closely competing with the local companies or buying them.
(v) They set up units where there is skilled and unskilled labour available at low cost.
(vi) Large MNCs in developed countries place orders for production with small producers.
Role of MNCs in the economic development:
(i) MNCs place order for production with small producers : Due to this small producers are able to get a global exposure as well as a huge customer base.
(ii) MNCs are setting up partnerships with local companies : The local companies are able to expand themselves at a global level.
(iii) They are interlinking the markets all over the world: Interlinking of markets all over the world has led to the exchange of foreign currency and thereby providing a boom to the economy.
The advantages of the Multi-national Cooperations (MNCs):
(i) MNCs also reduce the host countries dependence on imports. Imports reduce while exports from the country see a rise.
(ii) MNCs promote maximum utilisation of the country’s resources. This, in turn, leads to economic development.
(iii) The MNC is not only selling its finished products globally, but more important, the goods and services are produced globally.
(iv) MNCs might bring with them the latest technology for production, and generate employment opportunities.
The Disadvantages of MNCs :
(i) Small manufacturers like – batteries, capacitors, plastic toys, tyres, dairy products and vegetable oil are victims of competition.
(ii) Closing down of small units rendered many workers jobless.
(iii) Most employers prefer to employ workers ‘flexibly’, this means that workers jobs are no longer secure. Small Indian companies are hard hit because of government’s changed policies such as allowing import of the goods which were previously not allowed.
MNCs set up their production units where:
(i) MNCs set up production units at such a place where they can produce their goods at a minimum cost.
(ii) The place where markets are closer.
(iii) The place where skilled and unskilled labour are available at low cost.
(iv) Other factors of production are assured.
(v) Government policies are favourable.
|Foreign Trade||Foreign Investment|
|The process of buying and selling goods and services between two or more than two countries is known as foreign trade.||Foreign investment involves capital flows from one country to another, granting extensive ownership stakes in domestic companies and assets.|
Globalisation is the process of rapid integration or interconnection between countries through foreign trade and foreign investments by Multinational Corporations (MNCs).
Several top Indian companies have been able to benefit from Globalisation :
(i) They have invested in newer technology and production methods and raised their production standards.
(ii) Some have gained from successful collaborations with foreign companies.
(iii) Globalisation has enabled some large Indian companies to emerge as multinational themselves.
(iv) Globalisation has created new opportunities for companies providing services particularly those involving IT.
(v) The Indian company producing a magazine for the London based company and call centres are some examples.
(vi) Besides, a host of services such as data entry, accounting, administrative tasks and engineering are now being done cheaply in India and are exported to the developed countries.
The benefits of Globalisation can be shared better in the following ways :
(i) The government policy must protect the interest, not only of the rich and the powerful, but of all the people in the country.
(ii) The government can ensure that labour laws are properly implemented and workers get their rights.
(iii) It can support small producers to improve their performance till they become strong enough to compete.
(iv) It can use trade and investment barriers.
(v) It can negotiate at the WTO for ‘fairer rules’.
Government can ensure fair globalisation to its people in the following ways :
(i) Government needs to care about the labour laws so that workers get their rights and support small producers to improve their performance.
(ii) Government can negotiate with World Trade Organisation (WTO) for fairer rules and can align with developing countries to stand against the domination of developed countries.
Markets have been transformed in recent years:-
(i) We have a wide choice of goods and services before us.
(ii) The latest models of digital cameras, mobile phones and televisions made by the leading manufacturers of the world are within our reach now.
(iii) Today, Indians are buying cars produced by nearly all the top companies in the world.
(iv) A similar explosion of brands can be seen for many other goods ; from shirts to televisions to processed fruit juices.
Globalisation and greater competition among producers has been advantageous to consumers :
(i) Globalisation and greater competition among producers both local and foreign has been advantageous to consumers, particularly to well off sections of urban areas.
(ii) There is greater choice before these consumers who now enjoy improved quality and lower prices for several products.
(iii) People enjoy higher standards of living.
(iv) But the impact of globalisation has not been uniform among producers and workers.
(v) Services of the top Indian companies have been able to benefit from the increased competition.
(vi) They have invested in newer technology and production methods and raised their production standards.
(vii) Wide ranging choice of goods in our markets is a recent phenomenon and has brought changes in lives of people.
Rapid improvement in technology has stimulated the globalisation process :
(i) Transportation technology has made much faster delivery of goods across long distances possible at lower costs.
(ii) There are even more remarkable developments in information and communication technology.
(iii) Telecommunication facilities are used to contact one another around the world, to access information instantly, and to communicate from remote areas. information instantly, and to communicate from remote areas.
(iv) Through the internet, one can obtain and share information on almost anything. It also allows sending e-mail and talking across the world at negligible costs.
Problems created by the globalisation for small producers and workers:
(i) It has led to a widening of income inequalities among various countries.
(ii) Workers jobs are no longer secure. (iii)Expansion of the unorganized sector.
(iv) Small manufacturers have been hit hard due to severe competition.
(v) Several units have been shut down rendering many workers jobless.
(vi) Lives of workers are on the whims of employers.
(vii) Workers are deprived from their fair share of benefits.
Impacts of Globalization on Indian Economy :
(i) Higher standard of living in urban areas.
(ii) The impact has not been uniform among producers and workers.
(iii) There is the greater choice before the consumers who now enjoy the improved quality and lower prices for several products.
(iv) MNCs have increased their investments in India leading to more job opportunities.
(v) Globalisation has enabled some large Indian companies to emerge as MNCs themselves like Tata Motors, Infosys, Ranbaxy, Asian Paints, etc.
(vi) Globalisation has also created new opportunities for companies providing services particularly those involving IT (Information Technology).
(vii) Local companies supply raw materials to foreign industries and have prospered.
Foreign Trade is integrating markets of different countries
(i) Foreign trade creates an opportunity for the producers to reach beyond the domestic markets.
(ii) Producers can sell their products in the markets located in other countries.
(iii) It helps for expanding the choice of goods beyond domestic market.
(iv) It is a main channel connecting countries.
(v) Highly helpful for extensive trade.
(vi) The trading interest attracts various trading companies.
The impact of globalisation on our daily life are:
(i) Globalisation and greater competition among producers has been of advantage to consumers.
(ii) Greater choice before consumers.
(iii) Availability of standard quality products at lower price.
(iv) Improvement in living standard.
(v) Foreign investments have increased in many areas like cell phones, automobiles, electronics, soft drinks etc.
(vi) New job have been created.
(vii) Several of the units have shut down rendering many workers jobless.
(viii) Globalization has also created insecurity of job.
(i) There has been an increased investment in industries such as cell phones, automobiles, electronics, soft drinks, fast food or services such as banking in urban areas.
(ii) A lot of new jobs have been created.
(iii) Local companies supplying raw materials to these industries have experienced a boom.
(iv) Several top Indian companies have been able to benefit from the increased competition. Some have gained from successful collaborations with foreign companies.
(v) New opportunities for service such as data entry, accounting, administrative tasks, engineering are now being done cheaply in countries such as India and are exported to the developed countries.
Consumers and producers are benefited from foreign trade :
(i) Foreign trade creates an opportunity for producers to reach beyond the domestic market.
(ii) Producer 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 another country is one way of expanding the choice of goods.
(iv) With the opening of trade goods travel from one market to another .
(v) Choice of goods in the market rises.
(vi) Prices of similar goods in the two markets tend to become equal.
(i) By movement of goods.
(ii) By movement of services.
(iii) By movement of investments.
(iv) By movement of technology.
(v) By the movement of people between countries.
Cargill Foods is a very large American MNC. It has bought over smaller Indian companies such as Parakh Foods and expanded the range of its production of edible oils in India. 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. It has become the largest producer of edible oils in India. It refines processes and markets various edible oils for the food industry. Many popular brands like Sweekar, Nature Fresh, and Gemini are part of Cargill Foods.
Ford Motors want to develop Ford India as a component supplying base for its other plants across the globe :
(i) A number of local manufacturers are supplying components to its Chennai plant and the MNC feel that it can supply components to other plants across the globe.
(ii) Cost of labour and material is very low in India.
(iii) The components can be easily supplied to other MNC car manufacturers in India and China.
SEZs or Special Economic Zones are industrial areas with world class facilities. Companies who set up units in SEZs are exempted from tax for 5 years. They are setup to attract foreign investment.
Impacts of Globalisation in India:
(i) Stiff competition for local producers and manufacturers.
(ii) No job security. (iii)Workers are denied their fair share of benefit.
(iv) Long working hours and low wages to the workers.
(v) Expansion of unorganized sector.
(vi) New opportunities for IT sector.
(vii) Increase in investment and foreign trade.
(i) Globalization improves the productivity and efficiency in the use of resources through the process of competition.
(ii) Due to Globalization, growth rate of economy has gone up with an increase in foreign investment and foreign technology in India.
(iii) It allows the consumers to enjoy a wider range of goods and services at a lower cost.
Steps taken to make trade more fair between the countries :
(i) Before imposing trade barrier interest of the developing countries should be taken care.
(ii) Rules and regulations should be uniform.
(iii) Ensure that the developed countries do not retain trade barriers unfairly.
(iv) Labour laws should be implemented properly.
(v) Small producers should be supported to improve their performance till they become strong enough to compete.
Foreign trade has been integrating markets of different countries in following ways:
(i) Foreign trade creates an opportunity for the producers to reach beyond the domestic market, i.e. market of their own countries.
(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 the buyers, import of goods produced in another country is one way of expanding the choice of goods beyond what is domestically produced.
(iv) With the opening of trade, goods travel from one market to another. Choice of goods in the market rises. Prices of similar goods in the two markets tend to become equal.
(v) With the help of foreign trade, producers in the two countries now closely compete against each other even though they are separated by thousands of miles.
The role of technology in promoting globalisation process :
(i) This has made much faster delivery of goods across long distances possible at lower costs.
(ii) Even more remarkable have been the developments in information and communication technology.
(iii) Technology in the areas of telecommunications, computers, Internet has been changing rapidly.
(iv) Telecommunication facilities (telegraph, telephone including mobile phones, fax) are used to contact one another around the world, to access information instantly, and to communicate from remote areas.
(v) This has been facilitated by satellite communication devices.