CHAPTER-4 GLOBALISATION AND THE INDIAN ECONOMY TC-ASH

Transcription

1 CHAPTER-4 GLOBALISATION AND THE INDIAN ECONOMY TC-ASH GLOSSARY- 1. Globalisation- A process through which goods, services and capital flow freely between the countries. In this rapid integration or interconnection between countries take place. 2. Multinational corporation- MNC is a company that owns or controls production in more than one nation. 3. Investment- The money that is spent to buy assets such as land, building, machines, and other equipment is called investment. 4. Foreign investment- Investment made by MNCs is called foreign investment. 5. Trade barrier- Restrictions used by the governments to increase or decrease foreign trade and to decide what kind of goods and how much of each should come into the country. Like import duty, import license etc. 6. Liberalisation- Removing barriers or restrictions set by the government. 7. WTO- World Trade Organisation set up to ensure free trade between the nations. QUESTION-ANSWERS 1. What do you understand by globalisation? Globalisation is a process which encourages free flow of goods, services, capital, technology and people across nations throughout the world. It results in greater integration of different economies. 2. What were the reasons for putting trade barriers to foreign trade and investment by the Indian government? Why did it wish to remove these barriers? The reasons were- a) Immediately after independence, the Indian government aimed to protect the domestic producers from foreign competition, especially when industries had just begun to come up in 1950s and 1960s. b) At this time, competition from imports would have been a death blow to growing industries. Hence, India allowed imports of only essential goods.

2 c) In 1991, the government wished to remove these barriers because it felt that domestic producers were ready to face the competition with foreign industries. d) It felt that foreign competition would improve the quality of goods produced by Indian industries. e) This decision was also supported by powerful international organisations. This marked the beginning of the New Economic Policy in India. 3. How would flexibility in labour laws help companies? It help companies in the following manner- a) Flexibility in labour laws help companies to employ labour as per their requirements. b) They can employ labour on casual or contractual wages. c) They can turn out labour whenever they feel to do so. d) They are not bound by any labour laws. e) It help companies to carry out operations with the skilled and experienced workers and reduce the cost of production. 4. What are the various ways in which MNCs set up or control production in other countries? The various ways adopted are- a) Multinational companies set up their factories and production units close to the markets where they can get desired type of skilled or unskilled labour at low costs along with other factors of production. b) After ensuring these conditions, 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 production units in a new country. They buy the local companies and expand their production with the help of modern technology and foreign investment. They place orders for production with small producers and sell their products under their own brand names to the customers worldwide.

3 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? Developed countries want developing countries to liberalise their trade and investment because- a) Developed countries with the help of latest technology have surplus production and for this, they require market to sell their products. b) Developing countries provide favourable conditions for the developed countries either in the form pf market or centres of production. c) Therefore, developed countries to liberalise their trade and investment so that the MNCs can set up factories in less expensive developing nations, and thereby increase their profits, at lower manufacturing costs. d) The developing countries should demand for fair trade practices to be followed by the developed nations. e) They should stop giving subsidies to their agricultural sector. Unfair trade barriers should be removed. 6. The impact of globalisation has not been uniform Explain. Increasing globalisation has affected different sections of the society globally. Some of the benefits are- a) Consumers have benefitted a great deal from globalisation. There is a whole range of goods available top them that have been produced in different countries. b) Doors of investment have been opened up for MNCs. They have been investing large sum of money in India to earn large profits. c) Domestic suppliers of goods and services have also gained by selling these to MNCs. d) Indian companies have invested in newer technology and production method and raised their production standard. e) Indian companies have also gained from successful collaborations with MNCs. f) Many of the Indian companies themselves are now becoming MNCs. They are spreading their operations worldwide. g) New markets and opportunities have opened up for many new industries particularly those involving IT. But there had been negative impact also. Some of them are as follows-

4 a) Flexibility in labour laws has worsened the conditions of the workers because now they are hired on casual basis to avoid facilities such as medical benefits, provident fund etc. Labour has lost security of job. b) Big companies have adopted new technology. They can successfully compete with MNCs. But, small scale industries are in a pitiable condition. They are not able to compete and are closing down in hundreds. c) New technology by nature is labour displacing. As a result, unemployment is increasing. 7. How has liberalisation of trade and investment policies helped the globalisation process? a) Liberalisation of trade and investment policies have made foreign trade and investment easier. b) Removal of restrictions and trade barriers has resulted in phenomenal expansion in exports and imports. c) Removal in investment restrictions has resulted in MNCs coming to India to invest money. Indian companies going abroad to invest in other countries. 8. How does foreign trade lead to integration of markets across countries? Explain with an example. a) Foreign trade provides opportunities for both producers and buyers to reach beyond the markets of their own countries. b) Goods travel from one country to another. Competition among producers of various countries as well as buyers prevails. Thus, foreign trade leads to integration of markets across countries. c) During Diwali season buyers in India have the option to choose between Indian and Chinese decorative lights and bulbs.

5 9. Globalisation will continue in future. Can you imagine the world would be like twenty years from now? After twenty years, there are possibilities that there would be positive changes in the process of globalisation. There would be healthy competition, improved productive efficiency, increased output, fair distribution of income, more employment opportunities, better living standards, more access to information and modern technology. The following are the reasons in its support- a) Increase in number of countries supporting the demand for fairer rules in international trade keeping in mind the need and situation of the developing countries. b) Increased availability of availability of qualitative and quantitative human resources due to greater access to education. c) Increased resource and industrial base in major countries due to the establishment of production units. 10. Mention the factors that have enabled globalisation. a) Development in the field of information and communication technology has been very remarkable. b) Information and communication technology has facilitated the spread of production of services across the globe. c) Telecommunication facilities like telephone, mobile phones and fax are used to contact one another around the world to access information instantly and to communicate from remote areas. d) It is globalisation, which has created new opportunities for companies providing services, especially those involving information technology. e) Call centres across the countries are an example. Not only that, a number of other services like data entry, accounting other administrative tasks are now being done cheaply in India and are exported to the developed countries. 11. Explain the role played by WTO in liberalising international trade.

6 a) WTO was started at the initiative of the developed countries, establishes rules and regulations regarding international trade and ensures that they are obeyed by its members. b) Despite of WTO s permission to free trade for all, it has been noticed that the dev eloped countries have unfairly retained trade barriers. On the contrary, WTO riles have forced the developing countries to remove the trade barriers. c) But the unfair way of retaining trade barriers by the developed countries depicts its bias in favour of them. But this had led to massive campaigns and representation by people s organisations. 12. What are SEZs? Write its main features. a) To attract the foreign investment in India, the government of India has set up industrial zones which are known as Special Economic Zones. b) The following are the characteristics of SEZs- These zones are expected to have world class facilities such as electricity, water, roads, transport, storage, recreational facilities. Companies setting up their production units in the SEZs are exempted from the payment of taxes for the initial five years. Government has also allowed flexibility in the labour laws to attract foreign investment. 13. What do you mean by fair globalisation? How government can play a major role in making globalisation fair? a) Globalisation is not providing to be a fair deal. Fair globalisation would create opportunities for all and also ensure that benefits of globalisation are shared better. b) Government policies must protect the interests of not only the rich and powerful but of all the people in the country. c) Government should ensure that labour laws are implemented properly and workers get their due share. d) Small producers should be supported to improve their productivity and performance so that they can compete for international market. e) Government can use trade and investment barriers if needed.

7 f) Government should be ready to negotiate at WTO for ensuring fairer rules. g) If necessary, government should align with countries with similar interests to oppose the domination of major and powerful players in WTO. 14. How people have played an important role in the struggle for a fair globalisation? People have played an important role in the struggle for fair globalisation in the following manner- a) Peoples organisations raised their voice against WTOs softness towards the trade and investment needs of developed countries. b) Massive campaigns and representation have been organised by these organisations demanding fair globalisation. c) A demonstration was held against the WTO in Hong Kong in 2005 for a fair globalisation.