Session: 2019-20

Globalisation and the Indian Economy

Political Science
Class-10

I. Transformation of Markets
The globalisation has brought rapid transformation of the markets in India with the following effects:

• There is an explosion of brands in markets Board Questions:

1.How are our markets been transformed in recent
• Wide ranging choice of goods and services are years.? Explain with current examples. (2010)
available 2. A wide ranging of choice of goods and services are
available in the market. Support the statement with
• Quality products available at low prices
examples in context of globalisation. (2016)
• Leading manufacturers of the world have their
offices or factories in India
• The urban well-off section has made most of this transformation
• Example- Latest cars, mobiles, cameras etc.

II. MNC (Multinational Corporations)

A MNC is a company that owns and controls production in more than one nation. They spread their
production across countries. They have huge wealth even exceeding the budget of a developing country. All
this makes them very powerful and influential in international market.

III. Interlinking and control over production across countries

MNCs don’t produce all the goods on their own and at one single place. They operate in a number of countries
over a variety of products.
Board Questions:
1.Setting up factories or opening offices: 1.Examine any three conditions
which should be taken care of by
MNCs spread production by considering the following things. multinational companies to set up
their production units. (Delhi
• Availability of cheap skilled and unskilled labour force and other 2017)
resources.
2. Define any five factors that
Example- India has Skilled engineers and English educated youth
promote the Multi National
whom the MNCs can employ corporations (MNCs) to set up
• Closeness to the market their production units in a
• Favourable govt policies particular place. (Delhi 2019)
• Availability of other factors of production

2. Foreign Investment: MNCs invest money to buy assets like land, building and other equipment.
3. Routes to Controlling Production across countries:

• Joint Venture: MNCs start production jointly with local companies of different countries. Local
companies get benefit like-
 Local companies get money for further investment to enhance production process.
 Latest technologies are made available to local companies. E.g. Hero and Honda, Maruti and Suzuki
• Buying local companies: MNCs also expend their production by buying up local companies.
Example: American MNC Cargil Foods bought Parakh Foods to become the largest edible oil company
in India. Parle Group was taken over by Coca Cola of America.

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Session: 2019-20 | Class 10 (Geo.) Manufacturing Industries

• Engaging local small producers for production: MNCs place orders with local producers and sell the
products under their own brand name. Examples: garments, footwear, sports items, electrical goods,
toys, cosmetics etc.

4. Influence of MNCs:
• Because of their huge capital resources, latest technologies, and marketing skills MNCs determine
price, quality, delivery and labour conditions of local producers.
• Their influence is felt in global economy as around 200 MNCs control over quarter of the world
economic activities.

IV. Foreign Trade

Board Questions:
• Export and import are two important components of foreign trade 1.What are the benefits of
foreign trade?
• Goods travel between one market to another
2. State the basic functions of
• Choices of goods rises foreign trade. (2015)
• Prices of same goods tend to be equal
• Foreign trade is advantageous to consumers
• The country gets foreign investment
• Competition among distant producers is an important feature of foreign trade

V. Interconnecting and integrating of markets Board Questions:

• Since ages foreign trade has been an instrument in connecting Explain with examples how opening of
foreign trade results the markets in different
countries. India was also connected with South Asia and both countries. (20111)
east and west via different sea routes. How does foreign trade play an important
• Foreign trade gives opportunity to domestic producers role in integrating the market across the
countries? Explain. (2010, 11, 12)
compete and sell their goods and commodities in other
“Foreign trade integrates the markets in
countries different countries”. Support the statement
with arguments. (2015, 16)
• Import of goods expands the choices for the buyers. (e.g.
choice between Indian and Chinese toys)
• In this modern tech era with speedy transport and online facilities foreign trade has been more
instrumental in integrating and globalising the markets.
• E-retailer giants like Amazon and Alibaba Express are newer forms of connecting the world markets

Thus, we can say that foreign trade integrates and interconnects not only markets but at same time is
globalising the world.

VI. Globalisation:
Globalisation is a process the process of rapid integration or interconnection between countries. It is the
integration of domestic markets with the rest of the world through trade, capital and technology flows.

• Foreign trade plays a great role in the globalisation through integrating production and markets.
• Movement off the goods, services, investment, technology
• Movement of people between countries for better jobs and education, tourism etc.

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Session: 2019-20 | Class 10 (Geo.) Manufacturing Industries

• MNCs control most of the foreign trade. Thy paly a big role in globalisation. Example: Ford motors India
produces cars not only for India but also exports to other developing countries.

VII. Factors of globalisation (technology, liberalisation and WTO play a big role in globalisation)

(1) Role of technology in globalisation. Technological revolution in transportation and communication have
shrunk the time to cover distances. Now the world has become a global village.

• The transportation technology has helped in faster

Board Questions:
delivery of goods across long distances at lower low
Explain the role of technology in promoting the
costs. The use of containers has reduced the port globalisation process. (2017)

handling costs. “Rapid improvement in technology has been one

major factor that has stimulated the globalisation
• Telecommunication facilities have facilitated the instant process. Explain. (2008, 2014)
sharing of information. Satellite communication devices “Information and communication technology
have played a major role in spreading out
have facilitated the communication from remote areas.
products and services across countries.” Support
• Computer and the world of internet, e-mails, live the statement. (2012)

streaming and social networking sites are used to obtain Describe how IT helps in making globalisation
successful. (2014)
and share information at negligible costs.
• Online product launches, selling through e-retailers and online payment have integrated the world of
business
• Example: A publisher from England outsources the publication of a magazine from India and airlifts the
final output via air transport. Payment is made through e-banking.

(2). Role of Liberalisation of foreign trade on globalisation:

Removing trade barriers and restrictions from foreign trade is called liberalisation of foreign trade. It opens up
market to the world. It leads to globalisation

Steps taken by govt to liberalise foreign trade:

Around 1991, under the then Finance Minister Dr Manmohan Singh, liberalisation of Indian economy began.

• Govt tried to bring international competition in Indian market to make local producers improve their
performance.
• Trade barriers on foreign trade and were removed to a large extent.
• Goods could be now exported and imported easily
• Foreign companies could set up factories and offices
• Businesses feel free to decide upon import and export
Effect of liberalisation on India:
Board Questions:
• Boost to free trade practices
What is liberalisation? Describe any four effects on
• Rising competition and it’s positive/negative effects Indian economy. (2017, 2019)
on Indian economy
What steps were taken by the government to
• Increased foreign investment and FDI liberalise Indian economy? (2012)
• More economic integration of Indian market with
Explain the relation between liberalisation of foreign
the international market
trade and trade barriers. (2013)
• More import and setting up of SEZs

But liberalisation and rising competition has resulted in shutting down of many industries. The 'flexible-
employment policy put job security of workers at risk.

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Session: 2019-20 | Class 10 (Geo.) Manufacturing Industries

3.WTO: (164 members at present)

World Trade Organisation (WTO) was set up in 1 Jan, 1995 and India has been founder member.

Aims and functions:

• To liberalised international trade Board Questions:

• Establishes rules regarding international trade Describe any 5 characteristics of
WTO. (2013)
• See and ensure that rules of international trade are obeyed
Describe the function and
• It is also a forum for multilateral trade negotiations and settling of
importance of WTO. (2013)
trade related disputes
• Continuous economic research and analysis of international market and trade practices

Shortcomings of WTO:

• At times the “free an fare trade” concept is questioned

• It is dominated by developed countries
• Misused by developed countries to unfairly retain trade barriers
• Developing countries are forced to remove trade barriers
• For example- Developed country like America gives high subsidy to its farmers while at the same time
developing countries are asked not to support farmers.

VIII. Effect of globalisation on consumers

Board Questions:
• Globalisation has filled brought explosion of brands in markets
“Globalisation and competition among
• The quality of goods has been improved because Producers producers have been of advantageous to the
invested in new technologies consumers”. Give arguments in support of
this statement. (2009, 15, 16)
• Greater of choices in goods are available
• Competition tends to keep the prices of same products equal and low
• The urban area well-off section has benefited the most from globalisation. They can now enjoy a better
life.

IX. Effects of Globalisation on Indian Economy

The impact of globalisation is a mix of good and bad effects among Board Questions:
producers and workers.
Analyse any five positive effects of
Positive impacts: globalisation on the Indian
economy. (2017)
• Globalisation has been advantageous to consumers. (* see the topic What is globalising? Explain two
“effect on consumers”) positive and two negative impact of
globalisation. (2016)
• MNCs have increased their investment in industries like- cell phone,
What are the advantages of
automobiles, electronics, soft drinks, fast food and services like banking globalisation? (2011)

• Local raw material supplier companies have prospered Describe the impact of globalisation
on Indian economy. (2016)
• Top Indian companies have benefited from increased competition and
Analyse one good and one bad effect
successful collaboration with foreign companies of globalisation on India. (2009)
• Increase in FDI
• Globalisation has turned some Indian companies as Multi nationals – Tata Motors, Infosys, Asian Paints

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Session: 2019-20 | Class 10 (Geo.) Manufacturing Industries

• Employment and new opportunities have increased in service sectors like IT sector
• India has become a hub of cheap outsourcing in the fields of – data entry, accounting, administrative tasks,
engineering etc.
• Globalisation has benefited the urban well-off section to raise their standard of living.

Negative impacts due to high competition

On Producers-

• Rising competition has hit hard the small companies’ industries like- toys, tyres, plastics, dairy
products, batteries.
• Many industries have shut down or taken over by MNCs
• Example- case of Ravi in the text book, page 68
On workers – Board Questions:
• Hardships of the workers in industrial units and services have Explain in what ways has
increased competition affected workers,
• Many workers have lost their jobs Indian Exporters- and foreign
MNCs in the garment industry.
• Flexible policy toward employment has created uncertainty of jobs. (2013)
• Low wages and long working hours
• The workers of organised sectors resemble the unorganised sector.
Example- The case of a garment worker Shushila (NCERT textook page 69)
On Indian Exporters-

• Indian Garment Industry compete to get orders from MNCs at cheaper rates.
• To cut down labour costs they ‘flexibly' employ workers
• The workers are hired at low wages and have to do overtime also
Example- case of garment industry, page 69.

We can say that that globalisation has resulted in competition that has not been uniform. MNCs have
benefited as they are able to maximise their profits. But the workers are denied the fair share of benefits of
globalisation.

X. Attempts to make globalisation fair

Globalisation has been not fair to all. The benefits of globalisation are shared mostly among the educated,
skilled and wealthy people. The other lot has suffered by globalisation. Even WTO has not been fair to
developing countries.
Fair globalisation means-

• Creation of opportunities for all

• better sharing of benefits of globalisation.

Role of government to make globalisation fairer:

Board Questions:
• Govt must protect the interests of all the people of the How can the government of India play
a major role to make globalisation
• Labour laws be implemented properly
fair? Explain with examples. (2019)
• Workers should be given their rights Explain how globalisation can be
• Support for small producers till they are able to face competition made fair. (2010, 2014)

• Trade and investment barriers can be used to check import

• Govt can negotiate at the WTO for 'fairer rules'
• Govt can fight against the domination of developed countries at WTO by aligning with other developing
countries

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Session: 2019-20 | Class 10 (Geo.) Manufacturing Industries

Role of people:

At different important WTO meets people’s organisations and NGOs have campaigned and demonstrated against the
unfair trade and investment policies of WTO.

XI. Trade Barriers

Trade barriers refers to taxes imposed by govt in the form of import duties quantitative restrictions on foreign
goods. This economic control is used to regulate foreign trade and decide the kind and amount of goods to be
allowed for imports.
Use of trade barriers by govt after Independence:
Government resorted to trade barriers on foreign investment and trade for the following reasons.
Board Questions:
• To protect the domestic producers from foreign competition
What is trade barrier? Why did the
• During 1950s and 1960s the industries were just coming up Indian government put up trade
barriers after independence?
• At this nascent stage of industrialisation, the foreign competition Explain. (2011, 16)

would have adversely affected the growth of Indian industries

• But essential imports were allowed for items- machines, fertilizer, petroleum etc

Thus, owing to above reasons, govt of India adopted restrictive trade practices to save domestic producers
and growth of industries from foreign competition.
Removing of trade barriers:

• Govt wanted to improve economic situation suffering from slow growth, fiscal deficit, low foreign
exchange reserves etc. Board Questions:
• Govt thought Indian companies should face global competition Why did government remove
trade barriers? Explain with
• Global competition would improve the performance and quality of reason. (2013, 15)
domestic production
• The liberal policies were supported by international organisations
• Liberalisation of India began in around 1991 which still continues

XII. Government's attempts to attract foreign investment:

Both, central and state govt are taking special steps to attract foreign companies

• Special Economic Zones (SEZs) are being set up

Board Questions:
• Govt has allowed flexibility in labour laws so that workers could Explain three steps taken by govt to
be hired on temporary basis attract foreign investment. (2013)

• SEZs companies don’t need to pay taxes for the initial years.
• Govt is trying to provide single window clearance for most of the processes through online

XIII. Special Economic Zones (SEZs)

• The focus of SEZs are to attract foreign investment and MNCs
• Special emphasis is on exports
• World class facilities like water, electricity, roads, and transport, recreation, education are provided in
SEZs.
• The production units operating in SEZs do not have to pay taxes for an initial period of 5 years.

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Session: 2019-20 | Class 10 (Geo.) Manufacturing Industries

• Lands are provided at subsidized rates.

• Examples: Santa Cruz (Maharashtra), Cochin (Kerala), Kandla and Surat (Gujarat), Chennai (Tamil Nadu),

Benefits of SEZs:
Board Questions:
• Generation of additional economic activity
What are Special Economic Zones?
• Promotion of exports of goods and services Why have they been set up? (2012)
• Promotion of investment from domestic and foreign sources
• Creation of employment
• Development of infrastructure facilities

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