NCERT Solutions for Class 10 Social Science Understanding Economic Development Chapter 4 – Globalisation and the Indian Economy
NCERT Class 10 Social Science Chapter 4, “Globalisation and the Indian Economy,” discusses the concept of globalisation and its impact on the Indian economy.
The chapter begins by defining globalisation and explaining how it has transformed the world economy. It then discusses the various dimensions of globalisation, including economic, cultural, and technological dimensions.
The chapter also covers the history of globalisation in India and the impact of globalisation on various sectors of the Indian economy, such as agriculture, industry, and services
. Additionally, the chapter explores the challenges and opportunities that globalisation has presented for India, and discusses the role of the government in managing the impact of globalisation. Overall, the chapter provides a comprehensive overview of globalisation and its impact on the Indian economy, and helps students understand the complex and dynamic nature of the global economy.
| Textbook | NCERT |
| Class | Class 10 |
| Subject | Economics |
| Chapter | Chapter 4 |
| Chapter Name | Globalisation and the Indian Economy |
| Category | Class 10 Economics Notes |
| Medium | English |
Multinational corporations (MNCs)
❒ A MNC is a company that owns or controls production in more than one nation.
❒ MNCs set up offices and factories for production in regions where they can get cheap labour and other resources.
❒ This is done so that the cost of production is low (almost 50- 60%) and MNCs can earn greater profits.
❒ MNCs not only sell its finished products globally but also the goods and services are produced globally.
❒ e.g:- An American company manufactures its product in China, sells it in Europe, and its call centre is in India.
Production Across Countries
❖ Production across countries before MNCs:
• Until the middle of the twentieth century, production was largely organised within countries.
• What crossed the boundaries of these countries were raw material, 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.
❖ Production across countries after MNCs:
• Definitions: A MNC is a company that owns or controls production in more than one nation.
• MNCs set up offices and factories for production in regions where they can get cheap labour and other resources. This is done so that the cost of production is low and the MNCs can earn greater profits.
❒ Example:
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.
1. In the above example, China provides the advantage of being a cheap manufacturing location.
2. Mexico and Eastern Europe are useful for their closeness to the markets in the US and Europe.
3. India has highly skilled engineers who can understand the technical aspects of production.
Interlinking Production Across Countries
❒ In general, MNCs set up production where it is close to the markets; where there is skilled and unskilled labour available at low costs; and where the availability of other factors of production is assured. In addition, MNCs might look for government policies that look after their interests.
❒ Investment
• 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.
❒ At times, MNCs set up production jointly with some of the local companies of these countries. The benefit to the local company of such joint production is two-fold.
• First, MNCs can provide money for additional investments, like buying new machines for faster production.
• Second, MNCs might bring with them the latest technology for production.
❒ 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.
❒ Example:
Cargill Foods, a very largeAmerican MNC, has bought oversmaller Indian companies such asParakh Foods. Parakh Foods hadbuilt a large marketing network invarious parts of India, where its brandwas well-reputed. Also, Parakh Foodshad four oil refineries, whose controlhas now shifted to Cargill. Cargill isnow the largest producer of edible oilin India, with a capacity to make 5million pouches daily!
❒ There’s another way in which MNCs control production:
• Large MNCs in developed countries place orders for production with small producers.
• Garments, footwear, sports items are examples of industries where production is carried out by a large number of small producers around the world.
• The products are supplied to the MNCs, which then sell these under their own brand names to the customers.
• These large MNCs have tremendous power to determine price, quality, delivery, and labour conditions for these distant producers.
❒ MNCs are exerting a strong influence on production at these distant locations. As a result, production in these widely dispersed locations is getting interlinked.
Foreign Trade & Integration Of Markets
• Foreign trade creates an opportunity for the producers to reach beyond the domestic markets, i.e., markets of their own countries.
• 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. Similarly, for the buyers, import of goods produced in another country is one way of expanding the choice of goods beyond what is domestically produced.
❖ Chinese Toys In India
Chinese manufacturers learn of an opportunity to export toys to India, where toys are sold at a high price. They start exporting plastic toys to India. Buyers in India now have the option of choosing between Indian and the Chinese toys. Because of the cheaper prices and new designs, Chinese toys become more popular in the Indian markets. Within a year, 70 to 80 per cent of the toy shops have replaced Indian toys with Chinese toys. Toys are now cheaper in the Indian markets than earlier. What is happening here? As a result of trade, Chinese toys come into the Indian markets. In the competition between Indian and Chinese toys, Chinese toys prove better. Indian buyers have a greater choice of toys and at lower prices. For the Chinese toy makers, this provides an opportunity to expand business. The opposite is true for Indian toy makers. They face losses, as their toys are selling much less.
• 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.
Foreign Trade
Foreign trade is a trade between different countries of the world. It is also called international trade, external trade or inter–regional trade. Foreign trade helps in the integration of Markets as:
❒ It facilitate movement of goods and services between countries.
❒ It facilitate movement of people, ideas and technology.
❒ It gives opportunity to producers to reach beyond local/ domestic markets .
❒ Increases competition , overall reduction in the price of goods.
What Is Globalisation?
• Foreign investment by MNCs in these countries has been rising. At the same time, foreign trade between countries has been rising rapidly.
A large part of the foreign trade is also controlled by MNCs:
For instance, the car manufacturing plant of Ford Motors 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.
• The result of greater foreign investment and greater foreign trade has been greater integration of production and markets across countries.
• Globalisation is this process of rapid integration or interconnection between countries.
• MNCs are playing a major role in the globalisation process. More and more goods and services, investments and technology are moving between countries.
• Most regions of the world are in closercontact with each other than a few decades back.
• Besides the movements of goods, services, investments and technology, there is one more way in which the countries can be connected. This is through the movement of people between countries. People usually move from one country to another in search of better income, better jobs or better education.
Factors That Have Enabled Globalisation
1. 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.
• Even more remarkable have been the developments in information and communication technology.
• In recent times, technology in the areas of telecommunications, computers, Internet has been changing rapidly.
• 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. This has been facilitated by satellite communication devices. As you would be aware, computers have now entered almost every field of activity.
2. Liberalisation & Foreign Trade
• Tax on imports is an example of trade barrier. It is called a barrier because some restriction has been set up. Governments can use trade barriers to increase or decrease (regulate) foreign trade and to decide what kinds of goods and how much of each, should come into the country.
• The Indian government, after Independence, had put barriers to foreign trade and foreign investment. This was considered necessary to protect the producers within the country from foreign competition.
• Industries were just coming up in the 1950s and 1960s, and competition from imports at that stage would not have allowed these industries to come up. Thus, India allowed imports of only essential items such as machinery, fertilisers, petroleum etc.
• Note that all developed countries, during the early stages of development, have given protection to domestic producers through a variety of means.
• Starting around 1991, some far-reaching changes in policy were made in India. The government decided that the time had come for Indian producers to compete with producers around the globe. It felt that competition would improve the performance of producers within the country since they would have to improve their quality. This decision was supported by powerful international organisations. Thus, barriers on foreign trade and foreign investment were removed to a large extent. This meant that goods could be imported and exported easily and also foreign companies could set up factories and offices, here.
• Removing barriers or restrictions set by the government is what is known as liberalisation. With liberalisation of trade, businesses are allowed to make decisions freely about what they wish to import or export. The government imposes much less restrictions than before and is therefore said to be more liberal.
Multinational corporations (MNCs)
❒ A MNC is a company that owns or controls production in more than one nation.
❒ MNCs set up offices and factories for production in regions where they can get cheap labour and other resources.
❒ This is done so that the cost of production is low (almost 50- 60%) and MNCs can earn greater profits.
❒ MNCs not only sell its finished products globally but also the goods and services are produced globally.
❒ e.g:- An American company manufactures its product in China, sells it in Europe, and its call centre is in India.
Interlinking Production Across countries
MNCs link the production process of different countries. Some ways of interlinking production across countries are :
❒ Foreign Direct Investment (FDI):– Investment made by a company based in our country (usually an MNC), into a company based in another country.
❒ Partnerships / Joint Venture:– MNCs setup production unit jointly with some of the local companies of that region . Local companies get new technology and money to expand their factory from this partnership. ECONOMICS
❒ Local companies/Mergers/Takeover:– The most common route for MNC is to buy up local companies and then expand production.
❒ Contracts to local companies:– MNCs place order for production with many small producers. MNCs then receives the product and sell it under their brand name.
Globalisation
Globalisation is the process of rapid integration or interconnection between countries. More and more goods and services, investment and technology is moving between countries.
Globalisation and Migration: Factors that helped globalisation are-
❒ Development in transportation has led to cheap quick delivery of goods over long distances. e.g: Trains, ships, highways etc.
❒ Information and communication Technology (ICT or IT) has revolutionized the spreading of production of services across the globe. ECONOMICS
❒ New technologies like e–banking, telephones, fax, internet has made communication and payments easy for businesses.
❒ In 1991, the Indian government made changes in policies and removed trade barriers to a large extent.
Factors that have Enabled Globalisation
1. Technology- Advancement in transport, information and communication technology has enabled the globalisation process. A container for the transport of goods has increased the volume of goods transported by airlines. Telecommunication facilitates communication with one another around the world. The amazing world of the Internet allows obtaining and sharing information, sending mail and speaking to others across the world at a lower cost. ECONOMICS
2. Liberalisation of Foreign Trade:- The Indian Government protected domestic producers by putting barriers on foreign trade and investment. A trade barrier is a set of restrictions imposed on foreign trade, such as tax on imports. Liberalisation with its new policies came into existence in India in 1991. It removed barriers set by the Government to import and export goods. The Government felt that the competition would improve the quality of products and it was supported by powerful international organisations. Thus, Indian producers competed with producers in the global market.
World Trade Organization (WTO) It is an organisation of 160 members (2014) which aims to liberalise international trade. At the international level, WTO has pressured developing countries to liberalise trade and investment. World Trade Organisation (WTO) is an international organisation whose aim is to liberalise international trade. ECONOMICS At the international level, WTO has pressured developing countries to liberalise trade and investment.
❒ World Trade Organisation (WTO) is an international organisation whose aim is to liberalise international trade.
❒ Started at the initiative of the developed countries, WTO establishes rules regarding international trade, and sees that these rules are obeyed. ECONOMICS
❒ Nearly 160 countries of the world are currently members of the WTO (as on June 2014).
❒ 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.
Trade Barrier
❒ Government puts restrictions to control the foreign trade, these restrictions are called trade barrier. e.g. Tax on imports etc .
❒ All developed countries ,during the early stage of development have given protection to domestic producers through trade barriers .
❒ Similarly ‘ Quotas’ are a way of restriction on volume or quality of goods to be imported or exported.
New Economic Policy 1991
Around 1991, it was felt that Indian producers must compete with producers around the globe, so that they can improve their performance and quality of goods and services. That’s why Government of India in 1991 made some major changes in its trade policy. When government removes trade barriers, it is known as Liberalisation.
World Trade Organisation ( WTO)
It is an organisation whose aim is to liberalize international trade. It was started by developed countries, now nearly 164 countries are member of WTO. But it is seen that the developed countries have unfairly retained trade barriers while on other hand WTO foces developing countries to remove trade barriers.
Impact of Globalisation on India
POSITIVE IMPACTS:
❒ MNCs started investing in India and with time they increased investment as investing in India had been beneficial for them.
❒ Top Indian companies raised their production standards due to competition and they also got new technologies by collaborating with MNCs. ECONOMICS
❒ Some large Indian companies become MNCs like TATA , Asian Paints, Infosys elc., and contributed to economic growth of India.
❒ As many foreign companies come to India, huge number of jobs were created and more opportunities were created for Indian companies.
❒ Consumers got more choices and cheaper products. This also increased the standard of living of people.
NEGATIVE IMPACTS
❒ Small local businesses/companies could not face the competition and had to be shut down. e.g: toys factories of India etc.
❒ Labour laws were made flexible to attract foreign investment which was against the employees.
❒ Regional products like dhoti, matka etc. are not growing or have been replaced by some foreign product.
❖ Special Economic Zones (SEZ)
❒ In recent years, the Central and State Governments in India setup industrial zones, called SEZ so as to attract foreign companies to invest in India.
❒ SEZs have world class facilities like electricity, water, road, transportation, storage, recreational and educational facilities.
❒ Companies with unit in SEG do not have to pay tax for first five years and have flexibility in labour laws.
❖ How Globalisation can be made fair?
❒ Government must protect the interest of all the people, not just the rich such as by making better labour laws and implementing them.
❒ Government can support small producers till the time they get strong enough to compete. Government can use trade barriers in favour of them.
❒ Government Can align with other developing countries to fight against the domination of developed countries in WTO.
❖ Case Study Questions
Today, the world has been converted into a large village with the help of efficient and fast moving transport. Transport has been able to achieve this with the help of equally developed communication system. Therefore, transport, communication and trade are complementary to each other. Today, India is well-linked with the rest of the world despite its vast size, diversity and linguistic and socio-cultural plurality. Railways, airways, waterways, newspapers, radio, television, cinema and internet, etc. have been contributing to its socioeconomic progress in many ways.
The trades from local to international levels have added to the vitality of its economy. It has enriched our life and added substantially to growing amenities and facilities for the comforts of life. It is thus, evident that a dense and efficient network of transport and communication is a prerequisite for local, national and global trade of today.
1. Why is there a need to interlink with the world?
2. Infer the importance of means of transportation and communication for socio- economic progress?
3. How does trade strengthen the economy of a country? ECONOMICS
Ans.
1. There is need to interlink with the world for development, advancement, globalization etc.
2. (i) They are the very basis of industries and trade of country. (ii) Create job employment opportunities. (iii) Help to grow economy.
3. (i) Trade between nation and countries are the index to its economic prosperity. (ii) It generates employment. Describe the role of technology in promoting globalization process.
❖ World Trade Organisatrion
❒ World Trade Organisation (WTO) is an organisation whose aim is to liberalise international trade.
❒ The World Trade Organization (WTO) is an intergovernmental organization which regulates international trade.
❒ It officially commenced in 1995, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948.
❒ Started at the initiative of the developed countries, WTO establishes rules regarding international trade, and sees that these rules are obeyed.
❒ At present 164 countries of the world are currently members of the WTO.
❒ 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. An example of this is the current debate on trade in agricultural products.
❖ Debate On Trade Practices
❒ The agriculture sector provides the bulk of employment and a significant portion of the GDP in India.
❒ Compare this to a developed country such as the US with the share of agriculture in GDP at 1% and its share in total employment a tiny 0.5%! And yet these very small percentages of people who are engaged in agriculture in the US receive massive sums of money from the US government for production and for exports to other countries.
❒ Due to this massive money that they receive, US farmers can sell the farm products at abnormally low prices.
❒ The surplus farm products are sold in other country markets at low prices, adversely affecting farmers in these countries.
❒ Developing countries are, therefore, asking the developed country governments, “We have reduced trade barriers as per WTO rules. But youhave ignored the rules of WTO and havecontinued to pay your farmers vast sums ofmoney. You have asked our governments to stopsupporting our farmers, but you are doing soyourselves.
Globalisation and greater competition among producers – both local and foreign producers – has been of advantage to consumers, particularly the well-off sections in the urban areas.
• There is greater choice before these consumers who now enjoy improved quality and lower prices for several products.
• As a result, these people today, enjoy much higher standards of living than was possible earlier.
• Among producers and workers, the impact of globalisation has not been uniform.
a) Firstly, MNCs have increased their investments in India over the past 20 years, which means investing in India has been beneficial for them. MNCs have been interested in industries such as cell phones, automobiles, electronics, soft drinks, fast food or services such as banking in urban areas. These products have a large number of well-off buyers. In these industries and services, new jobs have been created. Also, local companies supplying raw materials, etc. to these industries have prospered.
b) Secondly, several of the top Indian companies have been able to benefit from the increased competition. They have invested in newer technology and production methods and raised their production standards. Some have gained from successful collaborations with foreign companies.Moreover, globalisation has enabled some large Indian companies to emerge as multinationals themselves! Tata Motors (automobiles), Infosys (IT), Ranbaxy (medicines), Asian Paints (paints), Sundaram Fasteners (nuts and bolts)are some Indian companies which are spreading their operations worldwide.
• Globalisation has also created new opportunities for companies providing services, particularly those involving IT. The Indian company producing a magazine for the London based company and call centres are some examples. Besides, a host of services such as data entry, accounting, administrative tasks, and engineering are now being done cheaply in countries such as India and are exported to the developed countries.
Struggles For A Fair Globalisation
• Since globalisation is now a reality, the question is how to make globalisation more ‘fair’? Fair globalisation would create opportunities for all, and also ensure that the benefits of globalisation are shared better.
• The government can play a major role in making this possible:-
a. Its policies must protect the interests, not only of the rich and the powerful, but all the people in the country.
b. For instance, the government can ensurethat labour laws are properly implemented and the workers get their rights.
c. It can support small producers to improve their performance till the time they become strong enough to compete.
d. If necessary, the government can use trade and investment barriers. It can negotiate at the WTO for ‘fairer rules’.
e. It can also align with other developing countries with similar interests to fight against the domination of developed countries in the WTO.
• In the past few years, massive campaigns and representation by people’s organisations have influenced important decisions relating to trade and investments at the WTO. This has demonstrated that people also can play an important role in the struggle for fair globalisation.
Steps To Attract Foreign Investment
• In recent years, the central and state governments in India are taking special steps to attract foreign companies to invest in India.
• Industrial zones, called Special Economic Zones (SEZs), are being set up. SEZs are to have world class facilities: electricity, water, roads, and transport, and storage, recreational and educational facilities. Companies who set up production units in the SEZs do not have to pay taxes for an initial period of five years.
• Government has also allowed flexibility in the labour laws to attract foreign investment.
• In the recent years, the government has allowed companies to ignore many of these.
• Instead of hiring workers on a regular basis, companies hire workers ‘flexibly’ for short periods when there is intense pressure of work. This is done to reduce the cost of labour for the company. However, still not satisfied, foreign companies are demanding more flexibility in labour laws.
Concussion
I hope Class 10 Social Science Understanding Economic Development Chapter 4 – Globalisation and the Indian Economy IS very important lesson.
