Globalisation and the Indian Economy Class 10 Notes (Eco Ch 4)

Globalisation and the Indian Economy is Chapter 4 of Class 10 Economics, from the NCERT book Understanding Economic Development. It explains how multinational corporations (MNCs) spread production across countries, how foreign trade links markets, what globalisation means, what made it possible, and how it has affected people in India. These notes cover the whole chapter in simple English.

Chapter at a glance

Globalisation is the process of rapid integration or interconnection between countries. MNCs are the main players.
It is driven by technology, and by the liberalisation of trade and investment policies. The World Trade Organisation (WTO) pushes countries to open up.
In India, consumers and skilled workers gained; many small producers and unskilled workers faced tough competition and insecure jobs.
Fair globalisation needs government policies that protect the interests of all, not just the rich.

Production across countries

Until the middle of the 20th century, production was mostly organised within countries; only raw materials, food and finished goods crossed borders. Then MNCs appeared. An MNC is a company that owns or controls production in more than one nation. MNCs set up offices and factories where cheap labour and other resources are available, so that the cost of production falls and profit rises.

Example: a large MNC designs a product in the United States, makes the parts in China (cheap labour), assembles it in Mexico and Eastern Europe (close to the markets), and runs customer care in India (cheap, English-speaking, skilled engineers). In this way, MNCs spread production and interact with local producers in many countries.

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Interlinking production across countries

MNCs link production in several ways:

Foreign investment: money spent to buy assets like land, buildings and machines in another country. MNCs invest to earn profit.
Joint production with local companies: the local company gets money for new machines and the latest technology.
Buying up local companies: the American MNC Cargill Foods bought Parakh Foods, an Indian company, and became the largest producer of edible oil in India.
Placing orders with small producers: garments, footwear and sports items are made by small producers around the world and sold under the MNC’s brand. The MNC controls price, quality, delivery and labour conditions.

Foreign trade and integration of markets

Foreign trade gives producers a chance to sell beyond the domestic market, and gives buyers a choice of goods from other countries. Example: if Chinese toys are imported into India, Indian buyers have two choices, Chinese producers expand their business, and Indian toy makers face competition. Result: the prices of similar goods in the two markets tend to become equal, and the two markets get integrated. The textbook’s history example: Indian cotton and silk were sold in Europe, and the East India Company was set up for this trade.

What is globalisation?

Globalisation is the process of rapid integration or interconnection between countries. MNCs are its main players. More goods and services, investments and technology move between countries. People also move for better income and jobs, though governments restrict this movement.

Factors that enabled globalisation

Technology

Improvements in transport (faster and cheaper delivery of goods over long distances) and in information and communication technology (telegraph, telephone, mobile phones, fax, internet, email, voice mail) let people contact each other instantly across the world. A newspaper can be designed in one country and printed in another; orders and payments move instantly.

Liberalisation of foreign trade and investment policy

Governments use trade barriers such as a tax on imports (which makes imported goods costly) and quotas (which limit the quantity imported). After independence, India put barriers on foreign trade and investment to protect producers from foreign competition; only essential items like machinery, fertilisers and petroleum were imported. Around 1991, the government decided that Indian producers could compete with the world, and removed the barriers. Removing barriers or restrictions set by the government is called liberalisation. Businesses became free to import and export, and foreign companies could set up factories and offices in India.

World Trade Organisation (WTO)

The WTO is an international organisation that aims to liberalise international trade. It sets rules for trade between countries and sees that they are followed; about 160 countries are members. Although the WTO says all countries should remove trade barriers, developed countries have unfairly kept theirs: for example, the United States gives huge subsidies to its farmers, so American farm products are sold cheaply in the markets of developing countries.

Impact of globalisation in India

Positive effects

Consumers, especially the well-off urban ones, get more choice, better quality and lower prices. Their living standards rose.
MNCs increased investment in cell phones, automobiles, electronics, soft drinks, fast food and banking, creating new jobs. Local companies supplying these industries prospered.
Top Indian companies grew by investing in new technology and production methods, and some became MNCs themselves: Tata Motors (automobiles), Infosys (IT), Ranbaxy (medicines), Asian Paints (paints) and Sundram Fasteners (nuts and bolts).
New opportunities came for companies providing services, especially IT: call centres, data entry, accounting, administrative tasks and engineering are done cheaply in India and exported.

Negative effects

Small manufacturers of batteries, capacitors, plastics, toys, tyres, dairy products and vegetable oil were hit by cheap imports; many closed and workers lost jobs. The small industry sector employs the largest number of workers in India after agriculture.
Employers now prefer flexible employment: workers are hired on a temporary basis with no job security, long hours and low wages. The garment export example in the chapter shows how factories cut costs to meet the demands of MNC buyers.

The government’s role: SEZs and fair globalisation

To attract foreign investment, the government has set up Special Economic Zones (SEZs) with world-class facilities: electricity, water, roads, transport, storage, recreation and education. Companies in SEZs do not pay taxes for an initial period of five years. The government has also allowed flexibility in labour laws, so companies can hire workers for short periods.

Fair globalisation would create opportunities for all and share the benefits better. The government can ensure that labour laws are implemented and workers get their rights; support small producers to improve their performance until they can compete; use trade and investment barriers where necessary; and negotiate at the WTO for fairer rules, in alliance with other developing countries. People’s organisations also put pressure on the WTO for fairer rules.

Key terms

Term	Meaning
MNC	Multinational corporation: a company that owns or controls production in more than one country.
Investment	Money spent to buy assets such as land, buildings, machines and equipment.
Foreign investment	Investment made by an MNC in another country.
Trade barrier	A restriction on foreign trade, such as a tax on imports or a quota.
Liberalisation	Removing barriers or restrictions set by the government on trade and investment.
WTO	World Trade Organisation: an international body that sets rules for trade and pushes countries to open up.
SEZ	Special Economic Zone: an area with world-class facilities and tax benefits to attract foreign companies.

Important questions

What do you understand by globalisation? Explain in your own words. (3 marks)
How are MNCs spreading their production across countries? Explain with examples. (5 marks)
What are the various ways in which MNCs set up or control production in other countries? (3 marks)
Why do governments try to attract more foreign investment? What steps has the Indian government taken? (3 marks)
What factors have enabled globalisation? (5 marks)
Explain the positive and negative impact of globalisation on people in India. (5 marks)
“The impact of globalisation has not been uniform.” Explain. (3 marks)
What steps are needed to make globalisation fair? (3 marks)

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FAQs

What is the WTO?

The World Trade Organisation, an international body with about 160 member countries that sets the rules for international trade and pushes countries to remove trade barriers.

What is an SEZ?

A Special Economic Zone: an industrial area with world-class facilities where companies get tax exemption for the first five years, set up by the government to attract foreign investment.

Has globalisation been good or bad for India?

Both. Consumers, skilled workers, IT companies and big Indian firms gained. Small producers and unskilled workers faced competition and insecure jobs. That is why the chapter asks for fair globalisation.

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