Globalisation and the Indian Economy

Integration between countries through foreign trade and foreign investment by MNCs.

A company that owns or controls production in more than one nation. They set up offices/factories where they can get cheap labour and other resources.

Design in USA, Manufacture in China, Assemble in Mexico/Europe, Customer Care in India. Complex production process.

1. FDI (Setting up new factories). 2. Joint Ventures (With local companies). 3. Buying up local companies (Most common, e.g., Cargill bought Parakh Foods). 4. Placing orders with small producers (Garments/Footwear).

Trade between countries. It creates an opportunity for producers to reach beyond domestic markets. Choice of goods expands.

1. Technology (Transportation, Containerisation, IT/Communication). 2. Liberalisation of trade policies.

Removing barriers or restrictions set by the government on trade and investment. (Done in India in 1991).

Organization to liberalize international trade. Establish rules for free trade. (Critique: Dominated by developed countries, unfair to developing ones).

Positive: greater choice for consumers, lower prices, higher standard of living. New jobs in IT/Services. Indian companies became MNCs (Tata, Infosys). Negative: Small producers hit hard (Batteries/Toys). Flexible labour laws exploit workers.

Industrial zones with world-class facilities (Electricity, Water, Roads) to attract foreign investment. Companies get tax holidays for 5 years.

Globalisation that creates opportunities for all and ensures benefits are shared better. Government intervention is needed to support small producers and ensure labour rights.

Tax on imports (Customs Duty). Used to regulate foreign trade and protect local industries.

To protect nascent industries in 1950s/60s from foreign competition. Only essential items (Machinery/Petroleum) were allowed.

Government felt Indian producers must compete globally to improve quality. Supported by World Bank/IMF.

Companies hire workers on short-term contracts (instead of regular) to cut costs during intense competition. Bad for worker security.

Well-off urban consumers benefited most. Richer choice, better quality, lower price.

Many closed down due to competition (e.g., Plastic toys, Tyres, Dairy products). Created unemployment.

Foreign Direct Investment. Investment made by MNCs.

Cheaper Chinese toys flooded Indian market. Indian toys lost market share. Trade connects markets.

Container services reduced port handling costs. Internet allows instant communication.

Ford Motors came to India in 1995.

Ford collaborated with Mahindra & Mahindra.

Ford exports cars from India to South Africa/Brazil.

Cargill Foods bought Parakh Foods.

Cargill is now largest producer of edible oil in India.

Ranbaxy (Medicines), Tata Motors (Autos), Infosys (IT), Asian Paints are Indian MNCs.

Sundaram Fasteners (Nuts/Bolts) is an Indian MNC.

Call Centres are BPO services.

Textile is a major export for India but faces competition.

WTO started at initiative of developed countries.

US gives massive subsidies to its farmers (Unfair).

Developing countries forced to remove subsidies.

164 countries in WTO (2016).

Ravi (small industrialist) lost business.

Garment exporters cut costs by squeezing labour wages.

Sushila (garment worker) lost benefits.

Government can negotiate at WTO for fair rules.

People's campaigns can influence decisions.

Information and Communication Technology (ICT) played major role.

New Economic Policy (Liberalisation)

WTO established

SEZ Act