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Globalization & Indian Economy

The document discusses globalization and its impact on the Indian economy, highlighting the role of multinational corporations (MNCs) and foreign investment. It outlines the advantages of foreign trade, the establishment of Special Economic Zones (SEZs), and the shift towards liberalization and privatization in India since 1991. Key factors facilitating globalization include advancements in technology and communication, enabling MNCs to operate across borders efficiently.

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12 views4 pages

Globalization & Indian Economy

The document discusses globalization and its impact on the Indian economy, highlighting the role of multinational corporations (MNCs) and foreign investment. It outlines the advantages of foreign trade, the establishment of Special Economic Zones (SEZs), and the shift towards liberalization and privatization in India since 1991. Key factors facilitating globalization include advancements in technology and communication, enabling MNCs to operate across borders efficiently.

Uploaded by

sreenidhipyla0609
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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GLOBALIZATION & INDIAN

ECONOMY
Globalisation refers to the integration of the domestic economy with the economies of
the world.

An MNC is a company that owns and controls production in more than one nation.

Foreign Investment is investment made by MNCs.

Advantages of Foreign Trade—

1. ‘Foreign Trade’ has facilitated the travel of goods from one market to
another.
2. It provides a choice of goods to the buyers.
3. Producers of different countries have to compete in different markets.
4. Prices of similar goods in two markets in two different countries become
almost equal.

SEZs or Special Economic Zones are industrial zones being set up by the Central and
State Governments in different parts of the country. SEZs are to have world class
facilities such as electricity, water, roads, transport, storage, recreational and
educational facilities. Companies who set up production units in SEZs are exempted
from taxes for an initial period of five years. SEZs thus help to attract foreign companies
to invest in India.

Reasons to put barriers to foreign trade:

1. The Indian government after independence had put barriers to foreign trade
and investment. This was done to protect the producers within the country

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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 develop and grow. Imports of only essential items such
as machinery, fertilizers, petroleum etc. was allowed.
2. To protect the Indian economy from foreign infiltration in industries
affecting the economic growth of the country as planned. India wanted to
move faster to catch up with the main industries in the world market and
therefore had to keep an extra watch on its progress in international trade
and give incentives to the more rapidly growing industries through fiscal
tariff and other means.

Around 1991, some changes were made in policy by the Indian government as it was
decided that the time had come for the Indian producers to compete with foreign
producers. This would not only help the Indian producers to improve their performance
but also improve their quality.

Liberalization means the removal of barriers and restrictions set by the government on
foreign trade. Governments use trade barriers to increase or decrease (regulate) foreign
trade to protect the domestic industries from foreign competition. Example, Tax on
imports. Around 1991, government India adopted the policy of liberalization.

World Trade Organization (WTO) was started at the initiative of the developed
countries. Its main objective is to liberalize international trade.

Privatization means transfer of ownership of property from public sector to private


sector.

Business Process Outsourcing (BPO) is the contracting of non primary business


activities and functions to a third party service provider.

Economic Reforms or New Economic Policy is policy adopted by the Government of


India since July 1991. Its key features are Liberalization, Privatisation and Globalisation

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(LPG).

MNCs set up production in various countries based on the following factors:

● MNCs set up offices and factories for production in regions where they can
get cheap labour and other resources; e.g., in countries like China,
Bangladesh and India.
● At times, MNCs set up production jointly with some of the local companies
of countries around the world. The benefit of such joint production to the
local company is two-fold. First, the MNCs can provide money for additional
investments for faster production. Secondly, the MNCs bring with them the
latest technology for enhancing and improving production.
● Some MNCs are so big that their wealth exceeds the entire budgets of
some developing countries. This is the reason why they buy up local
companies to expand production. Example, Cargill Foods, An American
MNC has bought over small Indian company such as Parakh Foods.
● MNCs control production by placing orders for production with small
producers in developing nations; e.g., garments, footwear, sports items etc.
The products are supplied to these MNCs which then sell these under their
own brand name to customers.

Factors which have helped in globalization:

● Technology. Rapid improvement in technology has contributed greatly


towards globalization.
● Development in information and communication technology has also
helped a great deal. Telecommunication facilities — telegraph, telephone
(including mobile phones), fax are now used to contact one another quickly
around the world. Teleconferences help in saving frequent long trips across
the globe.
● Information technology has also played an important role in spreading out
production of services across countries. Orders are placed through internet,
designing is done on computers, even payment for designing and printing

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can be arranged through internet.

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