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Globalisation (Indian Context)

Production Across Countries

In the context of globalisation, production across countries** refers to the process where goods and services are produced in different countries, often by different companies, and then brought together to form a final product or service.

  • Globalisation of Production: This means that the production process is no longer confined to a single country. Instead, different stages of production might take place in various locations around the world, chosen based on factors like cost of labour, availability of raw materials, expertise, and market access.
  • Example: Consider a car. A car might have its engine designed in Germany, its electronic components manufactured in South Korea, its tires produced in Japan, its body assembled in Mexico, and finally marketed and sold in the United States. Each part or stage is produced where it is most efficient or cost-effective.
  • Multinational Corporations (MNCs): These globalized production networks are often orchestrated by Multinational Corporations (MNCs), which set up production facilities or outsource specific processes to different countries.

This fragmented yet integrated approach to production is a hallmark of modern globalisation.


Interlinking Production Across Countries

Interlinking production across countries** is achieved through several mechanisms that connect the various stages of the production process globally:

  • Foreign Direct Investment (FDI): MNCs invest capital in foreign countries to set up production facilities, buy land, build factories, and hire local labour. This investment directly links the MNC's production network to the host country's economy.
  • Outsourcing: Companies hire external suppliers, often in other countries, to perform specific functions or produce specific components. This can range from manufacturing parts to providing services like customer support or software development. For example, a company might outsource its call centre operations to India.
  • Trade: The movement of goods and services across borders is essential. Raw materials, intermediate goods, and finished products are traded internationally, connecting different parts of the global production chain.
  • Technology Transfer: MNCs often bring advanced technology and production techniques to the countries where they operate, further integrating production processes.
  • Global Supply Chains: The entire network of producers, suppliers, distributors, and consumers that are interconnected through the flow of goods, services, and information across national borders is known as a global supply chain. These chains are the embodiment of interlinked production across countries.

These linkages allow for specialization, efficiency, and lower costs by leveraging comparative advantages in different countries.


Foreign Trade And Integration Of Markets

Foreign Trade** is the exchange of goods and services across national borders, and it plays a crucial role in the integration of markets** through globalisation.

  • Connecting Markets: Trade allows consumers in one country to access goods and services produced in another country. It also allows producers to sell their goods in markets beyond their own borders.
  • Specialization: Countries can specialize in producing those goods and services where they have a comparative advantage (i.e., where they can produce them more efficiently or at a lower cost). They then trade these goods for others they cannot produce as efficiently.
  • Price Convergence: Increased trade and competition tend to bring prices for similar goods closer across different countries, although differences remain due to transportation costs, tariffs, and local market conditions.
  • Flow of Ideas and Technology: Trade also facilitates the exchange of ideas, technologies, and business practices, further integrating markets and promoting innovation.
  • Market Integration: When markets become integrated, they behave more like a single, large market. Prices of similar goods tend to move together, and economic conditions in one market can quickly affect others.

Globalisation, through the liberalization of trade policies, has dramatically increased the volume and scope of foreign trade, leading to a more integrated global marketplace.


What Is Globalisation?

Globalisation** is a complex process of increasing interconnectedness and interdependence among countries and peoples worldwide. It is driven by the flow of goods, services, capital, technology, information, and people across national borders.

Key characteristics of globalisation include:

  • Interconnectedness: Events, decisions, and activities in one part of the world can have significant repercussions in distant parts of the world.
  • Cross-border Flows: Increased movement of goods, services, capital, technology, and people across international borders.
  • Role of MNCs: Multinational Corporations play a central role in orchestrating global production networks and trade.
  • Technological Enablers: Advancements in information and communication technology (ICT) and transportation have dramatically reduced the costs and time associated with cross-border interactions.
  • Liberalisation Policies: The adoption of liberal trade and investment policies by many governments has facilitated these cross-border flows.
  • Cultural Exchange: Increased interaction between cultures, leading to both homogenization and hybridization of cultural practices and ideas.

Globalisation is a dynamic process that continues to reshape economies, societies, and political systems around the world.


Factors That Have Enabled Globalisation

Several factors have enabled and accelerated the process of globalisation:

Technology

Technological advancements have been perhaps the most significant enabler of globalisation:

  • Information and Communication Technology (ICT): The development of the internet, mobile phones, satellite communication, and advanced computing has drastically reduced the cost and time required for communication and information sharing across the globe. This allows for real-time coordination of business activities across continents.
  • Advancements in Transportation: Innovations in shipping (containerization), air cargo, and faster modes of transport have made it cheaper and quicker to move goods and people across vast distances. This is crucial for global supply chains and international trade.
  • Automation and Robotics: Advancements in production technology allow companies to set up highly efficient manufacturing units anywhere in the world, often integrating sophisticated automated processes.

Liberalisation Of Foreign Trade And Foreign Investment Policy

Governments worldwide have actively facilitated globalisation by changing their policies:

  • Reduction of Trade Barriers: Many countries have lowered tariffs (taxes on imports) and removed non-tariff barriers (like quotas and import licenses) to encourage international trade.
  • Opening Up to FDI: Governments have eased restrictions on Foreign Direct Investment (FDI), encouraging MNCs to invest in their economies by setting up factories, acquiring companies, or forming joint ventures.
  • Deregulation: Reducing government controls on businesses allows them greater freedom to operate, expand, and engage in international activities.
  • Trade Agreements: Countries have entered into numerous trade agreements (bilateral and multilateral) to facilitate smoother cross-border commerce.

World Trade Organisation (WTO)

The World Trade Organisation (WTO)** plays a crucial role in promoting and regulating global trade:

  • Global Trade Rules: The WTO establishes rules for international trade and provides a forum for member governments to negotiate trade agreements and resolve trade disputes.
  • Promoting Liberalisation: It encourages member states to reduce trade barriers and adopt more liberal trade policies.
  • Enforcement Mechanism: The WTO has a dispute settlement mechanism that can address violations of trade rules, providing a degree of predictability and stability to international commerce.

The existence and policies of the WTO have been instrumental in shaping the global trading environment that underpins much of globalisation.


Impact Of Globalisation In India

Globalisation has had a profound and multifaceted impact on the Indian economy and society since the reforms of 1991.

Steps To Attract Foreign Investment

To become a part of the global economy and leverage FDI, India has taken several steps:

  • Liberalisation of FDI Policies: Restrictions on foreign investment have been significantly eased across many sectors. For example, limits on foreign ownership have been raised, and foreign companies are now allowed to invest in sectors previously reserved for the public sector or Indian companies (e.g., banking, insurance, retail).
  • Reduced Tariffs and Trade Barriers: India has lowered import duties and removed many quantitative restrictions on imports, making it easier for foreign goods to enter the market and for Indian businesses to import necessary inputs and capital goods.
  • Improved Investment Climate: Efforts have been made to improve the ease of doing business, streamline approvals, and create a more favourable environment for both domestic and foreign investors.
  • Special Economic Zones (SEZs): The establishment of SEZs offers tax incentives and streamlined regulations to attract export-oriented foreign investment.

Small Producers: Compete Or Perish

Globalisation has presented a mixed bag for small-scale producers in India:

  • Increased Competition: Small producers, especially in sectors like toys, garments, and household goods, face intense competition from cheaper, often better-quality imports and from large domestic companies that can achieve economies of scale.
  • Challenges: Many small producers find it difficult to compete due to their limited access to technology, finance, and markets compared to large corporations and MNCs. They may lack the scale or resources to invest in modern machinery or R&D.
  • Opportunities: However, some small producers have also benefited by finding new markets for their products through exports or by integrating into the supply chains of larger companies.
  • Need for Support: There is a strong argument for government support to help small producers upgrade their technology, improve quality, access credit, and adapt to the competitive environment.

Competition And Uncertain Employment

Globalisation and the associated economic shifts have also impacted employment patterns:

  • Increased Competition: The heightened competition can lead to greater efficiency and productivity but also means that companies that cannot compete may downsize or close, leading to job losses in certain sectors.
  • Uncertainty: Employment in sectors directly exposed to global competition or operating in a rapidly changing economic environment can become more uncertain. Workers may face risks related to job security, contract labour, and changing skill requirements.
  • Growth in Some Sectors: Conversely, globalisation has spurred growth in sectors like IT, BPO, and export-oriented manufacturing, creating new job opportunities.
  • Skills Mismatch: There can be a mismatch between the skills demanded by the new globalized economy and the skills available in the workforce, contributing to unemployment.

Managing the employment consequences of globalisation, ensuring fair labour practices, and providing social safety nets are critical policy challenges.


The Struggle For A Fair Globalisation

The impacts of globalisation have not been uniformly beneficial, leading to calls for "fair globalisation"**. This involves ensuring that the benefits of globalisation are shared more widely and that its negative consequences are mitigated.

  • Demands for Fairness: Movements and critics argue that globalisation should not lead to increased inequality, exploitation of labour, environmental degradation, or the erosion of local cultures.
  • Policy Interventions: They advocate for government policies that:
    • Protect Vulnerable Sectors: Support small producers, farmers, and workers who are negatively affected by increased competition.
    • Ensure Fair Labour Standards: Implement and enforce labour laws that guarantee fair wages, safe working conditions, and social security for all workers, including those in the informal sector and those employed by MNCs or through outsourcing.
    • Environmental Protection: Enact and enforce strong environmental regulations to prevent pollution and resource depletion driven by the pursuit of profit.
    • Promote Inclusive Growth: Ensure that the benefits of economic growth reach all sections of society, reducing income disparities and providing access to basic amenities like education and healthcare.
    • Democratic Oversight: Ensure that global economic institutions and agreements are democratic, transparent, and accountable to the people.
  • Role of Movements: Popular movements and civil society organizations play a crucial role in raising these issues, advocating for policy changes, and holding governments and corporations accountable for the social and environmental consequences of globalisation.

The struggle for fair globalisation is essentially a struggle for a more equitable, just, and sustainable form of global economic integration.