Latest Economics NCERT Notes, Solutions and Extra Q & A (Class 9th to 12th)
9th					10th					11th					12th

Class 10th Chapters
1. Development	2. Sectors Of The Indian Economy	3. Money And Credit
4. Globalisation And The Indian Economy	5. Consumer Right

Chapter 4 Globalisation And The Indian Economy

This chapter explores globalisation, focusing on the economic interconnectedness between countries through foreign trade and investment facilitated by Multinational Corporations (MNCs). Over the last three decades, MNCs have significantly driven this process, linking distant parts of the world.

The chapter examines why MNCs expand production globally, how they achieve this, the factors enabling globalisation (technology, liberalisation, international organisations), and the impact of this process, particularly on India, including its effects on consumers, producers (small and large), and workers.

Production Across Countries

Today's consumers often have access to a wide array of goods and services from leading global manufacturers. This extensive choice in markets is a relatively recent phenomenon, largely driven by transformations linked to globalisation.

Production Before Mncs

Before the emergence of large multinational corporations (MNCs), production was primarily contained within national borders. Connections between countries were mainly through trade, involving the export of raw materials, food, and the import of finished products (as seen in colonial contexts like India).

Emergence Of Mncs

The scene changed with the rise of Multinational Corporations (MNCs). An MNC is a company that owns or controls production facilities in more than one country.

Setting Up Production Abroad

MNCs strategically establish offices and factories for production in different countries to leverage advantages like cheap labour and other resources. Their goal is to minimise production costs and maximise profits.

Spreading Production (Example)

Example. Spreading of Production by an MNC

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.

Answer:

This example demonstrates how a Multinational Corporation structures its production process globally:

Design and Research: Located in the US.
Component Manufacturing: Outsourced to China, taking advantage of potentially lower manufacturing costs.
Assembly: Done in Mexico and Eastern Europe, likely for cheaper labour costs or proximity to major markets in the US and Europe.
Sales: Global distribution network.
Customer Care Service: Located in India, leveraging skilled, English-speaking workforce at lower wage rates.

By splitting the production process and placing different stages in different countries, the MNC can significantly reduce overall costs, leading to higher profits. This is a key aspect of how MNCs drive globalisation.

This example demonstrates that MNCs not only sell globally but also organise the production of goods and services across multiple countries, dividing the production process into different stages located where costs are lowest or access to markets/skills is best.

Interlinking Production Across Countries

MNCs employ various strategies to expand their production footprint and connect different parts of the world, thereby linking production processes across countries.

Joint Production With Local Companies

One common method is for MNCs to partner with existing local companies in other countries. Joint production offers benefits to the local company, such as access to additional funds for investment (e.g., new machines) and gaining exposure to the latest production technologies brought by the MNC.

Location Factors For Mncs

MNCs are selective about where they set up production. Key factors influencing their location decisions include:

Proximity to markets where the final products will be sold.
Availability of skilled and unskilled labour at low wages.
Assured availability of other necessary factors of production (e.g., raw materials, infrastructure).
Favourable government policies that support foreign investment and protect their interests.

Foreign Investment

The money spent by MNCs to purchase assets like land, buildings, machines, and equipment for setting up production facilities abroad is called foreign investment. MNCs undertake foreign investment with the expectation of earning future profits from these assets.

Buying Up Local Companies (Example)

A significant and often used strategy for MNC investment is buying up existing local companies. MNCs, possessing enormous wealth (often exceeding the budgets of developing countries), can easily acquire smaller, well-established local businesses. The example of Cargill Foods (a large American MNC) buying Parakh Foods (a reputable Indian company with a strong marketing network and refineries) illustrates this. Cargill became the largest edible oil producer in India through this acquisition.

Control Through Small Producers

MNCs also control production by placing orders with small producers globally. Industries like garments, footwear, and sports items often rely on networks of small producers in developing countries. The MNCs then sell these products under their own brand names, giving them immense power to dictate prices, quality standards, delivery terms, and even labour conditions for these distant manufacturers.

Influence On Production At Distant Locations

Through strategies like joint ventures, using local companies as suppliers, competing with local firms, or outright acquiring them, MNCs exert significant influence over production in various countries. This active involvement leads to the interlinking of production processes across geographically separated locations around the world.

Example: Ford Motors

Example. Ford Motors

Ford Motors, an American company, is one of the world’s largest automobile manufacturers with production spread over 26 countries of the world. Ford Motors came to India in 1995 and spent Rs. 1700 crore to set up a large plant near Chennai. This was done in collaboration with Mahindra and Mahindra, a major Indian manufacturer of jeeps and trucks. By the year 2017, Ford Motors was selling 88,000 cars in the Indian markets, while another 1,81,000 cars were exported from India to South Africa, Mexico, Brazil and United States of America. The company wants to develop Ford India as a component supplying base for its other plants across the globe.

Answer:

Based on the information about Ford Motors:

1. Yes, Ford Motors is definitely an MNC. It owns or controls production facilities and sales operations in more than one country (specifically, production is spread over 26 countries).

2. Foreign investment is the money spent by an MNC to acquire assets (like land, buildings, machines, equipment) in a foreign country for the purpose of production or setting up facilities. Ford Motors invested $\textsf{₹}\,1700$ crore to set up its plant near Chennai in India.

3. By setting up production plants in India, MNCs like Ford Motors leverage two main advantages: access to the large and growing Indian domestic market (88,000 cars sold in India in 2017 indicates a substantial market) and lower costs of production in India compared to developed countries. These lower costs can include cheaper labour, raw materials, and other operational expenses.

4. The company wants to develop Ford India as a component supplying base for its global operations due to factors such as:

(a) Cost of labour and other resources in India: Labour costs are generally lower in India compared to developed countries, making component manufacturing more cost-effective.
(b) Presence of several local manufacturers who supply auto-parts to Ford Motors: A network of existing local suppliers can provide quality components, potentially at competitive prices, reducing the need for the MNC to produce every part itself.
(c) Closeness to a large number of buyers in India and China: While this is more relevant for selling finished cars, having a manufacturing base in Asia (like India) can also be strategically located for supplying components to other plants in the region or for export to markets like China.

5. The production of cars by Ford Motors in India leads to interlinking of production in several ways:

The Chennai plant is integrated into Ford's global production network, potentially importing components from other Ford plants or local suppliers in other countries.
The Chennai plant exports finished cars to various countries (South Africa, Mexico, Brazil, USA), linking Indian production to global markets.
The company aims to develop Ford India as a component supplying base, meaning components manufactured in India will be exported to other Ford plants globally, integrating India into the MNC's worldwide supply chain.
The initial collaboration with Mahindra and Mahindra links an Indian company's resources and expertise with the MNC's global operations.

6. An MNC is different from other companies primarily because it owns or controls production (and often sales) in more than one country. Most other companies operate primarily within the borders of a single nation, even if they engage in international trade (importing/exporting). An MNC's operations are inherently transnational and often globally integrated.

7. Most major multinationals are American, Japanese, or European because these regions were pioneers in industrialisation and capital accumulation. Companies from these countries developed the technology, financial resources, and organizational structures necessary to expand their operations globally at an early stage of industrial capitalism. This historical advantage allowed them to become dominant players in international markets and production long before companies from developing countries had the capacity to do so.

Photo of cars made by Indian workers being transported for sale abroad by MNCs

Photo of women at home in Ludhiana making footballs for large MNCs

Photo of jeans produced in developing countries being sold in USA

Foreign Trade And Integration Of Markets

Foreign trade has historically been the primary way countries have connected. Trade routes have linked markets across continents for centuries.

Foreign Trade In The Past

Historically, trade routes facilitated extensive exchange between regions like India and markets in the East and West. Trading interests, such as those of the East India Company, were major drivers for early connections between distant countries.

Basic Function Of Foreign Trade

At its core, foreign trade creates opportunities. For producers, it opens up markets beyond their domestic borders, allowing them to sell their goods internationally and compete globally. For buyers, imports from other countries expand the range of goods available, offering more choices than just domestically produced items.

Example: Chinese Toys In India

The example of Chinese toys in India illustrates the effects of foreign trade. Chinese manufacturers, seeing a market opportunity due to high toy prices in India, began exporting plastic toys. This increased the supply of toys in India and offered Indian buyers more options (both Indian and Chinese toys) at potentially lower prices. Chinese toys gained popularity due to lower prices and new designs. Within a year, a large percentage of Indian toy shops were selling mostly Chinese toys.

While Indian buyers benefited from increased choice and lower prices, Indian toy makers faced losses as their sales declined due to competition from cheaper imported toys.

Illustration depicting Chinese toys becoming popular in India due to lower prices and new designs

Effect Of Trade On Markets

Generally, foreign trade has several effects on markets:

Goods move from one market to another.
The variety of goods available in markets increases.
Prices of similar goods in different markets tend to converge.
Producers in geographically separated countries become competitors.

Integration Of Markets

The combined result of these effects is that foreign trade leads to the connection or integration of markets in different countries. Markets that were previously separate become linked through the flow of goods and the competition among producers spanning international borders.

What Is Globalisation?

The recent intensification of foreign investment by MNCs seeking cost-effective production locations and the rapid increase in foreign trade are key drivers of a broader process known as globalisation.

Rising Foreign Investment And Trade

Over the past few decades, MNCs have significantly increased their foreign investments, and trade between countries has grown rapidly. MNCs control a large portion of foreign trade; for example, Ford Motors in India not only sells locally but also exports cars and components globally.

Definition Of Globalisation

Globalisation is defined as the process of rapid integration or interconnection between countries. This integration is driven by increased flows of goods, services, investments, technology, and to some extent, people between countries.

Role Of Mncs

MNCs are central to the globalisation process, playing a major role in organising production and facilitating the movement of goods, services, investment, and technology across national borders.

Movement Of Goods, Services, Investments, Technology

Globalisation involves increased movement of these factors across countries, bringing regions into closer contact than in previous decades.

Movement Of People

While goods, services, investments, and technology move more freely, the movement of people between countries has faced more restrictions in recent decades, despite individuals seeking better opportunities abroad.

Cartoon depicting a figure labelled 'GLOBALISATION' playing with a globe, with another figure warning about paying the price

Factors That Have Enabled Globalisation

Globalisation has been enabled and accelerated by several key factors, making it easier and more cost-effective to connect countries and integrate production and markets globally.

Rapid Improvement In Technology

Rapid advancements in technology have been a major stimulus for globalisation.

Improvements In Transportation

Over the past fifty years, transportation technology has seen significant improvements. The development of containers has revolutionised shipping, allowing goods to be easily loaded and transported across different modes (ships, railways, trucks) without unpacking. This has drastically reduced port handling costs and increased delivery speed. Air transport costs have also decreased, enabling larger volumes of goods to be transported by air.

Photo of cargo containers stacked at a port or transport hub

Developments In Information And Communication Technology

Even more impactful have been rapid advancements in Information and Communication Technology (ICT), particularly in telecommunications, computers, and the Internet. Facilities like telegraph, telephone (including mobile phones), fax, and satellite communication enable instant contact, information access, and communication globally, even from remote areas.

Computers are now ubiquitous, and the Internet allows instant access to vast amounts of information and seamless communication via email and voice calls at negligible costs.

Using It In Globalisation (Example)

Example. Using IT in Globalisation

A news magazine published for London readers is to be designed and printed in Delhi. The text of the magazine is sent through Internet to the Delhi office. The designers in the Delhi office get orders on how to design the magazine from the office in London using telecommunication facilities. The designing is done on a computer. After printing, the magazines are sent by air to London. Even the payment of money for designing and printing from a bank in London to a bank in Delhi is done instantly through the Internet (e-banking)!

Answer:

1. Words describing the use of technology in production in the example include: Internet (sending text, e-banking), telecommunication facilities (getting design orders), computer (designing), air (sending magazines), bank (payment processing - implicitly using banking technology/networks).

2. Information technology is fundamentally connected with globalisation because it enables real-time communication and information flow across vast distances. This allows production processes (like designing in Delhi for a London magazine) and services (like call centres in India serving customers abroad) to be geographically separated but functionally integrated. Payments can be processed instantly globally through e-banking, facilitating cross-border transactions. Globalisation would be significantly hindered, if not impossible in its current form, without the widespread expansion and advancement of IT, which drastically reduces the barriers of distance and time for communication and coordination.

Illustration contrasting modern printing with potentially low-quality textbook printing, raising questions about access to technology

This example demonstrates how IT enables services to be performed across countries: text is sent instantly via the Internet, design orders are given via telecommunications, designing is done on computers, and payment is transferred instantly via e-banking. These technological advancements greatly facilitate the integration of production and services globally.

Liberalisation Of Foreign Trade And Investment Policy

Besides technology, changes in government policies regarding foreign trade and investment have significantly promoted globalisation.

Trade Barriers

Governments traditionally used trade barriers (restrictions on imports/exports) to regulate foreign trade. A common example is a tax on imports. Taxes on imported toys, for instance, would make them more expensive, reducing their attractiveness compared to domestic toys and thus limiting imports. Trade barriers help governments control the type and quantity of goods entering/leaving the country and protect domestic industries.

Barriers In India (Protectionism)

After achieving independence, the Indian government imposed barriers on foreign trade and investment. This policy of protectionism was deemed necessary to shield nascent domestic industries, which were just developing in the 1950s and 60s, from intense foreign competition. Only essential items like machinery, fertilisers, and petroleum were allowed as imports. This approach of protecting domestic producers during early development stages was common among many developed countries historically.

Changes From 1991 (Liberalisation)

Starting around 1991, India implemented major policy shifts. The government concluded that Indian producers were now mature enough to compete globally and that competition would improve their quality and performance. This decision was influenced by powerful international organisations.

Removing Barriers

Consequently, barriers and restrictions on foreign trade and investment were substantially removed. This made it easier to import and export goods and allowed foreign companies to establish factories and offices in India.

World Trade Organisation

Powerful international organisations have been strong advocates for the liberalisation of trade and investment policies, arguing that barriers are harmful and trade between countries should be 'free'.

Support From International Organisations

India's liberalisation reforms starting in 1991 were supported by such organisations.

Aim Of Wto

The World Trade Organisation (WTO) is one prominent international organisation founded with the aim of liberalising international trade. It was initiated by developed countries.

Rules And Obedience

The WTO establishes and enforces rules governing international trade for its member countries (around 160 currently), ensuring these rules are followed.

Wto Critique (Developed Vs Developing Countries)

Critics argue that despite promoting free trade, the WTO structure is uneven. Developed countries have often maintained trade barriers unfairly while simultaneously pressuring developing countries to remove theirs. This is particularly evident in the debate over agricultural trade.

Debate On Trade In Agricultural Products (Example)

In developed countries like the US, where agriculture contributes minimally to the economy and employment (1% of GDP, 0.5% of employment), the government provides massive financial support (subsidies) to farmers for production and exports. This allows US farmers to sell products at artificially low prices globally. WTO rules have pushed developing countries like India, where agriculture is crucial for employment (bulk of employment) and a significant part of GDP, to reduce support for their farmers. The low-priced surplus products from developed countries, subsidised by their governments, then flood markets in developing countries, severely impacting local farmers.

Fair Trade Question

Developing countries argue that this situation is not 'free and fair trade'. They highlight the hypocrisy of developed countries pushing for liberalisation abroad while maintaining high levels of support for their own farmers at home, enabling them to compete unfairly in global markets.

Impact Of Globalisation In India

Globalisation has significantly transformed the Indian economy over the last two decades, with varied effects on different segments of the population.

Effect On People

The impact of globalisation on people's lives in India has not been uniform; there are both beneficiaries and those who have faced challenges.

Advantage To Consumers

Globalisation and increased competition have largely benefited consumers, particularly the wealthier sections in urban areas. They now have access to a wider variety of goods, often with improved quality and lower prices due to competition from both local and foreign producers. This has contributed to higher standards of living for this group.

Impact On Producers And Workers (Not Uniform)

The impact on producers and workers has been more mixed and less consistently positive compared to well-off consumers.

Increased Mnc Investments

MNCs have substantially increased their investments in India over the past 20 years, finding it a profitable destination. They have focused on industries with large numbers of well-off buyers (e.g., cell phones, cars, electronics, soft drinks, banking services in urban areas). This investment has created new jobs in these specific sectors and benefited local companies that supply these industries with raw materials and other inputs.

Benefit To Top Indian Companies

Increased competition due to globalisation has also benefited some of India's top companies. They have been able to improve their performance by investing in newer technology, modernising production methods, and raising their quality standards. Some have gained from successful collaborations with foreign companies.

Indian Companies As Mncs

Globalisation has enabled some large Indian companies to expand their operations beyond India and become multinationals themselves. Examples include Tata Motors, Infosys, Ranbaxy, Asian Paints, and Sundaram Fasteners, which have spread their operations globally.

New Opportunities In Services (IT)

Globalisation has opened significant opportunities in the services sector, especially those relying on Information Technology (IT). Examples include Indian companies designing magazines for foreign clients, running call centers, and providing services like data entry, accounting, administrative tasks, and engineering cheaply to developed countries. These services are exported, creating jobs and revenue in India.

Steps To Attract Foreign Investment (SEZs)

To further attract foreign investment, the central and state governments in India have taken specific measures, such as establishing Special Economic Zones (SEZs). These are industrial areas designed to have world-class facilities and infrastructure (electricity, water, roads, transport, storage, recreational, educational). Companies setting up units in SEZs receive incentives like a tax holiday for an initial period of five years.

Flexibility In Labour Laws

The government has also made labour laws more flexible to appeal to foreign investors. This means companies, particularly in the organised sector, are allowed to bypass some rules protecting workers' rights. Instead of permanent hiring, companies increasingly hire workers 'flexibly' for short periods during peak demand, reducing labour costs. However, foreign companies often demand even greater flexibility.

Small Producers: Compete Or Perish

While some segments have benefited, globalisation and increased competition have posed significant challenges for a large number of small producers and workers in India.

Challenges For Small Producers

Small manufacturers have been hit hard by competition from both MNC brands and imported goods. Industries like batteries, capacitors, plastics, toys, tyres, dairy products, and vegetable oil have seen many small units struggle or shut down.

Industries Affected

Several industries dominated by small manufacturers have been negatively impacted by the influx of cheaper imported goods or competition from large MNCs.

Closure Of Units And Job Losses

The intense competition has forced many small manufacturing units to close down, resulting in significant job losses for the workers employed in these units.

Importance Of Small And Medium Industries

Small and medium industries are vital for the Indian economy, employing a massive number of workers (11 crores), second only to the agriculture sector. Their struggles have a wide-ranging impact on employment.

Example: Ravi's Capacitor Unit

Example. Rising Competition

Ravi took a loan from the bank to start his own company producing capacitors in 1992 in Hosur, an industrial town in Tamil Nadu. Capacitors are used in many electronic home appliances including tube lights, television etc. Within three years, he was able to expand production and had 20 workers working under him.

His struggle to run his company started when the government removed restrictions on imports of capacitors as per its agreement at WTO in 2001. His main clients, the television companies, used to buy different components including capacitors in bulk for the manufacture of television sets. However, competition from the MNC brands forced the Indian television companies to move into assembling activities for MNCs. Even when some of them bought capacitors, they would prefer to import as the price of the imported item was half the price charged by people like Ravi.

Ravi now produces less than half the capacitors that he produced in the year 2000 and has only seven workers working for him. Many of Ravi’s friends in the same business in Hyderabad and Chennai have closed their units.

Answer:

1. Ravi's small production unit was affected by rising competition in several ways:

His major clients (Indian television companies) faced intense competition from MNC brands and shifted towards assembling for MNCs.
Even the Indian television companies that still bought components preferred cheaper imported capacitors over Ravi's domestically produced ones.
The removal of import restrictions (liberalisation) as per the WTO agreement made it easier and cheaper to import capacitors, directly competing with Ravi's product.
His production drastically reduced (less than half), and he had to lay off most of his workers.
Many other small producers in the same business were forced to shut down completely.

2. Whether producers like Ravi should stop production just because their costs are higher than producers in other countries is a complex question. Stopping production means job losses and loss of livelihood for the producer and workers. While global efficiency suggests production should occur where it is cheapest, a fair globalisation requires considering the social impact. Support might be needed for small producers to modernise or diversify, rather than simply letting them perish due to unequal competition.

3. Recent studies suggest small producers need:

(a) Better infrastructure and support networks (roads, power, water, raw materials, marketing, information): These reduce operational costs and improve efficiency, making them more competitive.
(b) Improvements and modernisation of technology: Updating technology can increase productivity, improve quality, and reduce production costs.
(c) Timely availability of credit at reasonable interest rates: Access to affordable finance is crucial for investing in technology, expanding, or managing operational costs, which informal high-interest loans make difficult.

l These three things would help Indian producers by reducing their costs, improving their quality and efficiency, and enabling them to invest and compete more effectively in the market.

l MNCs might not be interested in investing in these areas (basic infrastructure, small-scale technology upgrades, credit for small producers) because their primary focus is on leveraging existing advantages (cheap labour, large markets, specific skills) for their large-scale operations, not on developing the base for small local producers. They might invest in infrastructure *within* SEZs for their own benefit, but not broadly for small producers.

l Yes, the government has a significant role in making these facilities available. Providing infrastructure (roads, power, water), supporting technology modernisation for small industries, and ensuring access to affordable credit are public goods and welfare measures that the government is best positioned to provide, as the private sector often finds these less profitable or difficult to coordinate on a large scale.

l Other steps the government could take include providing training programs for workers and small producers to adapt to new technologies and market demands, offering subsidies for technology upgrades or environmentally friendly practices, and exploring mechanisms to link small producers to global supply chains in a fairer manner.

Ravi's story illustrates the devastating impact of liberalisation and global competition on small manufacturers. With the removal of import restrictions, cheaper foreign imports flooded the market, and even large Indian clients shifted towards using imports or assembling for MNCs. This led to a drastic reduction in Ravi's production, job losses, and the closure of many similar units.

Competition And Uncertain Employment

The pressure of competition brought by globalisation has fundamentally altered the working lives of many individuals, leading to increased job insecurity.

Impact On Workers' Jobs (No Longer Secure)

Employers, facing heightened competition, increasingly prefer to hire workers 'flexibly'. This means permanent jobs with associated benefits and security are being replaced by temporary employment arrangements, making workers' jobs much less secure.

Flexible Hiring

Instead of hiring workers on a regular, permanent basis, companies hire them temporarily for short periods, often only when there is high demand or 'intense pressure of work'. This strategy helps reduce labour costs for the company, as they don't have to pay workers during lean periods or provide permanent employee benefits.

Example: A Garment Worker (Sushila)

Example. Competition and Uncertain Employment

A Garment Worker

35 year old Sushila has spent many years as a worker in garment export industry of Delhi. She was employed as a ‘permanent worker’ entitled to health insurance, provident fund, overtime at a double rate, when Sushila’s factory closed in the late 1990s. After searching for a job for six months, she finally got a job 30 km. away from where she lives. Even after working in this factory for several years, she is a temporary worker and earns less than half of what she was earning earlier.

Sushila leaves her house every morning, seven days a week at 7:30 a.m. and returns at 10 p.m. A day off from work means no wage. She has none of the benefits she used to get earlier. Factories closer to her home have widely fluctuating orders and therefore pay even less.

Answer:

1. In the garment industry, competition has affected:

Workers: Face job insecurity, lower wages, loss of benefits (health insurance, PF, paid leave), longer working hours (including night shifts and compulsory overtime), and difficult working conditions due to flexible hiring and cost-cutting by exporters.
Indian exporters: Face pressure from large MNCs to cut costs to secure orders. They try to reduce costs by reducing labour costs through flexible hiring, lower wages, and forcing longer hours/overtime.
Foreign MNCs: Benefit from the competition among Indian exporters, allowing them to order products at the cheapest possible rates and maximise their profits.

2. Steps to ensure workers get a fair share of benefits from globalisation:

(a) Government: Strictly enforce labour laws, ensure minimum wages are paid, regulate working hours and overtime, mandate provision of benefits (PF, health insurance, paid leave), support the formation and functioning of labour unions, and penalize employers who violate workers' rights.
(b) Employers at exporting factories: Move beyond flexible hiring towards more secure employment where possible, pay fair wages, limit working hours to legal limits, provide mandatory benefits, and ensure a safe working environment.
(c) MNCs: Adopt ethical sourcing practices that include fair labour standards for their suppliers. They have significant power to influence labour conditions down their supply chain. They should ensure their orders enable exporters to treat workers fairly and consider the well-being of workers as part of their global responsibility.
(d) Workers: Organise themselves into strong labour unions to collectively bargain for better wages, working hours, and benefits. Unions can advocate for better legal protection and help enforce existing laws.

3. The debate on flexible employment policies involves contrasting viewpoints:

Employers' View: Flexible policies are necessary to remain competitive in the global market. Changing demand and production cycles require the ability to hire and lay off workers quickly to manage costs efficiently. Permanent hiring increases fixed costs and reduces adaptability, potentially leading to factory closures when orders are low. Flexible labour laws are seen as essential to attract and retain foreign investment and compete with producers in other countries with fewer labour regulations.
Workers' View: Flexible policies lead to exploitation, job insecurity, low wages, loss of benefits, and poor working conditions. Workers lose stable livelihoods and protection under labour laws. This model prioritizes company profits over workers' well-being, forcing them into vulnerable temporary jobs without basic rights and safety nets, making their lives uncertain and difficult.

Sushila's experience is illustrative: after her factory closed in the late 1990s, she lost her permanent job with benefits. Her new job, far from home and with long hours (7:30 am to 10 pm, seven days a week), is temporary, pays less than half her previous wage, and provides none of her former benefits. A day off means no pay. Factories closer to her face unstable orders, leading to even lower pay.

Working Conditions In Garment Export Industry

In the garment export industry, large MNCs (primarily from Europe and America) order products from Indian exporters, seeking the cheapest options to maximise profits. Indian exporters, under pressure to cut costs, reduce labour expenses. They shift from permanent to temporary hiring, avoid paying for the whole year, force long working hours (including night shifts and overtime), and pay low wages, compelling workers to work extra hours to survive.

Photo of factory workers folding garments for export

Workers Denied Fair Share Of Benefits

While competition benefits MNCs with large profits, workers bear the costs of this competition through job insecurity, low pay, and harsh conditions, being denied a fair share of the benefits generated by globalisation.

Conditions In Organised Sector

The difficult conditions seen in the garment export industry reflect a broader trend. Increasingly, working conditions in the organised sector are starting to resemble those in the unorganised sector. Even workers in formal jobs, like Sushila, are losing the protection and benefits they once had.

The Struggle For A Fair Globalisation

The evidence shows that the benefits of globalisation are not equally shared. Individuals with education, skills, and wealth have largely capitalised on the new opportunities, while many small producers and workers have suffered from increased competition and precarious working conditions.

Unequal Distribution Of Benefits

The uneven impact of globalisation highlights that while it has created opportunities, it has also exacerbated inequalities for those unable to benefit from the new economic landscape.

Making Globalisation Fair

Given that globalisation is an ongoing reality, the challenge is to make it 'fair'. A fair globalisation would ensure opportunities are accessible to all and that its benefits are shared more equitably across the population.

Government's Role

The government plays a crucial role in achieving fair globalisation. Its policies should protect the interests of all people, not just the wealthy and powerful.

Possible Government Steps

Specific actions the government can take include:

Ensuring labour laws are strictly implemented to protect workers' rights.
Supporting small producers to improve their performance and competitiveness.
Using trade and investment barriers if necessary to safeguard domestic interests.
Negotiating for 'fairer rules' at the WTO.
Collaborating with other developing countries to counter the dominance of developed countries in global trade forums.

People's Role

People also have a significant role in advocating for fair globalisation. Massive campaigns and representations by people's organisations have influenced important decisions regarding trade and investment at the WTO, demonstrating the power of collective action in shaping global economic processes.

Photo of a demonstration against WTO in Hong Kong, 2005

Summing Up

This chapter focused on the current phase of globalisation as the rapid integration of countries through increased foreign trade and investment, driven primarily by MNCs.

Definition And Process

Globalisation involves the increasing interconnection of countries through cross-border flows of goods, services, investment, technology, and to some extent, people. This process leads to the integration of production and markets globally.

Role Of Mncs

MNCs are key agents of globalisation, organising production and operations across multiple countries to minimise costs and maximise profits, thereby linking distant locations into a global production network.

Enabling Factors (Technology, Liberalisation, Wto)

Rapid technological advancements (especially in transport and IT) and the liberalisation of trade and investment policies by governments have significantly facilitated globalisation by reducing costs and removing barriers. International organisations like the WTO have further promoted liberalisation, though often with perceived biases towards developed countries.

Impacts (Benefits And Challenges)

Globalisation has brought benefits, particularly to well-off consumers through increased choice, quality, and lower prices. Some large Indian companies and those in IT-enabled services have also thrived. However, it has posed major challenges for small producers and workers who face intense competition, job insecurity, and deteriorating working conditions.

Need For Fair Globalisation

Given the unequal impact, the goal is to make globalisation 'fair' – creating opportunities for all and ensuring a more equitable distribution of its benefits. This requires active roles from governments, by protecting vulnerable groups and negotiating for fairer global rules, and from people, by raising awareness and advocating for change.