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Globalization is defined as the integration between countries through foreign trade and foreign investments by multinational corporations (MNCs). Increase in foreign trade migration of people, spread of technology, capital flow, private and public investments from foreign countries all together contribute to globalization. Globalization has been facilitated by several factors like rapid improvements in technology, liberalization of trade and investment policies and, pressures from international organization such as the WTO.
The Indian government after independence had put barriers to foreign trade
and foreign investment. This was done to protect the producers within the country from foreign competition especially when industries had just started to come up in the 1950s and 1960s. but later in 1990s the government accepted that foreign competition would encourage Indian industrialists to improve the quality of their products and removing these barriers would increase trade and quality of products produced in the country.
Flexibility in labour law helps companies to attract foreign investments. Instead of hiringworkers on a regular basis companies hire workers flexibility for short periods when there is intense pressure of work. Company heads can negotiate wages and terminate the employees depending on market conditions. This will lead to an increase in the company’s competitiveness and reduce its labour cost.
Various ways in which MNCs set up, or control, production in other countries are:
- MNCs set up production units close to the market so that they get cheaper labour.
- To increase production, MNCs collaborate with some local companies as the production rate would rapidly increase.
- MNCs buy local companies and expand their production with help of new
technology.
- They place orders for production with the small producers and sell these products under their own brand name to the customers worldwide.
Developed countries want developing countries to liberalise their trade and
investment so that their own companies can establish their business in the
developing countries. The manufacturing costs are less in the developing nations due to the availability of cheap labour and other resources at low cost. Therefore, MNCs belonging to the developed nations on setting up industries in the less-expensive developing nations can earn huge profits. Also setting up industries in developed countries increases completion. The developing countries should, in turn, ask for a fair removal of trade barriers in order to protect their own industries.
The impact of globalization has not uniform because it has benefitted only the
rich and developed countries. The developing countries are only a sources of setting industries and getting cheaper labour and the entire profits are earned by
the developed countries. Many small manufactures with low capital have not been able to withstand the competition from the large MNCs. Workers are now
employed flexibility in the face of growing competition. This has reduced their job security.
The liberalization of trade and investment policies helped the globalization
process in the following ways:
- It has helped in the removal of trade barriers.
- It has made foreign trade barriers.
- It led to the increase in imports and exports across the nations thereby contributing to the process of globalization.
- It has allowed the developed countries to establish their industries and offices in thedeveloping countries to establish their industries and offices in the developing countries which in turn is helping in the spread of globalizations.
Because of foreign trade the producers are now able to compete and export their goods to the markets of other countries. Not just the sellers but the buyers are also being benefited through this. Their choices have expanded as now they get to choose products manufactured by not only domestic companies but also by the foreign companies. Due to the increased competition in the market the prices of the goods have also decreased. For example, the Indian market today is flooded with several varieties of smart phone of foreign brands at competitive
prices . This has benefited the consumers as they can choose from various option available in the market on the basis of the comparing their features and prices.
Globalization will continue in the future as well. Twenty years from now :
- Productive efficiency will be improved
- Competition in the market will increased
- Quality of the goods will be improved
- Trade and capital flows will increase
- Advancement in every field will be evident This will occur because twenty years from now we will find further strengthening of the forces of globalization. Liberalization will get augmented and trade barriers will further be nreduced. MNCs will converge with other companies producing the same goods.
Globalization has come with both advantages and disadvantages in our country.
- The advantages of increased globalization are:
- Increase in the volume of trade
- Increase in the employment opportunities
- Increase in variety of goods in the market, for the buyers to choose from
- Improvement in the quality of goods due to increased competition in the market. The disadvantages of increased globalization are:
- Small scale industrialists may not be able to compete with those international enterprises and earn much profit.
- Workers are employed flexibility hence they do not get job security.
Indian buyers have a greater choice of goods than they did two decades back. This is closely associated with the process of globalisation. Markets in India are selling goods produced in many other countries. This means there is increasing trade with other countries. Moreover, the rising number of brands that we see in the markets might be produced by MNCs in India. MNCs are investing in India because of cheaper production costs. While consumers have more choices in the market, the effect of rising demand and purchasing power has meant greater competition among the producers.
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(i) MNCs buy at cheap rates from small producers |
(b) Garments, footwear, sports items |
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(ii) Quotas and taxes on imports are used to regulate trade |
(e) Trade barriers |
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(iii) Indian companies who have invested abroad |
(d) Tata Motors, Infosys, Ranbaxy |
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(iv) IT helped in spreading of production of services |
(c) Call centres |
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(v) Several MNCs have invested in setting up factories in India for production |
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