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Globalisation and the Indian Economy- NCERT Notes UPSC

May 25, 2022

Globalisation and the Indian Economy

Globalisation is the process of rapid integration or interconnection between countries. Let's explore more about the topic in this detailed article and enhance your IAS Preparation.

Production Across Countries

  • Trade was the main channel of connecting distant countries. Large companies, which are now called Multinational Corporations (MNCs) played a major role in trade. 
  • Today more and more goods and services, investments and technology are moving between countries, not just in terms of sales of products overseas but in terms of global production as well. 
  • Globalisation also happens through the movement of people between countries. People usually move from one country to another in search of better income, better jobs or better education.

Enabling Factors of Globalisation

  • Technology:
  • Rapid improvements in technology, for instance, improvements in transportation technology, have made much faster delivery of goods across long distances possible at lower costs.
  • Information and communication technology has made global transmission of information and communication possible at negligible costs. 
  • Liberalisation of foreign trade and investment policy:
  • Liberalisation is a process of removing barriers or restrictions set by the government.
  • With the liberalisation of trade, businesses are allowed to make decisions freely about imports, exports and investments. 
  • Starting around 1991 in India, the government decided to lift many barriers to foreign trade and foreign investment to a large extent. 

Today, goods and services are produced globally. As a result, production is organised in increasingly complex ways, spanning across national boundaries.

Also read: Rural Developmet in India

Impact of Globalisation on the World

Interlinking Production across countries:

  • Corporations look for the availability of factors of production and favourable government policy while scouting to set up production in a country. 
  • The money spent by corporations to acquire assets is termed a foreign investment by the host country. 
  • These MNCs use various routes like setting up new companies, joint ventures with local companies, buying a local company (most common) or placing orders to the local companies to manufacture under MNC’s brand name to set up in the host country. 
  • These corporations also bring enormous wealth and technical knowhow with them. 
  • In this way, geographically dispersed production is getting interlinked.

Also Read : Govt Spending on Healthcare FY-2023-24 : UPSC Key Points

Foreign Trade and Integration of Markets:

  • Foreign trade allows producers to sell their goods outside their domestic nations. 
  • It allows consumers to buy goods apart from those, made in their country. 
  • Foreign trade thus results in connecting the markets or integration of markets in different countries.

Also, watch a detailed video on the Unveiling of Indo Pacific Economic Framework to upgrade your IAS preparation:


Impact of Globalization on India

Positive impact

  • Increased investment by MNCs in India has led to the prosperous growth of local supplier companies in India.
  • Increased competition benefits Indian companies by inducing higher quality of goods. 
  • Creation of new opportunities for domestic service sector companies, in newer servicing fields like accounting, data entry, engineering etc. 
  • Some own Indian companies have themselves prospered into MNCs. For example, TATA, Infosys, Asian Paints etc. 

Important read: Economic Survey 2023 | Top 20 Key Highlights

Negative Impact

  • Small manufacturers and industries such as domestic industries of toys, tyres, vegetable oils etc. are unable to compete with large MNC’s leading to their shut down. 
  • Flexible employment culture, due to increasing competition for jobs leading to unsecured jobs.

Struggle for a Fair Globalization

Not everyone has benefited from globalization equally, people with education and skill have made the most out of it, while leaving many out. This highlights the need for a fair globalization process. This can be attained through the following methods: 

  • By using government policies. For example, strong implementation of labour laws, protection to small manufacturing units etc.
  • Cases of unfair use of the process can be vocalised through the platform of the World Trade Organization (WTO). 
  • People can play a major role, by being vocal about their concerns, and inducing favourable policy at both domestic and international level.   

World Trade Organisation

  • It is an international organisation whose aim is to liberalise international trade.
  • Started at the initiative of the developed countries, it establishes rules regarding international trade. 
  • Though it is supposed to get international trade liberalised, however, many developed countries have unfairly retained trade barriers. On the other hand, WTO has forced developing countries to remove all trade barriers. 
  • For example, farmers in the USA are receiving massive sums of money from the US government to produce and export agricultural produce to other countries, due to which they can sell their produce at abnormally low prices in other countries, adversely impacting the farmers in these destination countries.

In a nutshell, the globalization process has immensely benefited various industries and people, as mentioned above, however the need of the hour is for fair globalization so that the benefits can be equitably shared among all by creating additional opportunities for all. 

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