Globalization and

the Indian Economy

What is
Globalization?
DAV Dwarka _ Prepared by Ms. Geeta
Meaning of Globalization
Rapid integration between
countries.
It includes :-
Free export & import
of Goods and Services

Unrestricted exchange
ofDAV Dwarka _ Prepared by Ms. Geeta
 Free flow of Capital
Free movement of
People
(for better income, job,
education orIntegration
Example medical
between
facilities.) Countries: one
shirt sold in the US could have
been made from Chinese cotton
by workers in Thailand. Then it
could have been shipped in a
French Freighter that had a
Spanish crew.
DAV Dwarka _ Prepared by Ms. Geeta Gupta
 Barriers in
Foreign Trade &
Investment
Two types :-

1. Tariff Barriers
Tariff means tax. E.g.
Import duty, Export
duty etc.
DAV Dwarka _ Prepared by Ms. Geeta
2. Non-tariff Barriers
Not in form of a tax. E.g.
Import Quota i.e.
quantitative restrictions
on imports, types of
goods which can be
traded.
Removal of these
barriers indicates
DAV Dwarka _ Prepared by Ms. Geeta
 Globalisation - a broader
concept
Many dimensions :-
Economic
Cultural
Political
Social
In chapter, focus on
Economic interconnection
through foreign trade &
DAV Dwarka _ Prepared by Ms. Geeta Gupta
 History of Globalization in India

Prior to 1991:
Mainly Closed Economy.
(Imports of essential
industrial goods, petroleum
products, fertilizers etc.
were allowed.)
Barriers on Foreign Trade
and Investment.
DAV Dwarka _ Prepared by Ms. Geeta Gupta
Why Restrictions?
Because,
Indian industries
were :
at infant stages of
development.
unable to face
foreign competition.
DAV Dwarka _ Prepared by Ms. Geeta Gupta
 Why Restrictions were
removed?
Mounting Fiscal
Deficit
Balance of Payments
(BoP)
Crisis
Gulf crisis led to rise
in
DAV Dwarka _ Prepared by Ms. Geeta Gupta
 Inflation rising cost
of living
Inefficient functioning of
Public Sector
Loan taken from World
Bank & IMF which
pressurized India to open
up.
Also, Indian Govt. felt
that competition
DAV Dwarka _ Prepared by Ms. Geeta would
Gupta
As a result, in 1991:
New Economic Policy (NEP) was formed.
Three Elements of NEP: LPG

1.Liberalization: Removal
of restrictions set by the
Govt.
2.Privatization: Shifting
ownership to private
entrepreneurs.
DAV Dwarka _ Prepared by Ms. Geeta Gupta
 Who has played major role in Globalization?

Major Role of MNCs

Headqua
What is an
rter
MNC? of MNC
Multinational Operation in

Corporation
Natio Natio Natio
Owns/controls n1 n2 n3
production in
E.g.
more
Dwarka _ Prepared by Ms. Geeta Gupta
 Meaning of Investment &
Foreign Investment

Investment: Money spent to

buy assets like land, building,
machines and other equipments
for future returns.

Foreign Investment:
Investment by foreign countries
in domestic economy.
DAV Dwarka _ Prepared by Ms. Geeta Gupta
 Foreign Investment

FDI FII
Foreign Direct Foreign
Investment Institutional
Investment in Investment
fixed assets or Investment in
production by domestic
MNCs
We (mainly).
will companies
focus on FDI in chapter.
DAV Dwarka _ Prepared by Ms. Geeta Gupta
 Routes through which
MNCs invest
Four Routes:
Partnership with existing
local companies.
(E.g. Ford Motors collaborated with
Mahindra & Mahindra, Japans Honda
collaborated with Hero Cycles of
India.)
Buying up local companies.
(E.g. Cargill Foods bought over Parakh
Foods.)
DAV Dwarka _ Prepared by Ms. Geeta Gupta
 Supply orders to
small producers i.e.
outsourcing.
(E.g. Shoes producing
foreign co. give orders to
Small Shoe makers of Agra.)
By closely
competing with local
companies.
DAV Dwarka _ Prepared by Ms. Geeta Gupta
 Top 10 MNCs in India

Microsoft Corporation
: America
Nestle : Switzerland
Procter & Gamble :
America
PepsiCo : America
DAV Dwarka _ Prepared by Ms. Geeta Gupta
 Hewlett Packard (HP) :
America
Coca Cola : America
IBM : America
Tata Group : India
City Group : America
Source:
http://top10wala.in/top-10-biggest-mnc-in-i
ndia-largest-multi-national-companies-in-th
e-country/
DAV Dwarka _ Prepared by Geeta Gupta
 Why?
Among these top
10,
6 MNCs from
America and
only 1 from India!
Why most of the
MNCs
DAV Dwarka _ Prepared by Ms. Geeta Gupta
 Factors necessary to
become an MNC
Huge Capital
(Money/Investment)
Innovative Technology
Managerial Skills
Developed countries are
enriched with these factors
more than the developing
countries.
DAV Dwarka _ Prepared by Ms. Geeta Gupta
 MNCs of India

DAV Dwarka _ Prepared by Ms. Geeta Gupta

 MNCs in India

DAV Dwarka _ Prepared by Ms. Geeta Gupta

 Factors that MNCs look for
Best Investment Destination
Cheap & Skilled
Labour
Natural Resources,
Cheap Raw Material
Developed
Infrastructure
Market Demand
DAV Dwarka _ Prepared by Ms. Geeta Gupta
 Make in
India
Modi Govt. attracted foreign Investors through
3D Policy
1.Democracy which ensures liberal Govt. Policies.
2.Demography ensures huge supply of labour.
3.Demand which ensures huge market demand for
products of MNCs in India itself.

DAV Dwarka _ Prepared by Ms. Geeta Gupta

 Result
Nov, 2015 :
In the report of
Ernst & Young (EY),
India has been ranked
No. 1
Investment destination
in the world.
DAV Dwarka _ Prepared by Ms. Geeta Gupta
 Factors that have enabled
Globalization
Transportation
E.g. Containers, Air Transport, Shipment
etc.
Information &
Communication Technology
E.g. Computers, Internet, Telecom facilities
etc.
Case Study: Magazine for
London readers designed
and printed in Delhi
through these facilities.
DAV Dwarka _ Prepared by Ms. Geeta Gupta
 To Attract Foreign
Investment
1.Special Economic Zones (SEZs)
Industrial zones with electricity,
water, roads, transport, storage,
educational and other facilities.

2. Flexible Labour Laws

To facilitate MNCs hire labour
when there is intense pressure of
work to reduce cost of production.

DAV Dwarka _ Prepared by Ms. Geeta Gupta

 Flexible Laws A Boon or a
Curse?
Case Study of Garment Industry:
Temporary appointment
Casual jobs on daily wages
Workers forced to work overtime
No other Social benefits or
incentives such as provident fund,
health insurance, promotions etc.

This all leads to rise of

Unorganized Sector.
DAV Dwarka _ Prepared by Ms. Geeta Gupta
 Impacts
of
Globalizati
on
DAV Dwarka _ Prepared by Ms. Geeta Gupta
 Advantages
Increase in Foreign
Trade
Increase in Foreign
Investment
Technological
Development
Growth in GDP
Higher Employment
DAV Dwarka _ Prepared by Ms. Geeta Gupta
 Gains to Producers
Gain to suppliers of Raw
Materials
Incentives to adopt new
technology.
Successful collaboration
with MNCs.
Some Indian Co. emerged
as MNCs.
DAV Dwarka _ Prepared by Geeta Gupta
 Gains to
More choice of
Consumers
Goods.
Low Prices are
offered.
Improved quality.
Higher standard
of living.
DAV Dwarka _ Prepared by Geeta Gupta
 Limitations
Jobs for
educated &
skilled people.
Exploitation of
Resources.
Pollution &
Environmental
Hazards.
Flight off
V Dwarka _ Prepared by Geeta Gupta
 Limitations for
StiffDomestic
competition to
Small Producers
& Medium Scale
Domestic Industries.
Fall in their share in
Market Demand.
Few industries &
services have gained,
not all.
Top Indian companies
who could invest in new
technology have
prospered,
DAV Dwarka _ Preparednot small
by Ms. co.
Geeta Gupta
 Stiff competition from
Chinese Toys
China exports plastic toys
to India
at lower price
offering greater choice
Chinese Toys : Popular in
Indian Markets.
Opportunities for Chinese
Toy makers expand.
Indian
Dwarka
DAV Toy Makers
_ Prepared by Ms. Geetaface
Gupta
 Why FDI in
Consumer
Goods
Industry?
Indian
producers are
t a b l e able to
D e b a
A u e produce daily
Is s
Foreign Trade & consumable
Investment
should be allowed in Heavy
goods (FMCG).
Goods Industry, Petroleum
Products
DAV Dwarkaetc.
_ Prepared by Ms. Geeta Gupta
 WTO?
DAV Dwarka _ Prepared by Ms. Geeta Gupta
 World Trade Organization
Aim
Liberalize International Trade.
Function
Formation of & check on rules
for International Trade.
Member Countries
164
Shortcoming
WTO has forced developing countries
to remove trade barriers, but
developed countries have unfairly
retained them.
DAV Dwarka _ Prepared by Ms. Geeta Gupta
Case Study : Heavy Subsidies to
US Farmers
Heavy Subsidies to US farmers

Low price of farm products

Exports to other countries

Adverse effects on farmers of

Developing Countries
US asked Indian Govt. to stop
US asked Indian Govt. to stop
supporting Indian farmers. But US is
doing so itself.
We have Free Trade here. But is this
DAV Dwarkaa_ Fair Trade?
Prepared by Ms. Geeta Gupta
Protests against Unfair Globalization

Protests against Unfair Globalization

DAV Dwarka _ Prepared by Ms. Geeta Gupta
 We want
FAIR
GLOBALIZATI
ON

OPPORTUNI BENEFITS
TIES FOR SHARED
ALL BETTER.
DAV Dwarka _ Prepared by Ms. Geeta Gupta
 Role of Government
Formation of Policies for
benefits of all
Labour Laws - properly
implemented
Support to Small
Producers
Enforce Some Barriers (if
needed)
Negotiation with WTO
Alignment with Developing
Countries
To fight against domination of developed
countries.
DAV Dwarka _ Prepared by Ms. Geeta Gupta
 Conclusion
Globalization is undoubtedly
important for growth &
development of a country.
But we have to focus on a FAIR
Globalization.
The target should not be just
profit maximization & capturing
larger market share.
Rather aim should be to share
ideas, innovations, wealth,
DAV Dwarka _ Prepared by Ms. Geeta Gupta
DAV Dwarka _ Prepared by Ms. Geeta Gupta
DAV Dwarka _ Prepared by Ms. Geeta Gupta
Ques. State the types of goods which
are produced by the following brands.
Also, classify these companies into
Indian MNCs & Foreign MNCs.

DAV Dwarka _ Prepared by Ms. Geeta Gupta

Ques. Consider any one MNC operating in
India and answer the following questions.
(i) Through which route this MNC started
its operation in India and in which year?
(ii)In which country did it originate?
(iii) Mention the locations where it is
operating in India.
(iv) How has this MNC been prospering
after setting up business in India?
(v) Mention its positive impacts on our
country & its people. (any three)
(vi)Is it causing any harm to India? If yes,
how?

DAV Dwarka _ Prepared by Ms. Geeta Gupta