Globalisation – Introduction
* India has changed tremendously in the last two decades.
* Till the 1990’s, there was hardly any choice of goods, except for what was produced in the country.
* Today there is wide range of commodities for customers in India to choose from.
* One major reason for this choice is the spread of MNC’s.
* The rise of MNC’s resulted in the integration of production, trade, investment and markets across the globe.
* Even during the colonial period, Europe-based companies carried out trade with their colonies in Asia and Africa.
* However, during the colonial period, the colonies produced raw material and food stuff, while the colonising countries produced finished goods.
* From the 1950’s, MNC’s grew in America, Asia and Africa to put up their factories as labour was cheap and there was a huge market potential.
* Once there was liberalisation of policies, and trade and production barriers were lifted, MNC’s gained access and setup factories in these countries.
* Production and markets became global.
Production – Global Interlink
* There are several factors that MNCs take into account while establishing offices and factories in other countries.
These include:
* Proximity to markets for products
* Availability of cheap labour
* Availability of resources like raw material
* Favourable government policies
* To set up factories, MNCs put in money or foreign investment to buy land, machinery and other equipment.
There are several ways in which MNCs invest in countries:
* They collaborate with local companies
* They buy up local companies
* They get small local producers to supply them goods, which they sell under their banner
* Through such methods, MNCs exert influence on production at distant locations and interlink them.
* Through the ages, foreign trade has been a major link between different countries and civilisations.
* Via trade, producers can sell their products in new markets and compete there with the local goods.
* Consumers can have a wider choice.
* Prices also tend to become more and more competitive as local goods have to contend with goods made in another country.
* With globalisation, the integration, linking and competition, of markets and trade has increased tremendously.
Globalisation and its Impact
* Globalisation has had an uneven impact on the Indian economy.
* Some sectors have gained; while others have suffered losses.
* Competition among producers has led to lower prices of goods and a wider choice.
* The biggest benefit has been for the well-off consumers who can afford to buy a wider range of goods.
* MNC’s have made tremendous profits and invested more and more in India since liberalisation.
* MNC investment and production has largely been in sectors like automobiles, electronic items, fast foods, cold drinks and mobiles.
* Some MNCs have also invested in power and banking.
* Government policies have favoured MNC’s by providing them state-of-the-art facilities in Special Economic Zones, a five-year tax holiday and flexible labour laws.
* Local companies who have collaborated with MNC’s to supply them raw materials or services have also gained from globalisation.
* Indian companies like Tata Motors, Ranbaxy and Asian Paints have emerged as multinationals.
* BPO’s, call centres, data entry operators, accounting firms and administrative service providers are another set of gainers.
* Small producers have borne the negative impact as they have been forced to compete with MNC’s.
* Some small producers who were hit the worst include dairy products, toys, vegetable oils, capacitors and batteries.
* They have either stopped production of decreased the levels.
* Labour employed by MNC’s and other companies has to face hardships.
* Workers in many companies have to work overtime to earn a livelihood.
Fair Globalisation
* The fruits of globalisation have not been evenly distributed.
* Those with education, skills and wealth have benefited tremendously.
* The beneficiaries include well-off consumers, MNCs, their suppliers and employees, big Indian companies, and IT-enabled industries like call centers.
* Those who do not have the requisite, skills or education, and those who have to compete with MNCs have suffered.
* The sufferers include the working class and the small-scale producers.
The government can take steps to make sure that the benefits of globalisation reacheverybody by:
* Formulating watertight labour laws in favour of the workers.
* Having policies that protect the interests of the small producers against the MNCs.
* Erecting barriers against trade and investment within the country, and against unfair competition from developed countries.
* Apart from the government, people from various professions also need to come out and raise their voice against unfair globalisation.
* In the recent past, people have demonstrated against the unfair trade policies that are often encouraged in the name of globalisation.
* Such demonstrations have managed to influence some changes in the WTO’s policies regarding free trade.
Factors that Enabled Globalisation
* The last few years have witnessed a rapid integration of production and markets across the countries of the world.
* Multinational companies have been a major vehicle of such developments.
* This integration of production and markets across countries is known as globalisation.
Factors that have facilitated globalisation include:
* Developments in technology
* Liberalisation of government policies
* The role of organisations like the WTO
* The attracting of foreign investment through establishing Special
Economic Zones
As the result of technological advances:
* Goods can be carried faster, further and in greater bulk than ever before
* Sharing of information is much faster and easier
As a result of the liberalisation policies of the government:
* Trade and tariff barriers have largely been removed
* Foreign goods and products have now established themselves
* Liberalisation and globalisation has been pushed by organisations like the WTO, which believe that protectionism is harmful and should be abolished.
* In order to attract foreign investment and thus aid globalisation, the government has also promoted SEZ’s, which have world-class facilities.