globalisation and india

NOTES FOR THE TEACHER

Most regions of the world are getting increasinglyinterconnected. While this interconnectednessacross countries has many dimensions —cultural, political, social and economic — thischapter looks at globalisation in a more limitedsense. It defines globalisation as the integrationbetween countries through foreign trade andforeign investments by multinationalcorporations (MNCs). As you will notice, the morecomplex issues of portfolio investment have beenleft out.

If we look at the past thirty years or so, wefind that MNCs have been a major force in theglobalisation process connecting distant regionsof the world. Why are the MNCs spreading theirproduction to other countries and what are theways in which they are doing so? The first partof the chapter discusses this. Rather thanrelying on quantitative estimates, the rapid riseand influence of the MNCs has been shownthrough a variety of examples, mainly drawnfrom the Indian context. Note that the examplesare an aid to explain a more general point. Whileteaching, the emphasis should be on the ideasand examples are to be used as illustrations.You can also creatively use comprehensionpassages like the one given after Section II totest and reinforce new concepts.

Integration of production and integration ofmarkets is a key idea behind understanding theprocess of globalisation and its impact. This hasbeen dealt with at length in this chapter,highlighting the role of MNCs in the process. Youhave to ensure that the students grasp this ideawith sufficient clarity, before moving on to thenext topic.

Globalisation has been facilitated by severalfactors. Three of these have been highlighted:rapid improvements in technology, liberalisation

of trade and investment policies and, pressuresfrom international organisations such as theWTO. Improvement in technology is a fascinatingarea for students and you may, with a fewdirections, encourage them to do their ownexplorations. While discussing liberalisation, youhave to keep in mind that the students areunaware of what India was like in thepre-liberalisation era. A role-play could beconceived to compare and contrast the pre andpost-liberalisation era. Similarly, internationalnegotiations under WTO and the unevenbalances in power are interesting subjects thatcan be covered in a discussion mode rather thanas lectures.

The final section covers the impact ofglobalisation. To what extent has globalisationcontributed to the development process? Thissection draws on the topics covered in Chapters1 and 2 (for example, what is a fair developmentgoal), which you can refer to. Also, examples andactivities drawn from the local environment area must while discussing this section. This mightinclude contexts that have not been covered inthe chapter, such as the impact of imports onlocal farmers, etc. Collective brainstormingsessions can be conducted to analyse suchsituations.

Sources for InformationThe call for a fairer globalisation has been given,among others, by the International LabourOrganisation — www.ilo.org. Another interestingresource is the WTO website http://www.wto.org.It gives access to the variety of agreements thatare being negotiated at the WTO. For companyrelated information, most MNCs have their ownwebsites. If you want to critically look atthe MNCs, one recommended website iswww.corporatewatch.org.uk.

CHAPTER 4 : GLOBALISATION AND THE INDIAN ECONOMY

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CHAPTER 4

As consumers in today’s world, someof us have a wide choice of goods andservices before us. The latest modelsof digital cameras, mobile phones andtelevisions made by the leadingmanufacturers of the world are withinour reach. Every season, new modelsof automobiles can be seen on Indianroads. Gone are the days whenAmbassador and Fiat were the onlycars on Indian roads. Today, Indiansare buying cars produced by nearlyall the top companies in the world. Asimilar explosion of brands can beseen for many other goods: from shirtsto televisions to processed fruit juices.

Such wide-ranging choice of goodsin our markets is a relatively recentphenomenon. You wouldn’t havefound such a wide variety of goods inIndian markets even two decadesback. In a matter of years, ourmarkets have been transformed!

How do we understand theserapid transformations? What are thefactors that are bringing about thesechanges? And, how are these changesaffecting the lives of the people?We shall dwell on these questions inthis chapter.


Until the middle of the twentiethcentury, production was largelyorganised within countries. Whatcrossed the boundaries of thesecountries were raw materials, foodstuff and finished products. Coloniessuch as India exported raw materialsand food stuff and imported finishedgoods. Trade was the main channelconnecting distant countries. This wasbefore large companies called

Spreading of ProductionSpreading of ProductionSpreading of ProductionSpreading of ProductionSpreading of Productionby an MNCby an MNCby an MNCby an MNCby an MNC

A large MNC, producing industrial equipment, designs itsproducts in research centres in the United States, and thenhas the components manufactured in China. These are thenshipped to Mexico and Eastern Europe where the productsare assembled and the finished products are sold all over theworld. Meanwhile, the company’s customer care is carried outthrough call centres located in India.

PRODUCTION ACROSS COUNTRIES

multinational corporations (MNCs)emerged on the scene. A MNC is acompany that owns or controlsproduction in more than one nation.MNCs set up offices and factories forproduction in regions where they canget cheap labour and other resources.This is done so that the cost ofproduction is low and the MNCs canearn greater profits. Consider thefollowing example.

This is a call centre in Bangalore, equipped with telecom facilities and access toInternet to provide information and support to customers abroad.


Complete the following statement to show how the production process in the garmentindustry is spread across countries.

The brand tag says ‘Made in Thailand’ but they are not Thai products. We dissectthe manufacturing process and look for the best solution at each step. We aredoing it globally. In making garments, the company may, for example, get cottonfibre from Korea, ........

LET’S WORK THIS OUT

In this example the MNC is not onlyselling its finished products globally,but more important, the goods andservices are produced globally. Asa result, production is organised inincreasingly complex ways. Theproduction process is divided intosmall parts and spread out across theglobe. In the above example, Chinaprovides the advantage of being acheap manufacturing location.Mexico and Eastern Europe are useful

for their closeness to the marketsin the US and Europe. India hashighly skilled engineers who canunderstand the technical aspects ofproduction. It also has educatedEnglish speaking youth who canprovide customer care services. Andall this probably can mean 50-60 percent cost-savings for the MNC!The advantage of spreading outproduction across the borders to themultinationals can be truly immense.

INTERLINKING PRODUCTION ACROSSCOUNTRIES

At times, MNCs set up productionjointly with some of the localcompanies of these countries. Thebenefit to the local company of suchjoint production is two-fold. First,MNCs can provide money foradditional investments, like buyingnew machines for faster production.Second, MNCs might bring with themthe latest technology for production.

In general, MNCs set up productionwhere it is close to the markets; wherethere is skilled and unskilled labouravailable at low costs; and where theavailability of other factors ofproduction is assured. In addition,MNCs might look for governmentpolicies that look after their interests.You will read more about the policieslater in the chapter.

Having assured themselves of theseconditions, MNCs set up factories andoffices for production. The money thatis spent to buy assets such as land,building, machines and otherequipment is called investment.Investment made by MNCs is calledforeign investment. Any investmentis made with the hope that theseassets will earn profits.

WE WILL SHIFTTHIS FACTORY TO

ANOTHER COUNTRY.IT HAS BECOME

EXPENSIVE HERE!


But the most common route forMNC investments is to buy up localcompanies and then to expandproduction. MNCs with huge wealthcan quite easily do so. To take anexample, Cargill Foods, a very largeAmerican MNC, has bought oversmaller Indian companies such asParakh Foods. Parakh Foods hadbuilt a large marketing network invarious parts of India, where its brandwas well-reputed. Also, Parakh Foodshad four oil refineries, whose controlhas now shifted to Cargill. Cargill isnow the largest producer of edible oilin India, with a capacity to make 5million pouches daily!

In fact, many of the top MNCshave wealth exceeding the entirebudgets of the developing countrygovernments. With such enormouswealth, imagine the power andinfluence of these MNCs!

There’s another way in whichMNCs control production. LargeMNCs in developed countries placeorders for production with smallproducers. Garments, footwear,sports items are examples ofindustries where production iscarried out by a large number ofsmall producers around the world.

The products are supplied to theMNCs, which then sell these undertheir own brand names to thecustomers. These large MNCs havetremendous power to determine price,quality, delivery, and labourconditions for these distantproducers.

Thus, we see that there are avariety of ways in which the MNCs arespreading their production andinteracting with local producers invarious countries across the globe. Bysetting up partnerships with localcompanies, by using the localcompanies for supplies, by closelycompeting with the local companiesor buying them up, MNCs are exertinga strong influence on productionat these distant locations. As aresult, production in these widelydispersed locations is gettinginterlinked.

Women at home in Ludhiana making footballs for large MNCs

Jeans produced in developing countries beingsold in USA for Rs 6500 ($145)


Read the passage on the left and answer the questions.

LET’S WORK THESE OUT

1. Would you say Ford Motors is a MNC? Why?

2. What is foreign investment? How much did Ford Motors invest in India?

3. By setting up their production plants in India, MNCs such as FordMotors tap the advantage not only of the large markets that countriessuch as India provide, but also the lower costs of production. Explainthe statement.

4. Why do you think the company wants to develop India as a base formanufacturing car components for its global operations? Discuss thefollowing factors:

(a) cost of labour and other resources in India

(b) the presence of several local manufacturers who supply auto-parts to Ford Motors

(c) closeness to a large number of buyers in India and China

5. In what ways will the production of cars by Ford Motors in India lead tointerlinking of production?

6. In what ways is a MNC different from other companies?

7. Nearly all major multinationals are American, Japanese or European,such as Nike, Coca-Cola, Pepsi, Honda, Nokia. Can you guess why?

For a long time foreign trade has beenthe main channel connectingcountries. In history you would haveread about the trade routesconnecting India and South Asia tomarkets both in the East and Westand the extensive trade that took placealong these routes. Also, you wouldremember that it was trading interestswhich attracted various tradingcompanies such as the East IndiaCompany to India. What then is thebasic function of foreign trade?

To put it simply, foreign tradecreates an opportunity for theproducers to reach beyond thedomestic markets, i.e., markets of theirown countries. Producers can sell theirproduce not only in markets locatedwithin the country but can alsocompete in markets located in othercountries of the world. Similarly, for thebuyers, import of goods produced inanother country is one way ofexpanding the choice of goods beyondwhat is domestically produced.

FOREIGN TRADE AND INTEGRATION OFMARKETS

Ford Motors, an Americancompany, is one of theworld’s largestautomobile manufacturerswith production spreadover 26 countries of theworld. Ford Motors cameto India in 1995 andspent Rs. 1700 crore toset up a large plant nearChennai. This was donein collaboration withMahindra and Mahindra,a major Indianmanufacturer of jeepsand trucks. By the year2004, Ford Motors wasselling 27, 000 cars inthe Indian markets,while 24,000 cars wereexported from India toSouth Africa, Mexico andBrazil. The companywants to develop FordIndia as a componentsupplying base for itsother plants across theglobe.

Cars made by Indian workers beingtransported to be sold abroad by MNCs.

Chinese Toys in IndiaChinese Toys in IndiaChinese Toys in IndiaChinese Toys in IndiaChinese Toys in India

Chinese manufacturers learnof an opportunity to export toysto India, where toys are sold ata high price. They startexporting plastic toys to India.Buyers in India now have theoption of choosing betweenIndian and the Chinese toys.Because of the cheaper pricesand new designs, Chinese toysbecome more popular in theIndian markets. Within a year,70 to 80 per cent of the toyshops have replaced Indiantoys with Chinese toys. Toysare now cheaper in the Indianmarkets than earlier.

Let us see the effect of foreign trade

through the example of Chinese toys

in the Indian markets.

What is happening here? As aresult of trade, Chinese toyscome into the Indian markets.In the competition betweenIndian and Chinese toys,Chinese toys prove better.Indian buyers have a greaterchoice of toys and at lowerprices. For the Chinese toymakers, this provides anopportunity to expand business.The opposite is true for Indiantoy makers. They face losses,as their toys are sellingmuch less.



1. What was the main channel connecting countries in the past? How is it differentnow?

2. Distinguish between foreign trade and foreign investment.

3. In recent years China has been importing steel from India. Explain how the importof steel by China will affect.

(a) steel companies in China.

(b) steel companies in India.

(c) industries buying steel for production of other industrial goods in China.

4. How will the import of steel from India into the Chinese markets lead to integrationof markets for steel in the two countries? Explain.


In general, with the opening oftrade, goods travel from one marketto another. Choice of goods in themarkets rises. Prices of similar goodsin the two markets tend to becomeequal. And, producers in the twocountries now closely compete againsteach other even though they areseparated by thousands of miles!Foreign trade thus results inconnecting the markets orintegration of markets in differentcountries.

In the past two to three decades, moreand more MNCs have been looking forlocations around the world whichwould be cheap for their production.Foreign investment by MNCs in thesecountries has been rising. At the sametime, foreign trade between countrieshas been rising rapidly. A large partof the foreign trade is also controlledby MNCs. For instance, the carmanufacturing plant of Ford Motorsin India not only produces cars for theIndian markets, it also exports carsto other developing countries andexports car components for its manyfactories around the world. Likewise,activities of most MNCs involvesubstantial trade in goods and alsoservices.

WHAT IS GLOBALISATION?

BE CAREFUL! THAT’SOUROUROUROUROUR WORLD YOU’RE

PLAYING WITH!SOMEDAY YOU’LLHAVE TO PAY THE

PRICE!

GLOBALISATIONIS FUN!

Small traders of readymade garments facing stiffcompetition from both MNC brands and imports.


TechnologyRapid improvement in technology has been one major factor that hasstimulated the globalisation process. For instance, the past fifty years haveseen several improvements in transportation technology. This has made muchfaster delivery of goods across long distances possible at lower costs.

The result of greater foreigninvestment and greater foreign tradehas been greater integration ofproduction and markets acrosscountries. Globalisation is thisprocess of rapid integration orinterconnection between countries.MNCs are playing a major role inthe globalisation process. Moreand more goods and services,investments and technology aremoving between countries. Mostregions of the world are in closer

1. What is the role of MNCs in the globalisation process?

2. What are the various ways in which countries can belinked?

3. Choose the correct option.

Globalisation, by connecting countries, shall result in

(a) lesser competition among producers.

(b) greater competition among producers.

(c) no change in competition among producers.


contact with each other than a fewdecades back.

Besides the movements of goods,services, investments and technology,there is one more way in which thecountries can be connected. This isthrough the movement of peoplebetween countries. People usuallymove from one country to another insearch of better income, better jobs orbetter education. In the past fewdecades, however, there has not beenmuch increase in the movement ofpeople between countries due tovarious restrictions.

Containers fortransport of goodsGoods are placed in containersthat can be loaded intact ontoships, railways, planes and trucks.Containers have led to hugereduction in port handling costsand increased the speed withwhich exports can reach markets.Similarly, the cost of air transporthas fallen. This has enabled muchgreater volumes of goods beingtransported by airlines.

FACTORS THAT HAVE ENABLED GLOBALISATION

...WE’VE SEEN GREAT IMPROVEMENTSIN TRANSPORTATION...


amazing world of internet, where youcan obtain and share information onalmost anything you want to know.Internet also allows us to send instantelectronic mail (e-mail) and talk(voice-mail) across the world atnegligible costs.

Even more remarkable have beenthe developments in information andcommunication technology. Inrecent times, technology in the areasof telecommunications, computers,Internet has been changing rapidly.Telecommunication facilities (tele-graph, telephone including mobilephones, fax) are used to contact oneanother around the world, to accessinformation instantly, and tocommunicate from remote areas. Thishas been facilitated by satellitecommunication devices. As youwould be aware, computers have nowentered almost every field of activity.You might have also ventured into the

Using IT inUsing IT inUsing IT inUsing IT inUsing IT inGlobalisationGlobalisationGlobalisationGlobalisationGlobalisation

Information and communication technology

(or IT in short) has played a major role in

spreading out production of services

across countries. Let us see how.

1. In the above example, underline thewords describing the use oftechnology in production.

2. How is information technologyconnected with globalisation? Wouldglobalisation have been possiblewithout expansion of IT?


A news magazine published for Londonreaders is to be designed and printed inDelhi. The text of the magazine is sentthrough Internet to the Delhi office. Thedesigners in the Delhi office getorders on how to design the magazinefrom the office in London usingtelecommunication facilities. Thedesigning is done on a computer. Afterprinting, the magazines are sent by airto London. Even the payment of moneyfor designing and printing from a bankin London to a bank in Delhi is doneinstantly through the Internet(e-banking)!

NO, MY CHILD! THISPRINTING PRESS IS NOTFOR ORDINARY INDIANS!

IT LOOKS LIKE A VERY NICEMAGAZINE. BUT WHY ISN’T MY

TEXTBOOK PRINTED LIKETHIS? I CAN HARDLY READTHE WORDS IN MY BOOK!

...BUT WHEREIS THE

ELECTRICITY?...


Liberalisation of foreign tradeand foreign investmentpolicyLet us return to the example of importsof Chinese toys in India. Suppose theIndian government puts a tax onimport of toys. What would happen?Those who wish to import these toyswould have to pay tax on this.Because of the tax, buyers will haveto pay a higher price on imported toys.Chinese toys will no longer be ascheap in the Indian markets andimports from China will automaticallyreduce. Indian toy-makers willprosper.

Tax on imports is an example oftrade barrier. It is called a barrierbecause some restriction has been setup. Governments can use tradebarriers to increase or decrease(regulate) foreign trade and to decidewhat kinds of goods and how muchof each, should come into the country.

The Indian government, afterIndependence, had put barriers toforeign trade and foreign investment.This was considered necessary toprotect the producers within thecountry from foreign competition.Industries were just coming up in the1950s and 1960s, and competitionfrom imports at that stage would nothave allowed these industries to comeup. Thus, India allowed imports

of only essential items such asmachinery, fertilisers, petroleumetc. Note that all developedcountries, during the early stages ofdevelopment, have given protection todomestic producers through a varietyof means.

Starting around 1991, some far-reaching changes in policy were madein India. The government decided thatthe time had come for Indianproducers to compete with producersaround the globe. It felt thatcompetition would improve theperformance of producers within thecountry since they would have toimprove their quality. This decisionwas supported by powerfulinternational organisations.

Thus, barriers on foreign trade andforeign investment were removed to alarge extent. This meant that goodscould be imported and exportedeasily and also foreign companiescould set up factories and officeshere.

Removing barriers or restrictionsset by the government is what isknown as liberalisation. Withliberalisation of trade, businesses areallowed to make decisions freelyabout what they wish to import orexport. The government imposesmuch less restrictions than beforeand is therefore said to be moreliberal.

1. What do you understand by liberalisation of foreign trade?

2. Tax on imports is one type of trade barrier. The government could also place a limit onthe number of goods that can be imported. This is known as quotas. Can you explain,using the example of Chinese toys, how quotas can be used as trade barriers?Do you think this should be used? Discuss.



rules regarding international trade,and sees that these rules are obeyed.149 countries of the world arecurrently members of the WTO(2006).

Though WTO is supposed to allowfree trade for all, in practice, it is seenthat the developed countries haveunfairly retained trade barriers. Onthe other hand, WTO rules have forcedthe developing countries to removetrade barriers. An example of this isthe current debate on trade inagricultural products.

We have seen that the liberalisation offoreign trade and investment in Indiawas supported by some very powerfulinternational organisations. Theseorganisations say that all barriers toforeign trade and investment areharmful. There should be no barriers.Trade between countries should be‘free’. All countries in the worldshould liberalise their policies.

World Trade Organisation (WTO) isone such organisation whose aim isto liberalise international trade.Started at the initiative of thedeveloped countries, WTO establishes

WORLD TRADE ORGANISATION

Debate on Trade PracticesDebate on Trade PracticesDebate on Trade PracticesDebate on Trade PracticesDebate on Trade PracticesDeveloping countries are, therefore, asking thedeveloped country governments, “We havereduced trade barriers as per WTO rules. But youhave ignored the rules of WTO and havecontinued to pay your farmers vast sums ofmoney. You have asked our governments to stopsupporting our farmers, but you are doing soyourselves. Is this free and fair trade?”

You have seen in Chapter 2, thatthe agriculture sector provides thebulk of employment and asignificant portion of the GDP inIndia. Compare this to a developedcountry such as the US with theshare of agriculture in GDP at 1%and its share in total employmenta tiny 0.5%! And yet this verysmall percentage of peoplewho are engaged inagriculture in the US receivemassive sums of money fromthe US government forproduction and for exports toother countries. Due to thismassive money that theyreceive, US farmers can sellthe farm products atabnormally low prices. Thesurplus farm products aresold in other country marketsat low prices, adverselyaffecting farmers in thesecountries.

A typical cotton farm in USA consists of thousands of acres owned bya huge corporation that will sell cotton abroad at lowered prices.

In the last fifteen years, globalisationof the Indian economy has come along way. What has been its effect onthe lives of people? We look at someof the evidence.

Globalisation and greatercompetition among producers - bothlocal and foreign producers - has beenof advantage to consumers,particularly the well-off sections in theurban areas. There is greater choicebefore these consumers who nowenjoy improved quality and lowerprices for several products. As a result,these people today, enjoy muchhigher standards of living than waspossible earlier.

Among producers and workers,the impact of globalisation has notbeen uniform.

Firstly, MNCs have increased theirinvestments in India over the past 15years, which means investing in Indiahas been beneficial for them. MNCshave been interested in industriessuch as cell phones, automobiles,electronics, soft drinks, fast food orservices such as banking in urbanareas. These products have a largenumber of well-off buyers. In theseindustries and services, new jobs havebeen created. Also, local companiessupplying raw materials, etc. to theseindustries have prospered.

1. Fill in the blanks.

WTO was started at the initiative of __________countries. The aim of the WTO is to

____________________. WTO establishes rules regarding ________________ for

all countries, and sees that ___________________ In practice, trade between countries

is not ______________________________. Developing countries like India have

___________________, whereas developed countries, in many cases, have continued

to provide protection to their producers.

2. What do you think can be done so that trade between countries is more fair?

3. In the above example, we saw that the US government gives massive sums of moneyto farmers for production. At times, governments also give support to promote productionof certain types of goods, such as those which are environmentally friendly. Discusswhether these are fair or not.


IMPACT OF GLOBALISATION IN INDIA


are some Indian companies whichare spreading their operationsworldwide.

Globalisation has also creatednew opportunities for companiesproviding services, particularly thoseinvolving IT. The Indian companyproducing a magazine for the Londonbased company and call centres aresome examples. Besides, a host ofservices such as data entry, account-ing, administrative tasks, engineeringare now being done cheaply incountries such as India and areexported to the developed countries.

Secondly, several of the top Indiancompanies have been able to benefitfrom the increased competition. Theyhave invested in newer technology andproduction methods and raised theirproduction standards. Some havegained from successful collaborationswith foreign companies.

Moreover, globalisation hasenabled some large Indian companiesto emerge as multinationalsthemselves! Tata Motors (auto-mobiles), Infosys (IT), Ranbaxy(medicines), Asian Paints (paints),Sundaram Fasteners (nuts and bolts)

1. How has competition benefited people in India?

2. Should more Indian companies emerge as MNCs? How would it benefit the people inthe country?

3. Why do governments try to attract more foreign investment?

4. In Chapter 1, we saw what may be development for one may be destructive for others.The setting of SEZs has been opposed by some people in India. Find out who arethese people and why are they opposing it.


In recent years, the central and stategovernments in India are taking specialsteps to attract foreign companies toinvest in India. Industrial zones, calledSpecial Economic Zones (SEZs), arebeing set up. SEZs are to have world classfacilities: electricity, water, roads,transport, storage, recreational andeducational facilities. Companies who setup production units in the SEZs do nothave to pay taxes for an initial period offive years.

Government has also allowedflexibility in the labour laws to attractforeign investment. You have seen inChapter 2 that the companies in theorganised sector have to obey certainrules that aim to protect the workers’

rights. In the recent years, the governmenthas allowed companies to ignore many ofthese. Instead of hiring workers on aregular basis, companies hire workers‘flexibly’ for short periods when there isintense pressure of work. This is done toreduce the cost of labour for the company.However, still not satisfied, foreigncompanies are demanding more flexibilityin labour laws.

Steps to Attract Foreign InvestmentSteps to Attract Foreign InvestmentSteps to Attract Foreign InvestmentSteps to Attract Foreign InvestmentSteps to Attract Foreign Investment

NOW, WEARE READYTO INVEST!

Small producers: Compete or perishFor a large number of small producers andworkers globalisation has posed majorchallenges.

Batteries, capacitors, plastics, toys, tyres, dairy products, andvegetable oil are some examples of industries where the smallmanufacturers have been hit hard due to competition. Several of theunits have shut down rendering many workers jobless. The smallindustries in India employ the largest number of workers (20 million)in the country, next only to agriculture.

1. What are the ways in which Ravi’s small production unit was affected by rising competition?

2. Should producers such as Ravi stop production because their cost of production is higher compared toproducers in other countries? What do you think?

3. Recent studies point out that small producers in India need three things to compete better in the market(a) better roads, power, water, raw materials, marketing and information network (b) improvements andmodernisation of technology (c) timely availability of credit at reasonable interest rates.

Can you explain how these three things would help Indian producers?

Do you think MNCs will be interested in investing in these? Why?

Do you think the government has a role in making these facilities available? Why?

Can you think of any other step that the government could take? Discuss.


used to buy different componentsincluding capacitors in bulk for themanufacture of television sets.However, competition from the MNCbrands forced the Indian televisioncompanies to move into assemblingactivities for MNCs. Even when someof them bought capacitors, they wouldprefer to import as the price of theimported item was half the pricecharged by people like Ravi.Ravi now produces less than half thecapacitors that he produced in the year2000 and has only seven workersworking for him. Many of Ravi’s friendsin the same business in Hyderabadand Chennai have closed their units.

Ravi did not expect that he would haveto face a crisis in such a short periodof his life as industrialist. Ravi took aloan from the bank to start his owncompany producing capacitors in 1992in Hosur, an industrial town in TamilNadu. Capacitors are used in manyelectronic home appliances includingtube lights, television etc. Within threeyears, he was able to expandproduction and had 20 workersworking under him.

His struggle to run his company startedwhen the government removedrestrictions on imports of capacitors asper its agreement at WTO in 2001. Hismain clients, the television companies,

Rising CompetitionRising CompetitionRising CompetitionRising CompetitionRising Competition


Competition and Uncertain Employment Globalisation and the pressure of competition have substantially changed the livesof workers. Faced with growing competition, most employers these days prefer toemploy workers ‘flexibly’. This means that workers’ jobs are no longer secure.

A Garment WorkerA Garment WorkerA Garment WorkerA Garment WorkerA Garment Worker35 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.

Let us see how the workers in the garment export industryin India are having to bear this pressure of competition.

Large MNCs in the garment industry inEurope and America order their productsfrom Indian exporters. These large MNCswith worldwide network look for the cheapestgoods in order to maximise their profits. Toget these large orders, Indian garmentexporters try hard to cut their own costs. Ascost of raw materials cannot be reduced,exporters try to cut labour costs. Whereearlier a factory used to employ workers ona permanent basis, now they employ workersonly on a temporary basis so that they donot have to pay workers for the whole year.Workers also have to put in very longworking hours and work night shifts on aregular basis during the peak season. Wagesare low and workers are forced to workovertime to make both ends meet.

While this competition among the garmentexporters has allowed the MNCs to make largeprofits, workers are denied their fair share ofbenefits brought about by globalisation.

Factory workers folding garments for export. Though globalisation has created opportunities for paid work forwomen, the condition of employment shows that women are denied their fair share of benefits.



The conditions of work and the hardships of the workers described abovehave become common to many industrial units and services in India. Mostworkers, today, are employed in the unorganised sector. Moreover, increasinglyconditions of work in the organised sector have come to resemble theunorganised sector. Workers in the organised sector such as Sushila no longerget the protection and benefits that they enjoyed earlier.

that labour laws are properlyimplemented and the workers gettheir rights. It can support smallproducers to improve theirperformance till the time they becomestrong enough to compete. Ifnecessary, the government can usetrade and investment barriers. It cannegotiate at the WTO for ‘fairer rules’.It can also align with other developingcountries with similar interests tofight against the domination ofdeveloped countries in the WTO.

In the past few years, massivecampaigns and representation bypeople’s organisations haveinfluenced important decisionsrelating to trade and investments atthe WTO. This has demonstratedthat people also can play animportant role in the struggle for fairglobalisation.

The above evidence indicates thatnot everyone has benefited fromglobalisation. People with education,skill and wealth have made the bestuse of the new opportunities. On theother hand, there are many peoplewho have not shared the benefits.

Since globalisation is now areality, the question is how tomake globalisation more ‘fair’?Fair globalisation would createopportunities for all, and also ensurethat the benefits of globalisation areshared better.

The government can play a majorrole in making this possible. Itspolicies must protect the interests, notonly of the rich and the powerful, butall the people in the country. You haveread about some of the possible stepsthat the government can take. Forinstance, the government can ensure

1. In what ways has competition affected workers, Indian exporters and foreign MNCsin the garment industry?

2. What can be done by each of the following so that the workers can get a fair shareof benefits brought by globalisation?

(a) government

(b) employers at the exporting factories

(c) MNCs

(d) workers.

3. One of the present debates in India is whether companies should have flexiblepolicies for employment. Based on what you have read in the chapter, summarisethe point of view of the employers and workers.


THE STRUGGLE FOR A FAIR GLOBALISATION


A demonstration against WTO in Hong Kong, 2005

In this chapter, we looked at thepresent phase of globalisation.Globalisation is the process ofrapid integration of countries.This is happening throughgreater foreign trade and foreigninvestment. MNCs are playing amajor role in the globalisationprocess. More and more MNCsare looking for locations aroundthe world that are cheap for theirproduction. As a result,production is being organisedin complex ways.

Technology, particularly IT,has played a big role inorganising production acrosscountries. In addition,liberalisation of trade and

SUMMING UP

investment has facilitatedglobalisation by removingbarriers to trade andinvestment. At the inter -national level, WTO has putpressure on developing coun-tries to liberalise trade andinvestment.

While globalisation hasbenefited well-off consumersand also producers with skill,education and wealth, manysmall producers and workershave suffered as a result of therising competition. Fairglobalisation would createopportunities for all, and alsoensure that the benefits ofglobalisation are shared better.

1 What do you understand by globalisation? Explain in your own words.

2. What was the reasons for putting barriers to foreign trade and foreign investment bythe Indian government? Why did it wish to remove these barriers?

3. How would flexibility in labour laws help companies?

4. What are the various ways in which MNCs set up, or control, production in othercountries?

5. Why do developed countries want developing countries to liberalise their trade andinvestment? What do you think should the developing countries demand in return?

6. “The impact of globalisation has not been uniform.” Explain this statement.

7. How has liberalisation of trade and investment policies helped the globalisationprocess?

8. How does foreign trade lead to integration of markets across countries? Explainwith an example other than those given here.

9. Globalisation will continue in the future. Can you imagine what the world would belike twenty years from now? Give reasons for your answer.

10.Supposing you find two people arguing: One is saying globalisation has hurt ourcountry’s development. The other is telling, globalisation is helping India develop.How would you respond to these organisations?

11.Fill in the blanks.

Indian buyers have a greater choice of goods than they did two decades back. This

is closely associated with the process of ______________. Markets in India are selling

goods produced in many other countries. This means there is increasing

______________ 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 _____________ ___________________________________________ . While

consumers have more choices in the market, the effect of rising _______________

and ______________has meant greater _________________among the producers.

12.Match the following.

(i) MNCs buy at cheap rates from small (a) Automobilesproducers

(ii) Quotas and taxes on imports are used to (b) Garments, footwear, sportsregulate trade items

(iii) Indian companies who have invested abroad (c) Call centres

(iv) IT has helped in spreading of (d) Tata Motors, Infosys, Ranbaxyproduction of services

(v) Several MNCs have invested in setting (e) Trade barriersup factories in India for production

EXERCISES


ADDITIONAL ACTIVITY / PROJECT

13.Choose the most appropriate option.

(i) The past two decades of globalisation has seen rapid movements in

(a) goods, services and people between countries.

(b) goods, services and investments between countries.

(c) goods, investments and people between countries.

(ii) The most common route for investments by MNCs in countries around theworld is to

(a) set up new factories.

(b) buy existing local companies.

(c) form partnerships with local companies.

(iii) Globalisation has led to improvement in living conditions

(a) of all the people

(b) of people in the developed countries

(c) of workers in the developing countries

(d) none of the above

I. Take some branded products that we use everyday (soaps, toothpaste,

garments, electronic goods, etc.). Check which of these are produced by MNCs.

II. Take any Indian industry or service of your choice. Collect information andphotographs from newspapers, magazine clippings, books, television, internet,interviews with people on the following aspects of the industry.

(i) Various producers/companies in the industry

(ii) Is the product exported to other countries

(iii) Are there MNCs among the producers

(iv) Competition in the industry

(v) Conditions of work in the industry

(vi) Has there been any major change in the industry in the past fifteen years

(vii) Problems that people in the industry face.


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