Class 10 Social Science Notes Chapter 4 (Globalisation and the Indian economy) – Understanding Econimic Development Book

Alright class, let's delve into Chapter 4: Globalisation and the Indian Economy. This is a crucial chapter, not just for your board exams but also for understanding the economic landscape you'll encounter in various government exams. Pay close attention to the key terms and concepts.

Chapter 4: Globalisation and the Indian Economy - Detailed Notes

1. What is Globalisation?

• Definition: Globalisation is the process of rapid integration or interconnection between countries. This happens through increased movement of goods, services, investments, technology, and even people across borders.
• Core Idea: Think of it as the world becoming a smaller, more connected place economically.

2. Production Across Countries - The Role of MNCs

• Multinational Corporations (MNCs): These are large companies that own or control production in more than one country. They are key drivers of globalisation.
  • Why MNCs go global?
    • Cheap Labour: Access to low-cost labour in countries like India, China, Bangladesh.
    • Proximity to Markets: Setting up production near large consumer markets reduces transport costs.
    • Availability of Resources: Access to specific raw materials or skilled personnel.
    • Favourable Government Policies: Seeking countries with policies that encourage investment (e.g., lower taxes, flexible labour laws).
  • How MNCs operate?
    • Setting up wholly-owned subsidiaries: Establishing their own production units.
    • Joint Ventures: Partnering with local companies (provides local market knowledge and capital).
    • Buying Local Companies: Acquiring existing businesses to gain quick market access and established infrastructure (e.g., Cargill Foods buying Parakh Foods).
    • Placing Orders (Outsourcing): Contracting production to smaller, local producers (common in garments, footwear, sports items). The MNC then sells these under its own brand name.
    • Foreign Direct Investment (FDI): The investment made by an MNC to acquire assets (like land, buildings, machinery) in a foreign country with the aim of managing production. This is distinct from just buying shares (portfolio investment).

3. Interlinking Production Across Countries

• MNCs don't just produce in one location; they often break down the production process across different countries to maximise efficiency and minimise costs.
• Foreign Trade:
  • Definition: The exchange of goods and services across international borders.
  • Role in Globalisation:
    • Connects markets of different countries.
    • Provides wider choices for consumers.
    • Leads to competition, often resulting in lower prices and improved quality.
    • Facilitates the movement of goods produced by MNCs across borders.
• Foreign Investment (primarily FDI by MNCs):
  • Directly links production by setting up factories, offices, etc., in foreign countries.
  • Brings capital, technology, and managerial expertise.

4. Factors Enabling Globalisation

• a) Technology:
  • Transportation Technology: Improvements in shipping (containerisation), air cargo, railways have drastically reduced the cost and time of transporting goods over long distances.
  • Information and Communication Technology (ICT): Rapid advancements in telecommunications (mobile phones, internet, email, video conferencing), computers, and satellites have revolutionised communication. This allows MNCs to manage global operations efficiently, access information instantly, and coordinate complex production processes across continents. E-commerce is a direct result.
• b) Liberalisation of Foreign Trade and Investment Policies:
  • Liberalisation: Removing barriers or restrictions set by the government on foreign trade and foreign investment.
  • Trade Barriers: Restrictions imposed by governments on imports (and sometimes exports) to protect domestic industries. The most common is a tax on imports (tariff). Quotas (limits on quantity) can also be used.
  • India's Liberalisation (Post-1991): Before 1991, India had significant trade barriers to protect nascent domestic industries. From 1991 onwards, India adopted policies of liberalisation, gradually removing these barriers to encourage foreign competition, investment, and integration with the world economy.
• c) International Organisations:
  • World Trade Organization (WTO):
    • Aim: To liberalise international trade and establish rules for it.
    • Establishment: Started in 1995, successor to the General Agreement on Tariffs and Trade (GATT). As of recent data, it has over 160 member countries.
    • Functions: Sets rules for international trade, provides a forum for trade negotiations, and resolves trade disputes between member countries.
    • Criticisms: Often criticised for being dominated by developed countries and forcing developing countries to open their markets while developed countries sometimes retain their own barriers (especially in agriculture).

5. Impact of Globalisation on India

• Positive Impacts:
  • Consumers: Greater choice of goods (both domestic and imported), improved quality, and lower prices due to increased competition. Higher standards of living for many, especially in urban areas.
  • Producers (especially large Indian companies):
    • Opportunities to access global markets.
    • Access to new technology and production methods through collaboration or competition with MNCs.
    • Some large Indian companies have become MNCs themselves (e.g., Tata Motors, Infosys, Ranbaxy, Asian Paints).
  • New Jobs: Creation of jobs, particularly in the service sector (IT, call centres, banking, administrative tasks) catering to global clients. Also, jobs created by MNCs setting up factories.
  • Foreign Investment: Significant inflow of FDI, boosting capital formation and economic activity.
• Negative Impacts:
  • Small Producers: Many small manufacturers (e.g., making batteries, capacitors, plastic toys, dairy products, vegetable oil) have struggled to compete with cheaper imports or large MNCs, leading to closures and job losses.
  • Workers & Employment:
    • Increased competition puts pressure on employers to reduce costs.
    • Growing use of "flexible" labour laws: hiring workers temporarily or on contract, especially during peak seasons, to avoid providing permanent benefits (like provident fund, job security). This leads to uncertain employment.
    • While new jobs are created, job losses in uncompetitive sectors can be significant.
    • Widening wage gap between skilled workers (who benefit from globalisation) and unskilled workers (whose jobs may be precarious or lost).
  • Regional Disparities: Investment tends to concentrate in areas with better infrastructure (urban centres), potentially increasing the gap between developed and less developed regions.

6. The Struggle for a Fair Globalisation

• Fair Globalisation: Means creating opportunities for all and ensuring that the benefits of globalisation are shared more equitably.
• Role of the Government:
  • Protecting Domestic Producers: Use trade and investment barriers strategically, if necessary, to shield small producers until they are strong enough to compete.
  • Enforcing Labour Laws: Ensure workers get their rights and are not exploited under the pressure of competition.
  • Negotiating at the WTO: Advocate for fairer rules in international trade, resisting pressure from developed countries that might harm domestic interests. Align with other developing countries to increase bargaining power.
  • Investing in Infrastructure & Skills: Improve education, health, and infrastructure to enhance the competitiveness of the domestic economy and workforce.

Conclusion:

Globalisation has led to deeper integration of the Indian economy with the world, bringing significant opportunities (choice, technology, growth for some sectors) but also major challenges (competition for small producers, job insecurity, inequality). Ensuring that its benefits are widespread requires proactive government policies and a push for fairer global rules.

Multiple Choice Questions (MCQs) for Exam Preparation:

1. Which of the following is the most common route for MNCs to invest in countries like India?
   a) Buying shares in the stock market
   b) Providing loans to local companies
   c) Setting up new factories or buying existing local companies (FDI)
   d) Donating to local charities

2. Removing barriers or restrictions set by the government on foreign trade and investment is known as:
   a) Globalisation
   b) Privatisation
   c) Liberalisation
   d) Nationalisation

3. Which international organisation aims to liberalise international trade and sets rules for it?
   a) International Monetary Fund (IMF)
   b) World Bank
   c) World Trade Organization (WTO)
   d) United Nations (UN)

4. Globalisation has led to greater choices and improved quality of goods for consumers primarily due to:
   a) Increased government regulation
   b) Increased competition among producers
   c) Reduced production costs globally
   d) Rise in consumer incomes

5. Which of the following is a negative impact of globalisation on some sectors in India?
   a) Indian companies becoming multinationals
   b) Increased job opportunities in the IT sector
   c) Small producers facing stiff competition and potential closure
   d) Consumers getting a wider variety of goods

6. Investment made by MNCs is called:
   a) Domestic Investment
   b) Portfolio Investment
   c) Foreign Investment (specifically FDI when involving control/assets)
   d) Government Investment

7. What is a 'trade barrier'?
   a) A technology that speeds up trade
   b) A restriction imposed on foreign trade, like a tax on imports
   c) An agreement between countries to promote free trade
   d) A type of transport used for international shipping

8. Which of the following technologies has significantly contributed to globalisation by facilitating instant communication and access to information across the globe?
   a) Steam Engine
   b) Container Ships
   c) Information and Communication Technology (ICT)
   d) Assembly Line Production

9. Why might MNCs prefer to set up production in developing countries?
   a) Higher environmental standards
   b) Availability of lower-cost labour
   c) Stronger labour unions protecting workers' rights
   d) Higher taxes encouraging investment

10. 'Fair Globalisation' would imply:
    a) Only developed countries benefit from trade
    b) MNCs control all global production
    c) Benefits of globalisation are shared more equitably among all
    d) Complete removal of all government regulations on trade

Answer Key for MCQs:

1. c
2. c
3. c
4. b
5. c
6. c
7. b
8. c
9. b
10. c

Study these notes thoroughly. Focus on understanding the 'why' behind each concept, especially the impacts and the factors enabling globalisation. Good luck with your preparation!