Globalisation and the Indian Economy

MNCs and how they spread production, foreign trade and investment, liberalisation from 1991, the WTO, and the impact of globalisation.

Key ideas

An MNC owns or controls production in more than one country, setting up where costs are low and markets are near.
MNCs set up factories, partner local firms or buy them, as Cargill bought Parakh Foods.
Foreign trade links markets in different countries, and money invested by MNCs is foreign investment.
Globalisation is the rapid linking of countries through trade, investment, technology and the movement of people, made possible by cheaper transport, telecommunications and the internet.
From about 1991 India removed many barriers on trade and investment (liberalisation); the WTO sets rules to make trade freer.
Consumers gained choice and lower prices and some Indian firms became MNCs, but many small producers and workers faced hard competition and insecure jobs.
Fair globalisation creates opportunities for all and protects workers and small producers.

Remember

Trade barrier	a tax on imports, or a quota limiting how many can come in
Liberalisation	removing government barriers on trade and investment
SEZ	Special Economic Zone: world-class facilities, tax holidays
Indian MNC	Infosys
Ford in India	plant near Chennai, 1995

Watch out

Calling any company that exports an MNC: it must own or control production in other countries.
Using liberalisation and globalisation as the same word.
Assuming globalisation helped everyone equally.

Worked example

In 2017 Ford sold 88,000 cars in India and exported 181,000. Suppose another MNC sells 131,000 and exports 209,000. (a) How many does it make in India in all? (b) What share is exported, to one decimal place? (c) Why do MNCs set up production in countries like India?

Working: 131,000 + 209,000; 209,000 ÷ 340,000 × 100

Answer: (a) 340,000 (b) 61.5% (c) Lower costs, skilled workers, a large market and closeness to other markets.