Globalisation is the interconnection between counties through the expansion of foreign trade and foreign investment. It is the process of integrating the home country with foreign countries through the movement of goods, services, investment, technology and people. India has been a globalised economy since 1991 after the country faced an economic crisis in the pre-1991 period. After this 27 years of globalisation, the economy has experienced both ups and downs because of this increased integration of the country with other countries.
Some of the advantages that are the result of globalisation are:
• Production of standardised, high-quality products and services: Globalisation has resulted in greater competition among the producers. Producers in the home countries compete with the foreign producers and products thus improving the quality of the goods and services produced. This greater competition has resulted in the improved standards of the products produced at a lower price. This increased quality of products at lower prices has raised their standard of living significantly.
• The improved choice for buyers: MNCs are investing immensely in sectors like automobiles, communications and other industries. This has improved the choices of buyers. Consumers also have the choice to select commodities produced beyond the domestic markets through international trade.
• Increased employment opportunities: Globalisation will always bring in the bulk of employment opportunities. MNCs will require qualified and professional employees for the management of their regional offices. It will also increase employment in allied sectors like transportation, IT and other industries. They will also generate a lot of other jobs in sectors like footwear and garments when they place orders for the products with the local industries. This increases the employment opportunities for both skilled and unskilled labour.
• Additional investment: Globalisation beneficial as the huge MNCs with many resources will bring in their additional share of investment. This is particularly beneficial to the local firms in a developing country like India that has scarcity in resources. This will increase the number of resources available to local firms to expand their production.
• New and advanced technology: MNCs will always have highly sophisticated and advanced techniques and technology for production. They will always develop newer cost-reducing methods of production through consistent spending on research and development. Thus, MNCs bring in with them the latest technology as an investment with globalisation. It can be utilised to increase production. The improved techniques can also contribute to the development of new technology in other organisations. Thus it will result in a technology transfer.
Just like a coin, globalisation has also its other side. Even though the economy has highly benefitted through globalisation, it has also resulted in many issues. The extreme integration of the economy and the pressure of competition has posed many challenges. Some of them are:
• Challenges to small traders: Because of the growing competition through globalisation from the MNCs, small companies who are unable to withstand the increased competition are shutting down their companies. The unchecked imports of the goods without any restrictions and the aggressive advertising strategies taken by the MNCs has resulted in the closure of many small, domestic industries leading to large unemployment. The import of cheap, highly advertised commodities has created brand domination in many sectors. This has rendered many workers unemployed. Batteries, plastics, toys, tyres and foodstuff are some industries where the small manufacturers are worst hit.
• Uncertainty in jobs: Government is providing many incentives for the MNCs to attract foreign companies. In the organised sector, the rights of the workers are protected. But MNCs are allowed to overlook many of these rules. One such incentive provided to the MNCs is flexibility in labour laws. According to this, the companies are allowed to hire workers for short periods of time when the pressure of work is more, rather than hiring them on regular basis. This is a way to reduce the cost of production for the companies. With the increasing competition in the market, MNCs placing orders for their products in the domestic countries are forcing the domestic producers to employ workers on a temporary basis to reduce their cost of production. Thus, they need not pay them for the whole year and can employ additional workers only during the peak seasons of demand. Also, workers are made to work overtime, but they are paid less. This results in uncertainty in jobs.
• Unemployment: Globalisation has resulted in jobless growth. The employment opportunity created through globalisation is not sufficient enough to absorb the entire Indian workforce. On the top, the technology revolution brought about by globalisation has rendered many unemployed. Many jobs earlier performed by human labour is now replaced by machines. The replacement of human labour by machines has increased the unemployment level in the economy.
• Inequality: Globalisation has resulted in rising inequalities in income and wealth distribution. This has resulted in a rural-urban divide where many of the poor are excluded from the advantages and benefits of globalisation. Because of the strong demand for various essential goods due to increased competition, many poorer sections are adversely affected. This increases the income inequality between the rich and the poor.
It can never be said that globalisation should be totally evaded in the economy. But government and other authorities should ensure a fair scheme in which the benefits of the globalisation reaches everyone. This equity is yet to be achieved.
Multi-National Corporations are large companies established in a particular country and has offices, markets and produces and sells its products in many countries. They contribute to the economic development of the country in the following ways:
• Additional investment: MNCs can be beneficial to the home country as the huge firms with many resources may bring in their additional share of investment. This is particularly beneficial to the developing countries that have scarcity in resources.
• New and advanced technology: MNCs bring in with them the latest technology as an investment to the home country. MNCs always have new and advanced technology for operations which can be used by the home countries to increase their production.
• Increased employment opportunities: MNCs always bring in with the bulk of employment opportunities. They will require qualified and professional employees for the management of their regional offices in the home country. It will also increase employment in allied sectors like transportation, IT and other industries. They will also generate a lot of other jobs in sectors like footwear and garments when they place orders for the products with the local industries. This increases the employment opportunities in the home country.
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