Globalisation and the Indian Economy Test - 2

Globalisation and greater competition among producers - both local and foreign producers - has been of advantage to consumers,
particularly the well-off sections in the urban areas. There is greater choice before these consumers who now enjoy improved quality and lower prices for several products. As a result,these people today, enjoy much higher standards of living than was possible earlier.

For the lower the cost and to earn greater profits,MNCs set up offices and factories for
production in regions where they can get cheap labour and other resources.

The most common route for MNC investments is to buy up local companies and then to expand production. MNCs with huge wealth can quite easily do so. To take an example, Cargill Foods, a very large American MNC, has bought over smaller Indian companies such as Parakh Foods.

Ford Motors came to India in 1995 and spent Rs. 1700 crore to set up a large plant near Chennai. This was done in collaboration with Mahindra and Mahindra,a major Indian manufacturer of jeeps and trucks.

With the opening of trade, goods travel from one market to another. Choice of goods in the markets rises. Prices of similar goods in the two markets tend to become equal. And, producers in the two countries now closely compete against each other even though they are separated by thousands of miles.Foreign trade thus results in connecting the markets or integration of markets in different countries and helps in determines prices of products in different countries.

With the opening of trade because of globalisation, goods travel from one market to another. Choice of goods in the markets rises. Prices of similar goods in the two markets tend to become equal. And, producers in the two countries now closely compete against each other even though they are separated by thousands of miles.Thus the producers have to face greater competition.

Tax on imports is an example of trade barrier. It is called a barrier because some restriction has been set up. Governments can use trade barriers to increase or decrease (regulate) foreign trade and to decide what kinds of goods and how much of each, should come into the country.

Barriers on foreign trade and foreign investment were removed to a large extent. This meant that goods could be imported and exported easily and also foreign companies could set up factories and offices here.Thus removing barriers or restrictions set by the government is what is known as liberalisation.

Started at the initiative of the developed countries, WTO(World Trade Organisation) establishes rules regarding international trade,and sees that these rules are obeyed.WTO is one such organisation whose aim is to liberalise international trade.

MNCs have been interested in industries
such as cell phones, automobiles,electronics, soft drinks, fast food or services such as banking in urban areas. These products have a large number of well-off buyers.