Globalisation

Introduction to Globalisation

These revision notes cover Globalisation and the Indian Economy from Class 10 Economics. You can find the full set of Class 10 Economics notes and more study material in the OYI resources library.

In the last few decades our world has changed drastically. Changes in technology have made transport and communication much more efficient, allowing us to connect with almost anyone, almost anywhere.

Until the middle of the twentieth century, production was largely organised within countries. Colonies such as India exported raw materials and food and imported finished goods, and trade was the main channel connecting distant countries.

Globalisation is the process of rapid integration or interconnection between countries. More and more goods, services, investment, technology and even people move across borders in search of better income, jobs or education.

What are Multinational Corporations (MNCs)?

A multinational corporation (MNC) is a company that owns or controls production in more than one nation.

Why do MNCs decentralise their production?

MNCs set up offices and factories in regions where they can get cheap labour and other resources. This keeps the cost of production low, so the MNCs can earn greater profits.

• Production is organised in increasingly complex ways. MNCs not only sell finished products globally, but also produce goods and services globally.
• The production process is divided into small parts and spread out across the globe.
• Companies set up units across countries depending on the particular strengths of each nation.

For example, China offers the advantage of a cheap labour market for manufacturing, while India offers an educated and skilled English speaking workforce.

• In general, MNCs set up production close to the markets, where skilled and unskilled labour is available at low cost, and where other factors of production are assured.
• MNCs often look for government policies that protect their interests.
• Large MNCs in developed countries place orders for production with small producers. The goods are supplied to the MNCs, which then sell them under their own brand names.
• The money spent to buy assets such as land, buildings, machines and equipment is called investment. Many top MNCs have wealth exceeding the entire budgets of developing country governments.
• Investment made by MNCs is called foreign investment.
• MNCs spread their production by setting up partnerships with local companies, by using local companies for supplies, and by competing with or buying up local companies. In this way they exert a strong influence on production at distant locations.

As a result, production in these widely dispersed locations is getting interlinked.

What is a Joint Venture?

Sometimes MNCs set up production jointly with local companies of a country.

Benefits to the local company:

• MNCs can provide money for extra investment, such as buying new machines for faster production.
• MNCs may bring with them the latest technology for production.

Benefits to the foreign company: the most common route for MNC investment is to buy up local companies and then expand production. A well known example is Flipkart being acquired by Walmart.

Foreign Trade

Foreign trade has long been the main channel connecting countries. Trade routes such as the Silk Route connected India and South Asia to markets in both the East and the West, and trading interests attracted companies such as the East India Company to India.

Foreign trade lets producers reach beyond their home market, and it lets buyers import goods made in another country, widening the choice of goods beyond what is produced domestically.

When trade opens up, goods travel from one market to another, the choice of goods rises, and the prices of similar goods in different markets tend to become equal. Foreign trade therefore connects, or integrates, the markets of different countries.

A large part of foreign trade is controlled by MNCs, whose activities involve substantial trade in both goods and services. The result of greater foreign investment and greater foreign trade has been deeper integration of production and markets across countries, which is the heart of globalisation.

Factors that Enabled Globalisation

1. Technology

The past fifty years have seen major improvements in transport technology, making faster delivery of goods over long distances possible at lower cost.

Developments in information and communication technology, helped by satellite communication, have allowed people around the world to contact one another, access information instantly and communicate even from remote areas.

2. Liberalisation of foreign trade and investment policy

Governments can use trade barriers to regulate foreign trade and to decide what kinds of goods, and how much of each, should enter the country.

After Independence, the Indian government placed barriers on foreign trade and foreign investment. This was thought necessary to protect domestic producers from foreign competition, as new industries would not have survived competition from imports at that early stage. India allowed imports of only essential items such as machinery, fertilisers and petroleum.

In 1991, after an economic crisis, these barriers were removed to a large extent. Goods could now be imported and exported easily, and foreign companies could set up factories and offices in India. Removing the barriers or restrictions set by the government is known as liberalisation, and the government is then said to be more liberal because it imposes far fewer restrictions than before.

What is a Special Economic Zone (SEZ)?

In recent years the central and state governments in India have taken special steps to attract foreign companies. Industrial zones called Special Economic Zones (SEZs) are being set up, with world class facilities such as electricity, water, roads, transport, storage, and recreational and educational facilities. Companies that set up units in SEZs do not have to pay taxes for an initial period of five years.

What is the WTO?

The World Trade Organisation (WTO) is an organisation whose aim is to liberalise international trade. Started at the initiative of the developed countries, the WTO sets rules for international trade and sees that these rules are obeyed.

The WTO officially began on 1 January 1995 under the Marrakesh Agreement, signed by 123 nations on 15 April 1994. It replaced the General Agreement on Tariffs and Trade (GATT), which had run since 1948, and it is the largest international economic organisation in the world. As of 2024, 166 countries are members of the WTO.

In practice, WTO rules have often forced developing countries to remove trade barriers, while developed countries have sometimes unfairly kept their own barriers in place.

Positive Impact of Globalisation on India

Globalisation has brought clear gains, especially for consumers and well off sections in urban areas.

• Greater choice for consumers, who now enjoy improved quality and lower prices for many products.
• Higher standards of living than were possible earlier.
• Increased investment in India over the past few decades.
• New jobs have been created.
• Local companies that supply raw materials to these industries have prospered.
• Top Indian companies have benefited from tougher competition by investing in new technology and raising their production standards.
• Successful collaborations with foreign companies.

Negative Impact of Globalisation on India

For a large number of small producers and workers, globalisation has posed serious challenges.

• Small manufacturers have been hit hard by competition, and many have shut down.
• Uncertain employment: many low skilled workers have lost jobs, and employers increasingly hire workers on flexible terms, so jobs are no longer secure.
• Because the cost of raw materials cannot easily be reduced, exporters try to cut labour costs.
• Wages are often low, and workers are forced to work overtime to make ends meet.

What is Fair Globalisation?

Fair globalisation means sharing the benefits of globalisation more equally, so that it creates opportunities for everyone. Not everyone has benefited so far: people with education, skill and wealth have made the best use of the new opportunities, while many others have been left behind.

How can governments ensure fair globalisation?

• Frame policies that protect the interests of all citizens, not only the rich and powerful.
• Make sure labour laws are properly enforced so that workers get their rights.
• Support small producers until they become strong enough to compete.
• Use trade and investment barriers where they are genuinely needed.
• Negotiate at the WTO for fairer rules.
• Join with other developing countries that share similar interests to counter the dominance of developed countries in the WTO.

Why Globalisation Still Matters Today

Everything in these notes is playing out right now. The forces this chapter describes, MNCs spreading production across countries, foreign trade linking markets, and governments raising or lowering trade barriers, are shaping the news in 2025 and 2026.

Take the smartphone in many pockets. Apple, a classic MNC, has moved a large share of its iPhone assembly to India. By 2026 India was assembling roughly a quarter of the world’s iPhones, put together mainly by Foxconn and by India’s own Tata Group. This is exactly the decentralisation of production the chapter explains: a company keeps its brand and design at home and places assembly where labour and support are available. It also shows India attracting foreign investment, the very idea behind Special Economic Zones.

The World Trade Organisation is still central, and still growing. In August 2024, Timor-Leste became its 166th member. But the free flowing trade the WTO promotes is under strain. In 2025 several large economies, led by the United States, raised tariffs sharply. The WTO expected world merchandise trade to grow by about 2.4 per cent in 2025, then slow to just 0.5 per cent in 2026 as those higher tariffs began to bite. Economists now debate whether the world is entering a phase of slowbalisation, in which globalisation slows down or partly reverses.

For students, this is the live version of the fair globalisation debate in your textbook: who gains, who loses, and what governments should do about it. If you want to see how trade, technology and the world economy connect across subjects, explore the Learnacy Hub. This chapter is not just history. It is the story of the world you are growing up in.

Sources

1. World Trade Organisation, DG Okonjo-Iweala welcomes Timor-Leste as the 166th WTO member (August 2024)
2. World Trade Organisation, Global Trade Outlook and Statistics update (October 2025)
3. Manufacturing Today, Apple moves a quarter of iPhone production to India as exports surge

Key takeaways

• Globalisation is the rapid integration of countries through the movement of goods, services, investment, technology, and people across borders.
• Multinational Corporations (MNCs) are companies that own or control production in more than one nation to maximize profits.
• MNCs decentralise production to regions with cheap labour, resources, and favourable government policies to reduce costs.
• Foreign investment by MNCs involves spending on assets like land, buildings, and machines in other countries.
• Foreign trade connects markets across countries, increases the choice of goods, and tends to equalize prices of similar goods.

Test yourself

What is globalisation according to the note?

Globalisation is the process of rapid integration or interconnection between countries, enabling the movement of goods, services, investment, technology, and people across borders.

Why do MNCs decentralise their production?

MNCs decentralise production to regions where they can access cheap labour, resources, and favourable government policies to keep production costs low and maximize profits.

What is foreign investment?

Foreign investment is the money spent by MNCs to buy assets such as land, buildings, machines, and equipment in other countries.

How does foreign trade contribute to globalisation?

Foreign trade connects markets across countries, increases the variety of goods available, and tends to equalize prices of similar goods in different markets.

What role do MNCs play in foreign trade?

A large part of foreign trade is controlled by MNCs, whose activities involve substantial trade in both goods and services.