Page 194 - DECO303_INDIAN_ECONOMY_ENGLISH

Unit 11: Globalisation and Its Impact on India

EU nations. ASEAN is also removing their trade barriers. There is all likelihood that in Notes
few years, whole world will be segregated into few regional economic groups.
3. Multinational Corporations — It has been said that the Multinational Corporation (MNC)
is the most powerful institution in the world today. Certainly, the process of globalisation,
which is radically changing our world, is greatly driven by the rapid growth and spread
of corporations.
Since the end of the Cold War in 1991, almost all nations in the world have decreased the
role of the condition in the economy and decreased barriers to the international movement
of goods, capital, services, ideas and technology. As the walls levied by nations/states
have crumbled, multinational corporations have flourished, spreading across the world
in search of new markets as well as factors of production. MNCs have spread across
national borders in two manners: trade and Foreign Direct Investment (FDI). Each has
spent to stable, lasting advantages to the world economy.
The rising power of the multinational corporation (MNC) is beyond doubt. The production
of MNCs amounts to roughly one-quarter of the world’s output. Fifty-one of the world’s
largest 100 economies are corporations, not countries. The entire value of foreign sales of
MNCs now surpasses world exports of goods and services, and intra-firm trade by MNCs
alone explains for nearly one-third of world trade.

There are now roughly 63,000 multinational corporations – described as firms that involve
in international production – with more than 690,000 foreign affiliates. In 1997, these firms
regulated $12 trillion in foreign assets, hired 30 million workers and earned $9.5 trillion
in revenues – greater than the annual GDP of the United States or the European Union
(EU). The rapid growth of MNCs is a direct outcome of the worldwide liberalisation of
trade and investment. Corporations have grown larger as they now compete in much
larger markets.
4. The close of the cold war and a paradigm shift in erstwhile socialist countries also brought
vital changes to the world. International events such as the dismantling of USSR and the
end of communist regimes other than those of the USSR as well as Eastern Europe, the
unification of Germany, the communist government of China inviting FDI, and former
closed economies such as India pursuing a policy of Liberalisation, Privatisation and
Globalisation, etc., have contributed in altering the entire world into one economic theatre.

5. Technology is acting as a catalyst to multiply the speed of globalisation. Communication
has brought important changes in the way business is performed. Due to communication
technology, organisations are dividing their operations all over the world. Now
organisations are setting up there fundamental research centres in the US and Britain,
value added research centres at China and India, production facilities are moved to India,
South East Asia, China or Mexico, designing is moving to Italy and France, quality control
techniques are applied from Japan and then the product is marketed globally. All these
activities can be coordinated and managed only through the contemporary means of
communication and technology. It is due to technology that organisations are able to take
benefit of such huge opportunities.

!

Caution Globalisation has thrown up new challenges like growing inequality across and
within nations, volatility in financial market and environmental deteriorations. Another
negative aspect of globalisation is that a great majority of developing countries remain
removed from the process. Till the nineties the process of globalisation of the Indian
economy was constrained by the barriers to trade and investment liberalisation of trade,

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