Globalisation and the Indian Economy
Foreign trade and what globalisation means
Explain how foreign trade connects markets and what globalisation is.
What foreign trade does. For a long time, trade was the main link between countries; trading interests even brought the East India Company to India. Foreign trade lets producers sell beyond their own country's markets and compete abroad. It lets buyers choose from goods made in other countries, not just at home.
Chinese toys in India. Chinese makers saw that toys sold at high prices in India, so they began exporting plastic toys. Being cheaper and with new designs, they became popular: in just one year, 70 to 80 per cent of toy shops had replaced Indian toys with Chinese ones.
- Indian buyers: more choice at lower prices.
- Chinese toy makers: a chance to expand.
- Indian toy makers: losses, as their toys sold much less.
Integration of markets. When trade opens:
- goods move between the two markets;
- buyers get more choice;
- similar goods start to cost about the same in both markets;
- producers in the two countries compete closely, though thousands of miles apart.
So foreign trade connects markets in different countries: this is integration of markets.
MNCs drive trade too. Over the last twenty or thirty years, more MNCs have looked for cheap places to produce, so foreign investment has risen. Foreign trade has risen fast as well, and MNCs control much of it. Ford's Indian plant, for example, made cars for India, exported cars to other developing countries, and sent car parts to Ford factories around the world.
What is globalisation? More foreign investment and more foreign trade have tied countries' production and markets together more closely. Globalisation means this fast interconnection of countries. MNCs play a major role in it.
- More and more goods, services, investments and technology move between countries.
- Countries could also connect through people moving for better jobs or education, but this has not increased much, because of restrictions.
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