Page 98 - Understanding Economics for Class 10

4 Globalisation and the Indian Economy

Goyal Brothers Prakashan

IntroductIon
 In today's world, consumers are faced with a wide array of options for goods and services.
This includes the latest models of digital cameras, mobile phones, televisions, and cars
from top manufacturers worldwide.
 This expansion of choices is a relatively recent phenomenon, as just two decades ago,
Indian markets had limited variety. The rapid transformations in the market raise questions
about the factors driving these changes and their effects on people's lives.

ProductIon Across countrIes

 In the earlier part of the 20th Century, countries primarily organised their production
internally, with limited cross-border trade involving raw material, food stuff and finished
products.
 Colonies such as India, imported finished goods and exported raw materials and food stuff.
 Distant countries were connected mainly through the channel of trade. This was before
the emergence of large companies called as multinational corporations (MNCs).
 A MNC is a company that owns or controls production in more than one nation.
 Offices and factories are set up by MNCs where they can get cheap labour and other
resources for the purpose of production.
 This is done to reduce the cost and increase the profits.
Example: Spreading of Production by an MNC
 Industrial equipment is produced by a large MNC. It designs its products in research
centres located in the United States, and components are then manufactured in China.
Assembling of all the parts is done in Mexico and Eastern Europe and from there finished
goods are sold worldwide. Additionally, the company’s customer care services are handled
through call centers situated in India.
 Mexico and Eastern Europe are strategically advantageous due to their proximity to the
market in US and Europe. On the other hand, India possesses a pool of highly skilled
engineers who possess a deep understanding of the technical aspects of production.
 By carrying production in this way, a MNC can do cost saving of about 50-60%. Hence,
spreading production across the borders provides immense benefits to multintionals.

LET’S WORK THIS OUT (Page No. 57)
1. Complete the following statement to show how the production process in the garment
industry is spread across countries.
The brand tag says ‘Made in Thailand’ but they are not Thai products. We dissect the
manufacturing process and look for the best solution at each step. We are doing it globally.
In making garments, the company may, for example, get cotton fibre from Korea, ........
Ans. Manufacture it in China, get it designed from Italy, get buttons from France and get it
stitched in India and then can sell it all over the world.

E-84 Economics Class X