SECTION_A
1)
What is meant by globalisation? What
challenges does it pose for the Indian industry?
GLOBALISATION
The worldwide movement toward economic, financial, trade, and
communications integration.
Globalization implies the opening of local and nationalistic perspectives to a broader outlook of an interconnected and interdependent world with free transfer of capital, goods, and services across national frontiers. However, it does not include unhindered movement of labour and, as suggested by some economists, may hurt smaller or fragile economies if applied indiscriminately.
Globalization implies the opening of local and nationalistic perspectives to a broader outlook of an interconnected and interdependent world with free transfer of capital, goods, and services across national frontiers. However, it does not include unhindered movement of labour and, as suggested by some economists, may hurt smaller or fragile economies if applied indiscriminately.
Globalization of economic activity describes the process of merging between domestic economies, businesses and societies. The phrase relates to economic activity that indicates that globalization involves the participation of companies and corporations actively contributing to the integration of international businesses. The features of the globalization of economic activity include an international development of trade, production, investments and flow of workforce.
It involves the increased integration and interdependence of
national economies. Globalisation reflects the increased importance of the whole international
economy. Globalisation
involves increased international trade, increased inward investment and an
increased role for global multinational companies.
GLOBALISATION AND INDIAN INDUSTRY
Effects
of Globalisation on Indian Industry started when the government opened the
country’s markets to foreign investments in the early 19905. Globalisation of
the Indian Industry took place in its various sectors such as steel,
pharmaceutical, petroleum, chemical, textile, cement, retail.
Globalisation
means the dismantling of trade barriers between nations and the integration of
the nations economies through financial flow, trade in goods and services, and
corporate investments between nations. Globalisation has increased across the
world in recent years due to the fast progress that has been made in the field
of technology especially in communications and transport. The government of
India made changes in its economic policy in 1991 by which it allowed direct
foreign investments in the country. As a result of this, globalisation of the
Indian Industry took place on a major scale.
POSITIVE EFFECTS OF GLOBALISATION IN
INDIAN INDUSTRY
The
various beneficial effects of globalisation in Indian Industry are that it
brought in huge amounts of foreign investments into the industry especially in
the BPO. Pharmaceutical, petroleum, and manufacturing industries. As huge
amounts of foreign direct investments were coming to the Indian Industry, they
boosted the Indian economy quite significantly. The benefits of the effects of
globalisation in the Indian Industry are that many foreign companies set up
industries in India. Especially in the pharmaceutical, BPO, petroleum,
manufacturing, and chemical sectors and this helped to provide employment to
many people in the country. This helped reduce the level of unemployment and
poverty in the country. Also the benefit of the Effects of Globalisation on
Indian Industry are that the foreign companies brought in highly advanced technology
with them and this helped to make the Indian Industry more technologically
advanced.
NEGATIVE EFFECTS OF GLOBALISATION IN
INDIAN INDUSTRY
The
various negative Effects of Globalisation on Indian Industry are that it
increased competition in the Indian market between the foreign companies and
domestic companies. With the foreign goods being better than the Indian goods,
the consumer preferred to buy the foreign goods. This reduced the amount of
profit of the Indian Industry companies. This happened mainly in the
pharmaceutical, manufacturing, chemical, and steel industries. The negative
Effects of Globalisation on Indian Industry are that with the coming of
technology the number of labour required decreased and this resulted in many
people being removed from their jobs. This happened mainly in the
pharmaceutical, chemical, manufacturing, and cement industries.
The
effects of globalisation on Indian Industry have proved to be positive as well
as negative. The government of India must try to make such economic policies
with regard to Indian Industry’s Globalisation that are beneficial and not
harmful.
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SECTION-B
2-Explain the core and periphery
model.
The application of core–periphery theory at the global scale
identifies the developed countries of the world as the economic core of the
global economic system and the developing countries as the economic periphery.
Other terms used to distinguish between the richer and poorer nations are: •
developed and developing countries. • More economically developed countries
(MEDCs) and less economically developed countries (LEDCs).
The
core-periphery model, introduced in Krugman (1991) provides a basic
introductory framework for the NEG. It illustrates how the interactions among
increasing returns at the level of the firm, transport costs and factor
mobility can cause spatial economic structure to emerge and change.
Suppose
there are two regions, two production sectors (agriculture and manufacturing),
and two types of labour (farmers and workers). The manufacturing sector
produces a continuum of varieties of a horizontally differentiated product;
each variety is produced by a separate firm with scale economies, using workers
as the only input. The agriculture sector produces a homogeneous good under
constant returns, using farmers as the only input. Workers are freely mobile
between regions; whereas farmers are immobile, distributed equally between the
two regions. Finally, the trade of manufactures involves a positive transport
cost (in an iceberg form).
In
this model, the immobility of farmers is a centrifugal force because they
consume both types of goods. The centripetal force is more complex, involving a
circular causation. First, if a larger number of firms locate in a region, a
greater number of varieties are produced there. Then, workers (who are
consumers) in that region have better access to a greater number of varieties
in comparison with workers in the other region. Thus, (other things being
equal) workers in that region get a higher real income, inducing more workers
to migrate towards this region. Secondly, the resulting increase in the number
of workers creates a larger market than the other region, which in turn yields
the home market effect (HME) familiar in international trade (Krugman, 1980).
That is, because of scale economies, there is an incentive to concentrate the
production of each variety in only one region; because of the transport cost,
(other things being equal) it is more profitable to produce in the region that
offers a larger market, and ship to the other. This implies the availability of
even more varieties of differentiated goods in the region in question. In
short, the centripetal force is generated through. a circular causation of
forward linkages (the incentive of workers to be close to the producers of
consumer goods) and backward linkages (the incentive for producers to
concentrate where the market is larger). If forward and backward linkages are
strong enough to overcome the centrifugal force generated by immobile farmers,
the economy will end up with a core-periphery pattern in which all
manufacturing is concentrated in one region.
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