IMPACT OF MNCS AND TOP INDIAN COMPANIES
In the last twenty years, globalisation of the Indian economy has come a long way. What has been its effect on the lives of people? Let us look at some of the evidence.
Globalisation and greater competition among producers - both local and foreign producers - has been of advantage to consumers, particularly the well-off sections in the urban areas. There is a greater choice before these consumers who now enjoy the improved quality and lower prices for several products. As a result, these people today, enjoy much higher standards of living than was possible earlier.
Among producers and workers, the impact of globalisation has not been uniform.
1. MNCs have increased their investments in India over the past 20 years, which means investing in India has been beneficial for them. MNCs have been interested in industries such as cell phones, automobiles, electronics, soft drinks, fast food or services such as banking in urban areas. These products have a large number of well-off buyers. In these industries and services, new jobs have been created. Also, local companies supplying raw materials, etc. to these industries have prospered
2. several of the top Indian companies have been able to benefit from the increased competition. They have invested in newer technology and production methods and raised their production standards. Some have gained from successful collaborations with foreign companies.
Moreover, globalisation has enabled some large Indian companies to emerge as multinationals themselves! Tata Motors (automobiles), Infosys (IT), Ranbaxy (medicines), Asian Paints (paints), Sundaram Fasteners (nuts and bolts) are some Indian companies which are spreading their operations worldwide.
Globalisation has also created new opportunities for companies providing services, particularly those involving IT. The Indian company producing a magazine for the London based company and call centres are some examples. Besides, a host of services such as data entry, accounting, administrative tasks, engineering are now being done cheaply in countries such as India and are exported to the developed countries
Steps to attract foreign investment
In recent years, the central and state governments in India are taking special steps to attract foreign companies to invest in India. Industrial zones, called Special Economic Zones (SEZs), are being set up. SEZs are to have world-class facilities: electricity, water, roads, transport, storage, recreational and educational facilities. Companies who set up production units in the SEZs do not have to pay taxes for an initial period of five years.
Government has also allowed flexibility in the labour laws to attract foreign investment. You have seen in Chapter 2 that the companies in the organised sector have to obey certain rules that aim to protect the workers’ rights. In recent years, the government has allowed companies to ignore many of these. Instead of hiring workers on a regular basis, companies hire workers ‘flexibly’ for short periods when there is intense pressure of work. This is done to reduce the cost of labour for the company. However, still not satisfied, foreign companies are demanding more flexibility in labour laws.
Let’s work these out
1. How has competition benefited people in India?
2. Should more Indian companies emerge as MNCs? How would it benefit the people in the country?
3. Why do governments try to attract more foreign investment?
4. In Chapter 1, we saw what may be development for one may be destructive for others. The setting of SEZs has been opposed by some people in India. Find out who are these people and why are they opposing it.
Source: This topic is taken from NCERT TEXTBOOK
SMALL PRODUCERS – COMPETE OR PERISH
For a large number of small producers and workers, globalisation has posed major challenges.
Batteries, capacitors, plastics, toys, tyres, dairy products, and vegetable oil are some examples of industries where small manufacturers have been hit hard due to competition. Several of the units have shut down rendering many workers jobless. The small industries in India employ the largest number of workers (20 million) in the country, next only to agriculture.
Rising Competition
Ravi did not expect that he would have to face a crisis in such a short period of his life as an industrialist. Ravi took a loan from the bank to start his own company producing capacitors in 1992 in Hosur, an industrial town in Tamil Nadu. Capacitors are used in many electronic home appliances including tube lights, television etc. Within three years, he was able to expand production and had 20 workers working under him.
His struggle to run his company started when the government removed restrictions on imports of capacitors as per its agreement at WTO in 2001. His main clients, the television companies used to buy different components including capacitors in bulk for the manufacture of television sets. However, competition from the MNC brands forced the Indian television companies to move into assembling activities for MNCs. Even when some of them bought capacitors, they would prefer to import as the price of the imported item was half the price charged by people like Ravi.
Ravi now produces less than half the capacitors that he produced in the year 2000 and has only seven workers working for him. Many of Ravi’s friends in the same business in Hyderabad and Chennai have closed their units.
Competition and uncertain employment
Globalisation and the pressure of competition have substantially changed the lives of workers. Faced with growing competition, most employers these days prefer to employ workers ‘flexibly’. This means that workers’ jobs are no longer secure.
Large MNCs in the garment industry in Europe and America order their products from Indian exporters. These large MNCs with worldwide networks look for the cheapest goods in order to maximise their profits. To get these large orders, Indian garment exporters try hard to cut their own costs. As the cost of raw materials cannot be reduced, exporters try to cut labour costs. Where earlier a factory used to employ workers on a permanent basis, now they employ workers only on a temporary basis so that they do not have to pay workers for the whole year. Workers also have to put in very long working hours and work night shifts on a regular basis during the peak season. Wages are low and workers are forced to work overtime to make both ends meet. While this competition among the garment exporters has allowed the MNCs to make large profits, workers are denied their fair share of benefits brought about by globalisation.
Factory workers folding garments for export. Though globalisation has created opportunities for paid work for women, the condition of employment shows that women are denied their fair share of benefits.
A Garment worker
35-year-old Sushila has spent many years as a worker in garment export industry of Delhi. She was employed as a ‘permanent worker’ entitled to health insurance, provident fund, overtime at a double rate, when Sushila’s factory closed in the late 1990s. After searching for a job for six months, she finally got a job 30 km. away from where she lives. Even after working in this factory for several years, she is a temporary worker and earns less than half of what she was earning earlier Sushila leaves her house every morning, seven days a week at 7:30 a.m. and returns at 10 p.m. A day off from work means no wage. She has none of the benefits she used to get earlier. Factories closer to her home have widely fluctuating orders and therefore pay even less.
The conditions of work and the hardships of the workers described above have become common to many industrial units and services in India. Most workers, today, are employed in the unorganised sector. Moreover, increasing conditions of work in the organised sector have come to resemble the unorganised sector. Workers in the organised sector such as Sushila no longer get the protection and benefits that they enjoyed earlier.
Let’s work these out
1. What are the ways in which Ravi’s small production unit was affected by rising competition?
2. Should producers such as Ravi stop production because their cost of production is higher compared to producers in other countries? What do you think?
3. Recent studies point out that small producers in India need three things to compete better in the market.
(a) better roads, power, water, raw materials, marketing, and information network
(b) improvements and modernisation of technology
(c) timely availability of credit at reasonable interest rates.
(i) Can you explain how these three things would help Indian producers?
(ii) Do you think MNCs will be interested in investing in these? Why?
(iii) Do you think the government has a role in making these facilities available? Why?
(iv) Can you think of any other step that the government could take? Discuss.
4. In what ways has competition affected workers, Indian exporters and foreign MNCs in the garment industry?
5. What can be done by each of the following so that the workers can get a fair share of benefits brought by globalisation?
(a) government
(b) employers at the exporting factories
(c) MNCs
(d) workers.
6. One of the present debates in India is whether companies should have flexible policies for employment. Based on what you have read in the chapter, summarise the point of view of the employers and workers.
Source: This topic is taken from NCERT TEXTBOOK