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Government has also allowed flexibility in the labour laws to attract foreign investment

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.

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Globalisation is the process of rapid integration or interconnection between countries.

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The ways are:

(i)MNCs set up production where it is close to the markets; where there is skilled and unskilled labour available at low costs; and where the availability of other factors of production is assured.

(ii)In addition, MNCs might look for government policies that look after their interests.

(iii)MNCs set up production jointly with some of the local companies of these countries. But the most common route for MNC investments is to buy up local companies and then to expand production.

(iv)Large MNCs in developed countries place orders for production with small producers. Garments, footwear, sports items are examples of industries where production is carried out by a large number of small producers around the world.

(v)The products are supplied to the MNCs, which then sell these under their own brand names to the customers. 

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The Indian government, after Independence, had put barriers to foreign trade and foreign investment.

(i)This was considered necessary to protect the producers within the country from foreign competition.

(ii)Industries were just coming up in the 1950s and 1960s, and competition from imports at that stage would not have allowed these industries to come up. 

(iii)Starting around 1991, some farreaching changes in policy were made in India. The government decided that the time had come for Indian producers to compete with producers around the globe.

(iv)It felt that competition would improve the performance of producers within the country since they would have to improve their quality.

(v)This decision was supported by powerful international organisations.

Thus, barriers on foreign trade and foreign investment were removed to a large extent.

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Developed countries want developing countries to liberalise their trade and investment because goods could be imported and exported easily and also foreign companies could set up factories and offices in their country.

Developing countries should demand the free and fair flow of their labour and reduction in the subsidies in agriculture sector of developed countries in return.