Globalisation and the Role of TNCs

How globalisation connects India to the world

Globalisation is the increasing interconnectedness of countries through trade, investment, people and information. For India, an emerging country, these connections have helped businesses reach overseas customers and attracted investment from foreign companies.

Development involves improvements in people’s living standards, not simply a larger economy. Globalisation can support development by creating employment and raising incomes, but its benefits depend on the kinds of jobs created and who can access them.

Communications make services tradable

International trade does not only involve physical goods. A company can also buy a service from another country: for example, customer support or software development.

Advances in internet and mobile communications make information cheaper and faster to transfer. Staff in India can communicate with overseas customers and send digital work to clients without transporting a physical product. This makes distance less of a barrier to doing business.

India’s expanding ICT connections have supported its integration into global markets. Its large, skilled workforce, including many English speakers, makes it attractive to companies serving English-speaking customers. Relatively low labour costs also allow businesses to reduce their operating costs.

Transport connects production with markets

Transport improvements help firms move materials, finished products and people. Roads and railways connect production centres with ports and airports, while international shipping and aviation connect India with overseas markets.

Container ships carry goods in bulk at relatively low cost. Standard containers can be transferred between ships and land transport, making international supply chains easier to organise. Air travel also helps people travel between countries for business.

India’s extensive road and rail networks, seaports and airports support domestic and international trade. Better connections make it easier for firms to obtain supplies and sell products abroad, increasing the attractiveness of India as a business location. Transport is particularly important for goods; reliable communications are especially important for digitally delivered services.

TNCs bring investment and connect India to supply chains

A transnational corporation, or TNC, operates in more than one country. When a foreign company invests in business operations in India, this is foreign direct investment, or FDI.

India attracts TNCs because it offers both a workforce and a market. Its large, young workforce includes skilled workers who can produce goods and provide services at competitive costs. Its large population and rising incomes also offer companies potential customers.

TNC activity can create jobs, bring technology and connect Indian production with global supply chains. More sophisticated activities, including software and electronics, can generate higher-value exports rather than relying only on low-cost production.

Employment can also produce a multiplier effect. Workers spend some of their wages in local businesses, supporting further jobs and incomes. However, the scale of this benefit depends on how much activity and spending remain in the local economy.

Outsourcing and India’s service-sector growth

Outsourcing means hiring an external provider to carry out work. Overseas outsourcing allows a business to obtain services from another country, often to reduce costs or access specialist skills.

India is an important location for outsourced call-centre work, software development, IT support and back-office services. Bangalore and Hyderabad host service centres serving Western companies. These activities combine India’s workforce advantages with communications technology that allows work to be delivered internationally.

India’s IT and software-service exports were worth around US$100 billion in 2014–2015. This illustrates the scale of the sector at that time; it is not a current figure. Export earnings and employment have helped raise GDP and diversify the economy.

How important has globalisation been?

Globalisation has been an important driver of India’s economic change because it has connected Indian workers and businesses with overseas investment and customers. Communications have enabled service exports, while transport has supported trade in goods.

However, new jobs do not automatically guarantee good working conditions. TNC investment can also be insecure: companies may relocate if another country offers lower costs. Higher-level management or technical work may remain elsewhere, limiting the benefits available locally.

Benefits are also uneven. Skilled workers who can access internationally connected service centres are better placed to benefit than people without the necessary skills or connections. Growth in Bangalore and Hyderabad therefore does not show that all parts of India have developed equally.

Overall, globalisation has strongly supported India’s service-sector growth and economic diversification, but its contribution to wider development depends on job quality, access to opportunities and the durability of investment.