What are the ways in which Ravi's small production unit was affected by rising competition?
Ravi's small production unit was severely affected when the government removed restrictions on imports of capacitors as per the WTO agreement in 2001. This led to an influx of cheaper foreign goods, creating stiff competition for domestic producers.
His main clients, the television companies, shifted to assembling activities for MNCs and preferred to import capacitors because the price of the imported item was half of what Ravi charged. Consequently, Ravi's output dropped to less than half of his production in the year 2000. The crisis forced him to reduce his workforce from 20 workers to only seven workers. Many of his friends in the same business in Hyderabad and Chennai have also closed their units due to these challenges.
Explanation
The answer is derived from the specific case study of Ravi provided in the chapter 'Globalisation and the Indian Economy'. It highlights the chain of consequences starting from trade liberalisation (WTO agreement) to the loss of market share due to price competition from imports, resulting in reduced production and workforce. This illustrates the broader impact of globalisation on small producers in India.
Solution Steps
Identify the policy change: Government removed restrictions on imports of capacitors as per WTO agreement in 2001.
Identify the market shift: Television companies (clients) moved to assembling for MNCs and preferred imports due to lower prices (half of Ravi's price).
Identify the outcome for Ravi: Production fell to less than half, and workforce reduced from 20 to 7 workers.