Class X - Globalisation and the Indian Economy

Questions and answers to be written in note book:

1. Define Multinational Company. (MNC)A MNC is a company that owns or controls production in more than one nation. MNCs set up offices and factories for production in regions where they can get cheap labour and other resources. The MNC is not only selling its finished products globally, but the goods and services are produced globally.

2. What are the ways in which MNCs set up or control, production in other countries?

i). Directly set up offices and factories for production.

ii) Set up production with some of the local companies of these countries.

iii) Buy up local companies and then expand.

iv) Place orders for production with small producers of the countries e.g.

garments, footwear, etc (EXPLAIN WITH EG. IF NEEDED)

3. What do MNCs keep in mind while starting business in other countries?(i) MNCs set up offices and factories for production in regions where they can get cheap labour and other resources.(ii) The cost of production is low and the MNCs can earn greater profits.(iii) MNCs can get host country’s concessions for exports and imports. (v) By selling goods at cheaper rates, the MNCs can acquire the world market.

4. What do you understand by globalisation? What are the advantages of globalization? Mention main shortcomings of globalization in the context of India.

Ans. Globalisation means integrating the economy of a country with the economies of other countries under conditions of free flow of trade, capital, technology, cultures and movement of persons across borders. It includes

ADVANTAGES OF GLOBALISATION:

1.Lowers poverty in developing countries with increased employment which provides income through trade and investment.

2. People get variety of goods.

3. People get opportunity to get goods at competitive prices.

4. Local companies have prospered through supplying raw materials to the

industries.

5. Top Indian companies have benefitted for successful collaborations with

foreign companies.

6. Due to competition domestic industry also becomes competitive, which leads to industrial development.

7. Exchange of technology leads to technical development in the country.

8. It leads to increase in foreign exchange reserves.

9. Globalization leads to removals of barriers to the movement of people, capital and goods.

10. Globalization increases level and income of the country and ultimately leads to higher economic growth.

11. Globalisation promotes competition which leads to improvements in management practices and workplace arrangements.12. Globalization is feeding e-business too.

Shortcomings /Negative impact/disadvanges are as follows.

i) Small manufacturer producing toys, vegetables oils, etc have been hit hard

due to competition.

ii) In order to cut costs of the products, employers in exports industry try to cut labor cost. iii.) Workers job is no longer secure and they may be exploited.

(iv) It may not help in achieving sustainable growth.

(v) The gap between rich and poor is growing on a local and an international level . It may lead to widening of income inequalities among various countries.

(vi) It may lead to aggravation of income inequalities within countries.

(vii) Huge multinational corporations are benefiting at the expense of economies, farmers, workers and the environment

5. What is the basic function of foreign trade? Distinguish between foreign trade and foreign investment(i) Foreign trade creates an opportunity for the producers to reach beyond the domestic markets. Producers can sell their produce not only in markets located within the country but can also compete in markets located in other countries of the world.

(ii) Similarly, for the buyers, import of goods produced in another country is one way of expanding the choice of goods beyond what is domestically produced.

(iii) Foreign trade thus results in connecting the markets or integration of markets in different countries.

.Foreign trade implies exchange of goods and services across nations.Foreign investment implies transfer of capital from one nation to another.6.What has enabled globalisation in India?Or How is information technology connected with globalisation? Would globalisation have been possible without expansion of IT?

TECHNOLOGYInformation and communication technology (or IT in short) has played a major role in spreading out production of services across countries.

(a)The developments in information and communication technology, in the areas of telecommunications, computers, Internet has been changing rapidly.

(b)Telecommunication facilities (telegraph, telephone including mobile phones, fax) are used to contact one another around the world, to access information instantly, and to communicate from remote areas. This has been facilitated by satellite communication devices.

(c) Internet also allows us to send instant electronic mail (e-mail) and talk (voice-mail) across the world at negligible costs.

Globalisation would not have been possible without expansion of IT.

LIBERALISATIONRemoving barriers or restrictions set by the government on foreign trade and foreign investment is known as liberalisation.In 1991, the Indian government decided that the time had come for Indian producers to compete with producers around the globe. It felt that competition would improve the performance of producers within the

country since they would have to improve their quality. This decision was supported by powerful international organisations. Thus, barriers on foreign trade and foreign investment were removed to a large extent. This meant that goods could be imported and exported easily and also foreign companies could set up factories and offices here.

7. What are the measures of trade barrier?(a) tariff (tax on imports or custom duty) : this makes imports expensive and people are discouraged to purchase imported goods and protect domestic industry.(b) quota (upper physical limit imposed by government on goods to be imported: this is done to discourage imports and to control the supply of imported goods.

8. What was the reasons for putting barriers to foreign trade and foreign investment by the Indian government? Why did it wish to remove these barriers?1.The Indian government, after Independence, had put barriers to foreign trade and foreign investment. 2. This was considered necessary to protect the producers within the country from foreign competition. 3. Competition from imports at that stage would not have allowed these industries to come up. Thus, India had imposed barriers on imports.

1. In 1991, the Indian government decided that the time had come for Indian producers to compete with producers around the globe.

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

3. This decision was supported by powerful international organisations. 4. It was also felt the domestic manufacturers would invest more in

research and development and would become capable of selling their products at international market by competing with their foreign counter parts.

Thus, barriers on foreign trade and foreign investment were removed to a large extent. This meant that goods could be imported and exported easily and also foreign companies could set up factories and offices here.

9. Why do developed countries want developing countries to liberalize their trade and investment?

Ans. developed countries feel that all the barriers to foreign trade and investment are harmful for international trade.

They want that trade between countries should be free.

Developed countries like USA, UK have high production capacity and latest technology.

They want their surplus produce to sell in other countries and utilize their technology to their optimal use.

Developing countries should demand fair globalisation which ensures opportunities and benefits for all. Interest of the workers should also be taken care of.

10. What is ‘Fair Globalisation’? How it can be achieved?Fair globalisation would create opportunities for all, and also ensure that the benefits of globalisation are shared better.

a. The government can play a major role in making fair globalisation possible. Its policies must protect the interests, not only of the rich and the powerful, but all the people in the country.

b. The government can ensure that labour laws are properly implemented and the workers get their rights.

c. It can support small producers to improve their performance till the time they become strong enough to compete. If necessary, the government can use trade and investment barriers.

d. It can negotiate at the WTO for ‘fairer rules’.e. It can also align with other developing countries with similar

interests to fight against the domination of developed countries in the WTO.

11. How would flexibility in labour laws help companies?

Ans. Flexibility in labour laws helps companies to cut down the cost of production.

Now, instead of hiring workers on a regular basis, companies hire workers flexibly for short periods.

This reduces the cost of labour for the company.

12. What are the various ways  in which MNCs set up or control production in other countries?

Ans.  Multinational Corporations (MNCs) set up their factories or production units close to markets where they can get desired type of skilled or unskilled labour at low costs along with other factors of production. After ensuring these conditions MNCs set up production units in the following ways :

(a) Jointly with some local companies of the existing country.

(b) Buy the local companies and then expand its production with the help of modern technology.

(c) They place orders for small producers and sell these products under their own brand name.

13. Where do generally the MNCs prefer to setup their production process ?(or) By setting up the production plants MNCs tap the advantage not only of the large markets that countries provide, but also the lower costs of production. Explain the statement.MNCs set up production

(i) where it is close to the markets; (ii) where there is skilled and unskilled labour available at low costs; (iii) where the availability of other factors of production is assured. (iv) The concerned government policies are favourable to the MNCs.

ers worldwide.

14. What are the fears of globalization?

i) globalization may not help in achieving sustainable development

ii) It may lead to widening of income inequalities among various countries.

iii) It may lead to greater dependence of underdeveloped countries on advanced

countries.

iv) It may impart some instability in world’s economies.

15. “The impact of globalisation has not been uniform.” Explain this statement.

Ans. While globalisation has benefited the well-off consumers and also producers with skill, education and wealth, many small producers and workers have suffered as a result of the rising competition.

16. Write a note on WTO (World Trade Organisation).World Trade Organisation (WTO) is an organisation whose aim is to liberalise international trade. Started at the initiative of the developed countries, WTO establishes rules regarding international trade, and sees that these rules are obeyed.

149 countries of the world are currently members of the WTO (2006). It started functioning from January 1, 1995.

17. Globalisation will continue in the future. Can you imagine what the world would be like twenty years from now? Give reason for your answer.

Ans. After twenty years, world would undergo a positive change which will possess the following features—healthy competition, improved productive efficiency, increased volume of output, income and employment, better living standards, greater availability of information and modern technoloy.

Reason for the views given above : These are the favourable factors for globalisation :

(a) Availability of human resources both quantity wise and quality wise.

(b) Broad resource and industrial base of major countries.

(c) Growing entrepreneurship

(d) Growing domestic market.

FOLLOWING QUESTIONS AND ANSWERS ARE NOT TO BE DONE IN NOTE BOOK: These are extra questions which can be studied for exams point of view. Please check answer from NCERT.

Q.11. Fill in the blanks :

Indian buyers have a greater choice of goods than they did two decades back. This is closely associated with the process of         (1)          . Markets in India are selling goods produced in many other countries. This means there is increasing        (2)         with other countries. Moreover, the rising number of brands that we see in the market might be produced by MNCs in India. MNCs are investing in India because              (3)               . While consumers have more choices in the market, the effect of rising         (4)           and         (5)           has meant greater        (6)         among the producers.

Ans. (1) Globalisation (2) Trade (3) They can get cheap labour (4) Prices (5) Standard (6) Competition

Q.12. Match the following.

(i) MNCs buy at cheap rates from small producers (a) Automobiles

(ii) Quota and taxes on imports are used to (b) Garment, footwear, sports

regulate trade items

(iii) Indian companies who have invested abroad (c) Call centres

(iv) It has helped in spreading of production of services. (d) Tata Motors, Infosys, Ranbaxy

(v) Several MNCs have invested in setting up factories (e) Trade barriers.

in India for production of

 Ans. (i) (b) (ii) (e) (iii) (d) (iv) (c) (v) (a)

Q.13. Choose the most appropriate option.

(i) The past two decade of globalisation has seen rapid movements of

(a) goods, services and people between countries.

(b) goods, services and investments between countries.

(c) goods, investment and people between countries.

(ii) The most common route for investments by MNCs in countries around the world is to

(a) set up new factories.

(b) buy existing local companies.

(c) form partnership with local companies.

(iii) Globalisation has led to improvement in living conditions

(a) of all the people

(b) of people in the developed countries.

(c) of workers in the developing countries.

(d) none of the above.

Ans. (i) (a) (ii) (b) (iii) (c)

Q2(CBSE 2011): Which one of the following is a major benefit of joint production between a local company and a Multi-National Company ?

(a) MNC can bring latest technology in the production(b) MNC can control the increase in the price(c) MNC can buy the local company(d) MNC can sell the products under their brand name

Q3(CBSE 2011): Which one of the following is not true regarding the World TradeOrganization? 

(a) It allows free trade to all countries without any trade barriers.(b) Its aim is to liberalise international trade.(c) It establishes rules regarding international trade.(d) WTO rules have forced the developing countries to remove trade barriers.

Q4(CBSE 2011): Rapid integration or inter connection between countries is known as

(a) Privatisation (b) Globalisation(c) Liberalisation (d) Socialisation

Q5(CBSE 2011): Which one of the following has benefited least because of globalisation in India?

(a) Agriculture Sector(b) Industrial Sector(c) Service Sector(d) Secondary Sector

Q6: Till 1950, globalisation meant

(a) only foreign trade(b) only foreign investment(c) both (a) and (b)(d) none of these

Q7: Which of the following has played a big role in organizing production across the coutries?

(a) WTO(b) Domestic companies(c) Information technology(d) Consumers

Answers: 

2: (a) MNC can bring latest technology in the production3: (a) It allows free trade to all countries without any trade barriers.4: (b) Globalisation 5: (a) Agriculture Sector 6: (a) only foreign trade7: (c) Information technology  

:ONE MARK QUESTIONS.

1. Company that owns or controls production in more than one nation……

Ans.-MNCs…………………………….

2. Investment made by MNCs is called

Ans. foreign investment

3. Cargill foods a very large American MNC , has bought over smaller

Indian companies such as

Ans. Parakh foods.

4. Ford motors came to in

Ans.1995.

5. Rapid integration between countries is called.

Ans. globalization.

6.what is the name of the organization whose aim is to liberalize international

trade is Ans. WTO.

7. Till 2006, how many members were there in WTO.

Ans. 150

8. Removing barriers or restrictions set by the government is known as.

Ans. liberalization.

9. Name the term which refers to globalization which creates opportunities for

all and ensures that is benefits are better shared.

Ans. Fair globalization.

10. Companies who set up production units the special economic zones do not

have to pay taxes for an initial period of.

Ans.5 years.

HOT QUESTIONS

1. It creates an opportunity for the producers to reach beyond the domestic

market. What does it refer to?

2. How rapid movement in technology has stimulated the globalization process?

State through examples.

3. How governments use trade barriers in relation to foreign trade?

4. Give examples of industries where the small manufacturers have been hit hard

due to competition.

5. What are the investments made by MNCs called and with what are the

expectations are these made?

04. What is meant by Liberalisation?Ans. Liberalisation means removing unnecessary trade restrictions and making the economy more competitive.

05. What is outsourcing?Ans. Outsourcing means going out to a source outside the company to buy regular service that formerly used to be provided departmentally and internally just as legal advice, computer service, security, advertisement and accounting etc.

06. What is meant by modernisation of the Economy?Ans. The new economic policy accords top priority to modern techniques and technologies. It also promotes computers and electronics industries. It has made the Indian industries dynamic.

07. What do the top Indian companies have that allows them to modernise and compete, whereas many of the small producers have to shut down production? Choose the correct answer.(a) Workers(b) Money(c) Bis factoriesAns. Money

08. How many countries are currently the members of the World Trade Organisation (WTO)?Ans. It has 153 member countries as on 23 July, 2008.

09. In which year, the government started to remove barriers on foreign trade and foreign investment.Ans. In 1991

10. Why are the Chinese Toys popular in the world?Ans. Chinese Toys are comparatively cheaper and have new designs. That is why they are popular in the world.

11. Why are the MNCs making investments in India?Ans. In India labour cost is comparatively very low, that is why many MNCs are making investments in India.

12. Name the organisation which lay emphasis on liberalisation of foreign trade and foreign investment in India.Ans. World Trade Organisation (WTO)

13. When was the UNO established?Ans. The UNO was established on 24 October, 1945.

14. When was the WTO established?Ans. The WTO was established on 1st January, 1995.

15. Where is the main Head Office of WTO?Ans. Geneva-Switzerland.

Why do governments try to attract more foreign investment? It brings money and capital. Foreign investments create new job opportunities in the country. This not only provides finance but managerial and technical

personnel and new technology in production also. This encourages local enter-prises to invest more in subsidiary

services like transport and training agents and in collaboration with foreign enterprises.

A part of the profits from such investments generally invested in the expansion and modernisation of related industries.

The social returns are greater than the private returns on foreign investment.

The governments get revenue when it taxes the profits of foreign firms.

Should more Indian companies emerge as MNCs? How would it benefit the people in the country?Globalisation has encouraged Indian companies to go global. They are investing large sums of money abroad. They are setting up new industries abroad and acquiring new companies.Positive side:

1. This will lead t integration of Indian economy with the global economy.

2. Advanced technologies will be easily accessible to Indian companies.

3. Availability of more choice and better quality goods to Indian consumers

4. Cheaper goods in the Indian market from other countries5. Increasing Indian efficiency – industrialisation – more output

Negative sides:1. If the Indian companies spend a large proportion of their capital

abroad, it will restrict the domestic investment. Employment opportunities will not get created.

2. Our imports will suffer – local producers will suffer, this will adversely affect our balance of payment position.

3. Indian small scale industries will get affected.4. Over exploitation of resources will affect our sustainable

development.