Globalisation And The Indian Economy, Chapter4, Economics, Class 10, CBSE Exam Notes, (30 Plus Questions)
Overview
Wide ranging choice of goods in our markets is relatively recent phenomenon. And globalisation has been the cause behind it. Globalisation And The Indian Economy, Chapter4, Economics, Class 10, CBSE Exam Notes, has detailed discussion on it. This post titled Globalisation And The Indian Economy, Chapter4, Economics, Class 10, CBSE Exam Notes, digs deeper about the role of MNCs in understanding the relation between Globalisation And The Indian Economy. In due course it also dwells longeron the topic called ‘liberalisation of trade and investment’, and related issues.
Q.1 In a matter of years (almost within two decades), Indian markets have witnessed a transformational change. How do you or in what ways do you experience it in your day to day life?
Ans. On the basis of following observations, we can easily conclude that almost within two decades time, Indian markets have undergone transformational change.
- Today consumers have wide choice of goods and services.
- Latest models of various products made by the leading global manufacturers and producers are within our reach.
- We are experiencing explosion of brands in our markets.
Q.2. Until the middle of 20th century, what was the trade scenario world wide?
Ans. Until the middle of the 20th century, production of goods was largely organised within countries. Only raw material, finished goods and food stuffs crossed international boundaries.
Countries of the world were only connected through trade.
Production Across Countries / MNCs
Q.3 What is a multinational company (MNC)?
Ans. A multinational company or MNC is a company that owns or controls production in more than one nation.
MNCs setup offices and factories for production in region where they can get cheap labour and other resources. This is done so that the cost of production is low and the MNC can earn greater profits.
Thus, production process in MNCs is organised in very complex ways. Their goods and services are produced globally and sold globally.
Note : China provides advantage of being a cheap manufacturing location.
Note: India has highly skilled engineers who can understand the technical aspects of production. India also has educated English speaking youth who can provide customer care services.
Interlinking Production Across Countries
Q.4 What are the conditions that MNCs look for before setting up their factories and offices for production?
Ans. In general, MNCs set up their production units at places where following conditions appear.
- Proximity to market.
- Availability of skilled and unskilled labour at cheap rate.
- Favourable government policy.
Q.5 What do you mean by the term investment ? What is called foreign investment?
Ans. The money that is spent by a company to buy assets such as land, building, machines and other equipment is called investment. Investment made by MNCs is called foreign investment.
Q.6 At times MNCs setup production jointly with local companies in a country. How does the local company gets benefitted with it ? How MNC gets benefit with such alliance?
Ans. The benefit of local company by entering in to joint production with an MNC is two fold :
- MNCs can provide money for additional investments like buying new machines for faster production.
- MNCs might bring with them the latest technology for production.
MNC also gets benefitted with such alliance. It has benefit of using the large marketing network of local company in various parts of the company.
For example, Cargill Foods (American MNC) has bought over smaller Indian companies such as Parakh Foods.
Note: In fact, many of the top MNCs have wealth exceeding the entire budgets of the developing country government. With such enormous wealth, these MNCs have tremendous power and influence in world’s trade and business.
Q.7 How do MNCs control production of goods without setting up any factory?
Ans. Large MNCs in developed countries, place orders for production with small producers. Garments, footwears, sports items are examples of such kind of production.
The products produced by these small producers are supplied to the MNCs, which then sell these products under their own brand names to the customers.
These large MNCs have tremendous power to determine price, quality, delivery and labour conditions for these distant producers.
Q.8 Explain how under influence of MNCs, is the production of goods in widely dispersed locations across the globe, getting interlinked?
Ans. MNCs are spreading their production and interacting with local producers in various countries across the globe in variety of ways, such as :
- By setting up partnership with the local companies.
- By using the local companies for supplies.
- By closely competing with some local companies.
- By buying up the local companies.
Thus, MNCs are exerting a strong influence on production at these distant locations. As a result, production in these widely dispersed locations across the globe is getting interlinked.
Foreign Trade And Integration Of Markets
Q.9 What is the basic function of foreign trade?
Ans. Foreign trade creates an opportunity for the producers to reach beyond the domestic markets i.e. home markets , and compete in markets located in other countries of the world.
Similarly for buyers, imports expand the choice of goods beyond what is domestically available.
Q.10 Discuss the effect of foreign trade through the examples of Chinese toys in the Indian markets.
Ans. When Chinese toy producers started exporting toys to India, following changes took place:
- Indian consumers now have the option to make choice between Indian and Chinese toys.
- Cheaper prices and new designs of toys made Chinese toy more popular.
- With in a year, 70 to 80% of Indian shops replaced Indian toys with Chinese toys.
- Indian toy manufacturers couldn’t compete against the Chinese toy producers and faced loss.
Q.11 Discuss how foreign trade results in integration of markets in the two countries.
Ans. Integration of markets in two different countries due to foreign trade, takes place in following ways :
- With the opening of foreign trade, goods travel from market of one country to that of another.
- Choice of goods in the two markets rise.
- Prices of similar goods in the two markets tend to become equal.
- Producers in the two countries now closely compete against each other despite enormous distance between them. (Small traders face stiff competition from both MNCs and imports.)
Q. How will the import of steel from India in to Chinese markets lead to integration of markets for steel in two countries? Explain.
Ans. With the arrival of Indian steel in Chinese market will increase the choice range for consumers of steel in China. Price of steel of same quality will tend to shift in favour of consumers in China.
The steel producers in India and China will now closely compete with each other to grab big share in market. This will lead to integration of steel market in both the countries.
Q.12 Distinguish between foreign trade and foreign investment.
Ans.
Foreign Trade:
Foreign trade is export and import of goods between two countries. Foreign trade creates opportunity for the producers to reach beyond their domestic market to the markets in other countries.
Foreign Investment:
The money spent by the MNCs to buy assets in trade and business friendly foreign countries, to setup production units and start production, is called foreign investment.
Q.13 What was the main channel of connecting countries in the past ?
Ans. For a long time, foreign trade has been the main channel of establishing connection between various countries.
In historic times, there had been trade routes (ex- Silk Route), connecting India and South Asia to markets of West and East. Various European trading companies (Ex- East India Company) became attracted and came to India for their trade interests.
Q.14 What do you understand by globalisation? Explain in your own words.
Ans. Globalisation is the process of rapid integration or interconnection between countries.
As a result of globalisation more and more goods and services, investment and technology are moving between countries. Most of the regions of the world are in closer contact with each other than they were a few decades back.
Search for better jobs or better education make people move between countries and promote interconnection between countries. However, such movements are subject to various restriction,
Q.15 MNCs are playing major role in globalisation process. Explain.
Ans. Foreign investment and foreign trade are two major tools of globalisation, because they introduce rapid integration and interconnection between the countries. We can see MNCs playing major role in globalisation process in following ways :
- MNCs look for locations in the world which are cheap for their production of goods. Foreign investment by MNCs in such countries have been rising.
- Sometimes, large MNCs in developed countries place order for production with small producers in distant foreign countries. The finished product produced by these small producers are then sold by the large MNCs under their own brand name.
- The big giant MNCs with their enoumous budget, have tremendous power to determine price, quality, delivery and labour conditions for these distant small producers. Thus a large part of foreign trade is controlled by MNCs.
Factors That Have Enabled Globalisation
Q.16 Name the two areas of technology, the improvement in whom has helped globalisation.
Ans.
- Transportation sector
- Information and communication technology sector.
Q.17 Discuss how the improvement in transportation technology has helped in movement of goods across the globe.
Ans. Past 50 years have seen several improvement in transportation technology. This has made much faster delivery of goods across long distances possible, at lower rates.
- Goods are now placed in containers that can be loaded intact into ships, railways, planes and trucks.
- Use of containers have led to huge reduction in port handling costs and have made delivery faster.
- Air transport has also become cheaper.
- Road transport has also become faster and equipped with digital technology for toll payments.
Q. How is Information and Communication Technology (IT) connected with globalisation?
Ans. IT is the result of convergence of telecommunication technology, computer technology and Internet technology.
Telecommunication facilities are used to contact people around the globe and to have access to information fastly. Internet allows us to send instant electronic mail (e- mail) and voice mail across the world at the negligible cost.
IT has played a major role in spreading out production of services across the countries. Call Centres provide information and support to consumers abroad.
Thus, Information Technology has speeded up the foreign trade and supports immensely to the process of globalisation.
Liberalisation of Foreign Trade And Foreign Investment Policy
Q.19 What do you understand by liberalisation of foreign trade?
Ans. All countries (developed, developing and underdeveloped) during their early stages of industrial development, give protection to domestic producers through a variety of means and by imposing trade barriers like –
- tax on imports,
- Quota of goods to be imported,
- restriction on certain sectors of economy for foreign investment.
When it is felt that domestic industries are well founded , and the competition in market with foreign companies would improve the performance of domestic producers; trade barriers and other restrictions are removed. This removal of barriers and restriction in foreign trade and investment by government, is known as Liberalisation of Foreign Trade or Liberalisation.
Note: Removing barriers or restrictions, set by government on foreign trade and investment is known as Liberalisation or Liberalisation of foreign trade or Liberalisation of economy.
Q.20 What is trade barrier? What is its role in foreign trade?
Ans. A trade barrier refers to any regulation or policy of the government that restricts foreign trade by imposing taxes on imports, quota restrictions, and license restrictions.
Governments can use trade barriers to increase or decrease (regulate) foreign trade and to decide what kind of goods and how much of each, should come in to the country.
Various governments (for example, government of India after its independence) put trade barriers to foreign trade and investment to protect its domestic producers from foreign competition.
Q.21 How has liberalisation in trade and investment policies helped globalisation process?
Ans.
Removing barriers or restrictions, set by government on foreign trade and investment is known as Liberalisation or Liberalisation of foreign trade or Liberalisation of economy.
When barriers on foreign trade and investment are removed, goods can be imported and exported easily. Foreign companies are welcome to setup factories and offices in the country. In this way, the process of integration of world markets and interconnection between countries of the world accelerates, which further boosts the process of globalisation.
Q.22 What is the benefit of removing trade barrier?
Ans. As a result of removal of trade barriers in a country, there is competition in the market due to entry of foreign companies. This improves the performance of domestic producers and quality of their products.
Domestic producers thus may grow internationally and may become an MNC as well.
Q.23 What were the reasons for putting barriers to foreign trade and foreign investment by the Indian government? Why did it wish to remove these barriers in 1991?
Ans. The Indian government, after independence, had put barriers to foreign trade and foreign investment. This was considered necessary to protect its domestic producers from foreign competition. Since after independence, industries in India, were just taking roots in 1950s and 1960s, the competition from imports would destroy them in their infancy.
Hence India decided to allow imports of only essential items such as machinery, fertilizers, petroleum etc. Foreign investments were also allowed in only few sectors of economy.
In 1991, Government of India decided that time has come for Indian producers to compete with producers around the globe. It was felt that competition from foreign companies would improve the performance of producers with in the country and quality of produced goods will also improve.
Thus in 1991, phase of economic liberalisation was started in India, under which various restrictions and barriers related to foreign investment and foreign trade were removed to a large extent in phase wise manner.
Q.24 What are quota and quota restrictions ?
Ans. The government of a country can place a limit on the number of goods that can be allowed to be imported. This is known as quota.
World Trade Organisation (WTO)
Q.25 How do powerful international organisation of the world view the trade barriers?
Ans. The powerful international organisations view that all barriers to foreign trade and investment are harmful. They view that there should be no barriers, and the trade between the two countries should be free. All countries of the world should liberalise their policies.
Aim of WTO (World Trade Organisation) is also to liberalise the international trade.
Q.26 What is World Traded Organisation (WTO)?
Ans. World Trade Organisation (WTO) was started at the initiative of the developed countries.
WTO deals with the global rules of trade between the nations and sees that these rules are obeyed. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible.
About 160 countries of the world are currently members of the WTO.
Q.27 Do you think WTO has been successful in assuring free and fare trade across the globe ?
Ans. Though WTO is supposed to allow free trade for all, in practice, it is seen that the developed countries have unfairly retained trade barriers. On the other hand, WTO rules have forced the developing countries to remove trade barriers. An example of this is the current debate on agriculture products.
Agriculturists in USA receive massive sums of money from US government for production and exports. This is a kind of protectionism which is against the spirit and rules of WTO. This is vociferously opposed by the developing countries who have reduced trade barriers as per WTO rules.
Hence, WTO should assure uniformity in applying its rule to all member countries.
Impact Of Globalisation In India
Q.28 Study the impact of globalisation on Indian consumers and give your observations.
Q. How has competition benefitted people in India?
Ans. Globalisation and greater competition among producers both local and foreign, has brought a number of benefits to the consumers, such as:
- Now consumers have greater choice.
- Consumers now enjoy better quality and lower price for several products.
- This has introduced higher standards of living in India.
Q.29 How MNCs and top Indian companies have benefitted from globalisation?
Q. In what ways has competition affected workers, Indian exporters, and foreign MNCs (in garment industry)?
Ans. MNCs have increased their investments in India over 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. New jobs have also been created in these industries.
Also local companies supplying raw materials etc. to these industries, have prospered.
Several of top Indian companies have invested in newer technology and have raised their production standards to meet the competition from their foreign counterparts. Many of these companies have gained from successful collaborations with foreign companies.
Due to globalisation some large Indian companies (ex- Tata Motors, Infosys, Ranbaxy etc.) have emerged as multinational themselves.
Globalisation has also created new opportunities for companies producing services (particularly IT services).
Q.30 For a large number of small producers and workers, globalisation has posed major challenges . How?
Ans. Batteries, capacitors, plastics, toys, tyres, dairy products and vegetable oil are some examples of industries where the small manufacturers have been hit hard due to competition. Several units have shut down rendering many workers jobless.
Competition from the MNC brands forced the Indian television companies to move into assembly activities for MNCs.
Globalisation and the pressure of competition have substantially changed the lives of workers.
Large MNCs with world wide network look for minimising the cost of production of goods so that they can make maximum profit. This they do by cutting labour cost. Hence most employers these days prefer to employ workers flexibly which means that worker’s job are no longer secure. Employers employ workers on temporary basis. Workers have very long working hours and have to do night shifts on regular basis during the peak season. Wages are also low.
Thus, though MNCs are able to make large profits , workers are denied of their fare share of benefits brought by globalisation.
Most workers today are employed in the unorganised sector. Moreover, conditions of work even in organised sector have deteriorated and have come to resemble the unorganised sector.
Q.31 What are special steps that central and state governments are taking to attract foreign companies in India?
Q. Write a brief note on SEZ.
Ans. Special steps are being taken by the central and state governments in India to attract foreign companies to invest here.
- Industrial zones called Special Economic zone (SEZ) are being set up. These SEZs are to have world class facilities like 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 initial 5 years period.
- Government has also allowed flexibility in the labour laws to attract foreign investment. In recent years, the government has allowed companies to ignore many of the rules that aimed to protect the workers’ rights. However the foreign companies are demanding more flexibility in labour laws.
The Struggle For A Fair Globalisation
Q.32 Globalisation is now a reality. How can it be made more fair?
Ans. It has been noticed that there are many people especially poor, uneducated, unskilled persons who have not shared the benefits of globalisation.
Government’s role:
Fair globalisation would create opportunity for all, and also ensure that the benefits of globalisation are shared better. The governments can play a major role in making this possible in following ways:
- Government should make policies that must protect the interest of all the people in the country.
- Government should ensure that labour laws are properly implemented and the workers get their rights.
- Government can support small producers to improve their performance till the time they become strong enough to compete in the market.
- If necessary, the government can use trade and investment barriers constructively.
- Government can negotiate at WTO for fairer rules.
- Government can also align with other developing countries with similar interests to fight against the domination of developed countries in the WTO.
Role of people:
The people can also play an important role in the struggle for fair globalisation.
In the past few years massive campaign and representation by people’s organisations have influenced important decisions relating to trade and investments at the WTO.
Q.33 The impact of globalisation has not been uniform. Explain.
Ans. As a result of globalisation world markets have become integrated and the countries of the world are more interconnected now. However, the impact of globalisation has not been uniform in following ways:
- Though WTO is supposed to allow free trade to all, but in practice it has been observed that the developed countries have unfairly retained trade barriers. On the other hand, WTO has forced developing countries to remove trade barriers. For example, developing countries have reduced trade barriers but agriculturists in USA receive massive sums of money from the US government for production and exports. As a result, farmers of USA produce and export their agriculture produce at quite cheaper rate than that of developing countries. This unfair practice ruin the agriculturists in developing countries.
- Due to competition from MNCs, small manufacturers have been hit hard.Several units have shut down rendering many workers jobless. On the other hand, large companies have developed in to multinationals.
- Though MNCs are able to make large profits, workers are denied of their fair share of benefits brought by globalisation.
Q.34 Why do developed countries want developing countries to liberalise their trade and investment? What do you think should the developing countries demand in return ?
Ans. Developed countries, by taking advantage of WTO norms, want developing countries to liberalise their trade and investment laws. This they want because of the following factors associated with them:
- Their population is small, aged and witnesses negative population growth rate. Hence they face problems of shrinking manpower, costly labour, and shrinking market for their produced goods.
- They have utilised their natural resources to its maximum.
- They don’t want to use their energy resources any further and want to get it from developing countries at cheaper rates.
- They don’t want to degrade their environment.
In order to safeguard their interest and claim a fare share in globalisation process, developing countries should put following demands from developing countries :
- Protection to their small industries.
- Appropriate quota restriction on imports from developed countries.
- Their workers should get fair share of globalisation benefits in terms of justified working hours, job security, health benefits, provident funds etc.
- Transfer of technology.
- Lesser import duty on their products in developed countries markets.
- Restrictions on massive governmental financial support to agriculturists of developed countries of USA and Europe.
