Chapter 4 - Globalisation and the Indian Economy

1. What do you understand by globalisation? Explain in your own words.

Answer: Globalisation is defined as the integration between countries through foreign
trade and foreign investments by multinational corporations (MNCs). Increase in foreign
trade, migration of people from one country to another, the flow of capital finance from
one country to another and private and public investments from foreign countries all
together contribute to globalisation.
2. 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?
Answer: The main reason for putting barriers to foreign trade and foreign investment by
the Indian government was to protect the interest earned by producers and small
industrialists of our country from foreign competition.
But later it was accepted by the government that foreign competition would encourage
Indian industrialists to improve the quality of their products and removing these
barriers would increase trade and quality of products produced in the country.
3. How would flexibility in labour laws help companies?
Answer: Flexibility in labour law helps companies because it helps to attract foreign
investments. 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. However, still not satisfied, foreign companies are
demanding more flexibility in labour laws. The competition in the market is increasing
each day, and if the Government does not allow flexibility with these laws, the foreign
companies will not be able to reach their desired profit levels.
4. What are the various ways in which MNCs set up, or control, production in other
countries?
Answer: MNCs set up and control production by investing a huge amount of money in a
country’s economy. It sets up production units close to the market so that they get
cheaper labour. To increase production, MNCs collaborate with some local companies as
the production rate would rapidly increase. In most of the cases, the MNCs buy local
companies and expand their production. The other way in which they control production
is by placing the orders for production with small and local producers. They help
production using technology and heavy machinery, which makes the work more efficient
and productive.
5. Why do developed countries want developing countries to liberalise their trade
and investment? What do you think should the developing countries demand in
return?
Answer: Developed countries want developing countries to liberalise their trade and
investment because MNCs can set up industries in small and developing nations, which
are less expensive and can earn them more profit. The labour cost decreases the
manufacturing cost, and these decreases in cost results in an increase in profit. Also
setting up factories and industries in developed countries increases competition. The
developing countries should, in turn, ask for a fair removal of trade barriers in order to
protect their own industries.
6. “The impact of globalisation has not been uniform.” Explain this statement.
Answer: The impact of globalisation has not been uniform because only the developed
countries have gained profits due to globalisation. The developing countries are only a
source of setting industries and getting cheaper labour, and the entire profits are earned
by the developed countries. The small industries and companies in developing countries
have constantly been facing challenges in terms of earning profits and brings their goods
in the market.
7. How has liberalisation of trade and investment policies helped the globalisation
process?
Answer: The liberalisation of trade and investment policies helped the globalisation
process because it has helped in the removal of trade barriers. It has made foreign trade
and investment easier. The choices of the buyers have also expanded, as now they get to
choose products manufactured by not only domestic companies but also by the foreign
companies. Competition among traders has resulted in the cheaper price of products.
Liberalisation has spread globalisation as the decision making power of export and
import now lies with the businessmen themselves.
8. How does foreign trade lead to integration of markets across countries? Explain
with an example other than those given here.
Answer: Foreign trade has led to the integration of markets across the countries.
Because of foreign trade, the producers are now able to compete and export their goods
to the markets of other countries. Opportunities are provided not just for the seller but
also for the buyer to get goods outside their own country. Their choices have expanded
as now they get to choose products manufactured by not only domestic companies but
also by the foreign companies.
The price of these goods has decreased because of the competition in the market.
Producers from different countries are now able to compete not just with the competitors
in their own country, but with across the world. The Indian market today is not flooded
with goods made in India but goods from all across the world at an affordable price.
9. Globalisation will continue in the future. Can you imagine what the world would
be like twenty years from now? Give reasons for your answer.
Answer: Globalisation will continue in the future as well. Twenty years from now, the
production of goods will be more efficient, competition in the market will increase,
advancement in every field will be evident and the quality and quantity of goods
produced will also increase. Small industries and entrepreneurs will increase as more
opportunities will be provided to them.
10. Supposing you find two people arguing: One is saying globalisation has hurt
our country’s development. The other is telling, globalisation is helping India
develop. How would you respond to these arguments?
Answer: Globalisation has its pros and cons, and there are various advantages and
disadvantages of the increasing globalisation in the country. The advantages of
increased globalisation include improved trade opportunities and the increase in the
number of employed because of small scale industries. The profit market has increased,
and the increase in imports and exports has increased the economy of the nation. People
can buy goods that are made across the world at cheaper prices.
The disadvantages of globalisation include that globalisation has increased the income
of the rich and has decreased the income of the poor because the small scale local
industrialists are unable to earn much profit. Thereby increasing income inequality.
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 ______________. Markets in India are selling
goods produced in many other countries. This means there is increasing
______________ with other countries. Moreover, the rising number of brands that we
see in the markets might be produced by MNCs in India. MNCs are investing in
India because _____________ ___________________________________________ . While
consumers have more choices in the market, the effect of rising _______________
and ______________has meant greater _________________among the producers.
Answer:
Indian buyers have a greater choice of goods than they did two decades back. This is
closely associated with the process of globalisation. Markets in India are selling goods
produced in many other countries. This means there is increasing trade with other
countries. Moreover, the rising number of brands that we see in the markets might be
produced by MNCs in India. MNCs are investing in India Because of the cheaper
production costs. While consumers have more choices in the market, the effect
of rising demand and purchasing power has meant greater competition among the
producers.
12. Match the following.

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

(ii) Quotas and taxes on imports are used to regulate (b) Garments, footwear,
trade items sports

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

(iv) IT has helped in spreading of production of (d) Tata Motors, Infosys,

services Ranbaxy

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

factories in India for production
Answer:

(i) MNCs buy at cheap rates from small producers (b) Garments, footwear,
sports items

(ii) Quotas and taxes on imports are used to regulate (e) Trade barriers
trade

(iii) Indian companies who have invested abroad (d) Tata Motors, Infosys,
Ranbaxy

(iv) IT has helped in spreading of production of services (c) Call centres

(v) Several MNCs have invested in setting up factories (a) Automobiles producers
in India for production
13. Choose the most appropriate option.
1. The past two decades of globalisation has seen rapid movements in

a. goods, services and people between countries.

b. goods, services and investments between countries.
c. goods, investments and people between countries.

Answer: c. goods, services and investments between countries

2. 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 partnerships with local companies.

Answer: c. buy existing local companies

3. 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

Answer: d. none of the above

Globalisation and The Indian Economy Summary

Chapter 4 – ‘Globalisation And The Indian Economy’ from NCERT Class 10 Economics
book discusses globalisation across the world. It defines globalisation as the integration
between countries through foreign trade and foreign investments by multinational
corporations (MNCs). The impact of globalisation, how globalisation has contributed to
the development of the country, rapid improvement in the field of technology and
liberalisation have also been discussed in this chapter.
Other important topics that the students will read in this chapter include:

1. Foreign Trade and Integration of Markets

2. What is Globalisation?
3. Factors that have enabled Globalisation
4. Liberalisation
5. World Trade Organisation
6. Impact of Globalisation

Also, the struggle for fair globalisation has been discussed in this chapter. Fair
globalisation would create opportunities for all and also ensure that the benefits of
globalisation are shared better.