GLOBALISATION AND THE INDIAN ECONOMY QUESTIONS

CONCEPTS
 Globalisation means integrating the economy of a country with the economies of other countries
under conditions of free flow of trade and capital and movement of persons across borders.
 Integration of markets in different countries is known as foreign trade.
 Planning Commission in India has laid emphasis on the development of foreign trade in the five year
plans due to the following reasons.
 A country can make efficient use of its natural resources :
 It can export its surplus production.
 Further, through effective regularization of foreign trade, employment, output, prices and
industrialisation, economic development of a country can properly accelerate.
 Investment made by Multinational Corporations (MNCs) is called foreign investment.
 MNCs are playing a major role in the process of rapid integration or interconnection between
countries. Now more regions of the world are in closer contact with each other than a few decades
back.
 MNCs play an important role in the Indian economy by setting up production jointly with some of the
local companies. Example : MNCs can provide money for additional investments like buying new
machines for faster production.
Take another example - Cargil foods, a very large American MNC, has bought smaller Indian
companies such as Parakh Foods.
 Rapid improvement in information and communication technology has been one major factor that
has stimulated the globalisation process. To access information instantly and to communicate from
remote areas, devices such as telephones, mobiles and computers are very useful. Further, it has
played a major role in spreading out production of services across countries.
 Impact of globalisation on the country is manifold. This can be understood by these examples.
 MNCs have increased their investment over the past 15 years, which is beneficial for them as
well as for Indians also. This is because these MNCs provide employment opportunities to the
masses and local companies supplying raw material to these industries have prospered. But
globalisation has failed to solve the problem of poverty and it has widened the gap between
the rich and the poor. Only skilled and educated class has benefited from globalisation.
 There is a greater choice for consumers, with a variety of goods and at cheap prices. Now
they enjoy a much higher standard of living.
 Liberalization of economy means to free it from direct or physical controls imposed by the
government. In other words, it implies liberating the trade and industry from unwanted government
control and restrictions.
 Let us see the effect of foreign trade through the example of Chinese toys in the Indian market.
Chinese toys have become more popular in the Indian market because of their cheaper prices and
new designs. Now Indian buyers have a greater choice of toys and at lower prices. Simultaneously,
Chinese toy makers get the opportunity to expand business. On the other side, Indian toy makers
face losses.
 World Trade Organisation (WTO) was started at the initiative of developed countries. The main
objective of the World Trade Organisation is to liberalize international trade. At present 149
countries are members of the WTO.
  At present, central and state governments in India are taking special steps to attract foreign
companies to invest in India. For this, Special Economic Zones (SEZs) are being set up. Special
economic zones have world class facilities – electricity, telecommunication, broadband internet,
roads, transport, storage and recreational facilities – to attract investment from MNCs and other
companies.
 Globalisation and liberalization have posed major challenges for small producers and workers. Small
manufacturers have been hit hard due to competition. Several of the units have shut down rendering
many workers jobless. Around 20 millions of workers are employed in small industries.
 Because of growing competition, most employers these days prefer to employ workers flexibly. This
means that workers have no secure jobs. This can be explained with the help of an example : 35 year
old Sushila got a job after searching for six months. She is a temporary worker. She did not get any
benefit such as provident fund, medical allowance, bonus etc. A day off from work means no wage.
 Competition among the garment exporters has allowed the MNCs to make large profits, but workers
are denied their fair share of benefits brought about by globalisation.

I. SUMMATIVE ASSIGNMENT
A. NCERT TEXTBOOK QUESTIONS
Questions Within The Lesson

1) Fill in the blanks :

WTO was started at the initiative of____________ (1) ____________ countries. The aim of the WTO
is to____________(2) . WTO establishes rules regarding____________ (3) ____________ for all
countries, and sees that these____________ (4) ____________ . In practice, trade between countries
is not____________(5) ____________ . Developing countries like India have____________ (6)
____________ , whereas developed countries, in many cases, have continued to provide protection
to their producers.

Questions in the Exercise

1) 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.

2) 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.

3) 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

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

5) 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?

6) How would flexibility in labour laws help companies?

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

8) In what ways has competition affected workers, Indian exporters and foreign MNC in the garment
industry?

9) Why do developed countries want developing countries to liberalize their trade and investment?
What do you think should the developing countries demand in return?

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

11) How has liberalization of trade and investment policies helped the globalisation process?

12) How does foreign trade lead to integration of markets across countries? Explain with an example.

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

14) Supposing you find two people. 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?

OTHER IMPORTANT QUESTIONS (AS PER CCE PATTERN)

B. MULTIPLE CHOICE QUESTIONS
1) Which sector has not benefited by the policy of globalisation?
(a) Agricultural sector (b) Manufacturing sector
(c) Service sector (d) All the above

2) Cheaper imports, inadequate investment in infrastructure lead to

(a) slowdown in agricultural sector
(b) replace the demand for domestic production
(c) slowdown in industrial sector
(d) all the above

3) Fair globalisation refers to ensuring benefits to :

(a) labourers (b) producers
(c) consumers (d) all the above

4) Globalisation results in
(a) lesser competition among producers (b) greater competition among producers
(c) no change in competition among producers (d) none of the above

5) When was the WTO established?

(a) 1985 (b) 1995
(c) 2000 (d) 2005

6) Globalisation leads to rapid movements of the following between countries :

(a) goods and services (b) investments
(c) people (d) all the above

7) Which has played a big role in spreading globalisation?

(a) Information technology (IT) (b) Transport technology
(c) Both (a) and (b) (d) None of the above

8) Globalisation has led to improvement in

(a) choice to consumers (b) quality of goods and services
(c) foreign investment (d) all the above

9) Which of the following factors has not facilitated globalisation?

(a) Technology (b) Liberalization of trade
(c) WTO (d) Nationalization of banks

10) One of the major results of globalization in India has been in the growth of
(a) outsourcing by MNCs (b) transportation services
(c) telecommunication services (d) none of the above

11) Globalization so far has been more in favour of

(a) developed countries (b) developing countries
(c) poor countries (d) none of the above
12) Multinational corporations have succeeded in entering global markets through
(a) WTO (b) UNO
(c) UNESCO (d) none of the above

13) Upto 2006 the number of member countries of WTO was :

(a) 139 (b) 149
(c) 159 (d) 160

14) FDI (Foreign Direct Investment) attracted by globalisation in India belongs to the
(a) World Bank (b) multinationals
(c) foreign governments (d) none of the above

15) When economic activities in a country are influenced by economic activities in other countries, it is
called
(a) foreign trade (b) competition
(c) globalisation (d) all the above

16) A company that operates in more than one country is called a

(a) partnership (b) corporation
(c) foreign company (d) multinational

17) Investment means spending on

(a) factory building (b) machines
(c) equipments (d) all the above

18) Which of the following contributes to globalisation?

(a) internal trade (b) external trade
(c) large scale trade (d) small scale trade

19) Integration of markets means

(a) operating beyond the domestic markets (b) wider choice of goods
(c) competitive price (d) all the above

20) Liberalization refers to

(a) freeing the economy from direct control (b) putting an end to various restrictions
(c) opening up the economy (d) all the above

21) Name the organisation whose aim is to liberalize international trade.

(a) ILO (International Labour Organisation) (b) WHO (World Health Organisation)
(c) WTO (World Trade Organisation) (d) NSSO (National Sample Survey Organisation)

22) What attracts an MNC?

(a) Cheap labour (b) Ready demand for the product
(c) Both (a) and (b) (d) None of the above
23) What is the impact of LPG policy of the government?
(a) Stiff competition among producers (b) Increase in inequalities
(c) Greater choice to consumers (d) All the above

24) Globalization results in

(a) inflow of labour from abroad (b) inflow of capital from abroad
(c) inflow of tourists from abroad (d) all the above

25) Globalization leads to

(a) more competition (b) less competition
(c) monopoly (d) none of the above

26) Special Economic Zones (SEZ) developed by the Government of India aim
(a) to attract foreign companies to invest in India
(b) to encourage small investors
(c) to encourage regional development
(d) none of the above

27) Benefits enjoyed by companies who set up production units in the SEZs are :
(a) they do not have to pay taxes for some years (b) reduction in excise duty
(c) reduced tariffs and barriers (d) none of the above

28) Globalisation is called fair globalisation when it benefits

(a) labour (b) investors
(c) consumers (d) all the above

PREVIOUS YEARS’ QUESTIONS

1) Which one among the following is a far reaching change in the policy made in India in 1991 ?
2) Which one of the following is not true regarding impact of globalisation of India?
3) Which one of the following is not true regarding the World Trade Organisation?
4) Which one of the following is a major benefit of joint production between a local company and a
Multi-National Company ?
5) Globalisation shall result in :
(a) lesser competition among producers
(b) greater competition among producers
(c) no change in competition among producers
(d) destruction of large scale producers
6) By 2006, how many countries were the members of the World Trade Organisation ?
(a) 139 (b) 149
(c) 159 (d) 169
7) Rapid integration or inter connection between countries is known as :
(a) Privatization (b) Globalisation
(c) Liberalization (d) Socialization
8) 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 (d) None of these
9) Taxes on imports is an example of :
(a) terms of trade (b) collateral
(c) trade barriers (d) foreign trade

10) What is foreign investment ?

(a) Investment made by foreign governments.
(b) Investment made by foreign companies.
(c) Investment made by the foreign MNCs.
(d) Investment made by the IMF and the World Bank.

11) Entry of MNCs in a domestic market may prove harmful for :

(a) all large scale producers. (b) all domestic producers.
(c) all substandard domestic producers. (d) all small scale producers.

12) Which of the following organisations lays stress on liberalization of foreign trade and foreign
investment ?
(a) International Labour Organisation (b) World Health Organisation
(c) International Monetary Fund (d) World Trade Organisation

13) Which one of the following is an example of a trade barrier?

(a) Tax on export (b) Tax on imports
(c) Tax on local trade (d) High income tax

14) Globalisation has posed major challenges for:

(a) Big producers (b) Small producers
(c) Rural poor (d) Urban poor

15) Investment by MNCs is called :

(a) Mutual Investment (b) Inter-government Investment
(c) Portfolio Investment (d) Foreign Investment

16) Removing barriers or restrictions set by the government is known as :

(a) privatization (b) globalisation
(c) liberalization (d) socialization

17) What is the most common route for investments by MNCs in countries around the world ?
(a) Set up new factories (b) Buy existing local companies
(c) Form partnerships with local companies (d) None of the above

18) Which one of the following categories refers to investment ?

(a) The money that is spent to buy assets such as land, building, machines, etc.
(b) The money that is spent on religious ceremonies.
(c) The money that is spent on social customs.
(d) The money that is spent on household goods.
 19) Which one of the following is not a Multination’s Company?
(a) Tata Motors (b) Infosys IT
(c) Ranbaxy (d) Tata Iron and Steel Company

20) Which one of the following has benefied least because of globalisation in India?
(a) Agriculture Sector (b) Industrial Sector
(c) Service Sector (d) Secondary Sector

21) Why do MNCs set up offices and factories in more than one nation ?
(a) The cost of production is high and the MNCs can earn profit.
(b) The cost of production is low and the MNCs undergoes a loss.
(c) The cost of production is low and the MNCS can earn greater profit.
(d) The MNCs want to make their presence felt globally.
C. SHORT ANSWER TYPE QUESTIONS
1) Should more Indian companies emerge as MNCs? [HOTS]
PREVIOUS YEARS’ QUESTIONS
1) Explain any three ways in which MNCs set up or control production in other countries.
2) How does foreign trade lead to integration of markets across the countries? Give any three
examples.
3) Enumerate any three features of Multinational Corporations.
4) Why did India put barriers on foreign trade and investment after independence? Why was the policy
changed in 1991? Mention any two reasons.
5) What is globalization? How can the government ensure fair globalization to its people? Give two
points.
6) Should more Indian companies emerge as MNCs? How would it benefit the people in the country?
7) Analyze any three impacts of globalization in India.
8) Suggest any three measures to make globalisation just and fair ?
9) How has liberalisation of trade and investment policies helped the globalisation process? Explain.
10) Describe any three factors which have enabled globalisation in India.
11) Describe any three ways in which Multinational Corporations (MNCs) have spread their production
and interaction with local producers in other countries.
12) ‘‘The impact of globalization has not been uniform’’. Explain this statement.
13) What is the meaning of liberalization of foreign trade? What does it mean in the Indian context?
14) Define liberalisation. Mention two features of liberalisation.
15) What is meant by trade barrier ? Why do governments use it ? Explain.
16) Describe the impact of globalization on the lives of consumers.
17) Mention any three steps which have been taken by the government of India to attract foreign
investment in recent years?
18) ‘‘In spite of numerous advantages, there are many problems that globalisation still faces’’. Support
the statement with three problems.
19) What is WTO? What are its main aims? Mention any one of its limitation.

20) Why is ‘tax’ on imports known as a trade barrier? Why did the Indian Government impose barriers to
foreign trade and foreign investments after independence? Give three reasons.
 21) How have transportation technology and information and communication technology stimulated the
globalisation process? Explain with suitable examples.
22) Explain visible imports of globalisation on the Indian Economy, with two examples.
D. LONG ANSWER TYPE QUESTIONS

1) How has WTO affected Indian economy? What were its favourable and unfavourable impact?
2) How could you distinguish between ‘foreign trade’ and ‘foreign investment’? Explain the role of
MNCs in foreign trade and foreign investments.
3) What complaint do farmers of developing countries have against developed country governments?

PREVIOUS YEARS’ QUESTIONS

1) Explain any four ways in which multinational corporations have spread their production and
interaction with local producers in various countries across the globe.
2) ‘Globalisation and competition among producers have been of advantage to the consumers.’ Give
arguments in support of this statement.

II. FORMATIVE ASSESSMENT

A. PROJECT WORK

1) Organise a visit to an MNC in your area and collect information on the following points from the
concerned person.
(a) Type of product they are manufacturing, like electronic goods or FMCG (fast moving consumer
goods) or home appliances etc.
(b) How many offices do they have in India and abroad?
(c) Production volume per day.
(d) Is their product being exported or not?
(e) How many numbers of workers and staff are there in that unit?
(f) How much local staff are there in that unit?
(g) Which type of support they are getting from local government?
(h) How information technology has improved normal functioning and production process of that
unit?
(i) Which type of facilities employees are getting from the management side?
(j) Are they importing raw materials or raw materials are used from domestic market?
Objective: To understand the role of MNCs in promoting globalisation and improvement in economy.
Method : From the information collected on the above points, draw conclusions about :
 Role of Information and Communication Technology in connecting countries and people
together.
 How MNCs have changed employment scene in India.
 What is government’s role in promoting foreign direct investment.
 Various trade barriers imposed by the government to avoid malpractices in trading.

B. DEBATE
Organise a debate in your school on the topic ‘‘India has benefited from adoption of the policy
of Liberalisation and Globalisation.’’ Guidelines :

a) Divide the class in two groups. Ask Team ‘A’ to discuss various points in support of Liberalisation and
Globalisation policy like improvement in technology, employment scene in India and its effect on
Indian economy.
 b) Ask Team ‘B’ to discuss various points against the policy of Liberalisation and Globalisation like tough
competition, discouragement to agricultural sector, increased role of privatization etc. Draw
conclusion based on the points whether Liberalisation and Globalisation have really benefited our
economy or not.

C. ACTIVITY

Choose any product from Fast Moving Consumer Goods (FMCG), say toothpaste. Collect information and
photographs from papers, magazines, books, television, internet on the following points related to that
product.
(i) Various producers/companies engaged in manufacturing of product (‘toothpaste’)
(ii) How many Indian companies are manufacturing this product.
(iii) How many MNCs are manufacturing this product.
(iv) Price comparison of this product of various brands.
(v) What concessional offer or promotional offer are given by various manufacturers on this product.
(vi) Compare the wrapper (covering) of the product supplied by MNCs and Indian companies.

Based on this information, draw conclusion on how MNCs have created tough competition for Indian
companies.