NCERT Solutions on Globalisation and the Indian Economy

NCERT Exercise

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

• Ans. Globalisation is the process of rapid integration or interconnection between countries.
• Globalisation means integrating an economy with the world economy.
• As a result of globalisation, the different countries of the world become economically  interdependent on each other.
• This term is also often used to refer to economic globalisation: the integration of national economies into the international economy through trade, foreign direct investments, capital flows, migration and the spread of technology.

Q2. 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?

• Ans. Reasons for putting barriers to foreign trade and foreign investment by the Indian Government:
• (a) To protect the domestic producers within the country from foreign competition.
• (b) The competition from importers would have crippled the new-born industries of India. In such a situation, imports of only such commodities were allowed which were quite necessary such as machinery, fertilisers, petroleum etc.
• (c) During 1950s and 1960s, competition from imports was giving a death blow to growing industries in India. Hence, India allowed imports of only essential goods.
• Later in the 1990s, the government wished to remove these barriers because it felt that domestic producers were ready to compete with foreign industries.
• It felt that foreign competition would in fact improve the quality of goods produced by Indian industries.
• This decision was also supported by powerful international organisations.
• Thus, the government decided that the time had come for Indian producers to compete with producers around the globe.

Q3. How would flexibility in labour laws help companies?

• Ans. Flexibility in labour laws would help to reduce the cost of labour for the company.

Q4. What are the various ways in which MNCs set up or control production in other countries?

Ans. Various ways in which MNCs control production in other countries:

• (i) By setting up partnerships with local companies — At Times MNCS set up production jointly with some of the local companies.
• The benefit to the local company of such joint production is two fold .
• First MNCS can provide money for additional investments, the like buying new machines for faster production. Second, MNCS might bring with them the latest technology for production.
• By closely competing with local companies or buying them up. The most common route for MNC investments is to buy up local companies and to expand production. With their huge wealth they can easily do so.
• (iii) By using local companies for supply—Large MNCs in developed countries place orders for production with small producers. E.g. garments, footwear, sports item etc.
• The products are supplied to MNCs which then sell these under their own brand names to the customers.
• These large MNCs have great power to determine price, quality, delivery and labour conditions for these distant producers.

Q5. 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 want developing countries to liberalise their trade and investment because then the MNCs belonging to the developed countries can set up factories in less expensive developing nations, and thereby increase profits, with lower manufacturing costs and high sale price.

In my opinion, the developing countries should demand, in return, for some manner of protection of domestic producers against competition from imports. Also, charges should be levied on MNCs looking to set base in developing nations.

Q6. “The impact of globalisation has not been uniform.” Explain this statement.

Ans. (i) Globalisation has been proved beneficial for the top Indian companies but so far workers are concerned, globalisation has perished them. (ii) The top Indian companies have invested in newer technology and production methods and raised their production standards. Some have gained from successful collaborations with foreign companies. Globalisation has enabled some large Indian companies to emerge as multinationals themselves. For examples: Tata Motors (Automobiles), Infosys (IT), etc. (iii) But for a large number of small producers and workers globalisation has posed great problems. They have been hit hard due to competition. Several units have shut down rendering many workers jobless. Thus, we can say that the impact of globalisation has not been uniform.

Q7. How has liberalisation of trade and investment policies helped the globalisation process?

Ans. (i) Liberalisation of trade and investment policies has helped the globalisation process by making foreign trade and foreign investment easier. (ii) This has led to a deeper integration of national economies into one conglomerate whole. (iii) Now goods could be imported and exported easily. Foreign companies could set up factories and offices in India.

Q8. How does foreign trade lead to integration of markets across countries? Explain with an example other than those given here.

Ans. (i) Foreign trade gives opportunity to producers to sell their goods in other countries of the world. 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) For the ordinary consumers, the foreign trade proves very useful because the best brands of different articles are produced all over the world. Their choice of goods expands manifolds. (iii) For the buyers, import of goods produced in another country is one way of expanding the choice of goods beyond what is domestically produced. (iv) Foreign trade gives opportunity to producers in the two countries closely compete against each other even though they are far away from each other. This is how markets are integrated through foreign trade. For example, Japanese electronic items are imported to India, and have proved to be a tough competition for less-technologically-advanced companies here.

Q9. Globalisation will continue in the future. Can you imagine what the world would be like twenty years from now? Give reasons for your answer.

Ans. Globalisation will continue in the future. Twenty years from now, the world will be more globally connected and integrated into one international economy, if this process continues on a fair and equitable basis. Trade and capital flows will increase alongside the mobility of labour. This will occur because liberalisation will get augmented and MNCs will converge with other companies producing the same goods.

Q10. 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?

Ans. Both the arguments are right to some extent.

• Globalisation has hurt our country’s development as well as helped our country develop.
• In other words, we can say that globalisation has positive as well as negative impact on our country’s development.
• Positive impact of the globalisation on India
• (i) Availability of variety of products which enabled the consumers to have greater choice and enjoy improved quality and lower prices for several products.
• (ii) This led to higher standard of living.
• (iii) Increase in foreign direct investment.
• (iv) Creation of new jobs in certain industries.
• (v) Top Indian companies have been benefited by investing in new technology and production methods along with successful collaborations with foreign companies.
• (vi) Globalisation has enabled some large Indian company to emerge as multinationals themselves.
• For example, Tata Motors, Infosys, Ranbaxy etc.
• (vii) Enabled some large Indian companies to emerge as multinationals.
• (viii) Created new opportunities for companies providing services, particularly those involving IT.
• Negative impact of the globalisation on India
• (i) Small producers failed to compete and got perished.
• Rising competition has led to shutting down of many units. Many workers became jobless.
• For instance, batteries, capacitors, plastics, toys, dairy products and vegetable oil are the examples of the industries which have been hit hard due to hard competition.
• (ii) Globalisation and pressure of competition have substantially changed the lives of workers.
• Faced with growing competition most employers these days prefer to employ workers ‘flexibly’.
• This means that workers’ jobs are no longer secure.

Important Previous Year Asked question.

Describe any five factors that promote the Multinational Corporations (MNCs) to setup their production units in a particular place.

Ans. MNCs set up production units on the basis of: (i) proximity to the markets; (ii) availability of skilled and unskilled labour at low cost; (iii) availability of other factors of production is assured; and (iv) government policies that look after their interests. (v) developed infrastructure (vi) safety measures. (Any five)

Q. What are the basic functions of foreign trade?

Ans. Foreign trade creates an opportunity for the produces 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. O For the buyers, import of goods produced in another country is one way of expanding the choice of goods beyond what is domestically produced

Q.  What are the effects of foreign trade?

Ans. Effects of foreign trade are as follows: (i) Chinese have started exporting Chinese plastic toys to India. (ii) Buyers in India now have the option of choosing between Indian and Chinese toys. (iii) Because of the cheaper prices and new designs, Chinese toys have become more popular in the Indian markets. In the competition between Indian and Chinese toys, Chinese toys prove better. With the result, Indian toy-makers face losses, as their toys are selling less.

Q.What are MNCs?

Ans. (i) An MNC is a company that owns or controls production in more than one nation. (ii) These companies set up offices and factories for production in regions where they can get cheap labour and other resources. (iii) This is done to ensure that the cost of production remains low and MNCs can earn greater profits.

Q. What is investment? How is foreign investment different from it?

Ans. The money that is spent to buy assets such as land, building, machines and other equipment is called investment. Investment made by MNCs is called foreign investment. Every investment is made with the hope that the assets will earn profits for these companies

Q. Analyze the Impact of globalization.

Ans.

Positive

• (i) Wide variety of good is now available to the consumers.
• (ii) New jobs are created in industries.
• (iii) Local companies have prospered through supplying raw materials to the industries.
• (iv) Top Indian companies have benefitted for successful collaborations with foreign companies.
• Negative
• (i) Globalization has led to the annihilation of small producers who face stiff competition from cheaper imports.
• (ii) Workers no longer have job security as they are employed ‘flexibly’.
• (iii) It may lead to greater dependence of underdeveloped countries on advanced countries.

Q. Which factors have stimulated the globalisation process?

Ans.

• The following factors have stimulated the globalisation process.
• (i) Improvementintransportation: In the last fifty years, there have been a lot of improvements in transportation technology.
• This has made faster delivery of goods across long distances possible, at lower costs.
• (ii) Development in information and communication technology: Technology in the areas of telecommunication and computers has been advancing rapidly.
• (iii) Telecommunication: Telecommunication facilities like telephone, telegraph, mobiles, fax are used to connect people in the world. This has been made possible due to satellite communication devices.
• (iv) Computers: They have now entered almost in every field of activity. In the amazing world of internet, we can obtain and share information on almost anything.
• (v) Internet: Internet also allows us to send instant electronic mail (e-mail) and talk (voice mail) across the world at negligible cost. Even the payment of money from one bank to another can be made through e-banking.

Q. How was the liberalisation policy gradually adopted in India?

Ans.

• After Independence, the Indian government had put barriers on foreign trade and foreign investment.
• Initially, Indian industries were just coming up after Independence, so competition from imports wouldn’t have allowed these industries to come up.
• In 1999, the government decided that the time had come for Indian producers to compete with the producers around the globe.
• It was felt that competition would improve the performance of domestic producers since they would improve the quality of their products.

Q. Describe the problems created by globalisation for small producers and workers. Ans.

• Problems created by globalizations for Small Producers and Workers
• (i) Tough competition with the Big Companies.
• (ii) Several small units are being shut down.
• (iii) Unemployment of Workers.
• (iv) Insecurity of Job.
• (v) Small producers and exporters try hard to cut their cost due to competition.
• (vi) Workers are hired on temporary basis.
• (vii) Workers have to put in long working hours and work night shifts.
• (viii) Wages are low and forced to work overtime.
• (ix) Workers are denied their fair share of benefits brought about by globalisation.

Q.How did Ford Motors, an MNC, set its foot in India?

Ans. (i) Ford Motors, an American company, is one of the world’s largest automobile manufacturers with production spread over twenty-six countries of the world.

(ii) It came to India in 1995 and spent ` 1,700 crore to set up a large plant near Chennai.

(iii) This was done in collaboration with Mahindra and Mahindra, a major Indian manufacturer of jeeps and trucks.

(iv) By the year 2014, Ford Motors was selling 77,000 cars in the Indian markets, while another 77,000 cars were exported from India to South Africa, Mexico and Brazil.

(v) The company wanted to develop Ford India as a component supplying base for its other plants across the globe.