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Globalisation and the Indian Economy Class 10 Questions and Answers Economics Chapter 4
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Globalisation and the Indian Economy NCERT Intext Questions and Answers
Let’s Work These Out (NCERT Textbook page 59)
Read the passage on the (Textbook page) left and answer the questions:
Would you say Ford Motors is an MNC? Why?
Yes. Ford Motors is an MNC because it is one of the largest automobile manufacturers with production spread over 26 countries of the world.
What is foreign investment? How much did Ford Motors invest in India?
Investment made by MNCs is called foreign investment. Ford Motors invested Rs 1700 crore in India to set up a large plant near Chennai.
By setting up their production plants in India, MNCs such as Ford Motors tap the advantage not only of the large markets that countries such as India provide, but also the lower costs of production. Explain the statement.
MNCs set up offices and factories for production in regions where they can get cheap labour and other resources. This is done so that the cost of production is low and the MNCs can earn greater profits. MNCs also keep it in mind that their production units remain close to the markets where they can sell their product.
Why do you think the company wants to develop India as a base for manufacturing car components for its global operations? Discuss the following factors:
(a) cost of labour and other resources in India
(b) the presence of several local manufacturers who sypply auto parts to Ford Motors
(c) closeness to a large number of buyers in India and China.
(a) The cost of labour and other resources in India is low and therefore, affordable. This will help Ford Motors to strengthen its position in the global market.
(b) Local manufacturers supply auto parts to Ford Motors at a lower cost. The company then sells these under their own brand names to the customers. In this way, it earns huge profits.
(c) India and China are the two vast countries of the world. They form one-third of the global population and thus provide a huge market for various companies. This helps Ford Motors increase its sale and profitability.
In what ways will the production of cars by Ford Motors in India lead to interlinking of production?
The company is making engines and body at its plant. It gets other components from various suppliers operating in India. Thus, India is providing a perfect base for all the operations related to production of cars for Ford Motors. So, we can say that proper interlinking of production is happening in India for this company.
In what ways is an MNC different from other companies?
(i) An MNC owns or controls production in more than one nation. It not only sells its finished products globally, but more importantly, the goods and services are produced globally. Other companies limit their operation to a single country or to a few countries.
(ii) An MNC is able to take advantage of cheap labour and easier access to important markets. But other companies may not avail these facilities.
Nearly all major multinationals are American, Japanese or European, such as Nike, Coca- Cola, Pepsi, Honda, Nokia. Can you guess why?
These countries are well-developed and have advanced technology which helps them to produce higher level of output. They use different products as per their need and sell the surplus products in other country markets.
Let’s Work These Out (NCERT Textbook page 61)
What was the main channel connecting countries in the past? How is it different now?
Foreign trade was the main channel that connected countries in the past. History acknowledges us about the trade routes connecting India and South Asia to markets both in the East and West and the extensive trade that took place along these routes. Things have not changed much even today. Trade still is the main channel to connect the countries. However, tourism is also playing a major role in interconnecting places.
Distinguish between foreign trade and foreign investment.
Trade with different countries is called foreign trade and it includes import and export. Foreign investment, on the other hand, is the inflow of capital from another country to our own country. Thus, foreign trade means flow of goods and foreign investment means inward flow of capital.
In recent years China has been importing steel from India. Explain how the import of steel by China will affect
(a) steel companies in China.
(b) steel companies in India.
(c) industries buying steel for production of other industrial goods in China.
(a) Chinese companies may find it difficult to compete with the import.
(b) Steel companies in India will prosper in their business.
(c) Consumers will avail better choice.
How will the import of steel from India into the Chinese markets lead to integration of markets for steel in the two countries? Explain.
The Chinese companies will make various products of steel and will sell these products not only in the markets of China but in Indian markets as well. In this way, India can be an exporter of the raw material (steel) and an importer of finished products. This would lead to an integration of markets for steel in the two countries.
Let’s Work These Out (NCERT Textbook page 62)
What is the role of MNCs in the globalisation process?
(i) MNCs set up offices and factories for production in various parts of the world.
(ii) They sell their finished products globally and more importantly, the goods and services are produced globally.
(iii) Foreign investment by MNCs in various countries has been rising. At the same time, foreign trade between countries has been rising rapidly.
(iv) MNCs control a large part of the foreign trade. For instance, the car manufacturing plant of Ford Motors in India not only produces cars for the Indian markets but also it exports cars to other developing countries and exports car components for its many factories around the world.
(v) More and more goods and services, investments and technology are moving between countries. Most regions of the world are in closer contact with each other due to those MNCs. Thus, MNCs are playing a major role in the globalisation process.
What are the various ways in which countries can be linked?
Trade, tourism and educational institutions play an important role in linking countries together. Internet and telecommunication are also helping in interlinking different countries of the world.
Choose the correct option.
Globalisation by connecting countries result in
(a) lesser competition among producers.
(b) greater competition among producers.
(c) no change in competition among producers.
(b) greater competition among producers.
Let’s Work These Out (NCERT Textbook page 63)
1. A news magazine published for London readers is to be designed and printed in Delhi. The text of the magazine is sent through Internet to the Delhi office. The designers in the Delhi office get orders on how to design the magazine from the office in London using telecommunication facilities. The designing is done on a computer. After printing, the magazines are sent by air to London. Even the payment of money for designing and printing from a bank in London to a bank in Delhi is done instantly through the Internet (e-banking)!
In the above example, underline the words describing the use of technology in production.
A news magazine published for London readers is to be designed and printed in Delhi. The text of the magazine is sent through Internet to the Delhi office. The designers in the Delhi office get orders on how to design the magazine from the office in London using telecommunication facilities. The designing is done on a computer. After printing, the magazines are sent by air to London. Even the payment of money for designing and printing from a bank in London to a bank in Delhi is done instantly through the Internet (e-banking)!
How is information technology connected with globalisation? Would globalisation have been possible without expansion of IT?
Information Technology has brought about a revolutionary change in the world. It has also played an important role in globalisation. Telecommunication facilities have helped the people to come together from different parts of the world. Through the Internet, businesses are conducted in smooth way. Without expansion of Information Technology, globalisation would take a long time to happen. Through Information Technology any decision regarding business or other things can be taken within a very short span of time.
Let’s Work These Out (NCERT Textbook page 64)
What do you understand by liberalisation of foreign trade?
Liberalisation of foreign trade means reducing or removing various trade barriers. With the liberalisation of trade, businesses are allowed to make decisions freely about what they wish to import or export.
Tax on imports is one type of trade barrier. The government could also place a limit on the number of goods that can be imported. This is known as quotas. Can you explain, using the example of Chinese toys, how quotas can be used as trade barriers? Do you think this should be used? Discuss.
Quotas can be used as trade barriers in case of Chinese toys. Once this is done, the Indian toy makers will not face losses. Instead they will be in a position to sell their products. This will prove beneficial for both the Indian toy manufacturers and employees. So far my opinion is concerned, this should be used to protect Indian producers within the country from foreign competition.
Let’s Work These Out (NCERT Textbook page 66)
Fill in the blanks.
WTO was started at the initiative of countries. …………(a) ……….. The aim of the WTO is to …………(b) ……….. WTO establishes rules regarding ………..(c) ………..for all countries, and sees that ………..(d) ……….. In practice, trade between countries is not ………..(e) ……….. Developing countries like India have ………..(f) ……….. whereas developed countries, in many cases, have continued to provide protection to their producers.
(b) liberalise foreign trade
(c) international trade
(d) these rules are obeyed
(f) removed trade barriers
What do you think can be done so that trade between countries is more fair?
Removal of trade barriers from all countries is very important because only their will ensure a fair international trade. Developed countries should not force the developing countries to remove trade barriers particularly when they themselves unfairly retain them.
In the example given on Textbook Page 65, we saw that the US government gives massive sums of money to farmers for production. At times, governments also give support to promote production of certain types of goods, such as those which are environmentally friendly. Discuss whether these are fair or not.
The support that the US government gives to promote production of certain types of goods which are environment friendly are not justified. Different goods acquire unmerited competitive strength with each support measure. It adversely affects the producers of these commodities in the countries which import these goods, irrespective of whether they are environment friendly or not. If the developing countries raise trade barriers against such measure that hurt their market, then that will be quite appropriate measure.
Let’s Work These Out (NCERT Textbook page 67)
How has competition benefited people in India?
Globalisation has brought competition among producers—both local and foreign producers. This competition has benefited people in India in a variety of ways:
- There is greater choice before these people (consumers) who now enjoy improved quality and lower prices for several products.
- As a result, these people today, enjoy much higher standards of living than was possible earlier.
Should more Indian companies emerge as MNCs? How would it benefit the people in the country?
- Yes, more Indian companies should emerge as MNCs. This will help those companies in expanding their markets across the world. This will also create new job opportunities for Indians.
- Indian economy will become stronger which will be greatly beneficial for its citizens.
Why do governments try to attract more foreign investment?
Governments try to attract more foreign investment because of the following reasons:
- Foreign investment helps in increasing economic activities.
- Increase in economic activities helps in employment generation.
In Chapter 1, we saw what may be development for one may be destructive for others. The setting of SEZs has been opposed by some people in India. Find out who are these people and why are they opposing it.
(a) Special Economic Zones (SEZs) are being established at those places where the rural people or the tribals live. They are always afraid of being losing their livelihoods, which depend on land. The land is being acquired for setting up SEZs.
(b) The persons producing goods and services outside the SEZs are similar to those proposed inside the SEZs. They do not get the benefits and concessions being given to the producers inside the SEZs and so they will lose out in competition with them.
(c) It will cause severe damage to natural resources and environment.
Let’s Work These Out (NCERT Textbook page 68)
What are the ways in which Ravi’s small production unit was affected by rising competition?
Ravi’s small production unit was affected by the rising competition in the following ways:
(i) The most important reason is that his customers have changed their product. Because they are now manufacturing TV sets for MNCs. They do not use the capacitors produced by the unit of Ravi.
(ii) The production and sales have also reduced. It is also due to his capacitors being costlier than the imported variety.
(iii) Ravi has produced less than half the capacitors. He cannot recover his cost with such a small amount of production. In future, he may have to close down his unit like his friends.
Should producers such as Ravi stop production because their cost of production is higher compared to producers in other countries? What do you think?
Yes, I think so. If the cost of production of Ravi’s product is higher in comparison to the production of ; other countries, then nobody will pay high cost to Ravi. His product will fail in the market. He will not be able to compete with other producers. Ravi will face difficulty in paying bank loan. So it will be a wise I step for him to stop production.
Recent studies point out that small producers in India need three things to compete better in the market
(a) better roads, power, water, raw materials, marketing and information network
(b) improvements and modernisation of technology
(c) timely availability of credit at reasonable interest rates.
(i) Can you explain how these three things would help Indian producers?
(ii) Do you think MNCs will be interested in investing in these? Why?
(iii) Do you think the government has a role in making these facilities available? Why?
(iv) Can you think of any other step that the government could take? Discuss.
Better infrastructure will help them to work more timely and efficiently. Now they can compete with the foreign countries. If they get better technology, it will help them to manufacture better quality of products at reasonable rate. Timely availability of credit at reasonable interest rates will enable them to run their production in smooth way. It will also improve their competitiveness.
Multinational companies will not be interested in investing in these because the Indian producers will compete with them in the same market. It will reduce their market share.
The government has a major role to play in making these facilities available. It is also the responsibility of the government to provide better facilities to the producers. The government may stop much interference of red tapism. Corruption may be minimised in offices only by the interference of the government.
The government may provide single window clearance for people who want to set up industrial units. Now the entrepreneurs will not be harassed.
Let’s Work These Out (NCERT Textbook page 70)
In what ways has competition affected workers, Indian exporters and foreign MNCs in the garment industry?
Competition has affected workers in many ways. Now the factory employs workers on a temporary basis so that they do not have to pay workers for the whole year. They employ them according to their need, season and demand. Their wages are very low and they are forced to work overtime to make both ends meet. Indian exporters are facing tough competition. To be in competition, they try hard to cut down the cost of production. Multinational companies bring good brands in the market at competitive rates.
What can be done by each of the following so that the workers can get a fair share of benefits brought by globalisation?
(b) employers at the exporting factories
(a) Government: Government can make rules and regulations so that the workers can get a fair share of benefits brought by globalisation.
(b) Employers at the exporting factories can invest in new technology. It will help them in rising the cost of production.
(c) MNCs may provide relief to workers who have lost their jobs due to globalisation by giving financial aid. This will help them a lot till they get other employment.
(d) Workers: Workers will have to change their mentality. They will have to be more competitive. They will have to see themselves as equal partners with the management in pursuit of better productivity.
One of the present debates in India is whether companies should have flexible policies for employment. Based on what you have read in the chapter, summarise the point of view of the
employers and workers.
Do it yourself.
Economics Class 10 Chapter 4 NCERT Textbook Questions and Answers
What do you understand by globalisation? Explain in your own words.
Globalisation means integrating an economy with the world economy. It encourages foreign trade, and foreign investment which leads to integration of production and markets across countries. Rapid improvement in technology has been one major factor that has stimulated the globalisation process. As a result of globalisation, it has become easier to move between countries. MNCs are playing a major role in the globalisation process.
More and more goods and services, investments and technology are moving. between countries. Most regions of the world are in closer contact with each other than a few decades back.In short, we can say that globalisation has made possible the interconnection between countries. As a result of globalisation, different countries of the world have become economically interdependent on each other.
What was the reason for putting barriers to foreign trade and foreign investment by the Indian government? Why did it wish to remove these barriers?
The Indian government, after Independence, had put barriers to foreign trade and foreign investment. This was considered necessary to protect the producers within the country from foreign competition. Industries were just coming up in the 1950s and 1960s, and competition from imports at that stage would not have allowed these industries to come up.
In 1991, the 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. So, it removed barriers on foreign trade and foreign investment.
How would flexibility in labour laws help companies?
Flexibility in labour laws would help companies in the following ways:
- It would attract foreign investment.
- Earlier the companies in the organised sector had to obey certain rules that aimed to protect the workers’ rights. But now the government has allowed companies to ignore many of these rules.
- Instead of hiring workers on a regular basis, companies now 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.
What are the various ways in which MNCs set up, or control, production in other countries?
How do MNCs interlink production across countries? Explain with examples.
(i) MNCs set up factories and offices for production in regions where they can get cheap labour and other resources. Countries like India, China, and Bangladesh provide best facilities for the MNCs.
(ii) At times, MNCs set up production jointly with some of the local companies of these countries. But the most common route for MNC investments is to buy up local companies and then to expand production. MNCs with huge wealth can easily do so.
(iii) In fact, many of the top MNCs have wealth exceeding the entire budgets of the developing countries governments. With such enormous wealth, the MNCs exercise greater power and influence.
(iv) There is still another way in which MNCs control production. Big MNCs in developed countries place orders for production with small producers. Garments, footwear, sports items etc. are some of the industries where production is carried out by a large number of small producers around the world. The products are supplied to the MNCs, which then sell these under their own brand names to the customers.
Thus, by setting up partnerships with local companies, by using the local companies for supplies, by closely competing with the local companies or buying them up, MNCs control production in other countries.
Why do developed countries want developing countries to liberalise their trade and investment? What do you think should the developing countries demand in return?
Developed countries want developing countries to liberalise their trade and investment because this will enable them to send their MNCs to set up factories and offices in the less-expensive developing countries. In this way, developed countries will earn huge profits, with lower manufacturing costs.
Liberalisation of trade and investment will also enable developed countries to buy raw materials from the developing countries without paying much tariff.
In my opinion, the developing countries should demand, in return, for protection of domestic producers against competition from imports. Also, MNCs should be made to pay for settling base in developing nations.
“The impact of globalisation has not been uniform.” Explain this statement.
Analyse any five positive effects of globalisation on the Indian economy.
(i) While globalisation has benefited 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.
(ii) There is greater choice before well-off consumers who now enjoy improved quality and lower prices for several products. As a result, these people today, enjoy much higher standards of living than was possible earlier.
(iii) MNCs have increased their investments in India over the 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 or services such as banking in urban areas. These products have a large number of well-off buyers. In these industries and services, new jobs have been created. The supply of raw materials, etc. by the local companies to these industries have flourished.
(iv) Many Indian companies have turned into MNCs. Tata Motors, Infosys, Ranbaxy, Asian Paints, etc. are some Indian companies which are spreading their operations worldwide.
(v) Several of the top Indian companies have been able to benefit from the rising competition due to globalisation. They have invested in newer technology and production methods and raised their production standards. Some have gained from successful collaborations with foreign companies.
(iv) But small producers and workers have faced tough times in the process of globalisation. They have been hit hard due to competition. Several of the manufacturing units have been shut down rendering many workers jobless. Uncertain employment and insecurity among workers have made their lives quite different. Thus, we can say that the impact of globalisation has not been uniform.
How has liberalisation of trade and investment policies helped the globalisation process?
What is liberalisation? Describe any four effects of liberalisation on the Indian economy.
Removing barriers or restrictions set by the government is called liberalisation. Liberalisation of trade and investment policies has boosted up the Indian economy and also the globalisation process.
(i) With liberalisation, barriers on foreign trade and foreign investment have been removed. This has helped in the import and export of goods. This means that goods can be exported and imported easily and also foreign companies could set up factories and offices here.
(ii) Businesses are now allowed to make decisions freely about what they wish to import or export.
(iii) Larger foreign investment and larger foreign trade have led to greater integration of production and markets across countries.
(iv) As a result, more and more companies are coming closer to each other due to MNCs.
How does foreign trade lead to integration of markets across countries? Explain with an example other than those given here.
Foreign trade creates an opportunity for the producers to reach beyond the domestic markets. Producers can sell their products not only in markets located within the country but can also compete in markets located in other countries of the world too. Similarly, for the buyers, import of goods produced in another country expands the choice of goods beyond what is domestically produced. Japanese car in India and Indian ready made garments in other countries have resulted in connecting the markets in different countries. Thus, with the opening of trade between countries, goods travel from one market to another. This leads to integration of markets across countries.
Globalisation will continue in the future. Can you imagine what the world would be like twenty years from now? Give reasons for your answer.
After twenty years, world would undergo a massive change in positive direction. There will be healthy competition in the markets around the world. With improvement in productive efficiency, the volume of output will increase. This will lead to growth in income and employment. People will lead better living standards. Poverty will be hardly seen anywhere. Information and communication technology will be further boosted up. Some of the reasons for the views given above can be-
- Growing entrepreneurship among people of all classes
- Growing domestic markets
- Qualititative change in human resources.
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?
So far my opinion is concerned, I glorify globalisation because it has undoubtedly helped India develop. With the coming of MNCs, India’s economy has grown to a great extent. Although unemployment is still there, it is not as intense as it was a few decades back. People’s affordability has improved with the increase in income. Availability of a large variety of goods at affordable prices is a major feature of globalisation. People today enjoy much higher standards of living than was possible earlier.
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 ………..(a)………. Markets in India are selling goods produced in many other countries. This means there is increasing ………..(b)………. 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 ………..(c)………. While consumers have more choices in the market, the effect of rising ………..(d)………. and ………..(e)……….has meant greater ………..(f)………. among the producers.
c. of cheaper production costs
e. purchasing powers
Match the following:
(i) MNCs buy at cheap rates from small producers – a. Automobiles
(ii) Quotas and taxes on imports are used to regulate trade – b. Garments, footwear, sports 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 in India for production – e. Trade barriers
Choose the most appropriate option.
(i) The past two decades of globalisation has seen rapid movements in
(a) goods, services and people between countries.
(b) good, services and investments between countries
(c) goods, investments and people between countries.
(b) good, services and investments between countries
(ii) The most common route for investment by MNCs in countries around the word is to
(a) set up new factories.
(b) buy existing local companies
(c) form partnerships with local companies
(b) buy existing 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
(d) none of the above
I. Take some branded products that we use everyday (soaps, toothpaste, garments, electronic goods, etc.). Check which of these are produced by MNCs.
II. Take any Indian industry or service of your choice. Collect information and photographs from newspapers, magazine clippings, books, television, internet, interviews with people on the following aspects of the industry.
(i) Various producers/companies in the industry
(ii) Is the product exported to other countries
(iii) Are there MNCs among the producers
(iv) Competition in the industry
(v) Conditions of work in the industry
(vi) Has there been any major change in the industry in the past fifteen years?
(vii) Problems that people in the industry face.
Do it yourself.
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