CLASS X - CH4.

GLOBALISATION AND THE INDIAN ECONOMY

Until the middle of the twentieth century, trade was the main channel connecting distant
countries.
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1. Define Multinational Company. (MNC)
a) A MNC is a company that owns or controls production in more than one nation.
b) MNCs set up offices and factories for production in regions where they can get cheap labour
and other resources.
c) The MNC is not only selling its finished products globally, but the goods and services are
produced globally.
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2. Where do generally the MNCs prefer to setup their production?

MNCs set up production where

a) it is close to the markets;
b) there is skilled and unskilled labour available at low costs;
c) the availability of other factors of production is assured.
d) The concerned government policies are favourable to the MNCs.
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3. What is investment?
The money that is spent to buy assets such as land, building, machines and other equipment is
called investment.
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4. What is foreign investment?
Investment made by MNCs is called foreign investment.
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5. Discuss the benefit to the local company by setting up production with a MNC.

MNCs set up production jointly with some of the local companies of these countries. The benefit
to the local company of such joint production is two-fold.
i. MNCs can provide money for additional investments, like buying new machines for
faster production.
ii. MNCs might bring with them the latest technology for production.
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6. Explain the various ways by which the MNCs are spreading their production and interacting
with local producers in various countries across the globe.

a) MNCs set up production jointly with some of the local companies of various countries.
b) The most common route for MNC investments is to buy up local companies and then to
expand production. MNCs with huge wealth can quite easily do so.
(Example, Cargill Foods, a very large American MNC, has bought over smaller Indian
companies such as Parakh Foods.)
c) Large MNCs in developed countries place orders for production with small producers. The
products are supplied to the MNCs, which then sell these under their own brand names to the
customers.
(Examples are Garments, footwear, sports items etc.)
d) Another way is, by closely competing with the local companies.
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 7. In what ways is a MNC different from other companies?

MNC OTHER COMPANIES

a) A MNC is a company that owns or a) But other companies own
controls production in more than production in their own nation and
one nation. export their products.
b) MNCs set up offices and factories b) These companies are selling their
for production in regions where goods and services globally not
they can get cheap labour and other producing globally.
resources. The goods and services c) These companies have limited
are produced globally by an MNC. markets comparatively with MNCs.
c) As a result, a MNC operates in a
huge world market; enjoys large
scale production and economies of
scale; its pricing is competitive
world wide; has huge capital base.

8. What is the basic function of foreign trade?

a) Foreign trade creates an opportunity for the producers 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.
b) For the buyers, import of goods produced in another country is one way of expanding
the choice of goods beyond what is domestically produced.
c) Foreign trade thus results in connecting the markets or integration of markets in
different countries.
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9. Distinguish between foreign trade and foreign investment.

Foreign trade implies exchange of goods and services across nations.

Foreign investment implies transfer of capital from one nation to another.
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10. What is Globalisation?
Globalisation is the process of rapid integration or interconnection between countries.
(Globalisation refers to increasing global connectivity, integration and interdependence in the
economic, social, technological, cultural, political, and ecological spheres.)
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11. What is the role of MNCs in the globalisation process?

MNCs are playing a major role in the globalisation process.
a) MNCs are spreading their production to other countries.
b) A large part of foreign trade is controlled by MNCs. MNCs involve substantial trade in
goods and services.
c) The result of greater foreign investment and greater foreign trade has been greater
integration of production and markets across countries.
d) With movement of more and more goods and services, investments and technology
between countries, most regions of the world come closer contact to each other.
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12. What are the various ways in which countries can be linked?
(a) greater integration of production and markets across countries
(b) Movement of goods and services;

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 (c) Movement of investments;
(d) Movement of technology and wealth
(e) the movement of people between countries
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13. Explain the role of transportation technology in the globalisation process.

a) One of major factor that has stimulated the globalisation process is transportation
technology. This has made much faster delivery of goods across long distances
possible at lower costs.
b) Goods are placed in containers that can be loaded intact onto ships, railways, planes
and trucks. Containers have led to huge reduction in port handling costs and
increased the speed with which exports can reach markets.
c) Similarly, the cost of air transport has fallen. This has enabled much greater volumes
of goods being transported by airlines.
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14. How is information technology connected with globalisation? Would globalisation have
been possible without expansion of IT?
Information and communication technology (or IT in short) has played a major role in spreading
out production of services across countries.
(a) The developments in information and communication technology, in the areas of
telecommunications, computers, Internet has been changing rapidly.
(b) Telecommunication facilities (telegraph, telephone including mobile phones, fax) are used to
contact one another around the world, to access information instantly, and to communicate
from remote areas. This has been facilitated by satellite communication devices.
(c) Internet also allows us to send instant electronic mail (e-mail) and talk (voice-mail) across
the world at negligible costs.
Globalisation would not have been possible without expansion of IT.
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15. What do you understand by liberalisation of trade?

Removing barriers or restrictions set by the government on foreign trade and foreign investment
is known as liberalisation.
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16. What are trade barriers? Give example. How does it help to a government?
Trade barriers are the restrictions which have been set up on import and export of goods
and services.
Example: Tax on imports (Tariff), Quota

Governments can use trade barriers to increase or decrease (regulate) foreign trade and to
decide what kinds of goods and how much of each, should come into the country.
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17. Define Quotas.

The government could also place a limit on the number of goods that can be imported. This
is known as quotas.
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18. 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?
a) 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

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 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.
Thus, India allowed imports of only essential items such as machinery, fertilisers, petroleum
etc.
b) In 1991, the Indian 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. This decision was supported by powerful international organisations.
c) Thus, barriers on foreign trade and foreign investment were removed to a large extent. This
meant that goods could be imported and exported easily and also foreign companies could
set up factories and offices here.
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19. How did liberalisation of trade help India?

a) With liberalisation of trade, businesses are allowed to make decisions freely about
what they wish to import or export.
b) The government imposes much less restrictions than before and is therefore said to
be more liberal.
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20. Write a note on WTO (World Trade Organisation).

• World Trade Organisation (WTO) is an international organisation whose aim is to liberalise

international trade.
• Started at the initiative of the developed countries, WTO establishes rules regarding
international trade, and sees that these rules are obeyed.
• As on July 2016, nearly 165 Countries of the world are currently members of the WTO.
• It stresses that there should be no barriers. Trade between countries should be ‘free’.
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21. Is the trade really a fair trade? Why or why not?

• 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.
• For example, developing nations have reduced trade barriers as per WTO rules. But
developed nations like USA have ignored the rules of WTO and have continued to
pay their farmers vast sums of money which enable them to sell at world market at
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22. Analyse the impact of globalisation in India.
A. Advantages (or) positive impacts

i) On Consumers:
a) Globalisation and greater competition among producers – both local and foreign
producers - has been of advantage to consumers, particularly the well-off sections in
the urban areas.
b) There is greater choice before these consumers with improved quality and lower
prices for several products.
c) As a result, people enjoy higher standards of living.

ii) On Producers & Indian industries:

a) MNCs have increased their investments in India.

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 b) MNCs have been interested in industries such as cell phones, automobiles, electronics, soft
drinks, fast food or services such as banking in urban areas. In these industries and services,
new jobs have
c) been created.
d) Local companies supplying raw materials, etc. to these industries have prospered.
e) Indian companies have invested in newer technology and production method and raised
their production standard.
f) Indian companies have also gained from successful collaborations with MNCs. Many of the
Indian companies themselves are now becoming MNCs. Examples, Tata Motors
(automobiles), Infosys (IT), Ranbaxy (medicines) etc.
g) New markets and opportunities have opened up for many new industries particularly those
involving IT.

(B) Negative impact (or) disadvantages

a) Flexibility in labour laws has been reduced. Labour has lost security of job.
b) Small-scale industries are not in a position to stand up against the competition from big
Indian companies and MNCs. Batteries, capacitors, plastics, toys, tyres, dairy products, and
vegetable oil are some examples of industries where the small
c) manufacturers have been hit hard due to competition.
d) 3. New technologies are labour displacing which results in increase in unemployment.
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23. Why do governments try to attract more foreign investment?

a) It brings money and capital.
b) Foreign investments create new job opportunities in the country.
c) This not only provides finance but managerial and technical personnel and new technology
in production also.
d) This encourages local enter-prises to invest more in subsidiary services like transport and
training agents and in collaboration with foreign enterprises.
e) A part of the profits from such investments generally invested in the expansion and
modernisation of related industries.
f) The social returns are greater than the private returns on foreign investment.
g) The governments get revenue when it taxes the profits of foreign firms.
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24. What is ‘Fair Globalisation’? How it can be achieved?

Fair globalisation would create opportunities for all, and also ensure that the benefits of
globalisation are shared better.

a. The government can play a major role in making fair globalisation possible. Its policies must
protect the interests, not only of the rich and the powerful, but all the people in the country.
b. The government can ensure that labour laws are properly implemented and the workers get
their rights.
c. It can support small producers to improve their performance till the time they become
strong enough to compete. If necessary, the government can use trade and investment
barriers.
d. It can negotiate at the WTO for ‘fairer rules’.
e. It can also align with other developing countries with similar interests to fight against the
domination of developed countries in the WTO.

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