Class 10: Economics

Chapter 4 Globalisation
Question 1. What are Multi-National Corporations (MNCs)?
Answer: A Multi-National Corporation (MNC) is a company that owns or controls production in
more than one nation. The goods and services are produced globally. The production process is
divided into small parts and spread out across the globe.

Question 2. Explain ‘what is investment? Give a few examples of investment.

Answer: Investment is buying of an asset in the form of a factory, a machine, land and building,
etc. (Physical assets) or shares (monetary assets) for the purpose of making or sharing profits
of the enterprises concerned.
Common investments are: buying land, factories, machines for faster production, buying small
local companies to expand production, cheap labour, skilled engineers, IT personnel, etc.

Question 3. What is meant by “fair globalization’?

Answer: Fair globalization means globalization that would create opportunities for all and ensure
that its benefits are shared better.

Question 4. What do you understand by the term ‘Foreign Direct Investment’?

Answer: FDI is the investment of foreign capital in the economic and productive activities of a
country by foreign companies or MNCs with the aim of expanding capacity and production to
earn profits.

Question 5. Why do MNCs set up their offices and factories in those regions where they get
cheap labour and other resources?
Answer: MNCs set up their offices and factories in those regions where they get cheap labour
and other resources because they bring down the cost of production and ensure more profits
for themselves.

Question 6. Why had the Indian Government put barriers to foreign trade and foreign
investment after independence? State any one reason.
Answer: The Indian government after independence had put barriers to foreign trade and
investment.
This was done to protect the producers within the country from foreign competition.
To protect the Indian economy from foreign infiltration in industries affecting the economic
growth of the country as planned.

Question 7. What is meant by trade barrier?

Answer: Barriers or restrictions that are imposed by the government on free import and export
activities are called trade barriers. Tax on imports is an example of a trade barrier because it
increases the price of imported • commodities. The government can use a trade barrier like ‘tax’
to increase or decrease (regulate) foreign trade and to decide what kind of goods and how much
of what should come into the country.

Question 8. Differentiate between investment and foreign investment.

Answer: The money that is spent to buy assets (land, building, machines and other equipment) is
called investment, while the investment made by the MNCs is called foreign investment.
Question 8. Why do MNCs set up their offices and factories in those regions where they get
cheap labour and other resources?
Answer: MNCs set up offices and factories for products in regions where they can get cheap
labour and other resources so that—
 The cost of production is low
 The MNCs can earn greater profits.

Question 9: ‘Barriers on foreign trade and foreign investment were removed to a large extent in
India since 1991.’ Justify the statement.
Answer: In 1991, the Indian government decided that the time has come for Indian producers
to compete with producers around the world. It felt that foreign competition would improve the
quality of goods produced by Indian producers within the country. Thus, barriers on foreign
trade and foreign investment were removed to a large extent. It meant goods could be imported
or exported easily and foreign companies could set up factories and offices in India.

Question 10. “A wide ranging choice of goods are available in the Indian markets.” Support the
statement with examples in context of globalisation.
Answer: The Indian market has been transformed in recent years. The consumers have a wide
variety of goods and services to choose from, which were not available earlier. For example:
 The latest models of mobile phones, television, digital cameras of leading manufacturers
and other well-known brands of the world are easily available in the markets.
 New models of cars and automobiles are launched every season.
 The top companies in the world have introduced their popular brands in India for various
products like shirts, fruit juices, cosmetics, toys, furniture, stationery etc.
All this has been possible only due to globalisation.

Question 11. Explain the role of government to make globalization fair.

Answer: The government can play a major role in making fair globalization possible:
Fair globalization would create opportunities for all, and also ensure that the benefits of
globalization are shared better. Government policies must protect the interests not only of the
rich and the powerful, but also of all the people in the country.

Government should ensure that labour laws are implemented and workers’ rights are protected.
Government should support small producers to improve their performance till the time they
become strong enough to compete with foreign competition.
 If necessary, government should use trade and investment barriers.
 It can negotiate with WTO for fairer rules.
 It can also align with other developing countries with similar interests to fight against
the domination of developed countries in the WTO.

Question 12. Explain any three advantages of globalization.

Answer: Globalization means integrating the economy of the country with the world economy.
Under this process, goods and services along with capital, resources and technology can move
freely from one nation to another.
 It has increased the movement of people between countries. People usually move from
one country to another in search of better income, better jobs or better education.
Earlier the movement of people between countries was less due to various restrictions.
 Rapid improvement in technology has been one major factor that has stimulated the
globalization process. For instance, advancement in transportation technology has made
much faster delivery of goods across long distances possible at lower costs. Container
services have led to huge reduction in port handling costs. The cost of air transport has
fallen which has enabled much greater volumes of goods being transported by airlines.
 Developments in information and communication technology (IT in short) has brought a
revolution in telecommunications. It has made e-banking, e-commerce, e-leaming, e-mail
and e-governance a reality.
 Globalization has resulted in greater competition among producers and has been of
advantage to consumers, particularly the well-off section. Rich people now enjoy improved
quality and lower prices for several products.

Question 13. What is a trade barrier? Why did the Indian Government put up trade barriers
after Independence? Explain.
Answer: The restrictions set by the Government to regulate foreign trade are called trade
barriers. Tax on imports is an example of a trade barrier.

The Indian Government had put barriers to foreign trade and foreign investment after
independence to protect the domestic producers from foreign competition. Imports at that
stage would not have allowed local industries to come up. India allowed imports of only essential
items such as machinery, fertilizers, petroleum, etc.

Question 14. What would happen if Government of India puts heavy tax on import of Chinese
toys? Explain any three points.
Answer: If Government of India puts heavy tax on import of Chinese toys
  The cost of Chinese toys will increase.
 Less Chinese toys would come in the Indian market.
 Indian buyers would have lesser choice in the market and toys will become more
expensive.
 For Indian toy makers this would provide an opportunity to expand business as there will
be less competition in the market.

Question 15. How do Multinational Companies manage to keep the cost of production of their
goods low? Explain with examples. Or
Explain the conditions that determine MNCs setting up production in other countries?
Answer: MNCs set up offices and factories for production in regions where they can get cheap
labour and other resources. Example, Countries like China, Bangladesh and India. They also
provide with the advantage of cheap manufacturing locations.
MNCs also need close-by markets for their manufacturing goods. Mexico and Eastern Europe
are useful for their closeness to the markets in the US and Europe.
Besides these, MNCs also require skilled engineers and IT personnel and a large number of
English speaking people who are able to provide customer care services (India possibly tops in
this area).
All these factors help MNCs in saving costs of production by 50-60%.

Question 16. How do we participate in the market as producers and consumers? Explain with
three examples.
Answer: We participate in the market both as producers and consumers.
As producers of goods and services we could be working in any of the sectors like agriculture,
industry or services.
For example, a farmer who sells wheat to a flour mill. The man at the mill grinds the wheat and
sells the flour to a biscuit company. The biscuit company uses flour, sugar and oil to make
packets of biscuits. It sells the biscuits in the market to the consumer. Biscuits are the final
goods, i.e., the goods that reach the consumer and people as consumers buy.
We as producers in the market could be made to sell the produce to the moneylender at a low
rate in return for a timely loan.
For example, in case of small farmers; the failure of crops often makes loan repayment
impossible. They have to sell a part of their land to repay the loans.
As consumers we participate in the market when we purchase goods and services that we need.
As individual consumers we often find ourselves in a weak position. Whenever there is a
complaint regarding a good or service that had been bought, the seller tries to shift all the
responsibility on to the buyer.
For example, a long battle had to be fought with court cases to make cigarette manufacturing
companies accept that their product could cause cancer.
Question 17. How are local companies benefitted by collaborating with multinational companies?
Explain with examples.
Answer: When local companies enter into a joint venture with MNCs:
First, the MNCs provide money for additional investments for faster production.
Second, MNCs bring with them the latest technology for enhancing and improving the
production.
Some Indian companies have gained from successful collaborations with foreign companies.
Globalization has enabled some companies to emerge as multinationals.
Parakh Foods was a small company which has been bought over by a large American Company —
Cargill Foods. Parakh foods had built a large marketing network in various parts of India as a
well- reputed brand. Parakh Foods had four oil refineries whose control has now shifted to
Cargill. Cargill is now the largest manufacturer of edible oil in India making five million pouches
daily.

Question 18. How has foreign trade been integrating markets of different countries in the
world? Explain with examples. Or
“Foreign trade integrates the markets in different countries.” Support the statement with
arguments.
Answer: (i) Foreign trade creates opportunities for producers to reach beyond domestic
markets. Producers can compete in markets located in other countries of the world. Similarly,
for the buyers, import of goods from another country leads to expanding choice of goods
beyond what is domestically produced. Buyers can thus choose from a wide range of products to
suit their individual tastes.
(ii) With the opening of trade, goods travel from one market to another. Choice of goods in the
market rises. Prices of similar goods in two markets tend to become equal, and producers in the
two countries now closely compete against each other even though they are separated by
thousands of miles. Foreign trade, thus, results in connecting the markets or integration of
markets in different countries.
For example, there are endless number of footwear brands available in the Indian market. A
consumer who is aware of international trends can choose between a local brand like Bata,
Lakhani and international brands like Adidas, Nike, and Reebok etc.

Question 19. Define the term liberalization. Explain the reasons why the Indian Government
started the policy of liberalization in 1991. Or
‘Barriers on foreign trade and foreign investment were removed to a large extent in India since
1991’. Justify the statement.
Answer: Removing barriers or restrictions set by the government on foreign trade and foreign
investment is what is known as liberalization. The Indian Government removed these barriers
because:
Liberalization of trade and investment policies allows Indian producers to compete with
producers around the globe leading to an improvement in performance and quality of products.
After the barriers on foreign trade and foreign investment were removed to a large extent,
goods could be imported and exported easily and also foreign companies could set up factories
and offices in India. This has led to an increase in trade with different countries.
Businesses are allowed to make decisions freely about what they wish to import or export due
to the liberal policies of the government.
Doors of investment opened up for MNCs. They have been investing large sums of money in
India and have been seeking to earn large profits.

Question 20. How has information and communication technology stimulated globalisation
process? Explain with examples.
Answer: Information and communication technology has helped globalisation in the following
ways:
Rapid improvement in technology has contributed greatly towards globalisation. Advanced
technology in transport systems has helped in the delivery of goods faster across long distances
at lower costs.
Development in information and communication technology has also helped a great deal.
Telecommunication facilities — telegraph, telephone, mobile phones, fax are used to contact one
another quickly around the world, access information instantly and communicate from remote
areas. This is possible due to satellite communication devices. Teleconferences help in saving
frequent long trips across the globe.
Information technology has also played an important role in spreading out production of services
across countries. Orders are placed through internet, designing is done on computers, and even
payment of money from one bank to another can be done through e-banking through internet.
Internet also allows us to send instant electronic mail (e-mail) and talk (voice-mail) across the
world at negligible cost.

Question 21. Why had Indian government put barriers to foreign trade and foreign investment
after independence? Explain. Or
Why had the Indian government put barriers to foreign trade and foreign investments after
independence? Analyse the reasons.
Answer: The Indian government after independence had put barriers to foreign trade and
investment. This was done 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 develop and grow. Imports of
only essential items such as machinery, fertilisers, petroleum etc. was allowed.
Another reason was to protect the Indian economy from foreign infiltration in industries
affecting the economic growth of the country as planned. India wanted to move faster to catch
up with the main industries in the world market and therefore had to keep an extra watch on its
progress in international trade and give incentives to the more rapidly growing industries
through fiscal tariff and other means.

Question 22. “Globalisation and greater competition among producers has been of advantageous
to consumers.” Justify the statement with examples.
Answer: Globalisation and greater competition among producers has been of advantageous to
consumers in the following ways:
• Consumers in today’s world have a wide variety of goods and services to choose from. The
latest models of digital cameras, mobile phones and televisions made by the leading
manufacturers are available to them.
• Consumers now enjoy better and improved quality at lower prices.
• It has resulted in higher standards of living.
• There has been a varying impact on producers and workers.
• Many top Indian companies have been able to establish themselves as multinational
corporations.
• Latest technology and production methods have raised production standards.

Question 23. Why had the Indian government put barriers to foreign trade and foreign
investment after independence? Analyze the reasons.
Answer: The Indian government put barriers on foreign trade and foreign investment after
independence because:
(a) It was considered necessary to protect the producers within the country from foreign
competition.
(b) In 1950s and 1960s, the industries were initial stage and competition from imports at that
stage would not have allowed these industries to develop.
(c) Therefore, India allowed the imports of only essential items like machinery, fertilizers,
petroleum etc.

Question 8. Explain by giving examples how Multinational Corporations (MNCs) are spreading
their products in different ways.
Answer: Multinational Corporations (MNCs) are spreading their production in different ways.

Some of them are:

 By buying local companies and, then expanding production. For example, Cargill Foods, a
very large American MNC, purchased small Indian company, Parakh foods.
  Cargill Foods is, now, the largest producer of edible oil in India with a capacity making 5
million pouches daily.
 By placing orders for production with small producers. Garments, foot wears, sports
items are examples where production is carried out by small producers for large MNCs
around the world.
 By producing jointly with some of the local companies. It benefits the local company in
two ways.

1. A MNC can provide money for additional investments.

2. A MNC can bring latest technology for production.
For example, Ford Motors set up a large plant near Chennai, in collaboration with Mahindra and
Mahindra, a major Indian manufacturer of jeeps and trucks.

Question 24.How have our markets been transformed? Explain with examples.
Answer: The advent of globalisation and the policy of liberalization have opened the market to
the world players. It has given rise to wide choice of goods and services to the consumer.
MNCs have played a vital role in the world market. Foreign trade and investment in the country
has increased. It has also resulted in exchange of technology between countries. In recent
times, technology in the areas of telecommunications, computers and internet has been changing
rapidly.
Globalisation has also created new opportunities for companies providing services, particularly
those involving in IT. Better job opportunities for people have given rise to migration.
Globalisation has also enabled some large Indian companies to emerge as multinationals For
example, Tata Motors, Infosys, Ranbaxy have expanded their operations around the world.

Question 25. How foreign trade does integrates the markets of different countries? Explain
with examples.
Answer: Foreign trade integrates the markets of different countries as:
(a) It provides an opportunity for both producers and consumers to reach beyond the markets
of their own country.
(b) Producers now compete with markets located in other countries.
(c) There is an expansion of choice of goods beyond the domestic market.
(d) For example, during the Diwali season, buyers in India have the option of buying either
Indian or Chinese decorative lights or bulbs. The Chinese manufacturers get the opportunity to
expand their business.