Economics Notes (Class 10)

CBSE Class 10 Economics Chapter 4 Globalization and the Indian Economy

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Globalization and the Indian Economy

Globalization and the Indian Economy

Globalization and the Indian Economy

   

Important Notes
 
Various ways By which MNCs set up or control production in other countries – 
  • Set up production jointly with some of the local companies. Joint production provides money for additional investment and the latest technology for production.
  • To buy up local companies and then expand production.
  • Place orders for production with small producers.
  • By setting up partnerships with local companies, by using local companies for supplies, by closely competing with the local companies or buying them up, MNCs are exerting a strong influence on production at these distant locations. As a result, production in these widely dispersed locations is getting interlinked.
Foreign Trade and Integration of Markets –
  • Exchange of goods – purchase and sale – across geographical boundaries of the countries.
  • Goods travel from one market to another.
  • Choice of goods in the market rises.
  • Prices of similar goods in the two markets tend to become equal.
  • Producers in the two countries closely compete against each other even though they are separated by thousands of miles. Thus foreign trade results in connecting the markets or integration of markets in different countries.
Trade Barriers and its importance –
  • Various restrictions which are used by the government to increase or decrease
  • Foreign Trade.
  • The government uses trade barriers to increase or decrease Foreign Trade and to
  • decide what kinds of goods and how much of each, should come into the
  • country.
Special Economic Zones –
  • Setting up of industrial zones by the central and state governments to attract Foreign Companies to invest in India which has world-class facilities, electricity, water, roads, transport, storage, recreational and educational facilities.
Impact of Globalisation in India –
  • Greater competition among producers – both local and foreign producers has
  • been of advantage to consumers.
  • There is the greater choice before these consumers who now enjoy the improved
  • quality and lower prices for several products.
  • Foreign investment has increased.
  • Increased competition has encouraged top Indian Companies to invest in newer
  • technology and production methods and raise their production standards.
  • Globalization has enabled some large Indian Companies to emerge as Multinational.
  • Created new opportunities for companies providing services particularly those
  • involving Information Technology.
Important Questions
Q. ‘Barriers on foreign trade and foreign investment were removed to a large extent in India since 1991.’ Justify the statement.
 
A. 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 to 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.
 
 
Q. “A wide-ranging choice of goods are available in the Indian markets.” Support the statement with examples in the context of globalization.
 
A. The Indian market has been transferred formed 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 globalization

 
 

Q. “Globalisation and greater competition among producers has been of advantageous to consumers.”

A. Globalization and greater competition among producers have been of advantage 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 multi¬national corporations.
  • Latest technology and production methods have raised production standards.
Q. Should more Indian companies emerge as MNCs?
 
A. There is much scope for Indian companies to emerge as MNCs. These are the companies mainly related to Information Technology (IT sector), accounting and administrative sector. It will benefit the people in the country by providing them gainful employment and further enhance their quality of life. MNCs have enormous wealth with them. They have a strong influence on production in different countries.
 

Q. Explain any three ways in which MNC set up or control production in other countries.

A. Multinational Corporations (MNCs) can set up their factories or production units close to markets where they can get the desired type of skilled or unskilled labor at low costs along with other factors of production. After ensuring these conditions MNCs set up production units in the following ways :

  • Jointly with some local companies in the existing country.
  •  Buy the local companies and then expand its production with the help of modern technology.
  • They place orders for small producers and sell these products under their own brand name to the customers worldwide.
 
Q. How does foreign trade lead to the integration of markets across the countries? Give any three examples.
 
A.  Foreign trade is the main channel which connects the markets of various countries. Foreign trade leads to the integration of markets across the countries as follows :
  • Creates opportunities for the producers to reach beyond the domestic markets or the markets of their own countries.
  •  Import of goods from various countries provides a choice of goods for consumer beyond the goods that are produced domestically.
  • Producers of different countries compete with each other although they are thousands of miles away.
 
Q. Suggest any three measures to make globalization just and fair?
 
A.  Globalization means unification or integration of the domestic economy with the world economy through trade, capital, and technology flows.
The government can ensure fair globalization to its people in the following ways :
  • The government needs to care about the labor laws so that workers get their trade union rights and support small producers to improve their performance.
  • The government can negotiate with world trade organization for fairer rules and can align with developing countries to stand against the domination of developed countries.
 
Q. How has liberalization of trade and investment policies helped the globalization process. Explain.
 
A. Economic liberalization means reducing government interference in economic activities and removing trade and business barriers.
Liberalization of trade and investment policies helped the globalization process in the following ways :
  • Businesses are free to make decisions for foreign import and export.
  •  Foreign companies could easily set up factories and industries in a country after liberalization.
 
Q. Describe any three factors which have enabled globalization in India.
 
A. Globalization means unification or integration of the domestic economy with the world economy through trade, capital and technological flows. Factors that supported globalization in India are as follows :
  • Reduction of trade barriers with a view to allowing free flow of goods to and from other countries.
  • Involvement of various local producers with MNCs in various ways.
  •  Some of the large Indian companies like Tata Motors, Infosys (IT), Ranbaxy, Asian Paints etc. emerged as MNCs and start working globally.
 
Q. ”The impact of globalization has not been uniform”. Explain this statement.
 
A. It is true that the impact of globalization has not been uniform. This can be explained through the following points :
  • It has some negative impacts on employment and real wages. Ushering in of new technology, the output is increasing but the employment opportunities are not much especially in rural areas where 75% of the population lives.
  • It is mainly beneficial to large capitalists, industries and large companies. Consequently, it increases the concentration of economic power and leads to inequality.
  •  In India, during 1990-91 more than V3rd of national product originated in the agricultural sector, this share has come down to 23% in 2004-05.
 

Q. What is the meaning of liberalization of foreign trade? What does it mean in the Indian context?

A. Liberalization of foreign trade means removing barriers or restrictions put by the government on the import and export of goods.

The Indian government had put barriers to foreign trade and investment after independence so that Indian small-scale and cottage industries could come up. After 1991, the process of liberalization started in India. This was done for the following reasons :

  •  To improve the quality of Indian products our products are put in competition with international products.
  • To enhance industrialization and foreign exchange.
 
Q. Define liberalization. Mention two features of liberalization.
 
A. Liberalization means removing barriers or restrictions put by the government on the businesses. 
Features of liberalization are as follows :
  • Reduction of trade barriers with a view to allowing free flow of goods among the countries.
  • Allow the private sector to do many of those activities which were earlier restricted to the public sector.
 
Q. What is meant by trade barrier? Why do governments use it? Explain.
 
A. Barriers or restrictions that are imposed by the government on free import and export activities are called trade barrier. Tax on imports is a vital trade barrier. The government can use the trade barriers in the following ways :
  • Increase or decrease of foreign trade of the country.
  • With the help of trade barriers, the government can decide what kinds of goods and how much of each, should be traded in the country.
 
Q. Describe the impact of globalization on the lives of consumers.
 
A.  The impact of Globalization on the lives of the consumers is – 
  •  Globalization has improved the productivity of products which controlled the rate of inflation.
  • A wide variety of products are available in the markets due to globalization which has improved the standard of living of the consumers.
 
Q. Mention any three steps which have been taken by the government of India to attract foreign investment in recent years?
 
A. The investment made by MNCs is known as foreign investment. In order to attract foreign investment following steps are taken by the Indian government :
  • Restrictions on trade and investment, have been removed to a large extent.
  • India has allowed the Indian producers to compete with the producers of the world.
  • Allowing privatization of many public sector industries by the government.
Q. 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.
 
A. Tax on imports imposed by the government to regulate foreign trade and investment is known as a trade barrier.
The government imposed barriers on foreign trade and investment are for the following reasons :
  • The competition from importers would have crippled the new-born industries of India.
  • To protect the producers within the country from foreign competition.
  • Imports of only such commodities were allowed which were quite necessary, for example, machinery and petroleum.
 
Q. How have transportation technology and information and communication technology stimulated the globalization process? Explain with suitable examples.
 
A. Transportation technology: Rapid improvement in transportation technology has been one major factor that has stimulated the globalization process. There are fast trains connecting every nook and corner of a country and faster planes that cover the distance within a few hours between one country to another. Similarly, the cost of air transport has fallen.
Information and Communication Technology: In recent times communication and information technology got a boost from the invention of computers and the internet etc.
Information Technology (IT) has played a major role in spreading out production of services. For example, a news magazine published for London readers is to be designed and printed in Delhi.
 
 
Q. Explain visible imports of globalization on the Indian Economy, with two examples.
 
A. 
  • Greater Competition among producers: Greater competition among producers both local and foreign have been of advantage to consumers, particularly the well-off section of the society. Consumers of now have greater choice. For example, Shoes produced by Indian companies and shoes produced by MNCs like Bata, TSF, Woodland etc. Consumers have more choice. They can compare in terms of quality, price etc.
  •  The phenomenal growth of the service sector: The present share of service sector in the country’s GDP is more than 50%, which was about 40% in 1990 at the time of start of globalization. Information and communication technology also grew on an average of 20%.
 
Q. How has WTO affected the Indian economy? What was its favorable and unfavorable impact?
 
A.  Effect of Functioning of WTO on Indian Economy: The developing countries like India feel cheated as they are forced to open up their markets for the developed countries but are not allowed access to the markets of developed countries.
Favorable Impacts of WTO working: WTO creates an environment such as international trade among member countries in an open, uniform and non-discriminatory manner.
Unfavorable Impacts of WTO: WTO is dominated by the developed countries, especially by America, the European Union, and Japan etc. Developing and poor countries are seldom consulted until the rich nations complete their negotiations.
 
 
Q. How could you distinguish between ‘foreign trade’ and ‘foreign investment’? Explain the role of MNCs in foreign trade and foreign investments.
 
A. Foreign trade is the integration of markets in different countries. For example, export and import of goods and services from one country to another. But foreign investments are investments made by MNCs. For example, investment in land, machines, building etc. to earn a profit.
Role of MNCs in foreign trade and foreign investments: MNCs can provide money for additional investments like buying new machines for faster production to small companies.
MNCs can provide efficient managerial and advanced technology for faster production and efficient use of resources. So MNCs play an important role in foreign investment. MNCs facilitate movement of goods and services between various countries. Movement of people across the globe also creates better job opportunities and better income. So MNCs promote foreign trade also.
 
 
Q. What complaint do farmers of developing countries have against developed country governments?
 
A. In developing countries, governments have reduced trade barriers as per WTO rules. But developed countries have ignored the rules of WTO and have continued to pay their farmers vast sums of money for production and for export to other countries.
Therefore, farmers of developed countries are able to sell farm products at abnormally low prices in foreign markets which is adversely affecting the farmers of developing countries. This is really a case of unfair trade.
 
 
Q. Explain any four ways in which multinational corporations have spread their production and interaction with local producers in various countries across the globe.
 
A. The multinational corporations have spread their production and interaction with local producers in the following ways :
  • Setting up production jointly with local companies. They provide money for additional investments like buying new machines for faster production. For example, Cargil Foods, a very large MNC (USA), has bought smaller Indian companies such as Parekh Foods.
  • The MNCs provide efficient managerial and advanced technology for faster production and efficient use of resources.
  • They have increased their investments over the past 15 years. They provide employment opportunities to the masses. The local companies supplying raw material to these industries have prospered.
  • Many food processing multinational companies such as Pepsi, Coca-Cola have taken over Indian markets in cold drinks and food products. This helps in greater choice for consumers with a variety of goods at cheap prices.
 
Q.  ‘Globalisation and competition among producers have been of advantage to the consumers.’ Give arguments in support of this statement.
 
A. 
  • More choice for consumers: Globalisation and competition among producers has enabled the consumer to have a wide range of choice available in the market. For example, Chinese toys and Indian toys both are available. The consumer can compare quality, price, suitability and safety for both types of toys. So the consumer is ultimately benefitted.
  •  Better job opportunities: Globalisation and competition among producers have given rise to better job opportunities for skilled persons. People can get better salary and facilities for the specialized skills in other countries.
  •  Better job opportunities: Globalisation and competition among producers have given rise to better job opportunities for skilled persons. People can get better salary and facilities for the specialized skills in other countries.
 

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