CBSE Class 10 Social Science Globalisation And The Indian Economy Notes

• Globalization refers to the integration of the domestic economy with the economies of the world.
• An MNC is a company that owns and controls production in more than one nation.
• Foreign Investment is investment made by MNCs.
• Liberalization means the removal of barriers and restrictions set by the government on foreign trade.
• Governments use trade barriers to increase or decrease (regulate) foreign trade to protect the domestic industries from foreign competition. Ex. Tax on imports. Around 1991, government India adopted the policy of liberalization
• World Trade Organization (WTO) was started at the initiative of the developed countries. Its main objective is to liberalize international trade.
• Privatization means transfer of ownership of property from public sector to private sector.
• Business Process Outsourcing (BPO) is the contracting of non primary business activities and functions to a third party service provider.
• Multi lateral Agreement is agreement entered by group of countries. 
• Mixed economy is a system in which private and public sector work together.
• Economic Reforms or New Economic Policy is policy adopted by the Government of India since July 1991. Its key features are Liberalization, Privatization and Globalization (LPG)

Facts that Matter

1. Today we have wide choice of goods and services before us. There is explosion of brands. It is a recent phenomenon and in a matter of years our markets have been transformed.
2. Until the middle of the 20th century, production was largely organised within the countries. What crossed the boundaries was mainly the raw materials, foodstuff and finished products. Colonies such as India exported raw materials and foodstuff and imported finished goods. Trade was the main channel connecting distant countries.
3. Emergence of MNCs proved to be of immense importance.
4. These MNCs operate in many countries of the world.
5. They set up their offices and factories where they can get cheap labour and other facilities. This is done so that the cost of production is low and the MNCs can earn greater profits.
6. The money that is spent to buy assets such as land, building, machines and other equipment is called investment and the investment made by MNCs is called foreign investment.
7. Local companies get benefitted by these MNCs. They provide money for the additional investments like bringing new machines for faster production.
8. MNCs are playing major role in the globalisation process. Foreign investment in the countries has been rising. Foreign trade between the countries has also been rising. It has led to substantial trade in goods and also services. It has also led to greater integration of production and markets across countries.
9. MNCs are spreading their production by setting up partnerships with local companies, by closely competing with local companies or buying them and by using local companies for supply. As a result, production in these widely dispersed locations is getting interlinked.
10. MNCs set up their production units in those areas which are quite close to the market. They prefer such areas where there is skilled and unskilled labour available at low costs.In addition, the MNCs select such countries where the local governments properly look after the interests of the MNCs. Sometimes the MNCs set up production jointly with the local companies of the selected countries.
11. Foreign trade started through various trade routes, connecting India and South Asia to markets both in the East and West. Trading interests also attracted various trading companies such as East India Company to India.
12. Foreign trade gives opportunity to producers to sell their goods in other countries of the world. For the ordinary consumers, foreign trade proves very useful because the best brands of different articles are produced all over the world. Their choice of goods expands manifolds. Producers can sell their product not only in markets located within the country but can also compete in markets located in other countries of the world. For the buyers, import of goods produced in another country is one way of expanding the choice of goods beyond what is domestically produced. 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.
13. Globalisation has made possible the interconnection between countries. As a result of globalisation, the different countries of the world become economically interdependent on each other.
14. Rapid improvement in technology has been one major factor that has stirred globalisation process. Due to technology there has been improvements in various fields. Such as transport technology, information and communication technology etc.
15. Trade barrier means restrictions imposed on import and export of goods. It is called so because some restrictions have been set up. The trade barriers provide protection to domestic goods from foreign competition. The government can use barriers to increase or decrease (regulate) foreign trade and to decide what kind of goods and services and how much of each should come into the country.
16. The Indian government, after independence had put barriers to foreign trade and foreign investment. This was considered essential to protect the producers within the country from foreign competition.
17. But 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. Thus, the government decided that the time had come for Indian producers to compete with producers around the globe.
18. Liberalisation of foreign trade and foreign investment policy has proved to be a boon for India. This has led to a deeper integration of national economies into one conglomerate whole.
19. World Trade Organisation (WTO) is an organisation whose aim is to liberalise international trade. It helps to remove trade barriers and create a free environment for foreign trade. It establishes rules regarding international trade and sees that these rules are obeyed.
20. Though WTO is supposed to allow free trade for all, in practice, it is seen that the developed nations have unfairly retained trade barriers. On the other hand, WTO rules have forced the developing countries to remove trade barriers.
21. Globalisation has both positive and negative impacts on India. On the one hand, it has created new jobs in certain industries, on the other hand it has perished small producers.
22. The central and state governments in India are taking some special steps to attract foreign companies to invest in India. For this, special economic zones are being set up. SEZs are to have world class facilities like electricity, water, road transport, storage, recreational and educational facilities. The industries setting up their production units in the SEZs are exempted from paying taxes for initial five years.

Words that Matter

1. Globalisation: Integrating an economy with the world economy.
2. Liberalisation: Removing trade barriers between countries.
3. MNCs: Multinational Corporations.
4. Investment: The money that is spent to buy assets like buildings, machines and equipment.
5. WTO: World Trade Organisation which aims to liberalise international trade.
6. Trade barriers: Rules and regulations that regulate foreign trade.
7. Flexibility: Giving relaxation in trade and labour laws.
8. SEZs: Special Economic Zones are those industrial zones which have been set up by the government of India to attract foreign companies to invest in the country.

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 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 the 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 thousand 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.
- 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 have 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 greater choice before these consumers who now enjoy 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.
- Globalisation has enabled some large Indian Companies to emerge as Multinational.
- Created new opportunities for companies providing services particularly those involving Information Technology. 

Important Terms and Concept

1. Globalisation : Globalisation can be defined as the integration between countries through foreign trade and foreign investments by Multinational Corporations (MNCs).
2. Multinational Corporations (MNCs) : An MNC is a company that owns or controls production in more than one nation.
3. Investment : Expenditure incurred to buy assets such as land, building, machines and other equipments for further production is called investment.
4. Foreign Investments : Investment made by MNCs is called foreign investment.
5. Foreign Trade : Foreign trade refers to the export and import of goods by various countries.
6. Trade barrier : A trade barrier refers to some restriction on the trade.
7. Liberalisation : It refers to the relaxation of foreign trade and foreign investment rules by the government of the country.
8. World Trade Organisation : World Trade Organisation (WTO) is an organisation whose aim is to liberalise international trade.
9. Special Economic Zone (SEZ) : SEZs are confined zones that have world-class facilities like electricity, water, roads, transport, storage, recreational and educational facilities.

Full Forms

1. FDI : Foreign Direct Investment
2. MNC : Multinational Corporation
3. ICT : Information and Communication Technology
4. IT : Information Technology
5. JV : Joint Venture
6. LPG : Liberalisation, Privatisation and Globalisation
7. ILO : International Labour Organisation
8. WTO : World Trade Organisation
9. SEZ : Special Economic Zone

Very Short Answer Type Questions

Question. Differentiate between investment and foreign investment.
Answer : Investment can be defined as money spent for buying the inputs for the production like land, buildings, machines etc. whereas foreign investment is the investment done by a investor from abroad or MNC is termed as foreign investment.

Question. Why do MNCs setup their offices and factories in those regions where they get cheap labour and other resources?
Answer : MNCs setup their offices and factories in those regions where they get cheap labour and other resources so that they can reduce their cost of production and maximize the profit.

Question. What is a Multinational Corporation?
Answer : MNC : Multinational Corporations is a company owning and or controlling production in more than one nation.

Question. Give the meaning of globalisation.
Answer : It can be defined as process of rapid interconnection or integration between the international market.

Question. Due to what reason are the latest models of different items available within our reach?
Answer : It is due the policy of liberalisation, privatization and globalisation the latest models of different goods are available within our reach.

Question. What is meant by trade barrier?
Answer : Restrictions set by the government to increase or decrease (regulate) the foreign trade is what called trade barrier.

Question. Why did the Indian government remove barriers to a large extent on foreign trade and foreign investment?
Answer : The Indian government removed barriers to a large extent on foreign trade and foreign investment so that the Indian companies could compete in the international market.

Question. Why had the Indian government put barriers to foreign trade and foreign investment after independence? State any one reason.
Answer : The Indian government put barriers to foreign trade and foreign investment after independence in order to protect the industries in India from the foreign competition as they were in the infancy stage.

Question. What is the meaning of investment? or Define the term investment.
Answer : Investment can be defined as money spent for buying the inputs for the production like land, buildings, machines etc.

THREE MARKS QUESTIONS

Question. How is foreign trade interlinking markets of different countries? Explain with example.
Answer : Foreign trade means trade with other countries. When we trade with other countries then we connect with the markets of different countries. For example, Chinese toys in the Indian market. In this process, the goods and services are produced and sold at global level. There is movement of technology and people between the countries. It gives opportunity to the local producers to reach beyond the domestic market. Buyers get different choice, price and quality.

Question. What measures can be taken by the government of India to make globalisation fairer? Explain.
Answer : The various measures that can be taken by the government of India to make globalisation fairer are: a. Labour laws should be implemented properly and the workers get equal rights. b. Government should use trade barriers if required. c. Government should negotiate at the WTO for fairer rules.

Question. ‘Barriers on foreign trade and foreign investment were removed to a large extent in India since 1991.’ Justify the statement.
or Why have the barriers on foreign trade and foreign investment been removed to a large extent by the Indian government? Explain.
Answer : Barriers on foreign trade and foreign investment were removed to a large extent in India since 1991. Indian government decided to remove trade barriers due to the following reasons:
a. The Indian government wanted the domestic producers to face the global competition.
b. By this competition, the Indian producers j will also get a chance to improve their quality.
c. Removal of trade barriers will allow the producers of different countries to trade with India.

Question. Why had the Indian government put barriers to foreign trade and foreign investment after independence? Analyse the reasons.
Answer : Indian government put trade barriers after the independence on foreign trade and foreign investments to protect the domestic producers from the foreign competition. At that time in 1950s and 1960s Indian industries were just coming up, so were not in a position to compete with the foreign producers.

Question. What is foreign trade? How does it integrate markets? Explain with examples.
or How does foreign trade integrate the markets of different countries? Explain with examples.
Answer : Foreign trade means trade with other countries. When we trade with other countries then we connect with the markets of different countries. For example, Chinese toys in the Indian market. In this process the goods and services are produced and sold at global level. There is movement of technology and people between the countries. It gives opportunity to the local producers to reach beyond the domestic market. Buyers get different choice, price and quality. An MNC from USA producing the industrial equipment is designing its product in the research centres of the US, its components are manufactured in China, the assembling and the export work is done from Mexico and Eastern Europe and its call centres are there in India.

Question. Examine any three conditions which should be taken care of by Multinational Companies to set up their production units.
Answer : The three conditions which should be taken care of by Multinational Companies to set up their production units are: a. Labour: There should be easy availability of cheap and skilled labour for the industries. This will help in reducing in the cost of production and maximizing the profit. b. Market: The markets should be close to the production units so that there should be less expenditure on the transport cost. c. Government policies: The government policies of that particular countries should be in favour of the company such as flexibility in labour laws etc.

Question. What is globalisation? How does globali¬sation help in interconnection among dif¬ferent countries? Explain with examples.
Answer : It can defined as the process of rapid interconnection or integration between the markets. The following are the different ways through which globalisation help in inter-connection among different countries: a. By producing goods and services which are produced at global level. b. Goods and services are sold at global level. c. Investments, technology and people are moving between countries. d. It gives opportunity to the local producers to reach beyond the domestic market. e. MNCs by the foreign trade connects/ integrates the markets in the world.

Question. How are MNCs spreading their production across countries? Explain with an example.
Answer : An MNC from USA producing the industrial equipment is designing its product in the research centres of the US, its Components are manufactured in China, the assembling and the export work is done from Mexico and Eastern Europe and its call centres are there is India.

Question. How do Multi-National Corporations (MNCs) interlink production across countries? Explain with examples.
Answer : Interlinking of production is one of the important feature of the MNCs. For example: An MNC from USA producing the industrial equipment is designing its product in the research centres of the US, its components are manufactured in China, the assembling and the export work is done from Mexico and Eastern Europe and its call centres are there in India.

Question. “Foreign trade integrates the markets in different countries.” Support the statement with arguments.
Answer : Foreign trade integrates the markets in different countries through the following ways: a. Goods and services and produced at global level. b. Goods and services are sold at global level. c. Investments, technology and people are moving between countries. d. Production process is complex but organized. e. It gives opportunity to the local producers to reach beyond the domestic market. f. Buyers get different choice, price and quality. g. MNCs by the foreign trade connects/ integrates the markets in the world. For example: Chinese toys in India.

Question. What are the harmful effects of MNCs to a host country? Give three examples.
Answer : The harmful effects of MNCs to a host country are: a. They have to provide a world class facility to these MNCs. b. They have to ensure flexibility in labour laws. c. The local small producers are hit hard and have to shut down due to the competition with the MNC.

Question. What has been the impact of globalisation on India? Explain.
Answer : Globalisation has its deep impact on India. The impact of globalization has not been uniform in the Indian economy as different people are affected in a different way. The impact of globalization can be noticed, on these people: a. Producers: big producers who join hands with the MNCs are getting the profit but the small producers face loss and in many cases they have to shut down their business. b. Workers: MNCs helped in reducing the unemployment in India but as MNCs get flexibility in labour laws so they hire the workers on temporary basis. c. Buyers: MNCs produce mostly for the rich buyers so the rich buyers get choices in the market more than the poor buyers.

Question. How did Cargill Foods became the largest producer of the edible oils in India? Explain.
Answer : Cargill Foods, an American MNC has bought Indian company named Parakh Food. Now the control on the large marketing network and the four oil refineries has shifted to the Cargill Food. Cargill Food has now become the largest producer of edible oil in India.

Question. “The impact of globalisation has not been visualized uniformly among producers and workers.” Support the statement with facts.
Answer : The impact of globalization, has not been uniform among the producers and workers. The impact of globalization can be noticed on these people:
a. Producers: there are two types of producers. Large producers and small producers. The big producers who join hands with the MNCs are getting the profit but the small producers face loss because they are not able to compete with the large producers
b. Workers: MNCs affected the workers in both the ways. MNCs helped in giving employment to the workers and improved their economic conditions but at the same time MNCs due to flexibility in labour laws hire the workers on temporary basis and their job is not secured.
c. The large producers manipulate the market. They influence the price, labour, working conditions etc. So in many cases they have to shut down their business.

Question. How do Multinational Companies manage to keep the cost of production of their goods low? Explain with examples.
Answer : Due to the following reasons the Multinational Companies manage to keep the cost of production of their goods low:
a. They set up their production units where there is easy availability of cheap and skilled labour.
b. They look for the locations from the markets are close so that they will have to pay less transportation cost in supplying the final goods to the consumers.
c. They set up their business in the countries where the government policies are favourable for them. Such as in India the Indian government has given them the benefit of flexibility in labour laws.

Question. What would happen if government of India puts heavy tax on import of Chinese toys? Explain any three points.
Answer : The following are the three possible effects if government of India puts heavy tax on import of Chinese toys:
a. The price of the Chinese toys in the Indian market will rise.
b. Due to the high price there will be less number of buyers.
c. The Chinese toys market in India will shrink and the India toy makers will expand their market.

Question. Why did Ford Motors want to develop Ford India as a component supplying base for its other plants across the globe? Explain. or How are local companies benefitted by collaborating with multinational companies? Explain with examples.
Answer : Joining hand with local companies is also one of the way through which the MNCs spread production. Sometimes the MNCs join hands with the local companies and do the production.
In this process, the local companies get twin benefits:
a. They get foreign investment.
b. MNCs provide newer technology to them for the production. For example: In 1995 Ford Motors an American company joined hand with the Indian company called Mahindra and Mahindra (manufacturer of jeeps and trucks) due to the following reasons:
1. Availability of cheap and skilled labour.
2. Close to the markets.

Question. How does foreign trade connect the markets of different countries? Explain with example.
Answer : Foreign trade integrates the markets in different countries through the following ways: For example: Chinese toys in India. In this process the Goods and services and produced and sold at global level. There is movement of technology and people between the countries. It gives opportunity to the local producers to reach beyond the domestic market. Buyers get different choice, price and quality. An MNC from USA producing the industrial equipment is designing its product in the research centres of the US, its Components are manufactured in china, the assembling and the export work is done from Mexico and Eastern Europe and its call centres are there is India.

Question. How have our markets been transformed? Explain with examples. or In recent years how our markets have been transformed? Explain with examples. or “A wide ranging choice of goods are available in the Indian markets.” Support the statement with examples in context of globalisation.
Answer : It is true to say that now there is wide ranging choice of goods are available in the Indian markets. It is possible due to the policy of liberalisation, privatization and globalisation followed by India since 1991. Before 1990, we had limited brands and limited variety of products in the market but now the market is flooded with variety of brands. For example, earlier we had just Ambassador and Fiat cars on the Indian roads but now we have so many brands from all over the world. The same happened in the field of TV, mobile phones, garments etc.

Question. “Globalisation and greater competition among producers has been advantageous to consumers.” Justify the statement with examples.
Answer : It is true to state that Globalisation and greater competition among producers has been of advantageous to consumers. The consumers are getting advantage in the following ways:
a. They get different brands of the product.
b. They get the goods and services at cheaper rate.

Question. How has foreign trade been integrating markets for different countries in the world? Explain with examples.
Answer : Foreign trade means trade with other countries. When we trade with other countries then we connect with the markets of different countries. For example, Chinese toys in the Indian market. In this process the goods and services and produced and sold at global level. There is movement of technology and people between the countries. It gives opportunity to the local producers to reach beyond the domestic market. Buyers get different choice, price and quality. An MNC from USA producing the industrial equipment is designing its product in the research centres of the US, its components are manufactured in China, the assembling and the export work is done from Mexico and Eastern Europe and its call centres are there is India. 

Question. What are the benefits of the foreign trade to producers and consumers?
Answer : Globalisation has been advantageous to both the producers as well as the consumers in India. Producers: there are two types of producers. Large producers and small producers. The big producers who join hands with the MNCs are getting the profit but the small producers face loss because they are not able to compete with the large producers. The large producers manipulate the market. They influence the price, labour, working conditions etc. So in many cases they have to shut down their business. Consumers: a. They get different brands of the product. b. They get the goods and services at cheaper rate. c. They get better quality products.

Question. Explain the role of information technology in globalisation.
Answer : The role of information technology in globalisation: a. Development in technology is one of the most important factor that has enabled the process of globalization. b. Developments in ICT (information and communication technology) includes telephones, mobile phones, computers, internet, fax, e-mails etc. a remarkable development can be seen in the field of ICT throughout the world. c. Now the world is just a click away. With the help of ICT we can share and obtain information instantly across the globe at negligible cost.

Question. What is the main aim of the world trade organisation? Explain its functions.
Answer : The main aim of WTO is to liberalise international trade. The various functions of the World Trade Organisation are: a. It makes rules regarding international trade and checks that these rulds are followed. b. WTO says that there should be no trade barriers i.e. members of WTO should liberalise their trade policies and trade between countries should be free. c. But in practice it can be seen that developing countries follow these rules whereas the developed countries have not liberalized their trade policies.

Question. How has globalisation been advantageous to both the producers as well as the consumers in India? Explain.
Answer : This is true to state that Globalisation been advantageous to both the producers as well as the consumers in India. Producers: there are two types of producers. Large producers and small producers. The big producers who join hands with the MNCs are getting the profit but the small producers face loss because they are not able to compete with the large producers. The large producers manipulate the market. They influence the price, labour, working conditions etc. So in many cases they have to shut down their business.
Consumers:
a. They get different brands of the product.
b. They get the goods and services at cheaper rate.
c. They get better quality products.

Question. Explain any three conditions that determine MNCs setting up production in other countries.
Answer : The three conditions that determine MNCs setting up production in other countries are:
a. They set up their production units where there is easy availability of cheap and skilled labour.
b. They look for the locations from the markets are close so that they will have to pay less transportation cost in supplying the final goods to the consumers.
c. They set up their business in the countries where the government policies are favourable for them. Such as in India the Indian government has given them the benefit of flexibility in labour laws.

23. Some relaxation in rules aiming to protect the workers was given to the companies investing in India. For instance, instead of hiring workers on regular basis, companies hire workers flexibly for short period during the peak period. This was done to reduce the cost of labour for the company.

24. Fair Globalisation would create opportunities for all and also ensure that the benefits of globalisation are shared better. The government can play a vital role in making of fair globalisation. Its policies should protect the interests of both rich as well as poor. The government should ensure that labour laws are properly implemented and the workers get their rights.

25. Small producers should be given due support by the government to improve their performance till the time they become strong enough to compete.

26. In the past few years, massive campaigns and representation by people’s organisations have influenced important decisions relating to trade and investments at WTO. This shows that even people can also play an important role in the struggle for fair globalisation.

Short Answer Type Questions

Question. How are multinational corporations (MNCs) controlling and spreading their productions across the world? Explain.
Answer : Multinational Corporations (MNCs) usually set up production where it is close to the markets, where there is skilled and unskilled labour available at low costs and where the availability of other factors of production is assured. MNCs also might look for government policies that look after their interests.
Having assured themselves of these conditions, MNCs set up factories and offices for production. At times they set up production jointly with some of the local companies of these countries. They provide money to these local companies for additional investments like buying new machines for faster production. They also buy up local companies and then expand production. MNCs with huge wealth can quite easily do so.
There is another way in which MNCs control production. Large MNCs in developed countries place orders for production with small producers. The products are supplied to MNCs, which then, sell these under their own brand names to the customers. Thus, we see that there are a variety of ways in which the MNCs are spreading their production and interacting with local producers in various countries across the globe.

Question. Explain with examples how the opening up of foreign trade results in connecting the markets in different countries.
                                       Or
How does foreign trade play an important role in integrating the markets across the countries? Explain.
Answer : (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.

Question. Explain any three steps taken by the Indian Government to attract foreign investment.
Answer : In the recent years, the Indian Government has taken special steps to attract foreign companies to invest in India:
(i) The government has set up industrial zones called special Economic Zones (SEZs). SEZs provide world class facilities – electricity, water, roads, transport, storage recreational and educational facilities.
(ii) Companies who set up production units in the SEZs do not have to pay taxes for an initial period of five years.
(iii) The government has also allowed flexibility in the labour laws to attract foreign investment. The companies can now lower workers ‘flexibly’ for short period when there is intense pressure of work. This is done to reduce the cost of labour for the companies.

Question. What is liberalisation? What steps were taken by the government to liberate the Indian economy?
Answer : Removing barriers or restrictions set by the government is known as liberalisation:
(i) 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. Thus, India allowed imports of only essential items.
(ii) 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.
(iii) Barriers on foreign trade and foreign investment were removed to a large extent. Now, goods could be imported and exported easily and also foreign companies could set up factories and officers here.
(iv) With libralisations of trade, businesses are allowed to make decisions freely about what they wish to import or export.

Question. Describe with an example the role of multinational corporations in the process of globalisation
Answer : MNCs have played a major role in the process of globalisation.
(i) MNCs are in search for locations around the world that are favourable for their production activities.
(ii) Foreign investment and foreign trade has increased.
(iii) A large part of the foreign trade is controlled by the MNCs.
(iv) MNCs are engaged in translocating capital, technology, people, goods and services across different nations of the world. This is how globalisation is promoted.
It can be further illustrated with the help of an example – Production of cars by Ford Motors in India would lead to interlinking of production. Ford Motors will produce various car components in India. Some other components may be produced elsewhere on the globe. Components produced in India will be shipped to Ford factories outside India. Components and other resources will be shipped to India for automobiles to be produced in India. All these processes will result in the interlinking of production.

Question. Information and communication technology or IT has stimulated the globalisation process. How would it influence the country like India where people still depend on agriculture and believe in their customs and traditions?
Answer : Rapid improvement in technology has been one major factor that has stimulated the globalisation process. For instances, the past fifty years have seen several improvements in transportation technology. This has made much faster delivery of goods across long distances possible at lower costs.
Even more remarkable have been the developments in information and communica-tion technology. In the recent times, technology in the areas of telecommunication, computers, Internet has been changing rapidly. 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. Computers have now entered almost every field of activity. Internet allows us to send instant electronic mail (e-mail) and talk (voice-mail) across the world at negligible costs.

Question. Analyse one good and one bad effect of globalisation on India.
Answer :  One good effect of globalisation on India:
Globalisation has resulted in greater competition among producers—both local and foreign. As a result, quality of the products has been improved. At the same time prices of goods have been lowered.
One bad effect of globalisation on India:
For a large number of small producers and workers globalisation has posed a great problem. The small producers failed to compete and got perished. Several units have shut down rendering many workers jobless.

Question. What would happen if Government of India puts heavy tax on import of Chinese toys? Explain any three points. 
Answer : (i) People who wish to import these toys would have to pay tax on this.
(ii) Chinese toys will cost more therefore its import will reduce.

Question. In recent years china has been importing steel from India. Explain how the import of steel by china will affect. 
(i) Steel companies in china
(ii) Steel companies in India
(iii) Industries buying steel for production if other industrial goods in china.
Answer : (i) Steel companies in china will suffer bodily at that to import steel from India.
(ii) Steel companies in India will earn huge profits due to.
(iii) Industries in china will gain more as they will be reasonable price

Question. Explain the role of government to make globalization fair. 
Answer : Government can take some of the following steps to ensure achieving fair globalization:
(i) Labour Law should be implemented properly.
(ii) Small producers should be supported.
(iii) Use trade and investment barriers efficiently.
(iv) Negotiate at the WTO for 'Fairer Rules'.

Question. What is a trade barrier? Why did the Indian Government put up trade barriers after independence? Explain. 
Answer : Trade Barriers. It refers to the various restriction which are used by the government to increase and decrease the foreign trade e.g., tax on import.
Reason behind putting barriers to foreign trade and foreign investment by the Indian Government in 1950s and 1960s was to protect the producers within the country from foreign competition. At this stage competition from imports would have hampered the growth of industries.

Question. What are the benefits of foreign trade to producers and consumers? 
Answer : Foreign trade provides an opportunity for both producers and buyers to reach beyond the markets of their own countries. Goods travel from one country to another. There is huge competition among producer of one country and producer of another country. Competition among buyers also prevails. Thus foreign trade led to integration of markets across countries. For example, during Diwali seasons, buyers in India have the option of choosing between Indian and the Chinese decorative lights and bulbs. Many shops have replaced Indian decorative lights with Chinese light. For Chinese light manufacturers, this provide an opportunity to expand.

Long Answer Type Questions

Question. What are fears of globalization?
Answer : Fears or Negative Aspects of Globalization:
(i) Globalization may not help in achieving sustainable growth.
(ii) It may lead to widening of income inequalities among various countries.
(iii) It may lead to greater dependence of the underdeveloped countries on advanced countries.
(iv) It may lead to loss of autonomy.
(v) It may impart some instability in world's economies.

Question. What was the development strategy prior to 1991 adopted by India?
Answer : Development of strategy prior to 1991 adapted by India has:
(i) Private sector as well as public sector operated side by side in the economy.
(ii) Role of public sector was expanded.
(iii) Strict regulation of private sector was observed through various instruments such as licensing system, permits, etc.
(iv) Strict norms and conditions were imposed while giving permission to foreign direct investment.
(v) Strict institutions are imports were imposed.

Question. Match the following:

Answer : (i) - (b). (ii) - (e).
(iii) - (d). (iv) - (c). (v) - (c).

Question. Globalization will continue in the future. Can you imagine what the world would be like twenty years from now? Give reasons for your answer.
Answer : After 20 years, world would undergo a positive change which will possess the following features:
Healthy competition, improved productive efficiency, increased volume of output, income and employment, better living standards, greater availability of information and modern technology.
Reasons for the views given above - following are number of favourably factors for globalization.
(i) Availability of Human Resources both quantity wise and quality wise.
(ii) Broad resource and industrial base of major countries.
(iii) Growing entrepreneurship
(iv) Growing domestic market
(v) Expanding internal markets
(vi) Economic liberalizations
(vii) Growing competition
(viii) Transratiinalisation of world economy

Question. Discuss the disadvantages of MNCs.
Answer : Disadvantages of MNCs are as follows:
(i) MNCs are profit oriented and are not concerned with an overall economic development of the host countries.
(ii) Their technology is usually capital intensive which is not suited for a country like India.
(iii) MNCs create regional economic disparities.
(iv) Foreign remittances like payment of dividend, royalties, technical know-how and professional services, etc., put a severe drain on the foreign exchange resources of a developing economy.
(v) MNCs may prove detrimental to industrial development in the long run.
(vi) MNCs expenditure on scientific research in developing economy is negligible.
(vii) MNCs often resort to undesirable and corrupt practices.
(viii) MNCs prefer to participate in the production of mass consumption and non - essential items.

Question. Give the main features of economic reforms introduced in 1991.
Answer : Main features of Economic reforms introduced in 1991 in India were:
(i) Deregulation of industries.
(ii) Liberalized policy towards foreign capital and technology.
(iii) Reduced role for public sector.
(iv) Disinvestment in public enterprises.
(v) Liberalization of import licensing.
(vi) Rationalization of tariff structure.
(vii) Reforms in foreign exchange management.
(viii) Reforms in financial sector.

QUESTION AND ANSWERS: 

Question. Name the organization lay emphasize Liberalization of foreign trade and Foreign Investment.
Answer : World Trade Organization

Question. What do you mean by FDI?
Answer : Foreign Direct Investment.

Question. What are SEZ?
Answer : Special Economic Zone

Question. Name two Indian Companies which are also known as MNC.
Answer : TATA Motors, Bajaj

Question. What is the most common route for investments by MNCs in countries around the world?
Answer : Buy existing local companies

Question. What are the advantages of foreign trade?
Answer :
• Foreign trade gives opportunity to reach buyers in domestic and international markets.
• Choice of the consumers expands manifolds
• The process of similar goods in the markets tends to become equal

Question. What is globalisation?
Answer :
• Integrating a country’s economy with world’s economy
• Foreign producers can sell their goods and services in India and Indian producers can also sell goods and services in other country.
• Inter-dependence of different countries of the world economically

Question. What are the factors that attract MNCs to set up factories in third world countries?
Answer :
• For better prospectus and profits.
• Favourable government policies
• Availability of highly skilled man power easily and cheaply.

Question. How foreign trade leads to integration of markets?
Answer :
• Trade between countries enables them to extend the boundaries of the market.
• Foreign trade enables countries of the world to consume goods that they are not able to produce
• Foreign trade helps equalizing prices over different parts of the world

Question. What is Tax Barrier? How it helps in regulating the foreign trade?
Answer :
• In some cases it may be necessary to protect local manufacturers from imports.
• Countries set up Tax Barriers to protect their National Interest
• They may be in the form of high import duty and quota restrictions.

Question. ‘Globalisation has led to the worsening of the working conditions of the laborers’. Comment.
Answer :
• Globalisation and open competition leads to insecure working conditions.
• The workers do not get a fair share of profits which the big companies make.
• Workers are exploited by the big companies as they are not given any in- job benefits. 

Question. How does liberalization contribute to the expansion of markets in India?
Answer :
• As a result of liberalization foreign companies are able to set up their offices and markets in India
• The Government of India established many Special Economic Zones where all sorts of facilities made available to foreign companies.
• Foreign companies were allowed flexibility in lab our laws so that they could employ workers for short period.

Question. How has technology stimulated the globalization process?
Answer :
• Improvement in transportation technology has made faster delivery of goods across long distances at lower rates.
• Improvement in IT Sector
• Invention of Computers, Internet, Mobile Phones, and Fax etc. has made contacts with people around the world quite easy.

Question. How do MNCs interlink production across countries?
Answer :
• MNC’s set up their production units in those areas which are quite close to the markets.
• It sets up production jointly with some of the local companies of the selected countries
• Sometimes large MNCs place orders for production with small producers and provide them money for additional investments.
• Sometimes MNCs buy local companies and then expand their production
• Provide latest technology for better and speedy production

Question. What are the factors that have enabled globalisation?
Answer :
• Rapid improvement in technology
• Development in information and communication technology.
• Liberalization of foreign investment policies of the governments.
• Pressure from international organizations such as WTO

Question. Explain any five positive impacts of globalisation.
Answer :
• Globalisation and greater competition among producers have been of advantage to consumers, in terms of wider choice, improved quality and lower prices.
• Enormous increase in foreign investment through MNCs.
• Several of the top Indian companies have been able to benefit from globalisation as they got newer technology and collaboration with foreign companies.
• Some large companies emerged as MNCs Ex. Tata Motors, Infosys.
• New opportunities are created for companies providing services especially those involving IT.
• It has enabled the third world countries to get better technology at a cheaper rate

Question. Explain any five negative impacts of globalisation.
Answer :
• Globalisation has led to widening of income inequalities among various countries.
• It has widened the gap between the rich and the poor within the countries.
• It has worsened the working condition of the labourers, especially in the unorganized
• The benefits of globalization were not equally distributed among the people, and generally the upper class, in terms of income and education, only got benefited.
• Agricultural sector has been hard hit by the policies of globalization.

Question. What measures can be taken by the government to make globalization fair?
Answer :
• The policies of the government must focus on protecting the interests of all sections of the people.
• Government should ensure that lab our laws are properly implemented and workers get their rights.
• Government should support small industries to face competitions.
• In certain situations, trade and investment barriers should be imposed.
• The government should negotiate at the WTO for fairer rules.

Question. What were the main reasons for imposing barriers in Indian after independence?
Answer :
• The term liberalization means the removal of barriers and restrictions set by the government on foreign trade.
• Governments use trade barriers to increase or decrease (regulate) foreign trade.
• Trade barriers were used to protect the domestic industries from foreign competition. E.g. Tax on imports.
• It was considered necessary to protect producers within the country from foreign competition.
• The competition from foreign competitors could have crippled the new born industries in India.

Question. Critically examine the functioning of WTO
Answer :
• The operations of the WTO will lead to undue interference into the internal affairs of different countries.
• Domination of developed countries.
• Serves the interests of the developed nations.
• Access to markets of developed countries by developing countries is negligible’
• WTO rules forced the developing countries to remove trade barriers where as many developed countries unfairly retained trade barriers.

Value Based Questions

Question. 'Integration of production and integration of markets is the key idea behind understanding
The process of globalization and its impact.'
(a) What is meant by integration of production and integration of markets?
(b) What values do you learn from the above paragraph?
Answer : (a) The goods and the components are produced in countries where the labour is cheap, laws are favourably and the skill to produce goods exists. Integration of markets mean that the goods from the site of production are set directly to the importing country.
(b) Cooperation, fairness, unprejudiced opinion.

NCERT Questions

Question. How has liberalization of trade and investment policies helped the globalization process?
Answer : It facilitated import and export of the goods easily and allowed foreign companies to set up factories and offices in India. Competition cause due to this and also helped in improving quality of the Indian products. This change in the policy was welcomed by the world community.

Question. What are the various ways in which countries can be linked?
OR
Where do MNCs set up their production units? Explain.
Answer : (i) MNCs can jointly produce with local companies of other countries.
(ii) MNCs can buy the local companies.
(iii) MNCs can place order for production like garments, footwear etc. with small producers of other countries.

Question. What do you understand by liberalization of foreign trade?
Answer : Liberalization of foreign trade riders to removal of barriers or restrictions set by the government for attracting foreign investment. Since 1991, there has been a major shift in the thrust and direction of FDI policy, which can be described as an open - door policy on foreign investment and technology transfer.

Question. How has competition benefited people in India?
Answer : Due to competition, buyers can easily get good variety of quality products of different countries at reasonable price. Producers now sell their products not only in domestic market but also in different countries and thereby increase their profits.

Question. What was the reason for putting barriers to foreign trade and foreign investment by the Indian government? Why did it wish or remove these barriers?
Answer : Reason behind putting barriers to foreign trade and foreign investment by the Indian Government in 1950s and 1960s was to protect the producers within the country from foreign competition. At this stage competition from imports would have hampered the growth of industries.
Around 1991, government felt that it was the proper time for Indian produce to face competition and improve quality of products in comparison to produces around the globe. It was welcomed by the world business community and it has attracted a huge amount of foreign investment which is crucial for the overall development of the country.

Question. Why do developed countries want developing countries liberalize trade and investment? What do you think should the developing countries demand in return?
Answer : Developed countries feel that all barriers to foreign trade and investment are harmful for international trade. They want that trade between countries like USA, UK have high production capacity and latest technology. They want their surplus produce to sell in other countries and utilize their technology to their optimal use. Therefore they want that developing countries should liberalize their trade and investment.
Developing countries should demand for fair globalization which ensure opportunities and benefits for all. Interest of the workers should also be taken care of.

Question. What is globalization? Explain.
Answer : Globalization. It means integrating the economy of a country with the economies of other countries under condition of free flow of trade and capital, and movement of persons across borders. In simple words, it means integrating our economy with the world economy.
IMF defines globalization as "The growing economic interdependence of countries worldwide through increasing volume and variety of cross border transactions in goods and services and of international capital flows, and also through more rapid and widespread diffusion of technology."
Mitchell puts it, "Globalization for better and worse, has changed the way the world does the business. Though still in its early stages, it is all but unstoppable. The challenge that individual and businesses face is learning how to live with it, manage it, and take advantage of benefits it offers."

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