Chapter-4

Globalisation and the Indian Economy

Movement
of goods
and services

Production Globalisation
Movement of
across (Process of rapid intergration
Investment
countries between countries

Movement of
technology

Production across countries

Before Now
• Untill middle of the 20th • Multinational
country, production was organised corporationsemerged
within countries

• What crossed the boundries • They own or control

were raw materials, food production in more than one
stuffs and imported nished nation
goods

• Trade was the main channel • Set up of ces and

connecting countries factories in region where
they can get cheap labour
and resources
How MNC’s interlink production across counties.
MNC’s set up production unit where it is close to the market where skilled
unskilled labour is available at low cost, where government policies are
favourable.
They invest money called foreign investment
 At times set up production jointly with local companies.
Bene ts local companies by providing latest technology and additional
investment.
They buy local companies and expand production.
Place orders to small producers for products like Garments, footwear
sports items etc.
How foreign trade leads to integration of markets?
Foreign trade creates an opportunity for the producer to reach beyond the
domestic market.
Goods can be imported to expand the choice of goods for consumers.
Producers in two countries now closely compete against each other,
prices tend to become equal.

Factors that have enabled Globalisation

Technology Improvement Information Satellite Removing Internet

in technology communication barriers
Transport devices by govt

World Trade Organisation

Aim :- To liberalise international trade

Started at the initiative of the developed countries Set
up rules regarding international trade.
Force developing countries to remove trade barriers
Developed countries have unfairly retained trade barriers
Impact of Globalisation
For consumers:- Improved quality, lower prices, variety of choices, higher
standard of living.
Job have been created.
Local companies supplying raw material to MNC’s have become
prosperous.
Top Indian companies have been benefitted from increased competition.
Some Indian companies also emerged as MNC’s e.g. Tata Motor, Infosys,
Ranbaxy, Asian Paints
Struggle for a fair Globalisation
Fair globalisation would create opportunities for all.
The govt. must protect the interests of all the people in the country.
Government can ensure that labour laws are properly implemented and
workers get their rights.
Government can negotiate at the WTO for farier rules.
It can also align with other developing countries.
Liberalisation of foreign trade and foreign investment policy.
Starting around 1991, barriers on foreign trade and foreign investments
were removed to a large extent.
It allowed foreign companies to set up factories and offices in India.
Goods could be imported and exported easily.

Key Points to Remember:

• Globalisation is a process of international integration arising from
the interchange of world views, products, ideas and other aspects of
a culture.
• Multinational Corporation (MNC) is an enterprise operating in
several countries but Managed from one country or group that
derives a quarter of its revenue from operations outside of its home
country.
• Liberalization refers to the reduction or elimination of government
regulation or restrictions on private business and trade.
• Investment is the purchase of goods (such as machine, house, and
other parts etc.) that are not consumed today but are used in the
future to create wealth.
• Foreign Trade is basically trade between two different countries of
the world. It is also known as international trade.
• World Trade Organization is the only global international
organization dealing with the rules of trade between nations. The
 main aim of this organization is to liberalize the law of trade between
the nations.
• Privatization is the transfer of a business, industry, or service from
public to private ownership and control.
• Foreign Investment is when a company or individual from one
nation invests in assets or ownership stakes of a company based in
another nation.
• SEZ is a special economic zone of a country that is subject to unique
economic regulations that differs from other areas in the same
country. These regulations tend to be conductive to foreign direct
investment.

Very Short Answer Type Questions ( 1 mark each)

Q.1 What is Globalization?
Q.2 Give one example of Trade Barriers?
Q.3 When did India adopt the new economic policy?
Q.4 Provide one example of Indian MNC's?
Q.5 Why does MNC's Invest in different countries?
Q.6 Which sector of economy is still lagged behind even after the
Globalization?
Q.7 When did Ford Motors established in India?
Q.8 What is privatization?
Q.9 A company which has ownership or control in more than one country
is know as ?
Q. 10 In which category you will put Indian Economy?

ANSWERS
Ans.1 Globalization is the integration or interconnection between the
countries through trade and foreign investment by multinational
corporations.
Ans.2 Tax on Export
Ans.3 1992
Ans.4 Tata Motors
Ans. 5 To earn more profits.
Ans. 6 Agriculture Sector
Ans.7 1995
Ans. 8 Privatization means allowing the private sector to set up industries
which were earlier reserved for the Public sector.
Ans. 9 MNC's Ans. 10
Mixed Economy

1 Mark Questions
Q.1 Removing barriers or restrictions set by govt. is called__________.
Q.2 Name the Indian manufacturer with which Ford Motors entered the
Indian automobile business?
Q. 3 Which Indian company has been bought by Cargill foods and MNC?
Q.4 Globalisation has posed major challenges for
(a) big producers b) small producers
c) rural poor d) none of these
Q.5 Which of the following is an example of a trade barrier?
a) foreign investment b) delay or damage of goods
c) tax on imports d) none of these
Q.6 State the main motive of MNC?
Answers
1) Liberalisation
2) Mahindra and Mahindra
3) Parakh Foods
4) Small producers
5) Tax on Imports
6) To earn greater profit
LONG ANSWER TYPE QUESTIONS (3 OR 5 MARKS EACH)
Q.1 What do you mean by globalization? What are the effects of
globalization in India?
Q.2 What is WTO? What are the aim of WTO? What are the drawback of
WTO?
Q.3 What is MNC's? How MNC's can spread and get control over
productions?
Q.4 What is investment? How is foreign investment different from it?
Q.5 Why are the trade barriers imposed on the foreign trade and investment
in a country?
Q.6 Describe any five advantages to consumers due to globalization and
greater competition among producers.
Q.7 What are the factors have stimulated the globalization process?
Q.8 How the liberalization policy was gradually adopted in India?
Q.9 What is liberalization? Describe any five effects of liberalization on the
Indian Economy.
Q.10 How information technology is encouraging the Globalisation ?
Explain

3/5 Marks Questions

Q. 11 Explain how globalisation can be made fairer?
Q.12 Explain with examples how top Indian companies have benefitted
from globalisation.
Q.13 “Foreign trade integrates the markets in different countries”. Support
the statement with argument.
Q.14 “A wide ranging choice of goods are available in the Indian markets”.
Support the statement with examples in context of globalisation
Q.15 Explain the steps taken by government to attract foreign investment.
Q.16 “Not every state of India has benefitted from globalisation”. Examine
the statement.
Answers
Ans.1 Globalization is the integration or interconnection between the
countries through trade and foreign investment.
Positive Impacts:
• Greater choice and improved quality of goods at competitive price and
hence raises standard df living.
• MNC's have increased investment in India.
• Top Indian companies emerged as multinationals.
• Created new opportunities for companies providing services like
IT sector.
• Collaboration with foreign companies help a lot to domestic
entrepreneurs.

Negative Impacts:
• Indian economy faced the problem of brain drain.
• Globalization has failed to remove unemployment and poverty.
• Cut in farm subsidies.
• Closure of small industries.

Ans:2 WTO is World Trade Organization. It is an organization which is in

favor of increasing the world trade through globalization.

The Aim of WTO:

• To liberalize International trade by allowing free trade for all.

• To promote international trade among the countries of the world in an

open uniform and non-discriminatory manner.

• Removal of both the import and export restrictions.

The Drawback of WTO:

• It is dominated by developed countries.

• It is used by developed countries to support globalization in areas that

are not directly to trade.
Ans.3 MNC's are Multinational corporations. It is a company that owns or
controls production in more than one nation. MNC's can spread and
control by:

• Setting up joint production units with local companies.

• To buy up local companies and expanding its production base.

• Placing orders with small producers.

• By using their Brand.

Ans. 4 The money that is spent to buy assets such as land, building,
machines and other equipment is called investment.
Investment made by MNC's is called foreign investment. Every investment
is made with the hope that the assets will earn profits for these
companies.

Ans. 5 Trade barriers are used by the government:

• To increase, decrease or regulate foreign trade.

• To decide what kinds of goods and how much of each, should come into
the country.

• To protect the producers within the country from foreign competition.

Ans. 6 • There is a greater choice before consumers along with

competitive price.

• Then enjoy improved quality and lower prices for several products.

• They enjoy much higher standards of living that was possible earlier.

• Strengthening of Consumers Right like — Right to Information, Right to

choose, Right to Be Heard, Right to Seek Redressal has been given to
consumers.

• Legal. rights of consumers have become more effective.

Ans. 7 • Improvement in Transportation

• Development of Information Technology

• Telecommunication

• Computers

• Internet

Ans. 8 • After Independence, the Indian government put barrier on foreign

trade and foreign 'investment.

• Initially, Indian Industries were just coming up after Independence, so

competition from imports wouldn't have allowed these industries to
come up.
• In 1991, the government decided that the time has come for Indian
producers to compete the producers around the globe.
Ans. 9 Removing barriers or restrictions set by the government is known
as liberalization.
• Competition would improve the performance of producers within the
country.
• Barriers on foreign trade and foreign investment were removed to large
extent. This meant that goods could be imported and exported easily.
• Foreign companies could set up factories and offices to boost up
production. It allows making decision freely.
• The competition would improve the performance of producers
within the country since they have to improve their quality.
Ans. 10
• With Improvement in transportation technique now It become easier to
send good at distance place at lower cost.
• Sending and receiving information are now become easier.
• There is rapidly increase in trade with the help of information and
Technology.
 Answers
Ans.11 From Notes
Ans. 12 a) Several of the top Indian companies have been able to benefit
from the increased competition
b) They have invested in newer technology and production
methods and raised their production standards.
c) Gained from successful collaborations with foreign
companies.
d) Some large Indian companies emerged as multinationals
themselves.
e) Created new opportunities for companies providing services
particularly those involving IT.
Ans. 13 From notes.
A wide ranging choice of goods are available in the Indian
Ans. 14
market.
a) The latest model digital cameras, mobile phones and television
made by the leading manufactures of the world are within our
each.
b) Every season, new models of automobiles can be seen on
Indian roads.
c) A similar explosion of brands can be seen for many other
goods.
Government can take following steps to attract foreign
Ans. 15
investment:
a) Industrial zones called SEZ (Special economic zones) are
being set up to provide world class facilities-electricity, water,
roads, transport, storage etc.
b) Govt. has also allowed flexibility in the labour laws to attract
foreign investment.
c) Instead of hiring workers on a regular basis companies can
hire workers ‘flexibly’ for short provide when there is intense
pressure of work.
d) Exemption from paying tax in early 5 years
Ans. 16 Do it yourself from the notes.