Class 10 Economics

Globalisation and the Indian Economy

NCERT Solution

Select the correct otion
  • The past two decades of globalisation has seen rapid movements in
    • Goods, services and people between countries.
    • Goods, services and investments between countries.
    • Goods, investments and people between countries.

    Answer: Goods, investments and people between countries
  • The most common route for investments by MNCs in countries around the world is to
    • Set up new factories.
    • Buy existing local companies.
    • Form partnerships with local companies.

    Answer: Form partnership with local companies
  • Globalisation has led to improvement in living conditions
    • of all the people
    • of people in the developed countries
    • of workers in the developing countries
    • none of the above

    Answer: none of the above

Answer the following questions

  • What do you understand by globalisation? Explain in your own words.
    Answer: Integration of the world market in various ways is called globalization. Take example of Microsoft. Microsoft is having its headquarters in USA. This company is getting part of its software developed in India and several other countries. And Microsoft’s software is being used across the world. Another example can be Ford motors based in USA. Ford is having manufacturing plants in Chennai and cars manufactured in Chennai go for sale in other countries. Moreover, company may be getting gear boxes produced in some other country, seat belts from a different country, lights, rear view mirrors in some other nation by some other company. Almost all the components get supplied by various vendors to the Ford motor, which assembles them to make the car.
  • What was the reason for putting barriers to foreign trade and foreign investment by the Indian government? Why did it wish to remove these barriers?
    Answer: When India became independent, it was a poor country and private capital was negligible. At that time, it was necessary to protect the local industry so that they could grow to a certain size. This was the reason various trade barriers were in place in India. Once the situation improved and India became a ready market, the government decided to open up the market for foreign players.
  • How would flexibility in labour laws help companies?
    Answer: Flexibility in labour laws can help companies in keeping the size of the workforce under control. A company can hire and fire as per the seasonal variation in demand for the workforce. During lean season, it won’t be forced to carry a bloated workforce and thus can cut costs. This will definitely help in improving profitability.
  • What are the various ways in which MNCs set up, or control, production in other countries?
    Answer: MNCs set up or control production in other countries in various ways. Some of them are discussed below:
    • Many MNC make a joint venture with a domestic company to start its operations. This helps the MNC because the domestic company has the knowhow of the local business conditions. Moreover, the domestic company already has an established framework of business.
    • Once the business grows upto a certain size, the MNC can break the tie up and operate as an independent company. This helps it in having a greater control on the business.
    • Some MNCs start as independent entity right from the first day.
    • While some of the MNCs produce entirely for the local market, many others produce for the exports markets.
  • Why do developed countries want developing countries to liberalise their trade and investment? What do you think should the developing countries demand in return?
    Answer: The companies in the developed countries often pressurize their governments to create business-friendly environment in other countries. Due to this, developed countries want developing countries to open up their markets. The developing countries should demand the same favour in return.
  • “The impact of globalisation has not been uniform.” Explain this statement.
    Answer: While globalization has definitely changed the way business is being done in India and people go about their daily life, a large section of population is still to taste the fruit of development. The rich have become richer, but the poor have become poorer. Due to increased competition, many smaller entrepreneurs are unable to survive. Many workers have lost their job due to increased competition. On the other hand, consumers have better choice for almost every product. It can be said that the impact of globalization has not been uniform.
  • How has liberalisation of trade and investment policies helped the globalization process?
    Answer: Liberalisation of trade and investment policies has immensely helped in globalization process. There has been significant increase in FDI in India. Many large MNCs have opened their production centres and shops in India. Business Process Outsourcing has grown manifold and has generated lot of employment. All of this could have been possible because of liberalization policies.

  • How does foreign trade lead to integration of markets across countries? Explain with an example other than those given here.
    Answer: Foreign trade connects various markets of the world and thus leads to integration of markets across countries. To understand this, we can take the example of mobile phone. The major companies which manufacture mobile phone are in America and Europe. The product is designed in these countries. Different components of mobile are manufactured in the east Asian nations; like Malaysia, China and Taiwan. Most of them are assembled in China and India. The finished products are used all over the world. This shows the integration of markets across various countries.
  • Globalisation will continue in the future. Can you imagine what the world would be like twenty years from now? Give reasons for your answer.
    Answer: Twenty years from now, we shall be in a position to place a real time order to a company in any part of the world. We may be able to customize a product according to our specifications and this would be possible because of internet. Because of faster modes of transport, a product would be delivered anywhere in the world in no time.
  • Supposing you find two people arguing: One is saying globalisation has hurt our country’s development. The other is telling, globalisation is helping India develop. How would you respond to these arguments?
    Answer: In my view, globalization has helped in developing India. My parents say that when I was not borne, telephone used to be a luxury. One had to wait for many years to get a telephone connection. People used to communicate through letters which were painfully slow to reach. They say that globalization has helped in making mobile telephone a reality in India. I cannot imagine about a life without mobile phone. Even the local grocery store is able to do more business because of mobile phone.
  • Fill in the blanks.
    Answer: Indian buyers have a greater choice of goods than they did two decades back. This is closely associated with the process of globalisation. Markets in India are selling goods produced in many other countries. This means there isincreasing trade with other countries. Moreover, the rising number of brands that we see in the markets might be produced by MNCs in India. MNCs are investing in India because it is beneficial for them. While consumers have more choices in the market, the effect of rising demand and expectations has meant greater competition among the producers.
Column I Column II
MNCs buy at cheap rates from small producers Garments, footwear, sports items, etc.
Quotas and taxes on imports are used to regulate trade Trade barriers
Indian companies who have invested abroad Tata Motors, Infosys, Ranbaxy
IT has helped in spread of production services Call centres
Several MNCs have invested in setting up factories in India for production Automobiles