Economics Ch. 4: Globalisation and the Indian Economy

EXERCISES

1. What do you understand by globalisation? Explain in your own words.

Answer: Globalisation is the process of rapid integration or interconnection between countries. MNCs are playing a major role in the globalisation process. More and more goods and services, investments and technology are moving between countries.

2. What was the reason for putting barriers to foreign trade and foreign investments by the Indian government? Why did it wish to remove these barriers?

Answer: The Indian government had put barriers to foreign trade and foreign investment because at that time it was necessary to protect the Indian producers from the foreign competition. The government removed these barriers because it decided that the time had come for Indian producers to compete with producers all around the globe. It felt that competition would improve the performance of Indian producer.

3. How would flexibility in labour laws help companies?

Answer: Flexibility in labour laws help companies to cut down the cost of production. Now, instead of hiring workers n a regular basis, companies hire workers flexibly for short periods and this reduces the cost of labour for the company.

4. What are the various ways in which MNCs set up, or control, production in other countries?

Answer: The various ways in which MNCs set up, or control, production in other countries are as follows:

(i) MNCs set up offices and factories for production in regions where they can get cheap labour and other resources.

(ii) At times, MNCs set up production jointly, with some of the local companies in these countries.

(iii) Its twin benefits are-they can provide money for additional investments like buying of new machines for faster production and MNCs might bring with them the latest technology for production.

(iv) The most common route for MNC investments is to buy up local companies and then to expand production. MNCs with huge wealth can quite easily do so.

(v) Large MNCs in developed countries place orders for production with small producers.

(vi) The products are supplied to the MNCs which then sell these under their own brand names to the customers.

5. 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: Developing countries feels that all barriers to foreign trade and investment are harmful for international trade. They want the trade between countries should be free. Developing countries should demand fair globalisation which ensures opportunities and benefits for all. Interst of the workers should also be taken care of.

6. "The impact of globalisation has not been uniform." Explain this statement.

Answer: The truth of this statement can be verified if we observe the impact of MNCs on domestic producers and the industrial working class. Small producers of goods such as batteries, capacitors, plastics, toys, tyres, dairy products and vegetable oil have been hit hard by competition from cheaper imports.While globalisation has benefited the well-off consumers and also producers with skill, education and wealth, many small producers and workers have suffered as a result of the rising competition.

7. How has liberalisation of trade and investment policies helped the globalisation process?

Answer: Liberalisation of trade and investment has facilitated globalisation by removing barriers to trade and investment. At international level, WTO has put pressure on developing couintries to liberalise trade and investment.

8. How does foreign trade lead to integration of markets across countries? Explain with an example.

Answer: Foreign trade provides opportunities for both producers and buyers to reach beyond the markets of their own countries. Goods travel from one country to another. Competition among producers of various countries as well as buyers prevails. Thus foreign trade leads to integration of markets across countries. For example, during Diwali season, buyers in India have the option of choosing between Indian and Chinese decorative lights and bulbs. So this provides an opportunity to expand business.

9. Globalisation will continue in the future. Can you imagine what the world would be like twenty years from now? Give reason for your answer.

Answer: Twenty years from now, the world will be more globally connected and integrated into one international economy, if this process continues on a fair and equitable basis.This will occur because liberalisation will get augmented and MNCs will converge with other companies producing the same goods.

10. Supposing you find two people. 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: Benefits of globalisation:

(a) Increase in the volume of trade in goods and services

(b) Inflow of private foreign capital and export orientation of the economy.

(c) Increases volume of output, income and employment.

Negative Impacts of Globalisation.

(a) It may not help in achieving sustainable growth.

(b) It may lead to widening of income inequalities among various countries.

(c) It may lead to aggravation of income inequalities within countries.

11. Fill in the blanks:

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 is increasing trade with other countries. Moreover, the rising number of brands that we see in the market might be produced by MNCs in India. MNCs are investing in India because they can get cheap labour. While consumers have more choices in the market, the effect of rising prices and standard has meant greater competition among the producers.

12. Match the following.

Answer: 

(i)	MNCs buy at cheap rates from small producers	(b)	Garments, footwear, sports items
(ii)	Quotas and taxes on imports are used to regulate trade	(e)	Trade barriers
(iii)	Indian companies who have invested abroad	(d)	Tata Motors, Infosys, Ranbaxy
(iv)	IT has helped in spreading of production of services	(c)	Call centres
(v)	Several MNCs have invested in setting up factories in India for production	(a)	Automobiles

Q.13. Choose the most appropriate option.

(i) The past two decade of globalisation has seen rapid movements of

  (a) goods, services and people between countries.

  (b) goods, services and investments between countries.

  (c) goods, investment and people between countries.

Answer: (a) goods, services and people between countries.

(ii) The most common route for investments by MNCs in countries around the world is to

(a) set up new factories.

(b) buy existing local companies.

(c) form partnership with local companies.

Answer: (b) buy existing local companies.

(iii) Globalisation has led to improvement in living conditions

(a) of all the people

(b) of people in the developed countries.

(c) of workers in the developing countries.

(d) none of the above.

Answer: (c) of workers in the developing countries.