X_Economics_Ch-4_Globalization_QuesAns.

Class - X

Economics

Chapter - 4

Globalization in the Indian Economy

Practice Set

Q.1. What do you understand by globalization? Explain in your own words.
Answer. Globalization means integrating the economy of a country with the economies of other countries under conditions of free flow of trade, capital and movement of persons across borders. It includes:
(i) Free export and import of goods and services.

(ii) Unrestricted export and import of techniques of production.
(iii) Free flow of capital and finance from one country to the other.
(iv) Freedom of migration of people from one country to another.

Q.2. 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. The Indian government had put barriers to foreign trade and foreign investment to protect domestic producers from foreign competition, especially when industries had just begun to come up in the 1950s and 1960s. At this time, competition from imports would have been a death blow to growing industries. Hence, India allowed imports of only essential goods.

            In New Economic Policy in 1991, 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. This decision was also supported by powerful international organizations.

Q.3. How would flexibility in labor laws help companies?
Answer. Flexibility in labor laws will help companies in being competitive and progressive. By easing up on labor laws, company heads can negotiate wages and terminate employment, depending on market conditions. This will lead to an increase in the company's competitiveness.

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

Answer. Multinational Corporations (MNCs) set up their factories or production units close to markets where they can get desired type of skilled or unskilled labour 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 of the host 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.

→ They even set up new companies in the host country.

Q.5. Why do developed countries want developing countries to liberalize their trade and investment? What do you think should the developing countries demand in return?

Answer. Developed countries want developing countries to liberalize their trade and investment because then the MNCs belonging to the developed countries can set up factories in less-expensive developing nations, and thereby increase profits, with lower manufacturing costs and the same sale price.

            In my opinion, the developing countries should demand, in return, for some manner of protection of domestic producers against competition from imports. Also, charges should be levied on MNCs looking to set base in developing nations.

Q.6. "The impact of globalization has not been uniform." Explain this statement.
Answer. "The impact of globalization has not been uniform". It has only benefitted skilled and professional person in urban not the unskilled persons. The industrial and service sector has much gained in globalization than in agriculture. It benefitted 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.

Q.7. How has liberalization of trade and investment policies helped the globalization process?

Answer. Liberalization of trade and investment policies has helped the globalization process by making foreign trade and investment easier. Earlier, several developing countries had placed barriers and restrictions on imports and investments from abroad to protect domestic production. However, to improve the quality of domestic goods, these countries have removed the barriers. Thus, liberalization has led to a further spread of globalization because now businesses are allowed to make their own decisions on imports and exports. This has led to a deeper integration of national economies into one conglomerate whole.

Q.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.

Q.9. 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 twenty 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.

Reason for the views given above : These are the favorable factors for globalization :
→ Availability of human resources both quantitywise and qualitywise.

→ Broad resource and industrial base of major countries.

→ Growing entrepreneurship

→ Growing domestic market.

Q.10. Supposing you find two people arguing: One is saying globalization has hurt our country's development. The other is telling, globalization is helping India develop. How would you respond to these organizations?

Answer. Benefits of globalization of India :

→ Increase in the volume of trade in goods and services

→ Increase in inflow of private foreign capital and export orientation of the economy.

→ Increase in the volume of output, income and employment.

Negative Impact / Fears of Globalization.

→ It may not help in achieving sustainable growth.

→ It may lead to widening of income inequalities among various countries.

→ It may lead to aggravation of income inequalities within countries.

            Whatever may be the fears of globalization, I feel that it has now become a process which is catching the fancy of more and more nations. Hence we must become ready to accept globalization with grace and also maximize economic gains from the world market.