X_Eco_Ch-4_Globalization and the Indian Economy_Practice Questions_Set-1

Class - X

Economics

Chapter - 4

Globalization in the Indian Economy

Practice Set-1

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. ​S​upposing 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.