Globalisation And The Indian EconomyClass 10 Economics NCERT Solutions
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Q1EXERCISES
What do you understand by globalisation? Explain in your own words.
Solution
Globalisation is the process of rapid integration or interconnection between countries. This process is driven by greater foreign trade and foreign investment. Multinational Corporations (MNCs) play a crucial role by spreading their production and services across the world. Globalisation involves the movement of goods, services, investments, and technology between countries, leading to a more connected and interdependent world economy.
Q2EXERCISES
What were the reasons for putting barriers to foreign trade and foreign investment by the Indian government? Why did it wish to remove these barriers?
Solution
The Indian government put barriers to foreign trade and foreign investment after Independence for the following reasons:
- To Protect Domestic Industries: In the 1950s and 1960s, Indian industries were just starting to develop. The government wanted to protect these nascent industries from foreign competition, which would have hindered their growth.
- To Promote Self-Reliance: By restricting imports of goods that could be produced domestically, the government encouraged the development of a self-reliant Indian economy.
Around 1991, the government decided to remove these barriers because:
- To Improve Performance of Domestic Producers: It was felt that Indian producers were ready to compete in the global market. Competition from foreign companies would force domestic producers to improve their quality and efficiency.
- Influence of International Organisations: Powerful international organisations supported the decision, advocating that free trade would benefit the economy.
Q3EXERCISES
How would flexibility in labour laws help companies?
Solution
Flexibility in labour laws helps companies, especially MNCs, to reduce their operational costs and increase profits. Instead of hiring workers on a permanent basis with benefits like provident fund and health insurance, companies can hire workers 'flexibly' on a temporary basis for short periods, particularly during peak seasons. This allows them to:
- Reduce Labour Costs: Companies do not have to pay wages for the entire year or provide statutory benefits to temporary workers.
- Adjust Workforce to Demand: They can easily hire more workers when there is intense pressure of work and lay them off when demand is low, without facing legal complications associated with permanent employment.
Q4EXERCISES
What are the various ways in which MNCs set up, or control, production in other countries?
Solution
MNCs use several methods to set up and control production in other countries:
- Joint Ventures: They set up production jointly with a local company. This helps the local company with additional investment and access to the latest technology.
- Acquisitions: The most common method is to buy up existing local companies and then expand production. MNCs with vast wealth can easily acquire smaller firms, gaining control over their established production facilities and marketing networks. For example, Cargill Foods bought Parakh Foods in India.
- Outsourcing/Subcontracting: Large MNCs place orders for production with small producers in developing countries. Products like garments, footwear, and sports items are produced by a large number of small producers worldwide and then sold by the MNCs under their own brand names. The MNCs determine the price, quality, and delivery conditions.
- Wholly-Owned Subsidiaries: MNCs set up their own factories and offices for production from scratch in a foreign country.
Q5EXERCISES
Why do developed countries want developing countries to liberalise their trade and investment? What do you think should the developing countries demand in return?
Solution
Developed countries want developing countries to liberalise their trade and investment policies so that their large multinational corporations (MNCs) can gain access to the vast markets in these countries. Liberalisation allows MNCs to sell their goods and services without facing high tariffs or restrictions, and to invest freely to set up production where costs are lower, thereby increasing their profits.
In return, developing countries should demand fairer trade practices from developed countries. They should demand that:
- Developed countries remove their own trade barriers: As seen in the case of agriculture, developed countries like the US have unfairly retained trade barriers and provide huge subsidies to their farmers, making it difficult for farmers from developing countries to compete.
- Fairer rules at the World Trade Organisation (WTO): Developing countries should align with other nations having similar interests to negotiate for rules at the WTO that protect their interests and do not favour developed countries.
- An end to double standards: They should insist that if they are required to stop supporting their producers, developed countries must do the same.
Q6EXERCISES
"The impact of globalisation has not been uniform." Explain this statement.
Solution
The statement "The impact of globalisation has not been uniform" is correct because different groups of people have been affected differently.
Positive Impacts:
- Consumers: Well-off consumers in urban areas have benefited significantly. They now have a wider choice of high-quality goods and services at lower prices, leading to a higher standard of living.
- Large Indian Companies: Some top Indian companies have benefited from increased competition by investing in new technology and raising their production standards. A few have even emerged as multinational corporations themselves (e.g., Tata Motors, Infosys).
- MNCs and New Service Companies: Foreign investment has increased, and new jobs have been created in industries like automobiles, IT, and electronics.
Negative Impacts:
- Small Producers: Many small manufacturers have been unable to compete with cheap imports and large MNCs. Several units have shut down, resulting in significant job losses (e.g., in industries like batteries, capacitors, toys).
- Workers: Job security has decreased for many workers. To remain competitive, employers prefer to hire workers flexibly on a temporary basis, without benefits. This has led to longer working hours, low wages, and uncertain employment, even in the organised sector.
Q7EXERCISES
How has liberalisation of trade and investment policies helped the globalisation process?
Solution
Liberalisation of trade and investment policies has been a key factor in facilitating the globalisation process. Liberalisation involves removing government-imposed barriers and restrictions on foreign trade and investment, such as import taxes (tariffs) and quotas.
This helps globalisation in the following ways:
- Facilitates Free Movement of Goods: By removing trade barriers, goods can be imported and exported more easily. This increases foreign trade and integrates markets across countries.
- Encourages Foreign Investment: Removing restrictions on foreign investment allows foreign companies, especially MNCs, to set up factories and offices in other countries. This leads to the integration of production across different locations.
In essence, liberalisation allows businesses to make decisions freely about what to import, export, and where to invest, thereby accelerating the process of interconnection and integration between countries.
Q8EXERCISES
How does foreign trade lead to integration of markets across countries? Explain with an example other than those given here.
Solution
Foreign trade leads to the integration of markets across countries by connecting producers and consumers who are geographically distant. It creates a common marketplace for goods, leading to competition and price convergence.
The key mechanisms are:
- Expansion of Choice: For buyers, imports expand the choice of goods beyond what is domestically available.
- Market Expansion: For producers, it provides an opportunity to sell their products in markets of other countries, beyond their domestic markets.
- Competition: Producers in different countries have to compete directly with each other, which can lead to improvements in quality and efficiency.
- Price Equalisation: The prices of similar goods in different markets tend to move closer to each other.
Example: Consider the market for coffee. A large coffee producer in Brazil can export its coffee beans to India. This provides Indian consumers with more choices, possibly at a different price or quality than locally grown coffee. Indian coffee producers now have to compete with the Brazilian imports. To remain competitive, they might have to adjust their prices or improve their quality. Similarly, if India exports its specialty coffee to Brazil, Brazilian consumers get more variety. This two-way trade connects the coffee markets of India and Brazil, making them integrated. A change in coffee production in Brazil due to weather could now affect the price of coffee available in India, and vice versa.
Q9EXERCISES
Globalisation will continue in the future. Can you imagine what the world would be like twenty years from now? Give reasons for your answer.
Solution
Imagining the world twenty years from now, it is likely that globalisation will lead to an even more interconnected and integrated world.
Possible Future Scenario:
- Greater Integration: Technology, especially in communication and logistics, will make physical distances even less significant. We might see near-instantaneous delivery of goods across continents through advanced logistics like drones and high-speed transport.
- Increased Choices and Competition: Consumers will have access to an even wider array of goods and services from around the globe. Competition among producers will be even more intense.
- Rise of New MNCs: More companies from developing countries may emerge as global players, challenging the dominance of American, European, and Japanese MNCs.
- Globalisation of Labour: There might be greater movement of people for work, or alternatively, more services like education, healthcare, and engineering tasks could be performed remotely from anywhere in the world.
- Struggle for Fairness: The negative impacts of globalisation, such as job insecurity and income inequality, might intensify. This could lead to stronger global movements and international regulations demanding 'fair globalisation' with protections for labour rights and the environment.
Reasons for this prediction:
- Technological Advancement: The continuous and rapid improvement in technology is a primary driver of globalisation and shows no signs of slowing down.
- Economic Imperatives: MNCs will continue to seek lower production costs and new markets to maximise profits, further driving global integration.
- Political and Social Awareness: As the downsides of globalisation become more apparent, people's organisations and governments are likely to play a more active role in shaping its future direction to make it more equitable.
Q10EXERCISES
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?
Solution
I would respond by acknowledging that both arguments hold some truth, as the effects of globalisation have been mixed and have not impacted everyone in the same way.
To the person arguing that globalisation has hurt the country's development, I would say:
"You are right to be concerned. Globalisation has posed major challenges for many. Small producers, for example, have struggled to compete with cheap imports from large multinational corporations, leading to many businesses shutting down and causing job losses. Furthermore, many workers now face insecure employment with low wages and poor working conditions, as companies cut costs to remain competitive in the global market."
To the person arguing that globalisation is helping India develop, I would say:
"You also have a valid point. Globalisation has brought significant benefits. Consumers, particularly in urban areas, now have access to a much wider variety of high-quality products at lower prices. Foreign investment has brought new technology and created jobs in sectors like automobiles and IT. Moreover, some of our own Indian companies have grown strong enough to become multinationals themselves, operating worldwide."
In conclusion, I would explain that globalisation is a complex process with both positive and negative consequences. The challenge is not to stop it, but to implement policies that can mitigate its harmful effects and ensure that its benefits are shared more equitably among all sections of society. This involves supporting small producers, protecting workers' rights, and negotiating for fairer trade rules internationally.
Q11EXERCISES
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 __________. Markets in India are selling goods produced in many other countries. This means there is increasing __________ 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 __________. While consumers have more choices in the market, the effect of rising __________ and __________ has meant greater __________ among the producers.
Solution
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 foreign 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 of lower costs of production and a large domestic market. While consumers have more choices in the market, the effect of rising imports and foreign investment has meant greater competition among the producers.
Q12EXERCISES
Match the following.
(i)
MNCs buy at cheap rates from small producers
(ii)
Quotas and taxes on imports are used to regulate trade
(iii)
Indian companies who have invested abroad
(iv)
IT has helped in spreading of production of services
(v)
Several MNCs have invested in setting up factories in India for production
(a)
Automobiles
(b)
Garments, footwear, sports items
(c)
Call centres
(d)
Tata Motors, Infosys, Ranbaxy
(e) Trade barriers
Solution
(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
Q13EXERCISES
Choose the most appropriate option.
(i)
The past two decades of globalisation has seen rapid movements in
(a)
goods, services and people between countries.
(b)
goods, services and investments between countries.
(c)
goods, investments 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 partnerships with 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
Solution
(i)
The most appropriate option is (b) goods, services and investments between countries. The chapter notes that while these have moved rapidly, the movement of people has been comparatively restricted.
(ii)
The most appropriate option is (b) buy existing local companies. The chapter explicitly states that this is the 'most common route' for MNC investments.
(iii)
The most appropriate option is (d) none of the above. The chapter clearly states that the impact of globalisation has not been uniform. It has not improved the living conditions of 'all the people' (a), nor all 'workers in developing countries' (c). While it may have benefited people in developed countries (b), its primary benefit highlighted in the Indian context is for the 'well-off sections in urban areas', a specific group not listed in the options. Therefore, none of the given broad categories are accurately described as having uniformly improved living conditions.