DELHI PUBLIC SCHOOL BANGALORE – EAST
SOCIAL SCIENCE (ECONOMICS)
GLOBALISATION (NOTES)
1.Globalisation: Globalisation refers to the integration of the domestic economy with the economies of
the world or it is the process of rapid integration or interconnection between countries.
2.MNC: A Multi National Company is a company that owns and controls production in more than one
nation.
3.Investment: The money that is spent to buy assets such as land, building, machines and other
equipment is called investment. Any investment is made with the hope that these assets will earn
profits. Foreign Investment is investment made by MNCs.
4.Liberalisation: Liberalisation means the removal of trade barriers and restrictions set by the
government on foreign trade.
5. Trade Barriers: Various restrictions which are used by the government to increase or
decrease Foreign Trade.
6.World Trade Organization: WTO was started at the initiative of the developed countries. Its main
objective is to liberalise international trade.
7.Privatisation means transfer of ownership of property from public sector to private sector.
8.Business Process Outsourcing (BPO) is the process of giving contract of non-primary business
activities and functions to a third-party service provider.
9.Economic Reforms or New Economic Policy is the policy adopted by the Government of India since
July 1991. Its key features are Liberalization, Privatisation and Globalisation (LPG).
10.Special Economic Zones: Setting up of industrial zones by the central and state governments to
attract Foreign Companies to invest in India which have world class facilities, electricity, water, roads,
transport, storage, recreational and educational facilities.
Very Short Answer
11.State any one reason as to why had the Indian Government put barriers to foreign trade and
foreign investment after independence?
Ans: To protect the producers within the country from foreign competition.
12. How did ‘Cargill Foods’ become the largest producer of edible oils in India? Explain.
Ans: Cargill Foods, a very large American MNC, bought Parakh foods, which had a large marketing
network in many parts of India. It was a well reputed company. It had four oil refineries; whose control
passed to Cargill Foods. Cargill Foods is, now, the largest producer of edible oil in India, with a
capacity of making 5 million pouches daily.
13.What is the importance of Trade Barriers?
Ans: Government uses trade barriers to increase or decrease Foreign Trade and to decide what kind of
goods and how much of each, should come into the country and also to protect the domestic industries
from foreign competition. Example, Tax on imports.
14.How would flexibility in labour laws help companies?
Answer: Flexibility in labour laws will help companies in being competitive and progressive. By
easing up on labour laws, company heads can negotiate wages and terminate employment, depending
on market conditions. This will lead to an increase in the company’s competitiveness.
15.What are the advantages of foreign trade?
Ans: *‘Foreign Trade’ has facilitated the travel of goods from one market to another.
*It provides a choice of goods to the buyers.
*Producers of different countries have to compete in different markets.
*Prices of similar goods in two markets in two different countries become almost equal.
*It provides consumers with better quality goods.
16.Why did Ford Motors want to develop Ford India as a component supplying base for its other
plants across the globe? Explain.
Ans: *Ford Motors was selling 27,000 cars in the Indian market and 24,000 cars were exported from
India to South Africa, Mexico and Brazil. India was making components and know how to produce
them, so they could be easily manufactured and sent across the globe.
* Sending components from India to other plants will reduce the time in manufacturing the components
and the orders could be placed immediately.
*Same plants would not need to be set up at all locations.
Answer in brief
17.What is the impact of WTO on Indian economy?
Ans. *An opportunity to India for trading with other member countries.
* Availability of foreign technology to India at a reduced cost.
* Many laws of WTO are unfavorable to the developing countries like India.
* Certain clauses of WTO agreement on agriculture put restrictions on the provision of subsidised food
grains in India.
18.‘Barriers on foreign trade and foreign investment were removed to a large extent in India since
1991.’ Justify the statement.
Ans: *In 1991, the Indian government realised that its domestic industries had established themselves and
it was the proper time to face competition
*It felt that foreign competition would improve the quality of goods produced by Indian producers
within the country.
*Thus, barriers on foreign trade and foreign investment were removed to a large extent. It meant
goods could be imported or exported easily and foreign companies could set up factories and offices in
India.
19.“A wide-ranging choice of goods are available in the Indian markets.” Support the statement
with examples in context of globalisation.
Ans: *The Indian market has been transformed in recent years. The consumers have a wide variety of
goods and services to choose from, which were not available earlier. For example:
*The latest models of mobile phones, television, digital cameras of leading manufacturers and other
well-known brands of the world are easily available in the markets.
*New models of cars and automobiles are launched every season.
*The top companies in the world have introduced their popular brands in India for various products
like shirts, fruit juices, cosmetics, toys, furniture, stationery etc.
*All this has been possible only due to globalisation.
20. 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: *Developed countries want developing countries to liberalise 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.
21.The impact of globalisation has not been uniform.” Explain.
Answer: “The impact of globalisation has not been uniform”. 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.
Workers are now employed “flexibly” in the face of growing competition. This has reduced their job
security. Efforts are now on to make globalisation “fair” for all since it has become a worldwide
phenomenon.
*For consumers, choice of goods in the market rises, prices of similar goods in the two markets tend to
become equal and better-quality products are available at a competitive price.
*Producers in different countries closely compete against each other even though they are separated by
thousands of miles. Thus, foreign trade results in connecting the markets or integration of markets in
different countries.
22.Globalisation creates wide-ranging disparities in the domestic and international community. It
reaps enormous benefits for the rich while affecting the poor unfavourably. Taking this in view,
there is a popular demand for fair Globalisation. Give suggestions to bring fair globalisation.
• Trade policies must focus on protecting the interests of all domestic producers.
• Workers, both industrial and agricultural, should not face the brunt of blinded progress.
• Governments should negotiate with the WTO for fairer rules of trade.
Answer in detail:
23. Explain the factors which has helped in globalization.
*Technology. Rapid improvement in technology has contributed greatly towards globalization.
*Development in information and communication technology has also helped a great deal.
Telecommunication facilities — telegraph, telephone (including mobile phones), fax is now used to
contact one another quickly around the world. Teleconferences help in saving frequent long trips
across the globe.
*Information technology has also played an important role in spreading out production of services
across countries. Orders are placed through internet, designing is done on computers, even payment for
designing and printing can be arranged through internet.
* Liberalisation of trade and investment policies has helped the globalisation 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. But with many of the
countries opening their market to the world we could say that liberalisation has helped in globalisation.
24. “Globalisation and greater competition among producers has been of advantageous to
consumers.” Justify the statement with examples.
Ans: *Consumers in today’s world have a wide variety of goods and services to choose from. The
latest models of digital cameras, mobile phones and televisions made by the leading manufacturers
are available to them.
* Consumers now enjoy better and improved quality at lower prices.
*It has resulted in higher standards of living.
*There has been a varying impact on producers and workers.
* Many top Indian companies have been able to establish themselves as multinational corporations.
* Latest technology and production methods have raised production standards.
25. How have our markets been transformed? Explain with examples.
Ans: *The advent of globalisation and the policy of liberalization have opened the market to the world
players. It has given rise to wide choice of goods and services to the consumers.
*MNCs have played a vital role in the world market. Foreign trade and investment in the country has
increased. It has also resulted in exchange of technology between countries.
*In recent times, technology in the areas of telecommunications, computers and internet has been
changing rapidly.
*Globalisation has also created new opportunities for companies providing services, particularly those
involving in IT. Better job opportunities for people have given rise to migration.
*Globalisation has also enabled some large Indian companies to emerge as multinationals For
example, Tata Motors, Infosys, Ranbaxy have expanded their operations around the world.
26. Describe any five factors that is considered by the Multinational Corporations (MNCs) to set up
their production units in a particular place.
Ans: The factors that MNCs take into consideration to set up their production units in a particular
place are:
*where it is close to the markets.
*where the skilled and unskilled labour at low costs is available.
*where the favourable government policies looking after their interest are present.
*where the other factors of production such as raw materials, water, electricity and transport are
available.
*where there are standard safety measures for assured production.
27.What was the reason for putting barriers on foreign trade and foreign investment by the Indian
government?
Ans: *The Indian government after independence had put barriers on foreign trade and investment. This
was done to protect the producers within the country from foreign competition. Industries were just
coming up in the 1950s and 1960s and competition from imports at that stage would not have allowed
these industries to develop and grow. Imports of only essential items such as machinery, fertilizers,
petroleum etc. was allowed.
*To protect the Indian economy from foreign infiltration in industries affecting the economic growth of
the country as planned. India wanted to move faster to catch up with the main industries in the world
market and therefore had to keep an extra watch on its progress in international trade and give
incentives to the more rapidly growing industries through fiscal tariff and other means.
28. What are the various ways in which MNCs set up, or control production in various countries?
Ans: *MNCs set up offices and factories for production in regions where they can get cheap labour and
other resources; e.g., in countries like China, Bangladesh and India.
*At times, MNCs set up production jointly with some of the local companies of countries around the
world. The benefit of such joint production to the local company is two-fold. First, the MNCs can
provide money for additional investments for faster production. Secondly, the MNCs bring with them
the latest technology for enhancing and improving production.
*Some MNCs are so big that their wealth exceeds the entire budgets of some developing countries. This
is the reason why they buy up local companies to expand production. Example, Cargill Foods, An
American MNC has bought over small Indian company such as Parakh Foods.
*MNCs control production by placing orders for production with small producers in developing nations;
e.g., garments, footwear, sports items etc. The products are supplied to these MNCs which then sell
these under their own brand name to customers.
29. Explain the impact of Globalisation on Indian Economy.
OR
“The phenomenon of Globalisation has a varied impact on different countries and people.” Explain
the impact of globalisation with respect to the Indian Economy.
Ans: * Greater competition among producers – both local and foreign producers have been of advantage
to consumers.
*There is greater choice before these consumers who now enjoy improved quality and lower prices for
several products.
*Foreign investment has increased.
*Increased competition has encouraged top Indian Companies to invest in newer technology and
production methods and raise their production standards.
*Globalisation has enabled some large Indian Companies to emerge as Multinationals.
*Created new opportunities for companies providing services particularly those involving Information
Technology.
30.How has liberalisation of trade and investment policies helped the globalisation process?
Ans: *Liberalisation of trade and investment policies has helped the globalisation 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,
liberalisation has led to a further spread of globalisation 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.
31.“Fair globalisation creates opportunities for all and also ensures that the benefits of globalisation
are shared better. The government can play a major role in making this possible.” With respect
to this statement explain the role of government in bringing fair globalisation.
Ans: Some of the steps that the government can take are:
*It can ensure that labour laws are properly implemented and the workers get their rights.
*It can support small producers to improve their performance.
*If necessary, the government can use trade and investment barriers.
*It can negotiate at the WTO for ‘fairer’ rules.
*It can also align with other developing countries with similar interests to fight against the domination of
developed countries in the WTO.
32.Describe the major problems created by the globalisation for a large number of small producers
and workers.
Ans: The major problems created by the globalisation for a large number of small producers and workers
are:
*The small producers or workers either have to compete or perish.
* Small scale industries like batteries, capacitors, plastic toys etc. have been hit hard due to global
products and have suffered great losses in their businesses.
* Several small factory units are forced to shut down.
*Millions of workers have gone jobless and jobs are no longer secure.
*It has increased income inequalities among various countries.
*Unorganised sector has expanded.
33.What are the effects of globalization in India?
Ans. Globalization is the integration or interconnection between the countries through trade and foreign
investments by multinational corporations (MNCs).
Positive impacts:-
1) Greater choice and improved quality of goods at competitive price and hence raises standard of living.
2) MNCs have increased investments in India.
3) Top Indian companies emerged as multinationals.
4) Created new opportunities for companies providing services like IT sector.
5) Collaborations with foreign companies help a lot to domestic entrepreneurs.
Negative impacts:-
1) Indian Economy faced the problem of brain drain.
2) Globalization has failed to mark its impact on unemployment and poverty.
3) Cut in farm subsidies.
4) Closure of small industries.
34. “We have reduced trade barriers as per WTO rules. But you have ignored the rules of WTO and
have continued to pay your farmers vast sums of money. You have asked our governments to stop
supporting our farmers, but you are doing so yourself.” With respect to the statement answer the
questions.
(a)What is WTO?
(b)What are the aims of WTO?
(c)What are the drawbacks of WTO?
Ans. (a). WTO is World trade organization. It is an organization which is in favour of increasing the world
trade through globalization.
(b). The aims of WTO are:
(i) To liberalise international trade by allowing free trade for all.
(ii) To promote international trade among the countries of the world in an open uniform and non-
discriminatory manner.
(iii) Removal of both the import and export restrictions.
(c). The drawbacks of WTO are:
1) WTO is dominated by the developed countries.
2) WTO is used by developed countries to support globalization in areas that are not directly related to
trade.
3) Though WTO is supposed to allow free trade for all, in practice, it is seen that the developed countries
have unfairly retained trade barriers.
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