Economics Question & Answers Chapter 4 Class 10 CBSE Board

Globalisation and the Indian Economy

LET’S WORK THIS OUT (Page No. 57)

Complete the following statement to show how the production process in the garment industry is spread across countries.

The brand tag says ‘Made in Thailand’ but they are not Thai products. We dissect the manufacturing process and look for the best solution at each step. We are doing it globally. In making garments, the company may, for example, get cotton fibre from Korea, ……..

Answer: “…get cotton fibre from Korea, spin yarn in Vietnam, weave cloth in India, stitch the garments in Thailand, and sell these products in the United States.”

LET’S WORK THIS OUT (Page No. 59)

Ford Motors, an American company, is one of the world’s largest automobile manufacturers with production spread over 26 countries of the world. Ford Motors came to India in 1995 and spent Rs. 1700 crore to set up a large plant near Chennai. This was done in collaboration with Mahindra and Mahindra, a major Indian manufacturer of jeeps and trucks. By the year 2017, Ford Motors was selling 88,000 cars in the Indian markets, while another 1,81,000 cars were exported from India to South Africa, Mexico, Brazil and United States of America. The company wants to develop Ford India as a component supplying base for its other plants across the globe.

Read the passage on the left and answer the questions.

1. Would you say Ford Motors is a MNC? Why?

Answer: Yes, Ford Motors is a Multinational Corporation (MNC) because it owns and controls production in more than one country and has its production spread over 26 countries of the world.

2. What is foreign investment? How much did Ford Motors invest in India?

Answer: When a company invests money to buy assets such as land, building, machines, and equipment in another country, it is called foreign investment.
Ford Motors invested Rs. 1700 crore to set up a large plant near Chennai in India.

3. By setting up their production plants in India, MNCs such as Ford Motors tap the advantage not only of the large markets that countries such as India provide, but also the lower costs of production. Explain the statement.

Answer: MNCs like Ford Motors set up production in India because they get cheap labour and other resources here. This reduces the cost of production. At the same time, India provides a large market for selling their products. So, they gain both low costs and a large number of buyers.

4. Why do you think the company wants to develop India as a base for manufacturing car components for its global operations? Discuss the following factors:

(a) cost of labour and other resources in India.

Answer: Labour and resources are cheaper in India than in many other countries, which helps reduce costs.

(b) the presence of several local manufacturers who supply autoparts to Ford Motors.

Answer: There are many local companies that can supply parts easily and at low prices.

(c) closeness to a large number of buyers in India and China.

Answer: India and China have a large population and growing markets, so production here makes it easier to supply cars to nearby buyers.

5. In what ways will the production of cars by Ford Motors in India lead to interlinking of production?

Answer: The production of cars by Ford Motors in India will involve many local companies that supply car parts, materials, and services. These local producers become part of the production process. Thus, production in India gets linked with production in other countries, leading to interlinking of production across the globe.

6. In what ways is a MNC different from other companies?

Answer: An MNC operates in more than one country, while other companies are limited to one nation. MNCs have large wealth, advanced technology, and control production and trade across many countries.

7. Nearly all major multinationals are American, Japanese or European, such as Nike, Coca-Cola, Pepsi, Honda, Nokia. Can you guess why?

Answer: Because these countries are highly developed, have large wealth, advanced technology, and skilled managers, which helps them expand their production and business all over the world.

LET’S WORK THIS OUT (Page No. 61)

1. What was the main channel connecting countries in the past? How is it different now?

Answer: In the past, foreign trade was the main channel connecting countries. It mainly involved the exchange of raw materials, foodstuff, and finished goods between nations.
Now, apart from trade, countries are also connected through foreign investments by MNCs, technology, and services, making the connection much deeper and more complex.

2. Distinguish between foreign trade and foreign investment.

Answer:

3. In recent years China has been importing steel from India. Explain how the import of steel by China will affect.

(a) steel companies in China.

Answer: They will face losses because imported steel from India will be cheaper, reducing their sales and profits.

(b) steel companies in India.

Answer: They will gain as their exports increase, leading to more production and higher profits.

(c) industries buying steel for production of other industrial goods in China.

Answer: They will benefit because they can buy cheaper steel from India, reducing their production costs.

4. How will the import of steel from India into the Chinese markets lead to integration of markets for steel in the two countries? Explain.

Answer: When steel is traded between India and China, the prices of steel in both countries start to become similar, and producers in both nations compete with each other.
This means the markets of steel in India and China get connected, leading to integration of markets across countries.

LET’S WORK THIS OUT (Page No. 62)

1. What is the role of MNCs in the globalisation process?

Answer: MNCs play a major role in the process of globalisation. They connect different countries by setting up production units, trading goods and services, and investing money in various nations.
They help in increasing the movement of goods, services, investments, and technology between countries, leading to greater integration of production and markets across the world.

2. What are the various ways in which countries can be linked?

Answer: Countries can be linked in several ways:

• Through the movement of goods and services (foreign trade).
• Through the movement of investments and technology (foreign investment by MNCs).
• Through the movement of people from one country to another in search of jobs, education, or better income.

3. Choose the correct option.

Globalisation, by connecting countries, shall result in

(a) lesser competition among producers.
(b) greater competition among producers.
(c) no change in competition among producers.

Answer: (b) greater competition among producers.

LET’S WORK THIS OUT (Page No. 63)

1. In the above example, underline the words describing the use of technology in production.

Answer: The words describing the use of technology are:

“Internet,” “telecommunication facilities,” “computer,” and “e-banking.”

2. How is information technology connected with globalisation? Would globalisation have been possible without expansion of IT?

Answer: Information and communication technology (IT) has played a major role in spreading out production of services across countries.
It allows instant communication, sharing of information, and transfer of money between countries.
Without the expansion of IT, globalisation would not have been possible, because modern production, trade, and communication depend heavily on information technology.

LET’S WORK THIS OUT (Page No. 64)

1. What do you understand by liberalisation of foreign trade?

Answer: Liberalisation of foreign trade means removing barriers or restrictions set by the government on the import and export of goods.
It allows businesses to make decisions freely about what they wish to import or export, and the government imposes much fewer restrictions than before.

2. Tax on imports is one type of trade barrier. The government could also place a limit on the number of goods that can be imported. This is known as quotas. Can you explain, using the example of Chinese toys, how quotas can be used as trade barriers?
Do you think this should be used? Discuss.

Answer: If the Indian government sets a quota on the number of Chinese toys that can be imported, then only a limited number of toys will be allowed to enter the Indian market.
This will reduce competition for Indian toy makers and help protect domestic producers from losses.

Whether this should be used or not depends on the situation — it can be useful to protect small producers in the country, but too many restrictions can also limit trade and choice for consumers.

LET’S WORK THIS OUT (Page No. 66)

1. Fill in the blanks.

WTO was started at the initiative of _______ countries. The aim of the WTO is to ________. WTO establishes rules regarding ________ for all countries, and sees that _________ In practice, trade between countries is not ______ . Developing countries like India have ________, whereas developed countries, in many cases, have continued to provide protection to their producers.

Answer: developed, liberalise international trade, these rules are obeyed, free and fair, removed trade barriers, provide protection to their producer.

2. What do you think can be done so that trade between countries is more fair?

Answer: To make trade fair, developed countries should remove trade barriers and stop giving unfair support or subsidies to their producers.
Also, developing countries should be given equal opportunities and their interests should be protected in international trade agreements.

3. In the above example, we saw that the US government gives massive sums of money to farmers for production. At times, governments also give support to promote production of certain types of goods, such as those which are environmentally friendly. Discuss whether these are fair or not.

Answer: Giving support to farmers in rich countries while asking poor countries to remove support is unfair.
However, giving help to promote environment-friendly production is fair and necessary, because it helps protect the environment and benefits everyone.

LET’S WORK THIS OUT (Page No. 67)

1. How has competition benefited people in India?

Answer: Competition has benefited people in India by providing greater choice of goods, improved quality, and lower prices for several products, particularly for well-off consumers in urban areas. This has led to higher standards of living for these people compared to earlier times.

2. Should more Indian companies emerge as MNCs? How would it benefit the people in the country?

Answer: Yes, more Indian companies should emerge as MNCs. It would benefit people in the country by creating new jobs, spreading operations worldwide, investing in newer technology, raising production standards, and providing services like IT, which create opportunities for companies and workers.

3. Why do governments try to attract more foreign investment?

Answer: Governments try to attract more foreign investment by setting up Special Economic Zones (SEZs) with world-class facilities and tax exemptions for initial periods, and by allowing flexibility in labour laws. This is done to encourage MNCs to invest, which brings benefits like new jobs, technology, and prosperity to industries.

4. In Chapter 1, we saw what may be development for one may be destructive for others. The setting of SEZs has been opposed by some people in India. Find out who are these people and why are they opposing it.

Answer: The people opposing the setting of SEZs in India are likely local farmers and others whose land is acquired for these zones. They oppose it because the acquisition of land displaces them from their homes and livelihoods, and while SEZs may bring development for industries and companies, it can be destructive for these people by taking away their agricultural land and sources of income.

LET’S WORK THIS OUT (Page No. 68)

1. What are the ways in which Ravi’s small production unit was affected by rising competition?

Answer: Ravi’s small production unit was badly affected after the government removed restrictions on imports of capacitors as per the WTO agreement. His main clients, the television companies, began importing capacitors at half the price charged by Ravi. As a result, his sales dropped, and he now produces less than half of what he produced earlier. The number of workers in his unit also reduced from 20 to only 7, and many similar small units in other cities were shut down.

2. Should producers such as Ravi stop production because their cost of production is higher compared to producers in other countries? What do you think?

Answer: Producers like Ravi should not stop production completely. Instead, they need help to improve their efficiency and reduce costs. With better facilities, modern technology, and government support, small producers can improve the quality of their products and compete better with foreign goods.

3. Recent studies point out that small producers in India need three things to compete better in the market

(a) better roads, power, water, raw materials, marketing and information network
(b) improvements and modernisation of technology
(c) timely availability of credit at reasonable interest rates.

Can you explain how these three things would help Indian producers?

Answer: How would the three things — better infrastructure, modern technology, and timely credit — help Indian producers?

These three things would help Indian producers in the following ways:

• Better roads, power, water, raw materials, and marketing networks would lower production costs and help producers reach markets easily.
• Modernisation and improvement of technology would increase production speed, improve quality, and reduce waste.
• Timely credit at reasonable interest rates would allow producers to invest in better machines and raw materials without facing financial problems.

Do you think MNCs will be interested in investing in these? Why?

Answer: MNCs will not be much interested in investing in these facilities because they mainly look for quick profits and already established infrastructure. Their focus is on areas where they can earn more, not on improving small producers’ conditions.

Do you think the government has a role in making these facilities available? Why?

Answer: Yes, the government has a major role in providing these facilities. It should help small producers by ensuring proper infrastructure, easy availability of credit, and training in modern technology. The government can also protect small industries until they become strong enough to face global competition.

Can you think of any other step that the government could take? Discuss.

Answer: The government can take more steps such as:

• Providing subsidies and support to small industries.
• Ensuring fair trade policies that prevent dumping of cheap foreign goods.
• Promoting the use of locally made products.
• Organising training and awareness programmes to improve small producers’ skills.

LET’S WORK THIS OUT (Page No. 70)

1. In what ways has competition affected workers, Indian exporters and foreign MNCs in the garment industry?

Answer: Competition has affected all three in different ways:

• Workers: Competition has made their jobs insecure. Most employers now hire workers on a temporary basis, pay them low wages, and make them work long hours without benefits like health insurance or provident fund.
• Indian Exporters: They face pressure from large MNCs to produce goods at cheaper rates. To get more orders, they try to cut down labour costs.
• Foreign MNCs: They have gained large profits because they can buy garments from countries like India at low prices and sell them at higher prices in their own markets.

2. What can be done by each of the following so that the workers can get a fair share of benefits brought by globalisation?

(a) government

Answer: The government can ensure that labour laws are properly implemented so that workers get fair wages and job security. It can also support small producers and negotiate for fair trade rules at the WTO.

(b) employers at the exporting factories

Answer: They should provide better working conditions, regular employment, and fair wages to the workers instead of hiring them temporarily only to cut costs.

(c) MNCs

Answer: MNCs should pay fair prices for the goods they buy from Indian exporters and make sure that workers in the factories get fair wages and proper working conditions.

(d) workers.

Answer: Workers can unite and form associations or unions to demand their rights and fair treatment from employers.

3. One of the present debates in India is whether companies should have flexible policies for employment. Based on what you have read in the chapter, summarise the point of view of the employers and workers.

Answer:

• Employers’ point of view:
  Employers support flexible employment policies. They believe that hiring workers only when needed helps them reduce costs and face competition effectively in the global market.
• Workers’ point of view:
  Workers oppose flexible policies because these make their jobs insecure. They lose benefits like fixed wages, overtime pay, health insurance, and provident fund. They want regular jobs and better working conditions.

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. It happens through the movement of goods, services, investments, and technology between nations. MNCs play a major role in this process by setting up production and trade links across the world.

2. 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?

Answer: After Independence, the Indian government put barriers on foreign trade and investment to protect domestic producers from foreign competition, as Indian industries were just beginning to grow.
In 1991, these barriers were removed so that Indian producers could compete with the world, improve quality, and increase efficiency. It was also done under the support of international organisations.

3. How would flexibility in labour laws help companies?

Answer: Flexibility in labour laws allows companies to hire workers temporarily or when needed. This helps companies reduce labour costs and face global competition effectively.

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

Answer: MNCs set up and control production in other countries by:

• Setting up joint ventures with local companies.
• Buying up existing local companies.
• Placing orders with small producers.
• Using local companies for supplies and selling under their brand names.

Through these methods, MNCs control production and create interlinking between countries.

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: Developed countries want developing countries to liberalise trade and investment so that their companies can freely enter those markets.
In return, developing countries should demand fairer rules, protection for their producers, and equal opportunities in world trade.

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

Answer: The impact of globalisation has been different for different groups:

• Well-off consumers and skilled producers have benefited through better quality goods and services.
• Small producers and unskilled workers have suffered from competition and job insecurity.
  Thus, globalisation has not benefited everyone equally.

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

Answer: Liberalisation removed government restrictions on foreign trade and investment. This made it easier for goods, services, and capital to move between countries, allowing MNCs to expand production and trade globally, which increased globalisation.

8. How does foreign trade lead to integration of markets across countries? Explain with an example other than those given here.

Answer: Foreign trade connects producers and consumers across countries. It allows goods to move freely from one market to another, making prices and quality more uniform.
For example, if India exports iron to other countries and imports electronic goods, both markets become linked through trade.

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

Answer: Twenty years from now, globalisation will make the world more connected. Goods, services, and technology will move even faster across countries. Communication will improve further, and more people will work with global companies.

10.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?

Answer: Both statements are partly true. Globalisation has helped India by bringing better technology, foreign investment, and improved products. But it has also hurt small producers and workers due to rising competition and job insecurity. Globalisation should be made fair so that everyone benefits.

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 _________ . 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.

Answer: globalisation, integration, they can earn greater profits due to cheap labour and resources, imports, foreign investment, competition

12.Match the following.

Answer:

13.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.

Answer: (b) goods, services and investments 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.

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: (d) none of the above.