IMPORTANTPOINTSTOREMEMBER (CHAPTERGLOBALISATION)

Please refer to the Revision Notes of the Chapter.

  • -5
      Globalization and the India Economics
Q1. What were the main features of development strategies from 
1951-1991?
Ans. 1) Central planning commission was setup in 1950 to direct 
investment in priority sectors.
         2) All basic heavy industries were exclusively are reserved for the 
public sector.
3) The private sectors were subject to industrial licensing and 
controls to establish industries   and business.
         4) Free imports were restricted unless with a quota or license.
         5)  Banks and financial institution were under the government 
control.
         6) FERA (Foreign Exchange Regulation Act) was enforced to 
regulate Foreign Direct Investment (FDI).
         5)  Banks and financial institution were under the government 
control.
Q2. What were the positive aspects of development strategies 
from 1951 – 1991?
Ans .   1) It helped India forming a strong industrial base and the 
increased industrial sector           and production.
         2) The no. of people living below the poverty line declined.
         3) In five decades of developments strategy, we have reached self 
- sufficiency.
         4) Productivity has increased, though lower than International 
standards.
         5)  A based for export oriented industries have been created.
6) Saving was mobilized for development from our own resources.Q3.  What were the negative aspects of development strategies in 
1951-1991?
Ans.  1) Inefficiency of our industries cost a major problem that it could 
not face competition.
         2)  Laws made to regulate the private sector were one of the 
reasons for slow growth of   industrial sector.
         3) Public sector undertaking suffered from inefficient management
and ended up in losses.
Q4. Explain the need for economic reforms of 1991.
Ans.   The need for economic reform of 1991 were felt because of:-
          1) Public sector performed very badly and could not achieve 
desired objectives.
         2) Increase in fiscal deficit that the government heading towards 
debt – trap.
         3) Adverse balance of payments due to low Foreign exchange 
Reserves.
4) Gulf crisis was a major reason due to which the prices of petrol 
increased in 1990 – 91.
         5)  Rise in prices i.e., inflation rate in India increased from 6.7% to 
16.7%.
Q5. Explain the main aspects of New Economic policy of 1991.
Or
Explain liberalization, Globalization and Privatization. 
Ans . 1. Liberalization : means liberating the trade and industry from 
unwanted government controls and restrictions. It means reduced role of the government in trade and industry and a greater role for private 
sector and market forces.
         2. Globalization : indicates the opening of the economy for the 
world market. It means integrating our economy with the world 
economy. The economic gap between different nations is reduced by 
removing all restrictions between nations and the movement of goods, 
services, capital, technology and labour.
      3. Privatization : may be defined as a transfer of ownership and 
control from public sector to private sector. Under new economic 
reforms, policy of encouraging the private sector has been accepted.
Q6. Explain the factors that have enabled Globalization in India.
Ans. 1) Rapid improvement in technology :-
          This has been one of the major factors that have stimulated the 
Globalization process. The last 50 years has seen several improvements 
in transportation technology. This has made much faster delivery of 
goods across long distances possible at less cost. 
        2)Development in information and technology:-
Tele communication facilities like telephone, telegraph, fax, mobiles 
etc. which are used to contact one another around the world to access 
information instantly and to communicate from remote areas have 
developed rapidly. This has been facilitated by satellite communication 
devices. Computer and interne have made it possible to share and 
obtain information on almost anything one wants to know. Internet 
also allows sending e-mail and talk (voice-mail) across the world at low 
cost. Thus, it enables the globalization.
        3) Liberalization of foreign trade and foreign policy:-
The Liberalization of foreign trade by liberalizing the trade barriers like 
tax on import etc. has enabled Globalization. Barriers of foreign 
investment were also removed to a large extent. This meant that goods could be imported and exported easily and also foreign companies 
could set up factories and offices in our country. Thus, liberalization of 
foreign trade and foreign investment enabled globalization.
Q7. Evaluate the Globalization process (impact) in India.
Ans. Due to Globalization and liberalization many visible and invisible 
changes took place in Indian economy. It helps in foreign trade 
economy and investment in India.  Its impact can be studied through 
the following points :-
a)  The visible changes are :-
    i) Better communication facility at low prices.
ii) Many food companies have entered the country and taken over 
the market, e.g. Pepsi.
b)  The invisible changes are :-
    i) India’s balance of payment in 1999 to 2000 remained comfortable.
ii) During 1999-2000, exports made a recovery of 11.6%.
   iii) The total imports expanded sharply by 16.5 % in 1999 – 2000.
  iv) Capital inflows improved significantly in 1999- 2000.
  v) Software service exports emerged as the second largest item of 
invisible receipts. 
vi) The imports of gold and silver declined.
vii) Indian companies which were finding difficulties to compete with a 
powerful foreign business houses are seeking for collaboration.
viii) The exchange rate of rupee in real effective terms became stable 
in 1999-2000.
ix) The foreign Direct Investment (FDI) from other countries to India 
increased (from Rs.174 crores in 1991 to Rs. 9338 crores in the year 
2000).  x) The Foreign Exchange Reserves increased and the balance of 
payment position became favourable. The industrial growth increased 
between 1991 – 2001, although it was still not up to the expected level.
xi) India’s share of the world’s trade in goods and services increased 
marginally. 
xii) Price rise declined from 12% in early 90’s to 5% in late 90’s.
xiii) There was a major decline in poverty and improvement in the 
literacy rate.
xiv) New jobs were created in the economy as an impact of 
Globalization but it is still insufficient to meet the increased job 
requirement in the country.
Q8. What do you mean by Multinational Corporations (MNC) ?
Ans. A Multinational Company / Corporation are a large companies that 
owns and controls productions in more than one nation . They setup 
offices and factories for production in regions (Nations) where they can 
get cheap labour and other resources. This is done so that the cost of 
production is low and the MNC’s can earn greater profits. They produce 
and sell goods globally.
Q9. What are the reasons for putting barriers to foreign trade and 
foreign investment by the Indian government? Why did it wish to 
remove these barriers ?
Ans.   The government of India, after independence , has put barriers to 
Foreign Trade and Investment because it was considered necessary to 
protect the producers within the country from Foreign competition, in 
the early stages of development.      But later, in 1991, the government f India wished liberalization of 
these barriers and remove unwanted controls because the government 
decided that the time had come for Indian producers to compete with 
producers around the world. These competitions will only improve the 
quality of goods and services will be available for consumers and Indian 
producers will rise up -to International standards.
       Thus, the barriers on Foreign Trade and Foreign Investment were 
removed to a large extent. Therefore, import and export became easy 
and also the foreign companies could set up factories and offices here 
in India. As a result, the government imposes less restriction than 
before and is said to be more liberal.
Q10. How do flexibility in labour loss help companies?
Ans. With liberalization and globalization, the MNC’s are allowed to 
open their factories and offices in any country of the world. Labours are 
the most important factor among other factors of production because 
they are bound by labour loss. Therefore, labour laws should not be 
rigid. Flexibility of labour laws helps a company in the following ways :-
    1) The labours can travel in any part of the world to do the work in 
any type of company without restriction.
     2) It is easier for the MNC which have setup their branches 
throughout the world to get cheap labour.
    3) Companies can also engage workers on temporary basis. So, that 
they do not have to the workers for the whole year.
Q11. What are the various ways in which MNC’s setup all central 
production in other countries?
Ans. 1) MNC’S setup all control production in other countries where it is 
close to the market, where skilled and unskilled labourers are available at a low cost. Also, where the availability of other factors of production 
are assured.
         2) MNC’s setup production jointly with some local company of the 
country, where they want to establish themselves by providing money.
         3) Large MNC’s  in developed countries place orders for 
production with small producers, e.g. garments , foot wears, sports 
items , etc. these small producers supplies goods to MNC’S and these 
large MNC’s sell these products under their own brand names. They 
have the power to determine the price, quality, delivery and labour 
condition for these small producers from whom they buy the products.
Q12. The impact of ‘Globalization has not been uniformed’ . Explain the 
statement.
Ans. Globalization could not bring uniform impact throughout the 
country. this can be substantiated with the following :
                People with education skills and wealth may have the best use 
of new opportunities but poor people have not shared the benefits of 
Globalization. It is now uniform because fair Globalization would create 
good opportunities for all and also ensure that the benefits are shared 
better. Therefore, the government can play a major role in making this 
possible. It’s policies must protect the interest, not only of the rich and 
powerful , but also for all the people in the country.
  In this context , government can take the following steps for a fair and 
uniform Globalization :-
1) Government can ensure that labour laws are properly 
implemented and workers het their rights.
2) It can support small producers  to improve their performance till 
the time they become strong enough to compete.3) If necessary , government can use trade and investment barriers
by negotiating at the World Trade Organization (WTO) for fairer 
rules.
4) Government can also align with other developing countries with 
similar interest to fight against the domination of developed 
countries.
Conclusion:
In past few years, campaigns and representations by people’s 
organization have influenced important decisions relating to trade 
and investment of WTO.  This has demonstrated that people can 
also play important role in the struggle for fair and uniform 
Globalization.
Q13. What is WTO ? Explain it’s main functions .
Ans. The World Trade Organization ,i.e. WTO  was established on 
1
st
Jan , 1995 by the members of UN’s to promote trade among 
different countries. It’s head quarter  is located in Geneva. Its 
main objective was to provide equal opportunities for trade in the 
International markets for all the member countries.
Main functions of WTO :
1) Acting as forum ( organization) for multilateral trade organization.
2) Implementing the multilateral trade agreements.
3) Seeking to resolve trade disputes.
4) Cooperating with other International institutions of economic 
policy making.
5) Promoting International trade by removing tariff and non – tariff 
barriers for member countries.
Q14. What are the arguments in favour of WTO ?Ans. The following are the arguments in favour of WTO :-
1) WTO promotes free trade among different countries which 
leads to specialization . Hence, every country produces 
those goods in which it has comparative advantage over 
others.
2) WTO  has resulted in increase in world output, increase in 
world income, increase in world trade and increase in 
employment.
3) The consumers also gain because of WTO  as they get 
products at a reduced prices, because of specialization.
4) There is every possibility that every country who 
participates in world trade will benefit from WTO.
5) WTO is an effective instrument for the settlement of trade 
disputes between trading countries.
6) The developed countries now liberally invest in developing 
countries and thus they provide finance to the developing 
countries to improve their industrial base and to create 
more job opportunities.
Q15. Give arguments against the functioning of WTO.
Ans. Arguments against WTO are :-
1. It is argued that WTO operations will result in undue 
interference in will result in the internal affairs of different 
countries and thus harm their authority.
2. It is pointed out that WTO is dominated by the developed 
countries particularly by U.S.A ,Japan and European union. 
Thus,the developing countries are hardly consulted in 
negotiation.3. It is also argued that developed countries have succeeded in 
building up new economic order for their own interest but it 
sacrifices the interest of poor and developing countries.
4. The critics of WTO points out that while the developing 
countries feel cheated as they have been forced open their 
economy for the developed nations, their access to the market 
of developed countries have been restricted by protective 
measures like ‘Anti –dumping method’.
5. The developing country should also demand a more liberal 
policy of trade and investment from developed countries so 
that exchange can be on equal base.
6. They also fear that MNC, due to their large resources and 
capacities would harm the local companies of developing 
countries.
Q16. Explain the positive and negative impact of WTO on Indian 
economy.
Ans. Positive impact:-
1. It is hoped that with the help of WTO India’s share in world 
exports would improve from 0.5% to 1%.
2. The phasing up of multi – fiber arrangement will benefit India as 
exports of textiles and clothing will increase.
3. The prospects for agricultural exports would improve. The WTO 
has strengthened multi- lateral rules. This will create favourable 
environment for India in the New World Economic Order.
4. India would be able to get advanced technology from developed 
countries. It will strengthen the process of technological up 
gradation in the economy.Negative impacts:-
1. Agreement on trade mark , copyrights ,patents etc. is likely to 
work against India. Prices of many life saving essential drugs 
may go up. It will also have adverse effect on agriculture and 
food security.
2. The WTO agreement is adversely going to affect our self –
relined group growth based on technology and other resources 
available locally.
3. It would be difficult for our service sectors like banking , 
insurance , tele – communication , etc. to face competition 
from foreign firms dealing with services.
4. The real threat emerging out of this new world order is 
emergence of a new colonial world order. Even the sovereignty 
of India as a nation is at stake.
5. Ever since the creation of WTO, Indian economy has been 
facing a wide – spread down trend. Our agricultural sectors , 
particularly small scale and commerce have been severely 
affected. 
Q 17. Explain  the following terms :-
1. Bilateral agreement: whenever a country is involved with 
other country ,it makes an agreement with each country 
separately such an agreement and trade between two 
countries is called bilateral agreement.
2. Import quotes :  it is the restriction on the amount of 
commodities to be imported. It is put in order to prevent 
competition from foreign products. 
3. Export quotes : in order to protect the local consumers , the 
government puts some restriction on exports that certain 
goods cannot be exported beyond a certain limit. This limit is 
called export quotes. 4. Trade barriers : trade barriers are a check on the import and 
export of goods by which every government regulates 
foreign trade. The barriers provide protection to the 
domestic goods from foreign competition. 
5. SEZ ( special economic zones) : Special 3Economic Zones are 
being developed in India to attract foreign companies. SEZ  
would have world class facilities of electricity, water, roads, 
educational facilities , etc.  The companies who setup their 
factories in special economic zones will not have to pay taxes 
for an initial period of five years.
Q18. What is sustainable economic development?
Ans. Sustainable economic development was defined by 
Brundland Commission  in 1987 as ‘ the meeting of the 
needs of the present generation without compromising the 
ability of future generation, to meet their own needs’. Hence, 
this development enables all generations, i.e., present and 
future to make best use of their potential. It also means 
using of exhaustible resources wisely so that the profits from 
their use are re -invested in technology or in other forms of 
capital.
     Hence, sustainable  development is dynamic , long term 
process which includes socio – economic development and 
also better quality of life.
Q19. Why is there a need for sustainable economic 
development ?
OR
Why is sustainable economic development essential for 
growth?Ans. Sustainable economic development should take place 
without damaging environment and it should not 
compromise on the needs of the future generations. It is 
considered important because:
1. Rapid economic growth and industrialization led to 
ruthless exploitation of natural resources.
2. The stock of natural resources like coal, etc. required for 
energy is limited.
3. The growth of all countries will be endangered if limited 
resources are completely exhausted. Although fossils fuel 
and minerals helps in the development, their misuse 
harms the environment and the natural balance.
   Therefore, sustainable economic development becomes 
important because it maintains harmony (here
It stands for balance) between economic growth and 
environmental preservation.
Q20. Give any five arguments in favour of and against 
Globalization.
Ans. Arguments in favour of Globalization :
1. The idea of Globalization is much supported by 
International Organizations like UN , The International 
Monetary Fund, World bank , WTO, etc. 
2. Supporters of Globalization say that there is proof t 
show that among the poorest countries that trade with 
other nations, most of them had achieved higher per 
capita income and reduction in poverty.
3. A few countries that have decreased tariff barriers 
have gained in employment and National  income 
completing industries.4. It is argued that more countries started trading with 
each other and hence, their standards of living are 
improved because of Globalization.
5. A number of rising Nation of the developing world like 
Mexico ,Turkey, Egypt and Thailand has provided vocal 
support for Globalization.
Arguments against Globalization :-
1. There is inequality in the countries  due to pressure 
of market forces due to Globalization i.e. the rich 
and powerful captured the market throughout the 
world.
2. Large corporations invest in poor countries only 
because they can make greater profits as wages are 
low in poor countries and their natural resources 
can be used.
3. The free market does nothing to redistribute wealth.
4. There is an argument that the global companies 
generally locate polluting industries in poor 
countries , destroy their forest wealth or develop 
mines with inadequate control and safety.
5. Social organizations see Globalization as a special 
spread of capitalism in which the labourers of the 
poor countries are exploited for the benefit of the 
rich country.
Q21. How does foreign trade lead to integration of 
market across countries? Explain.
Ans. Foreign trade has also been an important 
channel connecting different countries they had different routes connecting India and South Asia to 
markets in the east and the west.  
   Foreign trade creates an opportunity for the 
producers to reach beyond the domestic markets . 
producers can sell their produce not only in the 
market located within the country but can also 
compete in markets located in other countries of 
the world similarly for the buyers import of goods, 
produce in another country is the one way of 
expanding the choice of goods beyond which is 
domestically produced.
    In general with the opening trade good travels 
from one market to another, choice of goods in the 
market rises. Prices of similar good in the two 
markets tend to become equal. Now producers in 
two countries closely compete against each other.
           Thus, foreign trade results in connecting 
market or integration of markets in different 
countries.
Q22. Suggest steps within can be taken to attract 
foreign investment.
Ans.  
1. In the recent years, central and state government in 
India has taken special step to attract foreign 
companies by setting of Special Economic Zone 
(SEZ). Their zones of world class companies 
concerning electricity, water, roads, transport, 
storage, educational and recreational facilities .2. Companies who set up their units in the SEZ do not 
have to pay tax for starting period of first five years 
.i.e.  they get a tax holiday.
3. The government has allowed flexibility in labour loss 
to attract foreign investment. Now, the companies 
can hire workers for a short period when there is 
lots of work to be completed in the company due to 
high demand of goods. This is done instead of 
keeping permanent labourers. Thus, this helps the 
company to reduce the cost of production.      
       
.
  • 19

THANKS A LOOOT......!!!....:P

  • 1
What are you looking for?