summary of globalisation and the indian economy

The summary of said chapter is available on our Website so you may refer to that.

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integration of world's economy with our economy is Globilization.Integrating production with markets is basic idea behind Globalization .In Indian economy it is important for upliftment of local producers and making small producers ready for international compietition.

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some questions from board exam.........

ans: regionalism, poverty, illiteracy , casteism , communalism

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 more to go


Chapter 4 - Globalisation and the Indian Economy

This is a Study Material for CBSE Boards in Economics Chapter 4 - Globalisation and the Indian Economy



01. What is Globalisation?
 Globalisation means opening up the economy to facilitate its integration with the world economy.

02. Define Economic reforms of new Economic Policy 1991.
 Economic policy adopted by the Government of India since July,1991 is termed as new economic policy or economic reforms.

03. Define Privatisation.
 Privatisation means reduced government intervention and increased private investment in production activities.

04. What is meant by Liberalisation?
. Liberalisation means removing unnecessary trade restrictions and making the economy more competitive.

05. What is outsourcing?
. Outsourcing means going out to a source outside the company to buy regular service that formerly used to be provided departmentally and internally just as legal advice, computer service, security, advertisement and accounting etc.

06. What is meant by modernisation of the Economy?
 The new economic policy accords top priority to modern techniques and technologies. It also promotes computers and electronics industries. It has made the Indian industries dynamic.

07. What do the top Indian companies have that allows them to modernise and compete, whereas many of the small producers have to shut down production? Choose the correct answer.
(a) Workers
(b) Money
(c) Bis factories

08. How many countries are currently the members of the World Trade Organisation (WTO)?
 It has 153 member countries as on 23 July, 2008.

09. In which year, the government started to remove barriers on foreign trade and foreign investment.
 In 1991

10. Why are the Chinese Toys popular in the world?
 Chinese Toys are comparatively cheaper and have new designs. That is why they are popular in the world.

11. Why are the MNCs making investments in India?
 In India labour cost is comparatively very low, that is why many MNCs are making investments in India.

12. Name the organisation which lay emphasis on liberalisation of foreign trade and foreign investment in India.
 World Trade Organisation (WTO)

13. When was the UNO established?
. The UNO was established on 24 October, 1945.

14. When was the WTO established?
 The WTO was established on 1st January, 1995.

15. Where is the main Head Office of WTO?


01. Explain the process of Globalisation.
02. Discuss the need of Globalisation.
03. Explain the features of World Trade Organisation in brief.
04. Explain the objectives of the new economic policy.
05. Exlpain the need of the Economic reforms of New Economic Policy.


01. What are the main features of Economic reforms?
02. What are the arguments in favour of economic reforms?
03. Discuss the arguements against Economic reforms.
04. Explain the achievements of economic reforms.
05. Analyse one good and one bad effect of globalisation in India?
06. Discuss any four functions of WTO?
07. Why did the Indian Government put barriers to foreign trade and foreign investment?

01. Globalisation is a process of integration of world economics to realise the benefits of geography, demography, cost and efficiency. Which three characteristics represent globalisation?
  (1) Increasing space
  (2) Shrinking space
  (3) Strengthened borders
  (4) Shrinking Time
  (5) Disappearing borders

(a) (2), (3) and (4)
(b) (1), (2) and (3)
(c) (1), (2) and (4)
(d) (1), (3) and (4)
(e) (2), (4) and (5)

02. While globalisation has benefited most of the groups, it has been a disadvantage for
(a) many small producers and workers who have suffered as a result of therising competition
(b) cheap labour working in small firms
(c) Indian producers and workers who are not well educated and skilled
(d) all of the above

03. In an economist's view, which of the following perspectives of globalisation is most suitable?
(a) The rise of global media and global culture
(b) The emergence of global institutions and global conflicts
(c) The development of communication technologies
(d) The growth of international trade and the increase in international trade flows
(e) The decline of sovereignty of the nation state

04. Removing barriers or restrictions set by the government is known as
(a) globalisation
(b) privatisation
(c) liberalisation
(d) fair trade practice

05. Globalisation is often criticised by political scientists on account of loss of sovereignty of the nation
(a) True
(b) False

06. Globalisation has proved to be advantageous for the Indian economy on account of
(a) lesser competition among producers
(b) greater competition among producers
(c) no change in competition among producers
(d) none of these

07. MNCs work in several countries to realise the benefits of globalisation. In fact, they can help the developing countries to
  (1) absorb domestice labour, especially in skilled jobs
  (2) increase productivity through foreign technology and innovative methods of production
  (3) reduce balance of payments deficit

Select the correct combination
(a) (1) and (2) only
(b) (2) and (3) only
(c) (1), (2) and (3)
(d) none of these

08. Investment made by MNCs is called
(a) Investment ny MNCs
(b) Foriegn investment
(c) Multinational investment
(d) Investment abroad

09. WTO seeks that countries of the world negotiate on Trade liberalisation. Every participating country should get welfare gains from WTO negotiations. However in practice, some developing countries mainly in Sub Saharan Africa did not gain very much from the past rounds of trade liberalisation. Why?
(a) Specialisation of poor countries remains in same products, clothing and commodities. Relative prices of these products fell resulting in falling terms of trade which has a negative effect on welfare
(b) Developing countries demand betther access to the markets of industrialised countries while maintaining the freedom to have high trade barriers themselves. As a result, they do not liberalise themselves, thus limiting the benefits from trade liberalisation
(c) Developing countries do not benefit as the trading oppurtunities offered by trade liberalisation are captured by multinational companies
(d) (b) and (c) only
(e) (a), (b) and (c) only

10. MNC is a company
(a) that owns or controls production in more than one countries
(b) that owns or controls production in one nation
(c) that owns or controls production outside the nation
(d) all o fthe above

(01) (e) (2), (4) and (5)
(02) (a) many small producers and workers who have suffered as a result of therising competition
(03) (d) The growth of international trade and the increase in international trade flows
(04) (c) liberalisation
(05) (a) True
(06) (b) greater competition among producers
(07) (c) (1), (2) and (3)
(08) (b) Foriegn investment
(09) (d) (b) and (c) only
(10) (a) that owns or controls production in more than one countries

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  • 2. The term globalization means International Integration.It is a process through which the diverse world is unified into a single society.Opening up of world trade, development of advanced means of communication, internationalisation of financial markets, growing importance of MNC's, population migrations and more generally increased mobility of persons, goods, capital, data and ideas WHAT IS GLOBALISATION ?
  • 4. IssuesAccountability of Global businesses?Increased gap between rich and poor fuels potential terrorist reactionEthical responsibility of business?Efforts to remove trade barriers.
  • 5. Shape of the world’s economy is being changed by “globalization” Marketing Branding AdvertisingNikeDell Cost down Outsourcing
  • 6. New trade pattern:developing countries don't just have to trade their raw materials to the West and get finished products in return; can become big-time producers as well. New production pattern:global product networkcompanies can locate different parts of their production, research and marketing in different countriesGlobalization – what’s really new? New Trade and Production Patterns
  • 7. Growing global markets in servicespeople can now offer and trade services globally -- from medical advice to software writing to data processing -- that could never really be traded before.Globalization – what’s really new? New marketsW-2, W-4, 1099 bonuses & stock statementsIndian accountantUS tax payers
  • 8. Market economic policies spreading around the world, with greater privatization and liberalization than in earlier decades. ex: BRICWidespread adoption of democracy as the choice of political regime.Globalization – what’s really new? New rules and norms
  • 9. Multilateral agreements in trade, taking on such new agendas as environmental and social conditions. New multilateral agreements – for services, intellectual property , communications – more binding on national governments than any previous agreements.Globalization – what’s really new? New rules and norms
  • 10. GrowthCustomer Survey
  • 11. *2010GDP – USD 1.36 trillionGDP growth rate – 9%Services contribution – 60-65%Balance of Trade – Negative balance should increase with surging imports versus exportsInvestment goal – USD 370 billion*2008GDP – USD 1.16 trillionGDP growth rate – 9.5%Services contribution – 60%Balance of Trade – Negative balance should increase with surging imports versus exportsInvestment goal – USD 305 billion2006GDP – USD 590 billionGDP growth rate – 9%Services contribution – 54%Balance of Trade – USD (-)46.2 billionInvestment goal – USD 250 billionGrowing Indian Economy*: ProjectedSource: Economic Times & India Brand Equity Foundation (IBEF)
  • 12. Growing GDPContribution of Services - increased from 48% to 62% and is estimated to contribute 60% by 2010*: ProjectedSource: India Brand Equity Foundation (IBEF)
  • 13. Growing Exports*: ProjectedSource: Ministry of Commerce & IBEF
  • 14. Source: Ministry of Commerce & IBEFGrowing Imports
  • 15. Increasing Forex ReservesSteadily increasing Forex reserves offer adequate security against any possible currency crisis or monetary instabilitySource: Reserve Bank of India & India Brand Equity Foundation (IBEF)
  • 16. Growing FDI InflowsIndia is ranked second in AT Kearney’s FDI confidence index (2007)Electronic equipment, manufacturing and telecom have witnessed significant FDI inflow* Provisional Source: Department of Commerce
  • 17. Increasing Per Capita IncomeSource: India Brand Equity Foundation (IBEF) & Economic Survey 2007-08
  • 18. Major M&A and Investments Announcements in IndiaPOSCO to invest in building steel manufacturing plants and facilities in India by 2016USD 12 billion Plans to establish three manufacturing plants to produce photo-voltaic unitsUSD 2 billion Plans to spend on its development operations in India over the next four yearsUSD 1.7 billionSource: India Brand Equity Foundation (IBEF)
  • 19. India Inc. Investing OverseasMain sectors: Main Destinations: China, UAE, UKNorth America is emerging as a destination.
  • 20. Additional economic indicators:India has a consumerbase of 1.14 billion peopleIndia is the 4th largest economy in the world when measured by PPPIndia’s has a growing middle class of over 300 million people - 30% of India’s population – and larger than the population of the USIndia is the 3rd largest global telecom market. The mobile subscriber base has grown from 0.3 Million in 1996 to over 250 million currently.India is likely to add over 200 shopping malls by 2010 and 715 malls by 2015The number of billionaires in the country were 3 in 1999; 23 in 2006; and are 48 currently.
  • 21. Exports to USIndia’s Trade with USAUSD BillionImports from USSource: Department of Commerce, Govt of India
  • 22. Major Items Exported to USA (2006)Source: US Department of Commerce
  • 23. Major Items Imported from USA (2006)Source: US Department of Commerce
  • 24. India co. going Global "Toyota Motor has chosen to source from India due to its competitive cost of manufacture, availability of abundant engineering talent, and strong indigenous machine tool."
  • 25. Automotive Sector - OverviewIndia is the world’s: 2nd largest two-wheeler market, 4th largest commercial vehicle market 11th largest passenger car market.Expected to be the 7th largest automobile market by 2016 India has become an attractive destination for global American,European,Japanese andKorean OEMs.Source: IBEF, Economic Times
  • 26. 1990 FDI $ 234 Million1998-2003 FDI $ 2.5 Billion Per YearTarget FDI $ 10 Billion Per YearOver 620 FIIs Compared to 500 in 2003 and EarlierChina FDI & FII FDI $ 50 Billion Per Year FII $ 20 Billion Per YearGOI POLICY-FDI AND FII
  • 27. AgricultureAgriculture acquired 17% of India’s GDP in 2008.60% of population still depends on agriculture for their livelihood.Occupied 43% of India’s geographical areas.All other sectors are growing at much faster.
  • 28. SHARE IN GDP
  • 29. EducationCurrent Literacy rate is 64.84%
  • 30. What are people talking about India?"India has a fantastic pool of software professionals. The world needs to benefit from this.“ This market (India) is critical to our plans for building a Ford Motor Co. for the 21st century Bill Gates, Microsoft ChairmanBill Ford, Chairman and CEOIndia on its way to becoming IT, manufacturing kingdom of the worldThe dynamism shown by India in the last 15 years is phenomenalMr Yasukuni Enoki, Japanese Ambassador to India Paul Wolfowitz, President, World Bank
  • 31. High growth but problem of unemployment.Need to generate 10 million jobs per year.Multi party rule, hence need to accommodate political ideology with economic reality (reservation, labour law reforms).India’s Problems
  • 32. ConclusionCompanies in India That Have Successfully Met Competition by Multinationals & Domestic Companies Had A Spirit Of Innovation Not Only In Their Products And Services But Also With Reference To All Their Resources And Effectively Restructured Them In A Time And Cost Frame And Met Customer Needs And Improved Their Top And Bottom Line.

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Globalisation: The way in which the world economy is integrated in the modern world is globalization. Take example of Microsoft. Microsoft is having its headquarters in USA. This company is getting part of its software developed in India and several other countries. And Microsoft’s software is being used across the world. Another example can be Ford motors based in USA. Ford is having manufacturing plants in Chennai and cars manufactured in Chennai go for sale in other countries. Moreover, company may be getting gear boxes produced in some other country, seat belts from a different country, lights, rear view mirrors in some other nation by some other company. Almost all the components get supplied by various vendors to the Ford motor, which assembles them to make the car.

All these activities help in generating employment opportunities across the world. This in turn affects the world economy. You can think of various activities in the step of final production of a product or a service which take place around the world at different locations. This results in interdependence of national economies around the world.

Development of Globalisation:

Since early history global trade has been connecting mankind in myriad ways. Silk route of early history helped in connecting Asia from the rest of the world. This trade route not only facilitated movement of goods but also movement of people and ideas. If zero traveled from India to rest of the world then western clothes came to India. Nowadays the way we relish eating pizza or noodles, people abroad are big fans of the Indian curry and chicken tikka.

Early phase of globalization involved export of raw material from Asia and import of finished products from Europe. But from mid twentieth century things began to change.

During mid to late twentieth century certain company’s became multinationals as they spread their economic activities to various parts of the world.

Causes of Globalisation:

Need of Cost Cutting:

Suppose a company is having two options to get a particular work done. The first option is to get it done in the home country but cost involved will be higher. Next option is to get it done in a different country at a lesser cost. Obviously any company will prefer the second option. Labour cost and cost of certain raw materials are cheaper in India, Malaysia, China and Taiwan. This results in reduced cost of production, which will result in better profit for the company. So you get a computer with certain parts manufactured in Taiwan or Malaysia, processor manufactured in India and software supplied from USA. The final product may get assembled in the market where it will be ultimately used.

Need to find newer markets:

If home market’s consumer base has purchased a product and needs no more of it or little bit of it, then the company has to plan to increase the business. This can be done by finding newer markets with new consumer base. Especially in today’s scenario when India and China constitute about one fourth of the world population, any company which wants to get more business can’t ignore these two markets. Try comparing it with your city or village. If vegetables produced in a village can only be sold in that village then it may not find many customers, resulting in low price and may be wastage of vegetables. To get a better price from large customer base the village vegetable grower needs to move to cities.

Stimulus for Globalisation:

Earlier countries imposed heavy import duties to restrict goods from outside and to promote local industries. These were part of deliberate trade barriers. But WTO (World Trade Organisation) convinced all member nations to reduce trade barriers. WTO believes in unrestricted economic opportunity across the world. In India after 1991, liberalization policies were being followed resulting in MNCs setting up shops in India. The result is for everybody to see. Earlier car meant an Ambassador or a Fiat and two-wheeler meant a Bajaj Scooter or Rajdoot Motorcycle. Now people have various options for car and two wheelers.

Results of Globalisation:

Better Employment Opportunities:

At present India is the leader in BPO sector. BPOs provide backoffice support to many MNCs. A customer calling in USA to sort out his problem may be talking to a call centre employee in Gurgaon. Because of growing economic activities many new centres of economic activity have developed in India. These are Gurgaon, Chandigarh, Bangalore, Hyderabad and Meerut. Earlier Mumbai, Chennai, Kolkata and Delhi used to be major economic centres.

Change in Lifestyle:

Eating habits have changed dramatically. Now you may be eating Kellog’s corn flakes for breakfast and Aloo Tikki Burger for lunch. You may be wearing a Levi’s jeans and if you are having a BPO employee as neighbour then you may have listened his accented English.

Uneven Benefits of Development:

For every MNC executive there is a larger number of rickshaw puller and daily wage earner. There are still millions who are unable to get two square meals in a day. We still hear news of farmers committing suicide in Maharashtra and Karnataka.

Unfair Means Adopted by Developed Countries:

Developed countries still give huge subsidies to their farmers and impose heavy trade barriers. In the bargain developed nations don’t get the desired benefit out of WTO negotiations.


Globalisation is a reality which is here to stay. Globalisation has given more benefits than problems. The economists and policy makers of the world need to fine tune their strategy so that benefits of globalization can reach the masses. The ultimate success of globalization can only be realized when it helps achieve all the parameters of development. These parameters or goals of development are not only about monetary income, but also about better healthcare, education, security and overall quality of life for all.

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