GLOBALISATION AND THE INDIAN ECONOMY (ECO)

1. State the differences between foreign trade and foreign investment.

Ans: Foreign Trade Foreign Investment
1. Includes buying and selling of 1. Deals with investment shares and
goods under an agreement properties on a foreign land
2.Flow of goods and services from 2. Flow of capital from one nation to
one nation to another. another.
3. Promotes integration of markets in 3. Promotes process of
different countries. industrialization.
2. How WTO has led to the adverse effects in the economy?
Ans: 1. At present major share of the world trade is contributed by the developed countries.
2. The advantage of being a member of WTO to the developing countries including India is very limited.
The WTO rules are biased. They favour the developed countries more.
3. They ignore the interest of developing countries. They are forcing the countries to open their
economies in the interest of developed countries.
4. WTO is interfering in areas other than trade, such as, WTO agreement on agriculture put restriction on
the provision of subsidised foodgrains in India. Such restrictions may result in rising prices. This adversely
affects the poor people of the country.
3. How has globalisation in India led to interdependence at the international level?
Ans: Globalisation facilitates interdependence between countries as given below:
1. Producers of other countries can sell their products in India. The Indian industrialists can sell their
products in other countries.
2. The foreign industrialists can set up industries in India. They can sell their products in India or exports
their product too other countries. Similarly Indian companies can do the same in other countries.
3. Globalisation includes movement of labourers from one country to another country. Worker from
other countries can migrate to India and Indian workers can go to other countries for employment opportunities.
4. Globalisation allows the exchange of capital, technology and experience among the countries. In case
of lack of technology the same can be obtained from other countries.
Thus it may be concluded that the globalisation leads to interdependence at international level.
4. Describe the changes that have occurred in India due to adoption of the policy of liberalization and
globalization?
Ans: Changes that have occurred in India due to the adoption of the policy of liberalization and globalization
are:
Visible change:
1.Better services in communication sectors such as telephone, colour television, electronic goods
2. Many companies dealing with food entered such as Mc Donald, Pizza Hut, Pepsi etc.
Invisible Changes:
1. India’s share in trade of goods have increased
2. FDI has increased
3. Foreign exchange reserves have increased
4. Employment and standard of living has increased.
5. What was the purpose behind the New Economic Policy, 1991?
Ans: The purpose behind the New Economy Policy, 1991 is as follows:
1. To improve the quality of goods within the country.
2. To remove pressure of powerful international bodies such as World Bank and IMF.
3. To encourage competition with foreign producers.
4. To improve the performance of domestic producers.
6. Give arguments against the functioning of W.T.O.
Ans: Arguments against the functioning of WTO
1. It is argued that the operations of WTO will lead to undue interference into the internal affairs of different
countries.
2. WTO is dominated by developed countries and the concerns of the developing countries are not
considered.
3. It is further argued that under the guise of development of free international trade and global integration,
the developed nations have succeeded in building up a new economic order that fully serves their interests.
4. Developing countries feel cheated because they have been forced to open their markets to developed
countries. However, access to market of developed countries is restricted due to anti-dumping measures.
7. State any four factors which determine the production location of MNCs.
Ans: Four factors which determine production location of MNCs are
1. Proximity to market
2. Availability of skilled and unskilled labour at low cost
3. Availability of other factors of production
4. Favourable government policies
8. What role does the government have in bringing about fair globalisation?
Ans: Fair globalisation would create opportunities for all, and also ensure that the benefits of globalisation are
shared better.
Role of the government in bringing about fair globalisation is:
1. Government can ensure that labour laws are properly implemented and the workers get their rights
2. Government should support small producers to improve their performance.
3. Government can use trade and investment barriers.
4. Government can negotiate with WTO for fairer rules.
9. Give any three positive and negative impacts of globalisation in India. M
Ans: Positive impacts of globalisation in India are as follow:
1. Increased availability of quality products and services at competitive prices to the consumers.
2. Increased productivity due to investments in new technologies.
3. Changed consumption pattern leading to high standard of living.
Negative impacts of globalisation are:
1. By their power to influence price, raw material and labour, they can wipe out local competitors.
2. Big corporations take advantage of weak regulatory rules by exploiting consumers and make huge
profits.
3. By virtue of their very large economic capacity and influence, MNCs can exert influence on a country's
policies and its international relations.
10. What are the types of trade barriers? Give examples of each.
Ans: Trade barriers are some restrictions set by the government to regulate trade. The types of trade barriers are:
1. Tariff: It is a tax imposed on imports or exports. For example, custom duty, Ad valorem tax, etc.
2. Non-Tariff Barriers: NTBs are trade barriers which indirectly affect imports and exports of the country.
For example, import licenses, export licenses, import quota, etc.
11. How has foreign trade led to integration of markets?
Ans: 1.Foreign trade has led to integration of markets as producers can widen their market and sell their
products across the world.
2. Moreover, the consumers have access to a wider range of goods.
3. Furthermore, the imported goods may be cheaper as well as of better quality.
12. Describe the positive impact of WTO on the Indian economy.
Ans: The positive impact of WTO on the Indian economy
1. India consumers can choose from a wider variety of goods (both domestic and imported).
2. India producers are able to export goods and services to other countries with less restriction from those
countries, thus enlarging their market.
3. India has greater access to technology from developed countries like USA, Germany at reduced cost.
13. How do local companies gain by setting up production jointly with MNCs? Why do MNC sometimes
buy up local companies?
Ans: The local companies start to gain by their joint venture in two ways:
1. MNC can provide money for additional investment like buying new machines for faster production
2. MNC bring with them the latest technology for production.
The MNC buy local companies due to following reasons:
1. With local collaboration they can easily expand their production
2. They can make use of their huge wealth in exploiting the brand name of the local companies thereby not only
capturing their market but also taking new ventures safely by exploiting the experience of the trained people.
14. What is investment and foreign investment?
Ans: Investment: The money that is spent to buy assets such as land, building, machines and other equipments
is called investment.
Foreign investment: The investment made by MNCs is called Foreign investment.
15. What are the different factors which have facilitated globalization?
Ans: The following factors have facilitated globalization:
1. Rapid improvement in technology
2. Liberalization of trade
3. Investment policy of Multinational Corporation
4 . Pressures from international bodies such as the World Trade organization.