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Globalisation
CH 4 Economics | Class 10
Hand Written Notes
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GLOBALISATION AND THE INDIAN ECONOMY
→ Globalisation is integration between countries
through foreign
trade and foreign investment by multinational corporations
( MNCs) .

* Production across Countries :

•
Until the middle of the twentieth century , production was

largely organised within countries .

•
Raw materials , food stuff and finished products are
being
traded from long time .

•
Colonies such as India exported raw materials and
food
stuff and imported finished goods .

•
This was before large companies called multinational corporations
( MNCs) emerged on the scene .

* MNCs :

A MNC is that controls

company owns or
production in
→
a

more than one nation .

MNCs set offices and factories for production in

regions
→

up
where they can get cheap labour and other resources .

→
This is done so that the cost of production is low and
the MNCs can earn
greater profits .

→
How MNCs Spread their Production :

A
4
large MNC , producing industrial equipment , designs its
products in research centres in the United States .

↳ The components manufactured in China .

4 These are then shipped to Mexico and Eastern Europe

where the products are assembled .

↳ The finished products are sold all over the world .

4 Meanwhile ,
the company 's customer care is carried out
through
call centres located in India .
 In the only
A above example MNC is not
selling
its
finished products globally .

4 But more important ,

the goods and services are produced
globally .

This production
*
spreading of reduces the cost of
manufacturing significantly .

→
Thus the advantage of spreading out production across the
borders to the multinationals can be truly immense .

* Selection of Country for Production sis based upon

:

→
Where it is close to the markets .

→
Where there is skilled and unskilled labour available at
low costs .

→
Where the availability of other factors of production is
assured .

→
In addition ,
MNCs might look for government policies that
look after their interests .

*
Foreign Investment :

t The that is spent by to buy

money a
company
like investment
assets
building ,
machines and other
equipment is called .

t Investment made by MNCs is called foreign investment .

t
Any investment is made with the hope that these assets
will earn
profits .

FAT times ,
MNCs set
up production jointly with some of the
local companies of these countries .

t The benefit to the local company of such joint production

is two -

fold .

1. First MNCs can

provide for additional investments like
,
money ,

buying new machines for faster production .

2. Second ,
MNCs might bring with them the latest technology for
production .
tr But the most common route for MNC Investments is
to buy up local companies and then to expand
production .

t do
MNC with
huge wealth can quite easily to so .

*
Example :

Deangelo Foods ,
a very large American MNC ,
has brought
over smaller Indian companies such as Pamakh Foods .

Panakh Foods had built a

large marketing network in
various
parts of India ,
where its brand was well -

reputed .

4 Also ,
Tanakh foods had four oil refineries ,
whose control has
now shifted to Cargill .

↳
Cargill is now the largest producer of edible oil in
India to
,
with a
capacity make 5 million pouches daily !

* There's another way in which MNCs control

production -

a
Large MNCs in developed countries place orders for
production with small producers .

4 Garments , footwear , sports items are examples of industries where

production is carried out by a large number of small
producers around the world .

↳ The products are supplied to the MNCs ,

which then sell
these under their own brand names to the customers .

↳ These large MNCs have tremendous power to determine price ,

quality , delivery ,
and labour conditions for these distant producers .

→ Thus we see that there are a

variety of ways in which
the MNCs production and
are
spreading their interacting with
local producers in various countries across the
globe .

a. By setting up partnerships with local companies .

2. By using the local companies for supplies .

By closely with the local

3.
competing companies or
buying
them up .
 -
MNCs are
exerting a strong influence on production at these
distant locations .

-
As a result , production in these widely dispersed locations is

getting interlinked .

*
Foreign Trade and integration of Markets :

For been
long time foreign trade has the main
•

channel
connecting countries .

•
In historyIndia you would have read about the trade routes
connecting and South Asia to markets both in the
East and West and the extensive trade that took place
along these routes .

* What then is the basic function of foreign

trade ?
B. To put it simply , foreign trade creates an
opportunity for
the producers to reach beyond the domestic markets ,
i.e . markets
of their own countries .

• Producers can sell their produce not only in markets located

within the country but can also compete in markets located
in other countries .

of the world .

•
Similarly , for the buyers , import of goods produced in another
country is one way of expanding the choice of goods beyond
what is
domestically produced .

* Chinese Toys in India :

•
Chinese manufacturers learn of an opportunity to export toys to
India ,
where toys are sold at a
high price .

They start exporting plastic toys to India .

Buyers in India now have the option of choosing between

Indian and the Chinese toys .

•
Because of the cheaper prices and new designs ,
Chinese toys
become more popular in the Indian markets .

•
Within a
year ,
70 -

80% of the toy shops have replaced Indian toys

with Chinese toys .
•

Toys are now cheaper in the Indian markets than earlier .

•
In the competition between Indian •
Indian
buyers have a

and Chinese toys ,

Chinese toys prove greater choice of toys and
better . at lower prices .

• for the Chinese toy makers , •

The opposite is true foe Indian
this provides an opportunity to toy makers .

expand They losses their toys

business
face as
-

.
,

are
selling much less .

* What is Globalisation ?
→
It is a
process of rapid integration or interconnection between
countries .

* Factors that have enabled Globalisation :

A) Technology :

•
Rapid improvement in
technology has been one major factor
that has stimulated the globalisation process .

This has faster delivery goods long

•
made much of across

distance possible at lower costs .

•
The due to
major changes were -

9) Internet -

It has helped us to send and relieve data

instantly .

) Mobile
ii Service To
facilitate communication on the
go
-

iii ) Satellite -

To link connections from any parts of the

world .

B) Liberalisation of Foreign trade and foreign investment policy :

•
Trade barriers are
necessary after independence to protect the
producers within the country from foreign competition .

• Around 9999 ,
Indian government accepted the liberalisation
policy .
• The government can use trade boonies to increase or decrease
(regulate) foreign trade and to decide what kinds of goods and
of each , should
how much come into the
country .

•
Tax on imports is an
example of TRADE BARRIER .

•
Removing barriers or restrictions set by the government on trade is
known as LIBERALISATION .

• When the government imposes less restrictions than before ,

it is

said to be more liberal .

* World Trade Organisation [WTO] :

→
An organisation whose aim is to liberate.se international trade .

→
Nearly 964 countries of the world are
currently members of the
WTO .

→ It 's main aim is making rules regarding international trade ,

and
sees that these rules are obeyed .

- Problems with WTO :

Though WTO is supposed to allow free trade for all ,

in practice ,

it is seen that the developed countries have unfairly retained

trade barriers .

•
On the other hand ,
WTO rules have forced the developing countries
to remove trade barriers .

* Impact of Globalisation in India :

i For
] Consumers :

•
Globalisation and greater competition among producers -
both local and
foreign producers
-
has been of advantage to consumers ,
particularly the
well -

off sections in the urban areas .

•
There is a greater choice before these consumers who now
enjoy
improved quality and lower for several products
prices .

•
As a result ,
these people today , enjoy much higher standards of
living than was
possible earlier .
it For Producer :

Foreign Investment increased in India .

Employment opportunities increased .

•
Rise to big MNCs .

•
Latest technology and production methods are within our grab .

→
Moreover , globalisation has enabled some
large Indian companies to
as multinational themselves !
emerge
•
Some of the Indian multinational companies such as Tata Motors ,

Asian Paints benefited globalisation

Infosys Ranbang
, ,
with the as
they
have spread their operations worldwide .

•
There are
enough opportunities for skilled workers but unskilled
workers remained poor .

%) For Small Producers :

•
Small producers face close competition with such a well established
firms .

bear small loses but small producers cannot bear

-

Big companies
such loss and ultimately end up selling their to
company
MNCs .

Eg . Batteries , capacitors toys plastic

, , , tyres are some examples of industries
where small manufacturers hit hard due to competition .

it For Workers :

9) No job security : with growing market competition among industries

employers prefers to hire the worker as per
need .

Thus fire
-

they can the worker

anytime ,
and there
is no job security for the workers .

) Very
ii long working hours : Worker has to work for long
hours to meet the demands .

They will have no choice than listening

to their employer .
 Low wages
: Tof opportunities are limited and number of
workers are far more than the opportunities .

-
Thus producers easily get cheap labour and workers
are ready to work at low wages .

The Struggle Globalisation

*
for a
fair :

↳ The above evidence indicates that not has benefitted

everyone
from globalisation .

4
People with education ,
skill and wealth have made the best
use
of the new opportunities .

4 On the other hand , there are

people who have not
many
shared the
benefits .

→ Fair globalisation would create opportunities for all , and also

ensure that the benefits of globalisation are shared better .

The government role this

can play major in
making
→
a

possible .

→ Its policies must protect the interests ,

not
only of the rich
and the powerful ,
but all the people in the country .

*
Steps Government can take :

1 It can insure that labour laws are

properly implemented
and the workers get their
rights .

1 It can support small producers to improve their performance

till the time they become to
strong enough compete .

1
If necessary ,
the government can use trade and investment
barriers .

'
-
It can
negotiate at the WTO for fairer rules :

4 It can also
align with each other
developing countries with
similar interests to fight against the domination of developed
countries in the WTO .

* Role of People :

→
In the past few years massive , campaigns and representation by people 's
organisations have influenced important decisions
relating to trade and
investments at the WTO .

→
This has demonstrated that people also can
play an important
role in the struggle for fair globalisation .
 1 Marks Questions

1. Which organization lays stress on liberalization of foreign trade

and foreign investment?
[1M, 2018]
A1. World Trade Organisation (W.T.O.)

2. Name an important barrier on foreign trade.

[1M, 2018]
A2. Tax on imports is an important barrier on foreign trade.

3. Differentiate between investment and foreign investment.

[1M, 2016]
A3. The money that is spent to buy assets (land, building,
. machines and other equipments) is called investment, while
 . the investment made by the MNCs is called foreign
. investment.

4. Why do MNCs set up their offices and factories in those regions

where they get cheap labour and other resources?
[1M, 2016]
A4. MNCs set up offices and factories for products in regions
. where they can get cheap labour and other resources so that -
• the cost of production is low
• the MNCs can earn greater profits.

5. Why had the Indian Government put barriers to foreign trade

and foreign investment after independence? State any one
reason.
[1M, 2015]
A5. The Indian government after independence had put barriers
. to foreign trade and investment.
• This was done to protect the producers within the
country from foreign competition.
 • To protect the Indian economy from foreign infiltration
in industries affecting the economic growth of the
country as planned.

6. What is meant by trade barrier?

[1M, 2015]
A6. Barriers or restrictions that are imposed by the government
. on free import and export activities are called trade barriers.
. Tax on imports is an example of a trade barrier because it
. increases the price of imported • commodities. The
. government can use a trade barrier like ‘tax’ to increase or
. decrease (regulate) foreign trade and to decide what kind of
. goods and how much of what should come into the country.

7. What do you understand by the term ‘Foreign Direct

Investment’?
[1M, 2014]
A7. FDI is the investment of foreign capital in the economic and
. productive activities of a country by foreign companies or
. MNCs with the aim of expanding capacity and production to
. earn profits.
 8. What is meant by “fair globalization’?
[1M, 2014]
A8. Fair globalization means globalization that would create
. opportunities for all and ensure that its benefits are shared
. better.

3 Marks Questions

9. How can the Government of India play a major role to make

globalization fairer? Explain with examples.
[3M, 2019]
A9. Fair globalization would create equal opportunities for all and
. would ensure that the benefits of globalization are shared
.. better. The government can play a major role in making this
. possible. The policies of the government must protect the
. interests of all the people of the country, not only of the rich
. and powerful. Hence, the government can play a functional
. role in helping to bridge the gap between the two.
The government must ensure that the labour laws are
. properly implemented and the workers get their rights.
 . Support to the domestic and smaller producers must be
. ensured for making them strong enough to enter the .
. competitive global market.
It is necessary for developing countries to have stronger
. trade and investment rules. They should negotiate at the
. WTO for fairer rules and regulations.

10. How has globalization affected the life of Indians? Explain with
. examples
[3M, 2019]
A10. Globalization has contributed in the booming of the Indian
. economy in the following ways:
• Greater competition among producers resulting from
globalisation is a great advantage to consumers as there is
greater choice regarding every product before them.
• Due to globalisation, many MNCs have increased their
investments in India, this has not only helped in the inflow
of capital but also helped largely in employment generation.
• Local companies supplying raw materials to the industries
that have been set as a result of the globalization have
prospered leaps and bounds.
• Large Indian companies have emerged as multinational
companies. This has helped our country to increase bur
contacts around the world. Globalisation has helped
increase our GDP and per capita income, thus making the
living standards better across the globe.
11. Why is the total income of countries not used to make
comparisons between them?
[1M, 2012]
A11. The total income of countries is not used to make
. comparisons between them, because the population of
. different countries is different and does not give a clear
. picture if comparisons are made on this basis.

12. How do Multi-National Corporations (MNCs) interlink

production across countries?
[3M, 2017]
• A12. Multi-National Corporations (MNCs) interlink their
production across countries in various ways:
A multinational corporation (MNC) is usually a large company
that owns and controls the production in more than one
nation. MNCs set up offices and factories for production in
regions where they can easily get cheap labour and other
resources. This is done to minimise the cost of production
end to maximise the profit.
 • The MNCs not only sell its finished products globally, but
more importantly, the goods and services are produced
globally.

• The production process is divided into small parts and spread

out across the globe.

13. Examine any three conditions which should be taken care of

by multinational companies to set up their production units.
[3M, 2017]
A13. Conditions:

1. MNCs set up offices and factories for production in

regions where they can get cheap labour and other
resources. Example, Countries like China, Bangladesh
and India. They also provide with the advantage of cheap
manufacturing locations.
2. MNCs also need close-by markets for their manufacturing
goods. Mexico and Eastern Europe are useful for their
closeness to the markets in the US and Europe.
3. Besides these, MNCs also require skilled engineers and
IT personnel and a large number of English speaking
people who are able to provide customer care services
(India possibly tops in this area).
4. All these factors help MNCs in saving costs of production
by 50-60%.
14. “A wide ranging choice of goods are available in the Indian
markets.” Support the statement with examples in context of
globalisation.
[3M, 2016]
A14. Globalisation has led to integration of markets across . .
. countries. The Indian markets are now flooded with a wide
. ranging choice of goods. Import from other countries has led
. to an expanding choice of goods beyond what is domestically
. produced —
1. We have a wide variety of goods and services before us in the
market.
2. The latest models of digital cameras, mobile phones and
televisions made by leading manufacturers of the world like
Sony, Samsung etc. are available in the market.
3. Every season, new models of automobiles can be seen on
Indian roads. Today Indians are buying cars produced by
nearly all the top companies in the world.
4. A similar explosion of brands can be seen for many other
goods like footwear. For example, Adidas, Nike, Reebok,
Puma and many more.

15. Why had the Indian government put barriers to foreign trade
and foreign investments after independence? Analyse the
reasons.
[3M, 2016]
A15.
1. The Indian government after independence had put barriers to
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, fertilisers, petroleum etc. was
allowed.
2. Another reason was 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.

16. Barriers on foreign trade and foreign investment were

removed to a large extent in India since 1991’. Justify the
statement.
[3M, 2016]
A16. Removing barriers or restrictions set by the government on
. foreign trade and foreign investment is what is known as
. liberalization. The Indian Government removed these
. barriers because:
1. Liberalization of trade and investment policies allows Indian
producers to compete with producers around the globe
 leading to an improvement in performance and quality of
products.
2. After the barriers on foreign trade and foreign investment were
removed to a large extent, goods could be imported and
exported easily and also foreign companies could set up
factories and offices in India. This has led to an increase in
trade with different countries.
3. Businesses are allowed to make decisions freely about what
they wish to import or export due to the liberal policies of the
government.
4. Doors of investment opened up for MNCs. They have been
investing large sums of money in India and have been seeking
to earn large profits.

17. “Foreign trade integrates the markets in different countries.”

Support the statement with arguments.
[3M, 2015]
A17.
(i) Foreign trade creates opportunities for producers to
reach beyond domestic markets. Producers can
compete in markets located in other countries of the
world. Similarly, for the buyers, import of goods from
another country leads to expanding choice of goods
beyond what is domestically produced. Buyers can
thus choose from a wide range of products to suit their
individual tastes.
 (ii) With the opening of trade, goods travel from one
market to another. Choice of goods in the market
rises. Prices of similar goods in two markets tend to
become equal, and producers in the two countries
now closely compete against each other even though
they are separated by thousands of miles. Foreign
trade, thus, results in connecting the markets or
integration of markets in different countries.

For example., There are endless number of footwear

brands available in the Indian market. A consumer who
is aware of international trends can choose between a
local brand like Bata, Lakhani and international brands
like Adidas, Nike, Reebok etc.

18. How has information and communication technology

stimulated globalisation process? Explain with examples.
[3M, 2014]
A18. Information and communication technology has helped
. globalisation in the following ways:
1. Rapid improvement in technology has contributed greatly
towards globalisation. Advanced technology in transport
systems has helped in the delivery of goods faster across long
distances at lower costs.
2. Development in information and communication technology
has also helped a great deal. Telecommunication facilities —
telegraph, telephone, mobile phones, fax are used to contact
 one another quickly around the world, access information
instantly and communicate from remote areas. This is possible
due to satellite communication devices. Teleconferences help
in saving frequent long trips across the globe.
3. 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 of money from one bank to another can be
done through e-banking through internet. Internet also allows
us to send instant electronic mail (e-mail) and talk (voice-mail)
across the world at negligible cost.

19. How are MNCs able to cope with large demands from all over
the world and control prices?
[3M, 2014]
A19.
1. Large MNCs in developed countries place orders for
production with small producers.
2. The MNCs sell these under their own brand names to the
customers.
3. As they control the market with the huge demand, they are
able to control prices.
20. In spite of Globalization, creating good quality products and
expanding market, how is it affecting the stability in jobs for the
workers?
[3M, 2014]
A20.
1. Employment of ‘flexible workers’.
2. Increased competition, objective to lower costs, the axe falls
on the ‘labour costs’—temporary jobs given.
3. Longer working hours for labour to get suitable salaries.

5 Marks Questions

21. Why do multinational corporations (MNCs) set up their offices

and factories in certain areas only? Explain any five reasons.
[5M, 2019]
A21. MNCs, take into consideration certain factors to set up their
. production units in particular areas.
These areas are generally:
• Where markets are closed.
• Where skilled and unskilled labour is available at low
costs.
 • Where the favourable government policies which look
after their interests are present.
• Where the other factors of production such as raw
materials, water, electricity and transport are available
and assured.
• Where there are standard safety measures for assured
production.

22. How has foreign trade been integrating markets of different

countries? Explain with examples.
[5M, 2018]
A22.

• Foreign trade provides an opportunity for both producers and

buyers to reach beyond the markets of their own country.
• Goods travel from one country to another. There is a huge
competition among producers of one country and producers of
another country.
• Competition among buyers also prevails because they have
more choice of goods, over domestically produced goods.
• With the opening of trade, goods travel from 6ne market to
another and varieties of goods on the markets rises. Price of
similar goods in the two markets tend to become equal.
• For e.g., During Diwali season, buyers in India have the option
of choosing between Indian and Chinese lights and bulbs,
Chinese lights manufacturers provide an opportunity to
 expand their business as these lights are cheap and available
in larger quantities easily.

23. How do we feel the impact of globalisation on our daily life?

Explain with examples.
[5M, 2018]
A23. Impact of Globalization in our daily life:
• Transportation technology has made much faster delivery of
goods across long distances possible and that too at lower
rates.
• The invention of computers, the internet, mobile phones, and
fax has made contacting each other around the world quite
easy.
• New jobs have been created in industries where MNCs have
invested.
• The prices of various products have come down due to
competition among producers and manufacturers.
• People are getting more employment because some Indian
companies have become multinational themselves due to
globalisation.
24. What is liberalisation? Describe any four effects of
liberalisation on the Indian economy.
[5M, 2017]
A24. The liberalisation of the economy means to free the trade
. from direct or physical controls imposed by the government.

The four effects of liberalisation on the Indian economy are:

• Competition would improve the performance of producers
within the country.
• Barriers to foreign trade and foreign investment were
removed to a large extent. This meant that goods could be
imported and exported easily.
• Foreign companies could set up factories and offices to
boost up production.
• It allows making decisions freely.
• The competition would improve the performance of
producers within the country since they have to improve
their quality.

25. Describe the contribution of technology in promoting the

process of globalisation.
[5M, 2017]
A25. The technology has contributed immensely in promoting the
. process of globalisation.

Visible improvements in the field are:

 • Several improvements have been seen from the last fifty
years in transportation technology.
• This has made faster delivery of goods across long
distances possible at cheaper costs.
• In recent times, technology in the areas of
telecommunication, computers, internet, mobiles have
changed rapidly.
• Technology has facilitated the satellite communication
devices.
• Telecommunication facilities are used to make contact
with one another around the world at any time. The facility
of video conferencing or one to one video calling has
become common in present days. It also allows us to send
instant electronic mail (e-mail), and voice mail across the
world at negligible costs.

26. How are MNCs spreading their products? Explain with

. examples.
[5M, 2015]
A26. MNCs set up production in various countries based on the
. following factors:
1. 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. These
countries also provide with the advantage of cheap
manufacturing locations.
 2. At times, MNCs set up production jointly with some of the
local companies of countries around the world. Such joint
production also provides benefits to the local company.
3. MNCs with huge amounts of wealth sometimes buy up
local companies to expand production, e.g., Cargill Foods,
a very large American MNC has bought over smaller
Indian companies such as Parakh Foods.
4. There is another way in which MNCs control production
and that is 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. MNCs also enter into close competition with
local companies thereby influencing production in distant
locations.

27. What is trade? Explain the importance of international trade.

[5M, 2016]
A27. The exchange of goods among people, states and countries
. is referred to as trade.

Importance of international trade:

1. International trade of a country is an index to its economic
prosperity.
2. It is considered the economic barometer for a country. If
the balance of international trade is favourable, a country
will be able to earn more foreign exchange.
 3. As no country is self-sufficient in all resources it cannot
survive without international trade.
4. Countries have trade relations with the major trading
blocks.
5. Exchange of commodities and goods have been
superseded by the exchange of information and
knowledge.

28. “Advancement of international trade of a country is an index of

its economic prosperity.” Justify the statement with five
arguments.
[5M, 2013]
A28. “Advancement of international trade of a country is an index
. to its economic prosperity”.
1. As no country is self-sufficient in all resources, it cannot
survive without international trade.
2. If the balance of international trade is favourable, a
country will be able to earn more foreign exchange.
3. International trade encourages a country to develop
secondary and tertiary sectors for exporting goods which
can fetch more foreign exchange.
4. A country’s economic prosperity can be gauged by the
health of its international trade.
5. A country can earn large amounts of foreign exchange
through international trade.
29. How is the Government of India trying to attract more foreign
investment? Explain with examples.
[5M, 2013]
A29. In order to attract foreign investment, the Government has
. taken the following steps:
1. All the barriers and restrictions on foreign trade and
investment have been removed to a large extent.
2. Liberalization of investment policies has allowed Indian
producers to compete with the producers around the
globe.
3. Allowing privatization of many public sector industries by
the government.
4. Allowing businesses to make decisions freely about what
they wish to import or export.
5. The government has allowed flexibility in labour laws to
attract foreign investment for the benefit of companies.

30. How has globalization been advantageous to both the

producers as well as the consumers in India?
[5M, 2012]
A30. To Producers. Several of the top Indian Companies have
. been able to benefit from the increased competition.
• They have invested in newer technology and production
methods and thereby raised their production standards.
• They have gained from successful collaborations with
foreign companies.
• Globalization helped in the development of IT sector.
• Good quality products are being produced at lower prices.
To Consumers. There is greater choice before consumers
who can enjoy improved quality and lower prices for
several products.
• People today, enjoy much higher standards of living than
was possible earlier.