Revision Notes

Class 10 - Economics

Chapter 4 - Globalization and Indian Economy

PRODUCTION ACROSS COUNTRIES

The main mode of communication between distant countries was trade.

Large corporations, now known as Multinational Corporations (MNCs), play a

significant role in trade.

● A multinational corporation (MNC) is one that owns or controls production

in more than one country.

● MNCs locate production headquarters and factories in areas where labour

and other resources are cheap. This is done to keep production costs down

and allow MNCs to make more money.

● MNCs locate production near markets, where skilled and unskilled labour

is readily available at low rates, and where the availability of other

production elements is ensured.

● Furthermore, MNCs may seek government measures that protect their

interests.

INTERLINKING PRODUCTION ACROSS COUNTRIES

● Investment refers to money spent on assets such as land, buildings,

machineries, and other equipment.

● MNC investment is referred to as foreign investment. Any investment is

made in the hopes of profiting from the assets.

MNCs are spreading their production and interacting with local producers in

numerous nations throughout the world in a variety of methods, as listed

below:

● Joint Production: MNCs partner with an existing local company in joint

production or partnership. The investment enables local producers to

obtain new and improved assets as well as cutting-edge technologies.

● Acquisition of Local Companies: MNCs purchase large established local

enterprises with vast networks in order to grow their production.

● Controlled Production: MNCs source materials and make orders with

local companies who create goods, resulting in controlled production. The

MNC's brand name is used to market the products.

MNCs collaborate with local businesses to set up production, which benefits

local businesses in the following ways:

1. MNCs can give funds for extra investments, such as the purchase of new

machines to increase production speed.

2. Multinational corporations may bring cutting-edge manufacturing

technology

with them.

FOREIGN TRADE AND INTEGRATION OF MARKETS

● Foreign trade allows producers to expand their reach beyond their home

markets, i.e. markets within their own countries.

● Producers have the option of selling their products not only in domestic
markets, but also in marketplaces around the world.

● Similarly, importing items manufactured in another country is one way for

purchasers to increase their options beyond what is offered domestically.

Thus, foreign trade leads to the connection or integration of markets in

other countries.

GLOBALISATION

The term “globalisation” refers to the process of integrating a country's

economy with the global economy. It's a multifaceted problem. It is the
culmination of a number of initiatives aimed at converting the world into
one of greater interconnectedness and integration.

It entails the establishment of networks and endeavours aimed at breaking

down social, economic, and geographic barriers. Globalisation aims to create

connections such that events in India can be influenced by events taking

place thousands of miles away. To put it another way, globalisation is the
process of people, corporations, and governments all over the world
interacting and uniting.

Globalisation has been enabled by the following factors:

1. Technology:

● One of the primary factors that has accelerated the globalisation process
is rapid technological advancement. This has allowed for considerably

speedier and more cost-effective distribution of commodities over great

distances.

● Information is now readily accessible because of advancements in

information and communication technologies.

● These advancements enabled India's IT revolution by allowing workers to

be located in different regions while yet being integrated into a virtual

workspace.

● Automation and precise control of production, as well as homogeneity,

have been made possible thanks to advanced computing facilities.

2. Trade Liberalisation:

● Government-imposed trade restrictions are known as trade barriers. The

government can employ trade barriers to control or enhance international

trade, as well as decide what sorts of goods and how much of each should

be imported. Import taxes are an example of a trade barrier.

● Liberalisation is the process of removing government-imposed trade

obstacles or limitations. The government is said to be more liberal when it

imposes fewer restrictions than before.

● In a developing economy, trade restrictions can help to boost growth and

productivity. It can, however, be harmful after a certain level of

development.

● India liberalised its trade in 1991, allowing companies to freely import and

export materials and goods. This was backed up by organisations like the

World Bank.

3. Foreign Investment Policy:

● A company's considerable investments in a foreign enterprise are known

as foreign direct investments (FDI).

● The investment could be used to acquire a material source, expand a

company's territory, or establish an international presence.

WORLD TRADE ORGANIZATION (WTO)

● The World Trade Organization (WTO) arose from the 1947 General

Agreement on Tariffs and Trade (GATT).

● The World Trade Organization (WTO) is a global organisation with 164

member countries that regulates international trade rules.

● The World Trade Organization's purpose is to keep trade flowing as

smoothly and predictably as feasible.

● If a trade dispute arises, the World Trade Organization (WTO) tries to

resolve it.

IMPACT OF GLOBALISATION IN INDIA

To begin with, MNCs have expanded their investments in India during the
last 20 years, indicating that investing in India has shown to be profitable.

● MNCs have shown an interest in urban industries such as cell phones,

autos, electronics, soft drinks, fast food, and banking.

● There are a lot of wealthy people who buy these things. New employment

has been created in these industries and services. Local businesses that

supply these sectors with raw materials and other necessities have also

prospered.

Second, increased competition has benefited a number of prominent Indian

firms.
● They have increased their production standards by investing in modern

technologies and production methods.

● Successful relationships with international enterprises have benefited

some.

THE STRUGGLE FOR A FAIR GLOBALISATION

Fair globalisation provides possibilities for everyone while also ensuring that
the advantages of globalisation are distributed more evenly. The government
has a significant role to play in making this happen.

Some of the steps that the government can take are:

1. It has the potential to help small producers boost their output.

2. It can ensure that labour rules are followed and that workers' rights are

protected.

3. The government can deploy trade and investment obstacles if required.

4. It can negotiate for "fairer rules" in the WTO.

5. It can also band together with other developing countries with similar
interests to combat the WTO's hegemony of developed countries.

Important Question and Answer

1. How has globalisation transformed the markets?

Ans: Globalisation is the process of establishing tight interconnections

between countries' output and markets. The following modifications have
occurred as a result of it:

1. Due to globalisation-induced competition, the variety and quality of goods

and services on the market has substantially increased/improved.
2. Consumers can now purchase items and services that were previously only

available in far-flung international markets.

3. Producers may now sell their goods and services on a broader global
market and obtain greater rates.

4. Due to the impacts of trade, the price of the same items on different
markets tends to equalise.

2. “The advantage of spreading out production across the borders to the

multinationals can be truly immense.” Explain.

Ans: The following points can be used to explain the above statement:

1. Multinational corporations can drastically reduce production costs by

placing production in areas with low resource and labour prices.

2. They can more easily reach markets by placing production in different

locations of the world.

3. They can afford to hire the best-skilled individuals for higher-level

employment.

3. How do MNCs spread their production facilities in new countries?

Ans: In order to locate their production in new regions, MNCs employ three
basic strategies:

1. Joint Production: MNCs form a joint production or partnership with a local

enterprise. Local producers will be able to receive new and enhanced assets
as well as cutting-edge technologies as a result of the investment.

2. Acquisition of Local Companies: MNCs purchase huge, well-established

local businesses with extensive networks in order to expand their production.

3. Controlled Production: MNCs acquire supplies and place orders with local

companies that produce items, resulting in regulated production. The

products are marketed under the MNC's brand name.

4. What are the changes that led to the dense interlinkages across markets

present in the world today?

Ans: a. Technology: Rapid technical improvement is one of the key elements

that has expedited the globalisation process. This has resulted in far faster
and more cost-effective distribution of goods over long distances. Because of
developments in information and communication technologies, information is
now easily available.

b. Trade Liberalisation: It has resulted in the reduction of trade barriers

such as tariffs and quotas on imports and exports, has enabled countries to
produce in one location but sell in multiple locations. Local producers have
also been able to import semi-finished goods and grow their operations as a
result. Consumers connect markets by purchasing goods made outside of the
country.

c. Foreign Investment Policy: Foreign direct investments are a company's

significant investments in a foreign enterprise (FDI). The money might be

used to buy a material source, expand a company's territory, or start a
business in another country.

5. Explain how MNCs have contributed to the increased competition in local

markets. How has this been beneficial and for whom?

Ans:

● MNCs have a low cost of production due to the advantages of locating

production in areas with cheap resource and labour costs. As a result, their

products are less expensive than those produced locally.

● MNCs have superior production technology, allowing them to manufacture

higher-quality items than local producers.

● MNCs can produce more than local competitors due to their large capital

availability.

● These factors combine to generate a competitive atmosphere in both

production and sales. To compete with the price and rating of MNCs' goods

and services, local producers should lower their production costs and

increase the quality of their goods and services.

● Large enterprises have benefited from the rivalry, allowing them to emerge

as formidable local and worldwide actors.

● Customers have reaped the benefits of higher quality at lower costs.

● Small and medium producers, on the other hand, have been left behind
due to a lack of resources to expand production or obtain better technology.

6. What are Special Economic Zones?

Ans: SEZs (Special Economic Zones) are industrial zones where governments

provide special incentives for businesses to set up shop. These are some of
them:

● Infrastructure that meets international standards is provided.

● For the first five years, you'll be on a tax rampage.

● Within the zones, labour regulations are applied more flexibly, allowing
for cheaper wage costs.

7. What is WTO? Why are their policies criticized?

Ans: The World Trade Organization (WTO) was founded in 1947 as a result of

the General Agreement on Tariffs and Trade (GATT) (GATT). The goal of
the World Trade Organization is to ensure that trade flows as smoothly and

predictably as possible.

● The World Trade Organization (WTO) is a global organisation that

controls international trade rules and has 164 member countries.

● WTO liberalisation measures disproportionately hurt developing countries.

● Developing countries are frequently put under increased pressure to

liberalise, and their early economies may not be able to withstand the fierce

international competition.

● Developed countries, on the other hand, have unfairly preserved barriers

while benefiting from their less fortunate peers' free trade policies.

8. Identify two sections who are harmed by globalisation. Explain how.

Ans: Globalisation has not benefited small manufacturers or workers in the

informal/unorganized industries. They are currently confronted with the

following challenges:

1. MNC competition is fierce, and they may not be able to keep up.

2. Insufficient funds to improve technology or expand manufacturing.

3. MNCs emphasise on employing a flexible workforce at low prices, hence

workers in the unorganised sector are paid very low pay.

4. Poor working conditions have resulted from a lack of state policy to
safeguard workers. They are not eligible for benefits such as fixed contracts
or pensions.

9. Who can ensure fair globalisation and how?

Ans: Governments have the power to ensure that globalisation is fair.

1. The government can enact labour laws and policies to safeguard workers in
the unorganised sector from MNC exploitation. It has the ability to provide
insurance and pension benefits to all employees.

2. The government can also work with international organisations to put in

place trade restrictions that protect economically fragile and essential
sectors. Agriculture in India, which provides income to about half of the
people, can be protected against international competition.

10. List different factors which affect the choice of location by MNCs.

Ans: The consideration of manufacturing costs has an impact on MNCs'

decision to site production in different countries.

1. When deciding on a location for a business, the people are the most
crucial factor to consider. Most businesses will fail if they do not have the
right employees to carry out the duties that drive success.

2. The cost of operating in a foreign nation encompasses a wide range of

factors, including not only the direct costs of space and staff, but also
indirect expenditures that affect the bottom line and level of productivity.

3. A country must give the institutions, human capital, infrastructure,

collaboration opportunities, market sophistication, and business aptitude to

assist a firm prosper in today's fast-paced market.

1. What is meant by 'Globalization'?

a) The process of a country becoming self-sufficient

b) The process of increasing interdependence among countries through trade

and communication

c) The growth of national economies in isolation

d) The process of reducing foreign investments

Answer: b) The process of increasing interdependence among countries

through trade and communication

2. Which of the following is a major factor contributing to globalization?

a) Increase in the size of the domestic market

b) Technological advancements in communication and transportation

c) Reduction in the number of multinational corporations

d) Decrease in foreign investments

Answer: b) Technological advancements in communication and

transportation

3. The term 'multinational corporations' (MNCs) refers to:

a) Corporations that operate in only one country

b) Corporations that produce goods and services for only the domestic
market

c) Corporations that operate in more than one country

d) Corporations that only export goods from one country to another

Answer: c) Corporations that operate in more than one country

4. Which of the following is an example of an MNC (Multinational

Corporation)?
a) Tata Motors

b) Reliance Industries

c) Coca-Cola

d) Mahindra & Mahindra

Answer: c) Coca-Cola

5. How has globalization affected the Indian economy?

a) It has led to a decrease in the production of goods

b) It has improved the quality of Indian products through competition

c) It has isolated India from the global market

d) It has reduced India's GDP growth rate

Answer: b) It has improved the quality of Indian products through

competition

6. Which of the following was a major policy change adopted by India in 1991
to promote globalization?

a) Introduction of the Green Revolution

b) Liberalization of trade and investment policies

c) Nationalization of banks

d) Expansion of public sector enterprises

Answer: b) Liberalization of trade and investment policies

7. What is the main advantage of globalization for consumers in India?

a) Decrease in the variety of goods available

b) Higher prices for goods and services

c) Availability of a wider variety of goods at lower prices

d) Limited access to foreign products

Answer: c) Availability of a wider variety of goods at lower prices

8. Which sector has benefited the most from globalization in India?

a) Agriculture

b) Services (especially IT and software)

c) Manufacturing of basic goods

d) Public Sector Enterprises

Answer: b) Services (especially IT and software)

9. What does 'liberalization' mean in the context of globalization?

a) The reduction of trade restrictions and opening up of the economy to

foreign companies

b) The complete closure of markets to foreign products

c) The increase of government regulations in the economy

d) Nationalization of private businesses

Answer: a) The reduction of trade restrictions and opening up of the

economy to foreign companies

10. What has been one of the major impacts of globalization on Indian
agriculture?

a) Increased self-sufficiency in food production

b) Increased competition leading to lower prices for farmers

c) Greater reliance on traditional farming methods

d) Increased exposure to international market fluctuations

Answer: d) Increased exposure to international market fluctuations