Q.1 How do Multinational Companies manage to keep the cost of production of their goods low? Explain with examples. (2013 D)
Or
Explain the conditions that determine MNCs setting up production in other countries? (2011 D)
Answer:

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%.

Q.2
How do we participate in the market as producers and consumers? Explain with three examples. (2013 D)
Answer:
We participate in the market both as producers and consumers.

1. As producers of goods and services we could be working in any of the sectors like agriculture, industry or services.
   For example, a farmer who sells wheat to a flour mill. The man at the mill grinds the wheat and sells the flour to a biscuit company. The biscuit company uses flour, sugar and oil to make packets of biscuits. It sells the biscuits in the market to the consumer. Biscuits are the final goods, i.e., the goods that reach the consumer and people as consumers buy.
2. We as producers in the market could be made to sell the produce to the moneylender at a low rate in return for a timely loan.
   For example, in case of small farmers; the failure of crops often makes loan repayment impossible. They have to sell a part of their land to repay the loans.
3. As consumers we participate in the market when we purchase goods and services that we need. As individual consumers we often find ourselves in a weak position. Whenever there is a complaint regarding a good or service that had been bought, the seller tries to shift all the responsibility on to the buyer.
   For example, a long battle had to be fought with court cases to make cigarette manufacturing companies accept that their product could cause cancer.

Q.3
How are local companies benefitted by collaborating with multinational companies? Explain with examples. (2013 OD)
Answer:
When local companies enter into a joint venture with MNCs:

1. First, the MNCs provide money for additional investments for faster production.
2. Second, MNCs bring with them the latest technology for enhancing and improving the production.
3. Some Indian companies have gained from successful collaborations with foreign companies.
   Globalization has enabled some companies to emerge as multinationals.
4. Parakh Foods was a small company which has been bought over by a large American Company — Cargill Foods. Parakh foods had built a large marketing network in various parts of India as a well- reputed brand. Parakh Foods had four oil refineries whose control has now shifted to Cargill. Cargill is now the largest manufacturer of edible oil in India making five million pouches daily.

Q.4
How has foreign trade been integrating markets of different countries in the world? Explain with examples. (2012 OD)
Or
“Foreign trade integrates the markets in different countries.” Support the statement with arguments. (2015 OD)
Answer:

(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.

Q.5
Define the term liberalization. Explain the reasons why the Indian Government started the policy of liberalization in 1991. (2014 D)
Or
‘Barriers on foreign trade and foreign investment were removed to a large extent in India since 1991’. Justify the statement. (2016 D)
Answer:
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.

Q.6
How has information and communication technology stimulated globalisation process? Explain with examples. (2014 D)
Answer:
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.

Q.7
Why had Indian government put barriers to foreign trade and foreign investment after independence? Explain. (2014 D)
Or
Why had the Indian government put barriers to foreign trade and foreign investments after independence? Analyse the reasons. (2016 OD)
Answer:

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.

Q.8
How are MNCs able to cope with large demands from all over the ivorld and control prices? (2014 OD)
Answer:

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.

Q.9
“A wide ranging choice of goods are available in the Indian markets.” Support the statement with examples in context of globalisation. (2016 D)
Answer:
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.

Q.10 In spite of Globalization, creating good quality products and expanding market, how is it affecting the stability in jobs for the workers? (2014 OD)
Answer:

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

Important Link

Quick Revision Notes : Globalisation and the Indian Economy

NCERT Solution : Globalisation and the Indian Economy

MCQs: Globalisation and the Indian Economy

Click here for Free Video Lectures