Globalisation and the Indian Economy

Globalisation and the Indian Economy

Globalisation carried about 4 marks in the 2026-27 sample paper and in both 2026 papers. The board asks mostly about what globalisation is and the two factors that enabled it: technology, and the liberalisation of foreign trade and investment. Know in outline what an MNC is and the basic effects on India too, because the 2026-27 sample paper had an Assertion-Reason on MNCs linking production and markets, and May 2026 a 3-marker on attracting foreign investment. How MNCs spread production across countries, Chinese toys, the WTO and the struggle for a fair globalisation are project work, so this page leaves them out.

The chapter gave a 3-marker in the sample paper (technology and liberalisation together) and in February 2026 (new technology connects the world), a 2-marker in 2025 (liberalisation from the 1990s), and MCQs on liberalisation (February and May 2026) and technology (2025). Marks are most often lost by listing technologies without saying how they helped, by calling liberalisation 'privatisation', by mixing up transport technology with ICT, and by writing that all barriers were removed.

Revise in 5 Minutes

Globalisation: rapid integration or interconnection of countries, as more and more goods, services, investment and technology move between them. People move too (for jobs, income, study), but far less, because countries restrict entry. MNCs are a major force behind it.

MNC: a company that owns or controls production in more than one country. A firm that makes goods at home and only sells abroad is an exporter, not an MNC. Money an MNC spends on land, buildings and machines in another country is foreign investment.

Factor 1: technology

Factor 2: liberalisation of foreign trade and investment

• Trade barrier: a restriction set by the government, e.g. a tax on imports. It regulates what, and how much, comes in.
• After 1947: barriers on foreign trade and investment protected young Indian industries; only necessary items (machinery, fertilisers, petroleum) came in.
• 1991: Indian producers were felt ready to compete with the world, and competition would improve them. Barriers were removed to a large extent.
• Liberalisation = removing barriers set by the government. Firms decide freely what to import or export, and foreign investment comes in more easily.
• Liberalisation opens the door; technology makes the movement fast and cheap.

Impact (basics): buyers who can afford it get more choice and better quality at lower prices; some big Indian firms gained; many small producers face tough competition. The gains are uneven.

Traps

• Globalisation is not just foreign goods in shops.
• Satellite links and the internet are ICT, not transport.
• Liberalisation removed barriers to a large extent, not all; it is not privatisation.
• A tax on imports raises the price that buyers at home pay.

How to use this page: try each question on paper first, then read the answer. The marks against each step show what an examiner looks for. The 1-mark MCQs and Assertion-Reason questions are in the quiz at the end, together with questions that test how well you understand the chapter; every quiz answer comes with its explanation.

Short Answer Questions (2 and 3 Marks)

Question 1 (3 marks)

Meher runs a small animation studio in the imaginary town of Sitagarh. Her clients are in Japan and Canada, but she has no office abroad and rarely travels. Explain three ways in which information and communication technology makes her business possible.

Answer.

Model answer:

1. Over the internet she gets scripts and sends finished files to clients instantly and cheaply.
2. Phone and video calls let her talk to clients far away without travelling.
3. Her work is a service made in India and delivered abroad electronically, so she needs no office there.

Marking scheme:

1. Through computers and the internet she receives scripts and sends finished files to clients instantly, at very little cost. — 1 mark
2. Phone, mobile and video calls let her discuss work with clients far away without travelling, even from a small town. — 1 mark
3. Her work is a service produced in India and delivered abroad electronically, so she needs no office abroad; services, not just goods, now move between countries. (Accept any other correct use of ICT, such as online payment or satellite links.) — 1 mark

Question 2 (3 marks)

Imagine a country that removes almost all its barriers on foreign trade and investment, but has poor roads and ports and very few telephone or internet links. Would it become closely connected with other countries? Give three reasons for your answer.

Answer.

Model answer:

No.

1. With poor roads and ports, goods cannot move in and out quickly or cheaply.
2. With few phone and internet links, information, orders and services cannot reach people abroad.
3. Liberalisation only opens the door; technology makes the movement fast and cheap, and globalisation needs both.

Marking scheme:

1. No. Without good transport, goods cannot move quickly and cheaply to and from other countries, so trade stays small even though it is allowed. — 1 mark
2. Without telephone and internet links, information, orders and services cannot flow between its people and firms and those abroad. — 1 mark
3. Liberalisation only opens the door; technology makes the movement fast and cheap. Globalisation has grown because the two worked together. (Accept: foreign firms would hesitate to invest where transport and communication are poor.) — 1 mark

Question 3 (2 marks)

Arun makes sewing machines in Ludhiana. Since the 1990s, sewing machines from Japan have competed with his in the local market. Using the government's reasoning when it removed trade barriers in 1991, explain why this competition was expected to help producers like him.

Answer.

Model answer:

1. The government felt Indian producers were now able to compete with the world and did not need high protection.
2. Competition would push Arun to improve quality, cut costs and use better technology.

Marking scheme:

1. The government felt that Indian producers had grown enough to compete with producers around the world, so they no longer needed high protection. — 1 mark
2. Competition was expected to push them to improve: better quality, lower costs and newer technology (Arun can, for example, import better motors), so their performance would get better. — 1 mark

Question 4 (2 marks)

Distinguish between transport technology and information and communication technology as factors of globalisation. Give one example of each.

Answer.

Model answer:

1. Transport technology carries goods and people faster and cheaper over long distances, e.g. container ships.
2. ICT carries information and services instantly across the world, e.g. the internet and mobile phones.

Marking scheme:

1. Transport technology moves goods (and people) over long distances faster and at lower cost; e.g. container ships, cheaper air cargo. — 1 mark
2. Information and communication technology moves information and services across the world instantly; e.g. mobile phones, satellite links, the internet, email. — 1 mark

Question 5 (2 marks)

Indian merchants sold spices and cloth to distant lands for many centuries. Why, then, do we call today's links with the world 'globalisation'? Give two points.

Answer.

Model answer:

1. Today not only goods but also services, investment, technology and people move between countries.
2. The links are much faster and closer, thanks to modern transport, communication and fewer barriers.

Marking scheme:

1. Much more now moves between countries: not only goods but also services, investment, technology and people. — 1 mark
2. The links have become very fast and close (rapid integration), because of modern transport and communication and the removal of many barriers. — 1 mark

Question 6 (2 marks)

Give one example of a barrier on foreign trade and one of a barrier on foreign investment, and say what removing each of them allows.

Answer.

Model answer:

1. Trade: a heavy tax on imported machines; removing it lets such goods come in more easily and cheaply.
2. Investment: a ban on foreign companies setting up factories; removing it lets them invest and produce here.

Marking scheme:

1. Foreign trade: e.g. a heavy tax on imported machines, or a limit on how many can come in; removing it lets such goods come into the country more easily and cheaply. — 1 mark
2. Foreign investment: e.g. a rule that foreign companies may not set up or own factories in the country; removing it lets foreign companies invest and start production here. — 1 mark

Question 7 (2 marks)

Identify the factor of globalisation shown by each of the following, and give a reason in each case.

(i) A new undersea cable brings faster internet between India and Europe.
(ii) The government cuts the tax on imported solar panels.

Answer.

Model answer:

(i) Information and communication technology: it speeds up the flow of information and services.
(ii) Liberalisation of foreign trade: the government lowers a trade barrier, so imports become easier.

Marking scheme:

1. (i) Technology (information and communication technology): it improves how fast information and services move between the two regions. — 1 mark
2. (ii) Liberalisation of foreign trade: a government decision that lowers a trade barrier, making imports easier. — 1 mark

Question 8 (3 marks)

Classify each of these events in an imaginary town as foreign trade or foreign investment, giving a reason for each.

(i) A shop brings in cameras made in Japan and sells them to local buyers.
(ii) A Korean company buys land, puts up a building and installs machines to make washing machines in the town.
(iii) A local rice mill sells its rice to buyers in the Gulf countries.

Answer.

Model answer:

(i) Foreign trade: an import; the Japanese maker owns nothing here.
(ii) Foreign investment: a foreign company spends on land, a building and machines to produce in the town.
(iii) Foreign trade: an export; goods cross the border, but no money goes into assets abroad.

Marking scheme:

1. (i) Foreign trade: goods made abroad are bought and sold here (an import); the Japanese maker owns nothing in the town. — 1 mark
2. (ii) Foreign investment: a company from another country spends money on land, a building and machines here to produce here. — 1 mark
3. (iii) Foreign trade: goods made here are sold to buyers in another country (an export); nobody puts money into assets abroad. — 1 mark

Long Answer and Case-Based Questions

Question 9 (5 marks)

The imaginary country of Ostavia changed its policy on foreign trade and investment in 1991. Study the table (hypothetical data) and answer the questions that follow.

(a) What change in Ostavia's policy after 1991 does the table show? (1 mark)

Answer.

Model answer:

Liberalisation: taxes on imports were cut sharply and foreign investment was let in.

Marking scheme:

1. Liberalisation: the government cut its barriers on foreign trade (taxes on imports fell sharply) and on foreign investment (investment rose). — 1 mark

(b) A TV set costs ₹10,000 abroad. Leaving out all other costs, work out its price in Ostavia with the average tax of 1988 and with that of 2003. (2 marks)

Answer.

Model answer:

1. 1988: ₹10,000 + ₹15,000 tax = ₹25,000.
2. 2003: ₹10,000 + ₹2,000 tax = ₹12,000, which is ₹13,000 less.

Marking scheme:

1. 1988: ₹10,000 + 150% of ₹10,000 = ₹10,000 + ₹15,000 = ₹25,000. — 1 mark
2. 2003: ₹10,000 + 20% of ₹10,000 = ₹10,000 + ₹2,000 = ₹12,000 (a fall of ₹13,000). — 1 mark

(c) Explain two ways in which the rise in foreign investment connects Ostavia more closely with other countries. (2 marks)

Answer.

Model answer:

1. Money from foreign companies flows into factories and machines in Ostavia, so investment moves across borders.
2. It brings foreign machines and methods too, so technology also moves in.

Marking scheme:

1. Money from companies of other countries flows into factories, machines and other assets in Ostavia, so investment moves across borders. — 1 mark
2. Such investment usually brings foreign machines, methods and know-how, so technology also moves into Ostavia. (Accept: it links Ostavia's production with firms and buyers abroad.) — 1 mark

OR

Study the same table and answer the following.

(a) By how many times did the foreign investment received by Ostavia grow between 1988 and 2003? (1 mark)

Answer.

Model answer:

2,900 ÷ 40 = 72.5 times.

Marking scheme:

1. ₹2,900 crore ÷ ₹40 crore = 72.5 times. — 1 mark

(b) Explain two ways in which the lower tax on imported machines in 2003 could help Ostavia's own factories. (2 marks)

Answer.

Model answer:

1. They can buy machines from abroad much more cheaply, so their costs fall.
2. They can use better foreign machines and technology, so the quality of their goods improves.

Marking scheme:

1. Factories can buy machines from abroad at a much lower price, so their cost of setting up or expanding falls. — 1 mark
2. They can use better foreign machines and technology, which improves the quality of their goods. (Accept any other sensible gain.) — 1 mark

(c) In 2003 Ostavia still taxed imported machines at 10 per cent. A student says this shows that Ostavia had not liberalised at all. Do you agree? Give two points. (2 marks)

Answer.

Model answer:

No.

1. Liberalisation removes barriers to a large extent, not always fully; the tax fell from 80 to 10 per cent.
2. The government still sets trade policy and may keep some taxes; a small tax is not a closed economy.

Marking scheme:

1. No. Liberalisation means removing barriers to a large extent, not necessarily all of them; the tax fell from 80 to 10 per cent and foreign investment grew many times. — 1 mark
2. The government still decides its trade policy and may keep some taxes where it thinks fit; a small tax is not the same as a closed economy. — 1 mark

Question 10 (4 marks)

Read the source given below and answer the questions that follow.

Rugs from Kalinpur

Kalinpur Rugs, a family firm in an imaginary town in eastern Uttar Pradesh, sells hand-knotted rugs to shops in Germany and Sweden. A buyer in Hamburg emails a new design on Monday. By Tuesday the weavers are discussing colours with her on a video call, and photos of the first sample reach her the same evening.

Every month the finished rugs are packed into large steel containers at a depot near the town. The sealed containers travel by train to a port in Gujarat and are lifted straight onto a ship, reaching Europe in about four weeks.

The owner, Rafiq, remembers the 1980s, when heavy taxes and limits made it very hard to bring in the special dyes his buyers wanted. Today he imports them from Italy and pays only a small tax. His orders have tripled in ten years.

(A report written for this question; the firm and people are imaginary.)

(a) How does the firm receive new designs and discuss them with buyers abroad? (1 mark)

Answer.

Model answer:

By email and video calls over the internet, that is, through ICT.

Marking scheme:

1. Through information and communication technology: designs come by email, and colours are discussed on video calls over the internet. — 1 mark

(b) Which improvement in transport helps the firm send its rugs to Europe cheaply? (1 mark)

Answer.

Model answer:

Sealed containers that go from train to ship without unloading, saving cost and time.

Marking scheme:

1. Container transport: the rugs travel in sealed containers that move from train to ship without being unloaded, which saves handling cost and time. — 1 mark

(c) Explain how the passage shows the two factors that have enabled globalisation working together for the firm. (2 marks)

Answer.

Model answer:

1. Technology: email, video calls and containers move designs, orders and rugs quickly and cheaply.
2. Liberalisation: lower taxes on imports let Rafiq buy dyes from Italy. With both together, his orders tripled.

Marking scheme:

1. Technology: email, video calls and container transport let orders, designs and rugs move between India and Europe quickly and cheaply. — 1 mark
2. Liberalisation: lower taxes and fewer limits on imports since the 1990s let Rafiq bring in dyes from Italy; with both factors together, his orders tripled. — 1 mark

Question 11 (4 marks)

Read the source given below and answer the questions that follow.

Our Town and the World

A display board put up by Class 10 students of a school in the imaginary town of Chandanpur during 'Globalisation Week'

• Mrs D'Souza's son works as a nurse in Ireland and sends money home every month.
• The new tractor-parts factory near the highway was set up with money from a Japanese company.
• Farmers around Chandanpur have started using a drip-irrigation method first developed in another country.
• Handloom sarees woven in Chandanpur are now sold online to buyers in the USA and Malaysia.
• The ketchup in our canteen comes in bottles from Thailand.
• Most of the phones in our class were put together abroad.

(Created for this question; the town and people are imaginary.)

(a) Which item on the board shows the movement of technology between countries? (1 mark)

Answer.

Model answer:

The drip-irrigation method developed abroad and now used by Chandanpur's farmers.

Marking scheme:

1. The farmers using a drip-irrigation method first developed in another country. (Also accept the Japanese-funded factory if the student says it brings foreign machines or methods.) — 1 mark

(b) Which item shows that globalisation also takes goods from Chandanpur to other countries? (1 mark)

Answer.

Model answer:

Chandanpur's handloom sarees being sold online to buyers in the USA and Malaysia.

Marking scheme:

1. The handloom sarees woven in Chandanpur being sold online to buyers in the USA and Malaysia. — 1 mark

(c) A visitor says, 'Globalisation just means foreign goods in our shops.' Using two items from the board, show why this view is incomplete. (2 marks)

Answer.

Model answer:

1. The tractor-parts factory built with a Japanese company's money shows investment moving between countries.
2. Mrs D'Souza's son working in Ireland shows that people move between countries too.

Marking scheme:

1. Any one item showing movement other than goods, explained, e.g. the tractor-parts factory set up with a Japanese company's money shows the movement of investment. — 1 mark
2. Any second such item, explained, e.g. the nurse in Ireland shows people moving, or the drip method shows technology moving. (The ketchup and the phones are goods, so they do not answer this part.) — 1 mark