About This Section
This is a collection of important questions with complete model answers covering the whole of Chapter 4 — Globalisation and the Indian Economy. It covers MNCs and the spreading of production, foreign trade and investment, what globalisation is, the factors that enabled it, the WTO, the impact on India, and the struggle for a fair globalisation.
Questions and Answers
Q1. What do you understand by globalisation? Explain in your own words.
Answer: Globalisation is the process of rapid integration or interconnection between countries, driven by greater foreign trade and foreign investment. Under globalisation, more goods, services, investment and technology move across borders, production is spread and interlinked across countries by MNCs, and distant markets get connected. As a result, most regions of the world are in closer contact than a few decades ago, and competition among producers increases.
Q2. How do MNCs interlink production across countries?
Answer: MNCs interlink production by: (i) setting up factories and offices in different countries (foreign investment); (ii) producing jointly with local companies, providing money and technology; (iii) buying up local companies (e.g., Cargill bought Parakh Foods); and (iv) placing orders with small producers (garments, footwear) and selling under their own brand while controlling price, quality and labour conditions. Through these routes, production in dispersed locations becomes interlinked.
Q3. What are the factors that have enabled globalisation?
Answer: Two main factors enabled globalisation: technology and liberalisation. Technology — faster, cheaper transport (containers, air transport) and information and communication technology (telecom, computers, Internet) — makes it possible to move goods and coordinate production worldwide. Liberalisation — the removal of government barriers on trade and investment (in India, from around 1991) — lets goods flow easily and foreign companies invest. The WTO further pushed countries to liberalise.
Q4. Why do we say that globalisation has not benefited everyone equally?
Answer: Because its impact has been uneven. Well-off consumers and producers with skill, education and wealth gained from greater choice, better technology and new opportunities — some Indian firms even became MNCs. But small producers (like Ravi's capacitor unit) were hit by cheap imports and shut down, and workers (like Sushila) lost secure jobs, becoming temporary workers with low wages and no benefits. So the benefits were not shared equally.
Q5. What is the role of the government in making globalisation fairer?
Answer: The government can make globalisation fairer by framing policies that protect all people, not just the rich: implementing labour laws so workers get their rights, supporting small producers until they can compete, using trade and investment barriers when needed, and negotiating fairer rules at the WTO while aligning with other developing countries. These steps help ensure the benefits of globalisation are shared more widely.
Q6. Distinguish between foreign trade and foreign investment.
Answer: Foreign trade is the buying and selling (export and import) of goods and services between countries — it lets producers reach beyond domestic markets and gives buyers more choice. Foreign investment is the money spent by MNCs to buy assets (land, buildings, machines) and set up production in another country. In short, trade moves goods across borders, while investment builds production across borders.
Q7. Why do governments try to attract foreign investment, and how?
Answer: Governments try to attract foreign investment because it brings money, technology, new industries and jobs. To attract it, India's central and state governments set up Special Economic Zones (SEZs) with world-class facilities and no taxes for the first five years, and have allowed flexibility in labour laws so companies can hire workers 'flexibly' and cut costs. These steps make the country more attractive to foreign companies.