Intext Questions

Q.1     What was the main channel connecting the countries in the past? How is it different now?
Sol.     Trade was the main channel which connected the countries in the past. Things have not changed much in the present as well. Trade still is the major channel to connect the countries. However, tourism and study also contribute towards making the world a more interconnected place now.

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Q.2     Distinguish between foreign trade and foreign investment.
Sol.     Trade with different countries is called foreign trade and it includes import and export. Foreign investment is the inflow of capital from another country to our own country. Foreign investment is just limited to the inward flow of capital, while foreign trade is about flow of goods.

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Q.3     In recent years China has been importing steel from India. Explain how the import of steel by China will affect.
           (a) Steel companies in China.
           (b) Steel companies in India.
           (c) Industries buying steel for production of other industrial goods in China.
Sol.     (a) Chinese companies may find it difficult to compete with the import.
           (b) Steel companies in India will see a growth in business.
           (c) For such companies, more option will translate into better choice.

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Q.4     How will the import of steel from India into the Chinese markets lead to integration of markets for steel in the two countries? Explain.
Sol.     The Chinese companies will make various products and those products would be selling in India as well. Thus, India can be a net exporter of the raw material and an importer of the finished goods. Because of low cost manufacturing by the Chinese companies, Indians can get various products at cheaper prices.

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Page 62

Q.1     What is the role of MNCs in the globalisation process?
Sol.      MNCs play an important role in the process of globalization. They bring not only their products to a country but also the new business policies and cultures. They also help in increasing competitiveness among the Indian companies. At present, most of us are able to use the latest models of cars and this could be possible because of globalization. Because of hordes of MNCs in our country, most of the urban Indians have become broad-minded in their outlook.

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Q.2     What are the various ways in which countries can be linked?
Sol.     Countries can be linked through trade, tourism and through educational institutions. Now-a-days, internet and telecommunication are also helping in interlinking different countries of the world.

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Q.3     Globalisation, by connecting countries, shall result in
           (a) Lesser competition among producers.
           (b) Greater competition among producers.
           (c) No change in competition among producers
Sol.     (b) Greater competition among producers

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Page 64

Q.1     What do you understand by liberalisation of foreign trade?
Sol.     Liberalization of foreign trade involves reducing or removing various trade barriers. Government provides policies and facilities which attract foreign companies to come to India for business activities. Such steps help in increasing the foreign trade.

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Q.2     Tax on imports is one type of trade barrier. The government could also place a limit on the number of goods that can be imported. This is known as quotas. Can you explain, using the example of Chinese toys, how quotas can be used as trade barriers? Do you think this should be used? Discuss.
Sol.     A fixed quantity for import is called quota. This can be done in case of Chinese toys. This will have both negative and positive impacts. Once the trade restrictions shall be there, the Indian toy manufacturers will be in a position to sell their products. This will help the Indian toy manufacturers and employees. But as the experience of better quality at lesser price; in case of Chinese toys; shows, this step would be detrimental for consumer’s interest.

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Page 66

Q.1     Fill in the blanks.
WTO was started at the initiative of developed countries. The aim of the WTO is to liberalise international trade. WTO establishes rules regarding international trade for all countries, and sees that these rules are obeyed. In practice, trade between countries is not fair. Developing countries like India have removed trade barriers, whereas developed countries, in many cases, have continued to provide protection to their producers.

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Q.2     What do you think can be done so that trade between countries is more fair?
Sol.     All countries should remove trade barriers to make for a fair international trade. Developed countries should desist from forcing the developing countries in agreements which they themselves may not obey.

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Q.3     In the above example, we saw that the US government gives massive sums of money to farmers for production. At times, governments also give support to promote production of certain types of goods, such as those which are environmentally friendly. Discuss whether these are fair or not.
Sol.     Supporting its own farmers at the cost of fair international trade cannot be termed as a fair practice. Supporting the production of environmentally friendly products is beneficial for the whole world and every country should follow such practices.

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Page 67

Q.1     How has competition benefited people in India?
Sol.     Competition has benefited the Indians in a positive way. To understand this, let us take the example of the availability of two-wheelers. Before liberalization, there were very brands of two-wheelers; like Bajaj, Rajdoot, Bullet and Yezdi. If someone wanted to buy a Bajaj scooter, the waiting period used to be for a couple of years. Once the markets opened up, many companies came in India. Right now, one can buy a two-wheeler of his choice at his own convenience. Two-wheelers can be seen even in remote villages of India. All of this could be possible because of competition.

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Q.2     Should more Indian companies emerge as MNCs? How would it benefit the people in the country?
Sol.     It is desirable that more Indian companies emerge as MNCs. This will help those companies in expanding their market and thus expanding their financial muscle. This will make India a stronger economy. A stronger economy is always beneficial for its people. The Indian MNCs too can directly benefit people through various CSR (Corporate Social Responsibility) Programmes.

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Q.3     Why do governments try to attract more foreign investment?
Sol.     More foreign investment in a sector helps in increasing the economic activities. This helps in employment generation. That is why governments try to attract more foreign investment.

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Q.4     In Chapter 1, we saw what may be development for one may be destructive for others. The setting of SEZs has been opposed by some people in India. Find out who are these people and why are they opposing it.
Sol.     When an SEZ is being made in a particular location, a vast tract of land needs to be acquired. Land acquisition means a large population is forced to relocate from many villages. Displacement is always painful for people. Moreover, people who are evacuated do not get proper compensation for their land and rehabilitation is never adequate and timely. These are the reasons; many people oppose various developmental activities.

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Page 70

Q.1     In what ways has competition affected workers, Indian exporters and foreign MNCs in the garment industry?
Sol.     Most of the workers have been badly affected by competition. Many people are forced to work in temporary jobs and at lower wages. Their earning is a meager fraction of what the intermediaries earn in the process.
Indian exporters are forced to improve the quality of their products to withstand competition. Those who have failed to do so, had to shut down their shops. Many smaller manufacturers have become bankrupt in the process.
MNCs are usually in profit. They buy cheap and sell dear. A cloth which may cost Rs. 100 for the procurement can sell at more than Rs. 5000 in USA market. Thus, MNCs usually make windfall gains in the process.

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Q.2     What can be done by each of the following so that the workers can get a fair share of benefits brought by globalisation?
           (a) Government
           (b) Employers at the exporting factories
           (c) MNCs
           (d) Workers.
Sol.     (a) Government should enforce rules and regulations to safeguard the interest of workers.
           (b) Employers should provide good salary, social security net and other facilities to the workers.
           (c) MNCs should refuse to procure from those manufacturers who do not provide proper facilities to their workers.
           (d) Workers should be aware of their rights. They should form unions so that they can have a bargaining leverage with their employers.

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Q.3    One of the present debates in India is whether companies should have flexible policies for employment. Based on what you have read in the chapter, summarise the point of view of the employers and workers.
Sol.    Many companies advocate the implementation of hire and fire policies so that they can work without thinking about the pressure from workers’ union. It sounds idealistic, but the real world is not ideal. A worker does not work just for himself but also for his family members. When a worker loses his job, his family and his society also gets affected. Hence, worker’s interest should always be the top priority when formulating employment policies.

Exercise

Q.1     What do you understand by globalization? Explain in your own words.
Sol.     Integration of the world market in various ways is called globalization. Take example of Microsoft. Microsoft is having its headquarters in USA. This company is getting part of its software developed in India and several other countries. And Microsoft’s software is being used across the world. Another example can be Ford motors based in USA. Ford is having manufacturing plants in Chennai and cars manufactured in Chennai go for sale in other countries. Moreover, company may be getting gear boxes produced in some other country, seat belts from a different country, lights, rear view mirrors in some other nation by some other company. Almost all the components get supplied by various vendors to the Ford motor, which assembles them to make the car.

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Q.2     What was the reason for putting barriers to foreign trade and foreign investment by the Indian government? Why did it wish to remove these barriers?
Sol.     When India became independent, it was a poor country and private capital was negligible. At that time, it was necessary to protect the local industry so that they could grow to a certain size. This was the reason various trade barriers were in place in India. Once the situation improved and India became a ready market, the government decided to open up the market for foreign players.

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Q.3     How would flexibility in labour laws help companies?
Sol.     Flexibility in labour laws can help companies in keeping the size of the workforce under control. A company can hire and fire as per the seasonal variation in demand for the workforce. During lean season, it won’t be forced to carry a bloated workforce and thus can cut costs. This will definitely help in improving profitability.

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Q.4     What are the various ways in which MNCs set up, or control, production in other countries?
Sol.     MNCs set up or control production in other countries in various ways. Some of them are discussed below:
           – Many MNC make a joint venture with a domestic company to start its operations. This helps the MNC because the domestic company has the know how of the local business conditions. Moreover, the domestic company already has an established framework of business.
– Once the business grows upto a certain size, the MNC can break the tie up and operate as an independent company. This helps it in having a greater control on the business.
– Some MNCs start as independent entity right from the first day.
– While some of the MNCs produce entirely for the local market, many others produce for the exports markets.

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Q.5     Why do developed countries want developing countries to liberalise their trade and investment? What do you think should the developing countries demand in return?
Sol.     The companies in the developed countries often pressurize their governments to create business-friendly environment in other countries. Due to this, developed countries want developing countries to open up their markets. The developing countries should demand the same favour in return.

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Q.6     “The impact of globalisation has not been uniform.” Explain this statement.
Sol.     While globalization has definitely changed the way business is being done in India and people go about their daily life, a large section of population is still to taste the fruit of development. The rich have become richer, but the poor have become poorer. Due to increased competition, many smaller entrepreneurs are unable to survive. Many workers have lost their job due to increased competition. On the other hand, consumers have better choice for almost every product. It can be said that the impact of globalization has not been uniform.

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Q.7     How has liberalization of trade and investment policies helped the globalization process?
Sol.     Liberalization of trade and investment policies has immensely helped in globalization process. There has been significant increase in FDI in India. Many large MNCs have opened their production centres and shops in India. Business Process Outsourcing has grown manifold and has generated lot of employment. All of this could have been possible because of liberalization policies.

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Q.8     How does foreign trade lead to integration of markets across countries? Explain with an example other than those given here.
Sol.     Foreign trade connects various markets of the world and thus leads to integration of markets across countries. To understand this, we can take the example of mobile phone. The major companies which manufacture mobile phone are in America and Europe. The product is designed in these countries. Different components of mobile are manufactured in the east Asian nations; like Malaysia, China and Taiwan. Most of them are assembled in China and India. The finished products are used all over the world. This shows the integration of markets across various countries.

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Q.9     Globalization will continue in the future. Can you imagine what the world would be like twenty years from now? Give reasons for your answer.
Sol.     Twenty years from now, we shall be in a position to place a real time order to a company in any part of the world. We may be able to customize a product according to our specifications and this would be possible because of internet. Because of faster modes of transport, a product would be delivered anywhere in the world in no time.

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Q.10     Supposing you find two people arguing: One is saying globalisation has hurt our country’s development. The other is telling, globalization is helping India develop. How would you respond to these arguments?
Sol.       In my view, globalization has helped in developing India. My parents say that when I was not borne, telephone used to be a luxury. One had to wait for many years to get a telephone connection. People used to communicate through letters which were painfully slow to reach. They say that globalization has helped in making mobile telephone a reality in India. I cannot imagine about a life without mobile phone. Even the local grocery store is able to do more business because of mobile phone.

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Q.11     Fill in the blanks. Indian buyers have a greater choice of goods than they did two decades back. This is closely associated with the process of globalization. Markets in India are selling goods produced in many other countries. This means there is increasing trade with other countries. Moreover, the rising number of brands that we see in the markets might be produced by MNCs in India. MNCs are investing in India because it is beneficial for them. While consumers have more choices in the market, the effect of rising demand and expectations has meant greater competition among the producers.

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Q.12     Match the following:

Column – I	Column – II
1. MNCs buy at cheap rates from small producers	(a) Automobiles
2. Quotas and taxes on imports are used to regulate trade	(b) Garments, footwear, sports
3. Indian companies who have invested abroad	(c) Cell centres
4. It has helped in spreading of production services	(d) Tata Motors, Infosys, Ranbaxy
5. Several MNCs have invested in setting up factories in India for production	(e) Trade barriers

Sol.         1- (b), 2-(e), 3-(d),4-(c), 5-(a)

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Q.13     The past two decades of globalization has seen rapid movements in
             (a) Goods, services and people between countries.
             (b) Goods, services and investments between countries.
             (c) Goods, investments and people between countries.
Sol.       (c)  Goods, investments and people between countries

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Q.14     The most common route for investments by MNCs in countries around the world is to                                (a) Set up new factories.
             (b) Buy existing local companies.
             (c) Form partnerships with local companies.
Sol.       (c) Form partnership with local companies

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Q.15     Globalization has led to improvement in living conditions
             (a) of all the people
             (b) of people in the developed countries
             (c) of workers in the developing countries
             (d) none of the above
Sol.       (d) None of the above