Globalisation and the Indian Economy — Competency Based Questions

Answers

2.
(a) The economic process described is Globalisation.
(b) Small-scale industries often struggle because they cannot match the lower production costs or advanced technology of foreign companies. They may also lack the marketing reach and brand recognition of MNCs, making it difficult to compete.
(c) Consumers in urban areas have benefited from globalisation through increased choice of goods and services, improved quality, and often lower prices due to competition.

3.
(a) Both A and R are true, and R is the correct explanation of A.

4.
(a) Spreading of production across different countries is known as the global organisation of production or global production network.
(b) Two factors could be:
i. Lower labour costs in Vietnam compared to developed countries.
ii. Availability of skilled or semi-skilled labour for assembly operations.
iii. Proximity to raw material sources or key markets.
(c) Outsourcing customer service to call centres in the Philippines allows the company to leverage a pool of educated, English-speaking youth who may be available at a lower wage rate than in the home country, thereby reducing operational costs.

5.
(a) This is an example of the service sector being globalised, specifically the export of IT-enabled services.
(b) Advancements in Information and Communication Technology (ICT), such as the internet and telecommunication facilities, enable instant communication, data transfer, and remote access, allowing services to be produced in one country and consumed in another with minimal delay and cost.

6.
(a) The Indian toy manufacturer is likely to face stiff competition, leading to reduced sales, lower profits, and potentially the closure of their unit. The MNC's lower prices and modern designs may make their products more attractive to consumers.
(b) The Indian toy manufacturer could focus on niche markets, highlighting the uniqueness and quality of their handmade wooden toys, or explore collaborations with the MNC for component supply or distribution, or invest in modernising their technology and designs while retaining their unique selling proposition.

7.
(a) Both A and R are true, and R is the correct explanation of A.

8.
(a) The method of investment used is by buying over local companies, which is a form of foreign investment.
(b) This acquisition is likely to reduce competition in the Indian edible oil market, as a large MNC now dominates the sector. This could lead to fewer choices for consumers and potentially influence pricing power.

9.
(a) Workers in the garment export industry face job insecurity and lower wages because Indian exporters, to cut costs and win large orders from MNCs, tend to employ workers on a temporary basis. They often work long hours with minimal benefits and overtime pay. This pressure to cut labour costs directly impacts worker conditions.
(b) The government can play a role by ensuring that labour laws are properly implemented and workers' rights are protected, even in export-oriented industries. It can also negotiate at the WTO for fairer rules, support small producers to improve their competitiveness, and ensure that workers get their fair share of benefits.

11.
(a) This tax is called an import duty or tariff.
(b) Such government-imposed restrictions on foreign trade are known as trade barriers.
(c) Argument in favour: It protects domestic industries from foreign competition, potentially saving jobs and promoting local manufacturing. Argument against: It can lead to higher prices for consumers, reduce consumer choice, and may invite retaliatory tariffs from other countries, harming export industries.

12.
(a) Both A and R are true, and R is the correct explanation of A.

13.
(a) Argument for improved standard of living: Globalisation has led to a wider variety of goods and services available at lower prices, increased job opportunities in certain sectors, and access to better technology, which can improve the quality of life for many.
(b) Argument for benefits concentrated: The benefits of globalisation are primarily reaped by urban populations, educated individuals, and those with wealth and skills. Small producers, uneducated workers, and those in rural areas may face job losses, increased competition, and limited access to the advantages of globalisation.

14.
(a) The term used is 'investment', specifically 'foreign investment' when made by an MNC.
(b) Potential benefits for India include: creation of new jobs, transfer of technology and managerial skills, increased production of goods and services, potential for export promotion, and boost to the economy through capital inflow.

15.
(a) The process facilitated is Globalisation.
(b) Advancements in ICT, such as the internet, telecommunication, and computers, have enabled rapid communication, transfer of information and services across borders, and efficient management of production processes spread across different countries. This has significantly reduced the cost and time involved in international transactions.

16.
(a) Both A and R are true, and R is the correct explanation of A.

17.
(a) The Indian producer faces challenges such as: lower sales volume, reduced profits, potential closure of the business, and difficulty in competing on price and quality.
(b) The government can support small producers by: providing subsidies, improving access to credit, investing in infrastructure (like better roads, power), facilitating access to technology upgrades, and implementing trade barriers (like quotas or tariffs) to regulate imports, if deemed necessary and feasible under international agreements.

18.
(a) When the farmer's products are exported and cheaper agricultural products are imported, the markets for these goods in India and the importing/exporting countries become linked. Producers in one country compete with producers in another, and consumers have access to goods from various origins, leading to market integration.
(b) The farmer's collective could: collectively purchase inputs to reduce costs, invest in modern farming techniques and technology, form alliances for better marketing and distribution, process their produce to add value, and lobby the government for supportive policies or trade negotiations.

19.
(a) This policy is called Liberalisation of trade.
(b) Consumers would likely experience a greater variety of goods and services from different countries and potentially lower prices due to increased competition. However, domestic industries might struggle to compete, potentially leading to job losses in certain sectors.

20.
(a) Globalisation has led to greater interdependence as countries increasingly rely on each other for goods, services, capital, and technology. For instance, a country might import essential raw materials, export manufactured goods, and receive foreign investment, making its economy more linked to the global economy.
(b) One challenge is the exploitation of workers. In the pursuit of lower costs, MNCs may pressure exporters in developing countries to cut labour costs, leading to low wages, long working hours, and poor working conditions for workers who may lack strong labour protections. Another concern is environmental impact, as increased production and transportation for global markets can lead to higher pollution and resource depletion.