MNCs set up production in other countries through direct investment, partnerships with local companies, acquisitions of local companies, and outsourcing production to small local producers. They consider factors like low labor costs, availability of resources, and host country incentives and policies. Globalization has integrated economies through increased trade, investment, and flow of technology, cultures and people across borders. While it has benefits like increased income and employment, critics argue it can worsen inequality and hurt small local producers. Information technology has enabled the spread of services production globally and facilitated globalization.

1. Class X - Globalisation and the Indian Economy
Questions and answers to be written in note book:
1. Define Multinational Company. (MNC)
A MNC is a company that owns or controls production in more than one
nation. MNCs set up offices and factories for production in regions where
they can get cheap labour and other resources. The MNC is not only selling
its finished products globally, but the goods and services are produced
globally.
2. What are the ways in which MNCs set up or control, production in
other countries?
i). Directly set up offices and factories for production.
ii) Set up production with some of the local companies of these countries.
iii) Buy up local companies and then expand.
iv) Place orders for production with small producers of the countries e.g.
garments, footwear, etc (EXPLAIN WITH EG. IF NEEDED)
3. What do MNCs keep in mind while starting business in other
countries?
(i) MNCs set up offices and factories for production in regions where they
can get cheap labour and other resources.
(ii) The cost of production is low and the MNCs can earn greater profits.
(iii) MNCs can get host country’s concessions for exports and imports.
(v) By selling goods at cheaper rates, the MNCs can acquire the world
market.
4. What do you understand by globalisation? What are the advantages
of globalization? Mention main shortcomings of globalization in the
context of India.
Ans. Globalisation means integrating the economy of a country with the
economies of other countries under conditions of free flow of trade, capital,
technology, cultures and movement of persons across borders. It includes
ADVANTAGES OF GLOBALISATION:
1.Lowers poverty in developing countries with increased employment which
provides income through trade and investment.

2. 2. People get variety of goods.
3. People get opportunity to get goods at competitive prices.
4. Local companies have prospered through supplying raw materials to the
industries.
5. Top Indian companies have benefitted for successful collaborations with
foreign companies.
6. Due to competition domestic industry also becomes competitive, which
leads to industrial development.
7. Exchange of technology leads to technical development in the country.
8. It leads to increase in foreign exchange reserves.
9. Globalization leads to removals of barriers to the movement of people,
capital and goods.
10. Globalization increases level and income of the country and ultimately
leads to higher economic growth.
11. Globalisation promotes competition which leads to improvements in
management practices and workplace arrangements.
12. Globalization is feeding e-business too.
Shortcomings /Negative impact/disadvanges are as follows.
i) Small manufacturer producing toys, vegetables oils, etc have been hit hard
due to competition.
ii) In order to cut costs of the products, employers in exports industry try to
cut labor cost.
iii.) Workers job is no longer secure and they may be exploited.
(iv) It may not help in achieving sustainable growth.
(v) The gap between rich and poor is growing on a local and an international
level . It may lead to widening of income inequalities among various
countries.
(vi) It may lead to aggravation of income inequalities within countries.
(vii) Huge multinational corporations are benefiting at the expense of
economies, farmers, workers and the environment

3. 5. What is the basic function of foreign trade? Distinguish between
foreign trade and foreign investment
(i) Foreign trade creates an opportunity for the producers to reach beyond
the domestic markets. Producers can sell their produce not only in markets
located within the country but can also compete in markets located in other
countries of the world.
(ii) Similarly, for the buyers, import of goods produced in another country is
one way of expanding the choice of goods beyond what is domestically
produced.
(iii) Foreign trade thus results in connecting the markets or integration of
markets in different countries.
.
Foreign trade implies exchange of goods and services across nations.
Foreign investment implies transfer of capital from one nation to another.
6.What has enabled globalisation in India?
Or
How is information technology connected with globalisation? Would
globalisation have been possible without expansion of IT?
TECHNOLOGY
Information and communication technology (or IT in short) has played a
major role in spreading out production of services across countries.
(a) The developments in information and communication technology, in
the areas of telecommunications, computers, Internet has been
changing rapidly.
(b) Telecommunication facilities (telegraph, telephone including mobile
phones, fax) are used to contact one another around the world, to
access information instantly, and to communicate from remote areas.
This has been facilitated by satellite communication devices.
(c) Internet also allows us to send instant electronic mail (e-mail) and talk
(voice-mail) across the world at negligible costs.
Globalisation would not have been possible without expansion of IT.
LIBERALISATION
Removing barriers or restrictions set by the government on foreign trade and
foreign investment is known as liberalisation.
In 1991, the Indian government decided that the time had come for Indian
producers to compete with producers around the globe. It felt that
competition would improve the performance of producers within the country
since they would have to improve their quality. This decision was supported
by powerful international organisations.

4. Thus, barriers on foreign trade and foreign investment were removed to a
large extent. This meant that goods could be imported and exported easily
and also foreign companies could set up factories and offices here.
7. What are the measures of trade barrier?
(a) tariff (tax on imports or custom duty) : this makes imports expensive and
people are discouraged to purchase imported goods and protect domestic
industry.
(b) quota (upper physical limit imposed by government on goods to be
imported: this is done to discourage imports and to control the supply of
imported goods.
8. What was the reasons for putting barriers to foreign trade and
foreign investment by the Indian government? Why did it wish to
remove these barriers?
1.The Indian government, after Independence, had put barriers to foreign
trade and foreign investment.
2. This was considered necessary to protect the producers within the
country from foreign competition.
3. Competition from imports at that stage would not have allowed these
industries to come up.
Thus, India had imposed barriers on imports.
1. In 1991, the Indian government decided that the time had come for
Indian producers to compete with producers around the globe.
2. It felt that competition would improve the performance of producers
within the country since they would have to improve their quality.
3. This decision was supported by powerful international organisations.
4. It was also felt the domestic manufacturers would invest more in
research and development and would become capable of selling their
products at international market by competing with their foreign
counter parts.
Thus, barriers on foreign trade and foreign investment were removed to a
large extent. This meant that goods could be imported and exported easily
and also foreign companies could set up factories and offices here.
9. Why do developed countries want developing countries to liberalize
their trade and investment?
Ans. developed countries feel that all the barriers to foreign trade and
investment are harmful for international trade.
They want that trade between countries should be free.
Developed countries like USA, UK have high production capacity and latest
technology.

5. They want their surplus produce to sell in other countries and utilize their
technology to their optimal use.
Developing countries should demand fair globalisation which ensures
opportunities and benefits for all. Interest of the workers should also be
taken care of.
10. What is ‘Fair Globalisation’? How it can be achieved?
Fair globalisation would create opportunities for all, and also ensure that
the benefits of globalisation are shared better.
a. The government can play a major role in making fair globalisation
possible. Its policies must protect the interests, not only of the rich
and the powerful, but all the people in the country.
b. The government can ensure that labour laws are properly
implemented and the workers get their rights.
c. It can support small producers to improve their performance till the
time they become strong enough to compete. If necessary, the
government can use trade and investment barriers.
d. It can negotiate at the WTO for ‘fairer rules’.
e. It can also align with other developing countries with similar interests
to fight against the domination of developed countries in the WTO.
11. How would flexibility in labour laws help companies?
Ans. Flexibility in labour laws helps companies to cut down the cost of
production.
Now, instead of hiring workers on a regular basis, companies hire workers
flexibly for short periods.
This reduces the cost of labour for the company.
12. What are the various ways in which MNCs set up or control
production in other countries?
Ans. Multinational Corporations (MNCs) set up their factories or production
units close to markets where they can get desired type of skilled or unskilled
labour at low costs along with other factors of production. After ensuring
these conditions MNCs set up production units in the following ways :
(a) Jointly with some local companies of the existing country.
(b) Buy the local companies and then expand its production with the help of
modern technology.

6. (c) They place orders for small producers and sell these products under their
own brand name.
13. Where do generally the MNCs prefer to setup their production
process ?
(or)
By setting up the production plants MNCs tap the advantage not only
of the large markets that countries provide, but also the lower costs of
production. Explain the statement.
MNCs set up production
(i) where it is close to the markets;
(ii) where there is skilled and unskilled labour available at low costs;
(iii)where the availability of other factors of production is assured.
(iv)The concerned government policies are favourable to the MNCs.
ers worldwide.
14. What are the fears of globalization?
i) globalization may not help in achieving sustainable development
ii) It may lead to widening of income inequalities among various countries.
iii) It may lead to greater dependence of underdeveloped countries on
advanced
countries.
iv) It may impart some instability in world’s economies.
15. “The impact of globalisation has not been uniform.” Explain this
statement.
Ans. While globalisation has benefited the well-off consumers and also
producers with skill, education and wealth, many small producers and
workers have suffered as a result of the rising competition.
16. Write a note on WTO (World Trade Organisation).
World Trade Organisation (WTO) is an organisation whose aim is to
liberalise international trade. Started at the initiative of the developed
countries, WTO establishes rules regarding international trade, and sees
that these rules are obeyed.
149 countries of the world are currently members of the WTO (2006). It
started functioning from January 1, 1995.

7. 17. Globalisation will continue in the future. Can you imagine what the
world would be like twenty years from now? Give reason for your
answer.
Ans. After twenty years, world would undergo a positive change which will
possess the following features—healthy competition, improved productive
efficiency, increased volume of output, income and employment, better living
standards, greater availability of information and modern technoloy.
Reason for the views given above : These are the favourable factors for
globalisation :
(a) Availability of human resources both quantity wise and quality wise.
(b) Broad resource and industrial base of major countries.
(c) Growing entrepreneurship
(d) Growing domestic market.
FOLLOWING QUESTIONS AND ANSWERS ARE NOT TO BE DONE IN
NOTE BOOK: These are extra questions which can be studied for exams
point of view. Please check answer from NCERT.
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 (1) . Markets in
India are selling goods produced in many other countries. This means there
is increasing (2) with other countries. Moreover, the rising
number of brands that we see in the market might be produced by MNCs in
India. MNCs are investing in India because (3) . While
consumers have more choices in the market, the effect of
rising (4) and (5) has meant
greater (6) among the producers.
Ans. (1) Globalisation (2) Trade (3) They can get cheap labour (4) Prices (5)
Standard (6) Competition
Q.12. Match the following.
(i) MNCs buy at cheap rates from small producers (a) Automobiles
(ii) Quota and taxes on imports are used to (b) Garment, footwear, sports

8. regulate trade items
(iii) Indian companies who have invested abroad (c) Call centres
(iv) It has helped in spreading of production of services. (d) Tata Motors,
Infosys, Ranbaxy
(v) Several MNCs have invested in setting up factories (e) Trade barriers.
in India for production of
Ans. (i) (b) (ii) (e) (iii) (d) (iv) (c) (v) (a)
Q.13. Choose the most appropriate option.
(i) The past two decade of globalisation has seen rapid movements of
(a) goods, services and people between countries.
(b) goods, services and investments between countries.
(c) goods, investment and people between countries.
(ii) 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 partnership with local companies.
(iii) Globalisation 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.
Ans. (i) (a) (ii) (b) (iii) (c)
Q2(CBSE 2011): Which one of the following is a major benefit of joint
production between a local company and a Multi-National Company ?
(a) MNC can bring latest technology in the production

9. (b) MNC can control the increase in the price
(c) MNC can buy the local company
(d) MNC can sell the products under their brand name
Q3(CBSE 2011): Which one of the following is not true regarding the World
TradeOrganization?
(a) It allows free trade to all countries without any trade barriers.
(b) Its aim is to liberalise international trade.
(c) It establishes rules regarding international trade.
(d) WTO rules have forced the developing countries to remove trade barriers.
Q4(CBSE 2011): Rapid integration or inter connection between countries is
known as
(a) Privatisation
(b) Globalisation
(c) Liberalisation
(d) Socialisation
Q5(CBSE 2011): Which one of the following has benefited least because of
globalisation in India?
(a) Agriculture Sector
(b) Industrial Sector
(c) Service Sector
(d) Secondary Sector
Q6: Till 1950, globalisation meant
(a) only foreign trade
(b) only foreign investment
(c) both (a) and (b)
(d) none of these
Q7: Which of the following has played a big role in organizing production
across the coutries?
(a) WTO

10. (b) Domestic companies
(c) Information technology
(d) Consumers
Answers:
2: (a) MNC can bring latest technology in the production
3: (a) It allows free trade to all countries without any trade barriers.
4: (b) Globalisation
5: (a) Agriculture Sector
6: (a) only foreign trade
7: (c) Information technology
:ONE MARK QUESTIONS.
1. Company that owns or controls production in more than one nation……
Ans.-MNCs…………………………….
2. Investment made by MNCs is called
Ans. foreign investment
3. Cargill foods a very large American MNC , has bought over smaller
Indian companies such as
Ans. Parakh foods.
4. Ford motors came to in
Ans.1995.
5. Rapid integration between countries is called.
Ans. globalization.
6.what is the name of the organization whose aim is to liberalize
international
trade is Ans. WTO.

11. 7. Till 2006, how many members were there in WTO.
Ans. 150
8. Removing barriers or restrictions set by the government is known as.
Ans. liberalization.
9. Name the term which refers to globalization which creates opportunities
for
all and ensures that is benefits are better shared.
Ans. Fair globalization.
10. Companies who set up production units the special economic zones do
not
have to pay taxes for an initial period of.
Ans.5 years.
HOT QUESTIONS
1. It creates an opportunity for the producers to reach beyond the domestic
market. What does it refer to?
2. How rapid movement in technology has stimulated the globalization
process?
State through examples.
3. How governments use trade barriers in relation to foreign trade?
4. Give examples of industries where the small manufacturers have been hit
hard
due to competition.
5. What are the investments made by MNCs called and with what are the
expectations are these made?
04. What is meant by Liberalisation?
Ans. Liberalisation means removing unnecessary trade restrictions and

12. making the economy more competitive.
05. What is outsourcing?
Ans. Outsourcing means going out to a source outside the company to buy
regular service that formerly used to be provided departmentally and
internally just as legal advice, computer service, security, advertisement and
accounting etc.
06. What is meant by modernisation of the Economy?
Ans. The new economic policy accords top priority to modern techniques
and technologies. It also promotes computers and electronics industries. It
has made the Indian industries dynamic.
07. What do the top Indian companies have that allows them to modernise
and compete, whereas many of the small producers have to shut down
production? Choose the correct answer.
(a) Workers
(b) Money
(c) Bis factories
Ans. Money
08. How many countries are currently the members of the World Trade
Organisation (WTO)?
Ans. It has 153 member countries as on 23 July, 2008.
09. In which year, the government started to remove barriers on foreign
trade and foreign investment.
Ans. In 1991
10. Why are the Chinese Toys popular in the world?
Ans. Chinese Toys are comparatively cheaper and have new designs. That is
why they are popular in the world.
11. Why are the MNCs making investments in India?
Ans. In India labour cost is comparatively very low, that is why many MNCs
are making investments in India.
12. Name the organisation which lay emphasis on liberalisation of foreign
trade and foreign investment in India.
Ans. World Trade Organisation (WTO)
13. When was the UNO established?
Ans. The UNO was established on 24 October, 1945.
14. When was the WTO established?
Ans. The WTO was established on 1st January, 1995.
15. Where is the main Head Office of WTO?
Ans. Geneva-Switzerland.

13. Why do governments try to attract more foreign investment?
 It brings money and capital.
 Foreign investments create new job opportunities in the country.
 This not only provides finance but managerial and technical personnel
and new technology in production also.
 This encourages local enter-prises to invest more in subsidiary
services like transport and training agents and in collaboration with
foreign enterprises.
 A part of the profits from such investments generally invested in the
expansion and modernisation of related industries.
 The social returns are greater than the private returns on foreign
investment.
 The governments get revenue when it taxes the profits of foreign firms.
Should more Indian companies emerge as MNCs? How would it benefit
the people in the country?
Globalisation has encouraged Indian companies to go global. They are
investing large sums of money abroad. They are setting up new industries
abroad and acquiring new companies.
Positive side:
1. This will lead t integration of Indian economy with the global economy.
2. Advanced technologies will be easily accessible to Indian companies.
3. Availability of more choice and better quality goods to Indian
consumers
4. Cheaper goods in the Indian market from other countries
5. Increasing Indian efficiency – industrialisation – more output
Negative sides:
1. If the Indian companies spend a large proportion of their capital
abroad, it will restrict the domestic investment. Employment
opportunities will not get created.
2. Our imports will suffer – local producers will suffer, this will adversely
affect our balance of payment position.
3. Indian small scale industries will get affected.
4. Over exploitation of resources will affect our sustainable development.