Chapter 4 - Globalisation and the Indian Economy

This is a Study Material for CBSE Boards in Economics Chapter 4 - Globalisation and the Indian Economy



01. What is Globalisation?
Globalisation means opening up the economy to facilitate its integration with the world economy.

02. Define Economic reforms of new Economic Policy 1991.
Economic policy adopted by the Government of India since July,1991 is termed as new economic policy or economic reforms.

03. Define Privatisation.
Privatisation means reduced government intervention and increased private investment in production activities.

04. What is meant by Liberalisation?
. Liberalisation means removing unnecessary trade restrictions and making the economy more competitive.

05. What is outsourcing?
. 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?
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

08. How many countries are currently the members of the World Trade Organisation (WTO)?
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.
In 1991

10. Why are the Chinese Toys popular in the world?
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?
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.
World Trade Organisation (WTO)

13. When was the UNO established?
. The UNO was established on 24 October, 1945.

14. When was the WTO established?
The WTO was established on 1st January, 1995.

15. Where is the main Head Office of WTO?


01. Explain the process of Globalisation.
02. Discuss the need of Globalisation.
03. Explain the features of World Trade Organisation in brief.
04. Explain the objectives of the new economic policy.
05. Exlpain the need of the Economic reforms of New Economic Policy.


01. What are the main features of Economic reforms?
02. What are the arguments in favour of economic reforms?
03. Discuss the arguements against Economic reforms.
04. Explain the achievements of economic reforms.
05. Analyse one good and one bad effect of globalisation in India?
06. Discuss any four functions of WTO?
07. Why did the Indian Government put barriers to foreign trade and foreign investment?

01. Globalisation is a process of integration of world economics to realise the benefits of geography, demography, cost and efficiency. Which three characteristics represent globalisation?
    (1) Increasing space
    (2) Shrinking space
    (3) Strengthened borders
    (4) Shrinking Time
    (5) Disappearing borders

(a) (2), (3) and (4)
(b) (1), (2) and (3)
(c) (1), (2) and (4)
(d) (1), (3) and (4)
(e) (2), (4) and (5)

02. While globalisation has benefited most of the groups, it has been a disadvantage for
(a) many small producers and workers who have suffered as a result of therising competition
(b) cheap labour working in small firms
(c) Indian producers and workers who are not well educated and skilled
(d) all of the above

03. In an economist's view, which of the following perspectives of globalisation is most suitable?
(a) The rise of global media and global culture
(b) The emergence of global institutions and global conflicts
(c) The development of communication technologies
(d) The growth of international trade and the increase in international trade flows
(e) The decline of sovereignty of the nation state

04. Removing barriers or restrictions set by the government is known as
(a) globalisation
(b) privatisation
(c) liberalisation
(d) fair trade practice

05. Globalisation is often criticised by political scientists on account of loss of sovereignty of the nation
(a) True
(b) False

06. Globalisation has proved to be advantageous for the Indian economy on account of
(a) lesser competition among producers
(b) greater competition among producers
(c) no change in competition among producers
(d) none of these

07. MNCs work in several countries to realise the benefits of globalisation. In fact, they can help the developing countries to
    (1) absorb domestice labour, especially in skilled jobs
    (2) increase productivity through foreign technology and innovative methods of production
    (3) reduce balance of payments deficit

Select the correct combination
(a) (1) and (2) only
(b) (2) and (3) only
(c) (1), (2) and (3)
(d) none of these

08. Investment made by MNCs is called
(a) Investment ny MNCs
(b) Foriegn investment
(c) Multinational investment
(d) Investment abroad

09. WTO seeks that countries of the world negotiate on Trade liberalisation. Every participating country should get welfare gains from WTO negotiations. However in practice, some developing countries mainly in Sub Saharan Africa did not gain very much from the past rounds of trade liberalisation. Why?
(a) Specialisation of poor countries remains in same products, clothing and commodities. Relative prices of these products fell resulting in falling terms of trade which has a negative effect on welfare
(b) Developing countries demand betther access to the markets of industrialised countries while maintaining the freedom to have high trade barriers themselves. As a result, they do not liberalise themselves, thus limiting the benefits from trade liberalisation
(c) Developing countries do not benefit as the trading oppurtunities offered by trade liberalisation are captured by multinational companies
(d) (b) and (c) only
(e) (a), (b) and (c) only

10. MNC is a company
(a) that owns or controls production in more than one countries
(b) that owns or controls production in one nation
(c) that owns or controls production outside the nation
(d) all o fthe above

(01) (e) (2), (4) and (5)
(02) (a) many small producers and workers who have suffered as a result of therising competition
(03) (d) The growth of international trade and the increase in international trade flows
(04) (c) liberalisation
(05) (a) True
(06) (b) greater competition among producers
(07) (c) (1), (2) and (3)
(08) (b) Foriegn investment
(09) (d) (b) and (c) only
(10) (a) that owns or controls production in more than one countries