Globalization of Indian Sector: 10th Economics

Question: Why had the Indian government put barriers to foreign trade and foreign investments after independence? Analyse the reasons.

Answer:

1. To protect the producers within the country from foreign competition.
2. Industries were just coming up in the 1950s and 1960s and competition from imports at that stage would not have allowed these industries to come up.
3. All developed countries, during the early stages of development, have given protection to domestic producers through a variety of means.

Question: “A wide ranging choice of goods are available in the Indian markets”. Support the statement with examples in context of globalization.

Answer:

1. The latest models of digital cameras, mobile phones and televisions made by the leading manufacturing of the world are within our reach.
2. Indian market is full of new models of automobiles.
3. The online shopping trend also increase the Indian consumers.

Question: How do multinational corporations (MNCs) interlink production across countries explain with examples.

Answer: The activities of the MNCs are spread over many countries. Their parent corporation is located in one country and the subsidiaries are scattered in many country and the subsidiaries are scattered in many countries in the world. For example: ITT, a very large American MNC designs its products in research centers in the United States, and then the components are manufactured in China. These components are then shipped to Mexico and Eastern European countries where these are assembled and the finished products are old all over the World. The company’s customer care is carried out through call centers located in India. In the above example, research is carried out in USA because the country has the Research and Development facilities. The goods are manufactured in China because of cheap manufacturing location. Mexico and Eastern European countries are useful for their closeness to the markets in the USA and Europe. The company has set up company’s customer care center in Bengaluru because India provides cheap skilled engineers and workers.

Question: What are the advantages of Multinational Corporations?

Answer:

1. Availability of capital and foreign investment: The Multinational Corporations or the MNCs help to solve the problem of capital and foreign investment of the underdeveloped and the developing countries. Most of the underdeveloped countries suffer from lack of capital. Consequently, Their rate of economic growth is low. MNCs set up factories and offices for the production in these developing and the under-developing countries and make huge investments. The money that is spent to buy assets such as land, buildings, machines and other equipment, it called investment.
2. Availability of foreign exchange: MNCs can be helpful in solving the problem of foreign exchange of the underdeveloped and the developing countries. In 90s, India faced a huge shortage of foreign exchange but, with the entry of the MNCs, today it has surplus foreign exchange reserves.
3. Promotion of small-scale Industries: Most of the MNCs take help from small-scale and local industries in manufacturing. Garments, footwear, sports items, etc. are examples of industries where the production is carried out by a large number of small producers around the world. The products are supplied to the MNCs which then sell these under their own brand names to the customers.
4. Foreign Trade and Integration of Markets: The MNCs help in the integration of world markets. With the entry of MNCs event the small countries have opened up their domestic markets for other countries. The MNCs increase the foreign trade.
5. Helpful in the growth of local producers: Foreign trade by the MNCs create an opportunity for the local producers to reach beyond the domestic markets, i.e., markets or their own countries.
6. Harmful for the environment: Many a time MNCs use the host country to dump harmful products in the underdeveloped countries which severely harms the local environment.

Question: What are the disadvantages of Multinational Corporations? Explain.

Answer:

1. Harmful for the host country: The main objective of the MNCs is to earn maximum profit. To achieve this objective, they invest their capital in the underdeveloped and the developing countries. These MNCs over-exploit the natural resources of the host country. Big chunk of profits earned in the underdeveloped countries go to the headquarters of the MNCs.
2. Harmful for the local producers: The MNCs place orders for production with small producers. The products produced are sold by the MNCs under their own brand power to determine manufacturing conditions for local producers. The history has shown that most of the local producers have failed to compete with the MNCs, so either they have sold their units to the MNCs or have been wiped off.
3. Harmful for Economic Equality: The MNCs have been proved harmful for the goal of economic equality, in more than one way:
   (i) Regional inequality has further aggravated because of them. The MNCs are interested in setting up industries in particular regions, and hence, these regions remain undeveloped.
   (ii) The MNCs pay more salaries and perks to their employees than the employees of other companies. This widens the gap between the income of the laborers giving rise to economic inequality.
4. Harmful for freedom: The MNCs also prove detrimental to the economic and political freedom of the host countries. These dabble in the politics of the country. The MNCs were at the back of armed insurgence of many host countries. These corporations make all efforts to bring in to power in the host country, a political party that is favorably inclined to them. Thus, it is not possible for the rulers of the host countries to pursue the nationalistic, economic and political policies.

Question: Explain any three steps taken by the Central and State Governments to attract foreign companies to invest in India.

Answer: Government attracts foreign investment in the following ways:

1. Special economic zones: Special Economic Zones have been set up to have world-class facilities such as cheap electricity, water, roads, transport, storage, recreational and educational facilities etc.
2. Flexible labour laws: Labour laws are made flexible so that companies can hire workers easily.
3. Removal of trade barriers: Government has removed barriers on foreign trade and foreign investment so that goods could be imported and and exported easily and also foreign companies could set up factories and offices in India.
4. Policy of liberalization and globalization: After 1991 Indian government has adopted the policy of globalization and liberalization.
5. Abolition of license: Under the New Economic Policy only few industries need license to operate.