Chapter 4: Globalisation and the Indian Economy
1. What is Globalisation?
Globalisation is the process of rapid integration
or interconnection between countries through
foreign trade and foreign investments, primarily
driven by Multinational Corporations (MNCs).
• Integration of Markets: Goods, services,
investments, and technology move between
countries, allowing consumers a wide choice of
products from leading global manufacturers.
• Role of MNCs: An MNC is a company that owns
or controls production in more than one nation.
They set up production where costs are low to
increase profits.
• Foreign Investment: The money spent by MNCs
to buy assets like land, buildings, and machines in
another country is called foreign investment.
• Interlinking Production: MNCs spread
production by setting up partnerships with local
companies, using them for supplies, or buying
them out entirely to expand.
• Movement of People: Besides goods and
capital, people move across borders in search of
better income, better jobs, or better education.
• Example: Ford Motors, an American MNC, set
up a large plant near Chennai in collaboration with
Mahindra and Mahindra, producing cars for both
Indian and global markets.
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CBSE Previous Year Questions
Q1. Define Globalisation. Describe the role of
Multinational Corporations (MNCs) in this
process. (5 Marks) Ans:
• Definition: Globalisation is the rapid integration
of countries through increased foreign trade and
investment.
• Investment: MNCs bring foreign investment and
latest technology to the host countries.
• Production: They spread production across
borders (e.g., designing in the USA, manufacturing
in China, and customer care in India) to save costs.
• Market Integration: MNCs connect distant
markets, providing consumers with a variety of
brands and higher quality goods.
• Trade Control: A large part of global trade is
controlled by MNCs, which enhances the
interconnection between economies.
Q2. How does foreign trade lead to the
integration of markets across countries? (3
Marks) Ans:
• Producer Reach: It allows producers to sell their
goods in markets located beyond their own
country.
• Buyer Choice: Import of goods expands the
choice of products for buyers beyond what is
produced domestically.
• Competition: Producers in different countries
compete with each other, leading to equalisation
of prices for similar goods.
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2. Factors that have Enabled Globalisation
Globalisation has been stimulated by rapid
improvements in technology and the
liberalisation of trade and investment policies.
• Transportation Technology: In the last fifty
years, faster delivery of goods over long distances
at lower costs has become possible.
◦ Containers: Goods are placed in containers
that can be loaded intact onto ships, planes, and
trucks, reducing port handling costs and
increasing speed.
• Information and Communication Technology
(ICT): Developments in computers, the Internet,
and telecommunications (mobile phones, fax)
allow instant contact and information sharing
globally.
◦ Example: A magazine for London readers can
be designed in Delhi with instructions sent via the
Internet, and payment made through e-banking.
• Liberalisation: This refers to the removal of
barriers or restrictions set by the government on
foreign trade and investment.
• Trade Barriers: Governments use barriers, like
taxes on imports, to regulate foreign trade and
protect domestic producers from foreign
competition.
• Policy Shift in India (1991): Around 1991, India
removed trade barriers to encourage domestic
producers to compete globally and improve
product quality.
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CBSE Previous Year Questions
Q1. "Technology has stimulated the globalisation
process." Support the statement with examples.
(3 Marks) Ans:
• Transportation: Improved shipping via
containers has made global delivery faster and
cheaper.
• Communication: Telecommunication facilities
like mobile phones and satellites allow people to
communicate from remote areas instantly.
• IT in Services: The Internet allows for the rapid
spread of services, such as software development
or call centres, across different nations.
Q2. What is meant by ‘liberalisation of foreign
trade’? Why did the Indian government choose
to do this in 1991? (5 Marks) Ans:
• Definition: Liberalisation means removing
government-imposed restrictions and barriers on
trade and investment.
• Competition: The government felt that
competition would improve the performance and
quality of Indian producers.
• Global Integration: It was intended to integrate
India into the global economy for better economic
growth.
• International Pressure: Powerful organisations
like the WTO supported the removal of trade
barriers.
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3. India and G20
The G20 (Group of Twenty) is an international
intergovernmental forum for economic
cooperation, playing a vital role in shaping global
policy.
• Structure: It was founded in 1999 and comprises
19 countries and the European Union.
• Economic Might: G20 members represent 85%
of global GDP, 75% of international trade, and
two-thirds of the world’s population.
• India’s Presidency (2023): India held the G20
presidency from 1st December 2022, culminating
in the Leaders’ Summit in September 2023.
• Theme: The theme was "Vasudhaiva
Kutumbakam" or "One Earth · One Family · One
Future", highlighting global unity.
• Key Priorities:
◦ Green Development and Climate Finance.
◦ Inclusive Growth and accelerated progress on
Sustainable Development Goals (SDGs).
◦ Technological Transformation and Digital
Public Infrastructure.
◦ Women-led Development.
• Mission LiFE: India promoted Life (Lifestyle for
Environment), encouraging sustainable living
practices globally.
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CBSE Previous Year Questions
Q1. Describe the significance of the G20 as an
international forum. (3 Marks) Ans:
• Economic Impact: It represents the majority of
the world's GDP, trade, and population, making it
the premier forum for international economic
cooperation.
• Global Issues: It allows leaders to discuss critical
issues like financial stability, climate change, and
sustainable development.
• Cooperation: It fosters collaboration between
developed and emerging economies to address
global challenges.
Q2. Discuss India’s role and priorities during its
G20 Presidency in 2023. (5 Marks) Ans:
• Leadership: India acted as a voice for the Global
South, advocating for inclusive and resilient
growth.
• Theme: Promoted "Vasudhaiva Kutumbakam",
emphasising that the world is one family.
• Environment: Focused on Green Development
and the LiFE mission for sustainable lifestyles.
• Digital Innovation: Championed the use of
Digital Public Infrastructure and technological
transformation.
• Social Equity: Prioritised women-led
development and poverty reduction through
SDGs.
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Exam Focus Points
• Definition of MNC: A company
owning/controlling production in more than one
nation.
• 1991 Reforms: The year India adopted
liberalisation and removed trade barriers.
• Trade Barrier Example: Tax on imports is the
most common trade barrier.
• Technology Impact: Containers and the Internet
are the two biggest enablers of modern
globalisation.
• WTO: The international organisation that aims
to liberalise international trade.
• G20 Theme: "One Earth · One Family · One
Future".
Conclusion
Globalisation is a complex process of global
integration led by MNCs and supported by
technology and liberalised policies. While it has
transformed markets and increased consumer
choice, the challenge remains to ensure fair
globalisation that creates opportunities for all and
protects the interests of workers and small
producers.