REVISION QUESTIONS AND ANSWERS
Question 1.
What are Multi-National Corporations (MNCs)?
Answer:
A Multi-National Corporation (MNC) is a company that owns or controls
production in more than one nation. The goods and services are produced
globally. The production process is divided into small parts and spread out
across the globe.
Question 2.
Explain ‘what is investment? Give a few examples of investment.
Answer:
Investment is buying of an asset in the form of a factory, a machine, land and
building, etc. (Physical assets) or shares (monetary assets) for the purpose of
making or sharing profits of the enterprises concerned.
Common investments
are: buying land, factories, machines for faster production, buying small local
companies to expand production, cheap labour, skilled engineers, IT personnel,
etc.
Question 3.
In which year did the government decide to remove barriers on foreign trade and
investment in India? (2011 D)
Answer:
1991
Question 4.
Why is ‘tax’ on imports known as a trade barrier? (2011 OD)
Answer:
Tax on imports is known as a trade barrier because it increases the price of
imported commodities. It is . called a barrier because some restriction has
been set up.
Question 5.
Which organization lays stress on liberalization of foreign trade and foreign
investment? (2014 D, 2012 OD)
Answer:
World Trade Organization (W.T.O).
Question 6.
Give one characteristic feature of a ‘Special Economic Zone’?
Answer:
Special Economic Zones or SEZs are industrial zones set up by the government
having word class facilities such as electricity, water, roads, transport,
storage, recreational and educational facilities. Companies who set up
production units in SEZs are exempted from taxes for an initial period of five
years.
Question 7.
Name an important barrier on foreign trade. (2013 D)
Answer:
Tax on imports is an important barrier on foreign trade.
Question 8.
What is meant by “fair globalization’? (2013 OD)
Answer:
Fair globalization means globalization that would create opportunities for all
and ensure that its benefits are shared better.
Question 9.
What do you understand by the term ‘Foreign Direct Investment’? (2014 OD)
Answer:
FDI is the investment of foreign capital in the economic and productive
activities of a country by foreign companies or MNCs with the aim of expanding
capacity and production to earn profits.
Question 10.
Why had the Indian Government put barriers to foreign trade and foreign
investment after independence? State any one reason. (2015 D)
Answer:
The Indian government after independence had put barriers to foreign trade and
investment.
· This was done to
protect the producers within the country from foreign competition.
· To protect the
Indian economy from foreign infiltration in industries affecting the economic
growth of the country as planned.
Question 11.
What is meant by trade barrier? (2015 OD)
Answer:
Barriers or restrictions that are imposed by the government on free import and
export activities are called trade barriers. Tax on imports is an example of a
trade barrier because it increases the price of imported • commodities. The
government can use a trade barrier like ‘tax’ to increase or decrease
(regulate) foreign trade and to decide what kind of goods and how much of what
should come into the country.
Question 12.
Differentiate between investment and foreign investment. (2016 D)
Answer:
The money that is spent to buy assets (land, building, machines and other
equipments) is called investment, while the investment made by the MNCs is
called foreign investment.
Question 13.
Why do MNCs set up their offices and factories in those regions where they get
cheap labour and other resources? (2016 OD)
Answer:
MNCs set up offices and factories for products in regions where they can get
cheap labour and other resources so that—
· the cost of
production is low
· the MNCs can earn
greater profits.
Short Answer
Questions (SA) 3 Marks
Question 14.
Explain the role of government to make globalization fair. (2011 D)
Answer:
The government can play a major role in making fair globalization possible:
Fair globalization would create opportunities for all, and also ensure that the
benefits of globalization are shared better. Government policies must protect
the interests not only of the rich and the powerful, but also of all the people
in the country.
1. Government should
ensure that labour laws are implemented and workers’ rights are protected.
2. Government should
support small producers to improve their performance till the time they become
strong enough to compete with foreign competition.
3. If necessary,
government should use trade and investment barriers.
4. It can negotiate
with WTO for fairer rules.
5. It can also align
with other developing countries with similar interests to fight against the
domination of developed countries in the WTO.
Question 15.
Explain any three advantages of globalization. (2011 OD)
Answer:
Globalization means integrating the economy of the country with the world
economy.
1. Under this process,
goods and services along with capital, resources and technology can move freely
from one nation to another.
2. It has increased
the movement of people between countries. People usually move from one country
to another in search of better income, better jobs or better education. Earlier
the movement of people between countries was less due to various restrictions.
3. Rapid improvement
in technology has been one major factor that has stimulated the globalization
process. For instance, advancement in transportation technology has made much
faster delivery of goods across long distances possible at lower costs.
Container services have led to huge reduction in port handling costs. The cost
of air transport has fallen which has enabled much greater volumes of goods
being transported by airlines.
4. Developments in
information and communication technology (IT in short) has brought a revolution
in telecommunications. It has made e-banking, e-commerce, e-leaming, e-mail and
e-governance a reality.
5. Globalization has
resulted in greater competition among producers and has been of advantage to
consumers, particularly the well-off section. Rich people now enjoy improved
quality and lower prices for several products.
Question 16.
What is a trade barrier? Why did the Indian Government put up trade barriers
after Independence? Explain. (2011 OD)
Answer:
The restrictions set by the Government to regulate foreign trade are called
trade barriers. Tax on imports is an example of a trade barrier.
The Indian
Government had put barriers to foreign trade and foreign investment after
independence to protect the domestic producers from foreign competition.
Imports at that stage would not have allowed local industries to come up. India
allowed imports of only essential items such as machinery, fertilizers,
petroleum, etc.
Question 17.
What would happen if Government of India puts heavy tax on import of Chinese
toys? Explain any three points. (2012 D)
Answer:
If Government of India puts heavy tax on import of Chinese toys
1. The cost of Chinese
toys will increase.
2. Less Chinese toys
would come in the Indian market.
3. Indian buyers would
have lesser choice in the market and toys will become more expensive.
4. For Indian toy
makers this would provide an opportunity to expand business as there will be
less competition in the market.
Question 18.
How do Multinational Companies manage to keep the cost of production of their
goods low? Explain with examples. (2013 D)
Or
Explain the conditions that determine MNCs setting up production in other
countries? (2011 D)
Answer:
1. MNCs set up offices
and factories for production in regions where they can get cheap labour and
other resources. Example, Countries like China, Bangladesh and India. They also
provide with the advantage of cheap manufacturing locations.
2. MNCs also need
close-by markets for their manufacturing goods. Mexico and Eastern Europe are
useful for their closeness to the markets in the US and Europe.
3. Besides these, MNCs
also require skilled engineers and IT personnel and a large number of English
speaking people who are able to provide customer care services (India possibly
tops in this area).
4. All these factors
help MNCs in saving costs of production by 50-60%.
Question 19.
How do we participate in the market as producers and consumers? Explain with
three examples. (2013 D)
Answer:
We participate in the market both as producers and consumers.
1. As producers of
goods and services we could be working in any of the sectors like agriculture,
industry or services.
For example, a farmer who sells wheat to a flour mill. The man at the mill
grinds the wheat and sells the flour to a biscuit company. The biscuit company
uses flour, sugar and oil to make packets of biscuits. It sells the biscuits in
the market to the consumer. Biscuits are the final goods, i.e., the goods that
reach the consumer and people as consumers buy.
2. We as producers in
the market could be made to sell the produce to the moneylender at a low rate
in return for a timely loan.
For example, in case of small farmers; the failure of crops often makes loan
repayment impossible. They have to sell a part of their land to repay the
loans.
3. As consumers we
participate in the market when we purchase goods and services that we need. As
individual consumers we often find ourselves in a weak position. Whenever there
is a complaint regarding a good or service that had been bought, the seller tries
to shift all the responsibility on to the buyer.
For example, a long battle had to be fought with court cases to make cigarette
manufacturing companies accept that their product could cause cancer.
Question 20.
How are local companies benefitted by collaborating with multinational
companies? Explain with examples. (2013 OD)
Answer:
When local companies enter into a joint venture with MNCs:
1. First, the MNCs
provide money for additional investments for faster production.
2. Second, MNCs bring
with them the latest technology for enhancing and improving the production.
3. Some Indian
companies have gained from successful collaborations with foreign companies.
Globalization has enabled some companies to emerge as multinationals.
4. Parakh Foods was a
small company which has been bought over by a large American Company — Cargill
Foods. Parakh foods had built a large marketing network in various parts of
India as a well- reputed brand. Parakh Foods had four oil refineries whose
control has now shifted to Cargill. Cargill is now the largest manufacturer of
edible oil in India making five million pouches daily.
Question 21.
How has foreign trade been integrating markets of different countries in the
world? Explain with examples. (2012 OD)
Or
“Foreign trade integrates the markets in different countries.” Support the
statement with arguments. (2015 OD)
Answer:
(i) Foreign trade
creates opportunities for producers to reach beyond domestic markets. Producers
can compete in markets located in other countries of the world. Similarly, for
the buyers, import of goods from another country leads to expanding choice of
goods beyond what is domestically produced. Buyers can thus choose from a wide
range of products to suit their individual tastes.
(ii) With the
opening of trade, goods travel from one market to another. Choice of goods in
the market rises. Prices of similar goods in two markets tend to become equal,
and producers in the two countries now closely compete against each other even
though they are separated by thousands of miles. Foreign trade, thus, results
in connecting the markets or integration of markets in different countries.
For example., There
are endless number of footwear brands available in the Indian market. A
consumer who is aware of international trends can choose between a local brand
like Bata, Lakhani and international brands like Adidas, Nike, Reebok etc.
Question 22.
Define the term liberalization. Explain the reasons why the Indian Government
started the policy of liberalization in 1991. (2014 D)
Or
‘Barriers on foreign trade and foreign investment were removed to a large
extent in India since 1991’. Justify the statement. (2016 D)
Answer:
Removing barriers or restrictions set by the government on foreign trade and
foreign investment is what is known as liberalization. The Indian Government
removed these barriers because:
1. Liberalization of
trade and investment policies allows Indian producers to compete with producers
around the globe leading to an improvement in performance and quality of
products.
2. After the barriers
on foreign trade and foreign investment were removed to a large extent, goods
could be imported and exported easily and also foreign companies could set up
factories and offices in India. This has led to an increase in trade with different
countries.
3. Businesses are
allowed to make decisions freely about what they wish to import or export due
to the liberal policies of the government.
4. Doors of investment
opened up for MNCs. They have been investing large sums of money in India and
have been seeking to earn large profits.
Question 23.
How has information and communication technology stimulated globalisation
process? Explain with examples. (2014 D)
Answer:
Information and communication technology has helped globalisation in the
following ways:
1. Rapid improvement
in technology has contributed greatly towards globalisation. Advanced
technology in transport systems has helped in the delivery of goods faster
across long distances at lower costs.
2. Development in
information and communication technology has also helped a great deal.
Telecommunication facilities — telegraph, telephone, mobile phones, fax are
used to contact one another quickly around the world, access information
instantly and communicate from remote areas. This is possible due to satellite
communication devices. Teleconferences help in saving frequent long trips
across the globe.
3. Information
technology has also played an important role in spreading out production of
services across countries. Orders are placed through internet, designing is
done on computers, even payment of money from one bank to another can be done
through e-banking through internet. Internet also allows us to send instant
electronic mail (e-mail) and talk (voice-mail) across the world at negligible
cost.
Question 24.
Why had Indian government put barriers to foreign trade and foreign investment
after independence? Explain. (2014 D)
Or
Why had the Indian government put barriers to foreign trade and foreign
investments after independence? Analyse the reasons. (2016 OD)
Answer:
1. The Indian
government after independence had put barriers to foreign trade and investment.
This was done to protect the producers within the country from foreign
competition. Industries were just coming up in the 1950s and 1960s and
competition from imports at that stage would not have allowed these industries
to develop and grow. Imports of only essential items such as machinery,
fertilisers, petroleum etc. was allowed.
2. Another reason was
to protect the Indian economy from foreign infiltration in industries affecting
the economic growth of the country as planned. India wanted to move faster to
catch up with the main industries in the world market and therefore had to keep
an extra watch on its progress in international trade and give incentives to
the more rapidly growing industries through fiscal tariff and other means.
Question 25.
How are MNCs able to cope with large demands from all over the ivorld and
control prices? (2014 OD)
Answer:
1. Large MNCs in
developed countries place orders for production with small producers.
2. The MNCs sell these
under their own brand names to the customers.
3. As they control the
market with the huge demand, they are able to control prices.
Question 26.
“A wide ranging choice of goods are available in the Indian markets.” Support
the statement with examples in context of globalisation. (2016 D)
Answer:
Globalisation has led to integration of markets across countries. The Indian
markets are now flooded with a wide ranging choice of goods. Import from other
countries has led to an expanding choice of goods beyond what is domestically
produced —
1. We have a wide
variety of goods and services before us in the market.
2. The latest models
of digital cameras, mobile phones and televisions made by leading manufacturers
of the world like Sony, Samsung etc. are available in the market.
3. Every season, new
models of automobiles can be seen on Indian roads. Today Indians are buying
cars produced by nearly all the top companies in the world.
4. A similar explosion
of brands can be seen for many other goods like footwear. For example, Adidas,
Nike, Reebok, Puma and many more.
Question 27.
In spite of Globalization, creating good quality products and expanding market,
how is it affecting the stability in jobs for the workers? (2014 OD)
Answer:
1. Employment of
‘flexible workers’.
2. Increased
competition, objective to lower costs, the axe falls on the ‘labour
costs’—temporary jobs given.
3. Longer working
hours for labour to get suitable salaries.
Question 28.
Examine any three conditions which should be taken care of by multinational
companies to set up their production units. (2017 D)
Answer:
Conditions:
1. MNCs set up offices
and factories for production in regions where they can get cheap labour and
other resources. Example, Countries like China, Bangladesh and India. They also
provide with the advantage of cheap manufacturing locations.
2. MNCs also need
close-by markets for their manufacturing goods. Mexico and Eastern Europe are
useful for their closeness to the markets in the US and Europe.
3. Besides these, MNCs
also require skilled engineers and IT personnel and a large number of English
speaking people who are able to provide customer care services (India possibly
tops in this area).
4. All these factors
help MNCs in saving costs of production by 50-60%.
Question 29.
How do Multi-National corporations (MNCs) interlink production across
countries? Explain with examples. (2017 OD)
Answer:
MNCs set up production in various countries based on the following factors:
1. MNCs set up offices
and factories for production in regions where they can get cheap labour and
other resources; eg., in countries like China, Bangladesh and India. These
countries also provide with the advantage of cheap manufacturing locations.
2. At times, MNCs set
up production jointly with some of the local companies of countries around the
world. The benefit of such joint production to the local company is two-fold.
First, the MNCs can provide money for additional investments for faster production.
Secondly, the MNCs bring with them the latest technology for enhancing and
improving production.
3. Some MNCs are so
big that their wealth exceeds the entire budgets of some developing countries.
This is the reason why they buy up local companies to expand production.
eg. Cargill Foods, a very large American MNC has bought over smaller Indian
companies such as Farakh Foods.
4. There is another
way in which MNCs control production and that is by placing orders for
production with small producers in developing nations; eg., garments, footwear,
sports items etc. The products are supplied to these MNCs which then sell these
under their own brand name to customers. MNCs also enter into close competition
with local companies thereby influencing production in distant locations.
Long Answer
Questions 5 Marks
Question 30.
Give the meaning of WTO? What is the major aim of WTO? Mention any two
shortcomings of WTO? (2011 D, 2012 OD)
Answer:
WTO (World Trade Organization). WTO believes that there should not be any
barriers between trade of different countries. Trade between countries should
be free.
Aims of WTO:
· To liberalize
international trade.
· To establish rules
regarding international trade.
Two shortcomings of
WTO:
1. Though WTO is
supposed to allow free trade for all, in practice, it is seen that the
developed countries have unfairly retained trade barriers and continued to
provide protection to their producers. For example, farmers in the US receive
huge sums of money from the government and as a result can sell the farm
products at abnormally low prices in other countries, adversely affecting
farmers in those countries.
2. On the other hand
WTO rules have forced the developing countries to remove trade barriers.
Question 31.
What is globalization? Explain with three examples how top Indian companies
have benefitted from globalization. (2011 OD)
Answer:
Globalization is the process of rapid integration or interconnection among
countries. It is the integration between countries through foreign trade and
foreign investments by multinational corporations. It means the coming together
of various economies of the world to form a global economy.
The top Indian
companies have benefitted from the increased competition and globalization.
1. They have invested
in new technology and production methods and raised their production standards.
2. Some have gained
from successful collaborations with foreign companies.
3. Moreover,
globalization has enabled some large Indian companies to emerge as
multinationals themselves. For example, Tata Motors, Infosys, Ranbaxy, Asian
Paints, Sundaram Fasteners etc.
Question 32.
What is an MNC? Give two examples of Indian companies that have emerged as
MNCs. What are the harmful effects of MNCs to a host country? Give three
examples. (2012 OD)
Answer:
A Multi-National Corporation (MNC) is a company that owns or controls
production in more than one nation. The goods and services are produced
globally. The production process is divided into small parts and spread out
across the globe.
Tata Motors
(automobiles), Infosys (IT), Ranbaxy (medicines), Asian Paints (paints),
Sundaram Fasteners (nuts and bolts), etc. are some of the Indian companies
which are spreading their operations worldwide as MNCs.
Harmful effects of
MNCs to a host country:
1. Small producers
compete or perish. MNCs have posed major challenges for a large number of small
producers and workers. The small manufacturers have been hit hard due to
competition. Several of the units have shut down rendering many workers
jobless. Batteries, taps, tyres, dairy-products, vegetable oil are some of the
industries that are badly affected due to stiff competition from MNCs.
2. Uncertain
employment. In order to maximize the profit MNCs look for a location with
minimum labour costs. Faced with competition, most employers these days prefer
to employ workers on temporary basis so that they do not have to pay workers
for the whole year. This has changed the lives of workers and their jobs are no
longer secure.
3. The Condition of
employment. Workers also have to put in very long working hours and work night
shifts on a regular basis during the peak season. Wages are low and workers are
forced to work overtime to make both ends meet. The workers are denied their fair
share of benefits and no longer get the protection that they enjoyed earlier,
for example, the Indian garment export industry often deny their workers their
fair share of benefits.
Question 33.
How has globalization been advantageous to both the producers as well as the
consumers in India? Explain. (2012 OD)
Answer:
To Producers. Several of the top Indian Companies have been able to benefit
from the increased competition.
· They have invested
in newer technology and production methods and thereby raised their production
standards.
· They have gained
from successful collaborations with foreign companies.
· Globalization
helped in the development of IT sector.
· Good quality
products are being produced at lower prices.
To Consumers. There is greater choice before consumers who can enjoy improved
quality and lower prices for several products.
· People today, enjoy
much higher standards of living than was possible earlier.
Question 34.
How has globalization benefitted India? Explain with five examples. (2013 OD)
Answer:
Globalization has benefitted India in the following ways:
1. People with education, skill and wealth have benefitted by globalization.
· Greater competition
among producers (both local and foreign) has been advantageous to consumers,
particularly the well-off section. Rich people enjoy improved quality at lower
prices for several products and enjoy a higher standard of living.
· MNCs have increased
their investments in India over the past 20 years in industries such as cell
phones, automobiles, electronics, soft drinks, fast food and services such as
banking.
· New jobs have been
created in all these industries and services.
· Top Indian
companies have benefitted from the increased competition. They have invested in
newer technology and production methods.
· Some Indian
companies have gained from successful collaborations with foreign companies.
Globalization has enabled some companies to emerge as multinationals.
Question 35.
How is the Government of India trying to attract more foreign investment?
Explain with examples. (2013 OD)
Answer:
In order to attract foreign investment, the Government has taken the following
steps:
1. All the barriers
and restrictions on foreign trade and investment have been removed to a large
extent.
2. Liberalization of
investment policies has allowed Indian producers to compete with the producers
around the globe.
3. Allowing
privatization of many public sector industries by the government.
4. Allowing businesses
to make decisions freely about what they wish to import or export.
5. The government has
allowed flexibility in labour laws to attract foreign investment for the
benefit of companies.
Question 36.
What is the meaning of SEZ? Mention any three features of SEZ. (2011 D)
Answer:
SEZ or Special Economic Zones are industrial zones set up by the Central and
State Governments with world class facilities in electricity, water, roads,
transport, storage, recreational and educational facilities. Three features of
SEZ:
1. The companies who
set up production units in the SEZs do not have to pay taxes for an initial
period of five years.
2. Government has also
allowed flexibility in the labour laws to attract foreign investment. This is
done to reduce the cost of labour for the company.
3. These are being set
up to attract foreign companies to invest in India.
Question 37.
“Advancement of international trade of a country is an index of its economic
prosperity.” Justify the statement with five arguments. (2013 OD)
Answer:
“Advancement of international trade of a country is an index to its economic
prosperity”.
1. As no country is
self-sufficient in all resources, it cannot survive without international
trade.
2. If the balance of
international trade is favourable, a country will be able to earn more foreign
exchange.
3. International trade
encourages a country to develop secondary and tertiary sectors for exporting
goods which can fetch more foreign exchange.
4. A country’s
economic prosperity can be gauged by the health of its international trade.
5. A country can earn
large amounts of foreign exchange through international trade.
Question 38.
Explain the role of multinational corporations in the globalization process.
(2014 D)
Answer:
Globalization is the process of rapid integration or inter-connection among
countries. MNCs have contributed greatly in the process of globalisation.
1. MNC’s have set up production
centres in various countries and are supplying produced goods, services and
technology to various countries.
2. The countries of
the world have come closer. It has also increased the movement of people
between countries.
3. The MNCs provide
money for additional investments, for faster production. Also, MNCs bring with
them the latest technology for enhancing and improving the production.
Question 39.
How has improvement in technology stimulated the globalization process? Explain
with five examples. (2013 OD, 2012 D)
Answer:
Improvements in technology have helped in globalization in the following ways:
1. Rapid improvement
in technology has contributed greatly towards globalization. Advanced
technology in transport systems has helped in the delivery of goods faster
across long distances at lower costs.
2. Development in
information and communication technology has also helped a great deal.
Telecommunication facilities—telegraph, telephone (including mobile phones),
fax are now used to contact one another quickly around the world, access
information instantly and communicate from remote areas. Teleconferences help
in saving frequent long trips across the globe.
3. Information
technology has also played an important role in spreading out production of
services across countries. Orders are placed through internet, designing is
done on computers, even payment for designing and printing can be arranged
through internet. Internet also allows us to send instant electronic mail
(e-mail) and talk (face-to-face) across the world at negligible cost.
4. The cost of air
transport has fallen which has enabled much greater volumes of goods being
transported by airlines.
5. Technology has made
e-banking, e-commerce, e-learning, e-mail and e-governance a reality.
Question 40.
What is globalisation? Describe the role of Multinational Corporations (MNCs)
in promoting globalisation process. (2016 D)
Answer:
Globalisation is the process of rapid integration or inter-connection among
countries. Over the last 20-30 years, these has been a tremendous increase in
globalisation with the increase in the number of MNCs.
1. MNCs set up
production centres worldwide where cheap labour is available, markets are near
and government policies are favourable.
2. They supply
produced goods to different countries.
3. Countries of the
world have come closer due to increased movement of people between countries.
4. MNCs provide money
for additional investments for faster production.
5. MNCs bring with
them the latest technology and know-how for enhancing and improving the
production process.
Question 41.
What is trade? Explain the importance of international trade. (2015 OD, 2016 D)
Answer:
The exchange of goods among people, states and countries is referred to as
trade.
Importance of international trade:
1. International trade
of a country is an index to its economic prosperity.
2. It is considered
the economic barometer for a country. If the balance of international trade is
favourable, a country will be able to earn more foreign exchange.
3. As no country is
self-sufficient in all resources it cannot survive without international trade.
4. Countries have
trade relations with the major trading blocks.
5. Exchange of
commodities and goods have been superseded by the exchange of information and
knowledge.
Question 42.
Describe the impact of globalisation on Indian economy with examples. (2016 OD)
Or, “Globalisation and greater competition among producers has been of
advantage to consumers.” Justify the statement with examples. (2015 OD)
Answer:
Impact of Globalisation on the Indian Economy:
1. Greater competition
among producers (both local and foreign), has been advantageous to consumers,
particularly the well-off section. There is greater choice before the consumers
who now enjoy improved quality and lower prices for several products.
2. Globalisation has
led to a higher standard of living especially in urban areas.
3. MNCs have increased
their investments in India in industries such as electronics, automobiles,
cellphones, soft drinks, fast food, banking services etc. thereby providing
consumers with a vast variety of products. New job opportunities have been
created in these industries and services, thereby increasing purchasing power.
4. Globalisation has
enabled some large Indian companies to emerge as MNCs themselves like Tata
Motors, Infosys, Ranbaxy, Asian Paints, etc.
5. Globalisation has
also created new opportunities for companies providing services particularly
those involving IT (Information Technology)- For example, call centres.
6. Top Indian
companies have benefitted from the increased competition. They have invested in
newer technology and production methods indirectly benefitting the consumers.
7. Local companies
supply raw materials to foreign industries and have prospered.
However, for a large number of producers and workers the impact has not been
uniform, and globalisation has posed major challenges.
Question 43.
How are MNCs spreading their products? Explain with examples. (2014 OD)
Or, How are multinational corporations (MNCs) controlling and spreading their
production across the world? Explain. (2015 D)
Answer:
MNCs set up production in various countries based on the following factors:
1. MNCs set up offices
and factories for production in regions where they can get cheap labour and
other resources; e.g., in countries like China, Bangladesh and India. These
countries also provide with the advantage of cheap manufacturing locations.
2. At times, MNCs set
up production jointly with some of the local companies of countries around the
world. Such joint production also provides benefits to the local company.
3. MNCs with huge
amounts of wealth sometimes buy up local companies to expand production, e.g.,
Cargill Foods, a very large American MNC has bought over smaller Indian
companies such as Parakh Foods.
4. There is another
way in which MNCs control production and that is by placing orders for
production with small producers in developing nations; e.g., garments,
footwear, sports items etc. The products are supplied to these MNCs which then
sell these under their own brand name to customers. MNCs also enter into close
competition with local companies thereby influencing production in distant
locations.
Question 40.
How do banks play an important role in the economy of India? Explain. (2015 OD)
Answer:
1. Banks help people
to save their money and keep their money in safe custody. To ensure safety of
their money, people deposit their money with banks. Banks accept deposits and
pay interest on deposits. People have the provision to withdraw their money as
and when they require.
2. Banks also grant
loans to people for a variety of purposes. In times of need individuals,
business houses and industries can borrow money from the banks.
3. Credit provided by
banks is crucial for the country’s growth and economic development. Credit is
needed for all kinds of economic activities, to set up business, buy cars,
houses, etc.
4. Banks also help
people in obtaining cheap and affordable loans. This can help people to grow
crops, do business, set up small-scale industries or trade in goods and also
help indirectly in the country’s development. They should do so, so that
relatively poor people do not have to depend on informal sources of credit
(money-lenders).
Question 41.
Describe the vital and positive role of credit with examples. (2016 D)
Answer:
In the festive season, a shoe manufacturer, Ram receives an order from a large
trader in town for 3,000 pairs of shoes to be delivered in a month’s time. To
complete production on time Ram has to hire workers for stitching and pasting
work. He has to purchase the raw materials. To meet these expenses Ram obtains
loans from two sources.
First, he asks the
leather supplier to supply leather now and promises to pay him later.
Second, he obtains
loan in cash from the large traders as advance payment for 1000 pairs of shoes
with a promise to deliver the whole order by the end of the month.
At the end of the
month, Salim is able to deliver the order, make a good profit and repay the
money he had borrowed.
Salim obtains
credit to meet the working capital needs of production. The credit helps him to
meet the ongoing expenses of production, complete production on time and thus
increase his earnings. Credit therefore plays a vital and positive role in this
situation.
Question 42.
How can the formal sector loans be made beneficial for poor farmers and
workers? Suggest any five measures. (2016 OD)
Answer:
Formal sector loans can be made beneficial for poor farmers and workers in the
following ways:
1. Create greater
awareness among farmers about formal sector loans.
2. Process of
providing loans should be made easier. It should be simple, fast and timely.
3. More number of
Nationalized Banks/cooperative banks should be opened in rural sectors. Banks
and cooperatives should increase facility of providing loans so that dependence
on informal sources of credit reduces.
