Solution of Chapter 4. Globalisation and the Indian Economy (Understanding Economic Development Book)

Complete the following statement to show how the production process in the garment industry is spread across countries.

The brand tag says ‘Made in Thailand’ but they are not Thai products. We dissect the manufacturing process and look for the best solution at each step. We are doing it globally. In making garments, the company may, e.g., get cotton fibre from Korea,

Read the passage and answer the questions.

Ford Motors, an American company, is one of the world’s largest automobile manufacturers with production spread over 26 countries of the world. Ford Motors came to India in 1995 and spent Rs 1,700 crore to set up a large plant near Chennai. This was done in collaboration with Mahindra and Mahindra, a major Indian manufacturer of jeeps and trucks. By the year 2004, Ford Motors was selling Rs 27,000 cars in the Indian markets, while, 24,000 cars were exported from India to South Africa, Mexico and Brazil. The company wants to develop Ford India as a component supplying base for its other plants across the globe.

Would you say Ford Motors is a MNC? Why?

Read the passage and answer the questions.

Ford Motors, an American company, is one of the world’s largest automobile manufacturers with production spread over 26 countries of the world. Ford Motors came to India in 1995 and spent Rs 1,700 crore to set up a large plant near Chennai. This was done in collaboration with Mahindra and Mahindra, a major Indian manufacturer of jeeps and trucks. By the year 2004, Ford Motors was selling Rs 27,000 cars in the Indian markets, while, 24,000 cars were exported from India to South Africa, Mexico and Brazil. The company wants to develop Ford India as a component supplying base for its other plants across the globe.

What is foreign investment? How much did Ford Motors invest in India?

Read the passage and answer the questions.

Ford Motors, an American company, is one of the world’s largest automobile manufacturers with production spread over 26 countries of the world. Ford Motors came to India in 1995 and spent Rs 1,700 crore to set up a large plant near Chennai. This was done in collaboration with Mahindra and Mahindra, a major Indian manufacturer of jeeps and trucks. By the year 2004, Ford Motors was selling Rs 27,000 cars in the Indian markets, while, 24,000 cars were exported from India to South Africa, Mexico and Brazil. The company wants to develop Ford India as a component supplying base for its other plants across the globe.

By setting up their production plants in India, MNCs such as Ford Motors tap the advantage not only of the large markets that countries such as India provide, but also the lower costs of production. Explain the statement.

Read the passage and answer the questions.

Ford Motors, an American company, is one of the world’s largest automobile manufacturers with production spread over 26 countries of the world. Ford Motors came to India in 1995 and spent Rs 1,700 crore to set up a large plant near Chennai. This was done in collaboration with Mahindra and Mahindra, a major Indian manufacturer of jeeps and trucks. By the year 2004, Ford Motors was selling Rs 27,000 cars in the Indian markets, while, 24,000 cars were exported from India to South Africa, Mexico and Brazil. The company wants to develop Ford India as a component supplying base for its other plants across the globe.

Why do you think the company wants to develop India as a base for manufacturing car components for its global operations? Discuss the following factors

(a) Cost of labour and other resources in India.

(b) The presence of several local manufacturers who supply auto-parts to Ford Motors.

(c) Closeness to a large number of buyers in India and China.

Read the passage and answer the questions.

Ford Motors, an American company, is one of the world’s largest automobile manufacturers with production spread over 26 countries of the world. Ford Motors came to India in 1995 and spent Rs 1,700 crore to set up a large plant near Chennai. This was done in collaboration with Mahindra and Mahindra, a major Indian manufacturer of jeeps and trucks. By the year 2004, Ford Motors was selling Rs 27,000 cars in the Indian markets, while, 24,000 cars were exported from India to South Africa, Mexico and Brazil. The company wants to develop Ford India as a component supplying base for its other plants across the globe.

In what ways will the production of cars by Ford Motors in India lead to interlinking of production?

Read the passage and answer the questions.

Ford Motors, an American company, is one of the world’s largest automobile manufacturers with production spread over 26 countries of the world. Ford Motors came to India in 1995 and spent Rs 1,700 crore to set up a large plant near Chennai. This was done in collaboration with Mahindra and Mahindra, a major Indian manufacturer of jeeps and trucks. By the year 2004, Ford Motors was selling Rs 27,000 cars in the Indian markets, while, 24,000 cars were exported from India to South Africa, Mexico and Brazil. The company wants to develop Ford India as a component supplying base for its other plants across the globe.

In what ways is a MNC different from other companies?

Read the passage and answer the questions.

Ford Motors, an American company, is one of the world’s largest automobile manufacturers with production spread over 26 countries of the world. Ford Motors came to India in 1995 and spent Rs 1,700 crore to set up a large plant near Chennai. This was done in collaboration with Mahindra and Mahindra, a major Indian manufacturer of jeeps and trucks. By the year 2004, Ford Motors was selling Rs 27,000 cars in the Indian markets, while, 24,000 cars were exported from India to South Africa, Mexico and Brazil. The company wants to develop Ford India as a component supplying base for its other plants across the globe.

Nearly all major multinationals are American, Japanese or European, such as Nike, Coca-Cola, Pepsi, Honda, Nokia. Can you guess why?

What was the main channel connecting countries in the past? How is it different now?

Distinguish between foreign trade and foreign investment.

In recent years China has been importing steel from India. Explain how the import of steel by China will affect.

(a) Steel companies in China.

(b) Steel companies in India.

(c) Industries buying steel for production of other industrial goods in China.

How will the import of steel from India into the Chinese markets lead to integration of markets for steel in the two countries? Explain.

What is the role of MNCs in the globalization process?

What are the various ways in which countries can be linked?

Choose the correct option.

Globalization, by connecting countries, shall result in

In the above example, underline the words describing the use of technology in production.

How is information technology connected with globalization? Would globalization have been possible without expansion of IT?

What do you understand by liberalization of foreign trade?

Tax on imports is one type of trade barrier. The government could also place a limit on the number of goods that can be imported. This is known as quotas. Can you explain, using the example of Chinese toys, how quotas can be used as trade barriers? Do you think this should be used? Discuss.

Fill in the blanks.

WTO was started at the initiative of ………. countries. The aim of the WTO is to……….. . WTO establishes rules regarding ………. for all countries, and sees that………… . In practice, trade between countries is not………. . Developing countries like India have……….., whereas developed countries, in many cases, have continued to provide protection to their producers.

what do you think can be done so that trade between countries is more fair?

In the above example, we saw that the US Government gives massive sums of money to farmers for production. At times, governments also give support to promote production of certain types of goods, such as those which are environmentally friendly. Discuss whether these are fair or not.

How has competition benefitted people in India?

Should more Indian companies emerge as MNCs? How would it benefit the people in the country?

Why do governments try to attract more foreign investment?

In Chapter 1, we saw what may be development for one may be destructive for others. The setting of SEZs has been opposed by some people in India. Find out who are these people and why are they opposing it.

What are the ways in which Ravi’s small production unit was affected by rising competition?

Should producers such as Ravi stop production because their cost of production is higher compared to producers in other countries? What do you think?

Recent studies point out that small producer in India need three things to compete better in the market

(a) better roads, power, water, raw materials, marketing and information network.

(b) improvements and modernization of technology.

(c) timely availability of credit at reasonable interest rates.

• Can you explain how these three things would help Indian producers?

• Do you think MNCs will be interested in investing in these? Why?

• Do you think the government has a role in making these facilities available? Why?

• Can you think of any other step that the government could take? Discuss.

In what ways has competition affected workers, Indian exporters and foreign MNCs in the garment industry?

What can be done by each of the following so that the workers can get a fair share of benefits brought by globalization?

(a) Government

(b) Employers at the exporting factories

(c) MNCs

(d) Workers

One of the present debates in India is whether companies should have flexible policies for employment. Based on what you have read in the chapter, summaries the point of view of the employers and workers.

What do you understand by globalization? Explain in your own words.

what were the reasons for putting barriers to foreign trade and foreign investment by the Indian government? Why did it wish to remove these barriers?

How would flexibility in labour laws help companies?

What are the various ways in which MNCs set up or control production in other countries?

or

How are Multinational Corporations (MNCs) controlling and spreading their productions across the world? Explain.

Why do developed countries want developing countries to liberalize their trade and investment? What do you think should the developing countries demand in return?

“The impact of Globalization has not been uniform.” Explain this statement.

How has liberalization of trade and investment policies helped the globalization process?

How does foreign trade lead to integration of markets across countries? Explain with an example other than those given here.

Globalisation will continue in the future. Can you imagine what the world would be like twenty years from now? Give reasons for your answer.

Suppposing you find two people arguing: One is saying globalization has hurt our country’s development. The other is telling, globalization is helping India develop. How would you respond to these arguments?

Fill in the blanks

Indians buyers have a greater choice of goods than they did two decades back. This is closely associated with the process of ____(a)____ Markets in Indian are selling goods produced in many other countries. This means there is increasing ____(b)____ with other countries. Moreover, the rising number of brands that we see in the markets might be produced by MNCs in India. MNCs are investing in India because ____(c)____ While consumers have more choices in the market, the effect of rising ____(d)____ and ____(e)____ has meant greater ____(f)____ among the producers.

Match the following:

List I

(i) MNCs buy at cheap rates from small producers

(ii) Quotas and taxes on imports are used to egulate trade

Indian companies who have invested abroad

(iii) IT has helped in spreading of production of services

(iv) Several MNCs have invested in setting up factories in India for production

List II

(a) Automobiles

(b) Garments, footwear, sports items

(c) Call centres

(d) Tata Motors, Infosys, Ranbaxy

(e) Trade barriers

Choose the most appropriate option.

The past two decades of globalization has seen rapid movements in

Choose the most appropriate option.

The most common route for investments by MNCs in countries around the world is to

Choose the most appropriate option.

Globalisation has led to improvement in living conditions