Class 10 Economics Chapter 3 Question Answers - Understanding Economic Development

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Q1: Describe any four characteristics of WTO.

Ans: The four characteristics of the World Trade Organization (WTO) are:

• Powerful organisation: The WTO is a significant international body.
• Liberalising trade: Its main goal is to promote free international trade.
• Establishing rules: The WTO creates and enforces rules for global trade.
• Trade barriers: While it aims for free trade, developed countries often maintain unfair trade barriers.

Q2: How is stability in jobs for the workers affected due to globalization?

Ans: The stability of jobs for workers is significantly affected by globalization in several ways:

• Workers often have temporary employment instead of permanent positions, leading to job insecurity.
• Many companies aim to reduce costs, resulting in lower wages and reliance on short-term contracts.
• During less busy periods, workers may face layoffs without any compensation.
• Workers are frequently required to work long hours, often without the benefits they previously enjoyed.

Q3: “The impact of globalization has not been uniform.” Explain this statement.

Ans: The impact of globalisation has not been uniform for several reasons:

• Consumer Goods: Globalisation has boosted the sale of consumer goods, such as cell phones and automobiles, which are mainly desired by a small segment of the population in developing countries. Many people still lack basic necessities.
• Economic Inequality: It has led to a concentration of economic power, benefiting large capitalists and corporations, like Google, while small-scale producers and workers face increased competition and challenges.
• Job Security: The nature of employment has shifted, with many workers now hired on a temporary basis, resulting in less job security.

Q4: How has liberalization of trade and investment policies helped the globalization process?

Ans: Liberalization of trade and investment policies has significantly contributed to the process of globalization in several ways:

• Facilitated trade: It has made the import and export of goods easier, allowing foreign companies to establish operations in different countries.
• Increased integration: Greater foreign investment and trade have led to a closer integration of production and markets across nations, bringing companies together through multinational corporations (MNCs).
• Spread of technology: The latest technologies, particularly in information and communication technology (ICT), have been disseminated globally due to liberalization.

Q5: “Fair globalization would create opportunities for all and also ensure that benefits of globalization are shared better.” Support the statement.

Ans: The government can play a significant role in achieving fair globalization through the following actions:

• Frame policies that protect the interests of both the wealthy and the vulnerable in society.
• Support small producers to enhance their ability to compete with larger manufacturers.
• Ensure proper implementation of labour laws so that workers receive their rights.
• Utilise trade and investment barriers and negotiate for fairer rules at the WTO.
• Collaborate with other developing countries to challenge the dominance of developed nations in the WTO.

Q6: “Information and Communication Technology (ICT) has played a role in spreading out products and services across countries.” Support this statement.

Ans: Information and Communication Technology (ICT) has significantly contributed to the global distribution of products and services in several ways:

• Telecommunication tools such as telegraphs, telephones (including mobile phones), and fax machines enable instant communication worldwide, even from remote locations. This is enhanced by satellite communication.
• Computers have opened up the vast world of the Internet, allowing access to and sharing of information on nearly any topic. This technology also facilitates the sending of electronic mail and voice messages globally at minimal costs, promoting trade and commerce.

Q7: How does the Government attract foreign investment? Explain different ways.

Ans: The government attracts foreign investment through several key strategies:

• Special Economic Zones (SEZs) are established, offering world-class facilities such as affordable electricity, roads, and transport.
• Companies operating in SEZs enjoy a tax exemption for the first five years, enhancing their profitability.
• Labour laws in SEZs are made flexible, making it easier for companies to hire and manage workers.

Q8: Why had the Indian government put barriers to foreign trade and foreign investments after independence? Analyze the reason.

Ans: The Indian government-imposed barriers to foreign trade and foreign investments after independence for several reasons:

• To protect domestic producers from foreign competition.
• To encourage the growth of local industries and increase production.
• In the 1950s and 1960s, Indian industries were still developing and not ready to face international competition.

Q9: Explain the facilities available in SEZ that are developed by Central and State governments to attract foreign Investment.

Ans: Special Economic Zones (SEZs) are industrial areas established by the government to encourage foreign investment. The facilities available in SEZs include:

• World-class amenities: SEZs offer essential services such as electricity, water, roads, transport, storage, and recreational and educational facilities.
• Tax incentives: Companies operating in SEZs are exempt from taxes for the first five years.
• Flexible labour laws: The government has introduced more flexible labour regulations to attract multinational corporations (MNCs).

Q10: “Globalization has been advantageous to consumers as well to producers”, Support the statement with suitable examples.

Ans: Globalization has provided significant advantages to both producers and consumers:

• Increased competition: Globalization has intensified competition among producers. This competition encourages them to offer better quality and lower prices, benefiting consumers.
• Access to international markets: Producers now have easier access to global markets and can obtain credit for capital and technology more readily. For instance, the electronics and garments industries have expanded significantly.
• More choices for consumers: Consumers enjoy a wider variety of goods and services than before, especially in modern technology products like cell phones and cameras.

Q11: What is investment? Name the companies that make foreign investments. Write any two benefits that a local company expects from joint production with a Multinational company.

Ans: Investment refers to the money spent on acquiring assets like land, buildings, machines, and equipment. Some companies that make foreign investments in India include Ford Motors, Nike, Coca-Cola, Pepsi, Honda, Nokia. 

Local companies expect the following benefits from joint production with a multinational company:

• Financial support for additional investments, such as purchasing new machines for quicker production.
• Access to advanced technology for improved production processes.

Q12: How are local companies benefited by collaborating with multinational companies? Explain with examples.

Ans: Local companies benefit from collaborating with multinational companies (MNCs) in several ways:

• Financial Support: MNCs can provide funding for local companies to invest in new machinery, enhancing production speed.
• Access to Technology: MNCs often bring the latest technology, improving production efficiency.
• Increased Efficiency: Partnerships with MNCs can lead to higher production levels and better financial returns for local companies.

Q13: What are the various ways in which MNCs set up or control production in other countries?

Ans: The various ways in which MNCs control or set up production in other countries include:

• Buying Local Companies: Large MNCs often acquire local firms. This approach provides access to an established customer base and allows local companies to benefit from advanced technology. Example: Cargill Foods merged with Parakh Foods.
• Joint Ventures: MNCs collaborate with local companies to establish production units. This strategy not only boosts production but also expands market reach. Example: Ford Motors partnered with Mahindra and Mahindra to set up an automobile plant.
• Placing Orders with Small Producers: MNCs often outsource production to small manufacturers in developing countries, where costs are lower. They then market these products under their own brand names. Examples: Garments, footwear, and sports equipment.

Q14: List the factors that encourage the MNCs to set up their production units at a place.

Ans: The factors that encourage MNCs to establish production units in specific locations include:

• Availability of skilled and unskilled labour: For instance, India has a large pool of skilled engineers who are adept at technical production.
• Access to affordable raw materials: Countries like China offer low-cost manufacturing options.
• Well-developed infrastructure: Efficient transport systems, such as roads and railways, are crucial.
• Liberal government policies: Supportive regulations can attract MNCs.
• Proximity to markets: Locations like Mexico and Eastern Europe are beneficial due to their closeness to US and European markets.
• Safe environment: A stable and secure setting is essential for operations.

Q15: ‘Barriers on foreign trade and foreign investment were removed to a large extent in India since 1991. Justify the statement.

Ans: Barriers on foreign trade and foreign investment have been largely removed in India since 1991 due to several key factors:

• The Indian government liberalised its policies in 1991, recognising the need for local producers to compete globally.
• It believed that competition would enhance the quality and performance of domestic producers.
• The economic crisis of 1990-91, along with support from the WTO and IMF, prompted the removal of trade barriers.

As a result, foreign goods could be imported and exported more easily, and foreign companies were allowed to establish operations in India. This process of removing restrictions is known as liberalisation, which has led to a more open trade environment.