Unit-4

Ch-1 : DEVELOPMENT

GIST OF THE LESSON / MIND MAP

1. People seek things that are most important for them, i.e., that which can fulfill their
aspirations or desires.
2. In fact, at times, two persons or groups of persons may seek things which are
conflicting.
3. So two things are quite clear:
(i) Different persons can have different developmental goals.
(ii) What may be developed for one may not be developed for the other. It may even be
destructive for the other.
INCOME AND OTHER GOALS:
1. What people desire are regular work, better wages and decent price for their crops or
other products that they produce. In other words, they want more income.
2. People also seek things like equal treatment, freedom, security, and respect for others.
3. In some cases, these may be more important than more income or more consumption
because material goods are not all that you need to live.
4. Money, or material things that one can buy with it, is one of the factors on which our
life depends on non-material things mentioned above.
5. There are many things that are not easily measured but they mean a lot to our lives.
These are often ignored.
6. However, it would be wrong to conclude that what cannot be measured is not
important.
7. Similarly, for development people look at a mix of goals.
8. The developmental goals that people have are not only about better income but also
about better income but also about other important things in life.
NATIONAL DEVELOPMENT:
1. It is very important to keep in mind that different persons could have different as well

2. National development means thinking about fair and just path for all, whether there is
a better way of doing things.
HOW TO COMPARE DIFFERENT COUNTRIES OR STATES?
1. Usually, we take one or more important characteristics of persons and compare them
based on these characteristics.
2. For comparing countries, their income is considered to be one of the most important
attributes.
3. Countries with higher income are more developed than others with less income.
153
4. The income of the country is the income of all the residents of the country. This gives
us the total income of the country.
5. For comparison between countries, total income is not such useful measure.
6. Hence, we compare the average income which is the country divided by its total
population. The average income is also called per capita income.
7. In World Development Report brought out by the World Bank, this
8. Countries with per capita income of USD 12736 per annum and above in 2013, are
called rich countries and those with per capita income of USD 1570 or less are called
low-income countries.
9. India comes in the category of low middle-income countries because its per capita
income in 2013 was just US$1570 per income.
INCOME AND OTHER CRITERIA:
1. Let us compare the per capita income of Maharashtra, Kerala, and Bihar.
2. Maharashtra has the highest per capita income and Bihar is at the bottom.
3. So, if per capita income were to be used as the measure of development, Maharashtra
will be considered the most developed state of the three.
PUBLIC FACILITIES:
1. Money in your pocket cannot buy all the goods and services that you may need to live
well.
2. Income by itself is not a completely adequate indicator of material goods and services
that citizens are able to use.
3. Normally, your money cannot buy the pollution-free environment or ensure that you
get unadulterated medicines unless you can afford to shift to a community that already
has all these things.
4. Money may also not be able to protect you from infectious disease unless the whole
of your community takes preventive steps.
HUMAN DEVELOPMENT Development of an individual in such a way that he can
able to earn and fulfill his materialistic desire.
SUSTAINABILITY OF DEVELOPMENTS:
1. Since the second half of the twentieth century, a number of scientists have been
warning that the present type, and levels, of development are not sustainable.
2. Resources are replenished by nature as in the case of crops and plants.
3. In the case of groundwater, if we use more than what is being replenished by rain
then we would be overusing this resources.
4. Consequences of environmental degradation do not respect national or state
boundaries; this issue is no longer region or nation-specific.
5. Sustainability of developments comparatively a new area of knowledge in which
scientists, economists, philosophers and other social scientists are working together.

154
1. ,

2. , -

3. :
(i) - -
(ii)

:
1. ,
,
2. , ,
3. ,

4. , ,
-
5.

6. ,

7. ,
8.

:
1. -
-
2. ,

?
1. ,

2. ,

155
3.
4.

5. ,
6. ,

7. , 2013 12736

1570 -
9. 2013
1570
:
1. ,
2.
3. , ,

:
1.

2.

3. ,
,
,

4.

156
1. ,

2.
3. ,

4. ;
-
5. ,
,

KEY WORDS OF THE LESSON

1. Developed Economies: These are those economies which are characterised by high
level of per capita income and high standard of living
2. Developing Economies: Those economies which are passing through the stages of
growth and development. In such economies significance of agriculture tends to decline
whereas the industrial sector grows sharply. e.g. India, Indonesia
3. Economy: It is a sum total of all the economics activities like production,
consumption, distribution exchange etc.
4. National Income: It is the total value of all the goods and services produced within a
country plus net income from abroad during a year.
5. Production: When an activity results in valuable and useful things it is called
production.
6. Per capita Income: It is the average income of the people of country in a definite
period.
7. Under-Developed Economies: These are the economies which are characterised by
low level of per capita income and miserable standard of living. Such economies are not
able to exploit their natural resources. e.g. Nepal, Burma etc.
8. Infant Mortality Rate or IMR: Indicates the number of children that die before the age
of one year as a proportion of 1000 live children born in that particular year.
9. Literacy Rate: Measures the proportion of literate population in the 7 and above age
group.

157
10. Net Attendance Ratio: Is the total number of children of age group 6-10 attending
school as a percentage of total number of children in the same age group.
1. :

2. :

,
3. : , ,

4. :

5. :

6. :
7. :

,
8. : 1000

9. :7
10. : 6-10 ,

ONE WORD QUESTION

Question 1.Define the term National Income?
Answer: National income is defined as the total value of all final goods and services
produced with a country plus net income from transactions like (export and import) with
other countries.
Question 2. Define GDP.
Answer: GDP or Gross Domestic Product is the total value of all final goods and
services produced during a particular year in a country.

158
Question 3. What is the main criterion used by the World Bank in classifying
different countries?
Answer: The World Bank uses average income or per capita income as a criterion for
classifying different countries.
Question 4.Why is the total income of countries not used to make comparisons
between them?
Answer: The total income of countries is not used to make comparisons between them,
because the population of different countries is different and does not give a clear
picture if comparisons are made on this basis.
Question 5.Literacy rate measures the proportion of literate population in which
age group?
Answer: The age group of 7 years and above.
Question 6.Which state of India has the lowest infant mortality rate?
Answer: Kerala
Question 7.What is Human Development Index?
Answer: Human Development Index is a composite index of achievements of a nation
in terms of three important variables, namely longevity, knowledge and standard of
living that determine the quality of life.
Question 8.Name the report published by UNDP which compares countries based
on the educational levels of the people, their health status and per capita income. (2013)
Answer: Human Development Report
Question 9

Answer: Life Expectancy

Question 10.What is the advantage of per capita income? Mention any one.
Answer: It helps to compare the development of countries as per capita income tells us
whether people in one country are better off than others in a different country.
1 ?

159
 :
- ( ) -

2
:

3
?
:

4.
?
: ,
-

5. ?
: 7
6. ?
:
7. ?
:
, - , ,

8. ,

:
9. ,
?
:
10. ?
:

Three Marks Questions

160
 Question1. What is per capita income? Mention any two limitations of per capita
income as an indicator of development.
Answer- The total income of a country divided by its total population gives the Per
Capita Income. Money cannot buy all the goods and services that are needed to live
well. So income by itself is not a completely adequate indicator of material goods and
services that citizens are able to use. For example, money can not buy a pollution-free
environment or ensure that one gets unadulterated medicines, unless one can afford to
shift to a community that already has all these things.
Question2. Kerala, with lower per capita income, has a better human development
ranking than Punjab. Hence, per capita income is not a useful criterion at all and
should not be used to compare States. Do you agree?
Answer- Per capita income is not a useful criterion at all to measure the human
development ranking of a state. High per capita income is not the only attribute to a
good quality life. Money cannot buy all the essential things required for a good life.
Pollution-free atmosphere to ensure good health, protection from infectious diseases,
lowering of mortality rate, promotion of literacy, etc. are essential for a good standard
of living. In order to achieve these, joint efforts have to be made by all members of a
community, be it rich or poor. Kerala ranks higher compared to Punjab even with a
lower per capita income because
1. mortality rate is lower
2. literacy rate is higher and
3. Total number of children attending school (Classes I-V) is higher.
Question3. On the basis of which three indicators of HDI 2004 Sri Lanka has better rank
than India?
Answer: Three indicators of HDI 2004 in which Sri Lanka has better rank than India:
1. Per capita income- The per capita income of Sri Lanka in US dollars was 4,390 US
dollars while that of India was 3,139 US dollars.
2. Life expectancy at birth- The life expectancy at birth for Sri Lanka was 74, higher
than that of India at 64.
3. Gross enrolment ratio for three levels Sri Lanka had Gross Enrolment ratio of 69
while that of India was 60.
161
 1. ?

, ,

2.
,
?
:

, ,
,
, ,

-
1.
2.
3. ( I-V)
3. 2004
?
: 2004 :
1. - 4 ,390
3,139
2. - 74 ,
64
3. - 69
60
Five Marks Questions

162
Question1. Why do we use averages? Are there any limitations to their use?
Illustrate with your own examples related to development.
Answer: 1. Total income is not a useful measure for comparison between countries.
Since countries have different populations, comparing total income does not tell what an
average person is likely to earn. Hence, we use average income which is total income of
the country divided by total population.
2.The defect of average as a measure is that it does not show the distribution
(dispersion) of income between the rich and the poor.
3.Two countries may have the same average income but in one country almost every
family may enjoy more or less the same kind of income, whereas in the other, some may
be very rich and others very poor. The disparity between rich and poor is an important
feature that the average measure (per capita income) does not consider. Example: In
terms of development, we can take the example of India, where the metro towns are full
of high-rise buildings and shopping malls while some villages have not yet been
provided with a basic necessity like electricity.
Question

suitable arguments.
Answer: Yes, I agree with the statement because money income and material goods
alone are not an adequate indicator of a good quality of life. Money cannot buy all the
goods and services one needs to live well.
Money cannot buy pollution free and dean environment with fresh air.
It cannot protect us from infectious diseases and guarantee good health for us.
Money cannot assure that medicines available in the market are not adulterated.
To live well one needs non-material factors such as equal treatment, freedom, security,
equal opportunity to learn, a pollution free environment, good and safe working
conditions etc.
1. ? ?

163
 : 1.
- ,
,

2.
( )
3.
, ,

( ) : ,
,
,
2. "
" ?

: ,

- ,
, , , ,

Subject Enrichment Activity

Activity 1 Make a chart on public facilities.
Activity 2 Compare the public facilities of India and Sri Lanka.
1
2

164
 Unit 4

Ch-02: SECTORS OF THE INDIAN ECONOMY

MIND MAPPING

ECONOMIC SECTORS

PRIMARY SECTOR SECONDARY SECTOR TERTIARY SECTOR

OR AGRICULTURE
RELATED SECTOR OR INDUSTRIAL SECTOR OR
SERVICE SECTOR

Intermediate goods are used up in producing final goods and services. The value of
final goods already includes the value of all the intermediate goods that are used in
making the final good.

The Gross Domestic Product (GDP) of a country. It is the value of all final goods and
services produced within a country during a particular year

( )

KEY WORDS

GDP-Gross Domestic Product (GDP) of a country is the value of all final goods and
services produced within a country during a particular year. GDP shows how big the
economy is.
Intermediate Goods
Goods are used up in producing final goods and services. The value of final goods
already includes the value of allthe intermediate goods that are used in making the
finalgood
PUBLIC SECTOR-In the public sector, the government owns most of the assets and
provides all the services.

165
PRIVATE SECTOR-In the private sector, ownership of assets and delivery of services
is in the hands of private individuals or companies

GDP- (GDP)

- ,

- ,

ONE MARKS QUESTION

Q.1 WHICH SECTOR IS ALSO KNOWN AS SERVICE SECTOR?
ANS-Tertiary Sector
Q.1 ?

ANS-
Q.2.WHICH SECTOR IS KNOWN AS INDUSTRIAL SECTOR?
Ans-Secondary sector
Q.2. ?
Ans-
Q.3. THE GOODS WHICH ARE USED UP IN PRODUCING FINAL GOODS AND SERVICES ARE
KNOWN AS---------------
ANS- Intermediate Goods
3. -----
---

ANS-
Q.4.WHAT IS THE FULL FORM OF GDP?
Ans-Gross Domestic Product
Q.4 ?

Ans-
Q.5 WRITES TWO EXAMPLES OF PRIMARY SECTOR?
Ans- Agriculture, Fishing
.5. ?
,

166
Q.6. What are the groups of classification of an economy called?
A. Sectors
B. Centers
C. Types
D. Categories
ANSWER-SECTORS
6. ?

-
Q.7. Which activities come under the agriculture and related sectors?
A. Dairy
B. Mineral excavation
C. using cotton fiber from the plant
D. Selling agricultural products in the market
ANSWER-DIARY
7. ?

C.
D.
-
Q.8.Using sugarcane as raw material, we make sugar or gur, under what sector does this activity
come?
A. Primary
B. Private
C. Secondary
D. Tertiary
ANSWER-Secondary
.8. ,

167
Q.9.Those activities, by themselves, do not produce a good but they are an aid or support for the

A. Primary
B. Private
C. Industrial
D. Tertiary
ANSWER-TERTIARY
Q.9. , , ,
- ?

.
-
Q.10.
A. Service sector
B. Agriculture and related sector
C. Pre- industry sector
D. Unorganized sector
ANSWER-Agriculture and related sector
Q.10. . ?

. -

3 MARKS QUESTION

Q.1.Why Primary sector is also called agriculture and related sector?

Answer- This is because it forms the base for all other products that we subsequently
make. Since most of the natural
products we get are from agriculture, dairy, fishing, forestry, this sector is also
Called agriculture and related sector.
Q.1. ?

168
 -

, , , ,

Q.2.What do you mean by secondary sector and why, it is also called as industrial sector?
Answer- We convert earth into bricks and use bricks to make houses and buildings.
Since this sector gradually became associated with the
different kinds of industries that came up, it is also called as industrial sector.
2. , ?
-
-
,
Q.3.Define Tertiary sector and why tertiary sector is also called the service sector?
Answer - Transport, storage, communication, banking,
trade are some examples of tertiary activities. Since these activities generate services
rather than goods, the tertiary sector is also called the service sector
Q.3. ?
- , , , ,

, |

Q.4 What is Disguised unemployment?

ANSWER -The situation of underemployment, where people are apparently working but
all of them are made to work less than their potential.
This kind of underemployment is hidden incontrast to someone who does nothave a job
and is clearly visible as unemployed.
Hence, it is also called disguised unemployment.
Q.4 ?

- - ,

169
5 MARKS QUESTION

Q.1. Why do you think MGNREGA 2005 is referred to as

Answer-
i.For theshort-term, we need some quickmeasures. Recognising this,
thecentralgovernment in India made alaw implementing the Right to Workin about 625
districts ofIndia.
ii.It iscalled Mahatma Gandhi NationalRural Employment Guarantee Act2005
(MGNREGA 2005).
UnderMGNREGA 2005, all those who areable to, and are in need of, work inrural areas
are guaranteed 100 daysofemployment in a year by thegovernment.
iii.If the government fails inits duty to provide employment, it willgive unemployment
allowances to thepeople.
iv. The types of work that wouldin future help to increase theproduction from land will
be givenpreference under theAct.
v.One third seats are reserved for women
1. 2005 ' ' ?
-
i.

625
ii.

2005 ( 2005)
iii. 2005 ,

100
iv. ,

v. |
Q.2. Distinguish between unorganised sector and organised sector Public sector and
private sector?
Answer - Organised sector covers those enterprises or places of work where
the terms of employment are regularand therefore, people have assuredwork. They are
registered by thegovernment and have to follow itrules and regulations which aregiven in
various laws such as theFactories Act, Minimum Wages Act,
Payment of Gratuity Act, Shops andEstablishments Act etc. It is called organised because
it has some formalprocesses and procedures. Some ofthese people may not be employed
by anyone but may work on their ownbut they too have to registerthemselves with the
government andfollow the rules and regulations.enjoy security of employment. Theyare

170
expected to work only a fixednumber of hours. If they work more,they have to be paid
overtime by theemployer. They also get several otherbenefits from the employers

The unorganisedsector is characterised by small andscattered units which are largely

outside the control of the government.There are rules and regulations butthese are not
followed. Jobs here are low-paid and often not regular. Thereis no provision for overtime,
paidleave, holidays, leaves due to sicknessetc. Employment is not secure. Peoplecan be
asked to leave without anyreason. When there is less work, suchas during some seasons,
some peoplemay be asked to leave. A lot alsodepends on the whims of theemployer. This
sector includes a largenumber of people who are employedon their own doing small
jobsuchas selling on the street or doing repairwork.
Q.2.
-
I.
,
II.
, ,
,
III.
I
IV.

V.
,

I.

II.
III. ,
, ,
IV.
, ,

V. -

Q.1.SOURCE BASED QUESTION

In the public sector, the governmentowns most of the assets and providesall the services.
In the private sector,ownership of assets and delivery ofservices is in the hands of private
171
Individuals or companies. Railways orpost office is an example of the publicsector
whereas companies like TataIron and Steel Company Limited (TISCO) or Reliance
IndustriesLimited (RIL) are privately owned.Activities in the private sector areguided by
the motive to earn profits.To get such services we have to paymoney to these individu
andcompanies. The purpose of the publicsector is not just to earn profits.Governments
raise money throughtaxes and other ways to meet expenseson the services rendered by it.
Moderndaygovernments spend on a wholerange of activities.
Q.1.
,
,

( ) ( )

On the basis of above paragraph Answer the following question

A.What is the full form of TISCO?
ANS-TataIron and Steel Company Limited

A. ?

-
B.Reliance IndustriesLimited (RIL) are -------------owned
I.privately
II.Government
III.None of the above
ANS-Pivately

B. (RIL) -------------
I.

II.

III.
-

172
C. Activities in the private sector areguided by the motive to earn profit, this statement is
true or false
Ans-True

C. ,
Ans-
Q.2.Picture based question

On the basis of above picture answer the following questions

Q.I.Kanta is working in which sector?
a.organisedb.unorganised
ans-organised

Q.I.Kanta ?
a. b.

-
Q.II.Kamal is working in ------------
a.organised sector
b.unorganised sector
Ans-unorganised sector

173
Q.II. ----------

a.
.

Ans-
Q.III.Kamal can be asked to leave anytime by his employer,this statement is true or false
Ans-true

Q.III. ,

Ans-
SUBJECT ENRICHMENT ACTIVITY
1. COLLECT AND PASTE THE PICTURE OF LOGO OF TOP TEN PRIVATE COMPANIES
2. COLLECT NEWS RELATED TO GDP AND WITH THE HELP OF YOUR TEACHER DISCUSS
IT

1.
2.

174
 Unit 4
Ch-03: MONEY AND CREDIT

Gist of the lession

1. Meaning of money and credit
2. Barter systems
3. Functions of money
4. Types of credit
5. Functions of Bank
6. Function of RBI
7. Self help group
MIND MAP

Function
of money

Medium Money
Types of
of and credit
exchange credit

Function
of RBI &
SHGS
Key words
1- Money:
Money acts as an intermediate in the exchange process & it is called medium of
exchange
2- Double coincidence of wants:When in the exchange, both parties agree to sell and buy
each commodities it is called double coincidence of wants
3- Reserve Bank of India:It is the central bank of India which controls the monetary
policy of the country. Reserve Bank of India supervises the activities of formal sector
and keep the track of their activities
4- Credit:The activity of borrowing and lending money between two parties.
5- Formal sector:Includes banks & cooperatives; RBI supervises the functioning of
formal sources of loans
6- Self Help Groups (SHG):A typical SHG has 15-20 members usually belonging to a
neighborhood, who meet and save regularly. Saving per month varies from 25-100
rupees or more depending upon the ability of the people
1) In India, _____________ issues currency notes on behalf of the Central
Government.
a) Reserve Bank of India (RBI)
b) Ministry of Finance
c) Finance Commission
d) None of the above

175
Answer: (a)
2) Which of the following statements are true?
a) As per Indian law, apart from RBI, no other individual or organization is allowed to issue
currency.
b) The law legalizes the use of rupee as a medium of payment that cannot be refused in
settling transactions in India
c) No individual in India can legally refuse a payment made in rupees.
d) All of the above are true.
Answer: (d)
3) Banks in India these days hold about _________ of their deposits as cash.
a) 25 percent
b) 20 percent
c) 15 percent
d) 5 percent
Answer: (c)
4) Banks use the major portion of the deposits to ______.
a) Extend loans
b) Invest in infrastructure
c) Deposit in foreign banks
d) None of the above
Answer: (a)
5) The difference between what is charged from borrowers and what is paid to
depositors is the main source of banks income.
a) True
b) False
Answer: (a)
6) ___________ of the loans taken by poor households in the urban areas is from
informal sources.
a) 85 percent
b) 70 percent
c) 65 percent
d) 50 percent
Answer: (a)
7) ___________ of the loans taken by rich households in the urban areas is from
formal sources.
a) 20 percent
b) 10 percent
c) 15 percent
d) 90 percent
Answer: (d)
8) ___________ of the loans taken by well-off households in the urban areas is from
formal sources.
176
a) 54 percent
b) 64 percent
c) 72 percent
d) 90 percent
Answer: (c)
9) ___________ of the loans taken by households with few assets in the urban areas are
from informal sources.
a) 72 percent
b) 28 percent
c) 53 percent
d) 47 percent
Answer: (c)
10) Which of the following could lead to a debt trap?
a) The high interest rate for borrowing can mean that the amount to be repaid is greater than
the income of the borrower.
b) Higher cost of borrowing means a larger part of the earnings of the borrowers is used to
repay the loan.
c) The high interest rate for borrowing can mean that the amount to be repaid is lesser than
the income of the borrower.
d) Both (a) and (b.)
Answer: (d)
THREE MARKS QUESTIONS
1 Write any three function of money.
Ans- The three functions of money are: Medium of exchange, unit of account, and store of
value.
2 Write the drawback of Barter system Drawbacks of Barter Systems:
Ans- Lack of double coincidence of wants.
Lack of a common measure of value.
Indivisibility of certain goods.
Difficulty in making deferred payments.
3 Write any three objectives of SHGS
Ans-The basic objective of the 'Self Help Groups' (SHG's) is to organize the rural poor,
in particular, women, into small groups so that they can pool in their savings. Usually
belonging to one neighborhood, these SHG's consist of 15-20 members who meet and save
regularly.
FIVE MARKS QUESTIONS
1 Explain the the functions of RBI
Ans- Important Functions of RBI
Issue of Bank Notes.
Banker to the Government.
177
Custodian of the Cash Reserves of Commercial Banks.
Custodian of country's forex reserves.
Lender of last resort.
Controller of credit
2 Write the main differences between formal sector credit and informal sector credit
Ans-
Formal Sector credit Informal Sector credit

The Reserve Bank of India (RBI) There is no organization which

organize the functioning of formal supervises the loan activities of
sources of loans. lenders.

RBI checks on how much they are They can lend the money at whatever
lending and at what interest. interest rate they select.

This sector has some rules and No one can stop them using unfair
boundaries to get the money back. means to get their money back.

They charge reasonable interest as They charge much higher interest as

compared to informal lenders on credit. compared to formal lenders on credit.

The main motive is to make their own

The main motive is public welfare.
profits.

Money
lender
60
commercial
bank
15

This includes traders, moneylenders,

This includes banks and co-operatives.
employers, friends etc.

178
3 Which source of credit utilize more in rural areas and why?
4 Why is it necessary to increase formal sector credit it rural areas and why?
1 SCASE STUDY
Swapna, a small farmer, grows groundnut on her threeacres of land. She takes a loan
from the moneylenderto meet the expenses of cultivation, hoping that herharvest
would help repay the loan. Midway throughthe season the crop is hit by pests and the
cropfails. Though Swapna sprays her crops withexpensive pesticides, it makes little
difference. Sheis unable to repay the moneylender and the debtgrows over the year
into a large amount. Nextyear, Swapna takes a fresh loan for cultivation. It is a normal
crop this year. But the earningsare not enough to cover the old loan. She is caught in
debt. She has to sella part of the land to pay off the debt.
1 What is Swapnaproblem
2 What is the cause of Swapna Problem?
ACTIVITIES
1 Visite the any brach oh bank and write main functions of the bank.
2Finnd out in you locality which type of credit use more and why?

1.
2.
3.
4.
5.
6.
7.

1. :

2. : , -
,

179
3. :

4. :
5. : ;

6. ( ):
15-20 ,
25-100

1) , _____________
a) (RBI)
)
)
)
: ( )
2) ?
a) , ,

b)

c)

)
: ( )
3) _________

) 25

180
 ) 20
) 15
) 5
: ( )
4) ______
)
)
)
)
: ( )
5)
,

)
: ( )
6) ___________

) 85
) 70
) 65
) 50
: ( )
7) ___________

) 20
) 10
) 15
) 90

181
 : ( )
8) ___________

) 54
) 64
) 72
) 90
: ( )
9) ___________

) 72
) 28
) 53
) 47
: ( )
10) ?
)

b)

) ( ) ( )
: ( )

1 -
: ,
2 :

182
 -

3
' '( ) ,

15-20

1.
- -

2.
-

(RBI)

183
1 :

2 : , -
,
3 :

4 :
5 : ;

6 ( ):
15-20 ,
25-100
1) , _____________
a) (RBI)
)
)
)
: ( )
2) ?
a) , ,

b)

184
c)

)
: ( )
3) _________

) 25
) 20
) 15
) 5
: ( )
4) ______
)
)
)
)
: ( )
5)
,

)
: ( )
6) ___________

) 85
) 70
) 65
) 50

185
 : ( )
7) ___________

) 20
) 10
) 15
) 90
: ( )
8) ___________

) 54
) 64
) 72
) 90
: ( )
9) ___________

) 72
) 28
) 53
) 47
: ( )
10) ?
)

b)

186
 )

) ( ) ( )
: ( )
3
1
: ,
2 :
-

3
' '( ) ,

15-20

5
1
-

2
:

187
 (RBI)

1 :

2 : , -
,
3 :

4 :
5 : ;

6 ( ):
15-20 ,
25-100

-
1
?
Money
lender
60
2
commercial
bank
15

188
 Unit 4
Ch-4: Globalization of Indian economy

Globalization refers to the integration of the domestic economy with the economies of
the world.
An MNC is a company that owns and controls production in more than one nation.
Foreign Investment is investment made by MNCs.

Advantages of Foreign Trade

1.
2. It provides a choice of goods to the buyers.
3. Producers of different countries have to compete in different markets.
4. Prices of similar goods in two markets in two different countries become almost equal.
SEZs or Special Economic Zones are industrial zones being set up by the Central and
State Governments in different parts of the country. SEZs are to have world class
facilities such as electricity, water, roads, transport, and storage, recreational and
educational facilities. Companies who set up production units in SEZs are exempted
from taxes for an initial period of five years. SEZs thus help to attract foreign
companies to invest in India.

Reasons to put barriers to foreign trade:

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, fertilizers, petroleum etc. was
allowed.
2. 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.
Around 1991, some changes were made in policy by the Indian government as it was
decided that the time had come for the Indian producers to compete with foreign
producers. This would not only help the Indian producers to improve their performance
but also improve their quality.
Liberalization means the removal of barriers and restrictions set by the government on
foreign trade. Governments use trade barriers to increase or decrease (regulate) foreign
trade to protect the domestic industries from foreign competition. Example, Tax on
imports. Around 1991, government India adopted the policy of liberalization.
189
World Trade Organization (WTO) was started at the initiative of the developed
countries. Its main objective is to liberalize international trade.
Privatization means transfer of ownership of property from public sector to private
sector.
Business Process Outsourcing (BPO) is the contracting of non primary business
activities and functions to a third party service provider.
Economic Reforms or New Economic Policy is policy adopted by the Government of
India since July 1991. Its key features are Liberalization, Privatization and
Globalization (LPG).

MNCs set up production in various countries based on the following factors:

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.
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.
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. Example, Cargill Foods, An American MNC has bought over small
Indian company such as Parakh Foods.
MNCs control production 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.

Factors which have helped in globalization:

Technology. Rapid improvement in technology has contributed greatly towards
globalization.
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. Teleconferences
help in saving frequent long trips across the globe.
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.

190
QUESTION AND ANSWERS (ONE MARK QUESTIONS)
1. Removal of barriers set by the government is known as
Ans. Liberalization.
2. What is the process of rapid integration or interconnection between
countries called?
Ans. Globalization
3. The most common route for investments by MNCs in countries around the
world is to
Ans. Buy up existing companies
4. Company that owns or controls production in more than one nation
Ans. Multi National Company
5. Investment made by MNCs is called?
Ans. Foreign Investment
6. Cargill Foods, a very large American MNC, has bought over smaller
Indian companies such as
Ans. Parakh foods
7. Effect of Chinese toys on Indian toymakers is
Ans. Suffering losses
8. Post 50 years have seen several improvements in
Ans. Transportation, Information and communication technology
9. Companies who set up production units in the Special Economic Zones
(SEZs) do not have to pay taxes for an initial period of
Ans. 5 years
10.Allowing private sector to set up more and more of such industries as
were previously reserved for the public sector.

191
Ans. Privatization.

THREE MARK QUESTIONS

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

Ans. Globalization is a process of interaction and integration among the people,
companies, and governments of different nations, a process driven by international trade
and investment and aided by information technology.
Under globalization the countries that hitherto closed to trade and foreign investment
open up their economies and go global. The result is increasing interconnectedness and
integration of the economies of the world.
Under globalization more and more goods and services, investments and technology are
moving between countries.

Q. How would flexibility in labour laws help companies?

Ans. Flexibility in labour laws will help companies in being competitive and
progressive. By easing up on labour laws, company heads can negotiate wages and
terminate employment, depending on market conditions. This will lead to an increase in

Q. What are the various ways in which MNCs set up, or control, production in other
countries?
1. Ans. MNCs set up production on the basis of the following factors :
Closeness of the place to the markets.
Availability of skilled and unskilled labour at low costs.
Availability of other factors of production e., raw material, etc.

After assuring above conditions, MNCs set up factories and offices for production. They
buy assets such as land, buildings, machines and other equipment.
At times MNCs set up production jointly with local companies because the local
company has knowledge of the local business conditions. Moreover the domestic
company has an established framework of business. MNCs provide money and latest
technology for production.
MNCs buy up local companies to expand production. MNCs with huge wealth can quite
easily do so.
Some MNCs start as an independent entity right from the beginning.
While some of the MNCs produce entirely for the local market, many others produce
for the exports markets.

192
 MNCs in developed countries place orders for production with small producers of
developing countries for various products such as garments, footwear. These products
are supplied to the MNCs which sell them under their own brand names to the
customers. The MNCs decide their price, quality, delivery, and labour conditions for
these distant producers.

Five mark Question

Q. globalization statement.
POSITIVE IMPACT
1. Ans. Globalization has resulted in more choices for the consumers who now get better
quality and at lower prices several products.
2. This has improved the standard of living of people, particularly living in urban areas.
3. MNCs have increased their investments in developing countries like India in
industries such as cell-phones, automobiles, electronics, soft drinks, etc. As a result of
it new jobs have been created in developing countries.
4. Some local companies that supply raw materials to MNCs have also benefited.
5. Some local companies in countries like India have been able to invest in newer
technology and production methods. They are successful in raising their production
standards.
6. Globalization has enabled some large companies such as Tata Motors, Infosys to
emerge as multi-national companies.
7. Companies providing services particularly in the field of information and communica-
tion technologies have also benefited by globalization. Similar is the case in services
like data entry, accounting, administrative tasks and engineering.
NEGATIVE IMPACT
The impact of globalization has been harmful too as mentioned below:
1. Creation of special economic zones has disrupted the lives of people who are displaced
such as trials. Sometimes to produce more electricity dams are constructed and their land
is submerged and the people are left without any job.
2. Flexibility in labour laws: Flexibility in labour laws is allowed by the government to
attract foreign investment. This has resulted in worsening the condition of workers
because they are appointed on a temporary basis to avoid payment of provident fund and
other facilities. No overtime is paid for extra hours of work. The workers are paid low
wages.
3. Effect on small producers: Globalization has hit the small producers because they are
unable to compete with MNCs or the big producers or manufacturers. Several units have
been shut down rendering many workers jobless. In India, small industries which
employ about 20 million workers have been hit adversely.

193
4. From above description, it is clear that the impact of globalization has not been uniform.
It has positive as well as a negative impact.
Q How has liberalization of trade and investment policies helped the globalization
process?
Answer: Liberalization of trade and investment policies has helped the globalization
process by making foreign trade and investment easier. Earlier, several developing
countries had placed barriers and restrictions on imports and investments from abroad to
protect domestic production. However, to improve the quality of domestic goods, these
countries have removed the barriers. Thus, liberalization has led to a further spread of
globalization because now businesses are allowed to make their own decisions on
imports and exports. This has led to a deeper integration of national economies into one
conglomerate whole.

-
1. ' '
2.
3.
4. -

, , , , ,

:
1.
1950 1960

194
 , ,
2.

1991 ,

( )
, 1991 ,

(WTO)

( )

1991
, ( )
:

; , ,
- ,
,
,

195
 , ,

; , , ,

-
, ( ),
:

-
, ( ),

, ,

( )
1.
-
2. ?
-
3. :
-
4.
-
5. ?

196
 -
6. , ,

- .
7.
-
8. 50
- ,
9. ( )

- 5
10.

1. ?
- ,
,
,

2. ?

197
3. ,
?
- :

,
, ,

, ,

1. " "
-
:
1.

198
2. ,
3. , , ,

4.
5.

6. , -

7.
, ,
, ,
:
:
1. -
-

2. :

3. :

, 20

4.

199
2: ?
:
,
,
,

200