Plus One Economics Chapter Wise Previous Questions Chapter 3 Liberalisation, Privatisation and Globalisation – An Appraisal

Kerala Plus One Economics Chapter Wise Previous Questions Chapter 3 Liberalisation, Privatisation and Globalisation – An Appraisal

Question 1.
Match Column A with Column B and C: (March 2009)

Answer:

Question 2.
In a mixed economy like India, public sector undertakings play an important role in the economic development of the country. Prepare a debate report on the role of public sector undertakings in the economic development of India in the present context. (Say 2009)
Answer:
Debate Report on Role of Public Sector undertak¬ings in the Indian economic development.
Favouring points

• Welfare oriented
• Absence of wealth concentration.
• Job Security
• Social security

Opposing arguments

• Inefficiency
• Mismanagement
• Corruption
• Less innovative spirit
• Less competitive

Question 3.
Liberalisation involves liberating the economy from controls. Discuss the process of liberalization introduced in India since 1991. (Say 2009)
Answer:
Liberalisation means liberating the economy from restrictions on growth. It became necessary because the earlier policy of government intervention became excessive interference.
Various economic reform measures of liberalisation are given below.

• Financial sector reforms
• Deregulation of the Industrial sector
• Tax reforms
• Foreign exchange reforms
• Trade and investment policy reforms

Question 4.
“Outsourcing is one of the most important outcomes of the globalization process.” Discuss the importance of outsourcing and its impact on employment in India. (March 2010)
Answer:
Outsourcing is one of the important outcomes of the globalization process. In outsourcing, a company hires regular service from external sources, mostly from other countries, which was previously provided internally or from within the country (like legal advice, computer service, advertisement, security each provided by respective departments of the company). As a form of economic activity, outsourcing has intensified, in recent times, because of the growth of fast modes of communication, par¬ticularly the growth of Information Technology (IT). Most multinational corporations, and even small companies, are outsourcing their services to India where they can be availed at a cheaper cost with a reasonable degree of skill and accuracy. The low wage rates and availability of skilled manpower in India have made it a destination for global outsourcing in the post-reform period. Thus I think in this reform period outsourcing is good for India.

Question 5.
Pick the odd one out and justify the financial sector reforms, tax reforms, land reforms, foreign exchange reforms, industrial sector reforms, trade, and investment policy reforms. (March 2010)
Answer:
Land reforms. Others are liberalisation measures.

Question 6.
Give two ways of converting government companies into private companies. (March 2010)
Answer:

1. Disinvestment – Sale of public sector companies.
2. Withdrawal of the govt, from ownership and management of public sector companies.

Question 7.
The origin of the financial crisis in 1991 can be traced to the inefficient management of the Indian economy in the 1980s. Discuss. (March 2011)
Answer:
The background of Financial crisis: The origin of the financial crisis can be traced to the inefficient management of the Indian economy in the 1980s. The continued spending on development programs of the government did not generate additional revenue. Moreover, the government was not able to generate sufficient revenue from internal sources such as taxation. The income from public sector undertakings was also not very high. The foreign exchange, borrowed from other countries was also spent on conception needs. No attempts were made to reduce such spendings or to boost exports. Finally India reached a stage where it had not adequate finance for even two weeks.

India approached the World Bank and the International Monetary Fund (IMF) to avail a loan. The condition laid by them against the loan was that India was expected to liberalise and remove restrictions on the private sector, remove trade restrictions and reduce the role of the government. India agreed to the conditions and announced the New Economic Policy (NEP). The strategy was termed as liberalisation, privatisation and globalisation.

Question 8.
It is 20 years since the New Economic Policy was introduced in India. Prepare a debate report on its impact on the Indian economy. (March 2012)
OR
Prepare a seminar report on the compelling economic situations that led to the implementation of the New Economic Policy in India.
Answer:
Background of New Economic policy 1991
The origin of the financial crisis can be traced from the inefficient management of the Indian economy in the 1980s. We know that for implementing various policies and its general administration, the government generates funds from various sources such as taxation, running of public sector enterprises etc. When expenditure is more than income, the government borrows to finance the deficit from banks and also from people within the country and from international financial institutions. When we import goods like petroleum, we pay in dollars which we earn from our exports.

Development policies required that even though the revenues were very low, the government had to overshoot its revenue to meet problems like unemployment, poverty and population explosion. The continued spending on development programmes of the government did not generate additional revenue. Moreover, the government was not able to generate sufficiently from internal sources such as taxation. When the government was spending a large share of its income on areaswhich do not provide immediate returns such as the social sector and defence, there was a need to utilise the rest of its revenue in a highly efficient manner. The income from public sector undertakings was also not very high to meet the growing expenditure.

At times, our foreign exchange, borrowed from other countries and international financial institutions, was spent on meeting consumption needs. Neither was an attempt made to reduce such profligate spending nor sufficient attention was given to boost exports to pay for the growing imports. India approached the International Bank for Reconstruction and Development (IBRD), popularly known as World Bank and the International Monetary Fund (IMF),and received $7 billion as loan to manage the crisis. For availing the loan, these international agencies expected India to liberalize and open up the economy by removing restrictions on the private sector, reduce the role of the government in many areas and remove trade restrictions. India agreed to the conditionality of World Bank and IMF and announced the New Economic Policy(NEP).

The NEP consisted of wide ranging economic reforms. The thrust of the policies was towards creating a more competitive environment in the economy and removing the barriers to entry and growth of firms. This set of policies can broadly be classified into two groups: the stabilization measures and the structural reform measures.

Stabilization measures are short term measures, intended to correct some of the weaknesses that have developed in the balance of payments and to bring inflation undjr control. In simple words, this means that there was a need to maintain sufficient foreign exchange reserves and keep the rising prices under control. On the other hand, structural reform policies are long-term measures, aimed at improving the efficiency of the economy and increasing its international competitiveness by removing the rigidities in various segments of the Indian economy. The government initiated a variety of policies which fall under three heads viz., liberalization, privatization andglobalization. The first two are policy strategies and the last one is the outcome of these strategies.

Question 9.
The Government of India recently decided to sell the shares of Hindustan Copper Ltd. (HCL), a Public Sector Undertaking. Do you think of it as a form of privatization? Name its other forms. (March 2013)
Answer:
Yes, it is a kind of privatization.
The other forms of privatization are

• Asset sale privatization – selling an entire organization (or part of it) to a strategic investor, usually by auction.
• Voucher privatization – distributing shares of ownership to all citizens, usually for free or at a very low price.

Question 10.
“Globalization is a strategy of developed countries to expand their markets in other countries.” Do you agree with this statement? Justify. (March 2013)
Answer:
No, I do not agree with this statement.
Globalization is the process of extending social relations across world-space.
Globalization describes the interplay across cultures of maco-social forces. These forces include religion, politics, and economics. Globalization can erode and universalize the characteristics of a local group. Advances in transportation and telecommunications infrastructure, including the rise of the Internet, are major factors in globalization, generating further interdependence of economic and cultural activities.

Question 11.
You are asked to conduct a survey regarding the role of the National Rural Employment Guarantee Scheme in eradicating poverty in Kerala. (March 2013)
a) Which method would you use to collect data: census or sample?
b) Suggest any two merits of that method.
Answer:
a) Sample method
b) The advantages of the sampling method are:

• Less time consuming
• Less cost is needed
• Gives more reliable information
• Gives more detailed information.

Question 12.
Briefly assess the impact of the New Economic Policy on Indian Economy. (Say 2013)
Answer:
Indian Economy During Reforms: An Assessment
The economic reforms had merits and demerits. They are given below.
Merits

• The GDP growth rate increased.
• The foreign exchange reserve increased.
• Foreign Direct Investment increased.
• Exports increased.

Demerits

• No sufficient employment opportunities.
• Public investment in agriculture has been falling.
• PSU disinvestment did not come up to target.

Question 13.
India has certain advantages which make it a favourite outsourcing destination. What are these advantages? (Say 2013)
Answer:
India is a favourable destination for outsourcing. This is because India has advantages in:

• Large supply of cheap labour.
• The skilled manpower.
• The development of telecommunication.
• The English speaking population.

Question 14.
Write a note on the Industrial Policy Resolution (IPR) 1956. (Say 2013)
Answer:
Industrial Policy Resolution 1956(IPR 1956): In accordance with the goal of the state controlling the commanding heights of the economy, the Industrial Policy Resolution of 1956 was adopted.
The features of the IPR is given below.

1. The industry was categorised into three:
   • Owned by state
   • Owned by state but if underprovided, the private sector can supplement.
   • Rest of the industries where the private sector could operate.
2. The licensing system was introduced.
3. Promoting regional balance.
4. Small scale industry was encouraged.

Question 15.
True or False.
The W.T.O was founded in 1995 as the successor organization to the GATT. (March 2014)
Answer:
True

Question 16.
Find the main areas and measures adopted by the Government of India to liberalize the Indian economy in 1991. (Say 2014)
Answer:
Liberalisation: Liberalization was introduced to put an end to these restrictions and open up various sectors of the economy. Though a few liberalization measures were introduced in the 1980s in areas of industrial licensing, export-import policy, technology up-gradation, fiscal policy and foreign investment, reform policies initiated in 1991 were more comprehensive. Let us study some important areas such as the industrial sector, financial sector, tax reforms, foreign exchange markets, and trade and investment sectors which received greater attention in and after 1991.

The features of liberalization are:

• Deregulation of the Industrial Sector
• Financial Sector Reforms
• Tax Reforms
• Foreign Exchange Reforms
• Trade and Investment Policy Reforms

Privatisation: It implies the shedding of the ownership or management of a government-owned enterprise. Government companies can be converted into private companies in two ways

• by the withdrawal of the government from ownership and management of public sector companies and or
• by the outright sale of public sector companies.

Privatization of the public sector undertakings by selling off part of the equity of PSUs to the public is known as disinvestment. The purpose of the sale, according to the government, was mainly to improve financial discipline and facilitate modernization. It was also envisaged that private capital and managerial capabilities could be effectively utilized to improve the performance of the PSUs.

Globalisation: Globalization is the outcome of the policies of liberalization and privatization. Although globalization is generally understood to mean integration of the economy of the country with the world economy, it is a complex phenomenon. It is an outcome of the set of various policies that are aimed at transforming the world towards greater interdependence and integration. It involves creation of networks and activities transcending economic, social and geographical boundaries. Globalization attempts to establish links in such a way that the happenings in India can be influenced by events happening miles away. It is turning the world into one whole or creating a borderless world.

Question 17.
Write the economic term:
Privatization of the Public sector undertakings by selling off part of the equity of public sector undertakings to the public. (March 2015)
Answer:
Public offering

Question 18.
While explaining the features of globalization, your Economics teacher says “outsourcing is one of the important out comes of the globalization process”. Examine how outsourcing helps Indian economy. (March 2015)
Answer:
Outsourcing is one of the important outcomes of the globalization process. In outsourcing, a company hires regular service from external sources, mostly from other countries, which was previously provided internally or from within the country (like legal advice, computer service, advertisement, security each provided by respective departments of the company). As a form ofeconomic activity, outsourcing has intensified, in recent times, because of the growth of fast modes of communication, particularly the growth of Information Technology (IT).

Most multinational corporations, and even small companies, are outsourcing their services to India where they can be availed at a cheaper cost with reasonable degree of skill and accuracy. The low wage rates and availability of skilled manpower in India have made it a destination for global outsourcing in the postreform period. Thus I think in this reform period outsourcing is good for India.

Question 19.
State true or false. Correct the statement if it is wrong. The Industrial Policy Resolution, 1956 classified industries into four categories. (Say 2015)
Answer:
False. Classified into three.

Question 20.
If the companies in developed countries stop outsourcing to India, it will be a heavy loss to the Indian youth. Explain. (Say 2015)
Answer:
Outsourcing is one of the important outcomes of the globalization process. Large number of Indian youth are employed in IT and other sectors due to this outsourcing. Low wage rate and availability of skilled manpower in India bring the benefits of outsourcing.

Question 21.
The plot of Malayalam film ‘Midhunam’ revolves around the struggles of the hero to get necessary licenses as required to commerce a biscuit company. This was the general condition of all businessmen in India before 1991. Critically evaluate the policies of Government of India on indutsrial development during 1950-1990. (Say 2015)
Answer:

1. Difficulty to get licence
2. Followed commanding heights principle
3. Public sector domination, private sector was not allowed in many industries
4. Existence of licence Raj.

Question 22.
If the hero of the Film ‘Midunam’ starts the company after 1991, he does not face the problems like ‘Permit Licence Raj’. Explain this with the help of the liberalization measures introduced in India since 1991. (Say 2015)
Answer:
Permit Raj was the elaborate system of licences, regulations and accompanying red tape that were required to set up and run business in India between 1947 and 1990. The licence Raj is considered to have been significantly reduced industrial growth. This system gradually eased after 1991 with the opening up of economy and privalisation.

Question 23.
Identify the various favourable conditions prevailing in India which make outsourcing possible. (March 2016)
Answer:
Outsourcing is one of the important outcomes of the globalization process. In outsourcing, a company hires regular service from external sources, mostly from other countries, which was previously provided internally or from within the country (like legal ad¬vice, computer service, advertisement, security each provided by respective departments of the company). As a form of economic activity, outsourcing has intensified, in recent times, because of the growth of fast modes of communication, particularly the growth of Information Technology (IT).

Most multinational corporations, and even small companies, are outsourcing their services to India where they can be availed at a cheaper cost with a reasonable degree of skill and accuracy. The low wage rates and avail¬ability of skilled manpower in India have made it a destination for global outsourcing in the post-reform period. Thus I think in this reform period outsourcing is good for India.

Question 24.
“India is emerging as a major outsourcing destination”. What are the advantages of India in business process outsourcing? (Say 2016)
Answer:
Outsourcing is one ofjhe important outcomes of the globalisation process. In outsourcing, a company hires regular service from external sources. In a developing country like India, skilled labourers can be availed at cheaper cost. Hence the foreign multinational companies utilise India, a favourite destination for global outsourcing. At the same time, itisacause for loss of employment in developed countries.
The advantages of India in outsourcing are:

• India had a better technological advantage
• India passes better infrastructure
• Cost of production in India is very low
• Time zone in India is suitable for industrialists countries.

Question 25.
True or False.
ONGC is a Navaratna company. (Say 2016)
Answer:
True

Question 26.
a) Name the outcome of the two policy strategies of liberalization and privatization.
b) Do you think that the Indian agriculture sector was adversely affected by the reform process? Justify. (March 2017)
Answer:
a) Globalization
b) I agree with this statement because of the following reasons.

• Fall in public investment in agriculture
• The withdrawal of fertilizer subsidy has increased the cost of production.
• The reduction of import duty forced the farmers to face international competition.
• The removal of the minimum support price has affected the position of Indian farmers.
• Expert oriented policy-induced the farmers to the production of cash crops.

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