NCERT Solutions for Class 10 Social Science (Understanding Economic Development) Chapter 4: Globalisation and the Indian Economy (NCERT 2026–27)
These Class 10 Economics Chapter 4 solutions cover Globalisation and the Indian Economy from Understanding Economic Development, the Class 10 economics textbook for the 2026–27 session. The chapter explains how multinational corporations (MNCs) spread production across the world, how foreign trade and foreign investment integrate markets, what liberalisation and the World Trade Organisation (WTO) mean, and how globalisation has affected consumers, producers and workers in India — ending with the idea of a fairer globalisation. Below you get step-by-step answers to all Exercises, clear notes on key terms, extra practice, MCQs, Assertion–Reason and FAQs.
Class: 10Subject: Social Science (Economics)Book: Understanding Economic DevelopmentChapter: 4Topic: Globalisation and the Indian EconomySession: 2026–27
Chapter 4, Globalisation and the Indian Economy, defines globalisation as the rapid integration or interconnection between countries through greater foreign trade and foreign investment. A central role is played by multinational corporations (MNCs) — companies that own or control production in more than one nation and set up production where it is cheap and close to markets. MNCs spread production by setting up factories, forming partnerships with local firms, buying up local companies (for example, Cargill Foods buying Parakh Foods), or placing orders with small producers of garments, footwear and sports goods. Globalisation has been enabled by rapid improvements in technology (containers, telecom, the Internet) and by the liberalisation of trade and investment policy in India since about 1991, supported by powerful organisations like the WTO. The chapter ends by showing that the impact of globalisation has not been uniform — it has benefited well-off consumers and skilled producers, while many small producers and workers have suffered — and argues for a fairer globalisation in which the government and the people play an active role.
Key Concepts & Terms
Globalisation: the process of rapid integration or interconnection between countries, mainly through greater foreign trade and foreign investment, so that more goods, services, investments, technology (and, to a lesser extent, people) move between countries.
Multinational corporation (MNC): a company that owns or controls production in more than one nation. MNCs set up offices and factories where they can get cheap labour and other resources, so that the cost of production is low and profits are higher.
Foreign investment: investment made by MNCs — money spent to buy assets such as land, buildings, machines and other equipment in another country, made in the hope of earning profit.
Foreign trade: the buying and selling (export and import) of goods and services between countries; it lets producers reach beyond domestic markets and gives buyers a wider choice of goods.
Integration of markets: when foreign trade connects markets of different countries so that goods travel between them, choice rises, prices of similar goods tend to become equal, and producers in different countries compete closely.
Trade barrier: a restriction (such as a tax or quota on imports) used by a government to regulate foreign trade and decide what kinds of goods, and how much, can come into the country.
Liberalisation: removing or reducing the barriers and restrictions set by the government on trade and investment, so that businesses can decide freely what to import or export.
World Trade Organisation (WTO): an international organisation (with about 160 member countries) whose stated aim is to liberalise international trade by establishing rules and seeing that they are obeyed.
Special Economic Zones (SEZs): industrial zones with world-class facilities (electricity, water, roads, transport, storage) set up to attract foreign companies; units there get tax holidays for an initial period.
Fair globalisation: globalisation that creates opportunities for all and ensures that its benefits are shared better, with the government protecting the interests of all the people, not only the rich and powerful.
“Exercises” — Full Solutions
All questions below are reproduced verbatim from the NCERT textbook’s end-of-chapter Exercises section. Answers are original, written in exam-ready style.
1. What do you understand by globalisation? Explain in your own words.
ANSWERGlobalisation is the process of rapid integration or interconnection among countries of the world. It happens mainly through greater foreign trade (export and import of goods and services) and greater foreign investment by multinational corporations.As a result of globalisation, more and more goods, services, investments and technology move freely between countries, and the production of goods is increasingly organised across several nations rather than within a single country.In simple words, globalisation has made the world more closely connected: a car may be designed in one country, its parts made in another and assembled in a third, while consumers everywhere get a wider choice of goods. MNCs play the leading role in driving this process.
2. 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?
ANSWERReasons for putting barriers: After Independence, the Indian government put barriers on foreign trade and foreign investment to protect domestic producers from foreign competition. Industries were just coming up in the 1950s and 1960s, and competition from cheap imports at that early stage would not have allowed these new industries to grow. So India allowed imports of only essential items such as machinery, fertilisers and petroleum.Why it wished to remove them: Around 1991, the government felt that the time had come for Indian producers to compete with producers around the globe, as it believed competition would improve the quality and performance of Indian producers. This decision was supported by powerful international organisations. Therefore, barriers on foreign trade and investment were largely removed so that goods could be imported and exported easily and foreign companies could set up factories and offices in India.
3. How would flexibility in labour laws help companies?
ANSWERFlexibility in labour laws means that companies are allowed to hire workers ‘flexibly’ — for short periods when there is intense pressure of work — instead of employing them on a regular, permanent basis.This helps companies reduce their cost of labour, because they need not pay workers for the whole year, nor provide regular wages and benefits such as health insurance and provident fund. Workers can also be made to work long hours and night shifts during the peak season.By cutting labour costs in this way, companies are able to compete better, maximise profits and attract foreign investment. However, this comes at the cost of workers, whose jobs become insecure and who are denied a fair share of the benefits of globalisation.
4. What are the various ways in which MNCs set up, control or produce in other countries?
ANSWERMNCs spread their production and exert control over production in distant locations in a variety of ways:(i) Setting up production jointly with local companies: The MNC provides money for additional investment (such as new machines) and brings the latest technology for production.(ii) Buying up local companies: The most common route — MNCs with huge wealth buy local firms and then expand production. For example, Cargill Foods, a large American MNC, bought over Parakh Foods and became the largest producer of edible oil in India.(iii) Placing orders with small producers: Large MNCs in developed countries place orders for goods such as garments, footwear and sports items with small producers, who supply the goods to be sold under the MNCs’ brand names. The MNCs determine the price, quality, delivery and labour conditions.In these ways — through partnerships, supplies, close competition or takeovers — MNCs interlink production across the globe.
5. Why do developed countries want developing countries to liberalise their trade and investment? What do you think should the developing countries demand in return?
ANSWERWhy developed countries want it: Developed countries want developing countries to liberalise trade and investment so that their own MNCs can freely set up factories and offices in these countries and sell their goods there without barriers. This gives the developed countries’ companies access to cheap labour, resources and large new markets, increasing their profits.What developing countries should demand in return: Developing countries should demand fair and equal treatment. In practice, developed countries have unfairly retained their own trade barriers and continue to give massive subsidies to their farmers, while forcing developing countries to remove barriers. So developing countries should demand that developed countries also remove their trade barriers and stop heavy subsidies, so that trade is genuinely free and fair. They should also negotiate at the WTO for fairer rules and align with other developing countries with similar interests.
6. “The impact of globalisation has not been uniform.” Explain this statement.
ANSWERThe benefits of globalisation have not reached everyone equally; some have gained while others have lost.Those who have benefited: Well-off consumers, especially in urban areas, enjoy greater choice, better quality and lower prices, and higher standards of living. Skilled, educated and wealthy producers have gained — top Indian companies invested in new technology, some collaborated with foreign firms, and a few (such as Tata Motors, Infosys, Ranbaxy and Asian Paints) became multinationals themselves. New opportunities also opened in IT and service sectors like call centres and data entry.Those who have suffered: A large number of small producers and workers have been hurt by rising competition. Industries such as batteries, capacitors, plastics, toys, tyres, dairy and vegetable oil have been hit hard, with many units shutting down. Workers now face insecure, ‘flexible’ employment with low wages and long hours.Thus globalisation has created winners and losers, which is why its impact is described as not uniform.
7. How has liberalisation of trade and investment policies helped the globalisation process?
ANSWERLiberalisation means removing or reducing the barriers and restrictions that the government had placed on foreign trade and investment.By liberalising its policies around 1991, India allowed goods to be imported and exported easily and permitted foreign companies to set up factories and offices in the country. Businesses became free to decide what to import or export.This led to a large rise in foreign trade and foreign investment by MNCs, which in turn brought greater integration of production and markets across countries. Since globalisation is precisely this rapid integration of countries through trade and investment, liberalisation directly accelerated the globalisation process.
8. How does foreign trade lead to integration of markets across countries? Explain with an example other than those given here.
ANSWERForeign trade creates an opportunity for producers to reach beyond their domestic markets, and gives buyers the option of importing goods made in other countries. When trade opens up, goods travel from one market to another, the choice of goods rises, prices of similar goods in the two markets tend to become equal, and producers in different countries compete closely even though they are far apart. This connecting of markets is called integration of markets.Example (other than those in the book): Suppose India begins importing cheap LED bulbs from Vietnam. Indian buyers can now choose between Indian and Vietnamese bulbs. Because of competition, the prices of LED bulbs in both countries tend to come closer, and manufacturers in India and Vietnam compete directly. In this way, foreign trade in LED bulbs integrates the bulb markets of the two countries.
9. Globalisation will continue in the future. Can you imagine what the world would be like twenty years from now? Give reasons for your answer.
ANSWERIf globalisation continues, the world twenty years from now is likely to be even more closely interconnected.Reasons: Improvements in technology — faster transport, the Internet and communication tools — will make trade and the sharing of services and information even easier and cheaper. More goods and services will be produced jointly across countries, consumers will have an even wider choice of products at competitive prices, and more developing-country firms may grow into MNCs.At the same time, competition will be tougher, so countries that invest in education, skills and technology will benefit most, while small producers and workers may still face pressure unless governments ensure fairer rules. Overall, the world should be more integrated, but how fairly its benefits are shared will depend on the policies that governments and international bodies adopt.
10. Supposing you find two people arguing: One is saying globalisation has hurt our country’s development. The other is telling, globalisation is helping India develop. How would you respond to these arguments?
ANSWERI would say that both arguments are partly correct, because the impact of globalisation has not been uniform.In favour of globalisation: It has given consumers greater choice, better quality and lower prices; created new jobs in industries and services like IT and call centres; brought in foreign investment and new technology; and helped some Indian companies grow into multinationals such as Tata Motors and Infosys.Against globalisation: It has badly hurt many small producers (toys, capacitors, dairy, etc.), forced several units to shut down, and made workers’ jobs insecure and poorly paid through ‘flexible’ employment, so the poor and unskilled have not shared its benefits.My response is that globalisation has both helped and harmed India, so the real task is to make globalisation fairer — the government should protect small producers and workers, ensure fair rules at the WTO, and see that the benefits are shared by all.
11. Fill in the blanks.Indian buyers have a greater choice of goods than they did two decades back. This is closely associated with the process of ______________. Markets in India are selling goods produced in many other countries. This means there is increasing ______________ 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 _____________ ___________________________________________ . While consumers have more choices in the market, the effect of rising _______________ and ______________has meant greater _________________among the producers.
ANSWERIndian buyers have a greater choice of goods than they did two decades back. This is closely associated with the process of globalisation. Markets in India are selling goods produced in many other countries. This means there is increasing foreign trade 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 of the availability of cheap labour and other resources, large markets, and government policies that favour them, which lowers their cost of production and raises profits. While consumers have more choices in the market, the effect of rising foreign trade and foreign investment has meant greater competition among the producers.
12. Match the following.
ANSWER
Column I
Column II
(i) MNCs buy at cheap rates from small producers
(b) Garments, footwear, sports items
(ii) Quotas and taxes on imports are used to regulate trade
(e) Trade barriers
(iii) Indian companies who have invested abroad
(d) Tata Motors, Infosys, Ranbaxy
(iv) IT has helped in spreading of production of services
(c) Call centres
(v) Several MNCs have invested in setting up factories in India for production
13. Choose the most appropriate option.
(i) The past two decades of globalisation has seen rapid movements in(a) goods, services and people between countries.(b) goods, services and investments between countries.(c) goods, investments and people between countries.(ii) The most common route for investments by MNCs in countries around the world is to(a) set up new factories.(b) buy existing local companies.(c) form partnerships with local companies.(iii) Globalisation has led to improvement in living conditions(a) of all the people(b) of people in the developed countries(c) of workers in the developing countries(d) none of the above
ANSWER(i) (b) goods, services and investments between countries. (There has been little increase in the movement of people between countries due to various restrictions, so options including ‘people’ are incorrect.)(ii) (b) buy existing local companies. (This is the most common route for MNC investments, as in Cargill Foods buying Parakh Foods.)(iii) (d) none of the above. (The impact of globalisation has not been uniform; it has not improved living conditions for all people.)
Extra Practice Questions
Short Answer Type Questions
Q1. What is a multinational corporation (MNC)?
ANSWERA multinational corporation is a company that owns or controls production in more than one nation. MNCs set up offices and factories in regions where they can get cheap labour and other resources, so that their cost of production is low and they can earn greater profits.
Q2. What is a trade barrier? Give one example.
ANSWERA trade barrier is any restriction set up by the government to regulate foreign trade and decide what goods, and how much of each, can enter the country. A tax on imports is one example; a quota (a limit on the quantity of goods that can be imported) is another.
Q3. Name any two Indian companies that have emerged as multinationals.
ANSWERTata Motors (automobiles) and Infosys (IT) are two large Indian companies that have spread their operations worldwide and emerged as multinationals. Others include Ranbaxy (medicines), Asian Paints (paints) and Sundaram Fasteners (nuts and bolts).
Q4. What are Special Economic Zones (SEZs)?
ANSWERSpecial Economic Zones are industrial zones set up to attract foreign companies, with world-class facilities such as electricity, water, roads, transport and storage. Companies that set up units in SEZs do not have to pay taxes for an initial period of five years.
Q5. How has the development of containers helped globalisation?
ANSWERGoods are placed in containers that can be loaded intact onto ships, railways, planes and trucks. Containers have led to a huge reduction in port-handling costs and increased the speed with which exports can reach markets, making faster delivery of goods over long distances possible at lower cost — an important factor enabling globalisation.
Long Answer Type Questions
Q1. Explain how foreign trade leads to the integration of markets across countries, using the example of Chinese toys in India.
ANSWERForeign trade lets producers sell beyond their own country and gives buyers a choice of imported goods. When Chinese manufacturers found that toys sold at a high price in India, they began exporting cheap plastic toys with new designs. Indian buyers then had a choice between Indian and Chinese toys, and because the Chinese toys were cheaper and more attractive, within a year 70 to 80 per cent of Indian toy shops had replaced Indian toys with Chinese ones, and toys became cheaper in Indian markets. This shows how, with the opening of trade, goods travel from one market to another, choice rises, prices of similar goods in the two markets tend to become equal, and producers in the two countries compete closely even though separated by thousands of miles. Thus foreign trade results in connecting markets, or the integration of markets, across countries — though Chinese gains came at the cost of Indian toy makers, who faced losses.
Q2. Discuss the role of the World Trade Organisation (WTO) in international trade. Is the WTO fair to all countries?
ANSWERThe World Trade Organisation is an international body, with about 160 member countries, whose stated aim is to liberalise international trade. It was started at the initiative of the developed countries. The WTO holds that all barriers to foreign trade and investment are harmful and that trade between countries should be ‘free’, so all countries should liberalise their policies. It establishes rules regarding international trade and sees that these rules are obeyed. However, in practice the WTO is not fair to all. Although it is supposed to allow free trade for all, developed countries have unfairly retained their own trade barriers while WTO rules have forced developing countries to remove theirs. For example, the US government gives massive subsidies to its farmers, allowing them to sell surplus farm products abroad at abnormally low prices, which hurts farmers in developing countries — even as the US asks those countries to stop supporting their own farmers. This uneven treatment shows that the WTO often works in favour of the developed countries.
Q3. How can globalisation be made more fair? Explain the role of the government and the people.
ANSWERSince not everyone has benefited from globalisation, the question is how to make it fairer so that opportunities are created for all and the benefits are shared better. Role of the government: Its policies must protect the interests of all the people, not only the rich and powerful. The government can ensure that labour laws are properly implemented so workers get their rights; support small producers to improve their performance until they are strong enough to compete; use trade and investment barriers when necessary; negotiate at the WTO for ‘fairer rules’; and align with other developing countries to fight the domination of developed countries in the WTO. Role of the people: In recent years, massive campaigns and representations by people’s organisations have influenced important decisions on trade and investment at the WTO. This shows that ordinary people, too, can play an important role in the struggle for a fairer globalisation.
MCQs & Assertion–Reason
1. Globalisation is the process of rapid integration between countries mainly through:
(a) cultural exchange only (b) foreign trade and foreign investment (c) tourism (d) migration of people
2. A company that owns or controls production in more than one nation is called a:
(a) public sector unit (b) cooperative (c) multinational corporation (d) small-scale industry
3. The most common route for MNC investment in other countries is to:
(a) set up new factories (b) buy up existing local companies (c) form partnerships (d) place export orders
For each Assertion–Reason question, choose: (A) Both true and the Reason correctly explains the Assertion; (B) Both true but the Reason is not the correct explanation; (C) Assertion true, Reason false; (D) Assertion false, Reason true.
A-R 1. Assertion: MNCs set up production where they can get cheap labour and other resources.
Reason: This lowers their cost of production and allows them to earn greater profits.
A-R 2. Assertion: A tax on imports makes imported goods more expensive for buyers.
Reason: A tax on imports is a trade barrier that adds to the price the buyer must pay.
A-R 3. Assertion: After Independence, India put barriers on foreign trade and investment.
Reason: The barriers were meant to protect the country’s newly growing industries from foreign competition.
A-R 4. Assertion: The impact of globalisation has been uniform for all people in India.
Reason: Globalisation has benefited well-off consumers and skilled producers while harming many small producers and workers.
A-R 5. Assertion: The WTO is supposed to allow free trade for all countries.
Reason: In practice, developed countries have retained trade barriers while developing countries were forced to remove theirs.
Answer key: 1-(A), 2-(A), 3-(A), 4-(D), 5-(B).
Exam Tips & Common Mistakes
How to score full marks in this chapter
Learn the precise definitions of globalisation, MNC, foreign investment, foreign trade, trade barrier, liberalisation and WTO — one-mark questions are often direct definitions. For ‘ways MNCs control production’, remember the three routes (joint production, buying local firms, placing orders with small producers) with the textbook examples (Cargill–Parakh, Ford–Mahindra). For ‘impact of globalisation’, always give a balanced, two-sided answer (consumers and skilled producers gain; small producers and workers lose). Quote the book’s examples — Chinese toys, Ravi’s capacitor unit, Sushila the garment worker, SEZs and US farm subsidies — to show you have studied the chapter.
Common mistakes to avoid
Confusing foreign trade (export/import of goods and services) with foreign investment (money MNCs spend to buy assets abroad).
Saying globalisation has helped everyone — its impact has not been uniform.
Forgetting that the movement of people between countries has not increased much (so MCQ option 13(i) including ‘people’ is wrong).
Mixing up liberalisation (removing trade/investment barriers) with privatisation or globalisation.
Writing that the WTO is fair to all — in practice developed countries retain barriers and subsidies.
Giving only one-sided answers for ‘impact’ or ‘is the WTO fair’ questions — examiners expect both sides.
Frequently Asked Questions
What is Chapter 4 of Class 10 Economics about?
Chapter 4, Globalisation and the Indian Economy, explains globalisation as the rapid integration of countries through foreign trade and foreign investment, the central role of MNCs, the factors enabling globalisation (technology, liberalisation, the WTO), and the uneven impact of globalisation on consumers, producers and workers in India, along with the idea of a fairer globalisation.
What is the difference between foreign trade and foreign investment?
Foreign trade is the export and import of goods and services between countries, which connects markets and gives buyers a wider choice. Foreign investment is the money MNCs spend to buy assets such as land, buildings, machines and equipment in another country, in the hope of earning profit. Trade moves goods; investment sets up production.
What is the exercise heading for Chapter 4 of Understanding Economic Development?
The end-of-chapter exercise in Understanding Economic Development Chapter 4 is headed Exercises and contains 13 questions (including fill-in-the-blanks, match the following and choose-the-correct-option), all answered step by step on this page.
