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Class 12 Economics Chapter 9 Liberalisation, Privatisation & Globalisation: An appraisal
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Liberalisation, Privatisation & Globalisation: An appraisal
Chapter: 9
PART – B
VERY SHORT TYPE QUESTIONS ANSWERS
1. Define liberalisation?
Ans : It refers to removal of unnecessary controls on trade and industry imposed by the government.
2. Define privatisation?
Ans : It means de-nationalisation or to allow the private sector to have more operation and ownership of production units.
3. Define globalisation?
Ans : It is a process in which one economy integrates with rest of the world with respect to production and trade.
4. What is W.T.O?
Ans : It is an organisation of various trading countries of the world which is pursuing the policy of re trade.
5. When was WTO?
Ans : January, 1995.
6. Define dis-investment?
Ans : The disinvestment of Public Sector Units (PSU) refers to the sale of the shares of public sector undertakings to the private hands.
7. Define fiscal deficit?
Ans : It is the excess of anticipated government expenditure over its receipts.
8. Define Structural Adjustment Programme.
Ans : These are policy measures which help in regulating the aggregate supply of the economy.
9. How many countries are members of the WTO?
Ans : 148.
10. What is inflation?
Ans : It is a state when the value of money is falling and prices are rising.
11. What are the three components of new economic reforms?
Ans : Libersation, Privatisation and Globalisation.
12. Define devaluation of rupee?
Ans : The depreciation of the value of rupee in comparison to other currencies is called devaluation
B. SHORT & LONG TYPE QUESTION AND ANSWER:
1. Why were reforms introduced in India?
Ans : In middle of 1991, need for major economic reforms was felt in the country. These are urgently needed to bring an up-turn in the economy. It was mainly due to the following reasons-
(a) Excessive Fiscal Deficit
(b) Balance of Payment Deficit.
(c) Rise in Prices
(d) Reduction in Foreign Exchange Reserve.
(e) Poor performance of Public Sector.
(f) Gulf Crisis.
(g) Excessive Control.
2. Why is it necessary to become a member of WTO?
Ans : As an important member of WTO India is following the global rules and regulations. It has removed quantitative restrictions on imports and reduced tariff rates. India is also committed to liberalise its trade regime in case of other reforms that are being defined in WTO.
3. Why did RBI have to change its role from controller to facilitator of financial sector in India?
Ans : The RBI decides the amount of money that the banks can keep with themselves, fixes interest rates, nature of lending to various sectors etc. One of the major aims of financial sector reforms is to reduce the role of RBI from regulation to facilitator of financial sector. This means that the financial sector may be allowed to take decisions on many matters without consulting the RBI.
4. How is RBI controlling the commercial banks?
Ans : RBI controlled the commercial banks by –
(a) Bank Rate Policy
(b) Open Market Operations
(c) Cash Reserve Ratio. (CRR)
(d) Marginal Required
(e) Direct Action
(f) Moral Situation
5. What do you understand by devaluation of rupee?
Ans : The depreciation of the value of rupee in comparison to other currencies is called devaluation.
6. Distinguish between the following:
(i) Strategic and Minority Sale
(ii) Bilateral and Multilateral Trade.
(iii) Tariff and Non-tariff barriers.
Ans : The differences are –
(i) strategic Sale: It means where the sale of goods and services are done by proper planning according to the choice, taste and preferences of the consumer.
Minority Sale: Where the demand for a particular goods on services is long and no proper planning is done for implementing the sale is known as minority sale.
(ii) Bi-lateral Trade:It is a trade between two countries. As there is a trade between India and Bangladesh.
Multilateral Trade: It is a trade among various countries. As there is a trade among. India, Bangladesh, Sri Lanka, Pakistan etc.
(iii) Tariff Barriers: When special tariff duties are imposed on foreign trade are called tariff barriers.
Non-Tariff Barriers: When in addition to taxes quota and licensing are used to stop foreign trade especially imports are called non-tariff barriers.
7. Why are tariffs imposed?
Ans : Tariffs are imposed to control imports. Imported goods become dearer when tariffs are imposed. Their demand falls down and imports tend to reduce. As a result there is a control on the flow of foreign exchange.
8. What is the meaning of quantitative restrictions?
Ans : Restrictions are imposed on foreign trade especially on imports. As a result imports are limited which are called quantitative restrictions.
9. Those public sector undertakings which are making profits should be privatised. Do you agree with this view? Why?
Ans : Profit making should not be privatised. Because the profit of public enterprises would be transferred to the capitalists. Such types of enterprises must be implemented by the government.
10. Do you think outsourcing is good for India? Why are developed countries opposing it?
Ans : Outsourcing is good for India. In outsourcing, companies get regular services from foreign sources. Therefore, this process is appropriate for India. As a result people of India get employment and the income of the country increases.
Developed countries are opposing it because India is getting huge amount of foreign exchange from the foreign countries.
11. Indian has certain advantages which makes it a favourite outsourcing destination. What are these advantages?
Ans : The advantages are –
(a) Cheap labour cost.
(b) Reasonable degree of skill and accuracy of manpower.
(c) Good geographically connected.
(d) Favourable climate for working environment.
(e) Political stability and proper law and order situation.
12. Do you think the navaratna policy of the govt. Helps in improving the performance of public sector undertakings in India?
Ans : Ye, it has provided sovereignty to the public enterprises. They are working independently. As a result the profits and efficiency of these enterprises have increased..
13. What are the major factors responsible for the high growth of the service sector?
Ans : The main factors are:
(a) Development of means of transport and communicated due to globalisation.
(b) Development of banking and insurance sector due to the policy of privatisation.
(c) Expenditure on the development of infrastructure.
(d) Investment in different service sectors due to indigenous and foreign institutional investment.
(e) Rapid industrialisation.
(f) Development of agriculture due to green revolution.
14. Agriculture sector appears to be adversely by the reform process. Why?
Ans : Agriculture sector is adversely affected by reform process. It could not get much benefit. Because this sector is already within the limit of private sector and liberalism. In this agriculture sector imports have become possible due to globalisation. As a result this sector has to face many challenges. Therefore, the growth rate of this sector lies in between 3% to 4% only.
15. Why has the industrial sector performed poorly in the reform period?
Ans : The reasons are –
(a) More dependence on foreign loans.
(b) Competition with foreign developed countries.
(c) Comparison on the quality of the product of Indian industries with foreign industries.
(d) Exploitation of consumers due to privatisation.
(e) Challenge of price from industrial sector of China.
16. Discuss economic reforms in India in the light of social justice and welfare.
Ans : The economic reforms in the light of social justice and welfare are as under –
A. Benefits/ Merits:
a) Increase in the rate of economic growth.
b) Reduction in poverty and inequality.
c) Increase in the efficiency of public sector enterprises.
d) Reduction in fiscal deficit.
e) Development of small-scale industries.
f) Control over price.
B. Loss/ Demerits:
a) Increase in unemployment
b) Neglect of agriculture sector.
c) Too much emphasis on privatisation.
d) Loss of economic sovereignty.
e) Promotion of consumerism.
f) More dependence on foreign debt.
17. Write the merits of Liberalisation.
Ans : The merits of Liberalisation are:
a) Use of new machines and technology.
b) No govt. Interference in production.
c) Free flow of foreign investment.
d) Freedom from bureaucracy.
18. Write the merits of privatisation.
Ans : The merits of privatisation are:
a) Reduction in extra burden on government.
b) Control over poor performance of public sector.
c) Check on high-handedness of bureaucracy.
d) Reduction in capital output ratio.
19. Write the merits of Globalisation.
Ans : The merits of Globalisation are:
a) It helps in removing inefficiency from industrial units.
b) Helps in improving allocative efficiency of resources.
c) It encourages foreign competition which reduces costs and improves quality.
d) It results in international division that helps in raising world production.
20. Write the demerits of Liberalisation.
Ans : The demerits of Liberalisation are:
a) It has all the demerits of capitalism.
b) Neglects of social welfare.
c) Possibility of monopolies and concentration.
21. Write the demerits of privatisation.
Ans : The demerits of privatisation are:
a) Neglects standard of living and social welfare of masses.
b) It will promote private monopoly.
c) Unbalanced growth of the economy.
22. Write the demerits of Globalisation.
Ans : The demerits of Globalisation are:
a) Wipes out small units.
b) Under developed countries are unable to face the competition of large scale foreign units.
c) Encourages MNC which hold monopoly like situation.
23. Distinguish between Liberalisation and Privatisation.
Ans : The main distinctions are –
a) Liberalisation means freedom from restrictions, non-interference of state in economic activities. But, privatisation means freedom of ownership of assets and business.
b) Liberalisation makes the business free from rules, procedures and instructions but privatisation promotes personal control and management over the business.
c) Liberalisation widens the scope of business, but privatisation restricts the management of business in few hands.
24. Distinguish between Globalisation and Liberalisation.
Ans : The main differences are –
a) Liberalisation of economy is generally limited to national level, but globalisation refers to internationalisation of trade.
b) Liberalisation means freedom of restriction and non-interference of government but globalisation means to link an economy with the world economy.
c) Liberalisation refers to freedom of trade, agriculture, industry or activities of financial institutions. However, globalisation is always referred with the economy as a whole.
25. What do you mean by economic reforms?
Ans : Economic reforms or new economic policy refer to various policy measures and changes introduced since 1991. Economic reform was to create a new economic environment for economic development, by removing existing obstacles.
26. Discuss the impact of WTO on India?
Ans : As an important member of WTO India is following the global rules and regulations. It has removed quantitative restrictions on imports and reduced tariff rates. India is also committed to liberalise its trade regime in case of other reforms that are being discussed in WTO.
27. What are the objectives of WTO?
Ans : The objectives of WTO are:
a) To ensure the reduction of tariff and other barriers to trade.
b) To enlarge production and trade of services.
c) To ensure optimum utilization of world resources.
d) To provide greater market access to all member countries.
e) To protect environment.
28. What are the major factors responsible for the high growth of the service sector?
Ans : The main factors are –
a) Development of means of transport and communicated due to globalisation.
b) Development of banking and insurance sector due to the policy of privatisation.
c) Expenditure on the development of infrastructure.
d) Investment in different service sectors due to indigenous and foreign institutional investment.
e) Rapid industrialisation.
f) Development of agriculture due to green revolution.
29. What are the causes of need for Economic Reforms?
Ans : The causes of need for Economic Reforms are :
a) Excessive Fiscal Deficit.
b) Balance of Payment Deficit.
c) Rise in Prices
d) Reduction in Foreign Exchange Reserve.
e) Poor performance of Public Sector.
f) Gulf Crisis.
g) Excessive Control.
30. Why Economic Reforms or New Economic Policy is useful?
Ans : The economic reforms is useful for economic development due to the following reasons –
a) Increase in the rate of Economic Growth.
b) Competitiveness of Industrial Sector.
c) Reduction of poverty and Inequality.
d) Encouraging Private Sector.
e) Increase in the Efficiency of Public Sector Enterprises.
f) Reduction in deficit in Balance of Payment and control over prices.
31. Is New Economic Policy harmful? If so, then how?
Ans : In some case the New Economic Policy may be harmful due to the following reasons –
a) Neglect of agriculture sector
b) More dependence of foreign debts.
c) Problem of unemployment.
d) Loss of economic sovereignty.
e) Pressure of World Bank and IMF.
f) Too much emphasis on privatisation.
32. Briefly mention the causes of inflation.
Ans : The causes of inflation are:
(i) Demand-pull inflation: aggregate demand growing faster than aggregate supply (growth too rapid)
(ii) Cost-push inflation: higher oil prices feeding through into higher costs
(iii) Devaluation: increasing cost of imported goods, also boost to domestic demand.
(iv) Rising wages: higher wages increase firms costs and increase consumers’ disposable income to spend more.
33. Explain briefly the following:
(a) Demand-pull inflation
Ans : Demand-pull inflation is asserted to arise when aggregate demand in an economy outpaces aggregate supply. It involves inflation rising as real gross domestic product rises and unemployment falls, as the economy moves along the Phillips curve. This is commonly described as ‘too much money spent chasing too few goods.”
(b) Cost-push inflation
Ans : Cost-push inflation is a type of inflation caused by substantial increases in the cost of important goods or services where no suitable alternative is available. It stands in contrast to demand-pull inflation. Both accounts of inflation have at various times been put forward with oftentimes inconclusive evidence as to which explanation is superior. A situation that has been often cited of this was the oil crisis of the 1970s, which some economists see as a major cause of the inflation experienced in the Western world in that decade. It is argued that this inflation resulted from increases in the cost of petroleum imposed by the member states of OPEC. Since petroleum is so important to industrialized economies, a large increase in its price can lead to the increase in the price of most products, raising the price level. Some economists argue that such a change in the price level can raise the inflation rate over longer periods, due to adaptive expectations and the price/wage spiral, so that a supply shock can have persistent effects.
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