Read the passage carefully and answer the following questions
Economy and change in India
Since the 1990s, private companies, especially foreign firms, have been encouraged to invest in sectors previously reserved for the government, including telecom, civil aviation, power, etc. Licenses have been no longer required to open industries. Foreign products have been now easily available in Indian shops. As a result, small and large, have been bought over by multinationals. Simultaneously, some Indian companies have been becoming multinational companies. More and more companies have been reducing the number of permanent employees and outsourcing their work to smaller companies or even to homes. For multinational companies, this outsourcing is done across the globe. The government is also trying to sell its share in several public sector companies, a process known as disinvestment. Many government workers have been scared that after disinvestment, they will lose their jobs. In ‘Modern Foods’, which was set up by the government to make healthy bread available at cheap prices, and which was the first company to be privatised, 60% of the workers were forced to retire in the first five years. In India, in 2018–19, nearly 43% were employed in the primary sector (agriculture and mining), 17% in the secondary sector (manufacturing, construction, and utilities), and 32% in the tertiary sector (trade, transport, financial services, etc.). India is still largely an agricultural country. The service sector – shops, banks, the IT industry, hotels, and other services have been employing more people, and the urban middle class is growing.
What is the impact of globalization and liberalization on Indian companies?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Indian companies are able to become multinational companies.
Option (1) Indian companies are able to buy new machines. — Incorrect. Buying machines is ordinary business that any firm does, with or without liberalisation; it is not the change liberalisation brought to Indian companies.
Option (2) Indian companies are able to open new factories. — Incorrect. Opening an industry without a licence is a freedom given to every firm, Indian or foreign. The change special to Indian companies is that some of them grew into multinational companies.
Option (3) Indian companies are able to become multinational companies. — Correct. Liberalisation worked both ways. Many Indian companies, small and large, were bought over by multinationals; at the same time some Indian companies are becoming multinational companies themselves, working across many countries.
Option (4) Indian companies are given opportunities to hire permanent workers. — Incorrect. The trend runs the other way: companies are reducing permanent employees and outsourcing their work.
NCERT (2025-26): “Globalisation, Liberalisation and Changes in Indian Industry Since the 1990s, the government has followed a policy of liberalisation. Private companies, especially foreign firms, are encouraged to invest in sectors earlier reserved for the government, including telecom, civil aviation, power, etc. Licenses are no longer required to open industries. Foreign products are now easily available in Indian shops. As a result of liberalisation, many Indian companies— small and large, have been bought over by multinationals. At the same time some Indian companies are becoming multinational companies.…” |