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BENNETT COLEMAN & CO.LTD. | ESTABLISHED 1838 | TIMESOFINDIA.COM MUMBAI | WEDNESDAY,AUGUST 29, 2007 | PAGES 56

MONEY POURING INTO ENTERTAINMENT & EDUCATION

Hemali Chhapia | TNN

UGC curbs had kept foregin players away, p8

Mumbai : While the government is still vacillating on liberalising rulespertaining to foreign direct investment (FDI) in the education sector,investment houses have started looking at ancillary opportunities in thisarea.

On Wednesday, the Mumbai-based Mahesh Tutorials will be thefirst Indian coaching class to sign an FDIagreement with the Mauritius-based fund HelixInvestments. The India-focused investment pool,backed by members of the Cullman andBloomingdale families of New York, plans toinvest $ 12 million in this coaching class as itbelieves in the “future growth plans” of thissector, said David Danziger, managing director,Helix Investments.

While norms permit up to 100% foreigndirect investment in the education sector, global

players have shied away from setting up colleges since there are restrictionson the fees that can be levied.

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Q.1 Fill in the blanks by selecting appropriate alternative :1. The Government of India introduced The New Economic Policy in

................... . (March ’09) (1977, 1984, 1991, 1997)2. In liberalisation, least importance is given to the .............. .

(licensing policy, industrial policy, import and export policy, price policy)3. Expansion and extension of economic activities across political boundaries

of the country is known as ................. . (Sept. ’10)(Privatisation, Globalisation, Liberalisation, Rationalisation)

4. .................... is the important characteristic of Globalisation.a) Fast growth of domestic corporation and their investmentb) Fast growth of banking sector.c) Transfer of Public sector units to Private sectorsd) Fast growth of Multinational Corporation and their investment

5. In 1990-91, total foreign exchange reserve was ............... million.($ 5,830, $ 8,530, $ 3,580, $ 5,380)

6. Transformation of public sector into private is known as .................... .(March ’08, Sept. ’08)

(Globalisation, Liberalisation, Privatisation, Nationalisation)7. Reduction in the anti-export bias of a trade regime means .................

(Liberalisation, Privatisation, Globalisation)8. The New Economic Policy allows ...................... % or more foreign equity

investment in Indian companies. (51, 99, 1)9. In liberalisation, ..................exchange rate is adopted in place of multiple

exchange rates. (uniform, same, single)10. Liberal imports lead to competition from ................ manufacturers.

(local, domestic, foreign)11. Globalisation is a process of ..................... movement of commodities.

(restricted, unlimited, free)12. Convertibility of Rupee enabled control on .................... transactions of

foreign exchange. (illegal, legal, lawful)13. Foreign Exchange Regulation Act was renamed as Foreign Exchange

Management Act in....................... (1947, 1991, 1998, 2000)14. Since March 1992, rupee has been made ................ on current account.

(fully-convertible, partly-convertible, non-accessible)15. Under globalisation the policies are................. for domestic and foreign

market. (discriminatory, indiscriminatory, different)16. .....................generated the wave of privatisation during the eighties.

(ManMohan Singh, Indira Gandhi, Rajiv Gandhi)17. Since 1991 the Government followed disinvestment programme for

................. (liberalisation, privatisation, globalisation)18. Convertibility of Rupee enabled control on illegal transactions like ............

system. (Hawala, Hundi, Smuggling)19. The number of reserved products for public sector was reduced from

seventeen to .............. (seven, ten, six)

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20. ..............% foreign equity participation for settingup power plants in the country is allowed.

(100, 51, 49)21. The finance minister in 1991 was .............

(P.Chidambaram, ManMohan Singh,P.V.Narasimha Rao)

22. From 1991 onwards, the government implementeddrastic reduction in import tariff rate from 130%to ............. %. (20, 13, 30)

23. ............... % equity is allowed in hotels and othertourist related areas.

(50, 51, 100)24. From 1991 onwards, the government has agreed to give automatic

permission for FDI upto .......... % foreign equity. (49, 100, 51)

Q.2 Answer the following questions in one or two sentences : (2 Marks)1. Define liberalisation.Ans. (i) ‘Economic Liberalisation’ consists of withdrawal of various restrictions

imposed by the Government on investment, production, import andexport of the country.

(ii) Liberalisation aims at giving up of licensing policy.

2. What is Globalisation? (Sept. ’09)Ans. (i) The expansion and extension of economic activities across political

boundaries of a country is called ‘Globalisation’.(ii) It is also a process of free movement of

commodities, capital, entrepreneurs,professionals and workers across nationalboundaries.

3. What do you mean by Privatisation?Ans. (i) Privatisation is the process of participation of

private sector in the ownership and managementof public sector.

(ii) It is the transformation of public sector intoprivate sector either fully or partially.

Mr. ManMohan Singh

Mr. Rajiv Gandhi

With less than half of its cashAPPLE can buy entire Reliance

Industries Ltd and ONGC.

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Shri. P.V.Narasimha Rao

4 Give any one positive effect of liberalisation.Ans. (i) Increase in Foreign Exchange reserves (FOREX),

In 1990-91 – $ 5,830 million2003-04 – $ 1,12,960 million ( )

5. What do you mean by total denationalisation ?Ans. (i) Denationalisation is the process of 100% disinvestment of the Public

Sector in favour of the Private Sector.(ii) Denationalisation is the reverse of nationalisation.

6. What was the financial crisis faced by India in 1991?Ans. (i) In 1991, India was facing a critical financial situation.

(ii) They were adverse balance of payments position,low level of foreign exchange reserves, sharp declinein foreign capital inflow, large fiscal deficits, lowproductivity of past investment and temporary lossof export markets, etc.

7. What were the objectives to be achieved by New Economic Policy 1991?OR

What were the corrective measures taken by the Government toovercome the foreign exchange crisis ?

Ans. The Government in Parliament on July 24,1991 introduced the NewEconomic Policy, 1991. This policy aimed at achieving three majorobjectives as under :-(i) Liberalisation (ii) Globalisation (iii) Privatisation.

8. Write two important measures towards liberalisation.Ans. (i) Removal of import and export duties.

(ii) Gradual removal of subsidies, tax rebates or compensation schemes.9. Give two Negative effects of liberalisation.

Ans. (i) Adverse effect on small scale industries(ii) Adverse effect on Indian Agriculture.

10. What are the two positive effects of Privatisation?Ans. Positive effects of privatisation are-

(i) Better service to customers(ii) Better efficiency and performance.

11. What are the two negative /adverse effects of Privatisation?Ans. The adverse/negative effects of Privatisation are:-

(i) Profit making motive affects adversely the interests of community.(ii) Problem of unemployment.

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12. Define Globalisation according to IMF.Ans. International Monetary Fund (IMF) puts, “Globalisation as

the growing economic interdependence of countriesworldwide through increasing :(i) Volume and variety of cross border transactions in goods

and services.(ii) International capital flows.(iii) More rapid and widespread diffusion of technology.”

13. Write any two characteristics of Globalisation.Ans. The characteristics of Globalisation are: (Learn any 2)

(i) Establishment of manufacturing and distribution facilities all overthe world.

(ii) Product planning and development based on the consideration ofworld market.

(iii) Recovery of raw materials, machinery, finance, technology, humanresources and managerial skills from all over the world.

14. What were the changes made in the provisions regarding foreignexchange?

Ans. (i) Foreign Exchange Regulation Act (FERA) was replaced and renamedas Foreign Exchange Management Act (FEMA) in 1998.

(ii) Rupee was made partly convertible on current account from March1992, but not on capital account.

15. What were the steps taken to liberalise imports ?Ans. (i) The Rupee was devalued by 22% i.e. from Rs. 21 to Rs. 27 per $.

(ii) Import Tariff was reduced drastically from 130% to 30%.

16. Which Government measures helped in opening up of foreign capital?(Learn any 2)

Ans. The Government announced the following measures for opening of foreigncapital.(i) Automatic permission was given for Foreign Direct Investment (FDI)

upto 51% equity.(ii) 100% foreign equity was allowed for setting up power plants in the country.(iii) 51% foreign equity was allowed in hotels and other tourist related

areas

IMF

4 in 10 Americansbelieve that the next Bill Gateswould be an Indian or Chinese

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17. What was the effect of opening up the Indian economy to foreign capital?Ans. The opening up of the Indian economy to

foreign capital increased Foreign DirectInvestment (FDI) from $133 million in1991-1992 to $5,181 million in 1999-2000.

18. What is the effect of globalisation onthe Indian economy?

Ans. The process of globalisation in India hasled to an unequal competition betweenMultinational Corporations (MNCs) andIndian enterprises.

19. Write two effects of globalisation onIndia’s external sector?

Ans. (i) Increase in foreign exchange(FOREX) reserves.In 1990-91 – $ 5,830 millionIn 2003-04 – $ 1,12,960 million ( )

(ii) Control on illegal transactionsConvertibility of rupee enabled control on illegal transactions of foreignexchange like Hawala system.

20. State any two effects of Globalisation on the Domestic Economy.Ans. Effects of Globalisation on the Domestic Economy are

(i) The keen competition created between the Indian Industries andMulti-national companies.

(ii) Decline of small-scale and cottage industries in India.21. How did the convertibility of rupee affect the foreign exchange

transactions?Ans. Convertibility of rupee enabled control on illegal transactions of foreign

exchange like the Hawala system.

22. How can the Indian industries meet the challenges posed by the MNCs?Ans. The Indian industries can meet the challenges posed by the MNCs by

producing world class output of acceptable quality and at a least cost.

23. Explain the difference between Balance of Trade (B.O.T) and Balanceof Payment (B.O.P)?

Ans. Balance of Trade (B.O.T) :A statement showing the merchandise imports and exports of a countryduring a particular period (generally one year)

Balance of Payment (B.O.P) :A statement showing all economic transactions of a country with therest of the world.

Thus, BOP = imports & exports inflow andof goods & services + outflow of capital(B.O.T)

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24. What do you mean by MNC?Ans. (i) MNC stands for Multinational Corporation.

(ii) It is a corporation having main/corporate office in one country and anetwork of subordinate branches all over the globe.

Q.3 Answer the following questions in five or six sentences : (4 Marks)1 Trace various decisions taken by the Government of India towards

Liberalisation after 1991.Ans. The Government of India took following decisions towards liberalisation

after 1991 :(i) Implement liberal import-export policy.(ii) Bring in convertibility of rupee on current account.(iii) Offer an opportunity to foreign investors to enter in infrastructure

and service sectors.(iv) Bring licensing system to an end.(v) Liberalising the Monopolies and Restrictive Trade Practices Act,

1969.(vi) Allowing 51% or more foreign equity investment in Indian companies.(vii) Adopt liberal policy of foreign exchange transactions.(viii) Offer incentive plans to attract the foreign investors.

2 Explain the concept of Globalisation.Ans. (i) The expansion and extension of economic

activities across political boundaries ofa country is called ‘globalisation’

(ii) It is a process of transforming nationaleconomy into global economy by freemovement of commodities, capital,entrepreneurs, professionals andworkers across national boundaries.

(iii) Globalisation has two main components; one is the globalisation ofmarkets and another is the globalisation of production.

(iv) International Monetary Fund (IMF) puts, “Globalisation as thegrowing economic interdependence of countries worldwide throughincreasing :

Mahesh Tutorials is thefirst coaching class in

India to get a FDI worth $12 million.

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a) Volume and variety of cross border transactions in goods and services.

b) International capital flows.

c) More rapid and widespread diffusion of technology.”3 Discuss the essential conditions of globalisation.

Ans. The essential conditions of globalisation are :

(i) Freedom to business through withdrawal of restrictions.

(ii) Availability of infrastructural facilities and other resources tobusiness firms.

(iii) Creation of competitiveness among the firms to produce and providequality goods and services at reasonable prices.

(iv) Orientation of business firms behaviour after globalisation.

4 Explain the argument in favour of privatisation.Ans. The following arguments are made in favour of privatisation :

(i) Improvement in efficiency and performance.

(ii) Easy fixation of responsibility.

(iii) Maintenance of capital market discipline.

(iv) Absence of political interference.

(v) Success in planning.

(vi) Immediate response.

(vii) Remedial measures undertaken early in private sector.

(viii) Privatisation leads to better services to customers.

5 Bring out a case against privatisation.Ans. The following arguments are made against privatisation :

(i) It is done because of wrong reason.

(ii) It is done in the wrong environment.

(iii) It is done only to finance budget deficit.

(iv) Lack of transparency.

(v) Lack of strong financial strategy.

(vi) Lack of realistic labour strategy.

(vii) Lack of political consensus.

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Determine whether the following actions fallunder the category of Liberalisation (L),Privatisation (P) or Globalisation (G) :

1. The Car manufacturing plant of Maruti, not only produces cars

for Indian market but also for foreign market.

………………………………………

2. After 1991, Mr. Shetty needed only 2 licenses to start his

restaurant business.

………………………………………

3. The hotel owned by the Government was taken over by the TATA

group of companies.

………………………………………

4. My friend prefers Jet to Air India.

………………………………………

5. A Paris fashion-house gets its cotton fibre from Korea.

………………………………………

6. Munnabhai & Sons increased investment in their business from

50 to 100 crores.

………………………………………

Q.5 Fill in the blanks by selecting appropriate alternative :1. The Government of India introduced the New Economic Policy in

................... .(1947, 1991, 2001)

2. Reduction in the anti-export bias of a trade regime means .................(Liberalisation, Privatisation, Globalisation)

3. Transformation of public sector into private is known as ....................(Nationalisation, Privatisation, Liberalisation)

4. .................... is the important characteristic of Globalisation.a) Transfer of Public sector units to Private sectorsb) Fast growth of Multinational Corporation and their investmentc) Fast growth of banking sector.

Q.6 Answer in 1 or 2 sentences each : (Any 4)1. What is Globalisation?2. Define liberalisation.3. What do you mean by Privatisation?4. Give any one positive effect of liberalisation.5. Write any two arguments in fevour of Privatisation?

Q.7. Answer in 5 or 6 sentences each : (Any 2)1. Discuss the essential conditions of globalisation.2. Trace various decisions taken by the Government of India towards

Liberalisation after 1991.3. Bring out a case against privatisation.

4

8

8

Best Of Luck

CHAPTER 6 : NEW ECONOMIC POLICY (SET A)

Std. : SSC

ECONOMICS

Marks : 20

Duration : 1 hr.

Q.5 Fill in the blanks by selecting appropriate alternative :1. In 1990-91, total foreign exchange reserve was ............... million.

($ 5,830, $ 8,530, $ 3,580)

2. The Government of India introduced the New Economic Policy in................... .

(1947, 1991, 2001)

3. Expansion and extension of economic activities across politicalboundaries of the country is known as ................. .

(Rationalisation, Liberalisation, Globalisation)

4. The New Economic Policy allows ...................... % or more foreignequity investment in Indian companies.

(51, 99, 1)

Q.6 Answer in 1 or 2 sentences each : (Any 4)1. Define liberalisation.2. What do you mean by Privatisation?3. Write any one positive effect of liberalisation.4. What do you mean by Globalisation?5. Write any two cases against Privatisation?

Q.7. Answer in 5 or 6 sentences each : (Any 2)1. Explain the argument in favour of privatisation.2. Discuss the essential conditions of globalisation.3. Trace various decisions taken by the Government of India towards

Liberalisation after 1991.

4

8

8

Best Of Luck

CHAPTER 6 : NEW ECONOMIC POLICY (SET B)

Std. : SSC

ECONOMICS

Marks : 20

Duration : 1 hr.