Economics 4 Marks Question

Human capital is directly related to economic growth. The relationship can be measured by how much is invested into people's educations. For example, many governments offer higher education to people at no cost. These governments realize that the knowledge people gain through education helps develop an economy and leads to economic growth. Workers with more education tend to have higher earnings, which then increases economic growth through additional spending.
A company can help increase human capital and increase economic growth as well. For example, consider a computer programmer working at a technology company; she receives on-site training, attends in-house seminars and the company pays for part of her tuition for higher education. If she decides to stay at the firm, she may develop new ideas and new products for the company.

Following are the negative impacts of liberalisation and globalization on business and industry in India:
i. Urban concentration of growth process- LPG policies have resulted in the concentration of the growth process in urban areas. All MNCs are focusing only on urban areas, where they find conducive infrastructural facilities. This has further widened the rural-urban gulf.
ii. Change in Industrial Structure- Industrial structure of the country has changed in favour of products and services demanded by rich sections of the society.
iii. Closure of Small Units- Hundreds and thousands of tiny and small scale units throughout the country have been forced to close down in face of the growing competition from the MNCs.
iv. The loss to Domestic Industry- Faced with the strong winds of international competition, the domestic industry has lost its feet.
v. Increasing Competition- As a result of changes in the rules of industrial licensing and entry of foreign firms, competition for Indian firms has increased especially in service industries like telecommunications, airlines, banking, insurance, etc.
vi. The destabilisation of Protected Environment- Indian markets are getting destabilised as Indian companies are facing challenges from the massive entry of MNC’s. Even some of the companies finding difficulty in survival. Indian companies are facing takeover threat and subordinate position in joint ventures.

As a form of economic activity, outsourcing has intensified in recent times. Most MNCs, and even small companies, are outsourcing their services to India.
The given statement is correct.
In recent times, outsourcing has intensified because of the growth of fast modes of communication, particularly the growth of Information Technology (IT). Today, voicebased business processes (popularly known as BPO or call centres), record keeping, accountancy, banking services, music recording, film editing or even teaching are being outsourced by companies in developed countries to India where they can be availed at a cheaper cost with reasonable skill and accuracy. Thus, low wage rates and availability of skilled manpower in India made it a destination for global outsourcing after 1991.

At the time of independence, Indian economic conditions were very poor and weak. There was neither much private capital nor did India have international investment credibility so as to attract foreign investment. Moreover, Indian planners did not want to be dependent on foreign capital for economic development. In such a situation, it was only logical that the public sector should take the initiative.
During the planning period, the public sector was given a leading role in industrial development because of the following reasons:
i. Lack of Capital with the Private Entrepreneurs: At the time of Independence, the requirement of capital for diversified industrial growth far exceeded its availability with private entrepreneurs. Accordingly, it became essential for the state to foster industrial growth through public sector undertakings.
ii. Lack of Incentive among the Private Entrepreneurs: The Indian market was comparatively small which discouraged Indian industrialists to invest in major projects (even though they had sufficient capital to invest). Thus, the government promoted the industrial sector.
iii. Socialistic Pattern of Society: Indian planners wanted to develop the Indian economy on a socialist base, so they focused on government-funded major projects.
iv. Social welfare: In India, there were certain projects in which the profit margin was negligible. Thus, the private sector was not interested in such projects, and it was only the public sector which could bring the balanced regional growth with the establishment of government units in the backward areas. This move could increase the employment and income of the people.