CBSE Class 12 · Globalisation

Economic Consequences of Globalisation and India (Class 12 Political Science)

Updated 16 October 2026 · Fact-checked

Economic globalisation means greater flows of commodities, capital and ideas between countries as import and investment restrictions fall, though movement of people stays limited by visas. It divides opinion: critics fear state withdrawal will impoverish the weak, while advocates expect faster growth. India moved from post-independence protectionism to economic reforms in 1991.

Goods, capital and ideas now move freely between countries, but the movement of people is still held back by visa limits.

Illustration drawn for QuestionBuddy.

Understand Economic Consequences of Globalisation

Why this topic matters. The economic dimension shapes most of the debate on globalisation, and India's experience is a common link question. Board papers ask for four economic consequences (6 marks), whether globalisation has been a boon for India (2 marks), and its effects on local markets. NCERT sections: 'Economic consequences' and 'India and globalisation', with the call-centre box.

1. What economic globalisation is (and is not).

It is often linked to the IMF and WTO and their role in shaping economic policies, but NCERT says this view is too narrow: many other actors are involved.
A broader view asks about the distribution of gains: who gets the most, who gets less, and who loses.
It usually means greater economic flows between countries; some are voluntary, some forced by international institutions and powerful countries.

2. The four flows in the economy.

Flow	What has happened
Commodities	Restrictions on imports have been reduced; more trade across the globe
Capital	Restrictions on capital movement reduced; investors in rich countries can invest in developing countries for better returns
Ideas	Spread of the internet and computer-related services
People	Not the same increase: developed countries guard their borders with visa policies so that outsiders cannot take their citizens' jobs

Same policies, different outcomes: similar policies adopted by governments everywhere have produced vastly different results, so context matters more than generalisation.

3. The great division of opinion.

Position	Argument
Social justice critics	State withdrawal benefits only a small section and impoverishes those who relied on the government for jobs and welfare (education, health, sanitation); they call for 'social safety nets' for the economically weak
Movements against forced globalisation	Safety nets are insufficient or unworkable; forced globalisation would ruin weaker countries, especially their poor; some economists call it 'recolonisation' of the world
Advocates	De-regulation produces greater growth and well-being for larger sections; more trade lets each economy do what it does best, benefiting the world; globalisation is inevitable
Moderate supporters	Globalisation is a challenge to be met intelligently, without accepting it uncritically

What no one denies: greater interdependence and integration between governments, businesses and ordinary people. NCERT's cartoon voice adds a sharp point: talk of a 'safety net' assumes that some people will fall.

4. India and globalisation: a timeline.

Period	India's experience
Centuries before colonialism	Flows of capital, commodities, ideas and people were part of Indian history
Colonial period	Britain's imperial aims made India export primary goods and raw materials and buy finished goods
After independence	Protectionism: make things ourselves and restrict imports so domestic producers could learn
Results of protectionism	Some advances, but health, housing and primary education were neglected; growth was sluggish
1991	Responding to a financial crisis and wanting higher growth, India launched economic reforms, steadily de-regulating sectors including trade and foreign investment

NCERT's test for the reforms: not high growth rates alone, but whether the benefits of growth are shared so that everyone is better off.

5. The call-centre box. A report by Ranjeetha Urs (*The Hindu*, 10 January 2005) describes a call-centre job: it offers insight into American culture, but some callers are abusive when they learn their call reached India, seeing Indians as having taken their jobs. It shows the economic and emotional sides of the globalisation of services, and why developed countries guard jobs.

Key quotations

Short lines worth knowing by heart: who says them, when, and why they matter.

who gets the most from globalisation and who gets less
NCERT, Contemporary World Politics, Chapter 7: A broader way of understanding economic globalisation.
Shifts the focus from institutions to distribution.
Some economists have described economic globalisation as recolonisation of the world
NCERT, Chapter 7: The critics' strongest charge.
Use in the 'against' side of a debate answer.
it is not wise to resist the march of history
NCERT, Chapter 7, reporting advocates: The argument that globalisation is inevitable.
Use in the 'for' side of a debate answer.

Economic Consequences of Globalisation: key facts

Economic flows: Commodities import restrictions cut
Capital investment restrictions cut; rich to developing
Ideas internet, computer services
People limited by visa policies; Same policies, vastly different outcomes.
The debate: Critics state withdrawal hurts the poor; safety nets
Movements safety nets not enough; recolonisation
Advocates growth, comparative advantage, inevitable
Moderates respond intelligently, not uncritically; Agreed: more interdependence and integration.
India's path: Colonial raw materials out, finished goods in
Post-1947 protectionism; neglect of health, housing, primary education; sluggish growth
1991 financial crisis, reforms, de-regulation of trade and foreign investment; Test: are benefits shared?

Commodities	import restrictions cut
Capital	investment restrictions cut; rich to developing
Ideas	internet, computer services
People	limited by visa policies

Critics	state withdrawal hurts the poor; safety nets
Movements	safety nets not enough; recolonisation
Advocates	growth, comparative advantage, inevitable
Moderates	respond intelligently, not uncritically

Colonial	raw materials out, finished goods in
Post-1947	protectionism; neglect of health, housing, primary education; sluggish growth
1991	financial crisis, reforms, de-regulation of trade and foreign investment

How to answer Economic Consequences of Globalisation questions

Economic-consequence questions want distinct consequences with explanation, often four for 6 marks. India questions want the path from colonialism through protectionism to 1991, ending with NCERT's test of shared benefits. Debate questions want both sides and a judgement.

1Open by saying economic globalisation is wider than the IMF and WTO: it is about who gains and who loses.
2List the consequences under flows: trade, capital, ideas, limited movement of people.
3Add the debate: critics, movements, advocates, moderates.
4For India, write the three stages and the 1991 trigger.
5Use a local example (a mall, a call centre, imported goods) when asked about daily life or markets.
6Conclude with NCERT's test: benefits must be shared.

Economic Consequences of Globalisation in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Distribution of gains

Suppose a foreign retail chain opens in a small town. Prices fall and young people get jobs at the store, but three family-run grocery shops nearby close within a year.

Use NCERT's broader view of economic globalisation to analyse this.

Try it first, then show the solutionSolution

Ask who gains: shoppers and new employees.
Ask who loses: small shopkeepers who cannot compete.
Critics would ask for safety nets for those hurt; advocates would point to cheaper goods and jobs.

Answer: Economic globalisation creates winners and losers; the key question is how gains are distributed.

Memory hook: Count the winners and the losers.

Voluntary and forced flows

Suppose one country, short of foreign exchange, borrows from an international institution and, as a condition of the loan, has to cut its import duties. Its neighbour, under no pressure, lowers its duties on its own to attract investors.

Which distinction in NCERT's account of economic globalisation does this illustrate?

Try it first, then show the solutionSolution

Both countries end up with greater economic flows.
The neighbour chose the change freely: a voluntary flow.
The borrower changed under pressure from an international institution: a forced flow.

Answer: NCERT notes that some of the greater economic flows are voluntary and some are forced by international institutions and powerful countries; critics' anger is directed mainly at forced globalisation.

Memory hook: Chosen or imposed? Ask before you judge.

Tricks to remember Economic Consequences of Globalisation

Short memory aids. Say each one aloud once, then use it on a question the same day.

C-M-A-M
Critics, Movements, Advocates, Moderates: the four voices in the economic debate.
Use it when: Debate questions.
Raw-Protect-Reform
India's path: raw materials (colonial), protectionism (after 1947), reforms (1991).
Use it when: India and globalisation.
Safety net = some will fall
NCERT's cartoon voice: a net is only needed if people fall.
Use it when: Critique of safety nets.

Economic Consequences of Globalisation: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: India under colonial rule · 1 mark · MCQBoard level

According to NCERT, as a consequence of Britain's imperial ambitions, India during the colonial period became:
(a) an exporter of finished goods and an importer of raw materials
(b) an exporter of primary goods and raw materials and a consumer of finished goods
(c) a closed economy with no foreign trade
(d) a major source of foreign investment in Britain

Try it first, then show the solutionSolution

NCERT: India became an exporter of primary goods and raw materials and a consumer of finished goods (1 mark).

Answer: (b) an exporter of primary goods and raw materials and a consumer of finished goods

Example 2: Beyond safety nets · 2 marks · Very short answerBoard level

Why do many movements consider social safety nets inadequate, and what do they demand instead? (2 marks)

Try it first, then show the solutionSolution

Safety nets insufficient or unworkable (1 mark).
Demand: halt to forced economic globalisation, which would ruin weaker countries and their poor (1 mark).

Answer: Many movements across the world feel that safety nets are insufficient or unworkable. They call for a halt to forced economic globalisation, because they believe its results would lead to economic ruin for weaker countries, especially for the poor within those countries.

Example 3: Assertion and reason: why protectionism · 1 mark · Assertion-reasonHarder board level

Assertion (A): After independence, India decided to make things itself and not to allow others to export to it.
Reason (R): During the colonial period India had become an exporter of primary goods and raw materials and a consumer of finished goods.
(a) Both A and R are true and R is the correct explanation of A.
(b) Both A and R are true but R is not the correct explanation of A.
(c) A is true but R is false.
(d) A is false but R is true.

Try it first, then show the solutionSolution

NCERT: "because of this experience with the British", India chose protectionism, so R explains A (1 mark).

Answer: (a) Both A and R are true and R is the correct explanation of A.

Example 4: India's experience · 4 marks · Short answerHarder board level

Trace India's experience of globalisation from the colonial period to the reforms of 1991. (4 marks)

Try it first, then show the solutionSolution

Colonial pattern (1 mark).
Protectionism and reasons (1 mark).
Problems of protectionism (1 mark).
1991 reforms and the test (1 mark).

Answer: Flows of capital, commodities, ideas and people go back centuries in Indian history. Under colonial rule, Britain's imperial aims made India export primary goods and raw materials and buy finished goods. After independence, because of this experience, India chose protectionism: it decided to make things itself and to restrict imports so that domestic producers could learn. This brought some advances but also problems: critical sectors such as health, housing and primary education did not get enough attention, and growth was sluggish. In 1991, facing a financial crisis and wanting faster growth, India began economic reforms that steadily de-regulated sectors including trade and foreign investment. NCERT's test of these reforms is not high growth alone but whether the benefits are shared so that everyone is better off.

Example 5: Source-based: a call-centre worker · 4 marks · Source-basedHarder board level

Read the passage (written for this page) and choose the most appropriate answer for each question.

A young graduate in Gurugram answers calls from American customers through the night. She earns more than her parents ever did and has learnt a great deal about American life. Some callers, however, become angry when they realise they are speaking to someone in India, complaining that jobs have been 'stolen'.

(i) Her job is an example of the globalisation of:
(A) commodities (B) services (C) military power (D) territory
(ii) The angry callers' complaint reflects a fear that is also behind:
(A) visa policies of developed countries that protect jobs for their own citizens (B) the World Social Forum (C) protectionism in India after independence (D) the patenting of Neem
(iii) The fact that she gains while some callers feel they lose shows NCERT's point that economic globalisation must be judged by:
(A) the role of the IMF alone (B) who gains, who gains less and who loses (C) the speed of the internet (D) the number of call centres
(iv) Which flow made her job possible?
(A) The free movement of people to the USA (B) The flow of ideas and services through the internet and computer-related services (C) The flow of raw materials (D) Colonial trade

Try it first, then show the solutionSolution

(i) (B): she renders a service to distant clients (1 mark).
(ii) (A): developed countries guard jobs with visa policies (1 mark).
(iii) (B): NCERT's broader view looks at the distribution of gains (1 mark).
(iv) (B): internet and computer-related services (1 mark).

Answer: (i) (B) services; (ii) (A) visa policies of developed countries that protect jobs for their own citizens; (iii) (B) who gains, who gains less and who loses; (iv) (B) the flow of ideas and services through the internet and computer-related services.

Example 6: Long answer: boon or recolonisation? · 6 marks · Long answerHOTS / competency

"For some, economic globalisation promises prosperity; for others, it is recolonisation." Examine both views and give your own conclusion. (6 marks)

Try it first, then show the solutionSolution

What economic globalisation involves (1 mark).
Critics' and movements' view (2 marks).
Advocates' and moderates' view (2 marks).
Conclusion (1 mark).

Answer: Economic globalisation involves greater flows between countries: lower barriers to imports, freer movement of capital so investors from rich countries can invest in developing countries, and the spread of internet and computer services. People, however, move far less freely because of visa policies. Some of these flows are voluntary and some are forced by international institutions and powerful countries.

Critics concerned with social justice warn that state withdrawal may benefit only a small section of the population while impoverishing those who relied on the government for jobs, education, health and sanitation, and they demand social safety nets. Many movements go further: they consider safety nets insufficient or unworkable and call for a halt to forced globalisation, which they fear will ruin weaker countries and their poor. Some economists describe it as the recolonisation of the world.

Advocates argue that de-regulation brings greater growth and well-being to larger sections of the population, that more trade lets each economy do what it does best to the benefit of all, and that globalisation is inevitable. Moderate supporters say it is a challenge to be met intelligently, not accepted uncritically.

My conclusion follows NCERT's caution: the same policies have produced vastly different outcomes in different places. Interdependence is now a fact, so the real question is how to manage globalisation so that its benefits are shared, as NCERT's test for India's reforms suggests.

Where students lose marks in Economic Consequences of Globalisation

The slips examiners see most often, and what to write instead.

Mistake: Listing only benefits
Treating economic consequences as positive only.
Wrong working
Globalisation increased trade, investment and jobs.
Right working
Increased flows plus uneven outcomes, state withdrawal and the critics' concerns.
Do this: Show who gains and who loses.
Usually costs: 1-2 marks.
Mistake: Saying people move as freely as capital
Assuming all four flows grew equally.
Wrong working
Globalisation allows people to work anywhere in the world.
Right working
Movement of people is limited by visa policies of developed countries.
Do this: Remember the visa point.
Usually costs: 1 mark.
Mistake: Skipping the colonial and protectionist stages
Starting India's story in 1991.
Wrong working
India joined globalisation in 1991.
Right working
Colonial pattern, then protectionism, then 1991 reforms.
Do this: Raw-Protect-Reform.
Usually costs: 1-2 marks.
Mistake: No judgement in debate answers
Listing views without concluding.
Wrong working
Some support it and some oppose it.
Right working
Conclude with NCERT's test of shared benefits or a reasoned view.
Do this: End with a clear conclusion.
Usually costs: 1 mark.

Exam tips

Asked in: 2023 board paper 59/3/1 Q28(b) (6 marks, four economic consequences of globalisation); 2026 board paper 59/3/1 Q14 (2 marks, globalisation as a boon for India's economy despite resistance); 2025 board paper 59/5/1 Q15 (2 marks, impact on markets near you); 2024 board paper 59/2/1 Q22(b) (4 marks, two positive effects). Answers here are our own.
Use the four flows to structure consequences.
Always include at least one negative or uneven effect.
Write India's story as three stages ending with 1991.
For 'daily life' or 'markets' questions, give concrete local examples.

Practice questions on Economic Consequences of Globalisation

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

Q1 · 1 mark · MCQBoard level
According to NCERT, the ultimate test of India's economic reforms is:
(a) achieving high growth rates
(b) making sure that the benefits of growth are shared so that everyone is better off
(c) the number of multinational companies in India
(d) the volume of exports
Hint
Growth is not enough on its own.
Answer
(b) making sure that the benefits of growth are shared so that everyone is better off.
Q2 · 2 marks · Very short answerBoard level
State two problems that NCERT links with India's policy of protectionism after independence. (2 marks)
Hint
Neglected sectors; growth rate.
Answer
(i) Key sectors like health, housing and primary education were neglected. (ii) India had a fairly sluggish rate of economic growth.
Q3 · 2 marks · Very short answerHarder board level
Why does NCERT say that viewing economic globalisation only through the IMF and WTO is too narrow? (2 marks)
Hint
Other actors; distribution.
Answer
Because economic globalisation involves many actors besides these institutions, such as companies, investors and workers, and a broader understanding must examine the distribution of gains: who gains most, who gains less and who loses.
Q4 · 1 mark · Assertion-reasonHarder board level
Assertion (A): Similar economic policies adopted under globalisation have produced the same results in all countries.
Reason (R): Governments in different parts of the world have adopted similar economic policies under globalisation.
(a) Both A and R are true and R is the correct explanation of A.
(b) Both A and R are true but R is not the correct explanation of A.
(c) A is true but R is false.
(d) A is false but R is true.
Hint
Same policies, vastly different outcomes.
Answer
(d) A is false but R is true: similar policies have produced vastly different outcomes.
Q5 · 4 marks · Short answerHarder board level
Economic globalisation has created an intense division of opinion. Explain the views of any four groups NCERT describes. (4 marks)
Hint
Social-justice critics; movements; advocates; moderate supporters.
Answer
(i) Those concerned with social justice: state withdrawal may benefit only a small section and impoverish those who depended on the government for jobs and welfare such as education, health and sanitation, so they want social safety nets. (ii) Many movements: safety nets are insufficient or unworkable; forced economic globalisation should be halted because it would ruin weaker countries and their poor; some economists call it recolonisation. (iii) Advocates: de-regulation brings greater growth and well-being to larger sections, more trade lets each economy do what it does best, and globalisation is inevitable. (iv) Moderate supporters: globalisation is a challenge to be met intelligently, without accepting it uncritically.
Q6 · 4 marks · Short answerHOTS / competency
Suppose a medicine factory in your town receives investment from a foreign fund, a weavers' cooperative starts selling sarees online to buyers abroad, and a family-run chemist's shop closes because an online pharmacy sells cheaper. Analyse the economic effects of globalisation using these examples. (4 marks)
Hint
Capital; ideas and commodities through the internet; winners and losers.
Answer
The foreign fund's investment shows the flow of capital: investors in richer countries put money where returns are better, bringing jobs to the town. The weavers selling abroad show how the internet carries goods and ideas across borders, so even small producers can reach distant buyers, and influence does not run only from rich countries to poor. The chemist's closure shows the other side: competition helps consumers with lower prices but can push out small businesses. Together they show NCERT's point that economic globalisation produces gains for some and losses for others, so the distribution of gains, not just their size, decides whether it is good for a community.
Q7 · 6 marks · Long answerHOTS / competency
"The ultimate test of globalisation in India is not high growth but shared benefits." Discuss India's experience of economic globalisation in the light of this statement. (6 marks)
Hint
History, protectionism, 1991, distribution.
Answer
India's encounter with globalisation is old: flows of capital, goods, ideas and people go back centuries. Colonial rule distorted it, making India an exporter of primary goods and raw materials and an importer of finished goods for Britain's benefit.
After independence, India adopted protectionism to build its own producers and avoid dependence. This produced some advances but left health, housing and primary education neglected, and growth remained sluggish. Protection by itself therefore did not deliver well-being for all.
In 1991 a financial crisis and the desire for higher growth led India to begin economic reforms, de-regulating trade and foreign investment. Advocates expected greater growth and well-being for wider sections; critics feared that state withdrawal would benefit a small section and hurt those who relied on public jobs and welfare, and called for safety nets.
NCERT judges that it may be too early to say how good the reforms have been, but sets a clear standard: high growth rates are not enough; the benefits of growth must be shared so that everyone is better off. The statement is therefore valid. Growth is a means, and the success of globalisation in India depends on whether the poor also gain from it.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1.Which two international institutions are commonly linked with economic globalisation?Show answer
The IMF and the WTO.
2.For which kinds of welfare did many people depend on the government, according to the critics?Show answer
Jobs and welfare such as education, health and sanitation.
3.Why do advocates say it is unwise to resist economic globalisation?Show answer
Because it is inevitable: it is not wise to resist the march of history.
4.Why, according to advocates, does greater trade benefit the whole world?Show answer
It allows each economy to do what it does best.
5.Which sectors did protectionism neglect, per NCERT?Show answer
Health, housing and primary education.
6.What is NCERT's ultimate test of India's reforms?Show answer
Whether the benefits of growth are shared so that everyone is better off.

Economic Consequences of Globalisation: frequently asked questions

What are the main economic consequences of globalisation?

More trade, freer capital flows, spread of internet-based services, limited movement of people, and uneven outcomes that divide opinion.

Why are critics worried about economic globalisation?

State withdrawal may benefit a small section and hurt those dependent on public jobs and welfare.

Has NCERT judged the 1991 reforms a success?

It says it may be too early to say how good they have been for India; the test is whether the benefits of growth are shared so that everyone is better off.

What do moderate supporters say?

Globalisation is a challenge to be handled intelligently, without accepting it uncritically.