EconomicsISC Class 11 · Liberalisation, Privatisation and Globalisation

Globalisation, Structural Changes and Evaluation of LPG (ISC Class 11 Economics)

Updated 17 October 2026 · Fact-checked

Globalisation means integrating the national economy with the world economy through free flows of goods, services, capital, technology and people. In India it meant lower import duties, FDI and FII, current account convertibility, WTO membership and outsourcing. After 1991 the economy saw structural changes: a falling share of agriculture and a rising share of services in GDP, a bigger private sector and greater openness. The LPG policies raised growth but also brought concerns.

Notice how the services block grows the most after 1991 while agriculture shrinks; the sizes shown are approximate.

Illustration drawn for QuestionBuddy.

Understand Globalisation, Structural Changes and Evaluation of LPG

Globalisation: features in India. Reduction of import duties and removal of quantitative restrictions; foreign direct investment (FDI) through the automatic route; foreign institutional investment (FII) in shares and bonds; current account convertibility (1994); membership of the WTO (founder member, 1995); outsourcing; export promotion and SEZs.

Outsourcing. A firm hires another firm (often abroad) to do some activities earlier done by itself (IT services, call centres, accounting, medical transcription), mainly to cut costs. India gained jobs and foreign exchange from outsourcing of services.

Need for globalisation. Access to world markets, capital and technology; competition; larger scale.

Structural changes after 1991. (1) *GDP composition:* agriculture's share fell, services rose most, industry changed little. (2) *Employment:* agriculture's employment share fell more slowly than its GDP share; much new work is in the informal sector and services. (3) *Ownership:* the private sector became the main investor. (4) *Openness:* trade and foreign investment rose relative to GDP. (5) *Financial sector:* private and foreign banks, stock markets and insurance expanded. (6) *Consumption:* wider choice and a growing middle class.

Evaluation of LPG.
*Positive:* higher GDP growth; large foreign exchange reserves; fast growth of services and exports; more competition, better quality and lower prices in many goods; FDI and technology.
*Negative:* agriculture neglected (lower public investment, exposure to world prices); some small industries hurt by imports; job growth slow; inequality (gains concentrated in urban, skilled groups); concerns about selling assets below value; global shocks affect India more.

Balanced view. LPG was needed and brought growth, but supportive policies for agriculture, small industry, jobs and social security are needed for inclusive development.

Globalisation, Structural Changes and Evaluation of LPG: key facts

Openness: Trade-GDP ratio = (Exports + Imports) / GDP x 100 | Per cent; Degree of integration.
Share change: Change in share = Share now - Share earlier | In percentage points; Structural change.
Cost saving from outsourcing: Saving % = (Home cost - Offshore cost) / Home cost x 100 | Per unit; Motive.

How to answer Globalisation, Structural Changes and Evaluation of LPG questions

Describe the feature, give its effect and weigh gains with concerns.

1Define globalisation and list features in India.
2Compute shares or cost savings from the data.
3Present positive and negative effects.
4Close with a balanced conclusion and a supportive policy.

Globalisation, Structural Changes and Evaluation of LPG 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.

Outsourcing

Suppose a foreign bank pays $12 anh o u r f or a c u s t o m er - ser v i ce a g e n t a t h o m e b u t o n l y$ 4 an hour for the same service from an Indian call centre.

What is the cost saving per hour and as a percentage?

Try it first, then show the solutionSolution

Saving = 12 - 4 = $8 per hour.
Percentage = 8 / 12 x 100 = 66.7%.

Answer: $8 per hour, about 66.7%.

Memory hook: Outsourcing goes where the cost is lower.

Tricks to remember Globalisation, Structural Changes and Evaluation of LPG

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

Globalisation: goods, services, capital, technology, people
Five flows.
Use it when: Meaning.
Services rose, agriculture fell
Main structural change.
Use it when: GDP shares.
Growth with concerns
Balance in evaluation.
Use it when: Evaluation.

Globalisation, Structural Changes and Evaluation of LPG: solved examples

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

Example 1: WTO · 1 mark · MCQBoard level

India became a founder member of the World Trade Organisation (WTO) in:
(a) 1947 (b) 1991 (c) 1995 (d) 2005

Try it first, then show the solutionSolution

The WTO began in 1995.

Example 2: Outsourcing · 3 marks · Short answerBoard level

What is outsourcing? State two benefits to India. (3 marks)

Try it first, then show the solutionSolution

A firm gets some work done by an outside firm, often abroad.
Benefits: jobs and foreign exchange.

Answer: Outsourcing is hiring another firm, often abroad, to do activities such as IT services and call-centre work; India gains employment and foreign exchange.

Example 3: Structural change numerical · 6 marks · Long answerHarder board level

GDP shares (%) in the early 1990s and the 2020s: agriculture 35 and 17; industry 27 and 28; services 38 and 55. Employment shares: agriculture 65 and 44; industry 15 and 25; services 20 and 31. Find the changes in percentage points, and the ratio of GDP share to employment share for each sector in the later period. Comment. (6 marks)

Try it first, then show the solutionSolution

GDP: agriculture -18, industry +1, services +17 points.
Employment: agriculture -21, industry +10, services +11 points.
Ratio later: agriculture 17 / 44 = 0.39; industry 28 / 25 = 1.12; services 55 / 31 = 1.77.
Agriculture has far lower output per worker than services: a large share of workers is in low-productivity farming (illustrative data).

Answer: GDP: -18, +1, +17; employment: -21, +10, +11; ratios 0.39, 1.12, 1.77, showing low productivity in agriculture.

Example 4: Trade and investment · 5 marks · Long answerHarder board level

In a year India's exports of goods and services are Rs 70 lakh crore and imports Rs 80 lakh crore with GDP of Rs 300 lakh crore; FDI inflow is Rs 6 lakh crore. Find the trade-GDP ratio, the trade deficit as a share of GDP and FDI as a share of GDP. A decade earlier the trade-GDP ratio was 36%; find the rise in points (illustrative figures). (5 marks)

Try it first, then show the solutionSolution

Trade-GDP ratio = (70 + 80) / 300 x 100 = 50%.
Trade deficit = 80 - 70 = Rs 10 lakh crore = 3.33% of GDP.
FDI share = 6 / 300 x 100 = 2%.
Rise in openness = 50 - 36 = 14 percentage points.

Answer: Trade-GDP ratio 50%; deficit 3.33% of GDP; FDI 2% of GDP; openness rose by 14 points.

Example 5: Evaluate LPG · 6 marks · Long answerHOTS / competency

A student says: "LPG helped the rich and hurt the poor." Evaluate in six points (three for, three against the statement) and give a balanced conclusion. (6 marks)

Try it first, then show the solutionSolution

For: gains concentrated in urban skilled groups; slow job growth; neglect of agriculture.
Against: faster growth gave more resources for poverty programmes; cheaper goods (mobiles, air travel) benefited many; services and exports created jobs for many youth.
Balanced: LPG raised growth and choice, but the benefits were unequal, so inclusive policies are needed.
Policy: investment in agriculture, health, education and social security.

Answer: LPG raised growth and choice, but benefits were uneven, with farm and small-industry concerns; inclusive policy is needed.

Where students lose marks in Globalisation, Structural Changes and Evaluation of LPG

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

Mistake: Writing only advantages of LPG
One-sided.
Wrong working
Positive effects only
Right working
Both effects
Do this: Add concerns.
Usually costs: 1-2 marks.
Mistake: Mixing percentage and percentage points
Terminology.
Wrong working
Agriculture share fell by 18%
Right working
Fell by 18 percentage points
Do this: Use points for differences of shares.
Usually costs: 1 mark.
Mistake: Thinking outsourcing is only inside the country
Narrow view.
Wrong working
Local contract only
Right working
Often to another country
Do this: Include foreign work.
Usually costs: 1 mark.

Exam tips

Use figures from the GDP and employment shares to show the productivity gap.
Mention WTO 1995 and current account convertibility 1994.
Give a balanced ending in evaluation answers.

Practice questions on Globalisation, Structural Changes and Evaluation of LPG

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
Which of these is a feature of globalisation in India?
(a) higher import duties (b) FDI through the automatic route (c) licensing of all industries (d) a fixed exchange rate for all payments
Hint
Openness.
Answer
(b) FDI through the automatic route
Q2 · 3 marks · Short answerBoard level
State three structural changes in the Indian economy after liberalisation. (3 marks)
Hint
GDP, ownership, openness.
Answer
The share of agriculture in GDP fell and that of services rose; the private sector became the main investor; trade and foreign investment rose relative to GDP.
Q3 · 5 marks · Long answerHarder board level
In an economy GDP shares in year A and year B: agriculture 30% and 20%, industry 25% and 24%, services 45% and 56%. Employment: agriculture 60% and 48%, industry 15% and 20%, services 25% and 32%. Find the changes in points and the productivity ratio (GDP share / employment share) for agriculture and services in year B. (5 marks)
Hint
20 / 48 and 56 / 32.
Answer
GDP: -10, -1, +11 points; employment: -12, +5, +7. Ratios in year B: agriculture 20 / 48 = 0.42; services 56 / 32 = 1.75. Services workers produce about four times the output per head of agricultural workers.
Q4 · 4 marks · Short answerHarder board level
A call centre in India charges $5 p er h o u r a g ain s t$ 14 at home for a task needing 40,000 hours a year. Find the annual saving to the foreign firm and the saving as a percentage. The Indian firm pays Rs 300 an hour to its staff at an exchange rate of Rs 80 per dollar; find its gross margin per hour in dollars. (4 marks)
Hint
9 x 40,000.
Answer
Saving = (14 - 5) x 40,000 = $3, 60, 000, w hi c hi s 64.3$ 3.75 an hour, so margin = 5 - 3.75 = $1.25 an hour.
Q5 · 3 marks · Short answerHOTS / competency
A critic of globalisation says that a nation which depends on world markets may suffer from distant crises. Evaluate with two examples of channels (trade, finance) and one safeguard. (3 marks)
Hint
Shocks.
Answer
A global recession cuts export demand (trade channel) and a financial crisis can cause investors to withdraw funds (finance channel). Safeguards include adequate reserves, a diversified export basket and sound regulation.

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.Globalisation means?Show answer
Integration with the world economy.
2.Current account convertibility year?Show answer
1994.
3.India joined the WTO in?Show answer
1995.
4.The fastest-growing sector after 1991?Show answer
Services.
5.Outsourcing aims at?Show answer
Lower cost.

Globalisation, Structural Changes and Evaluation of LPG: frequently asked questions

Is FDI the same as FII?

No, FDI is long-term control; FII is portfolio investment.

Is globalisation reversible?

Policies can change.

Did LPG end poverty?

It helped growth; poverty needs targeted policy.

What is GST?

A national indirect tax introduced in 2017.