Globalisation, free trade and protection — practice question

India contains several fast-growing industries, among them construction, engineering, healthcare and retail. Its high-technology industry, often called ‘hi-tech’, is the quickest expanding of all, creating more than 200 000 jobs each year. It now provides employment for over 10 million people and generates exports valued at US$90 billion annually. Businesses in this industry focus on research and development, electronics and software production. Software production covers applications (apps) for smartphones and tablets. One Indian hi-tech firm has created an app that enables users to view menus from a range of restaurants, reserve a table and place food orders. The firm now offers the app in several countries, including the Philippines, Turkey and the USA. This Indian hi-tech firm also manufactures electronic equipment in these countries. One reason for expanding overseas is the relatively weak demand for restaurant meals in India. That could soon alter as incomes rise and restaurants step up their advertising, including on the firm’s app. India’s hi-tech industry is centred in Bengaluru (Bangalore). The city has close connections with universities and multinational companies (MNCs), and it is home to some of India’s most innovative entrepreneurs. Some of these entrepreneurs originate from other countries. Immigrants have an important part in the formation and expansion of hi-tech firms across the world. Several factors can persuade entrepreneurs to relocate to another country, including a low tax rate on profits. Growth in an economy may affect how many new firms are established. In turn, economic growth is affected by the amount firms spend on capital goods (investment). Fig. 1 shows India’s economic growth rate and the percentage change in investment in India between 2008 and 2014. India’s economic growth rate reached its highest point in 2010. It then declined in 2011 and 2012, partly because interest rates rose and there were worries about future economic prospects. Fig. 1 Economic growth rate and percentage change in investment in India 2008-14. The vertical axis is marked ‘%’. The horizontal axis lists the years 2008, 2009, 2010, 2011, 2012, 2013 and 2014. A dashed line shows ‘Economic growth rate (%)’. A solid line shows ‘Change in investment (%)’.