MP Board Class 11th Economics Important Questions Unit 4 Development Experience (1947 – 1990) and Economic Reforms Since 1991
MP Board Class 11th Economics Important Questions
Development Experience (1947 – 1990) and Economic Reforms Since 1991 Objective Type Questions
Choose the correct option:
Industrial revolution came first in:
In which year first train ran on rails in India:
Development plans started in India in which year:
(a) 15 August 1947
(b) 1 April 1951
(c) 26 J anuary 1950
(d) 15 July 1969.
(b) 1 April 1951
Which of the following organisation frame 5 year plan:
(a) Yojana Ayog
(b) National development
(c) Finance ministry
(d) Home ministry.
(a) Yojana Ayog
In the year 1951 what % of contribution was from agriculture towards national income:
In India green revolution was successful for:
(a) Wheat and Potato
(b) Wheat and Rice
(c) Cereals and Rice
(d) Pulses and Com.
(b) Wheat and Rice
Small scale industry is:
(a) Labour intensive
(b) Capital intensive
(c) Complementary to large scale industries
(d) None of these.
(a) Labour intensive
Fill in the blanks:
- In India iron production company TISCO was established in the year …………………….
- In case of economic immobility industrial structure is ……………………………
- Before British rule condition of cottage industry was ………………………..
- Indian Poster Act was framed in the year ……………………………
- In India till date use have ……………………… five year plans.
- In India during independence …………………………… was the area on which population independance was least.
- In planning period rate of savings and investment got ………………………………. times increased.
- ………………………….. is the main programme for organisational remedy for agriculture.
- Declaration of National policy for farmers was done in the year …………………………..
- At present only Number of private public sector is ……………………………..
- …………………………….. business has fear of Deflation.
- At present only ………………………. type of industries are reserved.
- Land development
Match the columns:
State true or false:
- During independence 90% of working population was engaged in manufacturing unit.
- Main aim of planning in India was to achieve equality.
- Fourth plan started in 1969.
- Indian agriculture is dependant on Monsoon.
- NABARD is the best bank for agriculture.
- Raw materials were exported during British rule.
- In 1951 estimated age was 32 years.
- First railway train ran in India from Bombay to Thane.
- Chairman of Planning commission is President.
- At present Planning commission has been discontinued in India.
- Zamindari eradication Act was enforced first in Chennai in 1951.
- Green revolution is related to food grains.
- India is exporter of petroleum.
- In 1991 India’s devaluation took place in three phases.
Answer in one word:
- Main problem arised due to partition of country?
- When did Air transport started in India?
- Who is the chairman of Planning commission?
- Full form of M.R.T.P?
- Iron, Coal, Cement are which type of industry?
- Which are the main crops of India?
- When was New Industrial Policy declared?
- What is selling of goods to other countries called ?
- How are the natural resources utilized in International trade ?
- What is selling of goods at low prices to other nations called ?
- What was trade balance in 1950-51?
- What is called the interaction among economics of the world ?
- When was new economic policy enforced.
- Scarcity of raw material
- Prime Minister
- Monopoly and restrictional business behaviouract
- Primary industry
- Food crops
- Foreign trade
Development Experience (1947 – 1990) and Economic Reforms Since 1991 Very Short Answer Type Questions
Which is regarded as the defining year to mark the demographic transition from its first to the second decisive stage?
1921 is regarded as the defining year to mark the demographic transition from its first to the second decisive stage.
When was India’s first official census operation undertaken?
What is meant by planning?
Planning may be defined as a technique in which a central planning authority seeks to achieve definite objectives and targets with in a specified period of time. Planning is a way of organizing and utilizing country’s resources.
What are miracle seeds?
Miracle seeds are high yielding variety (HYV) seeds. Miracle seeds are good quality seeds and plants that grow out of these seeds give high yield. The use of miracle seeds has made substantial contribution to improvement in agriculture productivity.
What is marketable surplus?
The proportion of agricultural produce which is sold in the market is called marketable surplus.
Why, despite the implementation of green revolution, 65 per cent of our population continued to be engaged in the agriculture sector till 1990?
The season was that the industrial sector and the service sector did not absorb the people working in the agricultural sector.
How many members are there in WTO?
There are 149 members in 11th December, 2005.
What is the major function of RBI?
Preparing and Implementing monetary policy.
What is quantitative restriction?
Quantitative restrictions refer to non tariff barriers imposed on the quantity of imports and exports.
What were the aim of British colonial period in India?
Colonial government, followed the policies of protection and promotion of the economic interests of their home country than developing the Indian economy.
In which state cotton textile Industries were localized before Independence?
Whether Indian economy was industrial based or agricultural based at the time of Independence?
Why was Indian economy called agricultural based before independence?
Because 85% of population was dependent on agriculture.
What was the main occupation of people of the nation during colonial period?
What is meant by primary sector?
Primary sector of an economy makes direct use of natural resources or exploits natural resources. This includes agriculture, forestry, fishing and mining.
What is secondary sector?
Secondary sector includes those industries which converts one product into other and manufactures it. For e.g., Cotton textiles produced from raw cotton.
What is tertiary sector?
Tertiary sector includes those industries which provide services like Banking, Insurance, communication, transportation etc.
What was the contribution of primary sector in national income at the time of Independence?
58 – 7%.
What was the contribution of secondary sector in national income at the time of independence?
14 – 3%.
What was the contribution of tertiary sector in national income at the time of independence?
What is commercialization of Agriculture?
Commercialization of agriculture means encouraging farmers to use cash crops in place of traditional crops.
When was TATA Iron and Steel Company founded?
What is capitalist Industry?
Capitalist industries are those industries which manufactures machines and tools required for production of products of daily use.
What was the literacy rate of India at the time of Independence?
What is public sector?
Public sector means those industries which are in ownership of government.
What is Gross Domestic Product?
The monetary value of produced goods and services of an economy in a financial year is called Gross Domestic Product.
What is capitalism?
The economic system in which economic decisions, market forces activities are taken by private ownership.
What is socialism?
The economic system in which all economic decisions are taken by government, for social welfare.
What is mixed economy?
Mixed economy is economic system which comprises of features of capitalism and socialism.
Economic planning is the feature of which economic system?
Which medium was selected by Indian government for economic development after Independence?
On whose ideals second five year plan of India based?
Second five year plan was based on Ideals of Shri Prashant Chandra Mahalanovis.
Who is the chairman of planning commission?
When was planning commission formed by India?
What is the duration of planning commission in India?
When was economic planning started in India?
Economic planning was started on 1st April 1951 in India.
When was Green Revolution started in India?
In 1966 – 1967.
What is self reliance?
Self reliance means not depending on foreign aid for economic development of a nation.
What is devaluation of rupee?
Devaluation refers to fall in the official value of a currency with respect to foreign currency.
What is Green revolution?
Green revolution means to improve techniques of agricultural production and increase the agricultural production.
What is meant by land reforms?
Land reforms means the steps used to remove the limitations of land ownership.
What in Chakbandi?
It is the rearrangement of land holdings among different owners of a land in a manner such that the land holdings of individual, instead of being scattered become consolidated at one place.
What is co – operative farming?
Co – operative farming means that system in which various farmers unite together in the form of co – operative society and performs fanning.
What is industrial policy?
Industrial policy is the policy of government which helps the government to regulate the activities of industrial units.
What is license?
License means the written permission given by government to industries to produce or sell a specific types of product.
What is small scale and cottage Industry?
Those industries which requires less capital and more labour is called small scale and cottage industries.
What is Import substitution?
Import substitution implies domestic production of those goods which the economy has been importing from rest of the world.
What is Import duty?
The tax which is imposed to minimize the imports is called import duty.
Define balanced development?
Balanced development means planned development in all sectors.
What is meant by economic reforms?
Economic reforms refer to a set of economic policies directed to achieve improve¬ment in economic efficiency.
When was new economic policy implemented?
What is liberalization?
Liberalization of economy means its freedom from direct or physical controls imposed by the government.
What is privatization?
Privatization is the general process of involving the private sector in the ownership or operation of a state owned enterprise.
What is Globalization?
It is defined as a process associated with increasing openness, growing economic interdependence and deepening economic integration in the world economy.
How many industries of public sector were included in the industrial policy of 1956?
What is Direct tax?
Those taxes whose burden cannot be shifted to other persons is called direct tax.
What is Indirect tax?
Those taxes whose burden can be shifted to other persons is called indirect tax.
Why is entertainment tax an indirect tax?
The burden of entertainment tax can be shifted to other persons.
What is balance of payments?
Balance of payment means proper maintenance of records of economic transactions of a financial year with remaining world.
What is denationalization?
The policy through which ownership of public sector is transferred to private sector is called denationalization.
When was WTO formed?
What is foreign trade?
Trade between different countries (Import and Export) is called foreign trade.
What is special economic zone?
A special economic zone is an area in which business and trade laws are different from rest of country.
What is deficit finance system?
It is that situation when expenditure of government is more than revenue.
What is trade policy?
Trade policy means that policy of government which affects the import and export trade.
What is Direct foreign Investment?
Direct foreign investment means foreign investment in internal infrastructure, machineries and institutions of a country.
What is multiple trade agreement?
When any country makes agreement with two or more countries for give and take of goods and services then it is called multiple trade agreement.
What is fiscal reforms?
Fiscal reforms or tax reforms are concerned with the reforms in government revenue and government expenditure which are collectively known as fiscal policy.
When was new economic policy declared?
On 26th July 1991.
Which law was brought in place of FERA?
Development Experience (1947 – 1990) and Economic Reforms Since 1991 Short Answer Type Questions
What was the focus of the economic policies pursued by the colonial government in India? What were the impacts of these policies?
India was under British rule for almost two centuries before attaining independence in 1947. The main focus of the economic policies pursued by the colonial government was to make India a mere supplier of raw materials for Britain’s own industrial base which was undergoing rapid expansion. The Indian Economy was exploited in order to promote British industries.
Such exploitative policies created a lopsided structure in the Indian Economy by reducing it to a supplier of raw materials and consumer of finished industrial products imported from Britain. The impacts of these policies are discussed below:
1. Low Level of Economic Development:
During the colonial rule, Indian Economy experienced very low level of economic development reason that:
(I) The British government was more concerned with the economic interests of their home country.
(II) Be hue the colonial rule, Indian Economy was predominantly agriculture based but manufacturing activities of various kinds were also present.
(III) The handicrafts industries of India were well known for their quality of material as well as craftsmanship. British policies ruined these small manufacturing industries.
(IV) These industries faced a stiff competition from the British machine made products and India was reduced to a cheap raw material provider. This resulted in low growth of aggregate output which was less than two per cent according to studies along with a half per cent growth in per capita output per year.
2. Agricultural Backwardness:
Under the colonial rule, India was basically an agrarian economy with nearly 85% of its population employed in agriculture sector. Nevertheless, the growth of the agriculture sector was very poor and productivity was low. This was due to the prevalence of various systems of land settlement, particularly zamindari system. Under this system, the zamindars (owners of land) got the profit from land cultivation who collected rent from the cultivators regardless of the economic condition of the cultivators.
3. Deindustrialisation of India Economy:
The status of industrial sector during the British rule can be well defined by the term ‘ Systematic deindustrialization’ to make India an exporter of raw materials and importer of finished goods from Britain. The deindustrialization can be attributed to the downfall of India’s handicraft industry and the slow growth of modem industry due to lack of investment.
Name some notable economists who estimated India’s per capita income during the colonial period?
Dadabhai Naoroji, William Digby, Findlay Shiras, R.C. Desai and Dr. VKRV Rao.
What were the main causes of India’s agricultural stagnation during the colonial period?
Under the colonial rule, India was basically an agrarian economy with nearly 85% of its population employed in agriculture sector. Navertheless, the growth of the agriculture sector was very poor and productivity was low. This was due to the following causes:
1. Land Settlement and Revenue Settlement System:
Under the colonial rule, India was basically an agrarian economy with nearly 85% of its population employed in agriculture sector. Nevertheless, the growth of the agriculture sector was very poor and productivity was low.
2. Commercialisation of Agriculture:
In order to provide British industries with cheap raw materials. The Indian farmers were forced to grow cash crops (like indigo and cotton required by British textiles industries) instead of food crops (like rice and wheat). This led to the commersialisation of Indian agriculture,
3. Lack of Irrigation Facilities and Resources:
Besides the above factors, Indian agricultural sector also faced lack of irrigation facilities, insignificant use of fertilizer, lack of investment, frequent famines and other natural calamities etc, that further exaggerated the agricultural performance and made it more vulnerable.
Name some modern Industries working at the time of Independence?
- Cotton textile industries
- Jute industry
- Iron and steel industry.
What was the two – fold motive behind the systematic deindustrialization effected by the British in pre – independent India?
The following are the two – fold motive behind the systematic deindustrialization effected by the British:
1. Making India a supplier of Raw materials:
The main motive of the British Government was to make India a mere supplier of cheap raw materials to feed its own rapidly expanding industrial base.
2. Making India a Market for Finished Goods:
Another important objective of the British Government in deindustrialising Indian Economy was to use India as a large and growing market to sell the finished good produced by the British industries so that their industries never faced a demand shortage and could keep flourishing.
The traditional handicrafts industries were ruined under the British rule? Do you agree with this view? Give reasons in support of your answer?
Yes, we agree with the above statement that the traditional handicrafts industries were ruined under the British rule. The following are the reasons:
1. Discriminatory Tariff Policy:
The British rule used India both as a source of cheap raw materials as well as easy accessible market for their finished products. Thereby, they imposed heavy tariffs (export duties) on India’s export of handicraft products, while allowed free export of India’s raw material to Britain and free import of British finished products into India.
2. Competition from machine-made British Goods:
The demand for the handicrafts products experienced a downward trend in the domestic markets as well. This was due to stiff competition from the machine – made textiles from Britain. The goods produced mechanically in Britain using cheap raw material from India ware comparatively lower in price and of superior quality than the Indian handicraft goods. This narrowed the market for Indian handicrafts industries.
3. Emergence of Western Lifestyle:
The British rule in India popularized western lifestyle in India. There was an emergence of a new section of population (consisting mainly of zamindars) in India who liked the British goods and also promoted their use to please the British government.
This section used to spend lavishly on the British products that provided impetus for the development of British industries at the cost of the domestic industries. Hence, gradually Indian handicrafts industries perished away.
What objectives did the British intend to achieve through their policies of infrastructure development in India?
It is true that under the British rule. There was significant infrastructural development in the country. But the actual motive of the British behind the infrastructure development was only to serve their own colonial interests. British rule brought about development in the areas of transport and communication.
1. The roads served the purpose of mobilizing the army within India and facilitating transportation of raw materials from different parts of the country.
2. Ports, and ports were developed for easy and fast exports to and imports from Britain.
3. Railways were introduced and developed for commercialization of agriculture and for the transportation of finished goods of British industries to the interiors of India. Railways assisted British industries to widen the market for their finished product.
4. Posts and telegraphs were developed to enhance the efficiency and effectiveness of the British administration in maintaining law and order.
5. Hence, The aim of infrastructural development was not the growth and development of the Indian Economy but to serve the economic and political interests of Britain.
Critically appraise some of the shortfalls of the industrial policy pursued by the British colonial administration?
The focus of the industrial policies pursued by the colonial government in India was to make our country a mere supplier of Britain’s own flourishing industrial base. The policies were concerned mainly with the advancement of the British economic and political power. The industrial policy pursued by the British colonial administration had the following shortfalls:
1. Neglect of Indian Handicraft Industries:
The British followed a discriminatory tariff policy under which they imposed heavy tariffs (export duties) on India’s export of handicraft products while allowed free export of India’s raw material to Britain and free import of finished products from Britain to India.
2. Lack of investment in Modern Indian Industries:
The modem industries in India demanded investments in capital goods and technology that were beyond the means of Indian investors. British Government was least interested in investing in Indian industries as they never wanted India to become self reliant.
What do you understand by the drain of Indian wealth during the colonial period?
Dadabhai Naoroji propounded the theory of ‘Drain of Wealth’ in the 19th century. By the following ways drain of Indian worth during the control period:
1. The colonial period was characterized by the exploitation of Indian resources.
2. The primary motive of Britain to conquer India was to own a perennial source of cheap raw materials to feed its own industrial base in Britain.
3. On the other hand, income of Indians was spent on expensive imports of finished goods from Britain which made Britain richer on the expense of India.
4. Further, British Government used India’s manpower to spread its colonial base outside India. Indians served in the British army at lower salaries than their British counterparts.
5. The expenses of war and administrative expenses that were incurred by the British Government to manage the colonial rule in India were drawn from the revenue collected from Indians and the export surplus generated through foreign trade of India. Thus, the British rule drained out Indian wealth for the fulfilment of its own interests.
Highlight the salient features of Indias pre – independence occupational structure?
The occupational structure, which refers to the distribution of population working its different sectors, showed no variation throughout the British rule. The following are the salient features of India’s pre – independence occupational structure.
1. Predominance of Agriculture:
Under the colonial rule, India was basically an agrarian economy, with nearly 70-75% of its workforce engaged directly or indirectly in agriculture. Due to massive poverty and widespread illiteracy during the colonial rule, a large proportion of the population was engaged in farming and related activities to earn their subsistence.
2. Lack of Opportunities in Industry:
Only a small proportion of population was employed in manufacturing sector. Nearly 10% of the total workforce was engaged in manufacturing and industrial sector. This was due to the stiff competition that the Indian industries faced from the machine made cheap goods from Britain.
3. Unequal Distribution among sectors:
The three sectors of Indian Economy, i.e., agricultural, industrial and service sector were unequal in terms of occupational structure. While the agricultural sector employed majority of the workforce, the other two sectors were not contributing much to employment with 10% of the workforce in industries and 15-20% in service sector.
Underscore some of the India’s most crucial economic challenges at the time of independence?
The exploitative colonial rule created a damaging effect on almost every sphere of Indian Economy. As a result, India faced major economic challenges at the time of independence such as:
1. Low Agricultural Productivity:
During the colonial rule Indian agricultural sector was exploited by the British to serve their own interest. As a result, Indian agricultural sector experienced stagnation, low level of productivity and lack of investment in technology, fertilizers and irrigation facilities.
This resulted in poor condition of landless farmers and peasants. Commercialization of agriculture created shortage of food grains in India. Thus, the immediate concern for India was to develop its agricultural sector and its productivity to become self reliant and ensure food security for people.
2. Under – developed Industrial sector:
India failed to develop a sound industrial base during the colonial rule. There was a need of huge capital investments, infrastructure, human skills, technical know how and modem technology for industrialization. Further, due to stiff competition from the British industries.
India’s domestic industries had failed to sustain. Thus, development of small scale and large scale industries simultaneously while facing capital shortage was a matter of concern for India.
3. Inadequate Infrastructure:
Although, the British brought about significant infrastructural development in the country, but it was done only for serving their interests and was not sufficient to improve the performance of agricultural and industrial sector in the country. Also there was a need to upgrade and to modernize the existing infrastructure to enhance its efficiency and effectiveness.
Indicate the volume and direction of trade at the time of independence?
During the colonial rule, the British followed a discriminatory tariff policy under which they imposed heavy tariffs (export duties) on India’s export of handicraft products, while allowing free export of India’s raw material to Britain and free import of British products to India.
1. Volume of Trade:
The British policies made Indian handicrafts exports costlier and its international demand fell drastically. Consequently, India’s export basket during the colonial rule comprised mainly of primary products like sugar, jute, raw silk, indigo, wool, etc. And the imports comprised of finished consumer goods like cotton silk and woollen clothes and capital goods like light machinery from Britain. India registered large export surplus during the colonial period.
2. Direction of Trade:
As the monopoly power of India’s export and import rested with Britain, so, more than half of India’s trade was restricted to Britain and the remaining imports were directed towards China. Persia (Iran), and Ceylon (Sri Lanka). The surplus generated from India’s foreign trade was not invested in Indian Economy; rather it was used for administrative and war purposes. This led to the drain of Indian wealth to Britain.
Were there any positive contributions made by the British in India? Discuss?
Yes, there were various positive contributions that were made by the British in India though these contributions were not made with the objective of welfare for Indians but for the British interests. Some of the positive contributions made by British are:
1. Introduction of Railways:
The introduction of railways by the British was a breakthrough in the development process of Indian Economy. It opened up the cultural and geographical barriers and facilitated commercialization of Indian agriculture.
2. Introduction of commercialization of Agriculture:
The introduction of commercial agriculture is an important breakthrough in the history of Indian agriculture. Prior to the advent of the British, Indian agriculture was of subsistence nature. But with the commercialization of agriculture, the agricultural production was carried out as per the market requirements leading to higher agricultural incomes.
3. Introduction of free trade:
British forced India to follow free trade pattern during the colonial rule. This is the key concept of globalization today. The free trade provided domestic industry with a platform to compete with the British industries.
4. Development of Infrastructure:
The infrastructure developed in India by the British proved to be useful for Indian people. The telegram and postal services served Indian public and the roads built by British provided connectivity to interior regions.
Why did India opt for planning?
Following are the reason for planning:
With the objective that the government would undertake comprehensive planning for the nation as a whole, the planning commission was established in 1950:
1. After independence, India had to make an important choice of economic system and opt either for. capitalism or socialism. India finally opted for socialism as the Indian leaders were inspired by the extra – ordinary success of planning in Soviet Union.
2. Indian planners understood the death of private capital at the eve of independence and the lack of incentive for private sector to operate in social sector where profit making could not be the main motive.
3. India went for planning so as to adopt the socialist idea with a strong emphasis on public sector but also allow for active private sector participation in non – priority industries through a democratic framework.
4. Planning was undertaken to make public sector work towards the basic economic framework and to encourage private sector firms for their active contribution to the economic growth.
Why should plans have goals?
- Every plan should have specified goals, which it seeks to pursue.
- Goals are the ultimate targets, the achievement of which ensures the success of plans.
- A plan specifies the means and ways to allocate scarce resources in an optimum manner so as to achieve these desired goals.
- Without specific goals, a plan would be directionless and resources would not be utilized in a proper manner without wastage. There should be following goals:
- Economic Growth
- Self reliance
- Economic and social equality.
Explain subsidies to farmers and give arguments in favour and against of it?
Subsidies refers to availability of inputs at lower prices than the market price. Economic justification of subsidies in agriculture is at present a hotly debated question.
- Govemment should provide agricultural subsidies to farmers as farming requires latest technologies.
- In terms of equity subsidies are very much essential. .
- It is a huge burden on government finances.
- Subsidies are meant to benefit farmers but they are also benefitting various industries.
What is Green Revolution? Why was it implemented and how did it benefit the farmers? Explain in brief?
The introduction of High Yielding Varieties (HYV) of seeds and the increased use of fertilizers, pesticides and irrigation facilities are known collectively as the Green Revolution, which resulted in the increase in crop yield needed to make India self-sufficient in food – grains. Various land reforms were also undertaken in order to make green revolution successful. Thus, Green revolution included the following measures :
- Use of High Yielding Varieties (HYV) of seeds.
- Increase in irrigation cover.
- Use of insecticides and pesticides.
- Consolidation of holdings.
- Rural electrification.
- Improvement in rural infrastructure.
- Agricultural credit facilities.
- Use of chemical fertilizers.
Green Revolution was implemented because of the following reasons:
1. Food Security:
The colonial rule had made Indian agriculture suffer from low level of productivity especially in foodgrains as more emphasis during colonial rule had been on cash crops which served as raw material to British industries.
2. Low Irrigation Facility:
The land area under irrigation cover was only 17% in 1951. The major part of agriculture was dependent on rainfall from monsoon and in case of scanty rainfall or delayed monsoon, crops were destroyed due to lack of proper irrigation facilities. This caused low level of agricultural production.
3. Conventional Methods:
The use of conventional inputs and absence of modem techniques led to low level of agricultural productivity.
4. Self – reliance:
Due to low productivity and rapidly growing population, there was foodgrains shortage which had to be imported from United States and other countries. This drained away scarce foreign reserves.
Explain full employment as long term objective of planning?
The main objective of economic planning in the economy is aimed at full employment. Full employment is called when the willing people get work and also who are ready to work at the prevailing wage rate. This means that not only the rich people should take part in the process of economic growth but also the common people should take part equally. Economic growth should not be jobless otherwise this gives birth to disappointment, dissatisfaction and terrorism among the general public.
Why was it necessary for a developing country like India to follow self – reliance as a planning objective?
Self – reliance means avoiding imports of those goods which could be produced in domestically. Achieving self – reliance was considered important for a developing country like India to reduce the county’s dependence on foreign products, specially for food.
Dependence on foreign goods and services could make the country vulnerable to foreign interference in economic policies and hence, result into loss of economic sovereignty. This was a great fear after being under colonial rule for such a long time.
It was also considered important as imports may promote economic growth and consumer satisfaction but this may be at the cost of domestic infant industries. Further, imports drain away the scarce foreign reserves that are of prime importance to any developing and underdeveloped economy.
What is sectoral composition of an economy? it is necessary that the service sector should contribute maximum to GDP of an economy? Comment?
The sectoral composition of an economy is the proportionate contribution of different sectors to the total Gross Domestic Product (GDP) of an economy during a year. It gives the share of agricultural sector, industrial sector and service sector in GDP. It is necessary that at the later stages of development, the service sector should contribute the maximum to the total GDP.
There exists a phenomenon called structural transformation which implies that gradually the country’s dependence on the agricultural sector will shift from the maximum to minimum and at the same time, the share of industrial and service sector in the total GDP will increase.
Why was public sector given a leading role in industrial development during the planning period?
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 the public sector that could take the initiative.
The following are the reasons that explain the driving role of the public sector in the industrial development:
1. Heavy Capital Requirement:
There was a need of large amount of investment in infrastructure and heavy and basic industries for economic development. Private sector in India at the eve of independence did not have the capacity to invest such a big amount. Thus, the government played the leading role to provide the basic framework of heavy industries and infrastructure through public sector to facilitate the private sector.
2. Low Level of Demand:
After the exploitative colonial rule, the majority of Indian population was left poor and had very low purchasing power. Consequently, there was low level of demand and so there was no inducement for private sector to undertake investment. This could result into low level of employment in private sector thereby reducing demand even more. The only way to encourage demand was by public sector investments.
3. Social Welfare:
Majority of Indian population was suffering from abject poverty at the inception of planning. Hence, the strategic industries and those involving social considerations could not be left to the private sector which would have operated with a profit motive rather than social welfare motive.
Explain the statement that Green Revolution enabled the government to procure sufficient foodgrains to build its stocks that could be used during times of shortage?
The use of modem technology, extensive use of fertilizers, pesticides and HYV seeds which together formed the Green Revolution led to an impressive rise in foodgrains production. The agricultural productivity and average yield also increased considerably.
The other measures accompanying Green Revolution such as the development of marketing system, abolition of intermediaries and subsidized credit for farm investment provided greater portion of marketable surplus to farmers.
While subsidies encourage farmers to use new technology, they are a huge burden on government finances. Discuss the usefulness of subsidies in the light of this fact?
Subsidy in agriculture means providing some important inputs to farmers at a concessional rate that is much lower than its market rate. During 1960s, in order to adopt new technology, HYV seeds and use of modem fertilizers and insecticides, farmers were provided inputs at a subsidized rate. The following arguments are given to prove the usefulness of subsidies.
- It was necessary to use subsidies to provide an incentive for adoption of the new HYV technology by farmers especially the small fanners.
- Any new technology is considered as being risky by farmers. Subsidies were, therefore, needed to encourage farmers to adopt the new technology initially.
- Farming in India is still a risky business and subsidies provide hedging against the risk of climatic conditions.
- Most farmers are very poor and they will not be able to afford the required inputs without subsidies.
- Subsidies bring about equity between rich and poor farmers by enabling the poor farmers to use modem technology and inputs.
On the other hand, some economists believe that once subsidies should be phased out since their purpose has been served and the technology is now widely adopted due to its profitability. They argue that there is no case for continuing with subsidies as it does not benefit the target group and it is a huge burden on the government’s finances. They give the following arguments against subsidies in agriculture.
- Subsidies are benefitting the fertilizer industry more than farmers and it is not making any efforts towards increasing its efficiency as it is protected from market competition by subsidies.
- Subsidies are mainly being availed by big farmers in affluent regions who do not actually need them.
Though public sector is very essential for industries, many public sector undertakings incur huge losses and are a drain on the economy’s resources, Discuss the usefulness of public sector undertakings in the light of this fact?
Although, the inefficiency and low productivity in Public Sector Undertakings (PSUs/ Paralle) may lead to wastage of the scarce resources and result in huge losses forming a constraint on economic resources of the country, they do have some advantages.
1. Social Welfare:
The basic objective of the PSU was to provide goods and services that add to the welfare of the society without looking for profits. Public welfare facilities such as schools, hospitals, railways, electricity etc. are necessary to be provided at reasonable cost to the people of the country.
2. Heavy Investment and Long Gestation Projects:
Projects like heavy and basic industries, power generation, railways, etc. need a very huge initial investment and have long gestation period. Hence, government is the most appropriate to invest in these projects under public sector as private sector is reluctant to enter such ventures due to the high risk involved.
3. Basic Infrastructure:
An important ideology that was inherited in the initial Five Year Plans was that the public sector should lay down the basic infrastructure required for industrialization that would encourage and facilitate the private sector at the later stage of industrialization.
4. Reduce Exploitation:
It is believed that in public sector units the labour is not exploited as it is protected by the government. The consumers are also not exploited by charging high prices or serving low quality goods as PSUs/parallel do not operate with profit motive.
Explain how import substitution can protect domestic industry?
In the initial seven five year plans, India opted for import substitution strategy, which implies discouraging the imports of those goods that could be produced domestically. Import substitution strategy not only reduces an economy’s dependence on the foreign goods but also provides impetus to the domestic firms. Government provides various financial encouragements, incentives, licenses to the domestic producers to produce domestically the import substituted goods.
This would not only allow the domestic producers to sustain but also enables them to grow as they enjoy the protective environment. They need not to fear from any competition and also not to worry about their market share as license gives them the monopoly status in the domestic market.
Being monopolist, they earn more profits and invest continuously in R & D and always look for new and innovative techniques. This gradually improves their competitiveness and when they are exposed to the international market they can survive and compete with their foreign counterparts.
Why and how was private sector regulated under the IPR1956?
The Industrial Policy Resolution (IPR) 1956 was adopted in order to achieve the aim of a socialist state with government controlling the major strategic industries of the economy. According to this resolution, industries were classified into following three categories:
Those industries that were established and owned exclusively by the public sector.
Those industries in which public sector would perform the primary role while the private sector would play the secondary role.
Those industries that are not included in category 1 and category 2 were left to the private sector. The government kept an indirect control on the industries in the private sector through the policy of industrial licensing.
In order to initiate a new industry or expand existing capacity, private entrepreneurs were supposed to obtain license from the government. Hence, the government fully controlled the private sector either directly or indirectly through the IPR1956.
How is RBI controlling the commercial banks?
RBI controls the commercial banks through the following measures:
1. RBI Fixes the Bank Rate and Repo Rate:
Bank rate is the interest rate at which the RBI, lend funds to other commercial banks in the country. It is also called the discount rate. In order to control the supply of currency in the economic system RBI often uses the bank rate. On the other hand, Repo Rate is the rate at which commercial banks will borrow the funds from the RBI against the securities.
2. Variable Reserve Ratios:
The commercial banks have to keep a certain proportion of their total assets in the form of liquid assets so that they are always in a position to honour the demand for withdrawal by their customers. These reserve ratios are named as Cash Reserve Ratio (CRR) and a Statutory Liquidity Ratio (SLR).
The CRR refers to the percentage of deposits with the commercial banks which they have to maintain with the RBI in cash form and SLR refers to the percentage of deposits to be maintained as reserves in the form of gold or foreign securities.
3. Fixing Margin Requirements:
The margin refers to the “proportion of the loan amount which is not financed by the bank” This method is used to encourage credit supply for the needy sector and discourage it for other non-necessary sectors by increasing margin for the non-necessary sectors and by reducing it for priority sectors.
Distinguish between the following:
- Strategic and Minority sale?
- Bilateral and Multi – lateral trade?
- Tariff and Non – tariff barriers?
1. Differences between Strategic and Minority sale:
2. Differences between Bilateral and Multi – lateral trade:
3. Differences between Tariff and Non – tariff barriers:
Why are tariffs imposed?
Tariffs are taxes-imposed on the imports by a country for providing protection to its domestic industries. Imposition of tariffs increases the price of imported goods such as customs duty are indirect taxes the burden of which is shifted to consumers in the form of higher price. The rise in price discourages consumption of imported goods by consumers and thus domestic industries get a level playing field to compete with imports from other countries.
Those public sector undertakings which are making profits should be privatized? Do you agree with this view? Why?
Many of public sector units have become chronically sick and thus cause a huge drain on the exchequer, they also keep resources locked, preventing these from being put to productive use. Hence loss making sick PSUs/should be privatized instead of wasting resources in trying to revive them.
On the other hand, the profit making PSUs should not be privatized only for drawing out funds to cover the deficit in government budget. A profit – making PSU should be privatized only if it can earn better revenues and thus higher profit if run more efficiently by the private sector. Privatisation may cause exploitation of workers in these units and also may have socially undesirable effects such as concentration of economic power.
Do you think outsourcing is good for India? Why are developed countries opposing it?
Outsourcing is one of the important outcomes of the globalization process. In outsourcing, a company hires regular service from external sources. Mostly from other countries. Services by outsourcing: Many of the services such as voice – based business processes, record keeping accountancy, music recording, film editing, book transcription clinical advice, etc are being outsourced by companies in developed countries to India. Therefore, outsourcing has proved to be good for India in the following manner:
1. Employment Generation:
Outsourcing from developed nations has helped in creating more employment opportunities in India.
2. Increased Foreign Investment:
Successful execution of processes outsourced to India has increased India’s international credibility and hence the inflow of foreign capital to India.
3. Promotes Other Sectors:
Outsourcing creates various backward and forward linkages which make it beneficial for other related sectors like industrial and agricultural sector too.
4. Human Resource Development:
Outsourcing has helped in developing human resources by training the youth and imparting skills required for specific jobs which have high remuneration.
Why has Government of India gave protection to small scale industries and explain the measures taken?
Industrial protection policy is based on assumption that products manufactured by developing countries are not able to face competition with products of developed countries. So if protection is given to small scale industries than they will be able to face the competition. That’s why stress is given to domestic production compared to import for proper supply.
According to this policy small scale industries were protected from foreign competition. Process of Industrialisation was tuned to import substitution as a key policy instrument. Implying domestic production of imported goods was to be accorded as a high priority. It was to achieved with self – reliance. Domestic industry was to be protected from foreign competition by:
- Heavy duty on imports and
- Fixation of import quotas.
Do you think the navaratna policy of the government helps in improving the performance of public sector undertaking in India? How?
The government identifies PSUs and declare them as maharatnas, navaratnas and miniratnas in order to improve their efficiency and enable them to compete globally. They are given greater managerial and operational autonomy in taking various decisions. Greater operational, financial and managerial autonomy has also been granted to profit making enterprises referred to as miniratnas.
A few examples of public enterprises with their status are as follows:
- Indian Oil Corporation Limited
- Steel Authority of India Limited
- Bharat Heavy Electricals Limited
- Mahanagar Telephone Nigam Limited
- Bharat Sanchar Nigam Limited
- Airport Authority of India
- Indian Railway Catering and Tourism Corporation Limited.
Many of these profitable PSUs were established during the 1950s and 1960s when self – reliance was an important objective of planning. They were set up with the intention of providing infrastructure and direct employment to the public so that quality products are made available to the masses at a reasonable cost. These companies themselves were made accountable to all stakeholders.
What are the major factors responsible for the high growth of the service sector?
The major contribution to GDP in India comes from the service sector which has grown impressively since liberalization. The major factors responsible for the high growth of the service sector are as follows:
1. Rise in Income:
Rise in per capita income is an indicator of increase in general affluence levels. With rise in income people start demanding sendees which can make their lives more comfortable.
2. Rise in Life Expectancy:
Health programmes have contributed significantly to increase in life expectancy.
3. Working Women:
Increase in numbers of working women has led to an increase in demand for day care facilities for children, packed food, laundry services etc.
4. Complex and Busy Lifestyles:
As daily routines have got busier, individuals find it difficult to manage things on their own. Hence, people require services of tax consultants, legal advisors, investment advisors, etc. to manage various tasks.
5. Product complexity:
A large number of products such as air conditioners, water purifiers, computers etc. have now become a part of urban life. These products need after sales service, maintenance that can only be serviced by specialized persons.
6. Cultural changes:
The emergence of the nuclear family system in place of the traditional joint family system has created a demand for a host of services like education, health care, entertainment, telecommunication, transport, tourism and so on.
Agriculture sector appears to be adversely affected by the reform process? Why ?
Economic reforms did not benefit the agriculture and the agricultural growth rate has been decelerating. Public investment in agriculture sector has been reduced in the reform period due to which irrigation, power, roads, market linkages and agricultural research have suffered.
Globalisation and membership of WTO has resulted in policy changes such as reduction in import duties on agricultural products, removal of minimum support price and lifting of quantitative restrictions on agricultural products which have increased international competition for Indian fanners making their condition more miserable.
There has been a shift from production for the domestic market towards production for the export market because of export oriented policy strategies in agriculture. This has shifted the focus on cash crops in place of production of foodgrains which has led to a fall in supply of foodgrains thereby creating pressure on prices of foodgrains.
Why has the industrial sector performed poorly in the reform period?
The industrial sector has performed poorly in the reform period because of decreasing demand of industrial products due to various reasons such as cheaper imports, inadequate investment, infrastructure, etc. The investment made in infrastructure facilities, including power supply, has remained inadequate and hence domestic industries have not found conditions favorable to compete with foreign goods.
Globalisation has led to free movement of goods and services from foreign countries and thus caused the local industries to die out and employment opportunities to fall in developing countries like India. Moreover, India still does not have the access to developed countries markets because of high non – tariff barriers not only in the form of quantitative restrictions but also in the form of agricultural subsidies, sanitary and phytosanitary conditions, etc. Thus, the domestic industries were adversely affected by liberalization.
What were the features of strategies of Industrial development from 1950 – 1990?
The features of strategies of Industrial development from 1950 – 1990 were:
- Public sector was given more importance in industrial development of nation.
- To achieve the objective of employment small scale industries were encouraged.
- To develop basic infrastructure stress was laid on development of large scale industries.
“Zamindari system was responsible for the poor condition of agriculture before Independence”?Explain?
Land tenure system:
At the time of independence, the land occupancy and tenure system comprised the following forms:
- Zamindari system
- Ryotwari system
- Mahalwari system.
Over 60 per cent agricultural land was under zamindari system. The zamindars used to pay a certain fixed amount to the government in the form of land revenue, but realized the revenue from the peasants at higher rate. The same was the fraction tradition under ryotwari and mahalwari system and the ryots played the role of middlemen between the government and peasants.
Explain objectives of Britishers regarding development of railways in India?
The objectives of Britishers regarding development of railways in India were:
- Development of Railways was done by Britishers to have administrative control over various developed countries. It helped in maintaining law and order.
- It was done to send the raw materials prepared in Britain in internal parts of India.
- Britishers found it profitable in investing their capital in development of railways.
- Britishers wanted to utilize resources properly.
Why did India adopted mixed economy?
After Independence India adopted mixed economy, under mixed economy those industries which were more important for economy government kept in their own hands which included steel, energy, education and health services, etc.
Other industries which were in the hands of private sector were also controlled by government, so that centralization of economic powers should not take place. Thus, for getting benefits of private and public sector, mixed economy was adopted.
Explain the types of economy on the basis of ownership and control over means of production?
Economy may be classified into following categories on the basis of ownership and control over means of production:
- Capitalist economy
- Socialist economy
- Mixed economy.
1. Capitalist economy:
Capitalist economy means an economy system in which mean of production are owned by the private individuals who work for profit. In such an economy, there is no control or interference by the government in the economic activities. There is complete freedom of consumption and production.
2. Socialist economy:
Socialist economy means an economy system in which means of production are owned by the government who works for the welfare of the society. Socialist economy aims at the maximum welfare of all. All economic decisions are taken by the government controlled central planning authority.
3. Mixed economy:
Mixed economy means an economic system which combines the elements of capitalist economy and socialist economy. Mixed economy permits co – existence of both private and public sectors. There is a controlled price mechanism.
What is mixed economy? Why is it found in most of the countries of the world?
Mixed economy means an economic system which combines the elemenis of capitalist economy and socialist economy. Mixed economy permits co – existence of both private and public sectors. In most of the countries of the world, mixed economy is found because due to combination of public and private sector it results in encouragement of economic development and social justice.
Why was public sector given a leading role in industrial development during the planning period?
Public sector was given a leading role in industrial development during the planning period because of the following reasons:
- There were several basic and strategic industries which were essential for economic development but private sector did not have sufficient resources and will to development them.
- Private sector had no interest in the development of infrastructure such as roads, power, irrigation, scientific research etc.
- Private sector was keen to set up industries in backward regions. The government was committed to balanced regional development.
- Public sector was considered an instrument to reduce economic inequalities and to promote social justice.
Explain objectives of Five Year Plans in India?
Following have been important objectives of Five Year Plans:
1. Increase in national income:
The first objective of planning in India has been to increase national income by improving agriculture and industrial output.
2. Inverse in employment:
Another objective of plans has been to create more and more employment opportunities.
3. Social Justice:
One of the objectives of planning is to promote social and economic justice through removal of poverty and regional disparities and special assistance to weaker section.
4. Stable growth:
Another objective of planning is to ensure stable growth by removing fluctuations in the price level, wage rate etc.
Modernization of the economy by adopting the latest equipment and technology is the prime objective of Five Year Plans.
Explain industrial policy of 1956 in detail?
In a short period of operation of the 1948 Industrial Policy, some significant changes took place in the economic and political spheres that called for changes in industrial policy as well. The country hand launched a programme of planned economic development with the first five – year plan.
The second five – year plan gave high priority to industrial development aimed at setting up a number of heavy industries such as steel plants, capital goods industries, etc., for which direct government participation and state involvement was needed.
Further in December 1954, the Parliament adopted the ‘Socialistic Pattern of Society’ as the goal of economic policy which called for the state or the public sector to increase its sphere of activity in industrial sector and thus, prevent concentration of economic power in private hands. In view of all these developments, a new industrial policy was announced in April 1956. The main features of this Industrial Policy Resolution of 1956 were as follows:
A comprehensive industrial policy was formulated in 1956. It has following objectives:
- Development of machine – building industries
- Increase in rate of industrial development.
- Reduction of income and wealth inequalities.
Explain the main features of New Economic Policy?
Following are the main features of New Economic policy:
Liberalisation refers to the extensive reduction in government regulations guiding private sector. Liberalisation includes liberal provisions regarding licensing, foreign investment, foreign technology agreements, merger and amalgamation of units etc.
Globalisation refers to the growing economic interdependence among countries as reflected in increasing cross – border flow of goods, services, capital and technology. Globalisation ensures free movement of capital, technology, labour and man¬power.
Privatisation means infusing competition i.e., marketisation or liberalisation where demand and supply are allowed to play their free role instead of being controlled by the government. Privatisation ensures opening a larger part of the economy for private sector and thus reducing state monopoly.
Differentiate between the policy of restriction and policy of liberalisation?
Policy of restriction means the policy under which the government imposes a number of restrictions on economic activities through taxation policy, industrial policy, trade policy and monetary policy. On the other hand, policy of liberalisation means the policy under which the government withdraws some of the existing restrictions on the economic activities.
What is WTO? What were its major functions?
World Trade Organization is an international organization whose objective is to reduce the obstacles of International market and encourage open trade. Following are the major functions of WTO:
- To increase competition in international market.
- To encourage open trade among various nations of the world.
What is privatization? Explain its objectives?
Privatization refers to that process by which the participation of state and public sector in economic activities is reduced. Objectives of privatization:
Following are the objectives of privatization under new economic policy:
- To encourage the private sector to play more important role in the economy
- To provide functional liberty to private sector
- To privatize the public sector units
- To increase the competitiveness of private sector for global point of view.
- To protect the interest of private sector.
Explain the objectives of Economic reforms?
Objectives of New Economic Reforms:
The main objective of new economic reform is to improve the quality life of the people. Shri P. N. Dhar in his book ‘Economic Reforms in India has highlighted five objectives of new economic reforms.
- The policy of the government is to make the export and import trade free and independent and without much restrictions.
- The economy should have free exchange rate.
- The country should have efficient and dynamic industrial sector.
- The country should have sound financial system.
- The country should have an autonomous.
Development Experience (1947 – 1990) and Economic Reforms Since 1991 Long Answer Type Questions
What were the characteristics of Indian economy at the time of independence?
Indian economy at the time of independence:
Indian economy at the time of independence can be studied under three heads:
- Nature of Indian economy at the time of independence.
- Structural pattern of Indian economy at the time of independence.
- Main features of Indian economy at the time of independence.
Nature of Indian Economy at the Time of Independence:
According to Dr. Karma Singh Gil, “At the time of independence, Indian economy was underdeveloped, stagnant, semi-feudal, depreciated economy and the partition has made India a disintegrated economy”. Following points will help us to know more about the nature of Indian economy at the time of independence:
- Underdeveloped Economy
- Stagnant Economy
- Semi – feudal, Economy
- Depreciated Economy
- Disintegrated Economy.
1. Underdeveloped Economy:
At the time of independence, Indian economy was an underdeveloped economy. According to M.P. Todaro, “Underdeveloped economy is that economy in which there are low level of living, absolute poverty, low per capita income, low consumption level, poor health services, high death rates, high birth rates and dependence on foreign economy”.
2. Stagnant Economy:
During the British period, Indian economy remained almost stagnant. Stagnant economy is one in which there is prolonged period of slow economic growth.
3. Semi – feudal Economy:
During the British rule, Indian economy had a mixed mode of production. Feudalism was more prominent than other modes of production. A substantial developed capitalistic sector had emerged. Handicraftsmen had lost their independent status and were engaged in a simple commodity production. Bonded labour force was prevalent in agriculture. Primitive social organizations existed in areas inhabited by the tribals.
4. Depreciated Economy:
On the eve of Independence Indian economy was depreciated. In every economy, extensive use of factors of production, inevitably leads to their wear and tear. If no arrangements are made to replace the depreciated factors then the stock of gross capital declines. This results into the fall in production capacity.
Such an economy is called depreciated economy. After World War II, Indian economy also turned into depreciated economy. During World War II, India had supplied large quantity of goods to Britishers. India was paid for it in terms of sterling. But due to lack of real capital, its production capacity declined.
5. Disintegrated Economy or effect of partition on the Indian Economy:
Britishers from the very beginning were pursuing the policy of divide and rule in India. The partition of the country was very much an inevitable outcome of this British policy. The following were the main adverse impact of partition on Indian economy.
Explain the colonial exploitation of Indian Economy?
The Indian economy under the British rule was subjected to colonial exploitation. It implied a targeted exploitation of all sectors of the economy by the British government This is how it was achieved:
1. Agriculture was exploited through Zamindari system of land revenue.
2. Industrial sector in India implied the predominance of handicrafts. But these were systematically destroyed by allowing tariff free import of machine made goods from Britain.
3. India’s International trade was exploited through discriminatory tariff policy. Duty free export of Indian raw material was encouraged while on the other hand duty free import of British goods was encouraged to enhance access to Indian market by Britishers.
Explain in brief Indian agriculture at the time of independence?
Indian Agriculture at the Time of Independence:
1. Agricultural production:
The agricultural production of India was much less than its demand at the time of independence. The production of foodgrains in 1947- 1948 was only 508 lakh tonnes whereas its demand was 540 lakh tonnes. The main reason of this shortage was the policy of the British rule to pay more attention on the production of commercial crops. Hence, imports of foodgrains from foreign countries continued.
2. Commercialization of agriculture:
The Indian cultivators were inclined to grow such crops which can be immediately sold in the market. They gave more preference to cultivation for trade rather than for consumption. As a result, a new class of middlemen such as sahookar, money lender, broker etc. came into existence. These prices of Indian crops were controlled by international market conditions.
3. Rural indebtedness:
The economic conditions of cultivators was miserable. Hence they had to depend on loans from money lenders and sahookars for cultivation and paying land revenue. These loans were taken on high rate of interest. The cultivators had to face severe hardships and the burden of indebtedness increased.
4. Less utilization of agricultural inputs:
At the time of independence, agricultural inputs like irrigation, seeds, fertilizers and modem production techniques were not used properly. As a result, it adversely affected agricultural productivity.
5. More pressure on land:
At die time of independence, decline of handicrafts and cottage industries dye to competition of machine made goods the pressure on agricultural land was increased to a great extent. As a result, land holdings were subdivided and fragmented due to lack of alternative employment opportunities. Thus, the pressure of population on agriculture increased.
Explain the characteristics of Economic planning?
The Characteristics of Economic Planning:
1. Long term process:
Planning is a long term process. Its successful results can be achieved only in a long term period and therefore, it is like a chain work. If this chain of planning is disturbed, it has an adverse effect on the economic growth of the country.
2. Establishment of central authority:
Planning is always done by a Central authority. In India, this authority is named as ‘Planning Commission. ’ The Central authority conceives the plan, prepares it and suggests appropriate measures for its implementation.
3. Fixing of targets:
“Planning contains targets that are to be achieved. Targets are determine on the basis of priorities. Every field is touched and priorities are fixed on the basis of definite time – period. Efforts are made to achieve the aims within that period.
4. Predetermined objectives:
Economic planning is characterized by some definite and predetermined objectives to be realized within a definite time – period. Efforts are made to achieve the aims within that period.
5. Maximum utilization of natural resources:
Planning ensures maximum utilization of available resources of the country which results in its progress and development.
6. Financial planning:
Financial planning involves the provision for the financial outlay for the different sectors of the economy. It can be done through additional taxation, surplus of public enterprise, external assistance, public debts, deficit financing etc. A plan can be successfully implemented only if it makes an adequate and detail provision for the mobilization of financial, human and natural resources of the country.
Explain the measures of land reforms taken in India after independence?
The comprehensive land reform policy that evolved so far after independence consisted of:
1. Abolition of intermediaries:
Abolition of zamindari and similar intermediary tenures during 1950 – 1955 essentially involved removal of intermediary levels or layers of various amorphous and parasitic groups in land between the state and the actual cultivators. However, such abolition of intermediaries involved compensation to the owners of land.
As a result of this measure, about 2 – 5 crore farmers were brought into direct relationship with the state. This facilitated distribution of 61 lakh hectares of land to landless farmers. Large areas of privately owned forests and wasteland now vested in the state.
2. Ceiling on Landholdings:
To reduce the existing disparities in the pattern of land ownership and make some land available for distribution to landless agricultural workers, the Second Plan (1956 – 1961) recommended the imposition of ceilings on agricultural holdings.
It was envisaged that land above a certain limit would be acquired by the state and redistributed among the landless workers and small farmers so as to meet their hunger for land and, thus, to enable them to create economic holdings.
Land ceiling laws were passed in two phases. In the first phase – which lasted up to the end of 1972 ‘landholder’ was treated as the unit of the cultivation. This ceiling unit was changed to ‘family’ after 1972. The ceiling limits have also been lowered in the second phase with differences varying as between irrigated land with two crops, irrigated land with one crop and dry land.
But exemption for orchards, grazing land, cattle – breeding farms, religious/ charitable/educational trusts, sugar cane plantations, tank, fisheries have made the ceiling laws virtually redundant.
3. Technological Reforms:
For the improvement of agricultural yield, new technologies and equipment have been introduced in the recent years.
- Use of tube – wells and water – pumps, tractor, tiller, thresher, etc.
- Similarly, drip irrigation and sprinklers are used for irrigation, where the water supply is less and to irrigate more places with less water.
- Chemical fertilizers which have been used on a large – scale are now being supplemented by biofertilizers to retain the fertility of the land.
- The farm produces are carried to the market on trucks through all weather roads and faster means of transport.
4. Institutional Reforms:
- To initiate with government to provide facilities to the farmers. The government has started many programmes like Green Revolution, White Revolution or Operation floods.
- The government has assembled small lands to make them economically practicable.
- Radio and television broadcasting tell farmers about the new and improved techniques of cultivation or to give up to date knowledge to the farmers.
- Provision of crop – insurance, rural banking and small – scale cooperative societies protect farmers against the losses caused by crop – failure or help farmers for the modernization of agriculture.
Explain the achievements of Indian Agriculture?
Achievements of Agrarian Reforms:
1. Increase in National Product:
Before 1990, the growth rate of national income was 4 – 7% on the implementation of new economic policy, growth rate reduced to 0 – 6 per cent. In 1993 – 1994, growth rate rose to 5 0 per cent at 1993 – 1994 prices and in 1996 – 1997, it rose to 8 – 2 per cent. In 2000 – 2001, growth rate was witnessed to be 62%.
2. Foreign Investment:
With the implementation of new economic policy foreign capital investment has increased. In 1990, total foreign investment was 5133 million dollar and it increased to 6133 million dollar. In 2003 – 2004, foreign investment was 35-31 billion dollar.
3. Agricultural Production:
Prior to implementation of new economic reforms, growth rate of agricultural production was 3%. But in 1991 – 1992, growth rate got down to 1 – 9%. The growth rate came down. In 1995 – 1996, growth rate of agricultural production stood at to 6 – 6% and in 2003 – 2004, it was 6 – 3%.
4. Foreign Currency Reserves:
New economic reforms have favourable effect on foreign currency reserves. In 1989-90, the foreign currency reserve was Rs. 6251 crore. In 1995 – 1996, foreign currency reserve stood at Rs. 58,446 crore and in 2003 – 2004, it touched 2,07,204 crore mark.
5. Fiscal Deficit:
The main thrust of new economic policy is to bring down fiscal deficit to the extent of 3 per cent of GDP. In 1991 – 1992, fiscal deficit come down to 5 – 9% and further to 5 – 2% in 1992 – 1993. No doubt, after the implementation of economic policy, fiscal deficit has reduced but Govt, is still far away from its target. As in 1995-96 fiscal deficit rise to 7 – 9% against the target of 4 – 7%. Moreover, it again moved to 4 – 5% in 2003 – 2004.
Growth rate of imports saw wide fluctuation after the implementation of new economic policy. In 1991 – 1992, growth rate of imports declined to 11% against 22% in 1990 – 1991. But in 1992 – 1993, it jumped to 32 – 4%. Then in 1995 – 1996, it come down to 15%. In 2003 – 2004, growth rate of imports declined to 20 – 8 per cent.
Mention the important causes? Responsible for the limited success of economic planning in India?
1. Unrealistic Targets:
Indian planners have been unrealistic setting the targets. There is multiplicity of objectives and there is no clear ranking of objectives.
2. Lack of Instruments:
Planners are of the view that once the financial allocations have been made and necessary expenses incurred, their job is done.
3. Lack of implementation:
Most of the plan policies have not been implemented due to apathy of bureaucracy and corruption.
4. Lack of cooperation from private sector:
Indian Planners did not receive whole hearted cooperation from private sector. The participation of private sector and trade unions was almost nil.
“Agriculture is the backbone of Indian Economy”? Explain?
Agriculture is called as the backbone of Indian economy due to following reasons:
1. Agricultural influence on national income:
The contribution of agriculture during the first two decades towards the gross domestic product ranged between 48 and 60%. In the year 2001 – 2002, this contribution declined to only about 26%.
2. Agriculture plays vital role in generating employment:
In India, at least two-thirds of the working population earn their living through agricultural works. In India, other sectors have failed to generate much of employment opportunity the growing working populations.
3. Agriculture makes provision for food for the ever increasing population:
Due to the excessive pressure of population labour surplus economies like India and rapid increase in the demand for food, food production increases at a fast rate. The existing levels of food consumption in these countries are very low and with a little increase in the capita income, the demand for food rise steeply (in other words it can be stated that the income elasticity of demand for food is very high in developing countries).
Therefore, unless agriculture is able to continuously increase it marketed surplus of food grains, a crisis is like to emerge. Many developing countries are passing through this phase and in a bid to mark the increasing food requirements agriculture has been developed.
4. Contribution to capital formation:
There is general agreement on the necessity capital formation. Since agriculture happens be the largest industry in developing country like India, it can and must play an important role in pushing up the rate of capital formation. If it fails to do so, the whole process economic development will suffer a setback.
To extract surplus from agriculture the following policies are taken:
(I) Transfer of labour and capital from farm non – farm activities.
(II) Taxation of agriculture should be in such a way that the burden on agriculture is greater than the government services provided to agriculture. Therefore, generation of surplus from agriculture will ultimately depend on increasing the agricultural productivity considerably.
5. Supply of raw material to agro – based industries:
Agriculture supplies raw materials to various agro – based industries like sugar, jute, cotton textile and vanaspati industries. Food processing industries are similarly dependent on agriculture. Therefore the development of these industries entirely is dependent on agriculture.
Describe the importance of small scale and cottage industries?
The importance of small scale and cottage industries are as follows:
Small scale and cottage industries are labour based. By investing in these industries many people can be given employment.
2. Less capital:
Less capital is required in small scale and cottage industries. For these industries foreign exchange is not required.
3. Supplement to agriculture:
Small scale and cottage industries are supplement to agriculture. These industries are developed for developing agro – based industries.
4. Supplement to Industries:
Small scale and cottage industries are developed as supplement to industries.
5. Foreign trade:
Small scale and cottage industries doesn’t require imported goods. On the other hand products of these industries can be exported in large quantities.
What is small scale industry? Explain the need of development of small scale industries?
Small scale industries are those industries which require less capital and more labour. It is a unit employing less than 50 employees if using power and less than 100 employees if not using power and with a capital asset not exceeding Rs.5 lakhs. Need for development of small scale industries:
1. Employment opportunities:
Labour is widely used in small scale industries compared to large scale industries. Which provides employment opportunities to many people.
2. Helps in Reducing regional imbalance:
Due to less capital required and small size these industries can be established anywhere which reduces regional imbalance.
3. Helpful in proper wealth distribution:
Small scale industries are established with less capital while large scale industries requires huge capital thus, it can be formed by big. Thus, through these industries proper distribution of wealth takes place.
State the factor responsible for adopting New Economic Policy in India in 1991?
Following were the factor responsible for adopting New Economic Policy in India in 1991:
1. High rate of inflation:
The rate of inflation was about 16.7% in August 1991. The high rate of inflation adversely affected the cost of production and domestic and foreign demand of our products.
2. Increasing fiscal deficit:
The fiscal deficit of the government was very high due to borrowing by the government on large scale.
3. Poor performance of public sector: Public sector undertaking became liability on the economy since most of them were running in losses.
4. Problem of balance of payments:
Our foreign exchange reserves dropped down to about billion dollar which was not enough to meet import requirements. This seriously Lowered our credit worthiness in the international market.
Describe the Industrial Policy of 1991?
New Industrial Policy:
The main features of new industrial policy of 1991 whereas follows:
- Development of capital market.
- MRTP provisions have also been abolished for setting up new undertakings.
- Number of industries exclusively reserved for public sector was reduce from 17 to 4.
- At the time 1991 industrial policy was announced 18 items were subject to industrial licensing but gradually their number has been reduced to 5 namely.
- Cigars and cigarettes
- Electronic aerospace and defence equipment
- Industrial explosives
- Hazardous chemicals
- Certified specified drugs.
Explain the benefits of liberalization?
Following are the benefits of economic liberalization:
1. Increase of Foreign Investments:
Apart from America and Great Britain, other world countries like Germany, Switzerland, Japan, France, Holland and Singapore have also invested in our country. Even India has got a lot of the proposals for direct investment.
2. Increase in Foreign Currency Fund:
The positive effects of economic reform, more export and more investment led to increased foreign fund up to 18 billion dollar and gold fund to 5 billion dollar.
3. Better Quality Product:
Liberalization reduced the importance of public sector and encouraged the private sector. It resulted in quality production and removed the problems of mismanagement.
4. Encouragement of Private Sector:
Due to liberal policies of investment, the private sector can produce, invest and export any product. The results are very encouraging.
5. Stability in Balance Payment:
The problem of balance payment was acute in last two decades, now improved gradually. It is a positive sign for our economy.
6. Effective Utilization of Natural Resources:
Due to New economic policy, the natural resources of India were properly and effectively utilized. It led to increased productivity economic development in India.
Describe the components of economic reforms?
Components of Economic Reforms:
The economic reforms introduced from 1991 can be classified into two kinds:
- Structural measures
- Stabilization measures.
1. Structural measures:
Structural measures refer to those policies which strengthen the supply side of economic system. For example:
- Reforms with regard to trade, technology and foreign investment policy
- Re – forms with regard to industrial policy
- Financial reforms
- Reforms with regard to policy for public sector.
2. Stabilization measures:
Stabilization measures refer to those policies which strengthen the demand side of economic system. For example:
- Introducing liberal monetary policy by reducing the rates of interest
- Adjustment in the exchange rate of Indian rupee
- Amendment in fiscal policy
- Introducing an appropriate wage income policy.
Explain the concept of globalisation? What measures of globalisation have been adopted under New Economic Policy?
Globalisation means opening up of the economy to the world market. The policy of globalisation encourages both foreign trade and foreign investment. Measures adopted under globalisation policy in India are:
- Equity limit of foreign capital investment has been raised from 40% to 51 %.
- Long time trade policy was adopted. The policy removed all restrictions and controls on the foreign trade.
- Under the New Economic Policy custom duties and tariffs imposed on imports and exports are being reduced gradually.
- Under the New Economic Policy individuals and firms can buy and sell foreign currency (like dollar) for foreign transactions more easily.
“Economic reforms have increased the role of the private sector”? Comment?
Economic reforms have definitely reduced the role of public sector in the Indian economy. Privatisation was the major component of economic reforms programme. Privatisation means a greater role for private capital and enterprise. The main objective of economic reforms is to make use of privately owned resources for collective welfare of the people. Following steps have been taken to reduce the role of public sector in Indian economy:
- Denationalisation i.e., transfer of the ownership of public sector enterprises to private sector
- Disinvestment i.e., sale of a part of equity of public sector enterprises to private capitalists
- Restrictions on the further expansion and setting up of new units in the public sector
- Restricting the areas of public sector to the following:
- Essential manufactured goods.
- Exploration and exploitation of oil and mineral resources.
- Strategic areas i. e., defence equipments.
Give arguments in favour of the New Economic Policy (economic reforms) in India?
Arguments in favour of New Economic Policy:
1. Increase in growth rate:
The rate of growth of India’s GDP used to be about 4% in pre – reforms period. This has jumped to about 870 presently.
2. Increase in competitiveness of industrial sector:
New Economic Policy has increased competitiveness of the Indian industry. New economic policy aims to remove protective environment of the economy and to make productive enterprises competitive.
3. Increase in efficiency of public sector:
New Economic Policy has resulted in the increase in efficiency of public sector by removing its defects.
4. Decline in deficit of balance of payments:
New Economic policy aims to boost exports and to encourage foreign direct investment in India. As a result foreign exchange receives have increased.
5. End of government restrictions:
New Economic Policy aims to remove all types of controls. Producers are free to decide their scale and level of production. All price and distribution controls have been removed.
6. Limited role for the government:
New Economic Policy gives greater freedom to economic agents to take their own decisions. There is a very limited role for the government.
Give arguments against the new Economic policy?
Arguments against New Economic Policy:
1. Less importance to agriculture:
New Economic Policy is biased towards industrialisation and ignores the role of agricultural sector to Indian economy.
2. Dependence on foreign capital and technology:
New Economic Policy has accorded more importance to foreign assistance and foreign technology than internal resources and local technology.
Hundreds of small scale units throughout the country have been forced to close down in face of growing competition from MNCs. This has resulted in mass retrenchment and unemployment.
4. Promotion of consumerism:
New Economic Policy has encouraged alien culture and encouraged the production of “comforts” and “luxuries”.
5. More importance to privatisation:
New Economic policy encourages private sector and discourages public sector.