Indian Economy 1950 to 1990 Class 12 Important Questions and Answers Indian Economy Chapter 2

Important Questions of Indian Economy 1950 to 1990 Class 12 Indian Economy Chapter 2

Question 1.
Explain the meaning of economic planning.
Answer:
According to the Planning Commission, “Economic planning means utilisation of country’s resources in different development activities in accordance with national priorities.”

Question 2.
State the central objectives of Indian planning.
Answer:
Growth with stability and social justice were the central objectives of Indian planning.

Question 3.
Why was the objective of ‘modernisation’ of immense importance for India?
Answer:
This objective was important because at the time of independence, the Indian economy was plagued with superstitions and gender inequality.

Question 4.
Has India achieved the targeted growth rate of industrial production during the various plans?
Answer:
India has managed to achieve the targeted growth rate of industrial production only during the First Five Year Plan. In all the other plans, the actual growth rate was nowhere near the targeted growth rate.

Question 5.
Define a plan, NCERT
Answer:
Plan is a document showing detailed scheme, programme and strategy, worked out in advance for achieving an objective. It is a specific action which aims to help the organisation or a country in achieving its objectives.

Question 6.
What is a perspective plan?
Answer:
Plan documents which specifies the objectives to be achieved in 20 years is referred to a perspective plan.

Question 7.
Is agriculture in India, still dependent on rainfall?
Answer:
Yes, agriculture in India is still dependent on rainfall due to lack of irrigation facilities.

Question 8.
How do the PSUs facilitate the development of backward regions?
Answer:
PSUs are generally opened in backward areas so that more employment opportunities are generated in these areas and it is also able to progress economically.

Question 9.
What is a small scale industry?
Answer:
A small scale industry is presently defined as one whose investment in fixed assets does not exceed ₹ 5 crore.

Question 10.
What is meant by foreign trade?
Answer:
Foreign trade refers to the exchange of goods and services among different countries.

Question 11.
India a leading exporter of handicrafts. Why?
Answer:
Handicraft is a traditional industry of India and skilled workers are easily available here. That’s why India is a leading exporter of handicrafts.

Question 12.
What are High Yielding Variety (HYV) seeds? (NCERT)
Answer:
HYV seeds are better quality seeds which have a low maturity period, are highly productive and are disease resistant. The yield from these seeds exceeded 25 to 100 % as compared to yields from normal seeds.

Question 13.
What is marketable surplus? (NCERT)
Answer:
Marketable surplus refers to the difference between the total output produced by a farmer and his self-consumption from that output. In other words, it is that portion of the total produce that the farmer sells in the market.

Question 14.
Give any one advantage and one disadvantage of a socialist economy.
Answer:
Advantage of socialist economy It promotes equitable distribution of income.
Disadvantage of socialist economy It suffers from the drawbacks of a bureaucratic set up in the form of red-tapism and corruption.

Question 15.
Why should plans have goals? (NCERT)
Answer:
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 to achieve these desired goals. Without specific goals, a plan would be directionless and resources would not be utilised in a proper manner without wastage. Therefore, every plan should have specific goals which it strives to achieve.

Question 16.
Why was it necessary for a developing country like India to follow self-reliance as a planning objective? (NCERT)
Answer:
Self-reliance as an objective of economic planning is necessary for a developing country in order to reduce its dependence on foreign countries especially for food. Promoting self-reliance increases employment generation in an economy. Also, it is understandable that people who were recently freed from foreign dominion should give importance to self-reliance.

Question 17.
Why did the percentage share of agricultural sector in the exports of the country declined in the period 1950-1990?
Answer:
The share of agricultural sector has fallen because of the reasons enumerated below

During this period, there was substantial growth in Indian industrial sector. With growth in industrial sector, the domestic demand of agricultural products increased as they were being used as raw material in the factories.
During this period, there was a tremendous increase in the population of the country.
As population grew, the domestic demand for agricultural products also grew.

Question 18.
The benefits of green revolution was restricted to few states and few crops in initial stages of planning. Why?
Answer:
The green revolution was based on the use of High Yielding Varieties (HYVs) of seeds, which required reliable irrigation and financial resources to buy better inputs. Because of this, the green revolution was restricted to the more affluent states of Punjab, Andhra Pradesh and Tamil Nadu. Further the use of HYV seeds primarily benefitted the rice and wheat growing regions. Thus, the benefit of the green revolution was initially restricted to few states and the crops of wheat and rice only.

Question 19.
Give the differences between private sector and public sector with an example of each sector.
Answer:
Differences between private sector and public sector

Basis	Private sector	Public sector
Concept	Private sector is that	Public sector is that part of the economy in which state acts as an entrepreneur.
Example	Reliance Industries	Mahanagar Telephone IMigam Limited (MTNL)

Question 20.
Why and how was private sector regulated under the IPR, 1956? (NCERT)
Answer:
Under IPR, 1956, the private sector was kept under state control through a system of licenses. No, new industry was allowed unless a license was obtained from the government. Even an existing industry had to obtain a license for expanding output or for diversifying production. The objective behind regulating the private sector through licenses was to promote equitable development in the country. It was easier to obtain a license if the industrial unit was to be established in backward areas.

Question 21.
The Industrial Policy Resolution, 1956 categorised industries on the basis of ownership. State those categories.
Answer:
According to the Industrial Policy Resolution, 1956, industries were classified into three categories on the basis of ownership

The first category consisted of industries which’could be established and developed exclusively as public sector enterprises.
The second category consisted of industries which could be established both as public sector enterprises and private sector enterprises, with private sector being given a secondary role.
The third category consisted of all industries other than those specified in the above categories and was open for private sector.

Question 22.
State three characteristics of SSIs.
Answer:
The three typical characteristics of SSIs are

Labour intensive SSIs are labour intensive in character, i.e. they require more units of labour and are best suited for solving the problem of unemployment.
Less capital intensive SSIs are less capital intensive, i.e. they require relatively smaller amount of capital to produce a commodity. In a country like India where capital is scarce, SSI is best suited to bring about industrial development.
SSIs show locational flexibility SSIs can be established in remote areas also, because their need for various resources is limited. Therefore, they contribute to growth across different regions of the country.

Question 23.
What were the objectives of IPR-1956?
Answer:
The objecives of IPR-1956 were as follows

To provide a leading role to public sector.
To promote regional equality.
To promote social welfare at the cost of private profits.

Question 24.
Why do countries take part in foreign trade?
Answer:
According to classical economists, countries participate in foreign trade because they cannot produce all the goods and services competitively. A country’s resources are suitable only for the production of certain specific goods and services. Therefore, the country should produce only those goods for which its resources are suitable, thus giving it a cost advantage and import other goods from foreign countries.

Question 25.
Give two advantages and disadvantages of mixed economic system.
Answer:
The advantages of mixed economic system are

Mixed economy gives adequate scope to private individuals to co-exist and contribute towards economic development.
In this, planned economic development ensures stability and balanced development.

The disadvantages of mixed economic system are

Mixed economy cannot effectively control the private sector industries which are outside the government purview.
It is characterised by red-tapism and high degree of corruption.

Question 26.
Differentiate between planning objectives and plan objectives on any four basis.
Answer:
Differences between planning objectives and plan objectives

Basis	Planning objectives	Plan objectives
Aim	They are long-term objectives to be achieved over a long period.	They are objectives to be achieved in short period say 1 to 5 years.
Nature	They are common to all plans.	They vary from plan to plan.
Changes	They aim at structural changes.	They aim at quantitative changes.
Plans	They are broad goals, which development plans seek to achieve.	They are planned with greater precision.

Question 27.
Industries help to strengthen the economy of a country. How?
Answer:
Industries help to strengthen the economy of a country in the following ways

Industries help in the establishment of the infrastructure of the country such as dams, railways etc. Infrastructural development helps in the growth of other sectors also.
Industries help in increasing agricultural productivity by supplying the agricultural sector with mechanised means of production such as tractors, threshers etc and also with fertilisers, insecticides etc.
Expansion of capital goods industries pave the way for industrial growth and as a result, the economy is able to undertake large scale production of goods at low cost.
Industrialisation helps a country to become self-reliant in the production of defence goods.

Question 28.
Do you think that ‘Industrial licensing and industrial sops were used to promote regional equality’?
Answer:
The licensing policy was introduced in the IPR of 1956 to promote regional equality. As per this policy, private entrepreneurs were allowed to establish a new industry or to expand the productive capacity of the existing units only after obtaining license from the government. Strict rules and regulations were required to be followed before a license was provided. However, if the new unit was proposed to be established in a backward region, then the license was provided on simpler terms.

This promoted industrialists to establish new units in backward regions, thereby ensuring all round development of the country. Also, to further motivate the industrialists to establish new units in industrially backward areas, various sops (benefits) were also offered to them in terms of provision of cheap land, tax holiday, subsidised rates of electricity etc.

Question 29.
Give the advantages of international trade.
Answer:
The main advantages of international or foreign trade are

International trade encourages specialisation on the basis of comparative advantage. This enables a country to obtain foreign goods at a cheaper rate in context of the domestic resources used.
An increase in export trade widens the country’s total market. Production of more goods will further lower the cost of production, leading to lower cost per unit.
It widens the scope of industrialisation.
It encourages competition, leads to innovation and increases capital flows.
International trade acts as an ‘engine of growth’. It transmits growth from one part of the world to another. So, the demand in Britain for raw material brought prosperity to Australia, Canada, New Zealand etc.
It helps the country to earn valuable foreign exchange.

Question 30.
Discuss the issues that the Five Year Plans were unable to address.
Answer:
The Five Year Plans have not been able to address the following issues

Poverty The FYPs have failed to address the problem of poverty in our country. 21.9% of our population lives below poverty line and around 50% of the poor people of the world reside in India. The basic needs of food, shelter and clothing are not being fulfilled.
Inflation The FYPs have also failed to check the problem of inflation in the country. The continuously rising prices have eroded the purchasing power of money and increased the inequalities of wealth.
Unemployment At the end of the Eleventh Plan, nearly 4 crore people were unemployed in the country. The employment opportunities are not growing at the same rate in which the supply of labour is rising.
Inadequate infrastructure India has inadequate infrastructure. There is an acute shortage of public means of transport. Roads are in a pitiful condition, the cities are filthy and educational and medical facilities are highly inadequate.
Rising inequalities The FYPs have failed to promote equitable distribution of income. The rich people are getting richer and the poor people are getting poorer. The plans have in fact encouraged unequitable distribution of income.

Question 31.
‘Mixed economy is the basic framework of planning in India’. Discuss.
Answer:
Mixed economy is an economic system in which economic decisions are taken by the Central Government authority, as well as, are left to free play of the market. It is the basic framework of planning in India. In this economy, the market will provide whatever goods and services it can produce economically and the government will provide essential goods and services which the market fails to provide.

The following features of Indian economy prove that mixed economy is the basic framework of planning in India

In India, agriculture and most of the industrial and service sectors are in the private hands.
Market forces of demand and supply have free role in determining prices in various markets, i.e. goods having higher demand will be highly priced and vice-versa.
Over the period of time, many big business houses have come into being and have been growing, such as Reliance, Infosys, Bajaj etc.
After independence, the government recognised the need to provide infrastructure for the growth of the private sector. So, public sector was developed on a large scale.

Question 32.
Explain ‘growth with equity’ as a planning objective. (NCERT)
Answer:
Both growth and equity are the two important objectives of Indian planning. While growth refers to the increase in national income over a long period of time, equity refers to an equitable distribution of this income so that the benefits of higher economic growth can be passed on to all sections of population to bring about social justice.

Growth is desirable but growth in itself does not guarantee the welfare of society. Growth is assessed by the market value of goods and services produced in the economy and it does not guarantee an equitable distribution of income. In other words, the major share of Gross Domestic Product (GDP) might be owned by a small proportion of population, which may result in exploitation of weaker sections of society.

Hence,,growth with equity is a rational and desirable objective of planning. This objective ensures that the benefits of high growth are shared by all the people equally and hence, inequality of income is reduced along with growth in income.

Question 33.
Agriculture sector is deemed to be the backbone of Indian economy. Why?
Answer:
The importance of agriculture in the Indian economy is evident by the following points

Contribution to Gross Domestic Product (GDP) Agriculture contributes about 14% to India’s GDP. This share was as high as 51% in 1950-51, but has been gradually declining with the progress and development of the country.
Supply of wage goods Wage goods such as wheat, rice, maize, pulses, oil, sugarcane etc are the necessities of life. Agricultural sector in India provides wage goods to 121 crore people and 38 crore animals.
Employment In India, agriculture is the principal source of employment. Over 50% of working population is either directly or indirectly dependent on agriculture for means of their livelihood.
Supplier of raw material for industries Agriculture provides cotton for the textile industries, sugarcane for sugar industry, various seeds for oil industry and jute for gunnysack industry. The growth of the secondary sector is dependent on the primary sector.
Contribution to international trade Agriculture is the major contributor to external trade. India exports tea, jute, cashew nuts, tobacco, coffee, spices etc on a large scale.
Instrumental in the growth of transport industry Both railways and roadways are the bulk carriers of agricultural products in India. Thus, agricultural sector is a major consumer of the transport services of our country.
Contribution to wealth of nation In terms of fixed assets, land occupies the highest rank in India. In addition to it, a large amount is invested in irrigation projects. Thus, agricultural sector owns a large chunk of nation’s wealth.

So, we can conclude that agriculture is not only an important component of the primary sector, but it also helps to sustain and develop both secondary as well as tertiary sector. Thus, it is the backbone of economy.

Question 34.
Discuss the various technical reforms which were initiated by the government to improve the technology in Indian agriculture.
Answer:
The following steps have been taken by the government to upgrade the state of technology in Indian agriculture:
(i) Promoting the use of High Yielding Variety (HYV) seeds: The government is promoting the use of HYV seeds in place of conventional seeds. This has resulted in the increase in crop productivity leading to green revolution.

(ii) Use of chemical fertilisers: Use of chemical fertilisers is being promoted by the government and the fanners are encouraged to use them in the course of farming to increase productivity. Use of organic manure is also encouraged.

(iii) Use of insecticides and pesticides for crop protection: Government is advocating the use of insecticides and pesticides judiciously for protecting the crops from diseases and insects. 14 central plant protection centres have been set up. An integrated pest management programme has been initiated to fight the problem of pests attacking the standing crops.

(iv) Scientific farm management practices: Scientific methods of farming related to selection of crops, preparation of soil, crop rotation, use of fertilisers and pesticides, dry farming practices, multi-cropping system etc are encouraged.

(v) Mechanised means of cultivation: Government is taking steps to popularise the use of agricultural machines like tractors, harvesters and threshers. Cheap credit is also provided to farmers through cooperative societies, regional rural banks and commercial banks, to help them to buy farm equipments.

Question 35.
Briefly discuss the importance of industrial sector in the economy of a country.
Answer:
Following points highlight the importance of industry in an economy
(i) Structural transformation: Industrial development brings about structural transformation in the economy. It means that dependence of our economy on agriculture will be reduced.

(ii) Source of employment Indian economy has a very large skilled workforce which is still unemployed. It is the establishment of industries only, which can generate employment opportunities on a large scale.

(iii) Enhancing further the economic growth As industrialisation progresses, the capital goods industry also starts to flourish. This helps in further economic growth and also helps an economy to attain self-sustaining development.

(iv) Infrastructural growth With the spread of industrialisation, the need for economic infrastructure such as roads, dams, banking, insurance and communication facilities also rises and this leads to their growth. Also, with the improvement in quality of life, the demand for social infrastructure, i.e. facilities related to health and education, also rise and leads to their development.

(v) Share in GDP Industries contribute towards the GDP of the country. During the years, the share of the industrial sector has increased from 16.6% in 1950-51 to about 30% in 2011-12 (at constant prices).

(vi) Strengthening the economy Industries help to strengthen the economy in following ways:

With the growth of capital goods industry, the country is able to produce a number of goods in large quantities and at low cost.
It helps in the establishment of infrastructure goods like dams, railways, etc, which cannot be imported.
Industrialisation has helped our country to become self-reliant in defence goods.

Question 36.
Discuss the role of SSIs in the economy of our country.
Answer:
SSIs play an important role in the economy of our country, as explained below

Generate employment opportunities SSIs are labour intensive, therefore, they have generated huge employment opportunities in the country.
Favourable employment capital ratio The SSIs have a favourable employment capital ratio. According to all India Census of small scale industries, an investment of ₹ 10 lakh generated employment for 14 persons in small scale sector and for only 2 persons in large scale sector.
Self-employment SSIs are a suitable source of self-employment for millions of unemployed in the country.
Less capital is required SSIs are generally less capital intensive, implying that these can be established with a limited amount of capital.
Promotes export SSIs produce goods which are in great demand in the foreign countries, thus contributing towards the export of the country.
Promotes the handicraft industry The traditional village and cottage industries are clubbed with modem small scale industries, thereby providing the artisans and handicraftsmen with a means of living and also preserving and promoting the handicraft industry of our country.
Fulfilling the needs of medium and large industries SSIs work as ancillary units to fulfil the requirements of medium and large industrial units for materials, components, consumables etc.
Investment output ratio at par with large industries The investment output ratio of SSIs is almost at par with the large scale units. It is estimated that a small scale unit needs ₹ 48,000 to produce ₹ 1 lakh worth of output, while large scale units need only ₹ 43,000 to produce the same output.

Question 37.
Discuss the progress made in international trade after independence.
Answer:
Following points show the progress of India’s foreign trade
(i) Volume of foreign trade India’s foreign trade witnessed tremendous increase during the planning period.
(ii) Composition of foreign trade:
The following points bring about the changes in the composition of foreign trade

The share of agricultural sector has fallen.
Share of conventional items of India’s exports such as jute, tea, foodgrains and minerals has fallen.
The percentage share of manufactured goods in the volume of trade increased due to the growth in the industrial sector.

(iii) Direction of foreign trade Presently, our major trading partners are UAE, China,
Switzerland, Singapore, Australia, Iran, Hong Kong, Korea, Indonesia, UK, Japan and Belgium. This is in sharp contrast to the scenario at the time of independence, when our international trade was confined largely to UK, USA and Commonwealth countries.

Question 38.
Explain the need and type of land reforms implemented in the agricultural sector. (NCERT)
Answer:
At the time of independence, the land tenure system was characterised by intermediaries called zamindars, jagirdars etc. They collected rent from the actual tiller without contributing towards improvements on the farm. This demotivated the actual tillers and resulted in low productivity in this sector. Due to this reason, there was an urgent need for land reform policy.

The agricultural sector in India adopted the following types of land reform strategies:

Abolition of intermediaries The zamindari system was abolished and ownership rights were given to the actual tiller of land.
Regulation of rent Rent was regulated and a maximum limit of 33% of the value of crop was fixed.
Land ceiling The maximum size of landholding that an agricultural household could own was fixed. The surplus land was acquired after paying compensation and was re-distributed among poor farmers.
Consolidation of landholding To increase productivity, farmers were given big piece of land in place of his small and fragmented fields.
Cooperative farming Cooperative farming was encouraged to get benefit from the gains of consolidation of holdings.

Question 39.
What is green revolution? Why was it implemented and how did it benefit the farmers? Explain in brief. (NCERT)
Answer:
Green revolution refers to substantial increase in production of foodgrains resulting from the use of High Yielding Varieties (HYVs) of seeds and the increased use of fertilisers, pesticides and irrigation facilities. It resulted in the increase in crop yield needed to make India self-sufficient in foodgrains.

Green revolution was implemented because of the following reasons:
(i) 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. This resulted in shortage of foodgrains in India and made green revolution necessary to ensure food security for the population.

(ii) 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. This caused low level of agricultural production and a means was needed to overcome it.

(iii) Conventional methods The use of conventional inputs and absence of modern techniques led to low level of agricultural productivity.

Green revolution benefitted the farmers in the following ways:

Increase in income Green revolution helped the farmers to increase the productivity of their landholdings. Increased productivity led to an increase in their incomes.
Reduced vulnerability to natural forces Before the advent of green revolution, farmers were very much affected by the fluctuations of the climate. The various techniques of green revolution reduced their vulnerability to natural forces and helped them to harvest a good crop even in adverse conditions.

Question 40.
Why was public sector given a leading role in industrial development during the planning period? (NCERT)
Answer:
At the time of independence, Indian economic conditions were very poor and weak. There was neither much private capital nor did India have international investment credibility so as to attract foreign investment. Moreover, Indian planners did not want to be dependent on foreign capital for economic development. In such a situation, it was only logical that the public sector should take the initiative.

Following are the reasons that explain the driving role of the public sector in the industrial development

Lack of capital with the private entrepreneurs At the time of independence, the requirement of capital for diversified industrial growth far exceeded its availability with private entrepreneurs. Accordingly, it became essential for the state to foster industrial growth through public sector undertakings.
Lack of incentive among the private entrepreneurs The private investors lacked the incentive to invest in large industries. Because of this reason, public sector was forced to invest for the development of these industries.
Socialistic pattern of society The government realised that, a socialist society could be achieved only through direct participation of the state in the process of industrialisation because it requires investment that generates employment rather than investment that maximises profit. Concentration of wealth was to be discouraged and public investment was considered as the best means to achieve it.

Question 41.
“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. (NCERT)
Answer:
Subsidy in agriculture means providing some important inputs to farmers at a concessional rate, i.e. much lower than their market rate. During 1960s, in order to ensure Green Revolution, HYV seeds, fertilisers and insecticides were provided at a subsidised rate to the farmers. The following arguments are given to prove the usefulness of subsidies

It is necessary to give subsidies to farmers, especially the small farmers to provide ‘ an incentive for adoption of the new HY’ technology. Any new technology is considered being risky by farmers. Subsidies are, therefore, needed to encourage farmers to adopt the new technology initially.
Farming in India is still a risky business and subsidies provide protection 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 modern technology and inputs.

On the other hand, some economists believe that subsidies should be phased out once 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 fertiliser industry more than farmers.
Subsidies are mainly being availed by big farmers in affluent regions, who do not actually need them.

Hence, on the basis of above arguments, we can conclude that although subsidies are very useful and necessary for poor farmers to, overcome uncertainties associated with farming, it may lead to wastage of resources. Thus, it can put an excessive burden on the scarce government’s finances. Hence, suitable reforms are needed to be undertaken in order to ensure allocation of subsidies in a targeted manner only to the needy farmers.

Question 42.
Explain how import substitution can protect domestic industry? (NCERT)
Answer:
In the first seven Five Year Plans, India followed an inward looking trade strategy. This strategy aimed at replacing or substituting imports with domestic production, i.e. instead of importing goods made in a foreign country, industries would be encouraged to produce them in India itself. This concept is referred to as import substitution. Thus, the government protected the domestic industries from foreign competition through this policy.

Protection from imports took two forms

Tariffs, i.e. a tax on imported goods to make imported goods more expensive and discourage their use.
Quotas specify the quantity of goods which can be imported.

The policy of import substitution provides protection to domestic industries from foreign competition. The rationale for this policy is that industries of developing countries like India are not in a position to compete against the goods produced by developed economies. It is assumed that if the domestic industries are protected in the infant stage, they will gain strength by being able to produce on large scale and through experience they will be able to compete globally in the course of time.