1st PUC Economics Question Bank Chapter 2 Indian Economy 1950-1990

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Karnataka 1st PUC Economics Question Bank Chapter 2 Indian Economy 1950-1990

1st PUC Economics Indian Economy 1950-1990 Text Book Questions and Answers

Question 1.
Define Plan?
Answer:
A pian spells out how the resources of a nation should be put to use. It should have some general goals as well as specific objectives which are to be achieved within a specified period of time.

Question 2.
Why did India opt for planning?
Answer:

• At the time of independence, the Indian economy was in its worst stage.
• The GDP, National, and per capita income was very low and the unemployment was very high.
• The industrial growth was insignificant also the agricultural sector was not doing well.
• The resources were very limited.

So India opted for planning for better economic development and growth.

Question 3.
Why should plans have goals?
Answer:
Plans should have goals so that it can be achieved within a specified period of time. In India, plans are of five years duration and are called a Five Year Plans.

Question 4.
What are High Yielding Variety (HYV) seeds?
Answer:
High Yielding Variety (HYV) seeds are seeds, which produce large quantities of crops especially wheat and rice. The use of these seeds requires regular supply of water and optimum use of fertilizer and pesticide in correct proportions. Hence, the farmers require reliable irrigation facilities as well as the financial resources to purchase fertilizer and pesticide to benefit from.

HYV seeds. Due to this reason, the use of HYV seeds was restricted to the more affluent states such as Punjab, Andhra Pradesh and Tamil Nadu and mainly benefitted Wheat production in the first phase of the Green Revolution during mid 1960s up to mid 1970s, In the second phase of the Green Revolution (mid 1970s to mid 1980s), the HYV technology spread to a large number of states and benefited more variety of crops. The HYV seeds enabled India to achieve self- sufficiency in food grains.

Question 5.
What is marketable surplus?
Answer:
Marketable surplus refers to the difference between the total output produced by a farmer and his own farm consumption or we can say, the portion of agriculture produce which is sold in the market by the farmers is called market surplus.
Marketable surplus = Total farm output produced by farmer – own consumption of farm output.

Question 6.
Explain the need and type of land reforms implementation in the agriculture sector.
Answer:
At the time of independenceythe land tenure system was characterised by intermediaries called Zamindars, Jagirdars, etc., who normally collected rent from the actual tiller of the soil without contributing towards improvements on the farm This de-motivated the actual tiller, hence productivity was very low. Therefore, there was an urgent need of land reform policy.
Types of land reforms:

1. Abolition of intermediaries :
The prime focus of land reforms was to abolish intermediaries like zamindars, Jagidars, etc.,

2. Consolidation of land holdings :
As the land holdings were small and also fragmented, so it was very necessary to consolidate the landholding for the use of modem and advanced technology.

3. Land ceiling:
This means fixing the maximum size of land which could be owned by an individual. The purpose of land ceiling was to reduce the concentration of land ownership in a few hands.

Question 7.
What is Green Revolution? Why was it implemented and how did it benefit the farmers? Explain in brief.
Answer:
The term Green Revolution refers to the large increase in production of food grains resulting from the use of high yielding variety (HYV) seeds, especially for wheat and rice. It was implemented because at independence, about 75% of the country’s population was dependent on agriculture.

But the productivity in the agricultural sector was very low because of the old technology and the absence of required infrastructure for the vast majority of farmers. India’s agriculture vitally depends on the monsoon and if monsoon fell short the farmers were in trouble unless they had access to irrigation facilities which very few had.

By the use of HYV seeds, the productivity of food grains increased remarkably and a good proportion of the rice and wheat produced during the green revolution period was sold by the farmers in the market. India achieved self-sufficiency and self-reliability in food grains.

Question 8.
Explain the growth and equity as a planning objective?
Answer:
Growth refers to the increase in the country’s capacity to produce the output of goods and services within the country. A good indication of economic growth is the steady increase in GDP.

Inequity every Indian should be able to meet his or her basic needs such as feed, a decent hotise, education, and health care and inequality in the distribution of wealth should be reduced. Hence growth with equity ‘implies that benefit of development should be evenly available to everybody.

Question 9.
Does modernisation as a planning objective create contribution in the light of employment generation? Explain.
Answer:
The use of modem technology and input will raise productivity and consequently, the income of the people that will further raise the demand for goods and services. In order to fulfill these increased demands, there will be more job opportunities that will lead more people to be hired and hence more employment opportunities will be generated. Hence both modernisation and employment generation are not contradictory but are complementary to each other.

Question 10.
Why was it necessary for a developing country like India to follow self reliance as aplanning objective?
Answer:
It was necessary for a developing country like India to follow self-reliance as a planning objective otherwise, it would increase the country’s dependence on foreign products. Further, it was feared that dependence on imported food supplies, foreign technology, and foreign capital may make India’s sovereignties vulnerable to foreign interference in our policies.

Question 11.
What is sectoral composition of an economy? Is it necessary that the service sector should contribute maximum GDP of an economy? Comment.
Answer:
The GDP of a country is derived from the different sectors of the country, namely the agricultural sector, the industrial sector, and the service sector. The contribution made by each of these sectors makes up the structural composition of the economy.

Yes, it is necessary that at the Later stages of development, service sector should contribute the maximum to the total GDP. This phenomenon is called structural transformation. With the development the share of agriculture declines and the share of industry becomes dominant. At higher levels of development, the contribution of service sector becomes more than the two sectors. This has been observed in the case of developed economies of the world.

Question 12.
Why public sector was given a leading role in industrial development during the planning period?
Answer:
At the time of independence, Indian industrialists did not have the capital to undertake investment in industrial ventures required for the development of our economy, nor was the market big enough to encourage industrialists to undertake major projects even if they had the capital to do so.

It is principally for these reasons that the state had to play an extensive role in promoting the industrial sector. In addition, the decision to develop the Indian economy on socialist lines led to the policy of the state controlling the commanding heights of the economy.

Question 13.
Explain the statement that green revolution enabled the Government to procure sufficient food grains to build its stocks that could be used during times of shortage?
Answer:
Green Revolution led to an increase in the production of food grains with the use of modem technology, extensive use of fertilisers, pesticides and HYV seeds. There was a significant increase in agriculture productivity and product per farmland.

In addition to the spread of marketing system, abolition of intermediaries and easy availability of credit has enabled farmers with greater portion of marketable surplus. These factors enabled the Government to procure sufficient food grains to build the buffer stock and to Provide cushion against the shocks of famines and shortages.

Question 14.
While subsidies encourages farmers to use new technology they is a huge burden on Government finances. Discuss the usefulness of subsidies in light of this fact.
Answer:
Any new technology will be looked upon as being risky by farmers. Subsidies were, therefore needed to encourage farmers to test the new technology Some economists believe that once the technology is found profitable and is widely adopted, subsidies should be hased out since their purpose has been served. Further, subsidies are meant to benefit the farmers but a substantial amount of fertilizer subsidy also benefits the fertilizer industry and among farmers, the subsidy largely benefits the farmers in the more prosperous regions.

Therefore, it is argued that there is no case for continuing with fertilizer subsidies, it does not benefit the target group and it is a huge burden on the Government’s finances. On the other hand, some believe that the Government should continue with agriculture subsidies because farming in Indian continues to be a risky business. Most farmers are very poor and they will not be able to afford the required inputs without subsidies.

Eliminating subsidies will increase the inequality between rich and poor farmer and violate the goal of equity. These experts argue that if subsidies are largely benefiting the fertilizer industry and big formers the correct policy is not to abolish subsidies but to take steps to ensure that only the poor farmers enjoy the benefits.

Question 15.
Despite the implementation of green revolution 65% of our population continued to be engaged in the agriculture sector till 1990 Why?
Answer:
In India, between 1950 and 1990, the proportion of GDP contributed by agriculture declined significantly but not the population depending on it (69.5% in 1950 to 64.9% by 1990). The agricultural output could have grown with much less people working in the sector. This is because the industrial sector and the service sector did not absorb the people working in the agricultural sector. Many economist call this an important failure of our policies followed during 1950-1990.

Question 16.
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?
Answer:
Usefulness of public sector undertakings:
There is no doubt that manypublic sector undertakings are incurring huge losses and are a drain on the country’s resources. Inspite of this, they are very useful due to following reasons:

• They create a strong industrial base.
• They prevent contraction of economic power.
• They help in the development of backward areas.
• They seek to develop infrastructure.
• They provide employment.
• They promote import substitution.
• They promote equality of income and wealth distribution.
• They seek to remove regional imbalance in growth.

Question 17.
Explain how import substitution can protect domestic industry?
Answer:
Import substitution is also known as inward looking trade strategy which implies discouraging the inports of those goods that could be produced domestically.
1. Import substitution strategy not only reduces an economy’s dependence on foreign goods but also provides impetus to the domestic firms.

2. 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.

3. The import substitution eradicates fear from any competition and also not to worry about their market share as license gives them the monopoly status in the domestic market.

4. The import substitution gradually improves the competitiveness among domestic producers and when they are exposed to the international market they can survive and complete with their foreign counterparts.

Question 18.
Why and how was private sector regulated under the IPR1956?
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. This policy was used to promote industry in backward regions. It was easier to obtain a license if the industrial unit was established in an economically backward area.

In addition, such units were given certain concessions such as tax benefits and electricity at a lower tariff. The purpose of this policy was to promote regional equality. Even an existing industry had to obtain a license for expanding output or far diversifying production. This was meant to ensure that the quantity of goods produced was not more than what the economy required.

Question 19.
Match the following
Answer:

List -1	List-II
1. Prime Minister	Chairperson of the Planning Commission
2. Gross Domestic Product	The money value of all the final goods and services produced within the economy in one year.
3. Quota	Quantity of goods that can be imported.
4. Land Reforms	Improvements in the field of agriculture to increase its productivity.
5. HYV seeds	Seeds that give large proportion of output
6. Subsidy	The monetary assistance given y government for production activities.

1st PUC Economics Indian Economy 1950-1990 Additional Questions and Answers

1st PUC Economics Indian Economy 1950-1990 Very Short Answer Type Questions

Question 1.
What do you mean by economic planning?
Answer:
Economic planning means utilising of capital’s resources in different development activities in accordance with national priorities.

Question 2.
In India who is the chairperson of planning commission?
Answer:
In India, Prime Minister is the chairperson of planning commission.

Question 3.
Who floated the idea of planning in India first of all?
Answer:
P.C.Mahalanobis floated the idea of planning in India first of all.

Question 4.
Define capitalistic economy?
Answer:
When all the economic activities which will be owned and managed by private sector or private investors then it is called as capitalistic economy.

Question 5.
What is a socialistic economy?
Answer:
When all the economic activities which will be owned and managed by public sector can be called as socialistic economy.

Question 6.
What is mixed economy?
Answer:
When all the economic activities which will be owned and managed by both public and private sector can be called as mixed economy.

Question 7.
Name the sectors from which the GDP of a country is derived?
Answer:
The sectors from which the GDP of a country derived are:

1. Agricultural sector.
2. Service sector.
3. Industrial sector.

Question 8.
Why is agriculture called the backbone of Indian economy?
Answer:
More than two thirds of our population is dependent on agriculture directly or indirectly. One third of our national income comes from agriculture. It supplies the raw material and industries and food for more than one hundred crore people in India.

Question 9.
What is meant by agriculture?
Answer:
It is the art or science which is related to crop farming and cattle breeding activities.

Question 10.
What are the main causes of backwardness of Indian agriculture?
Answer:
System of ownership of land and small size of the-farmers are the main causes of the backwardness of Indian agriculture.

Question 11.
What do you mean by land reforms?
Answer:
The reforms which are related to institutional changes in the field of agriculture for its development.

Question 12.
What is Green Revolution?
Answer:
Significant and continuous rise in agricultural production with the use of fertilisers, hybrid seeds, and irrigational facilities is known as green revolution.

Question 13.
What is food problem?
Answer:
When all the citizen of the country do not get food for living, it is known as food problem.

Question 14.
What is meant by Industrial Policy?
Answer:
This industrial policy refers to the policy of the Government towards the development of industries.

Question 15.
When was the first industrial policy introduced after independence?
Answer:
In 1948.

Question 16.
What is meant by small scale industries?
Answer:
A small scale industry is the one in which fixed investment does not exceed Rs.,60 lakhs.

Question 17.
What are cottage industries?
Answer:
Those industries which use family labour for production process or purpose are known as cottage industries.

Question 18.
Why are small scale and cottage industries important in Indian economy?
Answer:

• They generate more employment with less use of capital.
• Locally available raw materials is put to maximum use. They have large export potential.

Question 19.
What was the main objective of industrial licensing?
Answer:
Its aim was to establishment, expansion, and ownership of private industries according to priorities of five year plans and to check the monopoly tendency in industries. It also had the objective of removing regional disparities.

Question 20.
Name the three different types of economic growth?
Answer:
In the world there are majorly three important economic systems they are:

1. capitalism
2. socialism and
3. mixed economy.

Question 21.
What is the duration of Indian Plans?
Answer:
The duration of Indian plans is ‘ five years ’

Question 23.
Which country is the pioneer in national planning?
Answer:
The former ‘ Soviet union’ is the pioneer in national planning.

Question 24.
What are the goals of the five year plans?
Answer:
The goals of the five years plans are:

• Achievement of the growth
• Bring modernization
• Becoming self-reliant
• Equity.

Question 25.
Name the different sectors of the economy from which the GDP of the country is derived?
Answer:
The different sectors of the economy from which the GDP of a country is derived are:

1. Agriculture sector or primary sector
2. Industrial Sector or secondary sector
3. Service sector or tertiary sector.

Question 26.
Why did the first five year plan focus on higher agriculture production as the principal objective?
Answer:
The first five year plan focussed on higher agriculture production as the country was confronted with an acute shortage of food grains when the first five year plan was initiated.

Question 27.
What are labour intensive technology?
Answer:
The labour intensive industries are those industries which use more labour and less capital.

Question 28.
What are capital intensive technology?
Answer:
The capital intensive industries are those industries which use more capital (machines) and less of labour.

Question 29.
In which states were the land reforms successful and why?
Answer:
Land reforms were successful in Kerala and West Bengal because these states had Government committed to the policy of the land to the tillers.

Question 30.
In which type of economy, only those goods are produced that are in demand i.e., goods that can be sold profitably either in the domestic or in the foreign markets?
Answer:
In market economy i.e., capitalistic economy.

Question 31.
In which type of economy, the Government decides what goods are to be produced in accordance with the needs of society?
Answer:
Socialistic economy i.e., centrally planned economy.

Question 32.
Which Industrial policy resolution formed the basis of the second five year plan?
Answer:
Industrial policy resolution of 195 6 formed the basis of the second five year plan.

1st PUC Economics Indian Economy 1950-1990 Short Answer Type Questions

Question 1.
What do you mean by structural change? What is its relationship with economic development?
Answer:
The occupational structure of a country refers to the distribution of its workforce according to the different occupations. It indicates the structure of economic activities. It tells us on what sector the people of the country depend for their living. It also indicates the level of development of the country.

As a country develops, it undergoes structural changes with the development of the economy the share of agriculture declines and the share of industry becomes dominant. At higher levels of development, the service sector contributes more to the GDP than the other two sectors. In India, the share of agriculture in GDP is declining and the share of service sector is increasing. It reflects the relationship of economic development and structural changes.

Question 2.
What is the importance of agriculture in Indian economy?
Answer:
Agriculture is the backbone of the Indian economy.

• It contributes to nearly 30 percent of national income.
• About two -thirds of our total labour force depends on agriculture for their living.
• It also plays significant role in the country’s Industrial Development.

Question 3.
What do you mean by New Agricultural Strategy?
Answer:
The new agricultural strategy was put into practice for the first time in India in 1966. This was termed as High Yielding Varieties programme.

HYV programme was introduced in the form of a package programme since high yielding varieties of seeds required regular and adequate irrigation facilities, extensive use of fertilizers, pesticides, and insecticides. As a result, food grains production increased in 1967-68 (nearly 25 percent increase compared to the production in 1966-67). The economists termed this increase in production as Green Revolution.

Question 4.
How has India achieved seif sufficiency in food grains?
Answer:
The spread of Green Revolution technology enables India to achieve self-sufficiency in food grains. New India is not importing food grains from other countries of the world. We no longer had to be at the mercy of America or any other nation for meeting our nation’s food requirements. Now we are exporting wheat and rice to number of countries.

Question 5.
The new agricultural technology involved risks. Explain?

• India became self-sufficient in food grains requirements but the technology involved was not free from risks.
• One was the possibility that it will increase the disparities between small and big farmers because big farmers could afford the required inputs and were able to reap most of the benefits of the Green Revolution.
• the HYV crops were also more prone to attack by pests, and the small farmers who adopt this technology may lose everything in a pest attack. But these did not come true because of steps taken by the Government.

Question 6.
What are the objectives of new industrial policy?
Answer:
The main objectives of the new industrial policy are as follows:

1. To correct weaknesses that may have crept the industrial structure as its has developed over last four decades.
2. To consolidate the strengths built up during the last four decades of economic planning and to build on the gains already made.
3. To maintain a sustained growth in productivity and gainful employment.
4. To attain international competitiveness.

Question 7.
What measures have been taken by the Government for the development of cottage and small scale industries?
Answer:
The various Measures taken by the Government for the development of cottage and small scale industries are:

1. Small industries are exempted from excise duties. This enables them to seek their products at lower prices.
2. 836 products have been exclusively reserved for production in small sector, large industries cannot produce them.
3. Training institutes have been set up throughout the country. These help small industries to upgrade their skills and modernise their technology.

Question 8.
Distinguish between subsistence agriculture and commercial agriculture?
Answer:
Under subsistence agriculture, a farmer mainly produces those crops which are required to meet the most immediate needs of his family. These are Primarily food crops and to some extent non-food crops like cotton, sugarcane, etc.,

On the other hand, under commercial agriculture, a farmer cultivates those crops which find a ready market. The farmer sells the crops in the Market and with the cash received from the sale of crops, he purchases the goods required by him.

Question 9.
What does self-reliance mean? Why was the policy of self-reliance considered ‘ necessary during the first seven year plan?
Answer:
Self-reliance:
Self reliance means avoiding import of those goods which could be produced in a country (say India) itself Necessity of the policy of self-reliance: the policy of self-reliance was considered necessary due to the following reasons:

1. To reduce our dependence on foreign countries, especially for food.
2. It was feared that dependence on imported food supplies foreign technology and foreign capital may make India Vulnerable to foreign interference in our policies.

Question 10.
Write a short note on marketed surplus.
Answer:
Marketed surplus refers to surplus of farm output over and above a farmer’s consumptions i.e., expected consumption or output by the farmer’s family during the year. This surplus is available to the farmers for sale in the market. Hence it is called marketed surplus.

Question 11.
Differentiate between planning objectives (objectives of planning) and plan objectives.
Answer:
Difference between planning objectives are plan objectives.

Question 12.
Write the three questions which are to answer by very society.

OR

Write down three decisions which are to be taken by every society
Answer:
A society has to answer are following three questions:
1. Choice of production :
What goods and services should be produced in the country?

2. Choice of technique :
How should the goods and services be produced? Should producers use human – labour or more capital for producing this?

3. For whom to produce :
How should the goods and services be distributed among people?

1st PUC Economics Indian Economy 1950-1990 Long Answer Type Questions

Question 1.
What do you know about capitalism, socialism and mixed economy?
Answer:
1. Capitalism :
When all the economic activities will be owned and managed by private sector or private individuals then it is called capitalism or capitalistic economy.

Under capitalism, the management, ownership, and control of productive activities are in private hands. They produce goods and services for the profit motive.

In a capitalist society, the goods produced and distributed between people are not on the basis of what people need but on the basis of what people can afford and are willing to purchase.

2. Socialism :
When all the economic activities will be owned and managed by public sector it can be called socialism or socialistic economy.

The Government decides what goods are to be produced in accordance with the needs of society. The Government decides how goods are to be produced and how they should be distributed. The distribution under socialism is supposed to be based on what people need and not on what they can afford to purchase.

3. Mixed economy:
When all the economic activities will be owned and managed by both public and private sector it, cari be called as mixed economy.

The Government and the market together answer the three questions of what produce, How to produce, and for whom to produce. In a mixed economy, the market will provide whatever

goods and services it can produce well, and Government will provide important goods and services which the market fails to do.

Question 2.
Give the achievements of economic planning?
Answer:
Major achievements of economic planning are:

1. Economic planning helps in increasing the National Income of the country.
2. Economic planning helps in raising the per-capita income of the people in country.
3. Economic planning helps in better capital formation for the growth and development of a country.
4. Planning has made way for the institutional reforms in agriculture and Green Revolution.
5. The economic planning brought the changes in the economy by increasing the importance of industries.
6. Economic planning helps in development of sound economic infrastructure for the economy to work smoothly.
7. Even economic plannings also helps in development of social infrastructure like Providing better health, education, etc.,
8. Economic planning leads to high employment generation or opportunities for people in a country.
9. It helps in building a modem country.
10. Economic planning helps us in achieving self sufficiency and self reliance.

Question 3.
Why has India adopted mixed economy?
Answer:
The leaders of Independent India had to decide among other things on the type of economic system and among them, socialism appealed to Jawahar Lai Nehru the most. But he was not in favour of the kind of socialism practiced in the Soviet Union whose all the means of production in the country were aimed and controlled by the Government. There was no private property.

It was not possible in a democracy like India to change the ownership pattern of land and other properties. The thinkers of newly Independent India sought an alternative to extreme versions of capitalism and socialism. They had sympathy with the socialist outlook and chose a system, which combined the best features of socialism and capitalism.

India would be a ‘ Socialism Society with a strong public sector but also with private property and democracy’. The Government would plan for the economy with the private sector being encouraged to be part of the plan effort.

The industrial policy resolution of 1948 and directive principle of the Indian constitution reflected this view. This system, on one hand, maintains the incentives and initiatives of the people, on the other, it helps the economy to be free from exploitation.

Mixed economy provides opportunities to fulfill the objectives of our planning, rapid economic growth, and social justice. It is most suitable in all present day democratic setup in which mixed economy has all the sectors such as private sector, public sector, co-operative sector co-exist and work together.

Question 4.
What are the various objectives of public sector undertakings?
Answer:
Public sector undertakings were assigned a key role while formulating strategy for planning because of the following reasons:

1. Growth of heavy capital goods industries.
2. Establishment of socialistic pattern of society.
3. Balanced regional growth.
4. It generates about 26. percent of national income produced by the country.
5. The public sector provides jobs to 185 lakh persons.
6. Surplus earned by the public sector enterprises have become an important source of non¬tax revenue of the Government.
7. Public sector enterprises check the concentration of economic power.

Question 5.
Explain the importance of small scale industries in India?
Answer:
A small scale industry is defined with reference to the maximum investment allowed on the assets of a unit. This limit changes over a period of time. In 1950, a small scale industrial unit was one which invested a maximum of Rs.5 lakhs, at present the maximum investment allowed is Rs. One crore.

These industries play a very significant role in every economy even in the more advanced countries like Japan and U. S. A and even in developing countries like India. Hence they are very important.

1. Small scale industries are labour intensive and capital light industries. The labour requirement per unit is high.
2. The import requirements of these industries are limited.
3. These industries promote regional balanced development and help to avoid concentration of economic power.
4. These industries are useful for those goods whose market is limited.
5. These industries can solve the problem of unemployment, poverty, and backwardness.
6. They help in decentralisation of industries throughout the country.

Question 6.
What are the problems of small scale industries in India?
Answer:
The problems of small scale industries in India are :

1. Majority of small scale industries in India suffer lack of proper financial supporter facilities.
2. Small scale industries are yet depending more on ancient technology.
3. Majority of small scale industries are struggling due to lack of proper and adequate marketing facilities.
4. The small scale industries are unable to compete with more unified large scale industries.
5. The small industries are also suffering due to inadequate raw materials.
6. Moreover many small scale industries are facing lack of proper managerial support.
7. The small scale industries have to face the problem of local and other.