Economics Assignment (Onam Exam)
Answer any four questions from 1 to 5. Each carries 1 score.
1. The primary motive of the British colonial rule in India was:
Answer : b) to protect and promote the economic interests of Britain
2. What was the main occupation of the Indian population on the eve of independence?
Answer: b)Agriculture
3. What is the full form of 'LPG' in the context of the 1991 economic reforms? ,
Answer; b) Liberalisation, Privatisation, Globalisation
4. Which of the following was a key feature of the Indian economy on the eve of independence?
Answer: c) Stagnant economy
5. Which of the following sectors received the highest priority in India's first five-year plan?
Answer: c) Agriculture
6) . Mention any two features of the Indian economy on the eve of independence.
Answer:
Indian economy was stagnant on the eve of independence.
Agriculture was the main economy activity.
India's Cottage industry destroyed. It create mass unemployment.
7) Distinguish between public sector enterprises and a private sector enterprises.
8) What were the reasons for the introduction of economic planning in India?
Answer:
India introduced economic planning to accelerate growth and modernization, build essential infrastructure, achieve self-sufficiency, reduce poverty and unemployment, and ensure greater social justice and equitable distribution of resources and wealth.
9. Explain the main features of the agricultural sector on the eve of independence.
Answer:
British rule led to stagnation in agriculture
1) Exploitative land settlement system - Zamindari system
2) Low level of technology
3) Less use of fertilizers.
4) Lack of irrigation facilities
5) Commercialization of agriculture
10. State three reasons for the introduction of the economic reforms of 1991.
The reasons for the introduction of the economic reforms of 1991 are :
1) Bad performance of public sector.
2) Acts like MRTP prevented large companies form making investment.
3) Acts like FERA restricted foreign investment.
4) Protection of domestic industries made them inefficient
5) Higher tax rate led to tax evasion.
11. What is meant by import substitution? How did this policy protect domestic industries? (3X2=6)
Answer
Import Substitution means substituting imports with domestic production. It aim to reduce dependence
on foreign countries. This policy protect domestic industries by Tarifff and Quotas .
Tariff are import duties. Imposition of tariff rises the price of foreign goods.
Quotas are quantitative restrictions on imports. It allows a limited quantity for import.
12. Analyse the condition of the industrial sector in India during the British colonial period.
Answer:
Industrial Sector
Industrial growth was very low.
Destruction of handicraft industries and unemployment.
India became a market for British goods.
Capital goods industry did not develop.
Two Objectives of British industrial policy were :
To use India as a source of raw material for British Industries.
To convert India into a market for finished products produced in Britain.
13. How did the land reform measures implemented after independence support the objectives of the five-year plans?
Answer:
Equity in land distribution.
Abolition of intermediaries like Zamindars.
Ceiling of land holding.
Distribution of land to the landless tiller by taking possession of surplus land form big landlords.
The abolition of intermediaries made 200 lakh tenants as owners of land.
14. Explain the concepts of liberalisation and privatisation.
Liberalisation
Liberating the economy from government restrictions. The following are the liberalisation measure in different sectors.
Industrial Sector reforms
Financial Sector reforms
Tax reforms
Foreign exchange reforms
Trade and investment policy reforms
Privatisation
Privatisation or denationalisation refers to giving more importance to private sector and withdrawal of public sector.Withdrawal of government ownership and management of public sector companies.
Answer any one question from
15. Explain the main objectives of India's five-year plans. Discuss the major achievements and failures of planning between 1950 and 1990.
Answer:
1) Agriculture
Land reforms
It was aimed to achieve equity in land distribution. Raising agricultural
production, increased productivity.
Land reforms includes the following measures.
1. Abolition of intermediaries like zamindars.
2. Ceiling of land holding.
3. Distribution of land to the landless tiller by taking possession of surplus land from big landlords.
4. Tenancy reforms, that is regulation of rent, security of tenure etc.
Land reforms were successfully implemented in states like Kerala and West Bengal.
The abolition of intermediaries made 200 lakh tenants as owners of land.
Green revolution
- It was the sudden increase in agricultural production which resulted from the new agricultural strategy adopted in 1964 - 65.
- Father of green revolution in India was Dr M S swami Nathan.
- There were two phases of green revolution.
- In the first phase (1965-75) the new strategy was confined to states like Punjab Tamilnadu and Andhra Pradesh and the production increased mainly in wheat.
- In the second phase (1975-85) the new strategy spread to more state and more crops.
Techniques / Features of green revolution
- Use of high yielding variety (HYV) seeds.
- Use of chemical fertilizers and pesticides.
- Use of modern implements like tractors, water pump sets etc.
- Irrigation facilities.
- Easy availability of credit to farmers at lower rate of interest.
Benefits of green revolution
1. Increased production and self-sufficiency.
2. Increase in production of commercial crops.
3. Reduction in the prices of food grains.
4. Increase in the marketable surplus. (Means surplus that can be sold in the market)
5. It helped government to create a food grain stock to be used during time of food shortage.
6. It helped government to distribute food grains through public distribution system (PDS).
Deficiencies of green revolution
1. Green revolution benefited rich farmers more.
2. Possibility of attack from insects and pests is more in HYV crops.
3. Heavy use of chemical fertilizers and pesticides caused pollution.
4. In the early phase, production was concentrated in wheat alone.
5. Increase in the use of machinery caused unemployment.
Industy
➤ Industrialisation is essential for economic growth of a country.
➤ IPR 1956 ( Industrial policy resolution )
1. Industries exclusively owned by the state.
2. Industries in which the private sector can coexist with the public sector but playing only a supplementary role.
3. Remaining industries were completely left to the private sector but they will be controlled by the state. This control was exercised through licensing to promote balanced regional growth...
Small scale industry
➤ It is that industry which has a maximum investment limit of 1 crore.
➤ The government appointed Village and Small scale Industries Committee (Karve committee) in 1955. (Sure Question)
➤ This committee recommended promotion of small scale industries for rural development.
Significance of small scale industry
1. Small scale industries require less capital.
2. It creates more job opportunities.
3. It use local resources.
4. They help in Village development.
5. Less pollution.
6. They use agricultural products as raw material. It helps agricultural
development.
Trade policy - Import substitution
➤ Import substitution means substituting imports with domestic production. It aims at reducing dependence on foreign countries.
➤ The policy of import substitution leads to the policy of protection. Protection is the policy of protecting domestic industries from foreign competition.
➤ Protection is given through tariffs and quotas.
Tariffs are import duties. Imposition of tariff rises goods.
Quotas are quantitative restrictions on imports. It allows a limited quantity for import.
Effect of policies on India's Industrial development
Benefits:-
1. The contribution of industrial sector to GDP increased from 12% in 1950-51 to 25% in 1990-91.
2. From 1950 to 1990 industrial sector grew by 6 % per year.
3. India's industrial sector became highly diversified.
4. Small scale industries created millions of jobs.
5. Growth of indigenous industries through protection.
Drawbacks:-
1. The system of licensing created Licence Permit Raj featured by red tapism and corruption.
2. Public sector enterprises incurred huge losses.
3. Reservation for public sector created public sector monopoly.
4. Protection created inefficient units.
5. Public sector entered into unnecessary areas led to wastage of resources. Eg:Production of bread.
6. Industrial policy restricted private initiative instead of regulating industry.
16. Discuss the features of India's economic reforms of 1991. What were the major criticisms of these
reforms?
Liberalisation
It means liberating the economy from government restrictions. The following are the liberalisation measures in different sectors.
1. Industrial sector reforms
- Delicencing - Industrial licensing was abolished except certain items like alcohol, cigarettes, explosives, drugs etc.
- Dereservation - Industries reserved for public sector has been reduced. Now defence, atomic energy and railway are reserved for public sector.
- MRTP act was amended. (Monopoly Restrictive trade practices)
- FERA act was also amended to attract private investment.
- Goods reserved for small scale industry were reduced.
2. Financial sector reforms
Here control of RBI was reduced.
- Bank branch licensing liberalised.
- New generation private banks allowed (ICICI, HDFC)
- Foreign banks were allowed to open branches in India (Citibank, ABN Amro Bank)
- Insurance companies were allowed in the private sector.
- Foreign investors were allowed to invest in India.
3. Tax reforms
Here direct and indirect tax rates were reduced.
- Reduction in personal income tax.
- Reduction in corporation tax.
- Reduction in excise duties.
- Reduction in customs duties.
- Introduction of GST (came into effect in July 2017).
4. Foreign exchange reforms
Indian rupee was devalued in 1991.
- Devaluation means deliberate reduction in the price of rupee. It encouraged exports and foreign currency inflow.
- Exchange rate, formerly determined by RBI (fixed exchange rate) was replaced by market determined exchange rate.
5. Trade and investment policy reforms
- Reduction in tariff rates.
- Quota system removed.
- Import licensing was abolished except hazardous items.
- Export duties removed.
- Foreign investors were allowed to invest in India.
Privatisation
Privatisation or denationalisation refers to giving more importance to private sector and withdrawal of public sector.
There was two types of privatization.
1. Withdrawal of government ownership and management of public sector companies.
2. Selling of part of government equity shares in public sector undertaking. It is called disinvestment.
Aims of privatisation:
1. Better performance of PSUs.
2. To rise financial resources.
3. Rising revenue of the government.
Globalisation
It means integration of Indian economy into the world economy.
It implies:-
1. Closer integration of countries.
2. Free flow of goods, services, capital and knowledge across national
borders.
3. Extension of markets.
Major Criticism of 1991 reforms
1. Economic reforms have not benefited to agriculture.
2. Decline in public investment in agriculture.
3. Reduction in import duties of agricultural products negatively affected domestic producers.
4. Cost of production increased. But prices of agricultural commodities has not increased at the same rate.
5. Industrial growth has also come down because of decreasing demand for Indian products due to cheaper imports.
6. Reform led growth has not generated sufficient employment opportunities in the country.
7. Related to disinvestment, critics says that assets sold to private sector have been undervalued and it made loss to the government.
8. Public expenditure in social sectors like education, health declined.
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