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KVS ZIET MYSORE

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क्रम SL.NO TABLE OF CONTENT / विषय सचू ी पष्ठृ सं PAGE

NO
1. COVER PAGE 01

2. MESSAGE BY THE COMMISSIONER 02

3. EDITORIAL TEAM 03

4. TABLE OF CONTENTS 04

5. CBSE SYLLABUS 2024-25 05-07

6. QUESTION PAPER DESIGN / BLUE-PRINT OF 08-09

QUESTION PAPER

7. STUDENT SUPPORT MATERIAL ON 10-115

INTRODUCTORY MACROECONOMICS
(PART-A)
8. STUDENT SUPPORT MATERIAL ON INDIAN 116-203
ECONOMIC DEVELOPMENT(PART-B)

9. CBSE GUIDELINES-PROJECT WORK IN 204-206

ECONOMICS
10. LINK: CBSE QUESTION PAPERS (2023-24) 206
WITH MARKING SCHEME
11. LINK: UNSOLVED SAMPLE QUESTION 206
PAPERS

12. LINK: MARKING SCHEME FOR UNSOLVED 206

SQPs FOR REFERENCE OF TEACHERS

13. VIDEO LINK: METHODOLOGY FOR 206

REASONING-ASSERTION BASED QUESTIONS

KVS ZIET MYSORE

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UNIT -6: DEVELOPMENT EXPERIENCE (1947-90) AND

ECONOMIC REFORMS SINCE 1991
INDIAN ECONOMY ON THE EVE OF INDEPENDENCE.
INTRODUCTION
Before British colonization, India was known as “Sone ki Chidiya” or “The Golden Bird”. It was a
reference to the wealth and economic prosperity of India before its colonization.
However, during the colonial rule (which lasted for almost two centuries before India finally won its
independence on 15th August 1947), the British extracted the wealth of India as much as they could.
as their economic policies were concerned with the protection and promotion of the economic interests
of their home country Britain rather than with the development of India.
STATE OF INDIAN ECONOMY ON THE EVE OF INDEPENDENCE:
(1) Low level of economic development under colonial rule
A. Before the advent of British rule-
i)Had an independent
ii) Main source of livelihood was Agriculture
iii) Economy was characterized by Various kinds of manufacturing activities
iv) Well known for handicraft industries-like in the fields of
a) cotton (like Muslin, Daccai Muslin) and silk textiles
b) metal and precious stone works etc.
v) Enjoyed world-wide market due to----
a) its reputation of the fine quality of material used and
b) high standard of craftsmanship seen in all imports from India.
i) During the British rule-
ii) Focus of economic policies - Colonial government in India followed such economic policies
which were concerned with the protection and promotion of the economic interests of their home
country Britain rather than with the development of India.
iii) Impact of such economic policies- Brought fundamental change in the structure of the economy
a) Transformed India into supplier of raw materials
b) Transformed India into consumer of finished products from Britain.
B. Estimation of national Income and per capita income :
The colonial govt. never made any sincere attempt to estimate India’s national and per capita
income. But some individual attempts were made.
Some of the notable economists who were engaged in estimation of national Income and per
capita income are
1). Dadabhai Naoroji 2). William Digby 3). Findlay Shirras 4). VKRV Rao 5).RC Desai
The estimates given by Dr. V.K.R.V. Rao suggested that growth rate of GDP was about 2% per
annum while the growth of per capita output was just 1/2 (0.5) percent per annum.
(2) Agricultural sector - Experienced stagnation
i) Land tenure system- Exploitative zamindari system- landowners extracted high rents from
peasants.
ii) Forced commercialization of Agriculture
iii) Lack of Irrigational Facilities
iv) Insignificant use of fertilizers,
v) Lack of investment,
vi) Use of out-dated modes of production
vii) Frequent famines and other natural calamities etc.
viii) Partition of the country.
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(3) Industrial sector - No sound industrial base
i) Adoption of the policy of Systematically De-industrializing India
ii) Decline of Indian handicraft industry.
iii) Lack of modern industries
iv) Lack of Capital good industries
v) Low contribution to GDP
vi) Limited operation of public sector
discrimanatory tariff policy
(4) Foreign trade –Drain of India’s wealth
i) Exporter of raw materials (primary products) and importer of finished consumer goods.
ii) Monopoly control of Britain over India’s foreign trade.
iii) Opening of Suez Canal in 1869 further intensified the British control over India’s foreign
trade.
iv) Generation of large export surplus and drain of India’s wealth.
(5) Demographic condition -Worsening Profile
First official census of British India-1881- revealed unevenness in India’s population growth.
Year 1921 is known as the year of great divide.
i) High death and Birth rate-40 and 48 per thousand respectively.
ii) High infant mortality rate-218 per thousand.
iii) Illiteracy-84% illiterate. Female Literacy level was about 7%.
iv) Low life expectancy- less than 32 years
v) Low standard of living and widespread poverty- People used to spend 80% to 90% of their
income on basic needs.
vi) Lack of public health facilities
(6). Occupational structure: More dependency on agriculture and growing regional variation
i) More dependency on primary sector
a) Largest share of work force which was 70-75% was engaged in agriculture.
b) 10% in manufacturing while
c) 15-20% workforce were engaged in service sector.
ii) Regional variation in occupational structure was also seen
a) Parts of the then Madras Presidency Bombay and Bengal witnessed a decline in the
dependence of the workforce on the agricultural sector with a commensurate increase in
the manufacturing and the services sectors.
b) However, during the same time in states such as Orissa, Rajasthan and Punjab there had
been an increase in the share of workforce in agriculture
(7). Infrastructure: Motive behind Infrastructural facilities - to subserve their colonial interest.
Some efforts have been made to develop basic infra-structure like roads, railways, ports, water
transport, post & telegraph by the British rulers. The main motive was not to provide basic
amenities to the Indian people but to subserve their colonial interest.
SOME POSITIVE SIDE-EFFECTS OF THE BRITISH RULE IN INDIA
A. Provided transport facilities, largely in terms of railway.
B. Development of ports.
C. Provision of post and telegraph services.
D. British Govt. left a base of a strong and efficient administrative set up.
E. Evolution of banking and monetary system.
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CONCLUSION
The social and economic challenges before the country were quite enormous at the time of
independence.
i) The agricultural sector was already saddled with surplus labour and extremely low
productivity.
ii) The industrial sector was crying for modernisation, diversification, capacity building and
increased public investment.
iii) Foreign trade was oriented to feed the Industrial Revolution in Britain.
iv) Infrastructure facilities, including the famed railway network, needed upgradation, expansion
and public orientation.
v) Prevalence of rampant poverty and unemployment required welfare orientation of public
economic policy.

MIND- MAPPING

STATE OF INDIAN ECONOMY ON THE EVE OF

INDEPENDENCE
1 Low level of economic development under colonial rule

2 Agricultural sector - Experienced stagnation

3 Industrial sector - No sound industrial base

4 Foreign trade –Drain of India’s wealth

5 Demographic condition -Worsening Profile

Occupational structure: More dependency on agriculture

6 and growing regional variation

Infrastructure: Motive behind Infrastructural facilities - to

7 subserve British colonial interest
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QUESTION ANSWERS
MCQs (1 mark each)

1. The main causes of India’s agricultural stagnation during the colonial period are
i) Exploitative zamindari system
ii) Lack of Irrigational Facilities
iii) Significant use of fertilizers
iv) Lack of investment
Choose the correct option:
a) Only ( i) is true b) Both (i) and (ii) are true
c) (i), (ii) and (iii) are true d) All are true

2. Which crop became less prevalent due to the focus on cash crops during British rule?
a) Cotton b) Jute
c) Tea d) Food grains

3. The decline of traditional industries during British rule resulted in:

a) Increased employment in the industrial sector
b) Mass unemployment and poverty
c) Growth of modern industries
d) Improvement in the standard of living

4. Look at the image given below and answer the question by choosing the correct alternative:
The opening of the Suez Canal in 1869
Suez Canal: Used as highway between India and Britain
Trade through the Suez Canal

a) Further intensified British control over India’s foreign trade

b) Reduced the cost of transportation
c) Made access to the Indian market easier
d) All of the above

5. Arrange the following in the chronological order. (Choose the correct alternative)
i) The year of great divide.
ii) Establishment of Tata Iron and Steel Industry
iii) Introduction of railways in India by the British
iv) Opening of Suez Canal

Alternatives:
a) (i), (ii), (iii), (iv)
b) (iii), (i), (ii), (iv)
c) (iii), (iv), (ii), (i)
d) (ii), (i), (iii), (iv)
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6. Match the following economic sectors with their characteristics on the eve of independence:

Sector Characteristic
I. Agriculture i) Decline of traditional industries
II. Industry ii) Low productivity and traditional methods
III. Trade iii). High dependence on foreign trade
IV. Infrastructure iv. Poor connectivity and limited reach

Alternatives:
I II III IV
a) (i) (ii) (iii) (iv)
b) (iii) (i) (ii) (iv)
c) (iii) (iv) (i) (ii)
d) (ii) (i) (iii) (iv)

7. Choose the correctly matched pair:

i) Commercialization of agriculture - Increased food grain production
ii) Introduction of railways - Enhanced British economic interests
iii) Zamindari system - Direct collection of revenue from farmers
iv) De-industrialization - Promotion of Indian industries

8. The export surplus during the British rule was used ____________________. (Choose the
correct alternative)
i) To make payments for expenses incurred by an office set up by the colonial government
in Britain.
ii) To meet expenses on war fought by the British government.
iii) To import invisible items
Alternatives:
a) Only (i) is true b) Only (ii) is true
c) Only (iii) is true d) All are true

9. The first official census of British India was conducted in the year ___________.

a) 1851 b) 1881
c) 1951 d) 1981

10. Read the following statements carefully:

Statement I: The commercialization of agriculture under British rule led to the production of
cash crops like cotton and jute.
Statement II: This shift towards cash crops increased the production of food grains and
improved food security

In the light of the given statements, choose the correct alternative from the following:

a) Statement I is true and statement II is false.

b) Statement I is false and statement II is true.
c) Both statements I and II are true.
d) Both statements I and II are false.
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11. Read the following statements carefully:

Statement I: The colonial government never made any sincere attempt to estimate India’s
national and per capita income.
Statement II: Among the notable estimators — Dadabhai Naoroji, William Digby, Findlay
Shirras, V.K.R.V. Rao, R.C. Desai — it was V.K.R.V Rao, whose estimates during the colonial
period was considered very significant.

In the light of the given statements, choose the correct alternative from the following:

a) Statement I is true and statement II is false.

b) Statement I is false and statement II is true.
c) Both statements I and II are true.
d) Both statements I and II are false

12. Read the following statements carefully:

Statement I:. The most important characteristic of India’s foreign trade throughout the colonial
period was the generation of a large export surplus.
Statement II: The export surplus during colonial period did not result in any flow of gold or
silver into India.

In the light of the given statements, choose the correct alternative from the following:

a) Statement I is true and statement II is false.

b) Statement I is false and statement II is true.
c) Both statements I and II are true.
d) Both statements I and II are false.

13. Read the following statements carefully:

Statement I: The introduction of Railways enabled people to undertake long distance travel and
thereby break geographical and cultural barriers.
Statement II: The introduction of Railways fostered commercialisation of Indian agriculture
which adversely affected the self-sufficiency of the village economies in India.

In the light of the given statements, choose the correct alternative from the following:

a) Statement I is true and statement II is false.

b) Statement I is false and statement II is true.
c) Both statements I and II are true.
d) Both statements I and II are false

14. Read the following statements-Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:

Assertion (A): British destroyed the indigenous handicraft market in India.

Reason (R): India was made market for British manufactured products.
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Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
c) Assertion (A) is true but Reason (R) is false.
d) Assertion (A) is false but Reason (R) is true.

15. Read the following statements-Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:

Assertion (A): The economic policies pursued by the British colonial transformed India into
supplier of raw materials and consumer of finished industrial products from Britain.
Reason (R): The economic policies of the British colonial government were concerned more
with the protection and promotion of the economic interests of their home country than with the
development of the Indian economy.

Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
c) Assertion (A) is true but Reason (R) is false.
d) Assertion (A) is false but Reason (R) is true.

16. Read the following statements-Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:

Assertion (A): India could not develop a sound industrial base during the British rule.
Reason (R): British followed restrictive trade policies, which led to the rise of Indian handicraft
industries.

Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
c) Assertion (A) is true but Reason (R) is false.
d) Assertion (A) is false but Reason (R) is true.

17. Read the following statements-Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:

Assertion (A): Agricultural productivity became low during British rule in India.
Reason (R): The productivity was low mainly due to various systems of land settlement
introduced by the colonial government.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
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c) Assertion (A) is true but Reason (R) is false.
d) Assertion (A) is false but Reason (R) is true.

18. Read the following statements-Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:

Assertion (A): The colonial government never made any sincere attempt to estimate India’s
national and per capita income.
Reason (R): Growth of aggregate real output during the first half of the twentieth century was
less than two per cent.

Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
c) Assertion (A) is true but Reason (R) is false.
d) Assertion (A) is false but Reason (R) is true.

19. Read the following statements-Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:

Assertion (A): More than half of India’s Foreign trade was restricted to Britain.
Reason (R): Britain maintained Monopoly control on India’s imports and exports.

Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
c) Assertion (A) is true but Reason (R) is false.
d) Assertion (A) is false but Reason (R) is true.

20. Read the following statements-Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:

Assertion (A): The economic condition of farmers under British rule improved a lot.
Reason (R): Commercialization of agriculture took place under British rule.

Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
c) Assertion (A) is true but Reason (R) is false.
d) Assertion (A) is false but Reason (R) is true.

ANSWERS FOR MCQs

Q.NO. ANSWER
1) d) All are true
2) d) Food grains
3) b) Mass unemployment and poverty
4) d) All of the above
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5) c) (iii), (iv), (ii), (i)
6) d) (ii) (i) (iii) (iv)
7) b) Introduction of railways - Enhanced British economic interests
8) d) All are true.
9) b)1881
10) a) Statement I is true and statement II is false.
11) c) Both statements I and II are true.
12) c) Both statements I and II are true.
13) c) Both statements I and II are true.
14) a) Both Assertion (A) and Reason (R) are true and Reason (R) is
the correct explanation of Assertion (A).
15) a) Both Assertion (A) and Reason (R) are true and Reason (R) is
the correct explanation of Assertion (A).
16) c) Assertion (A) is true but Reason (R) is false.
17) a) Both Assertion (A) and Reason (R) are true and Reason (R) is
the correct explanation of Assertion (A).
18) a) Both Assertion (A) and Reason (R) are true and Reason (R) is
the correct explanation of Assertion (A).
19) a) Both Assertion (A) and Reason (R) are true and Reason (R) is
the correct explanation of Assertion (A).
20) d) Assertion (A) is false but Reason (R) is true.

SHORT ANSWER TYPE QUESTIONS (3/4 Marks Each)

What was the main focus of the economic policies undertaken by the British government in India? What
were the impacts of these policies?

Ans: The economic policies pursued by the colonial government in India were concerned more with
the protection and promotion of the economic interests of their home country than with the
development of the Indian economy. Such policies brought about a fundamental change in the
structure of the Indian economy — transforming the country into supplier of raw materials and
consumer of finished industrial products from Britain.

“During the colonial period, a number of socio-economic indicators were in a dilapidated

state.” List any three such indicators that led to the worsening of India’s demographic
profile
Ans: India’s demographic indicators were in a dilapidated state during the colonial period as:
• The overall literacy level was less (below 16%).
• Life expectancy was very low (32 years).
• Alarming infant mortality rate (218/1000).

“The pre-independent India’s occupational structure experienced growing regional

variation.” Justify the above statement with valid explanation.
Ans: The pre-independent India’s occupational structure experienced growing regional variation as:
• Parts of Madras Presidency, Bombay and Bengal witnessed a decline in the dependence of the
workforce on the agricultural sector with a commensurate increase in the manufacturing and
the services sectors.
• There had been an increase in the share of workforce in agriculture in states such as Orissa,
Rajasthan and Punjab.

Indicate the volume and direction of trade at the time of independence.

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Ans: India became an 8 exporter of primary products such as raw silk, cotton, wool, sugar, indigo,
jute etc. and an importer of finished consumer goods like cotton, silk and woollen clothes and capital
goods like light machinery produced in the factories of Britain. For all practical purposes, Britain
maintained a monopoly control over India’s exports and imports. As a result, more than half of
India’s foreign trade was restricted to Britain while the rest was allowed with a few other countries
like China, Ceylon (Sri Lanka) and Persia (Iran). The opening of the Suez Canal further intensified
British control over India’s foreign trade.

What do you mean by export surplus? How was it generated during British period? what
was its effect on Indian economy?
Ans: When exports of a country are more than its imports it is known as Export Surplus. During the
British period this surplus came at a huge cost to the country’s economy. Several essential
commodities—food grains, clothes, kerosene etc., were scarcely available in the domestic market.
this export surplus did not result in any flow of gold or silver into India. it was used to make
payments for: -
• the expenses incurred by an office set up by the colonial government in Britain
• expenses on war fought by the British government
• the import of invisible items, all of which led to the drain of Indian wealth.

LONG ANSWER TYPE QUESTIONS (6 Marks each)

1. What were the main causes of India’s agricultural stagnation during the colonial period?
Ans:
i) Land Revenue System under the British Rule: The Britishers in India established the zamindari
system. Under this system, the zamindars were the permanent owners of the land. They were
required to pay a fixed sum to the government as land revenue and they were given full freedom
to charge any revenue they wanted from the tillers. The zamindars mercilessly exploited the
poor tillers, and did nothing for their upliftment.
ii) Lack of Resources: Because the tillers had to pay huge amounts of rent, they were not left with
any surplus to be able to provide for resources needed in agriculture in the form of fertilisers or
providing for irrigation facilities. This further lowered the agricultural productivity.
iii) Commercialisation of Agriculture: Instead of producing food crops, farmers were producing
cash crops, which were ultimately used by British industries. This further compounded the
plight of the tillers. While earlier they were growing crops to meet their family needs, now they
had to purchase from the market. This led to an increase in indebtedness and they were
constantly borrowing from moneylenders and landlords at very high rates of interest.

2. Give a quantitative appraisal of India’s demographic profile during the colonial period.

Ans: The overall literacy level was less than 16 per cent. Out of this, the female literacy level was at a
negligible low of about seven per cent. Public health facilities were either unavailable to large chunks
of population or, when available, were highly inadequate. Consequently, water and air-borne diseases
were rampant and took a huge toll on life. No wonder, the overall mortality rate was very high and in
that, particularly, the infant mortality rate was quite alarming—about 218 per thousand in contrast to
the present infant mortality rate of 33 per thousand. Life expectancy was also very low—32 years in
contrast to the present 69 years.

Extensive poverty prevailed in India during the colonial period which contributed to the worsening
profile of India’s population of the time
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3. Highlight the salient features of India’s pre-independence occupational structure.

Ans: During the colonial period, the occupational structure of India, i.e., distribution of working
persons across different industries and sectors, showed little sign of change. The agricultural sector
accounted for the largest share of workforce, which usually remained at a high of 70-75 per cent while
the manufacturing and the services sectors accounted for only 10 and 15-20 per cent respectively.
Another striking aspect was the growing regional variation. Parts of the then Madras Presidency
(comprising areas of the present-day states of Tamil Nadu, Andhra Pradesh, Kerala and Karnataka),
Bombay and Bengal witnessed a decline in the dependence of the workforce on the agricultural sector
with a commensurate increase in the manufacturing and the services sectors. However, there had been
an increase in the share of workforce in agriculture during the same time in states such as Orissa,
Rajasthan and Punjab

CASE BASED QUESTIONS

1. Go through the following image and text and answer the questions that follow.

i) What are the two water bodies connected by Suez Canal?

Ans: Red Sea and Mediterranean Sea

ii) When did Suez Canal start working?

Ans: 1869

iii) What was strategic importance of opening of Suez Canal?

Ans: Strategically and economically, it is one of the most important waterways in the world.
Its opening in 1869 reduced the cost of transportation

iv) How did opening of Suez Canal benefit British in India?

Ans: The opening of the Suez Canal made access easy and cheap to the Indian market further
intensified British control over India’s foreign trade
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2. Read the following passage and answer the questions that follow:

The Indian economy on the eve of independence was predominantly agrarian, with a majority of the
population dependent on agriculture. The sector, however, faced numerous challenges such as low
productivity, fragmented landholdings, and heavy dependence on monsoon rains. The
commercialization of agriculture during British rule led to an increased focus on cash crops like cotton,
jute, and tea, which were exported to Britain. This shift in agricultural practices resulted in reduced
production of food crops, contributing to frequent famines and widespread poverty among the peasantry.
i) What were the primary challenges faced by the agricultural sector in India on the eve of
independence?
a) High productivity and extensive irrigation.
b) Fragmented landholdings and dependence on monsoon.
c) Advanced farming techniques and surplus food production
d) Large-scale mechanization and modern irrigation

Ans: b) Fragmented landholdings and dependence on monsoon.

ii) What was the impact of the commercialization of agriculture under British rule?
a) Increased food crop production
b) Enhanced agricultural productivity
c) Focus on cash crops and reduced food crop production
d) Decrease in the number of famines

Ans: c) Focus on cash crops and reduced food crop production

iii) Which cash crops were primarily cultivated for export to Britain during the British rule
in India?
a) Rice and wheat
b) Cotton, jute, and tea
c) Maize and barley
d) Sugarcane and tobacco

Ans: b) Cotton, jute, and tea

iv) What was one of the major consequences of the shift in agricultural practices during
British rule?
a) Increase in food security
b) Frequent famines and widespread poverty
c) Industrial growth in rural areas
d) Enhanced irrigation facilities

Ans: b) Frequent famines and widespread poverty

3. Read the following passage and answer the questions that follow:

Textile Industry in Bengal Muslin is a type of cotton textile which had its origin in Bengal, particularly,
places in and around Dhaka (spelled during the pre-independence period as Dacca), now the capital
city of Bangladesh. ‘Daccai Muslin’ had gained worldwide fame as an exquisite type of cotton textile.
The finest variety of muslin was called malmal. Sometimes, foreign travelers also used to refer to it as
malmal shahi or malmal khas implying that it was worn by, or fit for, the royalty.
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i) What does Muslin refer to here in the passage?

Ans: Muslin is a type of cotton textile which had its origin in Bengal, particularly, places in and
around Dhaka, now the capital city of Bangladesh.

ii) For whom Muslin was made for?

Ans: Muslin was made for the Royal people

iii) The traditional handicrafts industries though famous world-wide were ruined under the
British rule. Do you agree? Give reasons.

Ans: British followed discriminatory tariff policy. It allowed free export of raw materials from India
and free import of British final goods to India, but placed heavy duty on the export of Indian handicrafts.
In this way, Indian. markets were full of manufactured goods from Britain which were low priced.
Indian handicrafts started losing both domestic market and export market. Ultimately, the handicraft
industry declined.

INDIAN ECONOMY 1950-90

India achieved its independence on 15th August 1947.
India decided to adopt
i) Mixed economic system in which much emphasis will be laid on public sector.
ii) Five-year planning method

AN ECONOMIC SYSTEM, or economic order, is a system of production, resource

allocation and distribution of goods and services within a society or a given geographic area.
NOTE:
There are three basic central problems of an economy.
What to produce and in what quantities.
How to produce and
For whom to produce.

TYPES OF ECONOMIC SYSTEMS: -

We can classify the economic systems into three different types

i) Capitalist economic system: - is that type of economic system in which means of production
are in the hands of private individuals and the main aim of production is to earn more and more
of profit.
In capitalist economy the central problems are solved through the price mechanism.
It is also known as market economy.

ii) Socialist economic system: - is that type of economic system in which the means of production
are in the hands of government and the main aim of production is to promote social welfare.
In the socialist economy, the central problems are solved through the central planning authority
or the government.
It is also known as planned economy.
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iii) Mixed economic system: - is that type of economic system in which the means of production
are in the hands of government as well as private individuals and the main aim to production is
to promote social welfare as well as to earn profit.
In the mixed economy, the central problems are solved through the help of government and
price mechanism.
Our first Prime Minister Jawaharlal Nehru preferred the socialist model. But in a democracy like
India, a pure socialist economy cannot flourish.
Capitalism was also not suited since the government had to build up an economy and look after the
common man and his needs. So as a solution, our economy combined aspects of both socialism and
capitalism.

Planning commission was established in 1950 and first five-year plan was implemented from 1951
onwards.

ECONOMIC PLANNING: It is the deliberate attempt made by the government to put the resources
of a country in its best use to achieve certain pre-determined objectives within a specified period of
time.

A PLAN spells out how the resources of a country should be put to use in order to achieve certain
pre-determined objectives within a specified period of time.
A plan document specifies
General goals as well as
Specific objectives

TYPES OF PLANS IN INDIA

Short term plans /specific plans/five-year plans-These are those plans in which the objectives stated
are to be achieved over a short period of time. i.e. five years.
Long term plans /perspective plans- These are those plans in which the objectives stated are to be
achieved over a period of 20 years.

LONG TERM GOALS / OBJECTIVES OF PLANNING

Economic Growth – Increase in the country’s capacity to produce Goods & services.
Modernization – Adoption of new technology and changes in social outlook
Self-reliance – Reducing dependence on imports.
Equity – Reduction in inequality of income and wealth

SHORT TERM GOALS / OBJECTIVES OR OBJECTIVES OF FIVE-YEAR PLANS

Short term objectives vary from plan to plan depending on current needs of the country. For example,
first plan (1951-56) focused on higher agricultural production while in second plan (1956-61) shifted
the focus from agriculture to Industry.
LIST OF FIVE-YEAR PLANS INDIA
FIVE YEAR PLAN PERIOD MAIN OBJECTIVES/ REMARKS

I 1951-1956 Agricultural development of the country.

II 1956-1961 Rapid Industrial development of the country.

III 1961-1966 To make India a self-reliant and self-generating economy

THREE ANNUAL PLANS 1966 -1969

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IV 1969-1974 Growth with stability

V 1974-1979 Removal of poverty and attainment of self-reliance

ROLLING PLAN 1978-1980

VI 1980-1985 Increase in national income, modernization of technology

Raising agricultural productivity, creation of more
VII 1985-1990
employment opportunities
TWO ANNUALPLANS 1990-1992

VIII 1992-1997 Human resource development

IX 1997-2002 Growth with social justice

To double the per capita income in 10 years, reduction in
X 2002-2007
poverty ratio
XI 2007-2012 Faster and more inclusive growth
Faster and more inclusive and sustainable
XII 2012-2017
growth

On 1 January 2015, a Cabinet resolution was passed to replace the Planning Commission with the
newly formed NITI Aayog (National Institution for Transforming India).
NITI Aayog Planning Commission

It serves as an advisory Think Tank. It served as extra-constitutional body.

It does not possess mandate to impose Imposed policies on states and tied allocation
policies. of funds with projects it approved.

It does not have powers to allocate funds. It had powers to allocate funds to ministries
and state governments.

STRUCTURAL CHANGE

In economics, structural change is a shift or change in the basic ways an economy functions or
operates. The structural change in an economy is an important feature of the economic development
process.

The structural change of an economy takes place mainly along two dimensions i.e. it can take two
forms.:

One is the CHANGES IN STRUCTURAL COMPOSITTION i.e. change in sector-wise share in GDP
and
The second one is the CHANGES IN THE OCCUPATIONAL STRUCTURE OF THE WORK
FORCE i.e. changing share of the work force, engaged in each sector.

In India, the service sector has grown by bye-passing the secondary sector.
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AGRICULTURE, INDUSTRY AND FOREIGN TRADE DURING1950-1990 PERIOD

I. AGRICULTURE

Main Features of Indian Agriculture

1) Low productivity
2) Disguised unemployment.
3) Dependency on rainfall
4) Subsistence farming-objective of farmer is to secure subsistence for his family not to earn
profit.
5) Use of traditional inputs
6) Small size of land holdings
7) Backward technology.
8) Landlord tenant conflict.

Reforms in Indian Agriculture

A. Institutional Reforms also called Land reforms.
i) Abolition of intermediaries.
ii) Consolidation of holdings.
iii) Ceiling on land holdings.
iv) Cooperative Farming
Land reforms were successful in Kerala and west Bengal

B. Technical Reforms or Green Revolution

i) Use of HYV seeds
ii) Use of chemical fertilizers.
iii) Use of insecticides and pesticides for crop protection
iv) Adoption of Scientific farm management practices
v) Mechanized means of cultivation.

Achievements of Green Revolution

i) Rise in production and productivity.
ii) Increase in income.
iii) Helped in attaining marketable surplus
iv) Buffer stock of foodgrains
v) Benefit to low income groups

Failures of Green Revolution

i) Inter-Crop Imbalances: Restricted to limited crops and areas such as two crops wheat
& rice growing states like Punjab, Haryana, U.P. and Andhra Pradesh.
Regional Disparities: Increase in income disparity between small and big farmers
ii) Ecological degradation.

Debate over Subsidies in Agricultural Sector

Subsidy –- It refers to the Monetary assistance given by the government for production activities.
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Subsidy in agriculture means provision of some important inputs to farmers by the government
at a concessional rate that is much lower than its market rate.

Arguments in favour of subsidies

i) It was necessary to use subsidies to provide an incentive for adoption of the new HYV
technology by farmers especially the small farmers.
ii) Any new technology is considered as being risky by farmers. Subsidies were, therefore,
needed to encourage farmers to adopt the new technology initially.
iii) Farming in India is still a risky business and subsidies provide hedging against the risk of
climatic conditions.
iv) Most farmers are very poor and they will not be able to afford the required inputs without
subsidies.
v) Subsidies bring about equity between rich and poor farmers by enabling the poor farmers
to use modern technology and inputs.

Arguments against subsidies

i) Some economists say that subsidies should be phased out since their purpose has been
served and the technology is now widely adopted due to its profitability.
ii) Subsidies are benefiting 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.
iii) Subsidies are mainly being availed by big farmers in affluent regions who do not actually
need them.
iv) It may lead to wastage of resources and thus put an excessive burden on the government.
v) Suitable reforms need to be undertaken in order to ensure allocation of subsidies in a
targeted manner only to the needy farmers.

II) INDUSTRY

1) Industrialisation is important for an economy as it:

2) Provides employment.
3) Raises national income.
4) Promotes regional balance.
5) Leads to modernisation.
6) Helps to modernise agriculture.
7) Imparts Dynamism to Growth Process
8) Industrialisation is a pre-condition for the final take-off of an economy.

Role of Public Sector/Government in Industrial Development

There was need for the leading role of public sector due to the following reasons.
1) Lack of capital with the private entrepreneurs.
2) Lack of incentive for the Pvt. entrepreneurs
3) social welfare - to generate employment rather than profits.
4) Development of infrastructure.
5) Development of backward areas.
6) To prevent concentration of economic power.
7) To promote import substitution.

Industrial Policy Resolution (IPR) 1956

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Industrial policy is an important instrument through which the govt. regulates the industrial activities
in an economy.
The 1956 resolution laid down the following objectives of industrial policy.
i) To accelerate the growth of industrialization.
ii) To develop heavy industries.
iii) To expand public sector.
iv) To reduce disparities in income and wealth.
v) To prevent monopolies and concentration of wealth and income in the hands of a small
member of individuals.

Features of Industrial Policy Resolution (IPR) of 1956

Features of Industrial policy resolution of 1956 were:
1) New classification of Industries: Industries were classified into three schedules depending upon
role of state.
a) Schedule-A- 17 industries were included in schedule-A which would be exclusively owned by
the State.
b) Schedule-B- 12 industries were included in schedule-B, in which Private sector could
supplement the efforts of the Public Sector, with the state taking sole responsibility for starting
new units.
c) Schedule-C – other remaining industries which were left open to private sector. Industrial

2) licensing: Industries in the private sector could be established only through a license from the
government.
Note- Industrial Licensing: - Licensing is a tool for channelizing scarce resources in
predetermined priority sector of an economy.

3) Stress on the role of cottage and small-scale industries. (in 1955 by Karve Committee stressed the
importance of SSI)

4) Industrial concessions-were offered- to pvt. entrepreneurs for establishing industry in the

backward regions of the country. Such as tax benefit and concessional rates for power supply.

Development of Small-Scale Industries (SSI)-Reservation of some products

Characteristics of SSI or Role of Small-Scale Industries

i) Labour intensive-employment oriented

ii) Self-employment.
iii) Less capital intensive.
iv) Shows locational flexibility.

Problems of Small-Scale Industries

i) Difficulty of finance.
ii) Shortage of raw material.
iii) Difficulty of marketing.
iv) Outdated machines & equipment
v) Competition from large scale industries.

Critical appraisal of industrial development

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i) Rise in industrial sectors share in GDP
ii) Industrial diversification
iii) Promotion of SSI
iv) Protection from foreign competition
v) Licensing policy helped the government to monitor and control industrial production.
vi) Role of public sector-created a strong industrial base.

III) FOREIGN TRADE

Trade Policy –Import substitution policy
In the first seven five-year plans of India, the trade was commonly called an ‘inward looking’ trade
strategy. This strategy is technically known as ‘import substitution’.

Import substitution means substituting imports with domestic production.

Domestic firms from foreign competition were protected by
i) Imposition of tariff and
ii) Imposition of quotas

Impact of Inward-looking Trade strategy

i) It helped to save foreign exchange by reducing import of goods.
ii) Created a protected market and large demand for domestically produced goods.
iii) Helped to build a strong industrial base in our country which directly lead to economic
growth.

Criticism of Inward-looking strategy (import substitution strategy)

i) It did not lead to increase in efficiency.
ii) Lack of competition implied lack of modernisation.
iii) Growth of inefficient public monopolies.

The need for reform was widely felt in the context of changing global economic scenario and the
new economic policy was initiated in 1991 to make our economy more efficient.
Moral of the lesson –Nurse the baby, feed the child and free the adult.

MCQs (1 mark each)

1. The main objective of India's foreign trade policy during 1950-1990 was:
a) Import substitution
b) Export promotion
c) Balanced trade
d) Trade liberalization

2. What type of economy is followed in India?

a) Communist Economy
b) Capitalist Economy
c) Mixed Economy
d) Socialist Economy

3. What was the main objective of the First Five-Year Plan (1951-1956)?
a) Industrial development
b) Agricultural development
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c) Infrastructure development
d) Social development

4. Look at the image given below and answer the question by choosing the correct alternative:
Green revolution led to ____________

a) Attainment of marketable surplus

b) Buffer stock of food grains
c) Benefit to low-income groups
d) All of the above

5. Arrange the following in the chronological order. (Choose

the correct alternative)
i) Constitution of Karva Committee
ii) Beginning of first Five Year Plain
iii) Establishment of Planning commission
iv) Establishment of NITI Aayog

Alternatives:
a) (i), (ii), (iii), (iv)
b) (iii), (ii), (i), (iv)
c) (iii), (iv), (ii), (i)
d) (ii), (i), (iii), (iv)

6. Select the correct combination between the following columns

Column A Column B
I. Tariff a) Increase in manufacturing sector
II. Quota b) Policy governing international trade
III. Make in India c) Tax on imported goods
IV. Trade policy d) Quantitative restrictions on import

Alternatives
I II III IV
a) (i) (ii) (iii) (iv)
b) (iii) (i) (ii) (iv)
c) (iii) (iv) (i) (ii)
d) (ii) (i) (iii) (iv)

7. Which sector was given the highest priority in the Second Five-Year Plan (1956-1961)?
a) Agriculture
b) Heavy industries
c) Services
d) Transport

8. Small scale industries__________________ (Choose the correct alternative)

i) Use Labour intensive techniques of production
ii) Shows locational flexibility.
iii) Are Less capital intensive.
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Alternatives:
a) Only (i) is true b) Only (ii) is true
c) Only (iii) is true c) All are true

9. The Green Revolution in India was primarily focused on increasing the production of which
crops?
a) Pulses and oilseeds
b) Fruits and vegetables
c) Wheat and rice
d) Cotton and jute

10. Read the following statements carefully:

Statement I: The green revolution enabled the government to procure sufficient amount of food
grains to build a stock which could be used in times of food shortage.
Statement II: The risk of the small farmers being ruined when pests attack their crops was
considerably reduced by the services rendered by research institutes established by the government.
In the light of the given statements, choose the correct alternative from the following:

a) Statement I is true and statement II is false.

b) Statement I is false and statement II is true.
c) Both statements I and II are true.
d) Both statements I and II are false.

11. Read the following statements carefully:

Statement I: the Industrial Policy Resolution of 1956 formed the basis of the Second Five Year
Plan, the plan which tried to build the basis for a socialist pattern of society.
Statement II: Although there was a category of industries left to the private sector, the sector was
kept under state control through a system of licenses.
In the light of the given statements, choose the correct alternative from the following:

a) Statement I is true and statement II is false.

b) Statement I is false and statement II is true.
c) Both statements I and II are true.
d) Both statements I and II are false

12. Read the following statements carefully:

Statement I: The first seven five-year plans gave importance to self-reliance which means
avoiding imports of those goods which could be produced in India itself.
Statement II: Domestic industries were protected through heavy duty on imports and fixation of
import quotas.
In the light of the given statements, choose the correct alternative from the following:

a) Statement I is true and statement II is false.

b) Statement I is false and statement II is true.
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c) Both statements I and II are true.
d) Both statements I and II are false.

13. Read the following statements carefully:

Statement I: Tariffs are a tax on imported goods
Statement II: Tariffs make imported goods more expensive and discourage their use
In the light of the given statements, choose the correct alternative from the following:

a) Statement I is true and statement II is false.

b) Statement I is false and statement II is true.
c) Both statements I and II are true.
d) Both statements I and II are false

14. Read the following statements-Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:
Assertion (A): India adopted a mixed economy after independence.
Reason (R): A mixed economy combines features of both capitalism and socialism.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
c) Assertion (A) is true but Reason (R) is false.
d) Assertion (A) is false but Reason (R) is true.

15. Read the following statements-Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:
Assertion (A): Land reforms were needed in India as the majority of its population depended on
agriculture.
Reason (R): Ownership of land would give incentives to the actual tillers to make improvements.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
c) Assertion (A) is true but Reason (R) is false.
d) Assertion (A) is false but Reason (R) is true.

16. Read the following statements-Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:
Assertion (A): Industries were classified into three categories, viz., Schedule A, Schedule B, and
Schedule C in Industrial Policy Resolution (IPR) 1956.
Reason (R): The system of Industrial Licensing was not applicable for Schedule C in Industrial
Policy Resolution (IPR) 1956.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A).
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b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
c) Assertion (A) is true but Reason (R) is false.
d) Assertion (A) is false but Reason (R) is true.

17. Read the following statements-Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:
Assertion (A): Land reforms were successful in Kerala and Uttar Pradesh
Reason (R): Governments of these states were committed to the policy of land reforms
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
c) Assertion (A) is true but Reason (R) is false.
d) Assertion (A) is false but Reason (R) is true.

18. Read the following statements-Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:
Assertion (A): HYV seeds were the main reason for the agricultural revolution in India.
Reason (R): The major benefit of HYV seeds was that they needed less irrigation facilities.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
c) Assertion (A) is true but Reason (R) is false.
d) Assertion (A) is false but Reason (R) is true.

19. Read the following statements-Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:
Assertion (A): Small scale industries promote equity.
Reason (R): Small scale industries are labour intensive in nature.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
c) Assertion (A) is true but Reason (R) is false.
d) Assertion (A) is false but Reason (R) is true.

20. Read the following statements-Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:
Assertion (A): Land ceiling promotes equity in the agricultural sector.
Reason (R): Land ceiling policy fixes a minimum size of land which could be owned by an
individual.
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Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
c) Assertion (A) is true but Reason (R) is false.
d) Assertion (A) is false but Reason (R) is true.

ANSWERS FOR MCQs

Q.NO. ANSWER
1) a) Import substitution
2) c) Mixed Economy
3) b) Agricultural development
4) d) All of the above
5) b) (iii), (ii), (i), (iv)
6) c) (iii) (iv) (i) (ii)
7) b) Heavy industries
8) d) All are true.
9) c) Wheat and rice
10) a) Statement I is true and statement II are true.
11) c) Both statements I and II are true.
12) c) Both statements I and II are true.
13) c) Both statements I and II are true.
14) a) Both Assertion (A) and Reason (R) are true and
Reason (R) is the correct explanation of Assertion (A).
15) a) Both Assertion (A) and Reason (R) are true and
Reason (R) is the correct explanation of Assertion (A).
16) c) Assertion (A) is true but Reason (R) is false.
17) a) Both Assertion (A) and Reason (R) are true and
Reason (R) is the correct explanation of Assertion (A).
18) c) Assertion (A) is true but Reason (R) is false.
19) a) Both Assertion (A) and Reason (R) are true and
Reason (R) is the correct explanation of Assertion (A).
20) c) Assertion (A) is true but Reason (R) is false.

SHORT ANSWER TYPE QUESTIONS (3/4 Marks Each)

1. Explain ‘growth with equity’ as a planning objective.

Ans. Both growth and equity are dual 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 the
population to bring about social justice.

2. Why was it necessary for a developing country like India to follow self-reliance as a planning
objective?

Ans. On the eve of independence, India was poor, stagnant and backward. There were heavy
imports of foodgrains. It was important to be self-reliance.
Features of Self-reliance are:
a) Self-sufficiency in foodgrains.
b) Fall in foreign aid and reduced dependence on imports which is possible when there is
growth in domestic production.
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c) Rise in exports.
d) Rise in contribution of industries in gross domestic product.

3. While subsidies encourage farmers to use new technology, they are a huge burden on
government finances. Discuss the usefulness of subsidies in light of this face.

Ans. Subsidy is an economic benefit, direct or indirect, granted by a government to domestic

producers of goods or services, often to strengthen their competitive position against foreign
companies. It helps farmers to buy HYV seeds, fertilizers and other inputs. The burden of granting
subsidies falls on the government. The government has to bear the burden of financing subsidies.
There is scope for improving the resource use efficiency by reducing subsidies and aiming them
better to small farmers and regions lagging behind.

4. Explain the policy of land to a tiller

Ans. The policy of ‘land to the tiller’ is based on the idea that the cultivators will take more interest—
they will have more incentive—in increasing output if they are the owners of the land. This is
because ownership of land enables the tiller to make profit from the increased output. Tenants do
not have the incentive to make improvements on land since it is the landowner who would benefit
more from higher output.

5. Why was the protection policy of our domestic economy criticized?

Ans. The protection from foreign competition was also being criticized on the ground that it
continued even after it proved to do more harm than good. Due to restrictions on imports, the Indian
consumers had to purchase whatever the Indian producers produced. The producers were aware that
they had a captive market; so, they had no incentive to improve the quality of their goods.
Competition from imports forces our producers to be more efficient.

LONG ANSWER TYPE QUESTIONS (6 Marks each)

1. 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.

Ans. Though many public sector undertakings are incurring huge losses, they are still very useful
in the areas of strategic concerns and hazardous chemicals. Public sector undertaking are required
for:
1. Creation of a Strong Industrial Base
2. Development of Infrastructure
3. Development of Backward Areas
4. To Mobilize Savings and Earn Foreign Exchange
5. To Prevent Concentration of Economic Power
6. To Promote Equality of Income and Wealth Distribution
7. To Provide Employment
8. To Promote Import Substitution.

2. What is Green Revolution? Why was it implemented and how did it benefit the farmers?
Explain in brief.

Ans. Green revolution refers to the large increase in food grains resulting: -
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i) Use of HVY seeds
ii) Use of chemical fertilizers
iii) Use of insecticides and patricides for crop protection (iv) Mechanized means of cultivation
It was implemented as the agricultural productivity was very low and 75 % of the country’s
population was dependent on agriculture.
Benefits to Farmers:
1. Increase in income followed the green revolution as most of the areas that cultivated wheat
and rice were witnessing great production, which helped in removing poverty from these
areas.
2. With the increase in the production of crops, age-old customs were abolished, and the
farmers began to adopt new agricultural methods, which were instrumental in bringing
change in productivity.
3. It helped reduce unemployment as the lands were used for growing two varieties of the crop
as per season, and therefore, it helped removed seasonal unemployment.
4. With nationalizing of banks, farmers were given subsidies on loans for cultivation, which
improved production as more farmers were able to take a loan

3. Why and how was private sector regulated under the IPR 1956?

Ans. IPR or Industrial Policy Resolution, 1956, was a resolution that was adopted by the Indian
parliament for industrial development in India. This resolution aimed at creating a socialistic pattern
of society. Under this rule there were three categories of industries which were:

i) Schedule A: Industries that are exclusive responsibility of the state

ii) Schedule B: Industries that will be pre-dominantly owned by the public sector while private
sector will be supplementing the efforts of the public sector
iii) Schedule C: The remaining industry types that will be managed by private sector

Although the government wanted to define a separate category for the private sector, it wanted to
keep the sector under state control and hence created a rule that in order to open a new industry or
to expand an existing one, a license was required to be obtained from the government. If the industry
was opened in a backward area, the government would offer subsidy and other facilities such as easy
licensing. This step was taken to maintain regional equality. In order to increase production, a license
was required so that no socially undesirable goods were produced.

CASE BASED QUESTIONS

Read the following hypothetical text and answer the given questions:
The performance of Indian economy during the period of first seven five-year plans (1950-1990) was
satisfactory if not very impressive. On the eve of independence, India was an industrially backward
country, but during this period of first seven plans our industries became far more diversified, with the
stress being laid on the public investments in the industrial sector. The policy of import substitution led
to protection of the domestic industries against the foreign producers but we failed to promote a strong
export surplus. Although public sector expanded to a large extent but it could not bring desired level of
improvement in the secondary sector. Excessive government regulations prevented the natural
trajectory of growth of entrepreneurship as there was no competition, no innovation and no
modernization on the front of the industrial sector. Many Public Sector Undertakings (PSU’s) incurred
huge losses due to operational inefficiencies, red-tapism, poor technology and other similar reasons.
These PSUs continued to function because it was difficult to close a government undertaking even it is
a drain on country’s limited resources. On the Agricultural front, due to the measures taken under the
Green Revolution, India more or less became self-sufficient in the production of food grains. So, the
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needs for reform of economic policy were widely felt in the context of changing global economic
scenario to achieve desired growth in the country.

1. Which of the following was not a reason for the public sector to play a major role in the
initial phase of Indian Economic Planning? (choose the correct alternative)
a) Private entrepreneurs lacked sufficient capital for investment.
b) Government aimed at social welfare.
c) The market was big enough to encourage private industrialists for investment.
d) The government wanted to protect the indigenous producers from the foreign competition.
Ans: c) The market was big enough to encourage private industrialists for investment

2. Read the following statements - Assertion (A) and Reason (R)

Assertion (A): Many public sector undertakings incurred huge losses due to operational
inefficiencies.
Reason (R): Red-tapism was one of the reasons for continuation of such enterprises.
Select the correct alternative from the following:
a) Both Assertion (A) and Reason (R) are true.
b) Both Assertion (A) and Reason (R) are false.

Ans: a) Both Assertion (A) and Reason (R) are true.

3. Inward looking trade strategy aimed at _________ (fill up the blank with correct answer)

Ans: Protecting domestic industries from international competition. (or any other valid answer)

4. State whether the given statement is true or false:

Mechanization of the Indian agriculture was one of the causes of Green Revolution in India.

Ans: True, it has led to tremendous increase in productivity and thereby tremendous increase in
production

Read the following passage and answer the questions that follow:
The economic justification of subsidies in agriculture is, at present, a hotly debated question. It
is generally agreed that it was necessary to use subsidies to provide an incentive for adoption of the
new HYV technology by farmers in general and small farmers in particular. 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 phased out since their purpose has been served.
There is no case for continuing with fertilizer subsidies.

a) What do you mean by subsidies?

Ans: The monetary assistance given by government for production activities.

b) Give any one argument in favour of subsidies.

Ans: A Large number of farmers are poor and they do not have sufficient means to purchase
the required inputs.

c) Some say that agricultural subsidy a vice? Give reasons.

Ans: Subsidies pose a huge burden on Government finances.
Benefits of Subsidies are reaped by the farmers in prosperous regions.
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New Economic Reforms / Liberalization, Privatization, and

Globalization
(LPG) Reforms in 1991

• Background: Severe economic crisis characterized by high fiscal deficit, balance of

payments crisis, and dwindling foreign exchange reserves.
• Need: Necessitated a shift from a state-controlled, inward-looking economy to a market-
oriented and globally integrated economy.
• Implementation: Initiated by Prime Minister Narasimha Rao and Finance Minister Manmohan
Singh through policy changes and legislative measures.

Liberalization:

• Definition: Relaxation of government controls and regulations on economic activities.

• Objectives: Reduce the state's role in the economy, promote competition, and encourage private
enterprise.
• Measures: Deregulation of industries, easing of trade barriers, and liberalizing policies in
sectors like finance and telecommunications.

Features of Liberalization:

o Market Deregulation: Reduced government control over the economy by easing

restrictions on private sector participation and foreign investments.
o Trade Liberalization: Encouraged trade by reducing tariffs and barriers, facilitating
easier imports and exports.
o Financial Sector Reforms: Introduced liberalized policies in banking, finance, and
insurance sectors to promote competition and efficiency.
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Privatization:

• Definition: Transfer of ownership and management of state-owned enterprises to the private

sector.
• Objectives: Improve efficiency, competitiveness, and profitability of industries by reducing
government control and introducing private management practices.
• Measures: Disinvestment and sale of shares in public sector companies, encouraging private
investment in key sectors.

Features of Privatization:

o Public Sector Reforms: Disinvestment of public sector enterprises to reduce

government ownership and encourage private investment.
o Encouraging Private Sector: Facilitated private participation in sectors traditionally
reserved for the public sector, such as telecommunications and infrastructure.

Globalization:

• Definition: Integration of national economies with the global economy through trade,
investment, and technological exchanges.
• Objectives: Integrate India into the global economic framework, attract foreign investment, and
access global markets.
• Measures: Opened up the Indian economy to foreign direct investment (FDI), liberalized trade
policies, and encouraged exports.

Features of Globalization:
o Integration with Global Economy: Opened up the Indian economy to foreign
investments, technology transfers, and global trade.
 145
o Impact on Industries: Fostered competition, innovation, and efficiency in industries
through exposure to global markets and practices.

Impact of LPG Reforms:

• Economic Growth: Accelerated economic growth, modernization of industries, and improved
productivity.
• Global Integration: India became a significant player in the global economy, attracting foreign
investments and participating in international trade.
• Challenges: Brought income disparities, regional imbalances, and environmental concerns,
which required subsequent policy interventions.
Appraisal of LPG Reforms (1991):
1. Positive Aspects:
o Economic Growth: Transformed India into a dynamic global player, significantly
boosting GDP growth rates.
o Foreign Direct Investment (FDI): Increased FDI inflows attracted foreign capital,
technology, and expertise.
o Job Creation: Expansion of private sector industries and services created employment
opportunities.
o Technological Advancement: Access to global technology and best practices improved
productivity and competitiveness.
2. Challenges and Criticisms:
o Income Inequality: Widened income disparities between rich and poor, exacerbating
social inequalities.
o Regional Disparities: Development was uneven, with urban areas benefitting more
than rural regions.
o Environmental Impact: Industrial growth and urbanization led to environmental
degradation and resource depletion.
o Vulnerability to Global Shocks: Increased integration made India susceptible to global
economic downturns and financial crises.
3. Policy Adjustments:
o Social Safety Nets: Interventions like MGNREGA aimed at mitigating adverse effects
on vulnerable sections.
o Sustainable Development: Emphasis on balancing economic growth with
environmental conservation.
o Inclusive Growth: Focus on addressing income disparities and regional imbalances.
4. Conclusion:
o Significance: Marked a pivotal moment in India’s economic history, fostering
liberalization, privatization, and globalization.
o Outcome: Accelerated economic growth and global integration, while posing
challenges requiring policy interventions for inclusive and sustainable development.

Recent Reforms: Demonetization and Goods and Services Tax (GST) in

India
DEMONETIZATION
Introduction:
o Definition: Act of stripping a currency unit of its status as legal tender to curb
corruption, counterfeiting, and black money.
o Context: on November 8, 2016., India invalidated Rs.500 and Rs.1,000 currency notes.
Impact:
o Short-term Effects:
▪ Liquidity crunch and economic slowdown in cash-dependent sectors.
▪ Disruption in informal sectors.
o Long-term Effects:
 146
▪ Encouraged shift towards digital payments and formal economy.
▪ Increased use of banking services and digital payment platforms.
▪ Aimed at reducing black money circulation.
Government Policies and Measures:
o Introduction of new currency notes (Rs.2,000 and redesigned Rs.500).
o Promotion of digital payments through initiatives like BHIM app and UPI.
Evaluation and Analysis:
o Successes: Initial increase in digital transactions and symbolic gesture against black
money and corruption.
o Challenges: Economic disruption and GDP slowdown.
Conclusion: Mixed outcomes, aimed at curbing black money and promoting a digital economy,
but faced challenges in implementation and economic disruption.

GOODS AND SERVICES TAX (GST):

Background and Introduction:

o Objective: Replace multiple indirect taxes with a unified tax to create a seamless
national market.
o Origin: Proposed by the Indian government in 2000 and enacted in 2017.
Key Features:
o Unified Tax Structure: Subsumed various indirect taxes.
o Dual GST Model: CGST, SGST, and IGST for intra-state and inter-state transactions.
Structure:
o Tax Slabs: Different rates for various categories: 0%, 5%, 12%, 18%, and 28%.
o Threshold Limits: Small businesses with annual turnovers below specified thresholds
can avail of composition schemes.
Implementation Process:
o Constitutional Amendment: Enabled GST levy and established the GST Council.
o GST Council: Chaired by the Union Finance Minister and comprising state finance
ministers.

Impact:
o Benefits: Unified market, reduction in tax cascading, and boost to GDP.
o Challenges: Initial implementation issues and adaptation for businesses.
Future Prospects:
o Policy Adjustments: GST Council continues to make adjustments.
o Further Integration: Aimed at integrating informal sectors and expanding the tax base.
Conclusion: Significant reform aimed at simplifying taxation, enhancing efficiency, and
fostering economic growth, despite initial challenges.

Online Resources and Government Websites:

1. Government of India. Press Information Bureau (PIB) Releases and Updates. Press Information
Bureau, https://pib.gov.in.
2. Reserve Bank of India. Reports and Bulletins. Reserve Bank of India, https://rbi.org.in.
3. Government of India. India Budget. Ministry of Finance, https://www.indiabudget.gov.in.
4. GST Council. Official Website of GST Council. GST Council, https://www.gstcouncil.gov.in.
 147
QUESTION & ANSWERS (1 MARKS)
1. What was the primary objective of the New Economic Policy (NEP) of 1991 in India?
A. To promote socialism and strengthen public sector enterprises
B. To address the balance of payments crisis and stabilize the economy
C. To nationalize foreign-owned enterprises
D. To increase tariffs on imports
2. Which sector saw significant reforms through privatization under the New Economic
Policy of 1991?
A. Agriculture
B. Healthcare
C. Education
D. Public sector enterprises
3. What was the main strategy used to dismantle the License Raj under the New Economic
Policy?
A. Increasing bureaucratic controls
B. Imposing stricter industrial licensing requirements
C. Reducing industrial licensing requirements
D. Nationalizing private enterprises
4. How did trade liberalization contribute to the New Economic Policy of 1991?
A. By increasing tariffs on imports to protect domestic industries
B. By promoting competition, enhancing efficiency, and integrating India into the global
economy
C. By nationalizing key industries
D. By imposing strict controls on foreign investment
5. What impact did the New Economic Policy of 1991 have on foreign direct investment
(FDI) in India?
A. It discouraged FDI by imposing stringent regulations
B. It had no impact on FDI
C. It liberalized FDI norms to attract capital inflows
D. It nationalized foreign-owned enterprises
6. What was the main objective behind the implementation of GST in India?
A. To reduce income tax rates
B. To simplify indirect taxes and create a unified national market
C. To promote privatization of public sector enterprises
D. To increase import tariffs
7. Under the GST regime, which taxes were subsumed into a single tax system?
A. Only central excise duty
B. Only service tax
C. Both central excise duty and service tax
D. None of the above
8. What was the primary objective of demonetization in India in 2016?
A. To eliminate counterfeit currency
B. To promote digital transactions
C. To curb black money and corruption
D. To increase liquidity in the economy
9. Which denomination currency notes were demonetized by the Government of India in
November 2016?
A. Rs.500 and Rs.2000
B. Rs.1000 and Rs.5000
C. Rs.100 and Rs.500
D. Rs.50 and Rs.100
 148
➢ Read the following statements – Assertion (A) and reason (R). Choose one of the correct
alternatives given below
a) Both assertion (A) and reason (R) are true and reason is the correct explanation of assertion.
b) Both assertion (A) and reason (R) are true and reason is not the correct explanation of
assertion.
c) Assertion (A) is true but reasons (R) is false
d) Assertion (A) is false but reasons (R) is true
10. Assertion: The New Economic Policy of 1991 aimed to address the balance of payments crisis
in India.
Reasoning: By liberalizing trade and reducing import tariffs, the policy sought to stabilize the
external sector and enhance foreign exchange reserves.
11. Assertion: Liberalization under the New Economic Policy led to increased competition among
industries in India.
Reasoning: Dismantling the License Raj removed barriers to entry and encouraged new players
to enter the market, fostering competitive dynamics.
12. Assertion: Privatization was a key component of the New Economic Policy of 1991.
Reasoning: The policy aimed to reduce the government's role in business operations, improve
efficiency, and raise resources for public expenditure.
13. Assertion: The New Economic Policy of 1991 emphasized fiscal consolidation to reduce the
fiscal deficit.
Reasoning: Rationalizing subsidies and controlling government expenditure were crucial
measures undertaken to achieve fiscal discipline.
14. Assertion: Trade liberalization was essential under the New Economic Policy to integrate India
into the global economy.
Reasoning: By reducing tariffs and removing quantitative restrictions on imports, the policy
aimed to enhance competitiveness and expand export opportunities.
15. Assertion: The New Economic Policy of 1991 aimed to promote technological advancements
in Indian industries.
Reasoning: By encouraging foreign direct investment (FDI), the policy facilitated technology
transfer and adoption of global best practices.
16. Assertion: The New Economic Policy of 1991 contributed to the growth of service sectors like
information technology in India.
Reasoning: Liberalization created favorable conditions for the service sector by relaxing
regulations and promoting innovation-driven industries.
17. Assertion: The agricultural sector remained largely unchanged by the reforms introduced under
the New Economic Policy of 1991.
Reasoning: The policy primarily focused on industrial and trade reforms, with minimal impact
on agricultural policies and practices.
18. Assertion: The New Economic Policy of 1991 aimed to reduce the dependency of Indian
industries on government approvals and licenses.
Reasoning: By streamlining bureaucratic processes and reducing regulatory burdens, the policy
aimed to enhance operational efficiency and promote entrepreneurship.
19. Assertion: The New Economic Policy of 1991 contributed to widening income inequalities in
India.
Reasoning: While promoting economic growth, the policy disproportionately benefited urban
areas and certain industries, exacerbating income disparities.
20. Assertion: GST aimed to streamline the indirect tax structure in India.
Reasoning: By subsuming multiple indirect taxes into a single tax, GST aimed to reduce tax
cascading and create a seamless national market.
21. Assertion: Demonetization aimed to reduce the circulation of black money in the Indian
economy.
Reasoning: By invalidating high-denomination currency notes, the government aimed to bring
unaccounted wealth into the formal banking system.
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22. From the set of statements given in Column I and Column II, choose the correct pair of
statements:
Column I Column II
A. Outsourcing (i) An important outcome of the process of
B. Foreign exchange reforms liberalisation
C. GST (ii) Initiated with the devaluation of the Indian rupee
D. Contraction of public against
sector foreign currency
(iii) A direct tax
(iv) A measure of privatization
Alternatives:
A-(1(
B-(ii)
C-(iii)
D-(iv)

ANSWERS FROM QUEISTION NO 1 TO 22

1 2 3 4 5 6 7 8 9 10
B D C B C B C C A A
11 12 13 14 15 16 17 18 19 20 21 22
A A A A A A B A A A A B

QUESTION ANSWERS (3 MARKS, 4 MARKS, AND 6 MARKS)

CASE /SOURCE-BASED QUESTIONS AND ANSWERS

Source 1: New Economic Policy (NEP) 1991

Source: "In 1991, India faced a severe economic crisis. The country’s foreign exchange reserves
had plummeted, and it was on the verge of defaulting on its international debt obligations. To
address this crisis, the Government of India, led by then Finance Minister Dr. Manmohan Singh,
introduced the National Economic Policy (NEP) of 1991. This policy aimed at liberalizing the
Indian economy by reducing government controls and promoting private enterprise. Major reforms
included de-licensing of industries, reduction in import tariffs, and opening up sectors like
telecommunications and insurance to foreign investments."

23. What were the main reasons behind the introduction of the National Economic Policy
(NEP) 1991?

Answer: The NEP 1991 was introduced due to a severe economic crisis in India, characterized by
plummeting foreign exchange reserves and the threat of defaulting on international debt
obligations.

24. Who was the Finance Minister responsible for implementing NEP 1991, and what were
the key reforms introduced?
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Answer: The Finance Minister responsible was Dr. Manmohan Singh. The key reforms included
de-licensing of industries, reduction in import tariffs, and opening up sectors like
telecommunications and insurance to foreign investments.

25. The 1991 economic crisis in India highlighted the need for structural reforms. Which of
the following was NOT a feature of the NEP 1991?
a) De-licensing of industries
b) Nationalization of banks
c) Reduction in import tariffs
d) Encouragement of foreign direct investment

26. How did the NEP 1991 aim to attract foreign investments?
a) By increasing import tariffs
b) By offering subsidies to domestic industries
c) By allowing 100% foreign equity in certain sectors
d) By reducing the value of the Indian Rupee

27. Which of the following is a likely consequence of the de-licensing of industries as per NEP
1991?
a) Increase in bureaucratic delays
b) Growth in private sector participation
c) Decline in foreign investments
d) Increase in state control over the economy

28. The reduction of import tariffs under NEP 1991 was aimed at:
a) Protecting domestic industries
b) Making imports more expensive
c) Increasing competition and efficiency
d) Reducing foreign trade

29. Which of the following was a significant impact of the NEP 1991 on the Indian economy?
a) Decrease in foreign exchange reserves
b) Increased government regulation
c) Boost in economic growth and employment
d) Reduction in foreign direct investment

Answers
25. b) Nationalization of banks
26. c) By allowing 100% foreign equity in certain sectors
27. b) Growth in private sector participation
28. c) Increasing competition and efficiency
29. c) Boost in economic growth and employment

Source 2: Demonetization

Source: "On November 8, 2016, the Government of India announced the demonetization of all
₹500 and ₹1000 banknotes, which constituted 86% of the cash in circulation. This move aimed to
curb black money, counterfeit currency, and corruption. The sudden announcement led to long
queues at banks and ATMs as people rushed to exchange or deposit their old notes. While the move
was praised by some for its bold approach to tackling black money, it also faced criticism for
causing disruption to the economy, particularly in the informal sector, which relies heavily on cash
transactions."
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30. What were the primary objectives of the demonetization policy announced on November
8, 2016?

Answer: The primary objectives of the demonetization policy were to curb black money,
counterfeit currency, and corruption.

31. What were some immediate effects of the demonetization move on the public and the
economy?

Answer: Immediate effects included long queues at banks and ATMs as people rushed to exchange
or deposit their old notes. The move caused significant disruption to the economy, particularly in
the informal sector, which relies heavily on cash transactions.

32. What was a primary objective of the demonetization policy announced in 2016?
a) To introduce new denominations
b) To reduce interest rates
c) To curb black money and counterfeit currency
d) To increase foreign investments
33. How did demonetization impact the informal sector?
a) Increased digital transactions immediately
b) Caused disruption due to reliance on cash
c) Improved access to formal banking
d) Reduced unemployment rates

34. Which of the following was an immediate effect of demonetization on the banking system?
a) Decrease in bank deposits
b) Surge in bank deposits
c) Reduction in bank liquidity
d) Increase in interest rates

35. What percentage of the cash in circulation was demonetized in November 2016?
a) 50%
b) 60%
c) 70%
d) 86%

36. Which Indian Prime Minister announced the demonetization policy in 2016?
a) Manmohan Singh
b) Narendra Modi
c) Atal Bihari Vajpayee
d) Rajiv Gandhi

Answers
32. c) To curb black money and counterfeit currency
33. b) Caused disruption due to reliance on cash
34. b) Surge in bank deposits
35. d) 86%
36. b) Narendra Modi
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Case Study 3: Goods and Services Tax (GST)

In July 2017, India implemented the Goods and Services Tax (GST), which aimed to create a
single, unified market by replacing multiple indirect taxes levied by the central and state
governments. GST is a value-added tax levied on most goods and services sold for domestic
consumption. It is a multi-stage, destination-based tax that is collected at every stage of the
production process but refunded to all parties except the final consumer. The GST Council, which
includes representatives from the central and state governments, is responsible for deciding the tax
rates and ensuring smooth implementation of the tax system.

37. What is the main objective of implementing the Goods and Services Tax (GST) in India?

Answer: The main objective of implementing GST in India was to create a single, unified market
by replacing multiple indirect taxes levied by the central and state governments.

38. Explain the role of the GST Council in the GST system.

Answer: The GST Council is responsible for deciding the tax rates and ensuring the smooth
implementation of the GST system. It includes representatives from the central and state
governments.

39. What is the main purpose of implementing GST in India?

a) To increase indirect tax rates
b) To create a unified national market
c) To reduce government revenue
d) To promote cash transactions

40. Which of the following best describes the GST system in India?
a) Single-stage tax system
b) Multi-stage, destination-based tax
c) Origin-based tax
d) Direct tax system

41. The GST Council is responsible for:

a) Implementing direct taxes
b) Deciding tax rates and policies under GST
c) Managing foreign exchange reserves
d) Regulating state-owned enterprises

42. One of the benefits of GST is the elimination of the 'tax on tax' effect. This is referred to
as:
a) Cascading effect
b) Direct tax benefit
c) Reverse charge mechanism
d) Input tax credit

43. Which of the following is a challenge faced by businesses due to GST implementation?
a) Increased manual record-keeping
b) Complex compliance requirements
c) Higher corporate tax rates
d) Reduced access to foreign markets

Answers
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39. b) To create a unified national market
40. b) Multi-stage, destination-based tax
41. b) Deciding tax rates and policies under GST
42. a) Cascading effect
43. b) Complex compliance requirements

44. Discuss the objectives and key measures of the New Economic Policy of 1991 in India.

Answer: The New Economic Policy of 1991 was introduced in response to India's severe economic
crisis, aiming to transition from a centrally planned economy to a market-oriented one. Its key
objectives included stabilizing the balance of payments, promoting economic growth,
enhancing efficiency, and integrating into the global economy. To achieve these goals, the
policy implemented several measures:

Liberalization: This involved dismantling the License Raj, reducing industrial licensing
requirements, and easing restrictions on foreign investment and trade. It aimed to foster
competition, innovation, and efficiency in Indian industries.

Privatization: The policy initiated the privatization of public sector enterprises to improve their
efficiency, reduce the burden on the government's finances, and attract private investment.

Fiscal Reforms: Measures included rationalizing subsidies, controlling government

expenditure, and reducing the fiscal deficit to ensure macroeconomic stability and investor
confidence.

Global Integration: Trade liberalization measures such as reducing tariffs and removing
quantitative restrictions aimed to integrate the Indian economy into the global market, boost
exports, and attract foreign investment.

45. Evaluate the impact of the New Economic Policy of 1991 on industrial growth in India.

Answer: The New Economic Policy of 1991 had a profound impact on industrial growth in India
by removing barriers to entrepreneurship and fostering a competitive business environment.
Key impacts include:

End of License Raj: Dismantling industrial licensing and reducing bureaucratic controls
allowed industries to operate more freely, encouraging new investments and technological
upgrades.

Foreign Investment: Liberalization policies attracted foreign direct investment (FDI), bringing
in capital, technology, and managerial expertise that accelerated industrial growth.

Privatization: Privatizing state-owned enterprises improved their efficiency and productivity,

contributing to overall industrial output and competitiveness.

Technological Advancement: Integration into the global economy facilitated technology

transfer and adoption of best practices, enhancing the technological base of Indian industries.
However, the policy also faced criticisms for widening income disparities and neglecting certain
sectors like agriculture. Nevertheless, its overall impact on industrial growth was significant,
positioning India as a key player in global manufacturing and services sectors.
 154
46. Explain the role of liberalization in the New Economic Policy of 1991 and its implications
for India's economy.

Answer: Liberalization was a cornerstone of the New Economic Policy of 1991, aimed at reducing
government control and promoting market forces in India's economy. Its role and implications
are as follows:

Trade Liberalization: Reduced tariffs and removal of quantitative restrictions on imports

promoted competition, expanded market access, and integrated Indian industries into global
supply chains.

Industrial Deregulation: Ending the License Raj encouraged entrepreneurship, innovation,

and efficiency in industries previously stifled by bureaucratic controls.

Financial Sector Reforms: Liberalization of the financial sector allowed for the entry of
private banks, enhanced access to credit, and improved efficiency in capital allocation.

Foreign Investment: Policies liberalizing FDI norms attracted foreign capital, technology, and
managerial expertise, contributing to economic growth and modernization.

47. Discuss the reasons behind the introduction of the New Economic Policy of 1991 in India.
Evaluate its impact on the Indian economy.

Answer: Introduction of the New Economic Policy (NEP) of 1991: The New Economic Policy
of 1991 was introduced in response to a severe balance of payments crisis and economic
stagnation in India. The country faced dwindling foreign exchange reserves, high inflation,
unsustainable fiscal deficits, and stagnant industrial growth. The policy was necessitated by the
need to move away from a highly regulated, centrally planned economy towards a market-
oriented approach.

Objectives and Measures:

Liberalization: The NEP aimed to liberalize the Indian economy by dismantling the License
Raj, which imposed stringent controls and bureaucratic hurdles on industry. This included
reducing industrial licensing requirements, easing restrictions on foreign investment, and
liberalizing trade through reduced tariffs and removal of quantitative restrictions.

Privatization: Another key objective was the privatization of state-owned enterprises (SOEs).
This aimed to improve efficiency, enhance competitiveness, and reduce the burden on
government finances. Strategic disinvestment in SOEs was undertaken to encourage private
sector participation and improve resource allocation.

Fiscal Reforms: The policy emphasized fiscal discipline by rationalizing subsidies, controlling
government expenditure, and reducing the fiscal deficit. This was crucial for macroeconomic
stability, reducing inflationary pressures, and improving investor confidence.

Global Integration: Trade and financial sector reforms were aimed at integrating the Indian
economy into the global market. Trade liberalization policies sought to boost exports, attract
foreign investment, and enhance India’s competitiveness on the global stage.

Impact on the Indian Economy:

The NEP of 1991 had profound impacts on the Indian economy:
 155
Economic Growth: Liberalization and reforms unleashed economic potential, leading to higher
GDP growth rates. India transitioned from the sluggish growth of the pre-reform era to
becoming one of the fastest-growing major economies globally.

Industrial Growth: Dismantling the License Raj and promoting competition spurred industrial
growth. Key sectors like information technology, telecommunications, and services flourished,
attracting investments and creating jobs.

Foreign Investment: Liberalization of FDI norms attracted foreign capital, technology, and
managerial expertise. This contributed to modernizing industries, improving productivity, and
integrating India into global supply chains.

Sectoral Reforms: Privatization and reforms in sectors such as telecommunications and

banking improved efficiency and service delivery. The entry of private players in previously
monopolized sectors enhanced competition and consumer choice.

Social Impact: While economic growth improved living standards for many, income disparities
widened between urban and rural areas and among different income groups. Social safety nets
and inclusive growth strategies became crucial to address these disparities.

Conclusion: In conclusion, the New Economic Policy of 1991 marked a turning point in India’s
economic history, steering the country towards liberalization, privatization, and globalization.
While it brought about significant economic benefits, challenges such as income inequality and
environmental concerns emerged.

48. Discuss its impact on India's industrial and technological development.

Answer: Role of Foreign Investment: Foreign investment played a pivotal role in the economic
reforms introduced under the New Economic Policy (NEP) of 1991 in India. The policy aimed
to attract foreign capital, technology, and managerial expertise to modernize Indian industries
and integrate them into the global economy.

Impact on Industrial Development:

Technological Advancement: Foreign Direct Investment (FDI) brought advanced technology

and best practices to Indian industries, particularly in sectors like telecommunications,
automobiles, and pharmaceuticals. This accelerated technological adoption and innovation,
enhancing industrial competitiveness.

Infrastructure Development: FDI inflows facilitated infrastructure development, especially

in sectors requiring substantial capital investments such as telecommunications, power
generation, and transport.

Job Creation: Foreign investments created employment opportunities across various sectors,
directly through new enterprises and indirectly through supply chains and support services.

Impact on Technological Development:

Knowledge Transfer: Multinational corporations (MNCs) brought global expertise and

research capabilities, fostering knowledge transfer and skill development among the local
workforce.
 156
R&D Investments: Many foreign companies established Research and Development (R&D)
centers in India, contributing to innovation and product development in fields such as IT,
pharmaceuticals, and automotive engineering.

Competitiveness: Access to global markets and technology through FDI enhanced the
competitiveness of Indian industries, enabling them to produce high-quality goods and services
for domestic and export markets.

Challenges and Considerations: Despite these benefits, challenges such as technology

dependency, repatriation of profits, and environmental impacts of industrialization required
careful management. The government's policies aimed to balance the benefits of FDI with
safeguarding national interests and promoting sustainable development.

Conclusion: In conclusion, foreign investment under the NEP of 1991 played a pivotal role in
transforming India's industrial and technological landscape. It catalyzed industrial growth,
technological innovation, and infrastructure development, making India a globally competitive
economy. However, continued policy attention is necessary to ensure that FDI contributes to
inclusive and sustainable development while addressing associated challenges effectively.

49. Discuss the impact of GST on the Indian economy.

Answer: GST (Goods and Services Tax) was implemented in India with the aim of simplifying the
indirect tax structure and creating a unified national market. Its impact on the economy includes:

Simplification: GST replaced multiple indirect taxes at the central and state levels with a single
tax, reducing tax cascading and compliance costs.
Unified Market: It created a seamless national market by standardizing tax rates and
procedures across states, facilitating interstate trade and reducing logistical inefficiencies.

Business Environment: GST improved ease of doing business by streamlining tax

administration and reducing bureaucratic hurdles, thereby promoting investment and economic
growth. Overall, while GST faced initial implementation challenges, it has contributed to
enhancing tax compliance, boosting government revenue, and fostering a more integrated
economy.

50. Evaluate the impact of demonetization on the Indian economy.

Answer: Demonetization, implemented in November 2016, aimed to curb black money,

corruption, counterfeit currency, and promote digital transactions. Its impact on the Indian
economy includes:
Short-term Disruption: Demonetization led to temporary cash shortages and disrupted
economic activity, particularly in the informal sector.
Digital Transactions: It accelerated the adoption of digital payment methods and formalized
financial transactions, promoting financial inclusion and transparency.
Tax Compliance: Demonetization increased the tax base as previously unaccounted wealth
was deposited or declared, enhancing tax revenues.
Long-term Effects: While the immediate impact on black money circulation was debated,
demonetization spurred reforms in digital infrastructure and tax administration. In conclusion,
demonetization had mixed outcomes but catalyzed shifts towards a less-cash economy and
underscored the importance of comprehensive reform
 157

UNIT 7-CURRENT CHALLENGES FACING INDIAN

ECONOMY

HUMAN CAPITAL FORMATION

1.Human capital formation means how people become resource by imparting knowledge, and skill
that converts a human being into human capital.
HEALTH AND EDUCATION:
Expenditure on health is an important source of human capital formation.
The amount of money spent on

★ preventive medicine (vaccination),

★ curative medicine (medical intervention during illness),

★ social medicine (spread of health literacy) and

★ provision of clean drinking water and good sanitation

Health expenditure directly increases the supply of healthy labour force
Spending on education by individuals

★ Is similar to spending on capital goods by companies

★ Individuals invest in education with the objective of increasing their future income.

★ It results in optimum resource utilisation.

ON THE JOB TRAINING:

★ The workers may be trained in the firm itself under the supervision of a skilled worker;

★ The workers may be sent for off-campus training.

★ Expenditure regarding on-the-job training is a source of human capital formation as the

return in the form of enhanced labour productivity is more than the cost of it.
MIGRATION:

★ Technically qualified persons, like engineers and doctors, migrate to other countries because
of higher salaries

★ Migration involves cost of transport, higher cost of living in the migrated places and psychic
costs of living in a strange sociocultural setup.

★ The enhanced earnings in the new place outweigh the costs of migration; hence, expenditure
on migration is also a source of human capital formation
 158

INFORMATION:

★ Expenditure on information is necessary to make decisions regarding investments in human

capital

★ For efficient utilisation of the acquired human capital stock.

★ For acquiring information relating to the labour market and other markets is also a source of
human capital formation.

Role of human capital in economic development

★ Both go hand in hand

★ Better handling of techniques and technology raises the productivity

★ Innovation is possible which increases GDP

★ Higher rate of participation means increased living standard

★ Per capita income has direct relation with positive education and health

★ Human capital and human development

Human capital considers education and health as a means to increase labour productivity.
Human development is based on the idea that education and health are intergral to human well being
Growth of Education Sector in India: Can be explained in two manners:

★ IN TERMS OF INCREASED EXPENDITURE

★ IN TERMS OF INCREASED SHARE IN GDP

★ In 2009, the Government of India enacted the Right of Education Act to make free education a
fundamental right of all children in the age group of 6-14 years.

★ 2% education cess on all union taxes – will be spent on elementary education

★ Along with RTE, NATIONAL LITERACY MISSION, SARVA SHIKSHA ABHIYAAN,

NATIONAL PROGRAMME FOR EDUCATION OF GIRLS AT ELEMENTARY EDUCATION,
KASTURBA GANDHI BALIKA VIDHYALAYAS AND MID DAY MEAL Scheme are the
programmes to promote literacy and elementary education
Secondary Education
Navodaya Vidyalayas and Kendriya vidyalayas NCERT
Higher Education
Universities, Colleges, Professional and Technical education. The following main institutions are
working in the field of higher education.
UGC, IGNOU, AICTE, ICMR etc
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★ Total 23 IITs, 31 NITs, 48 central universities, more than 800 universities, 13 AIIMS with 6 new
AIIMS are in pipeline. 3870 medical colleges

★ Atal Innovation mission: Atal Tinkering Labs- 5450

★ Problems facing human capital formation

i)Rising population
ii) High regional and gender inequality
iii) Brain-drain
iv) Insufficient man power planning
v)High levels of poverty
vi) Low levels of academic standard

★ Highlights of education sector in India NEP -2020

5+3+3+4 curricular structure

Vocationalisation in education
Equitable and inclusive education with an emphasis on GENDER EQUITY
Teacher recruitment etc
Elementary Education
Various policies such as Sarva Shiksha Abhiyan, Mid-day meal scheme, District Primary
Education programme, right to education have been playing a major role
Secondary Education
Navodaya Vidyalayas and Kendriya vidyalayas NCERT
Higher Education
Universities, Colleges, Professional and Technical education. Thefollowing main institutions are
working in the field of higher education.
UGC, IGNOU, AICTE, ICMR etc

Problems relating to development of education in India

i) Inadequte vocationalisation
ii) Gender bias
iii) Low level of rural accessibility
iv) Low government expenditure on education
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CASE BASED QUESTIONS

1. Read the following paragraph carefully and answer the following questions:
Human Capital can be defined as the body of knowledge possessed by the population and
the capacity of the population to use the knowledge effectively. Until the late 1950s, no
economist and any other social scientist did pay much attention to the role of investment
in human beings as an important determinant of economic development. The birth of this
idea can be dated from the presidential address of Prof. Theodore W. Schultze to the
American Economic Association in December 1960. As a result, the concept of human
capital formation came to the
lime light.A circular relationship between human development and economic growth has
come to be established. Economic growth creates conditions for better health and
education facilities, which in turn spur economic growth.
i) Human Capital came into existence in ________
a.1950 b.1960 c.1970 d.1980
ii) Economists say that the main key player of economic development is ________
a. Human capital b. Physical capital c. Real Capital d. None of these
iii) In ___________ Five Year plan,India emphasised on human Capital formation.
a. 2nd b. 3rd c. 5th d. 7th

iv) _________ means an improvement in quality of life and living standards in terms of
measures of literacy, life expectancy and health care.
a. Economic growth b.Economic Developmen c.Investment d)none

2. Read the following paragraph carefully and answer the following questions:
Traditional economic theory viewed capital in physical terms only. Economists during the
late 1950s based on the aggregate production function found that the standard measures of simple
labour and physical capital were incapable of explaining adequately the rapid post war growth.
Speculations on what was missing were diverse. Some argued that the principal explanation lays in
the lack of appropriate adjustments for improvement in the quality of physical capital and the
embodiment of technical progress in that capital. Others suggested that the most important omission
pertains to the organizational advance or a vaguely specified human capital. The residual of
unexplained growth was at first ascribed to technology by Solow, but later the residual was defined to
include improvements in the quality of capital and the investment in human beings.
Human capital is formed with improvement in skill, education. Improved health and education are
merit as well as a public good is associated with a large number of externalities which are often
indirect, indivisible and non-quantifiable.
i) Which of the following gives the definition of public goods?
a) Excludable and non-rivalrous in nature.
b) Non- Excludable and non-rivalrous in nature.
 161
c) Excludable and rivalrous in nature
d) Non- Excludable and rivalrous in nature.
ii) Standard economic theories failed to explain the post war rapid growth due to a) measuring growth
in terms of physical growth only
b) ignoring other important inputs such as improved skills and education
c) Both (a) and (b) d) None of the above
iii) In the context of the above paragraph, residual factor includes:
a) Improvement in the quality of human capital
b) investment in human beings
c) improvement in technology
d) All of the above
ASSERTION AND REASONING QUESTIONS
Read the following statements – Assertion (A) and reason (R). Choose one of the correct
alternatives given below.
a) Both assertion (A) and reason (R) are true and reason is the correct explanation of assertion.
b) Both assertion (A) and reason (R) are true and reason is not the correct explanation of
assertion.
c) Assertion (A) is true but reason (R) is false
d) Assertion (A)is false but reason(R) is true
3. Assertion (A): High level of human capital implies not only high earning potential but also
change in the social and economic outlook.
Reason (R): It transforms the way of thinking and allows an individual to make
well-informed and rational decisions.
4. Assertion (A): Human capital formation increases productivity of physical capital.
Rea: Larger the number of skilled and trained personnel, lesser the possibility of innovations,
inventions and technical improvements in the area of production.
5. Assertion (A): There is a need to bridge the skill-gap in India in order to enhance human
capital and bring about more productive labor force.
Reason (R): Skills are tangible in nature and can be separated from its owner.
6. Assertion (A): Human capital formation refers to adding on to the existing stock of skill,
expertise and talent of people.
Reason (R): Expenditure on information is not a determinant of human capital formation.
7. Assertion (A): People migrate because that can fetch them high earning jobs than what they
 162
get in their native places/ countries.
Reason (R): Enhanced earnings in the new place exceed the cost of migration.
8. Assertion (A): Brain drain is a serious threat to the process of human capital formation in the
country.
Reason (R): People of high caliber such as scientists, engineers, educationists, etc, may
decide to migrate.
9. Assertion (A): Education is wider concept and encompasses literacy.
Reason (R): A person is considered literate if he has ability to read and write in any
language.
10. Assertion (A): Rapidly rising population adversely affects the quality of human capital.
Reason (R): Population reduces per head availability of the existing facilities relating to
housing, sanitation, drainage, etc.
MULTIPLE CHOICE QUESTIONS
11. Both human capital and_____ are related to each other.
a) Human resource b) Human development c) Human being d) All of these
12. _____ refers to the produced means of production.
a) Human capital b) Human development c) Physical capital d) both a and c
13. Addition to the stock of capital can be done by
a) Expenditure on Education b) Expenditure on Health
c) Study Programme for adults d) All of these
14. Which cost is involved in Migration?
a) Transportation cost b) Higher Living cost in different place
c) Both a and b d) None of these
15. Problems in Human Capital Formation is
a) Low academic standards b) Brain Drain c) Rising population d) All of these
16. Which organization enforces the rules and regulations regarding technical education?
a) NCERT b) AICTE c) ICMR d) UGC

17. Education is important because

a) Expands mental horizon b) Develops human personality
c) Helps in economic development d) All of these
18. Which five-year plan recognizes the importance of human capital?
a) Second b) Fourth c) Seventh d) Eighth
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19. Which institution is the primary funding authority for universities?
a) NCERT b) AICTE c) ICMR d) UGC
20. Expenditure on health can be done in the form of: –
a) Preventive Medicine b) Curative Medicine c) Social Medicine d) All of these
21. Which organization enforces the rules and regulations relating to education and research in
health?
a) NCERT b) AICTE c) ICMR d) UGC
22. There is a growing trend towards ____ of education, which makes it expensive for poor
people.
a) Socialization b) Privatization c) Both a and b d) None of these
23. The enrolment ratio of female students in schools is ____and their drop- out ratio is____
a) High, Less b) Less, High c) Less, Less d) None of these
24. ____ capital is tangible and can be sold in the market.
a) Human b) Physical c) Service d) None of these
25. _____ of human capital refers to the ways of adding to the stock of capital.
a) Sources b) Determinants of physical capital
c) Both a and b d) None of these
26. _____ on health makes human more efficient and productive.
a) Expenditure b) Investment c) Both a and b d) None of these
27. Human development is ___ of human welfare.
a) A Parameter b) An Index c) An Attribute d) None of these
28. Expenditure on health makes a person more efficient and productive.
a) True b) False
29. ________ creates public and private benefits. (Fill in the blank with correct alternative)
a) Human Capital b) Physical capital c) Both (a) and (b) d)None of the above
30. Human capital treats human being as_____(Fill in the blank with correct alternative)
a) Separable elements b) Intangible elements c) Means to end d) As ends
31. ________ is based on the idea that education and health are integral to human beings. (Fill in the
blank with correct option)
a) Human capital b) Human development
c) Human capital formation d) None of the above
 164
STATEMENT BASED QUESTIONS
Read the following statement given below and choose the correct alternative
a) Both the statements are correct b) Both are statements incorrect
c) Statement 1 is correct and statement 2 is incorrect
d) Statement 1 is incorrect and statement 2 is correct
32.Statement 1- Education and health causes private benefits.
Statement 2- AICTE is the regulatory body for medical studies.
33. Statement 1- Percentage of education expenditure of total government expenditure indicates how
much of people’s income is committed to education in a country
Statement 2- Percentage of educational expenditure of GDP shows the importance of
education in the government’s scheme.
34. Statement 1- Migration involves cost of transportation and high cost of living
Statement 2- Education is the process of teaching, training and learning to improve
knowledge
35. Statement 1- On the job training helps workers to acquire new specialized skills
Statement 2- On the job training takes place in the firm itself
36. Statement 1- The expenditure on education and health makes short term impact
Statement 2- The expenditure on education and health can be reversed
37. Statement 1- In India, there is gender biases in offering education to all
Statement 2- After 1991 reforms, there has been growing tendency towards privatization of
education
ANSWERS

1. i.1960 ii. Human capital iii.5th iv.Economic Development

2. i. Non- Excludable and non-rivalrous in nature. ii. Both A and B iii. all of the above
3. a 4. B 5. C 6. C 7. A 8. A 9. B 10. a 11. b 12.c 13. d 14. Cin economic developme t
of India.
15. d 16.b 17. D 18. c 19.d 20. d 21. b 22. B 23. b 24. b 25.a
26. c 27. B 28. a 29. a 30. c 31. b 32. C 33. b 34. a 35. c 36. b 37. A
 165

RURAL DEVELOPMENT
Rural development is a comprehensive term which focuses on action for the development of village
economy.
Objectives of rural development:
1. Increasing productivity of agricultural sector.
2. Generating alternative means of livelihood in rural sector.
3. Promoting education and health facilities in the rural areas.
Key issues in rural development.
Land reforms
Development of human resources
Measures of poverty alleviation
Development of infrastructure
Credit facilities
Rural credit means credit for the farming communities for various purposes like purchasing
agricultural tools and machines, digging wells and tube wells, purchasing seeds, fertilizers, pesticides,
etc.
Sources of rural credit in India.
1. Non-institutional sources are money lenders, traders and commission agents, landlord, relatives
and friends.
2. Institutional sources are as follow:
(i) Co-operative credit societies.
(ii) Commercial Banks
(iii) Regional Rural Banks
(iv) NABARD (National Bank for Agriculture and Rural Development.) (established in 1982)
(v) Self Help Groups (SHGs)
The above institutional structure of rural banking which is called multi-agency system which has
initiated by govt. in 1969.
Agricultural marketing means all those activities which includes-gathering the produce after
harvesting, processing the produce, grading the produce according to its quality, packaging the
produce according to preferences of buyers, storing the produce for future sale and selling the
produce when price is lucrative.
Defects of agricultural marketing
(i) Inadequate warehouses
(ii) Multiplicity of middlemen
(iii) Malpractice in unregulated markets.
(iv) Lack of Adequate finance
(v) Inadequate means of transport and communication.
Measures adopted by the government to improve marketing system.
(i) Regulation of markets.
(ii) Co-operative agricultural marketing societies.
(iii) Provision of warehousing facilities.
(iv) Subsidised transport.
(v) Dissemination of marketing information.
(vi) Buffer stocks and minimum support price (MSP)
(vii) Public Distribution System (PDS)
(viii) Alternative marketing channels
(ix) Improvement of physical Infrastructure
Diversification in agriculture activities-It has the two aspects.
1. Diversification of crop production refers to a system of multiple cropping rather than mono
cropping.
 166
2. Diversification of productive activities imply a shift from crop farming to non-farming areas of
employment like animal husbandry, fisheries ,Horticulture etc.
It has following advantages:
1. Reduce the risk from agriculture sector.
2. Provide ecological balance.
3. Provide sustainable livelihood option to people living in village.
Organic farming is a system of farming that maintains, enhances and restores the ecological balance.
It helps in sustainable development of the agricultural sector, In organic forming, farmers use organic
manure, bio fertilizers and organic pesticides.
Advantages of organic farming:
(i) Inexpensive process.
(ii) Generates income.
(iii) Healthier and tastier food.
(iv) Solves unemployment problem.
(v) Environment friendly.
Limitation of Organic farming:
(i) Yields from organic farming is less than modern agricultural farming in initial years.
(ii) Organic produce have shorter shelf life than sprayed produce.
(iii) Choice in production of off-season crops is quite limited in organic farming.
Organic farming involves labour-intensive process of production of labour so India has comparative
advantage in organic farming.
Operation Flood
It is a system of milk co-operatives, launched in 1966. This system emphasised the pooling of milk by
farmers through co-operatives societies.

Non-farm sector: It refers to jobs in govt. manufacturing, services, construction, mining, retail, etc.
Labour intensive Process: It refers to the process or industry that requires a large amount of labour.

1. Read the following statement given below and choose the correct alternative
Assertion (A)- Farmers cannot reach nearby markets to sell their products at fair prices
Reason (R)- There is lack of transportation in agricultural marketing
a) Both assertion and reason are true. Reason is the correct explanation of assertion b) Both assertion
and reason are true. Reason is not the correct explanation of assertion c) Assertion is true but reason
is not
d) Reason is true but assertion is not
2. What are the measures to improve agriculture marketing?
a) Regulation of markets
b) Provision of infrastructure
c) Encouragement of cooperative marketing
d) All of the above
3. What are the policy instruments to improve agriculture marketing?
a) Public distribution system
b) Minimum support price c) Both (a) and (b)
d) None of the above
4. Read the following statement given below and choose the correct alternative
Assertion (A)- Livestock sector alone provides alternative livelihood options to over 70 million
farmers in India.
Reason (R)- Livestock production provides increased income
a) Both assertion and reason are true. Reason is the correct explanation of assertion b) Both assertion
and reason are true. Reason is the correct explanation of assertion c) Assertion is true but reason is
not
d) Reason is true but assertion is not
 167

5. Choose the correctly matched pair from the following

Column A Column B

A. Animal husbandry. 1. Organic farming

B. Food processing 2. IT sector

C. Use of animal manure 3. Diversification of agriculture

D. Dissemination of information 4.Dynamic sector

a) A- 3 b) B- 4 c) C- 2 d) D-1
6. Read the following statement given below and choose the correct alternative
Statement 1- TANWA project was initiated to train women in agricultural practices.
Statement 2- Dynamic sectors include agro- processing industries
a) Both are correct b) Both are incorrect
c) Statement 1 is correct and statement 2 is incorrect
d) Statement 1 is incorrect and statement 2 is correct
7. _____ includes all these processes between harvesting and final sale of the produce by the
farmers.
a) Agricultural Marketing
b) Rural Marketing
c) Rural Agriculture
d) All of these
8. ______________ refers to a situation when the farmers are compelled to sell the produce just
after harvest even in low prices.
a) Surplus sale
b) Distress sale
c) Commercial farming
d) None of these
9. Horticulture contributes___ of value of agricultural output and __ per cent GDP of India. a)
Two-third,5
b) One-third,6
c) One-fourth,8
d) None of these
10. Rural development is a ___ term.
a) Comprehensive c) Decretive
b) Selective d) None of these
11. __________ is the apex body which coordinates the functioning of different financial
institutions working for the expansion of rural credit.
a) NABARD b) Self help groups c) Regional Rural Banks b) d) Commercial Banks
12. Which of the following is true about organic farming?
a) Organically grown food is healthier and tastier
b) Yields in organic farming are lower than in chemical farming
c) it adversely effects the fertility of the soil.
d) if is quite expensive method of farming.
 168

13. Which source of credit had emerged to fully integrate the formal credit system into the
overall rural social and community development?
a) Self – help Groups b) Regional Rural Banks
c) Commercial Banks d) Land Development Banks
14. Which among the following is a process that involves the assembling storage, processing,
transportation, packaging, grading, and distribution of different agricultural commodities
across the country?
a) Agricultural Management b) Agricultural Banking
c) Agricultural Diversification d) Agricultural Marketing
15. Why is the minimum support price fixed by the government?
a) For government own benefit b) To safeguard the interest of farmers
c) To safeguard the interest of consumers d) None of these

16. Read carefully and answer the following Case based question.
The central government will spend Rs. 9800 crores on livestock development over the
next five years in a bid to leverage almost Rs. 55000 crores of outside investment into the Animal
Husbandry Sector. It would do this by merging a slew of schemes of the Department of Animal
Husbandry and Dairying into three main programmes, focused on indigenous cows and dairy
development, livestock health and infrastructure development, an official statement said. The Cabinet
Committee on Economic Affairs approved the implementation of the special livestock sector package
by revising and realigning the various components of the existing schemes in order to boost growth
and make animal husbandry more remunerative for the 10 crore farmers engaged in it.
(i) Livestock production provides ------------- for the family without disrupting other food
producing activities
a) Increased stability in income b) food security c) transport and fuel d) all of these
(ii) The central bank undertakes to invest on livestock development in ----------- ((a)horticulture/
(b)Animal husbandry) sector.
(iii) Livestock is ________
a) Only Sheep b) Buffalo c) Goats d) All the above

17. Read carefully and answer the following Source based question.
The revolutionary, 'Billion-litre idea' and execution of the world's largest dairy-agricultural
development programme, 'Operation Flood' transformed India from a nation with potential in the
dairy industry to a nation with massive production of milk and dairy products.
Operation Flood is the programme initiated by the National Dairy Development Board
to speed up "the White Revolution." It created a national milk grid linking producers throughout India
with consumers in over 700 towns and cities, reducing seasonal and regional price variations while
ensuring that the producer gets a major share of the price, consumers pay, by cutting out middlemen.
The bedrock of Operation Flood that made the White Revolution a success, was village milk
producers' cooperatives, which procured milk and provided inputs and services, making mode
management and technology available to members. Mother dairy, AMUL dairy, Nandini, are some of
the biggest dairies which provide milk and dairy products in India.

i. Operation Flood is an example of............. of productive activity in the rural areas.

a) Centralization b) Diversification c) Both [a] and [b] d) None of the above

ii). Who is the father of White Revolution?

a) Dr. Kurien c) Mr. Rajendra Singh b) Mr. Somnath Chatterjee d) Dr. Swaminathan

ii. Which is the biggest dairy in India?

a) Mother dairy c) Vijaya dairy b) AMUL dairy d) None of the above
 169

ANSWERS

1.a 2. D 3.c 4. B 5.a 6. A 7.a 8. B 9.a 10. b 11.a

12. a 13. b 14. A 15. C 16.a 17. D 18.a 19. d 20.d 21. B 22.d
23. i-a, ii-c, iii-d, iv-a 24. i-d, ii-b, iii-d 25. i-b, ii-a, iii-b

EMPLOYMENT: GROWTH INFORMALISATION AND OTHER ISSUES

Gist of the lesson

➢ Worker: A worker is an individual, who is involved in some productive activity, to earn a
living.
➢ Economic Activity: An economic activity refers to the activity performed by people to earn
the living. The main three types of economic activities are consumption, production and
distribution.
➢ Production activity refers to all those activities which are under taken to produce goods and
services for generation of income.
➢ Labor force: All persons, who are working (have a job) and those are not working but able to
work and willing to work at the existing wage rate constitutes labor force.
Labor Force: Persons working + persons seeking and/or available for work.

➢ Work force: The numbers of persons, who are actually employed at a particular time, are
known as workforce. It includes all those persons who are actually engaged in productive
activities. This includes person between age group of 15-60 years.
➢ Labor supply: It refers to various amount of labor that workers are willing to
work, corresponding to a particular wage rate.
➢ Work Force Participation Rate (Ratio): - It is measured as the ratio between workforce and
total population of a country.

Types of workers:
(a) Self employed
(b) Hired workers
i. Casual Workers
ii. Regular Workers (Salaried)

(a) Self Employed: - The workers who own and operate an enterprise to earn their livelihood
are known as self-employed.
(b) Hired workers: - Those people who are hired by others and are paid wages or salaries as
a reward for their services is called hired workers.
Casual Workers: - Those people, who are not hired by their employers on a
regular/permanent basis and do not get social security benefits are said to be casual workers.

Regular Workers (Salaried): –

➢ When a worker is engaged by someone or by an enterprise and paid his or her wages
on a regular basis, they are known to as regular salaried employees or regular workers.
➢ About two-fifth of the total population in the country is engaged in various economic
activities.
➢ Men particularly rural men, form the major section of workforce in India.
 170
➢ Majority of workers in India are self-employed, casual wage labourers and regular
salaried employees’ together account for less than half the proportion of India’s
workforce.
➢ About three fifth of India’s workforce depends on agriculture and other allied
activities as the major source of livelihood.
➢ Jobless Growth: It is defined as a situation where GDP grows faster than the
employment opportunities resulting in unemployment.

Casualization and informalization of employment:

❖ Casualization refers to a situation when the percentage of casually hired workers in

the total workforce tends to rise over time.
❖ Formal sector-formal sector refers to organized sector of the economy.
It includes all government departments, public enterprises and private establishments
which hire 10 or more workers.
Those working in the organized sector are called formal workers.

❖ Informal sector-
Informal sector refers to unorganized sector of the economy.
It includes all such private enterprises which hire less than 10 workers besides
farming and self-employment ventures.
Those working in unorganized sector are called informal workers.

❖ Informalization of workforce- it is defined as a situation where percentage of

workforce in the formal sector tends to decline and that in the informal sector tends to
rise.

Unemployment:
▪ It is a situation where a person is ready and willing to work at the prevailing wage rate but
doesn’t get work.
Unemployment Rate:
It is calculated as percentage of labor force who are unemployed, not as percentage
of total population.
 171

Types of unemployment:
1. Rural unemployment
a. Seasonal Unemployment
b. Disguised Unemployment
2. Other types of unemployment
a. Open
b. Frictional
c. Structural
d. Cyclical
3. Urban Unemployment
a. Industrial Unemployment
b. Educated Unemployment
c. Technological Unemployment

• Frictional unemployment: it is defined as the unemployment that occurs because of people

moving or changing occupations.
• Structural unemployment: it is defined as unemployment arising from technical change
such as automation, or from changes in the composition of output due to variations in the
types of products people demand. For example, a decline in the demand for typewriters would
lead to structurally unemployed workers in the typewriter industry.
• Cyclical unemployment: it is defined as workers losing their jobs due to business cycle
fluctuations in output, i.e. the normal up and down movements in the economy as it cycles
through booms and recessions over time.
• Open Unemployment: it refers to that situation wherein the worker is willing to work and has
the necessary ability to work yet he does not get work and remains unemployed for full time.
• Seasonal Unemployment: It refers to a situation where a number of people are not able to
find a job in a particular season.
▪ Disguised unemployment: it is a kind of unemployment in which some people look like
being employed but are actually not employed fully. This situation is also known as Hidden
Unemployment. In such a situation more, people are engaged in a work than required. In other
words, it refers to a situation of employment with surplus manpower in which some workers
have zero marginal productivity. For example, in rural areas, this type of unemployment is
generally found in agricultural sector.
▪ Educated Unemployment: - Among the educated people, apart from open unemployment,
many are underemployed because their qualification does not match the job. Faulty education
system, mass output, preference for white collar jobs, lack of employable skills and
dwindling formal salaried jobs are mainly responsible for unemployment among educated
youths in India. Educated unemployment may be either open or underemployment

Causes of unemployment:
a. Slow rate of economic growth
b. Population explosion
c. underdeveloped agriculture
d. Defective educational system
e. Slow growth of Industry
f. Decline of cottage and small industry.
g. Faulty planning
h. Inadequate employment planning.
i. Low capital formation.
j. Excessive use of Foreign Technology
 172
k. Lack of financial resources
l. Increase in labor force

Remedial measures for unemployment:

a. Accelerating growth rate of GDP
b. Control of population growth
c. Development to small scale enterprises.
d. Encouragement in infrastructure.
e. Special employment programs.
f. Rapid industrialization.

Special programs to fight poverty and unemployment:

Most poverty alleviation programs implemented are based on the perspective of the Five-Year Plans.
Expanding self-employment programs and wage employment programs are being considered as
the major ways of addressing poverty. Self-employment programs: - (i)Rural Employment
Generation Program (REGP), (ii) Prime Minister’s Rozgar Yojana (PMRY) and Swarna Jayanti
Shahari Rozgar Yojana (SJSRY) (iii) Swarnajayanti Gram Swarozgar Yojana (SGSY) (iv) National
Rural Livelihoods Mission (NRLM). Wage employment programs: - (i) Mahatma Gandhi National
Rural Employment Guarantee Act 2005. (MGNREGA): - The Parliament passed a new Act to provide
guaranteed wage employment to every rural household whose adult volunteer is to do unskilled manual
work for a minimum of 100 days in a year. (ii) Pradhan Mantri Gram Sadak Yojana, (iii) Pradhan
Mantri Gramodaya Yojana, (iv) Valmiki Ambedkar Awas Yojana (v) Development of small and
cottage industries (vi) Minimum needs program (vii) Twenty- point program (viii) Micro Units
Development Refinance Agency Bank (MUDRA BANK) Government has set up MUDRA Bank in
April 2015.Its objective is to meet credit needs of micro enterprise and self- employed persons. Under
MUDRA yojana, a micro enterprise is entitled for a loan up to Rs. 10 lakh per unit.

QUESTION-ANSWERS
1MARK QUESTIONS

1. A situation in which growth rate in GDP in the economy is not accompanied by

commensurate growth in Employment opportunities is called as
A. unemployment
B. Informalization of work force
C Jobless Growth.
D. Sustainable growth
Ans: jobless growth
2. Workers who are on permanent pay-roll of their employer are called:
(A) Self- employed workers
(B) Casual workers
(C) Regular workers
(D) None of the above
Ans: regular workers
 173

3.Unemployment is defined as:

(A) The section of the population that is not capable of being employed
(B) The section of population willing to work but unable to find employment
(C) The section of population that is waiting to be employed
(D) The section of population that are without the skills needed by employers
Ans: The section of population willing to work but unable to find employment
4.Data on unemployment in India can be obtained from which source?
(A) Reports of Census of India
(B) National sample survey organization (NSSO)
(C) Directorate general of employment
(D) All the above
Ans: All the above
5.When more persons are working in a job than actually required, it is known as ________.
(A) Disguised unemployment
(B) Seasonal unemployment
(C) Educated unemployment
(D) Open unemployment
Ans: Disguised unemployment
6.Those who work in their own establishment using their own resources are called _______.
(A) Hired workers
(B) Casual workers
(C) Regular workers
(D) Self-employed
Ans: Self-employed
CASE-BASED QUESTION:
 174

Q1(a). Analyze the nature/ distribution of Indian workforce for the fourth quarter of the
year 2020-21. (2 Marks)
Ans. In the quarter of the year 2020-21, as per the given text, the total casual labor employment has
decreased. Also, the said period saw a growth in the economy and increase in the work from home in
the organized sector.
Q1 (b): State and discuss any two initiatives taken by the Government to control the adverse impacts
of the pandemic. (3 Marks)
Ans. Two initiatives taken by the government to control the adverse impact of pandemic.
(i) Imposition of Lockdown to save human lives.
(ii) Increase in Public spending (any other argument with valid explanation)

3- & 4-MARKS QUESTIONS

1. Distinguish between formal and informal sector employment.

FORMAL SECTOR INFORMAL SECTOR

1. All public and private sector All establishments which
establishments which employ employ less than 10 workers
10 or more hired workers comprise employ comprise the informal sector
the formal sector.

2. Government exercises control over 2. Government has no control over this

this sector by passing necessary acts sector. Except for the Minimum Wages Act,
and formulating rules and no other act is applicable on this sector
regulations.
3. Workers working in this sector are 3. Workers working in this sector are not
entitled to social security benefits. entitled to social security benefits.

2. Briefly explain about jobless growth?

ANS: Jobless growth is an economic phenomenon in which an economy experiences growth
without reducing unemployment or we can say with decreasing the level of employment. The
term Jobless growth was coined by the Economist Nick Perna in early 1990s’. Situation of
‘jobless growth’ arises due to various reasons. Sometimes increased productivity through
automation allow economic growth with decrease in employment. Many times, it also arises
when economy experiences structural changes. Besides growing population may be another
reason for this situation.

6 MARKS QUESTIONS
1. Explain the different types of unemployment.
ANS: Unemployment: It is a situation where a person is ready and willing to work at the
prevailing wage-rate but doesn’t get work.
Types of unemployment:
1. Rural unemployment
a. Seasonal Unemployment
b. Disguised Unemployment
2. Other types of unemployment
a. Open
b. Frictional
c. Structural
d. Cyclical
3. Urban Unemployment
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a. Industrial Unemployment
b. Educated Unemployment
c. Technological Unemployment

Rural unemployment: It refers to non-availability of employment in rural areas.

Seasonal Unemployment: - It refers to a situation where a number of people are not able
to find a job in a particular season.
Disguised unemployment: is a kind of unemployment in which some people look like being
employed but are actually not employed fully. This situation is also known as Hidden
Unemployment. In such a situation more, people are engaged in a work than required. In other
words it refers to a situation of employment with surplus manpower in which some workers
have zero marginal productivity. For example, in rural areas, this type of unemployment is
generally found in agricultural sector. Frictional unemployment is defined as the unemployment that
occurs because of people moving or changing occupations.
Structural unemployment: is defined as unemployment arising from technical change such
as automation, or from changes in the composition of output due to variations in the types of
products people demand. For example, a decline in the demand for typewriters would lead to
structurally unemployed workers in the typewriter industry.
Cyclical unemployment: it is defined as workers losing their jobs due to business cycle
fluctuations in output, i.e. the normal up and down movements in the economy as it cycles
through booms and recessions over time.
Open Unemployment: refers to that situation wherein the worker is willing to work and has
the necessary ability to work yet he does not get work and remains unemployed for full time.
Educated Unemployment: - Among the educated people, apart from open unemployment,
many are underemployed because their qualification does not match the job. Faulty education
system, mass output, preference for white collar jobs, lack of employable skills and
dwindling formal salaried jobs are mainly responsible for unemployment among educated
youths in India. Educated unemployment may be either open or underemployment.
Technological Unemployment: This type of unemployment takes place every time
technology upgrades and the existing workforce are unable to cope with the new technology.
If the skills required to meet the new technology do not match the existing skill-sets of the
employed workers and they cannot adapt, they become unemployed. Up gradation is a natural
process, with cyclical obsolescence as one set of technology becomes irrelevant and gets
replaced by another.
Industrial Unemployment: Unemployment among industrial labor has assumed alarming
proportion as the modern industrial development based on latest capital-intensive technology
has not been able to absorb the ever-increasing labor force. Lakhs of people pour into cities
every year from the distant rural places in search of jobs and better living standards. But the
slow growth of industry and the fixed capital coefficient in the modern industrial sector make
it impossible to provide jobs to the migrated labor force. This causes widespread
unemployment among the industrial workers.

2. Explain the reasons for unemployment along with remedies for it.
ANS: Unemployment: It is a situation where a person is ready and willing to work at the
prevailing wage-rate but doesn’t get work.

Causes of unemployment:
➢ Slow rate of economic growth: slow rate of economic growth leads to slow growth of job
opportunity for rising population which in turn causes increase in unemployment.
➢ Population explosion: Constant increase in population has been a big problem in India. It is
one of the main causes of unemployment as number of people demanding job exceeds the
number of job available at a particular time.
➢ Underdeveloped agriculture: Agriculture is underdeveloped in India. It provides seasonal
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employment. Large part of population is dependent on agriculture. But agriculture being
seasonal provides work for a few months. So, this gives rise to unemployment
➢ Defective educational system: The number of universities and educational institutions has
increased manifold. But the education system prevailed in these institutions are not as per the
requirement of industries and society. This causes rise in educational unemployment in India
➢ Slow growth of Industry: The rate of industrial growth is slow. Though emphasis is laid on
industrialization yet the avenues of employment created by industrialization are very few.
➢ Decline of cottage and small industry: The industrial development had adverse effect on
cottage and small industries. The production of cottage industries began to fall and many
artisans became unemployed.
➢ Faulty planning: Defective planning is the one of the causes of unemployment. There is wide
gap between supply and demand for labor. No Plan had formulated any long-term scheme for
removal of unemployment.
➢ Low capital formation. The major cause of unemployment and underemployment in
underdeveloped countries like India is the deficiency of the stock of capital in relation to the
needs of the growing labor force. With the growth of technology and specialization, he
needs much more capital with which to engage in the productive activity. if the working force
grows faster than the stock of capital of a country, the entire addition of labor force cannot
be absorbed in productive employment because not enough instruments of production would
be there to employ them. The resulting unemployment is known as the long-term or chronic
unemployment.
➢ Excessive use of Foreign Technology: An important factor responsible for slow growth of
employment has been the use of capital-intensive techniques of production. Foreign
technology is based on capital intensity. Private sector prefers to invest in highly capital-
intensive plants and equipment on the basis of technology developed in labor-scarce western
countries. It is argued by them that the alternative labor-intensive techniques have low
productivity and low surplus-generating capacity. Capital intensive foreign technology has
replaced the labor force by machines in performing various activities and hence has retards the
opportunity of employment generation.

Remedial measures for unemployment:

▪ Accelerating growth rate of GDP: increase in growth rate of GDP leads to increase in
employment opportunity, which reduces unemployment.
▪ Control of population growth: The growth of population should be checked in order to
solve unemployment, problem. Family planning program should be implemented widely
and effectively. So that the demand and supply mismatch of labor force can be minimized.
▪ Development to small scale enterprises: In the Indian context, cottage and household
industries which are often associated with agriculture play a vital role in the development of
economy. Hence, they should be given due encouragement. Basket making, brick-making,
toy-making, agarbati making, carpentry and furniture making, leather works, carving,
smothery, and such other works are to be encouraged to keep our people engaged with work
that fetch economic rewards.
Special employment programs: Depending upon the local needs and feasibility new
agricultural programs and projects are to be launched so that the young people of the area
get new opportunities to use their talents and energy for the developmental programs.
Rapid industrialization:
➢ Planned development of industries is essential for creating more and more job
opportunities.
➢ Development of industries may include:
(a) large-scale industries,
(b) small scale industries, and
(c) Village and cottage industries including handicrafts.
➢ Proper balance should be maintained between agricultural growth and industrial
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development, so that industry would not destroy handicrafts and household industries.
➢ The unchecked process of mechanization and the domination of multinational
companies are adversely affecting the creation of new job opportunities.
➢ In the name of industrial growth new labor-saving machine are installed which are
taking away the jobs of men.
➢ Gandhi had opposed the process of mechanization in this regard.
➢ Sufficient care should be taken to see no new machine takes away the jobs of existing
workers.
➢ The process of economic liberalization let loose by the central government recently
has given new scope for the multinational companies to establish their domination
over the indigenous industries.
➢ The governmental invitation for these companies may erode the job opportunities for
millions of people.
➢ Educational reforms: The present education system needs a thorough overall check to
meet the changing pattern of demand not only through re-orientation but also by
diversifying the courses in the field of commerce, trade, banking, insurance, technical
and managerial personnel so that the adjustments of demand and labor in various
occupations become easy
Promoting self -employment: Self-employment schemes for the unemployed youth
have to be launched to enable them to start their own business or small-scale firm,
which can also generate employment for many others.
➢ Special programs to fight poverty and unemployment:
➢ Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA)
➢ It’s a significant recent attempt of government offering guaranteed employment to
those in the rural areas who are below poverty line.

ENVIRONMENT AND SUSTAINABLE DEVELOPMENT

INTRODUCTION: -

❖ Since independence, India has launched a number of economic plans, to attain

economics development at a quicker pace. However, the economic development that we have
achieved so far has come at a very heavy price- at the cost of environment quality.
❖ Liberalization, Privatization and Globalization (LPG) have resulted in the
development of the economy, but with the adverse consequences on our environment.
So, we have to bear in mind to adverse consequences of the past development path on
our environment and consciously choose a path of sustainable development.

MEANING OF ENVIRONMENT
Environment is defined as the total planetary inheritance and the totality of all resources.
➢ Environment is the sum total of external forces which surround us.
➢ It includes all the biotic factors that influence each other.
➢ Biotic element: -Biotic elements include all living element like birds, humans and
plants, forests, fisheries, etc.
➢ Abiotic Elements: -Abiotic elements include non- living element like air, water, land,
etc.
FUNCTIONS OF THE ENVIRONMENT
The environment performs four vital functions:
i. Provides resources for production
ii. Environment assimilates waste
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iii. Environment sustains life
iv. It provides aesthetic services

REASONS FOR ENVIRONMENTAL CRISIS:

i. Population explosion and advent of industrial revolution
ii. Intensive and extensive extraction of both renewal and non-renewal resources.
iv. Extinction of many resources.
iv. Affluent consumption and production standards of the developed world.
v. Development process has polluted the atmosphere and has resulted in increased
incidence of respiratory and water –borne diseases.
vi. Global environmental issues such as global warming and ozone depletion.

GLOBAL WARMING
It is the observed and projected increase in the average temperature of the earth’s
atmosphere and oceans. The global warming is due to increase in the greenhouse gas
concentrations, like water vapor, carbon dioxide, Methane and ozone in the
atmosphere.

OZONE DEPLETION
It refers to destruction of ozone in the ozone layer due to presence of chlorine from
manmade chlorofluorocarbons (CFCs) and other forces. It is causes by high level of
chlorine and bromine compounds in the stratosphere.

MONTREAL PROTOCOL

It is a historical treaty designed by the members of united nations of protect the ozone
layer by phasing out CFC, which is supposed to be main reason for ozone depletion.
Under the Montreal protocol, all the signing members agreed to freeze the
consumption and production of CFC by the year 2013.

CHALLENGES TO INDIA’S ENVIRONMENT

Air pollution, water contamination, soil erosion, deforestation and wildlife extinction
are some of the most pressing environmental concerns of India. The priority issues
identified are:
i. Land degradation
ii. Degradation of forest or deforestation
iii. Soil erosion
iv. Biodiversity loss
v. Air pollution
LAND DEGRADATION
Refers to decline in the overall quality of soil, water or vegetation condition,
commonly caused by human activities.

DEGRADATION OF FORESTS OR DEFORESTATION

Involves the permanent destruction of indigenous forest and woodlands.
SOIL EROSION
Takes place when the surface soil is washed away through excessive rains and floods.

BIODIVERSITY LOSS:
Biodiversity defined as the variability among living organisms from all sources.
Biodiversity loss has serious economic and social costs for any country as many plant
and animal species are severely threatened by the destruction of their habitat and over
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exploitation of resources.
AIR POLLUTION
Is the presence of materials in air in such concentration, which are harmful to humans
and the environment.

SUSTAINABLE DEVELOPMENT
It is the development, which will allow all future generation to have a potential
average quality of life, that is, at least as high, which is being enjoyed by the current
generation.

WAYS TO ACHIEVE SUSTAINABLE DEVELOPMENT

Restrict use of renewable resources
Substitute non-renewable with renewable resources
Become input efficient
Control pollution
Control the growth of population

STRATEGIES FOR SUSTAINABLE DEVELOPMENT

Use of non- conventional sources of energy
Use of cleaner fuels
Establishment of mini-hydel plants
Traditional knowledge and practices
Use of Bio compost
Control of Bio pest
Change in unsustainable patterns of consumption and production

CONCEPTS OF
A) CARRYING CAPACITY
B) ABSORPTIVE CAPACITY
A) Carrying capacity of the environment implies that the resources extraction is not above the
rate of regeneration of the resources and the wastes generated are within the assimilating
capacity of the environment.
B) Absorptive capacity means the ability of the environment to absorb degradation.

VERY SHORT TYPE QUESTIONS (1 Mark)

REASONING AND ASSERTION BASED

1. Read the following statements: Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:

Assertion (A): Sustainable development is essential for the economic growth of the country.

Reason (R): Sustainable development ensures that environment-friendly measures are adopted for
carrying out the production process.
Alternatives:
a) Both Assertion and Reason are true and Reason (R) is the correct
explanation of Assertion (A)
b) Both Assertion and Reason are true and Reason (R) is not the correct
explanation of Assertion (A)
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c) Assertion (A) is True but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True

Ans – a)

2. Read the following statements: Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:
Assertion (A): Non-renewable resources are abundant in nature.
Reason (R): Non-renewable resources will get exhausted after several years of usage.

Alternatives:
a) Both Assertion and Reason are true and Reason (R) is the correct
explanation of Assertion (A)
b) Both Assertion and Reason are true and Reason (R) is not the correct
explanation of Assertion (A)
c) Assertion (A) is True but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True

Ans – d)
3.Alternatives:
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion
(A)
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of
Assertion (A)
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.
4.ASSERTION (A): The environment fails to perform its vital function of life sustenance and this
results in an environmental crisis.
REASON (R): Many resources have become extinct and the wastes generated are beyond the
absorptive capacity of environment.
Ans: (a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A)
5.ASSERTION (A): The environment has an important function of supplying resources, both
renewable and non-renewable resources.
REASON (R): The environment is able to perform its functions as long as the demand on these
functions is within its carrying capacity.
Ans: (b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of
Assertion (A)
6. ASSERTION (A): Sustainable development is the development that meets the need of present
generation without compromising the ability of the future generations to meet their own needs.
REASON (R): Conservation and promotion of natural resources.
Ans: (a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A)
7. ASSERTION (A): Environmental degradation owes a great deal to supply demand reversal of
resources over time.
REASONING (R): Global warming is wake up call to save environment.
Ans: (b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of
Assertion (A)
8. ASSERTION (A): Deforestation is rising at such a rapid scale that it has totally disturbed the ecological
balance of the country.
REASON (R): Deforestation is one of the major reasons for soil erosion.
Ans: (b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of
Assertion (A)
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MCQs/BRIEF ANSWER

1. Which of the following statements is correct about achieving sustainable development? a)

Sustainable development can be achieved by restricting the usage of renewable resources
b) Sustainable development can be achieved by controlling the growth rate of world’s population
c) Sustainable development can be achieved by controlling the menace of pollution
d) All of the above
Answer: d

2. What is meant by biodiversity?

Ans. Biodiversity is defined as the variability among living organisms from all
sources, including terrestrial marine and another aquatic ecosystem and the ecological
complexes of which they are a part.

3. State the two major environmental issues that the world is facing today.
Ans. 1. Depletion of natural resources; 2. Environmental degradation

SHORT ANSWER TYPE QUESTION (3-4 MARKS)

1. What are the functions of the environment?
Ans. The environment performs four vital functions:
a. Environment supplies resource
b. Environment sustain life
c. Environment Assimilates waste
d. Environment enhance quality of life

2. Mention the strategies for sustainable development.

Ans. The strategies are: -
• Use of non – conventional sources of energy
Encouraging use of cleaner fuel
• Setting mini hydel plants
• Using traditional practices
• Bio composting
• Bio-pest control
3. Explain how the opportunity costs of negative environmental impacts are
high.
Ans. Opportunity cost is the cost of alternative opportunity give up. The country has
to pay huge amount for damages done to human health. The health cost due to
degraded environmental quality has resulted in diseases like asthma, cholera, etc.
Huge expenditure is incurred in treating the diseases.

4. Is environmental crisis are recent phenomenon? If so, why?

Ans. Yes, because India is suffering from population explosion.
a. India has approximately 20% of livestock population on a mere 2.5 % of the
world’s geographical area. The high density of population and livestock and the
completing uses of land forestry, agriculture, pastures, human settlements and
industries exert an enormous pressure on country’s finite land resources.
b. The per capita forestland in the country is only 0.08 hectare. There is an excess
felling of about 15 million cubic matter forest over the permissible limit.
Indiscriminate felling of trees has led to destruction of forest cover.
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LONG ANSWER TYPES QUESTION (6 MARKS)

1. Identify six factors contributing to land degradation in India
Ans.
(i). Loose of vegetation due to deforestation.
(ii). Overgrazing i.e. grazing of natural pastures at stocking intensities above the livestock
carrying capacity.
(iii). Encroachment into forest lands.
(iv. Non-adoption of adequate soil conservation measures.
(v). Unsustainable fuel would and fodder extraction.
(vi). Improper crop rotation.

2. ‘India has abundant natural resources. Substantiate the statement.

• Ans. The black soil of Deccan plateau is particularly suitable for civilization of
cotton leading industries in the region.
• The Indo-Gangetic plains from the Arabian sea to the Bay of Bengal are one of the
most fertile intensively cultivated and density populated region in the world.
• India’s forest thought unevenly distributed, provide green cover for a majority of its
population and natural cover for its wildlife.
• Large deposits of iron-ore, coal and natural gas are found in the country. India along
accounts for nearly 20% of the world’s total iron-ore reserves.
• Bauxite, copper, chromate, diamonds, gold, lead, lignite, manganese, zinc, uranium,
etc. Are also available in different parts of country

UNIT 8: COMPARATIVE DEVELOPMENT EXPERIENCE OF INDIA AND

ITS NEIGHBOURS
INTRODUCTION
Over the last two decades or so, the economic transformation that is taking place in
different countries across the world, partly because of the process of globalization, has both short as
well as long term implication for each country, India, China and Pakistan. Nations have been primarily
trying to adopt various means which will strengthen their own domestic economies. To this effect they
are forming regional and global economic grouping such as SAARC, European Union, ASEAN, G-8,
G-20, BRICS etc. In addition, there is also an increasing eagerness on the parts of various nations to
try and understand the developmental process pursued by their neighbouring nations as it allows them
to better comprehend their own strengths and weaknesses vis- a- vis their neighbours.

SIMILARITIES IN THE DEVELOPMENT STRATEGIES OF INDIA, CHINA,

PAKISTAN.
1) All the three countries started their development path at the same time. India and Pakistan got
independence in 1947 and people’s Republic of China was established in 1949.
2) All the three countries had started planning their development strategies in similar ways. India
announced its First Five-Year Plan in 1951, Pakistan announced in 1956 and China in 1953.
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3) India and Pakistan adopted similar strategies, such as creating a large public sector and raising public
expenditure on social development.
4) Both India and Pakistan had adopted ‘mixed economy’ model but China had adopted ‘Command
Economy’ model of economic growth.
5) Till 1980s, all the three countries had similar growth rates and per capita incomes.
6) Economic Reforms were implemented in China in 1978, in Pakistan in 1988 and in India in 1991.
DEVELOPMENT STRATEGIES OF INDIA
1) Sound Trade System: India was the country which had the history of closed trade. Because of this
historical background; there is a critical challenge for India to make a new policy which can support
the new trade system. This new reform has been introduced in the economy of India and accelerates
the growth of India.
2) Reduction in Poverty: India has adopted several poverty alleviations programs to reduce poverty
in India. This would help in increasing per capita income, rise in nutrition levels and reduction of poor
in some states.
3) Rural Development: Under this strategy, India adopted various measures of development of areas
that are lagging in the overall development of village economy.
4) Employment Generation: Several economic reforms were initiated to generate employment in the
country and their aim is to provide gainful self-employment and skilled wage employment
opportunities.
ECONOMIC DEVELOPMENT STRATEGY AFTER INDEPENDENCE-(INDIA)
1) Both public and private sectors were allotted to carry business activities. Public sector was allotted
activities like coal, mining, steel, power, roads etc. Private sector was allotted to establish industries
subject to control and regulations in the form of law.
2) Public sector was given major push by the Government. Maximum revenues in this sector was
invested which increased from Rs. 81.1 crore in First Five-Year Plan (1951-56) to Rs 34,206 crores in
Ninth Five-Year Plan (1992-97).
3) Public sector was given importance to eliminate poverty, unemployment etc.
4) Public sector contributed to the industrialisation of the economy. It also helped Indian economy to
achieve a considerable degree of self-sufficiency.
DEVELOPMENT STRATEGIES OF CHINA
1) Great Leap Forward Campaign (1958): This Campaign was started in 1958 aimed at
industrializing the country on a massive scale. People were encouraged to set up massive
industries in their backyards.
2) Commune System: Under the commune system, people collectively cultivated lands. In 1958, there
were 26000 communes covering almost all the farm population

3) Great Proletarian Cultural Revolution (1966-1976): In 1965, Mao Se Tung introduced the
Great Proletarian Revolution under which students and professionals were sent to work and learn from
the countryside.
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4) Economic Reforms in China 1978: In 1978, China began to introduce many reforms in phases.
Initial Phase- Reforms were initiated in agriculture, foreign trade and investment sectors.
Later Phase- Reforms were initiated in the industrial sector. The goal of Chinese economic reforms were
to generate sufficient surplus the finance the modernisation of mainland Chinese economy.
5) Concept of “Dual pricing”: This means fixing the prices in two ways; farmers and industrial
units required to buy and sell fixed quantities of inputs and outputs on the basis of prices fixed
by the government and rest were purchased and sold at market prices.
6) Special Economic zones (SEZs): In order to attract foreign investments and technology,
Special Economic Zones (SEZs).
DEVELOPMENT STRATEGIES OF PAKISTAN
1. Mixed Economy: Pakistan follows a mixed economy system were both public and
privatesector co-exists.
2. Import Substitution: Pakistan adopted a regulatory frame work in the late 1950s and 1960s
for import industrialization. The policy combined tariff protection for manufacturing of consumer
goods together with direct import controls on competing imports.
3. Green Revolution: This was introduced to increase the productivity and self-sufficiency in
food. This increased the output of food grains. This changed the agrarian system dramatically.
4. Nationalization of capital goods industries: In the 1970s, nationalization of capital goods industries
took place. During this period, Pakistan also received financial support from western nations and
remittances from continuously increasing outflow of emigrants to the middle east.

5. In 1988 economic reforms were initiated in the country.

COMPARATIVE STUDY – INDIA, PAKISTAN, AND CHINA:
1) The population of Pakistan is very small and accounts for roughly about one-tenth of China and
India.
2) Though China is the largest nation geographically among the three, its density is the lowest.
3) Population growth is highest in Pakistan followed by India and China. One child norm which was
introduced in China in the late 1970s is the major reason for low population growth. But this measure
led to a decline in the sex ratio, that is the proportion of females per 1000 males.
4) The sex ratio is low and biased against females in all the three countries. There is strong son
preference prevailing in all these countries.
5) The Fertility rate is low in China and very high in Pakistan.
6) Urbanisation is high in both China and Pakistan- with India having 28 percent of its people living in
Urban areas.
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DEMOGRAPHIC INDICATORS

(1) Size of population- (a) China has the highest population closely followed by India. India and china
together are a habitat for 38% of the world’s population.
(b) China with nearly 1371 million (2015) is a habitat for nearly 20 % of world population
(c) India with nearly 1311million people (2015) is a habitat for nearly 18% of world population.
(d) The population of Pakistan is very small and accounts for roughly about one- tenth of China or
India.
(2) Growth rate of population- (a) The population growth is the highest in Pakistan followed by India
and China.
(b) One Child Norm introduced in China in the late 1970s is the major reason for low population
growth.
(c) The trend of growth rate tells that the population of India would exceed China soon.
(3) Density of Population- It is estimated to be 148 persons per square kilometer in China 275 per
sq.km in Pakistan, and 455 persons per sq.km in India.
(4) Sex Ratio- The sex ratio is low and biased against females in all three countries ‘preference for son
‘prevailing in all these countries is the reason for low sex ratio
(5) Urbanization- In India 34% of population is urbanized compared with 37% in Pakistan and 59%
in China.
Note- One child norm and resultant arrest in growth of population also have other implications. For instance,
after a few decades, in China there will be more elderly people in proportion to young people. This led to
allowing couples to have two children from 2016 and allowing three children from 2021

GROWTH RATE OF GROSS DOMESTIC PRODUCT (GDP)

• China has the second largest GDP of 19.8 trillion dollars. India’s GDP is 8.07 trillion dollars.
Pakistan’s GDP is 0.94 trillion dollars.
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• In the 1980s Pakistan was ahead of India, China was having double digit growth and India was
at the bottom.

• In 2011-15 there has been decline in China’s growth rates, whereas, Pakistan met with drastic
decline at 4 percent. Some scholars hold the reform processes introduced in 1988 in Pakistan
and political instability over a long period as reasons behind the trend.
SECTORAL CONTRIBUTION TOWARDS GDP &SECTORAL SHARE OF EMPLOYMENT

• In both India and Pakistan, the contribution of agriculture to GDP was 17 and 25 per cent,
respectively, but the proportion of workforce that works in this sector is more in India. In
Pakistan, about 42 per cent of people work in agriculture, whereas in India, it is 43 per cent.

• The sectoral share of output and employment also shows that in all three economies, the industry
and service sector have less proportion of workforce but contribute more in terms of output.

• In China manufacturing and service sector which contribute the highest to GDP at 43 and 48
per cent respectively whereas in India and Pakistan, it is the service sector which contributes
the highest by more than 50 per cent of GDP

• The contribution of industries to GDP is at 30 per cent in India and 21 per cent in Pakistan.

HUMAN DEVELOPMENT INDEX

• China is moving ahead of India and Pakistan. This is true for many indicators of human
development-

(1) Income indicators such as GDP per capita, proportion of population below poverty line.
(2) Health indicators such as mortality rates, access to sanitation, adult literacy rate, life expectancy,
malnourishment
• Pakistan is ahead of India in reducing proportion of people below
the poverty line and also its performance in sanitation.
• Neither of these two countries- India and Pakistan- have been able
to save women from maternal mortality.
• In China, for one lakh births, only 27 women die whereas in India
and Pakistan, about 178 and 174 women die respectively.
(3) Liberty Indicators- Liberty indicators are those indicators which represent the degree of social
and political freedom to individuals in a country
Examples- A measure of the extent of democratic participation in social and political decision making.
A measure of the extent of constitutional protection given to rights of citizen A measure of the extent
of constitutional protection of the independence of the judiciary and the Rule of Law
 187

DEVELOPMENT STRATEGIES — AN APPRAISAL

CHINA
China introduced reforms in 1978 to address the slow pace of economic growth. They felt that
Maoist vision of economic development based on decentralization, self-sufficiency and shunning
of foreign technology, goods and capital had failed. Various factors that led to the rapid growth in
economic development in China
• Establishment of infrastructure in the areas of education and health, land reforms, long existence
of decentralized planning and existence of small enterprises helped positively in improving the
social and income indicators in the post reform period.
• Through the commune system, there was more equitable distribution of food grains. Each reform
measure was first implemented at a smaller level and then extended on a massive scale
• The experimentation under decentralized government created favorable condition for agriculture.
It created conditions for subsequent phenomenal growth in rural industries and built up a strong
support base for more reforms.
PAKISTAN:
Pakistan Reasons for the slow growth and re-emergence of poverty in Pakistan
• Agricultural growth and food supply situation were based not on an institutionalized process of
technical change but on good harvest. When there was a good harvest, the economy was in good
condition, when it was not, the economic indicators showed stagnation or negative trends
• If a country is able to build up its foreign exchange earnings by sustainable export of
manufactured goods, it need not worry. In Pakistan most foreign exchange earnings came from
 188
remittances from Pakistani workers in the Middle –east and the exports of highly volatile
agricultural products.
• There was also growing dependence on foreign loans on the one hand and increasing difficulty
in paying back the loans on the other.
CONCLUSION:
INDIA
• Indian economy performed moderately, but majority of its people still depend on
agriculture.
• Many initiatives to develop the infrastructure and improve the standard of living.
• It is yet to raise the level of more than one-fourth of its population that lives below the
poverty line.
PAKISTAN
Pakistan has performed poorly. The reasons for the slowdown of growth and reemergence of poverty
in Pakistan’s economy are
1. Political instability.
2. Volatile performance of agriculture sector.

3. Over dependence on remittances.

4. Growing dependence on foreign loans on the one hand and increasing

difficulty in paying back the loans on the other.

CHINA:
China has performed comparatively the best as it is clear from:
• Success in raising the level of growth along with alleviation of poverty.

• It used the market mechanism to create additional social and economic opportunities without
political commitment.

• By retaining collective ownership of land and allowing individuals to cultivate lands, China
has ensured social security in rural areas.
• Public intervention in providing social infrastructure has brought about positive results in
human development indicators in China
 189

MULTIPLE CHOICE QUESTIONS (1mark)

1. Arrange the following events in chronological order and choose the correct answer from the
given alternatives:
(i) Establishment of People’s Republic of China
(ii) Creation of Pakistan
(iii) First Five-Year Plan of India
(iv) First Five-Year Plan of China
Alternatives:
(a) (i), (iv), (ii), iii) (b) (iii), (ii), (i), iv)
(c) (ii), (i), (iii),(iv) (d) (iv), (iii), (ii), (i)
2. Commune system is the feature of
(a) India (b) China (c) Pakistan d) All the above
3. Mao initiated the ‘Great Leap Forward’ in the year------------
(a) 1951 (b) 1955 (c) 1958 (d) 1962
4. India is not a member of which of the following regional / global economic group:
(a) European Union (b)BRICS (c) G-20 (d)SAARC
5. “Multiple reasons for economic slowdown and re-emergence of poverty in Pakistan may be
enumerated”. Identify which of the following might not be one of them.
(i) Rising dependence on foreign loans (ii) Stable macroeconomic indicators
(iii) Unstable agricultural growth
Alternatives:
(i), (ii) and (iii) (b) (ii) and (iii) (c) (i) and (iii) (d) Only (ii)
6. Introduction of economic reforms in China took place in the year
(a) 1978 (b)1980 (c) 1988 (d)1991
7. The main aim of Great Leap Forward in China was to ensure rapid increase of
(a)Agriculture (b) Industries (c) Services (d)Export
8. Under________ in China, farmers and industrial units required to buy and sell fixed quantities of
inputs and outputs on the basis of prices fixed by the government and rest were purchased and sold
at market prices.
(a). Commune system (b) Great Leap Forward Campaign
(c) Dual Pricing (d) Great Proletarian Cultural Revolution
9. Great Proletarian Cultural Revolution was introduced under the leadership of _______.
 190
(a) Mao Zedong (b) J.L. Nehru (c) M.K. Gandhi (d)M.A. Jinnah
10. Identify the incorrect statement from the following:
(a) China’s Economic growth rate is better than that of Pakistan
(b) Pakistan is behind India in HDI ranking
(c) One child Policy norm was adopted in Pakistan
(d) In 1991, India adopted New economic reforms
ASSERTION AND REASONING BASED QUESTIONS
Read the following statements- Assertion(A) and Reasoning (R). Choose one of the correct
alternative s given below:
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A)
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.

11. ASSERTION (A): Great Leap Forward (GLF) campaign initiated in China brought a
new era of industrialisation and agricultural development.
REASON (R): Students and professionals were sent to countryside under the Great Leap Forward
(GLF) campaign.
12. ASSERTION (A): GLF campaign initiated in 1958 aimed at industrializing the country on a
massive scale.
REASON (R): Under the commune system, people collectively cultivated lands.
13. ASSERTION (A): India adopted a mixed economy model of growth.
REASON (R): People’s Republic of China as a growth model was established in 1949.
14. ASSERTION (A): China’s rapid industrial growth can be traced back to its reforms
introduced in 1978.
REASON (R): Private Sector firms and township and village enterprises (enterprises which
were owned and opened and operated by local collectives) were allowed to produce goods.
15. ASSERTION (A): India is moving ahead of both China and Pakistan.
REASON (R): India introduce economic reforms like GLF campaign of China, to industrialize the
country on a massive scale.
 191

STATEMENT BASED QUESTIONS

(Q.NO.16-20) Read the following statement-based questions carefully and choose the correct
alternative from the following
Alternatives:
a) Statement 1 is true and Statement 2 is false

b) Statement 2 is true and Statement 1 is false

c) Both the statements are true

d) Both the statements are false

16. Statement-1: All the three countries, China, India, Pakistan introduced the reforms in the same
year.
Statement-2: China’s annual growth rate of Population is more than India and Pakistan.

17. Statement-1: Both India and Pakistan initiated their economic reforms without any external
pressures.
Statement-2: Pakistan has successfully implemented the SEZ policy and reaped its benefits using the
Export Promotion Policy
18. Statement-1: In both India and Pakistan, the service sector has been emerging as a major source
of development.
Statement-2: Amongst the neighbors of India, China has highest life expectancy rate.
19. Statement-1: Special Economic Zones (SEZs) policy has led to huge Foreign Direct Investment
(FDI) flow to China.
Statement-2: China’s rapid Industrialization growth was the result of its economic reforms in 1981.
20. Statement-1: ‘Liberty indicators’ measure the extent of constitutional protection given to the
citizens.
Statement-2: India provides fair constitutional protection to its citizens.

MATCHING TYPE OF QUESTIONS

21. Match the statements given in column I with the correct option given in Column II

Column I Column II
(i) India A. One-child policy
(ii) China B. Reforms were initiated in the year 1988
(iii) Pakistan C. Highest density of population

22. From the set of events/ systems given in column I and corresponding relevant fact given in
Column II, about China , choose the correct pair of statement.
 192
Column I Column II
A. Great leap Forward (i) Cultivating land collectively
B. Commune system (ii) Opening of industries in their
homes.
C. Proletarian cultural Revolution (iii) Students were sent to work and
learn from the countryside
D. Economic reforms in China (iv) 1988
Alternatives:
a) A-i b) B-ii c) C-iii d) D-iv
23. Choose the correct sequence of options in Column II by matching them options in Column I

Column I Column II
A. 1949 (i) Great Proletarian Cultural Revolution
B. 1953 (ii) Establishment of People’s republic of China
C. 1965 (iii) Reforms introduced in China
D. 1978 (iv) First Five-year Plan of China

24. From the set of events given in column I and corresponding relevant fact given in Column II,
choose the correct pair of statement.

Column I Column II
A. Dual Pricing (i) Economic reforms in 1991
B. Setting up of Special Economic (ii) To attract foreign Direct
Zones in China Investment
C. Commune system (iii) Backyard based industrial
production units
D. Great Proletarian Cultural (iv) Collective farming
Revolution
Alternatives:
a) A-i b) B-ii c) C-iii d) D-iv
25. From the set of statements given in Column I and Column II, Choose the correct pair of
statements:

Column I Column II
A. Medium Term Development Plan (i) China model of growth
B. NITI Aayog (ii) Reforms in India
C. Command Economy (iii) Pakistan’s Five-year Plans
D. Economic Reforms in 1991 (iv) Planning Commission is replaced
Alternatives:
a) A-ii, B-i, C-iii, D-iv c) A-i, B-ii, C-iv, D-iii
b) A-iii, B-iv, C-i, D-ii d) A-iv, B-iii, C-ii, D-i
 193

ANSWERS:

1.c 2.b 3.c 4.a 5.d

6.a 7. b 8. c 9. a 10.c
11. c 12. b 13. b 14.a 15.d
16.d 17.d 18.c 19.a 20.c
21. (i)c; (ii) a; (iii) b 22. c 23. (i)b; (ii) d; (iii) a; (iv)c. 24. b 25.b

3, 4 MARKS QUESTIONS
Q.1. India and Pakistan initiated their journey of development, nearly at the same time, yet the
two economies have travelled different distances. Justify the given statement with the valid
arguments.
Ans. It is true that India and Pakistan started their journey of development nearly at the same time, in a
similar way. Bothe the nations adopted policies like economic planning, dominance of public sector,
high public expenditure etc. In the post 1947 period. There has been a decline in the annual growth of
GDP in Pakistan over the yea, whereas India met with moderate increase in GDP. The probable reasons
for slower growth in Pakistan are political instability, overdependence on remittance and foreign aid
along with volatile performance of agricultural sector. However, India met with greater success owing
to efficient economic planning and better implementation vis-à-vis Pakistan.
Q.2. Explain the Great Leap Forward campaign of China as initiated in 1958.

Ans- In 1958 ‘The Great Leap Forward’ was initiated by Mao to modernise China’s economy.

• Its aim was to industrialize the country on a large scale and in as short a time as possible.

• For this, people were encouraged to set up industries in their backyards.

• In villages, village Communes or cooperatives were set up. Communes mean collective
cultivation of land.

• Around 26000 communes covered almost all the farm population in 1958.
The Great Leap Forward program faced many problems. These were:
(i) In the earlier phase, a severe drought occurred in China and it killed some 3-crore people.
(ii) Soviet Russia was a comrade to communist China, but they had border dispute. As a result, Russia
withdrew its professionals who had been helping China in its industrialisation bid.
Q.3. Briefly explain the development strategies followed by China for its development
Ans- Policies followed by China are: -
a) Great leap forward (GLF) – The campaign initiated in 1958 aimed at industrializing the country on
a massive scale. People were encouraged to setup industries in their backyards. There were no
restrictions which provide momentum for economic growth.
 194
b) Commune system – In rural areas, people collectively cultivate lands, In 1958, there were
26,000 communes covering almost all the farm population
c) Great Proletarian Cultural Revolution (1966-1976) – Under this revolution, students and
professionals were sent to work and learn from the countryside.
d) One child policy – One child policy norm introduced in China to control its population growth.
e) Setting up of Special economic zones and opening of economy in 1978
Q4. Mention the salient demographic indicators of China, Pakistan and India.
Ans: . Following are the salient demographic indicators of China, Pakistan and India:
i) Population: The population of Pakistan is very small and accounts for roughly about one tenth of
China and India.
ii) Population Density: Though China is the largest nation geographically among the three, but its
density is the lowest.
iii) Population Growth: Population growth is highest in Pakistan followed by India and China. One-
child norm introduced in China in the late 1970s is the major reason for low population growth. But this
measure led to a decline in the sex ratio.
iv) Sex Ratio: The sex ratio low and biased against females in all the three countries. There is strong
son-preference prevailing in all these countries as the reason.
Q.5. Define the liberty indicator. Give some examples of liberty indicators.
Ans. Liberty Indicator may be defined as the measure of the extent of demographic participation in the
social and political decision making.
Examples of liberty indicators:
(i) Measures of the extent of the Constitutional Protection Rights given to the citizens;
(ii) Extent of the Constitutional Protection of the independence of the Judiciary and Rule of Law.
Q.6. Write three observations pointing to re-emergence of poverty in Pakistan.
Ans. Following observations pointing to re-emergence of poverty in Pakistan:

• Lack of institutional reforms in agriculture because of which this sector has remained volatile
(devoid of stability).

• Lack of political stability in Pakistan, leading to huge public expenditure on the maintenance of
law and order.

• Allocation of huge funds to build a strong defense-system at the cost of developmental

expenditure.

Q. 7. Write three observations pointing to growth story of India, China and Pakistan.
 195
Ans. Following observations highlight the growth story of India, China and Pakistan:

• China has outpaced both India and Pakistan with regard to GDP growth.

• India has performed better than Pakistan. But compared with China, India is way behind.

• The relative success of China is credited to political stability in China. China has proved that the
more relevant factor in the context of GDP growth is not the availability of resources but good
governance by the state and 'good compliance' by the citizens.

Q.8. Write three observations highlighting global exposure of the economy of China.
Ans. Following observations highlight the global exposure of the economy of China:
o Inward looking policy of self-sufficiency and protection of domestic industry from foreign
competition has gradually been replaced by the policy of growth through competition.
o It allowed the foreign investors the freedom to 'hire and fire' the workers. It also offered them a
lucrative infrastructure.
o China allowed foreign investors 100 per cent equity investment across most sectors of the
economy.

Q.9. Write three observations on the structure of growth in India, Pakistan and China.
Ans. Following observations highlight the structure of growth in India, Pakistan and China:
(i) Indian and Pakistan adopted a 'mixed-economy' model of growth. While, China adopted 'Statism' as
a model of growth.
(ii) India and Pakistan have relied more on tertiary sector while the economy of China has relied more
on secondary sector for the GDP growth.
(iii) In China, contribution of secondary sector to GDP is much more than in India and Pakistan.
Q.10. The complementarity between the structure of growth and the GDP growth appears quite
different from that shown by the historical experience of the developed countries. Comment.
Ans. Historical experience of the developed countries shows that in terms of the percentage share in
GDP, it was first the secondary sector and later the tertiary sector which emerged as the leading sectors
of the economy. However, in the Indian context, what was witnessed was that a major shift directly from
primary sector to the tertiary sector. Primary sector on the eve of independence was the largest
contributor to GDP. Now, tertiary sector has the lead in terms of contribution to GDP. Thus, a major shift
directly from primary sector to tertiary sector has been observed in India. This implies a lesser emphasis
has been accorded to industrial expansion in India.
Q.11. How do you view the opposition to FDI in retail in India? Compare it with the situation of
smooth operation of FDI in retail in China.
 196
Ans: It is an undisputed fact that FDI is growth-friendly. After all, it is an investment and increases
production capacity of the nation. The opposition to FDI in retail in India is not because it may be a
roadblock in the process of growth. It is because it may generate unwarranted competition for the retail
traders in India who may be marginalized and finally driven out of the market. Such a situation may
erode the opportunity of self-employment in the country, and may also lead to concentration of economic
power with the foreign investors. On the other hand, China was liberal in allowing FDI in retail. China
allowed foreign investors 100 per cent equity investment.
Q.12. Analyse the role assigned to public sector in the process of development in India and
Pakistan in comparison to that in China.
Ans: India, Pakistan and China relied on planned development programs as their basic strategy of
growth and development. But, whereas in India and Pakistan, mixed economy served as the basic
premise of the growth model, in China, all critical areas of production were brought under state
ownership, and command economy served as the basic premise of the growth model. Thus, China
adopted 'statism' as the model of growth.
Q.13. ‘GDP growth rate in China has slowed down in the recent past’. Give the reasons for this.
Ans- Some notable reasons in this regard are
a) Slowdown in the global economies has dampened the demand for the Chinese products.
b) Growth of domestic demand in China is slowing down. This is because of rising propensity to save
in the Chinese economy.
c) Corruption and economic crimes have tended to rise over time.
d) Chinese people are now exploring higher wage opportunities of employment in the rest of the world
where government intervention is minimum.
Q.14. Compare and analyse the given data of India and China, with valid reasons.

Country Annual Growth Rate of Sex Ratio (Per thousand

Population (2015) males)
India 1.2 % 929
China 0.5% 941
Ans. Comparison and observations:
(i) Annual Growth rate of population is much lower in China (0.5%) than India (1.2%). It
possible only successful implementation of One child policy introduced in China in 1979.
(ii) Gender ratio is more skewed in India 929 per 1000 males than China 941 per 1000 males
(No. of Females per Thousand Males).
iii) This reflect a strong preference for a male child in the Indian society, it is
sign of higher social backwardness in India than China.
Q.15. Compare the analyse the given data of India, China and Pakistan.
 197
Annual growth of Gross Domestic Product in %(1980-2017)
Country 1980-90 2015-17
India 5.7 7.3
China 10.3 6.8
Pakistan 6.3 5.3

• The above table states that, during 1980-90 China was having double- digit growth rate of 10.3%,
Whereas Pakistan’s growth rate was 6.3%, and India was bottom with just 5.7% growth rate.

• During 2015-17, there was a drastic fall in China’s growth rate from 10.3% to 6.8%.

• Pakistan also met with a decline in annual growth of GDP from 6,3% to 5.3%.

• India recorded an increase from 5.7% to 7.3% owing to efficient economic planning and better
implementation as compared to Pakistan.
16. Compare and analyse the following information related to Imports and Exports of thethree
neighboring nations:

Exports from India (in ₹ Imports to India (in ₹

Crore) Crore)
2004-05 2018-19 Annual rate of 2004-05 2018-19 Annual rate of
Country growth (%) growth (%)
Pakistan 2,341 14,426 3.7 427 3,476 5.1
China 25,232 1,17,289 2.6 31,892 4,92,079 10.3
Ans: The above table shows that during the given periods the Exports from India to Pakistan have
increased at an annualized rate of 3.7 % while the same with China shows 2.6% of growth. On the other
hand, India’s import from China accounted for a massive 10.3 %. The corresponding figure with
Pakistan witnessed an average of 5.1% respectively.
• The situation indicates that Indian imports from China are too high in comparison to the exports
to China. This shows that Indian economy was over-dependent on Chinese economyfor goods and
services, over the given period of time.

6 MARK QUESTIONS
Q.1. Describe the important parameters of HDI with reference to the performance of India and
China.
Ans a) In the year 2014, HDI for China and India was estimated to be 0.719and 0.586 respectively.
b) Global ranking of these countries found to be 91and 135.
c) In the year 2011 China’s GDP per capita was estimated to be US $8394, while it was merely
US$3703 for India.
d) 55% of China’s population has access to improved sanitation compared with 31% in India.
e) Infant Mortality Rate is as low as15.62 per thousand. In China compared with 46 per
 198
thousand in India.
f) Maternal Mortality Rate is just 38 per lakh in China Compared with 230 in India.
Q.2. “India, China and Pakistan have travelled more than seven decades of development path with
varied result.” Explain the given statement with valid argument.
Ans. India, China and Pakistan have travelled more than seven decades of development path
simultaneously, but the result is substantially different. China has edge both India and Pakistan, both are
lagging far be India, China and Pakistan have travelled more than seven decades of development path
with varied hind. The principal reasons are as under.
I. Great Leap Forward (GLF 1958) campaign of China: -
1.GLF was started in 1958 with a view to propelling the pace of economic and industrial development
2. Which aimed at Country’s industrialization and agriculture on a large scale
3.Chaina resorted to “Commune System of Production “Under which people cultivated land collectively.
II. Great Proletarian Cultural Revolution: Mao (Chinese communist revolutionary) believed that
both had to grow to allow the other to grow. Mao introduced the Great Proletarian Cultural Revolution
(1966–76) under which students and professionals were sent to work and learn from the countryside.
5. It focused on widespread industrialization of the economy
6.People to set-up household industry in their backyard.
III. One Child policy in China: - OCP adopted by China in 1979 has been very successfully pursued.
Consequently,
1. Growth rate of population has reduced to nearly half, from 1.33 per cent in 1979 to 0.47 per cent in
recent past
2. With a check on population growth, China focusses on raising the quality of life.
IV. Growth story of China: - (i)In 2017, GDP in China was estimated to be 12.40 trillion.
V. Special Economic Zones (SEZ) in China
VI. High Labour Supply in China.
VII. GNI per capita (PPP $ US): In China, GNI percapita is highest amongst the three nations
followed by India and Pakistan.

Q. 03. Mention salient demographic indicators of China, Pakistan and India.

Ans- 1. The population of Pakistan is very small &account for roughly about one tenth of China or India.
2. China is largest nation geographically among the three, its density is lowest
3. The population growth is highest in Pakistan followed by India. One child normal introduce in China
in late 1970s is the major reason for low population growth.
4. The sex ratio is low &based against females in all three countries
5. The fertility rate is low in China &very high in Pakistan
 199
6. Urbanization is high in both Pakistan &China with India having 28per cent of its people living in
areas.
Q.4. Compare and contrast India and China’s sectoral contribution towards GVA.GDP. what does
it indicate.
Sectoral Contribution to GVA/GDP in % (2018-19)
Sector India China
Agriculture 16 7
Industry 30 41
Service 54 52
Total 100 100

Answer:

• Contribution to Agriculture sector: The contribution of agriculture to GVA/GDP was 7% in

case of China, whereas, it was 16% in case of India.

• Contribution to Industrial sector: The contribution of Industrial sector to GVA/GDP was 41%
in case of China, whereas, it was 30% in case of India.

• Contribution to Service sector: The contribution of Service sector to GVA/GDP was 52% in
case of China, whereas, it was 54 % in case of India.

• By these points we can conclude that service sector is contributing highest in both the countries.
The industrialization in China is highest as the contribution from industrial sector is highest in
China. The service sector in China has also expanded proportionate to the industrial sector which
is not the case in India.
Q. 05. Compare and analyse the given data of distribution of workforce (in 2018- 19) with valid
reasons.

Country Agriculture sector Industrial sector Service sector (%)

(%) (%)
India 43 25 32
China 26 28 46
Pakistan 41 24 35
Source: NCERT

• Ans. As evident from the table, the percentage of workforce engaged in agricultural sector is the
highest in case of India, which stands at 43 per cent. The corresponding rates for China and
Pakistan are 26 per cent and 41 per cent respectively.

• The percentage of workforce engaged in industry is the highest in China, which stands at 28 per
cent. The corresponding rates for India and Pakistan are 25 per cent and 24 per cent respectively.

• The percentage of workforce engaged in services sector is again the highest in China, which
stands at 46 per cent. The corresponding rates for India and Pakistan are 32 per cent and 35 per
cent respectively.
 200
• These observations point to a fact that China is far ahead of India and Pakistan in industrialising
its production activity which is a sign of long period growth and development.

• Higher percentage of workforce in services sector in China is also a sign of its faster growth
compared to India and Pakistan. However, the fact should also be not ignored that Pakistan has
taken over India as regards the growth of services sector. This points to rapid urbanization in
Pakistan.
Q.6. Based on the given data, compare any two parameters for the economies of India and China.
Some selected indicators of Human Development, 2017-19
Items Human HDI (Rank) Life Expectancy GNI per capita
development at birth (in (PPP $ US)
index (HDI) years)
India 0.645 130 69.7 6,681
China 0.761 87 76.9 67.3
• Source: HDI Report 2019 and 2020 and world development indicators.

• Ans. HDI (value) : (i) HDI is an important indicator of socio- economic development. Higher
value of HDI shows higher level of growth and development of a nation. As per given report,
HDI for India is 0.645, which is lesser than that of China (0.761).

• (ii ) HDI Rank: HDI values are used to create ranking of different countries. China is placed at
87th position in the world whereas, India stands at 130th position. Higher rank indicates socio-
economic development.

• (iii ) Life Expectancy at birth (in years): A country which provides better health and civic
facilities secure a higher life expectancy for its citizens. China has higher life expectancy than
India by a margin of approximately 8 year.

CASE STUDY BASED QUESTIONS

I. Read the following text carefully and answer the questions given below:
SINO-PAK FRIENDSHIP CORRIDOR
The China-Pakistan Economic Corridor (CPEC) has deepened the decades long
strategic relationship between the two nations. But it has also sparked criticism for burdening Pakistan
with mountains of debt and allowing China to use its debt-trap diplomacy to gain access to strategic
assets of Pakistan.
The foundations of CPEC, part of China's Belt and Road Initiative, were laid in May
2013. At the time, Pakistan was reeling under weak economic growth. China committed to play an
integral role in supporting Pakistan's economy.
Pakistan and China have a strategic relationship that goes back decades. Pakistan
turned to China at a time when it needed a rapid increase in external financing to meet critical
investments in hard infrastructure, particularly power plants and highways. CPEC's early harvest
projects met this need, leading to a dramatic increase in Pakistan's power generation capacity, bringing
an end to supply-side constraints that had made rolling blackouts a regular occurrence across the country.
 201
Pakistan leaned into CPEC, leveraging Chinese financing and technical assistance in
an attempt to end power shortages that had paralyzed its country's economy. Years later, China's
influence in Pakistan has increased at an unimaginable pace.
China as Pakistan's Largest Bilateral Creditor: China's ability to exert influence on
Pakistan's economy has grown substantially in recent years, mainly due to the fact that Beijing is now
Islamabad's largest creditor. According to documents released by Pakistan's finance ministry, Pakistan's
total public and publicly guaranteed external debt stood at $44.35 billion in June 2013, just 9.3 percent
of which was owed to China. By April 2021, this external debt had ballooned to $90.12 billion, with
Pakistan owing 27.4 percent-$24.7 billion - of its total external debt to China, according to the
International Monetary Fund (IMF).
Additionally, China provided financial and technical expertise to help Pakistan build its
road infrastructure, expanding north-south connectivity to improve the efficiency of moving goods from
Karachi all the way to Gilgit-Baltistan (POK). These investments were critical in better integrating the
country's ports, especially Karachi, with urban centres in Punjab and Khyber Pakhtunkhwa provinces.
Despite power asymmetries between China and Pakistan, the latter still has tremendous agency in
determining its own policies, even if such policies come at the expense of the long-term socioeconomic
welfare of Pakistani citizens.
(https://www.usip.org/publications/2021/05/pakistans-growing-problem-its-china-economic-corridor - Modified)

QUESTIONS:
1Q. Outline and discuss any two economic advantages of China Pakistan Economic Corridor (CPEC)
accruing to the economy of Pakistan.
2Q. Analyse the implication of bilateral 'debt-trap' situation of Pakistan vis-a-vis the Chinese Economy.
Answer:
Economic advantages of China Pakistan Economic Corridor (CPEC) to the economy of Pakistan are:
China provided financial and technical expertise to help Pakistan build its road infrastructure,
supporting employment and income in the economy.
CPCE has led to a massive increase in power generation capacity of Pakistan. It has brought an end to
supply-side constraints in the nation, which had made blackouts a regular phenomenon across the
country.
China has become famous for its 'Debt Trap Diplomacy' in recent times. Under this China provides
financial and technical expertise/assistance to help various nations to bring them under its direct or
indirect influence.
The first and the foremost implication of the diplomacy is that Beijing has now become Islamabad's
largest creditor. According to documents released by Pakistan's finance ministry, its total public external
debt stood at $44.35 billion in June 2013, just 9.3 percent of which was owed to China. By April 2021,
this external debt had ballooned to $90.12 billion, with Pakistan owing 27.4 percent-$24.7 billion - of
its total external debt to China, according to the IMF.

II. Read the following case study carefully and answer the questions that follow.
Special Economic Zones (SEZs) are intended to function as zones of rapid economic
growth by using tax and business incentives to attract foreign investment and technology.The first four
economic zones were created in 1980 in southeastern coastal China and consisted of what were then
the small cities of Shenzen , Zhuhai, and Shantou in Guangdong province and Xiamen in Fujian
province. In these areas, local governments have been allowed to offer tax incentives to foreign
investors and to develop their own infrastructure without the approval of the central government.
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Business enterprises have made most of their own investment, production and marketing decisions and
foreign ownership of such ventures have been legalized. Though some of them began a little more than
small towns, the new SEZs soon attracted foreign investment and became boom towns, with rapidly
expanding light and consumer goods industries and growing population. Encouraged by the zone’s
success, the Chinese government in 1984 opened 14larger and older cities along the coast of foreign
trade and investment. In 1988, Hainan Island was made a separate province and a special economic
zone, and in 1990 the Pudong are within the Shanghai municipality became a special economic zone
with policies even more flexible than those already in force in the original four Special Economic
Zones (SEZs).
QUESTIONS:
(a)What were Special Economic Zones (SEZs)? Name any two cities in whichspecial economic
zones were started in China in 1980.
(b) When were economic reforms initiated in China? What autonomy was given to local government for
motivating foreign investors in China under special Economic Zones?
ANSWERS:
A special economic zone (SEZ) is an area in a country that is designed to generate positive economic
growth. An SEZ is normally subject to different and more favorable economic regulations compared to
other regions in the same country, including tax incentives and the opportunity to pay lower tariffs.
The first four economic zones were created in 1980 in China were the small cities of Shenzhen,
Zhuhai, and Shantou in Guangdong province.
In late 1978. In these areas, local governments have been allowed to offer tax incentives to foreign
investors and to develop their own infrastructure without the approval of the central government.

III. Interpret the given image on account of population policy and resultant effects in China.

Ans: “One child” norm/policy introduced in China in the late 1970s and the resultant arrest in the
growth of population and lower fertility rate has one significant implication. In a few decades, in
China, there will be more elderly people in portion to young people. This has led China to allow
couples to have two children.
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MIND MAP
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