Q.1. What are the characteristic features of Monopoly?
Ans: The main features of monopoly are as follows :
(1) One Seller and Large Number of Buyers : Under monopoly there should be a single producer of a commodity. He may be alone, or there may be a group of partners or a joint company or a state. Thus, there is only one firm under monopoly. But the buyers of the product are in large number. Consequently, no buyer can influence the price of the product.
(2) Restrictions on the Entry of the New Firms : Under monopoly, there are some restrictions on the entry of new firms into monopoly industry. As for instance, there are patent rights, or exclusive control over a technique or raw material.
(3) No Close Substitutes : A monopoly firm produces a commodity that has no close substitutes.
(4) Full Control Over Price : Since he alone produces the commodity in the market, a monopolist has full control over its price. A monopolist thus is a price maker. He can fix whatever price he wishes to fix for his product.
(5) Possibility or Price Discrimination : Many a time a monopolist charges different prices from different consumers. It is called price discrimination. “Price discrimination refers to the practice by a seller of charging different prices from different buyers for the same good.” In monopoly, there is possibility of price discrimination.
Q.2. What is External Economies of Scale? What are the main external economics ?
Ans : These are the economies which are industry-specific. These are available to all the firms in the industry when the scale of operation of the industry as a whole expands. Owing to overall expansion of the industry new markets are explored, new ways of doing things are discovered, managerial techniques are improved and many linked processes are developed. All such developments tend to generate economies in terms of increased productivity or reduced cost of production.
The main external economies are :
(i) Economies of Concentration : It refers to localization of large number of firms producing similar goods. As a result of it firms get various kinds of advantages e.g., development of means of communication and transport; availability of trained labourers, banking facilities, ancillary industries, etc. Consequently, cost of production of all the firm does down.
(ii) Economies of Information : When several firms of an industry are established at one place one finds publication available very useful informations concerning that industry viz., new inventions, new markets, price prevailing in different markets, position of demand in various markets, etc.
(iii) Economies of Disintegration : Development of an industry is followed by undertaking of different processes by different firms. For example, different firms doing the job of carding, weaving and dyeing of wool. One firm does not take upon itself all these processes. As a result of disintegration, cost of production falls because one firm specializes in one activity alone. This benefits all the firms of an industry.
It is to be noted, however, that Returns to scale are generally studied with reference to a particular firm, rather than the industry as a whole. Accordingly, external economies are not of much relevance from our point of view. Increasing returns to scale are thus to be explained largely in terms of internal economies of scale.
Q.3. Which peculiarities of labour as a factor of production influence the determination of wages ?
Ans : (1) Labour cannot be Separated from Labourer : Physical presence of the labourer is necessary to render his services, manual or mental. As such labour cannot be separated from labourer.
(2) Perishable : Labour is most perishable factor of production. Land cannot be destroyed. Capital suffers gradual wear and tear but the supply of labour perishes in the very act of labour. A labourer cannot store his labour.
(3) Difference in Efficiency : All labourers are not equally efficient. Some are more efficient than the others. It means they produce quantitatively and qualitatively more than others.
(4) Backward Bending Supply Curve : Human beings have the instinctive preference for leisure compared to work. Therefore, after a particular level of living is reached, increase in wages does not increase more supply of labour -- that is lesser labour is offered at higher wage-rate. So that the supply curve of labour bends backward.
(5) Weak Bargaining power of the Labour : Labour is a perishable commodity. It cannot be stored for the further. Hence it has a weak bargaining power vis-a-vis its employer. In order to make-up this weakness the labourers have to organise themselves into Trade Unions. These unions are an effective toll of collective bargaining. They bargain with the employers collectively rather than individually.
Q.4. Write a note on Fiscal Instruments related to Government Expenditure.
Ans : The government of a country incurs various types of expenditure, mainly;
(i) Expenditure of public works programmes such as the construction of roads, dams, bridges etc.
(ii) Expenditure on education and public welfare programmes.
(iii) Expenditure on the defence of the country and the maintenance of law and order.
(iv) Expenditure on various types of subsdies to the producers with a view to encouraging production/exports and on transfer payments to the public.
These various categories of expenditure serve as fiscal instruments related to government expenditure. It is by varying any or all types of expenditure that the government seeks to correct the situations of excess demand or deficient demand in the economy.
Q.5. What was the objectives of constituting the tenth finance commission ? What were its recommendation ?
Ans : The Tenth Finance Commission (TFC) was constituted in June 1992 with Mr. K. C. Pant as chairman to make recommendations for the five year period 1995-2000 relating to the following matters.
(i) The distribution between the Centre and the States of the net proceeds of taxes which are to be divided between them or may be divided between the States of the respective shares of such proceeds;
(ii) The changes to be made in the principles governing the distribution among States of the net proceeds of the additional duties of excise;
(iii) The principles which should govern the grants-in-aid of the revenue of the States out of the Consolidated Fund of India and the sums to be paid to the States which are in need of assistance by the way of grants-in-aid under article 275 of the constitution;
(iv) The amount of grants to be made and the principles governing the distribution among the States of such grants in lieu of the tax under the repealed Railway Passenger Fares Act, 1957;
(v) An assessment of the debt position of the States as on March 31, 1994 and suggest such corrective measures as deemed necessary, keeping in mind the financial requirements of the Centre; and
(vi) Review of policy and arrangements in regard to financing of relief expenditure;
Its main recommendations are : –
Transfer from Centre to State (Vertical Devolution)
Old Scheme – TFC has made recommendations for the devolution of funds from receipts of two major taxes viz., personal income tax and union excise duties. The share of States in the total receipts of personal income tax has been fixed at 77.5% and in the total proceeds of union excise duties has been fixed at 47.5%. This vertical transfers, however, were followed in 1995-96 and 1996-97.
Alternative Scheme – TFC has proposed an alternative scheme for vertical transfers which has been put into effect from 1997-98 financial year. This scheme envisages devolution of funds from only two taxes. The TFC has proposed that 29% of the revenue from all the taxes be transferred to the divisible pool for distribution among States. It has further recommended that this rate be maintained for 15 years after which it could be reviewed.
Division Among States (Horizontal Devolution)
The criteria for horizontal devolution or division of the transferred resources among the States have been recommended in terms of receipts from the income tax and union excise duties.
The shareable proceeds of income tax are to be distributed among the states in the following way–
(i) 20 percent on the basis of population.
(ii) 60 percent on the basis of distance of per capita income of state from the state with the highest per capita income. The respective 'distances' are multiplied by the population of the states and share of state is obtained by dividing the product by the sum of such products for all states.
(iii) 5 percent on the basis of area of state.
(iv) 5 percent on the basis of index of infrastructure prepared by TFC.
(v) 10 percent on the basis of tax effort measured by ratio of per capita own tax revenue of a state to its per capita income.
As for the union excise duties, TFC has used to same set of criteria as described above for distribution of 40 percent of their net proceeds among the states. The share of each state in the remaining 7.5 per cent (as 47.5 percent of excise duties are allocated to the states) is to be distributed among states who remain in deficits even after the devolution of resources.
Q.6. What were the objectives of the eighth plan.
Q.7. What are the procedure laid down in the constitution for the impeachment of the president ?
Ans : Procedure laid down in Art 61:
(a) Impeachment motion can be initiated by either house of Parliament.
(b) The charge must come in the form of a proposal contained in a resolution signed by not less than one-fourth of the total number of members in the House and moved after giving at least 14 days notice.
(c) Such resolution must be passed by at least two thirds majority of the House.
(d) The charge is then investigated by the other House. The President has right to appear at such investigation.
(e) If the other House also passes the resolution by 2/3rd majority, such resolution shall have the effect of removing the President.
Q.8. Discuss the ordinance making power of the president and governments. Has there been a judicious use of the power in India.
Ans : An ordinance can be promulgated only when necessity compels immediate action, while the legislature is not in session (Art 123, 213 and 239 B).
Governments at the Centre and in the States have bypassed the legislature with impunity and promulgated a spate of ordinances which are patently unconstitutional.
Ordinances are being regularly promulgated just before the session of a legislature is to commence so as to confront the legislature with a fait accompli, or just after the session is over. All schemes of nationalisation are invariably kept back while the legislature is in session and are promulgated only in the form of ordinances.
The letter of the Constitution is satisfied by the President or the Governors making a declaration that while the legislature is not in session, “circumstances exist which render it necessary for him to take immediate action.”
The President as well as the Governors are bound to act on the advice of the Council of Ministers who are blissfully aware that outraging the sanctity of the Constitution is not a punishable offence.
Again, an ordinance which is intended to be a temporary law to meet an urgent crisis ceases to operate at the expiry of six weeks from the reassembly of the legislature.
But, by the plain device of repromulgating ordinances again and again, they are kept indefinitely alive, while the assembly and prorogation of the legislature are merely interludes in the Ordinance Raj.
Thus, for example, in Bihar alone, 256 ordinances were kept alive for periods ranging from one to fourteen years.
Q.9. What Bill are reserved by the governor for the assest of the President? Discuss the procedure when a bill is so reserved.
Ans : The Governor usually reserves for the considration of the President, any Bill which, in the Governor’s opinion, would be derogatory to the powers of the High Court (if it became law) and endanger the position of the Court (Art. 200).
When a Bill is so reserved, the President has two options:
(a) he declares that he assents to the Bill, or
(b) he withholds his assent to the Bill.
The power vested in the Governor in this regard is discretionary.
In the event of the Bill, not being a Money Bill, the President may direct the Governor to return the Bill to the House, which after re-consideration, may pass it with or without amendments, within six months.
In such a contingency, the Bill is presented again to the President for his consideration (Art. 201).
The President is not, however, bound to give his assent. If he withholds the Bill, it is said to be vetoed.
Q.10. Compare the pardoning power of the president and governor.
Ans : Under the Indian Constitution, the pardoning power shall be possessed by the President as well as the State Governors under Art. 72 and 161 respectively.
President shall have the power to grant pardon, reprieve, suspension, remission or commutation in respect of—
(i) all cases of punishment or sentence by Court Martial;
(ii) cases where the punishment or sentence is for an offence against a law relating to a matter to which the executive power of the Union extends;
(iii) all cases where the sentence is one of death.
The only authority for pardoning a sentence of death is President.
Governor has no such jurisdiction as that of the President in cases of punishment by a Court Martial.
Though the Governor has no power to pardon a sentence of death, he has the power to suspend, remit or commute a sentence of death in certain circumstances.
Governor has similar power to those of President in respect of an offence against a law relating to a matter to which the executive power of the State extends (except as to death sentence).
Q.11. Discuss the position of the prime minister in the Indian cabinet.
Ans : The Indian Prime Minister enjoys formidable power and influence. He is in fact the “keystone of the Cabinet arch.” he has a constitutional basis and does strengthened by the 42nd Amendment, by making it obligatory for the President to act according to the advice of his Council of Ministers, led by the Prime Minister. No doubt, the 44th amendment sought to restore to the office of the President some of its lost prestige and glory. Nevertheless, the Prime Minister retains his pre-eminent position, as long as he carries his Cabinet with him.
The Prime Minister enjoys very extensive powers indeed. He acts as the main link between the Cabinet and Parliament. Being the chief spokesman of the Government in Parliament, all major announcements regarding policy are made by him.
“The Indian Prime Minister is invested with formidable power and influence and unless he be a genuine democrat by nature, he is very likely to become a dictator.”
Q.12. Does the constitution provide for the prime minister to induct into the cabinet the best talent available in the country, ouutside Parliament. If not, suggest a measure to achieve this end.
Ans : No. Art. 75 requires that a Minister at the Centre should be, or become within six months, a member of Parliament.
An amendment to this Article should provide that, while the existing provision would apply to the majority of ministers, a minority may be selected by the Prime Minister from outside Parliament, who would not be required to get into Parliament, at any time. Even the ministers who are not members of Parliament, would have the right to address, and would be responsible to Parliament ; thus the principle of collective responsibility of the Cabinet to the legislature would not be impaired.
In Japan, which has a democratic Constitution on the Westminister model, as we have, the majority of the ministers are selected from the Diet, but it is open to the Prime Minister to select a minority of the ministers from outside. The advantage of such a system is obvious.
Q.13. Define the duties and rights of Attroney general of India?
Ans : The Attorney General’s duties are to:
(i) advise the Union Government on such legal matters as are referred to him;
(ii) perform such duties as are assigned to him by the President from time to time;
(iii) appear in all cases, including suits, appeals and other proceedings, in the Supreme Court or any High Court, in which the Union Government is concerned; and
(iv) appear in Law Courts on behalf of the Speaker or the Houses of Parliament.
If, in any suit, questions involving interpretation of the Constitution are raised, notice has to be given to the Attorney-General.
His consent is necessary for initiating proceedings for contempt, in certain cases.
He represents Government in any reference made by the President under Article 143 of the Constitution.
He has a right to speak in, and otherwise take part in the proceedings of either House, any Committee of Parliament and any joint sitting of the Houses (Art 88), without voting right.
Q.14. Examine the position of Attorney-General in the U.K. and U.S.A in relation to his Indian counterpart.
Ans : The Attorney-General is a member of the Cabinet in the United Kingdom. His is a political appointment and is usually conferred on a flourishing barrister who supports the party in power and naturally enjoys its confidence. He is forbidden from private practice but is compensated with a fabulous salary from the Exchequer. His Indian counterpart is allowed private practice, as he is not a full-time servant of the Government. This should not, however, prejedice his obligations to the State. The Attorney-General in India holds office during the pleasure of the President, while his British counterpart changes with every change of Government.
The Attorney-Gereral in the U.S.A. is the Chief Legal Officer of the Federal Government and performs the functions of his counterpart in the U.K. such as enforcement and monitoring of all federal laws. He puts in appearances in the Supreme Court, like his Indian counterpart.
Q.15. Discuss the composition of council of ministers headed by the prime minister.
Ans : The Council of Ministers headed by Prime Ministers with the Prime Minister at the head to aid and advice the president who shall, in the exercise of his functions, act in accordance with such advice. The question whether any, and if so what, advice was tendered by Ministers to the President shall not be inquired into in any court.
The prime Minister is selected by the President and the other Ministers are appointed by the President on the advice of the Prime Minister [Art. 75(1)] and the allocation of portfolios amongst them is also made by him.
In selecting the Prime Minister, the President must obviously be restricted to the leader of the party in majority in the House of the People, or a person who is in a position to win the confidence of the majority in that House.
The Presidents’s power of dismissing an individual Minister is virtually a power in the hands of the Prime Minister. There is no bar to the appointment of a person from outside the Legislature as Minister. But he cannot continue as Minister for more than 6 months unless he secures a seat in either House of Parliament (by election or nomination, as the case may be), in the meantime [Art. 75(5)].
A Minister who is a member of one House has a right to speak in and to take part in the proceedings of the other House though he has no right to vote in the House of which he is not a member [Art. 88].
The Council of Ministers consists of the Prime Minister and other ministers he may like to appoint. The number of members of the Council of Ministers is determined according to the exigencies of the time. All the Ministers, however, do not belong to the same rank. The Constitution does not classify the members of the Council of Ministers into different ranks. All this has been done informally.
The Council of Ministers is in fact a composite body consisting of different categories. At the Centre, these categories are:
(i) Cabinet Ministers — are the core of the executive and are associated with all the important decisions;
(ii) Ministers of State — form the second tier of the Council of Ministers, some State Ministers are accorded independent charge while most of them are attached to Cabinet Ministers to look after less important affairs of larger Ministries, and
(iii) Deputy Ministers — are generally junior ministers, their appointment is mainly to provide them experience of the Ministers and administrative and legislative competence.
In practice, the Council of Ministers seldom meets as a body. It is the Cabinet, an inner body within the council, which shapes the policy of the Government. While Cabinet Ministers attend meetings of the Cabinet of their own right, Ministers of State are not members of the Cabinet and they can attend only if invited to attend any particular meeting. A Deputy Minister assists the Minister in charge of a Department of Ministry and takes no part in Cabinet deliberations.
Q.16. Define the Ministerial Responsibility.
Ans. The principle of collective responsibility as codified in Art. 75(3) of the Constitution is “The Council of Ministers shall be collectively responsible to the House of the People.” So, the Ministry, as a body, shall be under a constitutional obligation to resign as soon as it loses the confidence of the popular House of the legislature. The collective responsibility is to the House of the People even though some of the Ministers may be members of the Council of States.
Of course, instead of resigning, the Ministry shall be competent to advise the President or the Governor to exercise his power of dissolving the legislature, on the ground that the House does not represent the views of the electorate faithfully.
Individual Responsibility : The principle of individual responsibility to the head of the State as embodied in Art. 75(2) is “The Ministers shall hold office during the pleasure of the President.” The result is, that though the Ministers are collectively responsible to the Legislature, they shall be individually responsible to the Executive head and shall be liable to dismissal even when they may have the confidence of the legislature. But since the Prime Minister’s advice will be available in the matter of dismissing other Ministers individually, it may be expected that this power of the president will virtually be a power of the Prime Minister against his colleagues,—to get rid of an undesirable colleague even where that Minister may still possess the confidence of the majority in the House of the People. Usually, the Prime Minister exercises this power by asking an undesirable colleague to resign, which the latter readily complies with, in order to avoid the odium of a dismissal.
Q.17. What are the power and functions of the council of ministers?
Ans : Powers and functions of the Council of Ministers may be discussed as below:
(i) Legislative Functions : The Council of Ministers control the legislature of the union government, i.e., Parliament. It formulates its policy, submits and explains it to parliament for approval. Since it holds majority in parliament, it is always sure of the acceptance of its policy. The entire legislation of importance passed by parliament is initiated by the ministers.
(ii) Financial Powers : The Cabinet controls the financial policy of the union. It is the Finance Minister who submits the budget to Parliament. Parliament approves the budget—expenditure and revenue items in its original form with the support of a subservient majority.
(iii) Executive Powers : The Council of Ministers is the executive of the Union. The Ministers preside over the various departments of the government and give direction to the administration. The Cabinet brings about coordination of policy among various departments and settles their conflicts. The Cabinet formulates foreign and defence policies of the country and executes the five year plans.
Q.18. What is the position of the prime minister in the council of minister?
Ans : As in England, the Prime Minister is the “keystone of the Cabinet arch.” According to Art 74(1) of our Constitution the Prime Minister shall be “at the head” of the Council of Ministers. Hence, the other Ministers cannot function when the Prime Minister dies or resigns.
The Prime Minister has a pre-eminence, in the Council of Ministers as evident from the following:
(i) He is the leader of the party in majority in the popular House of the Legislature;
(ii) He has the power of selecting the other Ministers and also advising the Crown to dismiss any of them individually, or require any of them to resign. Virtually, thus, the other Ministers hold office at the pleasure of the prime Minister;
(iii) The allocation of business amongst the Minister is a function of the Prime Minister;
(iv) He is the chairman of the Cabinet, summons its meetings and presides over them;
(v) While the resignation of other Ministers merely creates a vacancy, the resignation or death of the Prime Minister dissolves the Cabinet;
(vi) The prime Minister stands between the Crown and the Cabinet. Though individual Ministers have the right of access to the Crown on matters concerning their own departments, any important communication, particularly relating to policy, can be made only through the Prime Minister;
(vii) He is in charge of co-ordinating the policy of the Government and has, accordingly, a right of supervision over all the departments.
In India all these special powers will belong to the Prime Minister inasmuch as the conventions relating to Cabinet Government are, in general, applicable. But some of these have been codified in the Constitution itself. The power of advising the president as regards the appointment of the other Ministers is, thus, embodied in Art. 75(1).
Q.19. How the Speaker and Deputy Speaker are chosen? What are the function of the Speaker?
Ans : Art. 178 states that legislature is to choose two members to be the Speaker and the Deputy Speaker. The Speaker is the chief presiding officer of the Legislative Assembly. Deputy speaker presides over the House in the Speaker's absence.
Both vacate their offices when they cease to be members of the House. They may also resign (the Speaker addresses his resignation to Deputy Speaker and vice-versa) or may be removed from their post by a resolution of assembly with a notice showing intention of removing them. When the house is dissolved, the Speaker continues in office until new House is reconstituted and a Speaker is elected (Art. 179).
When the office of Speaker as well as that of Deputy Speaker are vacant, their duties are performed by such member of the Assembly as may be appointed by the Governor (Art. 180). While a resolution for his removal from office is under consideration, the Speaker or Deputy Speaker, as the case may be, is not to preside over the meeting. The speaker shall have the right to speak in the proceedings but can vote only in the first instance on the resolution in case of an equality of votes (Art. 181).
Power and Functions of the Speaker :The duties, powers and constitutional status of a Speaker of the Legislative Assembly are the same as those of the Speaker of the Lok Sabha. He, too, is expected to remain above party politics, and to maintain the dignity, independence and impartiality of his esteemed office. His powers and functions are :
(i) He presides over the meeting of the House as per the provisions of the House;
(ii) He interprets the rules of the Assembly and decides all points of order and questions of procedure;
(iii) He is empowered to expel a member from the House if he violates the rules of the House.
(iv) He has power to adjourn or suspend the entire House in case of grave disorder;
(v) He certifies the money bills;
(vi) He decides cancellation of membership if covered under the anti-defection law, which is subject to judicial scrutiny.
Q.20. What is the function of the state legislature?
Ans : (i) Making of laws in respect of all subjects given in the State List and Concurrent list, but its laws on concurrent list are ineffective if they clash with the central law on the same subject;
(ii) Control of the finances of the state;
(iii) Ratifying those amendment of the Constitution which affect the federal structure of the country;
(iv) Keeping control, especially by Legislative Assembly, over the executive and having the power to oust the ministry through a no-confidence motion;
(v) Participation in the election of the president and in the election of the members of Rajya Sabha.
The privileges of the Legislature of a State are similar to those of the Union Parliament inasmuch as the constitutional provision [Arts. 105 and 19] are identical.