Q.1. How do you compare monopoly and perfect competition?
Ans : Comparison between monopoly and perfect competition is made on the basis of following features:
(1) Nature of Product : All firms produce homogeneous products under perfect competition. Product may or may not be homogeneous under monopoly. Total supply originates only from one firm under monopoly.
(2) Number of Sellers and Buyers : There are large number of buyers and sellers of homogeneous product under perfect competition. No single seller by changing his supply and no single buyer by changing his demand can influence the price. A group of firms producing homogeneous goods is called industry under perfect competition. Under monopoly there is a single seller and difference between firm and industry does not exist.
(3) Restriction on Entry: New firms are free to enter and old ones are free to quit the industry under perfect competition. On the contrary, there are restrictions on the entry of new firms in case of monopoly.
(4) Price and Output of the Commodity : A firm is a price-taker under perfect competition and so cannot influence the price. The only decision that a firm takes is how much to produce at the price which is determined by the industry so that it should be in equilibrium. Under monopoly, a monopolist himself is price-maker. He may determine either price or output, but he cannot determine both. It is so because when one of the two is determined the other also gets determined automatically.
(5) Difference Regarding Output and Price : Price under monopoly is higher in the long-run than under perfect competition but output is lower. It is so because in long-run equilibrium situation prices equal to minimum average cost under perfect competition corresponding to normal profits. But under monopoly it is not so because the monopolist earns super normal profit even in the long run.
(6) Difference Regarding Profit: Freedom of entry forces profits to come to the normal level under perfect competition. In monopoly, on the other hand, profits continue to be above normal because of barriers to the entry of new firms.
(7) Shape of the Demand Curve : While under perfect competition, firm’s demand curve is a horizontal straight line (Ed= ), it slopes downward in case of monopoly (Ed < 1). Accordingly under perfect competition AR = MR, while under monopoly AR > MR.
(8) Possibility of Price Discrimination : Under perfect competition firms charge uniform price from all buyers. There is no price discrimination. But in monopoly price discrimination is possible. A monopolist can charge different prices for the same commodity from different persons or for different uses from the same persons.
Q.2. What is the difference between Returns to a Variable Factor and Returns ?(50 Words) 3
Ans : The main differences between Returns to a Variable Factor and Returns to Scale are as under :
(1) Returns to a Factor is studied with reference to short period production function whereas Returns to Scale is studied with reference to long period production function.
(2) Returns to a Factor apply when one factor alone is variable and other factors remain fixed. Returns to scale apply when all factor of production are variable.
(3) Returns to a Factor are studied on the assumption that the scale of production does not change. In case of returns to scale, the scale of production ought to change.
(4) Returns to scale are studied on the assumption that factor ratio remains constant. In case of returns to a factor, factor ratio ought to change.
Q.3. What is demand for labour ? Which factors influence it ?
Ans : Demand for labour is made by the producer in the factor market. Labour is demanded because it helps in production. Demand for labour is a derived demand. Demand for labour depends upon the demand for those goods and services which it helps to produce. Demand for labour is that number of labourers which the employer wants to engage at the existing wage rate. No employer or producer will give the labourer more wages than his marginal productivity. Thus, so far as demand is concerned, the maximum wage will be equal to the marginal productivity. Demand for labour is influenced by the following factors :
(i) Productivity of Labour : Productivity of labour is the most important determinant of demand for labour. Higher productivity leads to more demand, and vice-versa.
(ii) Demand for the Final Product : Demand for labour depends upon the demand for the final goods produced by labour. If the demand for goods is less, there will be less demand for labourers.If the demand for goods is large there will be more demand for labour.
(iii) Price of the Labour : Other things remaining constat, higher price of the factor should imply lower demand and price of the labour should imply higher demand.
(iv) Price of Other Factor for Production : Demand for labour is influenced by the price of other factors of production and by the possibilities of their substitution for labour. If other factors of production are expensive then demand for labour in relation to other factors will be more because labour will be substituted for expensive factors. If other factors are cheap then demand for labour will be less because it will now be profitable to use other factors in place of expensive labour. Due to change in technical conditions, machines will take the place of labour and so the demand for the latter will fall. Besides, increase in investment in the country will also increase the demand for labour.
Q.4. Define Fiscal Instruments related to Financing of Government Expenditure.
Ans : (i) Taxes : Tax is a compulsory payment to the government according to the prescribed laws. Taxes are fo two types : (i) Direct Taxes : Direct taxes are those taxes which are levied on income and property of the persons. THe burden of these taxes are brone by those persons on whom these are levied. Inocme Tax, Gift Tax, Wealth Tax are some examples of direct taxed.
(ii) Indirect Taxes : Indirect Taxes are those taxes which are livied on goods and services. The burden of these taxes may be transferred to other persons. Sales, Tax, Excise Duty, Customs etc. are examples of indirect taxes.
If the rates of taxes and subsidies change automatically these are called Built-in-Stabilizers.
With the increase in income, rate of taxes automatically increase while with fall in income these rates decrease.
(ii) Public Debt or Borrowing : Public debt or borrowing is the debt or borrowing by the government from the public.
(iii) Deficit Financing : In India, deficit financing refers to issuing of more currency to meet dudgetary dificit. It increases the supply of money in the economy.
Accordingly, taxation, public debt and deficit financing are the three fiscal instruments related to Financing of Government Expenditure. It is by using these instruments that the government can correct the situations of excess demand or deficient demand in the economy.
Q.5. Why there is a Centre-State Conflict? Do you feel that state's demands are not so correct?
Ans : (i) Constitution provides for financially strong Centre and much weaker States.
(ii) Most of the revenue resources of the States (like land revenue) are inelastic in nature while revenue resources of the Centre are highly elastic.
(iii) States make a claim for their share in the proceeds of corporate tax as they provide considerable infrastructure for it.
(iv) More than 60% of States' revenues come from sales tax which Centre is planning to replace with VAT.
(v) Scope of central excise has been expanded including thereby more and more items under it which were previously taxed by the States.
(vi) Economic decisions taken by the Centre affect the overall price situation in the States leading to demands for hike in DA thereby putting additional burden on already resource scarce States.
(vii) Bias in grants of loans and grant-in-aid leads to uncertainty of budgeting. So many times the State governments are to able to fulfil their electoral promises.
(viii) Conflicting interests in location of new and important projects and industries.
(ix) States demand that administered prices should not be increased at will by the Centre and if this is done so then the profits thus accrued be shared with the States.
(x) States also clamour for greater freedom to contract any loan from anywhere.
State's demands not so correct
(i) States have been reluctant in bringing agriculture under their tax net lest it would affect their poll prospects.
(ii) States are also not willing to charge user's charge like electricity charge etc.
(iii) States are not efficient in collecting sales tax.
(iv) States have shown lack of will and commitment to practice austerity so as to reduce public expenditure.
(v) States are many a time found to divert the funds allocated for a particular scheme to other purposes.
Q.6. What were the approach and objectives of the ninth five year plan?
Objectives of the Ninth Plan
(i) quality of life of citizens;
(ii) generation of productive, employment;
(iii) regional balance; and
(iv) self reliance.
Q.7. How is the PM a communicating like between the council of ministers and the president?
Ans : As to the function of acting as the channel of communication between the President and the Council of Ministers, Art. 78 provides:
“It shall be the duty of the prime Minister—
(i) to communicate to the President all decision of the Council of Ministers relating to the administration of the affairs of the union and proposals for legislation;
(ii) to furnish such information relating to the administration of the affairs of the union and proposals for legislation as the president may call for; and
(iii) if the President so requires to submit for the consideration of the Council of Ministers any matter on which a decision has been taken by a Minister but which has not been considered by the Council.”
Q.8. How an ordinary bill is introduced and passed by theParliament?
Ans : Introduction : As ordinary bill (other than Money or Financial Bills) may be introduced in either House of Parliament (Art. 107) and requires passage in both Houses before it can be presented for President’s assent. A bill may be introduced either by a Minister or by a private person.
If introduced by a private person, he has to notify his intention and ask for leave of the House to introduce the Bill which is, however, rarely opposed. Unless published earlier, the Bill is published in the official gazette as soon as may be after it has been introduced.
The introduction of the Bill is also called the first reading of the Bill.
Motions After Introduction : After a bill has been introduced, there are three courses open to the House : (i) may take up the Bill for consideration; (ii) refer it to a Select Committee of the House or to the Joint Committee of the two Houses, (iii) or it may circulate the Bill for eliciting opinion thereon. At this stage, the principle of the Bill and its provisions may be discussed generally but the details cannot be discussed further than is necessary to explain its principles.
Referred to Select Committee : If a motion for circulation is adopted and the Bill is duly circulated the next step is for it to be referred to a Select or Joint Committee which considers the Bill clause-by-clause, just as the two Houses of Parliament do. Amendments can be moved to the various clauses by members of the Committee. After the Bill has been considered, the Committee submits its report to the House Members.
Consideration by the House : On receipt of the Committee’s report, the Bill as reported by the Committee is taken up for consideration by the House. Each clause is considered and put to vote. At this stage, amendments may be moved. The presiding officer is empowered to decide which amendments may be moved, although he may not always exercise this power. Once the clause-by-clause consideration is over and every clause is voted, the second reading of the Bill is over.
The final or ‘third reading’ stage of a Bill is reached only after the clauses (with amendments), the Schedules, if any, the enacting formula or preamble, if any, and the title of the Bill have all-been put to vote (in the form that they stand part of the Bill) and agreed to by the House. The third reading is in effect a motion that the Bill be passed. After a Bill has been considered and passed by one House, it is sent to the other for its concurrence, where it has to pass through a similar procedure. The House may agree to it or it may sent it back with amendments for consideration.
Where a Bill is returned with amendments by the Rajya Sabha to the Lok Sabha, and the latter agrees to the amendements made, the Bill is passed as amended, and a message to the effect is sent to the Rajya Sabha. In case of disagreement between the Houses on a Bill, other than a Money Bill and a Constitution Amendment Bill there is provision in the Constitution for a joint sitting of the two Houses, where the fate of the Bill is finally decided.
Presidential Assent : When a Bill has been passed by both Houses, it is submitted to the President for his assent. Once the Presidential assent is given to the Bill, it becomes an Act of Parliament. The President can, except in the case of a Money Bill, withhold his assent to a Bill and return the Bill with his recommendations. If the Houses pass the Bill again with or without amendments the pesident does not withhold assent therefrom.
Q.9. What is a 'Money Bill'? What is the procedure of passing the 'Money Bill'?
Ans : As defined in Art. 110, a Bill is known as a ‘Money Bill’ if it contains only provisions dealing with all or any of the following matters: (a) the imposition, abolition, remission, alteration or regulation of any tax; (b) the regulation of the borrowing of money by the Government; (c) the custody of the Consolidated Fund or the Contingency Fund of India, the payment of moneys into or the withdrawal of moneys from any such fund; (d) the appropriation of moneys out of the Consolidated Fund of India; (e) the declaring of any expenditure to be expenditure charged on the Consolidated fund of India or the increasing of the amount of any such expenditure; (f) the receipt of money on account of the Consolidated fund of India or the public account of India or the custody or issue of such money or the audit of the accounts of the Union or of a State, or (g) any matter incidental to any of the matters specified in sub-clauses (a) to (f) [Art. 110].
If any question arises whether a Bill is a Money Bill or not, the decision of the Speaker of the House of the People thereon shall be final. This means that the nature of a Bill which is certified by the Speaker as a Money Bill shall not be open to question either in a Court of law or in the either House or even by the President.
Procedure for passing Money Bills : A Money Bill shall not be introduced in the Council of States. After a Money Bill has been passed by the House of the people, it shall be transmitted (with the Speaker’s certificate that it is a Money Bill) to the Council of States for its recommendations. The Council of States cannot reject a Money bill nor amend it by virtue of its own powers. It must, within a period of fourteen days from the date of receipt of the Bill, return the Bill to the House of the People which may thereupon either accept or reject all or any of the recommendations of the Council of States. If the House of the People accepts any of the recommendations of the Council of States, the Money Bill shall be deemed to have been passed by both Houses with the amendments recommended by the Council of States and accepted by the House of the People.
If the House of the people does not accept any of the recommendations of the council of States, the Money Bill shall be deemed to have been passed by both Houses in the form in which it is passed by the House of the People without any of the amendments recommended by the Council of States.
If a Money Bill passed by the House of the People and transmitted to the Council of States for its recommendations is not returned to the House of the People within the said period of fourteen days, it shall be deemed to have been passed by both Houses at the expiration of the said period in the form in which it was passed by the House of the People [Art. 109].
Q.10. What is known as ' Finance Bill'?
Ans : A Financial Bill may be any Bill which relates to revenue of expenditure. But it is in a technical sense that the expression is used in the Constitution.
On the question whether any Bill comes under any of the sub-clauses of Art. 110, the decision of the Speaker of the House of the people is final and his certificate that a particular Bill is a Money Bill is not liable to be questioned. Thus, only those Financial Bills are Money Bills which bear the certificate of the Speaker as such.
Financial Bills which do not receive the Speaker’s certificate are of two classes. These are dealt with in Art. 117 of the Constitution : (i) To the first class belongs a Bill which contains any of the matters specified in Art. 110 but does not consist solely of those matters, for example, a Bill which contains a taxation clause, but does not deal solely with taxation [Art. 117(1)]. (ii) Any ordinary Bill which contains provisions involving expenditure from the Consolidated Fund is a Financial Bill of the second class [Art. 117(3).
Q.11. What is the need for Subordinate Legislation?
Ans : In the context of the concept of the modern Welfare State, there is hardly any walk of a citizen’s life which is not regulated by the state in one way or the other. Consequently, the legislation that has to be passed by the Legislature is so vast and varied that is impossible for any body of legislators to deliberate upon, discuss and approve every little detail of legislation which may be necessary for proper administration. Apart from the pressure on the parliamentary time, the technicality of the subject-matter, the need to meet unforeseen contingencies, the requirement of flexibility, etc. make an delegated legislation a necessity. The Legislature can only lay down the broad policy and principles of a legislation, leaving the details to be worked out by the executive in the form of rules, regulations, leaving the details to be worked out by the executive in the form of rules, regulations, bye-laws, etc.
Q.12. What are the risks inherent in subordinate Legislation?
Ans : Delegation of legislative power, inevitable and indispensable as it is, has certain inherent risks. One of the risks pointed out is that the Parliamentary statutes may tend to be skeletal, containing only the barest general principles omitting matters of substance which may have a vital bearing on the life of the citizen. Another risk pointed out is that the powers delegated might be so wide as to subject the citizen to a harsh or unreasonable action by the administration. The third risk is that some powers may be so loosely defined that the areas intended to be covered may not be clearly known. Another risk is that the executive may, while exercising rule-making power, transgress the limits laid down by Parliament. All these risks are there. It is the responsibility of Parliament to see that the power delegated by it are not abused. Hence the need for the Parliamentary control over the subordinate legislation.
Q.13. What are the ways for Parliamentry Control over Subordinate Legislation?
Ans : Firstly, Parliament has an opportunity of examining the power to make such legislation when it appears in a Bill before it. Secondly, the parent statutes often require the subordinate laws to be laid before Parliamentary procedure. Thirdly, the subordinate laws may in other ways be questioned or debated by Parliament. But the most effective control which Parliament exercises over the subordinate legislation is through a standing scrutiny committee—known as the Committee on Subordinate Legislation.
Q.14. What is the committee on Subordinate Legislation of Lok Sabha?
Ans : Suggestion to form a Standing committee on Subordinate Legislation was first mooted in Provisional Parliament during the Budget Session in the year 1950. A set of rules for constituting such a Committee was framed and incorporated in the Rules of Procedure and conduct of Business in Lok Sabha on April 30, 1951. However, the first such Committee was constituted by the Speaker on December 1, 1953. Initially, the Committee consisted of 10 members by amending the relevant rule on January 9, 1954.
A significant provision in the Rules is that a Minister cannot be nominated as a member of the Committee and if a member, after his nomination as member of the Committee, is appointed as a Minister, he ceases to be a member of the Committee from the date of such appointment. This provision is intended to keep the Committee free from any influence of the Government. Thus, the Committee can function independently and arrive at conclusions, on the basis of the facts which come to its notice, objectively without any fear or favour.
The term of office of the Committee is one year from the date of its appointment. In making selection from a panel of names as received from the Leader of the House and the leaders of other parities and groups in Parliament, the Speaker gives preference to those having legal background and experience. The Chairman of the committee is appointed by the Speaker from amongst members of the Committee. If, however, the Deputy Speaker is a member of Committee, he is appointed the Chairman. The Committee has had the privilege of being chaired by eminent luminaries in the legal field irrespective of their party affiliations.
Q.15. What are the functions of the Committee on Subordinate Legislation?
Ans : The Committee is authorised under the Rules of Procedure to make detailed rules for regulating its working, and in exercise of this power, the Committee has framed rules for its internal working. The procedure of work evolved in the course of working of the Committee for over 45 years have enabled the Committee to act as an effective instrument of Parliamentary control over the subordinate legislation brought out by the executive. The Committee exercises control over subordinate legislation at two stages: (i) Bill stage when the powers to frame subordinate legislation are delegated; and (ii) ‘Order’ stage when the rules, regulations etc. in pursuance of the delegated powers are issued by the executive.
An important safeguard against assumption of arbitrary powers by the executive is that the rules framed by it in exercise of the delegated powers of legislation not only be laid before Legislature but that Legislature be always alive to exercise its statutory right of annulling or modifying them. For this purpose, the Committee has long before set in motion a standard formula for inclusion in all Bills delegating rule-making power. Every Bill introduced in the House or transmitted by the Rajya Sabha is examined by the Committee to see whether it contains a provision for laying and modification of the rules on the lines set forth by the Committee.
Under Direction 103A, the Speaker may also refer a Bill containing provisions for delegation of legislative powers, to the Committee for scrutiny. The Committee is required to examine the extent of the powers sought to be delegated, and if the Committee is of the opinion that the provisions be annulled in part or as a whole or be amended in any respect, it may report that opinion and the grounds therefore to the House before the Bill is taken up for consideration. For facility of members, every Bill involving proposals for the delegation of legislative powers is accompanied by a memorandum explaining such proposal and stating also whether they are of normal or exceptional Committee.
Under Rule 317, the function of the Committee is ‘to scrutinise and report to the House whether the powers to make regulations, rules, sub-rules, bye-laws, etc. conferred by the Constitution or delegated by Parliament are being properly exercised within such delegation’. The committee examines all ‘Orders’, whether laid on the Table of the House or not, framed in pursuance of the provisions of the Constitution or a statute delegating power to a subordinate authority to make such ‘Orders’. In practice, the Committee starts scrutinising ‘Orders’ after they are published in the official Gazette, irrespective of whether they have been laid on the Table of the House or not. The Committee also examines the recruitment rules framed under the proviso to Article 309 of the Constitution, which are notified in the official Gazette and assigned serial numbers like all other statutory ‘Orders’ framed under the powers delegated by legislative enactment, even though they are not required to be laid before the House.
Q.16. What is the real approach of the committe on subordinate legislation?
Ans : In its approach, the Committee is not content merely with the legality of the rules framed under the authority of delegated powers. The Committee aims far beyond that as the ultimate goal of all legislation (including subordinate legislation) is the larger public good. The Committee ensures, on the one hand, that the subordinate legislation framed by the executive does not transgress the limits laid down in the parent statutes, and watch, on the other hand, that it is in conformity with the canons of equity and natural justice and does not in any way result in unnecessary hardship, harassment or inconvenience to the public at large. As the public at large consists mainly of laymen, it is imperative that the intention behind the subordinate legislation is expressed in simple language which can be understood by common man without any difficulty. To achieve this objective, the Committee has always recognised the need that the statutory orders should be precise, free from ambiguity and shouldn't be cryptic, sketchy or skeletal. The committee further ensures that such legislation does not in any way conflict with the general objects of the Constitution or the stature pursuant to which it is made.
Although the Committee does not like to question the powers conferred by Parliament through a statute, it can certainly while examining the subordinate legislation issued thereunder, take note that the powers are not abused. Under Rule 320, it is incumbent on the Committee to see whether a rule contains matter which in the opinion of the Committee, should more properly be dealt with in an Act of Parliament. It is also the duty of the Committee to see whether the rule appears to make some unusual or unexpected use of the given powers. Another important point which the Committee to see whether the rule appears to make some unusual or unexpected use of the given powers. Another important point which the Committee bears in mind is that the Government is not allowed to resort to issuing executive orders or administrative instructions to regulate the matters which should have been provided through the statutory rules. Once the need for issue of executive order has arisen, it should be incumbent on the executive to frame rules, regulations, as the case may be, in accordance with the relevant statute. In this connection, the Committee has categorically observed that ‘administrative instructions are no substitute for statutory rules because such instructions are not published in the Gazette and as such they do not come to the notice of the Committee to judge their fairness or otherwise.
Several statutes provide for prior publication of rules in the draft form for eliciting comments from the general public. The committee does not involve itself at this stage of drafting of rules of the obvious reasons that such rules are in fluid form and liable to be modified by the Government in the light of public comments. Even in cases where the rules are not statutory required to be published in the draft form and the government approaches the Committee for prior approval, it refrains from scrutiny of such rules with the following exceptions:-
(a) Where the stature providers for laying of draft rules before Parliament for approval e.g. rules made under Section 7(2)(c) of the Oilfields (Regulation and Development) Act, 1948.
(b) Where the draft rules or amendments emanate from the recommendations of the Committee itself.
Under Direction 105, after an ‘Order’ is published in the Gazette, it is examined by the Lok Sabha Secretariat to determine whether it is required to be brought to the notice of the committee on any of the grounds laid down in rules or in accordance with any practice or direction of the Committee. If, in the course of examination, it is considered necessary to seek any clarification regarding any point, it is referred to the Ministry concerned and the matter, if necessary, re-examined in the light of such reply. If it is considered necessary to bring any point to the notice of the Committee, a self-contained memorandum is prepared on the subject and after the approval of the Chairman, placed before the Committee. The approved memorandum together with extracts of the relevant ‘Order’ wherever necessary, are circulated to the members of the Committee in advance. In cases where the Committee considers it necessary, it hears the oral evidence of the representatives of the Ministry concerned. The decisions of the Committee are recorded in the minutes. The draft Report is then prepared by the Secretariat on the basis of the minutes. The draft Report, as approved by the Chairman, is placed before the Committee are recorded in the minutes. The draft Report is then prepared by the Secretariat on the basis of the minutes. The draft Report, as approved by the Chairman, is placed before the committee for adoption. In order to ensure that the members of the Committee are not precluded from examining the ‘Orders’ and giving suggestions, copies of all the ‘Orders’ laid on the Table of the House are circulated to them in convenient batches.
It is well known that the parties which are affected by a given set of rules are always in a better position to say how the rules work in actual operation.Likewise, persons who have to deal with the working of rules in their professional capacity, such as lawyers, accountants, actuaries, etc. have some special knowledge which can be profitably made use of by the Committee. As a result of consultation with such institutions/interests, not only unnecessary rigours of a subordinate law can be removed but such law made more purposive, and in tune with the needs of the day. Keeping this in view, the Committee always welcomes comments/suggestions from the chambers of commerce, trade unions, professional bodies, etc.on the provisions of the rules with which they are concerned wherever considered necessary. There can thus be no objection to the Committee taking cognisance of petitions relating to assumption of arbitrary powers or excessive exercise of delegated authority by the executive transgressing the limits laid down by Parliament and thereby subjecting a citizens to any harsh or unreasonable action by the administration.