Q.1. Compare monopolistic competition and perfect competition.
Ans : (1) Nature of the Product: Under perfect competition all firms produce homogeneous product. Under monopolistic competition, firms produce differentiated goods. Due to product differentiation, every firm has limited control over price.
(2) Determination of Price : Both under perfect competition as well as monopolistic competition, price of the commodity is determined by the forces of market supply and market demand. However, whereas under perfect competition, a producer has absolutely no control over price, under monopolistic competition partial control of price becomes possible through product differentiation.
(3) Selling Costs : Under perfect competition a producer incurs cost of production alone,but under monopolistic competition a producer incurs in addition to cost of production, selling costs as well.
(4) Difference Regarding Degree of Knowledge : It is assumed under perfect competition that buyers and sellers have perfect knowledge about market conditions. Under monopolistic competition, the tastes and preferences of the consumers are influenced through product differentiation and advertisement. Thus, there is lack of perfect knowledge.
(5) Shape of Demand Curve: Firm’s demand curve under perfect competition is a horizontal straight line, but under monopolistic competition, a firm faces a downward sloping demand curve. Accordingly under perfect competition AR = MR, while under monopolistic competition AR > MR.
(6) Decision of the Firm : Under perfect competition a firm can take decision only with regard to the quantity of output to be produced. It can only decide as to how much to produce at the price determined by the industry so as to be in equilibrium. On the other hand, a firm under monopolistic competition is to decide both about price as well as output.
Q.2. Under what condition the trade unions can increase wages ? (250 Words) 10
Ans : The workers organise themselves into trade union to get higher wages. Trade unions force their employers to increase the rate of wages by actions such as strikes, pickets, dharna, gheraos and boycotts. The trade unions can raise wages upto a certain limit only. After that limit, the actions of trade unions may lead to increase in unemployment.
We know that to firm the marginal cost of employing labour should not exceed it marginal revenue productivity. It means that the wages for the employment of a marginal worker in an industry must equal to its marginal revenue productivity. We also know that the MRPL curve slopes downward from left to right. Given this, the trade unions can raise wages under the following conditions :
(1) When Existing wage is less than MRPL : The trade unions could force the employers to increase the wages upto the level of marginal revenue productivity of labour in a situation when existing wage is less than marginal revenue productivity (W < MRPL). The situation when W < MRPL is the situation of exploitation of labour.
(2) Increase in Productivity : If higher wages bring about an improvement in productivity, (implying a forward shift in MRP curve of labour) the trade unions will succeed in forcing a level of wages higher than the existing level of MRP.
Figure illustrates how a shift in MRP curve of labour facilitates higher rate with greater employment than before.
When MRP shifts from MRPL to MRP() demand for labour increases from OL1 to OL2 when wage rate rises from OW1 to OW2.
(3) Inelastic Demand : If the demand for the commodity that labour makes is highly inelastic, the increase in costs due to high wages can be passed on the final consumer in terms of increased price of the commodity. In such cases, the trade unions can succeed in getting a raise in wages.
(4) Wages of Other Types of Labour can be Squeezed : The trade unions can force a raise in wages when wages of other types of labour (say managerial staff) is squeezable. This may be so if the demand for other type of labour is elastic. While demand for the members of the union is inelastic.
(5) When Other Factor Payments can be Squeezed : The trade unions can also get raise in wages for their members when payments to factors other than the labour can be squeezed. This will be so if demand for other factors is elastic.
(6) Abnormal Profits : Wages, may be raised through union actions if the firms are earning abnormal profits. Some part of this profit may be given to the labour in the form of bonus or higher wages.
(7) When Wages constitute a small percentage of Total Cost : A small increase in wage rate may not be resisted by the employers when their wage bill constitutes only a small percentage of the total cost. Because total cost may not significantly change in such a situation.
If any of the above conditions are not fulfilled, any effort to get a raise in wages will lead to unemployment.
Q.3. What is Distribution ?
Ans : In order to produce a commodity, factors of production such as land, labour, capital and entrepreneurship are required. Value added as a result of the co-operation of the factor is distributed among them as factor shares. The labour gets its share of the produce in the form of wages, capital in the form of interest, land in the form of rent and entrepreneur in the form of profit. In the words of Chapman, “The economies of Distribution accounts for the sharing of wealth produced by a community among the factors which have been active in its production.” Distribution is concerned with a problem of how the different factors of production - land, labour, capital and entrepreneurship are priced in the market.
The price paid to these factors for their services is called factor price, e.g., wages to labour, interest capital, rent to land and profit to entrepreneur. Theory of Factor Pricing is, therefore, concerned with the determination of prices of the services of different factors of production. In other words, theory of factor pricing studies how rent to the landlord, wages to the labourer, interest to the capitalist and profit to the entrepreneur are determined.
Q.4. Describe the Fiscal Measures that are recommended to correct the situation of deficient demand ?
Ans : (1) Decrease in Taxes : Taxes should be decreased leaving the households with more purchasing power and the firms with more cash reserves. Direct taxes like income tax, corporation tax etc. should be reduced. As a result both households as well as investors will be encouraged to spend more. Consequently, demand will increase. Taxation system should ave built-in-flexibility, that is, there should be automatic adjustment. The rate of taxes should increase with the rise in income and reduce as income falls. Such a system is called progressive taxation system.
The progressive taxation system is that system which envisages that rate of taxes increases with an increase of income and reduces with a fall in income.
(2) Increase in Public Expenditure : According to Keynes, the most important measure to stimulate the level of demand is to increase public expenditure. Thus, (a) Greater expenditure should be incurred on public health, education etc. (b) Greater expenditure be incurred on the maintenance of law and defence of the country. (c) Expenditure in terms of subsidies and transfer payments should be steeped up. (d) Above all, investment expenditure on public works programmes (construction of roads, dams and bridges) should be substantially raised. It will works as pump-priming in the system. It refers to stimulating overall investment activity in the system by some initial investment expenditure by the government.
(3) Increase Deficit Financing : Deficit financing (by way of printing more notes for additional expenditure) is increased during times of deficient demand so that the overall level of purchasing power is enhanced in the economy.
(4) Public Borrowing : Public borrowing should be reduced so that people are left with greater purchasing power.
In short, during periods of deficient demand the government should adopt the policy of 'deficit-budget', incurring greater expenditure and minimising the revenue proceeds.
Q.5. What are the recommendation of Sarkaria Commission on centre state relation?
Ans :(i) The commission did not find any need for drastic change in the Constitution.
(ii) The commission does not set any justification for major modification in the basic structure of financial relations between the Centre and the States.
(iii) It favoured amendments to provide for sharing corporate tax and levy of consignment tax and on advertisement and broadcasting.
(iv) There should be no limiting of the powers of the union.
(v) The various suggestions asking for transfer of subjects of the State or concurrent list have been rejected.
(vi) A process of consultation be initiated by the Centre on all concurrent subjects.
(vii) The suggestion to provide for levy of additional sales in lieu of excise duty has been rejected.
(viii) Rejected almost all the suggestions to shift the location powers of the Centre to the States.
(iv) The National Development Council should maintain its separate identity but should have a formal status and its duties should be reaffirmed through a Presidential order under Art. 263 of the Consti tution. The NDC should be renamed as the National Economic and Development Council (NEDC).
Q.6. What did the Ninth Five Year Plan do for the quality of life of the people?
(i) provision of safe drinking water;
(ii) availability of primary health service facilities;
(iii) universalisation of primary education;
(iv) provision of public housing assistance of all shelterless poor families;
(v) nutritional support to children;
(vi) connectivity of all villages and habitations by roads;
(vii) restricting of public distribution system targeted to the poor.
Q.7. Write a short notes on the following :
(1) Pro tem Speaker (2) Executive Power (3) Bona Vacantia (4) Supreme Court Sitting outside Delhi (5) Chief Justice as President (6) Special Mention (7) Administrator of Union Territory (8) Contempt of Court (9) Contingency Fund of India (10) National Development Council
Ans : (1) Pro tem Speaker : A Pro tem speaker is one who is appointed by President/Governor to perform the duties of the speaker temporarily until a newly elected legislature elects its own speaker.
(2) Executive Power : This expression is very wide. Briefly, its connotes the residue of governmental functions that remain after the legislative and judicial functions are taken away.
(3) Bona Vacantia : When there is no apparent or rightful claimant ot a property, such a property accrues to Government. This phenomenon is known as “Bona Vacantia”.
(4) Supreme Court Sitting outside Delhi : It can sit in such other places, as the Chief Justice of India may, with the approval of the President, from time to time appoint (Art 130).
(5) Chief Justice as President : Justice Mohammed Hidayatullah acted as the Head of the State for five weeks in July-August, 1969.
This happened when V.V. Giri, Vice-President of India, who was acting as President, following the death of Dr. Zakir Husain, tendered his resignation. Thereupon, the then Chief Justice of India, Md. Hidayatullah assumed the office of the President.
(6) Special Mention : It is a device to bring to the attention of the House and the Government a matter of urgent public importance that cries of immediate action.
(7) Administrator of Union Territory : The Administrator of a Union Territory appointed under Art. 239 is not a constitutional functionary like a State Governor. He is a delegate of the President.
(8) Contempt of Court : Anything which tends to bring the administration of justice into disrespect or interfere with the administration of justice constitutes contempt of court.
(9) Contingency Fund of India : The fund constituted in 1950, by an Act of Parliament, has been placed at the President's disposal, who can make advances to meet unforeseen expenditure. It has no constitutional backing.
(10) National Development Council : The NDC, an extra-Constitutional and extra-legal body (1952), is an adjunct to the planning Commission to associate the States in the formation of Plans.
Q.8. How the committee on Public Undertakings is constituted?
Ans : The Committee on Public Undertakings is constituted each year. It consists of 22 members comprising 15 members elected by the Lok Sabha every year from amongst its members, according to the principle of proportional representation by means of single transferable vote and 7 members of Rajya Sabha nominated by that House for being associated with the Committee. Thus, the membership of this Committee is drawn from almost all parties in Parliament in proportion to their respective strength and the system of election by proportional representation ensures this. Thus the Committee constitutes a cross-section, not only of each House but of Parliament as a whole.
A Minister is not eligible to become a member of the Committee. If a member after his election to the Committee is appointed a Minister he ceases to be a member of the Committee from the date of such appointment. The Chairman of the Committee is appointed by Speaker from amongst the members of the Committee belonging to Lok Sabha.
Q.9. What is the functions of the Committee on Public Undertakings?
Ans : The functions of the Committee have been laid down in Rule 312A of the Rules of procedure and Conduct of Business in Lok Sabha. These Are:
(a) to examine the reports and accounts of the public undertakings specified in Fourth Schedule of the Rules;
(b) to examine the reports, if any, of the Comptroller and Auditor General of India on the Public Undertakings;
(c) to examine in the context of the autonomy and efficiency of the public undertakings whether the affairs of the public undertakings are being managed in accordance with sound business principles and prudent commercial practices;and
(d) to exercise such other functions vested in the Committee on Public accounts and the Committee on Estimates in relation to the public undertaking specified in the Fourth Schedule as are not covered by clauses (a), (b) and (c) above and as may be allotted to the Committee by the Speaker from time to time.
The Committee is, however, precluded from examination and investigation of any of the following:-
(i) matters of major government policy as distinct from business or commercial functions of the public undertakings;
(ii) matters of day-to-day administration; and
(iii) matters for the consideration of which machinery is established by any special statute under which a particular public undertaking is established.
Q.10. What is the Jurisdiction of the Committee on Public Undertaking?
Ans : In terms of Rule 312A of the Rules of Procedure and Conduct of Business in Lok Sabha read with Fourth Schedule to the Rules every government company whose annual report is placed before the Houses of Parliament comes within the purview of Committee on Public Undertakings. Thus all government companies incorporated under the Companies Act, 1956 in which Central Government is a member could be examined by the Committee. This is not the case with the public undertakings established by special Central Acts. Only those undertakings set up under Central Acts have been specified in Part I of the Fourth Schedule to the Rules can be examined by the Committee. Other undertakings can be brought within the purview of the Committee only through amendment to the schedule recommended by the Rules Committee and approved by the Lok Sabha as has been done on some earlier occasions. Some organisations like the Reserve Bank of India, State Banks, National Bank for Agriculture and Rural Development and the Unit Trust of India are not included in Part I of the Schedule.
Q.11. How the committee on Public Undertaking works?
Ans : The Committee selects from time to time for examination, such Public Undertakings or such subjects as they may deem fit and as fall within straints of time and staff, the Committee normally selects 7 to 10 undertakings for examination each year. The Committee may select for examination such undertakings where comprehensive appraisals appear in the Audit Reports of the Comptroller And Auditor-General of India who assists the Committee in such cases in examinations of the undertakings. The Committee may select on its own certain other undertakings/subjects for independent examination.
It has been a problem for the Committee to cope with the growing number of public undertakings. With a view to widen its scope of coverage, the Committee, in addition to the taking up of individual undertaking for examination, has taken up a horizontal study of one or more aspects of problem which are common to all the undertakings. The committee had taken up the horizontal study on ‘Cost and time overrun of projects undertaken by Public undertaking during the year 1990-91, but due to dissolution of Lok Sabha, the examination of the subject could not be completed.
The Committee on Public Undertaking acts as the eyes and the ears of Parliament as far as the Public Undertakings are concerned. The reports of the Committee cover a wide gamut of activities and reveal the manner in which the public undertakings are functioning and suggest the areas where there is a tremendous scope of improvement.
Project formulations and implementation has been a perpetually weak area in the management of public Undertakings on which attention has been focused by the Committee from time to time. The Committee has been recommending a vigilant control both by the management as well as the Government over factors causing time and cost overruns in the implementation of various projects.
The Committee’s Reports have been unanimous and exposures of weaknesses and shortcomings have always been made in a constructive manner. The Committee not only criticises the Undertakings/ Government for their deficiencies but also suggests corrective measures side by side.
The Committee appreciates the difficulties and constrains faced by the public undertakings and recommends suitable remedial action to be taken at the Government level. On the other hand the Committee is also critical about irregularities committed by any officer of the Undertaking/Ministry, however, highly placed, he or she may be.
The Committee also suggests corrective action where it finds that certain uncalled for deviations have been made from the laid down Acts or procedures.
Q.12. How the recommendation of the committe on Public Undertakings implemented ? What is its impact?
Ans : The Committee is not satisfied with only presentation of Reports. It has devised a system of watching implementation of its recommendations/observations. The Committee calls for replies from the Government within 6 months of presentation of Reports showing action taken by the Government on its various recommendations. A sub-Committee of the Committee scrutinises these replies and prepares. Action taken Reports which, after approval by the main Committee are presented to both Houses of Parliament in the same manner as original reports. In the Action Taken Reports, the Committee may accept the replies of the Government or may not accept. The Committee in the latter cases may reiterate its earlier recommendations and offer its remarks/observations as is deemed fit.
Going by the comments that appear in the national press from time to time, it can safely be said that Committee has been able to create an impact on the public sector, Government and the public. The Committee on public Undertakings has not succeeded merely in its primary task of facilitating effective parliamentary oversight upon the functioning of public enterprises,but has undoubtedly filled a need. Its many Reports provided at one convenient point the fruits of critical and constructive examination of the vast and multifarious experience that has already been gained in public enterprise administration and management.
The Committee on public Undertakings is the only device available to the management whereby they are able to meet representatives of the people directly and in-confidence giving them the opportunity to explain their problems and difficulties not only in management but vis-a-vis Government. But for this mechanism their point of view have to be put to Parliament through the agency of a Minister which is possible only to a limited extent. The Committee on Public Undertakings is again the only forum where Parliament, Executive and the management directly meet each other, face to face, as it were, and moved by a common purpose they endeavour to analyse the problems of public enterprise, and find out acceptable solutions for the better planning and management of these enterprises.
In short, the Committee on Public Undertaking has performed very useful function in giving substance to the concept of accountability of the public undertakings to Parliament. It is for that reason that the Committee is regarded as one of the most important and influential Parliamentary Committees.
Q.13. What are the objectiives of Panchayati Raj System?
Ans : The 73rd and 74th constitutional amendment acts (included in 11th schedule), 1992 have inserted Parts IX and IX-A in the Constitution dealing with local government.
The Panchayati Raj system was initiated with the pious objectives of democratic decentralisation and promoting local participation in government policy formulation. The objectives of the system can be broadly stated as follows:
(i) To provide a broad base to democracy in the country by transferring the powers from the centre and States through districts and blocks to the villages;
(ii) To enable the people to participate in democracy in a more effective way and thereby to provide much needed training ground for future leadership in the country;
(iii) To provide the rural people with an opportunity to plan and administer their own affairs;
(iv) to imbibe plan consciousness among the lowest strata;
(v) To develop community feeling and self-reliance among people of the villages; and
(vi) To bring Central and State ministries and the District Development Departments into the rural affairs.
Q.14. Give a brief history of the Panchayti Raj System.
Ans : The problem of democratic decentralisation was felt immediately after independence. To realise the objective, the Community Development Programme was launched in 1952 with a view to carry out integrated rural development work. Under the programme, the administrative setup was reorganised to initiate and coordinate the rapid all round development of villages. A number of Community Development blocks were created all over the country. The administrative personnel in each of them consisted of the Block Development Officer (BDO), the Extension Officers (EO) and village level workers. Block Advisory Committee, comprising non-official members to help the bureaucracy was also created. In short the block was treated as the quit of planning and development work.
The National Extension Service (NES) was launched in 1953, exactly one year after the inauguration of the Community Development Programme. Although both had identical aims, the NES was less intensive than the community Development Program, with a permanent organisation and extended to cover the entire country in a short time.
These two programmes failed to yield satisfactory services. Meanwhile, the Second plan recommended the restructuring of local government and development of administration at the district levels, with village panchayats linked to higher tiers.
The report of the Balwantrai Mehta Committee, constituted in 1956, rested more on practical considerations. In its chapter entitled 'Democratic Decentralisation' it maintained that the executive machinery, through which a modern democracy is to function, cannot adequately appreciate local needs and circumstances unless there is devolution of power down to the lowest level. The Government of India concurred with the recommendation of the committee for the establishment of a three tier structure of Panchayati Raj. This involved genuine transfer of power and responsibility in planning and implementation of the development programme.
The recommendation of the committee came into effect on 1 April 1958. Panchayati Raj was introduced in various States, though in different patterns. Rajasthan and A.P. were the first to introduce the three tier system of Panchayati Raj as envisaged in the Mehta Report.
Part IX of the constitution, inserted by 73rd Amendment Act, 1992, containing Arts. 243 to 243-O relates to the Panchayats. By April 1994, all states has passed the necessary legislation to implement the Act as required.
The Act provides for three-tier system of Panchayats, namely, (i) The village level, (Gram Panchayat); (ii) The District Panchayat (Zila Parishad) at the district level and (iii) The Intermediate Panchayat (Panchayat Samiti) which stands between the village and district Panchayats in States where the population is above 20 lakhs.
Q.15. What is the compositon, duration and the qualification of the members of the Panchayat?
Ans : Composition
Art. 243B provides that all the seats in a Panchayat shall be filled by persons chosen by direct election from territorial constituencies in the Panchayat area. The electorate is called ‘Gram Sabha’ consisting of persons registered in the electoral rolls relating to a village comprised within the area of a Panchayat. Thus representative democracy is introduced at the grass roots.
The Chairperson of each Panchayat shall be elected according to the law passed by a State and such State law shall also provide for the representation of Chairpersons of Village and Intermediate Panchayats in the District Panchayat, as well as members of the Union and State Legislature in the Panchayats above the village level.
Reservation of Seats
Article 243D provides for reservation of seats for Scheduled Castes and Scheduled Tribes. The reservation shall be in proportion to their population. Out of the seats so reserved not less than 1/3rd of the seats shall be reserved for women belonging to Scheduled Castes and Scheduled Tribes, respectively. Not less 1/3rd of the total number of seats to be filled by direct elections in every Panchayat shall be reserved for women.
A State may by law make provision for similar reservation of the offices of Chairpersons in the Panchayats at the village and other levels. A State may by law also reserve seats or offices of Chairpersons in the Panchayat at any level in favour of backward classes of citizens.
These reservations for the Scheduled Castes and Tribes shall cease to be operative when the period specified in Art. 334 (it was 50 years, i.e., upto 2000 A.D.) comes to an end.
Every Panchayat shall continue for 5 years from the date of its first meeting. But it can be dissolved earlier in accordance with the procedure prescribed by state law. Elections must take place before the expiry of the above period. In case it is dissolved earlier, then the elections must take place within six months of its dissolution. A Panchayat reconstituted after premature dissolution (i.e. before the expiry of the full period of 5 years) shall continue only for the remainder of the period. But if the remainder of the period is less than 6 months it shall not be necessary to hold elections.
According to Article 243F all persons who are qualified to be chosen to the State Legislature shall be qualified to be chosen as a member of a Panchayat. The only difference is that a person who has attained the age of 21 years will be eligible to be a member (in case of State Legislature the prescribed age is 25 years—Art. 173). If a question arises as to whether a member has become subject to any disqualification, the question shall be referred to such authority as the State Legislature may provide by law.
Q. 16. What is the situation of pulses in India? What improvements have been brought about technologically in this area?
Ans. Pulses are the most important source of protein to the majority of people in India who live on a vegetarians diet. Being leguminous plants they also restore soil fertility by fixing atmospheric nitrogen.