Q.1. List the different types of economic systems.
Ans. The three main types of economic systems are:
(i) Capitalist economy
(ii) Socialist economy
(iii) Mixed economy
Q.2. What is capitalism?
Ans. Capitalism refers to the economic system in which resources are owned privately and the main objective behind economic activities is profit-making.
Q.3. When was licensing started in India?
Ans. In India, licensing was started in 1952.
Q.4. What is mixed economy?
Ans. Mixed economy is an economic system in which production, distribution and consumption decisions are left to the free play of the market forces. However, a large part of economic activities are regulated by the government to maximise the social welfare along with individual welfare or self-interest.
Q.5. Define socialism.
Ans. Socialism is that economic system in which resources are owned by the government and the main objective behind economic activities is social welfare.
Q.6. What type of economic system does India have?
Ans. India has mixed type of economic system.
Q.7. What do you mean by Small Scale Industries?
Ans. Small Scale Industry (SSI) is defined on the basis of maximum investment allowed on the assets of a unit. This investment limit changes over a period of time.
Q.8. How many industries were reserved for public sector under Industrial Policy Resolution, 1956?
Ans. Under Industrial Policy Resolution, 1956, 17 industries were reserved for public sector.
Q.9. What is industrial licensing?
Ans. Industrial licensing is a written permission of the government to a particular firm for the production of particular product.
Q.10. Define capitalistic economy. Why was Pt. Jawaharlal Nehru not in the favour of capitalism?
Ans. In capitalistic economy, resources are owned privately and the main objective behind economic activities is profit-making. Problems of the economy are solved through free price mechanism, independent of government intervention. Under this type of economy, goods are produced and distributed among the people not on the basis of what they need but on the basis of what the people can afford or are willing to purchase. The poor people are usually ignored under such a system as they do not have the purchasing power to back their demand. As a result, such goods are not produced. According to Pt. Jawaharlal Nehru, a vast majority of people would not get the chance to improve their quality of life under capitalism and hence, he was not in the favour of such a system.
Q.11. Define socialism. Why did our leaders not follow the path of socialism at the time of independence?
Ans. Socialism is that economic system in which resources are owned by the government and the main objective behind economic activities is social welfare. In this economy, the government decides what goods are to be produced in accordance with the needs of the country and distribution is based on what the people need. With the collapse of the Soviet System in the last decade of the 20th century, our leaders preferred not to follow the clear path of socialism.
Q.12. Explain the concept of mixed economy.
Ans. Mixed economy is an economic system in which production, distribution and consumption decisions are left to the free play of the market forces. However, a large part of economic activities are regulated by the government to maximise the social welfare along with individual welfare or self-interest. It is a combination of capitalism and socialism. The government and the market together answer the three basic questions of, what to produce, how to produce and for whom to produce in the mixed economy. In this type of economy, private sector or market will provide those goods and services, which it can produce well and the government sector will provide those goods and services, which are essential for the welfare of the society as a whole.
Q.13. Discuss the outcomes of India’s Five Year Plans over the years.
Ans. The first seven Five-Year Plans, covering the period 1951–1990, attempted to attain the four main goals, i.e. growth, equity, modernisation and self-sufficiency. Of these four main goals, these plans have succeeded mainly in achieving self-sufficiency. However, healthy growth rates, modernisation and equity have not been fully achieved. Growth rates are still not sufficient to meet the development criteria for the country. Modern facilities and technology are available only to a limited section of the society. Despite various efforts, plans have failed to reduce the gap between the rich and the poor. The main reason for failure in achieving the planned targets is the rapidly increasing population and the existence of corruption in the whole system of the country.
Q.14. What is economic planning?
Ans. Economic planning is the process through which economic decisions are made by the government for economic growth and development. In India, the duration of plans is five years. This form of plans was adopted from the former Soviet Union. In economic planning, a central authority defines a set of targets to be achieved related to growth and development of the nation, keeping in view the resources available to the country, within a specified period of time. According to Planning Commission, “Economic Planning means utilisation of country’s resources into different activities in accordance with national priorities.”
Q.15. Explain any two features of Indian agriculture.
Ans. Features of Indian agriculture are:
(i) Disguised Unemployment: Disguised unemployment is a situation in which more than required workers are absorbed. For example, in two hectare of land 3 workers can cultivate efficiently but there are 6 workers engaged on that land. These 3 extra workers are called disguisedly unemployed. If these 3 workers are removed from the work, the production will not be affected.
(ii) Seasonal Occupation: Indian agriculture is a seasonal occupation. In other words, its productivity is dependent upon season. Indian farmers find work for only six months period in a year and for remaining six months, they remain unemployed.
Q.16. What were the objectives of land reforms in India?
Ans. The following were the objectives of land reforms:
(i) To achieve egalitarian social structure by restructuring agrarian relations
(ii) To eliminate the exploitation in land relations
(iii) To provide the ownership of land to the tiller
(iv) To improve the socio-economic conditions of the rural poor by widening their land base
(v) To increase agricultural productivity and production
(vi) To facilitate land-based development of the rural poor
(vii) To promote the agriculture sector
Q.17. Discuss the phases of ‘Green Revolution’ in India.
Ans. The phases of the ‘Green Revolution’ in India are discussed below:
(i) The First Phase: In the first phase of green revolution, i.e. from mid 1960’s to 1970’s, the use of High Yielding Variety (HYV) seeds was restricted to the more prosperous states like Punjab, Andhra Pradesh and Tamil Nadu. Thus, the use of HYV seeds primarily benefitted wheat-growing regions.
(ii) The Second Phase: The period of the second phase of green revolution was from mid 1970’s to 1980’s. In this phase, the HYV technology spread to a larger number of states and also benefitted more variety of crops. The spread of green revolution enabled India to self-reliant in foodgrains.
Q.18. Why are subsidies necessary?
Ans. Subsidies are necessary due to the following reasons:
(i) Adoption of the New HYV Technology: It is generally agreed that subsidies were necessary to provide incentive for adoption of the new HYV technology by farmers, in general and small farmers, in particular.
(ii) Coverage of Risk: Subsidies were necessary to cover the risk associated with weather conditions. Also, any new technology will be looked upon as a risky technology by farmers. Therefore, subsidies are needed to encourage farmers.
Q.19. Give the division of the economy into public and private sector industries.
Ans. On the eve of independence, the activities of the public sector were restricted to a limited field. After independence, however, the area of activities of the public sector expanded at a very rapid speed. Two industrial resolutions were issued during 1948 and 1956 to assure private sector that its activities will not be unduly curbed.
(i) Category I: Industries exclusively owned by the state
(ii) Category II: Industries jointly owned and controlled by private sector and the state
(iii) Category III: Industries in the private sector
Thus, the commanding heights of the economy were controlled by the public sector and the policies of the private sector were to compliment the public sector policies. Private sector was kept under government control through the system of licenses.
Q.20. List the problems faced by small scale industries in India.
Ans. The problems faced by small scale industries in India are:
(i) Lack of raw material and power
(ii) Limited financial assistance
(iii) Old method of production and hence, low productivity
(iv) High production cost
(v) Lack of organisational ability
(vi) Heavy taxation
(vii) Less educated entrepreneurs
Q.21. Give some suggestions to solve the problems of small scale industries.
Ans. The problems of small scale industries can be solved by adopting the following measures:
(i) Small scale industries should be shielded from the power of large firms.
(ii) Criterion for the reservation of the products in these industries should be based on the ability of these units to manufacture the goods.
(iii) These industries should be given concession such as lower excise duty, bank loans at lower interest rates, etc.
(iv) Raw material and power should be provided at concessional rates to these industries.
(v) SSIs should be encouraged to use new techniques to improve quality of the products and reduce cost of production.
(vi) Education and training should be provided to the entrepreneurs.
Q.22. Explain briefly the concept of industrial licensing.
Ans. As per the Industrial Act of 1951, the Government of India has adopted the licensing policy to control the industries. Licensing is a written permission obtained by the enterprise from the government to produce a particular product. Other things included in the licensing are:
(i) Name of the produced goods
(ii) Limit of production
(iii) Place of the establishment of industry
(iv) Expansion of enterprise
Q.23. What are the objectives of licensing?
Ans. Main objectives of licensing in India have been:
(i) Development and control of industrial investment and production as per the planning objectives
(ii) Centralisation of industry
(iii) Expansion of Small Scale Industry
(iv) Balanced regional development
Q.24. What is the meaning of import and export?
Ans. Import is that process in which a country purchases goods and services from the other country. For example, purchase of goods by India from America will be called as an import of India. On the other hand, export is that process in which a country sells goods and services to other countries. For example, India sells goods to America will be called as an export of India.
Q.25. Give a brief account of India’s direction of trade.
Ans. The direction of trade means the countries with which India exchanges its goods and services. After independence, significant changes took place in the direction of India’s foreign trade. The share of British Empire (U.K. and her colonies), which was as high as nearly half of our total foreign trade before Second World War, has declined significantly. Share of England alone was about one-third in our exports and imports but it is now much smaller. Since 1950, America has almost maintained its share in our exports. Even now America is the most important customer of Indian goods. Russia’s share increased extraordinarily in the beginning. In 1950-51 this country had no trade relation with India, but in 1990-91 its share in Indian exports increased to 16.1 per cent. After the split of the Soviet Union its share sharply came down. India has mainly trade relations with European Union, North America, Australia, New Zealand, Japan and OPEC countries like Saudi Arabia, Iraq, Iran, etc.