Class 12 Economics Short Questions with Answers - Indian Economy 1950-1990

Q.1: What are the different types of economic systems?

Ans: The main types of economic systems are:

• Capitalist economy: Focuses on private ownership and market-driven production.
• Socialist economy: Emphasises government ownership and distribution based on societal needs.
• Mixed economy: Combines elements of both capitalism and socialism, where the government and market work together.

Q.2: What is capitalism?

Ans: Capitalism is an economic system characterised by:

• Private ownership of resources and businesses.
• The primary aim of economic activities is to generate profit.
• Goods and services are produced based on market demand.
• The distribution of goods is influenced by individuals' purchasing power.

Q.3: When did licensing begin in India?

Ans:

• Licensing in India began in 1952.
• This system required industries to obtain a license from the government before starting or expanding.
• Licenses aimed to control production and promote regional equality.

Q.4: Define mixed economy.

Ans:

• A mixed economy combines elements of both capitalism and socialism.
• In this system, the market decides what to produce, while the government regulates certain sectors to ensure social welfare.
• It aims to balance individual interests with the needs of society.
• The government provides essential services that the market may not supply effectively.

Q.5: What is socialism?

Ans:

• Socialism is an economic system where resources are owned by the government.
• The main goal of economic activities is to promote social welfare.
• In socialism, the government decides:
  - What goods to produce based on societal needs.
  - How to produce these goods.
  - How to distribute them fairly among the population.
• Unlike capitalism, socialism aims to provide essential services, such as free healthcare, to all citizens.
• In a socialist society, there is no private property as all resources are state-owned.

Q.6: What type of economic system does India have?

Ans: India has a mixed economic system, which combines elements of both socialism and capitalism. Key features include:

• The government plays a significant role in planning and regulating the economy.
• Private property and businesses coexist with a strong public sector.
• Essential services, such as healthcare, are provided by the government.

This system aims to promote the welfare of all citizens while encouraging economic growth.

Q.7: What are Small Scale Industries (SSIs)?

Ans:

• Small Scale Industries (SSIs) are businesses defined by their maximum investment in assets.
• This investment limit is updated periodically.
• As of now, the maximum investment allowed is one crore rupees.
• SSIs are typically more labour-intensive, meaning they create more jobs compared to larger industries.
• To support SSIs, certain products are reserved for them, along with benefits like lower excise duties and easier access to bank loans.

Q.8: How many industries were reserved for the public sector under the Industrial Policy Resolution of 1956?

Ans: The Industrial Policy Resolution of 1956 reserved 17 industries for the public sector.

Q.9: What is industrial licensing?

Ans: Industrial licensing refers to the permission granted by the government to a company to manufacture specific products. Key points include:

• It is a form of regulation to control industrial production.
• No new industry can start without obtaining a license.
• Licenses can also be required for expanding or diversifying existing production.
• This system aims to ensure that production aligns with the economic needs of the country.
• It promotes regional development by facilitating industries in economically backward areas.

Q.10: Define a capitalistic economy. Why did Pt. Jawaharlal Nehru oppose capitalism?

Ans:

• A capitalistic economy is characterised by private ownership of resources.
• The main goal is to make a profit.
• Pt. Jawaharlal Nehru opposed capitalism because:
  - He believed it would hinder the majority from improving their living standards.
  - Many people would lack the purchasing power to afford basic goods.

Q.11: Define socialism. Why did leaders avoid socialism at independence?

Ans:

Socialism is an economic system where the government owns resources to promote social welfare.

Leaders chose not to adopt strict socialism after independence due to:

• The failure of the Soviet model.
• Concerns about the lack of private property rights.
• The need for a balanced approach that included both public and private sectors.

Q.12: Explain mixed economy.

Ans:

A mixed economy blends market-driven choices with government oversight. It addresses key economic questions:

• What to produce?
• How to produce?
• How to distribute?

This system combines elements of capitalism and socialism. The market supplies goods and services efficiently, while the government provides essential services that the market may overlook.

Q.13: Discuss the outcomes of India's Five-Year Plans.

Ans: The first seven Five-Year Plans (1951-1990) focused on:

• Growth: Aimed to increase the country's ability to produce goods and services.
• Equity: Sought to ensure that economic benefits reached all citizens, not just the wealthy.
• Modernisation: Encouraged the adoption of new technologies and practices.
• Self-sufficiency: Strived for independence in food and resource production.

While these plans achieved self-sufficiency, they struggled with:

• Low growth rates due to high population growth.
• Corruption affects the equitable distribution of resources.

Q.14: What is economic planning?

Ans: Economic planning is a process used by the government to guide economic growth and development. It typically occurs in five-year cycles and focuses on:

• Making decisions about how to use resources effectively.
• Setting national priorities for development.
• Promoting overall economic stability.

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 hectares 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 the 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 an 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 the ‘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 the green revolution, i.e. from the mid-1960s to the 1970s, 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 the green revolution was from the mid-1970s to the 1980s. In this phase, the HYV technology spread to a larger number of states and also benefitted more variety of crops. The spread of the green revolution enabled India to be self-reliant in food grains.

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 incentives for the 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 in 1948 and 1956 to assure the private sector that its activities would not be unduly curbed.
(i) Category I: Industries exclusively owned by the state
(ii) Category II: Industries jointly owned and controlled by the 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 complement the public sector policies. The 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) The 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 concessions 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 the quality of the products and reduce the 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 a licensing policy to control the industries. Licensing is 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. The 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 the process by which a country purchases goods and services from the other country. For example, the purchase of goods by India from America will be called an import of India. On the other hand, export is the process in which a country sells goods and services to other countries. For example, if India sells goods to America will be called 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 the British Empire (U.K. and her colonies), which was as high as nearly half of our total foreign trade before the Second World War, has declined significantly. The 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 the European Union, North America, Australia, New Zealand, Japan and OPEC countries like Saudi Arabia, Iraq, Iran, etc.