UPSC Mains Previous Year Questions 2021: GS3 Indian Economy | Indian Economy for UPSC CSE PDF Download

Q1: Explain the difference between computing methodology of India’s Gross Domestic Product (GDP) before the year 2015 and after the year 2015. (Economic Development)
Ans: Old vs. New Methodology for Calculating India's GDP

• Change in Base Year:
  • Before 2015: The base year was 2004-05.
  • After 2015: The base year became 2011-12 to match global standards for accuracy.
• Manufacturing Sector Data:
  • Before 2015: Data from IIP and ASI (over two lakh factories) were used.
  • After 2015: MCA 21 data from around five lakh companies is used.
• GDP Calculation:
  • Before 2015: GDP at factor cost was calculated.
  • After 2015: Adopted GDP at market price and GVA at basic price.
• Labour Income Calculation:
  • Before 2015: All labor was considered equal.
  • After 2015: Different weights given based on roles - owner, professional, or helper.
• Agriculture Value Addition:
  • Before 2015: Limited to farm produce.
  • After 2015: Expanded to include livestock and beyond farm produce.
• Financial Sector Income:
  • Before 2015: Limited to certain financial entities.
  • After 2015: Expanded to include stock brokers, exchanges, asset management, etc.
• New Method Benefits:
  • The new method estimates more indicators like consumption, employment, and enterprise performance, capturing current changes better.

Q2: Distinguish between Capital Budget and Revenue Budget. Explain the components of both these Budgets. (Economic Development)
Ans: Union Budget - Annual Financial Statement (AFS)

• Objectives of the Budget:
  • Resource reallocation
  • Decreasing income and wealth inequalities
  • Contributing to economic growth
  • Ensuring economic stability
  • Managing public enterprises
  • Components of Government Budgets:
• Capital Budget:
  • Includes Capital Receipts and Expenditure
  • Capital Receipts decrease assets or increase liabilities, involving selling assets or borrowing money
  • Capital Expenditure creates assets or reduces liabilities, like long-term investments or loans
• Revenue Budget:
  • Comprises Revenue Expenditure and Receipts
  • Revenue Receipts don’t affect assets/liabilities, earned through taxes (like excise, income tax) or non-tax sources (dividends, interest)
  • Revenue Expenditure covers non-asset or non-liability impacting expenses like salaries, interest payments, pensions, and admin costs
• Difference:
  • Capital Expenditure creates or reduces assets/liabilities
  • Revenue Expenditure doesn’t impact assets/liabilities and tends to be recurring on a yearly basis

Q3: How did land reforms in some parts of the country help to improve the socio-economic conditions of marginal and small farmers? (Economic Development)
Ans: Land Reform and Its Impact: Land reform involves changing laws or customs related to land ownership, aiming to improve conditions. During British rule, farmers didn’t own the lands they cultivated. Post-independence India saw efforts to change this.

Benefits of Land Reforms for Small Farmers:

• Abolishing Zamindari System: Removed intermediaries, helping small farmers bear production costs and avoid debt traps.
• Tenancy Reforms: Regulated tenant rents, offered tenure security, and granted ownership to tenants.
• Landholding Ceilings: Prevented land concentration, redistributing it to landless laborers for ownership, credit access, and food security.
• Landholding Consolidation: Prevented land subdivision, lowering cultivation costs, reducing farmer disputes, and boosting incomes.
• Cooperative Farming: Members jointly farm while retaining land ownership, sharing profits based on land ownership.

Challenges Faced:

• Lengthy Process: Land reforms were slow and cumbersome.
• Concerns with Transactions: Benami transactions were problematic under land ceiling laws.
• Digitization of Records: Efficiency in digitizing land records is a time-consuming process.

While slow, land reforms achieved social justice to a significant extent. Adopting new measures vigorously is essential to eradicate rural poverty and uplift small farmers.

Q4: Do you agree that the Indian economy has recently experienced V-shaped recovery? Give reasons in support of your answer. (Economic Development)

Ans.  Understanding V-Shaped Economic Recovery: A V-shaped recovery indicates a swift and consistent rebound in economic indicators following a steep downturn.

Indian Economy's V-Shaped Recovery:

• Quarterly GDP Growth: India witnessed a significant economic decline with a historic 23.9% GDP contraction in Q1 2020, which narrowed to 7.5% in Q2 due to a partial recovery in domestic demand post lockdown.

• Government Expenditure: A substantial 48.3% year-on-year rise in government expenditure in November, particularly in capital expenditure, aided by the Atmanirbhar Bharat package, contributed to economic revival.

• Imports/Exports: After nine consecutive months of decline, merchandise imports grew by 7.6% in December 2020, while exports reached pre-COVID levels with a 0.1% growth, showcasing recovery.

• Financial Markets: Despite initial lows during the pandemic, both Sensex and NSE indices rebounded significantly by the end of 2020, indicating a bullish market trend.

• IPO Market: The IPO market showcased a notable rebound, raising Rs. 15,971 crore during 2020-21 (till December 2020), a substantial increase from the previous year.

• Industrial Activity: While industrial output exhibited volatility, PMI manufacturing expanded in December 2020, signaling a positive turnaround despite a contraction in November.

• GST Collections: The Gross GST collections hit a record high of over Rs. 1.15 lakh crore in December, indicating a continuous economic recovery post the stringent lockdown phase.

The diverse economic indicators and notable improvements across sectors point towards a robust V-shaped recovery for the Indian economy.

Q5: “Investment in infrastructure is essential for more rapid and inclusive economic growth.” Discuss in the light of India’s experience. (Economic Development)
Ans: 
Understanding Infrastructure Investments: Infrastructure investments involve physical assets such as roads, bridges, energy systems, and sewage networks that are crucial for a country's development. They are considered real assets and often attract investors due to their stability and predictable cash flows.

Advantages of Infrastructure Investments:

• Stable Cash Flows: Investment in infrastructure typically generates stable and predictable cash flows due to regulated revenue models and long-term contracts.

• Non-Cyclical Nature: Unlike businesses affected by economic downturns, infrastructure assets remain vital regardless of economic stages, ensuring continued usage.

• Low Operational Costs: Infrastructure assets have minimal per-use operational costs, making variable expenses negligible.

• Leverage: As infrastructure provides consistent cash flows, it allows for higher leverage, enabling increased investment albeit with higher interest costs.

Role of Infrastructure in Economic Growth:

• Employment Creation: Infrastructure projects like construction and transportation generate jobs, stimulating formal and informal sectors, thereby boosting domestic demand.

• Impact on Farmers: Investment in irrigation, storage, and marketing infrastructure aids in doubling farmers' income, benefiting the agricultural sector.

• Healthcare and Logistics: Improved healthcare infrastructure and efficient logistics reduce costs, enhancing competitiveness and exports while advancing healthcare services.

India's Infrastructure Initiatives: India has focused on infrastructure development, establishing a Development Finance Institution (DFI) and implementing the National Infrastructure Pipeline. However, successful execution relies on collaborative efforts from state governments, private enterprises, and comprehensive reforms in the banking sector.

Q6: How and to what extent would micro-irrigation help in solving India’s water crisis? (Agriculture)
Ans: 
Water in Agriculture: Water is a scarce resource crucial for agriculture. Efficiently using available water for irrigation poses a significant challenge. A nation is water deficient if annual availability is below 1,700 kilolitres per person. India's per capita availability is around 1,428 kilolitres per year.

Micro-Irrigation: This modern irrigation method employs drippers, sprinklers, and other emitters on or below the land's surface. Common types include sprinkler and drip irrigation.

Significance of Micro-Irrigation:

• Water Use Efficiency:
  Directly applying water to the root zone reduces conveyance, run-off, percolation, and evaporation losses.

• Water Savings: Saves 30-50% more water compared to flood irrigation.

• Electricity Consumption: Significantly reduces electricity use by needing less water for pumping.

• Nutrient Preservation: Prevents fertilizer runoff, reducing nutrient loss or leaching. It can also target fertilizers to prevent weed growth (fertigation).

• Soil Conservation: Localized water application prevents soil erosion, doesn't require land leveling, and works well on irregularly shaped fields, reducing labor and costs.

Limitations of Micro-Irrigation

• High Costs: Initial expenses, especially for marginal and small farmers, can be prohibitive.

• Maintenance: Small farmers may struggle with ongoing costs for tube and sprinkler maintenance.

• Tubes Durability: Sun exposure can reduce the lifespan of drip irrigation tubes, leading to wastage.

• Adoption Challenges: Requires greater awareness and higher adoption rates in water-stressed areas.

Future of Agriculture: Precision farming is the future revolution. Micro-irrigation serves as a stepping stone to make farming sustainable, profitable, and productive.

Q7: What are the salient features of the National Food Security Act, 2013? How has the Food Security Bill helped in eliminating hunger and malnutrition in India? (Agriculture)

Ans: 
National Food Security Act, 2013: The National Food Security Act, 2013, is a pivotal legislation aimed at improving the conditions of the food insecure population, ensuring access to quality food at reasonable prices. It provides subsidized food grains to 75% of rural and 50% of urban India.

Key Provisions:

• Eligibility and Coverage: Defines eligible households under the Antyodaya Anna Yojana and Targeted Public Distribution System (TPDS), identified by State Governments.

• Food Entitlements: Priority households receive 5 kg of foodgrains per person per month through TPDS, while AAY households are entitled to 35 kg per household at subsidized rates.

• Nutritional Support: Pregnant and lactating women are provided free meals through anganwadis and maternity benefits.

• Food Security Allowance: Ensures food security allowance for entitled persons in case of non-supply of entitled quantities of foodgrains or meals.

• Grievance Redressal: Requires every State Government to establish an internal grievance redressal mechanism.

Impact on Hunger and Malnutrition:

• Reduction in Undernourishment: Reports suggest a decline of 60 million undernourished people in India from 2006 to 2019.

• Improved Access to Food: Better access to foodgrains has positively impacted hunger outcomes among the poor.

• Resilience against Income Shocks: Broad coverage has increased resilience among two-thirds of the population.

• Reduction in Child Stunting: Stunting in children under 5 has decreased from 47.8% in 2012 to 34.7% in 2019 as per a UN report.

• Compensated Wage Loss: Monetary compensation has addressed wage loss during pregnancy.

• Increased Breastfeeding Rates: Awareness campaigns have boosted the number of exclusively breastfed infants.

Q8: What are the present challenges before crop diversification? How do emerging technologies provide an opportunity for crop diversification? (Agriculture)
Ans: 
Crop Diversification: Crop diversification involves adding new crops or cropping systems to agricultural production on a particular farm, aiming to enhance income by diversifying the crop portfolio.

Benefits:

• Assisting Small Landholding Farmers: Diversification with high-value crops like maize and pulses benefits farmers with smaller landholdings.

• Economic Stability: Helps in stabilizing farm incomes despite fluctuating prices of agricultural products.

• Resilience Against Adverse Conditions: Provides resilience against sudden adverse weather conditions and pest outbreaks through mixed cropping.

• Nutritional Improvement: Crops like pulses, oilseeds, horticulture, and vegetables contribute to food quality, soil health, and nutritional security, addressing malnutrition.

• Natural Resource Conservation: Introduction of legumes in crop systems aids in soil fertility by fixing atmospheric nitrogen.

Challenges:

• Rainfall Dependency: Majority of the country's cropped area relies entirely on rainfall.

• Resource Misuse: Overuse of land and water resources negatively impacts environmental sustainability in agriculture.

• Insufficient Supply: Inadequate availability of improved seeds and plants for cultivation.

• Land Fragmentation: Fragmented landholding discourages modernization and mechanization in agriculture.

• Infrastructure and Tech: Poor rural infrastructure and inadequate post-harvest technologies hinder agricultural progress.

• Weak Agro-Based Industry: The agricultural industry lacks strength and robustness.

• Research and Training: Weaknesses in research-extension-farmer linkages and inadequately trained human resources contribute to challenges in the sector.

• Diseases and Pests: Crop plants face numerous diseases and pest issues.

• Data and Investment: Insufficient database for horticultural crops and decreased investments in agriculture pose challenges.

Role of Emerging Technologies:

• Direct Farmer-Customer Connection: IT innovations enable direct connections between farmers and customers, supporting the cultivation of high-value perishable products through platforms like Big Basket and BlinkIt.

• Controlled Environment Cultivation: Techniques like aquaponics and urban farming aid in meeting urban demands for perishable items while diversifying crops.

• Financial Inclusion: Financial inclusion and digitization empower small farmers and women's groups, facilitating crop diversification through access to credit.

• Technology Adoption: In arid regions, technologies like Urea Deep Placement (UDP) and Poly-bag Nursery farming introduced by the Indo-Israel Agriculture Project are making a difference.

Soil Health Management: Soil health management assists in optimizing fertilizer usage, promoting organic farming, and implementing GIS-based soil mapping.