UPSC Mains Previous Year Questions 2023: GS3 Indian Economy | Indian Economy for UPSC CSE PDF Download

Q1: Faster economic growth requires increased share of the manufacturing sector in GDP, particularly of MSMEs. Comment on the present policies of the Government in this regard.(Economic Development)
Ans: Many developed nations, in their history, served as major manufacturing hubs, creating substantial value at scale for their economies. Manufacturing holds significant importance for nations, and small industries, particularly Micro, Small, and Medium Enterprises (MSME), play a crucial role, contributing around 50% to our imports and approximately 30% to the GDP.

Government Policies to Boost Manufacturing:

• Make in India Initiative: A program aimed at encouraging investment, fostering innovation, and developing infrastructure to position India as a global manufacturing hub.
• Industrial Corridor Development Programme: Implemented in collaboration with state governments to create greenfield industrial regions.
• Ease of Doing Business: Focused on simplifying procedures, rationalizing legal provisions, and digitizing government processes to enhance the business environment.
• National Single Window System: A one-stop shop providing support to investors, offering pre-investment advisory, information on land banks, and facilitating clearances at both the Centre and State levels.
• PM Gati Shakti National Master Plan (NMP): Aims to enable data-driven decisions for integrated planning of multimodal infrastructure, reducing logistics costs.

Policies Particularly for MSMEs:

• Udyami Mitra Portal: Enhances credit accessibility and provides handholding services for MSMEs.
• MSME Sambandh: Monitors the implementation of public procurement from MSMEs by Central Public Sector Enterprises.
• MSME Samadhan: Resolves cases related to delayed payments by Government organizations.
• Digital MSME Scheme: Offers cloud-based infrastructure support for MSMEs.

MSMEs contribute significantly to India's economic landscape, constituting around 8% of the GDP, employing over 60 million people, and holding a substantial share in exports and manufacturing. Their growth in recent years is noteworthy and is expected to continue, supported by emerging trends and favorable policies.

Q2: What is the status of digitalization in the Indian economy? Examine the problems faced in this regard and suggest improvements. (Economic Development)
Ans: Digitalization is the process of transitioning to an internet-based infrastructure to enhance economic and managerial efficiency in business operations.
The Indian economy presents significant opportunities for digitalization, with approximately 77% of the population having active cellular connections and one-third using social media. India boasts around 700 million internet users, constituting a penetration rate of 48.7%.

Challenges in Digitalization:

• Cost: While digitalization reduces operational costs, establishing the necessary infrastructure involves high initial expenses.
• Infrastructure: Limited internet availability in areas with insufficient infrastructural development poses a challenge.
• Privacy: Concerns about vulnerability to security breaches and data compromise are significant issues.
• Digital Literacy: Digital literacy, particularly in rural areas, is low, with women facing even greater challenges.

Possible Improvements:

• Comprehensive Policy: Policies addressing privacy, security, digital literacy, and infrastructure development are crucial.
• Investments: Substantial investments are needed to enhance digital infrastructure and literacy.

While digitalization in India has witnessed substantial growth in recent years, with the digital economy's contribution to Gross Value Added (GVA) rising from 5.4% in 2014 to 8.5% in 2019, there is still much work to be done.

Q3: How does e-Technology help farmers in production and marketing of agricultural produce? Explain it. (Economic Development)
Ans: e-Technologies encompass digital information-based systems that have experienced exponential growth, permeating all aspects of our lives. Agriculture, too, has reaped benefits from its integration.

Benefits in Agriculture:

• Irrigation: AI-enabled methods have streamlined and improved crop watering, enhancing efficiency and reducing water usage.
• Climate Prediction: Processing data from sensors allows farmers to make informed decisions on crop cycles and patterns based on climate predictions.
• Crop Safety: Integrated systems and sensors contribute to ensuring crop safety by monitoring and preventing damage from pests and vermin.
• Easy Financing: The internet and databases have facilitated faster loan approvals, thanks to the expanded banking networks.
• Alternative Methods: E-technology integration allows for the automation and control of methods like aquaponics and hydroponics, reducing manual labor.

Benefits in Marketing:

• Online Marketplace: Selling agricultural produce has become more accessible through online platforms, offering real-time product availability.
• Shorter Supply Chain: Increased information dispersal leads to an optimized transportation and warehousing process, resulting in a shorter supply chain.
• Real-Time Price Updation: Both farmers and consumers benefit from real-time price updates, enhancing transparency in the market.

e-Technology has brought transparency to agriculture, providing farmers with efficient tools for crop production, thereby reducing stress.

Q4: State the objectives and measures of land reforms in India. Discuss how land ceiling policy on landholding can be considered as an effective reform under economic criteria.(Economic Development)
Ans: Land holding, introduced based on the recommendations of the Kumarappa committee, has brought about significant transformations in India across various social, political, and economic dimensions.

Objectives of Land Reform:

• Restore Rights of Cultivators: These reforms aimed to restore the rights of small farmers who traditionally owned their lands.
• Records: Record updation was implemented to reduce disputes among citizens.
• Empowerment: The reforms empowered marginalized communities, particularly those with low land holdings contributing to a reduced socioeconomic status.
• Social Equality: Equitable distribution of resources resulted in reduced social marginalization.

Measures Taken:

• Land Ceilings: The government imposed a cap on the amount of land an individual or family could own.
• Abolition of Zamindari: Achieved through the passage of various legislations by states, such as the Zamindari Abolition Act, 1950 (Uttar Pradesh).
• Cooperative Farming: Farmers were encouraged to pool resources and engage in community-based farming.

The land ceiling policy sets limits on the maximum land an individual or family can own, aiming to reduce the concentration of land in the hands of a few wealthy landowners.

Land Ceiling as an Effective Reform:

• Increased equitable land distribution contributes to a broader population, fostering economic growth for the country.
• With a larger population experiencing economic growth, there is an improvement in health and a preference for better education, elevating the standard of living.
• A wider tax base is provided with an increased number of farmers earning from their lands, leading to improved tax collection.

Land reforms in India have not only provided resources to the landless but also addressed historical injustices, envisioning a more inclusive future.

Q5: Most of the unemployment in India is structural in nature. Examine the methodology adopted to compute unemployment in the country and suggest improvements. (Economic Development)
Ans: Structural unemployment is essentially involuntary unemployment resulting from a structural shift in the economy, such as the emergence of new technologies or industries, or a mismatch in skills between the population and available jobs in the market.
Major causes of structural unemployment in India encompass labor market rigidities, geographic mismatch, dependence on agriculture, infrastructure bottlenecks, and regulatory challenges.

Methodology for computing unemployment in the country:

• Computation by NSSO using:
  • Current Weekly Status (CWS): Involves a shorter reference period of a week. Individuals are considered employed if they have worked for at least one hour on at least one day in the preceding seven days. For example, the Labor Force Participation Rate in CWS in urban areas for persons aged 15 years and above increased to 48.2 percent in the October-December quarter of 2022.
  • Usual Principal and Subsidiary Status (UPSS): Determined based on the activity one spent the most time on in the previous year.
  • Current Daily Status: Indicates the number of people who did not find work for one or more days in a week.
• Labor Bureau Surveys: The Labor Bureau conducts surveys to obtain data on unemployment and employment in India, such as the All-India Quarterly Establishment-based Employment Survey (AQEES).

Way forward:

• Increase in Frequency of Surveys: Ensuring timely and updated surveys for a better understanding of changing employment trends.
• Modernizing Agriculture: Increased investment in agriculture could have a multiplier effect through backward and forward linkages, e.g., promoting cold storages.
• Incorporation of Informal Sector: Considering that more than 80 percent of the labor force is employed in the informal sector, there is a need to incorporate it into the formal sector.
• Seasonal Adjustments: Improving seasonal adjustment techniques to account for the impact of agriculture and other seasonal employment trends.

In conclusion, it is crucial to enhance certain computational methodologies to envision making India one of the largest economies and nurturing the rich demographic dividends while addressing unemployment challenges and bottlenecks.

Q6: Distinguish between ‘care economy’ and ‘monetized economy’. How can care economy be brought into monetized economy through women empowerment? (Economic Development)
Ans: The 'care economy' and 'monetized economy' pertain to the nature and value of work and represent two distinct aspects of economic activities.
Care economy encompasses unpaid or underpaid work related to caregiving and social support, typically carried out within households. This includes tasks like childcare, eldercare, domestic work, and involves paid labor from roles like nurses and caregivers, often filled by females. Compensation for such activities is generally absent or meager, despite their significant contribution to human development and social cohesion.
Monetized economy covers all economic activities valued in terms of monetary value, including the production of goods, finance, trade, etc. Its primary objective is profit generation, and compensation is received in monetary terms, such as wages and salaries. Its assessment is based on contributions to GDP and is commonly used as a measure of economic growth.

Ways to integrate care economy into monetized economy through women empowerment:

• Social protection measures are needed to ensure income security for women in caregiving roles, such as pension insurance.
• Emphasizing the development of skills for better transformation and the inclusion of women in the formal sector.
• Implementing supportive government policies that promote gender-neutral reforms and collaboration between the government and civil society organizations in the caregiving economy. Examples include the National Creche Scheme for the Children of Working Mothers and the enhancement of maternity benefits.
• Considering technological solutions in the care sector that reduce time demands and free up women for formal sector employment.

Integrating the care economy into the monetized economy will not only enhance economic opportunities for women but also contribute to a more inclusive and equitable society.

Q7: Explain the changes in cropping pattern in India in the context of changes in consumption pattern and marketing conditions. (Economic Development)
Ans: Changes in cropping patterns mirror the shifting demands of consumers, market dynamics, and economic factors, closely intertwined with evolving consumption patterns and marketing dynamics.

Factors influencing cropping patterns due to changing market conditions:

• Enhanced market access facilitated by improved road and rail connectivity has expanded opportunities for farmers, leading to increased cultivation of specific crops.
• The availability of international markets for certain crops, such as Alphonso mangoes and basmati rice, has driven their cultivation.
• Government initiatives, like the Minimum Support Price (MSP) mechanism, serve as incentives for farmers to cultivate crops covered under it.
• The launch of the National Agriculture Market (e-NAM) aims to facilitate better price discovery and improved market accessibility for crop growers.

Influence of changing consumption patterns on cropping patterns:

• As income and urbanization rise, there is an increased demand for protein-rich foods, fruits, vegetables, dairy, and poultry.
• Heightened health consciousness has driven a surge in demand for organic and nutrient-rich foods.
• The growing preference for chemical-free food has spurred the demand for exotic foods, leading to the growth of hydroponics and aeroponics crops.

Cropping patterns evolve due to a combination of factors, including consumer preferences, market conditions, government policies, technological advancements, among others.

Q8: What are the direct and indirect subsidies provided to the farm sector in India? Discuss the issues raised by the World Trade Organization (WTO) in relation to agricultural subsidies. (Economic Development)
Ans: Subsidies represent a form of financial aid or backing provided by the government to individuals or specific sectors of the economy. The main objective of subsidies is to lower the cost of goods and services, thereby stimulating economic activity.

Direct and indirect subsidies for the farm sector in India:

• To ensure affordability of fertilizers for farmers, the government extends subsidies for NPK fertilizers.
• Subsidies are granted on certified seeds, promoting the use of High Yielding Varieties (HYV) and genetically improved seed varieties.
• The central government implements direct cash transfers of Rs. 6,000 per farmer annually under the PM-Kisan yojana.
• Subsidies are provided for the acquisition of agricultural machinery and equipment, exemplified by the Sub-mission on Agricultural Mechanization (SMAM) Scheme.
• The government establishes Minimum Support Prices (MSP) for key crops in India, ensuring farmers receive a guaranteed price.

Concerns raised by WTO regarding agricultural subsidies:

• WTO deems the MSP mechanism as trade-distorting, especially in the case of rice, where subsidies have surpassed prescribed limits.
• India's agricultural practices are considered environmentally degrading by the WTO due to over-exploitation of groundwater and excessive use of fertilizers.
• Government support for domestic agricultural exporters to boost the export quantity of agricultural goods has also raised concerns.

Agriculture, employing half of India's population, relies significantly on subsidies to address food insecurity and unemployment. It is crucial to shape global trade practices in a way that allows developing countries to uplift a substantial portion of their population from poverty.