CHAPTER 1

INDIAN ECONOMIC DEVELOPMENT- INDIAN ECONOMY ON THE EVE OF

INDEPENDENCE

NCERT QUESTIONS
Q.1: Name some notable economists who estimated India’s per capita income during the
colonial period.
Ans: Some notable economists who estimated India‘s per capita income during the colonial
period are as follows:
∙ DadabhaiNaoroji
∙ William Digbi
∙ Findlay Shirras
∙ V K R V Rao
∙ R C Desai
Q 2: What was the focus of the economic policies pursued by the colonial government in
India? What were the impacts of these policies?

Ans: The colonial rulers were more interested in pursuing their own economic goals rather
than that of India. They focused on making India a net supplier of raw materials, so that the
British industry could get plenty of raw materials. Moreover, they deliberately worked on
destroying the local industry so that a
huge market for British manufactured goods could be created in India. Some of the impacts
of such policies are as follows:
1∙ The handicraft sector came to be in a terminal decline. This resulted in large scale
unemployment.
2∙ British manufactured goods flooded the Indian market and people lapped them up
because they were cheaper.
3∙ The GDP of India reduced drastically during the colonial rule.
4∙ No domestic modern industry could grow during the colonial period.

Q.3: What were the main causes of India’s agricultural stagnation during the colonial
period?

Answer: Following are the main causes of India‘s agricultural stagnation during the colonial
period:

1. Various land settlement systems which were introduced by the British from time to time
were faulty. The system ensured that zamindars only focused on collecting the revenue but
paid no attention to land development.
2∙ The British rulers paid no attention to develop irrigation system and hence agriculture was
highly dependent on monsoon.
3∙ No upgradation in technology could take place during this period and as a result, farming
remained at the level of subsistence farming.
4∙ No Land development methods followed.
5. Commercialisation of agriculture

Q.4: Name some modern industries which were in operation in our country at the time of
independence.
Ans: Following are some of the modern industries which were in operation on our country at
the time of independence:
∙ Textiles Industry
∙ Iron and Steel Industry
∙ Sugar Industry
∙ Cement Industry

Q.5: What was the two-fold motive behind the systematic deindustrialization effected by the
British in pre-independent India?

Ans: The two-fold motive behind the systematic deindustrialization effected by the British in
pre independence India is as follows:
∙ To make India are the net supplier of raw materials
∙ To make a huge market for British manufactured goods in India

Q.6: The traditional handicrafts industries were ruined under the British rule. Do you agree
with this view? Give reasons in support of your answer.

Ans: This is a correct statement that the traditional handicrafts industries were ruined under
the British rule. This is due to the following reasons:
i) Policy of discriminating protection: After gaining strategical dominance over Indian political
administration, Britishers imposed various trade barriers in their own interest in such a way
that India became cheap exporter of raw material to Britain & a big market of manufactured
goods. Britishers used this as a tool to remove their European competitors from
international trade.
ii) Non-Availability of raw material: cheap export of raw material for British industries has
reduced availability of raw material in India. Consequently, handicraft industries declined
leaving artisans and most of the workers in handloom and handicraft industries
unemployed.
iii) Western Influence on consumption pattern:
This was also evident from the fact that more and more people were preferring machine
made refined clothes from Manchester over the clothes made by the local weavers.
Similarly, most of the goods consumed by people were made in Britain as Indian made
goods could not compete with them.
iv) Decline of Princely States:
Indian rulers were encouraging the artisans by providing good reward of their work. So,in
the absence of motivating emperors, handicraft industry declined.
v) Contract System:
Britishers overtook the handicraft industry in their hands and gave contract to the artisans.
This policy deprived the workers of the freedom of work and getting profits.

Q.7: What objectives did the British intend to achieve through their policies of infrastructure
development in India?

Ans: It is beyond doubt that the British developed a lot of infrastructure in India:
ROADWAYS: - Roads constructed in India prior to the advent of the British rule were not fit
for modern transport. The roads that were built primarily served the purposes of mobilising
the army within India and drawing out raw materials from the countryside to the nearest
railway station or the port. There always remained an acute shortage of all weather roads
to reach out to the rural areas during the rainy season. Naturally, therefore, people mostly
living in these areas suffered grievously during natural calamities and famines.
RAILWAYS:- The most important contribution is introduction of railways in India in 1850.
Impact:
i) It enabled people to undertake long distance travel and thereby break geographical and
cultural barriers.
ii) It fostered commercialisation of Indian agriculture which adversely affected the
self-sufficiency of the village
iii) The volume of India‘s exports expanded but its benefits rarely accrued to the Indian
people. INLAND WATERWAYS:- The inland trade and sea lanes were developed, but these
measures were not satisfactory.
The inland waterways, at times, also proved uneconomical as in the case of the Coast
Canal on the Orissa coast. Though the canal was built at a huge cost to the government
exchequer, yet, it failed to compete with the railways, which soon traversed the region
running parallel to the canal, and had to be ultimately abandoned.
TELEGRAPH:- The introduction of the expensive system of electric telegraph in India,
similarly, served the purpose of maintaining law and order.
POSTAL SERVICES:- postal services despite serving a useful public purpose, remained all
through inadequate .
But while doing so, their goal was never to serve the people of India. They built infrastructure
to serve their own interests. Roads were developed so that the armed forces could be
mobilized and raw materials could be transported to the nearest railway station. The rail
network was developed so that raw materials and finished goods could be easily
transported across the country. Telegraph services were developed for security purposes.

Q.8: Critically appraise some of the shortfalls of the industrial policy pursued by the British
colonial administration.

Ans: The industrial policy pursued by the British colonial administration was having many
shortfalls.
1∙ No promotion policy of Indian Industry: Their policy never promoted the development of
indigenous industry. This led to continuous decline of the Indian industry.
2∙ Indian entrepreneur’s initiatives: Some new industries; like cotton textiles and iron and
steel began to come up at the beginning of the 20th century, but it was not because of any
friendly British policy. Most of the industries came up through private capital which was
invested the Indian entrepreneurs.
3∙ Fulfilling war time requirements from Indian industries: However, the jute textiles industry
was mainly dominated by the British entrepreneurs. The Second World War created a good
demand for Indian manufactured goods in Britain and this led to some development of
industries in India.
4∙ Modernisation of Indian industries required: The industrial sector was crying for
modernisation, diversification, capacity building and increased public investment.
5∙ No promotion to the Public Sector Units: But the British rulers never tried to develop any
public sector enterprise; except the railways. Nevertheless, railways helped a lot in
developing various industries in India.
Q.9: What do you understand by the drain of Indian wealth during the colonial period?
Ans: Drain of resources from India to Britain was called as economic drain. Throughout the
colonial rule, India became a net exporter of raw materials and a net importer of finished
goods.
1.Britain maintained a monopoly control over India‘s exports and imports. Foreign trade from
India was mainly restricted to Britain and to some other countries; like China, Ceylon and
Iran.
2.Export surplus did not increase inflow of wealth in India. During the colonial period, India
was an export surplus country, but this did not mean any foreign exchange earnings or
inflow of gold or silver to India.
3. Maintaining Office in Britain : Whatever wealth came to India; in the form of bullion was
utilized by the British rulers to maintain their offices in India. Thus, in spite of surplus
exports, Indian did not get any benefit from the inflow of bullion or foreign exchange.
4. Expenditure on war: The export surplus was used to incur expenses on war fought by the
British government against various countries. This resulted in a huge drain of Indian wealth
during the colonial period.
Q10: Which is regarded as the defining year to mark the demographic transition from its first
to the second decisive stage?

Ans: The year 1921 is regarded as the defining year to mark the demographic transition from
its first to the second decisive stage.

Q.11: Give a quantitative appraisal of India’s demographic profile during the colonial period.
Ans: Following is the quantitative appraisal of India‘s demographic profile during the colonial
period:

1∙ Demographic Transition: Before 1921, India was in the first stage of demographic
transition. The second stage of transition began after 1921. However, neither the total
population of India nor the rate of population growth at this stage was very high.
2∙ Rural Population: Around 85% of the country‘s population lived mostly in villages and
derived livelihood directly or indirectly from agriculture.
3∙ Overall literacy level was less than 16%
4∙ Female literacy was less than 7%.
5∙ Infant mortality was very high at 218 per 1000 live births.
6∙ Life expectancy was 44 years.

Q12: Highlight the salient features of India’s pre-independence occupational structure.

Ans: occupational Structure means distribution of working population across various
industries and sectors. It showed little sign of change which was as follows:
i) Agricultural sector: employed the largest portion of the workforce; at the level of 70 to 75%.
ii) Manufacturing sector employed about 10% of the workforce.
iii) Services sector employed about 15 to 20% of the workforce.
But the occupational structure was full of regional variations.
1∙ Decline in dependence on agriculture: For example; in Madras Presidency, Bombay and
Bengal; dependence on agriculture had significantly reduced. Development of various
industries in these regions can be attributed to such variations. In these regions, more and
more people were joining the manufacturing and services sector as they were port areas
and a lot of trade occurred there.
2∙ Increase in the share of agriculture: However, there had been an increase in the share of
workforce in agriculture during the same time in states such as Orissa, Rajasthan and
Punjab.

Q13: Underscore some of India’s most crucial economic challenges at the time of
independence.

Ans: Some of the most crucial economic challenges at the time of independence were as
follows:
1∙ Growth of the country with equity- to reduce poverty
2∙ Development and public orientation of railways and roadways.
3∙ Development of basic industries; like iron and steel.
4∙ Improvement of private capital.
5∙ Increasing employment opportunities.
6∙ Increasing various aspects of human development index; like literacy, child mortality, life
expectancy, etc.
7∙ Technology upgradation in agriculture and land reforms.
Q.14: When was India’s first official census operation undertaken?
Ans: India‘s first official census operation was undertaken in 1881.

Q15: Indicate the volume and direction of trade at the time of independence.

Ans: India has been an important trading nation since ancient times. But the restrictive
policies of production, trade and tariff pursued by the colonial government adversely
affected the structure , composition and volume of India‘s foreign trade. Following are the
main points:
A).Structure and composition:

i)Exporter of primary products: At the time of independence, India was an exporter of primary
products; like raw silk, cotton, wool, sugar, indigo, jute etc.
ii)Importer of finished products:
India was a net importer of finished goods like Cotton cloths, silk clothes, woollen clothes,
and light machinery, capital goods etc. from Britain.
B)Direction and volume of trade:

i)Monopoly control of Britain in India’s Foreign Trade:

Britain maintained monopoly control over India‘s foreign trade. Britain was the main trading
partner of India. Trade was mainly restricted to Britain .However, trade also continued with
China, Sri Lanka and Iran.

Q.16: Were there any positive contributions made by the British in India? Discuss.
Ans: While we discuss all the negatives associated with the British rule in India, we often
tend to forget many positives which came to India due to colonial rule.
1.The biggest contribution by the British was the construction of the railways. Railways
connected almost the whole country which facilitated inland trade and cross-cultural
exchange.
2.The British also introduced postal and telegraph services which helped in communication
and thus supported business activities.
3. The British also made fundamental changes in the laws of the land which further helped
in enhancing the business environment in economy
Additional Questions:

1 What was the condition of agriculture sector at the time of Independence?

Ans : 1) Low level of agricultural productivity :-
Agricultural productivity became very low and this stagnation in agriculture sector was mainly
due to systems of land settlement that were introduced by the British Government. The
Zamindari system, the profit accruing out of the agriculture sector went to Zamindaris
instead of the cultivators. This lead to discouragement amongst the cultivators to produce
less.
2. High dependence on Monsoon :-
Agriculture sector was mainly dependent on monsoon. No effort was ever made under the
British rule to develop permanent means of irrigation.
3. Lack of Proper Input:-
Low level of technology, lack of irrigation facility and negligible use of fertilizers, added to
aggravate the plight of the farmers and contributed to the dismal level of agricultural
productivity.
Q.2 What was the condition of Industrial sector at the time of Independence?
Ans :- 1) Discriminatory Tariff Policy:-

The British Government allowed tariff free export of raw materials from India and tariff free
import of British industrial products into India. But a heavy duty on the export of Indian
handicrafts products. It leads to decay of handicrafts industry in India.
(ii) Competition from machine made goods:-
Industrial revolution in Britain gave a stiff competition to the handicraft industries in India.
Due to low cost and better quality product produced by machine forced the Indian craftsmen
to shut down the handicraft Industry in India.
(iii) New Patterns of Demand:-
Owing to British rule in India, a new class of people emerged in India. This changed the
pattern of demand in India against the Indian products and in favour of British products. As
a result, the Indian Industry tended to Perish
(iv) More market for British Goods:-
An introduction of railways facilitated the transportation of the British products to different
parts of the country. As a result, the size of the market for the low cost British product
expanded while it started shrinking for the high cost Indian products. This lead to decay of
Industry in India.
Q3. What was the condition of foreign trade under the British rule?

Ans:i) Discriminative tariff policy adopted by the British Government:

India became net exporter of raw materials and primary products.
On the other hand, it became net importer of finished goods reproduced by the British
Industry.
(ii) Composition of exports and imports showed the backwardness of Indian economy.
Exports and imports were largely restricted to Britain only due to monopoly control of
India‟s foreign trade.
(iii)Export surplus:
Surplus profit made and account of foreign trade during the British rule was distributed on
administrative and as well as on war expenses. It was only used to increase the pursuits of
the British Government.
Q4 Mention the demographic profile during the British rule.
Ans : 1) High birth and High death rate implied low survival rate, which was nearly 8 per
thousand per annum.
2) Life expectancy was as low as 32 years which shows the lack of health care facilities, lack
of awareness as well as lack of means for health care.
3) Literacy rate was as low as 16 percent, which reflects the social and economic
backwardness of the country.
Q5. Mention the condition of occupation structure at the time Independence.
Ans:- (i) Agriculture was the principal source of occupation and about 72.7 percent of
working population was engaged in agriculture.
(ii) Only 10.1% of the working population was engaged in the manufacturing sector, which
showed the backwardness of Indian Industry at the time of Independence.
(iii) Only 17.2 percent of the working population were engaged in the service sector, which
also proved the slow growth of tertiary sector at the time of Independence.

(iv) There was an unbalanced growth of Indian economy at the time of Independence
Q6 What was the condition of Infrastructure at the time of Independence.
Ans : 1) There was some infrastructural development during the British in the area of
transport and communication.
2) Introduction of railways was a major breakthrough followed by the development of some
ports and the construction of some roads.
3) But the main motive of the British government was to foster the interest of the British
Government rather than to accelerate the growth of Indian economy.
4) There was transition from barter system of exchange to monetary system of exchange,
which facilitated division of labour large scale production.
Q7. Evaluate Indian economy on the eve of independence.
OR
Which sort of Indian economy Britishers left at the time of Independence?
Ans.
1.Colonial Economy: Colonial character of trade is shown in two things
i) India became cheap exporter of raw material and importer of manufactured material
ii)British capital gained control over large part of Indian economy.
2. Backward economy: Backwardness of the economy was reflected in low agricultural
growth, poverty, illiteracy, famine, hunger, high mortality rate, low life expectancy etc.
Decline of handicraft industry led the workers unemployed and slow growth of modern
industry prevented the progress in the economy.In the middle 18thcentaury India which was
known as a golden bird and self reliant economy, transformed into a poor & backward
economy.
3. Stagnant Economy: GDP and National income estimates during British period were done
by some economists & considered very significant. Most studies did find that the country‘s
growth of aggregate real output during the first half of the twentieth century was less than
two per cent coupled with a meagre half per cent growth in per capita output per year. This
shows stagnant growth in India.
4. Partitioned Economy: Partition of India, Pakistan and Bangladesh was a great loss to
the Indian economy. Most of the raw material centres were left with these countries due to
which our industries faced the problem of lack of raw material.
5. Depleted Economy:Our country's resources are draining to Britain. Export surplus was
there but it did not result in any flow of gold or silver into India. Rather, this was used to
make payments for the expenses incurred by an office set up by the colonial government in
Britain, expenses on war, again fought by the British government, and the import of invisible
items, all of which led to the drain of Indian wealth.

6. Semi Feudal Economy: Zamindari system was dominating in India where zamindars
were acting as feudal lords and cultivators were exploited. Their situation was little bit better
than serfs in feudal system, so it was called as semi feudal economy.
OBJECTIVE TYPE QUESTIONS
Q1: When was the 1st census data compiled during the British Raj? ( Choose the correct
alternative)
a)1882
b)1881
c)1981
d)1985
Answer: 1881
Q2: Worst Bengal Famine occurred in _____________. ( Fill up the blank with correct
answer)
Answer: 1943
Q3: Tata Iron and Steel company (TISCO) was incorporated in India in year_________
Answer: 1907
Q4: During British Period India‘s life expectancy was______ years and now it is---------
years.
Answer: As per the government issued data, life expectancy during British India was 44
years and today it is 68 years.
Q5: Suez Canal was opened in year____________.
Answer: 1869
Q7: Which of the following is not true about Suez canal
a)Suez canal connects Mediterranean Sea with red sea
b)It reduced the transportation cost as the distance was reduced
c)It was a natural canal in north eastern Egypt
d)It connects Port Said to Suez
Answer: (c)
Q8: When were the Railways introduced in India?
a)1830
b)1860
c)1853
d)1900
Answer: 1853
Q9: IMR (Infant Mortality Rate) during British India was_____________ children per
thousand live birth.
Answer: It was 218 per 1000
Q10: Which of the following was not correct about muslin?
( Choose the correct option)
a)A world fame exquisite type of cotton textile
b)Finest quality of muslin was called malmal
c)It originated in Pakistan
d)foreign travellers refer to the cloth as malmal shahi and malmal khas
Answer: (c)
Q11: India was particularly well known for which of its handicraft industries at the advent of
British period:
i)cotton textiles, ii) silk textiles iii) metal work iv) precious stone works Choose the correct
option
a)i) & iv only
b)i), ii) & iv)
c) i), ii) & iii)
d) all the above
Answer: d) all the above
Question 12: ________ and __________industries were adversely affected during the
partition of India? Answer: The Textile and Jute industries
Question 13: Excess of export over import is called as ________________. ( Fill up the
blank with correct answer)
Answer: export surplus. Export Surplus = Export – Import (In positive)
Question 14: Most of the studies disclosed that India‘s growth of aggregate real output
during the first half of the twentieth century was less than___________. ( Fill in the blanks
with correct options) a) >0.5%
b) >5%
c) >2%
d) >1.5%
Answer: c)
Page 4 of
Question 15: During British rule ___________ percent growth was recorded in Per capita
output per year. ( Fill up the blank with correct answer)
Answer: 0.5%
Question 16: The year1921 is described as the ―Year of Great Divide ‖because of a) High
birth rate and high death rate
b) High birth rate and low death rate
c) Low birth rate and high death rate
d) Low birth rate and low death rate
Answer: b)
Question 17: Who introduced Zamindari system in India?
Answer: Zamindari system was introduced by Lord Cornwallis in India, in the year 1793 via
the Permanent Settlement Act (PSA). It was introduced in the provinces of Varanasi, Bihar,
Bengal and Orissa. The Zamindars were considered and recognised as the landlords as
long as they paid the revenue to the East India Company regularly.

Chapter: 2
INDIAN ECONOMY ( 1950-1990)
Q1: Define a plan.
Ans: A plan is a long term strategy which spells out how the resources of a nation are going
to be used. A plan should have some general goals and some specific goals which are to be
achieved within a specified time period.
Q2: Why did India opt for planning?
Ans: Indian policy makers have opted mixed economy for the country where public sector as
well as private sector both coexist.
Following were the reasons for opting planning.
i)Poor, Backward and stagnant economy:
At the time of independence, Indian economy was in very poor shape. All indicators, GDP,
Per capita income, health, education etc were showing low and poor performance.
ii)Low Private Capital: The private capital was at a low level. Private sector was not so
strong to invest huge amount for the economic development of the country. So development
responsibilities lies with the government.
iii)Building the basic Industries and other sectors:
Basic industries were very few in numbers. The whole economy was dependent on a few
sectors. Government has to take up the responsibility of development , so planning was
required. Agriculture was done through primitive methods and needed a lot of improvement
to feed a growing population. The first Prime Minister and other thinkers of the time thought
it suitable to opt for a planned economy.
Q3: Why should plans have goals?
Ans: For any plan to succeed you need to have some goals. Without a goal, one does not
know where to reach. It is similar to setting a destination before beginning a journey.
Without a preset destination, you will reach nowhere at the end of a journey.
Q4: What are High Yielding Variety (HYV) seeds?
Ans: High Yielding Variety (HYV) seeds are new variety of seeds which are produced after
cross breeding or genetic engineering. As the name suggests; HYV seeds give higher yields
per acreage than the conventional seeds.
Q5: What is marketable surplus?
Ans: Excess of production over consumption is marketed surplus. If a farmer produces so
much of farm produce that a surplus amount can be saved after his own consumption, this
surplus amount can be sold in the market. This surplus amount is called market surplus.
Q6: Explain the need and type of land reforms implemented in the agriculture sector.
Ans: There were some land reforms introduced in the agriculture sector.
1.Abolition of Zamindari: The first reform was related to the ownership of land. The actual
tillers; who were not the owners of the land were given the ownership of land. It was
assumed that ownership would give them motivation to invest in improvement of land and it
would help in better farm productivity.
2.Fixing Land Ceiling: The second reform was related to the land ceiling. This put a ceiling
on maximum land holding which a farmer could have. This reform helped in equitable
distribution of land. Previously, a few farmers held the ownership of biggest chunks of land;
while most of the farmers were marginal farmers or landless farmers.
3.Redistribution of land: excess of land which was taken from zamindars after ceiling was
announced as surplus land which was distributed among the land less.
4.Consolidation of Landholdings: If a farmer has many land pieces scattered over here
and there, consolidation provided one compact plot of larger size instead of many small
plots.
Q7: What is Green Revolution? Why was it implemented and how did it benefit the farmers?
Explain in brief.
Ans: In mid 1960‘s a new agricultural strategy for agricultural development. The package of
following three was used for increasing production:
i)HYV Seed: Using HYV seeds for higher yield in quantity and quality both. Government has
provided these seeds to the farmers for getting good quality crops.
ii)Use of Chemical fertilizer: Using chemical fertilizers as per the soil conditions. Farmers
are supposed to test the soil and use chemical fertilizer as per requirement.
iii)Appropriate use of water: HYV seeds and chemical fertilizer need plenty of water.
Modern methods of irrigation were to be used for better yield.
Government has implemented Green Revolution for large increase in food grain production.
BENEFITS OF GREEN REVOLUTION:
i) High foodgrains production specially wheat & rice.
ii) India became self sufficient in food grains. The dependence of the country on other
countries for foodgrains has reduced.
iii) Income of farmers increased as they have more surplus of foodgrains.
i) The risk of the small farmers being ruined when pests attack their crops was considerably
reduced by the services rendered by research institutes established by the government.
Q8: Explain 'growth with equity‘ as a planning objective.
Ans: Equity was one of the major goals of planning. Growth, modernization and self-reliance
(the other goals of planning) could not be enough if the fruits of these developments did not
reach a large section of the society. If the issue of equity is not taken care of, then the rich
would become richer and the poor would become poorer. Prosperity would be concentrated
in only a few hands and a vast section of the society would be devoid of the quality of life
which a prosperous economy can give. Thus, equity should be a major objective of planned
economy. Government is trying to fulfil the basic needs of every Indian like food, decent
house, education, health care etc. Government imposes high tax on rich and launches
various welfare schemes for the poor, deprived sections of population.
Q9: Does modernisation as a planning objective create contradiction in the light of
employment generation? Explain.
Ans: It is a wrong notion that modernization as a planning objective creates contradiction in
the light of employment generation. Modernization not only involves adoption of new
technology but also changes in social norms. Many early thinkers thought that new
machines can reduce employment opportunities because one machine can do the work of
hundreds of people in less time. But we should not forget that a new machine can help in
opening up new employment opportunities which could not have been even thought of.
Following example illustrates this in a relevant way.
When our former Prime Minister, Rajiv Gandhi talked about computerization to modernize
various sectors; there were huge protest. People thought that since a computer can do the
work of thousands of people in a fraction of time, it would result in mass unemployment. But
current scenario tells a different story. Thanks to the advent of computer and IT, many new
employment opportunities have opened up about which people could not even imagine in
the past.

Q10: Why was it necessary for a developing country like India to follow self-reliance as a
planning objective?
Ans: This policy was considered a necessity in order to reduce our dependence on foreign
countries, especially for food. It is understandable that people who were recently freed from
foreign domination should give importance to self-reliance. Further, it was feared that
dependence on imported food supplies, foreign technology and foreign capital may make
India‘s sovereignty vulnerable to foreign interference in our policies.
For a developing country, it is very important that local business grows to a size that
develops the ability to compete with companies from other nations. Moreover, at the time of
independence; it was feared that overdependence on other countries may lead to
interference in domestic policies. Self-reliance was desirable at least in those products and
services which catered to the basic needs such as food and clothing.
For this government should try to increase production of the country and able to import the
goods which are in short supply.
Q11: What is sectoral composition of an economy? Is it necessary that the service sector
should contribute maximum to GDP of an economy? Comment.
Ans: An economy can be divided into three main sectors, viz. primary, secondary and tertiary
sectors. Agriculture and related activities come under primary sector, industries come under
secondary sector and services come under tertiary sector.
Relative share in GDP and in employment opportunities of different sectors shows the
sectoral composition of an economy. Traditionally, it has been seen that an economy
remains over-dependent on agriculture during initial stages of development. It gradually
progresses to being dependent on the industries. In case of developed economies,
dependency on services sector is the highest. This is not a rule but experience from most of
the developed economies suggests that a higher contribution by services sector is an
indication towards a developed economy.
Q12: Why was public sector given a leading role in industrial development during the
planning period?
Ans: Following were the reasons for giving leading role to public sector :-
i)Poor, Backward and stagnant economy:
At the time of independence, Indian economy was in very poor shape. All indicators, GDP,
Per capita income, health, education etc were showing low and poor performance. India was
a totally depleted, backward, stagnant, poor and partitioned economy that required
immediate revival. That was possible only when government takes initiatives.
ii)Low Private Capital: The private capital was at a low level. Private sector was not so
strong to invest huge amount for the economic development of the country. So development
responsibilities lies with the government. Most of the sectors which required huge
investments could not be operated by private businesspersons.
iii)Building the basic Industries and other sectors:
Basic industries were very few in numbers. The whole economy was dependent on a few
sectors. Government has to take up the responsibility of development , so planning was
required. Agriculture was done through primitive methods and needed a lot of improvement
to feed a growing population. The basic industries; like iron and steel and heavy machinery
needed immediate infusion of capital and technology. Infrastructure needed to be built. All of
this could not have been possible without the intervention of the government. Hence, public
sector was given a leading role in industrial development during the planning period
iv)Welfare of the people:
Our constitution described socialistic pattern of the society as the main goal, which was
possible only by the public sector. Private sector works for profit, so the objective was not
possible .
Q13: Explain the statement that green revolution enabled the government to procure
sufficient food grains to build its stocks that could be used during times of shortage.
Ans: Before the beginning of the Green Revolution, the government had to depend on
American imports to fulfil the demand of food during times of shortage. Green Revolution
helped in creating market surplus of food grains; especially wheat and rice. This resulted in
falling prices of food grains. There was so much surplus food available that the government
got enough food grains to build buffer stocks. This buffer stock could be used during the
times of shortage. There was no more dependency on imports to meet the need during
times of shortage.
Q14: While subsidies encourage farmers to use new technology, they are a huge burden on
government finances. Discuss the usefulness of subsidies in the light of this fact.
Ans: Subsidies to farmers has always been a debatable issue. It is beyond doubt that
subsidies result in huge financial burden on the government. But subsidies are important
also in the following respects:
i) Affordable cost of cultivation for small farmers.
Subsidizing HYV seeds, fertilizers, farm equipments, etc. helps even small farmers to afford
the inputs for cultivation. Prices are reduced for the inputs used in cultivation that helps
small farmers adopt new agricultural technology. They can also buy subsidised goods from
PDS, that improves the standard of consumption of poor people.
ii) Improving Productivity of Small Farmers:
Subsidy enables the farmers to improve their productivity. This helps poor farmers increase
their income.In the absence of subsidy, only the rich farmers would be benefited from new
technologies; like HYV, fertilizers, pesticides and irrigation facilities. This will make the rich
farmers more prosperous but the poor farmers would become even worse.
iii) Benefits for the country:
In the long run, good farm output benefits not only the farmers but the whole nation. Hence,
in spite of putting some financial burden on the government, subsidies definitely help the
farming community in particular and the whole society in general.
Q15: Why, despite the implementation of green revolution, 65 per cent of our population
continued to be engaged in the agriculture sector till 1990?
Ans: During 1950s, the contribution of agriculture to the GDP was 59%; which decreased
substantially to 35% by 1990. Contribution of other sectors in the GDP increased sharply
during this period. But employment generation in secondary and tertiary sectors did not
increase at the same pace. As a result, even after about four decades of the planned
economy, contribution of agricultural sector in employment generation remained more or
less same. 65% of the total population still continued to be engaged in agriculture till 1990.

Q16: Though public sector is very essential for industries, many public sector undertakings
incur huge losses and are a drain on the economy‘s resources. Discuss the usefulness of
public sector undertakings in the light of this fact.
Ans: Public Sector undertakings are useful in following respects;
i)Public Welfare: Public sector undertaking‘s main goal is public welfare rather than profit
making. It gives all the dues to the employees.
ii) Employment in Organised sector: The workers in PSUs are getting all benefits that
organised sector gets, while private sector mostly work in unorganised sector, so does not
keep the interest of workers in mind and workers are exploited.
iii)Production of Public Utility goods: Public sector undertakings usually produce goods or
services which are needed by people so that even the poor can afford such goods and
services.
In light of above benefits of PSU‘s government should continue the PSU‘s as the organised
sector is only around 7% now. Excessive loss making units may be burden on the economy,
so it may be sold to private sector.
Q17: Explain how import substitution can protect domestic industry?
Ans: If domestic industry can grow to such a level then it will be able to substitute the
imports. Imports are always costlier than locally produced goods, because importing
something involves transportation costs and tariffs. Apart from reducing the cost of a
particular product, import substitution also gives an opportunity to local players to gain
expertise and to grow in terms of revenue. Thus, import substitution helps in protecting the
domestic industry as well.
Q18: Why and how was private sector regulated under the IPR 1956?
Ans: Under the IPR 1956, private sector was regulated through licensing system. To start a
business, a company had to obtain a license from the government. The government also
put limit on the quantity of goods produced so that production should not be more than what
the economy needed. Certain sectors were exclusively reserved for small scale sector. It
was believed that small scale sector would provide more employment to people. If a
company wished to open a factory in backward area, then obtaining a license was very
easy. Thus, opening a new venture or capacity expansion was strictly controlled by the
government.
Q21: ―"Development Goals may be conflicting "Explain the statement by giving an
example.
OR
"It will be unrealistic to expect all the goals of a plan to be given equal importance". Explain
Ans: It will be unrealistic to expect all the goals of a plan to be given equal importance in all
the plans. In fact the goals may actually be in conflict. For example, the goal of introducing
modern technology may be in conflict with the goal of increasing employment if the
technology reduces the need for labour. The planners have to balance the goals, a very
difficult job indeed. We find different goals being emphasised in different plans in India.
Extra questions

Q1: The portion of agricultural produce which is sold in the market by the farmers is known
as_____________. ( Fill up the blank with correct answer)
Answer: Marketed surplus
Q2: Who presented the 1st 5-year plan of the country?
Answer: Pandit Jawaharlal Nehru
Q3 : _______________ refers to the size (dimension) of the land that an individual or family
can possess. (Fill in the blank with correct answer)
Answer: Land ceiling. In India, this act was passed during the year 1961-62 and it was
controlled by all the state governments. However, the ceiling limits vary from state to state.
Q3 : _____________is the father of high yielding variety seed.
Answer: Norman Borlaug.
Q4: High price is a signal of _____________ of goods. ( scarcity/ abundance) ( fill in the
blank with correct option)
Answer: Scarcity
Q5: The planning commission was set up in which year in India?
a)5th March 1951
b)25th April 1951
c)20th March 1951
d)15th March 1950
Answer: The planning commission was set up in the year 15th March 1950.
Q6: What were the priorities in the 11th five-year plan?
Answer: The primary focus areas in the 11th 5-year plan was – infrastructure development,
health, agriculture and education.
Q7: Define small scale industries.

Answer: Small scale industries are those which have fixed investment in plant and
machinery, whether hold on ownership basis or lease basis or hire purchase basis not more
than Rs. 1 crore.
Q8: Focus points of 1st Five year plan was __________ growth and 2nd five-year plan was
__________. ( Agriculture/ Industry/ Infrastructure) ( Fill up the blank with correct alternative)
Answer: Agriculture was the focal point for the 1st five-year plan whilst Industries was the
focal point for the 2nd five-year plan.
Q9 : Green revolution is also known as_____________. ( Fill up the blank with correct
answer) Answer : Wheat revolution
Q10 : __________________ is a type of economic system in which direct regulation and
management of the property and enterprise and workers are done through government. (
Capitalism/ Socialism) ( Fill up the blank with the correct option)
Ans: socialism