CHAPTER 2: Indian Economy 1950-1990 (Date : 25-07-2018)

Correct Answer : D

Explanation

After achieving independence, India sought an alternative to the extreme versions of capitalism and socialism. This resulted in a mixed economy model in which, the government and the market together answer the three questions of what to produce, how to produce and how to distribute what is produced. In a mixed economy, the market will provide whatever goods and services it can produce well, and the government will provide essential goods and services which the market fails to do. Hence, (d) is the correct option.

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Correct Answer : C

Explanation

In mixed economies, there is a partnership between both private and public, that is, the government and the market together answer the three questions of what to produce, how to produce and how to distribute what is produced. In a mixed economy, the market will provide whatever goods and services it can produce well, and the government will provide essential goods and services which the market fails to do. Hence, (c) is the correct option.

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Correct Answer : D

Explanation

• In a socialist society the government decides what goods are to be produced in accordance with the needs of society. It is assumed that the government knows what is good for the people of the country and so the desires of individual consumers are not given much importance.
• The government decides how goods are to be produced and how they should be distributed. In principle, distribution under socialism is supposed to be based on what people need and not on what they can afford to purchase. Strictly, a socialist society has no private property since everything is owned by the state.

Hence, all the statements are correct.

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Correct Answer : B

Explanation

The above statement describes the capitalist economy. In a market economy, also called capitalism, only those consumer goods will be produced that are in demand, i.e., goods that can be sold profitably either in the domestic or in the foreign markets. In a capitalist society the goods produced are distributed among people not on the basis of what people need but on the basis of what people can afford and are willing to purchase. Hence, (b) is the correct option.

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Correct Answer : B

Explanation

The Planning Commission was set up by a Resolution of the Government of India in March 1950 in pursuance of declared objectives of the Government to promote a rapid rise in the standard of living of the people by efficient exploitation of the resources of the country, increasing production and offering opportunities to all for employment in the service of the community. Hence, (b) is the correct option.

The Planning Commission was charged with the responsibility of making assessment of all resources of the country, augmenting deficient resources, formulating plans for the most effective and balanced utilisation of resources and determining priorities. Jawaharlal Nehru was the first Chairman of the Planning Commission.

However, it was dissolved by the current regime and NITI Aayog replaced the Planning Commission

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Correct Answer : A

Explanation

In India, the Second Five-Year Plan (1956-61), a landmark contribution to development planning in general, laid down the basic ideas regarding goals of Indian planning; this plan was based on the ideas of Prasanta Chandra Mahalanobis. In that sense, he can be regarded as the architect of Indian planning. Hence, (a) is the correct option.

The strategy of growth laid emphasis on rapid industrialisation with a focus on heavy industries and capital goods. Due to the assumption of a closed economy, shortages of food and capital were felt during this Plan.

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Correct Answer : D

Explanation

The GDP is the market value of all the goods and services produced in the country during a year. National income is equal to GNP less the consumption of fixed capital.

Service sector contributes highest in India’s aggregate GDP. Hence, both statements 1 and 2 are NOT correct.

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Correct Answer : B

Explanation

At the time of independence, the land tenure system was characterized by intermediaries who merely collected rent from the actual tillers of the soil without contributing towards improvements on the farm. Equity in agriculture called for land reforms which primarily refer to change in the ownership of landholdings. Land reforms were successful in Kerala and West Bengal because these states had governments committed to the policy of land to the tiller. Hence, (b) is the correct option.

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Correct Answer : A

Explanation

The use of HYV seeds required the use of fertiliser and pesticide in the correct quantities as well as regular supply of water; the need for these inputs in correct proportions is vital. The farmers who could benefit from HYV seeds required reliable irrigation facilities as well as the financial resources to purchase fertiliser and pesticide. As a result of, in the first phase of the green revolution (approximately mid 1960s upto mid 1970s), the use of HYV seeds was restricted to the more affluent states such as Punjab, Andhra Pradesh and Tamil Nadu. Further, the use of HYV seeds primarily benefited the wheat growing regions only. Hence, (a) is the correct option.

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Correct Answer : C

Explanation

The green revolution refers to the large increase in production of food grains resulting from the use of high yielding variety (HYV) seeds especially for wheat and rice. The use of these seeds required the use of fertiliser and pesticide in the correct quantities as well as regular supply of water. Hence, statement 1 is correct.

A good proportion of the rice and wheat produced during the green revolution period (available as marketed surplus) was sold by the farmers in the market. As a result, the price of food grains declined relative to other items of consumption. The low-income groups, who spend a large percentage of their income on food, benefited from this decline in relative prices. Hence, statement 2 is correct.

The green revolution enabled the government to procure sufficient amount of food grains to build a stock which could be used in times of food shortage.

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Correct Answer : B

Explanation

In accordance with the goal of the state controlling the commanding heights of the economy, the Industrial Policy Resolution of 1956 was adopted. This resolution formed the basis of the Second Five Year Plan, the plan which tried to build the basis for a socialist pattern of society. This resolution classified industries into three categories:

• The first category comprised industries which would be exclusively owned by the state;
• The second category consisted of industries in which the private sector could supplement the efforts of the state sector, with the state taking the sole responsibility for starting new units;
• The third category consisted of the remaining industries which were to be in the private sector.

Although there was a category of industries left to the private sector, the sector was kept under state control through a system of licenses. No new industry was allowed unless a license was obtained from the government. This policy was used for promoting industry in backward regions; it was easier to obtain a license if the industrial unit was established in an economically backward area. In addition, such units were given certain concessions such as tax benefits and electricity at a lower tariff. The purpose of this policy was to promote regional equality. Hence, (2) is correct.

An existing industry also had to obtain a license for expanding output or for diversifying production (producing a new variety of goods). This was meant to ensure that the quantity of goods produced was not more than what the economy required. License to expand production was given only if the government was convinced that the economy required the larger quantity of goods. Hence, (3) is correct.

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Correct Answer : A

Explanation

In 1955, the Village and Small-scale Industries Committee, also called the Karve Committee, noted the possibility of using small-scale industries for promoting rural development. A ‘small-scale industry’ is defined with reference to the maximum investment allowed on the assets of a unit. This limit has changed over a period of time. In 1950 a small-scale industrial unit was one which invested a maximum of rupees five lakh; at present the maximum investment allowed is Rs 5 crore. Hence, (a) is the correct option.

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Correct Answer : A

Explanation

The industrial policy that we adopted was closely related to the trade policy. In the first seven plans, trade was characterised by what is commonly called an inward looking trade strategy. Technically, this strategy is called import substitution. Hence, statement 1 is correct.

This policy aimed at replacing or substituting imports with domestic production. Hence, statement 2 is NOT correct.

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