Indian Economy 1950-1990

Economic Planning: Means utilisation of country’s resources in different development

activities in accordance with national priorities.
Goals of Planning in India
a. Long Term Goals (To be achieved over a period of 20 years)
b. Short Term Goals (To be achieved over a period of five years)

LONG TERM GOALS / OBJECTIVES OF PLANNING

A. Modernisation- Adoption of new technology and changes in social outlook
B. Self reliance- Reducing dependence on imports.
C. Economic Growth- Increase in the aggregate output of Goods & services.
D. Equity- Reduction in inequality of income and wealth.
E. Full employment- Refers to a situation when all the people in the working age group is
actually engaged in some gainful employment.

SHORT TERM GOALS / OBJECTIVES OF FIVE YEAR PLANS

Short term objectives vary from plan to plan depending on current needs of the country. For
example, first plan (1951-56) focused on higher agricultural production while in second plan
(1956-61) shifted the focus from agriculture to Industry. In India growth and equity are the
objectives of all the five year plans. The goal of current five year plan (12th, 2012-17) is
Inclusive Development.

AGRICULTURE
Main Features of Indian Agriculture:
1. Low productivity
2. Disguised unemployment
3. Dependence on rainfall
4. Subsistence farming- objective of farmer is to secure subsistence for his family not to earn
profit.
5. Traditional inputs
6. Small holdings
7. Backward technology
8. Landlord tenant conflict

Problems of Indian Agriculture

A. General Problems
1. Pressure of population on land
2. Land degradation
3. Subsistence farming
4. Social environment
5. Crop losses-by pest, insect, flood draught etc.

B. Institutional Problems
1. Small and scattered holdings
2. Poor implementation of land reforms
3. Lack of credit and marketing facilities

C. Technical Problems
1. Lack of irrigation facilities
2. Wrong cropping pattern
3. Outdated technique of production

Reforms in Indian Agriculture

A. Institutional Reforms also called Land reforms.
(i) Abolition of intermediaries
(ii) Regulation of rent
(iii) Consolidation of holdings
(iv) Ceiling on land holdings
(v) Cooperative Farming

B. General reforms
(i) Expansion of irrigation facilities
(ii) Provision of credit
(iii) Regulated markets and co-operative marketing societies
(iv) Support price policy

C. Technical Reforms or Green Revolution

(i) Use of HYV seeds
(ii) Use of chemical fertilizers
(iii) Use of insecticides and pesticides for crop protection
(iv) Scientific rotation of crops
(v) Modernized means of cultivation

ACHIEVEMENTS OF GREEN REVOLUTION

1. Rise in production and productivity
2. Increase in income
3. Rise in commercial farming
4. Impact on social revolution-use of new technology HYV seeds, fertilisers etc.
5. Increase in employment
6. Substantial Rise in Acreage

FAILURES OF GREEN REVOLUTION

1. Restricted to limited crops and areas such as two crops wheat & rice growing states like
Punjab, Haryana, U.P. and Andhra Pradesh
2. Partial removal of poverty
3. Neglected land reforms
4. Increase in income disparity between small and big farmers
5. Ecological degradation

INDUSTRY
ROLE OF INDUSTRIAL SECTOR IN INDIA
Industrialization is important for overall growth of a country. Following points highlight the
importance of Industry is an economy:
1. Provides employment
2. Raises national income
3. Promotes regional balance
4. Leads to modernisation
5. Helps to modernise agriculture
6. Leads to self-sustainable development
7. High potential for growth
8. Key to high volume of exports
9. Growth of civilisation
10. Change in basic structure of economy
11. source of Employment
12. Imparts Dynamism to Growth Process
Industrialisation is a pre-condition for the final take-off of an economy.

INDUSTRIAL DEVELOPMENT SINCE INDEPENDENCE

Share of industrial sector in the GDP has increased upto 20% in 2013-14.
The following important changes have taken place:
(i) Development of infrastructure like power transport, communication, banking & finance,
qualified and skilled human resource.
(ii) Much progress in the field of research and development.
(iii) Expansion of public sector.
(iv) Building up of capital goods industry.
(v) Growth of non-essential consumer goods industries.

PROBLEMS OF INDUSTRIAL DEVELOPMENT IN INDIA

1. Sectoral Imbalances- Agriculture and infrastructure have failed to provide the support to
the industrial sector.
2. Regional imbalance- Restricted to few states.
3. Industrial sickness- which raised the problem of unemployment.
4. Higher cost of industrial product due to lack of healthy competition.
5. Dependence on the Government- for reduction in tax or duty to make import easier.
6. Poor performance of the public sector
7. Under utilisation of capacity
8. Increasing capital-output ratio

ROLE OF PUBLIC SECTOR/GOVT. IN INDUSTRIAL DEVELOPMENT

Direct intervention of the state was considered essential in view of the following factors:
1. Lack of capital with the private entrepreneurs
2. Lack of incentive among the Pvt. entrepreneurs demand due to limited size of the market.
3. Socialistic pattern of society-main aim of Govt. is to generate employment rather than
profits.
4. Development of infrastructure
5. Development of backward areas
6. To prevent concentration of economic power
7. To promote import substitution

INDUSTRIAL POLICY RESOLUTION (IPR) 1956

Industrial policy is an important instrument through which the govt. regulates the industrial
activities in an economy.
The 1956 resolution laid down the following objectives of industrial policy.
(a) To accelerate the growth of industrialization
(b) To develop heavy industries
(c) To expand public sector
(d) To reduce disparities in income and wealth
(e) To prevent monopolies and concentration of wealth and income in the hands of a small
member of individuals
FEATURES OF INDUSTRIAL POLICY RESOLUTION (IPR) OF 1956
Features of Industrial policy resolution of 1956 were.
1. New classification of Industries: Industries were classified into three schedule depending
upon role of state.
(a) Schedule-A- 17 industries listed in schedule-A whose future development would be the
responsibility of state.
(b) Schedule-B- 12 industries were included in schedule-B, Private sector could supplement
the efforts of the Public Sector, with the state taking sole responsibility for starting new
units.
(c) Schedule-C - Other residual industries were left open to private sector.
2. Stress on the role of cottage and small scale industries.
3. Industrial licensing: Industries in the pvt. sector could be established only through a licence
from the government.
4. Industrial concessions were offered- Pvt. entrepreneurs for establishing industry in the
backward regions of the country. Such as tax rebate and concessional rates for power supply.

SMALL SCALE INDUSTRY (SSI)

A small scale industry is presently defined as the one whose investment does not exceed Rs. 5
crore.
CHARACTERISTICS OF SSI OR ROLE OF SMALL SCALE INDUSTRIES
1. Labour intensive-employment oriented
2. Self-employment
3. Less capital intensive
4. Export promotion
5. Seed beds for large scale industries
6. Shows locational flexibility
PROBLEMS OF SMALL SCALE INDUSTRIES
1. Difficulty of finance
2. Shortage of raw material
3. Difficulty of marketing
4. Outdated machines & equipment
5. Competition from large scale industries

FOREIGN TRADE
At the time of independence raw material was exported from India to Britain in abundance, on
the other hand finished goods from Britain were imported into India.
Notably our balance of trade was favourable (exports > imports). After independence, India’s
foreign trade recorded a noticeable change such as:
(i) Decline in percentage share of agricultural exports.
(ii) Increase in percentage share of manufactured goods in total exports.
(iii) Change in direction of export trade and import trade.
(iv) Decline of Britain as main trading Partner.

TRADE POLICY
In the first seven five year plans of India, the trade was commonly called an 'inward looking'
trade strategy.
This strategy is technically known as ‘Import Substitution’. Import substitution means
substituting imports with domestic production. Imports were protected by the imposition of
tariff and quotas which protect the domestic firms from foreign competition. Impact of Inward
looking Trade strategy on the domestic industry.
1. It helped to save foreign exchange by reducing import of goods.
2. Created a protected market and large demand for domestically produced goods.
3. Helped to build a strong industrial base in our country which directly lead to economic
growth.

Criticism of import substituting strategy

1. It did not lead to growth.
2. Lack of competition implied lack of modernization.
3. Growth of inefficient public monopolies.
4. It did not lead to efficiency.

The Industries Development and Regulation Act of India (1951)

The Industries development and resolution act (IDRA) .The Industries (Development and
Regulation) Act, (IDRA),was enacted in 1951, came into force from 8th May 1952 under a
notification of the Central Government published in the Gazette of India.The Act extends to
whole of India including the state of Jammu & Kashmir with a view to being under Central and
regulation of a number of important industries, the activities of which affect the country as a
whole and the development of which must be governed by economic factors of all India
importance.

MAIN OBJECTIVES OF IDRA act of 1951

1. Regulation of industrial development in accordance with planned priorities.
2. Avoidance of monopoly.
3. Balanced regional development.
4. Prevention of undue competition between large-scale industries and small scale industries.
5. Optimum utilization of scarce foreign exchange resources. Under this act the following were
applicable.
A. All the scheduled industries should be registered with the govt.
B. A licence must be obtained by all the new industries.
C. Govt. is authorized to examine the working of any industrial undertaking.
D. If the undertaking continued to be mismanaged, govt. can take over its management.

INDUSTRIAL LICENSING
Licensing is a tool for channelizing scarce resources in predetermined priority sector of an
economy.

PERMIT LICENCE RAJ

License Raj refers to regulations and accompanying bureaucracy that were required to set up and
run Indian businesses in India between 1951 and 1991. The Government resorted to licensing
system so that it can maintain control over industries as per the Industries Development and
Regulation Act, 1951.
Example: India’s automobile sector is most suitable to recall the heydays of license raj. In those
days, only a few brands such as Bajaj, Rajdoot (of Escorts), Vespa (of Bajaj later), Chetak (of
Baja), Lambretta etc. existed . Bajaj was market leader and its Chetak brand was so popular that
people used to book it and wait for months to get it delivered. The reason was that the Industrial
License stipulated what quantity of scooter they could produce and also that they could produce
only up to 25 per cent in excess of its licensed capacity. If they wanted to expand beyond this,
they needed prior permission.
Analysis of the Licensing Policy:
The Government had pursued the licensing policy to allocate the production targets set out in the
five years plans to the firms. The stated objectives of the licensing policy were as follows:
• To regulate the industrial sector
• To emphasize on balanced Regional Development.
• To encourage small-scale industry
• To encourage the new entrepreneurs to set up industries.
But the bureaucratic red tape imposed substantial administrative burden and there was no
certainty that an application for a license would be approved within or in what time frame. More
than one third applications were rejected which meant a loss of investments. This was a big
hurdle in rapid industrialisation.
CRITICISM AGAINST INDUSTRIAL LICENSING
1. There was an adhoc system for accepting or rejecting an application for licence.
2. The quality of techno economic examination conducted by Director General of technical
development was generally poor.
3. Licensing policy resulted in under utilisation of capacity in many industries.
4. In reality, the policy helped large business houses in accumulating economic power.

Short Questions with Answers - Indian Economy 1950-1990

Created by: Pj Commerce Academy
Full Screen
The document Short Questions with Answers - Indian Economy 1950-1990 is a part of
the Commerce Course Economics Class 12.
Q.1. List the different types of economic systems.
Ans. The three main types of economic systems are:
(i) Capitalist economy
(ii) Socialist economy
(iii) Mixed economy

Q.2. What is capitalism?

Ans. Capitalism refers to the economic system in which resources are owned privately and the
main objective behind economic activities is profit-making.

Q.3. When was licensing started in India?

Ans. In India, licensing was started in 1952.

Q.4. What is mixed economy?

Ans. Mixed economy is an economic system in which production, distribution and
consumption decisions are left to the free play of the market forces. However, a large part of
economic activities are regulated by the government to maximise the social welfare along with
individual welfare or self-interest.

Q.5. Define socialism.

Ans. Socialism is that economic system in which resources are owned by the government and
the main objective behind economic activities is social welfare.

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

Ans. India has mixed type of economic system.

Q.7. What do you mean by Small Scale Industries?

Ans. Small Scale Industry (SSI) is defined on the basis of maximum investment allowed on the
assets of a unit. This investment limit changes over a period of time.

Q.8. How many industries were reserved for public sector under Industrial Policy
Resolution, 1956?
Ans. Under Industrial Policy Resolution, 1956, 17 industries were reserved for public sector.

Q.9. What is industrial licensing?

Ans. Industrial licensing is a written permission of the government to a particular firm for the
production of particular product.

Q.10. Define capitalistic economy. Why was Pt. Jawaharlal Nehru not in the favour of
capitalism?
Ans. In capitalistic economy, resources are owned privately and the main objective behind
economic activities is profit-making. Problems of the economy are solved through free price
mechanism, independent of government intervention. Under this type of economy, goods are
produced and distributed among the people not on the basis of what they need but on the basis
of what the people can afford or are willing to purchase. The poor people are usually ignored
under such a system as they do not have the purchasing power to back their demand. As a
result, such goods are not produced. According to Pt. Jawaharlal Nehru, a vast majority of
people would not get the chance to improve their quality of life under capitalism and hence, he
was not in the favour of such a system.

Q.11. Define socialism. Why did our leaders not follow the path of socialism at the time of
independence?
Ans. Socialism is that economic system in which resources are owned by the government and
the main objective behind economic activities is social welfare. In this economy, the
government decides what goods are to be produced in accordance with the needs of the country
and distribution is based on what the people need. With the collapse of the Soviet System in
the last decade of the 20th century, our leaders preferred not to follow the clear path of
socialism.

Q.12. Explain the concept of mixed economy.

Ans. Mixed economy is an economic system in which production, distribution and
consumption decisions are left to the free play of the market forces. However, a large part of
economic activities are regulated by the government to maximise the social welfare along with
individual welfare or self-interest. It is a combination of capitalism and socialism. The
government and the market together answer the three basic questions of, what to produce, how
to produce and for whom to produce in the mixed economy. In this type of economy, private
sector or market will provide those goods and services, which it can produce well and the
government sector will provide those goods and services, which are essential for the welfare of
the society as a whole.

Q.13. Discuss the outcomes of India’s Five Year Plans over the years.
Ans. The first seven Five-Year Plans, covering the period 1951–1990, attempted to attain the
four main goals, i.e. growth, equity, modernisation and self-sufficiency. Of these four main
goals, these plans have succeeded mainly in achieving self-sufficiency. However, healthy
growth rates, modernisation and equity have not been fully achieved. Growth rates are still not
sufficient to meet the development criteria for the country. Modern facilities and technology
are available only to a limited section of the society. Despite various efforts, plans have failed
to reduce the gap between the rich and the poor. The main reason for failure in achieving th e
planned targets is the rapidly increasing population and the existence of corruption in the
whole system of the country.

Q.14. What is economic planning?

Ans. Economic planning is the process through which economic decisions are made by the
government for economic growth and development. In India, the duration of plans is five
years. This form of plans was adopted from the former Soviet Union. In economic planning, a
central authority defines a set of targets to be achieved related to growth and development of
the nation, keeping in view the resources available to the country, within a specified period of
time. According to Planning Commission, “Economic Planning means utilisation of country’s
resources into different activities in accordance with national priorities.”

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

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

Long Questions with Answers - Indian Economy 1950-1990

Created by: Pj Commerce Academy
Full Screen
The document Long Questions with Answers - Indian Economy 1950-1990 is a part of
the Commerce Course Economics Class 11.
Q.1. Define economic system. What are characteristics of different types of economic
systems?
Ans. An economic system comprises of production, distribution and consumption of goods and
services.
Characteristics of a Capitalist Economy
(i) Profit is the main motive of carrying out various economic activities.
(ii) Factors of production are privately owned.
(iii) Consumers are free to choose whatever they can afford.
(iv) Prices of goods and services are determined by market forces of demand and supply with
minimum intervention by the government.
Characteristics of a Socialist Economy
(i) The government is the only owner of the resources and is solely engaged in the production
and distribution of goods and services.
(ii) The prices of goods and services are determined by the government.
(iii) Welfare of the society is the main objective of carrying out various economic activities.
(iv) The government employs people and pays their salaries.
Characteristics of a Mixed Economy
(i) A mixed economy is a combination of capitalism and socialism.
(ii) The involvement of government in production and distribution activities is aimed at the
welfare of the public.
(iii) The involvement of private firms in production and distribution activities is aimed profit
maximisation.
(iv) The prices of goods and services produced by individuals are decided by the market forces
while the prices of goods and services produced by the government are decided by the
government.
Q.2. Explain the common goals of Five Year Plans in India.
Ans. The long-term goals are known as common goals of Five Year Plans. The long-term goals
of the five year plans are explained below:
(i) Economic Growth: Economic growth refers to the increase in the country’s capacity to
produce the output of goods and services in the country. Indian planners aimed at raising
economic growth as it was felt that it would lead to all round prosperity. It is very much
correlated with investment-income ratio. A good indicator of economic growth is steady
increase in the Gross Domestic Product (GDP). The GDP of a country is derived from the
different sectors such as primary, secondary and tertiary sectors of the economy. The
contribution of these sectors in GDP differs in different countries of the world. In India,
service or tertiary sector contributes more to the GDP. Now, the concept of economic growth
has been changed to sustainable development.
(ii) Modernisation: Modernisation refers to adoption of new technology and a change in social
outlook. Indian planners have always recognised the role of science and technology in the
country’s development. Application of science and sophisticated technology in production
raises the output level and over time accelerates the pace of economic growth. In this
modernisation process, farmers are increasing their output on the farm by using new seeds
varieties, fertilisers, pesticides, instead of using the old ones. Industrialists are also increasing
their output by using new types of machines. There is a change in the social outlook. Modern
society is encouraging the talent and appreciating the contribution of women in every field of
work.
(iii) Self-reliance: A nother common goal of Five Year Plan is self-reliance. This goal implies
reduction in the dependence on foreign aid. It means that we should spend on imports as much
as we can earn from exports. Self-reliance can be achieved through export promotion and
import substitution. Self-reliance does not mean the exclusion of commercial foreign capital.
The aim has been to promote self-reliance especially in food and defence so that independence
in policy may be maintained.
(iv) Equity: Equity means every Indian should be able to meet his or her basic needs and
inequality in the distribution of wealth should be reduced. In other words, social and economic
justice is among the common goals of the plans. Equity includes preservation of a democratic
political frame work; pursuit of economic, social and regional equality; checking concentration
of economic power; and special care to backward and disadvantaged sections of population.
(v) Removal of Unemployment and Poverty: Removal of unemployment and poverty is also a
common goal of Five Year Plans. Employment generation with increasing productivity and
elimination of poverty by providing basic needs such as food, a decent house, education and
health care are other important goals of the economic planning in India.

Q.3. Discuss the failures of Five Year Plans.

Ans. The main purpose of our plans was to remove poverty; to set up a socialistic pattern of
society; to reduce excessive dependence on agriculture through industrialisation; to remove
unemployment; etc. The important question which arises is whether the Indian plans have been
able to fulfill these objectives or not? If we cast a glance on the progress of these plans, we
shall know that all objectives could not be fulfilled. It means that our planned efforts met with
failure in many fields. The following points will enable us to discuss a few aspects in detail:
(i) Less Increase in Standard of Living: The main purpose of almost all the plans was to raise
the standard of living by removing poverty but increase in per capita income was so low that
standard of living could not be raised. Removal of poverty remained a dream only. More than
one-third of the population still lives below poverty line.
(ii) Unemployment: Planning Commission made efforts to remove unemployment in every
plan but unemployment continued to increase.
(iii) Inequality in the Distribution of Income and Wealth: One long-term purpose of the plans
was, setting up of a socialistic pattern of society. However, inequality of income and wealth
not only persist but seems to have increased in some field even after 65 years after the
initiation of plans. The rich have become richer. Thus, concentration of wealth goes on
increasing and ‘equality’ has been reduced to a mere slogan.
(iv) Poverty: One another important objective of planning has been the removal of poverty.
Unfortunately, we have not been able to achieve this objective. Poverty in India has been
caused mainly by slow growth rate, existence of widespread unemployment and inequalities in
income and wealth.
(v) Land Reforms: The decision of the government that the owner of the land will be the one,
who ploughs, could not be implemented very satisfactorily. Not much of success has been
gained in spite of spending a lot on the development of co-operative societies in the rural area.
In the same way, exploitation of landless agricultural labourers and tenants could not be
eliminated.
(vi) Increase in Prices: Prices went on increasing in all plans except the first one. As a result,
costs of development projects escalated and hence, the government had to face a lot of
difficulty in mobilising adequate resources.
(vii) Less Efficiency: In India, the work in some sectors like electricity generation, transport,
steel, production, efficiency can be increased to a large extent.
(viii) Crisis of Foreign Exchange: Planning failed to cover the deficit in the balance of
payments. Our export rate has been low. The heavy burden of debt and its interest have been
responsible for this.

Q.4. Give suggestions to make economic planning successful.

Ans. The following measures are suggested for making our planning more successful:
(i) Modest Targets and their Achievements: The targets should not be too high. These targets
should be modest and reasonable, only then they will be fulfilled. This will help in the success
of the plans and in earning people’s trust in the planning process.
(ii) Strict Control on Prices: Financial resources should be arranged in such a manner that there
is no unnecessary and uncontrolled monetary expansion. However, if monetary expansion does
take place, rigid control should be exercised on prices in order to keep inflation in check. If
prices remain controlled, no disturbances in plan expenditures will be caused and chances of
success of plans will increase manifold.
(iii) Increase in Employment Opportunities: The programmes which provide maximum
employment to the people should be included in the plans. Employment to all will earn public
approval, trust and co-operation.
(iv) Balance between Public and Private Sectors: The early plans laid too much emphasis on
public sector while restricting the private sector. But public sector failed to deliver the goods.
Therefore, it is essential to promote private sector also, which is usually more efficient and
returns-conscious.
(v) Population Control: Rapid growth of population is the basic cause of all the problems and
failure of planning. Growth of population is eating up the increase in national income. Thus,
controlling population will help in solving various other social problems.
(vi) Agricultural Development: Agriculture is the base of industrial development. Agricultural
development can provide more food to growing population and expand trade and commerce.
Therefore, land lying waste should be brought under plough and irrigation facilities should be
increased.

Q.5. Discuss the problems related to agriculture in India.

Ans. India is a developing country. Agriculture plays a vital role in its development. Most of
the population is engaged in agriculture and allied activities. But the agricultural sector is not
fully developed. There are many problems which are responsible for the backwardness of
Indian agriculture. These problems are as follows:
(i) Lack of Proper Marketing Channels: Marketing system of agricultural products is not good
in India. As a result of it, farmers could not get sound prices of their crops. Farmers sell their
products in villages at lower prices as a result of it they remain poor. Markets are far from the
villages and transportation facilities are not up to the mark.
(ii) Lack of Credit Facilities: Credit problem is one of the main problems of Indian farmers.
They find it easy to borrow from local money lenders at exorbitant rate of interest as taking
loan from banks and co-operative societies involve long and complicated procedures. This
tendency of loan taking makes them fall in debt traps.
(iii) Rural Indebtedness: Indebtedness is also the main problem of Indian agriculture. Indian
farmer always remains in debt. They have to take loans for cultivation and even for the sale of
their products. In the words of M.L. Darling, “Indian peasant born in debt, lives in debt and
dies in debt.”
(iv) Illiteracy: Large number of Indian farmers is illiterate. Hence, they are unable to use the
mechanised system of agriculture. As a result, their productivity remains low.
(v) Disguised Unemployment: Disguised unemployment exists on a large scale in agriculture.
The productivity of disguisedly unemployed people remains zero. Farmers cannot gain surplus
from their fields due to disguised unemployment.
(vi) Lack of Irrigation Facilities: Of the total cultivated area in the country, a little less than 40
per cent is irrigated even today. In the remaining areas, farming is largely dependent on
rainfall.

Q.6. Suggest some measures to remove the problems of agriculture in India.

Ans. The following measures can be adopted to improve the state of Indian agriculture and
farm productivity:
(i) New Techniques of Production: New agricultural technology with emphasis on High
Yielding Varieties and improved inputs must be adopted on a much wider scale. However, we
do not have to adopt capital intensive techniques of the west, rather our own research
institutions and experts should invent suitable techniques keeping in view the differences in
topography, climate, soil and other socio-economic conditions of different regions.
(ii) Land Reforms: Land reforms providing a land system conducive for agricultural
development should not only be enacted but also be faithfully implemented. The official land
tenure system must aim at ‘land to the tiller’ as self-cultivation can induce maximum
improvement in farming.
(iii) Creation of Economic Holdings: Most states have already passed acts relating to
consolidation of holdings in order to create economic holdings through removing the problem
 caused by sub-division and fragmentation of holdings. However, the progress has not been
satisfactory in many states. Even in states like Punjab, where the entire task of consolidation
was completed years ago, new sub-division and fragmentation have taken place. Therefore,
fresh measures like change in law of inheritance are required to overcome the difficulties
caused by sub-division and fragmentation.
(iv) Crop Insurance: Crop insurance is needed to provide protection against natural calamities
like floods, drought, locusts, thunderstorms, etc. Some states are already taking steps in this
direction. For example, Haryana Government is thinking of setting up a fund for this purpose.
(v) Cooperative Farming and Other Agricultural Cooperatives: Small and marginal farmers can
adopt scientific large scale commercial farming only through cooperative farming. This will
also solve the problem of uneconomic size of farms and act as a very powerful measure to
combat the problem of sub-division and fragmentation of holdings. Cooperative societies can
also enable the farmers to purchase modern inputs at cheap rate and store, process and market
their produce advantageously.
(vi) Extension of Irrigation Facilities: Expansion of irrigation facilities can contribute
significantly towards improving the agriculture. Along with starting more major and medium
irrigation projects to explicit our vast irrigation and hydel power potential, minor irrigation
facilities should also be expanded on a much larger scale.
(vii) Agricultural Inputs: Provision of improved inputs like certified seeds, fertilisers and
pesticides, etc. in adequate quantities and at fair prices is also essential for increasing farm
productivity.
(viii) Improved Implements: Large scale mechanisation of Indian agriculture is neither possible
nor desirable under existing conditions but use of improved implements and machines like
improved ploughs, drills, chaff cutters, threshers, small tractors and pumping sets can certainly
increase the efficiency of agricultural operations.

Q.7. Explain the policies which were adopted to promote equity in the agricultural sector.
Ans. The following policies can be adopted to promote equity in agricultural sector:
(i) Abolition of Intermediaries: Intermediary tenures like Zamindars, Jagirdars, etc., which
prevailed over 40 per cent of the country were abolished and the ownership of land was given
to the actual tillers or tenants. This ownership of land gives incentives to invest in making
improvements to the tillers.
(ii) Tenancy Reforms: It envisages provision of security to tillers or tenants and conferring
ownership rights on them. Under tenancy reforms, following three types of measures were
adopted:

 Regulation of Rent: Before independence, the rent charged by zamindars from the tenants was
exorbitant. Legislations were enacted after independence to regulate the limits of rents and
reduce the burden on tenants.
 Security of Tenure: Security of tenure to tenants had been given in all states through tenancy
reforms. For the security of tenure, legislations have been passed in most of the states.
 Ownership Rights for Tenants: Ownership rights for tenants have been conferred in areas of
Andhra Pradesh, Bihar, West Bengal, Punjab, Haryana and Tamil Nadu.

(iii) Land Ceiling: It was another policy to promote equity in the agricultural sector. The
purpose of land ceiling is to reduce the concentration of land ownership in a few hands. Land
ceiling laws were first enacted in the 1950s and the 1960s. It was further revised in 1972.
(iv) Updating and Maintenance of Land Records: For the promotion of equity in the
agricultural sector, a drive was taken up in 1985–86 for updating land records. Patta passbooks
with legal status are to be issued to land owners and tenants. Thus, without updating and
maintenance of land records, land reforms cannot be properly implemented.
(v) Consolidation of Holdings: This measure is designed to solve the problem of fragmentation
of holdings. The method adopted is to grant one consolidated holding to the farmer equal to the
total of the land in different scattered plots under his possession.
(vi) Cooperating Farming: Cooperating farming has been advocated to solve the problems of
subdivision of holdings. Under this system, farmers having very small holdings joined their
hand and pooled their lands for the purpose of cultivation. In this way, they can reap profits of
large scale farming.

Q.8. Why is it important to promote small scale industries? Explain.

Ans. It is important to promote small scale industries due to the following reasons:
(i) Greater Employment Opportunities: Small scale industries are more labour intensive. With
less earmarked investment of capital, more persons can be employed in these industries.
(ii) Equity in the Distribution of Income: Due to small scale of production, there remains
equity in the distribution of income. There is no concentration of capital in a few hands but it is
distributed among all the people engaged in production. The profit of these industries is shared
by many people.
(iii) Decentralisation: Small scale industries are situated in villages and towns. They reduce the
regional imbalances. As a result, benefits of these industries go to the masses.
(iv) Less Pressure on Agriculture: Small scale industries have great importance in India. Most
of its population is engaged in agricultural activities. Every year about 30 lakhs of people
increase as dependents on agriculture in India. Therefore, it is necessary to reduce the
increasing pressure on agricultural land. It can be achieved only by establishing more small
scale industries.
(v) Less Capital Requirements: Small scale industries need less capital as compared to large
scale industries. In country like India where capital is scarce, small scale industries can be
established with less amount of capital.
(vi) Immediate Increase in Production: The gestation period of small scale industry is short. As
a result, production starts immediately after the establishment of these industries. In India, 40
per cent of the industrial production is produced in small scale industries.
(vii) Production of Artistic Goods: More manual work is done in these industries. As a result,
production of artistic goods is only possible in small scale industries.
(viii) Importance in Exports: Small scale industries have great importance in India’s exports. In
1990’s, the contribution of these industries in total exports was 35 per cent.
(ix) Industrial Peace: Industrial peace is the feature of these industries because there is less
possibilities of labour exploitation.

Q.9. Discuss the significance of foreign trade.

Ans. The significance of foreign trade can be examined with the help of following points:
(i) Optimum Use of World’s Scarce Resources: It is compatible with the application of the
principle of maximum advantage for every country. Every country is enabled to sell its
products in those markets, where it gets best prices for them and to purchase raw materials and
other goods in the cheapest markets. Thus, in the foreign trade process, a country enjoys full
freedom both as the seller of its exports and the purchaser of its imports.
(ii) Import of Required Goods: Foreign trade enables the underdeveloped countries to import
capital goods and essential raw materials, which are required for their economic development.
(iii) Earn Foreign Exchange: Foreign trade also enables the countries to procure foreign
exchange.
(iv) Control Prices: Import and export often reduce the violent fluctuations of prices of those
commodities, which are scarce or available in surplus.
(v) Increase in Country’s Consumption Capacities: Foreign trade enlarges a country’s
consumption capacities, provides access to scarce resources and exposure to the worldwide
market for products, which is needed for growth.
(vi) An Engine of Economic Growth: Foreign trade is treated as engine of economic growth as
it plays an important role in the economic development of the country. Through foreign trade,
a country not only earns foreign exchange to purchase materials needed for development but
also leads to fuller utilisation of natural resources, increase in employment opportunities,
development of means of transportation and communication; expansion of tertiary services like
banking, finance and insurance; and increase government income in the form of various taxes.
Thus, foreign trade is an engine of economic growth.

Q.10. What the main features of foreign trade in India? Explain

Ans. The main features of foreign trade in India are as follows:
(i) Share in National Income: The share of foreign trade in national income of India is
increasing. This share was only 12 per cent in 1950-51 which presently increased to about 17
per cent in 1990-91.
(ii) Dependence on a Few Ports: India’s foreign trade is dependent mainly upon Mumbai,
Kolkata and Chennai ports. As a result, the pressure of trade has been increased on these ports.
Government of India is developing some other ports for trade.
(iii) Changing Composition of Exports: After independence, the composition of India’s exports
has been changed. In the beginning of planning era, India was the main exporter of agricultural
products like, tea, cotton, jute, cashew, oil and leather, etc. However, at present, India is
exporting manufactured goods like readymade garments, machinery, tea, electrical goods, etc.
(iv) Changing Composition of Imports: After independence, the composition of India’s imports
has also been changed. At the time of independence, India was the main importer of cloth,
medicines, vehicles, iron and steel, electrical goods, etc. But now India is importing petroleum,
machinery, fertilisers, raw materials, steel, oil, etc.
(v) Balance of Trade: At the time of independence, India’s trade was almost favourable. But
after independence, India’s foreign trade became unfavourable. Imports have been increasing
much faster than our exports.