CBSE Class 12 Economics Indian Economy Since 1991 Worksheet

Question. International Bank for Reconstruction and Development (IBRD) is popularly known as :
(a) World Bank
(b) Bank of Tokyo
(c) American Express
(d ) HSBC Bank
Answer : A

Question. Objectives of privatization policy are :
(a) To improve the government’s financial position
(b) To improve the performance of an enterprise
(c) To reduce the burden on public administration.
(d) All the above.
Answer : A

Question. What was the one major proposal of new industrial policy(1991)?
(a) NRI’s will not be allowed for capital investment in India.
(b) Facility of FDI upto 51 percent in high priority industries
(c) Import restrictions on technical know how for one year
(d) Abolition of industrial licencing except for six industries.
Answer : D

Question. Which is the latest tax introduced by the government of India?
(a) Goods and services tax
(b) Value –added tax
(c) service tax
(d) corporation tax
Answer : A

Question. IMF stands for :
(a) International Monetary Foundation
(b) Internal Monetary Fund
(c ) International Monetary Fund
(d) International money foundation
Answer : C

Question. Rate of which tax was reduced as per the tax reforms:
(a) Income tax
(b) corporation tax
(c) value –added tax
(d) property tax
Answer : B

Very Short Answer Type Questions

Question. Privatization of the public sector undertakings by selling off part of the equity of PSU’s to the private sector is known as,,,,,,,,,,,,,,,,,,
Answer : (disinvestment)

Question. What is meant by globalization?
Answer : Globalization is an outcome of the set of various policies aiming at transforming the world towards greater interdependence and integration.

Question. What is privatization?
Answer : It implies shedding of the ownership or management of a government – owned enterprise.

Question. What is meant by demonetization?
Answer : De monetization is the economic policy wherein the legal status of a currency unit is cancelled and new one comes into circulation.

Question. Define disinvestment.
Answer : Disinvestment refers to a deliberate sale of a part of the capital stock of a company to raise resources and change the equity and /or management structure of a company.

Question. SGST stands for,,,,,,,,,,,,,,,,,
Answer : ( State Goods and Services Tax)

Question. When was de monetization implemented in India?
Answer : On November 8,2016 , demonetization was implemented in India with its announcement by the Prime Minster Narendra Modi’s address to the nation at 20:15 IST.

Question. State the features of new economy policy.
Answer : 1. Liberalization
2. Privatization
3. Globalization

Short Answer Type Questions

Question. Why is it necessary to become a member of WTO?
Answer: It is important for any country to become a member of WTO (World Trade Organisation) for the following reasons :
(i) WTO provides equal opportunities to all its member countries to trade in the international market.
(ii) It provides its member countries with larger scope to produce at large scale to cater to the needs of people across the international boundaries. This provides ample scope to utilise world resources optimally and provides greater market accessibility.
(iii) It advocates for the removal of tariff and non-tariff barriers, thereby, promoting healthier and fairer competition among different producers of different countries. 
(iv) The countries of similar economic conditions being members of WTO can raise their voice to safeguard their common interests.

Question. Write a short note on Niti Aayog.
Answer: Its constitution comprises the following:
1. Chair person (The Prime Minister)
2. Vice-Chairperson
3. Full Time members(four)
4. Chief Executive officer(one)
Formed via a resolution of the union Cabinet on January 1,2015. NITI Aayog is the premier policy “Think-Tank” of the government of India (GOI), providing both directional and policy inputs. While designing strategic and long-term policies and programmes for the GOI, it also provides relevant technical advice to the centre and states.

Question. Explain financial sectors reforms under Liberalisation.
Answer: 1. Freedom to determine own interest
2.Private banks granted permission
3.Permission for foreign investment

Question. What are Fiscal policy reforms? Explain.
Answer: Fiscal policy reforms were undertaken to improve the expenditure and revenue policies of the government. The following steps were undertaken:
(a) Tax Reforms: Tax rates were reduced, tax evasion was plugged and procedures were simplified.
(b) Government expenditure was curtailed by cutting down on unnecessary expenses. Borrowings were reduced and all loss-making PSU’s were shut down.
(c) Disinvestment in PSU’s was undertaken to plug the budgetary deficit.

Question. Give any three aims of demonetization.
Answer: The three aims of demonetization are:
(a) To Curb corruption
(b) To curb counterfeiting
(c) To curb the use of high denomination notes for terrorist activities.

Question. Explain the reasons for introduction of New Economic policy.
Answer: (1) Poor performance by the public sector undertakings
(2) Inflationary pressures
(3) Increasing debt burden
(4) Fragile balance of payments position.                 

Question. What are the objectives of WTO?
Answer: Objectives of World Trade Organization(WTO) are:
(a) Reduction of trade barriers to liberalize world trade.
(b) Serves as a platform for countries to raise their concerns regarding the trade policies of their trading partners.
(c) To enlarge production and trade of services.
(d) To ensure optimum utilization of world resources.
(e) To protect the environment.
(f) To provide greater market access to all member countries.

Question. Explore the industrial policy Reforms under NEP 1991.
Answer:Industrial Policy Reforms were aimed at reducing government control and opening up the industrial sector to private participation. The reforms were:
(i) Delicensing of industries
(ii) Deregulation of industries
(iii) Dereservation of industries by withdrawal of reservation in public sector.
(iv) Foreign capital was also encouraged by increasing the share of foreign investment.

Question. Do you think outsourcing is good for India. Why are developed countries opposing it ?
Answer: (1) Employment
(2) Higher standard of living
(3) Contributes to human capital formation
(4) Encourages other sectors
(5) Greater infrastructural investment
(6) International worthiness
(7) Foreign Exchange

Question. What are the major factors responsible for the high growth of the service sector?
Answer: (1) Cheaplabour and reasonable degree of skill in India.
(2) Advanced technology and growth of IT
(3) Structural transformation
(4) High demand for services as final product

Question. Explain the main objectives of Globalization.
Answer: Following are the main objectives of globalization are as follows:
1. Reduction of trade barriers to liberalize world trade.
2. Serves as a platform for countries to raise their concern regarding the trade policies of their trading partners.
3. To enlarge production and trade of services.
4. To protect the environment
5. To provide greater market access to all member countries.
6. To ensure optimum utilization of world resources .

Question. What do you understand by GST? How good is a system of GST as compared to the old tax system? State its categories.
Answer: GST is the “single comprehensive indirect tax” on supply of goods And services right from manufacturer or service provider to the consumer.
The system of GST as compared to the old tax system.
1. Has simplified the multiplicity of taxes on goods and services.
2. The laws, procedures and rates of taxes across the country are also now standardized.
3. It has also facilitated the freedom of movement of goods and services.
4. It has created a common market in the country.
The two categories of GST and CGST and SGST.

Question. Why Small Scale Industries need protection from government ? 
Answer: Small Scale Industries have important place in the economic development of India. These industries are labour intensive which generate more employment.
They reduce the dependence of people on agriculture for living. These industries require less capital of which there is always a deficiency in India.

Question. ‘Promoting privatization is the objective of NEP’. State the measures taken to promote privatization in India. 
Answer: (i) Privatisation of PSUs by selling of part of their equity known as disinvestment.
(ii) Strategic scale of 51% or more stake of PSU to private sector.
(iii) Gradual withdrawal of share holding of Govt. as in case of Maruti Suzuki.
(iv) Public-Private partnership as in case of BSES, New Delhi.

Question. Critically appraise the need for subsidies for the farmers, when it actually creates a huge financial burden on the public money.
Answer: Though it is very much acceptable that subsidies create a huge financial burden on the exchequer, but despite that it is quite essential. The following points support the above argument :
(i) It is quite essential for marginal land owners and poor farmers who cannot avail the required farm inputs at the prevailing market prices.
(ii) Subsidies are provided to reduce disparities of income between poor and rich farmers and to promote an equitable distribution of income.
(iii) Subsidies provide an impetus to the farmer to adopt new technology of production and new improved inputs of production.

Question. Explain the type of demonetisation.
Answer: Type of Demonetisation:
(i) Total Demonetisation: When banknotes of all denomination are pulled from the economy and replaced by new one, it is known as total denomination.
(ii) Partial Demonetisation: In this type of Demonetisation, only some or least of currency units are replaced by new currency units and rest other currency units are continued for the circulation, e.g. banknotes ₹ 500 and ₹ 1000 were banned and replaced by new banknotes of ₹ 500 and ₹ 2000 afterwards on November 8, 2016.

Question. Exports from India have tended to lag behind our imports. What do you think is the principal reason behind it ?
Answer: We have failed to promote our exports to the desired extent basically because of our low competitive power in the international market. On the other hand, imports have continued to swell largely because these are of essential goods, the domestic production of which is low. 

Question. Name various methods of evasion adopted by black money holders in Demonetisation on November 8, 2016.
Answer: The following methods of evasion were adopted by black money holders in Demonetisation move of 2016:
(i) Purchase of gold,
(ii) Donations given at temples,
(iii) Initial bookings and subsequent cancellation of railway tickets,
(iv) Multiple bank transactions at different branches
(v) Backdating of accounting records and entries.

Question. Write short note on Foreign Exchange Reforms.
Answer: The first important reform in the external sector was made in the foreign exchange market. In 1991, as an immediate measure to resolve the balance of payment crisis, the rupee was devalued against foreign currencies. This led to an increase in the inflow of foreign exchange. After liberalisation policy of 1991:
(i) Approval was given for direct foreign investment upto 51% foreign equity in high priority industries.
(ii) Automatic permission was given for foreign technology agreements in high priority industries upto a lumpsum payment of ₹ 1 crore.

Question. ‘Foreign trade policy refers to take steps to regulate inflows and outflows of goods from and to foreign countries’. What value does the government add to the economy by liberalising imports ?
Answer: Under the New Economic Policy of 1991, Government of India liberalised imports to enhance the availability of goods in the country, e.g., in 2008-09, import duties on rice, wheat, pulses, edible oils, maize, butter, ghee, etc. were kept at zero. This increased the availability of goods within domestic market. As a result, price of these basic necessities were controlled and the poor people availed the benefits. The idea was to reduce poverty in the country

Question. What is Cooperative farming?
Answer: Under this system owners of small pieces of land perform cultivation jointly. Its benefits are under:
(i) The fields of the farmers become large.
(ii) They can use good quality of seeds, fertilizers and proper irrigational facilities.
(iii) There is no exploitation by the mediators.
(iv) Agricultural production increases.
(v) The income of the farmers rises.
(vi) Their standard of living becomes high.

Question. What are the major factors responsible for high growth of the service sector ?
Answer: The major factors responsible for high growth of the service sector are as under :
(i) Development of means of transport and communication due to globalization. 
(ii) Development of banking and insurance sector due to the policy of privatization.
(iii) Expenditure on the development of infrastructure.
(iv) Investment in different service sectors due to indigenous and foreign institutional investment.
(v) Rapid industrialisation.
(vi) Development of agriculture due to Green Revolution.

Question. Explain Industrial Development and its importance in brief. 
Answer: Industrial Development is considered to be a foundation stone to the economic development.
No economy can develop itself without adequate industrial growth. It is more important for a developing country like India. In fact Indian economy is imbalanced. For a balanced and complete development of the country, industrialisation of the country is the need of the hour.
Importance :
(i) Increase in National Income.
(ii) Increase in per capita Income.
(iii) Significance in agricultural development.
(iv) Increase in productivity.
(v) Improvement in standard of living.
(vi) Increase in savings and investments.
(vii) Balanced Economy.
(viii) Useful for defence.

Question. Those public sector undertakings which are making profits should be privatised. Do you agree with this view? Why?
Answer: No, I do not agree with this view, even though disinvestment would increase the revenue of the government, the profit-making industries should be retained in the public sector since, they raise resources from the capital market which government can use for the development of PSUs and the infrastructure. The assets of the profit-making industries if undervalued, might lead to a substantial loss to the government, if sold to the private sector. The government should retain the strategic industries to avoid emergence of any monopoly in the private sector.

Question. Describe any three arguments in favour of globalization.
Answer: Three arguments in favour of globalization :
(i) Business can transcend national boundaries.
(ii) The benefit of superior brands (International brands/Companies) can be made available locally.
(iii) Competition from MNCs would force domestic companies to adopt better technology.

Question. What is Bhoodan Movement?
Answer: This movement was launched by Vinoba Bhave in 1951. It is one of the great events in the land reforms of independent India. An appeal is made to the people for land donation by Bhoodan Movement. In this way, the acquired land is distributed amongst the landless farmers.
Objectives:
(i) It will decrease the gap between landlords and landless farmers.
(ii) In this movement, many programmes like Gramdan, Shramdan and Jeevandan have been started.
(iii) Landless farmers will be able to get some piece of land from this movement.
(iv) In this movement, muscle power is not used. It is a bloodless revolution.

Question. Explain the major failures of Economic Reforms in industry. 
Answer: Industrial growth has recorded a slowdown during economic reforms.
This is because of decreasing demand of industrial products due to the following reasons :
(i) Cheaper imports have decreased the demand for domestic industrial goods.
(ii) Globalisation created conditions for the free movements of goods and services from foreign countries that adversely affected the local industries and employment opportunities in developing countries.
(iii) A developing country like India still does not have the access to developed countries market because of high non-tariff barriers.
(iv) There was inadequate investment in infra structural facilities such as power supply.

Question. What measures were taken towards privatisation in 1991?
Answer: In order to encourage private sector, following measures have been adopted :
(i) The government through its economic policy reduced the number of industries from public sector from 17 to 4.
(ii) It had been planned to reduce the share of public sector investment to 45%. It increases the share of private sector to 55%.
(iii) Financial corporations could not insist the industries for conversion of their loans into equity shares. (iv) It had now been decided to increase the participation of general public and workers and selling them the shares of public enterprises.

Question. Outsourcing turned the fortunes of India in terms of huge foreign exchange reserves coupled with high growth of service sector. Present your views. 
Answer: Outsourcing coupled with high growth of service sector turned the fortunes of India in terms of huge foreign exchange reserves, as supported by the following :
(i) Foreign countries, in order to gather cheap raw material and cheap labour services, from a rich labour and material resource country like India are actively engaged in commercial terms with India.
(ii) Relatively less dependence on agricultural sector with growth of service sector has transgressed the national frontiers to align with international parties. Globalization has led to free movement of labour, capital, financial and other resources among nations.
(iii) Infrastructure development adhering to international standards.
Conclusion : All of the above resulted into huge earnings in terms of foreign exchange in India, trading and collaborating with international parties.

Question. What is organic farming? Mention its importance.
Answer:
(i) Organic farming refers to a system of farming that sustains and enhance the ecological balance. In other words, this system of farming relies upon the use of organic inputs for cultivation.
(ii) The traditional farming involves the use of chemical fertilizers, toxic pesticides, etc that harms the eco-system drastically. So, this type of farming is practiced to produce toxic free food for the consumers while simultaneously maintaining the fertility of the soil and contributing to ecological balance.
(iii) This type of farming enables eco-friendly sustainable economic development.

Question. What are Fiscal reforms introduced in 1991 ?
Answer: Government of India introduced a number of fiscal reforms to reduce fiscal deficit from 8%-9% to 4% of GDP. It includes :
(i) Reduction in non-development expenditure.
(ii) Increase in taxation through increase in income tax rates and corporate tax rates.
(iii) Streamlining the working of central and state public sector. (iv) Reduction in subsidies.

Question. Industrial development in India has accelerated the rate of economic development in India. How?
Answer:  An economy can progress only if it has a good industrial sector, providing a sound capital base.
Industrial development is important for an overall growth of a country due to following reasons :
(i) Industrialisation provides a stronger basis for rapid and continuous increase in the income of the people.
(ii) Industrialisation leads to higher savings, investments and capital formation, thereby creating a solid foundation for self sustaining development.
(iii) Industrialisation provides employment opportunities.
(iv) Industrialisation makes available to the consumer capital goods in the country, thus providing a higher standard of living.

Question. Distinguish between Liberalization and Privatization.
Answer: 

Question. In your opinion, what are the advantages of privatisation to the economy?
Answer: Advantages of privatisation are :
(i) Privatisation will introduce efficiency and profitability in Public Sector Undertakings (PSUs).
(ii) Privatisation promotes consumer’s sovereignty. High degree of consumer’s sovereignty implies wider choice and better quality of life.
(iii) Privatisation will reduce budgetary deficits which result from expenditure on loss making PSUs.
(iv) Privatisation promotes diversification of production. Unlike PSUs, private enterprises invariably generate high profits.

Question. Explain the major failures of Economic Reforms in fiscal policy.
Answer: In the post-reform period, there has been fall in tax revenue. This was due of following reasons :
(i) The tax reductions in the reform period aimed at yielding large revenue and to curb tax evasions which have not resulted an increase in tax revenue for the government.
(ii) The reform policies involving tariff reduction have curtailed the scope of raising revenue through customs duties.
(iii) To attract foreign investment, tax incentives were provided to foreign investors which further reduced the scope for raising tax revenues.

Question. What is the difference between Globalization and Liberalization ?
Answer:  

Long Answer Type Questions

Question. ‘Features of Indian agriculture itself explain the story of its backwardness’. Put out your views in the reference to this statement.
Answer: Indian agriculture is backward, despite the fact that it is of significant importance in the Indian economy. The main features of Indian agriculture are : (i) Agricultural output depends largely on rainfall and other natural factors like floods, droughts, storms, etc.
(ii) The historical, social and cultural background of state affects agricultural output.
(iii) Over three-fourth of land holdings are of small size. Thus, agriculture is the source of livelihood for poor farmers.
(iv) Farming is a way of life rather than a commercial activity. Thus, production is mainly for self-consumption.
(v) There is little use of machinery.

Question. Why was public sector given a leading role in industrial development during the planning period ?
Answer: At the time of independence, Indian economic conditions were very poor and weak. There was neither much private capital nor did India have international investment credibility so as to attract foreign investment. Moreover, Indian planners did not want to be dependent on foreign capital for economic development. In such a situation, it was only the public sector that could take the initiative. The following are the reasons that explain the driving role of the public sector in the industrial development :
(i) Lack of Capital with the Private Entrepreneurs — Industrial development in India needed a big push. At the time of independence, the requirement of capital for diversified industrial growth far exceeded its availability with private entrepreneurs (Tata and Birla). Accordingly, it became essential for the state to foster industrial growth through public sector undertakings.
(ii) Lack of Incentive among the Private Entrepreneurs—The private investors lacked incentives as well. Owing to limited size of the market, there was no inducement to invest. Only a big push of public investment could break this vicious circle of low inducement to investment.
(iii) Socialistic Pattern of Society—The government realised that, this objective could be achieved only through direct participation of the state in the process of industrialisation, because it requires investment that generates employment rather than investment that maximises profit. Concentration of wealth was to be discouraged and public investment was considered as the best means to achieve it.

Question. Explain the need and type of land reforms implemented in the agricultural sector.
Answer: The need for land reforms in India was very necessary due to the following reasons :
(i) There were three types of land tenure systems namely, the Zamindari system, the Mahalwari system and the Ryotwari system prevalent in the Indian agricultural sector at the time of independence. The common feature of these three systems was that the land was mostly cultivated by the tenants and the land revenues were paid by them to their landlords. This led to the exploitation of tenants in the form of exorbitant rents.
(ii) The size of land holdings owned by the farmers was very small. In addition, the land holdings were fragmented. This obstructed the use of modern techniques. (iii) As most of the land was owned by the landlords, so the farmers lacked initiative and neither had enough means to undertake mechanised methods of cultivation. (iv) Indian farmers used to rely on the conventional and the traditional inputs and methods and climate conditions that hampered the productivity of agricultural sector. Programmes of Land Reforms : (i) Abolition of Zamindari system
(ii) Ceiling on land holdings
(iii) Tenancy reforms :
(a) Exemption from rent
(b) No eviction from land
(c) Compensation to the tenants.
(d) Fixation of rent
(e) No attachment
(iv) Cooperative farming
(v) Consolidation of land holdings.
(vi) Bhoodan Movement

Question. Explain, how import substitution can protect domestic industry?
Answer: In the First Seven Plans, India followed an inward looking trade strategy. This strategy, aimed at replacing or substituting imports with domestic production, is called Import Substitution, e.g., instead of importing electronics goods made in a foreign country, industries would be encouraged to produce them in India itself. Thus, the government protected the domestic industries from foreign competition through this policy. Protection from imports took two forms :
(i) Tariffs, i.e., a tax on imported goods to make imported goods more expensive and discourage their use.
(ii) Quotas as they specify the quantity of goods which can be imported. The policy of import substitution provides protection to domestic industries from foreign competition. The rationale for this policy is that industries of developing countries like India are not in a position to compete against the goods produced by developed economies. It is assumed that if the domestic industries are protected in the infant stage, they will gain strength by being able to produce on large scale and through experience to compete in the course of time.

Question. What is Green Revolution ? Why was it imple-mented and how did it benefit the farmers ? Explain in brief.
Answer: The introduction of High Yielding Varieties (HYVs) of seeds and the increased use of fertilisers, pesticides and irrigation facilities are known collectively as the Green Revolution which resulted in the increase in crop yield needed to make India self-sufficient in food grains. Various land reforms were also undertaken in order to make Green Revolution successful. Thus, Green Revolution included the following measures :
(i) Use of High Yielding Varieties (HYVs) of seeds
(ii) Increase in irrigation cover
(iii) Use of insecticides and pesticides
(iv) Consolidation of holdings
(v) Rural electrification
(vi) Improvement in rural infrastructure
(vii) Agricultural credit facilities
(viii) Use of chemical fertilisers Green Revolution was implemented because of the following reasons :
(i) Food Security : The colonial rule had made Indian agriculture suffer from low level of productivity especially in food grains as more emphasis during colonial rule had been on cash crops which served as raw material to British industries. This resulted in shortage of food grains in India and made Green Revolution necessary to provide food security to the population.
(ii) Low Irrigation Facility : The land area under irrigation cover was only 17% in 1951. The major part of agriculture was dependent on rainfall from monsoon and in case of scanty rainfall or delayed monsoon, crops were destroyed due to lack of proper irrigation facilities. This caused low level of agricultural production.
(iii) Conventional Methods : The use of conventional inputs and absence of modern techniques led to low level of agricultural productivity.

Question. Critically explain the economic policy prior to 1991, with its achievements and failures.
Answer: Salient features of the policy were as follows :
(i) Economic growth to be achieved during five-year plANS.
(ii) Public enterprises to play an important role.
(iii) Import substitution to be the centre of the process of industrialisation.
(iv) Domestic industries to be developed along with small scale industries. Achievements :
(i) Economic growth got a push due to increased agricultural production. Industrial production also increased.
(ii) Growth of large scale industry projected an infrastructural shift in the Indian economy.
(iii) Growth of small scale industries made a substantial contribution in achieving the objectives of growth with equity and social justice. Failures :
(i) The public sector industries by incurring huge losses caused a drain of several scarce national resources.
(ii) Domestic industries failed to achieve international standards of product quality.
(iii) Foreign exchange reserves depleted to a very low level. Briefly the growth process started showing signs of stagnation across all sectors of the economy, industry in particular. Thus the government had to shift to New Economic Policy of 1991.

Question. 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.
Answer: Subsidy in agriculture means providing some important inputs to farmers at a concessional rate that is much lower than its market rate. During 1960s, in order to adopt new technology, HYV seeds and use of modern fertilisers and insecticides, farmers were provided inputs at a subsidised rate. The following arguments are given to prove the usefulness of subsidies :
(i) It was necessary to use subsidies to provide an incentive for adoption of the new HYV technology by farmers, especially the small farmers.
(ii) Any new technology is considered as being risky by farmers. Subsidies were, therefore, needed to encourage farmers to adopt the new technology initially.
(iii) Farming in India is still a risky business and subsidies provide hedging against the risk of climatic conditions.
(iv) Most farmers are very poor and they will not be able to afford the required inputs without subsidies.
(v) Subsidies bring about equity between rich and poor farmers by enabling the poor farmers to use modern technology and inputs. On the other hand, some economists believe that once subsidies should be phased out since their purpose has been served and the technology is now widely adopted due to its profitability. They argue that there is no case for continuing with subsidies as it does not benefit the target group and it is a huge burden on the government finances. They give the following arguments against subsidies in agriculture.
(i) Subsidies are benefitting the fertiliser industry more than farmers and it is not making any efforts towards increasing its efficiency as it is protected from market competition by subsidies.
(ii) Subsidies are mainly being availed by big farmers in affluent regions, who do not actually need them. Hence, based on the above arguments, we can conclude that although subsidies are very useful and necessary for poor farmers and to overcome uncertainties associated with farming, it may lead to wastage of resources and thus, put an excessive burden on the scarce government finances. Thus, suitable reforms need to be undertaken in order to ensure allocation of subsidies in a targeted manner only to the needy farmers.

Question. 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.
Answer: Although, the inefficiency and low productivity in Public Sector Undertakings (PSUs) may lead to wastage of the scarce resources and result in huge losses forming a constraint on economic resources of the country, they do have some advantages, which are as follows :
(i) Increase in employment,
(ii) Contribution in exports,
(iii) Development of SSIs, and
(iv) Development of backward area. The basic objective of the PSU was to provide goods and services that add to the welfare of the society without looking for profits. Public welfare facilities such as schools, hospitals, railways, electricity, etc. are necessary to be provided at reasonable cost to the people of the country.

Question. Write a brief note on objectives and outcomes of Demonetisation 2016.
Answer: On 8 Nov., 2016, ₹ 500 and ₹ 1000 demonetisation notes were demonetised and ₹ 500 and ₹ 2000 notes were introduced afterwards. The objectives and outcomes of Demonetisation of 2016 are as follows: Black money: The government estimated that ₹ 3 lakh crore, or approximately 20%, of the demonetised bank notes would be permanently removed from circulation. However, according to a 2018 report from the RBI, approximately 99.3% of the demonetised banknotes, or ₹ 15.30 lakh crore of the ₹ 15.41 lakh crore that had been demonetised, were deposited with banking system. The banknotes that were not deposited were only worth ₹ 19,720 crore. Commentators concluded that the government failed in its aim of purging black money from the economy. Counterfeit banknotes: There was increase in counterfeit banknote in denomination of old ` 500 and 1,000 in 2016-17 and decline in 2017-18. In 2017-18, the number of detection was close to the level before demonetisation levels. Additionally, after demonetisation only 0.0035% of the ₹ 1,000 were found to be counterfeit. Tax Collection: Reducing tax evasion was one of the objectives of demonetisation 2016. But there was no significant increase in returns filing. And increase in income tax collections in 2017 was due to Income Disclosure Scheme 2016. Due to expansion in tax base, tax-to-GDP ratio has also decreased. This objective was not achieved as demonetised notes could be used for payment of taxed to the bodies. For example, The Greater Hyderabad Municipal Corporation reported collecting about ` 1.6 billion (US$22 million) in cash payments of outstanding and advance taxed, within first four days of demonetisation.
Digital payments: Pushing Indian economy to digital economy was one of the stated intentions of the demonetisation. From November to December, 2016, there was immediate increase in digital payments. The debit card point of sale transactions increased more than estimated but no sharp growth was seen in case of credit cards. The other digital transactions, like mobile wallet, picked immediately after the demonetisation followed by dip in mid-2017 due to easing cash shortage. There was again sharp rise thereafter. By April 2018, the volume of the digital payments had doubled. After return of the cash, the growth in digital payment had been modest. Terrorism and internal security: Demonetisation leads to lack of money in physical form in economy which further leads to lack of funding to terrorists. In India, initially, there was decrease in the activities and attacks by Maoist and Naxalite radical groups which was attributed to lack of finance following demonetisation. But activities returned within few months.

Question. Cottage and small scale industries are the backbone of Indian economy. Justify the statements giving suitable reasons.
Answer: It is rightly stated because Cottage Industries and Small scale Industries offer following benefits to Indian economy :
(i) Labour Intensive: SSIs are labour intensive in character, i.e., they require more units of labour than machinery. So SSIs solve the problem of unemployment in India. (ii) Less Capital Intensive: In India, capital is scarce, SSIs are best suited to bring industrial development as SSIs require less capital.
(iii) Decentralisation of Income and Wealth: SSIs can serve more even distribution of income and wealth than large scale industries.
(iv) Seed Beds for large scale industries: SSIs provide all the essentials which are needed for development of large scale industries.

Question. Distinguish between the following 
(i) Strategic and Minority Sale (ii) Bilateral and multi-lateral trade
(iii) Tariff and non-tariff barriers
Answer: (a) Difference between strategic, and minority sale are :

(b) Difference between Bilateral and Multi-lateral Trade are : 

(c) Difference between Tariff and Non-tariff barriers are : 

Question. “GST is a game-changing reform for the Indian Economy”, justify.
Answer: GST is game-changing reform for the Indian Economy, as it will bring the net appropriate price of the goods and services. the various factors that have impacted Indian economy are:
(i) Increases competitiveness: GST has removed the Cascading effect of taxes, i.e., tax on tax. It is helpful in the reduction of cost of product. So, there is a scope to increase production, hence, competition increases.
(ii) Simple tax structure: Calculation of taxes under GST is simpler. Instead of multiple taxation under different stages of supply chain, GST is a one single tax. This saves money and time.
(iii) Economic Union of India: GST made the trade easier between two states or two country. Goods can be easily transported from one place to another under the new regime. This encourages businesses to have a PAN India presence.
(iv) Uniform Tax Regime: GST being a single tax, it has made it easier for the taxpayer to pay taxes uniformly. Previously, there used to be multiple taxed at every stage of supply chain, where the taxpayer would get confused, which was a disadvantage.
(v) Greater Tax Revenues: As GST has increased the tax base, there is increase in tax revenue. The total gross GST revenue collected in the month of January, 2019 is ₹ 1,02,503 crore of which CGST is ₹ 17,763 crore, SGST is ₹ 24,826 crore, IGST is ₹ 51,225 crore (including ₹ 24,065 crore collected on imports) and Cess is ₹ 8,690 crore (including ₹ 902 crore collected on imports). January 2019 collections are 14% above the January 2018 collections of ₹ 89,825 crore.
(vi) Increase in Exports : Exports are considered ‘zero- rated supplied’ under GST, i.e., no tax is levied on input tax side or the output side, which leads to reduction in the cost of product leading to increase the competitiveness towards the international market.

Question. Write the features of Liberalization, Privatization and Globalization.
Answer: Features of Liberalisation :
(i) Freedom of opening/starting production units.
(ii) Use of new machines and technology.
(iii) No government interference in production.
(iv) Free flow of foreign investment.
Features of Privatization :
(i) Reduction in extra burden on government.
(ii) Control over poor performance of public sector.
(iii) Check on high-handedness of bureaucracy.
(iv) Disinvestment (sale of shares in PSUs to public)
Features of Globalization :
(i) It results in integration of world economies that helps in raising world production.
(ii) It helps in removing inefficiency from industrial units.
(iii) It helps in improving allocative efficiency of resources.
(iv) It encourages global competition which reduces costs and improves quality.

Question. What measures have been taken for globalisation of Indian economy?
Answer: Measures taken for globalisation of the Indian economy are :
(i) Rupee was devalued by 20% in July 1990-91. The devaluation was made to encourage exports and discourage imports.
(ii) The government offered partial convertibility of rupee through the budget of 1992-93. Full convertibility was offered in 1993-94. Convertibility of rupee was aimed at encouraging export earnings.
(iii) The government announced foreign trade policy for a period of five years i.e., 1992-97. The sole purpose of this policy was liberalisation.
(iv) In order to build up our competitive strength, customs and tariff policies were modified to promote international trade.

Question. Give arguments in favour of the Economic Reforms in 1991.
Answer: The Economic Reforms are seen by some as an opportunity in terms of greater access to global markets, high technology and increased growth rates. The assumption was that the greater participation of the private sector would stabilize the Indian economy which was on the brink of collapse in 1990. Some arguments have been given in favour of New Economic Reforms which are as follows :
(i) Inspite of heavy investments by the public sector in 1990, our domestic production increased by 4%, per capita income showed an increase of just over 1%. It was assumed that the new economic reforms would foster greater rate of economic growth.
(ii) Reduction in fiscal deficit which had been continuously mounting has made new reforms inevitable.
(iii) The fall in tax rates, controlled supply, higher production, and other liberalization measures will bring prices under control which hampered the development process. (iv) The balance of payment problem will be tackled with rising exports due to removal of trade and investment barriers.
(v) It is expected that the efficiency of industries will increase due to competition from foreign industries and it would also create a favourable atmosphere for the development of small scale industries.

Question. India has certain advantages which makes it a favourite outsourcing destination. What are these advantages ?
Answer: Most multinational corporations and even small companies, are outsourcing their services to India as our country has the following advantages.
(i) Availability of Cheap Labour—India is a country with a large population and thus, abundant supply of labour. Due to this reason, labour in India is available at low wage rates. This helps foreign companies in reducing cost of operation by outsourcing their business processes to India.
(ii) Skill and Accuracy—India has, a wide pool of talent in the form of educated and trained youth who have the required skills and can work with accuracy in the business processes such as accounting, record keeping, IT consultancy, etc. Here outsourcing plays a vital role it gives a platform to the people so that they can enhance their skills and secondly the need low training period and thus, low cost of training.
(iii) Continuity and Risk Management—Periods of high employee turnover will add uncertainty to the operations. Outsourcing will provide a level of continuity to the company while reducing the risk that a substandard level of operation would bring to the company.
(iv) Reduced Overhead—Overhead costs of performing back office functions are extremely high but due to the outsourcing of various functions it has become cheaper and convenient to use.

Question. Do you think the Navaratna policy of the government helps in improving the performance of public sector undertakings in India ? How ?
Answer: The government identified PSUs and declared them as Maharatnas, Navratnas and Miniratnas in order to improve their efficiency and enable them to compete globally. They are given greater managerial and operational autonomy in taking various decisions. Greater operational, financial and managerial autonomy has also been granted to profit making enterprises referred to as Miniratnas, In 2011, about 90 public enterprises were designated with different status. A few-examples of public enterprises with their status are as follows :
(i) Maharatnas :
(a) Indian Oil Corporation Limited
(b) Steel Authority of India Limited
(ii) Navaratnas
(a) Bharat Heavy Electronics Limited
(b) Mahanagar Telephone Nigam Limited
(iii) Miniratnas
(a) Bharat Sanchar Nigam Limited
(b) Airport Authority of India
(c) Indian Railway Catering and Tourism Corporation Limited Many of these profitable PSUs were established during the 1950s and 1960s when self-reliance was an important objective of planning. They were set up with the intention of providing infrastructure and direct employment to the public so that quality products are made available to the masses at a reasonable cost. These companies themselves were made accountable to all stakeholders. The granting of this special status resulted in better performance of these companies, but some of these public enterprises were partly privatised through disinvestment. Recently, the government has decided to retain them in the public sector and enable them to expand themselves in the global markets and raise resources by themselves from financial markets.

Question. ‘Membership of WTO is optional or required in the context of Indian Economy.’ Explain.
Answer: In the context of Indian economy, it is very much required to be a member of WTO (World Trade Organisation) after the introduction of economic policies of liberalization, privatization and globalization. The following points justify the notion : (i) WTO helps integration of the international states with equal opportunities to trade in the international market. Therefore, developed country like India, does get a chance to stand up against the developed economies of the world. (ii) Benefits of synergy can accrue to India with sharing of resources with the international partner and cater to the surging needs of the people across nations. (iii) Growth of fair, transparent and healthy competition takes place due to removal of tariff and non-tariff barriers.

Question. Give the list of navaratna companies
Answer: (a) Bharat Electronics Ltd.
(b) Bharat petroleum Corporation Ltd.
(c) Hindustan Aeronautics Ltd.
(d) Hindustan Petroleum Corporation Ltd.
(e) Mahanagar Telephone Nigam Ltd.
(f) National Alluminium Company Ltd.
(g) National mineral Development Corporation Ltd.
(h) Neyvelil Lignite Corporation Ltd.
(i) Oil India Ltd.
(j) Power Finance Corporation Ltd.
(k) Power Grid Corporation of India Ltd.
(l) Rashtriya Ispat Nigam Ltd.
(m) Rural Electrification Corporation Ltd.
(n) Shipping Corporation of India Ltd.

Question. Why were reforms introduced in India ?
                                    OR
Why did India adopt New Economic Policy in 1991 ? 
Answer: In the middle of 1991, need for major economic reforms was felt in the country. These were urgently needed to bring U-turn in the economy.
It was mainly due to following reasons :
(i) Excessive fiscal deficit : In our planned economic development, anticipated expenditure was always in excess of anticipated receipts resulting into fiscal deficit. It increased to 8.5% of GDP in 1991 as against 5% in 1981-82. In order to meet this deficit, government had to make public borrowings involving interest burden of borrowing. 
(ii) Balance of payment deficit : Deficit in balance of payment means when foreign payments are in excess of foreign receipts. In India, it mounted from ₹ 2214 crores in 1980-81 to ₹ 17367 crores in 1990-91. To meet this deficit, government had to depend upon external borrowings. 
(iii) Rise in prices : After 1960-61, prices of all commodities continued to rise. The situation became serious when the rate of inflation arose from 6.7% to 16.7%. 
(iv) Reduction in foreign exchange reserves :
At one time, during 1990-91, foreign exchange reserves fell to a lower level of ₹ 2400 crores, which was just enough for the payments of three weeks imports. The crisis was so serious that Chandra Shekhar government had to mortgage gold reserves with other countries to pay off interest and foreign debts. It forced India to adopt a new set of measures to accumulate foreign exchange reserves.
(v) Poor performance of public sector : Government of India expanded public sector in a huge way during 1951-1991, but their return was negligible.
So, it was the need of the hour to shift it to thesector.
(vi) Gulf Crisis : Iran-Iraq war in 1990-91, is known as gulf-crisis. It led to a sharp rise in petrol prices in the international market. Our exports to gulf countries fell sharply but there was a steep rise in import bills.
It made the balance of payment position further grim. It compelled the government to introduce the new economic policy at this juncture.

Question. Discuss Economic Reforms in India in the light of social justice and welfare. 
Answer: Some studies have stated that there existed deep rooted inequalities in Indian society and
the economic reform policies were initiated by the government, 1991 further aggravated the inequalities. Reforms, led to an increase in the income of those who were already rich. Quality of consumption of only high income groups increased, economic growth has not trickled down to the poorer sections of the society. Growth has been concentrated only in some selected areas in the service sector such as telecommunication, information technology, finance, entertainment, travel, hospitality services, real estate and trade. Vital sectors such as agriculture and industry which provide livelihoods to millions of people in tbe country have not been benefited much from reforms thereby increasing income disparities. Besides, large scale production has been promoted under reforms at the cost of small scale industries again leading to concentration of economic power with large industrial houses and MNCs.

Question. Why did RBI have to change its role from controller to facilitator of financial sector in India? 
Answer: Financial Sector includes financial institutions such as commercial banks, investment consultants, stock exchange and foreign exchange market. RBI controls and regulates all the banks and other financial institutions in India. RBI decides the amount of money that the banks can lend and the amount they should keep as reserves, determines interest rates and prioritises lending to various sectors apart from regulating foreign exchange. One of the major aims of financial sector reforms is to transform the role of RBI from regulator to facilitator of financial sector. This means that greater autonomy may be granted to the financial sector in taking decisions on various matters without consulting the RBI. The reform policies led to establishment of private sector banks. Banks have been given freedom to setup new branches. Banks have also been given permission to generate resources from India and abroad through capital market.

Question. Agriculture sector appears to be adversely affected by the reform process. Why ?
Answer: Economic reforms did not benefit the agriculture and the agricultural growth rate has been decelerating. Public investment in agriculture sector has been reduced in the reform period due to which irrigation, power, roads, market linkages and agricultural research have suffered. Further, the removal of fertiliser subsidy has led to increase in the cost of production which has severely affected the small and marginal farmers. Globalisation and membership of WTO has resulted in policy changes such as reduction in import duties on agricultural products, removal of minimum support price and lifting of quantitative restrictions on agricultural products which have increased international competition for Indian farmers making their condition more miserable. There has been a shift from production for the domestic market towards production for the export market because of export oriented policy strategies in agriculture. This has shifted the focus on cash crops in place of production of food grains which has led to a fall in supply of food grains thereby creating pressure on prices of food grains.

Question. Why has the Industrial Sector performed poorly in the reform period ?
Answer: The Industrial Sector has performed poorly in the reform period because of decreasing demand of industrial products due to various reasons such as cheaper imports, inadequate investment, infrastructure, etc. India is a founder member of WTO and in facilitating globalisation of Indian economy. India like other developing countries is compelled to open up its economy to greater flow of goods and capital from developed countries and thus, the domestic industries become vulnerable to competition from imported goods. Cheaper imports have replaced the demand for domestic goods in India. The investment made in infrastructure facilities including power supply has remained inadequate and hence domestic industries have not found conditions favourable to compete with foreign goods. Globalisation has led to free movement of goods and services from foreign countries and thus. caused the local industries to die out and employment opportunities to fall in developing countries like India. Moreover, India still does not have access to developed countries markets because of high non-tariff barriers not only in the form of quantitative restrictions but also in the form of agricultural subsidies, sanitary, etc. Thus, the domestic industries were adversely affected by liberalisation.