CBSE Class 12 Economics Indian Economy Worksheet Set B

Short Answer Type Questions

Question. Why did India opt for planning ?
Answer: After independence, India had to make an important choice of economic system and opt either for capitalism or socialism. India finally opted for socialism as the Indian leaders were inspired by the extraordinary success of planning in Soviet Union. Indian planners understood the dearth of private capital at the eve of independence and the lack of incentive for private sector to operate in social sector where profit-making could not be the main motive. India went for planning so as to adopt the socialist idea with strong emphasis on public sector but also allow for active private sector participation in non- priority industries through democratic framework.
With the objective that the government would undertake comprehensive planning for the nation as a whole, the Planning Commission was established in 1950. Planning was undertaken to make public sector work towards the basic economic framework and to encourage private sector firms for their active contribution to the economic growth.

Question. What objectives did the British intend to achieve through policies of infrastructural development in India ?
Answer: (i) The true motive of British behind the infrastructural development was only to serve their colonial interest. There were infrastructural developments in the fields of transport and communication. (ii) The roads served the purpose of facilitating transportation of raw materials from different parts of the country to ports and ports were developed for easy and fast exports to and imports from Britain.  (iii) Railways were introduced and developed for the transportation of finished goods of British industries to the interiors of India. Railways assisted British industries to widen the market for their finished products.  (iv) Posts and telegraphs were developed to enhance the efficiency and effectiveness of the British administration. Hence, the aim of infrastructural development was not the growth and development of the Indian economy but to serve their own interest.

Question. State the main features of ‘Planning’ adopted by Government of India. 
Answer: A plan is a proposed list of goals that an economy wants to achieve within a specific period of time.
It suggests the optimum ways to utilise the scarce resources to achieve the enlisted goals.
In India, planning is done for a period of five years, which is called five year plan. Plans have both specific and general goals.
Some of the common goals are economic growth, modernization, self-reliance and equity. Plans are laid down on the basis of framework over which the policies are designed. Often various goals conflict each other.
For example: Modernization reduces labour employment. So there is a need to maintain a balance among different goals.

Question. Explain ‘growth with equity’ as a planning objective. 
Answer: Both growth and equity are the two important objectives of Indian planning. While growth refers to the increase in national income over a long period of time, equity refers to an equitable distribution of this income so that the benefits of higher economic growth can be passed on to all sections of population to bring about social justice. Growth is desirable as you must have the cake to distribute it but growth in itself does not guarantee the welfare of society. Growth is assessed by the market value of goods and services produced in the economy (GDP) and it does not guarantee an equitable distribution of the income from this production. In other words, the major share of Gross Domestic Product (GDP) might be owned by a small proportion of population which may result in exploitation of weaker sections of society. Hence, growth with equity is a rational and desirable objective of planning. This objective ensures that the benefits of high growth are shared by all people equally and hence, inequality of income is reduced alongwith growth in income.

Question. What are the main objectives of 11th five year plan? 
Answer: Objectives of 11th five year plan are as follows : (i) GDP growth rate– 9% to 10% per annum.
(ii) Agricultural growth rate– 4%
(iii) Industrial growth rate– 10.5%
(iv) Reduction of poverty ratio by 10% by 2012.
(v) Focus on elementary education and universal retention by 2010.
(vi) Reduction in decadal rate of population growth between 2001 to 2011 to 16.2%.
(vii) Increase in forest and tree cover to 33% by 2012.
(viii) Increase in literacy rate to 85% within the plan period.

Question. Distinguish between planning objectives and plan objectives on any four basis. 
Answer: Differences between planning objectives and plan objectives are : 

Long Answer Type Questions

Question. Write a short note on the main features of Indian Agriculture at the eve of Independence.
Answer: Main features of Indian agriculture at the eve of Independence are as follows :
(i) Agriculture was the major source of livelihood and about 75% of country’s population derived their livelihood from agriculture.
(ii) The agricultural sector experienced stagnation and deterioration during British rule.
(iii) British rulers introduced new land tenure system which proved to be the prominent cause of agricultural stagnation.
(iv) Agricultural production deteriorated because of lack of irrigation facilities and technological upgradation.
(v) Commercialisation of agriculture transformed Indian agriculture into a raw material export activity.
(vi) Partition of the country had an adverse effect on India’s agricultural production.

Question. Why was it necessary for a developing country like India to follow self-reliance as an objective of economic planning ?
Answer: Self-reliance as an objective of economic planning is necessary for a developing country because a nation can promote economic growth and modernization by using its own resources or by using resources imported from other nations. The first Seven Five Year Plans gave importance to self-reliance which means avoiding imports of those goods which could be produced in India itself. This policy was considered a necessity in order to reduce our dependence on foreign countries especially for food. It is understandable that people who were recently freed from foreign domination should give importance to self-reliance.

Question. What was the focus of the economic policies pursued by the Colonial government in India? What was the impact of these policies ?
Answer: The main focus of the economic policies pursued by the colonial government was to make India a mere supplier of Britain’s own flourishing industrial base. The policies were concerned mainly with the fortification and advancement for their home-country. The interests of the Indian economy were completely ignored. Such policies brought structural changes in the Indian economy by transforming it to a supplier of raw materials and consumer of finished products from Britain. 1 The impact of these policies is as follows : (i) Low economic development : Indian economy experienced very low level of economic development. The reason for such a low level of development was that the British government was more concerned with the promotion of economic interests of their home-country. Consequently, the colonial rule transformed India’s agriculture sector into a mere supplier of raw materials for the British Industries. This not only affected the production of the agricultural sector but also ruined the small manufacturing units like handicrafts and cotton industries. 1¼ (ii) Backwardness of Indian agriculture : Under the colonial rule, India was basically an agrarian economy employing nearly 75% of its population. The growth of the agriculture sector was meagre. This was due to the prevalence of various systems of land settlement, particularly Zamindari system. As a result of Zamindari system, burden of high revenues on the poor peasants took place which led India to face shortage of food grains. Therefore, Indian agriculture remained backward and primitive. (iii) De-industrialisation of Indian economy : India failed to develop a sound and strong industrial base during the colonial rule. The cause of deindustrialisation can be attributed to the downfall of India’s handicraft industry and the cause of bleak growth of modern industry was the lack of investment. On one hand, the British government imposed heavy tariffs on the export of Indian handicraft products and on the other hand, allowed free exports of Indian raw materials to Britain and free import of British products to India. As a result of heavy tariffs, the Indian exports became costlier and its demand in the International market fell drastically that led to the collapse of Indian handicraft industries. Simultaneously, the demand for the handicrafts products also fell in the domestic markets due to stiff competition. As a result, the domestic industries lacked investment and growth initiatives.
(iv) Regression in foreign trade : During the colonial rule, the British government had the monopoly power over India’s foreign trade. The British government used the trade policy according to the interests of their home-country. The exports and imports transactions were restricted only to India and Britain. On one hand, the exports from India provided the cheap raw materials to the British industries and on the other hand, India’s imports from Britain provided a new market for Britain’s products. Moreover, the surplus generated from foreign trade was not invested in the Indian economy, instead it was used for administrative and war purpose by Britain to spread their colonial power.

Question. The traditional handicrafts industries were ruined under the British rule. Do you agree with this view? Give reasons in support of your answer.
Answer: Yes, I agree with the given statement that the traditional handicrafts industries were ruined under British rule. Even as the country’s world famous handicraft industries declined, no corresponding modern industrial base was allowed to come up to take pride of place so long enjoyed by the former.
The following are the reasons in favour of the statement : (i) De-industrialisation— The primary motive of the colonial government behind this policy of systematically de-industrialising India was two-fold, which is described as follows : (a) To reduce India to the status of a mere exporter of important raw materials for the upcoming modern industries in Britain. (b) To turn India into a sprawling market for the finished products of modern industries so that their continued expansion could be ensured to the maximum advantage of their home country i.e., Britain. (ii) Capital Goods Industries were Lacking— The policy of Britishers was simply to develop those industries which would never be competitive to the British industry. They always wanted Indians to be dependent on Britain for the supply of capital goods and heavy equipment. Thus, the development of a few consumer goods industries were witnessed during the British rule.

Question. Highlight the salient features of India’s pre-independence occupational structure.
Answer: The occupational structure, refers to the distribution of population working in different sectors. It showed no variation throughout the British rule. The following are the salient features of India’s pre-independence occupational structure : (i) Predominance of Agriculture— Under the colonial rule, India was basically an agrarian economy, with nearly 75% of its workforce engaged directly or indirectly in agriculture. Due to massive poverty and widespread illiteracy during the colonial rule, a large proportion of the population was engaged in farming and related activities to earn their subsistence. But agricultural sector suffered from low productivity. (ii) Lack of Opportunities in Industry— Only a small proportion of population was employed in manufacturing sector. Nearly 10% of the total workforce was engaged in manufacturing and industrial sector. This was due to the stiff competition that the Indian industries faced from the machine made cheap goods from Britain. Further, the lack of investment initiatives and the unfavourable tariff structure constrained industrial sector. Thus, the Indian industrial sector failed to provide significant employment opportunities. (iii) Unequal Distribution Among Sectors— The three sectors of Indian economy, i.e., agricultural, industrial and service sector were unequal in terms of occupational structure. While the agricultural sector employed majority of the workforce, the other two sectors were not contributing much to employment, with 10% of the workforce in industries and 15-20% in service sector. (iv) Regional Imbalance— There was regional variation in the occupational structure of India. On
one hand, the Madras Presidency (comprising of present day states of Tamil Nadu, Andhra Pradesh, Kerala and Karnataka), Bombay and Bengal experienced a fall in the agricultural workforce and increase in occupational share of manufacturing and services. On the other hand, states like Orissa, Rajasthan and Punjab experienced a rise in the agricultural workforce.

Question. What are the causes of limited success of planning in India ?
Answer: Main causes responsible for little success of planning in India are : (i) Inappropriate Development Strategy— India adopted heavy industry centred development strategy with the hope to accelerate the pace of development. But neither the rate of development nor employment could increase. (ii) Slow Progress of Industrial Sector— Industrial progress was slow due to power shortage, irregular and insufficient supply of raw materials, lack of capital and infrastructural facilities, etc. (iii) Traditional Social Structure— It was because of India’s traditional social structure, fruits of planning could not reach to the weaker sections of the society because of the caste system, dowry system, etc. Mobility of labour, inducement to save and invest, work incentives, etc., have been greatly hurt. Family planning could not succeed because of traditional social outlook.

Question. Briefly explain the goals of five year plans.
Answer: Goals/Objectives of five years plans :
(i) Modernisation : It refers to adoption of new technology, new methods of production and changes in social outlook. For example, adoption of high yielding variety of seed, new methods of irrigation, gender empowerment, etc.
(ii) Self-reliance : Self reliance means reducing dependence on imports of those goods which can be produced within the country. Self reliance objectives of Indian Five Year Plans were:
(a) Self-sufficiency in food grains;
(b) Fall in foreign aid and increase in dependency on domestic product;
(c) Increasing the share of industries in GDP.
(iii) Growth : it refers to increase in country’s capacity to produce the output of goods and services within the country. It implies either a large stock of productive capital, or a large size of supporting services like transport and banking or increase in the efficiency of productive capital and services. The indicator of economic growth is GDP. GDP is the market value of all goods and services produced in the country in one year. The contribution made by each sector of an economy gives the structural composition of economy. (iv) Equity : Equity refers to reduction in inequality of income, uplifting weaker sections of the society and a more even distribution of economic power. A country can have high growth, the most modern technology and also have most of its people living in poverty. So, it was also one of the objectives of five year plan that every Indian should be able to meet his or her basic needs such as food, a decent house, education and health care and inequality in the distribution of wealth should be reduced.

Question. Underscore some of India’s most crucial economic challenges on the eve of independence.
Answer: The Indian economy was a backward economy. At the country’s eve of independence, over 75% of the population was engaged in agriculture sector. There were not many industries and capital was mostly invested by foreigners. There was a complete absence of any infrastructure for imparting knowledge on technical skills to the labourers. The following statistics reveal the extent of backwardness in the economy : (i) Per capita income was low. It was ₹ 1,274 in 1950-51 at 1980-81 prices. (ii) Large scale unemployment and under employment existed. (iii) Mass illiteracy with literates forming only 17% of the total population excluding children below 10 years. For rural areas, this percentage was even lower.
(iv) The birth rate and death rate were both high. With the decline in the death rate after 1920s-30s, the growth rate of population increased.

Question. Explain any four positive contribution made by Britishers in India.
Answer: Positive contributions of British Rule : British Rule had some positive effects on Indian economy. They are discussed as under : (1) Self-sufficiency in food grain production : Commercialization of agriculture initiated by British Government resulted in self-sufficiency in food grain production. (2) Better means of Transportation : Development of roads and railways provided cheap and rapid transport system and opened up new opportunities of economic and social growth. (3) Check on Famines : Roads and railways worked as a great check on the occurrence and impact of famines as food supplies could be transported to the affected areas in case of droughts. (4) Shift to Monetary Economy : British rule helped Indian economy to shift from barter system of exchange (exchange of good for goods) to monetary system of exchange. (5) Effective Administrative setup : The British Government had an efficient administration system, which served as a ready reckoner for Indian politicians.

Question. Does modernization as a planning objective create contradiction in the light of employment generation ? Explain.
Answer: No, modernization as a planning objective does not contradict employment generation rather modernization and employment generation share a positive relationship in the long run. Modernization refers to the use of new and modern technology in the production process. This may make some people lose their jobs in the initial stages. But gradually, the use of modern technology and input will raise the productivity and consequently, the income of the people that will further raise the demand for goods and services. In order to fulfil this increased demand, more production output will be required and there will be more job opportunities that will lead to higher employment in the economy. Even in short run, modernization leads to creation of employment opportunities for skilled workers and if proper training and vocational education is provided, it will lead to better employment in terms of quality of work and earnings. Hence, both modernization and employment generation are not contradictory but are complementary to each other.

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