Indian Economy 1950-1990 - Class 11 Economics - Chapter 2 - Notes, NCERT Solutions & Extra Questions
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Extra Questions - Indian Economy 1950-1990 | Indian Economic Development | Economics | Class 11
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Define a plan.
A plan in economics refers to a detailed proposal for achieving specific economic goals or outcomes. It typically outlines a set of strategies, policies, and actions to be undertaken to achieve those objectives, often within a certain timeframe. Plans can be created by individuals, businesses, or governments.
For example:
Individual level: Budgeting plans for personal savings or education expenses.
Business level: Corporate strategic plans for market expansion or new product development.
Government level: Economic development plans to boost growth, reduce unemployment, or control inflation.
Overall, a plan serves as a roadmap, providing direction and coordination to ensure that resources are allocated efficiently and objectives are met.
Why did India opt for planning?
India opted for planning post-independence to address its pressing socio-economic challenges. The primary motivation was to improve living standards and ensure a balanced distribution of wealth. Planning was seen as essential for a structured approach to economic development, aiming to transform India into a modern and self-sufficient nation. The government aimed to control the "commanding heights" of the economy through public sector dominance, ensuring that critical sectors like defence, infrastructure, and heavy industries received necessary investments. Planning aimed to avoid ad-hocism, bringing about efficiency and effectiveness in resource allocation and usage.
Why should plans have goals?
Plans should have goals to provide clear direction and purpose, ensuring that all efforts are aligned towards achieving specific outcomes. Goals establish measurable objectives that enable progress tracking and facilitate adjustments as required. They help in resource allocation, ensuring that limited resources are used efficiently to achieve maximum impact. Having well-defined goals also motivates and guides stakeholders, fostering coordination and commitment among various groups involved in the development process. Ultimately, goals ensure accountability, making it possible to evaluate the success of policies and plans, leading to better decision-making and outcomes.
What are High Yielding Variety (HYV) seeds?
High Yielding Variety (HYV) seeds are a type of seed developed through breeding practices to significantly increase crop productivity. Here are some key characteristics of HYV seeds:
Higher Productivity: These seeds are designed to produce more grains or fruits per plant compared to traditional varieties.
Shorter Maturity Period: HYV seeds generally have a shorter growing season, allowing farmers to harvest crops more quickly and potentially grow multiple crops in a year.
Disease Resistance: Many HYV seeds are bred to be resistant to certain diseases and pests, reducing crop loss and the need for chemical pesticides.
Adaptation to Fertilizers: HYV crops typically respond well to fertilizers, further boosting their productivity when grown with adequate inputs.
Water Requirement: Some HYV seeds require more water, making them suitable for regions with good irrigation facilities.
The introduction of HYV seeds has been a crucial factor in the Green Revolution, significantly transforming agricultural practices and improving food security in many parts of the world.
What is marketable surplus?
Marketable surplus refers to the portion of agricultural produce that farmers sell in the market, rather than consuming themselves. It is critical for the broader economy because it affects the availability of food products in markets and influences food prices. A larger marketable surplus implies that more food is available for sale, which can help in stabilizing food prices and ensuring food security. The level of marketable surplus depends on factors such as production volume, farmers' personal consumption needs, and storage facilities. Efficient management of marketable surplus is essential for economic stability and growth in the agricultural sector.
Explain the need and type of land reforms implemented in the agriculture sector.
- Need for Land Reforms:
- Ensure equity and social justice in the agricultural sector.
- Break monopolistic control of zamindars and landlords.
- Provide incentives for better agricultural productivity.
- Types of Land Reforms Implemented:
- Abolition of Intermediaries: Eliminated zamindars to directly connect tenants with the government.
- Land Ceiling: Capped land ownership to reduce its concentration among the wealthy and redistribute excess land to the landless.
- Tenancy Reforms: Secured tenancy rights and regulated rents to protect and empower tenants.
- Ensuring the right of ownership to those who actually till the land.
These reforms aimed to increase agricultural output and improve the livelihood of the rural population.
What is Green Revolution? Why was it implemented and how did it benefit the farmers? Explain in brief.
The Green Revolution refers to a major boost in agricultural productivity due to the introduction of high-yielding variety (HYV) seeds, primarily for wheat and rice. It was implemented during the mid-1960s to address India's chronic food shortages and to achieve self-sufficiency in food production.
The implementation of HYV seeds required the use of chemical fertilizers and pesticides, along with a regular and reliable water supply (irrigation), making farming more reliant on specific agricultural inputs. Affluent states like Punjab and Tamil Nadu initially benefited due to their better access to these resources.
The Green Revolution significantly increased food grain production, allowing India to become self-reliant and reducing its dependency on food imports. Farmers benefited from higher yields and greater marketable surplus, which provided more income opportunities and economic security against famines and food scarcity.
Explain 'growth with equity' as a planning objective.
Growth with equity is a fundamental objective in economic planning that aims to ensure a balanced distribution of the benefits of economic growth. Growth refers to the increase in a country’s capacity to produce goods and services, ideally leading to an increase in the Gross Domestic Product (GDP). However, growth alone might concentrate wealth in the hands of a few, which is why equity is crucial. Equity ensures that economic prosperity benefits everyone, particularly the poor, by providing fair access to resources and opportunities. This dual objective addresses both the quantitative and qualitative aspects of economic development, aiming for a society where progress is shared broadly across all its members. This ensures that as the economy grows, disparities in wealth and opportunities are minimized, leading to social stability and sustainable development.
Does modernisation as a planning objective create contradiction in the light of employment generation? Explain.
Modernisation as a planning objective can indeed create contradictions in terms of employment generation. Modernisation typically involves adopting new technologies and improving efficiency, which may lead to higher productivity but can also result in the reduction of the demand for labor, particularly unskilled labor. This process, often referred to as 'technological unemployment,' can increase productivity and economic growth, but may also lead to job losses. For instance, the introduction of automation in manufacturing can displace workers who are not skilled in managing or maintaining automated machinery. Therefore, while modernisation may drive economic growth and advancement, it can contradict the goal of expanding employment opportunities, especially if not paired with policies aimed at reskilling and upskilling the workforce.
Why was it necessary for a developing country like India to follow self-reliance as a planning objective?
Self-reliance was a crucial planning objective for India, primarily to build a resilient economic foundation. Post-independence, India aimed to reduce dependency on foreign nations, particularly to safeguard national sovereignty and ensure stability in face of global political dynamics. Pursuing self-reliance was vital for economic security, especially considering the historical context of colonial exploitation that left India economically depleted. By focusing on self-sufficiency, India intended to harness and mobilize domestic resources to foster economic growth and development. Additionally, promoting self-reliance helped to mitigate vulnerabilities associated with global economic fluctuations and political pressures, building a robust infrastructure that was less reliant on unpredictable foreign aid or imports, particularly in critical sectors like food and technology.
What is sectoral composition of an economy? Is it necessary that the service sector should contribute maximum to GDP of an economy? Comment.
The sectoral composition of an economy refers to the distribution of economic activities across different sectors such as agriculture, industry, and services, and their contribution to the Gross Domestic Product (GDP).
It is not necessary that the service sector should contribute the most to an economy's GDP; this varies based on the country's level of development and economic structure. In developing countries, agriculture might dominate, while in developed nations, services often lead due to high-value services like finance, technology, and healthcare. However, a strong service sector can indicate advanced economic development and diversification, potentially leading to greater stability and higher living standards. Nevertheless, a balanced growth among all sectors is crucial for sustainable economic development.
Why was public sector given a leading role in industrial development during the planning period?
During the initial planning period after independence, public sector was given a leading role in industrial development primarily due to the insufficient capital within the Indian private sector to handle large-scale industrial projects necessary for national development. Additionally, there was limited market size that made it economically non-viable for private industries to invest heavily. Given these constraints, the government decided to take the lead in order to kick-start industrialization across critical sectors. With the goal of controlling the 'commanding heights' of the economy, detailed in Industrial Policy Resolution 1956, the government wanted to ensure a strategic development of industries that were vital for the country's economic progress and self-sufficiency, while also promoting regional equity and balanced growth across different areas.
Explain the statement that green revolution enabled the government to procure sufficient food grains to build its stocks that could be used during times of shortage.
- Background of Green Revolution: Introduced in India around the mid-1960s, the Green Revolution involved using high-yielding variety (HYV) seeds, especially for wheat and rice, along with modern farming techniques.
- Increased Food Production: The revolution led to a significant increase in agricultural production. Farmers began producing more food grains than previously possible due to enhanced productivity.
- Building Government Stocks: With the substantial increase in food grain production, the government was able to purchase large quantities of these grains directly from farmers.
- Usage During Shortages: The procured food grains were stored in government-controlled granaries. These stocks were crucial as they could be utilized during periods when food production was low due to poor monsoons or other reasons, ensuring food security.
- Impact on National Food Security: The strategic reserves allowed the government to manage food supply effectively, avoiding reliance on international food imports and preventing hunger in adverse situations. This system helped stabilize food prices and availability across the country.
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.
- Encouragement of Technology Adoption: Subsidies make it financially viable for farmers, especially small-scale ones, to invest in modern technology, leading to increased productivity and self-sufficiency in food production.
- Financial Burden on Government: While beneficial, subsidies significantly strain government finances. This is critical in a developing economy where funds could be diverted to other essential sectors like education and healthcare.
- Risk of Misallocation: There's a risk that subsidies might benefit wealthier farmers or industries (like the fertilizer industry) more than the intended small farmers, leading to inefficient allocation of resources.
- Long-Term Dependency: Subsidies can lead to dependency, where farmers might continuously expect financial support, potentially stifling innovation and self-reliant agricultural practices.
- Economic Distortion: By distorting market prices and competition, subsidies can lead to overuse of resources, such as water and fertilizers, potentially harming the environment and future agricultural prospects.
Conclusion: The effectiveness of subsidies must be carefully weighed against their financial sustainability and targeted impact to ensure equitable and efficient support for farmers while not overburdening government finances.
Why, despite the implementation of green revolution, 65 per cent of India's population continued to be engaged in the agriculture sector till 1990 ?
- Limited Industrial Expansion: The industrial sector did not expand sufficiently to absorb the excess labour from the agriculture sector. This meant fewer alternative employment opportunities for those engaged in agriculture.
- Subsistence Farming Prevalence: A significant portion of the agricultural engagement was in subsistence farming, where families rely on farming for their own consumption rather than commercial purposes, thus keeping them bound to agriculture.
- Skill and Educational Barriers: A lack of adequate education and skills among the rural population made transitioning to industrial sector jobs challenging, keeping many in agriculture.
- Cultural and Social Factors: In many regions, farming is not just an occupation but a way of life, deeply ingrained in the cultural fabric of rural communities, leading to a reluctance to shift to other sectors.
- Inadequate Rural Infrastructure: Poor infrastructure and lack of supportive facilities in rural areas made it difficult for new industries to set up and thrive outside urban centers, limiting employment creation in non-agricultural sectors.
These factors collectively contributed to the high percentage of the population remaining in agriculture despite the technological advances of the Green Revolution.
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.
- Promotion of Key Industries: Public Sector Undertakings (PSUs) are crucial for industries considered strategically important, such as defence and infrastructure, where private investment might be reluctant due to high risks or low returns.
- Balancing Regional Development: PSUs often operate in economically backward or remote areas, promoting balanced regional development and employment.
- Control of Natural Resources: Public sectors help in the management and conservation of critical natural resources, preventing over-exploitation by private entities.
- Research and Development: Many PSUs invest in research and development, which is often not prioritized by the private sector due to high costs and long gestation periods.
- Incurring Losses: While PSUs do incur losses, the blame often lies in inefficient management and political interference rather than the non-viability of the sectors they operate in.
- Reform and Privatization: The need for reforms in management practices and strategic privatization of non-core units can help mitigate losses while sustaining essential services.
Thus, despite some inefficiencies, the public sector plays a vital role in the industrial and overall economic framework of a country.
Explain how import substitution can protect domestic industry.
Import substitution is a trade policy aimed at reducing dependency on foreign goods by promoting domestic production. Here’s how it can protect domestic industries:
- Tariffs: Imposing taxes on imported goods makes them more expensive than locally produced items, discouraging imports and encouraging consumers to buy domestic products.
- Quotas: Setting limits on the amount of goods that can be imported ensures that the domestic market is primarily served by homegrown industries, reducing foreign competition.
- Encouragement of Local Industries: By reducing the influx of foreign goods, domestic industries receive a captive market, which can lead to increased sales and growth opportunities.
- Job Creation: Increased production to meet domestic demand can lead to more jobs in local industries which bolsters the economy.
- Development of Local Industries: By protecting fledgling industries from international competition, they have the opportunity to develop and become competitive.
Overall, import substitution aims to enhance economic independence and reduce vulnerabilities to global market fluctuations.
Why and how was private sector regulated under the IPR 1956 ?
Under the Industrial Policy Resolution of 1956 (IPR 1956), the private sector was regulated to align with India's goal of socialistic pattern of society and to ensure balanced economic development. Three categories were delineated: industries exclusive to the state, those where the state would primarily operate with the private sector supplementing, and those mainly left to the private sector. However, even for the third category, licenses were mandatory for establishing new industries or expanding existing ones. This licensing system aimed to prevent overproduction, promote regional equality by encouraging industries in backward areas through concessions, and protect domestic enterprises from excessive market competition. The regulation was meant to ensure that private sector activities complemented public sector initiatives.
Match the following:
1. Prime Minister | A. Seeds that give large proportion of output |
2. Gross Domestic Product | B. Quantity of goods that can be imported |
3. Guota | C. Chairperson of the planning commission |
4. Land Reforms | D. The money value of all the final goods and services produced within the economy in one year |
| E. Improvements in the field of agriculture to increase its productivity |
6. Subsidy | F. The monetary assistance given by government for production <br> activities |
Prime Minister - C. Chairperson of the planning commission
Gross Domestic Product - D. The money value of all the final goods and services produced within the economy in one year
Quota - B. Quantity of goods that can be imported
Land Reforms - E. Improvements in the field of agriculture to increase its productivity
HYV Seeds - A. Seeds that give a large proportion of output
Subsidy - F. The monetary assistance given by the government for production activities
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Indian Economy 1950-1990: Comprehensive Notes and Analysis
Introduction to Post-Independence Economic Planning
After India gained independence in 1947, the nation's leaders faced the daunting task of rebuilding an economy battered by colonial exploitation. The establishment of a suitable economic system was critical, and a mixed economy—combining elements of both socialism and capitalism—emerged as the chosen model. This system aimed to harness the benefits of both economic ideologies while minimizing their drawbacks.
The Goals of Five Year Plans
The Five Year Plans were central to India's economic strategy, each focusing on four principal goals:
- Growth: Enhancing the production capacity of goods and services.
- Modernisation: Encouraging the adoption of new technologies and social reforms.
- Self-reliance: Reducing dependency on foreign imports.
- Equity: Ensuring that economic benefits reached the poor and reduced disparities.
Land Reforms and Their Impacts
At independence, the agricultural sector was marred by inequalities in land ownership. To address these, India implemented significant land reforms:
- Abolition of Intermediaries: Removing rent-collecting intermediaries like zamindars.
- Land Ceiling: Setting maximum limits on individual land ownership to prevent large-scale ownership by a few.
These reforms were aimed at promoting equity and incentivising landowners to enhance productivity. However, efforts were often hampered by legal challenges and loopholes exploited by large landowners.
The Green Revolution
The Green Revolution marked a major advancement in Indian agriculture through:
- Use of High-Yield Variety (HYV) Seeds: Initially focusing on wheat and later expanding to other crops.
- Supportive Inputs: Including fertilisers, pesticides, and reliable irrigation.
While the Green Revolution significantly boosted agricultural productivity and self-sufficiency, it also increased disparities between affluent and marginal farmers.
Industrial Policies: Public vs. Private Sector
India’s industrial policy aimed to balance roles between the public and private sectors. Key initiatives included:
- Industrial Policy Resolution of 1956: Classifying industries into government-owned, partly-private, and private sectors.
- Licensing System: Requiring government licenses for establishing and expanding industries, aimed at regional equity and controlled growth.
While this led to impressive industrial growth, the licensing system often stifled competition and innovation.
Small-Scale Industries and Their Role
Small-scale industries played a crucial role in:
- Promoting Employment: Utilising labour-intensive processes.
- Rural Development: Encouraging local entrepreneurship and reducing urban migration.
Government support included lower excise duties and reserved production quotas for small-scale industries.
Trade Policy: Import Substitution
India’s trade policy during this period focused on import substitution, aiming to:
- Replace Imports with Domestic Production: Protecting nascent industries from foreign competition through tariffs and quotas.
- Limit Foreign Exchange Utilisation: Preventing excessive expenditure on luxury imports.
Though initially beneficial, this policy later hindered competitiveness and quality improvements.
The Service Sector’s Growth
Structural changes in the economy were marked by the significant rise of the service sector:
By 1990, the service sector's contribution to GDP surpassed that of agriculture and industry, resembling trends observed in developed nations.
Role of Key Figures in Economic Planning
Prasanta Chandra Mahalanobis, often regarded as the architect of Indian planning, played a pivotal role, especially in designing the Second Five Year Plan. His inclusive approach brought together various economic viewpoints, shaping a balanced and sustainable planning framework.
Merits and Limitations of a Regulated Economy
Merits:
- Planned Development: Ensured focus on essential sectors like power and irrigation.
- Increased Production: Significant improvements in agricultural and industrial output.
Limitations:
- Inefficiencies: Poor performance of many public enterprises due to lack of competition.
- Regulatory Overreach: Excessive controls hampered private sector growth and innovation.
Agricultural Subsidies Debate
The debate on agricultural subsidies revolves around:
- Pro-Subsidy: Necessary for promoting technological adoption and supporting poor farmers.
- Anti-Subsidy: Leads to inefficiencies and benefits largely wealthier farmers and industries.
Finding a balanced approach remains crucial for equitable and sustainable agricultural growth.
Conclusion and Legacy
Between 1950 and 1990, India made significant economic strides under a regulated mixed economy, achieving diversification in industries and self-sufficiency in food production. However, issues like public sector inefficiencies, too much regulation, and lack of export orientation necessitated the economic reforms of the 1990s—a transition to a more open and competitive market economy.
Recap
The period from 1950 to 1990 was transformative for India’s economy, characterised by significant policy-driven interventions aimed at fostering growth, modernisation, self-reliance, and equity. While the achievements were numerous, lessons from the era paved the way for subsequent economic liberalisation.
Structural Changes (1950-1990) [Example Chart]
pie title Sectoral Contribution to GDP (1950 vs 1990)
"Agriculture: 72.1%" : 72.1
"Industry: 10.7%" : 10.7
"Services: 17.2%" : 17.2
"Agriculture: 66.8%" : 66.8
"Industry: 12.7%" : 12.7
"Services: 20.5%" : 20.5
This period laid the groundwork for India's modern economic landscape, with its mixed economy model serving as a springboard for future growth and development.
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