CBSE Class 11 Economics Economic Indian Economy

INDIAN ECONOMY (1950-1990)
• After two hundred years of British rule India finally got freedom on 15 August, 1947.
• It was necessary to rebuild the backward and stagnant Indian economy into a developed economy.
• the most important task before the Government of independent India was to decide the type of ‘Economic System’, which would be most suitable for India.

TYPES OF ECONOMIC SYSTEMS

1. Capitalist Economy: A capitalist economy is the one in which the means of production are owned, controlled and operated by the private sector. Production is done mainly for earning profits.

2. Socialist Economy: A social economy is the one in which the means of production are owned, controlled and operated by the government.

3. Mixed Economy: A mixed economic system refers to a system in which he public sector and the private sector are allotted their respective roles for solving the central problems of the economy
Solution of Central problems are solved in the following manner Economy What to produce How to produce For

India adopted the Mixed Economy
After the freedom, leaders of independent India (like Jawaharlal Nehru) were confused with regard to economic system, to be followed in India.
▪ Some leaders were in favor of Socialist Economy. However, in a democratic country like India, complete dilution of private ownership was not possible
▪ Capitalist Economic System did not appeal to Jawaharlal Nehru, our first Prime Minister, as under this system, there would be less chances for improvement in quality of life of majority of people.
▪ As a result, Mixed Economy (with best features of both Socialist and Capitalist Economy) was adopted by the Indian Economy. In this view, India would be a socialist society, with a strong public sector, but also with private property and democracy.

PLAN:-Meaning
• How the resources of a nation should be put to use.
• It should have some general goals as well as specific objectives which are to be achieved within a specified period of time.

PLAN Duration:- Five years- known as “Five Year Plans (Borrowed from former Soviet Union).
Economic Planning.- Defined as making major economic decisions on the basis of a comprehensive survey of the economy as a whole.

Implementation:-Government of India set up Planning Commission in 1950, with the Prime Minister as the Chairman.

GOALS OF FIVE YEAR PLANS (GEMS)

1. Growth:
• Growth Refers to increase in country GDP from different sectors (agricultural , industrial , service )
• GDP can be increase by
• Increase in the country’s capacity to produce the output of goods and services
• Increasing the supporting services like transport and banking, power, communication etc

2. Equity
• Benefits of economic prosperity reach the poor sections as well instead only by the rich.
• This can be done by reducing inequality in the distribution of wealth.
• Every Indian should be able to meet his or her basic needs such as food, housing, education and health care etc.

3. Modernization: -
• Adoption of new technology is called modernization to increase the production of goods and services.
• It can be new seed varieties in agriculture or using a new type of machine in factory • It also includes changes in social outlook such as the recognition women empowerment by giving them same rights as men

4. Self-reliance:
• Self-reliance means avoiding imports of those goods which could be produced in India itself to promote economic growth and modernization
• Main areas covered were food supplies, foreign technology and foreign capital
• It can be done by reducing our dependence on foreign countries to avoid foreign interference in economic and nation policies

Land reforms: - Land Reforms refer to change in the ownership of landholdings. It ensure that land in actually passed on to people who actually cultivate it (this is known as providing 'land to tiller of the soil

Agrarian Reforms
1. Institutional Reforms (Land Reforms)
2. Technical Reforms (Green Revolution)

TYPES OF LAND REFORMS IMPLEMENTED IN THE AGRICULTURE (RAT)

1. Redistribution of Land ( Land ceiling)
• This means fixing the maximamize of land which could be owned by an individual. • The purpose of land ceiling was to reduce the concentration of land ownership in a few hands.

2. Abolition of intermediaries
• In India, middlemen (Zamindars) who collected rent from the actual cultivators and deposited a part of it to the government as land revenue was abolished before 1951
• As a result almost 200 lakh tenants into direct contact with the government and were thus freed from being exploited by the (ZAMindars)

3. Tenants Ownership Rights
• Legislations have been passed to transfer ownership rights on tenant-cultivators. In some states, tenants were made the owners and asked to pay compensation to previous owners.
• It gave tenants the incentive to increase output and this contributed to growth in agriculture.

DRAWBACKS IN LAND REFORMS (FILE)

1. Fault in Legislations
• In some areas the former zamindars continued to own large areas of land by making use of some loopholes in the legislation.
• The intermediaries were allowed to retain substantial areas of land for personal cultivation

2. Implementation delay
• The big landlords challenged the legislation in the courts, delaying its implementation.
• They used this delay to register their lands in the name of close relatives, thereby escaping from the legislation.

3. Lack of Political Will
• Land reforms were successful in Kerala and West Bengal because these states had governments committed to the policy of land to the tiller.
• Unfortunately other states did not have the same level of commitment and vast inequality in landholding continued

4. Exploitation
• Landlords often forced their tenants to voluntarily surrender the land being cultivated by them.
• There were cases where tenants were expelled and the Landowners claimed to be self cultivators (the actual tillers)

Green revolution meaning:- Refers to the large increase in production of food grains resulting from the use of high yielding variety (HYV) seeds especially for wheat and rice.

Origin of Green Revolution:- In the Kharif season (1966), India adopted High Yielding Varieties Programme for the first time. The programme was successful due to:
• High Yielding Varieties (HYV) of seeds;
• Adequate irrigation facilities;
• Application of fertilizers, pesticides, insecticides, etc

REASONS REQUIRE FOR GREEN REVOLUTION (CAP)

1. Country’s 75 % of the population was dependent on agriculture.

2. Agriculture in India depends on the monsoon and if the monsoon fell short the farmers were in trouble

3. Productivity in the agricultural sector was very low because of the use of old technology.

PHASES IN GREEN REVOLUTION

1. First phase (Approximately mid 1960s upto mid1970s), the use of HYV seeds was restricted to the more rich states such as Punjab, Andhra Pradesh and Tamil Nadu. Further, the use of HYV seeds primarily benefited the wheat growing regions only.

2. Second phase (mid-1970s to mid-1980s), the HYV technology spread to a larger number of states and benefited more variety of crops.

BENEFITS OF GREEN REVOLUTION (SIDE)

1. Self reliance:- The spread of green revolution technology enabled India to achieve self-sufficiency in food grains; we no longer had to be at the mercy of America, or any other nation, for meeting our nation’s food requirements

2. Increase in the market surplus:- Marketable Surplus refers to that part of agricultural produce which is sold in the market by the farmers after meeting their own consumption requirement As a result of this income of the farmers increased

3. Decrease in price of good grains:- The price of food grains declined relative to other items of consumption. The low income groups, who spend a large percentage of their income on food, benefited from this decline in relative prices.

4. Enables Buffer stock:- The green revolution enabled the government to secure sufficient amount of food grains to build a stock which could be used in times of food shortage

CONCERN IN IMPLEMENTING THE GREEN REVOLUTION

1. Risk of Increase in Income Inequalities:- Possibility that it would increase the disparities between small and big farmers—since only the big farmers could afford the required inputs.

2. Risk of Pest Attack:- Moreover, the HYV crops were also more prone to attack by pests and the small farmers who adopted this technology could lose everything in a pest attack STEPS TAKEN BY

THE GOVERNMENT.(GOVERNMENT ROLE)

1. Financial help:- The government provided loans at a low interest rate to small farmers and subsidized fertilizers so that small farmers could also have access to the needed inputs.

2. Role of research institutes: - The risk of the small farmers being ruined when pests attack their crops was greatly reduced by the services provided by research institutes established by the government.

Debate over Subsidies to Agriculture:- Subsidy, in context of agriculture, means that the farmers get inputs at prices lower than the market prices.

ECONOMISTS IN FAVOR OF SUBSIDIES (RIP)

1. Risky Business: - The government should continue with agricultural subsidies as farming in India continues to be a risky business.

2. Income inequality: - Eliminating subsidies will increase the income inequality between rich and poor farmers and will violate the ultimate goal of equity.

3. Poverty:- Majority of the farmers is very poor and they will not be able to afford the required inputs without the subsidies.

ECONOMISTS -AGAINST THE SUBSIDIES

1. Burden on Govt. Subsidies were granted by the Government to provide an incentive for adoption of the new HYV technology. It is a huge burden on the government’s finances. It should withdraw as their purpose has been served

2. Benefit to rich farmers: - Subsidies do not benefit the poor and small farmers (target group) as benefits of large amount of subsidy go to fertilizer industry and prosperous farmers.

INDUSTRIAL DEVELOPMENT
At the time of independence, the variety of industries was very limited. The cotton textile and jute industries were mostly developed in India. There was only two well-managed iron and steel firms; one in Jamshedpur and the other in Kolkata.

ROLE OF PUBLIC SECTOR IN INDUSTRIAL DEVELOPMENT.(LOSE)

1. Lack of Incentive for Private Sector:
• The Indian market was not big enough to encourage private industrialists to undertake major project
• Due to limited size of the market, there was low level of demand for the industrial goods.

2. Objectives of Social Welfare:
• State had complete control over those industries, that were vital for the economy
• The objective of equity and social welfare of the Government could be achieved only through direct participation of the state in the process of industrialization.

3. Shortage of Capital with Private Sector:
• Private entrepreneurs did not have the capital to undertake investment in industrial ventures.
• Government had to make industrial investment through Public Sector Undertakings (PSU’s)

4. Employment generation:-
• Industry provides employment, which is more stable than the employment in agriculture. Industrialization promotes modernization and overall prosperity

INDUSTRIAL POLICY RESOLUTION 1956
• Industrial Policy Resolution of 1956 was adopted to build the foundation for a socialist pattern of society in 2nd five year plan
• Industries were reclassified into three categories,.

1. Schedule A: This first category comprised industries which would be exclusively owned by the state.like arms and ammunitions; atomic energy; aircraft; oil; railways etc

2. Schedule B: In this schedule, state would take the initiative of setting up industries and private sector will supplement efforts of the state. Includes industries like aluminum, mining industries, fertilizers, etc.

3. Schedule C: This schedule consists of the remaining industries which were to be in the private sector. These industries were controlled by the state through a system of license.
Private sector will join hand with state sector, with the state taking the sole responsibility for starting new units

SMALL-SCALE INDUSTRIES (SSI)
In 1955, the village and small-scale Industries Committee (Karve Committee) recommended growth small-scale industries
o Promote rural development.
o Generate more employment
• In 1950 a small scale industry unit was one which invested a maximum of rupees five lakh.
• At present the maximum investment allowed is rupees one crore

IMPORTANT POINTS ABOUT SMALL-SCALE INDUSTRIES

1. Need for Protection from Big Firms: Small-scale industries cannot complete with the big industrial firms so, various steps were taken by the government for their growth.
▪ Reservation of Products: Government reserved production of a number of products for the small-scale industry.
▪ Various Concessions: Small-scale industries were also given concessions, such as lower excise duty and bank loans at lower interest rates.

TRADE POLICY

Import substitution
▪ In the first seven plans, foreign trade policy was “inward looking Trade Strategy called “Import Substitution’.
▪ Import Substitution refers to a policy of replacement or substitution of imports by domestic product.

Protection from Imports used.

1. Tariffs:- refer to taxes levied on imported goods. The basic aim for imposing heavy duty on imported goods was to make them more expensive and discourage their use.

2. Quotas: refer to fixing the maximum limit on the imports of a commodity by a domestic producer.

REASONS FOR IMPORT SUBSTITUTION

1. Avoid foreign competition: - industries of developing countries, like India, are not in a position to compete against the goods produced by more developed economies. With protection, they will be able to compete in the due course of time.

2. Saving foreign exchange:- Restriction on imports was necessary as there was a risk of drain of foreign exchange reserves on the import of luxury goods. EFFECT OF POLICIES ON INDUSTRIAL

DEVELOPMENT (1950 -1990)(PICK)

1. Protection from foreign competition (through Import Substitution) enabled the development of local industries in the areas of electronics and automobile sectors, which otherwise could not have developed

2. Industry diversification- The industrial sector became well diversified by 1990, largely due to public sector. It was no longer restricted to cotton textiles and jute. It also included engineering goods and a wide range of consumer goods

3. Contribution in GDP contributed by the industrial sector increased in the period from 11.8 % in 1950- 51 to 24.6 in 1990 – 91. This rise in industry’s share of GDP is an important indicator of development.

4. Key Role in Promoting of small-scale industries: Gave opportunities to people with small capital to get into business. New investment opportunities helped in generating more employment. It promoted growth with equity.

Multiple Choice Questions

Question. In which year was Planning Commission abolished?
a) 2014
b) 2015
c) 2016
d) 2017
Answer : B

Question. Which of the following is the primary objective of economic planning in India?
a) Abolition of poverty
b) Removing unemployment
c) Growth with social justice
d) Reducing inequality of income
Answer : C

Question. Main features of IPR 1956 are:
a) Protection to cottage and small scale industries.
b) Specific and all important role assigned to public sector.
c) Cautions approach towards foreign capital
d) All of these.
Answer : D

Question. Which of the states got success in Land Reform?
a) Kerala and West Bengal
b) Punjab and Haryana
c) Rajasthan and Assam
d) None of these.
Answer : A

Question. The need for planning emerges from which of the following weaknesses of the free market system?
a) Inequalities
b) Exploitation of workers
c) Instability
d) All of these.
Answer : D

Question. Who was the chairman of India’s First Five Year Plans”
a) P. C. Mahalanobis
b) Mahatma Gandhi
c) Jawaharlal Nehru
d) None of these.
Answer : C

Question. Which plan was suspended one year before the time schedule?
a) First Plan (1951-56)
b) Third Plan (1961-66)
c) Sixth Plan (1980-85)
d) Fifth Plan (1974-79)
Answer : D

Question. The starting of land reforms programmer was set up in the right direction but it could not be successful because of:
a) Lack of political will
b) inadequate data of tenants
c) Both (a) and (b)
d) None of these.
Answer : C

Question. What do you mean by tariffs?
a) Tax imposed on imported goods
b) Tax imposed on exported goods
c) Tax imposed on starting an Industry
d) None of these.
Answer : A

Question. Schedule C industries development were left to:
a) Public sector
b) Private sector
c) Both (a) and (b)
d) None of these.
Answer : B

Question. What do you mean by Quotas?
a) The quantity of goods which can be exported.
b) The quantity of goods which can be imported.
c) Both (a) and (b)
d) None of these.
Answer : B

Question. Which of the following sectors contribute highest to India’s National Income?
a) Service Sector
b) Agriculture Sector
c) Secondary Sector
d) Foreign Trade
Answer : A

Question. Legally stipulated maximum size beyond which no individual farmer can hold any land:
a) Tenancy reforms
b) Land consolidation
c) Abolition of Intermediaries
d) Land Ceiling.
Answer : D

Question. Green revolution resulting from:
a) Traditional Irrigation facilities
b) Use of manures
c) HYV seeds
d) None of these.
Answer : C

Question. National Income in India is estimated by:
a) Planning Commission
b) Reserve Bank of India
c) Rajasthan and Assam
d) Central Statistical Organisation.
Answer : D

Question. There were some areas where the economic planning in India has failed:
a) Failure to reduce inequalities of income and wealth.
b) Inadequate growth in production sector.
c) Failure to eradicate poverty
d) All of these.
Answer : D

Question. Indian Green Revolution is most successful in:-
a) Wheat and Rice
b) Wheat and Vegetables
c) Rice and Pulses
d) Tea and Coffee
Answer : A

Question. Who developed HYV seeds?
a) Normal Borlaug
b) Norten Borlaug
c) Norah Jones
d) Normal Jones
Answer : A

Question. The strategy to earn foreign exchange by promoting domestic exports and making domestic industry competitive in the international market is called:
a) export promotion
b) import substitution
c) export liberalization
d) import restriction.
Answer : A

Question. An economy in which there is private as well as public ownership of the means of production is called:
a) Capitalist economy
b) Socialist economy
c) Mixed economy
d) None of these.
Answer : C

Assertion and Reason Based Question

Question. Assertion (A): Growth and social justice is the central objective of Indian plans.
Reason (R): India opted for planning to utilize available resources efficiently and to establish social justice.
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of assertion (A)
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion
c) Assertion (A) is true but Reason (R) is false.
d) Assertion (A) is false but Reason (R) is true.
Answer : a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)

Question. Assertion (A): Subsidies were, needed to encourage farmers.
Reason (R): Any new technology is looked upon as being risky by farmers
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
c) Assertion (A) is true but Reason (R) is false.
d) Assertion (A) is false but Reason (R) is true.
Answer : a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

Question. ASSERTION (A): Public sector was given leading role in industrialization during the period of planning.
REASON (R) Private sector was not having enough capital and also market was not so big to encourage industrialists to undertake big projects even if they had capital to do so. Alternatives:
a) Both (A) and (R) are true (R) is correct explanation of (A)
b) Both (A) and (R) are true (R) is not correct explanation of (A)
c) (A) is true (R) is false.
d) (A) is false (R) is true.
Answer : (a) Both (A) and (R) are true (R) is correct explanation of (A)

Question. Assertion (A) The year 1921 is described as the year of Great Divide.
Reason (R) It was from this year, population started increasing continuously.
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
c) Assertion (A) is true but Reason (R) is false.
d) Assertion (A) is false but Reason (R) is true
Answer : a) Both Assertion (A) and Reasoning (R) are true and Reason ( R) is the correct explanation of Assertion (A).

Question. Assertion (A): Tariffs and quotas in the economic policy post-independence were used to assist domestic industries.
Reason (R) : Our planners wanted to use foreign exchange for importing luxury goods.
a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.
b) Both Assertion and Reason are true and Reason is not the correct explanation of Assertion.
c) Assertion is true, but Reason is false
d) Assertion is false but Reason is true.
Answer : c) Assertion is true, but Reason is false

Question. Assertion: The need to obtain a license to start an industry was misused by big industrial houses.
Reason: A big industrialist would get a license not for starting new firm but to prevent competitors from starting new firms.
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
c) Assertion (A) is true but Reason (R) is false.
d) Assertion (A) is false but Reason (R) is true
Answer : a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

Question. Assertion (A): A good indicator of economic growth is steady increase in Gross domestic product (GDP).
Reason(R): GDP is the market value of all goods and services produced in a country during a year
a) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A)
b) Both Assertion (A) and Reason (R) are true, and Reason (R) is not the correct explanation of Assertion (A)
c) Assertion (A) is true, but Reason (R) is false.
d) Assertion (A) is false, but Reason (R) is true.
Answer : b) Both Assertion (A) and Reason (R) are true, and Reason (R) is not the correct explanation of Assertion (A)

Question. Assertion: Only a handful of states benefited from green revolution in India
Reason: Success of green revolution depends on policy implementation by state government.
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
c) Assertion (A) is true but Reason (R) is false.
d) Assertion (A) is false but Reason (R) is true.
Answer : a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

Question. Assertion (A): One of the pillars of IPR 1956 was to check concentration of economic power in few individuals, groups, or business houses.
Reason(R): It established the public sector as epicentre of industrialization.
a) Both (A) and (R) are true (R) is correct explanation of (A)
b) Both (A) and (R) are true (R) is not correct explanation of (A)
c) (A) is true (R) is false.
d) (A) is false (R) is true.
Answer : b) Both (A) and (R) are true (R) is not correct explanation of (A)

Question. Assertion- The developing countries (like India) can progress only if they have a good industrial sector.
Reason-. Industry provides employment, which is more stable than the employment in agriculture.
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
c) Both Assertion (A) and Reason (R) is false.
d) Assertion (A) is false but Reason (R) is true.
Answer : a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)

Case Study

Read the following case study paragraph carefully and answer the questions based on the same.

The Green Revolution started in 1965 with the first introduction of HYV seeds in India agriculture. This was coupled with better and efficient irrigation and the correct use of fertilizers to boost the crop. The result of the Green Revolution was to make India self-sufficient when it came to food grains.
After 1997 India had to rebuild its economy. Over three-quarters of the population depended on agriculture in some way. But agriculture in India was faced with several problems. Firstly, the productivity of grains was very low, and India was still monsoon dependent because of lack of irrigation and other infrastructure.
There was also an absence of modern technology. And India had previously faced severe famines during the British Raj, who has only promoted cash crops instead of food crops. The idea was to never depend on any other country for food sufficiency.
So in 1965, the government with the help of Indian geneticists M.S.Swaminathan, known as the father of Green Revolution, launched the Green Revolution. The movement lasted from 1967 to 1978 and was a great success.

Question. Green revolution is related with ____________.
a) Modern technology.
B) Better irrigation facilities
c) HYV seeds
d) All of the above.
Answer : D

Question. Britishers encouraged Indian farmers to grow food crops. (true/false)
Answer : False

Question. What was the need of green revolution to make India ________?
a) Sufficient production
b) Modernisation
c) Self- sufficient
d) None of these.
Answer : C