Indian Economy 1950-1990

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EXERCISES

1. Define a plan.

A plan spells out 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; in India plans were of five years duration and were called five year plans (we borrowed this from the former Soviet Union, the pioneer in national planning). Our plan documents up to the year 2017 not only specify the objectives to be attained in the five years of a plan but also what is to be achieved over a period of twenty years. This long-term plan is called ‘perspective plan’. The five year plans were supposed to provide the basis for the perspective plan. It will be unrealistic to expect all the goals of a plan to be given equal importance in all the plans. In fact, the goals may actually be in conflict.

2. Why did India opt for planning?

India opted for planning primarily to initiate a process of development that would raise living standards and provide new opportunities for a richer and more varied life. The leaders of independent India wanted to create an economic system that would promote the welfare of all citizens, not just a select few. They were inclined towards socialism but sought an alternative to the extreme versions of both capitalism and socialism. They aimed to establish a socialist society with a strong public sector, while also allowing for private property and democracy.

3. Why should plans have goals?

Plans should have goals to provide a clear direction and purpose, ensuring efficient use of resources to achieve specific objectives within a specified period of time. Goals guide the planning process, making it more structured and focused, and they help in evaluating the plan’s effectiveness, as the achievement of these goals can be measured and assessed at the end of the planning period.

A plan should have some clearly specified goals, and for the five-year plans in India, these goals include growth, modernisation, self-reliance, and equity. However, due to limited resources, priorities need to be set in each plan, deciding which goals should be given primary importance. Despite this, it is crucial to ensure that the policies of the plans do not contradict these four goals, even if not all of them can be given equal importance in every plan.

4. What are High Yielding Variety (HYV) seeds?

High Yielding Variety (HYV) seeds refer to seeds that are specifically engineered to increase the productivity of crops. These seeds play a significant role in the agricultural sector, particularly in the context of the Green Revolution. The Green Revolution marked a substantial increase in food grain production, primarily due to the use of HYV seeds, especially for wheat and rice.

The use of HYV seeds requires the application of fertilizers and pesticides in correct quantities, as well as a regular supply of water. The correct proportion of these inputs is vital to realize the full potential of HYV seeds. Farmers who benefit from HYV seeds need to have access to reliable irrigation facilities and the financial resources to purchase the necessary fertilizers and pesticides.

In the initial phase of the Green Revolution, the use of HYV seeds was restricted to more affluent states and primarily benefited wheat-growing regions. However, in the second phase, the technology spread to a larger number of states and benefited a more diverse variety of crops, contributing to India’s self-sufficiency in food grains.

5. What is marketable surplus?

Marketable surplus indeed refers to the portion of agricultural produce that is left over after the farmer has met his own needs and those of his family. This surplus is then sold in the market. It is an important concept because it directly impacts the supply of food grains and other agricultural products in the market, which in turn affects the prices of these goods. So, the marketable surplus includes the agricultural produce that the farmer is willing and able to sell in the market after satisfying personal and family needs.

6. Explain the need and type of land reforms implemented in the agriculture sector.

The need for land reforms in the agriculture sector was primarily driven by the aim to address issues of growth and equity that were prevalent during the colonial rule. The land tenure system at the time of independence was characterized by intermediaries such as zamindars and jagirdars, who collected rent from the actual tillers of the soil without contributing to improvements on the farm. This system resulted in low productivity in the agricultural sector and forced India to import food.

Land reforms were implemented as a means to change the ownership of landholdings and promote equity in agriculture. The key types of land reforms implemented were:

Abolition of Intermediaries: Steps were taken just a year after independence to remove intermediaries and make the tillers the owners of the land. This move was based on the idea that ownership would provide incentives to the tillers to invest in improvements on the farm, provided they had access to sufficient capital.

Land Ceiling: This policy involved fixing the maximum size of land that could be owned by an individual. The purpose of land ceiling was to reduce the concentration of land ownership in a few hands, promoting a more equitable distribution of land.

Tenancy Reforms: These reforms were aimed at providing security to tenants, ensuring they could not be easily evicted by landlords. They also focused on fixing fair rent, so that the excess burden on tenants could be reduced.

Consolidation of Holdings: This reform aimed at consolidating fragmented land holdings into a single, contiguous plot. Fragmented plots often led to inefficiency in farming practices, and consolidation helped in optimizing the use of resources and increasing agricultural productivity.

Cooperative Farming: Encouraging farmers to work together and pool their resources, cooperative farming aimed at improving efficiency, providing access to better resources, and ensuring fair distribution of benefits among the members.

Provision of Credit Facilities: Ensuring that farmers had access to credit was a crucial aspect of land reforms. This was necessary to enable them to invest in better inputs and technology, and to provide them with financial support in times of need.

Agricultural Education and Extension Services: Providing education and extension services to farmers was part of the broader land reform initiatives, aimed at equipping them with the knowledge and skills required to adopt modern agricultural practices.

Promotion of Agricultural Research: Investment in agricultural research to develop better farming techniques, high-yielding varieties of crops, and effective pest control measures was another important aspect of land reforms.

These reforms were aimed at enhancing equity in the agricultural sector and ensuring that the benefits of agricultural production reached a larger section of the population, particularly the actual tillers of the soil. The multifaceted approach taken to address the challenges and promote growth and equity in agriculture.

7. What is Green Revolution? Why was it implemented and how did it benefit the farmers? Explain in brief.

The Green Revolution refers to a significant increase in agricultural productivity resulting from the introduction of high-yielding variety (HYV) seeds, particularly for wheat and rice. It was implemented in the mid-1960s to address the low productivity in the agricultural sector due to old technology and the lack of required infrastructure for the majority of farmers. The stagnation in agriculture during the colonial rule was permanently broken by the Green Revolution.

The Green Revolution was implemented to achieve self-sufficiency in food grains and reduce dependence on food imports. The use of HYV seeds required the correct quantities of fertilizers and pesticides, as well as a regular supply of water. Farmers who could benefit from HYV seeds required reliable irrigation facilities and the financial resources to purchase the necessary inputs.

The Green Revolution benefited the farmers in several ways, as specified below:

Increased Productivity: The introduction of HYV seeds led to a substantial increase in the productivity of food grains, particularly wheat and rice.

Higher Income: With increased productivity, farmers were able to sell more produce, leading to higher income.

Creation of Marketable Surplus: A significant portion of the rice and wheat produced during the Green Revolution was sold in the market, creating a marketable surplus. This helped in stabilizing food grain prices and ensured availability in the market.

Reduction in Price of Food Grains: The availability of a marketable surplus led to a decline in the price of food grains relative to other items of consumption, benefiting low-income groups.

Achievement of Self-Sufficiency: The Green Revolution enabled India to achieve self-sufficiency in food grains, reducing the country’s dependence on food imports.

Benefit to Small and Big Farmers: Although there was a risk that the Green Revolution technology might increase disparities between small and big farmers, government interventions such as providing loans at low interest rates and subsidizing fertilizers ensured that small farmers could also access the required inputs. This ensured that the benefits of the Green Revolution were shared across different farmer groups.

8. Explain ‘growth with equity’ as a planning objective.

‘Growth with equity’ as a planning objective aims to ensure that the benefits of economic growth are distributed equitably among all sections of society. This concept is crucial in addressing the disparities in income and wealth, ensuring that the progress and prosperity resulting from economic growth reach all parts of the society, including the marginalized and disadvantaged groups.

Growth: Growth in this context refers to the increase in a country’s capacity to produce goods and services. It implies an enhancement in the productive capital, efficiency of productive capital, and an expansion of supporting services like transport and banking. A common indicator of economic growth is the increase in the Gross Domestic Product (GDP), which is the market value of all final goods and services produced in a country during a year.

Equity Equity, on the other hand, refers to fairness and justice in the distribution of resources and opportunities. In the context of planning, it implies ensuring that the benefits of economic growth are shared by all sections of society, particularly those who are disadvantaged or marginalized. It aims to reduce inequalities in income and wealth, providing everyone with access to basic needs such as food, shelter, education, and healthcare.

Implementation in Indian Planning In the Indian context, the planning objectives have been focused on achieving a balance between growth and equity. The five-year plans in India aimed at increasing the production of goods and services (growth), while also ensuring that the benefits of this growth reach all sections of society (equity). The planners recognized the importance of ensuring that the policies do not contradict these goals, even though not all goals may be given equal importance in all plans.

Conclusion In summary, ‘growth with equity’ as a planning objective underscores the importance of ensuring that economic growth leads to an improvement in the living standards of all citizens, and not just a select few. It emphasizes the need for inclusive development, where the benefits of growth are equitably distributed, leading to a more just and equitable society.

9. Does modernisation as a planning objective create contradiction in the light of employment generation? Explain.

No, modernisation as a planning objective does not necessarily create a contradiction in the light of employment generation. While it is true that the introduction of new technologies and methods can initially lead to job displacement, especially in sectors that rely heavily on manual labor, the long-term effects of modernisation often result in net job creation and a more skilled workforce.

Creation of New Industries and Jobs Modernisation can lead to the emergence of new industries and sectors, which can create numerous employment opportunities. For example, the technology and renewable energy sectors have seen significant growth due to modernisation efforts, leading to the creation of new jobs.

Skill Development and Upgradation Modernisation often necessitates the upskilling and reskilling of the workforce. Investment in education and training programs ensures that workers acquire the necessary skills to operate new technologies and adapt to changing job requirements. This not only helps in retaining existing jobs but also prepares the workforce for new opportunities.

Increased Productivity and Economic Growth Modernisation leads to increased efficiency and productivity, which can contribute to overall economic growth. A growing economy generally creates more job opportunities, offsetting the jobs lost due to modernisation.

Global Competitiveness By adopting modern technologies and practices, industries become more competitive on a global scale. This competitiveness can attract foreign investments and lead to the expansion of industries, further creating employment opportunities.

Diversification of the Economy Modernisation encourages the diversification of the economy, reducing dependence on traditional sectors and creating jobs in new and emerging sectors. This diversification ensures that there are employment opportunities available across various industries.

In summary, while modernisation may pose challenges in terms of job displacement in the short term, its long-term effects contribute to job creation, economic growth, and the development of a skilled workforce. With appropriate policies and support for skill development, the potential contradictions between modernisation and employment generation can be mitigated.

10. Why was it necessary for a developing country like India to follow self-reliance as a planning objective?

It was necessary for a developing country like India to follow self-reliance as a planning objective, due to the following reasons:

Reduction of Dependence on Foreign Countries:

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To diminish India’s reliance on other nations, particularly for crucial sectors like food and technology.

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Ensuring national security and sovereignty, preventing vulnerability to external pressures.

Utilization of Domestic Resources:

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Encouraging the optimal use of India’s own human and natural resources.

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Stimulating internal economic growth and development.

Building a Resilient Economy:

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Aiming to create an economy that can withstand global fluctuations and uncertainties.

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Important in the context of volatile international markets and geopolitical situations.

Fostering National Pride and Confidence:

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Enhancing a sense of national pride and self-confidence among the citizens.

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Asserting India’s capability to manage its own affairs independently.

Encouraging Indigenous Industries:

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Promoting the growth and development of local industries.

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Vital for job creation, skill development, and overall industrialization.

Ensuring Equitable Development:

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Using self-reliance as a means to distribute the benefits of development evenly across society.

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Aiming to reduce disparities and promote equitable growth.

Strategic and Economic Independence:

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Achieving autonomy in making policy decisions without undue external influence.

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Ensuring that India can chart its own course of development.

By following self-reliance as a planning objective, India aimed to establish a strong foundation for sustainable and inclusive growth, ensuring that the country could progress on its own terms.

11. 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, primarily including the agricultural sector, the industrial sector, and the service sector. Each of these sectors contributes differently to the Gross Domestic Product (GDP) of a country, and the proportion of their contribution reflects the stage of economic development and the structural composition of the economy.

Agricultural Sector: Involves activities related to farming, livestock, and fisheries.

Industrial Sector: Includes manufacturing, construction, and mining activities.

Service Sector: Encompasses a wide range of activities like education, health, banking, insurance, and other professional services.

Regarding the contribution of the service sector to the GDP, it is not necessary that it should always contribute the maximum. The dominance of a particular sector in the GDP depends on the stage of economic development of the country. In developing countries, agriculture might have a significant share, while in developed countries, the service sector usually dominates.

In India, post-1991, with the onset of globalization, there has been a noticeable shift with the service sector contributing a larger share to the GDP, surpassing both agriculture and industry. This shift reflects a transition towards a more service-oriented economy. However, this does not diminish the importance of agriculture and industry, as they play crucial roles in providing employment, raw materials, and contributing to overall economic stability.

In summary, while the service sector’s contribution to GDP is significant, especially in developed economies, it is not a necessity for it to contribute the maximum. A balanced contribution from all sectors is essential for sustainable and inclusive economic growth.

12. Why was public sector given a leading role in industrial development during the planning period?

The public sector was given a leading role in industrial development during the planning period for several reasons:

Lack of Capital Among Indian Industrialists:

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At the time of independence, Indian industrialists did not possess the necessary capital to invest in large industrial ventures that were crucial for the country’s development.

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The market size was also not substantial enough to encourage significant investments from the private sector, even if the capital had been available.

Need for Rapid Industrialization:

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There was a pressing need to diversify the industrial base of the country, which was primarily confined to cotton textiles and jute, with only a couple of well-managed iron and steel firms.

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Rapid industrialization was deemed essential for economic growth, modernization, and overall prosperity.

Role of Government and Private Sector:

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Policymakers were faced with the crucial decision of determining the roles of the government and the private sector in industrial development.

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It was decided that the government would play an extensive role in promoting the industrial sector, given the limitations of the private sector at that time.

Public Sector Leading the Way:

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The policies of the private sector were expected to complement those of the public sector, with the public sector taking the lead.

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This approach was in line with the goal of the state controlling the commanding heights of the economy, as outlined in the Second Five Year Plan.

Industrial Policy Resolution 1956 (IPR 1956):

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The Industrial Policy Resolution of 1956 classified industries into three categories, with the first category being exclusively owned by the government, the second category where the private sector could supplement the efforts of the public sector, and the third category left to the private sector but under state control through a system of licenses.

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This policy aimed to ensure that the quantity of goods produced met the economy’s requirements and promoted regional equality.

Promotion of Small-Scale Industries:

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The government also promoted small-scale industries as a means of promoting rural development and generating employment.

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Small-scale industries were defined based on the maximum investment allowed on the assets of a unit, providing opportunities for those with limited capital.

In summary, the public sector was given a leading role in industrial development during the planning period to overcome the capital constraints of the private sector, ensure rapid industrialization, promote regional equality, and generate employment, particularly in rural areas.

13. 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.

The statement that the Green Revolution enabled the government to procure sufficient food grains to build its stocks for use during times of shortage can be explained through the following points:

Increase in Food Grain Production:

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The Green Revolution, initiated in the mid-1960s, led to a significant increase in the production of food grains in India, particularly wheat and rice.

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This was achieved through the introduction of High Yielding Variety (HYV) seeds, along with the appropriate use of fertilizers, pesticides, and irrigation facilities.

Self-Sufficiency in Food Production:

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Before the Green Revolution, India was heavily dependent on food imports, particularly from the United States, to meet its food requirements.

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The Green Revolution played a crucial role in making India self-sufficient in food grain production, ensuring that the country no longer had to rely on foreign aid for its food security.

Marketable Surplus and Government Procurement:

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The Green Revolution resulted in a substantial amount of marketed surplus, which is the portion of agricultural produce sold in the market by the farmers.

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The government was able to procure a significant portion of this surplus, which helped in building up food grain stocks.

Price Stability and Food Security:

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The availability of sufficient food grains in the market led to a relative decline in the prices of food grains, benefiting low-income groups who spend a large percentage of their income on food.

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The government’s procurement of food grains and the building of stocks played a crucial role in ensuring food security and stability in food grain prices, particularly during times of shortage or crop failure.

Conclusion:

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The Green Revolution was a turning point in India’s agricultural sector, not only increasing food grain production but also enabling the government to maintain sufficient stocks for food security.

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This strategic stockpiling of food grains ensured that the government could release food grains into the market during times of shortage, stabilizing prices and ensuring availability, particularly for the vulnerable sections of society.

14. 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.

The statement that subsidies encourage farmers to use new technology but are a huge burden on government finances can be discussed in light of the following points:

Encouragement to Adopt New Technology:

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Subsidies provide an incentive for farmers, especially small and marginal farmers, to adopt new and improved agricultural technologies.

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The introduction of High Yielding Variety (HYV) seeds during the Green Revolution was accompanied by subsidies on fertilizers and other inputs to encourage farmers to adopt these new technologies.

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Subsidies help in reducing the risk perceived by the farmers in trying out new technologies, which they might otherwise be hesitant to adopt due to financial constraints.

Burden on Government Finances:

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While subsidies have played a crucial role in promoting the use of new technologies in agriculture, they also impose a significant financial burden on the government.

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A substantial amount of the government’s budget is allocated for subsidies, which could have been utilized for other developmental activities or public welfare.

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Some of the subsidies, particularly fertilizer subsidies, also inadvertently benefit the fertilizer industry, and among farmers, they largely benefit those in the more prosperous regions.

Issues with Targeting and Efficiency:

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The effectiveness of subsidies in reaching the intended beneficiaries, particularly the small and marginal farmers, is often questioned.

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There are concerns about the leakages in subsidy distribution and whether the subsidies are actually benefiting the poor farmers or are being appropriated by the richer farmers and intermediaries.

Environmental Concerns:

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Subsidies, particularly on fertilizers and water, have led to their overuse, resulting in environmental degradation, depletion of groundwater, and soil health issues.

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The provision of subsidies without considering the long-term environmental impact can lead to unsustainable agricultural practices.

Need for Reforms:

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There is a consensus among economists and policymakers on the need to reform the subsidy regime in agriculture.

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The focus is on making the subsidies more targeted, reducing leakages, and ensuring that the benefits reach the small and marginal farmers.

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There is also a call for phasing out subsidies that lead to environmental degradation and promoting sustainable agricultural practices.

Conclusion: While subsidies have played a crucial role in promoting the adoption of new technologies in agriculture and ensuring food security, there is a need to critically evaluate their impact on government finances and the environment. Reforms in the subsidy regime, focusing on better targeting and promoting sustainable agricultural practices, are essential to balance the benefits of subsidies with their financial and environmental costs.

15. Why, despite the implementation of green revolution, 65 per cent of India’s population continued to be engaged in the agriculture sector till 1990?

Despite the implementation of the Green Revolution, 65 percent of India’s population continued to be engaged in the agriculture sector till 1990 due to several reasons:

Limited Industrial and Service Sector Growth:

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The industrial and service sectors did not grow at a pace sufficient enough to absorb the labor force from the agricultural sector.

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Many economists consider this an important failure of the policies followed during 1950-1990.

Disparities in Green Revolution Benefits:

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The Green Revolution primarily benefited the more affluent states and the wheat-growing regions, leaving out a significant portion of the agricultural sector.

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Small farmers, particularly in less developed regions, did not benefit as much from the Green Revolution.

Lack of Alternative Employment Opportunities:

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There were not enough employment opportunities in the industrial and service sectors for the agricultural workforce.

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The agricultural sector continued to be a major source of employment, even though it was possible to increase agricultural output with fewer people.

Slow Pace of Structural Transformation:

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In most developed countries, as the economy grows, there is a structural transformation with a decline in the share of agriculture in GDP and employment.

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In India, between 1950 and 1990, while the share of agriculture in GDP declined significantly, the proportion of the population employed in agriculture did not decrease proportionately.

Subsistence Farming:

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A significant portion of the agricultural sector in India is characterized by subsistence farming, where families are engaged in agriculture primarily for their own consumption.

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This form of agriculture does not create surplus that can be sold in the market, leading to a lack of alternative sources of income for these families.

Lack of Education and Skills: The population engaged in agriculture often lacked the education and skills required to transition to jobs in the industrial and service sectors.

Social and Cultural Factors: Social and cultural factors also played a role in keeping families engaged in agriculture, as farming is often a traditional occupation passed down through generations.

In summary, despite the Green Revolution, a large proportion of India’s population remained engaged in agriculture due to limited growth in other sectors, disparities in the benefits of the Green Revolution, lack of alternative employment opportunities, slow pace of structural transformation, prevalence of subsistence farming, lack of education and skills, and social and cultural factors.

16. 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.

Public Sector Undertakings (PSUs) have played a crucial role in the industrial development of India, but many of them incur huge losses and are considered a drain on the economy’s resources. The usefulness of PSUs can be discussed in light of this fact:

Contribution to Industrial Development:

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PSUs have significantly contributed to the diversification and growth of the Indian industrial sector.

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They have played a leading role in sectors vital for the economy, such as power generation, irrigation, and infrastructure development.

Promotion of Small-Scale Industries: PSUs have provided opportunities for small-scale industries, enabling people with limited capital to start businesses.

Regional Development: PSUs have promoted regional development by establishing industries in backward areas, contributing to balanced regional growth.

Employment Generation: PSUs have created numerous job opportunities, contributing to employment generation and economic stability.

Social Welfare:

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The public sector is not solely focused on profit-making but aims to promote the welfare of the nation.

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PSUs contribute to the welfare of people and work towards societal development.

Financial Burden:

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Despite their contributions, many PSUs incur huge losses and require substantial financial support from the government.

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These losses are considered a drain on the nation’s limited resources, diverting funds from other crucial areas.

Inefficiency and Bureaucracy:

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Some PSUs suffer from inefficiency, bureaucratic hurdles, and lack of innovation, contributing to their financial losses.

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The permit-license raj and excessive regulation have prevented certain firms from becoming more efficient.

Need for Reforms:

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There is a consensus on the need for reforms in PSUs to enhance their efficiency, reduce losses, and ensure that they contribute positively to the economy.

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The government has initiated disinvestment and privatization of loss-making PSUs as a step towards this reform.

Conclusion: While PSUs have played a vital role in India’s industrial development and social welfare, their financial losses and inefficiency pose significant challenges. Reforms, efficient management, and strategic disinvestment are essential to enhance the performance of PSUs and ensure that they continue to contribute positively to the economy without being a financial burden.

17. Explain how import substitution can protect domestic industry.

Import substitution is a trade policy that aims to replace or substitute imports with domestic production. Here’s how it can protect the domestic industry:

Protection from Foreign Competition:

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Import substitution policies protect domestic industries from foreign competition through tariffs and quotas.

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Tariffs increase the cost of imported goods, making them more expensive compared to domestic products.

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Quotas limit the quantity of goods that can be imported, restricting the availability of foreign products in the domestic market.

Encouragement of Domestic Production:

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By making imported goods more expensive or less available, domestic industries are encouraged to produce these goods locally.

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This leads to an increase in domestic production and helps in the growth and development of local industries.

Development of Local Industries:

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Import substitution policies aim to promote the development of local industries, particularly in sectors where a country has a potential comparative advantage.

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This helps in diversifying the industrial base and reducing dependence on specific sectors.

Conservation of Foreign Exchange:

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By reducing imports, import substitution policies help in conserving foreign exchange.

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This is particularly important for developing countries with limited foreign exchange reserves.

Creation of Employment Opportunities:

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The growth and development of local industries lead to the creation of employment opportunities.

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This is crucial for countries with a large population and high unemployment rates.

Promotion of Self-Reliance:

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Import substitution policies promote self-reliance by encouraging countries to produce goods domestically rather than relying on imports.

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This reduces dependence on foreign countries for essential goods and services.

Stimulation of Economic Growth:

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The development of local industries and the creation of employment opportunities contribute to overall economic growth.

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A strong domestic industry also lays the foundation for future industrialization and economic development.

In summary, import substitution can protect domestic industry by shielding it from foreign competition, encouraging domestic production, developing local industries, conserving foreign exchange, creating employment opportunities, promoting self-reliance, and stimulating economic growth. However, it is important to note that while import substitution has its advantages, it also has potential downsides such as the risk of inefficiency and lack of innovation due to reduced competition.

18. Why and how was private sector regulated under the IPR 1956?

The private sector was regulated under the Industrial Policy Resolution (IPR) 1956 as part of India’s strategy to achieve a socialist pattern of society, with the state controlling the commanding heights of the economy. Here’s how and why the private sector was regulated:

Why was the Private Sector Regulated?

Socialist Outlook: The policymakers of the time were influenced by socialist ideals, aiming to combine the best features of socialism without its drawbacks. This led to a mixed economy with both public and private sectors, but with significant government control and planning.

Control of Commanding Heights: The government aimed to have complete control over industries vital for the economy, ensuring that the policies of the private sector complemented those of the public sector, with the public sector leading the way.

Complementary Role of Private Sector: The private sector was encouraged to be part of the planned economic development, but its activities were regulated to ensure they aligned with national objectives.

How was the Private Sector Regulated?

Industrial Policy Resolution 1956: The IPR 1956 classified industries into three categories:

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Category I: Industries exclusively owned by the government.

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Category II: Industries where the private sector could supplement the efforts of the public sector, but new units would be started only by the government.

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Category III: Industries left to the private sector.

Licensing System: Even in industries left to the private sector, state control was maintained through a system of licenses. No new industry could be started without obtaining a license from the government.

Promotion of Small-Scale Industries: The government also promoted small-scale industries, which were more labor-intensive and generated employment, through various concessions and benefits.

Regional Equality: The policy was used to promote industry in backward regions, making it easier to obtain licenses for units established in economically backward areas, and providing concessions such as tax benefits and lower electricity tariffs.

Control of Production: The licensing system was also meant to ensure that the quantity of goods produced was not more than what the economy required, preventing overproduction.

In summary, the private sector was regulated under the IPR 1956 to align its activities with national objectives, promote balanced regional development, and ensure that the private sector played a complementary role to the public sector in India’s industrial development.

19. 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. Quota

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

5. HYV Seeds

E. Improvements in the field of agriculture to increase its productivity

6. Subsidy

F. The monetary assistance given by government for production activities.

Here are the correct matches for the given terms: