NCERT Solutions for Class 11 Economics Chapter 2 - Indian Economy 1950-1990

1. Define a plan.

Ans: A plan is a proposed list of objectives for an economy to fulfil over a set period of time. It provides the best strategies to use the limited resources available to achieve the enumerated objectives. In India, planning is done for a five-year period, referred to as a five-year plan. Plans have both specific and broad objectives. Economic progress, modernization, self-reliance, and equity are some of the unifying aims. Plans establish the basic framework within which policies are developed.

2. Why did India opt for planning? 

Ans: India had to choose between capitalism and socialism soon after independence. Finally, India chose socialism after being impressed by the Soviet Union's tremendous success with planning. Despite the fact that Indian political and economic conditions were not as favourable as they were for Soviet Unions to accept socialism, India did so, but with a twist. India was founded on the socialist concept, with a strong emphasis on the public sector and active private sector participation within a democratic framework.

3. Why should plans have goals?

Ans: Every strategy should have a set of objectives. A plan without a goal is akin to living a life without a soul. While a plan should help to describe the means and methods for allocating the scarce resources in order to meet stated aims, goals are the ultimate targets, and achieving them guarantees that plans succeed. As a result, goals must be included in plans. It would be impractical to expect all of the plan's goals to be given equal weight in all of the plans. In fact, goals may contradict, therefore planners must find a way to reconcile them. In India, several aims are stressed in various five-year plans.

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

Ans: Dr Narman Barlauf, a Nobel Laureate, produced the High Yielding Variety of seeds in Mexico. These seeds are more productive and require more fertilisers and insecticides, as well as regular and proper irrigation. In 1966, the Indian agricultural sector saw a Green Revolution as a result of the introduction of HYV seeds, particularly in rice and wheat harvests. Because HYV seeds grow quicker than regular seeds, crops can be harvested in a much shorter amount of time.

5. What is a marketable surplus?

Ans: The difference between a farmer's entire output and his on-farm consumption is referred to as marketable surplus. To put it in simple words, it's the percentage of total amount of produce that the farmer sells in the market. Total farm output produced by farmers minus own use of farm output = marketable surplus.

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

Ans: Land reforms in India were urgently required for the following reasons:

1. Land Tenure System: At the time of independence, the Indian agricultural sector had three types of land tenure systems: the Zamindari System, the Mahalwari System, and the Ryotwari System. The land was largely cultivated by the tenants, and the land income was paid to their landlords, which was a common aspect of these three systems.

Exorbitant rents resulted as a result of this abuse of tenants.

2. Lack of initiative: Because the majority of the land was controlled by the landlords, the farmers lacked initiative and lacked the financial wherewithal to use mechanised farming methods.

3. Traditional Approach and Low Production: Traditionally, Indian farmers relied on conventional and traditional inputs and methods, as well as meteorological conditions, which limited agricultural productivity.

4. Size of Land Holdings: The farmers' landholdings were quite tiny. Furthermore, the landholdings were dispersed. This made it difficult to employ current procedures.

5. Lack of a well-developed marketing system: Farmers used to rely on middlemen to sell their products in the market due to a lack of a well-developed marketing system. These middlemen used to buy farm items for a low price and then sell them at a higher price at the market. As a result, the farmer did not receive the correct profit share, resulting in a shortage of financing and investment on the farm.

6. Nature of Farming: Subsistence farming was the primary motivation for farmers. That is, farming was done primarily to earn a living, rather than to sell for profit. 

Land reforms were essential to address the aforementioned issues in Indian agriculture. The following are the steps involved in land reform: - 

1. Eliminating Intermediaries: One of the main goals of land reform was to eliminate intermediaries such as Zamindars and Jagirdars. There were numerous initiatives taken to make the tillers the landowners.

2. Rent Control: The growers were exploited by paying high rents. Except in Punjab and Haryana, where it was third, the maximum rent imposed in the first five-year plan was one-fourth or one-fifth of total farm produce. Rent restrictions not only relieved tenants of their financial burdens, but also provided them with more funds to invest in their farms.

3. Consolidation of Holdings: Because the land holdings were tiny and dispersed, it was critical to consolidate them so that contemporary and advanced technologies could be used. Farmers were awarded consolidated holdings that were equal to the total amount of land in their different scatter plots. They were able to reap the benefits of large-scale production as a result of this.

4. Cooperative Farming: This action was taken to address issues caused by holdings being subdivided. Because small-scale farming by a single landowner is neither profitable nor productive, these measures encouraged farmers to pool their lands and farm together. Individual farmers shared more revenues as a result of increased output.

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

Ans: In the latter half of the second five-year plan, a team was formed to suggest alternative approaches to address low productivity, recurrent famines, and low levels of agricultural products. According to the team's suggestions, the government began using HYV seeds, contemporary techniques, and inputs such as fertilisers, irrigation, and subsidised financing. The Intensive Area Development Programme is the name given to all of these stages taken together (IADP). As a result, food grain production grew by about 25% in the years 1967-68. The result is known as the 'Green Revolution' because of the significant increase in food grain output.

The term Green Revolution is made up of two words: 'Green,' which refers to crops, and 'Revolution,' which refers to a significant growth. 

Following are the needs for the Green Revolution:

1. Limited Irrigation: In 1951, just 17% of the land was well-irrigated or permanently irrigated. The majority of the area was reliant on rainfall, and as a result, agriculture suffered from the low output.

2. Conventional and Traditional Approach: Agricultural productivity was further impeded by the use of traditional inputs and the lack of contemporary procedures.

3. Famines Are Frequently Occurring: Famines were highly common in India from the 1940s through the 1970s. Furthermore, due to the faster rate of population expansion, agriculture has lagged behind.

4. Self-sufficiency: Foodgrains were frequently imported due to conventional agricultural practices, low yield, and the need to feed a burgeoning population, draining scarce foreign reserves.

5. Lack of Finance (Credit): Small and marginal farmers found it difficult to obtain low-cost financing and credit from the government and banks, and hence became easy prey for money lenders.

Green Revolution Benefits:

1. Increased Income: The adoption of HYV seeds resulted in an increase in wheat and rice production during the Green Revolution. Wheat and rice-growing states such as Punjab, Andhra Pradesh, and Tamil Nadu benefited from it. The income of these states' farmers increased, alleviating rural poverty.

2. Increased Employment: As a result of the Green Revolution, seasonal unemployment in agriculture has greatly decreased.

3. Social Revolution: Traditional farming practises were replaced with modern farming methods that included the use of high yielding seeds, better irrigation facilities, fertilisers, and pesticides. People were willing to embrace improvements in technology since old societal ideas and conventions had been abolished.

8. Explain 'growth with equity' as a planning objective.

Ans: The two most significant features of India's five-year plans are growth and equity. While growth refers to a rise in GDP over time, equity refers to an equitable distribution of GDP so that the benefits of increased economic growth are shared equally by all segments of the population. Social justice involves equity. Growth is desirable in and of itself, but it does not guarantee people's well-being. The market value of goods and services (GDP) is used to measure growth, and it is likely that the commodities and services created will not benefit the majority of the population. In other words, only a select few with a high standard of life and financial resources may be eligible for a share of GDP.

As a result, growth with equity is a sensible and desirable planning goal. This goal ensures that everyone benefits equally from strong development, which not only reduces economic disparity, promotes poverty reduction, and promotes an equitable society, but also allows everyone to be self-sufficient. To sum up, the most important goal of economic planning is to achieve growth while maintaining equity.

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

Ans: No, modernisation as a planning goal does not conflict with employment creation. Both modernisation and the creation of jobs are, in reality, positively associated. Modernisation, on the other hand, refers to the application of new and modern technologies in the manufacturing process, which may result in the loss of some employment in the early phases. But, over time, the use of modern technologies and inputs will increase productivity and, as a result, people's income, increasing demand for goods and services. More job possibilities will be created to meet this growing demand, resulting in more individuals being hired and, as a result, more employment opportunities. As a result, modernisation and job creation are not mutually exclusive, but rather complementary.

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

Ans: Imports of commodities that could be produced domestically are discouraged as part of self-reliance. Self-sufficiency is critical for a developing country like India, since it would otherwise increase the country's dependency on imported goods. India's economic growth could be aided by reliance on foreign goods and services, but this would not contribute to the development of native productive resources. Dependence on foreign goods and services boosts the industries of foreign countries at the expense of indigenous startups. 

11. What is sectoral composition of an economy? Is it necessary that the service sector should contribute maximum to GDP of an economy? Comment.

Ans: The contribution of different sectors to an economy's overall GDP over the course of a year is known as its sectoral composition. That is the GDP proportion of the agriculture, industrial, and service sectors. Yes, it is vital for the service sector to contribute the most to overall GDP in later phases of development. Structural Transformation is the name given to this phenomenon. This means that the country's reliance on agriculture will progressively decline from its peak to its lowest point, while the share of the industrial and service sectors in total GDP would rise. Economic development refers to the combination of structural change and economic growth.

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

Ans: Indian economic conditions were extremely low and weak at the time of independence. India lacked sufficient foreign reserves and lacked international investment credibility. Only the public sector could take the initiative in the face of such dire economic conditions. 

The following are some of the reasons for the public sector's pivotal role in industrial development:

1. Low Demand: The bulk of the population was impoverished and had a low level of income at the time of independence. As a result, demand was minimal, and there was no incentive for the private sector to develop in order to meet these desires. As a result, India was caught in a vicious cycle of low demand. The only option to stimulate demand was for the government to invest.

2. Infrastructure development, such as roads, trains, and communication systems.

3. To make use of savings and earn foreign currency.

4. To prevent economic power consolidation.

5. Rural villages and other backward places are being developed.

6. Heavy Investment: Heavy investment was required for industrial development.

The private sector found it extremely difficult to invest such a large sum. Furthermore, the risks associated with these initiatives were extremely high, and they had a protracted gestation time. As a result, the government took the lead in establishing the basic framework for heavy industry.

13. Explain the statement that the green revolution enabled the government to procure sufficient food grains to build its stocks that could be used during times of shortage.

Ans: The Green Revolution resulted in a rise in food grain output. There was a huge rise in agricultural production and product per farmland due to the adoption of contemporary technologies, extensive use of fertilisers, herbicides, and HYV seeds. Furthermore, the widespread use of marketing systems, the elimination of intermediaries, and the widespread availability of finance have provided farmers with a larger share of the marketable surplus. All of these considerations allowed the government to obtain enough food grains to develop a buffer stock and give protection against famines and shortages.

14. While subsidies encourage farmers to use new technology, they are a huge burden on government finances. Discuss the usefulness of subsidies in light of this fact.

Ans: Subsidy refers to providing farmers with critical inputs at a discounted rate that is significantly lower than the market pricing. Farmers were given subsidised HYV seeds, modern fertilisers, pesticides, and other inputs in the 1960s to encourage them to adopt new technology. As a result, the role of the public sector was required to invest extensively in order to increase people's income, which in turn would increase demand, and so on.

The following are some arguments in favour of subsidies:

1. Subsidies in the 1960s were primarily intended to encourage farmers to embrace new farming techniques and essential inputs such as fertilisers and HYV seeds. The subsidy was mostly of persuasion and financial character, so farmers would not hesitate to utilise these sophisticated techniques.

2. Subsidies are critical for marginal landowners and poor farmers who cannot afford agriculture supplies at current market prices.

3. It is suggested that adopting new technology and procedures is risky and that only courageous farmers are ready to do so.

4. Subsidies are often given to poor farmers in order to reduce income disparities between rich and poor farmers and to promote an equitable distribution of income.

The following are some counter-arguments to subsidies:

1. Subsidies are also available to potential farmers who do not require them. This frequently results in resource misallocation and squandering.

2. It is widely assumed that fertiliser industries profit from subsidies more than farmers. Subsidies act as a buffer against market conditions, allowing these industries to focus on their core competencies rather than market share and competition.

3. There is widespread agreement that subsidies should be offered to test the benefit and viability of a certain technique, but that once the performance has been determined, subsidies should be discontinued.

4. Subsidies that are supplied at a considerably lower rate than the market rate may result in resource waste. Subsidized electricity, for example, results in energy waste.

As a result, based on the above benefits and drawbacks, we may infer that, while subsidies are beneficial and necessary for impoverished farmers to overcome the risks of farming, they place an undue load on the government's limited resources. As a result, good planning, appropriate reforms, and the allocation of subsidies to only the most vulnerable farmers are required.

15. Why, despite the implementation of the green revolution, 65 percent of our population continued to be engaged in the agriculture sector till 1990?

Ans: Although India's agricultural production increased significantly, allowing the country to achieve food grain self-sufficiency, this rise is significant only when compared to previous food grain production. Furthermore, India failed to achieve the structural changes associated with agricultural development and revolution. To put it another way, the industrial and service sectors failed to create enough job opportunities to attract and absorb extra agricultural labour. 

Agriculture's contribution to GDP fell from 51% in 1960-61 to 44% in 1970-71, while the percentage of industry and service sector in India's GDP climbed only from 19% to 23% and from 30% to 33% during the same period. Meanwhile, the proportion of the population depending on agriculture fell from 67.50 per cent in 1950 to 64.9 per cent now (in 1990). As a result, the industrial and service sectors grew slowly, failing to hire and attract surplus labour from the agricultural sector. This could be due to inadequacies in economic policies that have stifled the expansion of the secondary and tertiary sectors.

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. 

Ans: Despite the fact that mismanagement and poor planning in PSUs can lead to resource misallocation and, as a result, waste of scarce resources and funds, PSUs can have certain positive and helpful aspects.

1. Improving Nation’s Welfare: The PSU's primary goal was to provide commodities and services that improved the country's overall welfare. For instance, schools, hospitals, and power, to name a few. These services not only improve the well-being of the country's citizens, but they also improve the country's economic growth and development prospects.

2. Basic Framework: An important philosophy inherited from the early five-year plans was that the public sector should establish the basic framework for industrialization, which would then encourage the private sector to participate in the latter stages of industrialization.

3. Socialist Track: Indian planners and philosophers were more oriented toward a socialist pattern in the early years after independence. It was justified on the rationale that if the government controls productive resources and production, the country's economic progress will be skewed. This was the primary motivation for installing PSUs. These PSUs manufacture goods not in response to price signals, but in response to the country's social requirements and economic growth.

4. Projects with Long Gestation: It was neither practicable or economically viable for the private sector to invest in large-scale projects such as fundamental industries and energy, railways, highways, and so on. This is due to the fact that major initiatives require a large initial expenditure and a long gestation time. As a result, PSU is the best option for investing in these projects.

17. Explain how import substitution can protect domestic industry.

Ans: India chose an import substitution policy in its first seven five-year plans, which means it discouraged imports of commodities that could be produced domestically. Import substitution strategy not only minimises an economy's reliance on foreign commodities, but also gives home businesses a boost. The government offers domestic producers numerous financial incentives, incentives, and licences to produce imported replaced items domestically. Domestic producers would not only be able to survive, but also thrive as they benefit from the protected environment. They have no need to be concerned about competition or market share because their licence grants them monopoly status in the home market. They generate higher profits as monopolists, invest consistently in R&D, and are always on the lookout for new and innovative tactics. As a result, their competitiveness improves over time, and when they are exposed to worldwide marketplaces, they are able to survive and compete with their foreign competitors.

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

Ans: The Industrial Policy Resolution (IPR) of 1956 was passed with the goal of creating a socialist state with the government controlling the economy's most strategic industries.

The industries were divided into three categories as a result of this decision.

Category 1: Industries that were created and are solely held by the government.

Category 2: Industries where the public sector will play the key role and the private sector will play a secondary role. In these industries, the private sector supplements the public sector.

Category 3: The private sector is responsible for all industries that are not included in Categories 1 and 2.

Through its programme of industrial licencing, the government maintained an indirect influence on private-sector industries. Private entrepreneurs were required to get a government licence in order to start a new industry or expand existing capacity. Apart from licencing and taxation, the government employed tax exemptions and subsidies to regulate private companies and reduce regional imbalances in economic development, as well as to keep a lid on the production of socially unacceptable items. As a result of the IPR 1956, the government had complete control over the private sector, either directly or indirectly.

19. Match the following

Ans:

Chapter 2 Indian Economy Class 12 Indian Economy 1950 – 1990 – An Overview

The Economic Status of India During the Colonial Rule

1. Agrarian Economy 

• Class 11 Economics Chapter 2 NCERT Solutions states that the Indian economy was a largely based agrarian economy i.e. 85% of the population of India was involved in the agriculture sector.

• However, the agriculture sector started facing stagnation, unusual deterioration after the colonial rule began. The productivity level all over the country specifically in this sector started declining at a fast pace. 

• Chapter 2 Indian Economy Class 11 solutions should be downloaded by students. The chapter also mentions the land settlement techniques which were used by the colonial government, particularly the zamindari system. 

• The Colonial government also adopted many revenue settlement systems which were responsible for many zamindars losing the right over their land. At the same time, there has been much evidence of an increase in revenue in some regions of India due to the commercialisation of agriculture in these regions.

2. Industrial Sector

• Chapter 2 Indian Economy Class 11 goes into detail regarding the poor condition of the capital goods industry in India during colonial rule. Capital goods industry is the industry which manufacturers and produces the machine tools which are needed in the economy. 

• Indian Economic Development Class 11 NCERT Solutions Chapter 2 states that during this time of colonial rule, the Gross Domestic Product (GDP) and the Gross Value Added (GVA) remained extremely small.

3. Foreign Trade

• Economics Chapter 2 Class 11 states that India was a primary exporter of various goods such as silk, wool, cotton, sugar, indigo, jute etc. 

• The British maintained monopoly over the production of various exported goods from India. 

• NCERT Solutions for Class 11 Economics Chapter 2 mentions that India’s foreign trade was restricted to only British colonial countries and a few other countries such as China, Sri Lanka, and Persia in Iran. 

4. Demographic Conditions 

• The first stage of the demographic transition of India was before the starting of 1921. After 1921, the second age of demographic transition began according to Ch2 Eco Class 11.

• However, note that the rate of population growth of India was not high during this period. The literacy level of India remained very low, less than 16%.

• The public healthcare system was even worse and the facilities were unavailable to the majority of the Indian population.

• Indian Economy Class 11 NCERT Solutions also mention that the mortality rate was extremely high during this period, particularly the infant mortality rate in India. 

• The life expectancy was only 44 years which is extremely low compared to the 70 years currently.

Are There Any Positive Contributions Made by the Britishers?

Many positive contributions were made by the Britishers but that was also for their benefits. The major one among them was the commercialisation of the agriculture sector. Some of the other good contributions include:

• Introduction of railways 

• Infrastructure development by the colonial government 

• The legal system of India 

• Self-sufficiency in the food grain production

• Better transportation system made the Britishers 

• Famine control was also maintained by the Britishers 

• Monetary economy

Conclusion

During the colonial period, Indian development slowed down by a major factor in every industrial sector of the country. NCERT Solutions for Class 11 Economics Chapter 2 go in-depth into the repercussions of the British rule in every sector of India.

Fun Fact 

1. The Indian economy has grown a lot in the past years. It has sextupled in size in 20 years only 

2. It is expected that the Indian economy will surpass France and UK next year 

3. Even after such rapid growth, India’s economy lacks behind the state of California by 8.1%

4. The Indian economy has shown the fastest growth in the economy in the last year

5. 9% of India’s GDP goes to violence, external threats, etc.

6. India ranks 70th in the Average annual income of every country

7. Even after the end of colonial rule, India is still based on agriculture. The agriculture sector accounts for about 50% of jobs in the country

Solved Example 

1. What Was the Focus of the British Rule in the Economic Policies of India?

Ans: NCERT Solution Class 11 Economics Chapter 2 states that the colonial government was very much concerned with the protection and promotion of the economy of Britain and not India. The colonial government never made any sincere attempt to calculate the GDP of the country. Most of India’s wealth went to Britain.

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