Licensing Policy of the Government: Industrial Licensing Quiz

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Questions and Answers

Why did the proportion of GDP contributed by agriculture decline in India between 1950 and 1990?

The population dependent on agriculture decreased

The industrial and service sectors absorbed the agricultural workforce

The industrial and service sectors failed to absorb the agricultural workforce (correct)

There was a significant increase in the productivity of agriculture

What is the significance of a good industrial sector for poor nations, according to economists?

It leads to a decline in overall prosperity

It provides more stable employment compared to agriculture (correct)

It results in a decrease in modernization

It reduces the need for agricultural output

Why did a large proportion of the Indian population remain engaged in agriculture even though agricultural output could have grown with fewer people?

The industrial sector absorbed excess agricultural workforce

The government discouraged people from leaving the agricultural sector

The industrial and service sectors did not absorb the agricultural workforce (correct)

The service sector provided more opportunities than agriculture

What was an important failure of Indian policies during 1950-1990, according to many economists?

Inability of industrial sector to provide stable employment Signup and view all the answers

What was one of the major drawbacks in the industrial sector during the period of 1950-1990?

Inefficient functioning of the public sector resulting in losses Signup and view all the answers

Why did the Indian producers lack the incentive to improve the quality of goods they produced?

There was no competition, allowing them to sell low quality items at high prices Signup and view all the answers

What was the purpose of the public sector firms according to some economists?

To promote the welfare of the nation rather than focus on earning profits Signup and view all the answers

What led to the introduction of a new economic policy in India in 1991?

Conflicts among economists over economic policies Signup and view all the answers

What was a common goal of the five year plans in India?

Achievement of self-sufficiency and equity Signup and view all the answers

What did the mixed economy model in India aim to combine?

The best features of socialism and capitalism Signup and view all the answers

What is the purpose of the policy of requiring a license for expanding production?

To restrict the quantity of goods produced to match the economy's requirements Signup and view all the answers

Why were small-scale industries given concessions such as lower excise duty and bank loans at lower interest rates?

To help them compete with large industrial firms Signup and view all the answers

What was the aim of the import substitution policy adopted by India?

To replace imports with domestic production Signup and view all the answers

Why did the government protect domestic industries from foreign competition?

To help the domestic industries learn to compete Signup and view all the answers

What was the main reason for giving concessions like tax benefits and lower electricity tariff to industrial units in economically backward areas?

To promote regional equality and development Signup and view all the answers

Why did the Village and Small-Scale Industries Committee note the possibility of using small-scale industries for promoting rural development?

To generate more employment in rural areas Signup and view all the answers

What was the effect of tariffs and quotas on imports based on the import substitution policy?

They restricted imports and protected domestic firms Signup and view all the answers

Why was protection from imports necessary for the industries of developing countries?

To enable learning to compete over time Signup and view all the answers

What was an important indicator of development based on the achievements of India’s industrial sector during the first seven plans?

% of GDP contributed by the industrial sector Signup and view all the answers

Why didn't any serious thought given to promoting exports until the mid-1980s?

'Import substitution' policy discouraged export promotion Signup and view all the answers

'Small-scale industry' is defined with reference to:

$1 crore investment allowed on assets of a unit Signup and view all the answers

What was the sectoral contribution to GDP in the agriculture sector in 1990-91?

34.9 Signup and view all the answers

In which year did the industrial sector contribute the most to the GDP?

1990-91 Signup and view all the answers

What is one of the criticisms of the public sector enterprises mentioned in the text?

They often monopolize certain goods and services Signup and view all the answers

What was a consequence of the excessive regulation during the 'permit license raj'?

Prevention of new firm startups Signup and view all the answers

What was one of the criticisms of the protection from foreign competition mentioned in the text?

It proved to do more harm than good Signup and view all the answers

What industry continued to be reserved for the Public Sector even though private sector firms could also provide it?

Telecommunication service Signup and view all the answers

Why did some scholars argue that the state should get out of areas which the private sector can manage?

To encourage competition and innovation Signup and view all the answers

What was a consequence of protecting indigenous industries from foreign competition?

Stagnation in indigenous industry development Signup and view all the answers

What was one of the criticisms of state enterprises' continued production of certain goods and services?

It monopolized certain goods and services despite no longer being required Signup and view all the answers

What allowed big industrialists to prevent competitors from starting new firms?

Government-issued licenses Signup and view all the answers

What was a criticism of some public sector enterprises despite their contribution to the growth of the Indian economy?

Losses incurred without closure despite being a drain on resources Signup and view all the answers

Why did some economists criticize many public sector enterprises?

For monopolizing certain goods and services Signup and view all the answers

What was the role of the government in promoting the industrial sector at the time of independence?

The government controlled the industries vital for the economy. Signup and view all the answers

What was the basis of the Industrial Policy Resolution of 1956?

Classifying industries into three categories Signup and view all the answers

Why did the government have to play an extensive role in promoting the industrial sector at the time of independence?

To control the commanding heights of the economy Signup and view all the answers

What was the classification of industries as per the Industrial Policy Resolution of 1956?

Industries classified into three ownership categories Signup and view all the answers

Why was it necessary for the government to control the commanding heights of the economy?

To ensure a socialist pattern of society Signup and view all the answers

What was the primary reason Indian industrialists did not have the capital to undertake investment in industrial ventures at the time of independence?

Inadequate market size to encourage major projects Signup and view all the answers

What role did the private sector play in industrial development as per the policies at the time of independence?

The private sector's policies had to complement those of the public sector. Signup and view all the answers

Why did Indian governments have to control key industries at that time?

To keep key industries under state control Signup and view all the answers

What was the principal goal behind developing the Indian economy on socialist lines?

To build a socialist pattern of society Signup and view all the answers

Study Notes

Indian Economy (1950-1990)

The proportion of GDP contributed by agriculture declined between 1950 and 1990 in India.
A good industrial sector is significant for poor nations as it provides employment opportunities and GDP growth.

Industrial Sector Challenges

A large proportion of the Indian population remained engaged in agriculture despite the potential for agricultural output to grow with fewer people.
One important failure of Indian policies during 1950-1990 was the lack of incentive for Indian producers to improve the quality of goods.

Public Sector and Concessions

The purpose of public sector firms was to promote industrial growth according to some economists.
Small-scale industries were given concessions such as lower excise duty and bank loans at lower interest rates to promote rural development.
The aim of the import substitution policy was to promote domestic industries and reduce dependence on foreign goods.
The government protected domestic industries from foreign competition to promote industrial growth.

Sectoral Contributions to GDP

In 1990-91, the agricultural sector contributed 30.1% to the GDP.
The industrial sector contributed the most to the GDP in 1995.

Criticisms and Consequences

One criticism of public sector enterprises was their inefficiency and lack of accountability.
Excessive regulation during the 'permit license raj' led to corruption and discouraged entrepreneurship.
Protection from foreign competition prevented Indian industries from becoming competitive globally.
State enterprises continued to produce certain goods and services despite being inefficient.

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Test your knowledge about the industrial licensing policy used to promote industry in backward regions, including the process of obtaining a license, concessions provided, and its purpose of promoting regional equality.

Industrial Licensing Policy Quiz

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