42 Questions
Why did the proportion of GDP contributed by agriculture decline in India between 1950 and 1990?
The industrial and service sectors failed to absorb the agricultural workforce
What is the significance of a good industrial sector for poor nations, according to economists?
It provides more stable employment compared to agriculture
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 and service sectors did not absorb the agricultural workforce
What was an important failure of Indian policies during 1950-1990, according to many economists?
Inability of industrial sector to provide stable employment
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
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
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
What led to the introduction of a new economic policy in India in 1991?
Conflicts among economists over economic policies
What was a common goal of the five year plans in India?
Achievement of self-sufficiency and equity
What did the mixed economy model in India aim to combine?
The best features of socialism and capitalism
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
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
What was the aim of the import substitution policy adopted by India?
To replace imports with domestic production
Why did the government protect domestic industries from foreign competition?
To help the domestic industries learn to compete
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
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
What was the effect of tariffs and quotas on imports based on the import substitution policy?
They restricted imports and protected domestic firms
Why was protection from imports necessary for the industries of developing countries?
To enable learning to compete over time
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
Why didn't any serious thought given to promoting exports until the mid-1980s?
'Import substitution' policy discouraged export promotion
'Small-scale industry' is defined with reference to:
$1 crore investment allowed on assets of a unit
What was the sectoral contribution to GDP in the agriculture sector in 1990-91?
34.9
In which year did the industrial sector contribute the most to the GDP?
1990-91
What is one of the criticisms of the public sector enterprises mentioned in the text?
They often monopolize certain goods and services
What was a consequence of the excessive regulation during the 'permit license raj'?
Prevention of new firm startups
What was one of the criticisms of the protection from foreign competition mentioned in the text?
It proved to do more harm than good
What industry continued to be reserved for the Public Sector even though private sector firms could also provide it?
Telecommunication service
Why did some scholars argue that the state should get out of areas which the private sector can manage?
To encourage competition and innovation
What was a consequence of protecting indigenous industries from foreign competition?
Stagnation in indigenous industry development
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
What allowed big industrialists to prevent competitors from starting new firms?
Government-issued licenses
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
Why did some economists criticize many public sector enterprises?
For monopolizing certain goods and services
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.
What was the basis of the Industrial Policy Resolution of 1956?
Classifying industries into three categories
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
What was the classification of industries as per the Industrial Policy Resolution of 1956?
Industries classified into three ownership categories
Why was it necessary for the government to control the commanding heights of the economy?
To ensure a socialist pattern of society
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
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.
Why did Indian governments have to control key industries at that time?
To keep key industries under state control
What was the principal goal behind developing the Indian economy on socialist lines?
To build a socialist pattern of society
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.
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.
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