BY: KAMAL KUMAR : 9810500906,7290903559

LESSON – 1
INDIAN ECONOMY ON THE EVE OF INDEPENDENCE

NCERT QUESTIONS WITH ANSWERS

Q.1 What was the focus of the industrial policies pursued by the colonial government in India?
What were the impacts of these policies?
Ans. The economic policies pursued by the colonial government in India were concerned more with the
protection and promotion of the economic interests of their home country than with the development
of Indian economy.
They needed raw material for British industries and they also needed market for the industrial
products for the Britain.
Hence, they used Indian economy as the feeder economy for the British industry. The impact of these
policies was that India became a stagnant and backward economy.
Q.2 Name some notable economists who estimated India’s per capita income during the British
period.
Ans. The colonial government never made any attempt to estimate India’s national income and per capital
income. Some notable economists who estimated India’s national income and per capita income
were- Dadabhai Naoroji, William Digby, Findlay Shrrias, V.K.R.V. Rao, and R.C.Desai.
But their attempts to measure such income gave conflicting results. It was V.K.R.V.Rao whose
estimates during the colonial period were considered very significant. However, most studies did find
that the country’s growth rate of aggregate GDP during the first half of the twentieth century was only
less than 2 percent per year and per capita real GDP was about 0.5% per annum.

Q.3 What were the main causes of India’s agricultural stagnation during the colonial period?
Ans. The stagnation in the agriculture sector was caused mainly because of the various systems of land
settlement or revenue settlement that were introduced by British government, particularly Zamindari
system. Under this system-
i) Zamindars were declared as owners of the soil. They were to pay a fixed sum to the government
by way of land revenue and were free to extract as much as they wished from the tillers of the
soil.
ii) The tillers of the soil got bare minimum for survival. They were left with no surplus for investment
in agriculture.
iii) The zamindars on the other hand, spent their revenue income on the luxuries of life. Little or no
investment was made for development of agriculture.

Q.4 Name some modern industries which were in operation in our country at the time of
independence.
Ans. The modern industry began to take place root in India during the second half of the nineteenth
century.
i) Initially, this development was confined to the setting up of cotton and jute textile mills. The cotton
textile mills, mainly dominated by Indians, were located in the western parts of the country,
namely, Maharashtra and Gujarat, while the jute mills dominated by the foreigners were mainly
concentrated in Bengal.
ii) The Tata Iron and Steel Company was founded in 1907.
iv) Some sugar, cement and paper industries were also establishes by Indians. These were
established in the wake of worldwide scarcity of industrial goods because of world war –I and II.
v) The state participation in the process of modern industries was very limited. It confined only to the
area which would enlarge the size of the market for the British products in India. These areas
included: a) Railways, b) power generation, c) development of ports and d) communication.

Q.5. What were the two fold motive behind the systematic deindustrialisation effected by the
British?
Ans. The two fold motive behind the systematic deindustrialisation effected by the British were:
a) They wanted cheap raw material from India for their industries in Britain.

1
BY: KAMAL KUMAR : 9810500906,7290903559

b) They needed market for the industrial products of Britain

In this way they exploited India through the device of double exploitation.

Q.6 The traditional handicraft industries were ruined under the British rule. Do you agree with this
view? Give reasons in support of your answer.
Ans. Yes, I agree with this statement, British government systematically destroyed Indian handicraft
industries in order to serve their following two fold motives:
i) To get raw materials from India at cheap rates to be used by upcoming modern industries in
Britain.
ii) To sell finish products of British industries in Indian market at higher prices.
iii) Colonial government enforced discriminately tariff policy, which allowed tariff free export of raw
materials from India and tariff free import of final goods of British industry to India. But heavy duty
was imposed on export of Indian handicrafts. As a result, Indian markets were full of finished
goods from Britain, which led to the decline of Indian handicrafts, both in the domestic market as
well as in the export market.

Q.7. What objectives did the British intend to achieve through policies of infrastructure
development in India?
Ans. Some efforts were made by the colonial government to improve infrastructure facilities in India such
as railways, ports, power, posts and telegraphs. But these efforts were made with selfish motives: The
motive of growth and development of the British industries through the colonial exploitation of Indian
economy.
i) Railways were developed to transport finished goods from Britain to interiors of the colonial
India. It aimed to widening the size of the market for the British products in India.
ii) Ports were developed to handle export of raw material to Britain and import of finished goods
from Britain.
iii) Posts and telegraphs were developed to enhance administrative efficiency.
iv) Roads were developed to facilitate transport of raw material from different parts of the country
to the ports.
Briefly, some infrastructure was developed by the Britishers.

Q.8 Critically appraise some of the shortfalls of the industrial policy pursues by the British colonial
administration.
Ans. The state of Indian Industrial sector on the eve of independence was as follows:
i) De-industrialisation:- Britishers followed the policy of systematically de-industrializing India.
The primary motive behind the de-industrialisation by the British government was for the
protection and promotion of their home country.
ii) Limited area of operation of the public sector: - Another significant drawback of the new
industrial sector was the very limited area of operation of the public sector. This sector
remained confined only to the railways, power generation, communications, ports and some
other departmental undertakings.
iii) Lack of Capital goods industry: - There was hardly any capital goods industry to promote
further industrialisation in India.
iv) Low growth rate: - The growth rate of the new industrial sector and its contribution to the GDP
remained very small.
Q.9 What do you understand by the drain of Indian wealth during the colonial period?
OR
Why did export surplus not result in any flow of gold or silver into India?
Ans. During the British period, our exports exceeded our imports. It implied surplus came a huge cost to
the country’s economy.
This surplus owed largely to export of primary goods which are a sign of economic backwardness.
This trade surplus was not used for growth and development of the country. Instead it was used to
meet:
i) Administrative expenses of the British government in India, and
ii) Expenses of wars fought by the British government.
Administrative and war expenses led to a huge drain of wealth from India. This export surplus did not
result in any flow of gold or silver into India.

2
BY: KAMAL KUMAR : 9810500906,7290903559

Q.10 Which is regarded as the defining year to mark the demographic transition from its first to the
second decisive stage?
Ans. In the history of demographic transition, 1921 is regarded as the “Year of Great Divide”. Prior to 1921,
India was in the first stage of demographic transition. The second stage of transition began after 1921.
Prior to 1921, population growth in India was never consistent. Size of population kept fluctuating-
increasing in one census and decreasing in the other. But after 1921, population in India recorded a
consistent rise.
Note: - Till 1951, the rise in India’s population was never alarming.
Q.11 Give a quantitative appraisal of India’s demographic profile during the colonial period.
Ans. The demographic condition on the eve of independence was as follows:
i) High Birth Rate and Death Rate: - High birth rate and high death rate are treated as index of
backwardness of a country. Both birth rate and death rate were very high at 48 and 40 per
thousand of persons respectively.
ii) High Infant Mortality Rate:-It refers to death rate of children below the age of one year. It was
about 18 per thousand live births.
iii) Low Life Expectancy: - Life expectancy means the number of years that a new born child on
an average is expected to live. It was as low as 32 years.
iv) Mass Illiteracy: - Mass illiteracy among the people of a country is taken as an indicator of its
poverty and backwardness. The population census of 1941 (which was the last census under
the British rule) estimated the literacy rate at 17%. This means that 83% of the total
population was illiterate. Female literacy rate was still worse- only 7%. This indicated gender
bias in the country.
Q.12 Highlight the salient features of India’s pre-independence occupational structure.
Ans. Occupational structure means the distribution of working population across different sectors- primary
sector, secondary sectors and tertiary sector. The state of occupational sector on the eve of
independence was as follows:
i) Pre- dominance of Agriculture Sector: - The agriculture sector accounted for the largest share
of work- force which was 72%. The manufacturing and service sector accounted for 10% and
18% respectively.
ii) Growing Regional Variations: - There was growing regional variation. In the state of Tamil
Nadu, Andhra Pradesh, Kerala, Karnataka, Maharashtra and West Bengal, the dependence
of the workforce on the agricultural sector declined. On the other hand, there was increase in
the share of work force in the agriculture sector in the states of Orissa, Rajasthan and Punjab.
Thus India’s occupational structure was static and unbalanced.
Q. `13 Underscore some of India’s most crucial economic challenges at the time of independence.
OR
What were the challenges of Indian economy on the eve of independence?
Ans. On the eve of independence, Indian economy had the following characteristics:
i) Stagnant Economy: - On the eve of independence, Indian economy was completely a
stagnant economy. A stagnant economy is the one which shows little or no growth in income.
Between 1860-1945, growth rate of per capita income was as low as 0.5% per annum and
between 1925 and 1950 it was 0.1% per annum.
ii) Backward Economy:-Indian economy was a backward economy on the eve of independence.
Backward economy is the one in which per capita income is very low.
In 1947-48, per capita income in India was just Rs.230. the bulk of the population was very
poor, without sufficient food, clothing and shelter, unemployment was rampant.
iii) Agricultural Backwardness:- It is highlighted by the following facts:
a) Nearly 72% of country’s working population was engaged in agriculture. But its
contribution to GDP was only 50%.
b) Productivity was extremely low. Per hectare output of wheat was only 660 kilograms and
rice just 710 kilograms
c) Food grains production was barely enough for subsistence. In 1947-48, it was recorded to
be just 527 lakh tones.
iv) Industrial Backwardness :- ( For explanation see question no.8)
v) Extreme poverty: - Bulk of population was very poor. People were not getting two square
meals a day. They lacked shelter and clothing. All this was owing to widespread
unemployment and massive illiteracy.

3
BY: KAMAL KUMAR : 9810500906,7290903559

vi) Poor Infrastructure: - Infrastructural development was extremely low. In 1948, power
generation capacity was merely 2100MW, length of railway lines was 53,596km, and pucca
roads had coverage of 155 thousand km only.

Q.14 When was India’s first official census operation undertaken?

Ans. India’s first official census operation was undertaken in the year 1881. After that the census has been
conducted after every 10 years.

Q.15 Indicate the volume and direction of trade at the time of independence.
Ans. Volume of foreign trade means items which are included in the foreign trade. India became an
exporter of primary products such as raw silk, cotton, wools, sugar, indigo, jute etc. and an importer of
finished consumer goods like cotton, silk and woolen clothes and capital goods like machinery
produced in the factories of Britain.
Direction of foreign trade means the countries through which India exports and imports. More than
50% of India’s foreign trade was restricted to Britain while the remaining was allowed with few other
countries like China, Ceylon (Sri Lanka) and Persia (Iran). Hence, Britain had Monopoly Control on
Foreign Trade.

Q.16 Were there any positive contribution made by British in India? Discuss.
Ans. Certainly not, if the impact of the British rule is studied with reference to motive of the British
government in India. The motive was the colonial exploitation of the Indian economy. However, it has
some positive effects.
i) Commercial outlook of farmers: - Forced commercialisation of agriculture under the British
rule changed the outlook of farmers. Earlier, they considered that agriculture was only for the
subsistence. But now they started considering it as an important source of earning cash
(profit).
ii) New opportunities of Employment: - Spread of railways and roadways opened up new
opportunities of economic and social growth.
iii) Control of Famines: - Rapid means of transport facilitated rapid movement of food grain to the
famine affected areas. Accordingly, famines were controlled.
iv) Efficient System of Administration: - The British government in India left a legacy of efficient
system of administration. This served as a ready reference for our politicians and planners.

EXTRA QUESTIONS

Q.1 What was the condition of Indian economy before the advent of the British rule?
Ans. Agriculture: - Before the advent of the British rule agriculture was the main source of livelihood for
most people. The villagers were self- contained .There were no intermediaries (zamindars) between
the state and the farmers.
Industry: - India was well known for its handicraft industries in the field of cotton and silk textiles,
metal and precious stone works etc. These products enjoyed a worldwide market because of:
i) The reputation of the fine quality of material used and
ii) The high standards of craftsmanship.
Q.2 What was the main source of livelihood for most of the people during the British rule?
Ans. Agriculture was the main source of livelihood for most of the people. About 85% people lived in
villages and were directly and indirectly engaged in agriculture sector.
Q.3 Write a short note on Suez Canal.
Ans. Suez Canal is an artificial water ways running from North to South across the Isthmus of Suez in
north- eastern Egypt.
The opening of Suez Canal in 1869 reduced the cost of transportation and made access to the Indian
market easier.
The Canal provided a direct route for ships operating between Britain and India and avoided the need
to sail around Africa.
Strategically and economically, it is one of the most important waterways in the world.
Q.4 Railways during the British rule in India promoted colonial exploitation of the Indian economy.
How?
Ans. Railways promoted colonial exploitation of the Indian economy in two ways as under:
4
BY: KAMAL KUMAR : 9810500906,7290903559

i) Railways facilitated the movement of raw material from their source of supply to the ports for
further transportation to England.
ii) Railways led to expansion of the market for the British products in India.

Q.5 How did railways applied a check on the occurrence of famines during the period of British in
India?
Ans. Faster movement of food grain across different parts of the country (owing to railways) helped control
the spread of famines. Food supply could reach the people before they were driven to starvation.
Q.6 What was the state of agriculture sector of the Indian economy on the eve of independence?
Ans. On the eve of independence, Indian agricultural sector revealed the following characteristics:
a) Low production and productivity: - Production refers to total output, while productivity refers to
output per hectare of land. Both were found to be extremely low on the eve of independence.

CROP PRODUCTIVITY PRODUCTION

(kg per hectare) (in lakh tones)

1947 2016-17 1947 2016-17

Wheat 660 3216 64 984
Rice 665 2550 220 1102
b) High degree of uncertainty: - Agriculture showed a high degree of uncertainty. Because, it was
excessively dependent upon rainfall. Good rainfall implied good output, while poor rainfall implied
poor output. No effort was ever made under the British rule to develop permanent means of
irrigation.
c) Dominance of subsistence agriculture: - Farming was taken mostly as a means of subsistence.
Subsistence farming is a form of farming in which the crops are produced to provide for the basic
needs of the family. There is little surplus left for sale in the market. Accordingly, backwardness
prevalent and poverty dominated.
d) Small and fragmented holdings: - Landholdings were both small as well as fragmented.
Fragmented holding means a piece here and price there. Accordingly, most landholdings were
uneconomic: yielding low output at high cost.
e) Land Revenue System under the British Raj: - The British govt. in India introduced a unique
system of land revenue. It set up a triangular relationship among the government, the owner of
the soil and the tiller of the soil. This was popularly known as zamindari system of land revenue.
The distinct features of this system was as follows:-
i) The zamindars were recognised permanent owners of the soil.
ii) The zamindars were to pay a fixed sum to the government as land revenue.
iii) The zamindars were free to extract as much from the tillers of the soil as they could.
In this system, land revenue was frequently raised by the zamindars. Zamindars lived a lavish life.
On the other hand tillers merely got for subsistence.
f) Forced commercialisation of agriculture: - Commercialization of agriculture refers to a shift from
cultivation for self-consumption to cultivators for the market. Farmers were forced to shift
commercial crops (indigo, cotton, jute etc.) from the conventional subsistence crops (like wheat,
rice etc.)
While earlier they would grow grains for their family consumption. Now they needed cash to buy it
from the market. But they would seldom have cash. With the result they were caught in debt-
traps.

Q.7 What was the state of industrial sector of the Indian economy on the eve of independence?
Ans. Under the British Raj, modern industry saw only a bleak growth. It was only in second half of the 19th
century that the modern industry showed its emergence. Three observations needed to be noted in
this regard:
i) Some industries were established by the private enterprises. These included: iron and steel
(Tata iron and steel company was established in 1907), sugar, cement and paper industries.
These were established in the wake of worldwide scarcity of industrial goods because of
World War I and II.

5
BY: KAMAL KUMAR : 9810500906,7290903559

ii) The state participation in the process of modern industrialisation was very limited. It confined
only to the area which would enlarge the size of the market for the British products in India.
These areas included: (a) Railways, (b) Power generation, (c) Ports and (d) Means of
Communications.
There was no capital goods industry worth the name. Capital goods industry produces goods like
machines and industrial plants which are used for further industrialisation. In the absence of this
industry, industrialisation in India remained lopsided.

Q.8 What was the impact of Railways in India?

Ans. The British introduced the railways in India in 1850 and it is considered as one of the most important
contribution of the Britishers in India. The railways affected the structure of the Indian economy in two
important ways:
Positive Impacts:-
i) It enabled people to undertake long distance travel and thereby break geographical and
cultural barriers.
ii) Faster movement of food grain across different parts of the country helped the spread of
famines. Food supplies could reach the people before they were driven to starvation.
iii) Railways facilitated commercialisation of agriculture as goods could then be moved to
distance places. This implied a modest change in the outlook of the farmers. They started
viewing farming as a business rather than merely as a source of subsistence.
Negative Impacts:-
I) Railways contributed to colonial exploitation of the Indian economy. Because, primary goods
could then be easily transported from the fields and farms to the ports for the purpose of
exports to the British economy.
II) And finished goods, coming from Britain, could be easily transported to the interiors of India
for purpose of sale.
III) Thus spread of railways led to the spread of the domestic market for the British products.

OBJECTIVE TYPE QUESTIONS

Q.1 The sole purpose of the British rule in India was_____________. (Complete the sentence)
Q.2 Before the advent of the British rule, India was well known for its handicrafts industries in the fields of
____________________. (Complete the sentence)
Q.3 Before the advent of the British rule, India was well known for its handicrafts industries in the fields of
cotton and silk textiles metal and precious work etc. these products enjoyed a worldwide market due
to: (choose the correct answer)
a) Reputation of the fine quality of material used.
b) High standard of craftsmanship seen in all imports from India.
c) Both (a) and (b).
d) Wide export market.
Q.4 The economic policies pursued by the colonial government in India were concerned with the
protection and promotion of the economic interests of their country. How did these policies affect the
Indian Economy?
a) Higher rate of growth of industries, especially Handicrafts industries.
b) It transformed the country into a supplier of raw materials.
c) The country became consumer of finished goods from Britain.
d) Both (b) and (c).
Q.5 The country’s growth rate of aggregate real output during the first half of the 20th century was only
(a)______________ and per capita real output was (b)_________. (Fill up the blanks)
Q.6 Under the British colonial rule the agricultural production decreased. (True or false, give reason)
Q.7 The stagnation in the colonial rule in the agriculture sector was caused mainly because of
_____________
that was introduced by the colonial government.
Q.8 Which of the following is the cause of India’s agricultural stagnation and low productivity?
a) Various systems of terms of revenue settlement.
b) Low levels of technology and lack of irrigation facilities.
c) Lack of resources to investing terracing floods control, drainage and desalinisation of soil.
6
BY: KAMAL KUMAR : 9810500906,7290903559

d) All of the above.

Q.9 Under the Zamindari system, the main interest of the zamindars was only to collect rent regardless of
the economic condition of the cultivators. To a very great extent, the terms of_________ were
responsible for the zamindars adopting such an attitude. (Fill up)
Q.10 During the British rule, though agricultural productivity became low, there was some evidence of a
relatively higher yield of cash crops in certain areas of the country due to _________.
Q.11 Commercialisation of agriculture helped farmers in improving their economic condition. (T/F)
Q.12. India developed a sound industrial base under the colonial rule. (T/F).
Q.13. The British rule led to the collapsed of India’s world famous handicraft industry. What was its effect on
Indian economy? (Choose the correct option)
a) Massive unemployment in India (b) Increasing imports of cheap manufactured goods
from Britain.
(c) Both (a) and (b) d) Neither (a) nor (b)
Q.14 During the second half of the 19th century, modern industry begins to take route in India. (T/F)
Q.15 During the second half of the 19th century, the cotton textile mills, mainly dominated by Indians, were
located in ______, while Jute mills dominated by the foreigners were mainly concentrated
in______________.
Q.16 During the British rule, the Iron and Steel Industry began coming up in the beginning of 20th century.
______ was incorporated in 1907.
Q.17. One of the significant drawbacks of the industrial policies pursued by the British colonial
administration was the very limited area of operation of the public sector. This sector remained
confined only to the _________.
Q.18 The restricted policies of commodity production of, trade and tariff pursued by the colonial government
adversely affected the structure and composition of India’s foreign trade. (T/F)
Q.19 For all practical purposes, Britain maintained a monopoly control over India’s export and export. The
opening of _____ further intensified British control over India’s foreign trade.
Q.20 India’s foreign trade during the colonial period generated a large export surplus. But it came at a huge
cost to the country’s economy. (T/F)
Q.21 During the British colonial rule_______ was very low ________ in contrast to the present 68 years.
Q.22 Under the colonial region, there was no infrastructure development. (T/F)
Q.23 Capital goods industry produced machine tools which are in turned, used for producing article for
current consumption. (T/F)
Q.24 What percentage of India’s population was dependent on agriculture on the eve of independence?
a) 75% (B) 50% (C) 85% (D) 65%
Q.25. Growth rate of _______ sector was very small in GDP. (Agricultural/Industrial)
Q.26 Which one of the following was high during British rule in India?
a) Literacy rate (b) Female Literacy (c) Infant mortality rate (d) Life expectancy
Q.27 Arrange the following events of India before the independence in chronological order.
1) The opening of Suez Canal 2) Introduction of the Railways
3) Second stage of demographic transition 4) Incorporation of TISCO
Q.28 Before 1921, India was in the First stage of __________. The second stage began after 1921.
Q.29. The first census was conducted in 1881 during British India Period. (T/F)
Q.30 Which of the following statement is not true about India’s economic development during British rule?
a) Handicraft products were well known world wide
b) Agriculture was the main source of livelihood
c) India transformed into supplier and consumer of finished industrial products.
d) Per capita income grew by half % in the first half of 20th century.

7
BY: KAMAL KUMAR : 9810500906,7290903559

LESSON – 2
INDIAN ECONOMY (1950-1990)

NCERT TEXTUAL QUESTIONS

Q.1 Define a plan?

Ans. Plan is a document showing detailed scheme, programme and strategy worked out in advance for
fulfilling an objective.
Q.2 Why did India opt for planning?
Ans. India inherited from the British a backward and stagnant economy. It was backward as the level of
output and productivity were low. And, it was stagnant as the GDP growth was extremely low. Such
an economy could not be left to the market forces of supply and demand to get economic
development. It needed a big push of investment and support by the government. So, India opted for
planning.
Q.3 Why should plans have goals?
Ans. Plans should have goals or objectives which the country wants to achieve in a specific time period.
Without goals, the planners would not know which sector of the economy should be developed on a
priority basis.
Q.4 What are miracle seeds?
Ans. High yielding variety (HYV) seeds are called miracle seeds. These seeds have low maturity period,
are highly productive and are disease resistant. The yield from these seeds exceeded many times
more than the yield from normal seeds.
Q.5 What is marketable surplus?
Ans. Marketable surplus is the difference between total output produced by the farmer and his self-
consumption from that output. In other words it is that portion of the total output that the farmer is able
to sell in the market.
Q.6 Explain the need and type of land reforms implemented in the agriculture sector.
Ans. Land reforms refers to change in the ownership of landholdings (i.e. to abolish intermediaries and to
make the tillers the owners of land) and fixing the maximum size of land which could be owned by an
individual (i.e. land ceiling)
Type of land reforms implemented in the agriculture:
1. Abolition of intermediaries: - Intermediaries (between the state and the actual tiller of the soil),
popularly known as zamindars have been abolished. Ownership rights have been given to the
actual cultivators of the soil. This has been done with a view to stopping exploitation of the
cultivators by the zamindars.
2. Regulation of rent: - To put an end to excessive and illegal extortions from the cultivators, rents
have been fixed. Generally, these are not to exceed 1/3 of the value of crop.
3. Consolidation of holdings: - With a view to reducing fragmentations, steps have been initiated for
the consolidation of land holding. Consolation is a practice to allot land to the farmers at one place
as a replacement for his scattered holdings here and there. It saves the cost of cultivation.
4. Ceiling on land holdings: - With a view to promoting equality in the distribution of land, ceiling has
been imposed on the holding size. Ceiling on holdings is the maximum size of cultivable land that
an individual or a family can hold.
The surplus land has been resumed by the government and redistributed among small holders or
landless laborers.
Q.7 What is Green Revolution? Why was it implemented and how did it benefit the farmers?
Explain in brief.
Ans. The green revolution refers to the large increase in production of food grains resulting from the use of
high yielding variety seeds (HYV) especially for wheat and rice.
At independence 75% population was dependent on agriculture. However, production and productivity
in agriculture sector was very low because of the use of old technology and the absence of required
infrastructure for the vast majority of farmers. The stagnation in agriculture during the colonial rule
was permanently broken by the green revolution.
Benefits of Green Revolution:-
1. Increase in marketable surplus: - A good production of rice and wheat during the green revolution
period (marketable surplus) was sold by the farmers in the market. As a result, income of the
farmers increased.
8
BY: KAMAL KUMAR : 9810500906,7290903559

2. Decrease in prices of food grains: - The price of food grains decreased during the green
revolution. The low income group, who spend a large percentage of their income on food,
benefited from this decline in relative prices.
3. Buffer Stock: - The spread of green revolution technology enabled the government to produce the
sufficient quantity of food grains to build buffer stock which could be used in times of food
shortage.
4. Self Reliance: - Indian agricultural productivity increased sufficiently in food grains. We no longer
had to be at the mercy of America or any other nation for meeting our food requirements.
Q.8 Explain growth with equity as a planning objective.
Ans. Economic Growth is an increase in the aggregate output of goods and services in a country in a given
period of time. Equity refers to reduction in inequality of income and wealth. It means the benefit of
economic growth reach the poor sections as well instead of being enjoyed only by the rich.
Inequality in the distribution of wealth should be reduced. Every Indian should be able to meet his or
her basic needs such as food, a decent house, education and health care.
Q.9 Does modernisation as a planning objective create contradiction in the light of employment
generation? Explain.
Ans. Modernisation as a planning objective implies use of advanced technology. Advanced technology
requires less labour per unit of output. Thus, modernisation creates unemployment.
Q.10 Why it was necessary for a developing country like India to follow self-reliance as a planning
objective?
Ans. On the eve of independence, India was poor, stagnant and backward. There were heavy imports of
food grains. It was important to be self- reliance because of two reasons:
1. To reduce foreign dependence: - At the time of independence India imported a large quantity of
food grains. So, stress should be given to attain self- reliance.
2. To avoid foreign interference: - It was feared that dependence on imported food supplies, foreign
technology and foreign capital may increase foreign interference in the policies of our country.
Q.11 What is sectoral composition of an economy? Is it necessary that the service sector should
continue maximum to GDP of an economy?
Ans. Sectoral composition refers to the contribution made by agricultural, industrial and service in the gross
domestic product of the country.
No, it is not necessary that the service sector should continue maximum to GDP of an economy. But
the experience of developed countries shows that as a country grows, its contribution to GDP of
agriculture sector reduces and that of industrial sector and service sector increase.
Q.12 Why was public sector given a leading role in industrial development during the planning
period?
Ans. The public sector was given a leading role in the industrial development during the planning period
because of the following reasons:
1. Shortage of capital with Private Sector: - Industrial development in India needed a big push.
Implying a large amount of capital expenditure. At the time of independence Tata and Birla were
the only industrial houses in the country. The requirement of capital for the country’s growth was
beyond the capacity of these industrial houses.
Accordingly it became essential for the state to achieve industrial growth through public sector.
2. Low inducement to invest: - the private investors lacked inducement to invest. It was owing to
limited size of market. Limited size of market was owing to low level of demand. Level of demand
was low because of low level of income. Thus there was a sort of vicious circle operating in the
country.
3. Growth with Social Justice: - The government realised that this objective could be achieved only
by direct participation of the state in the process of industrialisation. Because it requires
investment that generates employment then investment that maximises profit.
Q.13 Explain the statement that Green Revolution enabled the government to produce sufficient
food grains to build its stock that could be used during times of shortage.
Ans. Green Revolution refers to the tremendous increase in agricultural production and productivity that
has come about with the introduction of new agricultural technology. It transformed the economy of
scarcity into an economy of plenty.
As a result, India was able to achieve self- sufficiency in food grains. Green Revolution helped in
building buffer stock which could be used in case of shortage of production.

9
BY: KAMAL KUMAR : 9810500906,7290903559

Q.14 While subsidies encourage farmers to use new technology, they are a huge burden on
government’s finance. Discuss the usefulness of subsidies in the light of this fact.
Ans. In India, new technology during 60’s was placed with subsidies to the farmers. It helped the supply of
essential inputs to farmers at a reduced rate. Continuation of subsidy has now become a debate able
issue. Some are in favour of it and some are against it.
Arguments against Subsidies:
1. The objective of subsidy was to enable farmers to get new technology at cheap rates. Now that
the new technology has been widely adopted by the farmers. It means subsidy has done its job, it
should no longer be offered.
2. Subsidy is meant to benefit the farmers but the huge amount of subsidy is being taken by the
fertilizer industry.
3. Even rich farmers are continued to enjoy the benefit of subsidy.
4. It is a huge burden on the government.
Arguments in favour of Subsidy:
1. Bulk of the farming population in India is poor. Withdrawal of subsidy will leave such poor farmers
to the uncertainties of the market for the purchase of essential inputs. Consequently the farmers
as well as the farming community will suffer
2. Withdrawal of subsidy would enlarge the gulf between the rich and the poor farmers. Thus the
objective of ‘equity’ would be defeated.
Q.15 Why despite the implementation of green revolution, 46% of our population continued to be
engaged in the agriculture sector till 1990?
Ans. We know that the growth process causes a shift in sectoral share in output and employment. As the
process of growth and development gathers momentum, percentage share of primary sector in output
and employment tends to decrease while that of secondary sector and tertiary sectors tends to
increase.
The structural change in composition of GDP shows that India is on the path of sustained
development. But the occupational structure pattern shows that India is still underdeveloped. When
nearly 46% of the workforce is engage in agriculture where productivity is low and employment
uncertain.
It also means that our industrial sector and service sector are not so developed that it can absorb the
surplus population of primary sector.
Q.16 Though public sector was 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. It is true that many public sector undertakings are incurring huge losses. However, they are still very
useful and crucial for the economy. They are needed:
1. To create a strong industrial base. Public sector plays an important role in development of those
industries which require heavy investment and have long gestation period.
2. To develop infrastructure.
3. To promote development in backward areas.
4. To generate employment opportunities.
5. To control and manage industries of the strategic areas like national defense, atomic energy etc.
Moreover, public sector is not meant to earn profit but to promote the welfare of the nation.
Q.17 Explain how import substitution can protect industry,
Ans. The domestic industries of India were not in a position to compete against the goods produced by
more developed economies. So, the policy of import substitution helped in protecting them in two
ways:
a) Tariffs: - Heavy duty or tariff was imposed on imported goods in order to make them more
expensive and to discourage their use.
b) Quotas: - Quotas refer to fixing the maximum limit on the imports of a commodity by a
domestic producer.
Q.18 Why and how was private sector regulated under the IPR 1956?
Ans. According to Industrial Policy Resolution (IPR) 1956, the industries were reclassified into three
categories: Schedule - A, Schedule - B, and Schedule – C.
1. Schedule –A: - This first category comprised industries which would be exclusively owns by the
state. In this schedule, 17 industries were included, like arms and ammunitions, atomic energy,
oil, railways, shipping, etc.

10
BY: KAMAL KUMAR : 9810500906,7290903559

2. Schedule B: - In this schedule 12 industries were placed, which would be progressively state –
owned. The state would take initiative of setting up industries and private sector will supplement
efforts of the state. This schedule includes industries like aluminum, mining industries, machine
tools, fertilizers, etc.
3. Schedule- C: - This schedule consisted of the remaining industries which were to be in the private
sector. The state would facilitate and encourage the development of all these industries. These
industries were controlled by the state through a system of licenses.

EXTRA QUESTIONS
Q.1 What is capitalist economy?
Ans. A capitalist economy is that economy in which all factors of production are owned, run and managed
by the private sector with the aim of earning profit.
Q.2 What is socialist economy?
Ans. A socialist economy is that economy in which all factors of production are owned, run and managed
by public sector. All economic activities are taken by some centrally planned authority with the motive
of public welfare.
Q.3 What is mixed economy?
Ans. Mixed economy is that economy in which there is co- existence of both the sectors – public sector and
private sector. It means that some factors of production are owned by private sector and some factors
of production are owned by public sector.
Q.4 Explain the common goals (general goals) of planning.
OR
Explain the objectives of planning.
Ans. Long period of goals are common to all five years plan and therefore are studied as common goals of
five year plans. There are four long period objective of planning:
1. GDP Growth: - Increase in GDP implies increase in the level of output in the economy. It implies
an increase in the flow of goods and services in the economy.
When the increase in the flow of goods and services is consistent over a long period of time, it is
called ‘economic growth’. This GDP growth leads to Economic Growth.
2. Equitable Distribution or Equity: - Growth, modernisation and self- reliance may not improve if
majority of the people in the country are living in poverty. So, in addition to growth, modernisation
and self- reliance, equity is also important.
Equity means to ensure that benefits of economic growth reach the poor sections as well instead
of being enjoyed only by the rich. Inequality in the distribution of wealth should be reduced. Every
Indian should be able to meet his or her basic needs such as food, house, cloth, education and
health care.
3. Modernisation: - Adoption of new technology in the production of goods and services to increase
the output is called modernisation. For example, a factory can increase output by using a new
type of machine.
However, modernisation does not refer only to the use of new technology but also to change in
social outlook. Conventional wisdom (wisdom without a valid reason) must give way to modern
outlook. It includes issues like empowerment of women so that they also participate in the
process of production and contribute the process of economic and social prosperity.
4. Self Sufficiency: - Self Sufficiency means dependence on domestically produced goods,
particularly food grains. This goal was accorded a high priority during the first seven plans.
The basic idea was not to expose Indian economy to political pressure from rest of the world
simply because we are dependent on them for the supply of essential goods. Indeed it happened
in 1965 when USA threatened to stop exports of food grains to India if it did not stop the then war
with Pakistan.
Q.5 “Economic Growth and Economic Development means one and the same” Defend or
refute the given statement. Do you think that India is economically developed? Why or why
not?
Ans. The given statement is refuted. Economic growth and economic development are different
concepts. Economic growth is a narrow concept. It means only continuous rise in GDP of the
country. On the other hand Economic Development is a broader concept. Economic Development
means in addition to continuous rise in GDP, there is equitable distribution of income and
changes in sectorial composition in favour of secondary and tertiary sectors. No, I don’t think that

11
BY: KAMAL KUMAR : 9810500906,7290903559

India is economically developed because income inequalities are continuously rising in our
country. The rich are getting richer and he poor are getting poorer, this social justice is being
avoided.
Q.6 The percentage share of agricultural sector in exports of the country declined in the period
1950 – 1990. Why?
Ans. The share of agricultural sector has fallen because of the following reasons:
i) During this period there was substantial growth in Indian industrial sector, the domestic
demand of agricultural products increased as they were being used as raw- material in
the factories.
ii) During this period, there was a tremendous increase in the population of the country. As
population grew, the domestic demand for agricultural products also grew.
Q.7 Why were the benefits of green revolution restricted to few states and few crops in initial
stages of planning?
Ans. The Green Revolution was based on High Yielding Varieties (HYV) Seeds, which required reliable
irrigation and financial resources to buy better inputs. Because of this, the Green Revolution was
restricted to the more rich states of Punjab, Andhra Pradesh, and Tamil Nadu. Further the use of HYV
seeds primarily benefitted the rice and wheat growing regions.
Thus, the benefit of the Green Revolution was initially restricted to few states and the crops of wheat
and rice only.
Q.8 Give the criticisms against Green Revolution.
Ans. a) It increased inequalities of income: - It increased the inequalities between small and big farmers
since only big farmers could afford the required inputs.
b) Prone to pest Attack: - 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.
c) Benefits to affluent states: - The use of HYV seeds was restricted to the more affluent states such
as Punjab, Andhra Pradesh and Tamil Nadu. Further the use of HYV seeds primarily benefited the
wheat growing regions only.
Q.9 How does industry help to strengthen the economy of a country?
Ans. Industry helps to strengthen the economy of a country in the following ways:
i) Source of Employment: - Industry is an important source of employment. This becomes
significant when agriculture is already overburdened and the labour force is rising rapidly.
In fact, with a rise in agricultural productivity, farming sector has released a large supply of
labour force. It can be gainfully employed only in occupations outside agriculture. Industry
plays an important role in this context.
ii) Source of Mechanised Means of Farming: - Industry plays a crucial role in mechanisation of
farming. Use of machines (like tractors, threshers and harvesters) in farming has become
possible only owing to the growth and development of industry.
iii) Infrastructural Growth: - Industrialisation has led to infrastructural growth in the economy. As
industry spreads in different parts of the country, there is an expansion of infrastructural
facilities such as means of transformation and communications, banking and insurance
services, power and the like. In fact, both the industrial growth and infrastructural growth are
inter- linked. The growth of one increases the growth of other.
iv) Epicenter of Economic Growth: - Industry serves as the epicenter of economic growth. As
GDP rises there are structural changes in the economy. Industry starts replacing agriculture
as the engine of growth. This is because, unlike agriculture, industry produces a wide range
of goods which the consumers would like to consume as their income rises.
v) Imparts Dynamism to Growth Process:-Industry imparts dynamism to growth process. In the
absence of industry, growth process would have been restricted to the production of food for
survival. But industry produces a large variety of goods and services.
vi) Growth of Civilization: - Urbanisation (in the wake of industrialisation) has led to the growth of
civilization. People become conscious of their quality of life. They work hard to achieve higher
levels of education and skill.
Q.10 Why and how did the government promote small- scale industries for rural development in
India?
Ans. The government promoted small scale industries because small scale industries generate more
employment since they use labour intensive technology.

12
BY: KAMAL KUMAR : 9810500906,7290903559

To promote these industries and protect them from large industries, the production of a number of
products was reserved for small scale industries. They were also given concession such as tax rebate
and bank loans at lower rate of interest.
Q.11 During the colonial rule there was neither growth nor equity in the agricultural sector. How did
the policy makers of independent India address these issues?
Ans. During the colonial period there was neither growth nor equity in agricultural sector. The policy makers
of independent India addressed these issues through land reforms and promoting the use of HYV
seeds (Green Revolution). These initiatives helped India to become self – sufficient in food grains
production.
Q.12 Why the ownership of land holdings was considered necessary under land reforms in the
agriculture sector?
Ans. The ownership of land holdings was considered necessary under land reforms in the agriculture
sector because ownership of land would enable the tillers to make profit from the increased output.
Secondly, it would give incentives to the tillers to invest in making improvements.
Q.13 Explain the drawbacks of the land reforms in India.
Ans. In some areas the former Zamindars continued to own large areas of land by making use of some
loopholes in the legislation.
a) There were cases where tenants were evicted and the land owners claimed to be self- cultivators.
b) Even when the tillers got ownership of land, the poorest of the agricultural labourers (such as
sharecroppers and landless labours) did not benefit from land reforms.
c) The big landlords challenged the legislation of ceiling on land holdings in the courts delayed its
implementation.
d) They used this delay to register their lands in the name of close relatives. Thereby escaping from
the legislation.
Q.14 Explain the positive effects of Industrial and trade Policies on Industrial Development.
Ans. The strategy of industrialisation yielded the following good effects:
i) Economic growth got a big push. Industrial output recorded a significant rise. There was
about 6% annual increase in output during the period 1950-1990.
ii) There was a marked diversification in the industrial sector. The then sunrise industry
(electronics in particular) marked its emergence in the domestic economy.
iii) Growth of large scale industry (like Rourkela and Bhilai Steel Plants) projected an
infrastructural shift in the Indian economy.
iv) Growth of SSI made a substantial contribution in achieving the objectives of growth with
social justice.
Q.15 Give drawbacks of the Industrial and Trade Policies.
Ans. a) Public Sector monopoly gradually tuned out to be a ‘dead social weight’. Inefficiency, corruption,
leakage and pilferage emerged as their principal characteristics.
b) Protection of domestic industry stimulated its growth. But, it failed to achieve international
standard of product quality.
c) Saving foreign exchange through import substitution (rather than generating it through export
promotion) proved to be an inefficient policy instrument. Our foreign exchange reserves started
shrinking.

OBJECTIVE TYPE QUESTIONS

Q.1 In 1950, the________ was set up with the _________as its chairperson.
Q.2 The common goals of the five years plans in India are: growth, modernisation, _____ and _____.
Q.3 One of the common goals of five years plans is ‘growth’. What does ‘growth’ imply?
(a) A large stock of productive capital. (b) A large size of supporting services like transport and
banking.
(c) An increase in the country’s productive capital and services. (d) All of the above.
Q.4 A good indicator of _______ is steady increase in the Gross Domestic Product (GDP).
Q.5 Which of the following is not a common goal of five year plans?
(a) Increase in the country’s capacity to produce the output of goods and services.
(b) Adoption of new technology in the production of goods and services to increase output.
(c) Increase in foreign exchange reserve of the country.
(d) Reduction in inequality in the distribution of income and wealth.

13
BY: KAMAL KUMAR : 9810500906,7290903559

Q.5 The contribution made by each of the sectors of the economy, namely the agricultural sector, the
industrial sector and the service sector, makes up the _________ of the economy.
Q.6 Equity in agriculture called for ____, which primarily refer to change in the ownership of land holdings.
Q.7 _____________ was a policy to promote equity in the agricultural sector. This means fixing the
maximum size of land which could be owned by an individual.
Q.8 Which of the following is not included in land reforms?
(a) Use of high yielding variety seeds. (b) The abolition of intermediaries.
(c) The change in the ownership of landholdings (d) Land ceiling
Q.9 The abolition of intermediaries meant that some ___________ tenants came into direct contact with
the government. They were thus freed from being exploited by the Zamindars.
(a) 50 lakhs (b) 100 lakh (c) 150 lakh (d) 200 lakh.
Q.10 Under ownership of land holdings, all types of agricultural labourers got benefit. True / False.
Q.11 Land reforms were successful in _______ and ________ because these states had a government
committed to the policy of ‘land to the tiller’.
Q.12 At the time of independence about _______ of the country’s population was dependent on agriculture.
Q.13 At independence, productivity in the agricultural sector was very low because of:-
a) Use of old technology b) the absence of required infrastructure
c) Lack of irrigation facilities d) all of the above
Q.14 The stagnation in agriculture during the colonial rule was permanently broken by the _________. This
refers to the large increase in production of food grains, especially wheat and rice resulting from the
use of _____.
Q.15 The first phase of green revolution (approx... mid 1960s, up to mid 1970s), the use HYV seeds
primarily benefited the ________ growing regions only.
Q.16 The second phase of the green revolution (mid 1970s to mid-1980s), the HYV technology benefitted
only the more affluent states and wheat growing regions. (T/F)
Q.17 Growth in agricultural output is important but is not enough. (T/F)
Q.18 The portions of agricultural produce is sold in the market by farmers is called _______.
Q.19 Which of the following is not a limitation of green revolution?
a) It increased the inequality between small and big farmers
b) Use of HYV seeds primarily benefited the wheat growing regions.
c) The HYV crops were also more prone to attack by pests.
d) All of the above.
Q.20 Because of the steps taken by the government, the green revolution benefited the small as well as
rich farmers. (T/F).
Q.21 Arguments in favor of subsidies:
a) To provide an incentive for adoption of the new HYV technology by farmers.
b) Farming in India continues to be risky business as it vitally depends on the monsoon.
c) Eliminating subsidies will increase the inequality between rich and poor farmers and violate the
goal of equity. d) All of the above
Q.22. It was necessary to use subsidies to provide an incentive for adoption of the new HYV technology by
farmers. (T/F)
Q.23 Eliminating subsidies will violate the goal of equity. (T/F)
Q.24 In India, between 1950 and 1990, the proportion of population depending on agriculture declined
significantly. (T/F)
Q.25 The five year plans place a lot of emphasis on industrial development because
a) Economists have found that poor nations can progress only if they have a good industrial
sector.
b) Industry provides employment which is more stable than the employment in agriculture.
c) It promotes modernisation and overall prosperity
d) All of the above
Q.26 The Public sector was given a leading role in industrial development in India because of
a) Lack of capital with the private individuals
b) Lack of incentive to invest in major projects.
c) The policy of the state controlling the commanding heights of the economy.
d) all of the above.

14
BY: KAMAL KUMAR : 9810500906,7290903559

Q.27 Under industrial policy resolution, 1956 although there was a category of industries left to the private
sector, yet the private sector was kept under state control through ____. The purpose of this policy
was to promote ______.
Q.28 Under industrial policy resolution, 1956 even an existing industry had to obtain a license for expanding
output or for diversifying production. This was meant:
a) To promote regional equality
b) To promote industry in backward regions.
c) To ensure that the state controlling the commanding heights of the economy.
d) To ensure that the quantity of goods produced was not more than what the economy required.
Q.29 In 1955, the village and small-scale industries committee, also called the ______________, noted the
possibilities of using small-scale industries for promoting rural development.
Q.30 In 1950, a small scale industrial unit was one which invested a maximum of ____ while at present the
maximum investment allowed is Rs. 1 crore.

LESSON -3
LIBREALISATION, PRIVATION & GLOBALISATION

NCERT QUESTIONS

Q.1 Why were reforms introduced in India?

Ans. In 1991, economic reforms are introduced in India because 1991 was Year of crises for the Indian
economy. It is clear from the following facts:
a) National income was growing at the rate of 0.8%.
b) Inflation reached the height of 16.8%.
c) Balance of payment crises was to the extent of 10,000 crores.
d) India was highly indebted country. It was paying 30,000 crores interest charges per annum.
e) Foreign Exchange reserve was only 1.8 billion dollars which was sufficient for only two weeks.
f) India sold large amount of gold to Bank of England.
g) India applied for the loans from World Bank and IMF to the extent of 7 billion dollars.
Q.2 How many countries are members of WTO?
Ans. At present 164 countries are members of WTO.
Q.3 What is the most important function of RBI?
Ans. The most important function of RBI is to issue the currency and to undertake credit control measures
in the country.
Q.4 How did RBI control the commercial Banks?
Ans. Prior to 1991 commercial banks were subject to too much control by the RBI through high bank rate,
high cash reserve ratio, and statutory liquidity ratio.
The bank had to take prior permission from RBI on all the financial decisions. However, after
Liberalisation in 1991, there was a substantial shift in the role of the RBI from regulator to facilitator of
financial sector.
Q.5 What do you understand by devaluation of rupee?
Ans. Devaluation refers to reduction in the value of domestic currency by the government under fixed
exchange rate.
Q.6 Distinguish between the following:
i) Bilateral and Multi-lateral trade
ii) Tariff and Non- tariff Barriers
Ans. (i) Bilateral and Multi-lateral Trade: - Trade between more than two countries is referred to multi-
lateral Trade.
Trade between two countries is referred to Bilateral Trade.
(ii) Tariff and Non- Tariff Barriers: - The barriers which are imposed on imports to make them
relatively costly and to protect the domestic production are known as tariff barriers. On the other hand,
non- tariff barriers are imposed on the amount of imports and exports.
Q.7 Why are tariff imposed?
Ans. Tariffs are imposed to make foreign goods relatively costly as a measure to protect domestic
production.
Q.8 What is the meaning of quantitative restrictions?
Ans. Quantitative Restrictions are imposed on the quantity of imports and exports.
15
BY: KAMAL KUMAR : 9810500906,7290903559

Q.9 Those public sector undertakings which are making profits should be privatised. Do you agree
with this view? Why?
Ans. No, profit making public sector undertakings should not be privatised. If such industries are privatised
then there will be only loss making PSUs left. Government needs the profit of the profit making PSUs
for the welfare of the country.
Q.10 Do you think outsourcing is good for India? Why are developed countries opposing it?
Ans. Outsourcing is good for India because it provides employment to large number of unemployed
Indians. Developed countries are opposing it because:
(i) Outsourcing leads to outflow of funds from the developed countries to India, which reduces
the income disparities between the two countries.
(ii) Outsourcing reduces the employment generation and creates job insecurity in the developed
countries.
Q.11 India has certain advantages which make it a favourable outsourcing destination. What are
these advantages?
Ans. India is a favorite outsourcing destination. The advantages that India has are:
(i) India can supply skilled and educated people at lower price.
(ii) Favorable Government Policies:-MNCs gets various types of lucrative offers from the Indian
government like tax holidays, low tax rates, etc.
Q.12 Do you think the navaratna policy of the government helps in improving the performance of
public sector undertaking in India? How?
Ans. The government has decided to give special treatment to some of the important profit making PSUs
and they were given the status of navratnas. These navratnas were granted financial and operational
autonomy in the working of the companies. These navratnas are:
a) Indian Oil Corporation LTD. (IOCL)
b) Bharat Petroleum Corporation Ltd. (BPCL)
c) Hindustan Petroleum Corporation Ltd. (HPCL)
d) Oil and Natural Gas Corporation Ltd. (ONGC)
e) Steel Authority Corporation Ltd. (SAIL)
f) Indian Petrochemicals Corporation Ltd. (IPCL)
g) Bharat Heavy Electricals Ltd. (BHEL)
h) National Thermal Power Corporation (NTPC)
i) Mahanagar Telephone Nigam Ltd. (MTNL)
j) Gas Authority of India Ltd.(GAIL)
k) Videsh Sanchar Nigam (VSNL)
The granting of navratnas status resulted in better performance of these companies.
Q.13 What are the major factors responsible for the high growth of the service sector?
Ans. The service sector has shown a high growth because of the following reasons:
a) Economic Reforms: - With the instruction of new economic policy, the FDI increases in India. This
led to huge inflow of foreign capital and outsourcing to India. It led to the growth of the service
sector.
b) Better performance of some service sector:- There was rapid growth in selected areas of the
service sector, such as telecommunication, information technology, finance, entertainment, &
travel, real estate & trade.
c) Better technology and growth of IT: - The innovations in the IT sector contributed to the growth of
the service sector in India.
d) Cheap and Skilled manpower: - Due to the availability of cheap and skilled manpower, India has
become favourable destination for outsourcing by the developed economies. It has led to the
growth of service sector.
Q.14 Agricultural sector appeared to be adversely affected by the reform process. Why?
Ans. Agriculture sector was adversely affected by the reform process in the following manner:
a) Neglect of agriculture: - Agriculture sector has suffered a serious neglect and its growth rate has
slipped down. This has led to a widening gulf between the rural and urban economies. Implying
the spread of poverty.
b) Removal of subsidy: - Removal of fertilizer subsidy increased the cost of production, which
adversely affected the small and marginal farmers.
c) Liberalisation and reduction in import duties: - After the advice of WTO, many policy changes
were made: (a) Reduction in import duties. (b) Removal of minimum support price and (c) Lifting

16
BY: KAMAL KUMAR : 9810500906,7290903559

the quantitave restrictions on agricultural product. All these policies adversely affected the Indian
farmers as they now have to face increased international competition.
Q.15 Why has the industrial sector performed poorly in the reform period?
Ans. The industrial sector performed poorly in the reform period because of the following reasons:-
a) Cheaper imported goods: - Due to globalisation, there was a greater flow of goods and services
from developed countries. Cheaper imports replaced the demand for domestic goods and
domestic manufacturers started facing competition from imports.
b) Lack of infrastructural facilities: - The infrastructural facilities including power supply have
remained inadequate due to lack of investment.
c) Non-tariff barriers by developed countries: - All quota restrictions on exports of textiles and
clothing have been removed from India. But some developed countries, like USA have not
removed their quota restrictions on import of textiles from India.
Q.16. Discuss economic reforms in India in the light of social justice and welfare.
Ans. The economic reforms have been criticised in the light of social justice and welfare due to following
reasons:
a) Growing unemployment: - Though the GDP growth rate has increased in the reform period, but
such growth failed to generate sufficient employment opportunities in the country.
b) Removal of subsidy: - Removal of subsidy on fertilizer and other agricultural inputs increased the
cost of production, which adversely affected the small and marginal farmers.
c) Rise in the prices of food grains: - Due to export oriented policy in agriculture, the production
shifted from food grains to cash crops for the export market. It led to rise in the prices of food
grains.
d) Cheaper imported goods: - Due to globalisation, there was a grater flow of goods and capital from
developed countries and as a result, domestic industries were exposed to imported goods.
e) Spread of consumerism: - The new policy has been encouraging a dangerous trend of
consumerism by encouraging the production of luxuries items of superior consumption.
f) Unbalanced Growth: - Growth has been concentrated only on some selected areas in the service
sector, such as telecommunication, information technology, finance, entertainment, travel and
hospitality services, real estate etc. But agriculture and industry which provide livelihood to
millions of people in the country remained neglected.

EXTRA QUESTIONS

Q.1 Define Liberalisation. Why Liberalisation was adopted?

Ans. Liberalisation of the economy means freedom of the producing units from direct or physical controls
imposed by the government. Prior to 1991, government had imposed several types of controls on
private enterprises. These included individual licensing system, import license, foreign exchange
control, restrictions on investment by big business houses, etc. These controls had given rise to
corruption, undue delays and inefficiency.
In view of these facts Liberalisation of the economy was considered as a key component of NEP.
Examples of developing countries (Korea, Thailand, and Singapore) that had achieved rapid growth
due to Liberalisation were considered as worthy.
Q.2 What were the economic reforms initiated under Liberalisation?
Ans. Liberalisation included the following reforms:
(a) Industrial Sector Reforms
(b) Financial Sector Reforms
(c) Fiscal Reforms
(d) External Sector Reforms.
Q.3 What were the industrial sector reforms initiated under liberalisation?
Ans. Following industrial reforms were initiated:
a) Abolition of Industrial Licensing :- In July 1991, abolished the requirement of licensing except for
the following five industries (a) liquor (b) cigarette (c) defense equipment (d) industrial explosives,
and (e) dangerous chemicals.
b) Contraction of Public Sector: - Under the new industrial policy, number of industries reserved for
public sector was reduced from 17 to 8. In 2010-11. The number was reduced to two (a) Atomic
Energy, and (b) Railways.

17
BY: KAMAL KUMAR : 9810500906,7290903559

c) De-reservation of Production Area: - Many production areas which earlier were secured for SSI
were deserved.
d) Expansion of Production Capacity: - Earlier production capacity was linked with licensing. Now,
freedom from licensing implied freedom from capacity constraints.
e) Freedom to Import Capital Goods: - Liberalisation also implied freedom for the industries to import
capital goods with a view to upgrading their technology.
Q.4 What were the financial sector reforms initiated under liberalisation?
Ans. Financial Sector Reforms: - Financial Sector includes (i) banking and non-banking financial institutes,
(ii) Stock Exchange Market.
In India financial sector is regulated and controlled by the RBI. The reforms introduced under the
financial sector are:
(i) Change in role of RBI: - The role of RBI was reduced from regulator to facilitator of financial
sector. As a result, financial sector was allowed to take decision on many matters, without
consulting the RBI.
(ii) Origin of Private Banks: - The reforms policies led to the establishment of private sector
banks. India as well as foreign. For example, Indian banks like ICICI and foreign banks like
HSBC increased the competition and benefitted the consumers.
(iii) Increase the limit of foreign investment: - The limit of foreign investment in banks was raised
to around 51%. Foreign Institutional Investment (FII) such as merchant banker’s mutual funds
and pension funds were now allowed to invest in Indian financial markets.
(iv) Ease in Expansion Process: - Bankers were given freedom to set up new branches (after
fulfillment of certain conditions) without the approval of the RBI.
Q.5 What were the Tax Reforms initiated under new economic policy? OR
What were the Financial Reforms (Fiscal Reforms) initiated under liberalisation?
Ans. Fiscal reforms relate to revenue and expenditure of the government. Tax reforms are the principal
component of fiscal reforms. Broadly taxes are classified as: (a) direct taxes and (b) indirect taxes.
The major tax reforms are:

(i) Reduction in Taxes: - Since 1991, there has been a continuous reduction in income and
corporate tax rates as it is realised that high tax rates were an important reason for tax
evasion.
(ii) Reforms in Indirect taxes: - Considerable reforms have been made in indirect taxes to
facilitate establishment of common national market for goods.
(iii) Simplification of Process:- For the benefit of the tax- payers many procedures have been
simplify.

Q.6 What were the External Sector Reforms initiated under liberalisation? OR
What were the foreign exchange and foreign trade reforms initiated under new economic
policy?
Ans. External sector include: (i) foreign exchange reforms and (ii) foreign trade policy reforms.
Foreign Exchange Reforms: - Important reforms made in foreign exchange market are:
(a) Devaluation of Rupee: - Devaluation refers to reduction in the value of domestic currency by the
government. With the result export increased and inflow of foreign currency rises.
(b) Market Determination of Exchange Rate: - The government allowed rupee value to be free from
its control. As a result, market forces of demand and supply determine the exchange value of the
Indian rupee in terms of foreign currency.
Foreign Trade Policy Reforms: - Before 1991, a lot of restrictions (high tariffs and quotas) were
imposed on imports to protect the domestic industries. But this protection reduced the efficiency and
competitiveness of domestic industries and led to their slow growth. So the reforms in the trade and
investment policy were initiated. The important trade and investment reforms were:
(a) Removal of Quantitative restrictions on imports and exports: - Under the new economic policy,
quantitative restrictions on import and export were greatly reduced.
(b) Removal of Export Duties: - Export duties were removed to increase the competitive position of
Indian goods in the international markets.
(c) Reduction in Import Duties: - Import duties were reduced to improve the position of domestic
goods in the foreign market.

18
BY: KAMAL KUMAR : 9810500906,7290903559

(d) Relaxation in import licensing system: - The import licensing was abolished except in case of
hazardous and environmentally sensitive industries. This encouraged domestic industries to
import raw materials at better prices, which raised their efficiency and made them more
competitive.
Q.7 Define Privatisatioin. Why privatisation adopted?
Ans. Privatisation means transfer of ownership, management and control of public sector enterprises to the
entrepreneurs in the private sector. It implies gradual withdrawal of government’s ownership from the
public sector enterprises. It may happen in two ways:
(i) Outright sale of the government enterprise to the private enterprise. This is known as
privatisation.
(ii) Withdrawal of the government ownership and management from the mixed enterprises. This
process is known a disinvestment.
The purpose of privatisation was mainly to improve financial discipline and facilitate modernisation. It
was also believed that private capital help in improving performance of the PSU.
Q.8 Define Globalisation. What were the measures under globalisation?
Ans. Globalisation means integration the economy of a country with the economies of other countries
under conditions of free flow of trade and capital across borders. Under globalisation, there will be
free flow of goods and services, technology and expertise between India and rest of the world.
Particularly it is expected that capital and technology will flow from the developed countries of the
world towards India.
India adopted following measures for globalisation:
1. Increase in Equity Limit of Foreign Investment: - Equity limit of foreign investment has been raised
from the initial 40%. It now ranges between 51% to 100%.
2. Partial Convertibility: - To achieve the objective of globalisation, the Union Budget of 1992-93
made Indian rupee partially convertible and then the rupee was made fully convertible in 1993-94
budget.
3. Long- term Trade Policy: - A new five years export- import (1992-97) was announces by the
government to establish the framework of globalisation of India’s foreign trade. The policy
removed all restrictions and controls on the external trade allowed market forces to play a greater
role in respect of exports and imports.
4. Reduction in Tariffs: - In order to encourage competitiveness, tariff barriers have been withdrawn
on most goods traded between India and rest of the world.
5. Withdrawal of Quantitative Restrictions: - Since 2001, the Quantitative Restrictions on all import
items have been totally withdrawn. This is in conformity with Indians commitment to the WTO.
Q.9 Explain merits and demerits of LPG policy.
Ans. Followings are the Merits of LPG Policy:
1. Vibrant Economy: - Indian economy has definitely become a more vibrant economy. Overall level
of economic activity has risen as indicated by GDP growth. The growth of GDP shot up as high as
8% per annum.
2. Inflow of Foreign Investment: - The opening of the economy has led to the rapid increase in
foreign direct investment. The foreign investment increased from about US dollar 100 million in
1990-91 to US dollar 36 billion in 2015-16.
3. Rise in foreign exchange reserve: - Foreign exchange reserve reached the level of dollar 25,186
million at the end of March 1995. At present, India foreign exchange reserve is around US dollar
469.540 billion.
4. Rise in exports: - During the reform period, India experienced considerable increase in exports of
auto parts, engineering goods, IT software and textiles.
5. Control on Inflation: - Increase in production, tax reforms and other reforms helped in controlling
the inflation. The annual rate of inflation reduced from the peak level of 17% in 1991 to around
5.48% in 2015-16.
6. Increase in role of Private Sector: - Abolition of licensing system and removal of restrictions on
entry of the private sector, in areas earlier reserved for the public sector, have enlarged the area
of operation of the private sector.
Followings are the Demerits of LPG Policy:-
1. Growing Unemployment: - Though the GDP growth rate has increased in the reform period, but
such growth failed to generate sufficient employment opportunities in the country.

19
BY: KAMAL KUMAR : 9810500906,7290903559

2. Neglect Agriculture: - The new economic policy has neglected the agricultural sector as compared
to industry, trade and service sector.
3. Reduction of Public Investment: - Public investment in agriculture sector, especially in
infrastructure, which includes irrigation, power, roads, etc., has been reduced in the reform period.
4. Removal of Subsidy: - Removal of fertilizer subsidy increased the cost of production, which
adversely affected the small and marginal farmers.
5. Shifts towards Cash Crops: - Due to export oriented policy strategies in agriculture, the production
shifted from food grain to cash crops for the export market. It led to rise in the prices of food
grains.
6. Low Level of Industrial Growth:- Industrial growth recorded a slowdown due to the following
reasons:
a. Cheaper imported goods: - Due to globalisation, there was a greater flow of goods and
capital from developed countries. As a result, domestic industries were exposed to
imported goods.
b. Lack of Infrastructure Facilities: - The infrastructure facilities, including power supply,
have remained inadequate due to lack of investment.
c. Non-Tariff Barrier by Developed Countries: - All quota restrictions on export of textiles and
clothing have been removed from India. But some developed countries, like USA have
not removed their quota restrictions on import of textiles from India.
d. Spread of Consumerism: - The new policy has been encouraging a dangerous trend of
consumerism by encouraging the production of luxuries items of superior consumption.

OBJECTIVE TYPE QUESTIONS

Q.1 Which of the following is not a factor which led the government in 1991 to introduce a new set of
policy measures – liberalisation, privatisation and globalisation?
(a) Decrease in foreign exchange reserves (b) Rising prices of essential goods
(c) Stagnation of agriculture output. (d) Government’s inability to repay its external debt.
Q.2 The origin of the financial crises in India in the 1980s can be traced from the ____________
(a) Challenges like unemployment, poverty and population explosion.
(b) Insufficient revenue generation from internal sources such as taxation.
(c) Sharp rise in the prices of essential goods.
(d) Inefficient management of the Indian economy.
Q.3 In the late 1980s, government expenditure began to exceed its revenue by such large margins that
meeting the expenditure through________________ became unsustainable.
Q.4 The thrust of the New Economic Policy was______________.
a) To create a more competitive environment in the economy and removing the barriers to entry
and growth of firms.
b) To maintain sufficient foreign exchange reserves and keep the rising prices under control;
c) To improve the efficiency of the economy and increasing its internal competitiveness by
removing the rigidities in various segments of the Indian economy.
d) To meet the challenges like unemployment, poverty and population explosion.
Q.5 The reform policies introduced in and after 1991, abolished industrial licensing for almost all except
product categories_________________.
Q.6 The only industry which is now reserved for the public sector are a part of_____________.
Q.7 The financial sector includes financial institutions, such as commercial banks, stock exchange
operations and ________________.The financial sector in India is regulated by_____________.
Q.8 One of the major aims of financial sector reforms is to reduce the role of RBI from ____ to ____of
financial sector.
Q.9 Recently the Parliament has passed a law, __________ to simplify and introduce a unified indirect tax
system in India.
Q.10 Goods and service Tax Act, 2016, which came into effect from July 2017, is expected to:
a) Generate additional revenue for the government.
b) Reduce its evasion
c) Create one nation, one tax and one market.
d) All the above.

20
BY: KAMAL KUMAR : 9810500906,7290903559

Q.11 _____have been removed to increase the competitive position of Indian goods in the international
markets.
a) Import licensing. b) Quantitative restrictions
c) Export duties d) Tariffs
Q.12 Import licensing was abolished except in case of_______________.
Q.13 _______ implies shedding of the ownership or management of a government owned enterprise.
Q.14 Privatisation of the public sector enterprises by selling off part of the equity of PSEs to public is known
as _________________.
Q.15 According to the government, the purpose of disinvestment was mainly to increase the resources
only. (T/F)
Q.16 The government has made attempts to improve the efficiency of PSEs by giving them autonomy in
taking managerial decisions. For instance, some PSEs have granted special status as
_____________.
Q.17 Match the following:
Column I Column II
a) Turning the world into one whole or creating a borderless world. A) Privatisation
b) Outright sale of public sector companies. B) Liberalisation
c) Putting an end to those restrictions, rule and laws which aimed at
regulating the economic activities but became major hindrances C) Globalisation
in growth and development.
Q.18 _____ and ____ in India have made it a destination for global outsourcing in the post- reform period.
Q.19 Which of the following services are being outsourced by companies in developed countries to India?
a) Voice based business process (BPO or call centers) b) Record keeping and accountancy.
c) Teaching d) All of the above.
Q.20 During the reform period the growth of agriculture sector has declined. (True /False)
Q.21 During the reform period, employment generation has increased. (True / False)
Q.22 Name two major taxes were levied by the Central Government, which now have been subsumed in
GST.
Q.23 GST will result into higher economic growth as GDP is expected to rise by about___________.
(a) 0.5% (b) 1% (c) 2% (d) 3%
Q.24 India has adopted a __________ policy of economic development since 1991. (Liberal/ Strict)

LESSON – 4
POVERTY
NCERT QUESTIONS

Q.1 Define Poverty.

Ans. Poverty refers to a situation in which an individual is unable to fulfill even the basic necessities of life.
The basic necessities include food, clothing, housing, education and health facilities.
Q.2 What is meant by National Food for work Programme (NFWP)?
Ans. The ‘Food for Work’ or National Food for Work Programme was launched on 14th November 2004 in
150 of the most backward districts of India with the objective of generating supplementary wage
employment. The programme was implemented as a 100% Centrally Sponsored Scheme.
(i) The programme was incorporated in Mahatma Gandhi National Rural Employment Guarantee
Act (MGNREGA) in 2005.
(ii) MGNREGA aims at enhancing the livelihood securing of people in rural areas by guaranting
100 days of wage – employment in a financial year to a rural household whose adult
members volunteer to do unskilled manual work.
(iii) All those among the poor who are ready to work at the minimum wage, can report for work in
areas, where this programme is implemented.
Q.3 State an example each of self- employment in rural and urban areas.
Ans. (i) PMRY is a self - employment programme in rural areas.
ii) SJSRJ is a self-employment programme in urban areas.
Q.4 How can creation of income earning assets address the problem of poverty?
Ans. With the creation of income earning assets people will have a way to earn their livelihood. It will help
in removal of poverty.

21
BY: KAMAL KUMAR : 9810500906,7290903559

Q.5 Briefly explain the three-dimensional attack on poverty adopted by the government.
Ans. A country is caught in a vicious circle of poverty. The government has followed three-dimensional
poverty removal programmes. These are:
1. The rate of economic growth should be raised: - Economic growth can be helpful in removing
poverty by the trickle down effect. It was felt that raised economic growth would benefit the
underdeveloped regions of the society.
2. Poverty Alleviation programmes: - The government has introduced a variety of programmes for
reduction of poverty.
3. Minimum Needs Programme: - This approach has been initiated from the Fifth Five Year Plan. It
aims to provide minimum basic amenities to the people. Programmes under this approach are
expected to supplement the consumption of the poor, create employment opportunities and bring
improvements in health and education.
Q.6 What programme has the government adopted to help the elderly people and poor and
destitute women?
Ans. National Social Assistance Programme (NSAP) was initiated by the central government to help a few
special groups. Under this programme, elderly people who do not have anyone to take care of them
are given pension to sustain themselves. Poor women who are destitute and widows are also covered
under this scheme.
Q.7. Is there any relationship between unemployment and poverty? Explain.
Ans. Yes, poverty is clearly related to nature of unemployment. Unemployment means lack of living. The
urban poor in India are largely the overflow of the rural poor who migrate to urban areas in search of
employment and livelihood. However, industrialisation has not been able to absorb all these people.
Most of the urban poor are either unemployed as casual labourers. Such casual labourers are among
the most vulnerable in society as they have no assets and no surplus to sustain them.
Q.8. What is the difference between relative and absolute poverty?
Ans.
RELATIVE POVERTY ABSOLUTE POVERTY
1.It refers to poverty of people relative to It refers to total number of people living
other people, regions or nations below the poverty line.
2. When we say that India is relatively The concept has relevance for less
poor, and then it is in comparison with their developed countries and the concept has
countries-the comparison is that of per no relevance for developed countries.
capita income of different countries.
3. Within India, relative poverty is In India, absolute poverty is calculated with
calculated with the help of Lorenz Curve the help of poverty line.
and Ginni Coefficient.
4. India is relatively one of the poorest In India 28.6 percent of the total population
countries of the world as its per capita is absolutely poor.
income is less than one dollar per day.
Q.9. Suppose you are from a poor family and you wish to get help from the government to set up a
petty shop. Under which scheme will you apply for assistance and why?
Ans. I will apply under the scheme “Swarna Jayanti Shahri Rozgar Yojna” (SJSRY). This scheme seeks to
provide gainful employment through encouraging the setting up of self-employment ventures.

Q.10 Illustrate the difference between rural and urban poverty. Is it correct to say that poverty has
shifted from rural to urban areas? Use the trends in poverty ratio to support your answer.
Ans. a) In urban areas, poor people include push cart venders, street cobblers, rag pickers, beggars, etc.
On the other hand, in rural areas, poor people include landless agricultural labourers, tenant
cultivators with small land- holdings, etc.
b) The urban poor are largely the overflow of the rural poor who had migrated to urban areas in
search of alternative employment and livelihood. However, rural people do not include people
from urban areas.
It is correct to say that poverty has shifted from rural to urban areas. The number of poor people
in rural areas reduced from 261.3 million to 170.3 million from 1973-74 to 2004-05, whereas, the
number of poor people in urban areas has increased from 60 million to 68.2 million in the same
period. So, the trends of poverty in India support the statement that poverty has shifted from rural
to urban areas.

22
BY: KAMAL KUMAR : 9810500906,7290903559

Q.11 Explain the concept of relative poverty with the help of the population below poverty line in
some states of India.
Ans. Relative poverty refers to poverty in relation to others. It refers to poverty of people in comparison to
other people, regions or nations. It indicates that a group or class of people belonging to the lower
income group is poorer when compared to those belonging to higher income groups.
Percentage of population below poverty line in some large states

STATES 2004-2005
1. Odessa 39.9
2. Bihar 32.5
3. Madhya Pradesh 32.4
4. Uttar Pradesh 25.5
5. West Bengal 20.6
6. Maharashtra 25.2
7. Tamil Nadu 17.8
8. Karnataka 17.4
9. Andhra Pradesh 11.10
10. Rajasthan 17.50
11. Gujarat 12.50

The concept of relative poverty reflects only the relative position of different segments of the
population. It does not consider how poor the poor person is. According to this concept, Odessa has
relatively more poor people as compared to Bihar and Bihar has relatively more poor people as
compared of Uttar Pradesh and so on.
Q.12 Suppose you are a resident of a village, suggest a few measures to tackle the problem of
poverty.
Ans. Some measures that can be taken are:-
a) Making people aware about benefits of sanitation.
b) Making people aware about various self-employment and wage-employment programmes of the
government.
c) Motivating the poor to acquire skills, information and knowledge.
d) Generate employment opportunities for the poor people.
e) Increase production and productivity in agriculture.
f) Awareness about family planning in order to control population growth.
g) Development of infrastructure.
EXTRA QUESTIONS

Q.1 What is poverty line?

Ans. Poverty Line is a cut off line which divides the people of the country as poor and non-poor. The people
having income below the poverty line are called poor and people with income above poverty line are
called Non-Poor.
Determination of poverty line:
In India, ‘Monthly Per Capita Expenditure or MPCE’ method is used to determine the poverty line.
According to this method, monetary value of the minimum calorie intake is calculated.
Minimum Calorie Intake: - The Planning Commission has defined poverty line on the basis of
recommended nutritional requirements of 2400 calories per person per day for rural areas and 2100
calories per person per day in urban areas. Higher calories have been fixed for rural areas because
the rural workers have to do greater physical work as compared to the urban workers.
Monetary Value of Minimum Calories Intake:- According to the Planning Commission, the Minimum
Monthly Per Capita Consumption Expenditure (MPCE) in 2011-12 is worked out to be Rs. 816 per
person in rural areas and Rs.1000 in urban areas.
Q.2 Explain the concept of Jail Cost of living of measuring poverty line.
Ans. In the pre-independence India, Dadabhai Naroji was the first person to discuss the concept of Poverty
Line. He used the concept of ‘Jail Cost of Living’ to calculate the poverty line. He used the menu for a
prisoner and used the appropriate prevailing prices to arrive at the cost of consumption of an adult
prisoner.

23
BY: KAMAL KUMAR : 9810500906,7290903559

He termed this consumption cost as ‘Jail Cost of Living’. As only adults live in Jail, he divided the
population into two parts:
He assumed that one-third of total population consists of children. One-half (i.e. ½ of 1/3= 1/6)
consumed half of the adult diet.
Two-third population consisted of adults and they consume full diet.
Weighted Average of consumption of three segments. The average poverty line comes out to be
three-fourth of the adult jail cost of living.
1/6 x Nil Diet + 1/6 x Half Diet + 2/3 x Full Diet = 1/6 x 0 + 1/6 x ½ + 2/3 x 1 = ¾
Q.3 What is the criticism of poverty line?
Ans. The method (MPCE) of determination of Poverty Line is criticised due to following reasons:
(i) This method groups all the poor together and does not differentiate between the very poor
and the other poor.
(ii) Though this method it is very difficult to identify the poor, who need help the most.
(iii) This method does not consider social factors that generate and are responsible for poverty,
like illiteracy, ill health, lack of access to resources, discrimination or lack of civil and political
freedoms.
Q.4 Explain the causes of poverty in India?
Ans. The following are the main causes of poverty:
1. Population Explosion: - Rapid growth of population, particularly among the poor, is
responsible for the problem of poverty in the country. It is obvious that when total national
income is thinly spread over a large number of people, the per capita income is bound to be
low.
2. Low level of economic development: - The Indian economy is highly underdeveloped due to
backwardness of agricultural and industrial sectors. Due to lack of infrastructural facilities and
slow pace of development, nearly 25% of population is still living below the poverty line.
3. Poor state of Agriculture: - Agriculture in India has continued to be backward due to use of
primitive method of production and fragmented small land holdings. As a result, labour and
land productivity continue to be low in India. Consequently, most of the farmers live in a state
of poverty.
4. High Illiteracy Rate:-The weaker sections of society have to take up low paid jobs due to lack
of knowledge. The scheduled castes and scheduled tribes are not able to participate in the
emerging employment opportunities in different sectors of the urban and rural economy as
they do not have the necessary knowledge and skills to do so.
5. High Level of Unemployment: - The urban poor in India are largely the overflow of the rural
poor who migrate to urban areas in search of employment and livelihood. Industrialisation has
not been able to absorb all these people. Most of the urban poor are either unemployed or
temporarily employed as casual labours. Such casual labourers are most vulnerable in
society. So, poverty is closely related to nature of unemployment.
6. Inflation: - The steep and continuous rise in prices, particularly of essential commodities like
food grains, has added to the miseries of the poor. Sharp rise in prices and negligible change
in monetary income has decreased the purchasing power of low-income earners and resulted
in lower standard of living.
Q.5 What are the measures to remove poverty?
Ans. a) GDP Growth: - GDP Growth is an ultimate solution to the problem of poverty, when the pace
of GDP growth is accelerated; new opportunities of employment are generated. More and
more workers will find employment in farms and factories. Greater the employment, more
inclusive would be the growth process, implying lesser poverty.
b) Fiscal Measures: - Fiscal Measures refers to the policy of taxation and subsidies. It implies a
higher tax on the rich while the poor are exempted. Tax receipts of the government should be
utilised by giving subsidies to the poor section of the society.
c. Legislative Measures: - Legislative Measures refers to Minimum Wages act, making it mandatory
for the employers to offer the stipulated minimum wage to the employees.
d. Population Control: - Indian experience shows that increase in national income fails to be
reflected in quality of life of the people. Owing to a rapid rise in population. Per capita income
continues to be low, because population is rising to neutralize the rise in national income. It is
clear that poverty can be removed only if growth rate of population is moderated so that increase
in GDP is translated into increase in per capita GDP.

24
BY: KAMAL KUMAR : 9810500906,7290903559

e. Development of Agriculture: - To remove poverty, special efforts should be made to develop

agriculture. It is recommended that agriculture should be mechanised and modernised. Better
seeds, means of irrigation, chemical fertilizers should be used. Small farmers should be given
financial help. These measures are expected to reduce poverty at the grass-root level.
f. Stability in the Price Level: - Price stability is an essential pre-requisite of poverty alleviation. If
prices continue to rise, the standard of living of poor will continue to deteriorate. Price can be
controlled by increasing the production of essential goods. Supply of goods should be more
than their demand.
g. Eradication of Unemployment: - Special measures should be taken to eradicate
unemployment and underemployment. The opportunities of employment in rural areas must
be fully explored. Cottage industries and construction activities should be encouraged in rural
areas.
h. Labour Intensive Technique: - Labour intensive technique of production is better for India. Its
adoption is better for increasing the level of employment and for reducing the level of poverty.
i. Provision for Minimum Needs of the Poor: - Government should take appropriate measures to
meet minimum needs of the poor, such as supply of drinking water, provision of primary
health centers, primary education, etc.
j. Effective Public Distribution System (PDS):- An effective Public Distribution System must be
there for the supply of food grains and other essentials of life to the BPL population of the
country. Food grains and other essential items should be provided at subsidised rates through
Fair Price Shops under direct control and supervision of the government.
Q.6 What measures have been taken by the government of India to remove poverty?
Ans. Following are some of the measures adopted by the government under Five Year Plans to Remove
Poverty:
1. Swarna Jayanti Gram Swarozgar Yojna (SGSY):- To remove poverty from the rural areas,
‘Swarna Jayanti Gram Swarozgar Yojna’ was launched in the villages, in April 1999.
People, who wish to benefit from this scheme, are encouraged to form self- help groups (SHG).
Initially they are encouraged to save some money and lend among themselves as small loans.
Later through banks, the government provides partial financial assistance to SHG’s which then
decide, whom the loan is to be given for the self-employment activities.
2. Swarn Jayanti Shahri Rozgar Yojna (SJSRY):- SJSRY mainly aims at creating employment
opportunities for both self-employment and wage employment in urban areas.
This programme seeks to provide gainful employment through encouraging the setting up of self-
employment ventures or provision of wage employment. It is a centrally sponsored scheme, which
is funded on 75:25 bases between the center and the states
3 Minimum Needs Programmes: - To raise the standard of the living of the poor, minimum needs
programme was launched during the Fifth Plan. The programme covers primary education, adult
education, rural health, rural water supply, rural roads, rural housing, rural electrification and
ecological improvement of the urban slums. This is expected to improve the quality of life of
poorer sections of the society.
4 Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA):- Under the act all
those who are willing to take unskilled work at the minimum wage are offered employment for a
minimum period of 100 days. Those seeking employment are to report in those areas where this
programme is being launched. This programme is becoming extremely popular in the rural areas.
Note: - It was launched in 2005.
5 National Food for Work Programme (NFFWP):- This programme was launched in 2004 with the
objective of intensifying the generation of supplementary wage employment. NFFWP was initially
implemented in 150 most backward districts of the country to provide additional resources apart
from the resources available under SGRY.
The programme was implemented as a 100% centrally sponsored scheme.
This programme was incorporated in Mahatma Gandhi National Rural Employment Guarantee
Act in 2005.
Q.7 Write your observation on the poverty alleviation programme. OR
Write criticisms of poverty alleviation programmes.
Ans. There have been some noticeable changes through the poverty alleviation programmes.
1. Percentage of population below poverty line has declined from 46% in 1973-74 to 9% in 2011-12

25
BY: KAMAL KUMAR : 9810500906,7290903559

2. Wage rate has tended to rise overtime. Yet PAPs (poverty alleviation programmes) have failed to
deliver the desired results. Causes are as under:
a) Lack of Resources:-As compared to the magnitude of poverty the amount of resources
allocated for these programmes are not sufficient.
b) Unequal Distribution of assets: - Due to unequal distribution of land and other assets, the
benefits from poverty alleviation has been appropriated by the non-poor.
c) Improper implementation: - These programmes depend mainly on government and bank
officials for their implementation. However, corruption, lack of training, pressure from local
leaders and non-participation of local level institutions, resulted in improper implementation of
programmes.
d) Large-scale leakage: - Power groups in the villages started exercising control over delivery
mechanism of the poverty alleviation programmes. As a result, there was a large-scale
leakage in the delivery package and the poor received only a small help.
e) PAPs were not linked with the overall developments: - The strategy of PAPs was no linked
with the overall development strategy and did nothing to modify the overall functioning of the
economy which is the root cause of poverty. Also, it did not consider the fact that the poor
would not be able to take advantage of the PAPs owing to their lack of awareness and
initiative

OBJECTIVE TYPE QUESTIONS

Q.1 Major aim of independent India is:

a) Providing minimum basic needs to the people b) Reduction of poverty
c) Both (a) and (b) d) Neither (a) and (b)
Q.2 The pattern of development that the successive five year plans envisaged laid emphasis on the:
a) Upliftment of the poorest of the poor b) Integrating the poor into the mainstream.
c) Achieving a minimum standard of living for all d) All of the above
Q.3 Push-cart venders, street cobblers, women who string flowers, rag-pickers, vendors and beggars are
some examples of poor and vulnerable groups in _______________ areas. (rural/urban)
Q.4 In- pre independence India,_____________ was the first person to discuss the concept of poverty
line.
Q.5 The weighted average of consumption of the three segments of population gives the average poverty
line, which according to Dadabhai Naroji, comes out to be __________of the adult cost of living.
Q.6 People who are always poor and those who are poor usually poor but who may sometimes have a
little more money (example: casual workers) are grouped together as the ______________.
(a) Chronic poor (b) Churning poor (c) Occasionally poor (d) Transient poor
Q.7 Small farmers and seasonal workers are categorised as:
(a) Chronic poor (b) Churning poor (c) Occasionally poor (d) Both (b) and (c).
Q.8 There are many factors other than income and assets, which are associated with poverty. They need
to be considered to develop Poverty Line, for instance, __________________.
Q.9 Which of the following is a poverty estimation tool?
(a) Sen Index (b) Poverty Gap Index (c) Squared Poverty Gap (d) All of These
Q.10 Give reasons why most people of schedule casts and schedule tribes are not able to participate in the
emerging employment opportunities in different sectors of the urban and rural economy.
Q.11 Casual labours are among the most vulnerable in society. True/ False
Q.12 The government approach to poverty alleviation has three dimensions. True/ False
Q.13 From the third five year plan (1961-66) while looking for alternatives to specifically address the poor,
policy makers started thinking the incomes and employment for the poor could be realised through
__________ and _____________.( Fill up the blank with correct answer)
Q.14 Most Poverty alleviated programmes implemented are based on the perspective of The Five Year
Plans. Expanding ______ and ____ are being considered as the major ways of addressing poverty.
Q.15 Since the 1990s those who wish to benefit from the self-employment programmes are encouraged to
form ______________.
Q.16 In 2013-14, nearly _____________ household get employment opportunities under Mahatma Gandhi
National Rural Employment Guarantee Act.
(a) One Crore (b) Two Crore (c) Five Crore (d) Seven Crore

26
BY: KAMAL KUMAR : 9810500906,7290903559

Q.17 Despite various strategies to alleviate poverty, __________ continue to be as common feature in
many parts of India.
Q.18 Without the_________, successful implementation of poverty alleviation programmes is not possible.
Q.19 The fruits of development have not reached all sections of the population in India. True/ False

Lesson - 5
HUMAN CAPITAL FORMATION

NCERT QUESTIONS

Q.1 What are the major sources of human capital formation in a country?
Ans. Following are the major sources of human capital formation:
1. Expenditure of Education: - Expenditure on education is the most effective way of raising a
productive workforce in the country. Labour skill of an educated person is more than that of an
uneducated person, which enables him to generate more income than the uneducated person.
Individuals invest in education to increase their future income and raise the living standard.
2. Expenditure on Health: - ‘A sound mind in a sound body’ is an old saying. Expenditure on health
makes a man more efficient and therefore more productive. His contribution to the production
process tends to rise. He adds more to GDP of the nation than a sick person.
3. On the Job Training: - On the Job Training helps workers to sharpen their specialised skills. It
enables them to raise the level of their efficiency. Firms are always inclined to undertake on the
job training programmes because returns are more than the cost of such programmes.
4. Expenditure on migration: - People migrate from one place to another in search of jobs that fetch
them higher salaries. Unemployed people migrate from rural areas to the urban areas in search of
jobs. Technically qualified persons (like engineers, doctors, etc.) migrate to other countries
because of higher salaries that they may get in such countries.
Migration in both these cases involves two kinds of cost:
a) Cost of transportation from one place to another, and
b) Higher cost of living in the migrated places.
Yet, people migrate in search of better jobs because gains of migration are greater than the
cost of migration.
5. Expenditure on Information: - Information relating to jobs markets and educational
institutions affecting specialised skill formation. It enables people to get their productive potential.
Q.2 What are the indicators of educational achievements in a country?
Ans. The indicators of educational achievements in a country are (i) Adult Literacy Rate, (ii) Youth Literacy
Rate, (iii) Primary Completion Rate.
Q.3 Why do we observe regional differences in educational attainment in India?
Ans. Regional differences in educational attainment in India are due to:
(a) Inequality of income
(b) Expenditure by the government in education facilities.
Q.4 Bring out the difference between human capital and human development.
Ans.
HUMAN CAPITAL HUMAN DEVELOPMENT
1. Human capital considers education and Human development is based on the idea that
health as a means to increase labour education and health are integral to human well-
productivity. being since only when people have the ability to
read and apply their knowledge to derive
maximum benefit they will be able to lead a long
and healthy life.
2. Human capital is a means. Human development is an end
3. Human capital is a narrow concept Human development is a broader concept which
which treats human beings as means to considers human beings as ends in themselves.
achieve an end which is higher Human welfare can be achieved through
productivity, failing which the investment investments in education and health. It
is not considered to be productive. considers welfare-a right of every individual
irrespective of their contribution to labour
productivity. Every individual has right to be
literate and lead a healthy life.
27
BY: KAMAL KUMAR : 9810500906,7290903559

Q.5 How is human development a broader concept than human capital?

Ans. Human capital is a narrow concept which treats human beings as a means to achieve an end which is
higher productivity, failing which the investment is not considered to be productive.
Human development is a broader concept which considers human beings an ends in itself. Human
welfare can be achieved through investment in education and health. It considers welfare a right of
every individual irrespective of their contribution to labour productivity. Every individual has right to be
literate and lead a healthy life.
Q.6 What factors contribute to human capital formation?
Ans. Sources of human capital formation:
(a) Expenditure on Education
(b) On the Job Training
(c) Expenditure on Health
(d) Migration
(e) Expenditure on Information
Q.7 Mention two government organisations each that regulate the health and education sectors.
Ans. Regulatory Authority in Health: - (i) Ministries of Health at the union and state level. (ii) Indian Council
for Medical Research (ICMR).
Regulatory Authority for Education: - (i) Ministries in Education at the union and state level, (ii)
National Council of Educational Research and Training (NCERT).
Q.8 Education is considered as an important input for the development of a nation. How?
Ans. The important role of human capital formation will be clear from the following points:
1. Effective use of Physical Capital: - Human capital increases productivity of physical capital
(referring to output per unit of capital). Specialised engineers and skilled workers can easily
handle machines better than the others. It enhances productivity and accelerates the pace of
growth.
2. Innovative Skills: - Human Capital formation facilitates innovations, under current of growth and
development. Larger the number of skilled and trained personals, greater the possibilities of
innovations in the area of production and related activities. Innovation is the life- line of growth.
3. Higher Rate of Participation and Equity: - By enhancing productive capacities of the labour farce,
human capital formation induces greater employment.
This increases the rate of participation. Higher rate of participation, greater the degree of
economic and social equality in the society.
4. Modernisation of attitudes: - The knowledgeable, skilled and physically fit people are powerful
instruments of change in the society. Investment in human capital helps in changing outlook and
promotes development of the country.
5. Increase life expectancy: - Formation of human capital raises life expectancy of the people.
Health facilities and availability of nutritive food enable people to live a healthy and long life. This
in turn, adds to quality of life.
6. Improves Quality of Life: - The quality of population depends upon the level of education, health of
a person and skill formation acquired by the people. Human capital formation not only makes
people productive and creative, but also transforms the lives of the people. People start living and
enjoying higher income and more satisfying life.
7. Control of Population growth: - It has been observed that educated persons have smaller families
as compared to illiterate families. So, spread of education is necessary to control the population
growth rate.
Q.9 Discuss the following as a source of human capital formation:
(a) Health Infrastructure (b) Expenditure on Migration
Ans. Health Infrastructure:-Health is an important source of human capital formation. Preventive medicine
(Vaccination), curative medicines, social medicine (spread of health literacy) and provision of clean
drinking water and good sanitation are the various forms of health expenditure. Health expenditure
directly increases the supply of healthy labour force and is thus, a healthy labour force is a source of
human capital formation.
Expenditure on Migration: - (See question no. point-4).

Q.10 Establish the need for acquiring information relating to health and education expenditure for
the effective utilisation of human resources.

28
BY: KAMAL KUMAR : 9810500906,7290903559

Ans. People need information regarding the cost and benefit of investment in health and education. When
people know the benefits of their investment in these two areas, they make more expenditure. The
result is more human capital formation.
Q.11 How does investment in human capital contribute to growth?
Ans. Role of human capital formation in economic growth:
(a) Raises Production
(b) Raises Efficiency and Productivity
(c) Brings Positive Changes in Outlook
(d) Improves Quality of Life
(e) Raises Life Expectancy
(f) Raises Social Justice
Q.12 ‘There is a downward trend in inequality world-wide with a rise in the average education
levels’. Comment.
Ans. The given statement is correct. Labour skill of an educated person is more than that of an uneducated
person, which enables him to generate more income than the uneducated person. The higher income
earning capacity and greater acceptability of modern techniques raise the standard of quality of living.
As a result, the gap between the rich and the poor is narrowing slowly. So, rise in average education
levels reduces the inequality of income worldwide.
Q.13 Trace the relationship between human capital and economic growth.
Ans. Human capital formation raises the process of economic growth and economic growth raises the
process of human capital formation. There is a cause and effect relationship between human capital
and economic growth. It means both depend on each other. It is shown in the figure:
Rise in Human Capital Rise in Economic Growth

= Modern attitude and outlook, = Rise in per capita income

better quality of life, higher life
expectancy = More investment in education
and health
= More efficiency
= Rise in human capital
= More production

= More economic growth

Q.14 Discuss the need for promoting women’s education in India.

Ans. Women Education Council has been set up to provide technical education to the women. It has set up
many women polytechnics. It is essential to promote women’s education in India:
(a) To improve women’s economic independence and their social status.
(b) To make a favourable impact on fertility rate and health care of women and children.
Q.15 Argue in favour of the need for different forms of government intervention in education and
health sectors.
Ans. The expenditure on education and health assume great importance on the formation of human capital.
To ensure favourable benefits of such expenditure, government intervention is important because of
following reasons:
(i) The expenditure on education and health make substantial long-term impact and they cannot
be easily reversed. For example, if a child is admitted to a school or health care centre and
required services are not provided in such institutes, then substantial amount of damage
would have been done before the decision is taken to shift the child to another institution.
(ii) Individual consumers of these services do not have complete information about the quality of
services and their costs.
(iii) The providers of education and health services may acquire monopoly power and may get
involved in exploitation.
(iv) Expenditure on education and health institutes are important for the growth of a nation. The
private providers of education and health need to be regulated by the government.
(v) So, the role of government is important to ensure the private providers of these services
adhere to the standards stipulated by the government and charge the correct price.

29
BY: KAMAL KUMAR : 9810500906,7290903559

Q.16 What are the main problems of human capital formation in India?
Ans. Main problems of human capital formation in India are:
(i) Rising Population: - Rapidly rising population adversely affects the quality of human capital
formation in developing countries. It reduces per capita availability of existing facilities. A large
population requires huge investment in education and health. This diverts the scarce money
to production of human capital at the cost of physical capital.
(ii) Long Term Process: - The process of human development is a long term policy because skill
formation takes time. The process which produces skilled manpower is thus slow.
(iii) High Regional and Gender Inequality: - Regional and gender inequality lowers the human
development levels.
(iv) Brain drain: - Migration of highly skilled labour, termed as Brain Drain, adversely affects the
economic development.
(v) Insufficient on the Job Training in Agriculture: - Agriculture sector is neglected where the
workers are not given on the job training to absorb emerging new technologies.
(vi) High Poverty Levels: - A large proportion of the population lives below poverty line and do not
have access to basic health and educational facilities. A large section of society cannot afford
to get higher education or expensive medical treatment for major diseases.

EXTRA QUESTIONS

Q.1 Cause and effect relation between human capital and economic growth can be easily proved.
Comment.
Ans. The given statement is incorrect. It is difficult to establish a relation of cause and effect from growth of
human capital (education and health) to economic growth. Both depend on each other but is difficult
to prove. In fact this relation is not direct; it is an indirect relation like this:
Rise in human capital Modern attitude and outlook, better quality of life, higher life expectancy
more efficiency more production more economic growth
Rise in economic growth Rise in per capita income More investment in education and health
Rise in human capital
Q.2 ‘Human Capital benefits only the owner (Private individual) and not the society’. Defend or
refute.
Ans. The given statement is refuted. Human Capital benefits not only the owner but also the society in
general. For example a teacher not only earns for himself but also he provides education to others.
Similarly, a healthy person prevents spreading of contagious diseases and epidemics by maintaining
personal hygiene and sanitation.
Q.3 A skilled person like software professional generates more income than an unskilled worker.
Why?
Ans. A skilled worker generates more income than an unskilled worker mainly because the productivity of
an educated and skilled person is higher than an unskilled one. A skilled worker also commands
higher earnings and gainful employment. This is because he cannot be substituted easily because it
takes years to generate a manpower which is skilled in a particular field. On the other hand, an
unskilled worker like a rickshaw puller can be easily substituted and such workers easily compromise
on lesser earnings.
Q.4 Bring out the difference between literacy and education.
Ans. Education is much wider concept than literacy. Literacy refers to the ability to read and write.
Education includes three parameters, viz primary education, secondary education and higher
education.
Q.5 Why was educational cess imposed by the government on all union taxes?
Ans. The government of India levied a 2% cess on all union taxes so that the revenue generated by the
government from this provision can be spent on financing elementary education.
Q.6 Literacy rate in India has increased but so has the absolute number of illiterates. Why?
Ans. Literacy rate in India has increased mainly because of the growth in the educational facilities.
However, with tremendous increase in the population, the absolute number of illiterates has also
increased.

Q.7 What are the indicators of educational achievements in a country?

Ans. The indicators of educational achievements in a country are:

30
BY: KAMAL KUMAR : 9810500906,7290903559

(i) Adult literacy rate (ii) Primary education completion rate, (iii) Youth literacy rate
Q.8 The per capita education expenditure is only Rs.3,600 in Bihar. What does this convey about
the state of education in Bihar?
Ans. Such low per capita education expenditure conveys that the Bihar government is not dedicated to the
cause of education in their state. Due to this literacy levels are low in Bihar.
Q.9 Explain the concept of vocationalisation of education.
Ans. To relate education with work, the government now lays stress to provide vocational education at ‘plus
-2’ level, specially to children in rural areas and to girl child. Practical knowledge of a specific work is
given to children, so that they possess necessary skills needed and are able to find employment.
Q.10 Write a brief note on National Literacy Mission.
Ans. In 1988, National Literacy Mission (NLM) was initiated to promote adult education. A women
education council was also established to promote women education in our country.
The NLM has been recast as ‘Saaksher Bharat’ with a central focus on female education. The
programme covers all citizens in the age group of 15 years and above.
Q.11 What in your opinion should be the principal objectives of education in India? OR
Education is an important ingredient of growth. Comment.
Ans. Following points highlight the importance and objectives of education:
(i) Education produces responsible citizens.
(ii) It develops science and technology.
(iii) It facilitates use of national and human resources of all regions of the country.
(iv) It expands mental horizons of the people.
(v) It helps economic development through greater participation of the people in the process of
growth and development.
(vi) It promotes cultural standard of the citizens.
(vii) It develops human personality.
Q.12 Human Capital formation increases the efficiency of physical capital. How?
Ans. This happens in the ways as under:
(i) Human capital formation leads to higher level of skills and expertise. Accordingly, labour force
is better equipped to handle plant and machinery. This raises the efficiency of physical capital
by way of higher output per unit of input (of physical capital).
(ii) Human capital formation leads to innovations. Implying new ways of doing things, or doing
things better than before. Accordingly, efficiency and productivity rises.

OBJECTIVE TYPE QUESTIONS

Q.1 The labour skill of an educated person is more than that of an uneducated person and hence the
former is able to generate more income than the latter and his contribution to ___________ is
consequently more.
Q.2 Economists have stressed the need for expanding educational opportunities in a nation. Give reason.
Q.3 Just as a country can turn physical resources like land into physical capital like factories; similarly, it
can also turn human resources like students into __________ like engineers and doctors.
Q4 We need investment into human capital. Give reason.
Q.5 Investment in education converts human beings into_____________.
Q.6 Investment in education, health, on the job training, __________ and __________are the sources of
human capital formation.
Q.7 Individuals invest in education with the objective of:
(a) increasing their future income (b) accelerating the development process.
(c) facilitating adoption of new technologies. (d) All of the above.
Q.8 Match the following:
(a) Medical intervention during illness. (i) Social medicine
(b) Spread of health literacy. (ii) Curative medicine
Q.9 Firms will insists that the workers should work for a specific period of time, after their on the job
training. Give reasons.
Q.10 ____________ is the reason for rural –urban migration in India.
Q.11 Technically qualified persons, like engineers and doctors, migrate to other countries because _____.
Q.12 Expenditure on migration is a source of human capital formation. Give reason.

31
BY: KAMAL KUMAR : 9810500906,7290903559

Q.13 Physical capital is ____________ and can be easily sold in the market. Human capital is ________; it
is not sold in the market, only the services of the human capital are sold. (Tangible/intangible)
Q.14 Both __________and_________, along with many other factors like on the job training, job market
information and migration, increase an individual’s income generating capacity.
Q.15 The cause and effect relation between human capital and economic growth flows in either directions.
Give reasons.
Q.16 The enhanced productivity of human beings or human capital:
(a) Contributes substantially towards increasing labour productivity.
(b) Stimulates innovations.
(c) Creates ability to absorb new technologies.
(d) All of the above
Q.17 Two independent reports on the Indian economy, in recent times, have identified that India would
grow faster due to its strength in __________________.
Q.18 Human capital considers ___________ as a means to increase labour productivity.
Q.19 ______ is the outcome of investment in education, health, on the job training, migration and
information.
Q.20 Government intervention is essential in the education and health service markets in India
because______.
Q.21 During 1952- 2014, education expenditure as percentage of total government expenditure increased
from 7.92 to________ and as percentage of GDP increased from 0.64 to__________. (Fill up the
blanks)
Q.22 Financial resources should be transferred from tertiary education expenditure to elementary
education. True/Falls
Give reasons.
Q.23 In 2009 the government of India enacted ________ to make free education a fundamental right of all
children in the age group of 6-14 years.
Q.24 Nearly ______ of the young rural female graduates are unemployed in 2011-12 as per NSSO data.
Q.25 In which year the government of India enacted the ‘Right to Education Act’. (RTE):
(a) 2007 (b) 2008 (c) 2009 (d) 2010
Q.26 Which of the following is a major source of Human Capital Formation in a country?
(a) Expenditure on defense (b) Expenditure on subsidy ( C) Expenditure on education (d)
Expenditure on fertilizers
Q.27 The government of India is leaving a ______ percent Education Cess on all the union taxes for
spending on elementary education.
(a) 2 percent (b) 5 percent (c) 10 percent (d) 12 percent

32