CBSE Class 12th Indian Economy Most Important Questions
Q1) Why Despite abolition of Zamindari system, poverty continues to be Pervasive in Indian agriculture?
Ans) Despite abolition of Zamindari system, poverty continues to be Pervasive in Indian agriculture due to two reasons:
(a) The bulk of the Indian farmers are small and marginal holders. Small and marginal holdings are not conducive to the adoption of innovative techniques of farming,
(b) delivery mechanism related to financial help by the state is grossly inefficient and ineffective.
Q2) What objectives did the British intend to achieve through their policies of infrastructure development in India?
Ans) The main objective behind the development of infrastructure in India by the British was to subserve their colonial interest.
(i) Roads were constructed to mobilize the army within India and for carrying out raw material from the countryside to the nearest railway station or port and to send it to England or other countries.
(ii) Railways
(iii) The post and telegraph were developed to serve the purpose of maintaining law and order.
| Positive | Negative |
| It broke geographical and cultural barriers thus promoted National Unity. | With the introduction of railways, the control and administration over the vast Indian territory by Britishers became more effective because it connected important administrative and Military centers through railway lines. |
| A check on famines. | Railways led to the expansion of the market for British products in India. |
| Railways facilitated the movement of raw material from their source of supply to the ports for further transportation to England. |
Q3) “The colonial Era was responsible for the decline of traditional handicraft industries”. Defend or refute the above statement?
Ans) Defend, The destruction of the Indian handicraft was systematically planned by the British government to coincide with the industrial revolution in Great Britain. The success of the industrial revolution depended on
i) growth of Indian market for the British products:- As British machine-made products were sold at cheaper rates which give competition to Indian handicraft.
ii) Export of raw material from India to Britain
For the attainment of this objective, the colonial government adopted a “Discriminatory tariff policy” where heavy taxes were imposed on the exports of Indian handicrafts and allowed free export of raw materials from India which result in a flood of British goods to the Indian market and a decline of Indian handicraft.
Q4) Was there any economic drain during the colonial period? T/F?
Ans) During the colonial period there was an economic drain i.e., the drain of Indian wealth by way of the following facts:
a) During the British regime Indian exports succeeded in imports that gave surplus trade but this surplus was used by the British for the following purposes.
i) Administrative expenses of the British government in India.
ii) Expenses of wars fought by the British government.
b) Commercialization of agriculture promoted the cultivation of cash crops like Indigo etc. at the cost of food crops. This was the vested move of the Britishers to benefit largely by using the cash crops in their Industries’ as raw materials in Britain.
c) Competition from machine-made goods from the British led to the decline of world-famous Indian handicraft. this brought above massive unemployment, poverty, and misery in the country.
Q5) Subsidies provide an incentive for the wasteful use of resources. Do you accept or reject? Justify your answer.
Ans) Yes, Subsidies provide an incentive for wasteful use of resources if they are provided free or at a subsidized rate then they will be used wastefully that is without any concern for the scarcity of such as water/electricity. Fertilizer and pesticide subsidies lead to overuse of resources like land. This, in turn, can be harmful to the environment. So in this way provision of subsidies may cause more harm than benefit if not properly used.
Q6) Why is PC Mahalanobis known as the architect of Indian planning?
Ans) The second five-year plan a landmark contribution to development planning in general laid down the basic ideas regarding goals of Indian planning. This plan was based on the ideas of PC Mahalanobis regarded as the architect of Indian planning.
Q7) Does modernization as a planning objective create a contradiction in the light of employment generation? Explain.
Ans) No, modernization as a planning objective does not create a contradiction in the light of the employment generation.
Note the following observation in this regard.
(i) In fact modernization, today is a wide term that refers to the use of new technology along with the rapid changes in the social outlook such as the recognition of the fact that women should be treated as equal having the same rights as men.
(ii) Modernization implies increase in productivity, implying lesser requirements of labor per unit of output.
(iii) With the increase in the productivity, level of production activity and the level of income tend to rise. Rising income implies a rising demand for goods and services.
Q8) Distinguish between import substitution and export promotion?
Ans) Import substitution/Inward-looking trading strategy:- This strategy refers to the policy of replacing or substituting imported goods with domestically produced goods and services. This strategy saves foreign exchange by restricting the volume of imports so that only capital goods and infrastructural facilities can be imported for the development of the home country.
By adopting an inward-looking trade strategy the government aims at economizing the use of Forex rather than maximize the generation of Forex.
It also protects the domestic industry from international competition.
- Export Promotion/ outward-looking strategy:- This strategy emphasizes participation in international trade by promoting domestic exports and making the domestic industry competitive in the international market. Under this strategy such as being given, firms get the encouragement to export in a variety of ways such as billing given increased access to credit often at a subsidized rate.
Q9) The current account BOP deficit of leads to borrowing from ROW. T/F?
Ans) True, the current account BOP deficit leads to borrowing because of the following reasons:-
There are two principal sources of funding the current account BoP deficit.
i) Borrowing from the rest of the world.
ii) foreign investment in the domestic economy including (a) FDI and (b) FII
Of these two sources, foreign investment is volatile (uncertain) therefore the government relies on borrowing from RoW.
Q10) Mention the condition put forth on India by the IMF while giving a $7 billion loan in 1991
Ans) A $7 billion loan to India was given for the restructuring of the economy on the following conditions:
a) Devaluation of the rupee by 22% in two phases
b) Drastic custom cut to a peak duty of 30 % from a high level of 130 % for all goods.
c) Excise duty to be increased by 20% to compensate for the loss of revenue due to custom cut.
d) Government expenditure to be cut by 10% per annum.
Q11) How does reply liberalization of the economy lead to economic growth?
Ans) Liberalization included a set of economic reforms offering freedom to the private enterprises from government controls. It focuses on
i) Delicensing of the industrial establishment.
ii) Simplification of trade and tariff policies.
iii) Fiscal consolidation/discipline.
iv) Freedom to the banking sector to decide their interest rate structure.