Indian Economy Solved Question Paper 2021 PDF GU -[Gauhati University B.Com 4th Sem(Hons.)]

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Indian Economy Question Paper 2021 (Held in 2022)

Full Marks: 80

Time: Three hours

The figures in the margin indicate full marks for the questions.

Paper: COM-HG-4016  (Indian Economy)

GROUP – A

1. Answer the following questions:      1×6=6

(a)       Define absolute poverty.

Ans:- Absolute poverty is a condition characterized by a severe lack of essential resources, such as food, shelter, and basic healthcare, that is considered necessary to meet minimum living standards.

(b)       In which year NEDFI was formed?

Ans:- NEDFI, which stands for North Eastern Development Finance Corporation Ltd., was formed in the year 1995.

(c)       Mention the name of the state of India which has the highest poverty rate.

Ans:-  The state of India with the highest poverty rate was Bihar.

(d)       Where is the headquarter of WTO located?

Ans:- The headquarters of the World Trade Organization (WTO) is located in Geneva, Switzerland.

(e)       Write the full form of DoNER.

Ans:- DoNER stands for the Ministry of Development of North Eastern Region.

(f) When and where the green revolution was started for the first time in India?

Ans: The green revolution in India began in the 1966-67, primarily in the state of Punjab, which is located in northern India.

2. Write short answers: (within 30 words)          2×5=10

(a) What is human development?

Ans:- (a) Human development refers to the process of expanding people's capabilities and opportunities, enabling them to lead a long, healthy, and fulfilling life. It encompasses aspects such as access to education, healthcare, income, and overall well-being.

(b)       Mention two measures for removing the problem of poverty in India.

Ans:- Two measures to address poverty in India are:

1. Enhancing employment opportunities: By promoting job creation through economic reforms, skill development programs, and supporting entrepreneurship, the government can provide sustainable livelihoods for the poor.

2. Implementing social welfare programs: Initiatives like direct cash transfers, subsidized food distribution, and housing schemes can help alleviate poverty by providing immediate relief and improving the living conditions of the underprivileged.

(c)  What do you mean by fiscal policy?

Ans:- Fiscal policy refers to the use of government spending, taxation, and borrowing to influence the economy. It involves the decisions and actions taken by the government to regulate the overall levels of spending, taxation, and public debt in order to achieve desired economic outcomes such as price stability, economic growth, and employment generation.

(d) Write two important functions of North Eastern Council (NEC).

Ans:- Two important functions of the North Eastern Council (NEC) are:

1. Regional development planning: The NEC plays a crucial role in formulating and implementing development plans and programs for the northeastern states of India. It focuses on addressing the specific needs and challenges of the region, fostering balanced and sustainable growth.

2. Coordination and cooperation: The NEC acts as a platform for coordinating and fostering cooperation among the northeastern states, central government agencies, and other stakeholders. It facilitates collaboration in various areas such as infrastructure development, resource utilization, and capacity building.

(e) Write two objectives of monetary policy of India.

Ans:- Two objectives of the monetary policy of India are:

1. Price stability: Maintaining low and stable inflation is a key objective of monetary policy. The central bank aims to control inflation within a target range to ensure stable prices, which is essential for sustainable economic growth and the well-being of households and businesses.

2. Economic growth promotion: The monetary policy also aims to support overall economic growth by ensuring adequate availability of credit and liquidity in the financial system. By influencing interest rates and liquidity conditions, the central bank seeks to foster investment, consumption, and overall economic activity.

3. Answer in brief of any four from the following (within 250 words):             6×4=20

(a)       Distinguish between economic growth and economic development.

Ans:- 

Economic Growth	Economic Development
Definition
It refers to the increase in the monetary growth of a nation in a particular period.	It refers to the overall development of the quality of life in a nation, which includes economic growth.
Span of Concept
It is a narrower concept than that of economic development.	It is a broader concept than that of economic growth.
Scope
It is a uni-dimensional approach that deals with the economic growth of a nation.	It is a multi-dimensional approach that looks into the income as well as the quality of life of a nation.
Term
Short-term process	Long-term process
Measurement
Quantitative	Both quantitative and qualitative
Applicable to
Developed economies	Developing economies
Government Support
It is an automatic process that may or may not require intervention from the government	It requires intervention from the government as all the developmental policies are formed by the government
Kind of changes expected
Quantitative changes	Quantitative as well as qualitative changes
Examples
GDP, GNP	HDI, per capita Income, industrial development

(b)       Explain briefly the role of service sector towards India’s economic development.

Ans:- The service sector plays a significant role in India's economic development. It has emerged as a major contributor to the country's GDP and employment. Here are a few key points highlighting the role of the service sector in India's economic development:

1. Employment generation: The service sector has been a significant source of employment opportunities in India. It encompasses a wide range of industries such as information technology, telecommunications, banking, finance, hospitality, healthcare, and education. The sector has absorbed a large number of the country's workforce, contributing to job creation and reducing unemployment.

2. GDP growth: The service sector has been a major driver of India's economic growth. It has experienced rapid expansion and contributed significantly to the country's GDP. This growth has been fueled by domestic demand as well as outsourcing of services from other countries, particularly in the IT and business process outsourcing (BPO) industries.

3. Foreign exchange earnings: The service sector, particularly IT and BPO services, has played a crucial role in earning foreign exchange for India. The country has become a global hub for outsourcing services, attracting clients from around the world. The export of services has helped in boosting India's foreign exchange reserves and strengthening its balance of payments.

4. Skill development: The service sector has contributed to the development of skilled human resources in India. It has created opportunities for individuals to acquire specialized knowledge and skills, particularly in sectors like IT and telecommunications. This has led to the development of a skilled workforce, which is essential for sustained economic growth and competitiveness.

5. Economic diversification: The growth of the service sector has contributed to the diversification of India's economy. It has reduced dependence on traditional sectors like agriculture and manufacturing and created new avenues for economic activity. The sector's dynamism and innovation have fostered entrepreneurship and encouraged the growth of small and medium enterprises.

(c)       What are the negative impacts of globalization on Indian economy?

Ans:- Globalization has had both positive and negative impacts on the Indian economy. While it has brought several benefits, such as increased foreign investment, technology transfer, and market access, there are also negative aspects to consider. Some of the negative impacts of globalization on the Indian economy include:

1. Job displacement: Globalization has led to the outsourcing of jobs to countries with lower labor costs, resulting in job losses in certain sectors of the Indian economy. Industries such as textiles and manufacturing have been particularly affected, leading to unemployment and underemployment.

2. Unequal distribution of benefits: Globalization has contributed to growing income inequality in India. While some segments of society have benefited from globalization through increased opportunities and higher incomes, others, particularly those in rural areas and low-skilled workers, have been left behind.

3. Vulnerability to global economic shocks: As India becomes more integrated into the global economy, it becomes susceptible to economic fluctuations in other countries. Financial crises, recessions, or trade wars in other parts of the world can have negative spillover effects on the Indian economy, causing disruptions in trade and investment.

4. Threats to domestic industries: The opening up of the Indian market to foreign competition has posed challenges to domestic industries, particularly small and medium-sized enterprises (SMEs). They often struggle to compete with multinational corporations that have greater resources and economies of scale, leading to a decline in certain domestic industries.

5. Environmental degradation: Globalization has also contributed to environmental challenges in India. The increased industrial activity, resource consumption, and pollution associated with globalization have put pressure on natural resources, leading to deforestation, pollution, and climate change.

(d)   Explain the positive effects of new economic reforms (1991) of India on its economy.

Ans:- The economic reforms implemented by India in 1991 had several positive effects on its economy:

1. Liberalization of Trade and Foreign Investment: The reforms allowed for greater foreign direct investment (FDI) and reduced trade barriers. This led to increased inflows of capital and technology, fostering economic growth and creating employment opportunities.

2. Industrial and Financial Sector Development: The reforms encouraged the growth of the industrial and financial sectors. They introduced competition, deregulated industries, and removed restrictions on private enterprises. This stimulated entrepreneurship, innovation, and efficiency, resulting in increased productivity and economic expansion.

3. Fiscal Discipline and Budgetary Reforms: The reforms aimed to address fiscal imbalances and reduce government deficits. Measures such as reducing subsidies, controlling public expenditure, and implementing fiscal responsibility laws improved fiscal discipline. This stabilized the economy, reduced inflation, and attracted domestic and foreign investments.

4. Banking and Financial Sector Reforms: The reforms focused on strengthening the banking and financial sectors. They promoted financial liberalization, deregulation, and modernization of the banking system. This enhanced access to credit, improved the efficiency of financial intermediation, and facilitated capital allocation for productive investments.

5. Technological Advancement and Innovation: Liberalization facilitated the transfer of technology and knowledge through foreign collaborations and investments. This fostered technological advancement, innovation, and improved productivity across various sectors. It also helped India become a global player in information technology and software services.

6. Increased Export Orientation: The reforms emphasized export promotion and opened up new avenues for Indian businesses to access global markets. Export-oriented industries flourished, contributing to higher foreign exchange earnings and a favorable balance of payments. This boosted overall economic growth and improved the country's trade competitiveness.

(e)       What are the problems related to deficit balance of payment in India?

Ans:- The deficit balance of payments in India poses several problems:

1. Current account imbalance: A deficit in the balance of payments means that India is importing more goods, services, and capital than it is exporting. This leads to a current account imbalance, which can put pressure on the country's foreign exchange reserves.

2. Currency depreciation: To bridge the deficit, India may need to sell its foreign exchange reserves, which can lead to a depreciation of the domestic currency. This makes imports more expensive and can contribute to inflationary pressures.

3. External debt burden: A deficit balance of payments often requires borrowing from external sources to finance the shortfall. This can lead to an increase in external debt, making the country vulnerable to changes in global interest rates and exchange rate fluctuations.

4. Reduced investor confidence: Persistent balance of payments deficits may raise concerns among foreign investors about the country's economic stability. This can lead to reduced foreign direct investment (FDI) and portfolio investment inflows, impacting economic growth and development.

5. Pressure on government finances: The government may need to use its reserves or borrow more to cover the deficit, putting strain on fiscal resources. This can lead to increased public debt and hamper government expenditure on critical sectors such as healthcare, education, and infrastructure.

(f)        Write a brief note on India’s Public Distribution System (PDS).

Ans:- India's Public Distribution System (PDS) is a government-run initiative aimed at providing essential commodities, such as food grains, to the country's economically disadvantaged population. The PDS was established to ensure food security and reduce poverty by offering subsidized food items through a network of Fair Price Shops (FPS) across the country.

Under the PDS, the central and state governments collaborate to procure food grains from farmers and distribute them at affordable prices to eligible beneficiaries. The system operates through the Targeted Public Distribution System (TPDS) and covers different categories of beneficiaries, including below poverty line (BPL) families and above poverty line (APL) families.

The PDS primarily provides staples like rice, wheat, and sugar, but the range of commodities may vary by state. The government procures food grains from farmers at Minimum Support Prices (MSP) and allocates them to states based on their requirements. The states, in turn, distribute these commodities to FPS, where beneficiaries can purchase them at subsidized rates.

To ensure transparency and prevent leakage, several reforms have been implemented in the PDS, such as computerization of operations, Aadhaar-based identification of beneficiaries, and the use of electronic point-of-sale (ePOS) machines. These measures aim to streamline the distribution process, eliminate intermediaries, and enhance accountability.

Despite its significance, the PDS faces challenges such as issues related to targeting and identification of beneficiaries, leakages and diversion of subsidized food grains, and inadequate storage and transportation infrastructure. The government continues to undertake various measures to improve the efficiency and effectiveness of the system, including technological interventions and policy reforms.

GROUP – B

4. Answer any four from the following: (within 600 words)    10×4=40

(a) Explain the recent changing pattern of India’s foreign trade in terms of its composition and direction.

Ans:- The recent changing pattern of India's foreign trade has seen shifts in both composition and direction. In terms of composition, India has experienced a gradual diversification of its exports and imports. Traditional sectors such as textiles, gems and jewelry, and pharmaceuticals continue to be significant, but there has been a growing emphasis on high-value manufacturing sectors like automotive, engineering goods, and electronics. Additionally, there has been a focus on promoting services exports, particularly in areas like information technology, software development, and business process outsourcing.

Regarding the direction of India's foreign trade, there has been a broadening of trade partners. While the United States and European Union remain important markets, India has actively sought to enhance trade ties with countries in East Asia, Southeast Asia, and Africa. The government has pursued initiatives like the "Act East" policy and the formation of regional trading blocs such as the Regional Comprehensive Economic Partnership (RCEP) to strengthen trade relationships with these regions. These efforts aim to reduce dependence on a few traditional trading partners and tap into the growing markets of emerging economies.

(b)  Discuss the agricultural pricing policy of India.

Ans:- The agricultural pricing policy in India involves a combination of support measures and market-oriented mechanisms. The government implements Minimum Support Prices (MSPs) to provide a safety net for farmers and ensure a minimum income level for their produce. MSPs are announced for various crops and commodities by the government's agricultural agency, the Commission for Agricultural Costs and Prices (CACP), based on factors like input costs, market trends, and farmer profitability.

Apart from MSPs, the government also procures crops directly from farmers through agencies like the Food Corporation of India (FCI). This procurement is primarily focused on essential commodities like wheat and rice and aims to maintain buffer stocks for food security and distribution through the public distribution system.

In recent years, there have been discussions around reforming the agricultural pricing policy to make it more market-oriented and farmer-centric. 

Objectives of Agricultural Price Policy: 

The agricultural price policy of the country like India should have the following objectives: 

(1) To protect or insure the producer through guaranteed minimum support price, which as a stabilisation measure reduces the variability in product prices and therefore price risk of the farmers. The impact of the risk reduction is expected to induce farmers to undertake large investments and to adopt improved production technology. 

(2) To induce the desired outputs of different crops according to growth targets. 

(3) To induce an increase in aggregate agricultural output through large input use and adoption of high yielding seed, fertilizer and water responsive technology. 

(4) To induce farmers to part with a large proportion of foodgrains production as a marketed surplus. 

(5) To protect the consumer against the excessive rise in prices, especially to protect the low income consumers in periods when supplies lag behind demand and market prices rise continuously”.

(c) Write in detail about the relationship between the growth of population and economic development in Indian context.

Ans:- The relationship between population growth and economic development in the Indian context is complex and multifaceted. India is the second most populous country in the world, and its population has been growing rapidly over the years. The impact of this population growth on economic development can be both positive and negative, depending on various factors.

One of the key arguments linking population growth and economic development is the demographic dividend. When a country experiences a significant increase in its working-age population, it can potentially harness this demographic dividend to drive economic growth. With a larger workforce, there is a potential for increased productivity, innovation, and consumption, which can spur economic development. India has been experiencing this demographic dividend in recent years, with a large proportion of its population in the working-age group.

However, for this demographic dividend to materialize into economic development, several conditions need to be met. These include adequate investment in education, healthcare, and skill development to ensure that the growing workforce is equipped with the necessary knowledge and skills. Additionally, there must be sufficient job opportunities and a conducive business environment to absorb the expanding labor force. If these conditions are not met, rapid population growth can strain the economy, leading to unemployment, poverty, and social instability.

Another aspect to consider is the pressure that population growth exerts on resources and infrastructure. India already faces challenges in providing basic amenities such as housing, clean water, healthcare, and sanitation to its growing population. Rapid population growth can further strain these resources and infrastructure, making it difficult to ensure equitable access and quality services for all. Inadequate infrastructure can hamper economic development by impeding transportation, communication, and overall productivity.

Furthermore, population growth can have implications for income distribution and inequality. If economic development fails to keep pace with population growth, income disparities may widen, leading to social and economic inequalities. Unequal distribution of wealth and resources can hinder inclusive growth and socio-economic progress.

(d)  State the prospects of industrialization in the north eastern region. Explain the role played by the Act East Policy in this context.

Ans:- The five prospects of industrialization in the northeastern region are:

1. Natural resources: The region is rich in natural resources such as oil, natural gas, coal, limestone, and various minerals, which can serve as a foundation for industrial development.

2. Strategic location: The northeastern region is geographically well-positioned as a gateway to Southeast Asia, making it advantageous for trade and economic cooperation.

3. Human resources: The region has a young and skilled workforce, which can contribute to the growth of industries and attract investments.

4. Infrastructure development: Infrastructure projects, including roads, railways, airports, and ports, are being developed to improve connectivity within the region and with neighboring countries, fostering industrial growth.

5. Special economic zones (SEZs): The establishment of SEZs promotes export-oriented industries and provides incentives and a favorable business environment for investment and trade.

-The Act East Policy plays important roles in promoting industrialization in the northeastern region:

1. Enhancing connectivity: The policy focuses on improving physical connectivity by developing road, rail, and air links within the region and with Southeast Asian countries. This facilitates the movement of goods, services, and investments, supporting industrial development.

2. Trade and investment promotion: The Act East Policy aims to strengthen economic ties with Southeast Asian countries, promoting bilateral trade and investment. This creates opportunities for the northeastern region to attract foreign investment and expand its markets, fostering industrial growth.

3. Skill development and capacity building: The policy emphasizes skill development initiatives and capacity building programs, enhancing the capabilities of the local workforce. This ensures a skilled labor pool for industries and encourages entrepreneurship in the region.

4. Cultural and people-to-people exchanges: The Act East Policy encourages cultural and people-to-people exchanges between the northeastern region and Southeast Asian countries. This helps in building stronger economic and social ties, fostering collaboration in industrial sectors and promoting investments.

5. Tourism development: The policy aims to promote tourism in the northeastern region, showcasing its natural beauty and cultural heritage. Increased tourism activities attract investments in the hospitality and service sectors, contributing to industrial growth and job creation.

(e) Critically explain the recent sectoral contribution of India’s national income.

Ans:- 1. Agriculture Sector: The agriculture sector has traditionally been a significant contributor to India's national income. It encompasses various activities such as crop production, animal husbandry, forestry, and fishing. However, its contribution to the national income has been declining over the years. Factors such as outdated farming practices, inadequate infrastructure, and reliance on monsoon rainfall have hampered the sector's growth. Despite these challenges, agriculture still employs a large portion of the Indian population and plays a crucial role in ensuring food security.

2. Industrial Sector: The industrial sector has witnessed significant growth in recent years and has become a vital component of India's national income. It includes manufacturing, mining, construction, and power generation. The government's emphasis on initiatives like "Make in India" and various economic reforms has attracted both domestic and foreign investment in industries such as automobile, pharmaceuticals, textiles, and information technology. The industrial sector's expansion has led to increased employment opportunities and technological advancements, contributing significantly to India's economic growth.

3. Services Sector: The services sector has emerged as the largest contributor to India's national income. It encompasses a wide range of activities such as banking, finance, insurance, information technology, telecommunications, tourism, and healthcare. India has witnessed a significant boom in the IT and IT-enabled services (ITES) sector, becoming a global outsourcing hub. The services sector's growth can be attributed to factors like skilled labor, competitive advantage in certain service domains, and the rise of the middle class, leading to increased domestic consumption.

4. Construction Sector: The construction sector has played a crucial role in India's economic development, contributing to both GDP and employment generation. It includes residential, commercial, and infrastructure construction activities. The government's focus on infrastructure development, such as building highways, railways, airports, and urban infrastructure, has propelled the growth of this sector. However, the construction industry also faces challenges related to project delays, land acquisition, and regulatory issues, which can impact its contribution to national income.

5. Trade and Hospitality Sector: The trade and hospitality sector encompasses wholesale and retail trade, restaurants, hotels, and tourism-related activities. It has witnessed substantial growth, driven by rising consumer spending, urbanization, and increasing tourism. The growth of e-commerce and organized retail has also contributed to the sector's expansion. However, the COVID-19 pandemic has severely impacted this sector, leading to a temporary decline in its contribution to national income.

6. Other Sectors: Apart from the major sectors mentioned above, there are other sectors that contribute to India's national income. These include mining and quarrying, real estate, transportation, communication, education, and healthcare. Each of these sectors has its unique dynamics and influences the overall national income to varying degrees.

(f) What is the role of public sector in Indian economic development? Do you think privatization is the necessity of today’s modern economic development in India? Give reasons.

Ans:- The public sector in India plays a significant role in economic development. It includes government-owned enterprises and institutions that are involved in various sectors of the economy, such as infrastructure, manufacturing, finance, and services. 

The key roles of the public sector in Indian economic development are as follows:

1. Infrastructure Development: The public sector undertakes the development of critical infrastructure projects like roads, railways, ports, airports, and power plants. These investments are crucial for promoting economic growth and attracting private sector investments.

2. Industrial Development: The public sector has historically played a key role in promoting industrial development through the establishment of public sector enterprises. These enterprises have contributed to the growth of key industries, such as steel, oil, telecommunications, and banking.

3. Employment Generation: Public sector enterprises are significant employers, providing job opportunities to a large number of people. This helps in reducing unemployment and poverty levels in the country.

4. Strategic Industries: The public sector retains control over certain strategic industries, such as defense, nuclear energy, and space exploration. These industries are considered vital for national security and development and are typically under the purview of the government.

5. Regional Development: Public sector investments often focus on promoting development in economically backward regions and sectors. This helps in reducing regional disparities and promoting inclusive growth.

6. Regulation and Governance: The public sector plays a crucial role in regulating and governing various sectors of the economy. 

-Privatization, on the other hand, involves transferring the ownership and management of public sector enterprises to the private sector. Whether privatization is a necessity for India's modern economic development is a matter of debate. Here are some reasons for and against privatization:

Reasons for privatization:

1. Efficiency and competitiveness: Privatization can introduce market competition, leading to increased efficiency, innovation, and improved service quality.

2. Investment and resource mobilization: Private sector participation can attract investment and technological advancements, facilitating economic growth.

3. Fiscal burden reduction: Privatization can help alleviate the financial burden on the government, reducing subsidies and improving fiscal management.

Reasons against privatization:

1. Social welfare and equity: Public sector enterprises often prioritize social welfare goals and provide essential services to marginalized sections of society, which may be neglected under private ownership.

2. Job security and employment: Privatization can lead to job losses and reduced job security for employees of public sector enterprises.

3. Strategic sectors and national interests: Some argue that certain sectors critical for national security and strategic interests should remain under public ownership.

In summary, the necessity of privatization in India's modern economic development depends on various factors, including sector-specific considerations, efficiency gains, social welfare concerns, and the government's ability to regulate and oversee private sector activities. It is a complex issue that requires careful evaluation and balancing of different interests.

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