Indian Economy Solved Question Paper 2023
COMMERCE (Generic Elective)
Paper: GE-601 (Indian Economy)
Full Marks: 80, Pass Marks: 32, Time: 3 hours
The figures in the margin indicate full marks for the questions.
1. Answer the following as directed: 1 x 8 = 8
(a) Who developed the PQLI used for measuring economic development?
Answer: Morris D. Morris
(b) Write one difference between economic growth and economic development.
Answer: Economic growth means increase in income or output, while economic development includes growth plus improvement in living standard and quality of life.
(c) Mention any one failure of the Five-Year Plans in India.
Answer: One failure is not enough employment was created.
(d) Write the full form of LPG.
Answer: Liberalization, Privatization, and Globalization
(e) During the Tenth Five-Year Plan, 7.6% was the average growth rate which was the highest ever growth achieved during entire plan period. (Write True or False)
Answer: False
(f) India is giving shelter to _______ percent of world’s population. (Fill in the blank)
Answer: 17%
(g) Define Special Economic Zone (SEZ).
Answer: SEZ is an area where business and trade laws are different from the rest of the country to encourage foreign investment and economic activity.
(h) Agricultural productivity is represented by average yield per hectare of land/marginal yield per hectare of land/total yield per hectare of land. (Choose the correct answer)
Answer: Average yield per hectare of land
2. Write Short Note on the following:
(a) Human Development Index (HDI)
Answer: The HDI, introduced by the United Nations in 1990, measures a country’s development through three indicators: life expectancy (health), education (average and expected schooling years), and per capita income (living standards). It emphasizes human well-being over mere economic growth. India’s HDI has risen steadily, reflecting progress in health and education, but challenges like inequality and poverty keep it in the medium category globally.
(b) NITI Aayog
Answer: NITI Aayog, formed in 2015, replaced the Planning Commission to foster sustainable development and cooperative federalism. It serves as a policy think tank, guiding the government on economic strategies and reforms, unlike the earlier centralized planning model. With initiatives like Atmanirbhar Bharat, it promotes innovation and inclusivity. Its structure involves state leaders, ensuring a bottom-up approach to national development.
(c) Nature of Unemployment Problem in India
Answer: India’s unemployment is multifaceted, including structural, seasonal, and disguised types. Structural unemployment stems from skill-job mismatches and slow industrial growth, while seasonal unemployment affects agricultural workers during off-seasons. Disguised unemployment is common in rural areas, with excess labor yielding low output. Rising youth unemployment and underemployment highlight the need for skill development and job creation.
(d) Population Explosion in India
Answer: India’s population explosion refers to its rapid growth, crossing 1.4 billion, driven by high birth rates and declining death rates due to better healthcare. It strains resources like food, water, and infrastructure, intensifying poverty and unemployment. Urbanization and environmental degradation are added pressures. Government measures like family planning and education aim to control this demographic challenge.
(e) Role of MSME Industries in India
Answer: MSMEs (Micro, Small, and Medium Enterprises) are vital to India’s economy, contributing 30% to GDP and employing over 110 million people. They boost exports (around 45%), encourage entrepreneurship, and reduce regional disparities by supporting rural industries. MSMEs drive innovation and job creation, with government backing through schemes like Make in India and easier credit access.
(f) Import Substitution Industrialization in India
Answer: Import Substitution Industrialization (ISI) was adopted post-independence to reduce reliance on foreign goods by promoting domestic production. Implemented through high tariffs and licensing in the 1950s–80s, it aimed at self-reliance and industrial growth. While it built a base for heavy industries, it led to inefficiencies, low-quality goods, and slow export growth. Liberalization in 1991 shifted focus to export-oriented policies.
3. What do you mean by ‘underdevelopment’? Explain the basic characteristics of an underdeveloped economy. 4+10=14
Answer:
Meaning of Underdevelopment: Underdevelopment means a condition where a country has low income, poor living standards, and lacks basic facilities like education, healthcare, and proper housing. It shows that the economy is not developed and most people are poor. These countries usually depend more on agriculture and have fewer industries.
Basic Characteristics of an Underdeveloped Economy:
Low Per Capita Income: People in underdeveloped countries earn very less money. Their income is not enough to live a good life.
High Population Growth: These countries have a high birth rate. Due to this, population increases very fast, which creates more pressure on resources.
Dependence on Agriculture: A large part of the population works in farming, but farming is not modern. It is based on old tools and methods.
Unemployment and Underemployment: Many people do not get proper jobs. Some work less than they can, which means they are underemployed.
Low Level of Technology: These countries use outdated technology in industries and farming. This leads to low production.
Lack of Capital: There is a shortage of money for investment in industries, education, health, and other important sectors.
Poor Infrastructure: Roads, electricity, schools, hospitals, and transport systems are not well-developed.
Income Inequality: The gap between rich and poor is very wide. Few people are rich, but most are very poor.
Low Human Development Index (HDI): These countries score low in education, health, and income levels.
Social and Political Problems: Underdeveloped countries often face issues like corruption, poor governance, and social unrest.
Or
Describe about the trend and composition of national income in India. 14
Answer: Trend of National Income in India: India's national income has increased over the years after independence. In the beginning, India had a slow growth rate, but after economic reforms in 1991, the growth of national income improved. Now, India is one of the fastest-growing economies in the world. However, income distribution is still unequal, and poverty is still a big problem.
Some key trends include:
From 1950s to 1980s, growth was slow.
From 1990s onwards, growth increased due to liberalization and privatization.
In recent years, services and industry have contributed more to national income than agriculture.
Composition of National Income in India:
The national income of India comes from three main sectors:
Primary Sector (Agriculture and related activities): Earlier, this sector had the largest share in national income. But now, its share has reduced. Still, many people depend on agriculture for livelihood.
Secondary Sector (Industry and Manufacturing): This sector includes factories and industries. Its contribution has increased over time, but still not as much as the service sector.
Tertiary Sector (Services): This is the largest contributor to national income today. It includes banking, transport, education, health, IT, etc. This sector has grown rapidly in recent years.
Conclusion: India's national income is rising, and the structure is shifting from agriculture to services. But the country still needs to improve income distribution, employment, and infrastructure for better development.
Here is the answer written in basic simple English for both options, as per your instruction:
4. What are the phases of economic reforms in India? Explain various characteristics of New Economic Policy. 4+10=14
Answer: Phases of Economic Reforms in India:
Economic reforms in India happened mainly in two phases:
Phase 1 (Before 1991): This period followed a mixed economy model where both government and private sector worked together. The government controlled most of the industries and set rules for the economy.
Phase 2 (After 1991): This phase started when India faced a major economic crisis in 1991. The government introduced the New Economic Policy which focused on Liberalisation, Privatisation, and Globalisation (LPG). This aimed to make the Indian economy more open and market-friendly.
Characteristics of New Economic Policy:
Liberalisation: It reduced government control over industries and allowed businesses to operate freely. Many restrictions like licenses and quotas were removed.
Privatisation: Government reduced its role in running businesses and encouraged private companies to invest and manage industries.
Globalisation: The Indian economy was opened to the world. Foreign companies were allowed to invest in India, and Indian companies could also do business abroad.
Reduced Role of Public Sector: Only key industries like defence, railways, and atomic energy remained with the government. Other sectors were opened to private players.
Tax Reforms: The government simplified the tax system and reduced tax rates to promote investment and growth.
Financial Sector Reforms: The banking sector was improved. Private banks were allowed, and rules were made more transparent.
Foreign Investment: Foreign Direct Investment (FDI) was allowed in many sectors to bring capital and technology.
Trade Reforms: Import and export policies were changed. Customs duties were reduced to promote international trade.
Disinvestment: The government sold its share in public sector companies to raise money and reduce its burden.
Modernisation and Technology Development: The policy encouraged use of new technology and better methods of production.
Or
What are the objectives of monetary and fiscal policies? Explain the implications of both monetary and fiscal policies in India. 4+10=14
Answer: Objectives of Monetary and Fiscal Policies:
Monetary Policy Objectives:
To control inflation (price rise).
To maintain stability in the value of money.
To ensure enough money supply for development.
To promote economic growth and employment.
Fiscal Policy Objectives:
To raise government revenue through taxes.
To control public expenditure wisely.
To reduce income inequality.
To support economic development and create jobs.
Implications of Monetary Policy in India:
Control Inflation: By increasing interest rates, the Reserve Bank of India (RBI) can reduce inflation.
Encourage Investment: When RBI reduces interest rates, it becomes cheaper to borrow money. This encourages businesses to invest more.
Money Supply Management: RBI controls the money supply to maintain balance in the economy.
Promote Exports: By controlling the value of the rupee, RBI helps make Indian goods cheaper in foreign markets.
Financial Stability: Monetary policy ensures banks and financial institutions work smoothly and safely.
Implications of Fiscal Policy in India:
Boost Economic Growth: Government spends on roads, schools, and health, which helps the economy grow.
Job Creation: By investing in big projects, the government creates more employment opportunities.
Reduce Income Inequality: By taxing the rich more and helping the poor through welfare schemes, fiscal policy promotes equality.
Control Inflation or Deflation: Government can increase or reduce spending to control inflation or boost demand in the economy.
Improve Infrastructure: Fiscal policy helps in building better infrastructure like roads, bridges, and power plants for long-term growth.
5. What are the causes of inequalities in income distribution in India? Briefly explain the Government’s policies and measures to eliminate such inequalities. 4+10=14
Answer:
Causes of Inequalities in Income Distribution in India (4 marks):
Unequal Distribution of Land and Resources:
In India, a small number of wealthy people or landowners control a large portion of land and other resources, while the majority, especially in rural areas, have very limited access to land or other economic resources. This leads to income inequality, as those who own land can generate higher income through farming, while landless laborers or small farmers struggle to make ends meet.Education and Skill Gap:
One of the biggest reasons for income inequality is the difference in access to education. The rich can afford quality education and higher learning, leading to high-paying jobs, while the poor, particularly in rural areas, may not have access to quality schooling. This leads to a gap in skills and opportunities, further widening the income disparity.High Level of Unemployment and Underemployment:
Despite India’s growing economy, unemployment remains high, especially in rural areas. Many people are forced to take up low-paying or informal jobs without proper job security or benefits. Underemployment, where people are employed in jobs that do not fully utilize their skills, also contributes to income inequality.Unequal Growth of Sectors:
Economic growth in India has been uneven across different sectors. While sectors like IT, services, and manufacturing have grown rapidly, sectors like agriculture, which employ a large portion of the population, have lagged behind in terms of productivity and income growth. This disparity between the formal and informal sectors has widened the income gap.
Government’s Policies and Measures to Eliminate Inequalities (10 marks):
Progressive Taxation System: The government has introduced a progressive tax system where the rich pay a higher rate of taxes than the poor. The revenue generated from these taxes is then used for social welfare schemes aimed at reducing inequality.
Land Reforms and Redistribution: The government has made efforts to redistribute land to the landless and reduce the concentration of land in the hands of a few. Measures like the Land Ceiling Act aimed at limiting the amount of land any individual can own have been introduced.
Subsidies and Welfare Schemes: Various subsidies (for food, healthcare, education, etc.) and welfare schemes have been implemented to support the poor. The Public Distribution System (PDS) provides food at subsidized rates to economically weaker sections.
Employment Generation Schemes: Programs like MGNREGA provide guaranteed employment to rural households for at least 100 days per year, ensuring a basic income for poor families and helping to reduce rural poverty.
Minimum Wage Legislation: The government has established minimum wage laws to ensure that workers, especially in informal sectors, receive fair compensation for their labor. This reduces income disparity by guaranteeing a basic income level.
Skill Development Programs: The Skill India Mission focuses on equipping the youth with vocational skills, making them employable in higher-paying jobs and reducing inequality due to lack of education and training.
Social Security Schemes: Government schemes like Pradhan Mantri Jan Dhan Yojana, Atal Pension Yojana, and PM Ujjwala Yojana aim to provide financial inclusion and support to the underprivileged sections, helping to bridge the income gap.
Reservation Policies: The reservation system in education and government jobs has been put in place to support historically marginalized groups like Scheduled Castes, Scheduled Tribes, and Other Backward Classes (OBCs), ensuring better opportunities for these communities.
Rural Development Programs: The government has launched initiatives for rural development, such as building infrastructure (roads, schools, healthcare) in rural areas, which helps in raising the income levels of rural populations.
Promotion of Small and Medium Enterprises (SMEs): The government promotes SMEs and small businesses through schemes like Mudra Yojana and Stand-Up India, which provide financial support to entrepreneurs from marginalized sections of society. This helps in creating jobs and generating income in rural and urban areas.
Or
What are the causes of unemployment problem in India? Explain Government’s initiative to solve this problem. 4+10=14
Answer: Causes of Unemployment Problem in India (4 marks):
Rapid Population Growth: India's population is growing at a fast rate, which creates a situation where the number of job seekers increases faster than the number of jobs being created. This leads to a large number of people being unemployed or underemployed.
Mismatch Between Education and Job Market Needs: Many individuals in India graduate with degrees that do not meet the demands of the job market. The education system often does not provide the necessary skills for current industries, leading to high unemployment among educated youth.
Slow Industrial Growth: While the services sector has grown rapidly, the industrial sector, which traditionally provides many jobs, has not expanded at the same pace. This imbalance in sectoral growth contributes to unemployment, especially in rural areas.
Technological Changes and Automation: With the increase in automation and advanced technology in industries, many manual and low-skill jobs are being replaced by machines, resulting in job losses. While some new jobs are created, they require advanced skills, leaving many unskilled workers unemployed.
Government’s Initiatives to Solve the Unemployment Problem (10 marks):
Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA): This scheme guarantees 100 days of wage employment to rural households, providing both income and work for rural populations. This has been instrumental in reducing rural unemployment.
Pradhan Mantri Kaushal Vikas Yojana (PMKVY): This initiative focuses on skilling India by providing training to youth in various fields. The aim is to equip them with employable skills that will make them suitable for modern industries.
Start-Up India Scheme: Launched to promote entrepreneurship, the Start-Up India scheme provides financial assistance, tax exemptions, and regulatory relief to new businesses, encouraging job creation.
Make in India Campaign: The Make in India initiative aims to boost manufacturing in India by inviting global companies to invest in the Indian manufacturing sector. This is expected to create millions of jobs in the industrial sector.
Pradhan Mantri Mudra Yojana (PMMY): This scheme provides micro-financing to small businesses, allowing entrepreneurs to start or grow their businesses. This directly contributes to job creation at the grassroots level.
Atmanirbhar Bharat Abhiyan: Focuses on promoting local manufacturing and self-reliance. By providing support to local industries, it aims to create jobs and reduce dependency on imports.
National Career Service (NCS): NCS is a job portal that connects job seekers with employers. It aims to bridge the gap between job availability and employment by providing a platform for skill development and job search.
Skill India Mission: The government has launched multiple initiatives under Skill India to enhance vocational training and employment opportunities for the youth. These programs help the youth gain industry-specific skills and increase their chances of employment.
Promotion of MSMEs (Micro, Small, and Medium Enterprises): MSMEs play a crucial role in creating jobs. The government provides various subsidies, loans, and tax incentives to MSMEs to boost their growth, which in turn generates employment.
Rural Development Programs: The government has initiated several rural development schemes such as the Pradhan Mantri Awas Yojana and Deen Dayal Upadhyaya Grameen Kaushalya Yojana, which not only improve infrastructure but also create job opportunities in rural areas.
5. What are the causes of inequalities in income distribution in India? Briefly explain the Government’s policies and measures to eliminate such inequalities. 4+10=14
Answer: Causes of inequalities in income distribution in India:
Unequal ownership of assets: A large number of people in India do not own land, houses, or other productive assets.
Differences in education and skills: Some people are highly educated and skilled, while many others are not.
Regional imbalance: Some states or areas are more developed than others. People in underdeveloped areas have fewer opportunities.
Unemployment and underemployment: Many people do not get regular work, which results in low income.
Government’s policies and measures to eliminate such inequalities:
Progressive taxation: The government collects more taxes from the rich and uses the money for welfare schemes.
Public distribution system (PDS): Provides food and essential items at low prices to poor people.
Employment generation schemes: Programs like MGNREGA provide jobs to rural people.
Education and skill development: Schemes like Skill India and free education help the poor get better jobs.
Rural development programs: The government invests in village roads, electricity, health, and sanitation.
Minimum wages law: Ensures that workers get a basic income for their work.
Social welfare schemes: Schemes like PM-KISAN, pensions for old age, widows, and disabled people reduce income gaps.
Reservation policy: Provides opportunities to SCs, STs, and OBCs in jobs and education.
Support to small industries: Promotes self-employment and entrepreneurship in rural and backward areas.
Subsidies and financial aid: Helps farmers, students, and small businesses grow and increase income.
Or
What are the causes of unemployment problem in India? Explain Government’s initiative to solve this problem. 4+10=14
Answer:
Causes of unemployment problem in India:
High population growth: More people are entering the job market than jobs being created.
Lack of skills and education: Many people are not skilled or properly educated for available jobs.
Seasonal nature of agriculture: Farmers get work only during planting and harvesting seasons.
Slow industrial growth: Fewer industries mean fewer job opportunities.
Government’s initiatives to solve this problem:
MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act): Provides 100 days of guaranteed wage employment in rural areas.
Skill India Mission: Aims to train youth in different skills to make them job-ready.
Startup India: Supports new businesses through funding, training, and resources.
Make in India: Encourages industries to manufacture in India, creating more jobs.
Atmanirbhar Bharat (Self-reliant India): Promotes local industries and employment.
Pradhan Mantri Kaushal Vikas Yojana (PMKVY): Offers free training in technical and non-technical skills.
Digital India: Creates job opportunities in IT and digital sectors.
Support to MSMEs (Micro, Small & Medium Enterprises): Helps small businesses grow and hire more workers.
National Career Service (NCS) Portal: Connects job seekers with employers.
Vocational training in schools and colleges: Prepares students for practical jobs.
6. What are the objectives of agricultural price policies in India? What are its features? Briefly explain the agricultural reforms recently introduced in the country. 14
Answer:
Objectives of agricultural price policies in India:
To ensure fair income to farmers: By providing Minimum Support Price (MSP) so that farmers get a reasonable return on their produce.
To protect consumers: By keeping prices of essential food items stable and affordable.
To control inflation: By managing supply and demand through pricing.
To promote production: By encouraging farmers to grow more through assured prices.
To maintain food security: By ensuring enough food is produced and stored.
Features of agricultural price policies:
Minimum Support Price (MSP): Fixed price announced by the government for certain crops.
Procurement prices: Prices at which government agencies buy produce from farmers.
Buffer stocks: Food grains are stored to be used during shortage or price rise.
Market intervention scheme: Government buys produce if prices fall below a certain level.
Focus on major crops: Policies mainly target wheat, rice, pulses, and oilseeds.
Price stability: Helps to reduce fluctuation in crop prices.
Agricultural reforms recently introduced in the country:
New Farm Laws (2020):
Farmers could sell their produce outside APMC (Agricultural Produce Market Committee) markets.
Encouraged contract farming with private companies.
Allowed barrier-free inter-state trade.
(Note: These laws faced protests and were later repealed in 2021.)PM-KISAN Scheme: Provides direct income support of Rs. 6,000 per year to small and marginal farmers.
E-NAM (National Agriculture Market): An online trading platform for better price discovery.
Promotion of organic and natural farming: To improve sustainability.
Crop Insurance Scheme (PMFBY): Protects farmers against crop loss due to natural disasters.
Agri-infrastructure fund: Supports building storage, cold chains, and markets.
Or
Discuss the various phases of industrial growth in India. 14
Answer: Phases of industrial growth in India:
Pre-independence period (Before 1947):
Very limited industrial development.
Focus was on raw materials export like cotton and jute.
British policies did not support Indian industries.
Initial planning period (1951–1965):
Focus on heavy industries and public sector.
First and Second Five-Year Plans encouraged industrialization.
Major industries set up like steel plants, machine tools, etc.
Control and regulation phase (1965–1980):
Government imposed licensing and controls.
Industrial growth slowed down due to excessive regulation.
Known as the "License Raj" period.
Industrial recovery (1980–1991):
Some liberalization and relaxation of controls.
Growth in consumer goods and small-scale industries.
Better performance in production and exports.
Post-liberalization period (1991 onwards):
Economic reforms were introduced in 1991.
Reduction in licensing, more private sector participation.
Growth in IT, telecom, automobile, and service sectors.
Foreign investment and globalization increased.
Modern phase (2010 onwards):
Focus on digital industries, startups, and Make in India.
Government initiatives like Startup India, Skill India, and Production-Linked Incentives (PLI).
More focus on innovation, green technology, and sustainable development.
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