Here we are providing Class 12 Economics Important Extra Questions and Answers Chapter 2 Indian Economy 1950-1990. Economics Class 12 Important Questions are the best resource for students which helps in class 12 board exams.
Class 12 Economics Chapter 2 Important Extra Questions Indian Economy 1950-1990
Indian Economy 1950-1990 Important Extra Questions Very Short Answer Type
Question 1.
List the different types of economic systems.
Answer:
The three main types of economic systems are:
(i) Capitalist economy
(ii) Socialist economy
(iii) Mixed economy
Question 2.
What is capitalism?
Answer:
Capitalism refers to the economic system in which resources are owned privately and the main d objective behind economic activities is profit-making.
Question 3.
What is mixed economy?
Answer:
Mixed economy is an economic system in which production, distribution and consumption decisions are left to the free play of the market forces. However, a large part of economic activities are regulated by the government to maximise the social welfare along with individual welfare or self-interest.
Question 4.
Define socialism.
Answer:
Socialism is that economic system in which resources are owned by the government and the main objective behind economic activities is.social welfare.
Question 5.
What type of economic system does India have?
Answer:
India has mixed type of economic system.
Question 6.
Name the plan formulating organisation in India.
Answer:
Planning Commission is the India’s plan formulating organisation.
Question 7.
When was the Planning Commission constituted?
Answer:
Planning Commission was constituted in 1950.
Question 8.
Who is the Chairman of Planning Commission?
Answer:
The Prime Minister of India is the Chairman of Planning Commission.
Question 9.
Which institution has replaced the Planning Commission?
Answer:
NITI Aayog, established in 2015, has replaced the Planning Commission,
Question 10.
Define economic planning.
Answer:
Economic planning is the process through which economic decisions are made by the government for economic growth and development.
Question 11.
Who is regarded as the architect of Indian Planning?
Answer:
Prof. P.C. Mahalanobis is regarded as the architect of Indian Planning.
Question 12.
Who established the Indian Statistical Institute?
Answer:
Prof. P.C. Mahalanobis established the Indian Statistical Institute.
Question 13.
What is the duration of Twelth Five Year Plan?
Answer:
The duration of Twelth Five Year Plan is from I st April, 2012 to 31 st March, 2017.
Question 14.
What do you mean by agriculture?
Answer:
Agriculture includes growing crops, fruits, vegetables, flowers and rearing of livestock.
Question 15.
What is the contribution of agriculture sector to the country’s GDP in the year 2016-17?
Answer:
Agriculture sector contributes 17.3 per cent to the GDP.
Question 16.
What percentage of population was engaged in Agriculture in 1990?
Answer:
48.9 percent of population was engaged in Agriculture in 1990.
Question 17.
Write any two features of agriculture.
Answer:
(i) Main source of employment
(ii) Supplier of raw materials to industrial sector
Question 18.
Write two problems associated with agriculture.
Answer:
(i) Problem of marketing
(ii) Insufficient irrigation facilities
Question 19.
Define land reforms.
Answer:
Land reforms are the measures to bring about changes in the ownership of land holdings to encourage equity.
Question 20.
What is meant by land ceiling?
Answer:
Land ceiling means fixing the maximum size of the land, which could be owned by an individual.
Question 21.
Define green revolution.
Answer:
Green revolution refers to the large increase in production of foodgrains resulting from the use of HYV seeds, especially in wheat and rice.
Question 22.
What is an industrial policy?
Answer:
An industrial policy is related to the functions, principles and laws, which determine the state of industrial development by controlling the industrial units.
Question 23.
What do you mean by Small Scale Industries?
Answer:
Small Scale Industry (SSI) is defined on the basis of maximum investment allowed on the assets of a unit. This investment limit changes over a period of time.
Question 24.
How many industries were reserved for public sector under Industrial Policy Resolution, 1956?
Answer:
Under Industrial Policy Resolution, 1956, 17 industries were reserved for public sector.
Question 25.
When was New Industrial Policy applied?
Answer:
New Industrial Policy was applied in 1991.
Question 26.
What is industrial licensing?
Answer:
Industrial licensing is a written permission of the government to a particular firm for the production of particular product.
Question 27.
When was licensing started in India?
Answer:
In India, licensing was started in 1952.
Question 28.
What is foreign trade?
Answer:
Foreign Trade involves inter-country flow of goods, services and financial resources.
Question 29.
What is import substitution?
Answer:
Import substitution is the policy which aims to replace or substitute imported goods by domestically produced goods.
Question 30.
Define tariffs.
Answer:
Tariffs are a tax on imported goods, which discourage the use of imported goods and make them more expensive.
Question 31.
What are quotas?
Answer:
Quotas specify the maximum quantity of goods, which can be imported.
Question 32.
List any three major imports of India.
Answer:
Major imports of India include:
(i) Petroleum
(ii) Engineering goods
(iii) Chemical fertilisers
Question 33.
List any five major exports of India.
Answer:
Major exports of India include:
(i) Tea
(ii) Coffee
(iii) Jute
(iv) Cotton yarn
(v) Readymade garments
Question 34.
What is the share of India in world exports?
Answer:
The share of India in world exports is 0.8 percent.
Indian Economy 1950-1990 Important Extra Questions Short Answer Type
Question 1.
Define capitalistic economy. Why was Pt. Jawaharlal Nehru not in the favour of capitalism?
Answer:
In capitalistic economy, resources are owned privately and the main objective behind economic activities is profit-making. Problems of the economy are solved through free price mechanism, independent of government intervention. Under this type of economy, goods are produced and distributed among the people not on the basis of what they need but on the basis of what the people can afford or are willing to purchase.
The poor people are usually ignored under such a system as they do not have the purchasing power to back their demand. As a result, such goods are not produced. According to Pt. Jawaharlal Nehru, a vast majority of people would not get the chance to improve their quality of life under capitalism and hence, he was not in the favour of such a system.
Question 2.
Define socialism.Why did our leaders not follow the path of socialism at the time of independence?
Answer:
Socialism is that economic system in which resources are owned by the government and the main objective behind economic activities is social welfare. In this economy, the government decides what goods are to be produced in accordance with the needs of the country and distribution is based on what the people need. With the collapse of the Soviet System in the last decade of the 20th century, our leaders preferred not to follow*the clear path of socialism.
Question 3.
Explain the concept of mixed economy.
Answer:
Mixed economy is an economic system in which production, distribution and consumption decisions are left to the free play of the market forces. However, a large part of economic activities are regulated by the government to maximise the social welfare along with individual welfare or self-interest. It is a combination of capitalism and socialism.
The government and the market together answer the three basic questions of, what to produce, how to produce and for whom to produce in the mixed economy. In this type of economy, private sector or market will provide those goods and services, which it can produce well and the government sector will provide those goods and senices, which are essential for the welfare of the society as a whole.
Question 4.
Discuss the outcomes of India’s Five Year Plans over the years.
Answer:
The first seven Five-Year Plans, covering the period 1951 – 1990, attempted to attain the four main goals, i.e. growth, equity, modernisation and self-sufficiency. Of these four main goals, these plans have succeeded mainly in achieving self-sufficiency. However, healthy growth rates, modernisation and equity have not been fully achieved.
Growth rates are still not sufficient to meet the development criteria for the country. Modern facilities and technology are available only to a limited section of the society. Despite various efforts, plans have failed to reduce the gap between the rich and the poor. The main reason for failure in achieving the planned targets is the rapidly increasing population and the existence of corruption in the whole system of the country.
Question 5.
What is economic planning?
Answer:
Economic planning is the process through which economic decisions are made by the government for economic growth and development. In India, the duration of plans is five years. This form of plans was adopted from the former Soviet Union. In economic planning, a central authority defines a set of targets to be achieved related to growth and development of the nation, keeping in view.
I the resources available to the country, within a specified period of time. According to Planning Commission, “Economic Planning means utilisation of country’s resources I into different activities in accordance with national priorities.”
Question 6.
Explain any two features of Indian agriculture.
Answer:
Features of Indian agriculture are:
(i) Disguised Unemployment: Disguised unemployment is a situation in which more than required workers are absorbed. For example, in two hectare of land 3 workers can cultivate efficiently but there are 6 workers engaged on that land. These 3 extra workers are called disguisedly unemployed. If these 3 workers are removed from the work, the production will not be affected.
(ii) Seasonal Occupation: Indian agriculture is a seasonal occupation. In other words, its productivity is dependent upon season. Indian farmers find work for only six months period in a year and for remaining six months, they remain unemployed.
Question 7.
What were the objectives of land reforms in India?
Answer:
The following were the objectives of land reforms
- To achieve egalitarian social structure by restructuring agrarian relations
- To eliminate the exploitation in .land relations
- To provide the ownership of land to the tiller
- To improve the socio-economic-conditions of the rural poor by widening their land base
- To increase agricultural productivity and production
- To facilitate land-based development of the rural poor
- To promote the agriculture sector
Question 8.
Discuss the phases of‘Green Revolution’ in India.
Answer:
The phases of the ‘Green Revolution’ in India are discussed below:
(i) The First Phase: In the first phase of green revolution, i.e. from mid I960’s to I970’s, the use of High Yielding Variety (HYV) seeds was restricted to the more prosperous states like Punjab, Andhra Pradesh and Tamil Nadu. Thus, the use of HYV seeds primarily benefitted wheat-growing regions.
(ii) The Second Phase: The period of the second phase of green revolution was from mid I970’s to 1980’s. In this phase, the HYV technology spread to a larger number of states and also benefitted more variety of crops. The spread of green revolution enabled India to self-reliant in foodgrains.
Question 9.
Why are subsidies necessary?
Answer:
Subsidies are necessary due to the following reasons:
(i) Adoption of the New HYV Technology: It is generally agreed that subsidies were necessary to provide incentive for adoption of the new HYV technology by farmers, in general and small farmers, in particular.
(ii) Coverage of Risk: Subsidies were necessary to cover the risk associated with weather conditions. Also, any new technology will be looked upon as a risky technology by farmers. Therefore, subsidies are needed to encourage farmers.
Question 10.
Give the division of the economy into public and private sector industries.
Answer:
On the eve of independence, the activities of the public sector were restricted to a limited field. After independence, however, the area of activities of the public sector expanded at a very rapid speed. Two industrial resolutions were issued during 1948 and 1956 to assure private sector that its activities will not be unduly curbed.
- Category I: Industries exclusively owned by the state
- Category II: Industries jointly owned and controlled by private sector and the state
- Category III: Industries in the private sector
Thus, the commanding heights of the economy were controlled by the public sector and the policies of the private sector were to compliment the public sector policies. Private sector was kept under government control through the system of licenses.
Question 11.
List the problems faced by small scale industries in India.
Answer:
The problems faced by small scale industries in India are:
(i) Lack of raw material and power
(ii) Limited financial assistance
(iii) Old method of production and hence, low productivity
(iv) High production cost
(v) Lack of organisational ability
(vi) Heavy taxation
(vii) Less educated entrepreneurs
Question 12.
Give some suggestions to solve the problems of small scale industries.
Answer:
The problems of small scale industries can be solved by adopting the following measures:
- Small scale industries should be shielded from the power of large firms.
- Criterion for the reservation of the products in these industries should be based on the ability of these units to manufacture the goods.
- These industries should be given concession such as lower excise duty, bank loans at lower interest rates, etc.
- Raw material and power should be provided at concessional rates to these industries.
- SSIs should be encouraged to use new techniques to improve quality of the products and reduce cost of production.
- Education and training should be provided to the entrepreneurs.
Question 13.
Explain briefly the concept of industrial licensing.
Answer:
As per the Industrial Act of 1951, the Government of India has adopted the licensing policy to control the industries. Licensing is a written permission obtained by the enterprise from the government to produce a particular product. Other things- included in the licensing are:
(i) Name of the produced goods
(ii) Limit of production
(iii) Place of the establishment of industry
(iv) Expansion of enterprise
Question 14.
What are the objectives of licensing?
Answer:
Main objectives of licensing in India have been:
(i) Development and control of industrial investment and production as per the planning objectives
(ii) Centralisation of industry
(iii) Expansion of Small Scale Industry
(iv) Balanced regional development
Question 15.
What is the meaning of import and export?
Answer:
Import is that process in which a country purchases goods and services from the other country. For example, purchase of goods by India from America will be called as an import of India.
On the other hand, export is that process in which a country sells goods and services to other countries. For example, India sells goods to America will be called as an export of India.
Question 16.
Give a brief account of India’s direction of trade.
Answer:
The direction of trade means the countries with which India exchanges its goods and services. After independence, significant changes took place in the direction of India’s foreign trade. The share of British Empire (U.K. and her colonies), which was as high as nearly half of our total foreign trade before Second World War, has declined significantly. Share of England alone was about one-third in our exports and imports but it is now much smaller. Since 1950, America has almost maintained its share in our exports.
Even now America is the most important customer of Indian goods. Russia’s share increased extraordinarily in the beginning. In 1950-51 this country had no trade relation with India, but in 1990-91 its share in Indian exports increased to 16.1 percent. After the split of the Soviet Union its share sharply came down. India has mainly trade relations with European Union, North America, Australia, New Zealand, Japan and OPEC countries like Saudi Arabia, Iraq, Iran, etc.
Question 17.
Differentiate between tariff and quota.
Answer:
Tariffs are the tax paid on imported items. They curb the use of imported goods by making them too expensive. Quota, on the other hand, is the specific quantity of commodities that can be imported from other countries.
Question 18.
Discuss the need for import substitution.
Answer:
India adopted ‘inward-looking trade strategy’ or Import Substitution’ during the first seven Five Year Plan Period (1951 -90). The main objective of the policy was to restore positive balance of payments by replacing or substituting imports with domestic production.
This also enabled the government to safeguard the interest of domestic industries from foreign competition and equip them well until they learn to compete with the global giants. Moreover, government imposed tariffs and quotas in order to control imports.
Indian Economy 1950-1990 Important Extra Questions Long Answer Type
Question 1.
Define economic system. What are characteristics of different types of economic systems?
Answer:
An economic system comprises of production, distribution and consumption of goods and services.
Characteristics of a Capitalist Economy
(i) Profit is the main motive of carrying out various economic activities.
(ii) Factors of production are privately owned.
(iii) Consumers are free to choose whatever they can afford.
(iv) Prices of goods and services are determined by market forces of demand and supply with minimum intervention by the government.
Characteristics of a Socialist Economy
(i) The government is the only owner of the resources and is solely engaged in the production and distribution of goods and services.
(ii) The prices of goods and services are determined by the government.
(iii) Welfare of the society is the main objective of carrying out various economic activities.
(iv) The government employs people and pays their salaries.
Characteristics of a Mixed Economy
(i) A mixed economy is a combination of capitalism and socialism.
(ii) The involvement of government in production and distribution activities is aimed at the welfare of the public.
(iii) The involvement of private firms in production and distribution activities is aimed profit maximisation.
(iv) The prices of goods and services produced by individuals are decided by the market forces while the prices of goods and services produced by the government are decided by the government.
Question 2.
Discuss the problems related to agriculture in India.
Answer:
India is a developing country. Agriculture plays a vital role in its development. Most of the population is engaged in agriculture and allied activities. But the agricultural sector is not fully developed. There are many problems which are responsible for the backwardness of Indian agriculture. These problems are as follows:
(i) Lack of Proper Marketing Channels: Marketing system of agricultural products is not good in India. As a result of it, farmers could not get sound prices of their crops. Farmers sell their products in villages at lower prices as a result of it they remain poor. Markets are far from the villages and transportation facilities are not up to the mark
(ii) Lack of Credit Facilities: Credit problem is one of the main problems of Indian farmers. They find it easy to borrow from local money lenders at exorbitant rate of interest as taking loan from banks and co-operative societies involve long and complicated procedures. This tendency of loan taking makes them fall in debt traps.
(iii) Rural Indebtedness: Indebtedness is also the main problem of Indian agriculture. Indian farmer always remains in debt. They have to take loans for cultivation and even for the sale of their products. In the words of M.L. Darling, “Indian peasant born in debt, lives in debt and dies in debt.”
(iv) Illiteracy: Large number of Indian farmers is illiterate. Hence, they are unable to use the mechanised system of agriculture. As a result, their productivity remains low.
(v) Disguised Unemployment: Disguised unemployment exists on a large scale in agriculture. The productivity of disguisedly unemployed people remains zero. Farmers cannot gain surplus from their fields due to disguised unemployment
(vi) Lack of Irrigation Facilities: Of the total cultivated area in the country, a little less than 40 per cent is irrigated even today. In the remaining areas, farming is largely dependent on rainfall.
Question 3.
Suggest some measures to remove the problems of agriculture in India.
Answer:
The following measures can be adopted to improve the state of Indian agriculture and farm productivity:
(i) New Techniques of Production: New agricultural technology with emphasis on High Yielding Varieties and improved inputs must be adopted on a much wider scale.
However, we do not have to adopt capital intensive techniques of the west, rather our own research institutions and experts should invent suitable techniques keeping in view the differences in topography, climate, soil and other socio-economic conditions of different regions.
(ii) Land Reforms: Land reforms providing a land system conducive for agricultural development should not only be enacted but also be faithfully implemented. The official land tenure system must aim at ‘land to the tiller’ as self-cultivation can induce maximum improvement in farming.
(iii) Creation of Economic Holdings: Most states have already passed acts relating to consolidation of holdings in order to create economic holdings through removing the problem caused by sub-division and fragmentation of holdings. However, the progress has not been satisfactory in many states.
Even in states like Punjab, where the entire task of consolidation was completed years ago, new sub-division and fragmentation have taken place. Therefore, fresh measures like change in law of inheritance are required to overcome the difficulties caused by sub-division and fragmentation.
(iv) Crop Insurance: Crop insurance is needed to provide protection against natural calamities like floods, drought, locusts, thunderstorms, etc. Some states are already taking steps in this direction. For example, Haryana Government is thinking of setting up a fund for this purpose.
(v) Cooperative Farming and Other Agricultural Cooperatives: Small and marginal farmers can adopt scientific large scale commercial farming only through cooperative farming.
This will also solve the problem of uneconomic size of farms and act as a very powerful measure to combat the problem of sub-division and fragmentation of holdings. Cooperative societies can also enable the farmers to purchase modern inputs at cheap rate and store, process and market their produce advantageously.
(vi) Extension of Irrigation Facilities: Expansion of irrigation facilities can contribute significantly towards improving the agriculture. Along with starting more major and medium irrigation projects to explicit our vast irrigation and hyde! power potential, minor irrigation facilities should also be expanded on a much larger scale.
(vii) Agricultural Inputs: Provision of improved inputs like certified seeds, fertilisers and pesticides, etc. in adequate quantities and at fair prices is also essential for increasing farm productivity.
(viii) Improved Implements: Large scale mechanisation of Indian agriculture is neither possible nor desirable under existing conditions but use of improved implements and machines like improved ploughs, drills, chaff cutters, threshers, small tractors and pumping sets can certainly increase the efficiency of agricultural operations.
Question 4.
Explain the policies which were adopted to promote equity in the agricultural sector,
Answer:
The following policies can be adopted to promote equity in agricultural sector:
(i) Abolition of Intermediaries: Intermediary tenures like Zamindarsjagirdars, etc., which prevailed over 40 per cent of the country were abolished and the ownership of land was given to the i actual tillers or tenants. This ownership of land gives incentives to invest in making improvements to the tillers.
(ii) Tenancy Reforms: It envisages provision of security to tillers or tenants and conferring ownership rights on them. Under tenancy reforms, following three types of measures were adopted:
Regulation of Rent: Before independence, the rent charged by zemindars from the tenants was exorbitant. Legislations were enacted after independence to regulate the limits of rents and reduce the burden on tenants.
Security of Tenure: Security of tenure to tenants had been given in all states through tenancy reforms. For the security of tenure, legislations have been passed in most of the states.
Ownership Rights for Tenants: Ownership rights for tenants have been conferred in areas of Andhra Pradesh, Bihar, West Bengal, Punjab, Haryana and Tamil Nadu.
(iii) Land Ceiling: It was another policy to promote equity in the agricultural sector. The purpose of land ceiling is to reduce the concentration of land ownership in a few hands. Land ceiling laws were first enacted in the 1950s and the 1960s. It was further revised in 1972.
(iv) Updating and Maintenance of Land Records: For the promotion of equity in the agricultural sector, a drive was taken up in 1985-86 for updating land records. Potto passbooks with legal status are to be issued to land owners and tenants. Thus, without updating and maintenance of land records, land reforms cannot be properly implemented.
(v) Consolidation of Holdings: This measure is designed to solve the problem of fragmentation of holdings. The method adopted is to grant one consolidated holding to the farmer equal to the total of the land in different scattered plots under his possession.
(vi) Cooperating Farming: Cooperating farming has been advocated to solve the problems of subdivision of holdings. Under this system, farmers having very small holdings joined their hand and pooled their lands for the purpose of cultivation, in this way, they can reap profits of large scale farming.
Question 5.
Discuss the impact of Green Revolution.
Answer:
Following is the impact of Green Revolution.
(i) Increase in Production: After introduction of Green Revolution, the production of many crops has increased many folds. Among foodgrains, crops of wheat and rice draw maximum benefit from Green Revolution.
(ii) Control over Imports: After independence, India was dependant on other countries for its food grains requirements. However, India has gained self-sufficiency over the years, especially after the advent of Green Revolution.
(iii) Overflowing Buffer Stocks: The surplus production of foodgrains enabled government to buy and build buffer stock that could be used in times of shortage.
(iv) Increased Employment: Green Revolution created diverse job opportunities as multiple cropping increased the need for hired workers.
(v) Link between Agriculture and Industry: The linkage between agriculture and industry has strengthened with increased demand for inputs produced and supplied by industries.
Question 6.
Why is it important to promote small scale industries? Explain.
Answer:
It is important to promote small scale industries due to the following reasons:
(i) Greater Employment Opportunities: Small scale industries are more labour intensive. With less earmarked investment of capital, more persons can be employed in these industries.
(ii) Equity in the Distribution of Income: Due to small scale of production, there remains equity in the distribution of income. There is no concentration of capital in a few hands but it is distributed among all the people engaged in production. The profit of these industries is shared by many people.
(iii) Decentralisation: Small scale industries are situated in villages and towns. They reduce the regional imbalances. As a result, benefits of these industries go to the masses.
(iv) Less Pressure on Agriculture: Small scale industries have great importance in India. Most of its population is engaged in agricultural activities. Every year about 30 lakhs of people increase as dependents on agriculture in India. Therefore, it is necessary to reduce the increasing pressure on agricultural land. It can be achieved only by establishing more small scale industries.
(v) Less Capital Requirements: Small scale industries need less capital as compared to large scale industries. In country like India where capital is scarce, small scale industries can be established with less amount of capital.
(vi) Immediate Increase in Production: The gestation period of small scale industry is short. As a result, production starts immediately after the establishment of these industries, In India, 40 per cent of the industrial production is produced in small scale industries.
(vii) Production of Artistic Goods: More manual work is done in these industries. As a result, production of artistic goods is only possible in small scale industries.
(viii) Importance in Exports: Small scale industries have great importance in India’s exports. In 1990’s, the contribution of these industries in total exports was 35 per cent.
(ix) Industrial Peace: Industrial peace is the feature of these industries because there is less possibilities of labour exploitation.
Question 7.
Explain the features of industrial licensing policy.
Answer:
Following are the features of industrial licensing policy:
(i) Compulsory Licensing: Since 1951, obtaining license is compulsory for those industries which had fixed capital up to ₹ 10 lakhs. But this fixed capital limit increased to ₹ I crore in 1970. This limit further increased to ₹ 3 crore in 1978, to ₹ 5 crore in 1983, ₹ 15 crore in 1985 and ? 25 crore in 1990. According to New Industrial Policy of 1991, licensing is compulsory only for those 14 industries whose production is related to defence, environment and dangerous chemicals. Number of these 14 industries further decreased to 2 in 2011— 12.
(ii) Expansion of Scale of Production: According to Industrial Licensing Policy of 1970, licensing was compulsory for the expansion of industries under MRTP Act. Since 1991, licensing is not compulsory for the expansion of production capacity.
(iii) Industries for Public Sector: From 1956 to 1991, 17 industries were reserved for the public sector. These 17 industries could be established in public sector. For the establishment of these industries in private sector, one had to take license from the government. Now, this number has been decreased to 2 since 2011 -12.
After 1970, policy of licensing has been continuously simplified and liberalised. As a result entrepreneurs are permitted to expand or establish industries according to their will and they have favourable effects on industrialisation.
Question 8.
Discuss the significance of foreign trade.
Answer:
The significance of foreign trade can be examined with the help of following points:
(i) Optimum Use ofWorld’s Scarce Resources: It is compatible with the application of the principle of maximum advantage for every country.
Every country is enabled to sell its products in those markets, where it gets best prices for them and to purchase raw materials and other goods in the cheapest markets. Thus, in the foreign trade process, a country enjoys full freedom both as the seller of its exports and the purchaser of its imports.
(ii) Import of Required Goods: Foreign trade enables the underdeveloped countries to import capital goods and essential raw materials, which are required for their economic development.
(iii) Earn Foreign Exchange: Foreign trade also enables the countries to procure foreign exchange.
(iv) Control Prices: Import and export often reduce the violent fluctuations of prices of those commodities, which are scarce or available in surplus.
(v) Increase in Country’s Consumption Capacities: Foreign trade enlarges a country’s consumption capacities, provides access to scarce resources and exposure to the worldwide market for products, which is needed for growth.
(vi) An Engine of Economic Growth: Foreign trade is treated as engine of economic growth as it plays an important role in the economic development of the country.
Through foreign trade, a country not only earns foreign exchange to purchase materials needed for development but also leads to fuller utilisation of natural resources, increase in employment opportunities, development of means of transportation and communication; expansion of tertiary services like banking, finance and insurance; and increase government income in the form of various taxes. Thus, foreign trade, is an engine of economic growth.
Question 9.
Discuss the changes in India’s value and volume of trade over the period.
Answer:
Value of trade means the money value of the imported and exported goods. On the other hand, the volume of trade means the physical quantity of the imports and exports. It is not possible to arrive at any total of the goods and services because different goods have different units of measurement.Thus, the total of goods and services is expressed in money term. Value of foreign trade of India can be understood from the following table:
Value of India’s Foreign Trade (₹ Crore)
| Year | Imports | Exports | Balance of Trade |
| 1950-51 | 581 | 606 | + 25 |
| 1960-61 | 1,121 | 642 | -479 |
| 1970-71 | 1,634 | 1,535 | -99 |
| 1980-81 | 12,549 | 6,711 | – 5,838 |
| 1990-91 | 20,083 | 32,553 | – 7,516 |
Source: Economic Survey 2013-14
From 1950-51 to 1960-61 imports grew rapidly mainly due to heavy imports of machinery, raw material and other items demanded by economic growth. Major changes in volume or value of foreign trade are clear from the above table.
Both imports and exports have increased in volume tremendously after independence. Increase in exports has been smaller than the increase in imports, which led to a persistent deficit in the balance of trade.
Imports increased due to increased needs, limited domestic production, oil crisis, fast growing population, natural calamities and liberalisations, etc.
Inspite of considerable increase in foreign trade in India, our share in world trade has declined. In 1950-51, our share in total imports of the world was 18 percent and in world export was 2 percent. Recently, India’s share in world imports has come down to 0.79 percent and that of exports has come down to 1.7 percent, which shows that the growth of foreign trade in India is much slower than the growth in the rest of the world.
Question 10.
What the main features of foreign trade in India? Explain
Answer:
The main features of foreign trade in India are as follows:
(i) Share in National Income: The share of foreign trade in national income of India is increasing. This share was only 12 percent in 1950-51 which presently increased to about 17 percent in 1990-91.
(ii) Dependence on a Few Ports: India’s foreign trade is dependent mainly upon Mumbai, and Chennai ports. As a result, the pressure of trade has been increased on these ports, Government of India is developing some other ports for trade.
(iii) Changing Composition of Exports: After independence, the composition of India’s exports; has been changed. In the beginning of planning era, India was the main exporter of agricultural products like, tea. cotton, jute, cashew, oil and leather, etc. However, at present, India is exporting manufactured goods like readymade garments, machinery, tea, electrical goods, etc.
(iv) Changing Composition of Imports: After independence, the composition of India’s imports has als6. been changed. At the time of independence, India was the main importer of cloth, medicines, vehicles, iron and steel, electrical goods, etc. But now India is importing petroleum, machinery, fertilisers, raw materials, steel, oil, etc.
(v) Balance of Trade: At the time of independence, India’s trade was almost favourable. But after independence, India’s foreign trade became unfavourable. Imports have been increasing much faster than our exports.
Indian Economy 1950-1990 Important Extra Questions HOTS
Question 1.
Mention two ways of increasing the flow of goods and services.
Answer:
The two ways in which flow of goods and services can be increased are:
(i) Increase the production capacity, which gives rise to the stock of productivity of resources.
(ii) Adopt innovative technology, which enhances the productivity of output per unit of input.
Question 2.
‘Full employment does not mean a situation of zero unemployment.’ Justify
Answer:
In every economy, unemployment always prevails in some form or the other due to the structural changes. One cannot say that full employment is a situation of unemployment. Due to some structural changes like change in technology, the employees who are unaware of the technology remain unemployed while those who upgrade themselves and adapt to the new technology get employment.
Question 3.
Give the reason for poor performance of the agricultural sector in the Soviet Union.
Answer:
Farmers in the former Soviet Union did not own any land. They neither enjoyed the profits nor suffered the losses. Since farmers lack ownership, there are no incentives for them to be efficient. This is the reason for the poor performance of the agricultural sector in the Soviet Union despite the availability of vast areas of highly fertile land.