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Written by Manish Verma
Where every problem is solved of University of Delhi, SOL, NCWEB
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Q.1. Explain the concept of food security system. What are the flaws in Indian food
security programme? What policy measures have been undertaken by the government to
ensure food security for all?
ANS: The Word Food Security is defined as to ensure that all people at all times have both
physical and economic access to the basic food they need. As for as the Food security
system in India is concerned, it is related to the distribution of food-grain in the food deficit
areas, towns and villages either through Govt.
Public Distribution System (PDS) is an Indian food security system. Established by the
Government of India under Ministry of Consumer Affairs, Food, and Public Distribution and
are managed jointly by state governments in India, it distributes subsidized food and nonfood items to India's poor.
Flaws in Indian Food Security Programme are:
• Population – Although a major part of the Indian population is engaged in agricultural
activities, the availability of food for all is a challenge due to the increasing population of the
country
• Poverty – This is one of the biggest challenges which need to be overcome in order to
attain the desired food security in the country. The percentage of people living below the
poverty line (BPL) is extremely high. Know about the Population – Although a major part of
the Indian population is engaged in agricultural activities, the availability of food for all is a
challenge due to the increasing population of the country
• Climatic Change – Farming and agricultural activities have been severely affected by
climatic change over the past few years. Some regions face floods while some experience
drought. Similar changes have severely affected livestock, forestry, fisheries and
aquaculture
• Biofuels – The growth of the biofuel market has reduced the land used for growing food
crops
• Corruption – Diverting the grains to open market to get better margin, selling poor quality
grains at ration shops, the irregular opening of the shops adds to the issue of food insecurity
• Inadequate storage facilities – Inadequate and improper storage facilities for grains,
which are often stored outside under tarps that provide little protection from humidity and
pests
• Lack of Awareness – Lack of education and training on new techniques, technologies and
agricultural products. Traditional farming methods are slightly more time consuming and
delay the production of food grains, etc.
• Unmonitored nutrition programmes – Emphasis must be given on introducing and
enacting well-monitored nutrition programmes at the linked article.
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The following are the measures to be taken for achieving food security for growing
population through higher food production.
1. Education and literacy
Role of education in improving farm efficiency and technology adoption has been well
established. As agriculture transformed from subsistence to commercial level, farmers seek
information on a wide range of issues to acquire knowledge or upgrade their skills and
entrepreneurial ability. Literacy emerges as an important source of growth in adoption of
technology, and use of modern inputs like fertilizers and machines.
2. Crop diversification
Food availability is a necessary condition for food security. India is more or less selfsufficient in cereals but has deficit in pulses and oilseeds. Due to changes in consumption
patterns, demand for fruits, vegetables, dairy, meat, poultry, and fishery products has been
increasing. There is a need to increase crop diversification and improve allied activities to
produce such crops and produces in which we are deficient.
3. Tackling climate change
Food security in India can be achieved by paying higher attention to issues such as climate
change, limiting global warming, including the promotion of climate-smart agricultural
production systems and land use policies at a scale to help adapt and mitigate ill effects of
climate change.
4. Integrated nutrient management
Attention needs to be given to balanced use of nutrients. To improve the efficiency of
fertilizer-use, what really needed is enhanced location-specific research on efficient fertilizer
practices, improvement in soil testing services, development of improved fertilizer supply
and distribution systems and development of physical and institutional infrastructure.
5. Improved technology adoption
Adoption of technologies like integrated nutrient management, integrated pest
management and integrated weed management need to be made available for adoption to
ensure higher production and sustainability of production base.
6. Awareness on population growth
The awareness of the pressures of increasing population growth and consumption patterns
on ecosystem functioning should be created to sensitize farmers on adoption of sustainable
crop cultivation and management practices.
7. Focus on small farmers
Increase in food production in the country does not necessarily ensure food security, if the
poor do not have the buying power. Therefore, participation of small farmers in food
production is essential to achieve food security. Most of them being illiterate and having
failed earlier either in adopting new technologies or repaying the loan provided under
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various development schemes. They need support not only to procure inputs but also to
gain confidence.
Q.2. Discuss the various land reforms undertaken by the Indian government. What are the
causes of unsatisfactory progress of these land reforms?
ANS: Land reforms programmes in India includes: Abolition of Intermediaries, Tenancy
reforms, consolidation of holdings and determination of holdings per family and to
distribute surplus land among landless peoples.
At the time of independence ownership of land was concentrated in the hands of a few.
This led to the exploitation of the farmers and was a major hindrance towards the socioeconomic development of the rural population. Equal distribution of land was therefore an
area of focus of Independent India's government. Laws for land ceiling were enacted in
various states during 50s & 60s which were modified on the directives of central
government in 1972.
Under the 1949 Indian constitution, states were granted the powers to enact (and
implement) land reforms. This autonomy ensures that there has been significant variation
across states and time in terms of the number and types of land reforms that have been
enacted. We classify land reform acts into four main categories according to their main
purpose.
1. The first category is acts related to tenancy reform. These include attempts to regulate
tenancy contracts both via registration and stipulation of contractual terms, such as shares
in share tenancy contracts, as well as attempts to abolish tenancy and transfer ownership to
tenants.
2. The second category of land reform acts is attempts to abolish intermediaries. These
intermediaries who worked under feudal lords (Zamandari) to collect rent for the British
were reputed to allow a larger share of the surplus from the land to be extracted from
tenants. Most states had passed legislation to abolish intermediaries prior to 1958.
3. The third category of land reform acts concerned efforts to implement ceilings on land
holdings, with a view to redistributing surplus land to the landless.
4. Finally, we have acts which attempted to allow consolidation of disparate land-holdings.'
Though these reforms and in particular the latter were justified partly in terms of achieving
efficiency gains in agriculture it is clear from the acts themselves and from the political
manifestos supporting the acts that the main impetus driving the first three reforms was
poverty reduction.
The Task Force on agrarian relations was set up the Planning Commission for the purpose of
appraising of progress and problems of land reforms. It enumerated the following causes of
poor progress of land reforms in India.
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1. Deficiency of Reliable Records:
The absence of concurrent evaluation and reliable (up-to-date) records is the biggest hurdle
for the slow progress of land reforms. After forty-five years of land reforms, the reporting
system is weak and irregular. There has been no systematic review of progress at periodic
intervals. Therefore, it is not possible to identify obstacles in the way of implementation of
land reform.
2. Lack of Financial Support:
Lack of financial support is still another hindrance in the way of land reforms. No separate
allocation of funds was made in the Five-Year Plans for financing land reforms. Thus, lack of
adequate budget support in any form is largely responsible for the poor results of its
implementation.
3. Lack of Integrated Approach:
Another reason for the failure of land reforms in India was the lack of integrated approach
such as abolition of intermediary tenures, tenancy reforms and ceiling of holdings etc. They
lack proper co-ordination in the programmes.
4. Improper Implementation:
The responsibility for the implementation of land reforms rests with the revenue
administration in almost all the states. To implement land reforms is only one among its
many functions.
5. Legal Hurdles:
Legal problems and constraints also stand in the way of implementation of land reforms in
the country. The Task Force has specifically stated that, “Whatever little chance of success
was there, has completely incorporated because of the loopholes in the laws and protracted
litigation.”
6. Lack of Pressure from Below:
The Task Force of Planning Commission has observed “except in few scattered and localized
pockets, practically all over the country the poor peasants and agricultural workers are
passive, un-organised and non-co-operative.”
7. Lack of Political Will:
The Task Force was of the view that there was lack of political will in the enactment of
progressive measures of land reforms and their efficient implementation. Efficient
implementation requires far hard political decisions and effective political support, direction
and control.
8. Indifferent Attitude of the Administration:
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In all the states, the whole responsibility for the implementation or measures of land
reforms is with the revenue administration. But it is a sorry state of affair that the attitude
of the administrative staff is quite indifferent and even their behaviour is cold.
Q.3. Explain the concept of Foreign Direct Investment. Discussing the advantages and
disadvantages of FDI, analyse the Indian government’s evolving policies on the same.
ANS: A foreign direct investment (FDI) is a purchase of an interest in a company by a
company or an investor located outside its borders. Generally, the term is used to describe a
business decision to acquire a substantial stake in a foreign business or to buy it outright in
order to expand its operations to a new region.
Advantages of Foreign Direct Investment:
1. Economic Development Stimulation:
Foreign direct investment can stimulate the target country’s economic development,
creating a more conducive environment for you as the investor and benefits for the local
industry.
2. Easy International Trade:
Commonly, a country has its own import tariff, and this is one of the reasons why trading
with it is quite difficult. Also, there are industries that usually require their presence in the
international markets to ensure their sales and goals will be completely met. With FDI, all
these will be made easier.
3. Employment and Economic Boost:
Foreign direct investment creates new jobs, as investors build new companies in the target
country, create new opportunities. This leads to an increase in income and more buying
power to the people, which in turn leads to an economic boost.
4. Development of Human Capital Resources:
One big advantage brought about by FDI is the development of human capital resources,
which is also often understated as it is not immediately apparent. Human capital is the
competence and knowledge of those able to perform labour, more known to us as the
workforce. The attributes gained by training and sharing experience would increase the
education and overall human capital of a country. Its resource is not a tangible asset that is
owned by companies, but instead something that is on loan. With this in mind, a country
with FDI can benefit greatly by developing its human resources while maintaining
ownership.
5. Tax Incentives:
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Parent enterprises would also provide foreign direct investment to get additional expertise,
technology and products. As the foreign investor, you can receive tax incentives that will be
highly useful in your selected field of business.
6. Resource Transfer:
Foreign direct investment will allow resource transfer and other exchanges of knowledge,
where various countries are given access to new technologies and skills.
Disadvantages of Foreign Direct Investment
1. Hindrance to Domestic Investment:
As it focuses its resources elsewhere other than the investor’s home country, foreign direct
investment can sometimes hinder domestic investment.
2. Risk from Political Changes:
Because political issues in other countries can instantly change, foreign direct investment is
very risky. Plus, most of the risk factors that you are going to experience are extremely high.
3. Negative Influence on Exchange Rates:
Foreign direct investments can occasionally affect exchange rates to the advantage of one
country and the detriment of another.
4. Higher Costs:
If you invest in some foreign countries, you might notice that it is more expensive than
when you export goods. So, it is very imperative to prepare sufficient money to set up your
operations.
5. Economic Non-Viability:
Considering that foreign direct investments may be capital-intensive from the point of view
of the investor, it can sometimes be very risky or economically non-viable.
6. Expropriation:
Remember that political changes can also lead to expropriation, which is a scenario where
the government will have control over your property and assets.
Liberalized Policy towards Foreign Investment since 1991: In view of the recent decline in
fresh inflows from foreign direct investment, the Government of India has announced a
liberal policy towards foreign capital. The new industrial announced in July 1994 includes
the following provisions with regard to foreign investment:
1. Approving direct foreign investment up to 51 per cent foreign equity in high priority
areas;
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2. Foreign technology agreements are also liberalized for the 34 industries with firms left
free to negotiate the terms of technology transfer based on their own commercial judgment
and without the need for prior Government approval for hiring foreign technicians;
3. In order to provide access to international markets, most of the foreign equity holding up
to 51 per cent equity will be permitted for trading companies;
4. Automatic approval for foreign investment up to 51 per cent equity in 34 specified high
priority, capital intensive, high technology industries;
5. A special Board viz., foreign investment Promotion Board has been set up to look into
foreign investment projects where higher foreign equity limits of more than 51 percent may
be permitted.
Further concessions were announced foreign equity capital in 1992-93. Existing companies
were permitted to raise foreign equity up to 51 per cent subject to certain prescribed
guidelines. Disinvestment of equity by foreign investors has been allowed at market rates on
stock exchange. Foreign companies have been allowed to trademark on domestic sales from
May 14, 1982. In February 2000, the government took major decisions to place all items
under the automatic route of FDI/NRIs investment except for a negative list.
Q.4. Discuss the problems of small-scale industries in India. Critically analyse the Indian
government’s policy for the small-scale industrial sector.
ANS: The government had reserved certain items for exclusive production by Small Scale
Industries. Large scale enterprises were not allowed to produce the items which were
reserved for the SSI sector. With the opening up of the economy and following the
principles of liberalization and globalization, many items have been successively Dereserved. Therefore, Small Scale Industries have to now counter the twin forces of
competition from Indian large-scale enterprises as well as foreign competitors.
Problems faced by Small Scale Industries:
The following are the problems faced by Small Scale Industries:
1. Poor capacity utilization
In many of the Small-Scale Industries, the capacity utilization is not even 50% of the installed
capacity. Nearly half of the machinery remains idle. Capital is unnecessarily locked up and
idle machinery also occupies space and needs to be serviced resulting in increased costs.
2. Incompetent management
Many Small-Scale Industries are run in an incompetent manner by poorly qualified
entrepreneurs without much skill or experience. Very little thought has gone into matters
such as demand, production level and techniques, financial availability, plant location,
future prospects etc. According to one official study, the major reason for SSI sickness is
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deficiency in project Management i.e., inexperience of promoters in the basic processes of
production, cash flow etc
3. Inadequate Finance
Many Small-Scale Industries face the problem of scarcity of funds. They are not able to
access the domestic capital market to raise resources. They are also not able to tap foreign
markets by issuing ADR’s (American Depository Receipts) GDR’s (Global Depository
Receipts) etc because of their small capital base. Banks and financial institutions require
various procedures and formalities to be completed. Even after a long delay, the funds
allocated are inadequate.
Bank credit to the small-scale sector as a percentage of total credit has been declining. It fell
from 16% in 1999 to 12.5% in 2002. Small Scale Industries are not able to get funds
immediately for their needs. They have to depend on private money lenders who charge
high interest. Finance, as a whole, both long and short term, accounts for as large as 43% of
the sector’s sickness.
4. Raw material shortages
Raw materials are not available at the required quantity and quality. Since demand for raw
materials is more than the supply, the prices of raw materials are quite high which pushes
up the cost. Scarcity of raw materials results in idle capacity, low production, inability to
meet demand and loss of customers.
5. Lack of marketing support
Small Scale Industries lack market knowledge with regard to competitors, consumer
preferences, market trends. Since their production volume is small and cannot meet
demand for large quantities their market is very restricted. Now with the process of
liberalization and globalization they are facing competition from local industries as well as
foreign competitors who sell better quality products at lower prices. For e.g. heavily
subsidized but better-quality imports from China has made most of the Indian SSI units
producing toys, electronic goods, machine tools, chemicals, locks and paper etc., unviable.
6. Problem of working capital
Many Small-Scale Industries face the problem of inadequate working capital. Due to lack of
market knowledge their production exceeds demand, and capital gets locked in unsold
stock. They do not have enough funds to meet operational expenses and run the business.
7. Problems in Export
They lack knowledge about the export procedures, demand patterns, product preferences,
international currency rates and foreign buyer behaviour. Small Scale Industries are not able
to penetrate foreign markets because of their poor quality and lack of cost competitiveness.
In countries like Taiwan, Japan etc. products produced by Small Scale Industries are
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exported to many foreign countries. But in India not much thought and focus has gone into
improving the export competitiveness of Small-Scale Industries.
8. Lack of technology up-gradation
Many Small-Scale Industries still use primitive, outdated technology leading to poor quality
and low productivity. They do not have adequate funds, skills or resources to engage in
research and development to develop new technologies. Acquiring technology from other
firms is costly. Therefore, Small Scale Industries are left with no choice but to continue with
their old techniques.
9. Multiplicity of labour laws
One of the merits of Small-Scale Industries are that they are labour intensive and can
provide employment to a large number of people. But the multiplicity of labour laws, need
to maintain several records (PF, ESI, Muster Rolls etc), fines and penalties for minor
violations etc place Small Scale Industries at a great disadvantage.
10. Inability to meet environmental standards
The government lays down strict environmental standards and Courts have ordered closure
of polluting industries. Small Scale Industries which are already facing shortage of funds to
carry out their business are not able to spend huge sums on erecting chimneys, setting up
effluent treatment plants etc.
Measures adopted by the government to solve the problems small a cottage industry:
1. Setting up of Boards to Look After cottage and small Industries: The Government of
India have set up a number of Boards to look after the development of industries under
their responsibility:
(i) Cottage Industries Board was set up in 1948 -to look after the specie problems of cottage
industries and take steps for the development,
(ii) All India Handloom Board was set up in October 1952 to help the handloom industry,
(iii) All India Handicrafts Board for promotion of scales of handicrafts goods in India and
abroad.
2. Khadi and Village Industries commission provides facilities for training and purchase of
raw materials and marketing goods of Khadi and village industries.
3. District Industries centres have been set up to provide all required services to small
industries under one roof.
Many other organisations (Small Industries Development Organisation, National Small
Industries Corporations, National Institute for Entrepreneurship and small Business
Development, etc.) have been set up to look after various problems facing these industries.
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4. Reservation of Items for Production: To enhance competitive strength and an assured
market to product of small-scale sector many items have been reserved for exclusive
production in the small-scale sector.
5. Government purchases a number of products from the small-scale sector: Presently, the
Government has reserved 409 items for exclusive purchase from small Scale Sector.
6. Credit facilities: State Financial Corporations look after the financial needs of this sector.
7. Equity participation by large Industries: Under the New Industrial Policy of July 1991, the
large industries have been permitted to buy shares of small industries up to 24% of the total
shareholding.
8. More concessions have been given to the tiny sector.
Q.5. Examine the performance of Industrial Sector in India. What are the main features of
the Industrial policy in India since 1991.
ANS: The pattern of industrial growth in India over the past few decades has the following
main features:
(i) Diversification of industrial structure with development of a variety of consumer goods,
capital goods, heavy and basic industries.
(ii) Increase in production of capital goods, metals, cement, etc., which provide a basis for
further industrial growth.
(iii) Slow growth of consumer goods industries such as cotton cloth, edible oil, Vanaspati,
tea, etc which was mainly due to slow growth of agriculture.
(iv) Rapid growth in production of consumer durable goods like televisions, washing
machines, refrigerators, automobiles etc.
(v) Strengthening of infrastructure by achieving high growth in such sphere as power
generation, increased production of coal, petroleum, transport equipment etc.
(vi) Achieving a more balanced industrial structure.
Problems of Industrial growth
The following are some of the major problems and obstacles that are being faced in the
process of industrialisation of the country:
1. Poor capital formation - Poor rate of capital formation is considered as one of the major
constraints which has been responsible for slow rate of industrial growth in India.
2. Political factor - During the pre-independence period, industrial policy followed by British
rule was not at all favourable for the interest of the country.
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3. Lack of infrastructural facilities - India is still backward in respect of infrastructural
facilities and it is an important impediment towards industrialisation of the country.
4. Poor performance of the agricultural sector - Industrial development of India is very
dependent on the performance of the agriculture sector. Poor performance of the
agriculture retards the development of industries in India.
5. Dearth of skilled and efficient personnel - The country has been facing the problem of
dearth of technical and efficient personnel required for the industrial development of the
country. In the absence of proper personnel, it has become very difficult to handle such
sophisticated computerized machinery necessary for industrial development of the country.
6. Elite oriented consumption - In recent years, a strong tendency to produce rich men's
goods has been established among the large industrial houses. Accordingly, the production
of "white goods" like refrigerators, washing machines, air conditioners, etc. expanded
substantially along with the other luxury products. But the production of commodities for
mass consumption has recorded a slow growth rate.
7. Poor performance of the Public Sector - Inspite of attempting a substantial expansion
during the planning period, the performance of public sector enterprises remained all along
very poor. This sector had not generated the required surplus necessary for further
investment in the industrial sector of the country.
8. Regional imbalances— Concentration of industrial development into some few states has
raised another problem of industrial development of the country.
9. Industrial sickness - Another problem faced by the industrial sector is its growing sickness
due to bad and extremely inefficient management.
The salient features of this policy since 1991 are:
1. Abolishing Industrial licensing -The industrial licensing will be abolished for all projects
except for those, which are important for security, strategic, social and environmental
reasons and items of elite's consumption.
2. Reservation for the Public Sector - Many of the industries reserved for the public sector
under the earlier policy, now opened for the private sector. The role of the public sector has
been limited only to 4 industries of strategic importance. Disinvestment is being carried out
in many public sector industrial units.
3. Liberalized policy towards foreign capital and technology- Policy towards foreign capital
has been liberalized. Approval will be given for direct foreign investment up to 51 per cent
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equity in 34 high priority industries provided equity covers the foreign exchange
requirements of capital goods.
The share of foreign equity participation has been increased and in many activities 100% FDI
is permitted. Automatic permission is now granted for technology agreements with foreign
companies.
4. Changes in the MRTP Act- Appropriate changes have been made in the MRTP Act to
remove obstacles in the way of growth and expansion of industrial units of the large
industrial houses.
5. Greater support to small-scale industries- Small-scale sector has been assured all help
and accorded due recognition.

Objectives
The major objectives that the Government wants to achieve through the New Policy are as
follows:
(i) Self-reliance through greater ability to pay for imports through our own foreign exchange
earnings.
(ii) Encouragement to entrepreneurship and development of indigenous Technology.
(iii) Spread of industrialisation in backward areas.
(iv) Enhance supports to the small-scale sector.
(v) Encouragement to foreign investment and technological collaboration.
(vi) Open all manufacturing activity to competition, except the strategic industries.
(vii) Sustained growth in productivity and employment.
Q.6. Explain the importance of agriculture sector in India. Explain the factors of low
agricultural productivity in Indian agriculture sector. Suggest the measures to improve the
productivity.
ANS: As per 2018, agriculture employed more than 50% of the Indian work force and
contributed 17–18% to country's GDP. In 2016, agriculture and allied sectors like animal
husbandry, forestry and fisheries accounted for 15.4% of the GDP (gross domestic product)
with about 41.49% of the workforce in 2020.
The importance of agriculture in the Indian economy is evident from the following points:
(i) Contribution to GDP: Agriculture contributes about 14 % to India's GDP. This share was
as high as 51% in 1950 - 5, but has been gradually declining with progress and development
of the country.
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(ii) Supply of wage goods: Wage goods such as wheat, rice, maize, pulses, oil, sugarcane, etc
are necessary goods. Agricultural sector in India provides wage goods to 121 crore people
and 38 crore animals.
(iii) Employment in India: Agriculture is the principal source of employment. Over 50% of
the working population is either directly or indirectly dependent on agriculture for means of
their livelihood.
(iv) Supplier of raw material for industries: Agriculture provides cotton for the textile
industries, sugarcane for sugar industry various seeds for oil industry and jute for gunnysack
industry. The growth of the secondary sector is dependent on the primary sector.
(v) Contribution to international trade: Agriculture is the major contributor to external
trade. India exports tea, jute, cashew nuts, tobacco, coffee, spices, etc on a large scale.
(vi) Instrumental in the growth of transport industry: Both railways and roadways are the
bulk carriers of agricultural products in India. Thus, the agricultural sector is a major
consumer of the transport services of our country.
(vii) Contribution to wealth of nation: In terms of fixed assets, land occupies the highest
rank in India, in addition to it, a large amount is invested in irrigation projects. Thus, the
agricultural sector owns a large part of the nation's wealth.
On the whole, Indian agriculture does not show high efficiency or productivity, though there
is an improvement since independence.
Some reasons for this situation are as follows:
1. Population Pressure:
Land is limited, and has almost reached the level where more expansion in cultivated area is
not possible. The growth in population creates immense pressure on land.
Even though land-human ratio in India is better compared to some of the developed
countries like Japan, the Netherlands, Belgium and even China, other factors like very low
yields and low levels of industrialisation in India compound the problem of population
pressure on agricultural land.
2. Uneconomic Holdings:
The average size of landholdings in India in 2001 was less than two hectares. One-fourth of
the total rural households own less than 0.4 hectare each, while another one-fourth are
landless. This creates difficulties in application of modern inputs, adoption of scientific land
improvement, water conservation and plant protection measures and in introducing
mechanised operations.
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These measures alone are capable of securing and stabilising high yields. The tardy progress
of land reforms in most states has compounded this problem. Consolidation of land can help
improve productivity.
3. Uncertain Monsoons and Inadequate Irrigation Facilities:
With more than half of the gross cropped area being rainfed, failure or inadequacy of rains
causes fluctuation in yields. Even if the maximum irrigation potential is realised, around 86.5
of gross cropped area will remain under rainfed conditions. This underlines the need to
develop rainfed agriculture on scientific lines.
4. Subsistence Nature of Farming:
Indian agriculture is characterised by its subsistence nature, i.e., most of the produce is
directly consumed by the producers and surplus, if any, is generally low. This is because
most Indian farmers, being poor, use outdated implements and technology, and are not
able to afford costly inputs. This results in low levels of returns and meagre incomes, which
in turn means low savings and low levels of reinvestments. Thus, a vicious circle operates
and stagnation in agriculture prevails.
5. Decline in Soil Fertility:
For an agricultural country like India, soil is a precious resource, and degradation- of soil is a
serious problem, which leads to depletion of soil fertility. Soil erosion is the main form of
degradation which occurs because of deforestation and unscientific agricultural practices
like shifting cultivation. Increasing salinity, alkalinity and aridity because of mismanagement
and repeated use are other reasons for loss of soil fertility.
6. Lack of Support Services:
This refers to the institutional support factors like support pricing, marketing and credit
facilities. These services help create a favourable environment to induce a spirit of
entrepreneurship among farmers by absorbing the risks involved in the agricultural activity.
These services are particularly inadequate in case of coarse cereals, and pulses.
7. Poor Organisation of Resources and Lack of Entrepreneurship:
India has an underdeveloped agricultural infrastructure and institutions. Conditions of
poverty and deprivation and unequal distribution of land resources hamper the evolution of
an agricultural entrepreneur class.
An underdeveloped agricultural sector on account of low productivity is the main reason for
low levels of diversification of the economy. A buoyant agricultural sector has been the basis
for industrial development in the developed countries.
Important measures to increase productivity are as follows:
1. Implementation of Land Reforms:
Special attempts will have to be made by the State Governments to implement the land
reforms legislation forcefully so that the slogan ‘land to the tiller* is translated into practice.
Unless this is done, the tiller will have no incentive to invest in land and adopt new
agricultural techniques. Therefore, land reforms are the first and foremost necessity.
2. Integrated Management of Land and Water Resources:
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The total geographical area of the country is 328.7 million hectares, of which only 264.0
million hectares possess potential for biotic production. Of this, ‘wastelands’ account for
79.5 million hectares leaving only 184.5 million hectares. However, even this area cannot be
regarded as being in good health. This proves the urgency for an integrated and efficient
management policy directed towards better utilisation of our land and water resources.
3. Improved Seeds:
Improved seeds can play an important role in increasing the productivity. This has been
amply proved by the experience of many countries and also by the use of high-yielding
varieties of wheat in Punjab, Haryana and Western Uttar Pradesh in our own country.
Farmers should also be educated in the methods of sowing, maturing and irrigating the new
high-yielding varieties of seeds.
4. Irrigation:
Use of improved seeds and fertilizers require proper irrigation facilities. Irrigation can also
make multiple cropping possible in a number of areas and hence enhance productivity.
5. Plant Protection:
Agricultural scientists have estimated that approximately 5 per cent of the crops are
damaged by insects, pests and diseases. Most of the farmers in the countryside are unaware
of the medicines and insecticides developed in recent years to face this challenge posed by
diseases and insects. The government should maintain its own technical staff to carry out
the spraying of pesticides and insecticides.
6. Provision of Credit and Marketing Facilities:
Use of improved varieties of seeds, fertilizers, pesticides, insecticides, agricultural machinery
and irrigation facilities, all require substantial money resources which small farmers do not
usually possess. Therefore, it is necessary to strengthen the credit cooperative sector and
free it from the clutches of large landowners.
Total food grain production increased from 50.8 million tonnes in 1950-51 to 234.47 million
tonnes in 2008-09. The production of food grains declined to 218.11 million tonnes during
2009 10 dues to long spells of drought in various parts of the country in 2009.
As per the second advance estimates released by Ministry of Agriculture on February 9,
2011, production of food grains during 2010-11 is estimated at 232.07 million tonnes
compared to 218.11 million tonnes in 2009-10.
In the non-food grains group, jute and cotton show slow progress. Oilseeds production
increased from 12.7 million tonnes in 1987-88 to 24.7 million tonnes in 1998-99. It fell to
15.1 million tonnes in 2002-03 but then fluctuated around 25 million tonnes in further
subsequent periods.
A significant improvement in yield has resulted in an increase growth rate of cotton
production from 2.80 per cent during the 1980s to 13.58 per cent per annum during 200010.
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Q.7. Briefly explain the problem of ‘Social Exclusion’ in India? Critically examine the
performance of various flagships programs followed in India.
ANS: Social Exclusion
The definition adopted here acknowledges that social exclusion is a complex and
multidimensional process. Specifically, the definition adopted here recognises that social
exclusion involves the lack of denial of resources, rights, goods and services, and the
inability to participate in the normal relationships and activities, available to the majority of
people in a society, whether in economic, social, cultural or political arenas. It affects both
the quality of life of individuals and the equity and cohesion of society as a whole.
The World Health Organisation identifies poor health status and inequalities as one of the
key consequences of social exclusion (WHO 2008). They suggest that this inequity is driven
by unequal access to resources, capabilities and rights.
These consequences of exclusion will also be experienced by disabled people. Social
exclusion shapes the extent and nature of participation that disabled people are able to
enjoy in their communities. Exclusion also spans relationships with close family and social
networks, broader community interactions, and dealings with the state. The WHO has
identified five key consequences of exclusion that create significant disadvantage for
disabled people (WHO 2011):
• Poorer health outcomes: Disabled people tend to have poorer health than the general
population, with greater vulnerability to secondary conditions and co- morbidities; they also
have higher rates of risky health behaviours such as smoking and inactivity, and a higher risk
of exposure to violence.
• Lower educational achievements: Educational completion gaps are common across lowincome and high-income countries.
• Less economic participation: Disabled people are less likely to be employed and generally
earn less when employed. In OECD countries, the employment rate for disabled people, at
44%, was only two-thirds that of non-disabled people (75%).
• Higher rates of poverty: Disabled people and households with a disabled member tend to
experience higher rates of deprivations, including food insecurity, poor housing, and
inadequate access to health care – and fewer assets than persons and households without a
disability.
• Increased dependency and restricted participation: Disabled people are often likely to be
isolated and dependent on others. Reliance on informal support is common, and this can
have adverse consequences for caregivers, including stress, isolation and lost socioeconomic opportunities. It is anticipated that understanding the drivers of exclusion will
support Think Differently to contribute to addressing these drivers and their consequences.
Flagship programmes of a government are those programmes which are the main or most
important and address major national concerns on health, education, environment,
irrigation, urban and rural development, employment and other sectors. The ultimate
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objective behind the flagship programmes is to achieve broad-based improvement in the
living standards of people and to ensure that growth is widely spread so that its benefits, in
terms of income and employment, are adequately shared by the poor and weaker sections
of the society.
The present volume is the scholar’s articles/research papers derived from capacity building
programme organized at Faculty of Commerce, BHU during the month of January, 2019. Ten
different flagship schemes of government of India namely MGNREGA, Pradhan Mantri Awas
Yojana, Pradhan Mantri Ujjwala Yojana, Pradhan Mantri Mudra Yojana, Pradhan Mantri Jan
Dhan Yojana, Pradhan Mantri Kaushal Vikas Yojana, Deen Dayal Upadhya Grameen
Kaushalya Yojana, Atal Pension Yojana, Pradhan Mantri Fasal Bima Yojana and Swachh
Bharat Abhiyan has been analysed and apprised.
The present volume would be helpful to policy makers in re-structuring, and re-assessment
of existing schemes for its successful implementation and value creation. Further, thirty (30)
review as well as empirical papers under ten useful flagship programmes of government of
India have been projected in the present volume that definitely will bring potential critical
thinking among prospective researchers which finally pave the way in preparing proposals
under STRIDE (Scheme for Trans-disciplinary Research for India’s Developing Economy)
IMPRESS (Impactful Policy Research in Social Science) and SPARC (Scheme for Promotion of
Academic and Research Collaboration) of Ministry of Human Resource Development,
Government of India.
Q.8. The poor socio-economic condition of Indian economy at the time of independence
was the result of unfavorable colonial policies. Do you agree? Explain.
ANS: India inherit a backward and underdeveloped economy from the British rulers. The
national and per capita income was very low; about 80% of the people lived in villages
characterized by wide-spread poverty, low agricultural production and productivity levels,
the industrial economy was very small with a predominance of traditional industries etc. It
was an underdeveloped economy:






its per capita income was very low,
there was capital deficiency in the economy and the rate of savings and investments
were low;
excessive pressure of population on agriculture was there;
Indian economy was experiencing an explosive growth of population; and the problem
of unemployment and underemployment existed;
there was economic backwardness of people and resources lay unexploited, and
the dependence of foreign trade was heavy. Such a dependence was indicated in several
ways, e.g. export of few commodities and foreign borrowings, inflow of foreign capital
and heavy dependence on imports.
Some prefer to call it a backward and stagnant economy. The backwardness is described in
terms of characteristics of people as an agent of production. Manifestations of such
backwardness are low labour efficiency, factor immobility, lack of specialization, illiteracy,
lack of entrepreneurship, economic ignorance and value system and social structure that
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minimizes the incentive for economic development. The rate of growth in per capita income
during the British period was around 0.5% per annum.
India's national income in 1948-49 was Rs. 8,650 crore and per capita income was Rs. 249.6
in that year. Agriculture provided nearly 50% of national income whereas the industrial
sector provided only 17.1% of national income. 72% of the total workforce was engaged in
agriculture whereas less than 11% of the total workforce was engaged in all forms of
industry and only less than 8% workers were employed in trades and transport. About 200250 million of India ion was either malnourished or undernourished. Only one-sixth in total
and cultivated land in India had irrigation facilities. Only 15% of the land in In was under the
cover of forests whereas 30-33% was regarded as the desirable percent.
Both saving and investment have a significant role in India's growth which is clearly
exhibited by the optimism of the economy to mobilize domestic savings.
According to the Harrod-Domar model, saving is assumed to be a constant proportion of
income with average and marginal propensity to save being equal. According to the
projections of the First Five Year Plan, the marginal propensity will increase from 0.20 in the
beginning to 0.50 over a period of time.
Whereas, in the Second Plan, Mahala Nobis Growth Model were also optimistic about
savings and considered both saving and investment to be important. It assumed that
productivity of investment in consumer goods industries was higher than that in the capital
goods industry and once it was installed, it could not be shifted anywhere else.
This will finally result in small investment in consumer goods industries in the short run
resulting in a higher growth rate and increased consumption in the long run as savings
would be higher in the short run. After the second Plan, successive Plans reaffirmed the
belief that the economy can generate savings. Which must eventually result in self-reliance
i.e. eliminating dependence on foreign aid. Thus, the economy will be able to generate the
required savings from domestic sources, including government and individuals and
households. It is a belief in the capacity of the economy to sustain a high investment is a
core of India's economy philosophy.
Q.9. “Indian economy on the eve of independence was stagnant as a result of colonial
policies”. Do you agree? Discuss in the light of the performance of agriculture, industry
and trade.
ANS: The Indian economy comprises of all the production activities and distribution
activities that relate to people. It also comprises of economic activities which related to
people and hence determines their appropriate standard of living. However, in this article,
we will discuss the status of the Indian economy on the eve of independence. It is important
for every Indian to know that on the eve of our independence, the economy of the country
was in a very bad shape. The end of the colonial rule left the nation in bits. We picked it up
and placed it in order. This bad condition of the country was the outcome of every policy of
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the British. Since every policy that they were framing was constantly focusing on favouring
their nation, we had very little left towards the end.
Therefore, in 1947, when British gave us back India to us, we took back our torn nation.
INDIAN ECONOMY ON THE EVE OF INDEPENDENCE
During the decades of British colonial rule in India, there were no efforts made to calculate
India’s per capital income. Similarly, the British rulers never found it necessary to calculate
our National Income or our Gross Domestic Product. Upon gaining independence, some
Indian individuals did try to measure India’s incomes. But the attempts tragically failed due
to inconsistency, lack of expertise and inaccuracy. But the contributions of VKRV Rao and
Dadabai Naoroji was very significant in this field.
Our economy had been a victim of enormous exploitation. Our natural resources, iron ores,
gold mines, wealth and manpower were subject to intense exploitation. Due to these
atrocities, the Indian economy on the eve of independence showed poor/low economic
growth. Immense efforts and knowledge were essential in order to move ahead.
Although India was a very independent economy before the British rule, towards the end, it
was exhausted. The Indian economy on the eve of independence was struggling to find the
path. Since all the policies that the British were framing only promote their interests, we
were diverging from prosperity. We were mere raw-material suppliers to the British. They
made use of our labour without treating them well. The 200 years of British rule also took
away our will to gain knowledge and awareness. Since we were their slaves, we never got
the right to proper education. And as a result of these actions, towards the end of their
reign, we were illiterate. The Indian economy on the eve of independence was full of people
who had absolutely no plan as to how to help the nation.
THE IMPACT ON INDIA’S AGRICULTURAL SECTOR
It is a known fact that over 70% of India’s National Income comes from its agricultural
activities. Back then, before 1947, over 95% of the country’s income came from its
agricultural activity. And over 85% of the country’s population lived in villages where
livelihood completely depended on agriculture. The Indian economy on the eve of
independence with respect to agriculture was disheartening. The most important Indian
sector was facing massive stagnation and continuous deterioration.
Hence the resulting situation of the sector was as follows:
Low productivity level: Productivity and output per hectare of land were very low. This
situation led to a very low yield of output irrespective of the large cultivation area.
High vulnerability level: Agricultural activities are dependent on climatic factors. Because a
poor rainfall generally led to a low output level and high crop failures. And no efforts were
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21
made by the British to eradicate irrigation issues. Hence making it vulnerable to external
factors.
Discussed below are some of the reasons for the stagnation of the agricultural sector.
• The Indian economy on the eve of independence suffered and continues to suffer the
effects of zamindari system. In this system, the main focus of the landlords is to extract rent
regardless of the economic conditions of the farmers. This is one of the focus reasons for
stress among farmers and fear to take a chance to grow. Hence, leading to a stagnant
agricultural sector.
• The lack of resources, be it financial or otherwise, is a critical factor leading to a stagnant
agricultural sector.
• Extensive commercialization of agriculture refers to the shift from cultivating for self to
cultivating for sale in the market. This has not been helpful in improving the condition of
farmers due to the existence of middlemen. Hence, the stagnation or retardation of the
Indian agricultural sector.
THE IMPACT ON INDIA’S INDUSTRIAL SECTOR
Before the British period, India’s well-known industry was the handicraft and textile
industry. India was well-known for its industries in cotton and silk textiles as well. And in
addition, Indians were excellent in metal and precious stonework as well. When the
Britishers came, they were followers of de-industrialization in India. They did this by creating
situations which were conducive to the decay of the handicraft and textile industry. They
also did not make any effort to promote to permit the continuation of the metal and
precious stone works.
The following was the condition of the industrial sector on the eve of independence.
The decay of the Handicraft Industry. The traditional handicraft industry in India initially was
in high demand. But the British rule completely discriminated the practice. The prevalence
of discriminatory tariff policy and the competition from machine-made products was very
critical for the downfall. Also, the introduction of railways in India was the reason for market
expansion. Consequently, the demand for the handicrafts began to fall. All of these directly
led to the downfall of our prominent industry.
Slow Growth of the Modern Industry. Due to the limited growth of the PSEs and the
lopsided industrial structure, the growth of the modern industry was slow. In addition, there
was a lack of basic and heavy industries.
To conclude:
Not only were the industrial and agricultural sectors of the country affected but so was the
foreign trade. Foreign trade plays a crucial role in the development and earnings of a
country. Although it is great to be a self-sustaining and independent country, foreign trade
and globalization are critical to a country’s success. Indian economy on the eve of
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independence in relation to the foreign trade was very poor. Due to the rules imposed by
the British, none of India’s products or skills had any recognition. And hence, adversely
affecting the structure, composition and volume of the country’s foreign trade and income.
Q.10. What is ‘Balance of payments’ of a country? Briefly point out the main reason’s for
the persistent deficit in India’s balance of payments.
ANS: The balance of payments tracks international transactions. When funds go into a
country, a credit is added to the balance of payments (“BOP”). When funds leave a country,
a deduction is made. For example, when a country exports 20 shiny red convertibles to
another country, a credit is made in the balance of payments.
Some of the major important causes of deficit (disequilibrium) in balance of payments are:
1. Economic Factors
2. Political Factors
3. Social Factors.
Deficit in the balance of payments may be caused due to number of factors.
These factors can be divided into three groups:
1. Economic Factors:
(i) Developmental activities:
Developing countries depend on developed nations for supply of machines, technology and
other equipment. This leads to increased levels of imports, thereby, resulting in a deficit in
the BOP account.
(ii) High rate of inflation:
When there is inflation in the domestic economy, foreign goods become relatively cheaper
as compared to domestic goods. It increases imports which causes a deficit in the BOP.
(iii) Cyclical fluctuations:
When the domestic economy is going through a phase of boom, then domestic production
may be unable to satisfy the domestic demand. It leads to a deficit in BOP, due to increase
in imports.
(iv) Change in Demand:
Fall in demand for country’s goods in the foreign markets leads to fall in exports and it
adversely affects the balance of payments.
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(v) Import of Services:
Underdeveloped countries import services from developed countries for which, they have
to pay huge amounts of money. It leads to a deficit in the BOP.
2. Political Factors:
(i) Political Instability:
Political instability may lead to large capital outflows and reduce the inflows of foreign
funds, thus, creating disequilibrium in the BOP.
(ii) Political disturbances:
Frequent changes in the government, inadequate support to the government in parliament
also discourage inflows of capital. This leads to a deficit due to higher outflows than inflows.
3. Social Factors:
(i) Demonstration Effect:
When the people of underdeveloped countries come in contact with those of advanced
countries, they start adopting the foreign pattern of consumption. Due to this reason, their
imports increase and it leads to an adverse balance of payments for underdeveloped
country.
(ii) Change in tastes, preferences, fashion and trends:
An unfavourable change for the domestic goods leads to a deficit in the balance of
payments.
Q.11. Explain the role played by the public sector enterprises in the economic
development of India. What are the main reasons for their poor performance?
ANS: The public sector encompasses more than just core government and may intersect
with the not-for-profit and private sectors. The public sector is described as a growing ring
of institutions, with the central government at the centre and agencies and public firms
following. A grey zone surrounds this ring, consisting of government-sponsored contractors
and publicly held enterprises that may or may not be part of the public sector. Public sector
agencies include the police, military, public roads, public transit, and public education.
Public companies and NGOs are similar to government organizations in that they produce
programmers, goods, or services, but they are not governed by the government and may
have revenue sources other than government money.
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7 Ways by Which the Public Sector Boost Economic Development
1. By developing Infrastructure:
Economic development is impossible without the development of infrastructure.
Infrastructure investment by the public sector in areas such as power, transportation,
communication, basic and heavy industries, irrigation, canals, education, and technical
training, and so on has set the way for the country’s agricultural and industrial
development, resulting in overall economic growth. These infrastructural facilities produced
by the country’s public sector are also dependent on private sector investments.
2. Strong industrial foundation:
Another significant contribution of the public sector is that it has successfully built the
country’s strong industrial foundation. With the expansion of public sector enterprises in
diverse disciplines such as iron and steel, coal, heavy engineering, heavy electrical
machinery, petroleum and natural gas, fertilizers, chemicals, and medicines, the economy’s
industrial basis has been significantly strengthened. These industries are also primarily
responsible for the development of private sector industries. As a result of creating a solid
industrial basis, the public sector has laid the groundwork for the country’s rapid
industrialization. Furthermore, the public sector has dominated key industries such as
petroleum products, coal, copper, lead, hydro and steam turbines, and so on.
3. Opportunities for employment:
Employment in the public sector can also be a source of resource redistribution. When
governments, for example, create more public sector positions in less affluent areas with
higher unemployment and lower salaries, they may be inadvertently draining resources
from more affluent areas of the economy to fund those jobs. This happens when tax
collection is unified and public sector wages become more uniform. Furthermore, the
development of public sector jobs has significant compositional implications on the
economy’s various sectors. Employment in government administration, defence, and other
government services are available in the public sector.
4. By creating job opportunities:
The public sector helps a country’s economic development by promoting rapid economic
growth through infrastructure creation and expansion. Hence, it generates job
opportunities, which further contribute to the development of the financial resources of a
country.
5. Formation of Capital:
The public sector has played a significant role to influence the country’s gross domestic
capital production. In India, the public sector’s share in gross domestic capital formation has
risen from 3.5 percent in the First five years’ plan to 9.2 percent in the Eighth five years
plan. The country’s comparative proportions of public sector gross capital formation
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likewise changed from 33.67 percent under the First Plan to 50 percent during the Sixth
Plan, before falling to 21.9 percent in 2005-06.
6. Export Promotion and Import Substitution:
Some public sector firms have a track record of attaining import substitution and thereby
saving the country’s valuable foreign exchange. In this regard, Bharat Heavy Electricals
Limited (BHEL), Bharat Electronics Ltd., Indian Oil Corporations, and the Oil and Natural Gas
Commission should be mentioned (ONGC). For example, Hindustan Antibiotics Ltd. (HAL),
has cleared the road for import substitution in India.
Here we detail about the following nine important roles played by public sector in Indian
economy, i.e.,
(1) Generation of Income,
(2) Capital Formation,
(3) Employment,
(4) Infrastructure,
(5) Strong Industrial Base,
(6) Export Promotion and Import Substitution,
(7) Contribution to Central Exchequer,
(8) Checking Concentration of Income and Wealth, and
(9) Removal of Regional Disparities.
1. Generation of Income:
Public sector in India has been playing a definite positive role in generating income in the
economy. The share of public sector in net domestic product (NDP) at current prices has
increased from 7.5 per cent in 1950-51 to 21.7 per cent in 2003-04. Again, the share of
public sector enterprises only (excluding public administration and defence) in NDP was also
increased from 3.5 per cent in 1950-51 to 11.12 per cent in 2005-06.
2. Capital Formation:
Public sector has been playing an important role in the gross domestic capital formation of
the country. The share of public sector in gross domestic capital formation has increased
from 3.5 per cent during the First Plan to 9.2 per cent during the Eighth Plan. The
comparative shares of public sector in the gross capital formation of the country also
recorded a change from 33.67 per cent during the First Plan to 50 per cent during the, Sixth
Plan and then declined to 21.9 per cent in 2005-06.
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But the Public sector is not playing a significant role in respect of mobilization of savings.
The share of public sector in gross domestic savings increased from 1.7 per cent of GNP
during 1951-56 to only 3.6 per cent during 1980-85. During 1980s, the share of public sector
in gross domestic savings declined from 16.2 per cent in 1980-81 to 7.7 per cent in 1988-89.
3. Employment:
Public sector is playing an important role in generating employment in the country.
Public sector employments are of two categories, i.e.:
(a) Public sector employment in government administration, defence and other
government services and
(b) Employment in public sector economic enterprises of both Centre, State and Local
bodies. In 1971, the public sector offered employment opportunities to about 11 million
persons but in 2003 their number rose to 18.6 million showing about 69 per cent increase
during this period.
Again in 2003, the public sector offered employment opportunities to 18.6 million persons
which was 69 per cent of the total employment generated in the country as compared to 71
per cent employment generated in 1991. However, there is considerable decline in the
annual growth rate of employment in the public sector from 1.53 per cent during 1983-1994
to 0.80 per cent during 1994- 2004.
The maximum number of employments is derived from transport, storage and
communications (28.1 lakh). The public sector manufacturing is the next industry which
generated employment to the extent of 11.1 lakh persons.
4. Infrastructure:
Without the development of infrastructural facilities, economic development is impossible.
Public sector investment on infrastructure sector like power, transportation,
communication, basic and heavy industries, irrigation, education and technical training etc.
has paved the way for agricultural and industrial development of the country leading to the
overall development of the economy as a whole. Private sector investments are also
depending on these infrastructural facilities developed by the public sector of the country.
5. Strong Industrial base:
Another important role of the public sector is that it has successfully build the strong
industrial base in the country. The industrial base of the economy is now considerably
strengthened with the development of public sector industries in various fields like—iron
and steel, coal, heavy engineering, heavy electrical machinery, petroleum and natural gas,
fertilizers, chemicals, drugs etc.
The development of private sector industries is also solely depending on these industries.
Thus, by developing a strong industrial base, the public sector has developed a suitable base
for rapid industrialization in the country. Moreover, public sector has also been dominating
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in critical areas such as petroleum products, coal, copper, lead, hydro and steam turbines
etc.
6. Export Promotion and Import Substitution:
Public sector enterprises have been contributing a lot for the promotion of India’s exports.
The foreign exchange earning of the public enterprises rose from Rs. 35 crores in 1965-66 to
Rs. 5,831 crores in 1984-85 and then to Rs. 34,893 crores in 2003- 04. Thus, the export
performance of the public sector enterprises in India is quite satisfactory.
The public sector enterprises which played an important role in this regard include—
Hindustan Steel Limited, Hindustan Machine Tools (HMT) Limited, Bharat Electronics Ltd.,
State Trading Corporation (STC) and Metals and Minerals Trading Corporation.
7. Contribution to Central Exchequer:
The public sector enterprises are contributing a good amount of resources to the central
exchequer regularly in the form of dividend, excise duty, custom duty, corporate taxes etc.
During the Sixth Plan, the contribution of public enterprises to the central exchequer was to
the tune of Rs. 27,570 crores.
Again, this contribution has increased from Rs. 7,610 crores in 1980-81 to Rs. 18,264 crores
in 1989-90 and then to Rs. 85,445 crores in 2003-04. Out of this total contribution, the
amount of dividend contributed only 2 to 3 per cent of it.
8. Checking Concentration of Income and Wealth:
Expansion of public sector enterprises in India has been successfully checking the
concentration of economic power into the hands of a few and thus are redressing the
problem of inequalities of income and-wealth of the economy. Thus, the public sector can
reduce this problem of inequalities through diversion of profits for the welfare of the poor
people, undertaking measures for labour welfare and also by producing commodities for
mass consumption.
9. Removal of Regional Disparities:
From the very beginning industrial development in India was very much skewed towards
certain big port cities like Mumbai, Kolkata and Chennai. In order to remove regional
disparities, the public sector tried to disperse various units towards the backward states like
Bihar, Orissa, and Madhya Pradesh. Thus, considering all these foregoing aspects it can be
observed that in-spite of showing poor performance, the public sector is playing dominant
role in all-round development of the economy of the country.
Public enterprises have played a stellar role in speeding up the process of industrial
development in the country. They have served the needs of the nation and ensured that
products and services are made available to consumers at affordable costs. The following
are a few of the achievements of public enterprises:
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1. Set up industries in strategic and core sectors.
2. Provided basic infrastructure facilities at affordable costs.
3. Promoted balanced regional development by setting up industries in backward areas.
4. Restricted the growth of private monopolies and protected consumers against the evils of
private monopolies.
5. Generated large-scale employment opportunities and contributed to the reduction in
unemployment.
6. Served as a model employer, providing good remuneration, job security and welfare
facilities to employees.
7. Exported goods and services thereby earning valuable foreign exchange.
8. Set up industries with a focus on import substitution to conserve foreign exchange
resources and achieve self-sufficiency.
9. Taken over sick industrial units, restructured them and converted them into viable units.
10. Achieved profitable growth and contributed to the national exchequer.
11. Set up a network of financial institutions which have financed the growing needs of the
industry.
12. Promoted the growth of village, cottage, traditional and small-scale enterprises by
providing advice, consultancy, finance and marketing facilities.
Q.12. Write the short notes for the following:
(a) Poverty, inequality and economic development
(b) Privatization in Indian Economy
(c) Foreign Trade policies in India
(d) Labour regulation in India
(e) Problem of child labour in India
(f) New EXIM policy of India
(g) Explain NABARD
(h) Agriculture marketing in India
ANS:
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a) Poverty: Poverty is defined as the inability to secure the minimum needs of
consumption for life, health and efficiency. India has a large number of poor’s. It is rich
in natural resources that are not fully exploited. The two most important reasons for
poverty are low economic development and inequalities in income and assets. Excessive
or ever-increasing population worsens this situation. Poverty is rampant in India due to
many factors like lack of capital formation and capital goods industry, lack of inadequate
infrastructure and decline of small industries and defective educational system and
excessive dependence on agriculture.
Inequality and economic development: Economic development is a wide and a more
comprehensive term as compared to economic growth. It's more than economic growth.
It is growth with some improvement or progressive changes in several key factors which
affect the well-being of the people of the nation like reduction of poverty, illiteracy,
inequality etc. i.e. the benefits of growth should trickle down to the lowest possible
section of the society. The process of development is difficult and extensive in output
whereas development includes changes in socio-economic structure of the nation
together with a change in allocation of resources to ensure social justice for all.
b) Privatisation in the Indian Economy- Privatisation refers to any process that reduces the
involvement of the State in the ownership, organisation and control of enterprises.
Privatisation is the general process of involving the private sector in the ownership or
operation of a State-owned enterprise.
Arguments in favour of Privatisation: The supporters of privatisation offer the following
arguments in its favour:
(i) It will stop the drain on budgetary resources which results from the public subsidising of
chronically loss-making Public Sector Enterprises (PSEs).
(ii) It will help the profit-making PSEs to raise additional resources to modernise, expand and
diversify their business.
(iii) It will enable PSEs to enter into strategic alliances with other companies to make them
competitive in international markets.
(iv) It will relieve PSEs from political and bureaucratic interference, giving them more
autonomy in decision-making. This will help improve the productivity, efficiency and
profitability of PSES.
(v) The sick units in the public sector have become a great liability for the State, and
privatisation is a possible remedy for their revival and reconstruction.
(vi) It will open an avenue for larger participation of foreign capital, which would help
improve the competitiveness of Indian industry in the international market.
Arguments against privatisation:
(i) It may help improve the profitability of PSEs but it cannot ensure material progress of
every section in the society.
(ii) Change in the ownership of enterprises cannot guarantee an increase in the general level
of income or the standard of living of the masses.
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(iii) Private sector lacks resources. For the development of infrastructure,
technology, etc., it has to depend upon the public sector.
(iv) It will encourage growth of monopoly power in the hands of big business houses. This
will lead to larger disparities of income and wealth and the goal of a just social order will
remain unfulfilled.
(v) Private entrepreneurs may not show any interest in the ownership and
control of the loss-making, sick and inefficient PSES.
(vi) The private sector may not have necessary financial resources to take over
the ownership and control of big PSEs. Even if it does, it may not be able to uphold the
principles of social justice and public welfare.
c) Definition: The transfer of ownership, property or business from the government to the
private sector is termed privatization. The government ceases to be the owner of the entity
or business.
The process in which a publicly-traded company is taken over by a few people is also called
privatization. The stock of the company is no longer traded in the stock market and the
general public is barred from holding stake in such a company. The company gives up the
name 'limited' and starts using 'private limited' in its last name.
Description: Privatization is considered to bring more efficiency and objectivity to the
company, something that a government company is not concerned about. India went for
privatization in the historic reforms budget of 1991, also known as 'New Economic Policy or
LPG policy'.
d) The foreign trade policy is essentially a set of guidelines for the import and export of
goods and services. These are established by the Directorate General of Foreign Trade
(DGFT), the governing body for the promotion and facilitation of exports and imports under
the Ministry of Commerce and Industry. The policy is notified for a period of five years. It is
updated every year on March 31, and the changes come into effect from April 1.
While the trade policy covers both imports and exports, its primary objective is to facilitate
trade by reducing transaction cost and time, thereby making Indian exports more globally
competitive. It aims to:
• Accelerate economic activity and make the most of global market opportunities
• Encourage sustained economic growth by providing access to raw materials, components,
intermediates (goods used as inputs for the production of other goods), consumables and
capital goods required for production
• Strengthen Indian agriculture, industry and services
• Generate employment
• Encourage stakeholders to strive for international standards of quality
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• Provide quality consumer products at reasonable prices.
e) Labour regulations in India: Laws regulating labour Indian governments at federal and
state level have sought to ensure a high degree of protection for workers, but in practice,
legislative rights of workers. India is a federal form of government and in the concurrent list
of the Indian constitution labour matters are in the jurisdiction of both central and state
governments. Both governments have enacted laws on labour relations and employment
issues.
India's labour laws underwent a major update in the Industrial Disputes Act of 1948. Since
then, an additional 45 national laws expand or intersect with the 1948 act, and another 200
state laws control the relationships between the worker and the company,
Among the employment contracts that the Industrial employment Act 1946 requires that
employers have terms including working hours, leave, productivity goals, dismissal
procedures or worker classification, approved by the government body. The contract labour
Act 1970 aims at regulating employment of contract labour so as to place it at par with
labour employed directly. Women are now permitted to work night shifts for (10 pm to 6
am) where the contract of employment is not fulfilled or work is not done as prescribed, the
principle of 'no work no pay' is brought into play.
f) Exim Policy or Foreign Trade Policy is a set of guidelines and instructions established by
the DGFT in matters related to the import and export of goods in India.
The Foreign Trade
Policy of India is guided by the Export Import in known as in short EXIM Policy of the Indian
Government and is regulated by the Foreign Trade Development and Regulation Act, 1992.
DGFT (Directorate General of Foreign Trade) is the main governing body in matters related
to Exim Policy. The main objective of the Foreign Trade (Development and Regulation) Act is
to provide the development and regulation of foreign trade by facilitating imports into, and
augmenting exports from India. Foreign Trade Act has replaced the earlier law known as the
imports and Exports (Control) Act 1947.
Indian EXIM Policy contains various policy related decisions taken by the government in the
sphere of Foreign Trade, i.e., with respect to imports and exports from the country and
more especially export promotion measures, policies and procedures related thereto. Trade
Policy is prepared and announced by the Central Government (Ministry of Commerce).
India's Export Import Policy also known as Foreign Trade Policy, in general, aims at
developing export potential, improving export performance, encouraging foreign trade and
creating favourable balance of payments position.
History of Exim Policy of India
In the year 1962, the Government of India appointed a special Exim Policy Committee to
review the government previous export import policies. The committee was later on
approved by the Government of India. Mr. V. P. Singh, the then Commerce Minister and
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announced the Exim Policy on the 12th of April, 1985. Initially the EXIM Policy was
introduced for the period of three years with main objective to boost the export business in
India.
g) National Bank for Agriculture and Rural Development (NABARD):
The NABARD set up on July 1, 1982, has been envisaged as the leader of the entire rural
credit system. It has taken over the functions of the agricultural credit department of the
RBI and the Agricultural Refinance and Development Corporation (ARDC).
The National Bank of Agriculture and Rural Development, (NABARD) sanctions credit limits
and refinance to State Cooperative bank, Development Bank, and the Regional Rural Banks
for supplementing their resources for short term and medium-term loans of various
agricultural and non-agricultural purposes, including the investment credit provide by them
under various schemes. In the case of commercial banks, NABARD provides only refinancing
against the term loans issued by them.
The bank has to play a dual role as an apex institution, and as a refinance institution. The
authorized share capital of the NABARD was 500 crores, and its paid up capital was Rs.100
crores, contributed equally by the central government; and the RBI. Its paid up capital was
raised from Rs.100 crores to Rs.3,500 crores, and later on by Rs.1000 crores. By the year
1999, it was proposed to be raised to Rs.2000 crores.
The NABARD draws its funds also from the World Bank, the other International Agencies.
The NABARD, being an apex financing institution in the area of agricultural credit, has met
the financial needs of all types of agricultural and rural development activities. Since its
inception, the bank has been performing various activities assumed by it smoothly and
efficiently. During 1996-97 it sanctioned short-term credit worth 6050 crores and in the
same period, it extended medium term and long-term credit worth Rs. 370 crores. The most
important aspect of NABARD's activities is the grant of refinance assistance to various
agencies engaged in the field of rural credit. In this regard NABARD has made great
progress.
h) India is an agricultural country and one third population depends on the agricultural
sector directly or indirectly. Agriculture remains as the main stray of the Indian economy
since times immemorial. Indian agriculture contribution to the national gross domestic
product (GDP) is about 25 per cent. With food being the crowning need of mankind, much
emphasis has been on commercialising agricultural production. For this reason, adequate
production and even distribution of food has of late become a high priority global concern.
Agricultural marketing is mainly the buying and selling of agricultural products. In earlier
days when the village economy was more or less self-sufficient the marketing of agricultural
products presented no difficulty as the farmer sold his produce to the consumer on a cash
or barter basis.
Today's agricultural marketing has to undergo a series of exchanges or transfers from one
person to another before it reaches the consumer. There are three marketing functions
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33
involved in this, i.e., assembling, preparation for consumption and distribution. Selling on
any agricultural produce depends on some couple of factors like the demand of the product
at that time, availability of storage etc. The products may be sold directly in the market or it
may be stored locally for the time being. Moreover, it may be sold as it is gathered from the
field or it may be cleaned, graded and processed by the farmer or the merchant of the
village. Sometime processing is done because consumers want it, or sometimes to conserve
the quality of that product. The task of distribution system is to match the supply with the
existing demand by whole selling and retailing in various points of different markets like
primary, secondary or terminal markets.
Most of the agricultural products in India are sold by farmers in the private sector to
moneylenders (to whom the farmer may be indebted) or to village traders. Products are
sold in various ways. For example, it might be sold at a weekly village market in the farmer's
village or in a neighbouring village. If these outlets are not available, then produce might be
sold at irregularly held markets in a nearby village or town, or in the mandi.
In India, there are several central government organisations, who are involved in
agricultural marketing like, Commission of Agricultural Costs and Prices, Food Corporation of
India, Cotton Corporation of India, Jute Corporation of India, etc. There are also specialised
marketing bodies for rubber, tea, coffee, tobacco, spices and vegetables.
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