Economics Test - 14

The correct answer is Second. 

Key Points

• The Khadi and Village commission was set up by the Govt. of India under the Khadi and Village Industries Commission Act of 1956. Its headquarters is in Mumbai. It is a statutory body. It comes under the Ministry of Micro, Small and Medium enterprises.
• The success of the First Five-year plan enhanced the confidence of the leaders. The agriculture growth aim in the first plan was attained, so the government quickly started looking beyond agriculture. The second five-year plan targeted the industry, specifically heavy industry. The target of a 25% enhancement in the national income was prescribed through instant industrialization.
• The second five-year plan was designed on the basis of the so-called Mahalanobis model. This was actually the USSR model Indianized by PC Mahalanobis, the father of the Indian Statistical Institute, and a close aide of Nehru.
• This model is considered to have set the statistical base for state-directed investments and established the intellectual underpinnings of the license-raj through a well-explained input-output model. This Model recommended that there should be a focus on the heavy industries, which can take the Indian Economy to a long-term greater growth path. The second five-year plan and Industrial policy Resolution 1956, which cleared the path for the improvement of the Public Sector and license raj; were based upon this model.

Additional Information

• Five-year plans details are as below-
  • 1. First - 1951-1956, it was based on the Harrod-Domar Model.
  • 2. Second - 1956-61, PC Mahalanobis Model.
  • 3. Third- 1961-66 - Gadgil Plan
  • 4. Plan Holidays - 1966-69
  • 5. Fourth - 1969 to 1974, under the leadership of Indira Gandhi.
  • 6. Fifth - 1974-78, focused on Garibi Hatao.
  • 7. Rolling Plan  - 1978 to 1980.
  • 8. Sixth - 1980 to 1985, based on Investment Yojna.
  • 9. Seventh - 1985-90, under Rajiv Gandhi's leadership.
  • 10. Annual Plans - 1990-92.
  • 11. Eight Plan - 1992-97, priority given to the development of human resources.
  • 12. Ninth Plan - 1997-02, focused on 'growth with justice and equality'.
  • 13. Tenth Plan - 2002-07 - focused to double per capita income.
  • 14. Eleventh Plan - 2007-12 - prepared by C Rangarajan.
  • 15. Twelfth Plan - 2012-17- the theme was 'faster, more inclusive, and sustainable growth'.

• The main motives behind the English introducing improved communications and transport was too get the raw material from the interiors and also to flood it with cheap British manufactured goods.
• It was realized by the British that railways could be an efficient means of transporting goods. Industrial Revolution in England had created a huge demand for raw materials. Also, markets were needed for the sale of finished industrial goods.
• Hence, Railway serves an easy and cheap mode of transport for serving the British industrial and commercial needs. Railways were also felt necessary for a quick and efficient movement of troops for expanding the territories of the Empire and to quell any internal rebellion
• Areas around towns, raw material producing areas and of plantations and other commercial crops, hill stations and cantonment towns were well-connected by railways from the British colonial era. These were mostly developed for the exploitation of resources. 

• Finished goods from Indian manufacturer were taxed in Britian.
• Free trade was not free for Indian manufacturer and neither it was directed towards increasing economic condition of India.
• Free trade was an economic policy of British only to promote  interest of British manufacturer in India.
• While import to India was free, Indian goods were charged at very high duty (like 66.5% on muslin) in Britain. 
• Industrial Revolution in England made the cost of foreign goods cheaper. 
• Inspite of higher prices Indian goods (especially muslin, silk, etc.) were very popular in England. 
• Free trade was only one-sided as Indian goods were still charged with heavy levies.
• Indian handmade goods were at disadvantage competing with machine-based British goods.

• India's first finance minister was R K Shanmukham Chetty.
• RK Shanmukham Chetty served as Finance Minister in Jawaharlal Nehru's cabinet from 1947 to 1949.
• The main job of a minister is to prepare a general budget and to run the economy of the country.
• The Finance Commission has been constituted under Article 280 of the Constitution.
• Jawaharlal Nehru was the first Prime Minister of India.
• Sardar Patel is also called the Iron Man of India.

The correct option is the Bombay Plan

• The plan was published in 1944/1945 by eight leading Indian industrialists.
• Proposed state intervention in the economic development of the nation after independence from the United Kingdom.

Key Points

1. “The Bombay Plan” is the nickname of a 15-year economic plan for India proposed by a group of industrialists and technocrats in January 1944.
2. Initially, it was released for private circulation only. Soon afterward, the plan was published as a pamphlet in response to the interest generated by it.
3. This plan was Titled A Brief Memorandum Outlining a Plan of Economic Development for India.

Hence, the 1945 plan of Economic Development for India is also known as the Bombay plan.

National Planning Committee was set up in the year 1938.

• NPC was set up under the chairmanship of Jawahar Lal Nehru to work for the concrete programs for development in all the areas of the economy.
• It was on the initiative of the INC president Subhash Chandra Bose.
• The setting up of the National Planning Committee showed the increasing influence of Left Politics in the National Struggle for Independence.
• Resolution on Fundamental Rights and Economic Policy - Karachi session of the Congress in 1931.
• The resolutions on economic policy passed at the Faizpur session in 1936.
• Bombay Plan - 1944.

The correct answer is Promoting skill development.

Key Points

• The Economic survey 2011-12 says that India did not have as much growth in capital per worker as other countries such as China, South Korea but had comparatively stronger growth in TFP.
• China grew because of more capital deployed as well as strong increases in TFP. Underpinnings for continued strong Chinese growth in the years beyond the second decade after takeoff are a robust investment rate as well as substantial increases in the intrinsic productivity of jobs.
• If India were to follow a similar path, it would need to increase savings and investment, both of which will follow from the demographic transformation.
  • But it will also have to increase the intrinsic productivity of jobs, that is total factor productivity (TFP).
• In summary, the survey says that the country can reap the demographic dividend by improving the Total Factor Productivity, a transition from agriculture to non-agriculture sectors such as manufacturing/service sector, and from unorganized sector to the organized.
• This can be done via skill development and that is why skill development is key to reaping the demographic dividend for a country like India.
• Hence the correct option is 1.​

​​​Additional Information

• Economic Survey
  • The Economic Survey of India is an annual document released by the Ministry of Finance, Government of India.
  • It contains the most authoritative and updated source of data on India’s economy.
  • It is a report that the government presents on the state of the economy in the past year, the key challenges it anticipates, and their possible solutions.
  • The Economic Survey document is prepared by the Economics Division of the Department of Economic Affairs (DEA) under the guidance of the Chief Economic Advisor.
  • It is usually presented a day before the Union Budget is presented in Parliament.
  • The first Economic Survey in India was presented in the year 1950-51.
  • Up to 1964, it was presented along with the Union Budget.
    • From 1964 onwards, it has been delinked from the Budget.

Human Development Index (HDI was developed by Indian Nobel Laureate Amartya Sen and Pakistani economist Mahbub ul Haq, with the help from Gustav Ranis of Yale University and Lord Meghnad Desai of the London School of Economics, and was further used to measure the country's development by the United Nations Development Program (UNDP).

• Amartya Kumar Sen is an eminent Indian economist and philosopher, who since 1972 have taught in countries like India, the United Kingdom and the United States. Amartya Sen is known for his contributions to welfare economics, social choice theory, economic and social justice, economic theories of famines and indices of the measure of well-being of citizens of developing countries.
• Mehbub-ul-Haq, a Pakistani game theorist, economist and an international development theorist and also served as the 13^th Finance Minister of Pakistan.

• Poverty is a state or condition in which a person or community lacks the financial resources and essentials for a minimum standard of living.
• Poverty means that the income level from employment is so low that basic human needs can't be met.

Key Points 

Migration:

• When people move from one place to another, the place they move from is called the Place of Origin and the place they move to is called the Place of Destination.
• The place of origin shows a decrease in population while the population increases in the place of destination.
• Migration may be permanent, temporary or seasonal.
• It may take place from rural to rural areas, rural to urban areas, urban to urban areas and urban to rural areas.
• Migrants who move into a new place are called immigrants.
• Migrants who move out of a place are called emigrants
• People migrate for a better economic and social life. 
• Migration is caused as a result of poverty and not a cause of poverty.

Additional Information

Causes of Poverty:

Population Explosion: 

• India’s population has steadily increased through the years.
• During the past 45 years, it has risen at a rate of 2.2% per year, which means, on average, about 17 million people are added to the country’s population each year.
• This also increases the demand for consumption goods tremendously.

Unemployment: 

• Unemployment is another factor causing poverty in India.
• The ever-increasing population has led to a higher number of job-seekers.
• This leads to the migration of people from rural to urban areas and working at minimum wage conditions.
• However, there is not enough expansion in opportunities to match this demand for jobs.

Large size of the family: 

• The majority of the big families belong to remote areas and work in the informal economy causes poverty.
• The social customs and traditions are also hindering households to come out of poverty.

Income inequalities:

• Income inequality is the unequal distribution of income and opportunity between individuals or different groups in society.
• Unemployment has forced people to work at minimum wage, especially in the lower section of society. 

Thus, unequal distribution of land is not a cause of poverty in India.

Concept:

Mahatma Gandhi:

• Mahatma Gandhi has been regarded as the 'Father' of the Indian nation.
• The School of economic thought was based on the spiritual and socio-economic principles, laid by Mahatma Gandhi.
• He found that western economic systems were unsustainable and devastating to the human spirits as they were based on the multiplication of needs.
• Gandhiji adopted a non-violent rural economy, as an aim of development.
• Under Gandhian economics, production is determined by social necessity and not by personal greed.
• Gandhiji worked to develop ways to fight India's extreme poverty, backwardness and socio-economic challenges.