QUESTION BANK

SHORT ANSWER QUESTIONS

1. What are export promotion policies?

2. What do you mean by import substitution?
3. How is free trade and globalization different?
4. What do you mean by agricultural marketing?
5. What is National Company Law Tribunal?
6. What is a cooperative society?
7. What are Joint stock Companies?
8. What is Industrial Sickness?
MEDIUM ANSWER QUESTIONS

9. Differentiate between Liberalisation & Privatisation?

10. What are the macro economic stabilization measures taken
under new economic policy?
11. Discuss the structural reforms undertaken in Indian
Economy after 1991.
12. State the objectives of Land Reforms.
13. What can be the institutional causes for low productivity of
agriculture in India?
14. Evaluate the role of land reforms in alleviating poverty and
reducing inequalities in India.
15. Write a note on India’s Anti trust Law.
16. Give an account of the growth of trade union movement in
India? How far it has been successful in protecting labour interests.
17. Differentiate between trust and cooperative society.
18. What do you mean by Special Economic Zones? Critically
evaluate the role of SEZ in India’s Exports after 2000?
19. What are Multinational Corporations? Critically examine their
impact on expansion of Indian economy.
20. What are Co-operative societies? What are their types? Write
a note on cooperative movement in Rural India.
21. Write a note on New International Economic Order.
22. What is the difference between Foreign Direct Investment &
Foreign Institutional Investment?
LONG ANSWER QUESTIONS

23. Discuss the changes in sectoral distribution of domestic

product of India after 1991.
24. What is Globalisation? Describe the steps taken by
government of India towards globalisation and its effect on Indian
Economy.
25. What are the problems of agricultural marketing in India?
Suggest measures for improving the agricultural marketing system.
26. Describe the current scenario of Indian Agriculture. What are
the steps taken by government for the betterment of the situation?
27. Write a note on the policy of land reform and its
implementation.
28. Give a brief account of problems faced by agriculture in India.
29. Explain the role of trade unions in protecting labour interests.
30. Critically evaluate the role of industrial Financing institutions
in the industrial development of India.
31. Define Industrial Sickness. What are its causes? What are the
different remedial measures taken by Govt of India for industrial
sickness?
32. Give an account of industrial policies in India prior to 1991?
In what sense the new industrial policy of 1991 reformed Indian
economy.

ANSWER KEY
SHORT ANSWER QUESTIONS

1. The government of India has liberalized the schemes for the

export oriented units and export processing zones, agriculture,
horticulture, poultry, fisheries and dairying have been included in
the export oriented units. Export promotion capital goods schemes
(EPCGS) has been started to permit the exporters to import capital
goods on concessional import duties. Under the EPCGS scheme,
such importers of capital goods have to export goods of 4 times
 values of import within next five years. Establishment of the EXIM
bank and SEZs promoted the export from country.
2. Import substitution industrialization is a trade and economic policy
that advocates replacing foreign imports with domestic production.
It is based on the premise that a country should attempt to reduce
its foreign dependency through the local production of
industrialized products
3. Globalization is not simply free trade; it is trade plus shifting
productivity. We have not sent China consumer goods, but the
capability to produce more effectively.
4. Agricultural marketing covers the services involved in moving an
agricultural product from the farm to the consumer. These
services involve the planning, organizing, directing and handling of
agricultural produce in such a way as to satisfy farmers,
intermediaries and consumers.
5. It is a quasi-judicial body in India that adjudicates issues relating to
Indian companies. The tribunal was established under the
Companies Act 2013 based on the recommendation of
the Balakrishna Eradi committee on law relating to the insolvency
and the winding up of companies.
6. A cooperative is "an autonomous association of persons united
voluntarily to meet their common economic, social, and cultural
needs and aspirations through a jointly-owned enterprise".
Cooperatives are democratically owned by their members, with
each member having one vote in electing the board of directors.
7. A joint-stock company is a business owned by its investors, with
each investor owning a share based on the amount of stock
purchased. Joint-stock companies are created in order to finance
endeavors that are too expensive for an individual or even a
government to fund.
8. Industrial sickness can be defined as a steady imbalance in the
debt-equity ratio and distortion in the financial position of the unit.
A sick unit is one which is unable to support itself through the
operation of internal resources. Once the sick units continue to
operate below the break-even point (at which total revenue = total
 cost), industries are forced to depend on the external sources for
funds of their long-term survival.

MEDIUM ANSWER QUESTIONS

9. Liberalization refers to the process of eliminating unnecessary

controls and restrictions on the smooth functioning of business
enterprise. It includes:
 a) Abolishing industrial licensing requirement in most of the
industries.
 b) Freedom in deciding the scale of business activities.
 c) Freedom in fixing prices of goods and services.
 d) Reduction in tax rates.
Privatization means transfer of ownership or management of an
enterprise from thee public sector to the private sector. It includes:
 a) Divestiture, or privatization of ownership, through the sales of
equity.
 b) Denationalization or re-privatization.
 c) Contracting- under which government contracts out services to
other organizations that produce and deliver them.
10. Stabilisation measures: The prime objective of the macro
economic policy is to bring and enhance macroeconomic stability.
Stabilization means the economic atmosphere in a national
economy where the local as well as foreign private investors and
institutions has gained confidence in starting business at low risk
factor and sure about returns on their investments. In economic
context stabilization plays important role which includes:
i)Reduction in fiscal deficit so as to improve the budgetary balance
in the country.
ii)Correction of adverse balance of payment along with increase in
the supply of foreign exchange to finance export needs.
iii) Control of inflation in order to assist improvement in economic
growth as a whole.

These stabilization measures are emergency measures.

 11. Structural adjustment: These are long run policies, aimed at
improving the efficiency of the economy and increasing its
international competiveness by removing the rigidity in various
segment of the Indian economy. Structural reforms are essentially
measures that change the fabric of an economy, the institutional
and regulatory framework in which businesses and people operate.
They are designed to ensure the economy is fit and better able to
realise its growth potential in a balanced way.
1. Liberalisation
Removal of Industrial Licensing and Registration:
Previously private sector had to obtain license from Govt. for starting a
new venture. In this policy private sector has been freed from licensing
and other restrictions.
Industries licensing is necessary for following industries:
(i) Liquor
(ii) Cigarette
(iii) Defence equipment
(iv) Industrial explosives
(v) Drugs
(vi) Hazardous chemicals

2. Privatisation:
Simply speaking, privatisation means permitting the private sector to set
up industries which were previously reserved for the public sector. Under
this policy many PSU’s were sold to private sector. Literally speaking,
privatisation is the process of involving the private sector-in the
ownership of Public Sector Units (PSU’s).
The main reason for privatisation was in currency of PSU’s are running in
losses due to political interference. The managers cannot work
independently. Production capacity remained under-utilized. To increase
competition and efficiency privatisation of PSUs was inevitable.
Step taken for Privatisation:
The following steps are taken for privatisation:
1. Sale of shares of PSUs
2. Disinvestment in PSU’s
3. Minimisation of Public Sector
(a) Railway operations
(b) Atomic energy

3. Globalization:
Literally speaking Globalisation means to make Global or worldwide,
otherwise taking into consideration the whole world. Broadly speaking,
Globalisation means the interaction of the domestic economy with the
rest of the world with regard to foreign investment, trade, production and
financial matters.
Steps taken for Globalisation:
(i) Reduction in tariffs
(ii) Long term Trade Policy

Main features of the policy are:

(a) Liberal policy
(b) All controls on foreign trade have been removed
(c) Open competition has been encouraged.
(d) Partial Convertibility of Indian currency
(e) Increase in Equity Limit of Foreign Investment

12. Objectives of Land Reforms:

o Redistribution of land
o Land ceiling to disburse surplus land amongst small and marginal
farmers.
o Removal of rural poverty.
o Abolition of intermediaries.
o Tenancy reforms.
o Increasing agricultural productivity.
o Consolidation of land holdings and prevention of land
fragmentation.
o Developing cooperative farming.
o To ensure social equality through economic parity.
o Tribal protection by ensuring their traditional land is not taken over
by outsiders.
o Land reforms were also for non-agricultural purposes like
development and manufacturing.
13.
o Instability
o Cropping Pattern
o Land Ownership: Some degree of concentration of land holding.
o Land Tenure
o Systems and techniques of farming
o Marketing of agricultural products
o Land reforms
14.
o In India, the abolition of intermediaries who existed under the
various British systems has largely been successful.
o The other objectives have yielded mixed results and vary across
states and over time periods.
o Land reforms come under the State List and so, the success of
land reforms varies from state to state.
o The most comprehensive and successful reforms took place in the
communist strongholds of Kerala and West Bengal.
o Andhra Pradesh, Madhya Pradesh and Bihar saw inter-community
clashes as a result of land reforms.
15. The antitrust law in India that is the Competition Act, 2002,
("Act") and rules and regulations made there under regulates
businesses in India to ensure a level playing field and effective
competition in the market. The intent of the Act is to promote
competition, protect the interest of consumers, ensure freedom of
trade and prevent practices having an appreciable adverse effect
on competition ("AAEC"). The statutory body of the Government of
India responsible for enforcing the Act and promoting competition
throughout India and to prevent activities that have an AAEC on
 competition is the Competition Commission of India ("CCI").
Features of the Act
Anti-Competitive Agreements: As per Section 3(1) of the Act no
enterprise or association is allowed to enter into any agreement
which can cause or is likely to cause an appreciable adverse effect
within India. Further, Section 3(2) of the Act clearly provides that
such an agreement shall be void. These agreements are subject to
the adverse presumption of being anti-competitive.
Abuse of Dominance: Section 4(1) of the Act prohibits any
enterprise or group from abusive dominant position.
Combinations: According to Section 5 of the Act, combination is
the acquisition of one or more enterprises by one or more persons
or merger or amalgamation of enterprises. The mergers or
combination is controlled by the Government to promote
competition in a way that small industries are not overpowered by
well-known industries. Companies which are merging has to
ensure the threshold limits in terms of assets or turnover as
specified in the Act. The various types of Combinations are
horizontal combination, vertical combination and conglomerate
combinations.
Competition Advocacy: Competition Advocacy is one of the main
objectives of Competition Law which deals with creating a
competitive environment in the market by spreading awareness
among the people about the benefits of a competitive market. The
Competition Commission of India (CCI) is obliged to take charge of
advocacy for Competition Law are the consumers whose welfare
forms the key objective of the law.
16. The first factories Act was passed in the year 1881. The
workers of the Bombay textile industry demanded that the working
hour should be reduced, weekly holidays and compensation in
case of injuries suffered by the workmen. Bombay mills hand
association is first union established for workers by N.lokhande in
the year 1890.
 Several Labour movements started after the outbreak of worldwar
one. The miserable social and economic condition of the people at
that time triggered the labour movement. Formation of ILO
(international labour organization) leads to formation of trade
unions .Ahmadabad labor textile association was formed under
the guidance of Mahatma Gandhi principle of non violence.
The four major organization serving as union for workmen are
INTUC, AITUC ,HMS, UTUC:
 INTUC (Indian National Trade Union Congress)
 AITUC (All India Trade Union Congress)
 HMS (HIND MAZDOOR SABHA)
 UTUC (United Trade Union Congress)
Apart from these four trade unions there are other trade unions
working in various industries not affiliated to any central
organization.

All India trade union congress was formed in the year 1920 for the
purpose of selecting the delegates for ILO, first meeting of AITUC
was held in Bombay under the presidentship of Lala Lajpat Rai in
the year 1920 AIRF (All India Railways man Federation) was
formed in 1922 , all the union consisting and compromising of
railway workmen were made part of it and affiliated to it. AITUC
witnessed the split because some members were in support of the
war and other were not in support of the war, later group is
separated as an organization under the leadership of congress
leaders resulted in the formation of Indian National Trade Union
Congress (INTUC) .Socialists also got themselves separated from
the AITUC which resulted in the formation of Hind Mazdoor sabha
in the year 1948. Therefore the splits and detachment can be
observed resulting in creation of separate trade unions.

Trade union movement was not so successful owing to following

reasons:
Uneven Growth: Trade union activities are concentrated in large
scale industries and that too in regard of manual labor only and
 mainly in bigger industrial centre, there are hardly any trade union
activities in small scale enterprises, domestic and agricultural
labour. The degree of unionism varies a lot from industry to
industry, thus touching only a portion of the working class in India.
Low Membership: Even though, the number of trade unions has
increased considerably in India but this has been followed by the
declining membership per union. The average number of members
per union was about 3,500 in 1927-28. It reduced to about 1,400 in
1946-47 and again to as low as a figure of 675 in 1985-86 and 659
in 2000-01. This indicates the emergence of small scale trade
unions.
Multiplicity of Unions: Another problem faced by the growth of
trade unions is that of multiplicity of unions. There may exist many
trade unions in the same establishment. The existence of large
number of trade unions can be attributed to the fact that The
Trade Unions Act, 1926 permits any association of seven workers
to be registered as a union, and confers upon it certain rights.
Many a time, it is contended that multiplicity of unions is because
of outside leaders, but more pertinent point is that they are able to
work because law permits and gives sanctity to the small unions.
17.
 18.
Special economic zones (SEZs) in India are areas that offer incentives to
resident businesses. SEZs typically offer competitive infrastructure, duty
free exports, tax incentives, and other measures designed to make it
easier to conduct business. Accordingly, SEZs in India are a popular
investment destination for many multinationals, particularly exporters.

While India’s SEZs are similar to those found in other parts of Asia,
business leaders that are considering setting up in a SEZ should seek to
understand how SEZs work in India. Each SEZ is unique. Many business
leaders conduct market entry studies that compare sites, resources, tax
incentives, and costs before making site visits.

The role of Special Economic Zones in human capital formation and as

an engine for promoting new knowledge, technologies and innovations
through technology transfers and technology creation appears to be
relatively limited. With new generation Special Economic Zones
emerging, the scope of human capital formation and technology
upgrading effects will widen. It is therefore important for the
government to play a pro active role in strengthening these effects.

Systematic efforts need to be made to help zone units forge links with
the outside units. Also, the effects of Special Economic Zones are
contingent upon the success of these zones in attracting investment, in
particular, Foreign Direct Investment. A comprehensive policy framework
is required to attain this. The government has to ensure that strategies
are developed in a timely manner to strengthen the opportunities that
are likely to emerge, protect interests of the Special Economic Zones
workers, and forge linkages between Special Economic Zones and the
domestic economy. Such a regulated and monitored approach is the
only means of attaining the actual potential of these Special Economic
Zones.

19. These are the corporations that has its head quarters in one state
 and operates in other countries; these corporation are called
subsidiary MNCs, works independently and do not alloy the
participation of host country.

“MNCs are those companies that control facilities in two or more

countries” (MENIS).

Impact on Indian Economy:

 Promotion of Foreign Investment

 Non-Debt Creating Capital inflows
 Technology Transfer
 Promotion of Exports
 Investment in Infrastructure

20.
Society is a group of persons who are associated together for a
common purpose. The purpose may be related to promoting any literary,
charitable or scientific work.
The incorporation of a society is very simple which requires minimum
seven members who sign the memorandum of association (MOA) and
then files it to the Registrar of Companies (ROC). In this way, the society
is legally formed under the Societies Registration Act, 1860.
Types:
1. Consumer Cooperative Society
2. Producer Cooperative Society
3. Credit Cooperative Society
4. Housing Cooperative Society
5. Marketing Cooperative Society
Co-operative Movement in pre-Independence era:
The term cooperative Societies came into existence when the farmers of
Poona and Ahmednagar spearheaded an agitation against the money
lenders who were charging exorbitant rates of interest. Hence, British
government came forward and passed three acts- the Deccan
Agriculture Relief Act (1879), the Land Improvement Loan Act (1883)
and the Agriculturists Loan Act (1884).
But Cooperative move came with structure and shape when British
enactment of the Cooperative Credit Societies Act, 1904. In 1919,
cooperation became a provincial subject and the provinces were
authorised to make their own cooperative laws under the Montague-
Chelmsford Reforms. This categorization carried on to Government of
India Act, 1935. In 1942, Government of British India enacted the Multi-
Unit Cooperative Societies Act to cover Cooperative Societies with
membership from more than one province.
Co-operative Movement in post-Independence era:
After independence cooperatives became an integral part of Five-Year
Plans:
1. In 1958, the National Development Council (NDC) had recommended
a national policy on cooperatives and also for training of personnel's and
setting up of Co-operative Marketing Societies.
2. In 1984, Parliament of India enacted the Multi-State Cooperative
Societies Act to remove the plethora of different laws governing the
same types of societies.
3. The most important success stories lays behind the success of White
Revolution which made the country the world's largest producer of milk
and milk products; and Green Revolution and the conversion of villages
into model villages have assumed great importance in the wake of the
Green Revolution.
4. Government of India announced a National Policy on Co-operatives in
2002. The ultimate objective of the National Policy is to-
(a) Provide support for promotion and development of cooperatives
(b) Reduction of regional imbalances
(c)Strengthening of cooperative education, training and human resource
development
21. New international Economic Order
At the Sixth Special Session of the United Nations General Assembly in
1975, a declaration was made for the establishment of a New
International Economic Order (NIEO).
The New International Economic Order (NIEO) is a set of proposals
advocated by developing countries to end economic colonialism and
dependency through a new interdependent economy. The main NIEO
document recognized that the current international economic order "was
established at a time when most of the developing countries did not
even exist as independent states and which perpetuates inequality.“ In
the spirit of "trade not aid," the NIEO called for changes in trade,
industrialization, agricultural production, finance, and transfer of
technology.
Features:
 The sovereign equality of all States, with non-interference in their
internal affairs, their effective participation in solving world
problems and the right to adopt their own economic and social
systems;
 Full sovereignty of each State over its natural resources and other
economic activities necessary for development, as well as
regulation of transnational corporations;
 Just and equitable relationship between the price of raw materials
and other goods exported by developing countries, and the prices
of raw materials and other goods exported by the developed
countries;
 Strengthening of bilateral and multilateral international assistance
to promote industrialization in the developing countries through, in
particular, the provisioning of sufficient financial resources and
opportunities for transfer of appropriate techniques and
technologies.
Main reforms required:
 An overhaul of the rules of international trade, especially those
concerning raw materials, food, the system of preferences and
reciprocity, commodity agreements, transportation, and insurance.
 A reform of the international monetary system and other financing
 mechanisms to bring them into line with development needs.
 Both financial and technology transfer incentives and assistance
for industrialization projects in developing countries.
 Promotion of cooperation among the countries of the South, with a
view to greater individual and collective autonomy, broader
participation and enhanced involvement in international trade. This
cooperation is called Economic Cooperation among Development
Countries.
22.
 Both FDI and FII is related to investment in a foreign country. FDI or
Foreign Direct Investment is an investment that a parent company
makes in a foreign country. On the contrary, FII or Foreign
Institutional Investor is an investment made by an investor in the
markets of a foreign nation.
 In FII, the companies only need to get registered in the stock
exchange to make investments. But FDI is quite different from it as
they invest in a foreign nation.
 The Foreign Institutional Investor is also known as hot money as
the investors have the liberty to sell it and take it back. But in
Foreign Direct Investment, this is not possible. In simple words, FII
can enter the stock market easily and also withdraw from it easily.
But FDI cannot enter and exit that easily. This difference is what
makes nations to choose FDI’s more than then FIIs.
 Foreign Direct Investment only targets a specific enterprise. It
aims to increase the enterprises capacity or productivity or change
its management control. In an FDI, the capital inflow is translated
into additional production. The FII investment flows only into the
secondary market. It helps in increasing capital availability in
general rather than enhancing the capital of a specific enterprise.
 The Foreign Direct Investment is considered to be more stable
than Foreign Institutional Investor. FDI not only brings in capital
but also helps in good governance practises and better
management skills and even technology transfer.
 LONG ANSWER QUESTIONS

23.
1. Changing Sectoral Distribution of Domestic Product: Change in
composition of domestic product or change in national income by
industry of origin refers to change in relative significance (share) of
different sectors of the economy. Generally, an economy is divided into
three major sectors viz. primary, secondary and tertiary sectors.
Primary sector includes agricultural and allied activities, secondary
sector includes manufacturing industries and tertiary sector includes
services. With the development process, significance of primary sector
declines while that of secondary and tertiary sectors increases. After
independence, Indian economy has also experienced such changes.
The share of primary sector in GDP at factor cost (at 1999-2000 prices)
which was 56.5 per cent in 1950-51 declined to 34.6 per cent in 1990 91
and then to 19.7 per cent in 2007-08.
The secondary sector’s share in GDP was 13.6 per cent in 1950-51
increased to 23.2 per cent in 1990-91 and further to 24.7 per cent in
2007-08. Tertiary sector’s share in GDP increased from 29.9 per cent in
1950-51 to 55.6 per cent in 2007-08, and in 2009-10 it was over 7 per
cent.
2. Growth of Basic Capital Goods Industries: When country attained
independence, the share of basic and capital goods industries in the
total industrial production was roughly one-fourth.
Under the second plan, a high priority was accorded to capital goods
industries, as their development was considered a pre-requisite to the
overall growth of the economy. Consequently, a large number of basic
industries which produce capital equipment and useful raw materials
have been set up making the country’s industrial structure pretty strong.
3. Expansion in Social Overhead Capital: Social overhead capital broadly
includes transport facilities, irrigation systems, energy production,
educational system and organisation and health facilities. Their
development creates favourable conditions for growth and also for
better human living. The transport system in India has grown both in
terms of capacity and modernisation.
The railways route length increased by more than 9 thousand kms and
the operation fleet practically doubled. The Indian road network is now
one of the largest in the world as a result of spectacular development of
roads under various plans. India has also seen growth in Life-
lixpectancy and Literacy Rate but education has not expanded at a
desired rate.
4. Progress in the Banking and Financial Sector: Since independence,
significant progressive changes have taken place in the banking and
financial structure of India. The growth of commercial banks and
cooperative credit societies has been really spectacular and as a result
of it the importance of indigenous bankers and money-lenders has
declined.
Since nationalisation, these banks have radically changed their credit
policy. Now more funds are made available to priority sectors such as
agriculture, small-scale industries, transportation, etc.
Indian economy has progressed structurally when we consider the
growth of capital goods industries, expansion of the infrastructure,
performance of the public sector, etc.
These factors over the years are believed to have created an element of
dynamism in the country’s economy and one can now hopefully say that
it would sustain development in the future.
24. In simple words “Globalization is refers to a process of increasing
economic integration and growing economic interdependence between
countries in the world economy”.
Following measures were undertaken for globalization-
 Reduction in custom duties and tariffs imposed on imports and
exports to make the Indian economy attractive to international
investors.
 Enforce long-term foreign trade policy involving open competition,
removing restrictions on foreign trade, etc.
 Partial convertibility of the Indian rupee to increase the inflow of
foreign investment through Foreign Institutional Investment (FII)
and Foreign Direct Investment (FDI).
 Increasing the equity limit for foreign investment from 40% to
100% percent, for which the foreign exchange management act
 was enforced.

Globalization has helped in:

• Raising living standards,

• Alleviating poverty,
• Assuring food security,
• Generating buoyant market for expansion of industry and
services, and
• Making substantial contribution to the national economic growth.
 Helped to reduce the level of unemployment and poverty in the
country.
 Foreign companies brought in highly advanced technology with
them and this helped to make the Indian Industry more
technologically advanced.
 The negative Effects of Globalization on Indian Industry are that
with the coming of technology the number of labour required
decreased and this resulted in many people being removed from
their jobs.
 The emergences of various financial institutions and regulatory
bodies have transformed the financial services sector from being a
conservative industry to a very dynamic one.
 Growth in financial services (comprising banking, insurance, real
estate and business services), after dipping to 5.6% in 2003-04
bounced back to 8.7% in 2004-05 and 10.9% in 2005-06. The
momentum has been maintained with a growth of 11.1% in 2006-
07.
 Market shifts, competition, and technological developments are
ushering in unprecedented changes in the global financial services
industry.
 India's Export and Import in the year 2001-02 was to the extent of
32,572 and 38,362 million respectively. Many Indian companies
have started becoming respectable players in the International
 scene.
 Agriculture exports account for about 13 to 18% of total annual of
annual export of the country. In 2000-01 Agricultural products
valued at more than US $ 6million were exported from the country
23% of which was contributed by the marine products alone.
 Cereals (mostly basmati rice and non-basmati rice), oil seeds, tea
and coffee are the other prominent products each of which
accounts fro nearly 5 to 10% of the countries total agricultural
exports.
25. Agricultural marketing is a method that includes gathering,
storage, preparation, shipping, and delivery of different farming
materials across the country. In agriculture marketing, the selling
of an agriculture product depends on various components like the
demand for the product at that time, availability of storage, etc.

STEPS TO IMPROVE AGRICULTURAL MARKETING

The initial step is to regulate the market and plan a clean,
transparent and simple marketing strategy. This regulation helped
both the farmers and the consumer. But it still needs to realize the
full potential of rural markets.
The second measure is the procurement process like
transportation facilities, warehouse, cold storage, godowns, and
the processing unit. However, the current infrastructure is
inadequate to adhere to the growing demand and therefore needs
to be improved.
The third aspect is to decide on the fair price for the product.
In the past, it has been a set back due to the unequal coverage of
farmer members and the absence of a suitable link between
marketing, processing cooperatives, and inefficient financial
management. Example of a successful cooperative is the Gujarat
milk cooperative which transformed the social and economic
landscape of Gujarat.
The last one is more policies such as:
 I. Guarantee of Minimum Support Prices (MSP) for agricultural
products
II. Storage of surplus stocks of wheat and rice by Food
Corporation of India (FCI)
III. Distribution of food staples and sugar through PDS
26. Problems of Indian Agriculture
 Instability
 Cropping Pattern
 Land Ownership: Some degree of concentration of land holding.
 Land Tenure
 Systems and techniques of farming
 Marketing of agricultural products
 Land reforms
Measures
 Redistribution of land
 Land ceiling to disburse surplus land amongst small and marginal
 Abolition of intermediaries.
 Tenancy reforms.
 Increasing agricultural productivity.
 Consolidation of land holdings and prevention of land
fragmentation.
 Developing cooperative farming.
 To ensure social equality through economic parity.
 Tribal protection by ensuring their traditional land is not taken over
by outsiders.
 Land reforms were also for non-agricultural purposes like
development and manufacturing.

27. Land reforms refer to the regulation of ownership, operation, leasing,

sales, and inheritance of land.

Outcomes of Land Reforms

Abolition of middlemen like landlords
The powerful class of Zamindars and Jagirdars cease to exist. This
reduced the exploitation of peasants who now became owners of the
land they tilled. This move was vehemently opposed by the Zamindars
who employed many means to evade the law. They registered their own
land under their relatives’ names. They also shuffled tenants around
different plots of land so that they wouldn’t acquire incumbency rights.
Land ceiling
With a cap on the size of land holding an individual/family could hold
equitable distribution of land was possible to an extent. With only
landlord abolition and no land ceiling, the land reforms would not have
been at least partially successful. Land ceiling ensured that the rich
farmers or higher tenants did not become the new avatar Zamindars.
Land possession
Land is a source of not just economic income but also social standing.
Land reforms made it mandatory to have records of holdings, which was
not the case previously. It is also compulsory to register all tenancy
arrangements.
Increased productivity
More land came under cultivation and since tillers themselves became
the landowners, productivity increased. Land reforms were largely
successful in the states of West Bengal and Kerala because of the
political will of the left-wing governments to implement them efficiently.
There was a sort of revolution in these places in terms of land holding
patterns and ownership, and also the condition of peasants. The backing
slogan was ‘land to the tiller’. In Jammu and Kashmir also, there was
partial success in the redistribution of land to landless labourers.

Drawbacks of land reforms

There are still many small and marginal farmers in India who pray
to the clutches of moneylenders and continue to remain indebted.
Rural poverty still exists.
Land ceiling varies from state to state.
 Many plantations were exempt from land ceiling act.
Many people own huge tracts of land under ‘benami’ names.

28. Problems of Indian Agriculture

Instability
Cropping Pattern
Land Ownership: Some degree of concentration of land holding.
Land Tenure
Systems and techniques of farming
Marketing of agricultural products
Land reforms

29. The first factories Act was passed in the year 1881. The workers of
the Bombay textile industry demanded that the working hour should be
reduced, weekly holidays and compensation in case of injuries suffered
by the workmen. Bombay mills hand association is first union
established for workers by N.lokhande in the year 1890.
Several Labour movements started after the outbreak of worldwar one.
The miserable social and economic condition of the people at that time
triggered the labour movement. Formation of ILO (international labour
organization) leads to formation of trade unions .Ahmadabad labor
textile association was formed under the guidance of Mahatma Gandhi
principle of non violence.

The four major organization serving as union for workmen are INTUC,
AITUC ,HMS ,UTUC.
INTUC (Indian National Trade Union Congress)
AITUC (All India Trade Union Congress)
HMS (HIND MAZDOOR SABHA)
UTUC (United Trade Union Congress)
Apart from these four trade unions there are other trade unions working
in various industries not affiliated to any central organization.

All India trade union congress was formed in the year 1920 for the
purpose of selecting the delegates for ILO, first meeting of AITUC was
held in Bombay under the presidentship of Lala Lajpat Rai in the year
1920 AIRF (All India Railways man Federation) was formed in 1922 , all
the union consisting and compromising of railway workmen were made
part of it and affiliated to it. AITUC witnessed the split because some
members were in support of the war and other were not in support of the
war, later group is separated as an organization under the leadership of
congress leaders resulted in the formation of Indian National Trade
Union Congress (INTUC) .Socialists also got themselves separated from
the AITUC which resulted in the formation of Hind Mazdoor sabha in the
year 1948. Therefore the splits and detachment can be observed
resulting in creation of separate trade unions.
Trade union movement was not so successful owing to following
reasons:
(A) Uneven Growth: Trade union activities are concentrated in large
scale industries and that too in regard of manual labor only and mainly in
bigger industrial centre, there are hardly any trade union activities in
small scale enterprises, domestic and agricultural labour. The degree of
unionism varies a lot from industry to industry, thus touching only a
portion of the working class in India.
(B) Low Membership: Even though, the number of trade unions has
increased considerably in India but this has been followed by the
declining membership per union. The average number of members per
union was about 3,500 in 1927-28. It reduced to about 1,400 in 1946-47
and again to as low as a figure of 675 in 1985-86 and 659 in 2000-01.
This indicates the emergence of small scale trade unions.
(C) Multiplicity of Unions: Another problem faced by the growth of
trade unions is that of multiplicity of unions. There may exist many trade
unions in the same establishment. The existence of large number of
trade unions can be attributed to the fact that The Trade Unions Act,
1926 permits any association of seven workers to be registered as a
union, and confers upon it certain rights. Many a time, it is contended
that multiplicity of unions is because of outside leaders, but more
pertinent point is that they are able to work because law permits and
gives sanctity to the small unions.
(D) Inter Union Rivalry: Unions try to play down each other in a bid to
gain greater influence among workers. In the process they do more harm
than good to the cause of unionism as a whole. Employers are given an
opportunity to play unions against each other. They can refuse to
bargain on the contention that there is not true representative union.
Besides this, the workers own solidarity is lost. Employers are able to
take advantage of in fighting between workers groups.
(E) Weak Financial Position: The financial position is very low as their
average yearly income is very low and inadequate. The subscription
rates are very low due to multiplicity of unions, unions interested in
increasing their membership keep the subscription rates very low
resulting inadequacy of funds with the unions. Another important reason
for the weak financial position of unions is that large amounts of
subscription dues remain unpaid by the workers. The name of constant
defaulters continuously appears on the registers on most of the unions.
They are neither expelled nor cease to be members ipso facto according
to the union rules.
30. Special financial institutions both at the national level and state level
were set up for fast industrial growth after independence:
National level special financial institutions set up by the Central
Government includes the Industrial Finance Corporation of India, the
Industrial Credit and Investment Corporation of India, national Industrial
Development Corporation of India, the Industrial Development Bank of
India and the Industrial Reconstruction Corporation of India.
State level include the State Financial Corporations and State Industrial
Development Corporations.

These institutions are, mainly financing agencies, providing

medium and long- term capital.
Their operations also include conducting of market surveys,
preparation of project report, provision of technical advice and
management services, and establishment and management of industrial
units.
They help in the development of the capital market by providing
direct financial assistance to industrial enterprises and by helping them
to raise long-term loans from the market.
They underwrite the new issues of industrial securities and also
subscribe to them.
They are working as an instrument of balanced economic
development by focusing their efforts on less developed industries and
backward regions of the country.
 They also provide guarantee of deferred payment against imports
of capital goods and thus bring together local and foreign entrepreneurs.
Generally speaking, they are multipurpose institutions in the sense
of financing projects in the various sectors of the economy.

31. Causes of Industrial Sickness

1. Internal causes – which includes
Faults at the initial levels of planning and construction.
Financial constraints.
Labour and management problems.
Defective, inefficient, and age-old machinery.
Incompetence on the parts of entrepreneurs.
Unskilled laborers to work with modern technology.
2. External causes are those which are beyond the control of its
management and include –
Sudden changes in government policies.
Erratic supply of inputs.
Non-availability of energy resources and raw materials.
Increased competition.
Power cuts.
Demand and credit restraints.
Delay on the part of the Government in sanctioning licenses,
permits, etc.

Revival and rehabilitation measures

Financial Assistance
As per the directions of the RBI, the commercial banks granted the
following concessions to sick industrial units:
Rescheduling of loans and interest
Grant of additional working capital
Waiving off interest on loans
Moratorium on payment of interest, etc.
Organizational measures
The different organizational measures are given below:
State-level inter-institutional committees: These are set up by the
RBI to ensure better coordination between the banks, state governments,
and other concerned financial institutions.
Special Cell: It was set up by the Rehabilitation Finance Division of
the IDBI to assist the banks for the revival of sick units.

Fiscal Concessions
The government amended the Income Tax Act in 1977 to provide a
tax benefit to those units which take over the sick units for reviving them.
The government announced a scheme for the grant of excise
loans to sick/weak units.
Under this scheme, selected sick units are eligible for excise loans
not exceeding 50% of the excise duty paid over the preceding 5 years.

32.Industrial policy refers to government’s policy towards industries,

their establishment functioning and growth.

Industrial Policy Resolution, 1948

• It declared the Indian economy as Mixed Economy
• Small scale and cottage industries were given the importance
• The government restricted foreign investments
• Industries were divided into 4 categories
1) Exclusive monopoly of central government(arms and ammunitions,
production of atomic energy and management of railways)
2) New undertaking undertaken only by state(coal, iron and steel,
aircraft manufacturing, ship building, telegraph, telephone etc.)
3) Industries to be regulated by the government(Industries of basic
importance)
4) Open to private enterprise, individuals and cooperatives(remaining)

Industrial Policy Resolution, 1956 (IPR 1956)

• This policy laid down the basic framework of Industrial Policy
• This policy is also known as the Economic Constitution of India
• It is classified into three sectors
1) Schedule A – which covers Public Sector (17 Industries)
2) Schedule B – covering Mixed Sector (i.e. Public & Private) (12
Industries)
3) Schedule C – only Private Industries
• This has provisions for Public Sector, Small Scale Industry, Foreign
Investment. To meet new challenges, from time to time, it was modified
through statements in 1973, 1977, and 1980.

Industrial Policy Statement, 1977

• This policy was an extension of the 1956 policy.
• The main was employment to the poor and reduction in the
concentration of wealth.
• This policy majorly focused on Decentralisation
• It gave priority to small scale Industries
• It created a new unit called “Tiny Unit”
• This policy imposed restrictions on Multinational Companies
(MNC).

Industrial Policy Statement, 1980

• The Industrial Policy Statement of 1980 addressed the need for
promoting competition in the domestic market, modernization, selective
Liberalization, and technological up-gradation.
• It liberalised licensing and provided for the automatic expansion of
capacity.
• Due to this policy, the MRTP Act (Monopolies Restrictive Trade
Practices) and FERA Act (Foreign Exchange Regulation Act, 1973) were
introduced.
• The objective was to liberalize the industrial sector to increase
industrial productivity and competitiveness of the industrial sector.
• The policy laid the foundation for an increasingly competitive
export-based and for encouraging foreign investment in high-technology
areas.

New Industrial Policy, 1991

The New Industrial Policy, 1991 had the main objective of providing
facilities to market forces and to increase efficiency.

Larger roles were provided by

L – Liberalization (Reduction of government control)
P – Privatization (Increasing the role & scope of the private sector)
G – Globalisation (Integration of the Indian economy with the world
economy)
Because of LPG, old domestic firms have to compete with New
Domestic firms, MNC’s and imported items

The government allowed Domestic firms to import better technology to

improve efficiency and to have access to better technology. The Foreign
Direct Investment ceiling was increased from 40% to 51% in selected
sectors.

The maximum FDI limit is 100% in selected sectors like infrastructure

sectors. Foreign Investment promotion board was established. It is a
single-window FDI clearance agency. The technology transfer agreement
was allowed under the automatic route.

Industrial licensing was abolished except for some industries like

aerospace, hazardous chemicals, explosives, tobacco, etc.

Monopolies and Restrictive Trade Practices Act – Under his MRTP

commission was established. MRTP Act was introduced to check
monopolies. The MRTP Act was relaxed in 1991. Competition Act 2000
was passed. Its objectives were to promote competition by creating an
enabling environment.

Review of the Public sector under this New Industrial Policy, 1991 are:
• Public sector investments (Disinvestment of Public sector)
• De-reservations –Industries reserved exclusively for the public
sector were reduced
• Professionalization of Management of PSUs
• Sick PSUs to be referred to the Board for Industrial and financial
restructuring (BIFR).
• The scope of MoUs was strengthened (MoU is an agreement
between a PSU and concerned ministry).

Way Foward
It is time to replace the 30-year-old Industrial policy and draft a new
policy for better strategic engagement with the world. The Government
is working on a new industrial policy that would be a road map for all
business enterprises in the country.