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Telangana TSBIE TS Inter 2nd Year Commerce Study Material 9th Lesson Principles of Management Textbook Questions and Answers.

TS Inter 2nd Year Commerce Study Material 9th Lesson Principles of Management

Long Answer Type Questions

Question 1.
What are the principls of management?
Answer:
Principles of Management :
Henry Fayol is known for the general principles of management formulated by him in the 20^th century. Hence, he is called as ‘Father of Management’. Fayol’s principles of management are as follows :

Fayol’s principles of management are as follows :

1. Division of Labour :

1. Division of labour leads to specialization which increases the efficiency of individual employees.
2. Fayol recommended that work of all kinds must be subdivided and allocated to number of persons. Sub division makes each task simpler and results in greater efficiency, by repeating a small’part of work the individual acqires speed and accuracy in his performance. This principle is applicable to both technical as well as managerial work.

2. Parity of Authority and Responsibility :

1. Authority refers to the right of a superior to give order to subordinate, take decision on specified matters, use resources of the organization, and guide and regulate the behavior of subordinates.
2. Responsibility includes with respect to performance of functions and achieving goals in the satisfactory manner.
3. The principle of parity suggests that there must be parity between authority and responsibility. Giving authority without corresponding responsibility can lead to arbitrary and unmindful use of authority.
4. Similarly, if a person is given some responsibility he must also be given adequate authority. Lack of necessary authority makes the individual ineffective.

3. Discipline :

1. Discipline in the context of management means obedience, proper conduct in relation to others and complying with the rules and regulations of the organization.
2. Discipline is required not only on the part of workers but also on the part of management, It is facilitated if there are good supervisors at all levels, rules are clear, and penalties ae imposed with fairness.

4. Unity of Command :

1. The principle states that a subordinate should receive orders and be accountable to one and only, one superior.
2. No employee, therefore, should receive instructions from more than one person. The principle is necessary to avoid confusion and conflict.

5. Unity of Direction :

1. According to this principle, the efforts of all the members of the organization should be directed towards common goals. A group of activities having the same objective must have one head and one plan.
2. For this purpose there should be one hed and one plan for a group of activities having the same objectives.
3. The principle seeks to ensure unity of action, co-ordination of strength and focusing of effort.

6. Subordination of individual to general interest:

1. The interest of one employee or group of employees should not prevail over that of the company organization.
2. The interest of the firm as a whole is more important than the interest of an individual or group of person.
   3) Individual interest must be subordinaed to the general interest or the interest of the whole firm.

7. Remuneration of personnel :

1. To maintain the loyalty and support of workers, they must receive full and fair wage for services rendered.
2. Remuneration should provide maximum possible satisfaction to employees and em-ployer. They should put in their best effors to improve productivity.

8. Centralization :

1. It refers to the extent to which authority is concentrated or dispersed.
2. The appropriate degree of centralization will vary with different concerns.
3. Under centralization managers or executives play an important role.

9. Scalar Chain :

1. The scalar chain is the chain of superiors ranging from the ultimate authority to the lowest ranks.
2. It shows the line of authority from the highest executive to the lowest one for the purpose of communication.
3. This will help an employee to know the person whom he sould contact for advice and guidance.

10. Order :

1. Order requires that there is a place for everything and everything in its place.
2. Social order requires the employment of ‘the right man in the right place’.

11. Equity :

1. Equity is a combination of kindliness and justice. It seeks to elicit loyalty and devo-tion from personnel.
2. The managers should show kindness and justice in dealing with their subordinaes.
3. The application of the principle equity leads to successful working of the firm.

12. Stability of tenure of personnel :

1. Every employes must feel that he enjoys security of the job. If he knows that he has to work at one place only, he will take interest in the give his best performance.
2. If there is no stability of tenue, he loses interest in the job and wits for an opportunity to quit the firm. It is said instability, of tenure is an evidence of bad running of affairs.

13. Initiative :

1. Initiative involves thinking out and execution of a plan and ensuring its success. This gives zeal and energy to an organization.
2. Fayol advised managers to allow employees. Show initiative as much as possible. The freedom to propose a plan and to execute it is known as initiative.
3. It will enable employees to experience the keenest satisfaction from their jobs.

14. Esperit de crops :

1. It implies that union is strength, which comes from the harmony of the personnel.
2. It emphasizes the importance of teamwork and group endeavors,
3. The management should never adopt divide and rule policy. It should encourage team spirit and team work. This ensures smooth working of the organization.

Question 2.
Management is considered to be both on art and science. Explain.
Answer:
Management is considered both an art and science, because it is systematized knowledge which Provides laws capable of universal application and has a cause and effect relationship.

Management is an art :

1. The application of management skills is governed by the type of aptitudes and ability possessed by the manager, which are highly personalized blending of imagination, creativity and insight.
2. This permits management being described as an art. Management cannot be compared with sciences like physics, chemistry or mathematics so far the degree of precision is concerned.
3. No doubt, mangement is a science, but not as exact in its results as in the case of physics or chemistry. This is for the simple reason that management science deals with human beings who are more widely influenced by a number of material factors.
4. Management as science is still in the evolutionary stage and management is practiced as yet largely as an art like the earlier period. But the growing needs of management service have evolved it as a profession.

Management is science :

1. Science is a systematized body of knowledge pertaining to a specific field of study and contains general facts that explain a phenomenon. It establishes the cause and effect relationship between two or more factors and ascertains the underlying principle governing the relationship.
2. Theories are being continuously formulated as an aid to a more systematic analysis of managerial behavior thus resulting in the study of management moving into the man-agement science.
3. This expression stresses the constant search for evolving and verifying principles and rules as well as for further knowledge resulting.in the emergence of managerial tech-niques effective universally.
4. Scientific method or attitude has been increasingly adopted by good managers towards performance of their job of managing.
5. They have developed inquiring minds which first attempt to identify the problem, for hypothesis or tentative solutions, then investigate in terms of current knowledge and even controlled experiments, classify the data so obtained and develop it into alternative courses of action.

Question 3.
What are the contributions of Henry Fayol in the field of management?
Answer:
Henry Fayol is known for the general principles of management formulated by him in the 20^th century. Fayol graduated in 1860 as a mining engineer. Henry Fayol, an engineer; industrial magnate and he was a successful cheif executive with a large experience in the field of general Administration and Management.

Fayol developed general theory of organization, and administration to all organizations. He wrote “to manage is to forecast and plan, to organize, to command to coordinate and to control”.

Fayol’s contribution to the science of management may be summerised as follows :
a) Classification of industrial activities.
b) Classification of managerial functions.
c) Universal principles of management.
d) Significance of management function.
e) Managerial qualities and training.
f) Macro approach to management.
g) Human aspect of management.

Henry Fayol has been rightly called “The father of the management”. He has identified 14 principles of management those are division of labour, authority and responsibility, discipline, unity of command; unify of direction; subordination; remuneration; centralisation, scalar chain, order, equity, stability of tenure; initiative; esperit-de-corps etc.

Question 4.
Explain the nature of management.
Answer:
1. Science as well as an Art :
Managemen is considered both a science and an art, because it is systematized knowledge which provides laws capable fo universal application and has a cause and efffect relationship.

2. Social Responsibility :
Management has been accepted as a profession in the area of discipline and its responsibilities have increased. A manager is not only answerble to his employer but equally to the society. He is considered to be .the representative of the society also and has to care for the interests of the consumers as well.

3. Mamagement has a Distinct Entiry :
Managers at the higher level do not work at the operative level. They get the work done by others. Organisation get success in maximum output of work at minimum imput in the form of man power, materials and time. Management is a process of universal application and it is required at each and every level of organization.

4. Purposive Activity :
Management is always aimed at achieving certain specified objecives. It is a tool which helps efficient use of human and physical resources to accomplish the predetermined goals. Management has no justification to exist without objectives.

5. Management is Pervasive :
Management is relevant for all types of organizations- economic political and political. Wherever more than one person is engaged in working for a common goal, management is necessary. That is why it is asserted that management is an essential element of organized activity irrespective of the type or size of the activity.

6. Management is a Group Activity :
Management is concerned with a group activity. It involves the use of group efforts in the achieving predetermined objectives.

Question 5.
What are the objectives of management?
Answer:
In any organisation there are different objectives and management has to achieve the objectives in an effective and efficient manner. Objectives of any business entity can be classified into Organizational objectives, Social objectives and Personal or individual objectives.

i) Organizational Objectives :

1. Management of a business is responsible for setting and achieving objectives for it ssuccess.
2. It has to achieve a variety of objectives in all areas considering the interest of all stakeholders including shareholders, employees, customers and government.
3. The main objective of any organization should be to utilize human and material resources to the maximum possible advantage i.e, to fulfil the economic objectives of a business. These are survived, profit and growth.

ii) Social Objectives :

1. It involves the creation of benefit for society. As a part of society, every organization whether it is business or non-business, has a social obligation to fulfill.
2. This includes using environmental friendly methods of production, giving employment opoortunities to the disadvantaged sections of society and providing basic amenities like schools and creches to employees.

iii) Peraonal Objectives :

1. Organizations are made up of person who have different personalities, backgrounds, experiences and objectives.
2. They all become part of the organization to satisfy their diverse needs. These vary form financial needs social needs growth and development.
3. Management has to reconcile personal goals with organizational objectives for har-mony in the organization.

Question 6.
Explain the significance of Management.
Answer:
Management plays an important and crucial role in a changing and complex society, whatever is the political philosophy, or structue of a society.

1. Management assembles and organizes available resources for achieving of the goals of an enterprise.
2. Management helps in improving the quality of lives of the people in the society by developing the human as well as non-human resources of production.
3. Management has to face and solve numerous labour problems which arise almost every day in society and industrial organizaion.
4. Management has to accomplish the objectives set forth in the beginning by any industrial organization.
5. Management ability is put to test when it helps organization to survive in the market under free cut-throat competition.
6. Management provides stability in the society by changing and modifying the resources or production in the fast changing economic and social environment.
7. Various factors of production are inter-related and interdependent each contributing to the efficiency of others. Management strikes proper balance among them by securing maximum efficiency.
8. Management provides maximum utilization of scarce resources by selecting its best possible alternative use in industry from out of various uses to which it can be put.
9. Management helps an organization to survive in its dynamic environment. Good management enables an enterprise to adjust to the complex and every changing external environment.

Question 7.
What are the characteristics of Management?
Answer:

1. Management is the process of planning organizing, staffing, directing and controlling the enterprise resources efficeintly and effectively for achieving the goals of the organization.
2. According to RF. Drucker, “Management is a multipurpose organ that manages a business and manages managers, and manages workers and work”.

CHARACTERISTICS :
The following are the important characteristics of management.
1. It is an Economic Activity :
Management is part and parcel of every economic activity of man who struggles for better living in his existing society moulded under different management aspects like planning, coordianting, controlling etc.

2. It is a creative activity :
Management is creative, purposeful, group, motivating, economy oriented and delegating activity, and above all decision-making activity.

3. It gets things done through others :
It is its purpose that management gets the things done through other people. It does not perform the work itself but helps others to do. It coordinaes individual actions into a team.

4. It coordinates efforts :
In any organization a group of people is involved in working. The management activity brings about a co-ordinated efforts of many individuals and small groups towards organisational objective.

5. It is a process :
Management is the process which managers create, direct, maintain and operate purposive organizations through systematic, Coordinative human efforts.

6. Its goal oriented :
The purpose of management is to achieve certain goals. If the objective of a comp is to maximize profit, steps may be taken to reduce the cost or production and add new line of product or replace the existing machine with automated machine to provide maximum output which results in attaining the aim of maximum profits.

7. If acts as a group :
Management refers to a group of people who together carryout various managerial activities. All the managers from the chief executive to the first line supurvisors are collectively addressed as management.

8. It is a discipline :
Management is recognized as formal discipline having an organized body of knowledge which can be learnt through instructions and teaching. All over world scholars are doing research on the principles and practices of management.

Question 8.
Explain the levels of Management?
Answer:
There are threee levels of management which are explained here under :

A. Top level :
1) According to of E.F.L Brech, the functions of top level, which actually are board of directors, Managing Director, Chief Executive and General Manager, who establishes policies, plans and objecives.
2) It needs more human skills, innovative decision making conceptual clarity to compare the technical skills.

3) The functions include :
i) Fixing the objectives of the enterprise and protecting the interests of the enterprises’ as its trustees;
ii) Evaluating the achievements of the enterprises
iii) Selecting the chief executive, allocating the incomes, discussing the complicated and serious matters.

B. Middle Level:

1. Middle level management bridges gap between Top level management and Lower level management.
2. Departmental heads of various departments are finance manager, personnel manager, production or marketing manager etc.
3. Their main function is to implement the policies and programs formulated by the top management for the execution and to render valuable services for the successful operation of their deparments.

C. Lower Lelvel:

1. Lower level management consist of superintendents, supervisors and foremen who are in touch with direct arrangement of workers.
2. Supervisors are those having authority to exercise independent judgement in hearing, discharging, disciplining, rewarding and taking other actions of a similar nature with respect to employees. In offices they are known as supervisors and in factories as foremen.
3. In the present age, supervisors have an important place in the management hierarchy and they are considered as ‘friends, guides and well wishers of labour.

Question 9.
Is management science or Art? Explain.
Answer:
Management is considered both an art and science, because it is systematized knowledge which Provides laws capable of univerwsal application and has a cause and effect relationship.

Management is an art:

1. The application of management skills is governed by the type of aptitudes and ability possessed by the manager, which are highly personalized blending of imagination, creativity and insight.
2. This permits management being described as an art. Management cannot be compared with sciences like physics, chemistry or mathematics so far the degree of precision is concerned.
3. No doubt, mangement is a science, but not as exact in its results as in the case of physics or chemistry. This is for the simple reason that management science deals1 with human beings who are more widely influenced by a number of material factors.
4. Management as science is still in the evolutionary stage and management is practiced as yet largely as an art like the earlier period. But the growing needs of management service have evolved it as a profession.

Management is science :

1. Science is a systematized body of knowledge pertaining to a specific field of study and contains general facts that explain a phenomenon. It establishes the cause and effect relationship between two or more factors and ascertains the underlying principle governing the relationship.
2. Theories are being continuously formulated as an aid to a more systematic analysis of managerial behavior thus resulting in the study of management moving into the management science.
3. This expression stresses the constant search for evolving and verifying principles and rules as well as for further knowledge resulting in the emergence of managerial techniques effective universally.
4. Scientific method or attitude has been increasingly adopted by good managers towards performance of their job of managing.
5. They have developed inquiring minds which first attempt to identify the problem, for hypothesis or tentative solutions, then investigate in terms of current knowledge and even controlled experiments, classify the data, so obtained and develop it into altemative courses of action.

Short Answer Type Questions

Question 1.
Define Management.
Answer:
Generally mangement has been defined as “getting things done through others”.

Definitions :

1. Management is a multipurpose organ that manges a business and manages managers and manages workers and work. – Peter F. Drucker.
2. Management is the art of knowing what you want to do and then seeing that it is done in the best and cheapest way”. – F.W. Taylor.
3. “To manage is to forecast and to plan, to organize, to*command, to co-ordinate and to control.” – Henry Fayol.

Question 2.
Name any two important dcharacteristics of management.
Answer:
The following are the important characteristics of management.

1. It is an economic activity.
2. It gets things done through others.
3. It is a creative activity.
4. It co-ordinates efforts.
5. It is a process.
6. It is goal oriented.
7. It acts as a group.
8. It is a discipline.

1) It is an economic activity :
Management is part and parcel of every economic activity of man who struggles for better living in his existing society, the fate of which is rather moulded by management under different aspects like planning, co-ordinating, controlling etc., It is the sum total of those activities.

2) It gets things done through others :
It is its purpose that management gets the things done through other people. It does not perform the work itself but helps to do. It co-ordinates individual actions into a team. In any organization a group of people is involved in working towards a common objective. Whatever the managers do they have some purpose in it. Managers motivate people to get things done through them.

3) It is a creative activity :
Management is creative activity-purposeful activity-group activity – motivating activity – economy oriented activity – delegating activity and above all, a decision – making activity.

Question 3.
What is the meant by unit of Direction.
Answer:
Unity of Direction :

1. According to this principle, the efforts of all the members of the organization should be directed towards common goals. A group of activities having the same objective must have one head and one plan.
2. For this purpose there should be one hed and one plan for a group of activities having the same objectives.
3. The principle seeks to ensure “unity of action, co-ordination of strength and focusing of effort.

Question 4.
What are the basic features of management as a profession?
Answer:

1. Profession refers to an occupation, which is supported a well-defined of knowledge that can be learnt through instruction, in which entry is restricted by examination or education and which is associated with service to others above self interest.
2. The view of management is progressively changing. Managers must receive training in management and possess requisite educational qualifications.
3. In the field of management does not any professional association as that of Bar Council of India for practicing lawyers, chartered accountants, cost accountants and company secretaries and so on.
4. In some respects management qualify as a profession but it does not have certain features which generally are recognized as profession.
5. We may say that the management is emerging as a profession backed by a number of principles, techniques and tools have developed which need proper training, education and learning.

Question 5.
Is Management Art?
Answer:
Management is an art :
The application of management skills is governed by the type of aptitudes and ability possessed by the manager, which are highly personalized blending of imagination, creativity and insight. This permits management being described as an art. Management cannot be compared with sciences like physics, chemistry or mathematics so far the degree of precision is concerned. No doubt, mangement is a science, but not as exact in its results as in the case of physics or chemistry.

This is for the simple reason that management science deals with human beings who are more widely influenced by a number of material factors. Management as science is still in the evolutionary stage and management is practiced as yet largely as an art like the earlier period. But the growing needs of management service have evolved it as a profession.

Question 6.
Is Management Profession.
Answer:

1. Profession refers to an occupation, which is supported a well-defined of knowledge that can be learnt through instruction, in which entry is restricted by examination or education and which is associated with service to others above self interest.
2. The view of management is progressively changing. Managers must receive training in management and possess requisite educational qualifications.
3. In the field of management does not any professional association as that of Bar Council of India for practicing lawyers, chartered accountants, cost accountants and company secretaries and so on.
4. In some respects management qualify as a profession but it does not have certain features which generally are recognized as profession.
5. We may say that the management is emerging as a profession backed by a number of principles, techniques and tools have developed which need proper training, education and learning.

Question 7.
Is management a science?
Answer:
Management as science :
Science is a systematized body of knowledge pertaining to a specific field of study and contains general facts that explain a phenomenon. It establishes the cause and effect relationship between two or more factors and ascertains the underlying principle governing the relationship. Theories are being continuously formulated as an aid to a more systematic analysis of managerial behavior thus resulting in the study of management moving into the management science.

This expression stresses the constant search for evolving and verifying principles and rules as well as for further knowledge resulting in the emergence of managerial techniques effective universally. Scientific method or attitude has been increasingly adopted by good managers towards performance of their job of managing. They have developed inquiring minds which first attempt to identify the problem, for hypothesis or tentative solutions, then investigate in terms of current knowledge and even controlled experiments, classify the data so obtained and develop it into alternative courses of action.

Question 8.
What are the organisational objectives of Management?
Answer:
Organizational Objectives :

1. Management of a business is responsible for setting and achieving objectives for it ssuccess.
2. It has to achieve a variety of objectives in all areas considering the interest of all stakeholders including shareholders, employees, customers and government.
3. The main objective of any organization should be to utilize human and material resources to the maximum possible advantage i.e., to fulfil the economic objectives of a business. These are survival, profit and growth.

Question 9.
What is top level management.
Answer:
Top level:
1) According to of E.F.L Brech, the functions of top level, which actually are board of directors, Managing Director, Chief Executive and General Manager, who establishes policies, plans and objecives.

2) It needs more human skills, innovative decision making conceptual clarity to compare the technical skills.

3) The functions include :
i) Fixing the objectives of the enterprise and protecting the interests of the enterprises’ as its trustees;
ii) Evaluating the achievements of the enterprises :
iii) Selecting the chief executive, allocating the incomes, discussing the complicated and serious matters.

Question 10.
Distinguish management and administration.
Answer:
Management and Administration :
Administration is considered as wider in scope in comparison with management. Administration is concerned with policy making for achieving objectives whereas management is considered as executing the policy.

Distinction between Management and Administration :

1. Administration lays down broad goals and objectives for which the industrial enterprises have been set up. Management formulates plans which would lead to the fulfillmen of the enterprise objectives.
2. Administration lays down broad policies and principles for guidance. Management execute these policies into practice.
3. Administration draws out the outline and framework for the execution of its policies. Management controls and supervises the activities concerned to execution of policies.
4. Administration provides directon, guidance and leadership in all the activities of the enterprise. Management co-ordinates the various activities within a particular department and co-ordinates the activities of the various departments.

Question 11.
Distinguish Unity of command and unity of Direction.
Answer:

Question 12.
What is parity of authority and responsibility.
Answer:
Partiy of Authority and Responsibility

1. Authority refers to the right of a superior to give order to subordinage, take decision on specified matters, use resources of the organization, and guide and regulate the behaviour of subordinaes.
2. Responsibility includes obligation with respect to perforance of functions and achieving goals in the satisfactory manner.
3. The principle of parity suggests that there must be parity between authority and responsibility. Giving authority without corresponding responsibility can lead to arbitrary and unmindful use of authority.
4. Similarly, if a person is given some responsibility he must also be given adequate authority. Lack of necessary authority makes the individual ineffective.

Very Short Answer Type Questions

Question 1.
Scalar chain.
Answer:

1. The scalar chain is the chain of superiors ranging from the ultimate authority to the lowest ranks.
2. It shows the line of authority from the highest executive to the lowest one for the purpose of communication.
3. This will help an employee to know the person whom he sould contact for advice and guidance.

Question 2.
Administration.
Answer:

1. Administration is concerned with policy making.
2. Administration is considered as wider in scope in comparision with management.
3. According to Haimann, administration is overall; determination of policies, the setting of major objectives, layingout of broad programmes, major projects so forth.

Question 3.
List out the principles of management.
Answer:
Henry Fayol contributed 14 principles. He is a ‘Father of Management’ The important principles are division of labour, parity of authority and responsibility, discipline, unity of com-mand, esperit-de-corps etc.

Question 4.
Unit of command.
Answer:

1. The principle states that a subordinate should receive orders and be accountable to one and only one superior.
2. No employee, therefore, should receive instructions from more than one persoji. The principle is necessary to avoid confusion and conflict.

Question 5.
Esperit de corps.
Answer:

1. It implies tht union is strength, which comes from the harmony of the personnel.
2. It emphasizes the importance of teamwork and group endeavors.
3. The management should never adopt ‘divide and rule’ policy. It should encourage team spirit and team work. This ensures smooth working of the organization.

Question 6.
Unity of Direction.
Answer:

1. According to this principle, the efforts of all the members of the organization should be directed towards common goals. A group of activities having the same objective must have one head and one plan.
2. For this purpose there should be one hed and one plan for a group of activities having the same objectives.
3. The principle seeks to ensure “unity of action, co ordination of strength and focusing of effort.

Question 7.
Authority and responsibility.
Answer:

1. Authority refers to the right of a superior to give order to subordinate, take decision on specified matters, use resources of the organization, and guide and regulate the behavior of subordinates.
2. Responsibility includes with respect to performance of functions and achieving goals in the satisfactory manner.
3. The principle of parity suggests that there must be parity between authority and re-sponsibility. Giving authority without corresponding responsibility can lead to arbitary and unmindful use of authority.

Question 8.
centralization.
Answer:

1. It refers to the extent to which authority is concentrated or dispersed.
2. The appropriate degree of centralization will vary with different concerns.
3. Under centralization managers or executives play an important role.

Question 9.
Principle of Inititative.
Answer:

1. The freedom to propose a plan and to execute it is known as initiative. Initiative involves thinking out and execution of a plan and ensuring its success. This gives zeal and energy to an organization.
2. Fayol advised managers to allow employees.
3. It will enable employees to experience the keenest satisfaction from their jobs.

Question 10.
Middle level management.
Answer:

1. Middle level management bridges gap between Top level management and Lower level management.
2. Departmental heads of various departments are finance manager, personnel rpanager, production or marketing manager etc.
3. Their main function is to implement the policies and programs formulated by the top management for the execution and to render valuable services for the successful operation of their deparments.

Question 11.
Principle of Discipline.
Answer:

1. Discipline in the context of management means obedience, proper conduct in relation to others and complying with the rules and regulations of the organization.
2. Discipline is required not only on the part of workers but also on the part of management, It is facilitated if there are good supervisors at all levels, rules are clear, and penalties are imposed with fairness.

Telangana TSBIE TS Inter 2nd Year Commerce Study Material 3rd Lesson Banking Services Textbook Questions and Answers.

TS Inter 2nd Year Commerce Study Material 3rd Lesson Banking Services

Long Answer Type Questions

Question 1.
Define banking and explain its functions.
Answer:
Banking is derived rom French word “Bance” means a “Bench”. A bank is regarded as an institution which attracts deposits for the purpose of lending to business (or) other.

According to Banking Regulation Act 1949, Banking is defined as “accepting for the pur-! pose of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise.

Function of Banking :
Banking functions are divided into two categories.
A) Primary functions
B) Secondary functions

A) Primary functions :
The primary functions of Banks are divided into
I. Acceptance of deposits and
II. Advancing Loans

I. Acceptance deposits :
Accepting deposit is the primary functions of a commercial bank. The bank accept deposits from the customers in the forms such as fixed deposits, current deposits savings deposits and recurring deposits accounts.

II. Advancing Loans :
The second primary function of a commercial Bank is to make loans and advances to all types of persons particularly to business men, and entrepreneurs. Loans are made against personal security, gold and silver, stocks of goods and other assets.

Banks offers loans in the form of overdraft, cash credit, term loans, consumer credit money at call, retail loans etc.

B) Secondary Functions :
Secondary functions of a bank includes
I. Agency Services and
II. General utility services .

I. Agency Services :
Banks perform certain agency functions / services on the behalf of their customers.

The various agency services rendered by banks are as follows.

1. Collection and payment of credit instruments like cheques, bills of exchange, promissory note. etc.
2. Purchase and sale of securities on behalf of their customers.
3. Collection of dividends on shares and credit to their accounts.
4. To work as correspondent, representative of their customers.
5. Banks also prepare income tax returns for their customers and help them to get refund of Income Tax.

II. General Utility Services :
In addition to agency services, banks provides many general utility services which are given belows.

1. Bank provides locker facility.
2. Bank issue traveller’s cheques to help their customers to travel without fear of theft or loss of money.
3. Banks issue letters of credit to their customers certifying their credit worthiness.
4. Banks accept and collect foreign bills of exchange on behalf of their customers.
5. Banks underwrite the shares and debentures issued by the Govement, public or privage companies.

Question 2.
Explain the various types of deposit accounts in bank.
Answer:
Banks generally accept four types of deposits viz., Current Deposits, Savings Deposits, Fixed Deposits and Recurring Deposits.

a) Current Deposits :

1. These deposits are also known as demand deposits. These deposits can be withdrawn at any time.
2. These deposits are kept by businessmen and industrialists who receive and make large payments through banks.
3. Generally, no interest is allowed on current deposits.

b) Savings Deposits :

1. This is meant mainly for professional men and middle-class people to help them deposit their small savings.
2. There is a restriction on the amount that can be withdrawn at a particular time or during a week.
3. Interest is allowed on the credit balance of this account. The rate of interest is less than that on fixed deposit. The present rate of interest offered by SBI is 2.75% p.a.

c) Fixed Deposits :

1. These deposits are also known as time deposits. Thews deposits cannnot be with-drawn before the expiry of he period for which they are deposited.
2. Fixed deposits are liked by depositors both for their safety and as well as for their interest.
3. The present rates of interest offered by SBI ranges between 4.5% and 6.10% p.a.

d) Recurring Deposits :

1. This type of deposit allows the account holder to deposit a fixed amount once a month for a certain period.
2. The total deposit along with interest is payable on maturity.
3. The present rates of interest offered by SBI ranges between 5,8% and 6.25% p.a.

Question 3.
Discuss the different forma of lending by a banker.
Answer:
Types of Deposits :
Bank lending can be classified into
I. Cash credit.
II. Loans (Demand loans & Term loans),
III. Overdraft.
IV. Purchasing and Discounting of bills.

I. Cash credit :
Bank agrees to lend money to the borrower upto a certain limit. The amount so agreed upon will be credited to the account of the borrower. The borrower draws the money as and when he needs and interest will be charged only on the amount actually drawn by the borrower.

II. Loans :
Loan is a specified amount sanctioned by a bank to the customer. It is granted for a fixed period. Loans are classified into A) Demand Loan B) Term Loan.
A) Demand Loan :
Demand loan is a loan which is repayable on demand. In other words, these are repayable at short notice.

B) Term Loan :
Medium and long term loans are called ‘Term Loans”. Term loans are granted for more than one year.

III. Overdraft :
The account holder is allowed to draw an amount in excess of the balance held in the account. OD facility provides on current accounts only.

IV. Purchasing and Discounting of Bills :
Bills are negotiable instruments, banker purchasing the bills. If the discounted bill is dishonoured on the due date, the banker can recover the amount from the customer who had discounted thebill.

Question 4.
How the banks in India are classified? Explain.
Answer:
Classification of Banks :

All the banks in India are governed by RBI and classified as scheduled and non scheduled banks .

A) Scheduled Bank :
1) Scheduled Banks ae banks which are included in the Second Schedule of the Banking Regulation Act, 1965. According to this schedule, a scheduled Bank :
i) Must have paid-up capital and reserve of not less than Rs. 5,00,000.
ii) Must also satisfy the RBI that its affairs arer not conducted in a manner detrimental to the interests of is depositors.

2) scheduled banks include all commercial banks like nationalised, foreign, development, co-operative and regional rural banks. There are 202 scheduled banks as on 8^th October 2018)

Scheduled banks types :
1) State Co-operative Banks :
These are co-operatives owned and managed by the State.

2) Commercial Banks :
These are business entities whose main business is accepting deposits and exending loans. Their main objective is profit maximization and adding shareholder value.

Commercial Banks further sub-divided as :
1) Indian Banks :
These banks are companies registered in India under the Companies Act, 1956. Their place of origin is in India.

2) Foreign Banks :
These are banks that were registered outside India and had originated in a foreign country.

A) Non Scheduled Banks :

1. These are banks which are not included in the Second Schedule of the Banking Regulation Act, 1965. It means they do not satisfy the conditions laid down by that schedule.
2. These banks are not allowed to borrow money from RBI for regular banking purposes. Periodic returns need not be submitted wih RBI and cannnot become memeber of clearing house.

Question 5.
Explain the features of Internet Banking.
Answer:

1. It could reach out to customer spread across the countries. It removes geographical barriers.
2. Traditional risks in bank transactions are eliminated.
3. It enables the customers to pay electricity bills, insurance premiums etc.
4. Internet is a public domain which is not subject to control of any single authority or group.
5. Railway tickets air tickets are booked through E – system.
6. It facilitates payment of direct taxes online.
7. It enables Real Time Gross Settlement (RTGS) i.e., inter-bank funds transfer.
8. It should continuously update their technology, as when a new technology is developed.
9. New technology is developed for future period.
10. It leads to establishment of an efficient and effective cost and control system.

Question 6.
Explain the primary functions of Banks.
Answer:
1) Primary functions of Banks are divided into two types.
A) Accepting Deposits and
B) Advancing loans

A) Accepting deposits:
Accepting deposits is the primary function of a commercial Bank. Banks accept deposita from the customers in the form of Fixed Deposits, current deposits, savings deposits and Recurring Deposits accounts.

a) Current Deposits :

1. These deposits are also known as demand deposits. These deposits can be withdrawn at any time.
2. These deposits are kept by businessmen and industrialists who receive and make large payments through banks.
3. Generally, no interest is allowed on current deposits.

b) Savings Deposits :

1. This is meant mainly for professional men and middle-class people to help them deposit their small savings.
2. There is a restriction on the amount that can be withdrawn at a particular time or during a week.
3. Interest is allowed on the credit balance of this account. The rate of interest is less than that on fixed deposit. This system greatly encourages the habit of thrift or savings. The present rate of interest offered by SBI is 2.75% p.a.

c) Fixed Deposits :

1. These deposits are also known as time deposits. These deposits cannnot be with-drawn before the expiry of he period for which they are deposited.
2. Fixed deposits are liked by depositors both for their safety and as well as for their interest which is higher.
3. The present rates of interest offered by SBI ranges between 4.5% and 6.10% p.a.

d) Recurring Deposits :

1. This type of deposit allows the account holder to deposit a fixed amount once a month for a certain period.
2. The total deposit along with interest is payable on maturity.
3. The present rates of interest offered by SBI ranges between 5.8% and 6.25% p.a.

B) Advancing Loans :
The second primary fucntion of commercial bank is to make loans and advances to businessmen, and entrepreneurs. Loans are made against personal security, gold and silver, stocks of goods and other assets.

Bank tendering can be classified into
I. Cash credit.
II. Loans (Demand loans & Term loans).
III. Overdraft.
IV. Purchasing and Discounting of bills.

I. Cash credit :
Bank agrees to tend money to the borrower upto a certain limit. The amount so agreed upon will be credited to the account of the borrower. The borrower draws the money as and when he needs and interest will be charged only on the amount actually drawn by the borrower.

II. Loans i Loan is a specified amount sanctioned by a bank to the customer. It is granted for a fixed period. Loans are classified into
A) Demand Loan
B) Term Loan.

A) Demand Loan:
Demand loan is a loan which is repayable on demand. In other words, these are repayable at short notice.

B) Term Loan :
Medium and long term loans are called “Term Loans”. Term loans are granted for more than one year.

III. Overdraft :
The account holder is allowed to draw an amount in excess of the balance held in the account. OD facility provides on current accounts only.

IV. Purchasing and Discounting of Bills :
Bills are negotiable instruments, banker purchasing the bills. If the discounted bill is dishonoured on the due date, the banker can recover the amount from the customer who had discounted the bill.

Question 7.
Discuss the secondary functions of banks.
Answer:
Secondary Functions :
Secondary functions of a bank include A) Agency services and B) General utility services

A. Agency Services :
Banks also perform cerain agency functions for and on behalf of heir customers. The various agency services rendered by banks are as follows:
1. Collection and Payment of Credit Instruments :
Banks collect and pay various credit instrumets like cheqes, bills of exchange, promissory notes etc., on behalf of their customers.

2. Purchase and Sale of securities :
Banks purchase and sell various securities like shares, stocks, bonds, debentures on behalf of their customers.

3. Collection of Dividends on Shares :
Banks collect dividends and interet on shares and debentures of their customers and credit them to their accounts.

4. Acts as Correspondent :
Sometimes banks act as representative and correspondents of their customers. They get passports, traveller’ stickets and even secure air and sea passages for their customers.

5. Income-tax Consultancy :
Banks may also employ income tax experts to prepare income tax returns for their customers and to help them to get refund of income tax.

6. Execution of Standing Orders :
Banks execute the standing instructions of their cus-tomers for making various periodic payments. They pay subscriptions, rents, insurance premium etc., on behalf of their customers.

7. Acts as Trustee and Executor :
Banks preserve the “will’s of their customers and execute them after their death.

B. General Utility Services :
In addition to agency services, the modern banks provide many general utility services for the community given as under :

1. Locker facility :
Bank provides locker facility to their customers. The customers can keep their valuables, such as gold and silver ornaments, imporant documents; shares and de-bentures in these lockers for safe custody.

2. Traveller’s Cheques and Credit Cards :
Banks issue travller’s cheques to help their customers to travel without the fear of theft or loss of money.

3. Letter of Credit :
Letters of credit are issued by the banks to their customers certifying their credit worthiness. Letters of credit are very useful in foreign trade.

4. Collection of Statistics :
Banks collect statistics giving important information relating to trade, commerce, industries, money and banking. They also publish valuable journals and bulletins containing articles on economic and financial maters.

5. Acting Referee :
Banks may act as referees with respect to the financial standing, business reputation and respecability of customers.

6. Underwriting Securities :
Banks underwrite the shares and debentures issued by the Government, public or private companies.

7. Gift Cheques :
Some banks issue cheques of various denominations to be used on auspicious occasions.

8. Accepting Bills of Exchange on Behalf of Customers :
Sometimes, banks accept bills of exchange, internal as well as foreign, on behalf of their customers. It enables customers to import goods.

Question 8.
Explain the different types of bank payments.
Answer:
Different types of bank payments are given below
1. Cheque :
1) A cheque is document which orders a bank to apy a particular amount of money from a person’s account to another individual or company’s account in whose name the cheque has been made or issued.

2) The cheque is utilized to make safe, secure and convenient paymens. It serves as a secure option since hard cash is not involved during the transfer process; hence the fear of loss or theft is minimized.

2. National Electronic Funds Transfer (NEFT) :

1. Naional Elecronic Fund Transfer (NEFT) is a country-wide electronic fund transfer system for sending money from one bank account to another in a safe and hassle-free manner.
2. All NEFT settlements are made in a batch-wise format. Money can be sent using this system to all NEFT-enabled banks in India on an individual basis.

3. Real Time Gross Settlement (RTGS) :

1. ‘RTGS’ or Real Time Gross Settlement is a fund transfer method through which money is sent in ‘real time’ basis without any delays.
2. RTGS is typically meant for larger value transactions and the minimum amount that can be sent via this mode is Rs. 2 lakh.
3. Money can be sent using RTGS through net banking. To inititate such a transaction, it is important to collect some details from the payee such as account number, bank name, IFSC code, and account holder name.

4. Immediate Payment Service (IMPS) :

1. Immediate Payment Service (IMPS) is a real-time electronic fund transfer method through which money is credited immediately to the payee/beneficiary account.
2. IMPS transfers can be done at any time on a 24/7 basis and on all 365 days in a year, including on Sundays and other bank holidays.
3. Through IMPS, interbank transfers can be inititate through multiple channels such as mobile banking, internet banking, SMS, ATMs, etc.
4. The IMPS services are managed by the National Payments Corporation of India (NPCI) and cone under the purview of the Reserve Bank of India.

5. Payment Wallets :

1. A waller is a small software program used for online purchase transactions. E-wallet is a type of electronic card which is used for transactions made online through a computer or a smartphone.
2. In E-wallet needs to be linked with the individual’s bank account to make paymets. E-wallet is a type of pre-paid account in which a user can store his money for any future online transaction. An E-wallet is protected with a password.
3. Some of the popular Mobile Wallet companies in India are : PayTM, Google Pay, BHIM Axis Pay, PhonePey, Mobikwik, SBI’s Yono, Citi MasterPass, ICICI Pockets, HDFC PayZapp, Amazon Pay, etc.

Question 9.
What are the various types of Retail loans? Explain.
Answer:
Retail Loans :
1. Meaning :
Retail Loans are the loans acquired to buy an asset or property. Retail loans are offered by financial institutions in wide variety of forms. They are Home Loan, Car Loan, Education Loan, Personal Loan and Credit Card.

2. Types :
a) Home Loans :

1. Housing being one of the fundamental needs of life. Housing Loans are provided by the financial institutions for the purpose of construction or purchase of a new home.
2. National, Housing Bank (NHB) was set up with the support of RBI for coordinating and development of housing finance schemes. Housing Loans are provided by LIC, SBI, UTI and other financial Institutions.
3. The Central Government has taken steps towards “Housing for All”, in this connection it has startd The Pradhan Mantri Awas Yojana (PMAY). This scheme covers housing for weaker sections and middle-imcome section people.

b) Car Loans

1. Car Loan or Vehicle loan is the f ;nity provided by the banks to the customers allowing them to pay the value of the car in instalments.
2. The payment of instalments includes interst amount determined by the abnk officials from time to time.
3. These loans are granted to the salaried employees and self-employed individuals after providing necessary documents.

c) Education Loan :

1. Education loan is a student friendly designed loan. These loans are given to the students who are unable to continue higher education in India and abroad due to lack of cash.
2. These loans aim at providing financial support to meritorious students for pursuing higher education, such as Graduation, Post-Graduation, Professional Courses.
3. Financial support is granted to the extent of Rs. 10 lakhs for studies in India and Rs. 25 lakhs for studies in abroad respectively.

d) Perosnal Loans :

1. Personal loan is an unsecured loan granted by the banks to meet personal needs.
2. Personal loans can also be granted for the purpose fo house repairs, renovations,wedding, on the basis of loan eligibility with a minimal document on the prevailing rages of interest.
3. Personal loans are provided with a term between 1 to 3 years repayment period.

e) Credit Card :

1. Credit Card is a magnetic Strip Card issued by the bank authorizing the customer to purchase the items now and pay the amount with in the prescribed period.
2. Credit cards can be domestic cards and International cards. These cards are issued to individual customers and business firms operating an acccount in the banks.
3. Credit Cards are generally issued based upon the individual’s credit worthiness.

Question 10.
What is E-Banking? What are its advantages and limitations.
Answer:
E-Banking :
E-Banking is a system 6f banking which is carried out with the use of elec-tronic tolls and facilitated through electronic delivery channels.

Advantages of E-Banking :

1. Round the clock services will be available to the customer for all 7 days a week i.e, 24 x 7.
2. Fastness and flexibility in the transactions.
3. Lower operating cost for banks.
4. A higher degree of personalization.
5. Increased speed and accuracy of information exchange.
6. Bank account can be easily accessed from anywhere and at any time.
7. Leads of greater customer satisfaction.
8. Internet banking help banks in reducing the workload of their branches, such as generation of statement, balance enquiry etc.
9. NRI’S can monitor their bank accounts in the bank in India from wherever they are stationed. They can operate their accounts in anywhere in the world.

Disadvantages or limitations of E-Banking :

1. Problems may crop up regarding security and reliability.
2. Imparting training to banking staff is a big challenge.
3. Non – availability of internet connection with highspeed band width in the rural areas.
4. High illiteracy rate in India, is a hindrance to E-banking..
5. Resistance to paperless transaction by the customer, as they may prefer evidence for their transactions on paper.
6. The technology is advancing, our legal environment is not in a position to keep pace with the technology.

Short Answer Type Questions

Question 1.
What is Cash Credit?
Answer:

1. Under cash credit the bank gives loans to the borrowers against certain security.
2. The entire loan is not given at one particular time. He will be allowed to withdraw small sums of money according to his requiremetns through cheques, but he can not exceed the credit limit allowed to him.
3. The borrower is required to pay interest only on the amount of credit availed by him.

Question 2.
What is fixed deposit?
Answer:

1. These deposits are also know as time deposits.
2. These deposits can not be withdrawn before the expiry of the period for which they are deposited.
3. Fixed deposits are liked by depositors both for their safety and as well as for interest which is higher.
4. In India, they are accepted between seven days to five years.
5. The present rates of interest offered by SBI ranges between 4.5% and 6.10% p.a.

Question 3.
What is Credit Card?
Answer:
Credit Card :

1. Credit Card is a magnetic Strip’ Card issued by the bank authorizing the customer to purchase the items now and pay the amount with in the prescribed period.
2. Credit cards can be domestic cards and International cards. These cards are issued to individual customers and business firms operating an acccount in the banks.
3. Credit Cards are generally issued based upon the individual’s credit worthiness.

Question 4.
What is any where banking?
Answer:

1. The banking services to the customer of a bank have undergone a change with the further advancement of technology.
2. A customer can operate his account from any branch of his bank situated in India. This is called “Core Banking’.
3. The various services provided under anywhere banking are
   A) Telebanking
   B) Internet Banking
   C) Real Time Gross Settlement (RTGS)
   D) Electronic Clearance Service (ECS)
   E) Mobile banking
   F) E-cheque and
   G) National Electronic Fund Transfer (NEFT)

Question 5.
What do you know abot ATM service in Banking?
Answer:
Automatic Teller Machine (ATM) :

1. ATM is one of the methods of electronic fund transfer. It have removed the time limitations of customer services.
2. ATM is an unattended or unmanned device usually located on or off the bank premises.
3. The operation mechanism begins when the card is inserted into ATM, the terminal reads and transmits the tape data to processor, which activates the account.
4. It works for 24 hours a day, 7 days a week (24 x 7).
5. ATM’s were used only for withdrawal, electronic transfer of funds etc. But now they are used for recharging cell phones, bill payments etc.

Question 6.
What services are offered by banker under Internet Banking?
Answer:

1. Internet Banking is one of the popular modes of E-Banking.
2. It enables to obtain general purpose information by a customer through banks websites, Electronic Fund Transfer (EFT), Electronic payment such as E-cheque, E-Card based payments.
3. The various internet banking services ae given below :
   a) Real Time Gross Settlement (RTGS),
   b) Electronic Clearance Service (ECS)
   c) Natinal Electronic Fund Transfer (NEFT)
   d) Mobile Banking
   e) E-cheque.

Very Short Answer Type Questions

Question 1.
Money at call.
Answer:
Money at Call:
Bank also grant loans for a very short period, generally not exceeding 7 days to the borrowers, usually dealers or brokers in stock exchange markets against collateral securities like stock or equity shares, debentures, etc., offered by them. Such advances are repayable immediately at short notice. Hence, They are described as money at call or call money.

Question 2.
Recurring Deposit.
Answer:

1. This type of deposit allows the account holder to deposit a fixed amount once a month for a certain period.
2. The total deposit along with interest is payable on maturity.
3. The present rates of interest offered by SBI ranges between 5.8% and 6.25% p.a.

Question 3.
Cash credit.
Answer:

1. It is an arrangement between a bank and its customer where by the bank agrees to lend money to the borrower upto a certain limit.
2. The borrower is required to pay interest only on the amount of credit availed by him.

Question 4.
Car loan.
Answer:

1. Car Loan or Vehicle loan is the facility provided by the banks to the customers allowing them to pay the value of the car in instalments.
2. The payment of instalments includes interst amount determined by the abnk officials from time to time.
3. These loans are granted to the salaried employees and self-employed individuals after providing necessary documents.

Question 5.
Credit card.
Answer:

1. Credit Card is a magnetic Strip Card issued by the bank authorizing the customer to purchase the items now and pay the amount with in the prescribed period.
2. Credit cards can be domestic cards and International cards. These cards are issued to individual customers and business firm operating an acccount in the banks.
3. Credit Cards are generally issued based upon the individual’s credit worthiness.

Question 6.
Savings account.
Answer:

1. This is meant mainly for professional men and middle-class people to help them deposit their small sayings.
2. There is a restriction on the amount that can be withdrawn at a particular time or during a week.
3. Interest is allowed on the credit balance of this account. The rate of interest is less than that on fixed deposit. The present rate of interest offered by SBI is 2.75% p.a.

Question 7.
Fixed Deposit.
Answer:

1. These deposits are also known as time deposits. These deposits cannnot be withdrawn before the expiry of he period for which they are deposited.
2. Fixed deposits are liked by depositors both for their safety and as well as for their interest they which is higher.
3. The present rates of interest offered by SBI ranges between 4.5% and 6.10% p.a.

Question 8.
Foreign Bank.
Answer:

1. Foreign Bank are the banks that were registered outside India and had originated in a foreign country.
2. At pesent there are 45 foreign banks in India.

Question 9.
Term loan.
Answer:

1. It is the loan required for long term needs for acquiring fixed assets.
2. Term loans ae granged for moe than one year.

Question 10.
Demand loan.
Answer:

1. Demand loan is a loan which is repayable on demand.
2. These loans are repayable at short notice. .

Question 11.
Over draft.
Answer:

1. It is an arrangement where in the account holders is allowed to draw an amount in excess of the balance held is the account.
2. This overdraft is allowed to current account holidays only.

Question 12.
Scheduled Bank.
Answer:
1) Scheduled Banks ae banks which are included in the Second Schedule of the Banking Regulation Act, 1965. According to this schedule, a scheduled Bank :
i) Must have paid-up capital and reserve of not less than Rs. 5,00,000.
ii) Must also satisfy the RBI that its affairs are not conducted in a manner detrimental to the interests of is depositors.

2) scheduled banks include all commercial banks like nationalised, foreign, development, co-operative and regional rural banks. There are 202 scheduled banks as on 8^th October 2018)

Question 13.
Non-scheduled Bank.
Answer:

1. These are banks which are not included in the Second Schedule of the Banking Regulation Act, 1965. It means they do not satisfy the conditions laid down by that schedule.
2. These banks are not allowed to borrow money from RBI for regular banking purposes. Periodic returns need not be submitted with RBI and cannnot become memeber of clearing hose.

Question 14.
ATM
Answer:
ATM (Automatic Teller Machine) is an unattended or unmanned device usually located on or off the bank premises. The operation mechanism beings when the card is inserted into ATM, the terminal reads and transmits the tape data to a processor, which activates the account. It works for 24 hours a day, 7 days a week (24 x 7).

Question 15.
Tele Banking
Answer:
“Tele banking refers to banking on telephone”. The customer can dial the branch’s designated telephone number which is connected to computer, by dialing his identification number, the software provided in the machine will become interactive with customer asking him to dial the code number of the service required by him and gives suitable answer. The customer can enquire about his balance, previous transactions or fund transfer between the accounts.

Question 16.
RTGS.
Answer:

1. RTGS means Real Time Gross Settlement.
2. RTGS is a fund transfer method through which money is sent in “real time” basis without any delays.
3. This electronic fund transfer system allows the money sent by the remittens to immediately reacy the payee when the money transfer transaction is initiated.

Question 17.
ECS.
Answer:

1. ECS means Electronic clearance Service.
2. This scheme provides an alternative method of effecting bulk payent transactions peridically.
3. At present, this service is available in the department of posts at 15 RBI locations and 21 SBI locations.

Question 18.
NEFT
Answer:

1. NEFT means National Electronic Fund Transfer.
2. NEFT is a country wide electronic fund transfer system for sending money from one bank to another in safe and hassle free manner.
3. There is no ceiling on the minimum or maximum, that can be transfered through NEFT.

Question 19.
Mobile Banking.
Answer:

1. The delivery of Banking services to a customer through mobile phone is called “Mobile Banking”.
2. This service is provided free of Cost to all customers of the bank, irrespective of their mobile service network provider and make of the hand set owned by the customer.
3. Customer to know his account balance and debit, crdit transactions of his account etc., through alerts.

Telangana TSBIE TS Inter 2nd Year Commerce Study Material 8th Lesson International Trade Textbook Questions and Answers.

TS Inter 2nd Year Commerce Study Material 8th Lesson International Trade

Long Answer Type Questions

Question 1.
What is International Trade? How it differs from Internal Trade.
Answer:

1. International Trade refers to buying and selling of goods and services between nationals of different countries.
2. International Trade is also called as “Foreign Trade” or “External Trade”. .
3. How International Trade is different from internal Trade is explained below :

Question 2.
Explain the scope and importance of International Trade.
Answer:
Scope :
International Trade has a very wide scope.

The following aspects fall under the scope of International trade

1. International economics and trade theories.
2. Quantitative techniques for foreign trade.
3. Global business communication and public relatins.
4. Computer application in foreign trade.
5. Insurance and risk management is foreign trade.
6. International business loans.
7. Export and Import finance.
8. Foreign exchange and exchange control.
9. Export incentives.
10. Export pricing.

Importance of International Trade :

1. No country in the world is self sufficient, no country can produce all the goods it requires. This situation where one country is dependent on another country has created the need for international trade.
2. Nature endows each country with different types of natural resources. Therefore one country has to depend on some other country for natureal resources which result in need of foreign trade.
3. some countries are more suitabe placed to produce certain goods in large numbers more economically due to availability of raw material, labour, etc,. In such case foreign trade is needed to export its surplus prodction to other countries.
4. International trade is the back bone of our modem commercial world. International
   trade promotes increased international understanding, exchange of ideas, cultures, and world peace.
5. International trade has lowers the prices of goods and services all over the world.
6. Globalisation and liberalization policies of the governments across the globe with specific reference to international trade have made it possible.

Thus all the countries in the world have to depend upon another for meeting all their requirements it created the need for international trade.

Question 3.
Discuss the benefits of International trade.
Answer:
The benefits of international trade are discussed below :

1. It leads to better use of available resources.
2. It reduces wastage of resource. .
3. It equalizes the prices of goods throughout the world.
4. It helps countries to sell those goods which they have in surplus, and buy goods which are in short supply.
5. It create healthy competition.
6. It creates cordial relation ship between the people of different countries and leads to cultural advancement and International peace.
7. It brings about international division of labour and specialization.
8. It increase employment opportunities.
9. It increase foreign exchange reserves.

Question 4.
Explain the procedure to be followed in export trade.
Answer:
As per the Export Control Rules which ae in force in India, an export transaction has to pass through the following stages.
1. Enquiries and Qauotations :

1. The export trade starts with the receipt of enquiry from the buyers. An enquiry is a written request from him seeking information regarding the price and other services.
2. Quotations are a reply to such an enquiry. In quotations, all the details asked for in enquiries are to be furnished. Price, time, method of delivery, method of packing are indicated in them.

2. Orders or Indents :

1. If the buyer is satisfied with regard to the details supplied in quotations, he places an indent. An indent is an offer made by a foreign buyer to buy goods.
2. If that is accepted by the exporter, then it becomes an order. The indent contains all the details in respect of the goods required as well as various other instructions with regard to shipping, packing etc.

3. Securing the Licence :

1. Export of goods from India is controlled under the Import and Export Control Act, Goods covered by controls cannot be exported without an export licence.
2. Certain commodities are kept on the Open General License (OGL) List. The exporters are permitted to export these commodities freely during a definite period. If the goods do not fall under OGL, then he has to apply for an export license to an appropriate authority by paying the prescribed fees.
3. Along with the export licence, a quota permit should also to be obtained by the exporter n the case of commodities which are short supply.

4. Fulfulling Exchange Regulations :
Under the Foreign Exchange Regulations Act, the exporter has to submit a declaration that he will surrender foreign exchange to the Reserve Bank of India within the prescribed time in the prescribed forms and submit them in the customs office and also with the foreign exchange bank.

5. Letter of Credit:

1. before sending the goods, the exporter must be satisfied with the credit worthiness of the importer.
2. In some cases, only a bank reference may be considered sufficient. In the case of new buyers, the deposit of full price in advance may be demanded by the exporter.

6. Shipping Order :

1. After satisfying with the credit worthiness of the importer, the exporter enters into an agreement with a shipping company for hiring space in a ship for sending the goods to the port of the importers choice.
2. The shipping company issues shipping order giving instructions to the captain of the ship to receive on board the vessel, the specified quantity of goods from the exporter.

7. Exchange Rate :

1. The rate at which the currency of one country is exchanged for currency of another country is known as exchange rate.
2. The exporter must fix with his bank the rate at which importer’s payment will be converted into the currrency of the exporting country with a view to avoid losses arising on account of fluctuations in foreign Exchange rates.

8. Packing and Forwarding :

1. Packing should be done in such a way that it ensures safety as well as economy.
2. Special instructions given by the importer, should be followed in this regard.
3. After the goods are packed, distinctive marks showing the name of the importer and the port of destination should be printed on each bundle for the purpose of easy identification.

9. Customs Formalities :
exporter has to observe certain customs formalities; the exporter has to fill the Shipoing Bill in triplicae. The other forms are to be attached to the shipping bill.

10. Mate’s Receipt :
When the goods ae directly handed over to the captain of the ship or his assisant called Mate, he issues a mate’s receipt.

11. Bill of Lading :

1. Tile Bill of Lading is art official receipt of the shipping company acknowledging the receipt Of the goods oh board.
2. It is a document of title as to goods. The importer cannot take delivery of the goods without producing the Bill of Lading.

12. Insurance of Goods :

1. As goods entering into the international trade are exposed to perils of sea, they should be properly insured.
2. This has to be done by purchasing a marine insurance policy form an insurance company. The policy has to be sent to the importer along with Bill of Lading and other documents.

13. Certificate of Origin :

1. This certificate is the declaration testifying the origin of exports.
2. This certificate is issued by an authorized Chamber of Commerce of Trade Council.
3. In order to enable the importer to get the benefit of lower tariff, Certificate of Origin has to be sent to him.

14. Consular Invoice :
To avoid this delay the exporter gets a consular invoice which enables the importer to obtain prompt clearance of goods after they reach the port of destination.

15. Preparation of Invoice :
After all the formalities are compiled with, the exporter hs to prepare an invoice. This irivoice is prepared in triplicate and must be based on the price and terms previously agreed upon.

16. Securing Payment :

1. The final step in the export procedure is to secure payment in settlement of the transaction.
2. The exporter can receive the payment in three different ways :
   A) Drawing a bill on the importer: This bill of exchange is to be sent to the importer along with other documents.
   B) If the exporter wants to receive the amount iinmdiately, he can discount the bill drawn on the importer with his bank.
   C) A Letter of Credit is issued in favour of exporter by the importer’s bank. Strength of this Letter of Credit, the exporter draws a bill and gets the payment from the bank issuing the Letter of Credit.

Question 5.
What procedure and foimalities are adhered in import Trade? Explain.
Answer:
When goods are purchased from a foreign country; and brought down to fhe country of the buyers, it is Import Trade. There is a procedure for importing goods from a foreign country.

1. Procurement of Licence :

1. An importer is not free to import whatever he wants. No goods can be imported into our couiltry withoug vallid licence.
2. An importer can import goods under a general licence or an individual licence. General licence is one which is used for imports from any country whereas individual licence applies to specific countries.
3. For obtaining an import Licence, the importer has to make an application in the prescribed from. A quota certificate is also issued be licensing authority on the basis of applicants past imports.

2. Obtaining Exchange :

1. After obtaining the import Licence Control authorities to release the necessary foreign exchange.
2. The application has to be endorsed by a foreign exchange bank. ‘

3. Indent or Order :

1. The importer places an order for the goods that he requires. This order is called Indent.
2. The indent contains instructions to the exporter with regard to the quality and quantity of goods, the method of forwarding of goods, nature of packing, method of payment, grage I price etc.

4. Letter of Credit:

1. The importer has to prove has creditworthiness to the exporer. For this, he has to send a letter of Credit to the exporter.
2. A letter of Credit is issued by the bank in the importer’s country in favour of the exporter. The bank gives an undertaking that the bills of exchange drawn bn importer by the exporter will be honoured.

5. Procuring Shipping Documents :

1. After the goods are shipped by the exporter, he sends an advice notice to the importer.
2. The exporter also drawsa a bill of exchange on the importer. Other documents such as invoice, insurance policy, bill of loading, consular invoice are attached to the bill of exchange. Therefore, this is called Documentary Bill and it is forwarded to the importer through the exporter’s bank.

6. Clearing of goods :
After taking possession of shipping documents, the importer can take delivery of goods after complying with the following formalities :

1. First the importer has to obtain the Delivery Order from the shipping company.
2. After obtaining the delivery order the importer has to submit three copies of Bill of Entry.
3. When the importer has not received particulares of the goods in order to fill up the bill of entry, he ahs to fill a document called Bill of Sight.
4. Then he has to pay certain dock dues etc., to the Port Trust Office. Then they issue . Port Trust Dues Receipt.

7. Delivery of goods :

1. After examining the bill of entry the custoks office permits the importer to take possession of imported goods.
2. If any duties are levied, the importer is required to pay duty as calculated by the customs authorities.

8. Warehouse :

1. For the convenience of the mporters who do not has own godowns, port authorities maintain large warehouses. They charge a reasonable rent!
2. If the importer is not in immediate need of goods or wants to re – export them or pending payment of the customs of excise duties, he can store the goods in the warehouses. Such a warehouse is described as a “Bonded Warehouse”.
3. In this case, he importer is required to execute a bond, wherin he undertakes to pay the duty on goods on taking delivery.

Question 6.
Explain the features and advantages of EPZ’s.
Answer:
Features : Features of the EPZ’s are as follows :

1. The activities that are carried out in the EPZs are not liable to be licensed.
2. The units setup in the EPZ can select their desired locations by following certain parameters as prescribed by the State Government.
3. The EPZ’s rigorously follow the active export import policy.
4. The units in EPZ are totally custom bonded.
5. The proposals for starting up units in EPZ’s in India are entitled to follow the automatic route for approval as enforced by the State Governments.

Advantages of EPZ’s are as follows :

1. EPZ’s have given a major boost to the economic growth and industrialization of the country.
2. The EPZs are specialized areas in the country where quotas and tariffs are eliminated.
3. EPZ’s are the production centres where large number of workers is employed.
4. The EPZ units involve the import of raw materials and the export of finished goods with a view to increase foreign exchange earnings and exports.
5. Various incentives such as income-tax holidays are introduced and exemptions are provided in respect of VAT, Import duty and also other taxes.
6. 100% Foreign Direct Investment (FDI) are allowed for all the manufacturing activities in EPZ’s.

Question 7.
What is EPZ? Explain the reasons for their setup in India.
Answer:

1. EPZ means export processing zones.
2. EPZ’s are teh zones, which have minimum bureaucratic setup.
3. They are set up in underdeveloped parts of a host counting, aiming to reduce poverty and unemployment and stimulate the area’s economy.

The reasons for EPZ’s setup in India :

1. Ensuring better infrastructural facilities in industrial units that were set up in the EPZ’s.
2. Introducing the privilege of tax holidays.
3. Establishing 100 percent export-oriented system in the EPZ.
4. EPZ’s are entirely devoid of all kinds of duties levies and taxes.
5. The units in EPZ’s follow the automatic route set by the Government of India which offers 100% foreign direct investment in the zone.

Short Answer Type Questions

Question 1.
What is the significance of international trade?
Answer:
Scope : International Trade has a very wide scope.

The following aspecs fall under the scope of International trade :

1. International economics and trade theories.
2. Quantitative techniques for foreign trade.
3. Global business communication and public relatins.
4. Computer application in foreign trade.
5. Insurance and risk management is foreign trade.
6. International business loans.
7. Export and Import finance.
8. Foreign exchange and exchange control.
9. Export incentives.
10. Export pricing.

Importance of International Trade :

1. No country in the world is self sufficient, no country can produce all the goods it requires. This situation where one country is dependent on another country hads created the need for international trade.
2. Nature endows each country with different types of natural resources. Therefore one country has to depend on some other country for natureal resources which result in need of foreign trade.
3. some countries are more suitable placed to produce certain goods in large numbers more economically due to availability of raw material, labour, etc,. In such case foreign trade is needed to export its surplus prodction to other countries.
4. International trade is the back bone of our modem commercial world. International trade promotes increased international understanding, exchange of ideas, cultures, and world peace.
5. International trade has lowers the prices of goods and services all over the world.
6. Globalisation and liberalization policies of the governments across the globe with specific reference to international trade have made it possible.

Thus all the countries in the world have to depend upon another for meeting all their requirements it created the need for international trade.

Question 2.
How internal Trade and international trade differ?
Answer:

Question 3.
What are the four important benefits of International Trade.
Answer:
The benefits of international trade are discussed below :

1. It leads to better use of available resources.
2. It reduces wastage of resource.
3. It equalizes the prices of goods throughout the world.
4. It helps countries to sell those goods which they have in surplus.
5. It create healthy competition.
6. It brings about international division of labour and specialization.
7. It increase employment opportunities.
8. It increase foreign exchange reserves.

Question 4.
What is shipping order?
Answer:

1. After satisfying with credit worthiness of the importer, the exporter enters into an agreement with a shipping company for hiring space in a ship for sending the goods to the port of the importers choice.
2. The shipping company issues shipping order giving instructions to the captain of the ship receive on board the vessel, the specified quantity of goods from the exporter.
3. If the entire space of a ship is hired by an exporter, the agreement reached to this effect between the exporter and ship owner is known as charter party agreement. This charter party agreement which binds the captain of the ship to receive on board the vessel, a specified quantity of goods from the exporter.
4. Charter party is an agreement which binds the ship owner to transport the goods to a particular place. The person whose goods are carried under such an agreement is known as charter. Charter party may be a voyage charter party or a time charter party.

Question 5.
What is packing and forwarding in international trade?
Answer:

1. packing is the perparation of a product for storage or transportation.
2. For export the goods, packing should be compact and should be such cargo which occupies minimum space in the ship to save foreight charges.
3. Packing should be done in such a way that it ensures safety as well as economy. Special instructions given by the importer should be followed.
4. After the goods are packed, distinctive marks showing the name of the importer, and part of destination should be printed an each bundle for easy identification.

Question 6.
How licence is procured in import trade?
Answer:
Procurement of licence :

1. An importer can import goods under a general licence or on individual licence.
2. An importer is not free to import whatever he wants. No goods can be imported into our country without valid licence.
3. External licence is which is used for import from any country where as individual licence applies to specific countries.
4. For obtaining an import licence, the importer has to make an application in the prescribed form.
5. A quota certificate also issued by licencing authority on the basis of applicants past imports.

Question 7.
Why EPZ’s are setup?
Answer:

1. EPZ means export processing zones.
2. EPZ’s are teh zones, which have minimum bureaucratic setup.
3. They are set up in underdeveloped parts of a host counting, aiming to reduce poverty and unemployment and stimulate the area’s economy.

The reasons for EPZ’s setup in India :

1. Ensuring better infrastructural facilities in industrial units that were set up in the EPZ’s.
2. Introducing the privilege of tax holidays.
3. Establishing 100 percent export-oriented system in the EPZ.
4. EPZ’s are entirely devoid of all kinds of duties levies and taxes.
5. The units in EPZ’s follow the automatic route set by the Government of India which offers 100% foreign direct investment in the zone.

Question 8.
What is the scope of International trade?
Answer:
The following aspects fall under the scope of international trade.

1. International economic and trade theories.
2. Quantitative techniques for foreign trade.
3. Computer application in foreign trade.
4. Export and import finance.
5. Foreign exchange and exchange control.
6. Export incentives.
7. Export pricing.
8. International business law.

Question 9.
What are the features of EPZ’s in India?
Answer:
Features of the EPZ’s are as follows :

1. The activities that are carried out in the EPZs are not liable to be licensed.
2. The units set up in the EPZ can select their desired locations by following certain parameters as prescribed by the State Government.
3. The EPZ’s rigorously follow the active export import policy.
4. The units in EPZ are totally custom bonded.
5. The proposals for starting up units in EPZ’s in India are entitled to follow the automatic route for approval as enforced by the State Governments.

Very Short Answer Type Questions

Question 1.
Quotations and enquiries.
Answer:

1. The quotations are a reply to such an enquiry. In quotations, all the details asked for in enquiries are to be finished.
2. An enquiry is a written request from him seeking information regarding the price and other service.

Question 2.
Letter of credit.
Answer:

1. It is a letter which is obtained by an exporter to satisfy himself about the credit worthiness of an importer.
2. Letter of credit is issued by the banking imports country in the favers of the exports.

Question 3.
Bill of loading.
Answer:

1. The Bill of Lading is an official receipt of the shipping company acknowledging the receipt of the goods on board.
2. It is a document of title as to goods. The importer cannot take delivery of the goods without producing the Bill of Lading.

Question 4.
Bill of Entry.
Answer:

1. The bill of entry is a statement declaring and describing the goods that are imported.
2. The importer has to submit 3 copies of bill of entry to the customs authories.

Question 5.
Closed Indent.
Answer:

1. The importer places an order for the goods he required, this order is called indent.
2. When the indent specifies the details of goods required, it is called “closed Indent”.

Question 6.
Four stages of EPZ policy in India.
Answer:
Following are the four stages of EPZ policy in India.

1. Initial phase (1964 – 1985)
2. The expansionary phase (1985 – 1991).
3. The consolidating phase (1991 – 2000)
4. The emergence phase (2000 on wards)

Question 7.
Rounded warehouses.
Answer:

1. if the importer is not in immediate need of goods or wants to re – export them or pending payment of the customs or excise duties, he can store the goods in the warehouse called “Bonded warehouse”.
2. The importer is required to execute a bond, where in he undertakes to pay the duty on goods an taking delivery.

Question 8.
Exchange rate.
Answer:

1. The rate at which the currency of one country is exchanged for currency of another country is known as exchange rate.
2. The exporter must fix with his bank the rate at which importer’s payment will be converted into the currrency of the exporting country with a view to avoid losses arising on account of fluctuations in foreign Exchange rates.

Question 9.
Certificate or origin.
Answer:

1. This certificate is the declaration testifying the origin of exports.
2. This certificate is issued by an authorized Chamber of Commerce of Trade Council.
3. In order to enable the importer to get the benefit of lower tariff, Certificate of Origin has to be sent to him.

Question 10.
Consualr invoice.
Answer:
To avoid this delay the exporter gets a consular invoice which enables the importer to obtain prompt clearance of goods after they reach the port of destination.

Question 11.
Warehouse.
Answer:

1. Ware house refers to a facility created for the storage of goods.
2. For the convenience of the importers who do not have own godowns, the port authorities maintain large warehouses. They charege reasonable rent.

Question 12.
Therory of Comparative cost advantage.
Answer:
The theory that explains the basis of foreign trade is called “Theory of comparative cost advantage”. The resources like land, raw materials, minerals, water, labour skills determine the capacity of a country to produce. Country which has more resources, their cost will be less than the other countries. The country has cost advantage in production of those goods which use more of these resources. Therefore country can be able to export these goods and import those goods which will cost more to produce.

Telangana TSBIE TS Inter 2nd Year Commerce Study Material 2nd Lesson Stock Exchange Textbook Questions and Answers.

TS Inter 2nd Year Commerce Study Material 2nd Lesson Stock Exchange

Long Answer Type Questions

Question 1.
What is stock exchange? Explain its functions.
Answer:
Introduction :
Stock exchange is an organized secondary market, where the listed secu-rities are bought and sold by the investors.

Definition :
“Stock exchange is an association, organization or body of individuals, whether incorporated or not, established for the purpose of assisting, regulating and controlling business in buying, selling and dealing in securities”. – The Securities Contracts Act 1956

“Security exchanges are market places where securities that have been listed thereon may be bought and sold either for investment or speculation”. – “Pyle”

Functions of Stock Exchange :
1) Provides infrastructure for trading :
In the stock exchange, instantaneously trading gets executed. It draws investment by providing ready and continuous market for securities.

2) Provides information regarding prices :
It gives sensible information through reliable sources and publishers to investors about the prices of securities. The proposed investor knows the quotation and the investor knows the price of his holdings.

3) Protects investors wealth :
It protect the interests and wealth of investors through the enforcement of its rules and regulations.

4) Clearing House :
Without clearing house one will find lot of trades mismatched. It act on behalf of both buyer and seller and helps in trading of securities.

5) Provides liquidity :
The holder of securities can easily encash the securities by selling them to the buyer whenever he wants.

6) Helps to raise new capital :
The requirement of additional capital of an existing company can be raised by issuing the rights shares, through stock exchange.

7) Acts as a Barometer :
An efficient stock exchange acts as a Barometer of business conditions in the country.

8) Increases credit worthiness of company :
A company which got its shares to be listed in the stock exchange enjoys good reputation.

9) Minimises the dangers of speculation :
By following rules and regulations of the Acts, it minimises the dangers of speculative dealings and price manipulations.

10) Facilitates speculation :
Stock exchange facilitates speculation thereby businessman can speculate and earn profits from fluctuations in security prices.

Question 2.
Explain he significance of stock exchange.
Answer:
Introduction :
The stock exchange is a market for the purchase and sale of second hand securities. It is the central place where industrial and financial securities are brought and sold. It is the place where a buyer of a security can find a seller or a seller can find a buyer.

Significance of Stock Exchange :
The importance and need of stock exchange can be identified through its benefits to the investors, company and society.

A) To the Investors :

1. Helps the investor in finding an opportunity to invest surplus funds in a reputed company.
2. Reduces the risk of investro by providing continuous information market with correct evaluation of securities.
3. Investors can change their investments to different companies according to their gaining.
4. Continuously available for the conversion of securities thereby providing liquidity to the securities.
5. Safeguards the interests of investors by the strict enforcement of rules and regulations.
6. The holdlers of securities can use them as collateral securities for procuring loans.
7. Investors able to know the activities of company and its credit worthiness.
8. Investors earn not only good returns but they know the security prices from time to time and this promotes saving, investing and risk-taking among them.

B) To the company :

1. The stock exchange provieds an opportunity to the companies to raise capital by sale of shares. So, the rapid progress of companies is largely facilitated by stock exchanges. The listing facilities provided by the stock exchange make the securities .attractive. The listing of securities gives an impression that the company is sound.
2. A listed company generally enjoys better reputation and credit.
3. As a listed company furnishes its financial statements, it wins the faith of investor and proves itself to be sound company.
4. Stock exchange promotes the primary market for new issues as it engages ready and continuous market of securities.
5. A well-organised stock exchange minimises price fluctuations and maintains steadiness of prices of securities.
6. It will have wider market for its scurities.
7. It can have maximum funds for expansion and modernisation sthrough ‘Rights Issue’.

C) To the society :

1. By pooling up all the interested investors towards investment, it contributes to the economic developed of the nation.
2. It provides opportunities to utilize the scarce financial resources to its maximum.
3. It enables the government to establish successful companies for the progress of nation. A good company can keep up its status by trading its securities in stock exchange.
4. It develops savings habit among the public and these savings are turned into capital for the growth of industries.
5. The stock exchange acts as a mirror of society’s economy.

Question 3.
What is the procedure of listing securities?
Answer:
Introduction :
A company with minimum issued capital of ₹ 3 crores of which at least ₹ 1.8 crore (60%) is offered to the public can apply for listing in the prescribed preforma along with the following documents.

1. Copies of Memorandum of Association and Articles of Association, Prospectus, Directors Reports, Balance sheets and agreements with underwriters and brokers etc.
2. Specimen copies of shares and debentures certificates, letters of allotments, acceptance renunciation etc.
3. Particulars regarding capital structure.
4. A statement showing the distribution of shares.
5. Particulars of dividends and bonus declared and or paid during the last 10 years.
6. Particulars of shares of debentures for which permission to deal is applied for.
7. Brief report on company’s activities since its incorporation,
8. Listing agreement with required initial and annual listing fee.

A new company may not able to submit some of the above documents and it will not be an objecion for enlisting.

After submission of application along with the above documents by the company, the stock exchange scrutinizes the application, if stock exchange is statisfied with the particulars field, it may inform the company to execute a listing agreement. The agreement contains the obligations and restrictions which listing entail.

The central iisting authority has been set up in the year 2003 by’SBI for ensuring unifrom and standard practices for listing the securities in all India stock exchanges. It will have a check on the operators in small stock exchanges that have lenient listing norms.

Question 4.
What is SEBI? What are its functions and powers?
Answer:
SEBI means securities and Exchanges Board of India. SEBI come into existence through the SEBI Act, 1992 by the Indian Parliament and was given statutory powers, to overcome the undesivable practices in the stock exchange. In the year 1995, SEBI was given additional statutory powers by Government of India through an amendment to SEBI Actg 1992.

SEBI is managed by its members which consists of
a) The chairman who is nominated by Government of India.
b) Two members i.e. officers from Union Finance Ministry.
c) One member from the RBI.
d) The remaining 5 members (nominatged by Union Government of India.

Functtions of SEBI:
SEBI has three functions rolled into one body i.e.,

1. quasi legislative
2. quasi judicial and
3. quasi executive

It drafts regulations in its legislative capacity (quasi legislative), it conducts investigation and enforcement action in its executive function (quasi judicial) and it passes rulings and orders in its judicial capacity (quasi executive). These functions may be summarised as :

1. Educate investors and imparting training to the intermediaries of securities.
2. Controls the working of stock exchanges.
3. Register and regulate the working of intermediaries such as stock brokers, merchant bankers, underwriters etc. ,
4. Regulate working of collective investment schemes including mutual funds.
5. Conducts audits and inspections
6. Restrocts insider trading of securities.

Powers :
For the discharging of its functions efficienctly, SEBI is vested with the following powers.

1. to approve and amend the by-laws of stock exchange.
2. to inspec the books of accounts of financial intermediaries.
3. to inspect the books of accounts and call for periodical returns from recognised stock exchanges.
4. to mandate the companies to list their shares in one or more stock exchanges.

Question 5.
Explain the various types of stock exchange speculators.
Answer:
A) Stock Exchange Speculators :
Persons who make profits by trading securities for short term purpose are known as stock exchange speculators. They accept high risk and do not take or give delivery of securities. The difference between buying and selling is their profit.

Types of speculators :
Depending upon the nature of speculation, the speculators may be called as bulls, bears, stag and lameduck.

1. Bull :

1. A bull is a speculator who expects a rise in the price of certain security in future. He buys that security to sell it at the expected higher price.
2. A bull in general throws its vicitm upwards. As the speculator expects a rise in the price of securities, his tendency is compared to that of bull.
3. In technical terms he is said to be “on the long side of the market.” He is also known as tejiwala.

2. Bear :

1. He is also known as mondiwala. A bear is a speculator, who expecs a fall in the price of certain securities and agrees to sell the securities at a fixed date in future, which he may or may not possess.
2. If the price of that security falls before the date of sale, he purchases the security at a lower rate and sells it for higher rate as agreed earlier.
3. The different between the purchase price and selling price is the profit earned by him.
4. A bear usually presses its victim down to the ground. As the pessimistic tendency of the speculator, he expects a fall in price of security and therefore, he is named after bear.

3. Stag :

1. A stag is a cautious speculator. He neither buys nor sells the shares. He, applies for the shares of a new company for face value and he expects they are sold at a premium i.e., more than its face valued.
2. The difference between the price paid by him and the selling price is his profit.

4. Lameduck :

1. When the expectations of bear does not become true and the price of security does not fall, he cannnot fulfil his commitment, and he is said to be lameduck.
2. Bear may agree to sell certain security on a certain date and may not be able to deliver the security as it may not be available in the market.
3. On the agreed date if the other party does not agree to oblige him, he suffers like a lameduck.

Question 6.
Explain the features of BSE and NSE.
Answer:
The Bombay Stock Exchange (BSE) is formerly known as “Native Stock and Share Bro-kers Association”, which was established in the year 1877. The aim of association was to support and protect the character and status of brokers, to promote fair practices and to discourage malpractices.

Features of BSE :

1. It has online trading system introduced in 1995, which is called BOLT(BSE online trading). This helps in active trading and safeguards market integrity.
2. It provides other services like risk management, clearing, settlement, market, data and education to capital market participants.
3. It provides a trading platform for equities of small and medium enterprises.
4. It conforms international standards.
5. It provides on efficient and transparent market for trading in equity, debt instruments and mutual funds.
6. It has global reach helping customers around the world.

The National Stock Exchange (NSE) was incorporated in November, 1992. It is a “country wide screen based online trading system” and has international standards.

Features of NSE :

1. It is a computerized national wide stock exchange where NSE members all over India are linked via statellite and cable system.
2. The automated quotation system makes it convenient to the brokers to buy and sell electronically and need not shout in the trading ring about prices.
3. It deals with the wholesale debt market like government securities, units by UTI etc.
4. Price data will be broadcasted by the Press Trust of India (RT.I)
5. It improves the settlement system, arid minimizes the risk therein. NSE has setup a subsidiary national securities clearing corporation, which guarantees the settlement of trade executed.
6. It operates dealings in the corporate equity and debt instruments.

Question 7.
Who is a stock broker? Explain the role played by him in the financial market?
Answer:
Stock Broker – Meaning :

1. A Stock Broker is a professional who executes buy and sell orders for stocks and other securities on behalf of clients.
2. A stock broker may also be known as a registered representative, investment adviser or simply, Broker.
3. Stock Brokers are usually associated with a brokerage firm and handle transactions for retail and institutional customers alike Stock Brokers often receive commissions for their services.

Role played by stock brokers in financial markets :

I. Buying :

1. One of the most basic reponsibilities of a Stock Broker is to buy stock on behalf of his client; he may do this in different ways, depending on the type of account the client has.
2. In a discretionary account, he Stock Broker buys stock for a client based on some prearranged guidelines.
3. An advisory account, however, the stockbroker only advises a client on what stock to buy, while in an execution account, the Stock Broker only buys stock that the client hs specifically indicated.

2. Selling :

1. The other responsibility a Stock Broker has is selling stock on behalf of a client.
2. The Stock Broker can only sell stocks of a client based on the account that a client signed up for.
3. If a client has an execution only account, the Stock Broker can only sell a client’s stock when asked to do so. If a client has an advisory account, a Stock Broker can only advise the client to sell his stocks, while if a client has a discretionary account, a Stock Broker has some leeway on selling the stocks based on a prearranged guideline.

3. Research and Adivce :

1. Most of the broking house have set up in-house research team that scans companies and stocks as well as analyze the macro-economic scenario that impactgs the stock market.
2. With the inputs from the research team, brokerage house puts buy or sell recommendation on stocks.
3. Brokers also conduct investor education programmes to help improve their clients’ knowledge about investing in the markets.

4. Personalized Service :

1. Most Broking Houses assign a relationship manager to interact with the client who would act as an advisor.
2. Relationship managers advise their clients about when to make transactions and guide them about what to look for in the market dealings.
3. They monitor client’s portfolio and provide timely advices to them.

5. Margin Financing :

1. Stock exchanges monitor the extent to which brokers are lending in line with their net worth. As a result, many large Broking Houses provide financing facilities to clients who are looking to take leverage positions.
2. Clients are allowed to take a position in the market after paying the margin amount. In most cases, investors are allowed to trade with a 50% margin.

6. Invest in other Asset Class :
A part from investing in stocks, Brokers also help the investors to invest in other assets classes like commodities, gold exchange traded fuds (ETFs) and mutual fund products. They also help their clients in investment in initial public offerings (IPO) of companies.

7. Marketing :
A Stock Broker finds prospective clients and builds a customer base. He may do this by writing articles in newspapers and magazines, hosting radio and television or taking time to clal prospective clients. A Stock Broker can also receive new clients through referrals from other individuals and organizations or by.attending social events where he can market his services.

Question 8.
Discuss the need for services of stock broker in the financial market.
Answer:
For a common man, it’s not possible to buy the stocks directly from the exchange. They need middlemen to execute the trade; such middlemen are known as ‘Stock Brokers’.

The Stock Broker services are needed to facilitate the buying and selling of stocks at the stock markets, on behalf of irivesors. A part from facilitating the buying selling of stocks from the stock market, Stock Brokers also offer a gamut of services to their clients such as :

1. To Provide Advisory Services :
Stock Market Brokers possess expertise related to the working of stock market, performance of stocks, market trends, and so on. Besides, they have access to the data base and research findings of Brokerage Firms that they are associated with. Hence, they can provide excellent investment advice to their clients.

2. To Offer Limited Banking Services :
Stock Market Brokers are authorized to provide limited banking services such as interest-bearing accounts, electronic deposits, and withdrawals. The clients can avail such banking-related services from the stock brokers by paying them a nominal brokerage charge.

3. To Support Other Investment Services :
A part from stokes, many stock brokers also deal in other securities such as mutual funds, bonds, exchange tradded funds, futures, options and commodity trading. They also provide investment advice related to all these products, to their clients.

4. To maintain Email Support Services :
Replying of email within a few hours during business time is considered reasonable in this matter. It’s depending on the severity of the incident.

5. To communicate through Phone/Toll Free Numbers :
Broker can provide excellent customer care through phone and toll free number.

6. To Offer Live Chat Support :
As far as live chat goes, the response should be immediae but is only possible during working days and for certain time.

7. To Leave a Message on their Website :
This can also help a clien in getting assisted fast and directed to the specific representative.

8. To Educate through Discussion forums :
This is a new and popular concept these days wher you can ask questions directly to the Broker related to any particular topic or issue.

9. To Offer Knowledge Base and. Video Tutorials :
Quick presentation of recurring issue in the knowledge base is one of the effective ways for he online community. Training and features about the tools are best to demonstrate in video tutorials to reduce traffic on ohter support features.

Thus, the services of stock broker are quite essential in trading the stock of joint stock companies.

Short Answer Type Questions

Question 1.
What do you know about NSE?
Answer:
The National Stock Exchange (NSE) was incorporated in November, 1992. It is a “country wide screen based online trading system” and has international standards.

Features of NSE :

1. It is a computerized national wide stock exchange where NSE members all over India are linked via satellite and cable system.
2. The automated quotation system makes it convenient to the brokers to buy and sell electronically and need not shout in the trading ring about prices.
3. It deals with the wholesale debt market like government securities, units by UTI etc.
4. Price data will be broadcasted by the Press Trust of India (P.T.I)
5. It improves the settlement system and minimizes the risk therein. NSE has setup a subsidiary national securities clearing corporation, which guarantees the settlement of trade executed.
6. It operates dealings in the corporate equity and debt instruments. .

Question 2.
What is BSE?
Answer:
The Bombay Stock Exchange (BSE) is formerly known as “Native Stock and Share Brokers Association”, which was established in the year 1877. The aim of association was to support and protect the character and status of brokers, to promote fair practices and to discourage malpractices.

Features of BSE :

1. It has on-line trading system introduced in 1995, which is called BOLT(BSE on line trading). This helps in active trading and safeguards market integrity.
2. It provides other services like risk management, clearing, settlement, market, data and education to capital market participants.
3. It provides a trading platform for equities of small and medium enterprises.
4. It conforms international standards.
5. It provides on efficient and transparent market for trading in equity, debt instruments and mutual funds.
6. It has global reach helping customers around the world.

Question 3.
What do you mean by Bulls and Bears?
Answer:
Bull :
A Bull or Tejawalla is an operator who expects a rise in prices of securities in the future. In anticipation of price rise he makes purchases of shares and debentures with the intention to sell at higher prices in future. He being a speculator has no intention of taking delivery of securities but deals only in difference of prices. Such a speculator is called ‘Bull’ because of resemblance of his behaviour with bulb A bull tends to throw his victims up in the air. Similarly, a bull speculator tries to raise the prices of securities by placing big purchase orders.

Bears :
Bear or Mandiwala speculator expects prices to fall in future and sells securities at present with a view to purchase them at lower prices in future. A bear does not have securities at present but sells them at higher prices in anticipation that he will supply them by purchasing at lower prices in future. If the prices move down as per expectations of the bear, he will earn profits out of these transactions. A bear does not take the delivery of securities but takes the * difference if prices fall down, In case the prices are not falling as expected by the bears then they may start speculator rumours to pressurise price downwards, it is known as ‘bear said’.

Question 4.
What are the aims of listing securities?
Answer:
Listing of securities means the inclusion of securities in the official list of stock exchange for the purpose of trading.

Aims of listing the securities :

1. To have control over the dealings of securities and to have proper supervision.
2. To decentralise the economic power.
3. To safe guard the interests *}# promoters.
4. To protect the interests of investors and shareholders.

Question 5.
What is Demutualisation?
Answer:
The concept of demutualisation of stock exchange had originated in India, where two exchanges called OTCEI in 1990 and NSE in 1992 adopted a pure demutualisation structure from their birth. Demutualised stock exchanges are generally ‘for profit’ and tax paying entities.

In a demutualised stock exchange, three separate sets of people own the exchange, manage it and use its services, The owners usually appoint Board of Directors to manage the exchange, by professionals. The brokers or members are totally different from ownership and management. The ownership rights are freely transferable. Trading rights are acquired surrendered transparently.

Under this organisation structure, membership cards do not exist. Demutualisation of exchanges means segregating the ownership from management. This move was necessitated by the fact that brokers in the management of the stock exchange were misusing their position for personal gains.

Question 6.
What are the top ten stock broking firms in India?
Answer:

Very Short Answer Type Questions

Question 1.
Stock Exchange.
Answer:
It is an association, organization or body of Individuals, whether incorporated or not, established for the purpose of assisting, regulating, and controlling business in buying, selling and dealing in securities.

Question 2.
Listing of securites.
Answer:
The inclusion of securities in the official list of stock exchange for the purpose of trading.

Question 3.
Lameduck.
Answer:
He is a speculator when the expectations of Bear does not become true and the price of security does not fall, he cannot fulfil his commitment, and he is said to be lameduck.

Question 4.
Stag.
Answer:
A stag is a cautious speculator. He applies for the shares of a new company at face value and he expects they are sold at a premium.

Question 5.
Jobber.
Answer:
He is a speculator who deals with securities independently and purchases and sells the securities in his own name.

Question 6.
Stock Broker.
Answer:
Broker is a link between a Jobber and general public who deals with a large variety of securities and works for commission. He contracts the Jabbr to buyer sell the securities an behalf of the general public. ’

Question 7.
SEBI.
Answer:
Securities and Exchanges Board of India(SEBI) helps to over come the undesirable practices in the stock exchange. It is controller of capital issues. Its head quarters is located in Mumbai.

Question 8.
Permitted securities.
Answer:
A stock exchange sometimes permits trading in certain securities, which are not listed at the stock exchange but are actively traded in other stock exchanges. Such securities are known as permitted securities.

Question 9.
Stock Exchange Speculators.
Answer:
The persons who make profits by trading securities for shorterm purpose, are known as stock exchange speculators.

Question 10.
Stock Exchange operators.
Answer:

1. Stock Exchange operators are the participants in stock exchange market.
2. Business transactions in a stock exchange are allowed only by a member of the exchange.
3. There are two categories of members who transact, the business on stock exchange. They are A) Jobbers B) Broker.

Telangana TSBIE TS Inter 2nd Year Commerce Study Material 7th Lesson Internal Trade Textbook Questions and Answers.

TS Inter 2nd Year Commerce Study Material 7th Lesson Internal Trade

Long Answer Type Questions

Question 1.
Define trade and explain its features.
Answer:

• Trade means buying and selling of goods and services for money or money’s worth.
• It involves exchange or transfer of goods & services.

Features :

1. Trade os a branch of commerce. It connects with buying and selling activities.
2. Trade creates possession utility.
3. Trade involves sales or transfer of the ownership of goods and services from producer to the consumer.
4. Trade includes home trade and foreign trade.
5. Trading activities ae performed in market place.
6. Trade involved low risk and limited capial investment.

Question 2.
Explain the services of wholesaler to manufactures.
Answer:
Wholesale trade involves purchasing goods in large quantities from producers or manu-facturers and selling in smaller lots to retailers.

Services to Manufactures :

1. Enabling large scale production, by purchasing large quantities.
2. Sharing / transfer of risk.
3. Financial assistance in the form of advance payments.
4. Advice regarding the market conditions.
5. Removing the place barrier.
6. Facilitating continuous production.
7. Discharging the distribution function and thereby allowing the manufacturer to concentrate on production.
8. Reducing the burden of storing the goods in a warehouse.

Question 3.
Explain the services of a retailer to manufacturer.
Answer:
Retailer purchase goods from the wholesale and selling them in very small qauantitite sto the customers.
Services of Retailer to Manufacturer :

1. Preparing a ready market for goods.
2. Providing useful information to the market researchers and the producer.
3. Risk bearing and risk sharing.
4. Distribution of goods to different segments of the market and at different places.

Question 4.
Explain the objective of SEZ’s.
Answer:
SEZ means special Economic Zone.

SEZ’s are areas that offer incentives to resident busines. SEZ concept is introduced with a view to attract foreign investment and adapt latest technology.

Objectives of SEZ :
The following are the main objectives of SEZs.

1. Generation of additional economic activity.
2. Promotion of exports of goods and services.
3. Promotion of investment from domestic and foreign sources.
4. Creation of employment opportunities.
5. Development of infrastructure facilities.
   i) SEZ the exim policy 2000 envisaged that units would be able to import capital goods and raw materials duty free.
   ii) SEZ units should be deemed to foreign territory for the purpose of trade operations < and tariffs. Question

Question 5.
Explain the advantages of SEZ’s.
Answer:
The following are the major benefits of SEZs.
i) Employment generation :
SEZs are viewed as highly effective tools for job creation.

ii) Economic development :
SEZs are viewed as the engines for economic development.

iii) Growth of labour-intensive manufacturing industry :
Establishment of SEZs would lead to fast growth of labour intensive manufacturing and service industries in the country.

iv) Balanced regional development :
SEZs are beautiful crafted initiatives for achieving the balanced regional development. v) Capacity building : SEZs are important for stronger capacity building.

vi) Export performance :
SEZ s create dynamism in the export performance if a country by eliminating false resulting from tariffs, other trade barriers and Corporate tax system.

Question 6.
Discuss the adyjzfipages and disadvantages of departmental stores.
Answer:
Advantages :

1. It is established in a central location.
2. It sells different types of products under a single roof in a specialised manner. It is thus convenient for the buyer.
3. It facilitates economies of large scale distribution.
4. It helps in eliminating middle men.

Disadvantages :

1. The operating costs of departmental stores are high.
2. As the size of the stores is large, it may at times be difficult for the departments to draw personal attention.
3. The prices are usually high due to the large establishment costs and large working, capital requirements.
4. It requires huge capital.
5. Usually departmental stores are not situated in far off posh locaities which may cause difficulty for those living in middle segment residential localities in reaching the stores.

Question 7.
Discuss the advantages and disadvantages of multiple shops.
Answer:
Multiple shops are identical shops which sell standardised products in different parts of a particular place or city or town.
For example :
Baskin Robins, Bombay dyeing. The multiple shops have the following advantages and disadvantages.

Advantages :

1. They are in the reach of one and all.
2. They sell standardised products.
3. Customers repose lot of confidence in these establishments as these. Identical establishments are seen everywhere.
4. They help in eliminating middlemen.
5. They help in division of work and specialisation.

Disadvantages :

1. The operating costs are high.
2. They sell limited variety of products.
3. They lack storage facilities.
4. They require huge capital.

Question 8.
Explain the merits and demerits of mail order business.
Answer:
In mail order business, the trader sends a mail to the prospective buyer regarding the product. If the consumer is statisfied he will place the order by mail. The seller on receipt of the required of the required sum from the buyer, shall send the product by mail or post.

Advantages :

1. The capital required is relatively less.
2. There is convenience, both in buying and selling.
3. The goods are reasonably priced.
4. Operating costes are less.
5. Middlemen are eliminated.

Disadvantages :

1. It is very difficult to convince the buyer as the buyer will be able to check the goods. only after buying the goods.
2. They lack efficient management.
3. The lack storage facility.
4. E-tailing, which is a form of e-commerce overtook mail order retail business.

Short Answer Type Questions

Question 1.
What services are offered by wholesaler to retailer?
Answer:
Wholesaler purchase goods in large quantities from products and selling them in smaller lots to retailers.

Services to Retailer :

1. Wholesaler making the goods available to retailers as time.
2. Wholesaler gives marketing support to the relailers.
3. He also gives credit facilities to retailers.
4. sharing of specialised knowledge.
5. Risk bearing and risk sharing.

Question 2.
How do you classify the trade?
Answer:

1. Trade means buying and selling of goods and services for money or money’s worth.
2. Depending upon the geographical limits with in which trade is carried on, the trade in classify into two types.
   a) Home trade / Internal trade / Domestic Trade.
   b) External Trade / Foreign trade / International trade.
3. Internal trade is take place with in the geographicla boundaries of a particular country Internal trade is further divided into.
   A) whole sale Trade
   B) Retail Tsade.
4. External trade is take place between the countries. External trade is further divided into
   a) Export trade
   b) Import trade
   c) Entrepet trade

Question 3.
What services are refers by retailer to the, consumers?
Answer:
Retailer purchase goods from the wholesaler in bulk quantities and sell them in very small quantities to the consumers for their personal consumption or use

Services of Retailer to consumers :

1. Retailer provides wide variety of goods available to consumers.
2. Retailer supply goods quickly and timely.
3. Retailer, provides expert guidance and demonstrations of the product to the customers.
4. He provides after sales service to customers for their purchases.
5. Sometimes retailers provides home delivery service.
6. Retailers provides credit facilities for consumer.
7. Retailors make available goods to consumers convenient location.

Question 4.
What are the features of Internal Trade?
Answer:

1. The trade which take place within the geographical boundaries of a country is called Internal Trade.
2. Internal trade is also called as “Home trade” (or) “Domestic Trade”.

Features of Internal Trade :
Internal trade has the following features

1. The selling and buying of goods take place within the boundaries of the same country.
2. The payment are made by the purchaser to the seller in the home country in the domestic currency.
3. Only a few formalities are requited to be completed by the trade.
4. Risk is more becaus fo changes in demand from widely spread localised domestic markets.
5. The influence of political, legal social, cultural and economic environment of the country is less when compared with the foreign trade.
6. The goods are manufactured according to the requirements of domestic consumers and no specifications are received from the buyers.
7. For physical flow of goods from manufacturing point to the consumeses point, only domestic transportation system is used, like Railways and roadways.

Question 5.
Who are the It itinerant Retailers?
Answer:

1. Itinerant Retailes are those retailers who do not have a fixed place with sale of goods.
2. For example : Hawkers & pedlars, street stalls, cheap jacks etc.
3. Some of Itinerant Retailers are explained below.

A) Hawkers and pedlars :
The itinerats move from place to place with a view to search their customers. They sell low cost and unbranded products, at doorsteps of the customers.

B) Street stalls :
Street traders display their products on pavements, street comers of different localities in urban area. They usually operate their business near public places like railway sations, bus stands and street corners.

C) Cheap Jacks :
Cheap Jacks operat their business in small hired or rented shops for a specified period. When it is felt that the trade is not going on well at a particular place, they shift to another place.

D) Periodic Itinerants :
The periodic Itinerants deals with products which suit certain occasions like Deepawali, kites during Sankranthi etc. In local language, periodic market is called “Santha” or a “weekly market”.

Question 6.
What are the advantages and disadvantages of consumer co-operatives?
Answer:

1. A consumer cooperative store is defined as “a voluntary association of persons based on co-operative principles for buying in common and selling in common”.
2. Consmer cooperative store has the following advanages and disadvantages.

I. Advantages :

1. The capital required is relatively less.
2. There is convenience, both in buying and selling.
3. The goods are reasonably priced.
4. Operating costa are less.
5. Middlement afe eliminaed.
6. There are economies of large scale distribution.
7. Co-operative societies enjoy certain benefits and incentives from the government.

II. Disadvantages :

1. Capital is limied.
2. They lack efficient management.
3. The lack storage facility.

Question 7.
What are the zones covered by SEZ’s?
Answer:
SEZ means special economic zone. SEZ’s are areas that offer incentive to resident busi-ness. SEZ concept is introduced with a view to attract foreign investment and adopt latest technology.

SEZ implies the following Zones :

1. Free Trade Zones (FTZ)
2. Export Processing Zones (EPZ)
3. Free Zones (FZ)
4. Industrial Parks
5. Free Ports
6. Urban Enterprise Zones

At present there are eight functional SEZs are located at Maharashtra, Kerala, Gujarat, Tamil Nadu, Telangana, Andhra Pradesh, West Bengal and Uttar Pradesh.

Question 8.
What incentives are offered by Telangana government for the SEZ’s?
Answer:
In Telangana state there are 29 SEZs in opetation in fields of Bio – technologys. IT, IT enabled services, Gems, Jewellery, Pharmaceutical, electronic software and handware, etc.

Incentives offered by Telangana government for the SEZ’s :
Some of the incentives offered by Central and State governments for setting up SEZs are as follows :

1. Duty free import and domestic procurement of goods for the development, operation and maintenance of he company.
2. 100% IT exemption on export income for the first 5 years, 50% for next 5 years and . 50% of the export profit reinvested in business for the next five years.
3. Exemption of GST and levies imposed by state government.
4. Single window clearances for all state governments approvals. Thus, the SEZs in Telangana State are being given special treatment for the development of industrial sector in the state.

Additional Questions

Question 1.
What is External Trade and Explain its’ types?
Answer:

1. The trade refers to buying and selling between traders of two or more countries is called “External Trade”,
2. External Trade is also called “Foreign Trade” or “International Trade”.
3. External Trade s divided into 3 types.
   A) Export Trade
   B) Import Trade snf
   C) Intrepot Trade.

A) Export Trade :

1. When a trader of home country sells his goods to traader or customer of another countries, it is called Export Trade.
2. For Eg.: A Trader from India maysells his goods to a customer in Iran.

B) Import Trade :

1. When a trader of home country purchase goods from trader of another country, it is called import trade.
2. For example: A trader from India may purchase goods from a trader from Singapore.

C) Entrepot Trade :

1. When goods are imported from one country and later exported them to another country, it is called entrepot trade. It is also called “Re – export trade”.
2. For Example: An India trader purchase raw material from a Srilankan trader and convert rawmaterial into finished goods and sell them to British trader. Here indian trader involved in Entrepot Trade.

Question 2.
What is Distribution chain, and explain the types of Distribution chain?
Answer:

1. A Distribution chain is a chain of business or intermediaries through which goods or services are passes until it reaches the final buyer or consumer.
2. Distribution chain can include producers, wholesalers, retailers and consuers.
3. On the combination of producer, wholesaler; retailer and consumer, the distribution chain is divided into 3 channels they are
   A) The first channel of distribution
   B) The second channel of distribution and
   C) The third and find channel of distribution.

A) The first channel / chain :
1) The first channel is the longest because it includes producer, wholesaler, retailer and consumer.
2) In this chain, producer sell product to whole saler who sells to a retailer, and then retailer sells to the consumer.
Producer ⇒ Wholesaler ⇒ Retailer ⇒ Consumer

B) The second channel / chain :
1) In this chain producer sells directly to a retailer who sells the product to the consumer.
2) In this channel, there is no wholesaler, only one intermediary i.e. retailer.
Producer ⇒ Wholesaler ⇒ Retailer ⇒ Consumer

C) The third and find channel / chain :
1) In this channel, the producer sells his products directly to the consumers.
2) This is shortest distribution channel, because cutting out both wholesaler and the retailer.
Producer ⇒ Consumer

Very Short Answer Type Questions

Question 1.
Internal Trade.
Answer:
Internal trade :

1. Internal trade is conducted within the political and geographical boundaries of a particular country.
2. It can take place at local or regional or national level.
3. Internal Trade in also called “Domestic Trade or Home track.

Question 2.
Wholesale Trade.
Answer:
Wholesale trade :

1. Wholesale trade involves purchasing goods in large quantities from producers or manufacturers and selling in smaller lots to retailers for resale to ultimate consumers.
2. Wholesaler is importance between producer and retailor.

Question 3.
Retail Trade.
Answer:
Retail trade involves buying goods from the wholesaler and selling them in very small quantities to the consumers for their personal use.

Question 4.
Itinerants.
Answer:

1. Itinerants retailers are those retailers who do not have a fixed place for sale of goods.
2. Hawkers and pedlans, street stalls, cheap jacks are examples of itinerants.

Question 5.
Hawkers and Pedlars.
Answer:
Hawkers and Pedlars These itinerants move from place to place with a view to search their customers.

Features are :

1. They sell low cost products.
2. They usually sell unbranded products.

Question 6.
Periodic Itinerants.
Answer:
Periodic Itinerants :

1. The periodic market traders deal with regular products and products which suit certain occasions.
2. In local language, it is cailed Santha or a weekly market.

Question 7.
Street Stalls.
Answer:

1. Street traders display their products on pavements, street comers of different localities in urban areas.
2. They usually operate their business near public places like Railway station, bus stands, parks etc.

Question 8.
Cheap Jacks.
Answer:
Cheap Jacks :

1. Cheap jacks, the other form of itinerant traders operate their business from small hired shops for a specified period.
2. They keep moving from place to place. When they felt, trade in not going on wells.

Question 9.
Fixed Shop Retailers.
Answer:

1. Fixed shop retailer Fixed shop retailers are those retailers who have a fixed place for sale of goods.
2. Fixed shbp retailers divided into small scale fixed retail shops and large scale fixed retail shows.

Question 10.
General Stores.
Answer:
General stores :

1. These are usually small shops and establishment located in residential area.
2. They usually sell essential commodities on cash or credit basis.

Question 11.
Single Line Stores.
Answer:
Single line stores :
The retailers deal with a single /one line of products such as vegetables, bakery products, plastic goods are spld by single time stones, footwear.

Question 12.
Speciality Stores.
Answer:

1. A speciality store deals in a particular type of product.
2. They selling one type of product only (all brands).

Question 13.
Street Shops.
Answer:

1. These are called street stalls because these types of retailers display their goods on tables or under the tent.
2. These shops are also called “street stalls”.

Question 14.
Second Hand Goods Shops.
Answer:

1. Second – hand goods shop deals in used articles or second hand goods such as old furniture and old books.
2. In these shops goods price is low.

Question 15.
Second’s Shops.
Answer:
Second’s shops :

1. “seconds shops deals in defective goods”.
2. Goods are sold at a discounted rate in seconds shop,

Question 16.
Large Scale Fixed Retail Shops.
Answer:

1. The large scale fixed retailers operate on a large scale and they are established with heavy investment.
2. They deals in a large bulk of goods.

Question 17.
Multiple Shops.
Answer:
Multiple shops are identical shops which sell standardised products in different parts of a particular place or city or town. Eg : Bombay dyeing.

Question 18.
Consumer Co-operative Store.
Answer:

1. A consumer co-operative store is defined as a voluntary association of persons based on co-operative principle for buying in common and selling in common.
2. They sold goods at reasonable price and enjoy benefits and incentives from the government.

Question 19.
SEZ.
Answer:

1. SEZ means special economic zones.
2. SEZ’s are introduced with a view to attract foreign investment and adopt the latest technology.

Telangana TSBIE TS Inter 2nd Year Commerce Study Material 1st Lesson Financial Markets Textbook Questions and Answers.

TS Inter 2nd Year Commerce Study Material 1st Lesson Financial Markets

Long Answer Type Questions

Question 1.
What is money market? Explain it s functions.
Answer:
Meaning :

1. Money market is market for short term funds which deals with monetary assets whoes period of maturity is upto one year.
2. Money market is a credit market, where short term debt instruments, having high liquidity, .unsecured and at low risk are traded between the parties.
3. The sort term funds are raised to manage temporary shortage of cash and obligations, that the savers are to invest on them to earn returns.

Introduction :
Money market is a credit market, where short-term debt instruments, having high liquidity, unsecured and at low risk are being traded actively between the parties. In other words money market supply short-term funds to the industry.

Definitions. :
“The centre for dealing mainly of a short-term character, in monetary assets, it meets the short-term requirements of borrowers and provides liquidity or cash to the. lenders.

Functions of Money Market : (Main functions) :

1. It is an equilibrating mechanism to even out demand for the supply of short-term funds.
2. It provides a focal point for central bank intervention and influencing liquidity and the general level of interest rates in the economy.
3. It enables a reasonable access to providers and users of short-term funds.
4. Money market fulfill providers and users borrowing and investment requirements at an efficient and market clearing price.

Other functions :

1. It provides short-term credit to the business to meet the working capital requirements.
2. It funds the Government by issuing shor-term instruments to the savers.
3. It deals with credit instruments.
4. It enables the savers of the funds and investors to transact with each other.
5. It helps trade and commerce to develop in a better manner, by issue of bills.
6. It helps in promoting the saving habit in the people.
7. It provides valuable and accurate information to the transacting parties to save money time and efforts.

Question 2.
Explain the functions of capial market.
Answer:
Introduction :

1. Capital market means, it is the market where long-term finance is provided to the business firms through the sale of securities.
2. The capital market participants are private sector manufacturing industries, government, specialised financial institutions and individual savers.
3. The capital market is classified as primary market and secondary market.

Functions of Capital Market :
1. Mobilisation of the resources :
It mobilizes the resources from surplus areas to deficit and productive areas, it increasing the productivity and economic growth of the country.

2. Encourages savings :
It encourages savings motive among the people as they get returns in the form of interest, dividends and bohus.

3. Encourages investments :
It encourages investment by mobilising more capital through financial institutions.

4. Reduces the fluctuation in prices :
It stabilises the prices of securities and reduces the fluctuation in prices to the minimum.

5. Reduce unproductive activities :
It facilitates the reduction in speculation and unproductive activities.

6. Economic development :
It promotes the economic growth and development of the country.

7. Proper allocation of surplus funds :
It helps proper allocation of funds in public and private sectors. Improve the growth of the economy.

Question 3.
What are the differences between money market and capital market?
Answer:
Introduction :
Money Market :
The centre for dealing mainly of a short term character, in monetary assets, it meets the short term requirements of funds.

Capital Market :
It is the market where long term finance is provided to the business firms through the sale of securities.

Differences :

Question 4.
Explain the different money market instrumetns?
Answer:
The various money market instruments ae tresury bill, commercial paper, call money, certificate of deposit and commercial bill.
1. Treasury Bill :

1. A Treasury Bill, or zero-coupon bond, is a promissory note issued by RBI, on behalf of central government, to meet the requirement of short – term funds.
2. Treasury bills are issued at a lower price than their face value and repaid at par. The difference between the purchase price and the amount paid on maturity is the interest earned and called as “discount”.
3. At present the Government of India issues three types of treasury bills thorugh auctions namely 91 days, 182 days and 364 days. Treasury bills are avilable for a minimum amount of rs. 10,000 and in multiples there of. Banks, individuals, HUF, financial institutions and corporations normally participate in the treasury bill market.

2. Commercial paper :

1. Commercial paper is a short-term unsecured promissory note issued by creditworthy companies and are negotiable by endoursement at a discount value.
2. A commercial paper tenure ranges from 1 day to 270 days. Commercial papers are issued for the purpose of financing of accounts receivable, inventory and meeting short-term liabilities.
3. The returns on commercial paper are high when compared to Treasury Bills but less secured.

3. Call Money :

1. Call money is an inter-bank transaction for short-term funds repayable with interest called as call rate to meet their cash reserve requirements on demand.
2. The maturity call money is of 1 day to 14 days.
3. Commercial banks require to maintain minimum cash balance known as Cash Reserve Ratio. The banks with cash reserve below the statutory requirement borow from such banks having surplus cash reserves. For the services rendered by the lending bank, interest is paid which is known as call rate. The call rate varies from day to day and even hour to hour.

4. Certificate of Deposit :

1. Certificate of Deposit is an unsecured promisssory note, negotiable short-term in-strument issued by the commercial banks in the form of a certificate authorising the bearer to receive interest along with the face value.
2. Certificate of Deposits can be issued to individuals, NRI’s corporations and compa-nies.
3. These certificates are available for the term of 3 ,pmtjs to 5 years.

5. Commercial Bill :

1. Commercial Bill is a negotiable instrument drawn by the drawer (seller) on the drawee (buyer) for acceptance to pay the amount of credit sales indebted to him at a future date.
2. Once it is accepted by the drawer it becomes a legal document and it can be discounted with a bank when the drawer is in need of cash.
3. The bank receives the face value from drawee on the due date. These trade bills can be rediscounted by the banks with RBI and can be considered as liquid assets.

Question 5.
What is Derivative? Explain the various products of Derivatgives.
Answer:

1. Derivative is a financial contract whose value is dependent on an underlying asset or group of assets.
2. The commonly used assets are stocks, bonds, currencies commodities and market indices, the value of the underlying asset keeps changing according to market conditions.
3. According to John C.Hall “A derivative can be defined as a financial instrument who value depends on the values of other, mole basic underlying variables”.

Derivative Products :
The most common types of derivatives are given below :
A) Forwards
B) Futures
C) Options and
D) Swaps

A) Forwards contracts :

1. A forward contract is a customized contract (Non standardized contract) between two parties to buy or sell an asset at a specified date in future at a price agreed upon today.
2. Forward contracts are self-regulated and no collecteral is required for the same.

B) Futures contracts :

1. A futures contracts is a standardized contract between two parties to buy or sell an asset at a certain time in the future at a certain price.
2. Futures contracts ae special type of forward contracts which are regulated by the stock exchange and being standard in nature, these contracts can not be modified.

C) Optipm contracts :

1. Option contracs are those contracts that give the right but not the obligation to buy or sell on underlying asset.
2. There are two types of options call and put in call option, the buyer has the right but not the obligation to buy an underlying asset at a price determined while entering the contract.
3. In put option, the buyer has the right but not the obligation to sell an underlying asset at a price determined while entering the contract.

D) Swaps contracts :

1. Swaps contracts are private agreements between two parties to exchange their cash flows in the future according to pre-arranged formula.
2. Swap contracts are risky and they can be regulated as port folios of forward con-tracts.

Question 6.
Discuss the various debt market instruments.
Answer:
The following ae the important debt market instruments that are issued by the Central and State Governments, Municipal Corporations, Government bodies and commercial entities like Financial Institutions, Banks, Public Sector Units and Public Ltd. companies.

1. Debentures :
1) It is a type of Debt instrument which offers a fixed rate of interest for a specified tenure. Companies or governments use debentures to borrow money.

2) Debentures are simply loans taken by he companies and do not provide the ownerwhip in the company.

2. Bonds :

1. Bonds are the fixed-income securities that are issued by corporations and governments to raise capital. The bond issuer borrows capital frim the bondholder and makes fixed payments to them at a fixed interest rate for a specified period.
2. The different types of bonds that are traded in the debt market includes Zero Coupon Bonds, Coupon Bearing Bonds, Government Guaranteed Bonds, Public Sector Units (PSUs) Bonds, Private Sector Bonds, Floating Rate Bonds, etc.

3. Government Securities :
1) Government Securities or G-Secs are issued by the Reserve Bank of India on behalf of the Government of India.
2) These securities have a maturity period of 1 to 30 years. Securitites offer fixed interest rate, where interests are payable semi annually.

4. Treasury Bills :
Treasury Bills or T-Bills, which are issued by the RBI for 91 days, 182 days and 364 days. They are also called zero coupon bonds.

5. Certificate of Deposit :

1. Certificate of Deposits (CDs) is issued by the bank to depositors of funds that remain with the bank for a specified period of time.
2. CDs are similar to the traditional term deposits but are negotiable and tradable in the short-term money market.

6. Commercial Papers :

1. Commercial paper, also called CP. It is a short-term debt instrument issueb by companis to raise funds.
2. It is an unsecured money market instrument issued in the form of a promissory note and was introduced in India for the first time in 1990.

Question 7.
Explain the equity market instruments.
Answer:
The different equity market instruments are common shares, preferred shares, private equity, mutual funds and derivatives.

1. Common shares :

1. Common stock shares respresent ownership capital, and holders of common shares are receive dividends out of the company’s profits.
2. Common shareholders have a residual claim to the company’s income and assets.
3. They are entitled to a claim in the company’s profits only after the preferred shareholdes and bondholders have been paid.

2. Preferred Shares :

1. Preferred shares are a hybrid security because they combine some features of com-mon equity stock and debentures.
2. They are like debentures as they have a fixed rae of dividend, have a claim to the company’s income and assets before equity.
3. They do not have a claim in the company’s residual income, and do not confer voting rights to shareholders.

3. Private Equity :

1. Equity investments made through private placements are known as private equity.
2. Private equity is raised by private limited enterprises and partnerships, as they cannot trade theri shares publicly. Typically, start-up and small/medium-sized companies raise capital through this route from institutional investors and wealthy individuals.

4. Mutual Funds :

1. Mutual funds are an investment tool that pools money from several investors and invests it in company stocks, bonds, government instruments, etc. in order to generate a profit for investors.
2. This profit may be paid out as dividends to investors or reinvested by the fund for capital appreciation.

5. Derivatives :

1. These are financial contracts whose value is dependent on an underlying asset or group of assets.
2. The commonly used assets ae stocks, bonds, currencies, commodities and market indices. The value of the underlying assets keeps changing according to market condidtions.

Question 8.
Define Mutual Fund and explain its objectives.
Answer:
Meanings :
1) A Mutual Fund is a Financial Service Organisation that pools the savings of a number of investors who share a common financial goal. The money collected from investors is then invested by the fund manager in different types of securities; these could range from shares to debentures based upon the scheme’s stated objectives.

2) The income earned through these investments and the capital appreciation realised is shared by its unit holders in proportion to the number of units owned by them.

Objectives of Mutual Fund Investments :
a) Goal-Based Investing :
This is the top investment objective of Mutaul funds. It offers different types of mutual funds in order to suit the needs of the various investors. The fund manager invests according to target asset mix suitable for investors after looking at his/her risk profile and liabilities etc.

b) Investment Growth :
Investors who are looking for aggressive returns can do so by taking some extra risk. Mutual Funds on this objective invest money in fast-growing companies.

c) Tax Savings :
Tax Savings is also one of the important investment objectives of Mutual fund. Mostly wealthy clients, Institutional investors, and corporates have an objective to minimize the tax burdern. Mutual funds offer investors with a variety of funds which will reduce the tax.

Question 9.
What are the different types of mutaul funds? Explain.
Answer:
Mutual Fund schemes may be classified on the basis of its structure and investment objective.

I. Based on Structure :

a) Open – ended Funds :

1. An open-ended fund is one that is available for subscription and repurchase on a continuous basis i.e. throughout the year.
2. These funds do not have a fixed maturity period.
3. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices. The key feature of open-end schemes is liquidity.

b) Close-ended Funds :

1. closed-ended funds have a stipulated maturity period which generally ranges from 3-15 years.
2. These funds are open for subscription only during a specified period.
3. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are lised.

c) Internal Funds :
Internal funds combine the features of open-ended and close- ended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices.

II. Based on Investment Objectives :
a) Growth Funds :

1. The funds which are aimed at appreciation in the value of the underlyhing in-vestments through capital appreciation are called growth funds.
2. Grwoth funds invest in growth oriented securities i.e., in shares of companies which can appreciage in long run.
3. Growth funds are also known as Nest Eggs or Long Haul Investments.

b) Income Funds :

1. The aim of income funds is to provide regulare and steady income to investors.
2. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and Government securities.
3. Income Funds are ideal for capital stability and regular income.

c) Balanced Funds :

1. The aim of balanced funds is to provide both growth and regular income.
2. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents.

d) Money Market Funds :

1. The aim of money market funds is to provide easy liquidity, preservation of capital and moderate income.
2. These schemes generally invest in safer short term instruments such as treasury bills, certificates of deposit, commercial paper and interbank call money.
3. The returns on these schemes may fluctuate depending upon the interest rates prevailing in the market.

III. Others :
a) Tax Savings Funds :
These schemes offer tax rebates to the investors under specific provisions of the Indian Income Tax laws, as the Government offers tax incentives for investment in specified avenues to encourage the investors.

b) Industry Specific Funds :

1. Industry Specific Schemes invest only in the industries specified in the offer document.
2. The investment of these funds is limited to specific industries like Info Tech, Fast Moving Consumer Goods (FMCG), Pharmaceuticals, etc.

c) Index Funds :
Index Funds attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE.

d) Exchange Traded Funds :
Exchange Traded Funds (EFT) provide investors with combined benefits of a closed-end and open-end mutual fund. Exchange traded funds follow stock market indices and are traded on stock exchanges like a single stock at index linked prices.

Short Answer Type Questions

Question 1.
Differentiate between indigeneous bankers and money lenders.
Answer:

Question 2.
What is the role of organised money market?
Answer:
The institutions functioning under this organized money market are regulaed by RBI and other regulating agency like NABARD.

Commercial banks, Indian and foreign, public sector and privae sectors are treated as organized sector. All these institutions participate on the demand side along with central government business entities and individuals.

The role of organised Money market:
Organised money market fulfil the requirement of finance

1. for the government arise because of deficit.
2. For the firms to meet their working capital needs.
3. For the banks to maintain cash reserve ratio.

This money market deals with credit instrument like treasury bills, commercial paper, call money, certificae of deposits, and mutual funds.

Question 3.
What are the differences between primary market and secondary market.
Answer:

Question 4.
What is Treasury bill?
Answer:

1. A Treasury bill is also called zero coupon bond, it is a promissory note issued by RBI, on behalf of Central Government, for a discount to meet the requirement of short term funds. Treasury bills were first issued by the Government of India in 1917.
2. It is one of the safe money market instruments and the returns are not that attractive. But they are zero risk instruments having assured earnings.
3. Treasury bills are issued at a lower price than their face value and repaid at par (face value). The difference between these two are called as discount.
4. These are circulated in primary market and secondary markets. At present the Government of India issues three type of treasury bills. They are
   a) 91 days treasury bills
   b) 182 days treasury bills
   c) 364 days treasury bills
5. Treasury bills are available for a minimum amount of ₹ 25,000 and in multiples there of. Banks and financial institutions are participate in the treasury bill market.

Question 5.
How financial markets are classified?
Answer:
Financial market is the market in which financial assets are created and transferred. On the basis of tenure of credit needs, the financial markets are classified into money market and capital market.

A) Money market is the market where shorterm debt instruments are traded and money market is divided as organised money market and unorganised money market.
B) Capital market is the market where long term finance is provided to the business firm with new issues of shares.

Capital market is divided into primary market and secondary market.

Question 6.
What do you mean by Certificate of Deposit?
Answer:

1. Certificate of deposit is an “unsecured promissory note”, negotiable short – term instrument issued by the commercial banks in the form of a certificate authorising the bearer to receive interest along with the face value.
2. Certificate of deposits can be issued to individuals, NRI’s, corporations and companies.
3. They are issued during the period of high liquidity when the percentage of deposits are low compared to demand for loans. These certificates are available for the term of 3 months to 5 years.
4. The return on certificate of deposit are higher than the T – Bill as the rate of risk is high.

Question 7.
What is meant by commercial paper?
Answer:

1. Commercial paper is a short – term unsecured promissory note issued by credit worthy companies and are negotiable by endorsement at a discount value.
2. A commercial paper tenure ranges from T day to 270 days. Commercial papers are issued for the purpose of financing of accounts receivable inventory and meeting short-term liabilities.
3. The returns on commercial paper are high when compared to treasury bills but less secured. These securities are actively traded in secondary market also. A non-resident can also invest in commercial paper on non – repartition basis.

Question 8.
What is call money?
Answer:
Call Money :

1. Call money is an inter-bank transaction for short-term funds repayable with interest called as call rate to meet their cash reserve requirements on demand.
2. The maturity of call money is of 1 day to 14 days.
3. Commercial banks require to maintain minimum cash balance known as Cash Reserve Ratio. The banks with cash reserve below the statutory requirement borow from such banks having surplus cash reserves. For the services rendered by the lending bank, interest is paid which is known as call rate. The call rate varies from day to day and even hour to hour.

Question 9.
What is Bond market?
Answer:
Bond Market :

1. The bond market is a market place where investors buy debt securities that are brought to the market by either governmental entitie or publicly-traded corporations.
2. This is also called as Fixed-income Market, or Credit Market.
3. Governments typically issue bonds in order to raise captial to pay down debts or fund infrastructural improvements. Publicly traded companies issue bonds when they need to finance business expansion projecs or maintain on going operations.
4. The general bond market can be segmented into Corporae bonds, Government bonds, Municipal bonds, Mortgaged backed bonds and Emerging market bonds.

Question 10.
What is Debit Market?
Answer:

1. Debit market deals with those securities which yield fixed income. The debt market is any market situation wherer trading of debt instruments takes place.
2. The debit instruments include mortages, promissory notes, bonds, and Certificates of Deposit.
3. A debt market establishes a structured environment where these types, of debt can be traded with case between interested parties.
4. Debt market provides greater funding avenues to both public sector and private sector projects and reduces the pressure on institutional financing.

Question 11.
What is equity market?
Answer:

1. It is the place where buyers and sellers meet to trade in listed companies shares.
2. An Equity Market also known as the Stock Market or Share Market, is a platform for trading in company shares.
3. An equity market is not a physical facility or discrete entity. A stock exchange is a physical entity and a designated place. Two major Indian Stock exchanges BSE (Bomnay Stock Exchange) and NSE (National Stock Exchange) provide real-time trading information on the listed securities.
4. In simple terms, an equity market can be viewed as a market where the buyer and sellet of a stock meet.

Question 12.
What is Forex Market?
Answer:

1. The foreign exchange market or the ‘forex market’ is a system which establishes an international network allowing the buyers and sellers to carry out trade or exchange of currencies of different countries. It simply means buying one currency and selling the other.
2. The objective of forex trader is to make profits from these fluctuations in prices, speculating on which way the foreign exchange rates ae likely to move in the future.
3. The forex market is made up of banks, commercial companies, central banks, investment management firms, hedge funds, and retail forex brokers and investors.
4. The forex market is a network of institutions, allowing for trading 24 hours a day, five days per week, with the exception of when all markets are closed because of a holiday.
5. Forex transactions are generally quoted in pairs because when one currency is bought, the other is sold. The first currency is called the ‘base currency’ and the second currency called he ‘quote currency’.

Question 13.
What is close ended fund?
Answer:
Close-ended Funds :

1. closed-ended funds have a stipulatd maturity period which generally ranges from 3-15 years.
2. These funds are open for subscription only during a specified period.
3. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed.

Question 14.
What is convertible bond.
Answer:

1. A convertible bond is a regular corporate bond that has the added feature of being convertible into a fixed number of shares of common stock.
2. Convertible bonds are debt instruments because they pay interest and have a fixed maturity date.
3. The conversion ratio is determined at the time of issuance, and typically can be acted upon by the holder at any time.

Very Short Answer Type Questions

Question 1.
Financial Market.
Answer:

1. Financial market is the market in which financial assets are creaed and transferred.
2. Financial market facilitate the transfer of savings to investment.
3. On the basis of tenure of credit needs, the financial markets are classified into money market and capital market.

Question 2.
Money Market.
Answer:

1. Money market is a market for short term funds which deals with monetary assets whose period of maturity is upto one year.
2. Money market is a credit market, where short-term debt instrument, having high liquidity unsecured and at low risk are traded between the parties.

Question 3.
Capital Market.
Answer:

1. Capital market denotes the market where long-term finance is provided to the business firms through the sale of securities.
2. The capital market participants are private sector manufacturing industries, government, specialized financial institutions, and individual savers.
3. Capital market is divided as primary market and secondary market.

Question 4.
Organised money market?
Answer:

1. Financial institutions functioning under this organized money market are regulated by eithe the RBI or other regulating agency like NABARD.
2. Comercial banks, Indian, foreign, public, private government entities are participate in organised money market.
3. Organised money market deals with creditg instruments like treasury bills, commercial paper, call money etc.

Question 5.
Unganised money market?
Answer:

1. Unorganised money market is not regulated by any specific authority.
2. It is continuing in the country inspite of development of banking system in rural ayeas through indigenous bankes and money lenders.

Question 6.
Primary market.
Answer:

1. Primary market is also known as “new issues market”.
2. The company issuing securities may be new or old in the primary market.

Question 7.
Secondary market.
Answer:

1. Secondary market is also called as stock exchange
2. The listed securities (shares) are bought and sold in the secondary market.

Question 8.
Price in Financial Markets.
Answer:

1. For financial asset or securities, the most recent price at which it was traded is considered as financial market price.
2. In primary market, management decide the price / value of the securities, and in secondary market, the demand and supply determine the price of securities.

Question 9.
Business Finance.
Answer:

1. The requirement of funds to carryout its various activities is called business finance.
2. Finance is needed for the business for fixed capital reqirements and for working capital require.

Question 10.
Instruments of money market.
Answer:
Instruments of money market are

1. Treasury Bill
2. Commercial paper
3. call money
4. certificate of deposit
5. commercial bill

Question 11.
Terms of certificate of Deposit.
Answer:

1. certificate of Deposit is an unsecured promissory note, negotiate short-term instrument issued by the commercial banks in the form of a certificae authorising the bearer to receive interest along with the face value.
2. Certificate of deposits can be issued to individuals, NRIs, corporations and companies
3. These certificates are available for the trm of 3 months to 5 years.

Question 12.
Commercial bill.
Answer:

1. Commercial Bill is negotiable instrument drawn by the drawer (seller) on the drawee (buyer) for acceptance to pay the amount of credit sales indebted to him at a future date.
2. Once it is accepted by the drawer it becomes a legal document and it can be discounted with a bank when the drawer is in need of cash.
3. The bank receives the face value from drawee on the due date. These trade bills can be rediscounted by the banks with RBI and can be considerd as liquid assets.

Question 13.
Discount on T-Bill.
Answer:
Treasury bills are issued at a lowe price than their face value and repaid at par. The difference between the purchase price and maturity value is the interest earned and it is called as discount on T – Bill.

Question 14.
call rate.
Answer:

1. commercial banks require to maintain minimum cash balance the banks with cash reserve below he statutory requirement it borrows from such banks having surplus cash reserve.
2. For the services rendered by the lending bank, interest is paid which is known as “call rate”.

Question 15.
Derivates.
Answer:

1. These ae financial contracts whose is dependent on an underlying asset or group of assets.
2. The commonly used assets are stocks, bonds, currencies, commondities and market indices. The value of the underlying assets keeps changing secording to market conditions.

Question 16.
Forwards.
Answer:

1. A forward contract is a customized contract (Non standardized contract) between two parties to buy or sell an asset at a specified date in future at a price agreed upon today.
2. Forward contracts are self regulated and no collecteral is required for the same.

Question 17.
Features.
Answer:

1. A futures contracts is a standardized contract between two parties to buy or sell an air et at a certain time in the future at a certain price.
2. Futures contracts ae special type of forward contracts which are regulated by the stock exchange and being standard in nature, these contracts can not be modified.

Question 18.
Option.
Answer:

1. Option contracs are those contracts that give the right but not the obligation to buy or sell on underlying asset.
2. There are two types of options call and put in call option, the buyer has the right but , not the obligation to buy an underlying asset at a price determined while entering the contract.
3. In put option, the buyer has the right but not the obligation to sell an underlying asset at a price determined while entering the contract.

Question 19.
Swap.
Answer:

1. Swaps contracts are private agreements between two parties to exchange their cash flows in the future according to pre-arranged formula.
2. Swap contracts are risky and they can be regulated as portfolios of forward contracts.

Question 20.
Structured product
Answer:

1. A standard product is tailored investment solution, using a combination of traditional financial instruments, and derivatives.
2. This combination allows investors to adjust the level of risk to their optimal acceptable leel, while benefiting from movements in the underlier (for example, a stock, an exchange rate, etc.
3. These products are usually long-term in nature requiring a lock-in of at least year and an investment horizon of 2-3 years to gain maximum return.

Question 21.
Mutual fund.
Answer:

1. Mutual funds are an investment tool that pools money from several investors and invests it in company stocks, bonds, government instruments, etc. in order to generate a profit for investor.
2. This profit may be paid out as dividends to investors (dividend plans) or reinvested by the fund for capial appreciation (growth plan).

Question 22.
Open ended fund.
Answer:

1. An open-ended fund is one that is available for subscription and repurchase on a continuous basis i.e. throughout the year.
2. These funds do not have a fixed maturity period.
3. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices. The key feature of open-end schemes is liquidity.

Question 23.
Grwoth fund.
Answer:

1. The funds which are aimed at appreciation in the value of the underlying investments through capital appreciation are called growth funds.
2. Growth funds invest in growth-oriented securities i.e., in shares of companies that can appreciate in long run.
3. Growth funds are also known as Nest Eggs or Long Haul Investments.

Question 24.
Industry-specific fund
Answer:

1. Industry Specific Schemes invest only in the industries specified in the offer document.
2. The investment of these funds is limited to specific industries like info Tech, Fast Moving Consumer Goods (FMCG), Pharmaceuticals, etc.)

Telangana TSBIE TS Inter 2nd Year Economics Study Material 6th Lesson Industrial Sector Textbook Questions and Answers.

TS Inter 2nd Year Economics Study Material 6th Lesson Industrial Sector

Essay Questions

Question 1.
Explain the pattern of Industrial development in India.
Answer:
Pattern of Industrial Development in India :
The pattern of industrial development in India was determined by the state of economy in which the British left us. The British had used India as a source of cheap raw materials and a lucrative market for their finished products and they had not made any effort to develop the infrastructure. After getting independence, India immediately felt the need for capital goods and it was decided to promote the rapid growth of capital goods industries.

Almost till the end of the Third Five Year Plan, India had to import a variety of capital goods including iron and steel, transport equipment and Various kinds of machinery. But, the situation has radically changed now. India is now in a position to export these capital goods even to the technologically advanced countries of western Europe, America and Russia.

A significant feature of industrial development in India has been the phenomenal growth of the public sector. This sector comprises public utility services like the railways, road transport, post and telegraph, power and irrigation projects, departmental under takings of the central and state governments including the defense production establishments, and a number of other industrial undertakings which are wholly supported by the central government.

The public sector now contributes about one-fifth of the share of industrial sector in the national income knd the surpluses earned by it form an important source of non-tax revene of the government. It also offers job opportunities to large number of people.

With the initiation of the Indian five year plans in 1951, it was imperative that the perspective change in favour of industrial development of India as well as simultaneous development of agriculture. Development of agroindustries, village industries and small scale enterprises form an essential part of industrial development process.

According to the state-wise analysis of the absolute figures of working capital, employment and number of factories, Maharashtra continues to remain at the top. Next fo it Tamil Nadu followed by Gujarat, erstwhile Andhra Pradesh and Uttar Pradesh in respect of number of factories and workers employed. However, in terms of working capital, Gujarat occupies second place followed by Tamil Nadu, Uttar Pradesh, Karnataka, erstwhile Andhra Pradesh and Haryana.

It is heartening that due to the concerted effors made by the government for industrial development, India became the 6th industrialized country of the world having achieved a re-markable distinction in production of a variety of products and generation of employment. But unplanned efforts by the central and state governments did not control the emergence of uneven industrial development in the country.

Question 2.
Analyse the nature of Industrial growth in India.
Answer:
Industrial Growth in India :
It is a well-known fact that British government never intended to develop the industries in our country during pre-independence period. After independence, the people of this country expected high hopes from the government for the betterment of their life. It is the industrial development which provides basic infrastructure necessary for the development of the economy as a whole. Industrial Policy Resolution, 1948 and the Industries (Development and Regulation) Act, 1957 gave an idea of the attitude’ of the government with regard to the development of industries. But, it was only the adoption of planning in 1951 which created a favourable atmosphere for the development of industries in India.

A large number of industries have been established in the post-independehce Ihdia in private, public and joint sectors. There are a lot of industrial resources afnd raw ihateiials avilable in India. For instance, Bhilai, Bokaro, Rourkela, Ranchi, Jamshedpur, RenUkoot emerged as major centers during the first one and a half decades of independence.

However, later on, industrialization at medium and small scale was taken up in all the states. The main sectors of industrialization today are electronics, transport and telecommunications. Compared to advanced countires, industrialization in India has to develop at a much faster rate. About 10 percent of the total workers are employed in the organized industrial sector. Both private and public sectors have grown side by side since independence.

The state enterprises and public sector undertakings rate into heavy losses, and this puts a question mark on the capabilities of the Indian state and its approaches in managing its own establishment. A debate started on private-public sector partnership. The debate titled in favour of die private sector. Many of the government enterprises were handed over to private entrepreneurs and industrialists. Privatization has entered in a selected way in the transport sector, including roads, railways and airways.

Large-scale industries started in the first fifteen years of planning in India. Rate of industrial growth was fluctuating between 2 and 12 percent. However, India has observed a steady industrial progress after 1967. The enduring factors which have contributed to the growth are vast natural resources, economic surplus, large labour force, high urban concentration, and concentration of surplus within a small social group, availability of trained personnel, a stable political structure and powerful means of state economic control. Today, India is one of the top developing countries compared to the countries of Africa and South America.

However, production of luxury goods, control of monopolies, sluggish rate of agricultural development have come as obstacles in industrial development. Despite these factors, investments in private sector have been increasing.

Collaborations with industrially advanced countries like the USA the UK, Russia, France, Germany, Italy, Japan are a clear testimony of India’s industrial porgress. A boost has been given to the development of small-scale industries too during various plans. India today is a global market, India and China are considered as the fast developing countrie in the world.

In twentieth century when science and technology have gained unquestionable supremacy, the level of the industrial development of a country has become the yardstick to be applied to judge i,ts actual development.

The development of the economy can be measured with the help of different criteria such as, the growth rate in industrial output, industry’s contribution to national income and two employment. A close application of these criteria divides the planned period into two distinct phases, the first upto 1965-66 and the second from 1965-66. The economy took rapid strides during the first three five year plans, but slowed down later. Since, industry’s contribution to national, income and its capacity to generate employment have displayed similar trends, we cannot describe our industrial development as spectacular though there has been a spurt of new industrial complexes all over the country.

Question 3.
Comment on the Industrial development during the Five year plans in India.
Answer:
Industrial Growth in India: The real growth and development of the industrial sector in India started during the period of five year plans.

First Five Year Plan (1951-56) :
The main thrust of the first five year plan Was on agricultural development. Therefore, the emphasis was on increasing capacity of the then existing industries rather than the establishment of new industries. Cotton, woollen and jute textiles, cement, paper, news – print, power – looms, medicines, paints, sugar, vanaspati (vegetable oil), chemical and engineering goods and transport equipment show some progress.

Second Five Year Plan (1956-61) :
Great emphasis was laid on the establishment of heavy industries during the second five year plan. The main thrust of industrial development was on iron and steel, heavy engineering, lignite projects and fertilizer industries, Three new iron and steel plants were located in Bhilai, Durgapur and Rurkela.

Third Five Year Plan (1961-66) :
There Was emphasis on the expansion of basic industries like iron and steel, fossil – fuel and machine building. The Ranchi Machine Tool and three more HMT units were established. Machine building, locomotive and railway coach making, ship-building, air – craft manufacturing, chemicals, drugs and fertilizer industries also made steady progress. .

Annual Plans (1966-69) :
The period between 1966 and 1969 was the period of annual plans. The industrial period could not make much progress during the annual plans period.

Fourth Five Year plan (1969-74) :
During this plan, there was much emphasis on the agro – based industries such as sugar, cotton, jute, vanaspati, metal based and chemical industries. It was during this plan, much progress was made in alloys, aluminium, automobile tyres, electronic goods, machine tools, tractors and special steel. Efforts were also made to accelerate the process of industrial dispersal.

Fifth Five Year Plan (1974-79) :
The main stress in this plan was on rapid growth of steel plants, export-oriented articles and goods of mass consumption. The steel plants at Salem. Vijayanagar and Visakhapatnam were proposed to create additional capacity. The Steel Authority of India Ltd. (SAIL) was constituted. Moreover, drug Manufacturing, oil refining, chemical fertilisers and heavy engineering industries made steady progress.

Sixth Five Year Plan (1980-85) :
The main emphasis in the sixth five year plan was on producting goods to exploit the domestic and international markets. To achieve this objective industries like aluminium, automobiles, electric equipment, thermostats were given the priority. Production targets were achieved in industries like commercial vehicles, drugs, TV receivers, automobiles, cement, coal, jute industry, non – ferrous metals, textiles, railway wagons, sugar industry etc.

Seventh Five Year Plan (1985-90) :
The main thrust of the seventh five year plan was on high – techand electronic industries. Industrial dispersal, self employment, exploitation of local resources and proper training were the preference areas of the plan.

Eight Five Year Plan (1992-97) :
The period between 1990 and 1992 was the period of annual plans. There was a major change in the industrial policy of the government of India which was initiated in 1991. The policy of liberalization was adopted for the investment of foreign multinationals. Emphasis was given on the removal of regional imbalances and encouraging the growth of employment in small and tiny sectors.

Ninth Five Year Plan (1997-2002) :
The main emphasis during this plan was on cement, coal, crude oil, consumer goods, electricity, infrastructure, refinery and quality steel products.

Tenth five year plan (2002-07) :
During this plan, the main emphasis was on ;

1. The modernization, technology, upgradation, reducing transaction costs and increasing exports;
2. To enhance exports and to increase global competitiveness; and
3. To achieve balanced regional development.

Eleventh Five Year Plan (2007-12) :
This plan document entitled “Towards faster and more inclusive growth” gave priority to industry, infrastructure and employment. The plan recognized that there should be rapid industrial development that brings faster reduction in poverty, generates employment and ensures essential services such as health and education to all sections of the society.

Twelfth Five Year Plan (2012-17) :
The planning commission’s focus on instilling ‘incluSive growth1 is making headway. The plan is expected to create employment through developing India’s manufacturing sector and move the nation higher up the value chain is a boon for industry, the planning commission indicated that it aims to have industry & manufacturing related activities grow by 11% during this plan period, contrasted to 8% over the previous 11th five year plan.

However in 2014, the 65 years old planning commission was dissolved and a think tank, NITI (National Institution for transforming India). Aayog took in its place.

Question 4.
What are the reasons for industrial backwardness in India.
Answer:
Industrial Backwardness :
The industrial development is the indicator of economic development. The industrial backwardness results in economic backwardness. Consequently the quality of life of people is very bad and poverty level is very high.

The most backward districts lie in eastern Uttar Pradesh, Assam, Western Rajasthan, Central Plateau region of Telangana, Western ghat region and adjacent plateau region of Kerala.

Causes of Industrial Backwardness :
1. British Rule policy :
It rulers utilized the natural resources of India for their own economic development. They did not establish the industries in India. This policy affected industrial development badly. They used the raw material of this area in their own countries, which caused a huge loss to India.

2. Lack of Mineral Resources :
There is a lack of mineral resources like oil and coal which are necessary for industrial development. So, the rate of industrial development is very slow in India because it is facing the problem of mineral shortage.

3. Lack of Capital :
The rate of savings is low due to low percapita income in India. Due to low savings, rate of investment is very low. It is the main obstacle for industrialization.

4. Lack of Credit Facilities :
There is a shortage of credit facility by financial institutions which provide credit to the industries according to the needs of the industry.

5. Lack of Foreign Exchange :
There is a lack of foreign exchange which is the most important factor for the import of modem technology for industrial sector. It is the main problem for industrial development that India has to pay the debts and also to import the technology.

6. Lack of Technical Experts :
It is unfortunate that there is lack of skilled persons in India. It is the major drawback for the industries, A heavy amount is paid to the foreign experts and Indian skilled persons are working abroad for a higher return.

7. Lack of Transport Facility :
The transport system is less developed in India. The available facilities are costly and inadequate. Roads and railway transport conditions are miserable.

8. Lack of Industrial Research :
Due to lack of research and development facilities, invention did not take place in the production techniques which has increased the cost of production and reduced the demand for production.

9. Energy Crisis :
These is a shortage of electricity for industries because the sources of power are limited in the country.

10. Increase in Taxes :
Heavy taxes have been imposed on the industrial production. Heavy import and export duties have also discouraged the industrial production.

11. Limited Market :
Our domestic market has been limited. On the other hand, the quality of product is very poor and Indian products are unable to compete in the international market. So, the limited nature of domestic and international markets is also one impediment for faster rate of industrial development.

12. Attitude of the Labour :
The quality of labour is poor and the spirit of work is absent. Political parties also use them for their own benefits. It has discouraged the industrial prpduction.

13. Defective Planning :
There is a lack of effective planning in industrial sector. There is no c-ordination among the different wings of industrial sector. It increases the cost of production.

Question 5.
Discuss the features of Industrial Policy Resolutions 1948 and 1956.
Answer:
Industrial Policy Resolution :
Industrial policy is a statement which defines the role of government in industrial development, the place of the public and private sectors in industrialization of the country, the relative role of large and small industries and the role of foreign capital.

Industrial Policy Resolution, 1948 :
The Industrial Policy Resolution, 1948 was passed when our constitution was not adopted ahd there was no legal frame work.

The Government of India announced its Industrial policy Resolution (IPR) on April 6,1948 where by both public and private sectors were involved towards industrial development. Accordingly the industries were divided into four broad categories.

a) Exclusive state monopoly :
This includes the manufacture of arms and ammunition, production and control of atomic energy and the ownership and management of railway transport. These industries were the exclusive monopoly of the Central Government.

b) State monopoly for new units :
This category includes coal, iron and steel, aircraft manufacture, ship building, manufacture of telephone, telegraphs and wireless apparatus (ex-cluding radio receiving sets) and mineral oils. New undertakings in this category could hence forth be undertaken only by the State.

c) State Regulation :
This category included industries of such basic, importance like machine tools, chemicals, fertilizers, non-ferrous metals, rubber manufactures, cement, paper, newsprint, automobiles, electric engineering etc, which the central government would feel nec-essary to plan and regulate.

d) Unregulated Private Enterprise :
The industries in this category were left open to the private sector, individuals as well as to co-operatives.

Industrial Policy Resolution, 1956 :
Further, in December 1954, the Parliament adopted the, ‘Socialistic Pattern of Society’ as the goal of economic policy which called for the state or the public sector to increase its sphere of activity in industrial sector and thus prevent concen-tration of economic power in private hands. In view of all these developments, a new industrial policy was announced on 30th April, 1956. The main features of this industrial policy resolution of 1956 were as follows.
1) Classification of Industries :
Industries were classified into three types which are indicated below. .

i) Schedule A contained 17 industries :
All new units in these industries, where their establishment in the private sector has already been approved, would be setup only by the state.

ii) Schedule B contained 12 industries :
Such industries would be progressively state owned, but private enterprise is expected to supplement the efforts of the state in . these fields.

iii) The remaining industries fell in Schedule category. The future development of these industries had been left to the initiative and enterprise of the private sector.

2) Assistance to private sector :
while the industrial policy of 1956 sought to give domi-nant role to public sector, at the same time it assured a fair treatment to the private sector. The policy said that the state would continue to strengthen and expand financial institutions that extend financial assistance to private industries and co-operative enterprises. The state would also strengthen infrastructure to help private sector.

3) Expanded role of cottage and small scale industries :
The industrial policy laid stress on the role of cottage and small scale industries for generating larger employment opportunities making use of local man power and resources and reducing regional inequalities in industrial development. It stated that the government would continue pursuing a policy of supporting such industries through tax concessions and subsidies.

4) Balanced industrial growth among various regions :
The industrial policy helped to reduce regional disparities in industrial development. The policy stated that facilities for development will be made available to industrially backward areas. The state, apart from setting up more public sector industries in these backward areas, will provide incentives such as tax concessions, subsidized loans etc. To the private sector to start industries in these backward regions.

5) Role of. foreign capital :
The industrial policy of 1956 recognized the important role of foreign capital in country’s development. The foreign capital supplements domestic savings. It provides more resources for investment and relieves pressure on balance of payments.

6) Development of managerial and technical cadres :
The industrial policy noted that the program of rapid industrilization in India will create large demand for managerial and technical personnel.

7) Incentives to Labour :
The industrial policy recognized the important role of labour as a partner in the task of development. The policy therefore, put emphasis on the provision of adequate incentives to workers and improvement in their working and service conditions.

The industrial policy 1956, thus, provide a comprehensive framework for industrial de-velopment in India. However, this policy has been criticized on the grounds that by enormously expanding the field of public sector, it had drastically reduced the area of activity for the private sector.

Question 6.
Critically examine the Industrial Policy Resolution, 1991.
Answer:
The Government of India announced a sensational industrial policy in parliament on 24 July, 1991. Later this was come to known as new economic policy. The architect of this policy was then Finance Minister and the present Prime Minister of the country, Dr. Manmohan singh.

1991 Industrial Policy is also known as the liberalised economic policy or Rao – Manmohan model or the LPG model.

Objective :

1. Liberalising the industrial sector from all kinds.of legal and administrative controls.
2. Mediating the indian economy with the global economy known as globalisation.
3. Generation of more employment opportunities by enlarging and strengthening the private sector.
4. Increase in the capacity of the Indian economy to compete and face the competition at the international level.
5. Reduction in the economic inequalities.
6. To increase the economic growth rate.
7. To enhance the industrial production capacity.

Important Elements :
The following are the important elements in the industrial policy 1991.

1. industrial licensing policy :
The 1991, industrial policy abolished industrial licensing for all, but for 18 industries. Again in 2002, licensing is compulsory for only 5 industries.

2. Gradual dilution of public sector :
The 1956 resolution had reserved 17 industries for the public sector. The 1991 industrial policy reduced this number to 8. Now, only 3 industries are reserved exclusively for the public sector.

3. Foreign investment :
Foreign direct investment is permitted upto 100 percent on the automatic route in 34 most important industries. The new industrial policy resolution prepared a specified list of high technology and high investment priority industries.

4. Foreign technology :
In the case of 34 important industries mentioned to have direct foreign investment, where in technology can also be imported, which was made easy. The amount is limited to one crore for importing the technology. Government permission is not required to import the managerial expertise.

5. Amendment to MRTP Act :
The new industrial policy scrapped the threshold limit of assets in respect of MRTP and dominant undertakings. On the recommendations of the S.VS Raghavan committee in 2002, MRTP Act was abolished and in its place competition act was declared.

6. Wider Extensive Licensing :
In 1985 the wider extensive licensing policy permitted the industries to use now machinery without obtaining the Government permission. The industrial units need not obtain separate licenses when there is close resemblance in production process.

7. Wider definition to industry :
The definition of industry is widened under the 1991 industrial policy. The services related to industry and trade units are also brought under the purview of industry.

8. Special package to small, tiny and village industry :
The Government announced a special package to the small, .tiny and village industry. The investment limit to the tiny sector was increased from ₹ 2 lakh to ₹ 5 lakh. Because of this reason many small industries in big cities got recognition as the tiny sector.

9. Medium scale industries :
The maximum investment limit to the medium scale industries is ₹ 10 lakh.

10. Liberalised industrial location policy :
As a departure from the earlier locational policy for industries, the new industrial policy provided that in locations other than cities of more than 10 lakhs population, there will be no requirement of obtaining industrial approvals from the centre, except for industries subject to compulsory licensing.

Critical Analysis :
I. Positive Impact :

1. Creativity and innovation have become the order of the day. Industries started concent rating on research and development to bring out creativity.
2. The focus is on total equality which is to be maintained at all levels right from the manufacture of goods till it reaches the customer.
3. Free flow of foreign capital on account.
4. Employment opportunities in MNCs.
5. Increase in standard of giving.

II. Negative impact:

1. Though competition for domestic industries.
2. Opposition from trade unions.
3. Unemployment.
4. Indiscriminate use of natural resources of domestic country by MNCs.
5. Distortions in production structure.

Question 7.
Explain the economic reforms introduced in India since 1991.
Answer:
Liberalization, Privatization and Globalizatio (LPG) :
The important features of the economic reforms were as follows.

I. Liberalization :
The new economic policy introduced a number of liberalization measures to remove the unnecessary controls a’nd regulations on the industrial sector. Liberalization refers to the removal of restrictions on trade and industry. The main objective of liberalization was to unshackle the industrial sector from the cobwebs of unnecessary bureaucratic controls.

The main features of liberalization policy were as follows :

I. Abolition of Industrial Licensing :
The new industrial policy of 1991 abolished the industrial licensing for all the industries except for a selected 18 industries due to security and strategic concerns. These included industries manufacturing hazardous chemicals and industries that could cause environmental pollution.

2. Removal of Restrictions :
All industries, other than those 18, could setup and sell shares without any restrictions; they could expand their business and start a new product line without the need of obtaining any license.

3. Relaxation of MRTP Restrictions :
The MRTP Act aimed at controlling monopoly practices to pevent concentration of economic power. It also aimed at preventing unfair and re-strictive trade practices to protect consumer’s interest. Prior to introduction of reforms, a number of restrictions were imposed on industries with an investment of Rs. 100 crore or more under the Monopolies and Restrictive Trade Practices (MRTP) ACt.

The MRTP Act has now t?een replaced by the Competition Act, 2002, which came into effect from 2009. The Competition Act checks all anti-competitive practices and prohibits abuse of dominance. In order to protect consumer interest at large, it aims at promoting and sustaining competition in the market.

4. Foreign Investment :
The 1991 reforms reduced a number of procedural bottle necks for foreign investments. Approval was given for foreign direct investment upto 51 percent of equity in high priority industries. The liberalization measures enhanced the investment ceiling on small scale industries. Industries were also allowed to raise invesments from abroad with simple procedures.

5. Foreign Technology :
Automatic approval was provided to Indian industries with respect to foreign technology agreements, especially in the case of high priority industries, Permissions were not required for hiring foreign technicians and experts and for foreign testing of indigenously developed technologies.

II. Privatization :
Privatization refers to the introduction of private ownership in public sector enterprises. The privatization measures introduced during the economic reforms reduced the number of industries reserved exclusively for public sector from 17 to 18. The government’s holding in public sector enterprises was sold to increase private participation.

Many public-sector units were incurring losses due to inefficiencies in management and lack of innovation and investments in research and development. Privatization measures enabled the use of modem technology and improved the quality of service and led to efficient utilization of resources.

Various privatization measures introduced in India included :

1. Transfer of ownership of public sector units, either fully or partly, to private hands through denationalization.
2. Transfer of control to the private sector through disinvestment policies.
3. Opening of areas that were exclusively reserved for public sector.
4. Transfer of management to the private sector through franchising, contracting and leasing.
5. Limiting the scope of the public sector.

III. Globalization :
Globalization may be defind as the integration of the domestic economy with the world economy with the objective of facilitating free movement of goods, services, people, ideas, technology etc. It refers to the opening up of the economy to international competition.
The major features of globalization measures as undertaken in 1991 were :

1. Reduction of Trade Barriers :
Trade barriers restrict free flow of goods and services between countries. With the introduction of globalization measures, these restrictions were reduced. Globalization created an environment for smooth exchange of goods and services between India and other nations.

2. Promotion of Foreign Direct Investment :
With the introduction of globalization, many Indian industries were opened to foreign direct investment. India became a favourable investment destination for foreign investors due to the low cost of production and availability of cheap labour resources. The efficiency of the banking sector also improved because of the competition from foreign banks.

The government of India further initiated a series of measures to promote foreign technical collaborations incase of high priority industries and for import of foreign technology. Foreign Investment Promotion Board (FIPB) was set upto facilitate foreign direct investments in India.

3. To Encourage Efficiency :
Globalization encouraged domestic industries to become more competitive and efficient to face competition at the global level. The domestic industries had to produce quality goods at low cost to compete with the cheaper and superior quality goods of he foreign producers.

4. Diffusion of Technology :
Globalization provided an opportunity to India to have an access to global technology. It made diffusion of knowledge faster. India could utilize the tech-nologies of developed countries without much investment in research and development.

Question 8.
What do you mean by privatisation ? Discuss the reasons for its implementation in India.
Answer:
The privatization wave in India, which was a part of the economic reforms of 1991, in-creased the role of private sector and restricted the public sector to priority areas which included

1. Physical and social infrastructure
2. Mining and oil exploration
3. Manufacture of producs that were of strategic importance and where security concerns were involved like in the case of manufacture of defense equipment, and
4. Investments in technologies that required huge outlay and where private sector investment was inadequate.

Privatization measures were introduced in India as part of the economic reforms in 1991 for the following reasons :
1. To Reduce the Burden of the Government :
The public sector companies created the base for industrial growth in India. However, a number of public sector companies were incurring continuous losses due to delay in completion of projects and rise in the cost of production. Many public sector units were only functioning to protect the interests of the labourers. Privatization offloaded this burden from the government and reduced the strain on resources.

2. To Promote Efficiency :
Many public sector companies were also struggling due to inefficient management, lack of transparency and corruptive practices. Poor industrial relations and over staffing reduced the productivity, causing losses to these units. The measures got rid of these problems and enabled the public sector units to achieve optimum productivity.

3. To Enhance Investment Opportunities :
Privatization helped in reducing the incon-sistencies in management and improved the economic status of many public sector units. This brought in good returns and attracted investments.

4. To facilitate Growth of infrastructure :
Privatization of industries led to the growth of industrial sector on modem lines. The private enterprises, to provide competitive products and services, initiated and facilitated improvement of the infrastructure.

5. To Reduce Unnecessary Bureaucratic Interventions :
Privatization reduced unnecesssary government intervention in the management, thereby giving the private enterpries more autonomy in management and operations. This enhanced their efficiency and profitability. Elimination of restrictions effectively reduced corruption and improved productivity.

Question 9.
What are small and cottage industries? State the characteristics of small scale industries.
Answer:
Small scale industries are the industrial units having fixed investment in plant and machinery, whether held on ownership basis (or) lease basis (or) hire purchase basis and the investment is more than ₹ 25 lakhs, but not exceeding ₹ 1 crore.

Characteristics of Small Scale Industries :
i) Ownership :
Ownership of small scale unit is with one individual in sole proprietorship (or) it can be with a few individuals in partnership.

ii) Management and Control :
A small scale unit is normally a one man show and even in case of partnership the activities are mainly carried out by the active partner and the rest are generally sleeping partners. These units are managed in personalized fashion. The owner is actively involved in all decisions concerning business.

iii) Area of operation :
The area of operation of small units is generally localized catering to the local (or) regional demand. The overall resources at the disposal of small scale units are limited and as a result of this, it is forced to confine its activities to the local level.

iv) Technology :
Small industries are fairly labour intensive with comparatively smaller capital investment than the larger units, Therefore, these units are more suited for economies where capital is scarce and there is abundant supply of labour.

v) Gestation period :
Gestation period is that period after which teething problems are over and return on investment starts. Gestation period of small scale unit is less when compared to large scale unit.

vi) Flexibility :
Small scale industries are highly reactive and responsive to socio-economic conditions. They are more flexible to adopt changes like new method of production, introduction of new products.

vii) Resources :
Small scale units are use local (or) indigenous resources and such can be located any where subject to the availability of these resources like labour and raw materials.

viii) Dispersal of units :
Small scale units use local resources and can be dispersed over a wide territory. The development of small scale Units in rural and backward areas promotes more balanced regional development and can prevent the migration of job seeks from rural areas.

Question 10.
Describe the role of small scale industries in Indian Economy.
Answer:
In a developing country like India, the role and importance of small scale industries is very significant in terms of poverty eradication, employment generation, rural development and creating regional balance in promotion and growth of various development activities.

It is estimated that this sector has been contributing at present about 40% of the gross value of output produced in the manufacturing sector and the generation of employment by the small scale sector is more than five tijnes to that of the large scale sector.

1) Small Scale Industries Generate Employment Opportunities :
The basic problem that is confronting the Indian economy is increasing pressure of population on the land and the need to create massive employment opportunities.

2) Enhance Mobilization of Resources and Entrepreneurial Skill :
Small scale industries can mobilize a good amount of savings and entrepreneurial skills from rural and semiurban areas remain untouched from clutches of large industries and put them into productive use by investing in small scale units.

3) Facilitate Equitable Distribution of Income :
The small scale industries ensure equitable distribution of income and wealth as the Indian society is largely characterised by more concentration of income and wealth in the organized sector keeping unorganized sector undeveloped. This is mainly due to the fact that small industries are wide spread and are having large employment potential.

4) Regional Dispersal of Industries :
People migrate from rural and semi urban areas to the urban areas and highly developed centers in search of employment and sometimes to earn a better living which ultimately leads to many evil consequences of over-crowding, pollution, creation of slums, etc. This problem of Indian economy is better solved by small scale industries which utilize local resources and brings about dispersion of industries in the various parts of the country, thus promotes balanced regional development.

5) Provide Opportunities for Development of Technology :
Small scale industries have tremendous capacity to generate (or) Absorb innovations. They provide ample opportunities for the development of technology and technology in return creates an environment conductive to the development of small units. It also facilitates the transfer of technology from one to other. As a result, economy reaps the benefits of improved technology.

6) Utilize Indigenous Organizational and Management Capabilities :
Small scale industries make better use of indigenous organizational and management capabilities by drawing a pool of entrepreneurial talent that is limited in the early stages of economic development. They provide productive Outlets for enterprising independent people. They also provide a seed bed for entrepreneurial talent and a testing ground for new ventures.

7) Promote Exports :
Small scale industries have registered phenomenal growth in their exports over the years. They contribute about 40% of India’s total exports. Thus, they help in increasing the country’s foreign exchange reserves there by reducing the pressure on country’s balance of payment.

8) Support the Growth of Large Industries :
The small scale industries play an important role in assisting bigger industries and projects, so that the planned activity of development work is timely attended. They support the growth of large industries by providing components, accessories and semifinished goods required by them. Infact, small industries can breathe vitality into the life of large industries.

9) Maintain Better Industrial Relations :
Better industrial relations between employer and employees help in increasing efficiency of employees and reducing the frequency of industrial disputes. The loss of production and man – days are comparatively less in small scale industries. There are hardly any strikes and lock outs in these industries due to good employee -employer relationship.

Question 11.
Examine the problems of small scale industries in India.
Answer:
Problems faced by the small scale industries in India :
The various constraints and problems faced by the small scale industries are explained below.

1) Finance :
It is the lifeblood of an organization and non organization can function effectively in the. absence of adequate funds. Small scale industries are facing acute shortage of finance in India. The scarcity of capital and inadequate availability of credit facilities are the major causes of this problem.

2) Raw Material :
It is important to note that small scale industries normally tap local sources for meeting raw material requirements. These units have been facing numerous problems like availability of inadequate quantity, poor quality and even supply of raw material is not on regular basis. All these factors adversely affect the functioning of these units.

3) Idle capacity :
It is a fact that there is under utilization of installed capacity to the extent of 40 to 50 percent incase of small scale industries. Various causes of this under utilization are shortage of raw material problem associated with funds and even availability of power. Small scale units are not fully equipped to overcome all these problems as is the case with the rivals in the large scale sector.

4) Technology :
Indian small scale entrepreneurs are not fully exposed to the latest technology. Moreover, they lack requisite resources to update or modernize their plant and machinery. Due to obsolute methods of production, they are confronted with the problems of less production in’inferior quality and that too at higher cost. They are in no position to compete with their better equipped rivals operating modern large scale units.

5) Marketing :
Small scale industries are also exposed to marketing problems in Our country. They are not in a position to get first – hand information about the market i.e., about the competition, tastes, liking, disliking of the consumers and prevalent fashion. With the result, they are not in a position to upgrade their products keeping in mind market requirements.

6) Infrastructure :
infrastructure aspects adversely affect the functioning of small scale units. There is inadequate availability of transportation, communication, power and other facilities in the backward areas. Inadequate and inappropriate transportation and communication network will make the working of various units all the more difficult All the factors are going to adversely affect the quantity, quality and production schedule of the enterprises operating in these areas. Thus, the operations will become uneconomical and unviable.

7) Project Planning :
Another important problem faced by small scale entrepreneurs is poor project planning in India. These entrepreneurs do not attach much significance to viability studies. They do not bother to study the demand aspect, marketing problems, sources of raw materials and even availability of proper infrastructure before starting their enterprises. Project feasibility analysis, covering all these aspects in addition to technical and financial viability of the projects, is not at all given due weightage.

8) Skilled Manpower :
A small scale unit located in a remote backward area may not have problem with respect to unskilled workers, but skilled workers may not be available there. The reasons are; firstly, skilled workers may be reluctant to work in these areas and secondly, enterprise may not afford to pay the wages and other facilities demanded by these workers.

9) Managerial Competence :
Many small scale units have turned sick due to lack of managerial competence on the part of the entrepreneurs. An entrepreneur is required to undergo training and counseling for developing his managerial skills.

Question 12.
What is Industrial finance? What are the major sources of Industrial finance in India?
Answer:
Finance is the life and blood of any industry. The amount of finance required by industrial establishments to carry out their production activity is known as industrial finance. The finance can be mobilized by the industrial concerns for investing in fixed and working capital from different sources.

a) Internal Self – Finance :
One source, quantitatively of big importance, is the saving of the unit itself. It may be the household, the business or the government. Normally the household not only invests out of its own savings, but it also has surplus which it lends to other units via, financial institutions, like banks, capital market etc.

b) Equity, Debentures and Bonds :
A large part of finance for fixed assets comes from different types of equity or shares such as ordinary cumulative and non – cumulative preference shares. These shares bear risks of different degrees and are tailored to suit the temperament of different investors. Often industrial companies also get long – term finance through the issues of debentures and bonds.

c) Public Deposits :
Another source is public deposits. It is also a debt – instrument, mostly for short – term finance. Under this system people keep their money as deposit with these companies or managing authorities for a period of six months, a year, two years, three years or so. Depositors receive a fixed interest.

d) Loans from Banks :
Commercial banks can also provide funds for meeting Short – term needs or for meeting working capital. Loans are given against the guarantee of government securities and stocks with companies. Loans are advanced in the form of overdraft and cash credit. Commercial banks are generally reluctant to put their money in the purchase of shares.

e) Indigenous Bankers :
Inspite of the establishment of new financial institutions, indigenous bankers also provide financial help to a few large scale industries, particularly during the time of stress, both for fixed capital and working capital.

f) Foreign capital :
As a supplement to domestic finance, external capital too has been made use of in meeting the needs of industrial finance, mostly for long – term needs. This has taken several foreign institutions dike the World Bank) extended to the government.

g) Development Finance Institutions :
Established with the help of the government to fill in the gap in industrial finance and to promote the objective of planning, these institutions cater to the needs of large and small industries. These institutions provide huge quantity of finances for setting up of new industries, for meeting their several needs and in several forms. These institutions also ensure and monitor the use of finance in pre-planned directions. As such, they fit well with the modem scenario of industrial development. The following are the most important development banks in india.

i) Industrial Development Bank of India (IDBI) :
IDBI provides credit and other facilities for industrial development in the country. It provides long term finance for green field projects, as also for modernization, expansion and diversification. It has structured various products such as equipment finance, asset credit and corporate loans in order to cater to the needs of its corporate clients.

ii) Industrial Finance Corporation of India (IFCI) :
IFCI’s operations principally comprise project finance, financial services and corporate advisory services. Through, its subsidiaries or companies, IFCI provides custodial and investor services, rating and venture capital services.

iii) Industrial Credit and Investment Corporation of India (ICICI) :
ICICI plays a facilitating role in consolidation in various sectors of the Indian industry, by financing mergers and acquisitions. The ICICI groups financing and banking operations, both wholesale and retail, have been integrated into a single company effective to from May 2002.

iv) Industrial Investment Bank of India (IIBI) :
UBI offers a variety of financial products such as project finance, short duration non – project asset-backed financing and working capital, other short term loans to companies.

v) Infrastructure Development Finance Company Limited (IDFC) :
IDFC Ltd. was incorporated in 1997, conceived as a specialized institution to facilitate the flow of private finance to commercially viable infrastructure projects through innovative products and processes. Energy, telecommunications, information technology, integrated transportation, urban infrastructure and food and agribusiness infrastructure constitute the current areas of operation measures for IDFC Ltd.

vi) Small Industries Development Bank of India ( SIDBI) :
SIDBI offers refinance, bill re-discounting, lines of credit and resource support mechanism to route assistance to SSI sector through a work of banks and state level financial institutions. SIDBI also offers direct finance for meeting specific requirements of SSI sectors. It underates a wide range of promotional and developmental measures for rural poor.

Short Answer Questions

Question 1.
Explain the structure of Indian Industry.
Answer:
Structure Of Indian Industry :
In India, industries can be structured on the following basis.

Structure in terms of usage :
a) Basic Industries :
These industries produce capital goods i.e, heavy engineering and machine building industries.

b) Industries producing consumer goods :
These industries produce consumer goods such as cotton textiles, leather goods, salt, sugar, paper, and other industries.

c) Industries producing intermediate goods :
These industries produce coal, cement, steel, power, alcohol, chemicals, and other industries.

Structure by type of ownership :
a) Public sector undertakings :
These are the undertakings owned, managed, and controlled by government. Ex : Air India Ltd, ONG.C, HPCL.

b) Private sector undertakings :
These are the undertakings owned, managed and controlled by private individuals or firms. Ex : Reliance industries Ltd.

c) Joint sector undertakings :
Joint sector consists of business undertakings wherein the ownership, control and management are shared jointly by the government, the private entrepreneurs and the public at a large. Ex : Cochin refineries.

Structure by size of the capital :
a) Large Industries :
The investment is more than ₹ 10 crores, but less than ₹ 100 crores in these industries.

b) Medium Industries :
The industry whose investment is more than ₹ 5 crores, but less than ₹ 10 crores in manufacturing units is called medium industry. This limit is ₹ 2 crores to ₹ 5 crores in service enterprises.

c) Mega Industries :
In these industries, the investment limit is more than ₹ 100 crores.

d) Micro Industries :
The industry whose investment is less than ₹ 25 lakhs in manufacturing units is called micro industry. This limit is ₹ 10 lakhs in service enterprises.

Question 2.
Identify the major industries in India.
Answer:
Major Industries in India.
The major industries in India are described as follows :

1. Textile Industry :
The textiles and apparel industry in India is the second largest employer in the country providing employment to about 45 million people. The domestic textiles and apparel industry contributes 2.3% to India’s GDR accounts for 13% of industrial production and 12% of the country’s export earnings (2018 – 2019). Although cotton textile mills are located in over 80 towns and cities of India, yet its larger concentration is found in Maharashtra, Gujarat, West Bengal, and Uttar Pradesh.

2. Sugar Industry :
Sugarcane is most important commercial crop and it is occupying about 5.0 million hectares in area in India: Sugar industries in India remain regulated and are a source of livelihood for about 50 million farmers and their families. It provides direct employment to over 5 lakhs not only for skilled labour, but also to semi-skilled labour in sugar mills and allied industries across the nation.

3. Cement Industry :
India is the second largest cement producer in the world and accounted for over 8 percent of the global installed capacity as of 2019. Cement production reached 337.32 million tonnes (MT) in 2018-19. The cement production capacity is estimated to touch 550 MT by 2020. Of the total capacity, 98 percent lies with the private sector and the rest with public sector. The top 20 companies account for around 70 percent of the total cement production in India. There are 210 large cement plants in the century. Of these 77 are located in the states of Andhra Pradesh, Rajasthan and Tamil Nadu.

4. Iron and Steel Industry :
Iron and steel industry is one of the most important industries in India. This is a feeder industry whose products are used as raw material for other industries. In 2018 and 2019, India became the 2^nd largest producer of crude steel in the world after China. The iron and steel industry in India contributes around 2 percent of the Gross Domestic Product (GDP) and its weight in the index of industrial production (IIP) is 6.2 per cent.

5. Indian Pharmaceuticals Industry :
India is the largest provider of generic drugs globally. Indian pharmaceutical sector industry supplies over 50 percent of global demand for various vaccines, 40 percent of generic demand in the US and 25 percent of all medicines in UK. Presently over 80 percent of the antiretroviral drugs used globally to combat AIDS (Acquired Immune Deficiency Syndrome) are supplied by Indian pharmaceutical firms.

Indian pharmaceutical sector is expected to grow to US $ 100 billion and medical device, market expected to grow US $ 25 billion by 2025.

The drugs and pharmaceuticals sector attracted Cumulatiwe FDI inflows worth US$ 16.50 billion between April 2019 and March 2000, according to data released by the Department for Promotion of Industry and Internal Trade (DPIIT).

6. Mining Industry :
India ranks fourth in terms of iron ore production globally. Production of iron re in 2018 – 19 stood at 229 million tons. India has around eight percent of world’s deposits of iron ore. India became the world second largest, crude steel producer, in 2018-19 with production 111.2 million tons. According to Ministry of Mines, India and the 7th largest bauxite reserves around 2,908.85 million tons in 2017-18. Aluminium production stood at 2,43 MT in 2018-19.

7. Indian Automobile Industry :
India became the fourth largest auto market in 2018-19 with sales increasing 8.3 percent year-on-year to 3.99 million units. It was the seventh largest manufacturer of commercial vehicles in 2018-19. The two wheelers segment dominates the market in terms of volume owing to a growing middle class and a young population. Moreover, the growing interest of the companies in exploring the rural markets further aided the growth of the sector. The industry saw a 25.5 percent jump in Foreing Direct Invesment (FDI) from 2017-18 to 2018-19.

8. Indian Oil and Gas Industry :
India’s economic growth is closely related to energy demand. Therefore, the need for oil and gas is projected to grow more, thereby making the sector quite conductive for investment. The government of India has adopted several policies to fulfill the increasing demand. The government has allowed 100 percent foreign direct investment (FDI) in many segments of the sector, including natural gas, petroleum products and refineries, among others. Today, it attracts both domestic arid foreign investment, as attested by the presence of Reliance Industries Ltd (RIL) and Cairn India. India had 4.5 thousand million barrels of proven oil reserves at the end of 2018 and produced 39.5 million tons in 2018.

Question 3.
State the elements of Industrial Policy Resolution-1977.
Answer:
Industrial Policy Resolution, 1977 :
In March 1977, the Janata Party assumed power at the Centre. On 23^rd December 1977, the Janata Government announced its new industrial policy by way of a statement in the Parliament.

The main elements of this new policy were :

1. Small scale sector was classified into three categories viz :
   a) cottage and household industries,
   b) tiny unit with less than Rs. 1 lakh investment, and
   c) small scale industrial unit with an investment upto Rs. 10 lakhs.
2. District Industrial Centres were to be setup in each district to beep in the development of small scale and cotage industries.
3. Handloom sector was given preference over power loom and mill sectors.
4. For reduction in regional imbalance, shifting of industries to backward areas was to be assisted and establishment of new industries in urban areas was to be avoided.
5. Special fiscal concessions were proposed for export oriented units.
6. Takeover of sick units would be on a selective basis.
7. Special attention was to be given to the promotion of tiny sector, namely units with investment of Rs. 1 lakh and situated in towns / villages with a population not exceeding Rs. 50,000/-.
8. Large house would have to rely on their own internally generated resources for financing new projects or expansion of the existing ones.
9. The public sector would be strengthened with the responsibility of encouraging the development of a wide range of ancillary industries, and contributing to the growth of decentralized production by making available its expertise in technology and management to small scale and cottage industry sectors.
10. In order to promote technological self-reliance, the policy recognized the necessity for continued inflow of technology in sophisticated and high priority areas where Indian skills and technology were not adequately developed.

Question 4.
What are the major features of Industrial Policy Resolution, 1991?
Answer:
In June 1991, congress government took over charge and the wave of reforms and liberalization were observed in the economy. In this new atmosphere of economic reforms, the government announced a new industrial policy on July 24, 1991. This new policy deregulates the industrial economy in a substantial manner. The government announced a series of initiatives in the new industrial policy as outlined below :

Features of Policy :
The features of the policy are as follows.
1. Abolition of Industrial Licensing :
In a major move to liberalize the economy, the new industrial policy abolished all industrial licensing irrespective of the level of investment except for certain industries related to security and strategic concerns, and social reasons.

Now, there are only 6 industries for Which licensing are compulsory as amended in February 1999. These are alcohol, cigarettes, hazardous chemicals, drugs and pharmaceuticals, electronics, aerospace and defense enquipment, and industrial explosives.

2. Public Sector’s Role Diluted :
Seventeen industries were reserved for the public sector since 1956. This number has now been reduced to three. They are: i) arms and ammunition and allied items of defense equipment, ii) atomic energy and iii) rail transport.

3. MRTP Actg 1969 :
This Act has been amended to remove the threshold limits of assets in respect of Monopolies restrictive trade practices (MRTP) companies and dominant un-dertakings. The new industrial policy also states that the government will undertake review of the existing public enterprises in low technology, small scale and non-strategic areas. Sick units will be referred to the Board for Industrial and Financial Reconstruction (BIFR) for advice about rehabilitation and reconstruction.

4. Free Entry to Foreign Investment and Technology :
The government is committed to promote increased flow of Foreign Direct Investment (FDI) for better technology, modernization, exports and for providing products and services of international standards. Therefore, the policy of the government has been aimed at encouraging foreign investment particularly in core infrastructure sectors, so as to supplement national efforts.

5. Liberalized Industrial Location Policy :
The new industrial policy provides that in locations other than Cities of more than 1 million population, there will be no requirement of Obtaining industrial approvals from the center, except for industries subject to compulsory licensing.

6. Removal of Mandatory Convertibility Clause :
A large part of industrial investment in India is financed by loans from banks and financial institutions. These institutions have followed a mandatory practice of including a convertibility clause in their lending operations for new projects. This has provided them an option of converting part of their loans into equity, if felt necessary by their managements. The new industrial policy has provided that henceforth financial institutions Will not impose this mandatory convertibility clause.

Question 5.
Write a note on the National Manufacturing policy.
Answer:
National Manufacturing Policy (NMP), 2011 of India :
The contribution of the manufacturing sector in Indian GDP was about 16-17% during 2011-12, which is much below its potential and in comparison of other big economies of the Asian continent. In order to bring about a quantitative and qualitative change and to give necessary impetus to the manufacturing sector, the Department of Industrial Policy and Promotion (DIPP) under the Ministry of Commerce and Industry notified the National Manufacturing Policy (NMP) in November 2011 with the objective of enhancing the share of manufacturing in GDP to 25% and creating 100 million jobs over a decade or so.

Objectives of National Manufacturing Policy (NMP) :
Following are the main objectives of NMP:

1. The share of manufacturing sector in GDP to rise by 25% in 2022,
2. Increase in the rate of employment creation in manufacturing sector for creation of 100 million additional jobs by 2022.
3. Enhanced global competitiveness of Indian manufacturing sector through efficient policy support.
4. Launch of the Make in India program in 2014 with the aim of attracting business to make investments in manufacturing sector in India.,
5. To setup national investment and manufacturing zones (NIMZ) using clean energy efficient technology.
6. Industrial townships ae proposed to be self-governing and autonomous bodies under the constitution,
7. Infrastructure will be financed appropriately by the central government through viability gap funding, and
8. To improve access to finance for SMEs in manufacturing sector.

Question 6.
Discuss the major features of globalisation measures as initiated in 1991.
Answer:
National Manufacturing Policy (NMP), 2011 of India :

Globalization :
Globalization may be defind as the integration of the domestic economy with the world economy with the objective of facilitating free movement of goods, services, people, ideas, technology etc. It refers to the opening up of the economy to international competition.

The major features of globalization measures as undertaken in 1991 were :
1. Reduction of Trade Barriers :
Trade barriers restrict free flow of goods and services between countries. With the introduction of globalization measures, these restrictions were reduced. Globalization created an environment for smooth exchange of goods and services between India and other nations.

2. promotion of Fbreign Direct Investment :
With the introduction of globalization, many Indian industries were opened to foreign direct investment. India became a favourable investment destination for foreign investors due to the low cost of production and availability of cheap labour resources. The efficiency of the banking sector also improved because of the competition from foreign banks.

The government of India further initiated a series of measures to promote foreign technical collaborations incase of high priority industries and for import of foreign technology. Foreign Investment Promotion Board (FIPB) was set upto facilitate foreign direct investments in India.

3. To Encourage Efficiency :
Globalization encouraged domestic industries to become more competitive and efficient to face competition at the glpbal level. The domestic industries had to produce quality goods at low cost to compete with the cheaper and superior quality goods of he foreign producers.

4. Diffusion of Technology :
Globalization provided an opportunity to India to have an access to global technology. It made diffusion of knowledge faster. India could utilize the technologies of developed countries without much investment in research and development.

Question 7.
Write a note on demonetization in India.
Answer:
Demonetization :
Demonetization is a situation where the Central Bank of the country (Reserve Bank of India) withdraws the old currency notes of certain denomination as an official mode of payment.

On November 8, 2016, the central government announced that the existing higher denomination currency (Rs. 500 and Rs. 1,000)would cease to be legal tenders. It said this is government biggest push to fight black money and end corruption.

The government also introduced new Rs. 500 and Rs. 2,000 notes and urged people to move towards cash-less economy. This is not the first time that demonetization has been implemented in India. In 1936, Rs. 10,000, which was the highest denomination note, was introduced, but demonetized in 1946. Though, it was re-introduced in 1954 but later, in 1978, the then government in its intensive move to counter the black money, introduced the High Denomination Banks Act (Demonetization) and declared Rs. 500, Rs. 1,000, and Rs. 10,000 notes illegal.

A lot of analysis in India and abroad claimed that demonetization of November 2016 failed to do what it was supposed to do and its impact turned out to be more protracted than initial expected.

Even from the point of view of promoting digital money, the government need not 86 ‘ percent of all currency out of circulation. Further studies pointed out that very little black money was caught.

The Reserve Bank of India on August 30, 2017 released its report on demonetization. In the report, it said 99 percent of the banned notes came back into the banking sysem which trashes all claims of the central government that the move will flush out the black money and counterfeit currency. With 99 percent currency back in the system, the failure of demonetization hints two things: either the black money held in cash was very low or the government failed to implement the demonetization efficiently and all the black money held in Rs. 500 and Rs. 1,000 bank notes laundered back to the banking sysem.

Question 8.
Why is (QST) introduced in Indio? state its impact of Indian economy.
Answer:
Goods and Services T&x (GST) :
Goods and Services Tax (GST) is an indirect tax which has replaced many indirect taxes in India. The GST Act was passed in the Parliament on 29th March 2017. The act came into effect on 1st July 2017. The goods and services tax in India is a comprehensive, multistage, destination-based tax that is levied on every value addition. In simple words, GST is an indirect tax levied on the supply of goods and services. This law has replaced many indirect tax laws that previously existed in India. GST is one indirect tax for the entire country.

Impact of GST OP Indian Economy :
This impact of GST on Indian economy is explained below:

1. GST reduces tax burden pn producers and fosters growth through more production. The earlier taxation structure, pumped with myriad tax clauses, prevents manufacturers from producing to their optimum capacity and retards growth. GST takes care of this problem by providing tax credit to the manufacturers.
2. Different tax barriers, such as check posts and toll plazas, lead to wastage of unpreserved items being transported. This penalty transforms into major costs due to higher needs of buffer stock and warehousing costs. A single taxation system eliminates this roadblock.
3. There is more transparency in the system as the customers will know exactly how much taxes they are being charged and on what base.
4. GST adds to the government revenues by extending the tax base.
5. GST provides credit for the taxes paid by producers in the goods or services chain. This is expected to encourage producers to buy raw material from different registered dealers and its hoped to bring in more vendors and suppliers under the purview of taxation.
6. GST removes the custom duties applicable on exports. The nation’s competitiveness, in foreign markets will increase on account of lower costs of transaction.

Question 9.
Indicate the measure to solve the problem of smull scale industries,
Answer:
Goods and Sendees Tax (GST) :
The important measures to solve the problems of cottage and small scale industries :
1) Credit facilities :
The government should provide the credit to small and cottage industries at lower rate interest. Further, commercial banks should also provide lays to develop the industries.

2) Industrial Estates :
The government has setup number of industrial estates in different cities and towns. These areas have been provided Various facilities like roads, banking, marketing and transport to encourage the small scale industries.

3) Testing laboratories :
The government has established the testing laboratories to maintain the prescribed standard of product of cottage industries.

4) Supply of Designs :
The government is also providing the new models and designs to the producers to improve the quality of cottage industry.

5) Publicity :
The government has setup the display centres and showrooms inside and outside the country to increase the sales of cottage industry products.

6) Facilities of Raw material :
The government imports raw material for cottage Industries from abroad and provides them at lower price to encourage them.

7) Purchase of cottage industry prnduct :
The government also purchases finished products from them and sells the same in showrooms display centres inside and outside the countiy for creations demand.

8) Protection Against Foreign competitions :
The government has also provide protection to have industry by imposing, heavy duties on the imports still there is a need for further protection smuggling should be controlled.

9) Established of training institutions :
The government has set by various situations like industrial, vocational commercial and polytechnic institutions to provide qualified technical workers to the cottage and small scale industries.

10) Handicrafts centres :
Handicrafts, development centres have been setup to promote the handicrafts.

Question 10.
Suggest the. measures for survival and growth of small seals industries.
Answer:
Suggestions for Survival and Growth of Small Seale Industries :
Small scale iridustries are occupying a very important place in the industrial structure of the Indian economy.

Following remedial measures are suggested for the sustainable growth of small scale industries in India :

1. The government should conduct detailed survey of the existing small scale industries and draw up productive program for them.
2. The government has to make necessary arrangements for imparting proper training to workers engaged in small scale units.
3. The government should make provision for making available of proper and sufficient quantity of raw material at reasonable rates.
4. It is necessary to further liberalize the rules and practices of banking and other financial institutions supplying credit to small scale industries, so that they can arrange adequate credit required for the purpose.
5. The government should take adequate measures for the development of infrastructure in terms of roads, electricity, drainage and water supply particularly in the unorganized sector where the small scale industries are poorly served.
6. The government should establish effective marketing organizations to remove the comparative disadvantages vis-a-vis large scale units in the field of marketing.
7. The small scale industries should conduct research on the techniques of production and thus try to improve the techniques of production and make the industries to adopt mod* em and sophisticated technology in their units.
8. The entrepreneurs should maintain the quality and standard of their output produced on par with similar products of large units.
9. The government should take measures in lowering the rates of duty and provide export incentives to small entrepreneurs.

Thus, if all these steps are taken at proper time and spirit, small scale industries will come out successfully from the problems and continue their stay in the economy.

Very Short Answer Questions

Question 1.
Extractive industry.
Answer:
It concerned with extraction out goods from the soil, air, water. Products of extractive industries come in raw from and they are Used by manufacturing and construction industries for producing finished products. Ex : Coal, mineral, oil industry etc.

Question 2.
Construction Industry.
Answer:
This industry is different from all other types of industry because incase of other goods industries can be produced at place and sold at another place. This industries take up the work of construction of buildings.

Question 3.
Index of Industrial production.
Answer:
The index of industrial production (IIP) comprises three components of industry, i.e., mining, manufacturing and electricity. It also categorized by ‘use based classification’.

Question 4.
Textile Industry.
Answer:
This industry covers a wide range of activities ranging from generation of raw materials such as jute, wool; silk and cotton to greater value added goods such as readymade garments prepared from different types of man made or natural fibers. It provides job opportunity to over 45 million individuals thus playing a major role in the nation economy.

Question 5.
Iron and steel industry.
Answer:
Indian steel industry is a 400 years old. It is the fourth largest in the world. It provide employment opportunities to more than 0.6 million people. The key players in steel industry are Steel Authority of India (SAIL), Bokaro Steel Plant, TISGO etc.

Question 6.
Industrial backwardness.
Answer:
The industrial backwardness results in economic backwardness. The most backward districts lie in eastern U.P, Assam, Western Rajasthan Telangana etc.

Question 7.
Industrial policy resolution-1956.
Answer:
The 2^nd plan gave high priority to industrial development aimed at setting up a number of heavy industries such as steel plant capital goods industries etc. Inview of all these developments a new industrial policy was announced on 30^th April 1956.

Question 8.
Industrial, policy resolution -1977.
Answer:
The industrial policy 1956, failed expanding the field of public sector, it had drastically reduced the area of activity for the private sector. This was adversely affect the industrial growth of India by reducing private initiative and enterprises. So in March 1977, the Janata Party government anounced it new industrial policy by way of a statement in the parliament.

Question 9.
Industrial policy resolution – 1980.
Answer:
The congress govt in 1980 was announced a new industrial policy. The main features of this policy is revitalization of the public sector, economic federalism, promotion of rural industries, removed of regional imbalances etc.

Question 10.
Liberalisation.
Answer:
It refers to relaxation of previous government restrictions usually in area of social and economic policies thus, when government liberalised trade it means it has removed the tariff, subsidies and other under employment restrictions on the flow of goods and services between the countries.

Question 11.
Small industries development bank of India (SIDBI).
Answer:
SIDBI offers refinance, bill re-discounting, lines of credit arid resource support mechanism to route assistance to SSI sector through a Work of banks and state level financial institutions. SIDBI also offers direct finance for meeting specific requirements of SSI sectors. It underates a wide range of promotional and developmental measures for rural poor.

Question 12.
Industrial Finance.
Answer:
The amount of finance required by industrial establishments to carryout their production activity is known as industrial finance. The finance can be mobilised by the industrial concerns for investing in fixed and working capital from different sources. Finance is the life and blood of any industry.

Question 13.
Global market.
Answer:
The market in which the goods arid services of one counry are traded (purchased and solve to people of other countries. It is the activity of buying or selling goods and services in all countries of the world or the value of the goods and services sold. The explosive growth of the online company is forcing businesses of all sizes to compete in a global market.

Question 14.
Public and private sector.
Answer:
Public sector is usually comprised of organisations that are owned and operated by the government and exist to provide services for its citizens, organisations in the public sector do not seek to generate profit.

Private sector is the part of the economy, sometimes reffered to as the citizeji sector, which is owned by private individuals or groups, usually as a means of enterprise for profit, rather than being owned by the state.

Question 15.
Make in India.
Answer:
The ‘Make in India’ initiative was launched in September 2014 as a part of a wider set of nation-building 2014 as part of a wider set of nation-building’initiatives. Devised to transform India into a global design and manufacturing hub. In this programme, companies are boosted to set up their plans in India. Make in India was a timely response to a critical situation.

Telangana TSBIE TS Inter 2nd Year Economics Study Material 10th Lesson Telangana Economy Textbook Questions and Answers.

TS Inter 2nd Year Economics Study Material 10th Lesson Telangana Economy

Essay Questions

Question 1.
Write an essay on the structure of Telangana State.
Answer:
The historical background as a backdrop for the birth of Telangana is discussed here under. It was on 1st November 1956, the former A.R state (that existed upto 1^st June, 2014) was formed by merging the Hyderabad state with the former Andhra state.

Former Hyderabad State :
Hyderabad state was a princely state ruled by the Nizams for more than two centuries (1724-1948). It had its own currency, administrative system, transport and communication network including railways and postal services. Urdu was not only the official language, but also the medium of instruction at all levels of education.

When India became independent on 15^th August 1947, the then ruler of Hyderabad state, Mir Osman Ali khan, the Seventh Nizam, preferred to retain the state as an independent entity. All the other princely states agreed to amalgamate with the Indian union and the Hyderabad state continued to remain as a separate unit outside the purview of the Indian sovereignty. During that period, internal unrest generated in the state and the people of the state particularly peasants, revolted against the feudal regime. This is known as the Telangana armed struggle. Under those circumstances, the Government of India compelled the Nizam for the merger of the Hyderabad state with Indian union though an armed intervention which was recorded in history as police action. This merger took place on 17^th September 1948. In the year 1952, general elections were held to the state assembly and a popular government assumed the power with Dr. Burgula Ramakrishna Rao as the Chief Minister.

Six Decades Struggle for Separate Telangana State :

The promises and safeguards to Telangana region made at the time of formation of Andhra Pradesh state were not fulfilled, they were neglected and the resources were exploited. Notable among those safeguards that were flouted are :

• The Gentlemen’s Agreement of 1956
• The All Party Accord of 1969.
• The Eight Point Formula and Five Point Formula of 1969 & 1970, repsectively.
• The Judgement of Supreme Court of India in 1972.
• The Six Point Formula and the Presidential Order of 1974.
• G.O. No. 610 of 1985 and Girglani Commission Report.

As a consequence of this, the Telangana region had lagged behind Seemandhra area in all the vital sectors, contributing to serious imbalances in all the levels of development between Telangana and Seemaandhra. This situation emerged as the root cause for recurring agitations and causing enormous loss of life.

Though, earlier struggles, especially the struggle in 1969 had revived the demand for separate Telangana state it was intensified in the recent decade and in particular from 2009, the decade old struggle has taken place in the form of mass strikes, bandhs, rail roko, blocking national highways, strikes by students, closure of universities and educational institutions, “sakala janula samme” by government employees, open suicides and the unto death hunger strike of Sri K. Chandra Sekhar Rao, TRS President, the then M.P At last, the UPA government declared the .Telangana as 29th state.The “appointed day” was notified as 2^nd June 2014 for bifurcation and formation of Telangana as a separate state with existing 10 districts of Telangana region and the remaining 13 districts of Seemaandhra as A.P. state.

Telangana Topography :
Telangana is situated on the Deccan plateau of Indian peninsula. The region is drained by two major rivers, Godavari with about 79% catchment area and Krishna with about 69% catchment area and several minor rivers such as Bhima, Manjeera, Musi, Pranahita and other smaller rivulets. The annual rainfall is between 900 mm to 1,500 mm in northern Telangana and 700 to 900 mm in southern Telangana from the south west. monsoons. Various soil types exist in the state. About 45% of the forest area of united A.P. is located in 5 districts of Telangana. The state of Telangana is spread over 1,14,840 square kilo meters and consists of 10 districts. It is the 12^th largest state in terms of area and size of the population in the country.

Question 2.
What is GSDP? Explain the trends in GSDP and per capita income in Telangana.
Answer:
Gross State Domestic Product (GSDP) :
Gross state domestic product (GSDP) or state income is the most important indicator for measuring the economic growth of a state. Gross state domestic product may be defined as “the sum of total volume of all goods and services produced in a year within the geographical boundaries of a state accounted without duplication”.

Trends of GSDP in Telangana Economy :
Growth rate of GSDP indicates the performance of a state economy and the sectoral performance reflects the change in the magnitude and composition of different sectors out of GSDP of the state economy over a time.

GSDP, in Telangana it increased from Rs. 3.59 lakh crore to Rs. 9.69 lakh crores in current prices and from Rs. 3.59 lakh crores to Rs. 6.63 lakh crores between 2011-12 and 2019-20 in constant prices. In the same period, the GDP of All – India increased from Rs. 87.36 lakh crores to 203.8 lakh crores in current prices and from Rs. 87.36 crores to Rs. 146.83 lakh crores in constant prices. With regard to year to growth rates in Telangana, the growth rate of GSDP in 2012-13 was 11.7 percent and it increased to 14.3 percent in 2018-19 and 12.6 in currect prices by 2019-20 while in the same period, the growth rate of GDP in all-India decreased from 13.8 percent to 11 per cent and 7.5, respectively, in current prices. Except in 2012-13 and 2013-14, the Telangana state out performed in respect of its GSDP growth rate over GDP growth rate of all India in between 2011-12 to 2019-20.

In constant prices the growth rate of GSDP of Telangana increased from 3 percent to 8.2 percent during 2012-13 to 2019-20. The growth rate of GDP of all India increased from 5.5 percent in 2012-13 to 8.3 percent by 2016-17 then after it decreased to 5 percent by 2019-20. The GSDP growth rate of Telangana when compared to GDP growth rate of all India is less than all India during 2012-13 to 2014-15, but then after it is more than the growth rate of all India.

With regard to the share of Telangana in all India GDP both in current prices, and constant prices ranged in between 4.11 percent to 4.5 percent during 2011-12 to 2019-20.

Per Capita Income at Current Prices in Telangana and All India : The per capita income (PCI) is obtained by dividing the net state domestic product by mid year population of the state/country in the respective year. The per capita income of Telangana vis-a-vis all India and their growth trends at current prices are shown in Table.

The Per Capita Income of Telangana vis-a-vis All India and Their Growth Trends at Current Prices

From the above table it is evident that, the per capita income (PCI) of Telangana is much higher than the all India over the years. There is a steup rise in the PCI of the state from Rs. 91,121 in the year 2011-12 to Rs. 2,28,216 in the year 2019-20(AE), registering a growth rate of 150 percent over 2011-12. Whereas the PCI of all India was Rs. 63,462 in the year 2011-12, and it increased to Rs. 1,34,432 in the year 2019-20(AE), registering a growth of 111 percent over 2011-12. This implies that the PCI of the state grew much faster than the All-India PCI.

Question 3.
Write an essay on sectoral contribution of gross state value added of Telangana Ecoriomy.
Answer:
Annual Average Sectoral Growth Rates in GSVA of Telangana State :
The growth rates of primary, secondary and tertiary sectors will be measured in terms of Gross Value Added (GSVA) at basic prices. The constituents of these sectors include :

a) Primary Sector :
This sector consists of sectors like crops,’livestock, forestry and logging, fishing and acquaculture and mining and quarrying.

b) Secondary Sector :
This sector comprise of the sectors such as manufacturing, electricity, gas, water supply and other utility services and construction.

c) Tertiary Sector :
This sector include sectors, namely, trade and repair services, hotels and restaurants, transport (including railways, road, water, air and services incidental to transport), storage, communication and services related to broadcasting, financial services, real estate, ownership of dwellings and professional services, public administration and other services.

The sectoral analysis provides an outline about how well the sectors have performed in the previous years and are expected to perform in the current year.

If we look at the annual average growth rates of these sectors in current prices, in respect of primary sector its growth rate decreased from 21.9 percent (8.6% in constant prices) in 2012-13 to just 2.2 percent (-58% in constant prices) in 2015-16 then after it increased to 17.1 percent in 2016-17, but again it decreased 15.8 percent (10.7% in constant prices) by 2019-20 (AE). Thus, we observe a mixed trend in the growth rate pattern of this sector.

As regards secondary sector, it experienced a negative growth rate in 2012-13 and 2014-15. A highest growth rate of 20.3 percent (21.4% in constant prices) in 2015-16 and a lowest of just 1.6 per cent (0.1% in constant prices) in 2016-17 and a moderate growth of 5.3 per cent . (1.7% in constant prices) by 2019-20 (AE).

The growth rate of tertiary sector ranged between 18.4 percent to 14.1 percent (8.4% to 9.6% in constant prices) during 2012-13 to 2019-20. Overall, we can see a mixed trend, both in current and constant prices, in the growth rates of sectoral GSVA in Telangana state during 2012-13 to 2018-19.

Sectoral Contribution to over all Gross State Value Added (GSVA) in Telangana :
In current prices, the share of tertiary sector is growing at a higher rate (from 52.8 percent in 2011-12 to 65.2 percent in 2019-20AE) while the shares of primary (from 19.6 percent in 2011-12 to around 18.6 percent in 2019-20AE) and secondary (from 27.6 percent in 2011-12 to around 16.2 percent in 2019-20 AE) are declining during the period 2011-12 to 2018-19 in Telangana. We can observe instability in the growth pattern of shares of both primary , and secondary sectors. In contrast to his, we find a gradual and stable increase in the share of services sector during 2011-12 to 2019-20.

Question 4.
Describe the demographic profile of Telangana State.
Answer:
Telangana State through changes in quantity and quality of population. As the size and quality of population shape human resource endowment. They have an angle bearing both on demand generation and supply creation aspects of goods and services. There are significant changes in the size of the population and other demographic features during seven census decade years from 1951 to 2011. The total population of Telangana more than doubled from 1.1 crore in 1951 to over 2.6 crores by 1981, climbing to 3.52 crores by 2011.

In total geographical area of India, the share of Telangana is 3.5% according to 2011 census. Ranga Reddy stands at the top with 52.97 lakhs population as against this Nizamabad stands at bottom with 25.51 lakhs population. Population density is defined as an average number of persons living per square kilometer area compared to all India Telangana is less densely populated. Hyderabad district being the capital city is highly populated with 18,172 persons living her square km.

Population growth rate of Telangana state is marked lower than the growth rate at all India level. In the recent census decade, while Telangana registered and annual growth rate of 1.4%.

The age group consisting of 0-6 years denote child population. In Telangana, the share of child population marginally decreased from 14.2% in 2001 to 10.5% in 2011.

As per 2011 census, the percentage of SC population to total population is 15.44% as against to this, the percentage of S.T population to total population is 9.34% in Telangana state. Among Sc’s, the highest percentage of population is to be found in Karimnagar district with 18.80% of the total and the lowest in Hyderabad district with 6.29% of the total. As far as ST’s are concerned, the highest percent of their population is found in Khammam district with 27.37% of the total ST population.

As per the 2011 census, the sex Ratio is 990 females per 1,000 males in Telangana, where as it is 940 females per 1,000 male population in India. Thus, Telangana state has relatively more female population than that is recorded at the national level.

Share of Immigrants in Telangana Population : The higher growth of urban population in Telangana state is mainly due to migration of population from Andhra and partly from other states. The share of Telangana in the erstwhile Andhra Pradesh was 42 percent in 2011. From 1961 to 2011, total migration of population is 62 lakh. Rangareddy district stood top in urban-ization with 70% people living in towns, which is mainly due to development of towns and suburban areas around Hyderabad that fall in Rangareddy district.

Question 5.
Describe the status of education and Health sectors in Telangana State.
Answer:
Education in Telangana :
Education is a crucial element in strengthening the human resources and economic development of a country. Education helps in creating more productive labour force. The 45^th Article of the Indian Constitution has laid the responsibility on the states to provide free and compulsory education to both boys and girls of the age group of 6 tb 14 years.

Literacy Rates in Telangana :
According to the Population Census, 2011 the literacy rate of Telangana is 66.54 per cent. However considerable variations are observed in literacy rates among different groups like rural and urban, within districts, age groups, social groups and male and female.

As far as literacy levels in districts are concerned, among 33 districts of the state, Hyderabad stands at top with 83.25 percent literacy rate and Jogulamba Gadwal district stands at the bottom with 49.87 per cent.

1. Education Profile of the State :
a. Enrolment :
During the year 2017-18, about 58.71 lakh children were enrolled in all the schools, of them 53 percent were enrolled in private schools, 47 percent in government schools including the schools run by the centred government, local bodies and aided schools.

b. Gross Enrolment Ratio (GER) :
In 2017-18, the gross enrolment rate among children in primary schools was 98.76 for boys and 98.05 for girls and in upper primary schools, it was 87.32 for boys and 88.47 for girls. Overall, the GER for girls was higher than boys in upper primaiy schools in Telangana.

c. Pupil – Teacher Ratio (PTR) :
During 2018-19, the pupil-teacher ratio observed was 18.90, 14.12, and 17.85 for primary, upper primary and secondary schools respectively. The overall PTR is 17.67 for the year 2018.19.

2. School Education :
a. Samagra Shiksha Abhiyan :
Hitherto the state government implemented the centrally sponsored schemes (a) ‘Sarva Siksha Abhiyan’ (SSA) to universalise elementary education; and (b) ‘Rashtriya Madhyamik Shiksha Abhiyaan’ programme (RMSA) to improve the access and quality of secondary education.

b. Kasturba Gandhi Balika Vidyalaya (KGBV) :
There were 391 KGBVs at the time of formation of the state and this number increased to 475 by 2017-18. Government of India supports only classes VI to VIII under KGBVs, however, state government extended the scheme by adding IX and X classes to facilitate continuation of girls’ education upto Class-X and to avoid dropouts.

e. Model Schools :
194 model schools were started in the academic year 2013-14 in the state, with an objective to provide quality education in English medium by highly qualified teachers. As the scheme was terminated by the centre, the government of Telangana took over the responsibility of running model schools from the year 2015-16 onwards.

3. Intermediate Education :
The Department of Intermediate Education administers intermediate education system in the state. There are 2,558 junior colleges with a total enrolment of 7.18 lakh students. The department also offers 23 vocational education courses at intermediate level in junior colleges in the state with special focus on job oriented courses.

4. Higher Education:
a. Collegiate Education :
The objective of Department of Collegiate Education is to provide access, equity and quality in higher education. Towards this direction, state government is making all efforts with government of India funds under Rashtriya Uchchatar Shiksha Abhiyan (RUSA).

b. Degree Online Services, Telangana (DOST) :
The government of Telangana has introduced online admissions for under graduate courses (BA/BCom/BSc/BBA/etc) in the state of Telangana in the year 2016 through web based system called Degree Online Services, Telangana (DOST). In the year 2018-19, a total of 2,00,472 students were admitted in all degree colleges through DOST. Out of which 42,688 were admitted in government degree colleges.

c. Technical Education :
The department manages the government polytechnics and monitors the private unaided polytechnics and professional colleges. At present there are 820 diploma and degree level professional institutions in the state with a total intake of 1,36,805.

5. Social Welfare Educational Institutions :
To bring social equity and improve access to education for children of SCs, STs, BCs, minorities and differently-abled children, the state has been providing hostel and residential school facilities, supply of books and other provisions at free of cost.

a. Scheduled Castes Residential Schools :
Telangana Social Welfare Residential Educational Institutions Society (TSWREIS) is running 268 (out of which 175 meant only for girls) residential educational institutions (from 5^th standard to undergraduate level) in the state for Scheduled Caste (SC) children. Of the 268 institutions, 134 were sanctioned after formation of the state.

b. Schedule Tribes Residential Schools :
(a) Telangana Tribal Welfare Residential Educational Institutions Society (TTWREIS) (Gurukulams) : There are 175 Gurukulams in the state (b) Ashram Schools : There are 321 ashram schools in the state, (c) Government Primary Schools (GPS) : Tribal Welfare Department is running 1,427 government primary schools with 1^st to 3^rd or 5^th classes and around 22 thousand students.

c. Backward Classes Welfare Residential Schools :
Mahatma Jyothiba Phule Telangana Backward Classes Welfare Residential Education Institutions Society (MJPTBCWREIS) is es-tablished to facilitate access to quality education for the students of backward classes (BCs) and economically backward classes (EBCs).

d. Minority Residential Institutions :
Telangana Minorities Residential Educational Institutions Society (TMREIS) established with the objective of providing a high quality education A total of 216 minority residential institutions including 12 colleges with 79,424 students are functioning in the state.

Health Sector in Telangana :
In order to reach the goal of “Health for All” of World Health Organization (WHO), Government of Telangana is implementing different programmes like National Maternity Benefit Programme, Integrated Child Development Programme and Supplementary Nutrition Programme for the women in reproductive age group and the programme of Balika Samrudhi Yojana for children.

As per SEO – 2020, in Telangana state, there are 4,797 health sub-centres, 633 primary health centres, 249 urban primary health centres, 90 community health centres, 19 area hospitals, 29 district hospitals, 9 medical college hospitals, 12 speciality hospitals and 2 super speciality hospitals.

Health Sector related Programmes of Telangana :
After formation of the state, Telangana government initiated several health related programmes. Some of them are presented here under :

a) Kanti Velugu :
People mostly tend to live with eye problems or postpone until it is too late. Particularly, the women and elderly persons neglect eye vision problems. To address this problem, the government has launched Kanti velugu programme with a vision to build avoidable blindness free Telangana through simple pair of glasses and cataract surgery.

b) Basti Dawakhana :
Basti Dawakhana is an initiative to offer quality health services to urban poor. One basti dawakhana caters to 5000 – 10000 population. The basti dawakhana is located within the urban slum. Currently 104 basti dawakhanas are functioning in the state.

c) Health and Wellness Centres :
Health and Wellness centres will provide comprehensive health care, including for non-communicable diseases and maternal and child health services. These centres will also provide free essential drugs and diagnostic services. Currently 636 PHCs, 86 sub-centres, 104 Basti dawakhanas and 227 UPHCs have been converted as Health and Wellness Centres.

d) Telangana Vaidya Vidhana Parishad (TWP) Hospitals :
These hospitals (107) functioning under the control of TWP mainly cater to the maternity and child health care services, besides general medicine, general surgery, ophthalmology, paediatrics, orthopaedics, dermatology, ENT, etc.

e) AYUSH (Ayurveda, Yoga, Naturopathy, Unani and Homoeopathy) :
The Telangana government along with the National AYUSH Mission (NAM) is encouraging the AYUSH system of medicine. Presently 860 dispensaries and institutions are functioning under the AYUSH department.

f) Aarogyasri Health Care Trust :
Aarogyasri Scheme (AS) is a unique government sponsored health insurance scheme being implemented by Aarogyasri Health Care Trust in the state, with the objective of assisting below poverty line families. The scheme provides end-to-end cashless medical services for identified diseases.

g) KCR Kit :
The Telangana state government launched a new programme called KCR Kit on 2 June 2017 to provide compensation to pregnant women (pre and post natal periods) living below poverty line, who are receiving health services from public health institutions in the state, @ Rs. 12,000 (for a male child) and Rs. 13,000 (for a female child) for wage loss.

Question 6.
Explain the irrigation facilities available in Telangana State.
Answer:
Irrigation Sources in Telangana :
According to Arthur Lewis, “the revolutionary change in the farm sector can be obtained only through the provision of adequate irrigation facilities and agricultural inputs”. Since, water is an important factor in agricultural production; government should ensure adequate and timely supply of water.

The main sources of irrigation in Telangana state can be classified into four categories, viz. (i) canals, (ii) wells, (iii) tanks and (iv) other sources.

Source – wise Irrigation in Telangana (in percentage)

The above table shows gross irrigated area under different sources from 1960-61 to 2013-14. From the table, it can be seen that tank irrigation which had a higher share of 60 percent in 1960-61, gradually declined to 8.94 percent in 2013-14, whereas the share of well irrigation increased from 19.01 percent to 73.83 percent during the same period.

The present status of irrigation projects in Telangana state is as follows :

A. Godavari River Basin :
i) Kaleshwaram Project :
Kaleshwaram Project has been conceived from the erstwhile Dr. B.R. Ambedkar Pranahita – Chevella Sujala Sravanthi project. Originally, Dr. B.R. Ambedkar

Pranahita – Chevella Sujala Sravanthi was proposed to utilize 160 TMC of allocated water of Godavari basin as per Godavari Water Dispute Tribunal (GWDT) award.

The original project has been divided into two components viz., Kaleshwaram and Dr. B.R. Ambedkar Pranahita Project (Adilabad) as follows :

(a) Dr. B.R. Ambedkar Pranahita Project :
To divert 20 TMG of water by constructing a barrage across river Pranahita near the confluence of Wainganga and Wardha rivers at Tummidihetti (V), Koutala (M), Kumram Bheem district for irrigating an ayacut of 2,00,000 acres in East Adilabad district against the original proposed 56,500 acres in the district.

(b) Kaleshwaram Project :
Construction of one barrage across river Godavari at Medigadda near Kaleshwaram and two more barrages between Medigadda (Lakshmi barrage) and Sripada Yellampally Project at Annaram and Sundilla and to convey water from Sripada Yellampally Project to the command area spread over in 7 districts of Telangana.

(ii) Alisagar Lift Irrigation Scheme :
Through this it is intended to supplement irrigation facilities to the gap ayacut of the Nizam Sagar Project in Navipet, Renjal, Yedapally, Nizamabad, Dichpally and Makloor mandals of Nizamabad district to the extent of 53,793 acres. The scheme proposes lifting 720 cu secs of water from right bank of Godavari rivesr near Kosli village.

(iii) Argu 1 a Raj a ram Guthpa Lift Irrigation Scheme :
Through this it is intended to supplement the irrigation facilities to the gap ayacut of the Nizam Sagar Project in Nizamabad district to the extent of 38,792 acres lying under the distributaries D74 to D82 of the Nizam Sagar Project.

(iv) Choutpally Hanmanth Reddy Lift Irrigation Scheme :
Through this it is proposed on the Shetpally tank, which is fed by Distributary D4 of Sri Rama Sagar Project – Laxmi canal, is taken upto provide irrigation facility to an ayacut of 11,625 acres in 18 villages.

(v) Lendi Interstate Project :
This is an interstate major irrigation project between Telangana and Maharashtra. The head works are loqated in Nanded district of Maharashtra. This project proposes to irrigate 49r000 acres, out of which the irrigation*potential would be 22,000 acres in Telangana and 27,000 acres in Maharashtra.

(vi) M. Baga Reddy Singur Project :
The Singur project has been constructed across river Manjeera, a tributary of the river Godavari near Singur village, Sangareddy district, with a gross capacity of 29.91 TMC.

(vii) J. Chokka Rao Devadula Lift Irrigation Scheme :
This scheme contemplates for lifting of water from Godavari river near Gangaram (V), Eturunagaram (M), Jayashankar district to irrigate 6.21 lakh acres in upland drought-prone areas of Warangal Urban.

(viii) Lower Penganga Project :
This is a joint project between the states of Maharashtra and Telangana on the river Penganga, which is a tributary of the river Godavari. The headworks are located near Tadsoali village in Ghatanji taluk of Yavathmal district of the Vidharbha region in Maharashtra state. The net available yield is estimated to be 42.67 TMC and shared in the ratio of 88:12.

(ix) Sita Rama Lift Irrigation Scheme :
After formation of Telangana state, the government has takenup this duly combining both Rajiv Dummugudem and Indira Sagar Rudramkota Ayacut and uncovered an ayacut of about 1.00 lakh acres totalling to 5.00 lakh acres in Bhadradri Kothagudem, Khammam and Mahabubabad districts.

(x) Thupakulagudem Barrage (Sammakka Barrage) :
The government had taken up construction of barrage at Kanthanapalli, Mulugu district. The project envisages lifting of 50 TMC of water from Godavari river at Kanthanpalli. The government approved the proposals to shift the barrage location from Kanthanapally (V) to Thupakulagudem (V) Warangal rural. Telangana government proposed to rename this project as “Sammakka Barrage”.

(xi) Sri Kumuram Bheem Project :
This is a medium irrigation project proposed across Peddavagu stream near Ada (V), Asifabad (M) and (Dist). The project is proposed to irrigate an ayacut of (18,421 Ha) 45,500 acres covering 69 villages in 4 mandals i.e., Asifabad, Wankidi, Kagaznagar and Sirpur (T) of Asifabad district.

(xii) Palemvagu Project :
This is a medium irrigation project across Palemvagu stream, a major tributary of river Godavari. It is located near Mallapuram village, Venkatapuram mandal of Jayashankar Bhupalapally district. It provides irrigation facilities to 4,100 Ha. (10,132 acres) kharif wet and 1250 Ha ID rabi ayacut and drinking water supply.

(xiii) Sri Ramsagar Project :
It was constructed on the Godavari river at Pochampadu village in Nizamabad. The districts covered under this project are Karimnagar, Warangal, Adilabad, Nalgonda and Khamam. Area irrigated under this project is 4 lakh acres.

(xiv) Nizamsagar Dam :
It is a reservior constructed across the Manjeera river, a tributary of the Godavari river between Achampet and Banganpalle villages of Nizamabad district. It provides irrigation facilities to the area of 2.31 lakh acres.

(xv) Kadem Project :
It is located in Adilabad district on kadem river. Area irrigated under this project is 25,000 areas in Adilabad district.

B. Krishna River Basin :
i) Mahatma Gandhi Kalwakurthy Lift Irrigation Project :
This project is proposed to provide irrigation facilities to an extent of 4.10 lakh acres and to supply drinking water to chronically drought-prone upland areas in the erstwhile Mahabubnagar district. Fourty TMC of water is proposed to be lifted in the three stages from the foreshore of Srisailam reservoir.

ii) Rajiv Bhima Lift Irrigation Scheme :
This scheme envisages lifting of water from the Krishna river at two different places : One at Panchadevpad, the foreshore of the Jurala Project and another at the foreshore of the Ookachetty vagu project at Ramanpad for irrigation in the chronically drought-affected upland areas in part of 15,mandals and to provide drinking waer to the enroute 196 villages of Mahabubnagar district.

iii) Jqwahar Nettempadu Lift Irrigation Scheme :
This scheme ewisages the lifting of 21.425 TMC of water from the forehsore of Priyadarshini Jurala project reservoir to provide irrigation facilities to 2 lakh acres in the drought-prone upland areas of Gadwal and Alamput constituencies, covering about 148 viollages in eight mandals.

iv) Priyadarshini Jurula Project :
This is a multi purpose project across the river Krishna, near .Revulapally village in Jogulamba-Gadwal district. The project is intended to irrigate an ayacut of 1.02 lakh acres under the left main canal (NTR canal) and right main canal (Nalla Somanadri canal) in drought prone mandals of Atmakur, Kothakota, Pebbair of Wanapathy district.

v) Rajoli Banda Diversion Scheme :
The construction of anicut was started in 1946 and completed by 1958. The water whs supplied to the 143 km long Rajolibanda diversion scheme (RDS) canal to benefit a drought area of 15 villages in Manvi taluk of Karnataka, and eight villages in Gadwal taluk, 67 villages of Alampur taluk in erstwhile Mahabubnagar district.

vi) Koilsagar Lift Irrigation Scheme :
This project was constructed at Bollaram village of Devarakaddra mandal, Mahaboobnagar district in 1955 to irrigate an ayacut of 12,000 acres in Amarchintha constitutency in Mahaboobnagar district.

vii) Palamuru-Rangareddy Lift Irrigation Scheme :
This scheme envisages irrigating an ayacut of 12.30 lakh acres in upland areas of Nagarkumool (1 lakh acres), Mahabubnagar (4.14 lakh acres), Rangareddy (3.34 lakh acres), Vikarabad (3.22 lakh acres) and Nalgonda (0.30 lakh acres) districts and drinking water requirement to en-route villages, GHMC and industrial water requirements from the foreshore of Srisailam reservoir during flood season.

viii) Ghattu Lift Irrigation Scheme :
It envisages irrigating an ayacut of 28,000 acres in upland areas of Ghattu, Dharur and K.T. Doddi mandals of Jogulamba Gadwal district.

ix) Dindi Lift Irrigation Scheme :
The upland areas of Nalgonda district are endemi- cally drought prone besides large areas are in grip of fluoride. The only source of water that can be brought to this area to mitigate the above problems is the river Krishna. The Dindi LIS envisages providing irrigation facilities to 3.61 lakh acres and drinking water to four districts, i.e., Nagarkurnool, Nalgonda, Yadadri-Bhuvanagiri and Rangareddy.

x) Udayasamudram LIS :
This scheme envisages lifting of 6.70 TMC of water from the foreshore of Udayasamudram balancing reservior of AMR SLBC project for irrigating 1 lakh acres of ayacut in chronically drought-affected upland areas of Nakrekal, Nalgonda; Munugode. Thungathurthy assembly constituencies of Nalgonda district.

xi) Nagarjuna Sagar Project :
The biggest in the world constructed on the river Krishna in the border of Nalgonda and Guntur districts. Its right canal irrigates 1.11 million acres to Andhra and 0.32 million acres in Telangana.

xii) Srisailam Project :
This project was constructed on Krishna river in the border of Mahabubnagar and Kumool districts. Area irrigated under this canal is 4.20 lakh acres.

Question 7.
Assess the growth and perspectives of IT and ITeS sectors in Telangana state.
Answer:
FT and HfeS Sectors in Telangana; The state holds a leading position in IT and information technology enabled services (ITeS) in the country in terms of production and exports. Rapid changes in technology in the IT sector gave rise to new opportunities, especially in big data analytics, cyber security; cloud computing, animation and gaming, etc. Hyderabad, the capital of Telangana, is now recognised as one of the leading IT hubs globally. It houses over 1500 iT/ITeS companies, both large and small, which together employ over 4.3 lakh professionals, besides providing indirect employment to over 7 lakh people. There has been robust growth in the performance of the IT/ITeS sectors in the state, since 2014-15. It can be witnessed from the given table. There has been a sharp increase in all parameters i.e., in ritunber of units, employment and exports of IT&ITeS in Telangana during 2014-15 to 2016-17.

Growth of IT and ITeS in Telangana

In 2018-19, the total value of software and IT Product exports of the state accounted for Rs. 1,09,219 crore (US$ 15.6 billion). Telangana state contributes over 11% share ofthe country’s IT, exports and Hyderabad ranks 2nd in terms of total revenues from IT sector in the country.

IT Policy Rrame work :
Government of Telangana, in order to augment the growth in IT/ ITeS sector and attract investments and employment generation, has framed an ICT policy with an objective to make the state the most preferred technology investment destination in the country. The following are some important initiatives of IT and ITeS :

i) IMAGE Tower :
Government is establishing a dedicated work place for development of animation, gaming and VFX industry i.e., IMAGE Tower with state of the art infrastructure and services. IMAGE Tower is being developed in an area of 10 acres (in Raidurgam village,
E.R. district) with a project cost of Rs. 1,000 crore on a public private partnership (PPP) mode

ii) Telangana Fiber Grid (T-Fibre) Project :
Government of Telangana has initiated this project in 2015. Its vision is to establish a state-of-the-art network infrastructure that would facilitate the realization of Digital Telangana to 10 Zones (33 districts).

iii) Electronic Services Delivery (BSD) :
Electronic Services Delivery (ESD), Department of ITE&C, government of Telangana is the nodal agency for delivery of government services to citizens and business with focus on improving efficiency, transparency and accountability for the government service delivery. The obejctive is to provide smart, citizen centric, ethical efficient and effective governance facilitated by technology towards Digital Telangana.

iv) Telangana Academy for Skill and Knowledge (TASK) :
Government of Telangana has creaed a unique institution called Telangana Academy of Skill and Knowledge (TASK) to develop a skilled work force in IT and ITeS, life sciences, healthcare, aerospace, banking and financial services. It is setup as a non-profit organisation in partnership with academia and industry. TASK strengthens the quality of graduates coming out of degree and engineering colleges by imparting industry-ready skills, both technical and non-technical (soft skills).

A part from the above, the government of Telangana is developing IT incubation centres in Warangal, Karimnagar, Khammam and Nizamabad districts to ensure technology oriented jobs for youth.

Question 8.
Briefly explain the development and welfare programmes of the government of Telangana.
Answer:
After formation of the state, a number of programmes have been taken up by the Telangana Government to improve the living standards of poor people. These progress can be categorised as under.

A) Development Welfare Progermme for All:
1) Aasara Pensions Scheme :
‘Aasara’ pensions scheme is meant to protect the most vulnerable sections of society in particular the old and infirm, people with HIV-AIDS, widows, incapacitated weavers and toddy tappers, who have lost their means of livelihood with growing age, in order to support their day to day minimum needs required to lead a life of dignity and social security.

This Scheme was launched at Kothur in Mahabubnagar district on Nov 8,2014. The state government enhanced the Aasara monthly pension from Rs. 200 to Rs. 1000 for the old aged, widows, weavers, toddy tappers and AIDS patients and Rs. 500 to Rs. 1500 for disabled persons.

ii) Aarogya Lakshmi :
With ah aim to enhance the levels of nutrition in pregnant and lactating women, Telangana government is providing one nutritious meal everyday to pregnant women and the children below the age of six, living below poverty line, through Anganwadi centers. The scheme was launched on January 1,2015.

iii) Amma Vodi :
The government introduced this scheme with an objective to reduce infant and maternal mortality rates in state. Through this programme, financial as well as medical assistance and transport facility is provided to pregnant women before and women who deliver their babies in the government hospitals.

iv) Mission Bhagiratha :
It was launched on Aug 7,2016 in Komati Banda (V) Gajwel, Medak District. This programme was conceived to provide 100 litres per capita per day (LPCD) of treated and piped water in rural areas, 135 LPCD in municipalities, and 150 LPCD in municipal corporations.

v) Housing for Poor :
Through this programme the Telangana government is intending to provide quality and respectable housing to the poor. The ‘housing for the poor1 plan provides for two and three storied buildings with the 2 BHK flats in Hyderabad and other urban areas while they are to be built as independent houses in rural areas.

vi) Bice Distribution :
This programme was launched from 1st January, 2015. Telangana state Civil Supplies Corporation in supplying rice under PDS @ 6 kgs per person at Rs. 1 per kg without any ceiling on the number of members in the family. To arrive at the eligibility of the BPL families, the family income limit in rural areas has been increased to Rs. 1.50 lakh and in urban areas to Rs. 2 lakh.

B, SC/STi Development and Welfare Programmes :
1) SC and ST Special Development Fund: Through SC/STs special development fund (SDF) Act, 2017, government has formulated two budget heads, namely:
i) ‘SC Special Developoment Fund (SCSDF); and
ii) ‘ST Special Development Rind (STSDF)’.

2) Scheduled Castes Welfare :
In Telangana, the Scheduled Castes Development De-partment co-ordinates and monitors the implementation of the following SC welfare schemes.

a) Kalyana Lakshmi for SCs :
The government launched this scheme on 2nd October, 2014. A one-time financial assistance of Rs. 51,000/- was being provided to the brides family at the time of marriage to meet the marriage related expenses of a Telangana resident girl of over 18 years of age belonging to SC community with a parental income not exceeding Rs. 2 lakh, and further to Rs. 1,00,116 in 2018.

b) Ambedkar Overseas Nidhi Scheme : Under this scheme the students belonging to SC community are provided with a scholarship grant for overseas study to the tune of Rs. 20 lakh subject to parental annual income limit up to-Rs.’5’lakh. During 2018-19, 101 students have been selected under this scheme.

c) Land Purchase Scheme :
The government of Telangana launched this programme for the benefit of the poorest of the poor SC women families. Under this scheme, an extent of 15,044.35 acres of land has been purchased and distributed to 5,930 beneficiaries at a cost of Rs. 657.71 crore from 2014-15 to 2019-20.

3) Scheduled Tribes Welfare :
The government of Telangana launched the following schemes for the integrated development of the scheduled tribes :

(a) Kalyana Lakshmi for STs :
This programme was launched on 2nd October 2014. A one-time financial assistance of Rs. 1,00,116/- shall be granted at the time of marriage to each ST girl who attains the age of 18 years.

(b) Economic Support Schemes :
Under this scheme, financial assistance to tribal population is provided in the fields of agriculture, horitculture, fisheries, minor irrigation, animal husbandry and self-employment.

(c) Forest Rights Act, 2006 :
Under this Act, individual titles were distributed to 93,494 forest dwellers (tribals) covering an extent of 3,00,092 acres. The forest and right holders have right for self-cultivation and the land is non-transferable, inalienable, but heritable. During the year 2018-19, 91,927 farmers were distributed with an extent of 2.99 lakh acres under Rythu Bandhu scheme.

C. BCs Development and Welfare Programmes:
The welfare schemes launched by the state government for the welfare of BCs include:

1. Kalyana Lakshmi Scheme for BCs :
The government extended the scheme of Kalyana Lakshmi to backward classes (BCs) and economically backward classes (EBCs) in the year 2016-17.

2. Most Backward Classes Development Corporation :
It was established in 2017 to with a sharp focus on improving the social, educational and financial conditions of most backward classes (MBQ among BCs. Rs. 1,000 crore has been allocated in the financial year 2018-19 and 13,367 beneficiaries were identified.

D. Minorities Development and Welfare Programmes :
In order to improve the socioeconomic conditions of minorities the state government has formulated several schemes. Some of them sire as follows :

a) Bank Linked Subsidy Scheme :
The scheme is being implemented for minorities to setup viable self-employment business units. The financial assistance from the Telangana State Minorities Finance Corporation is by way of subsidy, which is linked to the credit component from banks.

b) Training, Employment and Skill Development :
The minorities department extends training and skill development and arranges self-employment for minority youth through the Minorities Finance Corporation. New schemes for training have been introduced in collaboration with NAC, department of youth affairs and SETWIN.

c) Shaadi Mubarak Scheme :
Under this scheme, the government gives a one-time .grant of Rs. 1,00,116/- to the eligible minority bride’s family at the time of marriage.

Short Answer Questions

Question 1.
Explain about sectoral growth rate trends of Telangana economy.
Answer:
Answer:
Annual Average Sectoral Growth Rates in GSVA of Telangana State :
The growth rates of primary, secondary and tertiary sectors will be measured in terms of Gross Value Added (GSVA) at basic prices. The constituents of these sectors include :

a) Primary Sector :
This sector consists of sectors like crops,’livestock, forestry and logging, fishing and acquaculture and mining and quarrying.

b) Secondary Sector :
This sector comprise of the sectors such as manufacturing, electricity, gas, water supply and other utility services and construction.

c) Tertiary Sector :
This sector include sectors, namely, trade and repair services, hotels and restaurants, transport (including railways, road, water, air and services incidental to transport), storage, communication and services related to broadcasting, financial services, real estate, ownership of dwellings and professional services, public administration and other services.

The sectoral analysis provides an outline about how well the sectors have performed in the previous years and are expected to perform in the current year.

If we look at the annual average growth rates of these sectors in current prices, in respect of primary sector its growth rate decreased from 21.9 percent (8.6% in constant prices) in 2012-13 to just 2.2 percent (-58% in constant prices) in 2015-16 then after it increased to 17.1 percent in 2016-17, but again it decreased 15.8 percent (10.7% in constant prices) by 2019-20 (AE). Thus, we observe a mixed trend in the growth rate pattern of this sector.

As regards secondary sector, it experienced a negative growth rate in 2012-13 and 2014-15. A highest growth rate of 20.3 percent (21.4% in constant prices) in 2015-16 and a lowest of just 1.6 per cent (0.1% in constant prices) in 2016-17 and a moderate growth of 5.3 per cent . (1.7% in constant prices) by 2019-20 (AE).

The growth rate of tertiary sector ranged between 18.4 percent to 14.1 percent (8.4% to 9.6% in constant prices) during 2012-13 to 2019-20. Overall, we can see a mixed trend, both in current and constant prices, in the growth rates of sectoral GSVA in Telangana state during 2012-13 to 2018-19.

Sectoral Contribution to over all Gross State Value Added (GSVA) in Telangana :
In current prices, the share of tertiary sector is growing at a higher rate (from 52.8 percent in 2011-12 to 65.2 percent in 2019-20AE) while the shares of primary (from 19.6 percent in 2011-12 to around 18.6 percent in 2019-20AE) and secondary (from 27.6 percent in 2011-12 to around 16.2 percent in 2019-20 AE) are declining during the period 2011-12 to 2018-19 in Telangana. We can observe instability in the growth pattern of shares of both primary , and secondary sectors. In contrast to his, we find a gradual and stable increase in the share of services sector during 2011-12 to 2019-20.

Question 2.
Write about demographic features of Telangana state.
Answer:
Telangana State through changes in quantity and quality of population. As the size and quality of population shape human resource endowment. They have an angle bearing both on demand generation and supply creation aspects of goods and services. There are significant changes in the size of the population and other demographic features during seven census decade years from 1951 to 2011. The total population of Telangana more than doubled from 1.1 crore in 1951 to over 2.6 crores by 1981, climbing to 3.52 crores by 2011.

In total geographical area of India, the share of Telangana is 3.5% according to 2011 census. Ranga Reddy stands at the top with 52.97 lakhs population as against this Nizamabad stands at bottom with 25.51 lakhs population. Population density is defined as an average number of persons living per square kilometer area compared to all India Telangana is less densely populated. Hyderabad district being the capital city is highly populated with 18,172 persons living her square km.

Population growth rate of Telangana state is marked lower than the growth rate at all India level. In the recent census decade, while Telangana registered and annual growth rate of 1.4%.

The age group consisting of 0-6 years denote child population. In Telangana, the share of child population marginally decreased from 14.2% in 2001 to 10.5% in 2011.

As per 2011 census, the percentage of SC population to total population is 15.44% as against to this, the percentage of S.T population to total population is 9.34% in Telangana state. Among Sc’s, the highest percentage of population is to be found in Karimnagar district with 18.80% of the total and the lowest in Hyderabad district with 6.29% of the total. As far as ST’s are concerned, the highest percent of their population is found in Khammam district with 27.37% of the total ST population.

As per the 2011 census, the sex Ratio is 990 females per 1,000 males in Telangana, where as it is 940 females per 1,000 male population in India. Thus, Telangana state has relatively more female population than that is recorded at the national level.

Share of Immigrants in Telangana Population : The higher growth of urban population in Telangana state is mainly due to migration of population from Andhra and partly from other states. The share of Telangana in the erstwhile Andhra Pradesh was 42 percent in 2011. From 1961 to 2011, total migration of population is 62 lakh. Rangareddy district stood top in urban-ization with 70% people living in towns, which is mainly due to development of towns and suburban areas around Hyderabad that fall in Rangareddy district.

Question 3.
Discuss the Agricultural economy of Telangana.
Answer:
Agricultur sector is mainly rainfed and depends to a significant extent on the depleting gorund water resources. As nearly 55.49% percent of the state’s population is dependent on farm activity for livelihood. The share of agriculture sector in Gross State Value Added (GSVA) is 18.1% in current prices (15.6% in constant prices) of 2018-19 (FRE) and 18.6% (16% in constant prices) of 2019-20 (AE).

Telangana is the 12^th largest State in India in terms of geographical area with 112.08 lakh hectares of which about 60% of the area is arable. In the year 2018-19, about 48.98 lakh hectares area was under net cropped area and 60.59 lakh hectares was gross cropped area. Forest occupies 26.98 lakh hectares, accounting for 24.07% of the total geographical area. About 8.34 lakh hectares of land is put to non-agricultural uses, 15.78 lakh hectares is kept follow, 6.07 lakh hectares area is not fit for cultivation and the remaining 5.94 lakh hectares area is classified as of permanent pastures etc.

1. Net and Gross Area Sown :
The net area sown in 2018-19 was 46.60 lakh hectares representing 41.50 percent of geographical area spread across the districts.

2. Area under food and Non-food-Crops in Telangana :
Food crops broadly consist of cereals, millets, pulses and non-food crops include cotton, oil seeds, flowers etc. The food crops were cultivated in an area of 37.14 lakh hectares during the year 2017-18. The non-food crops were cultivated in an area of 23.45 lakh hectares during the year 2017-18.

Food crops account for lion’s share in total cropped area of the State. The share food and non-food crops in total cropped area was 53% and 47% respectiely in 2015-16 and it is 61.2% and 38.8%, resectively in the year 2018-19. In Telangana, there has been a gradual decline in
food crops from 70.8% in 2001-02 to 61.2% in 2018-19 mainly on account of decline in area under coarse grains.

3. Area under Food and Non-Food Crops in 2018-19 :
Gross area sown in Telangana during 2018-19 under kharif and rabi seasons was 57.75 lakh hectares. 45.0 lakh hectares area cultivated in kharif season in 2018-19, about 53.9 percent was under food crops and the rest 46.1 percent was under non-food crops. However, the share of food-crops was 87 percent with a cultivated area of 11.07 lakh hectares, out of the total cultivated area of 12.75 lakh hectares during rabi season.

4. Operational Landholdings :
The average size of the operational landholding in the state is 1.00 hectare (2.47 acres) in 2015-16 which is less than the national average size of 1.08 hectares and declined from 1.12 hectares in 2010-11.. It is noteworthy that the operational landholding size of marginal and small farmers constitutes about 80% of the total operational holdings in the state. There had been a decline in landholding size of semi-medium, medium and large categoreies in the year 2015-16, when compared with 2010-11.

5. Agricultural Sector Flagship Programmes of Telangana :
a) Rythu Bandhu :
Rythu Bandhu scheme is aimed at empowering the farmers of the state of Telangana by providing them with an investment support to relieve them from the burden of debt. It was launched on May 10th 2018. The government provides investment support for agriculture and horticultue crops by way of gmat of Rs. 4,000/- per acre to all farmers (pattadars) each season (Rs. 8,000 per annum) for purchase of inputs like seeds, fertilizers, pesticides, labour and other investments in the field operations of farmer’s choice for the crop season.

b) Rythu Bhima :
The government of Telangana launched Rythu Bima scheme on August 15, 2018. Its objectives is to provide financial relief and security to the family members/ dependents of the deceased farmer incase of his/her death. The scheme provides an insurance cover of Rs. 5 lakh to every farmer.

Question 4.
Explain the industrial development in Telangana.
Answer:
Industrial Sector in Telangana :
The state is one among the major industrial states in the country and it is ranked 6th in terms of industries and ranked 8th in terms of gross value added.from industries. The share of industrial sector contribution to GSVA at current prices was 17.4% (19.9% at constant prices) in 2018-19 (FRE) and it declined to 16.2% (18.7%) at current prices) in 2019-20 (AE).

As per Annual Survey of Industries data, in Telangana state the number of industries increased from 7,357 in 2008-09 to 10,279 in 2012-13, 11,068 in 2013-14, 11,995 in 2014-15 and 12,353 in 2015-16, registering a growth rate of 68 percent in number of factories during over 2008-09 and 3 percent ovef 2014-15 in the state. The total Gross Value Added (GVA) of manufacturing units in the state was Rs. 24,117 crore in 2008-09, which increased to Rs. 34,322 crore in the year 2014-15 and Rs. 44,840 crore in 2015-16 indicating a growth of about 85 percent over 2008-09 and about 31 percent over 2014-15.

1. MSME Sector in Telangana :
Micro, Small and Medium Enterprises (MSME) provides complementary products to large industries as ancillary units arid contribute enormously to inclusive growth and region balanced development of the state. This sector plays a pivotal role in providing employment opportunities at comparatively lower capital cost to those who are low skilled.

There has been a steady growth in the number of MSME registrations over the years in Telangana. As many as 8,435 units have commenced their operations since formation of the state, with an investment of about Rs. 11,847 crore by providing additional employment opportunities to about 1.59 lakh persons in all micro, small and medium units durint 2015-19.

2. New Industrial Policy of Telangana :
Telangana state, after emerging as the 29th state of the country, unveiled its new ‘Industrial Policy Framework, 2014’. The vision for iindustrialization of the state is “Research to Innovation; Innovation to Industry Industry to Prosperity”. The industrial policy framework is driven by the goal of “Innovate, Incubate, and Incorporate”., The core objective of this policy framework is to prpvide a business regulatory environment for ease of doing business in the State.

Question 5.
Write a note on TSGENCO are TRANSCO.
Answer:
a) Telangana State Power Generation Corporation Limited (TSGENCO) : The con-tracted capacity of Telangana state, including Generation Corporation of Telangana Limited (TSGENCO) and other plants as on 01.07.2019. is 16,201 MW, which includes the contracted capacity of private sector 7,739 MW, the state sector 5,825 MW, central sector 2,536 MW, inter-state 76 MW and joint sector 25 MW TSGENCO’s installed capacity of 5,825.26 MW comprises of thermal (3,282.50 MW), hydel (2,441.76 MW) and solar (1 MW).

Keeping in view the growing demand for power in Telangana state, TSGENCO has un-dertaken capacity addition programme by establishing two new thermal power projects of 5,080 MW and they are : Bhadradri Thermal Power Station (4 x 270 MW to be commissioned in 2019-20 and Yadadri Thermal Power Station (5 x 800 MW to be commissioned in 2020-21).

b) Transmission and Distribution of Energy in Telangana Transco :
After formation of the state, the Telangana state Transmission Corporation of Telangana Limited (TSTRANSCO) was constituted to take care of transmission needs of the state. A years after formation of the state, 112 numbers EHT substations, 833 numbers 33/11KV substations are comissioned and 2.54 lakh of distribution transformers are added (SEO-2020, GOT).

The state had a power deficit of around 2,482 MU during 2013-14. The energy requirement was 47, 428 MU. But available energy was only 44,946 MU. During 2014-15, the energy requirement was 50,916. MU and the available energy in the state was 48,788 MU from all the sources.

There are two distribution companies in the state namely, Telangana state Southern Power Distribution Company Limited (TSSPDCL) and Telangana State Northern Power Distribution Company Limited (TSNPDCL) that supply electricity to consumers in Telangana. As on 01-12-2019, there were a total of 1.53 crore service connections in the state. About 73 percent of energy consumption in Telangana is in the form of domestic consumption.

Question 6.
Write brief note on education profile of the state.
Answer:
According to the population Census, 2011 the literacy rate of Telangana is 66.54 percent. However, considerable variations are observed in literacy rates among different groups like rural and urban, within districts, age groups, social groups and male and female. The literacy gap between rural (57 percent) and urban (81 percent) areas is 24 percentage points and the literacy gap between male (75 percent) and female (58 percent) population is 17 percentage points. The literacy rates for the age groups of 7-14 years and 15-24 years in the state are higher than the national average. In the remaining age groups, the national averages are higher than that of state averages.

Education Profile of the state :
According to Socio Economic Outlook-2020 document of Telangana government, a total number of 40,597 schools are functioning in the state. Out of these 26,050 are run by state government, 3,269 are welfare/residential schools, 678 are aided schools, 10,369 are in the private sector, 180 are madarsas and the remaining 51 schools are run by central government in the State.

a) Enrolment :
During the year 2017-18, about 58.71 lakh children were enrolled in all the schools, of them 53 percent were enrolled in private schools, 47 percent in government schools including the schools, run by the central government, local bodies and aided schools.

b) Gross Enrolment Ratio (GER) :
Gross enrolment ratio determines the number of students enrolled in educational institutions i.e., schools, colleges, universities etc. In 2017-18, the gross enrolment rate among children in primary schools was 98.76 for boys and 98.05 for girls and in upper primary schools, it was 87.32 for boys and 88.47 for girls. Overall, the GER for girls was higher than hoys in upper primary schools in Telangana.

c) Pupil-Teacher Ratio (PTR) :
It indicates average number of pupils per teacher at a specific level of education in a given school-year. During 2018-19, the pupil-teacher ratiio observed was 18.90, 14.12 and 17.85 for primary, upper primary and secondary schools respectively. The overall PTR is 17.67 for the year 2018-19.

Question 7.
Discuss the status and prospects of residential institutions of Telangana state.
Answer:
To bring social equity and improve access to education for children of SCs, STs, BCs, minorities and differently-abled children, the state has been providing hostel and residential school facilities, supply of books and other provisions at free of cost.

A) Scheduled Castes Residential Schools :
Telangana Social Welfare Residential Edu-cational Institutions Society (TSWREIS) is running 268 (out of which 175 meant only for girls) residential educational institutions (from 5th standard to under graduate level) in the state for Scheduled Caste (SQ children. Of the 268 institutions, 134 were sanctioned after formation of the state.

B) Schedule Tribes Residential Schools :
a) Telangana Tribal Welfare Residential Educational Institutions Society (TTWREIS) (Gurukulams) :
There are 175 Gurukulams in the state, out of which 153 are residential schools and junior colleges and 22 are residential degree colleges for boys and girls. The total strength of the institutions is about 52 thousand students. The medium of instruction in these institutions is English,

b) Ashram Schools :
There are 321 ashram schools in the state with a total strength of about 92 thousand students; and

c) Government Primary Schools (GPS) :
Tribal Welfare Department is running 1,427 government primary schools with 1st to 3^rd or 5^th classes and around 22 thousand students are getting primary education as day scholars in these schools.

C) Backward Classes Welfare Residential Schools :
Mahatma Jyothiba Phule Telangana Backward Classes Welfare Residential Education Institutions Society (MJPTBCWREIS) is established to facilitate access to quality education for the students of backward classes (BCs) and economically backward classes (EBCs). The Society and the BC Welfare Department are running residential schools (261), residential junior colleges (19) for boys and girls and one residential degree college. The total sanctioned strength of all these institutions is 93,360.

D) Minority Residential Institutions :
Telangana Minorities Residential Educational Institutions Society (TMREIS) established with the objective of providing a high quality education for children belonging to the minority communities through residential schools. A total of 216 minority residential institutions including 12 colleges with 79,424 students are functioning in the state.

Question 8.
Describe health sector initiatives of Telangana state.
Answer:
Answer:
Education in Telangana :
Education is a crucial element in strengthening the human resources and economic development of a country. Education helps in creating more productive labour force. The 45^th Article of the Indian Constitution has laid the responsibility on the states to provide free and compulsory education to both boys and girls of the age group of 6 to 14 years.

Literacy Rates in Telangana :
According to the Population Census, 2011 the literacy rate of Telangana is 66.54 per cent. However considerable variations are observed in literacy rates among different groups like rural and urban, within districts, age groups, social groups and male and female.

As far as literacy levels in districts are concerned, among 33 districts of the state, Hyderabad stands at top with 83.25 percent literacy rate and Jogulamba Gadwal district stands at the bottom with 49.87 per cent.

1. Education Profile of the State :
a. Enrolment :
During the year 2017-18, about 58.71 lakh children were enrolled in all the schools, of them 53 percent were enrolled in private schools, 47 percent in government schools including the schools run by the centred government, local bodies and aided schools.

b. Gross Enrolment Ratio (GER) :
In 2017-18, the gross enrolment rate among children in primary schools was 98.76 for boys and 98.05 for girls and in upper primary schools, it was 87.32 for boys and 88.47 for girls. Overall, the GER for girls was higher than boys in upper primaiy schools in Telangana.

c. Pupil – Teacher Ratio (PTR) :
During 2018-19, the pupil-teacher ratio observed was 18.90, 14.12, and 17.85 for primary, upper primary and secondary schools respectively. The overall PTR is 17.67 for the year 2018.19.

2. School Education :
a. Samagra Shiksha Abhiyan :
Hitherto the state government implemented the centrally sponsored schemes (a) ‘Sarva Siksha Abhiyan’ (SSA) to universalise elementary education; and (b) ‘Rashtriya Madhyamik Shiksha Abhiyaan’ programme (RMSA) to improve the access and quality of secondary education.

b. Kasturba Gandhi Balika Vidyalaya (KGBV) :
There were 391 KGBVs at the time of formation of the state and this number increased to 475 by 2017-18. Government of India supports only classes VI to VIII under KGBVs, however, state government extended the scheme by adding IX and X classes to facilitate continuation of girls’ education upto Class-X and to avoid dropouts.

e. Model Schools :
194 model schools were started in the academic year 2013-14 in the state, with an objective to provide quality education in English medium by highly qualified teachers. As the scheme was terminated by the centre, the government of Telangana took over the responsibility of running model schools from the year 2015-16 onwards.

3. Intermediate Education :
The Department of Intermediate Education administers intermediate education system in the state. There are 2,558 junior colleges with a total enrolment of 7.18 lakh students. The department also offers 23 vocational education courses at intermediate level in junior colleges in the state with special focus on job oriented courses.

4. Higher Education:
a. Collegiate Education :
The objective of Department of Collegiate Education is to provide access, equity and quality in higher education. Towards this direction, state government is making all efforts with government of India funds under Rashtriya Uchchatar Shiksha Abhiyan (RUSA).

b. Degree Online Services, Telangana (DOST) :
The government of Telangana has introduced online admissions for under graduate courses (BA/BCom/BSc/BBA/etc) in the state of Telangana in the year 2016 through web based system called Degree Online Services, Telangana (DOST). In the year 2018-19, a total of 2,00,472 students were admitted in all degree colleges through DOST. Out of which 42,688 were admitted in government degree colleges.

c. Technical Education :
The department manages the government polytechnics and monitors the private unaided polytechnics and professional colleges. At present there are 820 diploma and degree level professional institutions in the state with a total intake of 1,36,805.

5. Social Welfare Educational Institutions :
To bring social equity and improve access to education for children of SCs, STs, BCs, minorities and differently-abled children, the state has been providing hostel and residential school facilities, supply of books and other provisions at free of cost.

a. Scheduled Castes Residential Schools :
Telangana Social Welfare Residential Educational Institutions Society (TSWREIS) is running 268 (out of which 175 meant only for girls) residential educational institutions (from 5^th standard to undergraduate level) in the state for Scheduled Caste (SC) children. Of the 268 institutions, 134 were sanctioned after formation of the state.

b. Schedule Tribes Residential Schools :
(a) Telangana Tribal Welfare Residential Educational Institutions Society (TTWREIS) (Gurukulams) : There are 175 Gurukulams in the state (b) Ashram Schools : There are 321 ashram schools in the state, (c) Government Primary Schools (GPS) : Tribal Welfare Department is running 1,427 government primary schools with 1^st to 3^rd or 5^th classes and around 22 thousand students.

c. Backward Classes Welfare Residential Schools :
Mahatma Jyothiba Phule Telangana Backward Classes Welfare Residential Education Institutions Society (MJPTBCWREIS) is established to facilitate access to quality education for the students of backward classes (BCs) and economically backward classes (EBCs).

d. Minority Residential Institutions :
Telangana Minorities Residential Educational Institutions Society (TMREIS) established with the objective of providing a high quality education A total of 216 minority residential institutions including 12 colleges with 79,424 students are functioning in the state.

Health Sector in Telangana :
In order to reach the goal of “Health for All” of World Health Organization (WHO), Government of Telangana is implementing different programmes like National Maternity Benefit Programme, Integrated Child Development Programme and Supplementary Nutrition Programme for the women in reproductive age group and the programme of Balika Samrudhi Yojana for children.

As per SEO – 2020, in Telangana state, there are 4,797 health sub-centres, 633 primary health centres, 249 urban primary health centres, 90 community health centres, 19 area hospitals, 29 district hospitals, 9 medical college hospitals, 12 speciality hospitals and 2 super speciality hospitals.

Health Sector related Programmes of Telangana :
After formation of the state, Telangana government initiated several health related programmes. Some of them are presented here under :

a) Kanti Velugu :
People mostly tend to live with eye problems or postpone until it is too late. Particularly, the women and elderly persons neglect eye vision problems. To address this problem, the government has launched Kanti velugu programme with a vision to build avoidable blindness free Telangana through simple pair of glasses and cataract surgery.

b) Basti Dawakhana :
Basti Dawakhana is an initiative to offer quality health services to urban poor. One basti dawakhana caters to 5000 – 10000 population. The basti dawakhana is located within the urban slum. Currently 104 basti dawakhanas are functioning in the state.

c) Health and Wellness Centres :
Health and Wellness centres will provide comprehensive health care, including for non-communicable diseases and maternal and child health services. These centres will also provide free essential drugs and diagnostic services. Currently 636 PHCs, 86 sub-centres, 104 Basti dawakhanas and 227 UPHCs have been converted as Health and Wellness Centres.

d) Telangana Vaidya Vidhana Parishad (TWP) Hospitals :
These hospitals (107) functioning under the control of TWP mainly cater to the maternity and child health care services, besides general medicine, general surgery, ophthalmology, paediatrics, orthopaedics, dermatology, ENT, etc.

e) AYUSH (Ayurveda, Yoga, Naturopathy, Unani and Homoeopathy) :
The Telangana government along with the National AYUSH Mission (NAM) is encouraging the AYUSH system of medicine. Presently 860 dispensaries and institutions are functioning under the AYUSH department.

f) Aarogyasri Health Care Trust :
Aarogyasri Scheme (AS) is a unique government sponsored health insurance scheme being implemented by Aarogyasri Health Care Trust in the state, with the objective of assisting below poverty line families. The scheme provides end-to-end cashless medical services for identified diseases.

g) KCR Kit :
The Telangana state government launched a new programme called KCR Kit on 2 June 2017 to provide compensation to pregnant women (pre and post natal periods) living below poverty line, who are receiving health services from public health institutions in the state, @ Rs. 12,000 (for a male child) and Rs. 13,000 (for a female child) for wage loss.

Question 9.
Analyse poverty and unemployment situations in Telangana.
Answer:
Poverty is a multi-faceted phenomenon and is influenced by social, economic, political and partly by external factors. Poverty can be defined as a social phenomenon in which a section of the society is unable to fulfill even it basic necessities of life and thus deprived of the minimum level of living.

a) Tendulkar Expert Group Poverty Estimates :
In 1993-94 for poverty line estimation, annual per capita was assumed as Rs. 244 for rural and Rs. 282 for urban population for Telangana. Similarly, in 2011-12 the annual per capita for poverty line was assumed as Rs. 860 for rural and Rs. 1009 for urban population. The rural and urban poverty in Telangana between 1993-94 and 2011-12 were 49% and 30.5% respectively.

b) Rangarajan Committee Report on Poverty Estimates :
The poverty in Telangana is much lower than the Indian average. The percentage of poor in rural Telangana is 9.3 whereas the corresponding figure for India is 30.9% and the percentage of urban poor in Telangana is 11.1, where as it is 26.4 in India.

Unemployment in Telangana :
Unemployment may be defined as a situation in which the person is capable of working both physically and mentally at the existing wage rate, but does not get employment to work. It means a person who is willing to work at the existing wage rate does not get a job. It indicates a situation where the total number of jobs is less than the total number of unemployed in the country. It is a kind of situation where the unemployed persons do not find any gainful employment inspite of having willingness and capacity to work. In Telangana, agriculture sector provides employment to over 60 percent of work force. A moderate portion of population in the state gets livelihood and employment from, allied activities such as livestock and fishing.

Further, the presence of industries in the state are not widespread large amount of industrial units are located in and around Hyderabad and Rangareddy districts. The other districts in the state have no or little industrial presence and therefore, a limited qualified, skilled and semi-skilled work force are absorbed by industry. Rest, of the labour force including semi-skilled workers rely on primary sector for income generation. Though, urbanization opened up window of opportunities for workers in the state, there are hitches for urban sector to absorb all work forces. On the contrary, growth in tertiary sector nonetheless created increased number of employment particularly for skilled professionals.

Unemployment Rates in Telangana :
Unemployment rate in the state is below the national average rate of unemployment in 2011-12. Unemployment on the whole is more prevalent among females than males. The similar sort of pattern could be seen across urban and rural areas.

Question 10.
Discuss the importance of Kaleswaram project.
Answer:
Kaleshwaram Project: Kaleshwaram Project has been conceived from the erstwhile Dr. B.R. Ambedkar Pranahita-Chevella Sujala Sravanthi project. Originally, Dr. B.R. Ambedkar Pranahita-Chevella Sujala Sravanthi was proposed to utilize 160 TMC of allocated water of Godavari basin as per Godavari Water Dispute Tribunal (GWDT) award. A barrage was proposed at Tummidihetti (V) to divert 160 TMC of water to irrigate 16.40 lakh acres in the rstwhile 7 districts of Telangana state viz., Adilabad, Nizamabad, Karimnagar, Medak, Warangal, Nalgonda and Rangareddy, besides drinking water and industrial uses.

Further, it also planned to provide 10 TMC of drinking water to the villages enroute, 30 TMC of drinking water to twin Cities of Hyderabad and Secunderabad and 16 TMC of water for industrial use. The entire project works are divided into 7 links and 28 packages. Agreements concluded for all 28 packages during 2007-08 and 2008-09.

Construction of one barrage across river Godavari at Medigadda near Kaleshwaram, and two more barrages between Medigadda (Lakshmi barrage) and Sripada Yellampally Project at Annaram and Sundilla and to convey water form Sripada Yellampally Project to the command area spread over in 7 districts of Telangana (now 13 districts after re-organization of districts in the state) through components such as canals, tunnels, lift systems, reservoirs and sitributory network for irrigating an ayacut of 18,25,700 acres against the original proposed acres against the original proposed ayacut of 16,40,000 acres.

Further, it is proposed to stabilize the existing ayacut i other major projects viz., SRSP Stage-I, SRSP Stage-II, Flood Flow Canal, Singur and Nizamsagar projects to an extent of 18,82,970 acres (new ayacut 18,25,700 plus stabilisation ayacut 18,82,970=37,08,670 acres). Besides irrigation, drinking water (30 TMC for twin cities and 10 TMC for enroute villages) and water for industrial use (16 TMC) were also proposed.

The total estimated cost of Kaleshwaram Project is Rs. 80,000 crore and the total expen-diture incurred till 31-07-2019 is Rs. 51,434 crore.

Question 11.
Write about various sources of energy in Telangana.
Answer:
Energy Sector in Telangana :
Telangana being agriculture dependent economy, is one of the highest power intensive states in India, with a per capita power consumption of over 1,727 units (as per 2017-18) by recording 13.62 percent annual growth rate in power consumption, Telangana stands first in the country as against an All India per capita power consumption of 1,181 units (as per 2018-19). With regard to power consumption, Telangana consumption was 53,017 million units (MU) in 2016-17 and it rose to 60,237 MU in 2017-18. Similarly, per capita consumption in 2016-17 was 1,551 units while it was increased to 1,727 units in 2017-18.

The total installed capacity of erstwhile Andhra Pradesh was divided between the suc-ceeding states in the proportion of 53.89 percent (to Telangana) and 46.11 percent (to Andhra Pradesh). Accordingly Telangana’s installed capacity as on December 2016, was at 12,295.75 MW which includes state, central and private sectors. As per Power Sector, Jan.2018, Gol, report as on 31-01-2018, the installed capacity of Telangana state was 14,689.46 MW, which includes state (7572.65 MW), central (2036.85MW) and private (5079.96 MW) sectors.

The major power projects in Telangana state are :
National Thermal Power Corporation (NTPC) located in Ramagundam (Karimnagar district), Kothagudem Thermal Power Corporation (KTPC) situated in Palvoncha (Khammam district), Kakatiya Thermal Power Corporation located in Bhupalapally (Warangal district) while some of the major hydroelectricity power plants are located at Nagarjunasagar, Pochampadu, Singoor, Nizamsagar and Pulichintala.

Question 12.
Write about SC/ST welfare programmes of Telangana.
Answer:
SC/STs Development and Welfare Programmes : These programmes are discussed as under.

1) SC and ST Special Development Fund :
Through SC/STs special development fund (SDF) Act, 2017, government has formulated two budget heads, namely :
i) ‘SC Special Development Fund (SCSDF); and
ii) ‘ST Special Development Fund (STSDF)’ The ongoing programmes like Kalyana Laxmi, Sanna biyyam to the SC/ST hostels etc. for the welfare of SC/STs are provisioned under SCSDF and STsDF respectively.

2) Scheduled Castes Welfare :
In Telangana, the Scheduled Castes Development Department co-ordinates and monitors the implementation of the following SC welfare schemes :

a) Kalyana Lakshmi for SCs :
The government launched this scheme on 2^nd October, 2014. A one-time financial assistance of Rs. 51,000/- was being provided to the bride’s family at the time of marrriage to meet the marriage related expenses of a Telangana resident girl of over 18 years of age belonging to SC community with a parental income not exceeding Rs. 2 lakh. The financial grant has been enhanced from Rs. 51,000 to Rs. 75,116 in 2017 and further to Rs. 1,00,116 in 2018.

b) Ambedkar Overseas Nidhi Scheme :
Under this scheme the students belonging to SC community are provided with a scholarship grant for overseas study to the tune of Rs. 20 lakh subject to parental annual income limit upto Rs. 5 lakh. With this grant the students can pursue their higher studies in USA, UK, Canada, Australia, Singapur, France, Germany. Japan, Newzealand and South Korea. During 2018-19. 101 students have been selected under this scheme.

c) Land Purchase Scheme :
The government of Telangana launched this programme for the benefit of the poorest of the poor SC women families. Under this scheme, and extent of 15,044.35 acres’of land has been purchased and distributed to 5,930 beneficiaries at a cost of Rs. 657.71 crore.from 2014-15 to 2019-20.

3) Scheduled Uribes Welfare :
The government of Telangana launched the following schemes for the integrated development of the scheduled tribes :
a) Kalyana I akshmi for STs :
This programme was launched on 2nd October 2014. A one-time financial assistance of Rs. 1,00,116/- shall be granted at the time of marriage to each ST girl who attains the age of 18 years.

b) Economic Support Schemes :
Under this scheme, financial assistance to tribal population is provided in the fields of agriculture, horticulture, fisheries, minor irrigation, animal husbandry and self-employment.

c) Forest Rights Act, 2006 :
Under this Act, individual titles were distributed to 93,494 forest dewllers (tribals) covering an extent of 3,00,092 acres. The forest land right holders have right for self-cultivation and the land is non-transfefable, inalienable but heritable. During the year 2018-19, 91,927 farmers were distributed with an extent of 2.99 lakh acres under Rythu Bandhu scheme.

Very Short Answer Questions

Question 1.
Gross district domestic product.
Answer:
Gross District Domestic Product (GDDP) is the sum of the economic value of all final goods and services produced within the geographical boundaries of the district, counted without duplication during a specified period of time, usually a year. Hyderabad district tops in GDDP followed by Rangareddy Medchal-Malkajgiri and Sangareddy districts which stand at second, third and fourth positions respectively.

Question 2.
Per capita Income (PCI).
Answer:
Per capita income can be obtained by dividing National income with total population
P.I = National income/Total no. of population.

It is useful to know the standard of living of the people in a country.

There is a step rise in the PCI of the state from Rs. 91,121 in the year 2011-12 to Rs. 2,28,216 in the year 2019-20 (AE).

Question 3.
Child Population.
Answer:
The age group of consisting of 0-6 years denote child population. In Telangana, the share of child population marginally decreased from 14.2% in 2001 to 10.5% in 2011. It may be due to the impact of growing literacy, education, and higher increases besides adoption of family planning measures. The share of child population to total population in all most all districts is nearer to state share of 10.5% except in Mahaboobnagar where it is 17.4%.

Question 4.
Food and Non-food Crops.
Answer:
Food crops broadly consist of cereals, millets, pulses and non-food crops include cotton, oil seeds, flowers, etc.

Question 5.
Operational holding.
Answer:
The average size of the operational land holding in the state is 1.00 hectare (2.47 acres) in 2015-16 which is less than the national average size of 1.08 hectares and declined from 1.12. hectares in 2010-11. It is note worthy that the operational land holdings size of marginal and small farmers constitutes about 80 percent of the total. Operational holdings in the state.

Question 6.
Rythu Bandhu.
Answer:
Rythu Bandhu :
Rythu Bandhu scheme is aimed at empowering the farmers of the state of Telangana by providing them with an investment support to relieve them from the burden of debt. It was launched on May 10^th 2018. The government provides investment support for agriculture and horticultue crops by way of gmat of Rs. 4,000/- per acre to all farmers (pattadars) each season (Rs. 8,000 per annum) for purchase of inputs like seeds, fertilizers, pesticides, labour and other investments in the field operations of farmer’s choice for the crop season.

Question 7.
Rythu Bhima.
Answer:
Rythu Bhima :
The government of Telangana launched Rythu Bima scheme on August 15, 2018. Its objectives is to provide financial relief and security to the family members/dependents of the deceased farmer incase of higher death. The scheme provides an insurance cover of Rs. 5 lakh to every farmer.

Question 8.
MSME.
Answer:
MSME Sector in Telangana :
Micro, Small and Medium Enterprises (MSME) provides complementary products to large industries as ancillary units and contribute enormously to inclusive growth and region balanced development of the state. This sector plays a pivotal role in providing employment opportunities at comparatively lower capital cost to those who are low skilled.

Question 9.
TS – I pass.
Answer:
The government has enacted the “Telangana state industrial project Approval and self certification system (T.S. – I pass) Act 2014. To provide for an investor friendly environment in the state of Telangana based on the self certification by the entrepreneur”

Question 10.
Image Tower
Answer:
IMAGE Tower :
Government is establishing a dedicated work place for development of animation, gaming arid VFX industry i.e., IMAGE Tower with state of the art infrastructure and services. IMAGE Tower is being developed in an area of 10 acres (in Raidurgam village, R.R. district) with a project cost of Rs. 1,000 crore on a public private partnership (PPP) mode.

Question 11.
Asara pensions Scheme.
Answer:
This scheme introduced with a view to ensure secured,life with dignity for all the poor. It is meant for the old and infirm poeple with HIV – AIDS, widows; oldage people etc.

Question 12.
Telangana Fibre grid.
Answer:
Telangana Fiber Grid (T-Fibre) Project :
Government of Telangana has initiated this project in 2015. Its vision is to establish a state-of-the-art network infrastructure that would facilitate the realization of Digital Telangana to 10 Zones (33 districts).

Question 13.
Mission Kakatiya.
Answer:
The Telangana government has introduced a new scheme called “mission kakatiya”. The main tag of it is “manavooru – mana cheruvu”. The scheme envisages the revival and restoration of minor irrigation tanks including chain – link tank system in the villages of the state that facilitated most of the irrigation in Telangana prior to 1956. The government expected to solve the water scarcity of drought prone Telangana effectively.

Question 14.
Sex ratio in Telangana.
Answer:
It is defined as the number of females per 1000 male population. As per the 2011 census, the sex ratio was 988 females per 1000 male in Telangana, where as it was 943 females per 1000 rriales population in India. Thus, Telangana state has relatively more female population than that is recorded at the national level.

Question 15.
Gross Enrolment ratio.
Answer:
This concept determines the number of students enrolled in educational institutions that is schools colleges, universities etc. In 2017-18, the gross enrolment rate among children in primary schools was 98-76 for boys and 98.05 for girls and in upper primary schools it was 87.32 for boys and 88.47 for girls. Overall, the GER for girls was higher than boys in upper primary schools in Telangana. .

Question 16.
Scheduled caste residential schools.
Answer:
The Telangana social welfare residential Educational Institutions society (TSWREI) is running 268 (out of which 175 meant only for girls) residential educational institutions (from 5th standard to under graduate level) in the state for scheduled caste (SC) children of the 268 institutions. 134 were sanctioned after formation of the state.

Question 17.
Kanti velugu.
Answer:
Kanti Velugu :
People mostly tend to live with eye problems or postpone until it is too late. Particularly, the women and elderly persons neglect eye vision problems. To address this problem, the government has launched Kanti velugu programme with a vision to build avoidable blindness free Telangana through simple pair of glasses and cataract surgery.

Question 18.
Human development Index.
Answer:
The composite index of human development consists of three dimensions that arepercapita income, continuity of life and health standards, literacy and education,.

Question 19.
Arogya Lakshmi.
Answer:
Aarogya Lakshmi :
With an aim to enhance the levels of nutrition in pregnant and lactating women, Telangana government is providing one nutritious meal everyday to pregnant women and the children below the age of six, living below poverty line, through Anganwadi centers. The scheme was launched on January 1, 2015.

Question 20.
Unemployment.
Answer:
Unemployment may be defined as a situation in which the person is capable pf working both physically and mentally at the existing wage rate, but does not get employment to work. It indicates a situation where the total number of jobs is less than the total number of unemployed in the country. It means a person who is willing to work at the existing wage rate does not get a job.

Question 21.
Kalyana Lakshmi.
Answer:
To alleviate financial distress of SC/ST families, government had decided to sanction a one time financial assistance of Z 51,000/- at the time of marriage of each SC/ST girl. It is implemented on October, 2nd 2014.

Question 22.
Mission Bhagiratha.
Answer:
It was launched on Aug 7, 2016 in Komati Banda (V) Gajwel, Medak District. This programme was conceived to provide 100 litres per capita per day (LPCD) of treated and piped water in rural areas, 135 LPCD in municipalities, and 150 LPCD in municipal corporations.

Question 23.
BCs welfare schemes.
Answer:
The welfare schemes launched by the state government for the welfare of BC’s include.
a) Kalyana lakshmi scheme for BC’s. This scheme was extended to economically back- v ward classes in the year 2016-17.

b) Most backward classes development corporation was established in 2017 to with a sharp forms on improving the social, educational and financial conditions of most backward classes (MBQ among BCs. Rs. 1000 crore has been allocated in the finan- rial year 2018-19 and 13,367 beneficiaries were identified.

Question 24.
Minorities Welfare Schemes :
Answer:
The minorities they are Muslims, Christians, Sicks, Buddhists, Parsees and Jains constitute 14 percent of the total population of Telangana. (a) Bank linked subsidy scheme. The scheme is implemented for minorities for setup viable self employment business units.

(b) Training, employment and skill development the minorities department tends training and skill development and arranges self employment for minority youth through minority finance corporation, (c) Shaadi mubarak scheme, under this scheme the government one time grant of Rs. 1,00,116 to the eligible minority bride’s family at the time of marriage.

Telangana TSBIE TS Inter 2nd Year Economics Study Material 9th Lesson Environmental Economics Textbook Questions and Answers.

TS Inter 2nd Year Economics Study Material 9th Lesson Environmental Economics

Essay Questions

Question 1.
Explain different types of pollution and examine their effects.
Answer:
Pollution :
Environmental pollution refers to the presence of mater (gas, liquid, solid) or energy (heat, noise, radiation) whose nature, location of quality directly or indirectly alters characteristics or processes of any part of environment, and causes (of has the potential to cause) damage to the condition, health, safety or welfare of animals, humans, plants or property. In short it is a term that refers to all the ways by which people pollute their surroundings.

1. Air Pollution :
Air pollution is a mixture of solid particles and gases in the air. The sources of air pollution are :

1. agricultural activities
2. Combustion
3. manufacturing processes
4. solvent usage; and
5. nuclear energy programmes.

Air pollution affects the respiratory system of humans, animals and birds. It causes diseases like T.B. and asthma. Air pollution affects food items, vegetables and fruits. Plants, crops and grazing lands are covered with layers of dust and land productivity decreases. Its effects are felt on monuments, buildings and art forms as particles of acid are spread out.

It damages the green house and there by the temperature on the earth increases, icy glaciers and polar regions melt down. Life of the living organisms become vulnerable. Acid rains are also due to air pollution and they damage the earth’s surface, buildings, trees, plants and wild life.

2. Water Pollution :
The process of altering the properties of water which makes it useless or harmful is called water pollution. It is defined as the addition of excess materials to water, which are harmful to living organisms. It is a change in the quality of water due to which it is unusable or dangerous. Fresh water contains dissolved materials like phosphates, oxygen, hydrogen, organic compounds, silt and micro organisms. Lack of balance between them is due to pollution. Main water pollutants are :

1. sewage and other oxygen demanding wastes infectious agents
2. exotic organic chemicals and
3. inorganic mineral and compounds.
4. radioactive waste
5. plastic pollution .
6. chemical fertilisers and pesticides.

Water-born diseases like cholera, typhoid and dysentry affect human health, especially, in the rural areas where safe drinking water is a problem. Water pollution decreases the agricultural productivity and degrades the natural fertility of the soil. Cost of production of some industries increases as they have to spend huge amounts to purify water they need. Water pollution kills the fish and thus damages the aquatic food reserves.

3. Noise Pollution :
Noise pollution refers to the physiological or psychological harm created by sound. Traffic, railways, industries, construction works, public gatherings, use of loud speaker, crackers, drums etc. are the sources of noise pollution. Loud or disagreeable sound is noise. Noise is a pollution component and it deteriorates the environment. Noise pollution affects human beings, animals and birds also. It damages the ear and causes temporary or permanent hearing loss, Prolonged exposure to noise pollution causes deafness. Some times noise pollution creates physiological disorders. It creates irritation and affects the brain and nervous system. Mental fatigue, lack of concentration and inability to think and act properly are the other effects. The efficiency of labour and their occupational performances decrease due to continuous exposure to noise.

Question 2.
In what way environmental degradation effects the economy? Suggest remedial measures to overcome this problem.
Answer:
Environmental degradation means the disintegration of the earth or the deterioration of the natural assets in the environment. It is any change or aggravation to nature’s turf which is undesirable. It occurs when earth’s natural resources are depleted as result of which extinction of some species, pollution in air, water and soil take place. Environmental degradation has become one of the largest threats to the world.

Effects of Environmental Degradation :

1. Human health is at the receiving end. Pollution has increased. Diseases like asthma, pneumonia and diarrhea. These are bringing about certairi atmospheric changes which are likely cause uncertain and irreversible hazards like green house effects and ozone deplection to future generations. Air bom, water borne and sound related health issues have been increasing.
2. Bio-diversity is important to maintain the balance of the eco-system. Environment degradation leads to loss of bio-diversity.
3. Ozone layer protects the earth from harmful ultraviolet rays. Environmental degrada-tion depletes the ozone layer. Harmful radiations are sent back to the earth.
4. Tourists visit a country to see and enjoy the nature, animals birds and lush green landscape. Environmental degradation discourages tourist traffic into a country.
5. Government is constrained to spend huge amounts to protect environment from degradation and this is an avoidable burden.
6. Environmental degradation can be prevented and taken care of the mother earth. People should be educated on the need to preserve and protect environment from degradation.

Question 3.
Explain the causes and consequences of various pollutions.
Answer:
Answer:
Pollution :
Environmental pollution refers to the presence of mater (gas, liquid, solid) or energy (heat, noise, radiation) whose nature, location of quality directly or indirectly alters characteristics or processes of any part of environment, and causes (of has the potential to cause) damage to the condition, health, safety or welfare of animals, humans, plants or property. In short it is a term that refers to all the ways by which people pollute their surroundings.

1. Air Pollution :
Air pollution is a mixture of solid particles and gases in the air. The sources of air pollution are :

1. agricultural activities
2. Combustion
3. manufacturing processes
4. solvent usage; and
5. nuclear energy programmes.

Air pollution affects the respiratory system of humans, animals and birds. It causes diseases like T.B. and asthma. Air pollution affects food items, vegetables and fruits. Plants, crops and grazing lands are covered with layers of dust and land productivity decreases. Its effects are felt on monuments, buildings and art forms as particles of acid are spread out.

It damages the green house and there by the temperature on the earth increases, icy glaciers and polar regions melt down. Life of the living organisms become vulnerable. Acid rains are also due to air pollution and they damage the earth’s surface, buildings, trees, plants and wild life.

2. Water Pollution :
The process of altering the properties of water which makes it useless or harmful is called water pollution. It is defined as the addition of excess materials to water, which are harmful to living organisms. It is a change in the quality of water due to which it is unusable or dangerous. Fresh water contains dissolved materials like phosphates, oxygen, hydrogen, organic compounds, silt and micro organisms. Lack of balance between them is due to pollution. Main water pollutants are :

1. sewage and other oxygen demanding wastes infectious agents
2. exotic organic chemicals and
3. inorganic mineral and compounds.
4. radioactive waste
5. plastic pollution .
6. chemical fertilisers and pesticides.

Water-born diseases like cholera, typhoid and dysentry affect human health, especially, in the rural areas where safe drinking water is a problem. Water pollution decreases the agricultural productivity and degrades the natural fertility of the soil. Cost of production of some industries increases as they have to spend huge amounts to purify water they need. Water pollution kills the fish and thus damages the aquatic food reserves.

3. Noise Pollution :
Noise pollution refers to the physiological or psychological harm created by sound. Traffic, railways, industries, construction works, public gatherings, use of loud speaker, crackers, drums etc. are the sources of noise pollution. Loud or disagreeable sound is noise. Noise is a pollution component and it deteriorates the environment. Noise pollution affects human beings, animals and birds also. It damages the ear and causes temporary or permanent hearing loss, Prolonged exposure to noise pollution causes deafness.

Some times noise pollution creates physiological disorders. It creates irritation and affects the brain and nervous system. Mental fatigue, lack of concentration and inability to think and act properly are the other effects. The efficiency of labour and their occupational performances decrease due to continuous exposure to noise.

Question 4.
What are the objectives of environmental sustainability? Explain the im-portance of sustainable development.
Answer:
Sustainable Development: Economic development without destruction of the envi-ronment is called sustainable development. Such a development integrates environment in the process. It can be defined as “development meeting the needs of the present without compro-mising the ability of the future generations to meet their own needs”. Mere growth is not enough to enhance the human well-being; it is accepted that a balance between the use of resources and their regeneration sustains the process of development.

Objectives of Sustainable Development :

1. Increase of Growth or Income :
Sustainable development aims to increase the standard of living of all the sections of the society. Health, education, participation in public life, clean environment and promotion of equity for the future generations are included in improving standards of livings.

2. Continuity of Development :
Physical, human and natural capital are to be preserved and carefully used under sustainable development. It emphasizes both present and future de-velopment.

3. Controlling Degradation :
Development should not lead to environmental degradation affecting the quality of life. Development should not reduce productivity in the long run. It implies control of pollution. Quality of land, water, air and soil should be maintained for sustainable development, Current decisions on economic development should not impair the prospects of living standards of future”generations.

4. Protection of Bio-Diversity :
Sustainable development assigns priority to preserve the bio-diversity. All production activities are related to bio-diversity Genetic diversity, species diversity and eco-diyersity are to be maintained for sustained development.

Importance of Sustainable Development: Sustainable development practices protect wild life, forests, water bodies and biodiversity needed for life to continue on earth. The importance of sustainable development is as follows :

1. Change of Attitudes :
Sustainable development changes the attitudes of the people. Instead of abusing nature we must preserve and protect it. It promotes the attitude to use natural resources to satisfy our needs but not greed.

2. Eco-Friendly Innovations :
It encourages only eco-friendly methods and innovations for economic development.

3. Limits Economic Activities :
It limits the economic activities within the absorbing capacity of the environment.

4. Future Development :
It ensures economic well-being of the future generations by protecting the environment.

5. Scope for Increased Action by the Government :
Sustained development assigns greater role to the governance. The activities of the government under sustained development include:
a) community involvement,
b) decentralization,
c) positive incentives,
d) creation of new policy and administrative mechanism; and
e) encouragement to environmental workers and NGOs.

6. New Look to Growth :
Sustainable development gives a new meaning to economic growth in terms of quality of life.

7. Conservation of Resources :
Sustainable development harps upon the need to conserve resources for continuity and equality in development. It encourages regeneration of resources.

8. Preserves Bio-Diversity :
Sustainable development recognizes the importance of bio-diversity. Human survival depends oh the preservation and maintenance of bio-diversity. It encourages policies to control:
a) environmental degradation.
b) pollution.
c) over exploitation fo natural resources.
d) decline in the flora and fauna; and
e) global environmental disparities.

9. Balances Economic, Social and Environmental Dimensions of Development :
The three components of sustainable development are interlinked as shown below:

10. Realization of the Importance of Nature :
Sustainable development helps the stake holders to realize the importance of nature. This earth is meant for all the living organisms, but not to human beings only. All of us should preserve it and hand it over to future generations.

Sustainable development reminds the humanity of the need to work with others to help, sustain and heal the earth. It stresses the need to protect and preserve environment with all its resources.

Short Answer Questions

Question 1.
What are natural resources?
Answer:
Natural Resources :
Resources are the means to satisfy human needs at a given time and place. Nature is a reservoir of different resources. These resources are used in production process to satisfy the consumption needs. Natural resources are defined as organic and inorganic matter provided outside the economic system which are manipulated by humans to furnish the raw materials needed to satisfy human wants.

Features of Natural Resources :

1. They are free gift of nature and persons only extract them.
2. The stock of the natural resources is fixed at a given point of time.
3. Some natural resources are hidden in nature and they come out only when persons explore them with technology.
4. The stock is fixed by nature in many cases.
5. The changes in the stock of natural resources are subject to natural and biological changes over a period of time.
6. With the development of technology and scientific knowledge new resources emerge from nature over a period of time.

Question 2.
What is the sustainable development?
Answer:
Economic development without destruction of the environment is called sustainable de-velopment. Such a development integrates environment in the process. It can be defined as development meeting the needs of the present without compromising the ability of the future generations to meet their own needs. Mere growth is not enough to enhance the human well being it is accepted that a balance between the use of resources and their regeneration sustains the process of development. Hence, development strategies today emphasis the development of the environment economy and the society together. Development goes on taking place if it is sustainable.

The concept of sustainable development was first used in 1980 by the world conservation strategy presented by the international Union for Conservation for Nature. The term “sustain-able development” was brought into common use by the Brundtland report.

Daly (1990) gave three rules for sustainable development which include :

1. Those resources which are renewable are not used at a rate which surpasses the rate of their regeneration.
2. Those resources which are not renewable are not used at a rate which surpasses the rate at which a substituting resource become available.
3. The rate of which polluting materials are disposed off does not surpass the carrying capacity Of the environment.

Question 3.
Why should we protect the environment?
Answer:
Need for Environment production :
The need for environmental protection can be explained here under:
1) Most of the developing countries including India depend on agriculture. Agricultural development and food security depend on environment. Good rains, climate, soil and quality seeds are made available by the environment. Over utilization of chemical fertilisers, insecticides and pesticides damage the environment andn in the long run, land loses its original fertility.

2) Forests and vegetation provide rains and balanced weathers. Forests regain water to maintain the ground water levels favourably. More trees should be planted to balance the depleted forests.

3) Environmental protection helps economic activities like mining, dairy, fisheries along with industries. A country can eliminate poverty by producing more goods in the long run by maintaining environmental balance.

4) Environmental protection contributes to social development by increasing health and wealth of a nation.

5) Environmental protection promotes human happiness. Environmental imbalances lead-ing to floods, earth quakes, famines, cyclones destroy the economy and society.

6) Over-use of natural resources by the present generation damages the interests and well being of the future generations. Environmental protection through sustainable development takes care of the future generations and their economic welfare.

7) Environmental protection ensures pollution – free living. Health and happiness of the humanity improve a lot in a no-pollufion situation.

8) Environmental protection helps to maintain bio-diversity and ecological balance. It also helps to maintain the ozone layer, glaciers and other endowments of nature in proper order.

Question 4.
Discuss the types of pollutions.
Answer:
Pollution :
Environmental pollution refers to the presence of mater (gas, liquid, solid) or energy (heat, noise, radiation) whose nature, location of quality directly or indirectly alters characteristics or processes of any part of environment, and causes (of has the potential to cause) damage to the condition, health, safety or welfare of animals, humans, plants or property. In short it is a term that refers to all the ways by which people pollute their surroundings.

1. Air Pollution :
Air pollution is a mixture of solid particles and gases in the air. The sources of air pollution are :

1. agricultural activities
2. Combustion
3. manufacturing processes
4. solvent usage; and
5. nuclear energy programmes.

Air pollution affects the respiratory system of humans, animals and birds. It causes diseases like T.B. and asthma. Air pollution affects food items, vegetables and fruits. Plants, crops and grazing lands are covered with layers of dust and land productivity decreases. Its effects are felt on monuments, buildings and art forms as particles of acid are spread out.

It damages the green house and there by the temperature on the earth increases, icy glaciers and polar regions melt down. Life of the living organisms become vulnerable. Acid rains are also due to air pollution and they damage the earth’s surface, buildings, trees, plants and wild life.

2. Water Pollution :
The process of altering the properties of water which makes it useless or harmful is called water pollution. It is defined as the addition of excess materials to water, which are harmful to living organisms. It is a change in the quality of water due to which it is unusable or dangerous. Fresh water contains dissolved materials like phosphates, oxygen, hydrogen, organic compounds, silt and micro organisms. Lack of balance between them is due to pollution. Main water pollutants are :

1. sewage and other oxygen demanding wastes infectious agents
2. exotic organic chemicals and
3. inorganic mineral and compounds.
4. radioactive waste
5. plastic pollution .
6. chemical fertilisers and pesticides.

Water-born diseases like cholera, typhoid and dysentry affect human health, especially, in the rural areas where safe drinking water is a problem. Water pollution decreases the agricultural productivity and degrades the natural fertility of the soil. Cost of production of some industries increases as they have to spend huge amounts to purify water they need. Water pollution kills the fish and thus damages the aquatic food reserves.

3. Noise Pollution :
Noise pollution refers to the physiological or psychological harm created by sound. Traffic, railways, industries, construction works, public gatherings, use of loud speaker, crackers, drums etc. are the sources of noise pollution. Loud or disagreeable sound is noise. Noise is a pollution component and it deteriorates the environment. Noise pollution affects human beings, animals and birds also. It damages the ear and causes temporary or permanent hearing loss, Prolonged exposure to noise pollution causes deafness. Some times noise pollution creates physiological disorders. It creates irritation and affects the brain and nervous system. Mental fatigue, lack of concentration and inability to think and act properly are the other effects. The efficiency of labour and their occupational performances decrease due to continuous exposure to noise.

Question 5.
Bring out the relationship between environment and development.
Answer:
Economic development in the context of environmental degradation poses health related issues also to the poor. Environmental costs are not taken into account while calculating GNP. The basic reason for this lacuna is a historical absence of environmental consideration in the process of economic development. Long term national productivity is affected due to the damage to the environment. Rapid population growth and expanding economic activities are likely to damage the environment within which further economic activity would take place.

Environment provides the raw materials and proper climatic conditions for the economic activities. At the same time it absorbs the wastes discharged by the economic enterprises. Reckless and exploitative natue of the economic activity reduces the efficiency of environment to supply the needed resources. Over the years, the capacity of environment to absorb different wastes also decline. Economists like Kenneth E Bounding warned the world about the conse-quences of pressure in the interest of the future as well as the present generations. A balance between inputs to produce goods and the discharge of waste should be maintained. The quantitiy of wastes and emissions must be less, so that absorption by the environment can be feasible.

Environment performs three interlinked economic functions it supplies us both renewable and non-renewable resources it assimilates the waste and it provides’the life support services. These functions have positive values. Crisis arises when the environment fails to perform these three functions. Hence, economic functions of the. environment are to be viewed carefully. One should recognise that there are interlinkages between economic development and the environment.

All the resources for economic development come from nature. Life on this earth survives only within environment. There is a necessity to conserve resources without decreasing the growth rates. Development projects involve ecological issues and depletion of the resources. So conservation programmes are to be planned while formulating social and economic objectives.

Economic development is to keep sustainability in view. Sustainable development aims to take care of future generations and environmental capital which includes pure air, safe drinking water, forest and mineral resources. Pollution of air, water, noise and vision is the direct dutcome of economic development. Environmental pollution is the externality of economic growth. Over production in a country creates air, water and noise pollution.

Economic policies concerned with agriculture and rural development should be environ-ment.friejidly. Farm practice, bio-diversity, limited use of chemical fertilizers, water harvesting and development of plantations be conceived in the interest of environmental protection and sustainable development.

Growing urbanization creates problems to the environment. Migration of rural people to urban centers has increased the slums. They create water, air and vision pollution. Sanitation becomes a major issue in the urban centers besides housing. Vehicular and industrial emissions pollute the environment. Urbanization as a result of rapid industrialization and growing economic activities damages the environment.

Grbwing consumerism in the process of development leads to over exploitation and misuse of natural resources. Depletion of ozone layer, global warming, acid rains and untimely floods are some of the problems due to production and excessive use of resources.

Environment provides the resources for economic development. At the same time it gets degraded through economic activities. A balance between these two is to be maintained by all the global partners.

Question 6.
Point out the reasons for environmental degradation.
Answer:
United Nations International Strategy for Disaster Reduction characterizes environmental degradation as the decrease in the limit of the earth to meet social and environmental degradation.

Reasons for Environment Degradation :
1. Land Disturbance :
Weedy plant species assume control over nature and eliminate the local greenery. Invasive species destroy land and environmental assets. Over grazing also disturbs the fertile turf and earth becomes hard. Land degradation and soil erosion are serious problems which India is facing, as nearly 40 percent of land is subjected to soil erosion through water and wind.

2. Pollution :
Air, water, land and noise pollutions are harmful for the environment. They destroy the quality in air, water and land. Sound pollution damages the ears and threatens the animals and birds. Rapid population growth also puts strain on the natural resources due to which environment degrades.

3. Solid and Hazardous Wastes :
Many cities, particularly in developing countries, generate more solid wastes than they can collect or dispose of. Even where provision for collection is satisfactory, safe disposal of collected wastes often remains a problem. It badly affects human health and productivity. In addition to spreading disease, solid and hazardous wastes pollute ground water resources. E-waste is another important and growing hazardous waste. Electronic waste is one of the fastest growing waste streams worldwide.

4. Soil Degradation :
One of the chief forms of soil degradation is soil erosion, which is often a result of wind and water erosion. Soil erosion denudes the agricultural land of its top fertile layer and thus affects agricultural productivity adversely. It also harms productivity by depositing silt in dams, irrigation systems and river transport channels and by damaging fish-eries. Salinisation and water logging are other serious forms of soil degration. If salinity level is exceeded, the land becomes unfit for cultivation.

5. Rangeland Degradation :
In general, rangeland degradation is reduction in the status of natural Vegetation. The main causes of rangeland degradation in India are irrational land use management practices leading to denudation of vegetation from rangelands which exacerbated by intermittent droughts has resulted in many parts of desertification. Rangeland degradation affects water quality because streams, rivers and lakes are strongly influenced1 by land scape characteristics of their watershed.

6. Loss of Biodiversity :
Biodiversity comprises of genetic information, species and eco-systems. It is an essential requirement for the maintanance of global food supply. Production activities depend on biodiversity. Biological diversity provides the cultural identity. Hence, loss of biodiversity jeopardises all this.

7. Deforestation :
Deforestation is cutting down of trees to provide space for more homes and industries. Trees in the forest are destroyed for fuel and to take up agriculture. Big river valley projects are also responsible for the clearance of the forests. Deforestation increases global warming by sending carbon back into environment.

8. Natural Causes :
Earth quakes, tidal waves, storms, tsunamis and wild fires crush animals and plant groups. They have immediate as well as long term effectgs on nature.

9. Industrialization and Over Production :
Science and technology have expanded pro-ductive capacities of the nations at the global level; Raw materials and other natural resources are exploited extensively to produce more. Replacement is not planned. Industries through smoke, sound, effluents degrade the environment.

10. Faulty Mining Practices :
Large scale extraction of minerals are creating serious environmental problems, ruining the country’s land, water, forest and air. The disposable mining waste, mineral dust from mines are constantly polluting the air and also reducing agricultural productivity.

Very Short Answer Questions

Question 1.
Types of Environment
Answer:
Environment is the combination of all physical and organic factors that act on living, being. These are three types of environment.

1. Physical environment
2. Biotic environment .
3. Social or Cultural environment.

Question 2.
Ecosystem.
Answer:
This concept was given by A.G. Tansely in the year 1935. An ecosystem is a region with specific land scape such as forest grassland, desert, plant and animals.

Question 3.
Air pollution.
Answer:
Air is the combination of various individual gases like oxygen and hydrogen.

The recessive concentration of contaminated substance in the air which adversely affects the well’being of the individuals, living organs and properly of all forms is called as air pollution.

Question 4.
Water pollution.
Answer:
Water is very essential for the existence of all the living organisms. Water.pollution is defined as the addition of some substances of factor present in water which degrades its quality. So that it becomes health hazard or unfit for use. Increased human and economic activities make the water impure for consumption.

Question 5.
Physical Environment.
Answer:
It is also known as abiotic environment and natural environment. It includes non-living or physical things like land, water, air and atmosphere. Climatic factors like sun beams, rain water etc., are included in this.

Question 6.
Environmental degradation.
Answer:
Depletion of potentially renewable resources. It means the disintegration of the earth or the deterrioration of the natural assets in the environment. It has become one of the largest threats to the world.

Question 7.
Sustainable development.
Answer:
Concepts of sustainable development :
Economic development without the destruction of the environment is called sustainable development. It can be defined as development meeting the needs of the present without compromising the ability of future generations to meet their own needs.

Question 8.
Renewable and non-renewable resources.
Answer:
Natural resources which can be used permanently without depletion are called renewable resources. They are not exhaustible. Their stock is not fixed. These are also known as non-conventional resources. For example solar, wind, and tidal.

The natural resources which will exhaust by use are called nonrenewable resources. They cannot be regenerated. They are also called conventional resources example gold, silver, copper oil, gas, coal, etc.

Telangana TSBIE TS Inter 2nd Year Economics Study Material 5th Lesson Agricultural Sector Textbook Questions and Answers.

TS Inter 2nd Year Economics Study Material 5th Lesson Agricultural Sector

Essay Questions

Question 1.
Explain the importance of agriculture in Indian Economy.
Answer:
Importance of Agriculture in I nidian Economy :
1. Share of Agriculture in GDP or GVA :
At the time of the First World War, agriculture contributed two-thirds of national income. After the initiation of planning in India, the share of agriculture has declined due to the development of the secondary and tertiary sectors. In 1950-51 the share of agriculture and alllied activities in gross domestic product (GDP) was 56.5% and it declined to 24.7% in 2000-01 and further to 13.9% in 2012-13.

The value of GVA of agriculture and allied sectors increased from Rs. 20.94 lakh crore in 2014-15 to Rs. 30.47 lakh crore in 2019-20(PE). The share of agriculture sector as percentage of GVA decreased from 18.2 percent in 2014-15 to 16.5 percent in 2019-20 (PE). Further during the same period, the share of crops dec reased from 11.2 percent to 10 percent, the share of livestock increased from 4.4 percent to 4.9 per cent, the share of forestry & logging decreased from 1.5 percent to 1.2 percent while the share of fishing marginally increased from 1.0 per cent to 1.1 percent. In developed countries like USA and the UK around 2% of GDP only is derived from agriculture sector.

2. Providing Employment :
The number of people engaged in agriculture increased from 98 million in 1951 to 235 million in 2001. In terms of percentage, people working on land came down from 70 in 1951 to 59 in 2001. During the period 2008-11, agriculture provided employment to 46% of the male workers and 65% of the female workers. Overall, 49 percent workforce engaged in agriculture by the year 2011. Employment in agriculture in India was reported at about 43% in 2019.

3. Providing Raw Materials to Industries :
Agricullture provides raw materials to various leading industries. Sugar, jute, cotton textiles, vanaspati, flour mills, plantations and food processing industries depend on agriculture directly. Many other industries depend on agriculture indirectly. Many small scale and cottage industries depend upon agriculture for their raw materials.

4. Market for Industrial Products :
Since more population of developing economies live in rural areas, increased rural purchasing power is a stimulus to industrial development. If measures are taken to expand agricultural output and productivity, the income of the rural sector will increase. Hence, the demand for industrial produts increases and the process of industrial development will get a boost up.

5. Capital Formation :
Unless the rate of capital formation increases to a higher level, economic development cannot be achieved. As agriculture sector happens to be is the largest sector in developing countries, it will play an important role in pushing up the rate of capital formation. If it fails to do so, whole process of economic development will suffer. Generation of surplus from agriculture will ultimately depend on the agricultural productivity.

6. Provision of Food Security and Poverty Reduction :
According to the Food and Agriculture Organization (FAQ) and the United Nation.s Organization (UNO), hunger, malnutrition and under weight are main problems in India. To overcome these issues, development of agriculture sector is required. Since agriculture continues to be a source of livelihood and food security for a majority of low income poor and vulne rable sections of the society, its role in poverty reduction is self-evident. The experience indicates that 1% growth in agriculture is at least 2 to 3 times more effect in reducing poverty than the same growth in non-agricultural sectors. A growing surplus of agricultural produce is needed even to control inflation.

7. Agriculture Exports :
India occupies a leading position in global trade of agricultural products. However, its total agricultural export basket accounts for a little over 2.15 per cent of the world agricultural trade. What is note worthy is that since the economic reforms began in 1991, India has remained consistently a net exporter of agri-products, touching Rs. 2.7 lakh crore exports and imports at Rs. 1.37 lakh crore in 2018-19. Agricultural products such as tea, sugar, oil seeds, tobacco, spices, etc. are the main iterns of exports of India in 1950-51, the proportion of agricultural goods exported comes to 50% of our exports and exports with agricultural content contribute another 20%.

Question 2.
Describe the causes for low productivity in agriculture.
Answer:
There are many causes for low productivity in Indian agriculture which can be explained under general causes, institutional causes and technical causes.
1) General Causes :
1) Social Environment :
The social environment of villages is an obstacle in agricultural development. Majority of india farmers are illiterates, superstitious, conservative and non – responsive to new agricultural techniques. But the fact is with in their limitations, the indian farmers use their resources efficiently.

ii) Population Pressure on Land :
Population pressure is heavy on land, non – agricultural sectors are unable to absorb the total workers. So, pressure on land is increasing continuously. In 2011, out of 349 millions rural working populaton 263 million workers were employed in agricultural sector. Increasing population pressure on land is parthy responsible for subdivision and fragmentation of holdings, productivity is small uneconomic land holdings is low.

iii) Land Degradation :
Nearly half of the country’s land (329 millions hectares) is de-graded. 43% of the land suffers from high degradation resulting in 33-67 percent yield loss. 5% of the land is so damaged that it is unusable. Soil degradation is a major foctor for low agricultural productivity in many regions of the country.

iv) Inadequate Infrastructure :
Inadequate infrastructural facilities such as roads, communications, marketing, credit, power and drainage will lead to low agricultural productivity.

2) Institutional Causes :
i) Land Tenure System :
Highly exploitative zamindari system drained out the capacity willingness and enthusiasm of the farmers to increase production and productivity. Regulation of rent, security of tenure, ownership rights for tenants did not change the position of tenants better. In this situation productivity cannot be increased.

ii) Size of Holdings :
The average size of land holdings in india is very low. In 2010-11, 85% of total land holdings had a size of less them 2 acres, so, the cultivation on them can be only by labour intensive techniques, and scientific cultivation with improved implements, seeds etc., may not be possible. The existance of uneconomic land holdings is also the cause for low agricultural yield.

iii) Lack of Entrepreneurship :
Agricultural sector is devoid of full entrepreneurship and competition in their agricultural operations. All the developed nations have the enterprise system.

iv) Deficiency of Investment: It is another problem in the agricultural sector. The CSO (Central Statistical Organization) does not consider investment as the essential component of rural infrastructure. Electrification, development of roads, investment in storages and tele-communications are excluded.

3) Technical Causes :
i) Poor Techniques of Production :
Most of the India farmers are using outdated production techniques. Use of fertilisers and new high yielding varieties of seeds is also limited. Still, agriculture is traditional and there, productivity is low.

ii) Inadequate Irrigation :
Among the various inputs, the most important is irrigation to which the modem agricultural technology is closely tied. In india in 2010-11, out of 199 million hectares of gross cropped area only 89 million hectares of land had irrigation facilities. Thus, 45% of gross cropped area had irrigation facilities.

iii) Environmental Factors :
Severe soil erosion, degradation due to heavy rains, floods and deforestation, water logging, improper drainage, ground water depletion, drought and global warming reckless use of fertilizers and pollution of soil water and air are also contributing to low productivity in agriculture.

Question 3.
Write about the main components of land reforms in India.
Answer:
Components of Land Reforms :
The three main constituents of land reforms are explained as follows :

1) Abolition of Intermediaries :
There were mainly three forms of land relations in pre-independence India. They are : zamindari system/jagirdaiy system, mahalwari system and rytwary system which were initiated and implemented by Britishers. Except rytwary system in which there is direct relation between farmer and state all other systems are intermediary systems in which middle men in the form of zamindar/jagirdar are present in between cultivator of land and state. These middle men used to exploit farmer as well as they used to cheat state also. Because of this middle men system in land relations, agriculture became an exploitative ground. Accordingly, all state governments were instructed to enact the laws to abolish the intermediaries.

2) Tenancy Reforms :
A tenant is a person who cultivates land of the land owner owing portion of production to owner of land. But the owing portion called rent was very high and sometimes/ in some areas it was even two third of the total production. There was no security to tenant from the landlord. The continuation of tenancy is left to the mercy of land owner. To reform this land relation system, the following measures were suggested to the state. The sug-gested measures were regulation of rent, security of tenure and ownership rigents to tenents.

3) Ceilings on Land Holdings :
Fixing a statutory limit on the maximum land that a family can have under its ownership is called ceiling. Surplus over the ceiling is taken by the government for redistribution to the landless and marginal farmers. Ceiling on land holdings act has been initiated in different states since 1960.

The following are some of them :

1. Ceiling limit is to be lowered to 18 acres of wet land and 54 acres of land without irrigation facilities.
2. Family with 5 members is taken as a unit to determine the ceiling. Extra land is allowed for extra members.
3. Exemption from the ceiling are to be reduced.
4. The related Acts to be kept out of the purview of the civil courts.
5. Scheduled Castes and Scheduled Tribes are to be given priority in the distribution of surplus land.
6. Lands under plantation crops like tea, rubber and coffee are exempted from the Ceiling.

4) Consolidation of Land Holdings :
The government has encouraged consolidation to solve this problem. Under this reform Punjab, Haryana and Maharashtra states could provide economic holdings to a considerable number of farmers with small and fragmented holdings. By September 2001, only 1,633 lakh acres were consolidated. Farmers in many states have not come forward to co-operate and therefore the consolidation has been slow.

5) Co-operative Farming :
This is not a reform and depends on voluntary spirit. Farmers in an area join their small holdings by pooling lands. Co-operative farm is managed by an elected body and it has the advantages of large scale farming with government support. However, co-operative farming has not been effective due to different reasons like lack of motivation, dominant natur role of the big farmers, inefficient administration, improper distribution of produce and the treatment of small farmers as wage labourers.

Question 4.
Explain Self-Sufficiency in food grains and Food Security in India.
Answer:
The Indian planners, right from the beginning, realized the need to attain self-sufficiency in food grains as one of the important goals of planning.

When India suffered very severe droughts during 1965 and 1966, the then American President, Lyndon Johnson, restricted food aid to monthly basis under the Public Law (PL) – 480 Programme. The government of India under Prime Minister, Mrs. Indira Gandhi went in for seed – water – fertilizer policy popularly known as the green revolution. This policy ushered in a revolution in food production in India and dispensed with food grains imports altogether. India achieved self-sufficiency in food grains by the year 1976 and since then, Indian imports of cereals have remained neglibible. India’s food grains production reached to 285 million tons in 2018-19 from 50 million tons in 1950-51.

Though, India has achieved self-sufficiency in food grains, as per the Expert Group headed by SD Tendulkar, the percentage of poor living below poverty line for the year 2011-12 was 21.9 and as per the Expert Group headed by Dr. C. Rangarajan (2014) the population living below the poverty line was 454 million in 2009-10 and 363 million in 2011-12. Thus, in India though there is physical availability of food grains at national level the economic access is missing.

Question 5.
Assess the impact of New Agricultural Strategy in India.
Answer:
Impact of New Agriculture Strategy / HYVP on Indian Economy

Though, green revolution is the ultimate result of new agriculture strategy / HYVP, we can find out some other impliations of this process too as follows :
i) Increase in Agriculture Productivity / Production :
Due to new agriculture strategy, an enormous increase in agriculture productivity and production took place in India due to the adoption of modem agriculture inputs and which is termed as green revolution. We have seen this increase under the heading of increase in agriculture produc-tivity/production of major crops in India. By the year 1976. India became self-suffi-cient in food grain production.

ii) Employment :
The adoption of new agricultural strategy has led to substantial increase in area under crops, production of food grains and agricultural productivity. This technology has given a boost to agricultural employment because of diverse job opportunities created by multiple cropping. Labour intensive crops like rice, sugarcane, potato, vegetables, and fruits have increased the job opportunities in agricultural sector. The agriculture-retailing is developed into a big business now.

iii) Improvement in Farmer’s Income :
Farmers especially, in Kerala, Madhya Pradesh, Andhra Pradesh, Tamil Nadu, Gujarat, Punjab, Haryana and Himachal Pradesh had good chances of improving their incomes. Green revolution facilitated the farmers to follow simple but scientific and technical ways like grading the product in the field itself. Selling directly to the retail companies by avoiding middlemen also helped to increase in farmer’s income after new agricultural strategy as organized retailers have provided better remuneration to the farmers.

iv) Improvement in Exports :
India used to import huge basket of food grains prior to green revolution which became the rare case in post – green revolution period. Agriculture exports increased with green revolution. The value of exports of agriculture and allied products was Rs. 284 crores in 1960-61 and it increased to Rs. 2.7 lakh crore by 2018-19.

Question 6.
Examine the sources of agricultural credit in India.
Answer:
Sources of Agricultural Credit :
The sources of agricultural credit available to Indian farmers can be classified into two types :

A. Non-Institutional Sources :
Non-institutional sources include money lenders, land lard, traders, commission agents, relatives, friends etc. In 1951-52, non-institutional sources contributed 93 percent of financial requirements of farmers whereas the government could contribute only 7 percent. The money lenders and landlords supplied credit for both productive and unproductive purpose. They are easily accessible to farmers at any point of time. But this source has many defects in it. Interest rates are not uniform and exorbitant (18 to 50 percent). Often small farmers are cheated and their lands are appropriated. The landless labourers are forced to become bonded slaves.

B. Institutional Sources :
Since the private / non-institutional source of credit is defective and exploitative, the government followed a multiagency approach consisting of co-operatives, commercial banks and regional rural banks which knwon as institutional credit to provide cheaper and adequate credit to farmers. The basic objectives of this approach are :

1. to ensure timely and adequate flow of credit to the farming sector;
2. to reduce and gradually eliminate the money lenders from the rural scene; and
3. to make available credit facilities to all regions of the country.

i) Co-operatives :
The co-operative movement was initiated way back in 1904 through the establishment of co-operative credit societies to relieve rural people from their indebtedness. The co-operative credit societies in India have been organized into short-term and long-term structures. The short-term co-operative credit structure is based on a three tier structure. At the lowest tier are the Primary Agricultural Credit Societ-ies (PACS) and these are organized at village level.

At the second tier, the District Co-operative Credit Banks (DCCBs)-are organized at the district level. At the third and at apex tier, the State Co-operative Banks (SCBs) are organized at the state level. The SCB coordinates the extension of short and medium term loans to farmers through DCCB and PACS. In addition to short and medium term loans, the long term credit requirements of the farmers are provided through PCARDBs and SCARDBs.

ii) Commercial Banks :
The share of commercial banks in the provision of agricultural credit was very meager in 1950s. It was just 0.9 percent in 1951-52 and 0.7 percent in 1961-62. The advances to agriculture by commercial banks aggregated to only Rs. 162 crores in 1969. But after nationalization of banks in 1969 and later in 1980, not only the number of branches of commercial banks increased at rural level but also the amount of advances to agriculture increased massively. The share of public and private sector commercial banks put together at present accounted for more than 70 percent of the institutional credit provided to agriculture.

iii) Regional Rural Banks (RRB):
As the commercial banks failed to fill the geographical gap in the availability of credit not covered by the co-operatives, the Working Group on Rural Banks headed by Sri M. Narasimham recommended for the establishment of RRBs to bridge the gap in the provision of loans to small and marginal farmers, landless labourers, artisans and other rural residents of small means. Consequent upon the recommendations of the working group, 5 RRBs were set up initially on 2nd October, 1975.

In the recent past, government of India fixed institutional credit flow target to agri-culture sector in respect of all of the above stated institutions in our country. The agricultural credit flow target for 2019-20 has been fixed at Rs. 13,50,000 crore.

iv) National Bank for Agriculture and Rural Development (NABARD) :
Reserve Bank of India had set up the Agricultural Refinance Development Corporation (ARDQ to provide refinance support to the banks to promote agricultural development. With the widening of the role of bank credit from agricultural development to rural development, the government proposed to have a broad-based organization at the apex level to support and guide the credit extending institutions. Accordingly, NABARD was set up in July, 1982 by subsuming ARDC.

Question 7.
What are the defects in agriculture marketing? Explain measures taken by the government to overcome the defects of agriculture marketing.
Answer:
Defects of Agricultural Marketing in India Due to inadequate storage facilities farmers are forced to sell their agriculture surplus immediately after harvesting irrespective of supply/demand position in market. Further, due to inadequate transportation facility, the farmer is forced to sell the goods to local traders/money lenders, commission agents with lower than market prices. In the mandis, the farmers are deceived by the use of wrong weights and rriea- sures. They are also cheated by brokers and traders. The farmer has to pay wighing charges, unloading charges, charges for separation of impurities in the produce and many other miscellaneous undefined and unspecified charges. Due to lack of proper grading system farmer is not getting remunerative price.

Government Measures :
The measures taken by the government of India to overcome the defects of agriculture’marketing.

1) Regulated Markets :
In order to eliminate unhealthy market practices and to protect the interests of the farmers by ensuring remunerative prices, State Agricultural Produce Marketing Act was enacted for the establishment of regulated markets. Accordingly, in 1951 more than 200 regulated markets were established in India and at present about 7,246 regulated markets are functioning in the country. Regulated markets aim at the development of the market structure to :

• Ensure remunerative prices to the producer of agricultural commodities;
• Narrow down the price spread between the producer and the consumer,and
• Reduce non-functional margins of the traders and commission agents,

2) Grading and Standardization :
Improvements in agricultural marketing system cannot be expected unless grading and standardization of agricultural produce is made. The government has done much to grade and standardize many agricultural goods. Under the Agricultural Produce Act, 1937, the government has set up grading stations. The graded goods are stamped with the seal of the Agricultural Marketing Department AGMARK and these goods will have a wider market and command better prices.

3) Warehousing Facilities :
The Central Warehousing Corporation (CWQ was setup in 1957 for the storage of agricultural produce. The states have setup the state warehousing corporations for the same. Food Corporation of India (FCI) was also setup at the national level. As on 31.12.2018 the total storage capacity available with Food Corporation of India (FCI), Central Warehousing Corporation (CWC) and state agencies is 851.54 lakh metric tonnes (LMT) comprising 724.79 LMT in covered godowns and 126.75 LMT in cover and plinth (CAP) storage.

4) Market Information :
The government has initiated a number of steps to provide the information about the prices prevailing in different markets to farmers. The prices prevailing in markets are broadcast daily by All India Radio. Trends in market prices are reviewed weekly in special programmes and talks are organized by AIR and Doordarshan. A kisan cedi center (KCC) with toll free no. 1800-180-1551 was set-up to help the fanners in all aspects.

5) Support Prices :
The government announces minimum support prices and procurement prices for various agricultural commodities from time to time in a bid to ensure fair returns to farmers. These prices are fixed in accordance with the recommendations of the Commission for Agricultural Costs and Prices (CACP).

6) Other Measures :
The following measures are also necessary to make agricultural marketing beneficiary to the farmers :

1. Improving the physical connectivity (roads and communications).
2. Improving the economic connectivity (banks and financial institutions)
3. Improving the electronic connectivity (pohfme, internet cables etc).
4. Restriction on sale of produce outside the regulated markets.
5. Reducing the cost of transportation.
6. Encouraging Rythubazaars (A Center for Direct Sale to Consumer by Farmer).
7. Promoting the use of standard weights and measures.
8. Development of warehousing facilities in villages and rural areas.

Question 8.
Examine the causes of rural indebtedness and its remedial measures in India.
Answer:
Rural Indebtedness :
In India about 70 percent of the people are living in villages. It is found that these people spend higher proportion of their borrowed money for unproductive purposes. Consequently they are unable to repay the old debts. Whenever there is a little or no access to institutional sources. They go to usurious money lenders, who are immediately avail-able in their villages. They borrow money at higher rate of interest at the cost of their assets and get caught in the evil clutches of the money lenders. .

Estimations of Rural Indebtedness :
Many institutions and individuals have estimated the magnitude of indebtedness in rural areas. In 1951-52, the amount indebted by the rural households was estimated at Rs. 913 crores. All India Debt and Investment Surveys have estimated that it was Rs. 3,848 crores in 1971, Rs. 6,193 crores in 1981, Rs. 22,211 crores in 1991 and Rs. 1,11,468 crores in 2002 (NSSO 59th Round). According to this survey the total indebted amount both in rural and urban put together was Rs. 1,76,795 crores in 2002. The NSSO conducted All India Debt and Investment Survey from January 2013 to December 2013.

Causes of Rural Indebtedness :

The following are the causes of rural indebtedness :

1. The main cause of indebtedness of the farmers is their poverty, low level of savings and crop failures.
2. Borrowed funds for making improvements on land.
3. Borrowed funds for unproductive activities / purposes.
4. Debt inheritance of the parents.
5. Dependence on nOn-institutional sources.
6. Inadequate support prices for the crops.
7. Increasing cost of cultivation.

Remedial Measures to Reduce Rural Indebtedness :
Rural indebtedness with its magnitude and dimensions is causing many problems in rural areas. It is breeding poverty. It is also leading to distress sales of agricultural products and the farmers are left with food insecurity. Therefore, rural indebtedness should be reduced by adopting the suitable remedial measures. The following remedial measures are suggested to reduce rural indebtedness.

1. To enact appropriate legislations to scale down the old debts / ancestral debts of small farmers.
2. To increase the network of co-operatives, commercial banks and RRBs to reduce the dependence of the rural people on money lenders.
3. To provide timely and adequate credit to small, marginal farmers and rural artisans.
4. To give due importance to rural poor under priority sector lending by banks.
5. Consumption loans should be provided by the public sector commercial banks to weaker sections.
6. Mortgaging the lands to money lenders must be avoided.
7. Rebate for one Jime settlement of dues may be enhanced.
8. Coverage of women farmers under micro finance methodology should be increased.

Union government and state governments are frequently implementing loan waiver schemes to address the problem of rural indebtedness. State government of Telangana introduced Rytu Bandhu scheme under which an amount of Rs. 10,000 (initially it was Rs. 8,000) is given per acre per year in two installments to all types of land owners. Union government of India is also implementing the Pradhan Mantri Kisan – Samman Nidhi to (PM – KISAN) farmer families under which Rs. 6,000 is given per acre per year in three equal installments as minimum income support.

Question 9.
Write about the main elements of agricultural price policy.
Answer:
The Agricultural Prices Commission was setup in January, 1965 to advise the govem- ment on price policy of major agricultural commodities. It kept a view of evolving a balance and integrated price structure in the perspective of the overall heeds of the economy and with due regard to the interests of the producer and the consumer. Since March 1985, the Commission has been known as Commission for Agricultural Costs and Prices (CACP).

Main Features of Agricultural Pricing Policy
The salient features of the agricultural pricing policy are as follows :
1) Institutions :
The government has set uyp two institutions to implement the price policies. They are:
i) Agriculture Price Commission (1965) :
This commission advices the government regarding agriculture price policy, also determines minimum support prices (MSP) and procurement prices of agriculture products. Since March 1985, the Commission has been known as Commission for Agricultural Costs and Prices (CACP).

ii) Food Corporation of India (1965) :
It organizes procurement of food grains at prices determined by government and their sale through public distribution system.

iii) Fixation of Minimum Support Prices (MSP) :
The government determines minimum support prices of many agriculture products such as wheat, rice, maize, every year based on recommendations made by Commission for Agricultural Costs and Prices (CACP).

2) Maximum Price Fixation :
Government also determines maximum prices for certain agriculture products. The government sells many agriculture products such as grain, sugar, rice etc., through fair price shops under public distribution system (PDS).

3) Procurement Prices :
The prices at which government, procures food grains for the purpose of public distribution system and to maintain buffer stocks are called procurement prices. To prevent change in prices of agriculture products beyond a certain limit, government maintains buffer stock of goods. This is done by Food corporation of India (FCI). When price of food grains starts increasing, government starts selling food grains from buffer stock at spe-cific prices. As a result, increase in price of food grain can be checked. Fbrther, buffer stock operations aim at eliminating unduly low prices consequent to bumper crops.

Question 10.
Write the measures to provide food security in India.
Answer:
Measures to Provide Food Security in India

To tackle the quantitative and qualitative aspects of the food security problem, the govemment of India has relied on the following three food-based safety nets :

i) Public Distribution System (PDS):
Under PDS, food grains are provided with fair prices through fair price shops. Now it is Targeted PDS under which targeted poorest of the , poor first served.

ii) Integrated Child Development Services (ICDS):
Under ICDS, pre-school children are given free food through pe-school centers (Anganwadi).

iii) Mid-Day Meals (MDM):
Under MDM, school going children are gien free lunch.

iv) Food Security Legislation :
As an integrated approach in providing food security in India, government of India enacted National Food Security Act (NFSA) in July, 2013 which gives legal entitlement to 67% of the population to receive highly subsidized food grains. Under the Act, food grain is allocated @ 5 kg per person per month for priority households category and @ 35 kg per family per month for Antyodaya Anna Yojana (AAY) families at a highly subsidized prices of Rs. 1/-, Rs. 2/- and Rs. 3/- per kg for nutri-cereals, wheat and rice respec-tively. Coverage under the Act is based on the population figures of Census, 2011.

The Act is now being implemented in all 26 State/UTs and covers about 81.35 crore persons. The annual ‘ allocation of food grain under National Food Security Act and Other Welfare Schemes is about 610 Lakh Metric Tons. Pregnant ladies would be entitled to get free food from Anganwadi during the pregnancy period and six months after the delivery and would also be entitled to get a maternity’benefit of Rs. 6,000. Children from six month to six years of age would also be entitled to get free food from Anganwadi. Children in the age group of 6-14 years studying up to middle class would be given free lunch. If the government fails to provide food grains to the eligible people it will have to provide food security allowance.

Short Answer Questions

Question 1.
Explain the growth pattern in agricultural sector.
Answer:
Growth of Agriculture :
This concept can be studied under two heads as follows :

i) Pattern of Growth in Agriculture :
At the time of independence, India’s agriculture was in a State of backwardness, Farmers were in heavy debt and they did not have the knowledge to use proper equipment, good seeds and chemical manures. Except in certain irrigated areas, they were dependent on rain fall and monsoons. Productivity per hectare and per worker was extremely low. The country was not self-sufficient ih food grains and had to depend on imports of food grains. Over 70% of our working population was engaged in cultivation.

India had adopted planning process to develop the economy. First Five Year Plan (1951-56). Third Five year Plan (1961-66) and Fourth Five Year Plan (1969-1974) gave priority to agriculture sector by allocating highest percentage of resources to agriculture sector. India also implemented the land reforms to develop the agriculture. India has adopted New Agriculture Strategy in the year 1966-67 by supplying new agriculture inputs like high yielding variet-ies of seeds, chemical fertilizers, pesticides etc., due to which India became the self-sufficient in food grain production by the year 1976.

At an average, India’s agriculture growth remained at around 3.5% during low growth period (1950-51 to 1969-70; around 3.5 percent/per annum and termed as Hindu Rate of Growth), and at around 5% during medium growth period and at around 7% high growth period of Indian economy (1991-92 to 2019-20 around 7 per annum) High growth rate of Indian economy during reforms is being pooled by service sector’s growth and mainly due to information technology (IT) revolution.

ii) Growth in Productivity and Production of Major Crops :
Though productivity and production level of major crops were very low immediately after independence, it increased by seventies due to “new agriculture strategy” adopted during sixties which is termed as Green Revolution.

If we take food grains production, its productivity increased from 522 kg per hectare in 1950-51 to 2299 kg per hectare in 2018-19(PE). During the same period rice productivity increased from 688 kg to 2659 kg, wheat productivity increased from 663 kg to 3507 kg, maize productivity increased from 547 kg to 2966 kg. Pulses productivity increased from 441 kg to 806 kg. Oil seeds productivity increased from 481 kg to 1265 kg. Overall, during the period 1950-51 to 2018-19, wheat productivity increased nearly 6 folds whereas pulses productivity registered a two fold growth. If we look at the trends in production during the period from 1950-51 to 2018-19, food grains production increased from 50.8 million tonnes to 285 million tonnes.

Rice production increased from 20.5 million tonnes to 116.4 million tonnes. Wheat production increased from 6.4 million tonnes to 102.2 million tonnes. Maize production increased from 1.7 million tonnes to 27.2 millioni tonnes. Pulses productioni increased from 8.4 million tonnes to 23.4 million tonnes. Oil seeds productioni increased from 5.1 million tonnes to 23.4 million tonnes. Again in production of major crops too, highest increase took place in wheat production whereas lowest increase took place in pulses production.

Question 2.
Write about trends in production of major agricultural crops in India.
Answer:
Trends in production of major agricultural crops :
Though productivity and production level of major crops were very low immediately after independence, it increased by seventies due to “new agriculture strategy” adopted during sixties which is termed as Green Revolution.

This can be studied with help of the table given below.

If we look at the trends in production during the period from 1950-51 to 2018-19, food grains production increased from 50.8 million tonnes to 285 million tonnes. Rice production increased from 20.5 million tonnes to 116.4 million tonnes. Wheat production increased from 6.4 million tonnes to 102.2 million tonnes. Maize production increased from 1.7 million tonnes to 27.2 million tonnes. Pulses production increased from 8.4 million tonnes to 23.4 million tonnes. Oil seeds production increased from 5.1 million tonnes to 23.4 million tonnes. Again in production of major crops too, highest increase took place in wheat production whereas lowest increase took place in pulses production.

Various initiatives of central and state governments like land reforms, new agriculture strategy (green revolution), technology missions of pulses, oil seeds, free and subsidized inputs distribution such as electricity, seeds, fertilizers, water (irrigation), machinery and strengthening marketing and financing infrastructure etc., helped to achieve this agriculture growth.

Question 3.
What are the trends in agricultural productivity in India? Explain.
Answer:
Productivity needs average production per hectare. India’s agriculture productivity is still low where compare. India’s productivity with same advanced country. The trends relating to agricultural productivity in India can be studies as under with the help of the following table.

The table shows the growth pattern of India’s agriculture productivity and production. If we take food grains production, its productivity increased from 522 kg per hectare in 1950-51 to 2299 kg per hectare in 2018-19 provisional estimates (PE). During the same period rice productivity increased from 688 kg to 2659 kg, wheat productivity increased from 663 kg to 3507 kg, maize productivity increased from 547 kg to 2966 kg. Pulses productivity increased from 441 kg to 806 kg. Oil seeds productivity increased from 481 kg to 1265 kg. Overall, during the period 1950-51 to 2018-19, wheat productivity increased nearly 6 folds whereas pulses productivity registered a two fold growth.

Question 4.
What are the reasons for inadequate implemention of land reforms in India?
Answer:
Land Reforms :
Government’s direct intervention to bring about the changes in agrarian structure is called land reforms. Land reforms facilitate the redistribution of land with a view to safeguard the interests of land less households, small and marginal farmers. It brings about the introduction of economic and non-economic changes relating to land and the development of agriculture. After independence the Government of India has introduced land reforms for the reconstruction of rural economy with equity and social justice.

Poor implementation of land reforms are as follows :
1) Loop holes in the Acts :
There are loopholes in the land reform acts. Big landlords with their financial and political power are able to retain their ownership on land by using the loopholes.

2) Lack of political Will :
The political parties in power have not evinced real interest in the implementation of theV acts as they did not want to annoy the big landlords and therefore diluted the acts.

3) Passive Nature of the Beneficiaries :
Marginal and small farmers and landless labourers don’t aware of their rights and ongoing process. Most of them are illiterates and ignorant. They have little awareness about reforms which benefit them, Their failure to de-mand their due is one of the main causes for poor implementation of land reforms.

4) Bureaucracy :
Indian bureaucracy, trimmed and trained under the colonial rule, has been apathetic to the land reforms and cause of the rural poor. They have-not shown keen interest in implementing the reforms.

5) Legal Hurdles :
Some of the big landlords have approached the courts of law by taking advantage of the loopholes in the law.

6) Non-Availability of Land Records :
For decades, land records have not been main-tained property in India. Implementation without land records has become a difficult task.

7) As a State Subject :
Agriculture is a state subject. Different states responded with different degree to implement land reforms. No uniformity in their action to the issue. National Council for Land Reforms was established in 2008 but no positive change in the process has been seen.

8) Delay in the Followup Action :
There has been enourmous delay in taking follow up action. All the land declared surplus was not taken by the government and whatever land taken under the ceiling act was not distributed in total. Further, the beneficiaries have not been provided other ancillary help like credit and other inputs, though ownershp rights have been conferred on them.

Question 5.
What are defects of Nan-Institutional sources of agricultural credit?
Answer:
The financial requirements of the Indian farmers can be classified into three types depending upon the period and purpose for which they need funds : (a) They may need funds for a short period of less than 15 months for the purpose of cultivation. This may include purchase of seeds, fertilizers, fodder etc. (b) They may require finance for medium term period ranging from 15 months to 5 years for making improvement on land, buying cattle, agricultural implements etc. (c) They may also require finance for long term period for more than five years to develop the land to provide irrigation facility, to purchase heavy machinery etc.

The financial requirements of the Indian farmers can further be classified into productive and unproductive purposes. The productive loans include for purchase of seeds, fertilizers, buying cattle and agricultural implements, digging wells/tube wells, whereas unproductive loans include for performing marriages, social ceremonies, religious functions, festivals etc.

Non-institutional Sources :
Non-institutional sources include money lenders, land lords, traders, commissioni agents, relatives, friends etc. In 1951-52, non-institutional sources contributed 93 percent of financial requirements of farmers whereas the government could contribute only 7 percent. The money lenders and landlords supplied credit for both productive and unproductive purposes. They are easily accessible to farmers at any point of time. But this source has many defects in it. Interest rates are not uniform and exorbitant (18 to 50 percent).

Often small farmers are cheated and their lands are appropriated. The landless labourers are forced to become bonded slaves.

Question 6.
What are the causes of rural indebtedness?
Answer:
Rural Indebtedness :
In India about 70 percent of the people are living in villages. It is found that these people spend higher proportion of their borrowed money for unproductive purposes which can give them any income. Consequently they are unable to repay the old debts. Whenever there is a little or no access to institutional available in their villages. They borrow money at higher rates of interest at the cost of their assets and get caught in the evil clutches of the money lenders. The indebtedness increases year by year and makes the rural people permanently indebted.

Causes of Rural Indebtedness :
The following are the causes of rural indebtedness.

1. The main cause of indebtedness of the farmers is their poverty, low level of savings and crop failures.
2. Borrowed funds for marketing improvements on land.
3. Borrowed funds for unproductive activities / purposes.
4. Debt inheritance of the parents.
5. Dependence on non-institutional sources.
6. Inadequate support prices for the crops.
7. Increasing cost of cultivation.

Question 7.
Explain are functions of NABARD.
Answer:
National Bank for Agriculture and Rural Development (NABARD) :
Reserve Bank of India had set up the Agricultural Refinance Development Corporation (ARDQ to provide refi-nance support to the banks to promote agricultural development. With the widening of the role of hank credit from agricultural development to rural development, the government proposed, to have a broad-based organization at the apex level to support and guide the credit extending institutions. Accordingly, NABARD was setup in July, 1982 by subsuming ARDC.

Functions of NABARD :
NABARD performs the following functions :
a) Refinancing the banks for extending loans for investment and production purpose in rural areas.

b) Provides loans to state governments, non-government organizations (NGOs), panchayat raj institutions for the development of rural infrastructure.

c) Supports credit innovations of NGOs and other non-formal agencies.

d) Extension of formal banking services to the unreached rural poor by self-help groups (SHGs).

e) Promoting participatory watershed development for enhancing productivity and prof-itability of rain fed agriculture in a sustainable manner.

f) Preparation of credit plans for identification of exploitable potentials under agriculture and other activities available of development through bank credit, g) Inspectioni of RRBs arid co-operative banks other than PACS.

Question 8.
What are the defects of agriculture marketing in India?
Answer:
Due to non-availability of storage facilities about 10 to 20 percent of agricultural produce is eaten away by rats and insecticides further, due to inadequate transportation facility, the farmer is forced sell the goods to money lenders, commission agents in mandis; and could not get fair price. The existence of more number of intermediaries betweeri the farmer and the ultimate consumer is another chronic problem where by intermediaries could realize more money.

In the mandis the farmers are deceived by the use of wrong weights and measures. They are also cheated by brokers and traders. The farmer has to pay weighing charges, unloading charges, charges for separation of impurities in the produce and many other miscellaneous undefined and unspecified charges. There is no proper grading system and hence the farmer is not getting fair price.

Government Measures :
1) Regulated Markets :
In order to eliminate unhealthy market practices and to protect the interests of the farmers by ensuring fair prices, the government proposed the state agricultural produce marketing Act for the establishment of regulated markets. Accordingly, in 1951 more than 200 regulated markets were established in India and at present about 7,246 regulated markets are functioning in the country. Regulated markets aim at the development of the market structure to:

• Ensure remunerative prices to the producer of agricultural commodities;
• Narrow down the price spread between the producer and the consumer; and
• Reduce non-functional margins of the traders and commission agents.

2) Grading and standardisation :
Improvements in agricultural marketing system cannot be expected unless grading and standardization of agricultural produce is made. The government has done much to grade and standardize many agricultural goods. Under the agricultural produce Act, 1937 the government has setup grading stations. The graded goods are stamped with the seal of the agricultural marketing department AGMARK and these goods will have a wider and command better prices.

3) Ware housing facilities :
To prevent distress sale by the farmers, particularly by the small and marginal farmers godowns have been setup in villages and towns. The Central Ware-housing Corporation (CWC) was setup in 1957 for the storage of agricultural produce. The states have setup the state warehousing corporations for the same purpose Food Corporation of India (FCIJ was also setup at the national level.

4) Market Information :
The government has initiated a number of steps to provide the information about the prices prevailing in different markets to farmers. The prices prevailing in markets are broadcast daily by all India Radio – Trends in market prices are reviewed weekly in special programmes and talks organized by AIR and Doordarshan.

5) Support prices :
The government announces minimum support prices and procurement prices for various agricultural commodities from time to time in a bid to ensure fair returns to farmers. These prices are fixed in accordance with the recommendations of the Commission for agricultural Gosts and Prices (CACP).

6) Other Measures :
The following measures are also necessary to make agricultural marketing beneficiary to the farmers :

1. Improving the physical connectivity (roads and communications).
2. Improving the economic connectivity (banks and financial institutions).
3. Improving the electronic connectivity (Phone, internet cables etc).
4. Restriction on sale of produce outside the regulated markets.
5. Reducing the cost of transportation.
6. Encouraging rythu bazars.
7. Promoting the use of standard weights and measures.
8. Development of warehousing facilities in village and rural areas.

Question 9.
State the objectives of agricultural pricing policy.
Answer:
Objectives of Agricultural Pricing Policy :
The objectives of agricultural pricing policy vary from country to country depending upon the place of agriculture in national economy. Generally, in developed countries, the major objective of price policy is to prevent drastic fall in agricultural income, but in developing economies, it is multi-task oriented as mentioned below:

1. to meet the domestic consumption requirements;
2. to provide price stability in the agricultural product;
3. to ensure reasonable relation between the prices of food grains and non-food grains;
4. to ensure reasonable relationship between the prices of agricultural commodities and manufactured goods;
5. to smooth seasonal and cyclical fluctuations of prices of agricultural commodities;
6. to remove price differences between the regions; .
7. to make available food to consumers at the time of shortage;
8. to increase the production and exports of agricultural products;
9. to provide raw materials to the industries at reasonable prices;
10. to prevent exploitation of farmers from intermediaries, who may purchase products at a very low price in the absence of price policy.

Very Short Answer Questions

Question 1.
Share of agriculture in the National Income.
Answer:
After independence the share of agriculture has declined due to the development of the secondary and tertiary sectors. In 1950-51 the share of agriculture and allied activities in gross domestic product was 56.5% and it declied to 24.7%. In 2000-01, and furniture to 13.9% in 2012-13, again it was inversted to 16.5 in 2019-20 (provisional estimates).

Question 2.
Share of agriculture in Employment.
Answer:
The number of people engaged in agriculture was increased from 98 millions in 1951 to 236 millions in 2001. Agriculture provide employment to 46% of the male workers and 65% of the female workers.

Question 3.
Relation between Agriculture and industry.
Answer:
Agriculture provides raw materials to various leading industries. Sugar, jute, cotton tex-tiles, vanaspati, flour mills, plantations and food processing industries depend on agriculture directly. Many other industries depend on agriuclture indirectly. Many small scale and cottage industries depend upon agriculture for their raw materials.

Question 4.
Irrigation.
Answer:
Irrigation infrastructure is a must to increase the agriculture productivity as irrigation facilitates nearly three-fold increase in agriculture productivity per annum and per hectare. Irrigation along with improvement in power supply largely contributes to increase in productivity.

Question 5.
Agricultural Productivity
Answer:
Productivity of a crop is measured by the average production.of that crop per hectare of the cropped area. However India’s agriculture productivity is still veiy low when we compare India’s productivity with same.

Question 6.
Land degradation.
Answer:
Land Degradation: Nearly half of the country’s land (329 millions hectares) is degraded. 43% of the land suffers from high degradation resulting in 33-67 percent yield loss. 5% of the land is so damaged that it is unusable. Soil degradation is a major foctor for low agricultural productivity in many regions of the country.

Question 7.
Abolition of interference.
Answer:
There were mainly three forms of land relations in pre-independence India. They are : zamindari system/jagirdary system, mahalwari system and rytwary system which were initiated and implemented by Britishers, Except rytwary system in which there is direct relation between farmer and state all other systems are intermediary systems in Which middle men in the form of zamindar/jagirdar are present in between cultivator of land and state. These middle men used to exploit farmer as well as they used to cheat state also. Because of this middle men system in land relations, agriculture became an exploitative ground. Accordingly, all state governments were instructed to enact the laws to abolish the intermediaries. „

Question 8.
IAOP.
Answer:
It means intensive Agriculture District Programme. This was introduced in the year 1964. This programme was introduced in 7 districts. This programme is also known as package programme.

Question 9.
Green Revolution.
Answer:
Green Revolution :
This programme was introduced in the year 1965. Acheiving high produce and productivity in the farm sector, by using hybrid seeds, fertilizers, pestisides and machines etc is called green revolution. At first this term was used by William S. Gand.

Question 10.
PACS.
Answer:
The Co-operative credit societies in India have been organised into short-term and long term structures. At the lowest level the primary agriculture co-operative credit soceiteis (PACS) and these are organised at village level. There are 92.432 primary Agriculture Credit societies for short term credit structure.

Question 11.
Regional Rural Banks. (RABs)
Answer:
RRB’s are set up on 2nd October, 1975. If is bridge the gap in the provision of loans to small and marginal farmers, landless labourers, etc. 2012-13 it provided 10%.

The agricultural credit flow target for 2019-20 has been fixed as Rs. 13,50,000 crore.

Question 12.
Micro Finance.
Answer:
Micro Finance is’the provision of financial services to low income clients pr solidarity lending groups including consumers and self employed, who rationally lack access to banking , end related services. It lovers a wide range of credit, savings, insurance, remittance and also non financial services like training and counselling.

Question 13.
Self help groups (SHG’s)
Answer:
This is the bank led micro finance changed which was initiated by NARARD in 1992.

Under the self help group model, the numbers usually women in villages are encouraged to the form groups of around 10-15. The numbers contribute their savings in the group periodically, and from these savings small loans are provided to the members.

Question 14.
Grading
Answer:
The government has done much to grade and standardize many agricultural goods. Under the agricultural produce Act 1937. The government has set up grading stations. The graded goods are stamped with seal of AGMARK.

Question 15.
Warehousing facilities.
Answer:
The central ware housing corporation was set up in 1957 for the storage of agricultural 1 produce. The states have set up the state ware housing corporations and at nartional level food . corporation of india setup.

Question 16.
CACP. (Commission for Agricultural Costs and Prices)
Answer:
This commission was established in the year 1985. This commission advices the govern-ment regarding agriculture price policy, also determines MSP and procurement prices of agri-cultural products.

Question 17.
Minimum suport prices. (MSP)
Answer:
Minimum support prices (MSP) for major agricultural products are fixed by Government every year prior to sowing season to assure the remunerative prices to farmers. MSP for major agricultural products are fixed by the government each year, after taking into account the recommendations of CACP.

Question 18.
Maximum Price Fination.
Answer:
Government determines maximum prices for certain agricultural products. The govern-ment sells many agricultural products such as grain, sugar, rice at fair prices under public distribution system.

Question 19.
Butterstock.
Answer:
It is a reserve Of a commodity that can be used to offset price fluctuatives and in case of natural disaster or unsourcessness energies. It is an attempt to use commodity storage for the purpose of stabilising prices in an entire economy or an individual or commodity market. It is generally maintained for essential commodities and necessities like foodgrains, pulses.

Question 20.
Food Security.
Answer:
World Development Report (1986) defined food security as access by all people at all times to enough food for an active, healthy life. Food and Agriculture organiation (FAO, 1983) defiend the food security as ensuring that all people at all times have both physical and economic access to basic food they need.

Question 21.
Food Security legislation.
Answer:
Government of india issued on ordinance on july 5, 2013 guaranteeing food security to the people of india. The new low could provide a legal entitlelent to subsidized food grains ot the people as par the law, the beneficiaries would be provided food grains at subsidised prices.

Question 22.
Food Corporation of India. (FCI)
Answer:
Food Corporation of India was established in the year 1965. This commission organises procurement of food grains of prices determined by government and their sale through public distribution system.

Telangana TSBIE TS Inter 2nd Year Economics Study Material 4th Lesson Planning and NITI Aayog Textbook Questions and Answers.

TS Inter 2nd Year Economics Study Material 4th Lesson Planning and NITI Aayog

Essay Questions

Question 1.
What are the major objectives of planning in India? Give an evaluation of the same.
Answer:
Planning of the development programmes under the central government was accepted and the Planning Commission was setup in March 1950 to formulate a plan for the most effective and balanced utilization of the resources in the country. Planning era, thus,; started in independent India in 1950.

The Planning Era :
With the formulation of the First five year plan, India embarked upon the programme of planned economic development of the country. The First five year plan covered the period 1951-56 followed by the Second Plan (1956-61) and the Third Plan (1961 – 66). Later plan holiday was adopted due to the impact of external shocks such as hostilities with Pakistan and severe drought conditions for two years. The country adopted annual plans for 1966-67, 1967-68,1968-69. Planning was renewed with the Fourth Plan in 1969 for the period of 1969 – 74. Then came the Fifth Plan (1974-79) which didn’t complete its full term because of the changes of the party in power. Janata Government came to power and launched Sixth Plan covering the period 1978-83.

Again with the change in the government in 1980 a new Sixth Plan was started for the period 1980 – 85 followed by the Seventh Plan (1985-90). The Eighth Plan was to begin from April 1990 but, could not be finalized and again annual plans were implemented for two years. Eighth Plan was launched in 1992 covering the period 1992 – 97 followed by the Ninth Plan covering the period 1997-2002 and the Tenth Plan .covering the period 2002-07. Eleventh Plan was launched for the period 2007 – 12. The Twelfth Plan started on April, 2012 and cover, the period 2012-17.

Major Objectives :
Although from one five year plan to another five year plan, some of the aims difered; a few important long term socio economic objectives recurred in all the five year plans. These are : 1. Economic growth, 2. Self reliance, 3. Balanced regional development, 4. Enhancement of the employment opportunities, 5. Reduction in income inequalities, 6. Elimi-nation of poverty, 7. Modernization and 8. Inclusiveness and sustainability of growth.

The objective of economic growth continues to be an important objective including in the 12^th five year plan which aims to achieve 8% gross domestic produt (GDP) growth per annum. In each five year plan, different priorities were laid down. For example while the First and Second five year plans prioritized agriculture and industries respectively, the Sixth plan prioritized unemployment reduction and that of faster growth of economy in the Seventh plan. The 10th five year plan prioritized agriculture, roads and infrastructure. The Eleventh and. Twelfth five year plans laid focus on faster, sustainable and more inclusive growth.

On the whole, India completed twelve five year plans (1951-2017). Various objectives stressed under five year plans are given here under :

Major Objectives under Different Plans (1951 – 2012)

Question 2.
Review the performance of five year plans in India in relation to the objectives.
Answer:
The achievements of the economy in the post – independent era under five year plans are briefly reviewed hereunder in relation to the major objectives of successive five year plans.

Economic Growth :
During the first half of the 20^th century there.was a near stagnation in per capita income while the growth in national income was minimal. There was a steady growth in both gross domestic product (GDP) and GDP per capita during the second half of the 20^th century.

During the palnning era the growth in national income was I percent per annum. This is composed of hardly 0.3 percent of growth rate in agriculture and 2 percent in industry. The growth in per capita income during the planning era was 0.2 per cent per annum. Between 1900-01 and 1946-47, at 1938-39 constant prices, national income for the undivided India increased from Rs. 15.4 billion to Rs. 24.9 billion by 60 percent, whereas per capita income from Rs. 54 to Rs. 60 by a mere 11 percent. A study revealed that between 1950-51 and 2004-05, at constant prices, gross domestic product (GDP) increased by 1,000 percent while gross domestic product per capita increased by 250 percent. Against this backdrop an attempt is made to assess the pattern of economic growth during the planned period of 1951-2017.

The following Table provides data pertaining to the targets fixed under different plans and the actual growth rate achieved.

Growth performance in the Five Year Plans, (at 1993-94 Prices)
NNP at Factor Cost (Percent per Annum)

Trends in the growth rates and contribution of different .sectors to gross domestic prod- ‘ uct. (GDP), over a period of time are briefly presented here under:

1. The average growth rate during the period of First to Eleventh Plan works out to be about 4.5 percent. This is quite a considerable achievement compared to 1 percent growth during the pre-independence period as stated earlier.

2. Agriculture has been growing at 2 – 3 percent during the plan periods as against 0.3 per cent growth during the pre-independence period.

3. Spectacular industrial progress has been made during the plan periods. The industrial growth rate is recorded at 6-8 percent which is nearly 3 to 4 times higher than the 1′ growth rate during pre – independence period.

4. The trend growth rate during the first three decades of economic planning was extremely modest at the rate of 3.5 percent for annum. In the later phase of 1981 – 2013. the growth rate was recorded at 5.9 percent per annum.

5. It is clear that there was a sharp acceleration in the rate of growth since 1980.1twent almost unnoticed. It came ito the limelight in the early 2000s. A majority of scholars opined that the structural break in the economic performance of independent India ocured around 1980. The growth was impressive, not only in comparison with the part in India but also in comparison with the performance of most developed countries in the world.

6. As per the Ministry of Statistics and Programme Implementation, composition of agriculture industry and service sectors during 2018-19 at 2011-12 prices are 14 – 39 per cent, 31.46 percent and 54.15 percent respectively.

7. In developed economies, the industrial and service sectors contrihbute a major share in GDP, with agriculture accounting for a relatively lower share. During the progres of growth over the years, the Indian economy too experienced and improvement i the shares of industry (31.46 percent) and services sectors (54.15 percent) in overall GDP. However, the share of the agricultural secor in GDP has been continuously declining and it came down to 14.19 percent in 2018 – 19. It is a cause of worry, as the Indian agriculture has been in crisis with crop holidays and farmers suicides.

8. Service sector is the largest sector of India. At 2011-12 pricesffcervice sector accounts for 54,15 percent in gross value added (GVA) during 2018-19. It reflects the structural transformation of the economy as it mvoes to a somewhat higher level of develop- t ment, However, one should think about the sustainability of this pattern of growth. The real failure, throughout the secong half of the 20th century, was India’s inability to transform its growth into deelopment, which Would have brought about aft improvement in the living conditiofts of common people.

Question 3.
Explain the growth performance during the five year plans.
Answer:
The growth performance during five year plans in India can be studied as under.

1. Self – Reliance :
The Fourth plan (1969-74) set before itself the two principal objectives of “growth with stability” and “progressive achievement of self-reliance”. Even in the subsequent plans, planned development enabled India to be self sufficient in most of the important sectors and productive activities, it is no small achievement to note that India is the only country with self – sufficiency to a considerable extent among the 115 developing countrie of the world

2. Balanced Regional Development :
Regional disparities in development have been a major concern throughout the plan period. The Planning Commission of India has sought to tackle the probelm of regional disparities in three ways :
a) the recognition of backwardness as a factor to be taken into account in the transfer of financial resources from the centre to the states.
b) Special area development programmes directed at development of backward areas, and
c) Measures to promote private investment in backward areas.

3. Enhancement of Employment Opportunities :
The extent of unemployment in the country at the start of the planning and its reduction over the years shows how eradication of unemployment is being undertaken. As per the 68th round of National Sample Survey Organisation (NSSO); unemployment rate according to usual principal status (UPS) was 2.7 per cent for 2011-12, while it was 3.7 percent according to current weekly status (CWS) and 5.6 percent according to current daily status (CDS). It implies that high degree of intermittent unemployment is there in India. Rural unemployment in the form of seasonal unemployment is higher than urban unemployment.

4. Reduction in Income Inequalities :
As per the world development indicators in 2013, the, net worth of 100 richest Indians is as high as one sixth of India’s GDP During the whole plan period, income inequalities have not been reduced in India. In the post reform period, especially last one and half decades income inequalities have been further widening.

5. Elimination of Poverty :
During the plan period, various measures were introduced by the government to reduce the problem of poverty in the country. Provision of essential food items and kerosene through the public distribution system (PDS) at subsidized prices, rural and urban employment programmes, free educstion, health and housing facilities are some key government programmes in thi direction. The government has also proposed food securiy legislation according to which food at affordable prices would be made available to the people living below the poverty line.

6. Modernisation :
The term modernisation means a variety of structural and institutional changes in the economic activities. India has given importandce to science, technology and rationalization during the plan period to improve productivities. ‘New agricultural strategy’ in the form of green revolution was introduced in the Third five year plan. From the Seventh plan onwards technological advances were given priority under modernisation.

7. Inclusiveness and Sustainability of Growth :
Inclusive growth is a broader concept covering economic,social and cultural aspects of development. The major components of inclusive growth in India are : (i) agriculture growth, (ii) employment generation and poverty reduction, (iii) reduction in regional and other disparities and (iv) achieving an equitable growth.

The objective of inclusiveness is reflected in the adoption of 26 monitarable targets at the national levle related to 1) income and poverty 2) education 3) health 4) women and children 5) infrastructure and 6) environment. The Twelfth five year plan specifically stated the need for environmental protection. Inclusiveness primarily aims at providing economic benefits to higher to neglected marginalized sections so that the economy can move towards an equitable growth.

Question 4.
Explain the causes for regional Imbalances and suggest remedial measures to reduce the same.
Answer:
The situation of coexistence of relatively developed and economically backward states and regions with the states with in the states is referred to as regional inbalances or regional disparities.

Causes of Regional Imbalances in India :
The regional imbalances became hurdles for national integration, economic growth and overall development. Backward states/regions develop the feeling of dissatisfaction and development becomes lopsided.

British rule :
in India was responsible for some regions to be backward. Maharashtra and West Bengal were the two states preferred by the British. The three presidency towns Viz, Calcutta, Bombay and Madras attracted most of the industries and the rest of the country remained industrially backward. British rule through land revenue paperized the rural people and drove them into poverty.

Geographical Conditions :
Land, soil, mountains, rivers influence economic growth. Even today hilly and mountain areas remain backward in UP, Himachal Pradesh and Jammu & Kashmir. Agricultural prosperity along with the agro activities depend the geographical condi-tions of the area. Good rainfall and favourable climate help economic development and contribute for higher agricultural output. Regions with unfavourable climate conditions suffer from low agricultural and industrial activity.

Private Investment: Since the scope of profits is high. The reasons for concentration of industries in Mumbai, Calcutta and even in Chennai are due to the factors like availability of skilled labour, infrastructural facilities and well developed financial institution.

Natural resources :
Play a vital role in regional imbalances. Some regions are endowed with quality natural resources, while otherwise in short supply. Regions with more natural resources can develop fast and linkages can be maintained. Some areas/states have developed t infrastructure facilities like roads, electricity, telecommunications, railway and water ways, They develop at higher rate than those lacking them.

Policy issues and suggestions for reducing regional imbalances :

1. Investment should be increased in backward states for higher economic growth arid reduction in the incidence of poverty. Private capital is also to be channelized into the backward regions for which infrastructure, technology and skilled labour are to be developed by the centre and state government.
2. Backward states need to concentrate on the development of physical infrastructure, health facilities, training and education.
3. Less developed states have to initiate policies to reduce growth rate of population in their efforts to encourage economic growth.
4. Agriculture is in a state of crisis so many backward states. Investment in irrigation, credit facilities and remunerative prices are to be provided to encourage the growth of agricultural output.
5. Technology has an important role in reducing regional imbalances both in agriculture and industry. Hence technology needs to be developed to suit the needs of the back-ward areas.
6. Employment should be expanded to reduce poverty in the backward states. In this connection increase in the guranteed days at employment under MGNREGA needs to be enhanced especially in the tribal and most backward areas.
7. The social sector allocation and performance should be improved in the backward regions. The allocation in the past reform period have come down at the national level.
8. in the poor states SC, STs and other neglected sections of the society should be made participatory in the process of development.
9. Governance to be effective and transparent in the backward regions.
10. Based on the available resources, cottage, house hold and small scale industries should be promoted in the backward regions through subsidies, tax concessions, training and monitoring.

Additional Questions :

Question 5.
Describe the nature objecives, organisation structure of national Institution for transforming India (NITl) Ayog,
Answer:
National Instituion for Trans forming India (NITI) was established by the Government of India as a replacement for the Planning Commission on January 1, 2015. It was formed on the basis of extensive consultations across the stakeholders viz state governments, relevant institutions, experts and the people at large. NITI Aayog has not come into existence all of a sud-den.

NITI Aayog shifts the focus towards cooperative federalism. It hopes to replace the one way centre – to – state flow of policy with ’cooperative federalism’. The NITI Aayog will now recommend policies. Their implementation will be upto governments. Importantly, unlike the Planning Commission, the NITI Aayog does not have the power of allocation central funds to states. This will now be done by the Finanfce Ministry.

Nature of NITI Aayog

1. The Planning Commission era witnessed centre-to-state one way flow of policy. NITI Aayog seeks genuine and continuing partnership of centre and Indian states.
2. It will emerge as a “think – tank” to provide strategical and technical advice to the central and state governments.
3. It helps to evolve, promote and stregthen cooperative federalism believing that strong sates make a strong nation.
4. It develops mechanisms to formualte village level plans and integrate them at higher levels of government.
5. It ensures that all sections of socieyt would benefit adequately from economic processes.
6. It will create knowledge, innovation and entrepreneurial support through collaboratins,
7. It acts as a paltform for resolution of inter-sectoral and inter-departmental issues to accelerate development.
8. It is to monitor and evaluate the implementation of progrmmes and focus on upgradation and capacity building.

Objectives of NITI Aayog :

1. To change the role of the government from provider of the firs and last resort to that of an “enabler”.
2. To focus on a mix of agricultural production with food security at the base to benefit the farmers.
3. To ensure that India is an active player in the deliberations on the global issues.
4. To utilize the economically vibrant middle class in the process of production to realize their potential, in full.
5. To leverage entrepreneurial, scientific and intellectual human capital.
6. To incorporate the non – resident Indian community in the process of development.
7. To enhance the use of modem technology in the growing urban centers for making them secure habitats.
8. To promote good governance through the use of technology.

Organisational Structue of NITI Aayog
It is an organization, a network of expertise focusing on functionality, flexibility and domain knowledge.

I. Its organization consists of :
1. Chairperson :
Prime Minister

2. Vice-chairperson :
To be appointed by the Prime Minister

3. Members : (i) Full time members (ii) Part time members :
Two from research institutions / leading universities on rotational basis.

4. Ex-officio Members :
Maximum four from the union council of ministers to be appointed by the Prime Minister.

5. Chief Executive Officers :
To be appointed by the Prime Minister for a fixed tenure in the rank of secretary to the Government of India.

NITI Aayog works in close co-operation, consultation and co-ordiantion with the state governments and central ministers.

II. The Governing Council comprises of the chief ministers of all state and governors of union territories.

III. Regional Councils address specific issues and contingencies impacting moe than one state or region. Regional councils have specified tenures. They evolve strategies and overall implementation. They are headed by one of the chief ministers of the group. They also have central ministers, experts and academic institutions as members. They have a support cell in the NITI Aayog secretariat.

Question 6.
Describe the census for the Rural-urban divide and explain the remedial measures to reduce the rural urban divide.
Answer:
Causes for the Rural-Urban Divide :
Rural urban imbalances have excised since recorded history in India. However they have come out in a greater dimension at present confronting the development process.

Three different types of factors contribute to the disparities :

A. Natural Differences :
Historically cities and towns have grown where natural resources, waer and good climate were avilable. This historical advantage has helped the urban centres to develop better infrastructure over the years. Industries, business, educatinal and health facilities have also been expanded in the cities and towns owing to the favourable conditions. These factors create the rising differences between urabn and rural areas.

B. Non-Economic Factors :
Values, traditions joint family and attitudes affect social and economic mobility. Social restrictions, caste system, fatalistic attitude and feeling of inferiority discourage mobility and innovative spirit in the rural areas. On the other hand, in the urban areas heterogeneous individuals in higher density of population live in a spirit of competition with no sentiments. Urban people specialize in production and find demand for their products in big amrkets. All these contribute for economic development.

C. Policies of the Government :
Disparities between rural and urban areas are also due to the urban bias in development policies of the government. Huge amounts of money have been spent on the development and maintenance of infrastructure in the cities and towns. Sometimes the incomes of the rural farmers are affected due to the policy of the government to favour the urbanites. Governments also spend more on services like health and education in the urban centers neglecting the rural areas.

D. Other Factors :
Rural India suffers from illiteracy, higher infant mortality rates, more anemic women and children, lack of transport and communication facilities, low level of incomes, uncertain wage employment days, shortage of drinking water facility and lack of hospital facilities. They feel that even the poor in the urban areas are better than many of them.

Remedial Measures :
The government of India hs initiated a variety ©f programmes for the development of rural India and to reduce the urban – rural divide. The Bharath Nirman Programme aims to develop rural infrastructure and create irrigation, road connectivity, hous-ing, water supply, electrification and telephone facilities.

The following remedial measures also ensure the development of rual areas and arrest urban migration.

a) NREGA scheme is to porovide training to the rural youth in different vocational and service sectors. Such a scheme had already been undertaken by states like Rajasthan and Assam, where the results are encouraging.

b) Marginal farmers and small farmers are to be provided with credit facilities to discourage money lenders and commission agents. Crop insurance schemes should be made effective and remunerative prices to the farmers should be ensured.

c) Private investment in infrasstructure in the rural areas may be encouraged by the government wherever possible. Private and public participation in infrastructure development ‘ in rural areas can be activised.

d) Rural youth should be provided with quality education, training and skill formation so that self employment can be enhanced. It is unfortunate that India spends less than 2 percent of GDP on health care. Public health system in the rural areas is ineffective and has lost its credibility. Improvement of health – care would definitely increase productivity and the social security scenario in the rural areas.

Short Answer Questions

Question 1.
Write a note on Nm Aayog. or discuss the functions of NITI Aayog.
Answer:
National Institution for transforming India. (NITI) Aayog was established by the government of India as replacement for the planning commission on January 1, 2015. It was formed on the basis of extensive consultatios across the stakeholders like state governments, relevant institutions, experts and the people at large.

Functions of NITI Aayog :

1. It will facilitate to transform India into cooperative and competitive federalism. “National agenda” is provided to the prime minister and chief ministers for development along with priorities and strategies.
2. It introduces bottom – up model through decentralized planning. It prepares vision and scenario plans for the states and nation.
3. It prepares domain strategies with experts to assist the central and state ministries. It serves as a knowledge and innovation hub by accumulating and disseminating research and best practices.
4. It augurs an integrated and holistic approach to development. It also resolves inter state and inter – sectoral conflicts.
5. It serves as the nodal agency for harnessing global expertise and resources. It acts as a consultant to the central and state governments on policies, programmes and skills in governance.
6. It enables capacity building and technology upgradation.
7. Finally it monitors the implementation of the policies and programmes and evaluates their impact.

Question 2.
What is planning? Explain the MPCs of planning.
Answer:
Every country has its economic planning in some degree with its own methods of implementation. Economic planning implies deliberate control and direction of the economy by a control authority for the purpose of achieving definite targets and objectives within a specified period of time.

As per Todaro, economic planning may be described as “The conscious governmental error to influence, direct and in some cases, even control changes in the principle economic variables consumption, investment, savings, exports, imports etc. of a certain country or region over the course of time in order to achieve a predetermined set of objectives, the essence of economic planning is summed up in these nations of government influence, direction and control”.

A plan is simply a document a blue print, an action oriented model. But planning includes the blue print and the efforts to achieve the goals; The essence of planning is scientific choice and systamatic thinking and economic efforts to achieve the choices. Planning is for the economy as a whale in a given period of time to achieve certain objectives. National priorities and basic needs decides the objectives. Resources are to be mobilized and allocated in the planning process of different sectors. Planning is for both production and distribution, based on the national goals which are technically called plan objectives.

Question 3.
Explain the measures taken by the government for balanced regional development.
Answer:
Balanced Regional Development: It implies the extension of the economic progress to the backward areas and wide spread diffusion of industry. It does not mean equal development of the different regions in the country.

Measures taken by the government for balanced regional development: The regional imbalances became hurdles for national integration, economic growth and overall development. Backward states/regions develop the feeling of dissatisfaction and development becomes lopsided.

British rule :
In India was responsible for some regions to be backward. Maharashtra and West Beqgal were the two states preferred by the British. The three presidency towns Viz, Calcutta, Bombay and Madras attracted most of the industries and the rest of the country remained industrially backward. British rule through land revenue paperized the rural people and drove them into poverty.

Geographical Conditions :
Land, soil, mountains, rivers influence economic growth. Even today hilly and mountain areas remain backward in UP, Himachal Pradesh and Jammu & Kashmir. Agricultural prosperity along with the agro activities depend the geographical conditions of the area. Good rainfall and favourable climate help economic development and con-tribute for higher agricultural output. Regions with unfavourable climate conditions suffer from low agricultural and industrial activity.

Private Investment :
Since the scope of profits is high. The reasons for concentration of industries in Mumbai, Calcutta and even in Chehnai are due to the factors like availability of skilled labour, infrastructural facilities and well developed financial institution.

Natural resources :
Play a vital role in regional imbalances. Some regions are endowed with quality natural resources, while otherwise in short supply. Regions with more natural resources can develop fast and linkages can be maintained. Some areas/states have developed infrastructure facilities like roads, electricity, telecommunications, railway and water ways. They develop at higher rate than those lacking them.

Policy issues and suggestions for reducing regional imbalances :

1. Investment should be increased in backward states for higher economic growth and reduction in the incidence of poverty. Private capital is also to be channelized into the backward regions for which infrastructure, technology and skilled labour are to be developed by the centre and state government.
2. Backward states need to concentrate on the development of physical infrastructure, health facilities, training and education.
3. Less developed states have to initiate policies to reduce growth rate of population in their efforts to encourage economic growth.
4. Agriculture is in a state of crisis so many backward states. Investment in irrigation, credit facilities and remunerative prices are to be provided to encourage the growth of agricultural output.
5. Technology has an important role in reducing regional imbalances both in agriculture and industry. Hence technology needs to be developed to suit the needs of the backward areas.
6. Employment should be expanded to reduce poverty in the backward states. In this connection increase in the guranteed days at employment under MGNREGA needs to be enhanced especially in the tribal and most backward areas.
7. The social sector allocation and performance should be improved in the backward regions. The allocation in the past reform period have come down at the national level.
8. In the poor states SC, STs and other neglected sections of the society should be made . participatory in the process of development.
9. Governance to be effective and transparent in the backward regions.
10. Based on the available resources, cottage, house hold and small scale industries should be promoted in the backward regions through subsidies, tax concessions, training and monitoring.

Question 4.
Explain briefly different concepts of planning.
Answer:
There are different types of planning in the literature of economics. Some of he major concepts ae explained here under :
1. Planning under Capitalism :
Capitalism is driven by market forces, freedom of enter-prise and choice of the customers. Profit motive and self interest guide capitalism. Capitalism and planning never go together as they differ conceptually. The state may intervene by providing basic facilities and control law and order for the smooth functioning. Moreover in the modem world, there is no country which is purely capitalist in nature.

2. Planning in a Mixed Economy :
In a mixed economy, public secor and private sector coexist. India is a good example for a mixed economy. In a mixed economy the central planning authority prepares the plan and the private sector should also comply with it. Through planning process private sector is assisted, contgrolled and regualted in he interets of plan objectives.

3. Planning under Socialism :
A socialist economy must necessarily have economic plans. The central planning authority mobilizes the resources and allocates them to different sectors in accordance with the plan objectives. Market forces has no role in resources allocation. Economic plans are implemented in letter and spirit in socialist economies.

4. Democratic Planning versus Authoritarial Planning :
In democratic planning, the stae will not control all the means of production. It helps the masses an takes the public opinion. Objectives and targets of the plan are fixed by considering the opinions of the people. Freedom in economic activities is allowed in democratic planning. Authoritarian planning is nothing but socialist centralized planning. In this type, the entire economy is directed and
controlled by the planning authority.

5. Centralised and Decentralised Planning :
Centralized planning was adopted in the former Soviet Russia. It is a socialist planning. Decentralized planning is ‘planning in a mixed economy’ like India. Important decisions are taken by the planning authority and freedom in given to the units in execution. In a decentralized planning system, coordination among the units in executio is ensured.

6. Planning from Above and Below :
Under planning from above, the central planning authority prepares the plans for the nation and forwards them to the regional units. They have to implement the plans as they are. Planning from below is based on local needs and conditions. People at the grassroots leel particiapte and prepare regional plans. All these regional plans are Consolidated and a national plan is proposed and this type of planning is more realistic and democratic.

7. Perspective Planning and Annual Planning :
Perspective planning is long term planning in which targets are set for a period of 15 – 20 years or 25 years. It s a blue print of development o be undertaken over a longer period. Perspective plan is normally split into short term plans of 3 – 5 years. A perspective plan ensures continuity in planning. Each short term plan is again divided into annual plans for operational purposes. Annual plans are subdivided into annual allocations and targets for implementation. Strictly speaking annual plans are the real worksheets of the economy in a particular year.

Very Short Answer Questions

Question 1.
Balanced Regional Development.
Answer:
lt implies the extension of the economic progress to the backward areas and wide spread diffusion of industry. It does not mean equal development of the different regions in the country.

Question 2.
Inclusive growth.
Answer:
Inclusive growth refers to both the pace and the patem of the economic growth. This concept stresses the inclusiveness of th higher to scheduled population in the growth process, which is respected to bring in several, other benefits as well to the economyh. -It the bottom 20% share can increase to 5 to 10% at lease, then it ca be termed as incljsive growth.

Question 3.
Pearsons for rural – urban imbalances.
Answer:
Reasons for Growth of Urbanisation :
The growth of urbanization in India is mainly due to the imbalances between urban and rural areas in different aspecs prompting rural people to migrate to cities and towns.

Rural people go to urban centres and settle there because of the following reasons :

1. Rural areas fail to provide non – agricultural employment. Employment opportunities ae more in urban centers. So rural labour migrate in search of means of livelihood.
2. Industrial expansion and growth of service sectors attract educated and skilled rural youth to the urban areas.
3. Transport, communication, educational and health facilities assure a comfortable living and hence some of the rural people migrate to urabn centre.
4. Urban centers give scope for anonymous living with little interference in the personal issues and some sections migrate with the hope of a peaceful living.
5. Life in the urban centers attracts some of the rural people to migrate.

Question 4.
Democratic planning and authoritarian planning.
Answer:
Democratic Planning versus Authoritarial Planning :
In democratic planning, the stae will not control all the means of production. It helps the masses an takes the public opinion. Objectives and targets of the plan are fixed by considering the opinions of the people. Freedom in economic activities is allowed in democratic planning. Authoritarian planning is nothing but socialist centralized planning. In itheis type, the entire economy is directed and controlled by the planning authority.

Question 5.
Perspective planning and an Annual planning.
Answer:
Perspective Planning Annual Planning :
Perspective planning is long term planning in which targets are set foHa period of 15 – 20 years or 25 years. It s a blue print of development o be undertaken over a longer period. Perspective plan is normally split into short term plans of 3 – 5 years. A perspective plan ensures continuity in planning. Each short term plan is again divided into annual plans for operational purposes. Annual plans are subdivided into annual allocations and targets for implementation. Strictly speaking annual plans are the real worksheets of the economy in a particulare year.

Question 6.
NITI Aayog.
Answer:
National Institution for transforming India. (NITI) Aayog was established by the government of India as replacement for the planning commission on January 1, 2015. It was formed on the basis of extensive consulratios across the stake holders like state govenments, relevant institutions, experts, and the people at large.

Telangana TSBIE TS Inter 2nd Year Economics Study Material 8th Lesson Foreign Sector Textbook Questions and Answers.

TS Inter 2nd Year Economics Study Material 8th Lesson Foreign Sector

Essay Questions

Question 1.
Examine India’s trade balance and balance of payments.
Answer:
Balance of Payment, (BOF) is a statistical record in the form of a balance sheet comprising all its transactions with rest of the world during any given period of time.

India’s Trade Balance and Balance of Payments : This can be studied under following heads.

I. Trade Balance :
India experienced a negative balance or deficit in its balance of trade in almost all five year plans. The annual average trade deficit in First plan was Rs. 108 crore. It was Rs. 467 crore in Second plan. During Third plan it was Rs. 477 crore and it was Rs.36,363 crore and Rs. 1,49,841 crore during Ninth and Tenth plans respectively.

Value of foreign trade over the years focuses on the trends in India’s foreign trade. Value of foreign trade is equal to the value of imports plus exports.

a. Decadal Variation in the Value of Foreign Trade :
Value of imports and exports are added to account for the total value of foreign trade as stated earlier. As per the figures presented in Table-volume of foreign trade was Rs. 3,835 crore in 1960-61. It increased from Rs. 3,169 crore in 1970-71 to Rs. 19,260 crore in 1980-81. From then onwards, the value of trade increased at a higher pace to Rs. 75,751 crore in 1990-91 to Rs. 4,29,663 croere in 2000-01 and to Rs. 28,26,389 crore in 2010-11. It touched the peak level of Rs. 46,33,485 crore in 2014-15 and marginally decreased to Rs. 42,06,676 crore in 2015-16 and then increased to Rs. 49,57,548 crore in 2017-18 and again declined to Rs. 28,18,764 crore during the year 2019-20.

It is clear that in the two decades between 1960-61 and 1980-81 value of foreign trade rose by 579.4 percent. In other word, the increase in 1980-81 is 608 times to the value in 1960-61. Decadal increases during 1980-81 – 1990-91 was 293 percent while the increase during 1990-91 – 2000-01 was 467 percent. The increase in the following decade ending with 2010-11 was 558 percent. Increase in the value of foreign trade in 2015-16 by 9.2 percent. A marginal increase at 12 percent was recorded in 2017-18 over 2016-17 and again there was a decline at 41 percent in the year 2018-19 over 2017-18 and again declined to 3 percent in the year 2019-20 over the year 2018-19. Therefore, it can be stated that the value of foreign trade in India has been increasing at a higher rate over the years since 1960-61.

2) Decadal Growth of Imports :
Another significant feature of India’s foreign trade is the every growing imports. The total value of imports inl960-61 was Rs. 2,795 crore and it had increased to Rs. 12,549 crore in 1980-81 by 349 percent. Value of imports rose to Rs. 43,198 crore in 1990-91 and to Rs. 2,28,307 crore in 2000-01. The percentages of growth for these two decades were 244 and 428 respectively. Imports further rose to Rs. 16,83,467 crore in 2010-11 recording a growth of 637 percent over 2000-01. Value of imports touched the peak in 2014-15 at Rs. 27,37,087 crore and then marginally decreased in 2015-16 and 2016-17 and again declined to Rs. 17,01,997 crore in the year 2019-20 and the percent decline was 5 over the year 2018-19.

3) Decadal Growth of Exports :
The growth rate of exports has been sluggish in India over the years. The value of exports was Rs. 1,040 crore in 1960-61 and it had increased to Rs. 6,711 crore in 1980-81. The growth rate was 545.3 percent for the two decades. Value of exports increased to Rs. 32,553 crore in 1990-91 and then to Rs. 2,01,356 crore in-2000-01 and the decadal growth rates were 385 and 518 percent respectively. Value of exports increased to Rs. 11,42,922 crore by 468 percent in 2010-11 over 2000-01.

Exports in 2017-18 were the highest at Rs. 19,56,515 crore and then decreased to Rs. 11,16,767 crore in the year 2019-20. Indian exports recorded some increase with the export promotion policies of the government since the devaluation of rupee in 1966. But, the growth in the exports was inadequate when compared to the growth in imports. This disparity between exports and imports widened the trade deficit from year to year.

Unfavourable terms of trade for Indian agro-based goods, inadequate exportable surplus in the economy, protection policies of the developed countries, the long period of recession in the developed countries and regular depreciation of the exchange value of the rupee were the main factors responsible for the low growth of Indian exports.

4) Deficit in the Balance of Trade :
Higher growth of imports and sluggish growth of exports have led to mounting deficits in the balance of trade over the years in India. The country has recorded a small surplus only two tifties, 1972-73 and in 1976-77, ever since 1951. Deficit in the balance of trade was Rs. 1,755 crore in 1961 and it rose to Rs. 5,838 crore in 1980-81. The increase was 673 percent. The increase had been regular in 1990-91 and 2000-01. The deficit in 2010-11 was Rs. 5,40,545 crore recording a growth of 191 percent over 2000-01.

It reached the maximum level of Rs. 10,44,545 crore in 2017-18 and then decreased to Rs. 5,85,230 crore in 2019-20. The average annual deficit in the balance of trade during the First plan was Rs. 108 crores and it gradually increased to Rs. 7,720 crore during the Seventh plan. The years of deficits in the balance of trade in 2018-19 and 2019-20 had declined when compared to the deficit in 2017-18.

The trend in the decrease in the deficit due to import compression and export promotion during the Fourth plan could not be sustained and economy faced growing deficits in the balance of trade. Recurring depreciation of the rupee in terms of dollar has resulted in enhancing the value of imports due to which deficits are widening of late; the share of China in India’s trade deficit has increased from 20.3 per cent in 2012-13 to 43.2 percent in 2017-18 as most of the Chinese goods are dumped into the Indian markets. The Indian government is seriously thinking to levy anti-dumping taxes to counter the Chinese imports.

II. Balance of Payments :
It can be seen that the current account BoP deficit for First plan was Rs. 42 crore. During Second plan the deficit in BoP was Rs. 1,725 crore. The highly unfavourable BoP in this plan was due to heavy imports of capital goods to develop heavy and basic industries and the failure of agricultural production. India adopted the policy of import substitution as one of the instruments to achieve the objective of self-reliance. Accordingly, the government managed to restrict imports and succeeded in expanding exports. The net result was a surplus in the BoP for the first time to the tune of Rs. 100 crore due to a sharp increase in net invisibles. After that India experienced a deficit in all plan periods.

Question 2.
Describe the status of foreign direct Investment in India.
Answer:
Foreign Direct Investment in India :
It can bes said that the FDI, which was only US$ 129 million in the year 1991 increased to US$ 3557 million in 1997-98, but then it decreased to US$ 2155 million in the year 1999-2000. The said decline could be attributed to the East Asian crisis, which adversely affected capital flows to all emerging markets. During the year 2000-01. the inflows were encouraging. There was a positive increase in the value of FDI inflows which might be attributed to various reasons such as heavy demand of Indian consumers, liberalized government policy, communications facilities.

The FDI inflows increased to US$6130 million in the year 2001-02, but again fell to US$ 5095 million in 2002-03 and further to US$ 4322 million in 2003-04. In the year 2004-05, the inflows again raised to US$ 6052 million and further to US$ 22862 million in 2006-07 showing the global investment trend to the developing countries.

The recessionary slow down had also observed during the latter period and as such the infows fell to US$ 37746 million. Further the inflows increased to US$ 46552 million in the year 2011-12, which signifies the impact of liberalization on economy and gradual opening up of the capital account. At a time when the general outlook on FDI was buoyant, the FDI inflows dipped again to US$ 36,047 million in the year 2013-14. Various reasons have been caused for this sort of downfall like rise in corruption cases, unnecessary procedural delays, environmental related issues, and higher inflation rates during the period.

In addition to this, the issues prevailing domestically may also have an adverse affect on the long-term FDI flows to India. But in the year 2014-15 the FDI inflows once again rose to US$ 45,147 million, and further to US$ 55,559 million in the year 2015-16. But declined in the year 2016-17 and again rose in 2017-18 and 2018-19 to the tune of US$ 42,156 million and US$ 50,553 million respectively.

A major share of 87 percent of FDI inflows was contributed by these ten countries while only 13 percent was contributed by rest of the world. Of the total FDI inflows to India, 32 per cent of the total investment by Mauritius and thus emerged as the dominant source of FDI 20 percent of the total investment was made by Singapore and was the second dominant source of FDI inflows to India. However, Japan and Netherlands backed the third and fourth position by respectively contributing percent each. UK and USA both contributed 6 each percent each followed by Germany by contributing 3 percent. Cyprus, UAE and France with 2 percent each contributed to the FDI inflows.

Further, it can be said that Mauritius and Singapore both together contributed 52 percent of total FDI inflows to India. The reason for this may be that they offer tailor made solutions in offshore banking and low tax rate, and robust privacy. On top of that they also have double tax avoidance agreement (DTAA) with India wherein profits made in India are not subject to any taxes. Therefore, it had also been observed that Mauritius became an excellent route to direct any investment in India, and hence it has a lion’s share in our FDI and this might be due to the fact that money travels from India to Mauritius and then again back to India in the form of FDI.

Though, the total investment by Singapore ranks it at second position, but if we see the inflows in the year 2018-19, this has almost doubled in comparison to the inflows of the 2016-17 year. The reason for this sudden increase could be attributed to the cancellation of DTAA with Mauritius. Before that also the reason for low inflows from Singapore despite of the DTAA Treaty was that it had both objective and subjective restrictions on who gets the benefits of the treaty.

An analysis of the recent trends in FDI flows at the global level as well as across regions/ countries suggest that India has generally attracted higher FDI flows in the line with its robust domestic economic performance and gradual liberalisation of the FDI policy as part of the cautious capital account liberalisation process. Even during the recent global crisis, FDI inflows to India did not show as much moderation as was the case at the global level as well as in other emerging market economies (EMFs). However, when the global FDI flows to EMEs recovered during 2010-11, FDI flows of global recovery. A panel exercise for 10 major EMEs showed that FDI is significantly influenced by openness, growth prospects, macro economic sustainability (International Investment Position), labour cost and policy environment.

Question 3.
What are the provisions of GATT?
Answer:
The first and second world wars badly affected the world economies and therefore, various countries imposed several restrictions on imports. As a result, international trade among the nations deteriorated significantly. So the allied powers thought of having a plan for new, more viable relations in the international economy. The Bretton Woods conference held in 1944 was the starting point for a new order. The International Monetary Fund (IMF), International Bank for Reconstruction and Development (IBRD) and International Trade Organisation (ITO) were thought of towards this end.

Although, a conference, held in Havana in 1947-48, established a charter for the ITO, it never came into existence. Instead, the General Agreement on Tariffs and Trade (GATT) came into being. The GATT came into force on January 1, 1948.

Objectives of GATT :
The major objectives of GATT are as follows :

1. To follow unconditional most favoured nations (MFN) principle;
2. To grant protection to domestic industry through tariffs only;
3. To carry on trade on the principle of non-discrimination, reciprocity and transparency; and
4. To liberalise tariff and non-tariff measures through multilateral negotiations.

Functions/Provisions of GATT :
1. Most Favoured Nations (MFN) Clause :
Article I of GATT deals with the most favoured nations arid forbids the contracting parties from granting any new preference. It means a county agrees not to give special treatment to any single nation than it gives to all the contracting parties. The MFN clause rules out any preferential treatment among nations as far as trade \ policy is concerned ie., concessions must be extended immediately to all other countries, so that all contracting parties benefit to the same extent. In the same way, if an action is taken by any country to protect domestic industry then it must be applied to all contracting parties.

2. Tariff Concessions :
Article H deals with basic tariffs, incorporating schedules of tariff concessions. The tariff concessions contained in GATT usually known as ‘bound’ rates came into force in 1948 for 3 years until the end of 1950.

3. Elimination of Quantitative Restrictions (QRs) :
According to Article XI, the contracting parties are prohibited from imposing the QRs, subject to the principal exception that a country might, in certain defined circumstances which a restricter for the developed countries, apply restrictions with the objective of protecting its external balance of payments. In general, such restrictions must be applied in non-discriminatory manner.

4. Safeguard Code :
Article XIX of the GATT provided emergency safeguard code. Under this, a country could impose a tariff or quota to restrain imports which caused or threatened serious injury to domestic producers.

5. Exceptions :
Article XX and XXI provided general and security exceptions towards the prohibitions of import quotas by contracting parties.

6. Subsidies and Countervailing Duties :
The rule on subsidies and countervailing duties were incorporated in a separate code negotiated in the Tokyo round of 1970s. Under these rules, export duties on manufacturing products were banned except in developing countries. Export subsidies for primary products were restricted only on the condition that they should not lead to the acquisition of more than an equitable share of world export trade. The agreement also contained provisions that authorised importing countries to take compensating action against trading partners found to be dumping goods in their markets of increasing rates through export subsidies.

7. Settlement of Disputes :
The greatest success of the GATT had been in the field of settlement of disputes among its members. Any member having complaint against the other member on the issue of violating the rules of the organisation brings its complaint to the annual meetings for settlement.

Question 4.
What are the provisions of Final Act of WTO?
Answer:
The final act prepared in December, 1993 was finally signed by member nations of GATT in April, 1994 and this paved way for the setting up of WTO. The WTO agreement was signed by 104 member nations of GATT and it came into force from January 1, 1995 and India became a founder member of the WTO by signing the WTO agreement on December 30, 1994. Its head quarter is in Geneva, Switzerland.

WTO Agreements for Provisions of Final Act :
1. Agreement on Agriculture (AoA) :
It is related to commitments in the area of market access, domestic support and export promotion. The members have to transform their nontariff barriers like quotas into equivalent tariff measures.

The WTO Agreement on Agricultural contains provisions in 3 broad areas of agriculture and trade policy:
a) Market access-abolishment of all non-tariff barriers such as quotas, variable levies, minimum import prices etc.

b) Domestic support reduction by 20 percent in developed and 13.3 percent in developing countries; and

c) Export subsidies-reduction of subsidy expenditure by 36% and volume by 21% in 6 years, in equal instalments for developed and developing countries by 24% and 14% respectively in equal annual instalments over 10 years.

2. Agreement on Trade in Textiles and Clothing (Multi-Fibre Arrangements) :
This provides for phasing out the import quotas on textiles and clothing in force under the multifibre agreement since 1974, over a span of 10 years i.e., by the end of the tranisition period on January 1, 2005.

3. Agreement on TRIMs :
The main provisions provided in the TRIMs text ensure that government shall not discriminate against foreign capital. In other words, the TRIMs text compels member countries to give national treatment to foreign capital.

4. Trade Related Intellectual Property Rights (TRIPs) :
Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) is an international agreement between the member nations. TRIPS agreement is aimed at harmonizing the intellectual property (IP) related laws and regulations worldwide. The TRIPS agreement accomplishes this motive by setting minimum standards for protection of various forms of IP. The nations that are signatory to the TRIPS agreement have to abide by these minimum standards in their national laws related to IP. The TRIPS agreement generally sets out the minimum standards regarding the grant of rights to the owner of IP, enforcement requirements in the national laws,and settlement of disputes and remedies to those whose IP rights get infringed.

5. General Agreement on Trade in Services (GATS) :
For the first time, trade in services like banking, insurance, travel, marine transportation, mobility of labour etc., was brought within the ambit of negotiations in the Uruguay round. The GATS provides a multilateral frame-work of principles and services which should govern trade in services under conditions of transparency and progressive liberalisation. It spells out certain obligations like grant of MFN’ status to the other member nations with regard to trade in services, maintenance of transparency and also a commitment for liberalisation in general terms.

6. Disputes Settlement Body (DSB) :
One of the unique features of WTO is its provision relating to dispute settlement mechanism. Settlement of disputes under GATT was never ending process. There was ample scope for procedural delays, objections could be raised at each stage of the dispute settlement process and final reports could be rejected by the offending party. The DSB setup under WTO, seeks to plug these loopholes and thus, provide security and predictability to the multilateral trading system. It has now been made to settle a dispute within 18 months.

Question 5.
Explain the impact of WTO on Indian Economy. How it is different from GATT?
Answer:
Impact of WTO on Indian Economy :
Being a founder member of the World Trade Organisation country, India would get immense benefits. At present, only just 5 percent of our tariff lines remain bound. With the finalization of the Uruguary round, about 68 percent of India’s tariff lines covering basically raw materials, components and capital goods, but excluding consumer goods, petroleum and fertilizers and some non-ferrous metals would have been bound. The expert view is that it is in the long term interest of India to have low duties on raw materials, components and capital goods since they satisfy the productive needs of the economy.

However, regarding the threat arising out of TRIPS, India has pointed out that exclusive marketing rights to be provided for patent holders would in no way has pointed out that exclusive marketing rights to be provided for patent holders would in no way dilute the national interest in such crucial areas as agriculture, drugs and pharmaceuticals as enough safe grounds had been built into the system to take care of the concern voiced by developing countries including India.

It is expected that dur country would stand to gain immensely from the membership of WTO. By and large, it can be said that there are different opinions over advantages and. disad-vantages for India joining WTO.

Advantages :
India is likely to derive the following benefits by joining WTO :
1) It is believed that India will obtain large gains in agricultre, forestry, fishery products and processed food and beverages.
2) India’s share in world exports may increase from 0.5 to 1 percent.
3) It is believed that India can gain US$ 2.7 billion extra in its exports per year.
4) The phasing out of multi fibre arrangement (MFA) by 2005 will benefit as its exports of textile and clothing will increase.
5) Improved prospects for agricultural export prices due to reduction of subsidies and tariffs.
6) India has the advantage of trade links with all other member countries without the need for bilateral agreements due to multilateral agreements provision of WTO.
7) By being a member of the WTO, India can benefit from International Trade centre jointly operated by WTO and UNO.
8) GATS is the another area where India can gain immensely in banking, insurance, telecommunications and shipping. There is ample of scope for global job opportunities.

Disadvantages :
The following are the major disadvantages for India by joining WTO :

1. The claim of increase in India’s exports due to expansion of world trade is not acceptable to many. They feel that flow of goods and services across the globe depends not much on trade restrictions, but on factors like infrastructure, technology, assured supply of exportable goods etc.
2. Critics state that the benefits due to reduction of trade barriers and expansion of market and world trade will accrue more to developed countries only.
3. WTO agreements relating to steep hike in prices of drugs and agricultural inputs will hamper the growth of these sectors in India.
4. The IPRs protection is anticompetition and anti-liberalisation and which may lead to monopoly of MNCs.

Short Answer Questions

Question 1.
Assess the role of international trade on Indian-economy.
Answer:
The role of international trade in economic development is highly significant. It plays a vital role for the development of world economies. It provides the urge to develop the knowledge and experience that makes development possible. The classical and neo-classical economists attached so much importance to international trade in a country’s development that they regarded it as an engine to economic growth.

1. Comparative Cost Advantage :
Foreign trade helps to produce those commodities which have comparatively cheaper cost than others. It results in less cost of production in producing a commodity. If all the countries adopt this procedure and produce those goods in which they have less comparative cost, will lead to availability of goods at a lower price. India also specialised in the production of those commodities in which it has comparative cost ad-vantages.

2. Market Expansion :
Foreign trade increases the scope of market because of domestic demand and foreign demand for the product. If the production of goods increases, average cost declines and price of goods declines as a result consumers will get different varieties of goods both in quantitative and qualitative terms.

3. Agricultural Development :
Agricultural development is the backbone of our economy. Foreign trade has played very imporant role for the development of our agriculture sector. Every year India exports rice, cotton, fruits and vegetables to other countries. The export of goods makes our farmers more prosperous. It inspires the spirit of development in them.

4. Competition :
International trade discourages the formation of local monopolies. The local producers cannot exploit the consumers because of fear of cheap imports. In the absence of imports, some local firms may create monopoly and charge very high prices.

5. Trade Policy :
Trade and commerce have been the backbone of the Indian economy right from the ancient times. Textiles and spices were the first products to be exported by India. From 1950s to the late 1980s, the country followed socialist policy resulting in protectionism and heavy regulations on foreign companies conducting trade with India. Average tariffs were more than 200 percent, extensive quantitative restrictions were imposed on imports, and stringent restrictions wre imposed on foreign investments. However, the country began to reform the economy since 1990s, through adoption of LPG policy.

6. Foreign Capital :
As part of economic reforms, India opened up its economy and allowed MNCs in the core sectors such as power and fuel, electrical equipments, transport etc. to allow foreign invesment upto 74 percent stake in Indian firms and even 100 percent stake in some firms.

Question 2.
Distinguish balance payments and balance of Trade.
Answer:
Balance of Trade Vs Balance of Payments :
Balance of trade (BoT) takes into account nly those transactions arising out of the exports and imports of the visible items, it does not consider the exchange of invisible items such as the services rendered by shipping, insurance, banking, payment of interest and dividend, and expenditure by tourists. Therefore, balance of trade is nothing, but the difference between the value of goods exported and imported. A crucial point to pote is both goods and services are counted for exports and imports, as a result of which a nation has balance of trade for goods (also known as the merchandise trade balance) and a balance of trade for services.

In equation form, the balance of payments (BoP) is Y = C + 1 + G + (X – M) which includes all transactions which give rise to or exhaust national income. The expression in the above equation denotes the balance. If the difference between exports and imports is zero, the balance of trade is balanced. If exports are greater than imports, the balance of trade is favourable, or there is surplus balance of trade. Favourable balance of trade indicates the good economic condition of the economy. On the other hand, if exports are less than imports, the balance of trade is in deficit or unfavourable. The difference between BoP and BoT are as follows :

Balance of Payments Vs Balance of Trade

Question 3.
Distinguish current account and capital account.
Answer:
The balance of payments denotes a record of a country’s total money receipts received from and payments made to abroad,the difference betweeen the receipts and payment is the surplus or deficit. If total receipts are greater than total payments, there will be surplus; and if total receipts are lesser than total payments, there would be deficit in balance of payments.

Components of Balance of Payments :
A country’s balance of payments is merely a way of listing international receipts and payments. In this sense, it is an application of double-entry book-keeping. Usually a country’s balance of payments consists of two accounts : a) current account and b) capital account. A simplified example is given in the following Table, to understand items of balance of payments of a country in much better way.

Cbnqponeiits of Balance off Payments

The right side of Table-shows how the foreign currency is spent. The row 1 of the table indicates that the country has exported goods to a value of 1,100 and analogously row 5 shows that the country has imported goods to a value of 1,600. These two rows describe the country’s visible trade.

Row 2 indicates the receipts of the country from the sale of services to foreigners during the period in question. These may be in the form of shipping services, interest and dividends which citizens of the country earn on investment abroad, income through tourism. Such payments are regarded as payments made by foreigners. These payments are registered under exports of services or invisible exports. In a completely analogous way, row 6 denotes payments which residents of the country in question make to foreigners for similar services. The net difference between row 2 and row 6 is called as invisible trade balance.

The items under row 3 include unrequired receipts i.e., the receipts which the residents of a country receive for free without having to make any present or future payment in return. Examples of this kind are : Gifts which residents receive from foreigners, money sent by emigrants to their relatives indemnities, payments from developed to developing countries. In a purely analogous way, row 7 describes payments which the country in question makes as gifts, assistance, indemnities, etc.

Items under 1, 2, 3, 5, 6 and 7 enumerate all the payments and receipts made for the current period of time where items 4 and 8 refer to capital receipts and payments. The items of 4 include loans taken by the government of a country from other foreign governments, sale of stocks abroad, sale of gold to other countries etc. In all these instances, the country in question will acquire foreign currency. Similarly, if residents of the country in their turn were to acquire foreign assets, for instance in the form of land abroad or foreign shares, or if the government were to acqire foreign assets, for instance in the form of land abroad or foreign shares, or if the government were to lend money to a foreign government, this would give rise to an outflow of foreign currency and comes as a capial transfer under row 8.

Question 4.
Describe the functions of GATT.
Answer:
The general agreement on tariffs and trade (GATT) came into force on January 1, 1948.

1) Most Favoured Nation Clause :
The basic principle of GATT is that of non-discrimination, confined in article – I. Contracting parties accept the so-called most favoured nation clause. The MFN clause rules out any preferrential treatment among nations as far as trade policy is concerned.

2) Tariff Concessions :
Article II deals with basic tariffs, incorporating schedules of tariff concessions. The tariff concessions contained in GATT known as band rates came into force in 1948 for 3 years until the end of 1950.

3) Elimination of quantitative restrictions (QRS) :
According to article XI, the contracting parties are prohibited from imposing the QRs, subject to the principal exception that a country might, in certain defined circumstances which are stricter for the developed countries, apply restrictions with the objective of protecting its external BOP. In general, such restrictions must be applied in a non-discriminatory manner.

4) Safeguard code :
Article XIX of the GATT provided emergency safeguard code under this, a country could impose a tariff or quota to restrain imports which caused or threatened serious injury to domestic producers.

5) Exceptions :
Article XX and XXI provided general and security exceptions towards the prohibitions of import quotas by contracting parties.

6) Subsidies and countervailing duties :
The rule on subsidies and countervailing duties were incorporated in a separate code negotiated in the Tokyo round of 1970’s. Under these rules, export duties on manufacturing products were banned except in developing countries.

7) Settlement of disputes :
The greatest success of the GATT had been in the field of settlement of disputes among its members. Any member having compliant against the other member on the issue of violating the rules of the organisation brings its complaint to the annual, meetings for settlement.

Question 5.
Discuss the rounds of GATT.
Answer:
Eight rounds of negotiating conference took place between the participating countries from 1947 to the last year of GATT. This can be shown in the following table.
Chart : Rounds of GATT

In the table first six rounds of conference were related to curtailing tariff rates whereas the seventh was related to non-tariff issues. The eight round was entirely different and it was popularly known as Uruguay round.

Question 6.
Explain the objectives of WTO.
Answer:
WT.O. came into force from Ist January, 1995. It’s head quarter is Geneva, Switzerland.

Objectives :

1. Raising standard of living and income, promoting full employment, expanding production and trade and optimum utilisation of world resources.
2. Introduce Sustainable development – a concept which envisages the development.
3. Taking positive steps to ensure that developing countries, secure a better share in world trade.
4. Promote trade flows by encouraging nations to adopt non discriminatory and predictable trade practices.
5. Establish procedures for solving trade disputes among members.

Question 7.
Analyse the differences between GATT and WTO :
Answer:
Difference between GATT and WTO
The major differences between GATT and WTO are as follows :

Question 8.
Write a note on Agreement on Agriculture (AoA)
Answer:
It is related to commitments in the area of market access, domestic support and export promotion. The members have to transform their non-tariff barriers like quotas into equivalent tariff measures. The tariffs resulting from this transformation, as well as other tariffs on agricultural products are to be reduced on an average by 36 percent in the case of developed countries and 24 percent incase of developing countries. The reductions were required to be undertaken over 6 years in case of developed countries and 10 years incase of developing countries.

The W.T.O. agreement on Agriculture contains provisions in 3 broad areas of agriculture and trade policy:
a) Market access – abolishment of all non-tariff barriers such as quotas, variable levies, minimum import prices etc.

b) Domestic support – reduction by 20 percent in developed and 13.3 percent in developing countries, and

c) Export subsidies – reduction of subsidy expenditure by 36% and volume by 21% in 6 years, in equal instalments for developed and developing countries by 24% and 14% respectively in equal instalments over 10 years.

Very Short Answer Questions

Question 1.
FDI.
Answer:
It is a form of a long term international capital movement made for the purpose of productive activity and accompanied by the intention of managerial control or participation in the management of foreign firm.

Question 2.
Balance of Trade.
Answer:
A country’s balance of trade refers to the net difference between the value of exports and value of imports of merchandise only a given period.

Question 3.
Invisibles.
Answer:
The receipts of the country from the sale of services to foreigners during the period. These may be in the form of shipping services, interest and dividends, which citizens of the country earn on investment abroad.

Question 4.
GATT objectives.
Answer:

1. To follow unconditional most favoured nations principle.
2. To grant protection to domestic industry through tariffs.
3. To carry on trade on the principle of non discrimination, reciprocity.
4. To liberalise tariff and non tariff measures through multilateral negotiations.

Question 5.
WTO objectives.
Answer:

1. Raising standard of living and income and employment,
2. Introduce sustainable development.
3. Iaking positive steps to ensure that developing countries.
4. Promote trade flows by encouraging nations to adopt non discriminatory.
5. Establish procedures for solving trade disputes among members.

Question 6.
MFN.
Answer:
Any concession given to any nation was automatically extended to all the members countries of the GATT. MFN means Most Favoured Nations.

Question 7.
TRIP’S.
Answer:
It means Trade Related Intellectual Property Rights. It legally protects the intellectual property of an individual (or) a business firm (or) a nation against illegal usage by others.

Question 8.
TRIMS.
Answer:
The main provisions provided in the TRIM’S text ensure that government shall not dis-criminate against foreign capital. TRIM’S refers to Trade related investment measures. The TRIMs text compels member countries to give national treatment to foreign capital.

Question 9.
GATS.
Answer:
(General Agrement on Trade in Services) : It provides a multilateral frame work of principles and services which should govern trade in services under conditions of transparency and progressive liberalisation. ;

Question 10.
Export subsidies.
Answer:
It means a country may encourage its exports to foreign countries by granting subsidies on goods exported. A combination of tariffs against imports and countries for exports may elimination external deficit facing a country.

Question 11.
Balance of payments (BoP).
Answer:
It is a statistical record in the form of a balance sheet comprising all its transactions with rest of the world during any given period of time.

Question 12.
Dunkel Proposals.
Answer:
The Uruguay round negotiations were expected to complete in four years, but it took more than eight years of complex negotiations. Mr. Arthur Dunkel, the Director General of GATT compiled a very detailed document at this round popularly known as Dunkel proposals. This proposal culminated to the Final Act on December 15, 1993. This act led to formation of WTO. Some of the important areas contained in these proposals include; tariff and non-tariff measures, textile and clothing, agriculture, subsidies, multi trade agreements, trade related intellectual property rights (TRIPs), trade related investment measures (TRIMs) and general agreement on trade and services (GATS).