IX_Economics_Chapter-3_Poverty_Long Ques-Ans.

Class IX

Chapter – 3

Poverty as a Challenge

Question-Answers Part -3

Ques.1. Describe how the poverty line is estimated in India.

Ans : In India, poverty line is measured considering the following factors required for subsistence:
1. Minimum level of food requirement           2. Clothing       3. Footwear

4. Fuel and Light                                             5. Education    6. Medical requirement etc.

These physical quantities are multiplied by their prices. The present formula for food requirement is based on the desired calorie requirement. On the basis of these calculations in 1999 - 2000, the poverty line in the rural areas was fixed Rs.328 per capita per month and in urban areas, it was Rs.454. People earning more than this amount were considered above poverty line and earning less than this amount were considered as living below poverty line. The minimum amount in urban area is higher than that in rural area because of higher price levels in urban areas. The minimum food requirement is measured in calories which is 2100 per person per day in urban areas and 2400 in rural areas. The minimum calorie requirement in rural area in higher as rural people are engaged in more physical work.

Ques.2. Do you think that present methodology of poverty estimation is appropriate?

Ans. The present methodology of poverty estimation does not look appropriate. It only takes one factor in view and that is the economic factor. Moreover it considers about a “minimum” subsistence level of living rather than a “reasonable” level of living.

Poverty has many dimensions. With development, the definitions of what constitutes poverty also changes. Its concept now has broadened to human poverty.

If poverty is to be removed in real sense and the people are to be brought above the poverty line, not only we need to increase their income but also, we have to provide the people with job-security, equality, social status, respect and dignity.

Ques.3. Describe poverty trends in India since 1973.

Ans : (i) As per the data, there is a substantial decline in poverty ratio in India from 55 percent in 1973 to 36 percent in 1993. There was further decline from 36 percent in 1993 to 26 percent in 2000.

(ii) Although the number of poor people remained stable (about 320 million) in the earlier two decades (1973 to 1993), there was significant reduction in the number of poors to about 260 million till 2000.

(iii) Poverty ratio always remained higher in rural areas compared to urban areas.

(iv) If the present trend continues, the people below poverty line may come down to less than 20 percent in the next few years.

Ques.4. Give an account of interstate disparities in poverty in India.

Ans : The proportion of poor is not the same in every state. Though there has been a decline in poverty in every state from the early seventies, the success rate of reducing poverty has varied from state to state. In 20 states and union territories, the poverty ratio is less than the national average of 26. In others, the poverty ratios are higher than the national average. Among these, Orrisa and Bihar continue to be the two poorest states with poverty ratios of 47 and 43 per cent respectively. Both rural and urban poverty are quite high in these states, and also in Madhya Pradesh and Uttar Pradesh.

On the other hand, states like Tamil Nadu, Andhra Pradesh, Gujarat, Kerala, Punjab, Haryana and Jammu and Kashmir and West Bengal have shown a significant decline in poverty. Improved Public distribution of food grains in Andhra Pradesh and Tamil Nadu, focus on human resource development in Kerala, high agricultural development in Punjab & Haryana and land reform measures adopted in West Bengal are some of the factors responsible for the decline in poverty in these states.

Ques.5. Describe global poverty trends.

Ans : The proportion of people in developing countries living on less than $1 per day has fallen from 28 per cent in 1990 to 21 per cent in 2001. There has been a substantial reduction in global poverty since the nineteen eighties. However, the reduction in poverty is marked with great regional differences. Due to rapid economic growth and massive investment in human resource development, poverty declined substantially in China and Southeast Asian countries.

On the other hand, in South Asian countries (India, Pakistan, Sri Lanka, Nepal, Bangladesh, Bhutan), the decline has not been as rapid. While the ratio of poverty in Latin America has remained the same, in sub-Saharan Africa, poverty has risen from 41 per cent in 1981 to 46 per cent in 2001. According to the world development report of 2001, countries like Nigeria, Bangladesh and India still have a large percentage of people living under poverty. Poverty has also resurfaced in some of the former socialist countries like Russia, where officially it was non-existent earlier.

Ques.6. Discuss the major reasons for poverty in India.

Ans : The major reasons for poverty in India are:

a)    Colonial Rule: India went through a long phase of low economic development under the British colonial administration. The policies of the colonial government ruined traditional handicrafts and discouraged development of industries like textiles.

b)    High growth in Population: The rapid growth of population, particularly among the poor, is considered one of the major causes behind Indian poverty. Poor people are illiterate and have traditional outlook. Hence, they are either ignorant of birth control measures or not convinced of the need of birth control. Moreover, they consider male child as an asset, that is, as a source of income and a source of security during old age.

c)    Low Rate of Economic Development: The actual rate of growth in India has always been below the required level. It has been around 4 per cent since 1951. This has resulted in less job opportunities. This was accompanied by a high growth rate of population.

d)    Unemployment: Another important factor that can be held responsible for the incidence of high poverty in India is the high degree of unemployment and underemployment. The job seekers are increasing at a higher rate than the increase in the employment opportunities.

e)    Unequal Distribution: Although national income of India has been increasing since 1951, it was not properly distributed among different sections of the society. A large proportion of increased income has been pocketed by a few rich. They become richer. Consequently, the majority of people have to live below the poverty line.

f)     Social Factors: Various social factors, viz., caste system, joint family system, religious faiths, law of inheritance, etc., have blocked the path of economic development.

Ques.7. Describe current government strategy of poverty alleviation.

Ans : Removal of poverty has one of the major objectives of Indian developmental strategy.

The current government strategy of poverty alleviation is based on two planks:

(1) Promotion of Economic Growth

(2) Targeted Anti-poverty Programmes

Some of the anti-poverty programmes undertaken by government at present are discussed below:

a)    Prime Minister’s Rozgar Yojana (PMRY): Started in 1993, this programme aims to create self-employment opportunities for educated unemployed youth in rural areas and small towns.

b)    Pradhan Mantri Gramodaya Yojana (PMGY): Launched in 2000, this aims to create and improve basic services like primary health, primary education, rural shelter, rural drinking water and rural electrification.

c)    National Food for Work programme (NFWP): Launched in 2004 in 150 most backward districts of the country, this programme is open to all rural poor who are in need of wage employment and desired to do manual unskilled work.

National Rural Employment Guarantee Act (NREGA): This act was passed in September 2005. The act provides 100 days assured employment every year to every rural household in 200 districts. Later, the scheme will be extended to 600 districts and also one third to the proposed jobs would be reserved for women.

IX_Economics_Chapter-3_Poverty_MCQs

Class IX
Economics
Chapter - 3
Poverty as a Challenge

Multiple Choice Questions :

1. The country which has the largest single concentration of the poor people in the world is

a) China        b) Pakistan    c) India          d) Nepal

2. Poverty as defined by World Bank implies living below

a) $1 per day             b) $100 per month c) $10 per day           d) $100 per day

3. For the year 2000, the poverty line for a person in urban areas in India was fixed at

a) Rs. 454 per month           b) Rs. 500 per month

c) Rs. 328 per month           d) Rs. 1640 per month

4. Define the statement which suggests that calories requirements in rural areas are considered to be higher than urban areas.

a) Because people in rural areas are poor.

b) Because people in rural areas are adversely affected by natural calamities.

c) Because people living in rural areas engage themselves in more physical work.

d) Because people living in rural areas arc engaged in agriculture.

5. The accepted average calorie requirement per person in urban areas in India is

a) 2200 calories b) 2000 calories c) 2300 calories d) 2100 calories

6. The poorest states in India are: i) Orissa ii) Bihar iii)Punjab iv) Haryana
a) (i) and (ii)   b) (iii) and (iv)           c) (ii) and (,iii)           d) All (i), (ii), (iii) and (iv)

7. There is inequality of income within a family. Persons who are poorest of the poor in the family are ____________ .

(i) Women (ii) Girl (iii) Children (iv) Old people

a) (i)and(ii)     b) (i)and(iii)    c) All (i),(ii)and(iv)     d) All are irrelevant.

8. Antyodaya Anna Yojana was launched in

a) 2003           b) 1999           c) 2000           d) 2005

9. For making comparisons between developing countries, which uniform standard (per person per day) for the poverty line is used in terms of minimum availability?
a) $1   b) $2   c) $3   d) $5

10. Every____ person in India is poor.

a) Third          b) Fourth        c) Fifth            d) Tenth

11. In which of the following countries did poverty actually rise from 1981 to 2001?
a) Sub-Saharan Africa        b) India           c) China         d) Russia

12. Which of the following is a social indicator of poverty laid by social scientists?
a) Increase in population   b) Illiteracy level       c) Caste         d) Health club membership

13. Which one of the social groups is vulnerable to poverty?

a) Scheduled caste                                    b) Urban casual labour

c) Rural agricultural households              d) All of these

14. Which state has the largest percentage of poor in India?

a) Bihar b) Orissa c) Kerala d) Punjab

15. What is accepted average calories required in India in rural areas?

a) 2100           b) 2400          c) 2800           d) 2500

16. Which one is a social group from amongst the following groups largely vulnerable to poverty?

a) Rural agricultural labour households (HHs)              b) Urban casual labour HHs

c) Scheduled castes & scheduled tribes HHs                d) Female daily wagers

17. There has been a significant decline in poverty in the state of

a) Assam       b) Bihar          c) Jammu & Kashmir           d) Uttar Pradesh

18. Which among the following is the method to estimate the poverty?
a) Investment Method         b) Income Method    c) Capital Method     d) Human Method

19. Which scheme was started in 1993 to create self employment opportunities for educated unemployed youth in rural areas and small towns?

a) Rural Employment Generation Program

b) National Rural Employment Guaranty Act

c) Prime Minister Rojgar Yojna

d) Swarnajayanti Gram Swarojgar Yojna

20. Which one is not the major cause of income inequality in India?

a) Unequal distribution of land                 b) Lack of fertile land

c) Gap between the rich and the poor      d) Increase in population

21. Which industry suffered the most during colonial period?

a) Jute            b) Textile        c) Indigo         d) All the above

XI_Eco_Development_Ch-5_Foreign Trade_Solutions.

Class XI    Economics

Indian Economic Development

Chapter – 5 India’s Foreign Trade

Q.1. Define International Trade.

Ans. International trade refers to the export and import of goods and services across different countries of the world.

Q.2. Define the following terminology.

a)   Gains of Trade

b)  Volume of Trade

c)   Direction of Trade

d)  Composition of Trade

e)   Trade Surplus

f)    Trade Deficit

Ans. Their meanings are:

a) Gains of Trade – Benefits of trade arising out of export and import of a country.

b) Volume of Trade – Quantum of export and import of a country.

c) Direction of Trade – Countries to which a country exports its goods and services and the countries from which it imports.

d) Composition of Trade – Types of goods and services we export and import.

e) Trade Surplus – Trade Surplus occurs when exports > imports.

f) Trade Deficit – Trade Deficit occurs when exports < imports.

Q.3. Did Inward looking trade strategy (Import Substitution Policy) led to monopolistic exploitation of the market?

Ans. Yes. Inward looking trade strategy offered protection to domestic industry from foreign competition. Thus, in absence of international competition, domestic industries started monopolistic exploitation of the market.

Q.4. Is international trade based on the principal of comparative cost advantage? Give reason.

Ans. Yes. Because a country specializes in the production of those commodities for which its cost of production is less than that in most other countries of the world.

Q.5. Does international trade yield gain only to the exporting trading partner?

Ans. No. International trade yields gain to both exporting as well as importing countries. While exporters get international market access to sell their surplus production, the importers get goods cheaper than their cost of production in the domestic economy.

Q.6. A massive fall in crude oil price has also led to a fall in our exports. Give one possible reason for this fact.

Ans. True. Because a fall in crude oil price has led to the decline in income of oil exporting countries (Gulf countries). Accordingly, their demand for imports of our products has declined leading to a fall in Indian exports.

Q.7. Explain any five gains which a country yield from International trade.

Ans. A country can yield a number of gains from International trade. Some of them are mentioned below:

a) International specialization.

b) Greater access to market to sell the surplus domestic production.

c)  Import of goods and services which cannot be produced in domestic economy.

d) Source of earning the foreign exchange, essential for developing countries to make developmental imports.

e) Good quality goods and services, and in large varieties can be availed at internationally competitive rates.

f) Larger opportunities for investment and thereby, higher growth of the country.

Q.8. What do you understand by Inward Looking Trade Strategy?

Ans. Inward Looking Trade Strategy is also known as Import Substitution Policy. It refers to the production of those goods domestically which are being imported from the rest of the world. For example, instead of importing the vehicles from foreign countries, our domestic industry can be encouraged to produce them within the country itself. This policy would protect the domestic automobile producers from foreign competition.

The basic aim behind initiating this policy was to protect the domestic industry from international competition and also to save the foreign exchange reserves. The saved foreign exchange reserves were utilized for developmental imports such as import of plant and machinery, which cannot be produced efficiently domestically due to lack of technology or investment. This strategy of import substitution is implemented through import quotas and import duties.

But there was a major lack in this strategy. The government focused on saving foreign exchange reserves through import substitution rather than maximizing them through the policy of export promotion.

Q.9. Differentiate between import substitution and export promotion strategies.

Ans. Import Substitution: It is a strategy to save foreign exchange by encouraging domestic production of such goods which the country has been importing from the rest of the world. Through this strategy, the domestic industry is given protection from the foreign competition by imposing the restrictions through import duties and quotas.

Export Promotion: It is a strategy to earn foreign exchange by promoting domestic exports and making domestic industry competitive in international market.

Q.10. Should India rely more on ‘Import Substitution’ rather than ‘export promotion’ to improve its BOT (Balance of Trade i.e. Net of exports and imports of goods)?

Ans. Amidst globalization which has resulted free trade and moderate tariffs, the policy of import substitution to protect the domestic industry is no longer a viable option. India has to rely on the policy of export promotion to improve its balance of trade. However, we can certainly focus on greater domestic output so that our import bills are reduced. But it would be more through competition rather than the policy of protection.

Q.11. Exports from India have tended to lag behind our imports. According to you, what is the principal reason behind it?

Ans. We have failed to promote our exports to the desired extent basically because of high domestic cost of production leading to low competitive power in the international market. On the other hand, imports have continued to rise because these are of essential goods like oil and defense goods, the domestic production of which is low due to the lack of natural resources, investment or the lack of technology.

Q.12. State the good and the bad impacts of Inward Looking Trade Strategy i.e. Import Substitution Policy.

Ans. The good impacts are as follows:

a) Structural Transformation leading to High Industrial Growth - Structural Transformation occurs when share of Industrial sector in GDP rises with corresponding fall in share of agriculture sector. With import substitution policy, the former increased from nearly 12 per cent in 1951 to about 25 per cent in 1991 leading structural transformation of Indian economy.

b) Diversification of Industrial Growth – Jute and textile industries were no longer the only part of Modern Industry. Rather the engineering goods and wide range of consumer goods industries were emerging. Also, there was a noticeable growth of Sunrise industry viz., electronic goods industry.

c) Opportunities of Investment – The protection to Small Scale Industry opened up newer opportunities of investment for those who had just small amount of capital leading to greater self-employment, and in turn resulting more utilization of latent (hidden) resources.

The bad impacts are as follows:

a) Growth of Inefficient Public Monopolies – Protection of public sector industry led to the growth of inefficient public monopolies. For example, telecom industry was a Govt. monopoly till around 1990. People had to wait for years just to get a telephone connection. And now we get repeated SMS offering new connection for free.

b) Lack of Competition implied Lack of Modernization – Since domestic industries were protected from foreign competition, they did not bother to modernize their products and services or to adopt newer technology to match the international standards of quality. E.g. Fiat and Ambassador were the only car models in India. Policy of protection resulted a near-monopoly of domestic car industry.

c) Indiscriminate spread of Public Sector Enterprises – During 1950-1990, public sector was given more importance in production of a large number of goods that led to indiscriminate spread of public sector undertakings (PSUs) resulting two things:

(i) Inefficient use of public resources.

(ii) Swallowing up opportunities of investment for private sector.

d) Economically Unviable PSUs – A Political Compulsion – A private sector enterprise would shut-down if running into losses. But even inefficient public sector enterprises continue operating due to political compulsion as politicians and Trade unions oppose their shut down on the point of social injustice.

XI_Eco_Dev_Ch--4_Industrial Policy_Practice Set.

Class XI

Economics

Indian Economic Development

Chapter – 4

Q1. Why was public sector given a leading role in industrial development during the planning period?

Answer :

At the time of independence, Indian economic conditions were very poor and weak. There were neither sufficient foreign reserve nor did India have international investment credibility. In the facet of such poor economic condition, it was only the public sectors that need to take the initiative. The following are the reasons that explains the driving role of the public sector in the industrial development:

1. Need of Heavy Investment: There was a need of heavy investment for industrial development. It was very difficult for the private sector to invest such a big amount. Further, the risks involved in these projects were also very high and also these projects had long gestation period. Thus, the government played the leading role to provide the basic framework of heavy industries.

2. Low Level of Demand: At the time of independence, the majority of population was poor and had low level of income. Consequently, there was low level of demand and so there was no impetus for any private sector to undertake investment in order to fulfill these demands. Thus, India was trapped into a vicious circle of low demand. The only way to encourage demand was by public sector investments.

3. Socialist Pattern of the Society: The govt. realized that the objective of growth with equity could be achieved only through direct participation by the State in the process of industrialization because only state can target maximization social welfare rather than maximization of profits only.

Q2. Though public sector is very essential for industries, many public sector undertakings incur huge losses and are a drain on the economy's resources. Discuss the usefulness of public sector undertakings in the light of this fact.

Answer :

Although, the mismanagement and wrong planning in PSUs may lead to misallocation and, consequently, to wastage of the scarce resources and finance but PSUs do have some positive and useful advantages.

1. Enhancing Nation's Welfare: The main motive of the PSU was to provide goods and services that add to the welfare of the country as a whole. For example, schools, hospitals, electricity, etc. These services not only enhance welfare of country's population but also enhance the future prospects of economic growth and development.

2. Long Gestation Projects: It was not feasible and economically viable for the private sectors to invest in the big and wide projects like basic industries and electricity, railways, roads, etc. This is because these projects need a very huge initial investment and have long gestation period. Hence, PSU is the most appropriate to invest in these projects.

3. Basic Framework: An important ideology that was inherited in the initial five year plans was that the public sector should lay down the basic framework for industrialization that would encourage the private sector at the latter stage of industrialization.

4. Socialist Track: In the initial years after independence, Indian planners and thinkers were more inclined towards socialist pattern. It was justified on the rational ground that if the government controls the productive resources and production, then it won't mislead the country's economic growth. This was the basic rationale to set up PSUs. These PSUs produce goods not according to the price signals but according to the social needs and economic welfare growth of the country.

5. Reduce Inequality of Income and Generate Employment Opportunities: It was assumed that in order to reduce inequalities of income, generate employment opportunities, eradicate poverty and to raise the standard of living, government sector should invest in the economy via PSUs.

Q3. Explain how import substitution can protect domestic industry.

Answer :

In the initial seven five year plans, India opted for import substitution strategy which implies discouraging the imports of those goods that could be produced domestically. Import Substitution Strategy not only reduces an economy’s dependence on the foreign goods but also provides impetus to the domestic firms.

Government provides various financial encouragements, incentives, licenses to the domestic producers to produce domestically the import substituted goods. This would not only allow the domestic producers to sustain but also enables them to grow as they enjoy the protective environment.

They need not to fear from any competition and also not to worry about their market share as license gives them the monopoly status in the domestic market. Being monopolist, they earn more profits and invest continuously in R&D and always look for new and innovative techniques. This gradually improves their competitiveness and when they are exposed to the international market they can survive and compete with their foreign counterparts.

Q4. Why and how was private sector regulated under the IPR 1956?

Answer :

IPR 1956 was adopted in order to accomplish the aim of state controlling the commanding heights of economy. This policy was aligned with the Indian economy’s inclination towards socialist pattern of system of Soviet Union.

Principal elements of IPR – 1956 are as follows :-

1.    Three-fold Classification of Industries: According to this resolution, industries were classified into following three categories:

Category 1: Those industries that are established and owned exclusively by the public sector.

Category 2: Those industries in which public sector will perform the primary role while the private sector will play the secondary role. That is, the private sector supplements the public sector in these industries.

Category 3: Those industries that are not included in Category 1 and Category 2 are left to the private sector.

2.    Industrial Licensing: These industries that were left to the private sector, the government owns an indirect control by the way of license. In order to initiate a new industry, private entrepreneurs should obtain license (or permit) from the government.

Further, in order to expand the scale of production, private sector needs to obtain license from government. This was supposed to keep a check on the production of goods that are socially undesirable and unwanted.

3.    Industrial Concessions: By licensing system, tax holidays and subsidies government can promote industries in a backward region that will ,in turn, promote the welfare and development of that region. This was supposed to reduce regional disparities.

Hence, the state fully controlled the private sector either directly or indirectly.

Q5. To promote equity in the economy, explain how protection to Small Scale Industries (SSI) was provided in the industrial policy pursued up to 1990 in India.

Answer:

Small Scale Industries (SSI) is presently defined as one whose investment does  not exceed Rs. 5 cr. The features of SSI are as follows :-

1.    SSI is Labour-intensive and therefore Employment Friendly:

SSI is generally considered to be labour-intensive i.e. uses more labour than capital to generate output. Thus, in a labour-surplus country like India, SSI are viewed as tool to achieve the goal of employment generation.

2.    SSI leads to inter-regional equality:

As raw material requirement of large-scale industries is huge, therefore these are setup close to the source of raw material like Bhilai Steels or Rourkela Steels to avoid huge transport cost. On the other hand, SSI can be established at distinct places, thereby contributing to growth in all regions.

3.    SSI leads to inter-personal equality:

SSI needs smaller investment as compared to large-scale industry. Thus, it does not cause concentration of economic power in fewer rich hands. As a result, SSI promotes equity in the economy.

(Note- Read the chapter thoroughly and prepare following also:

Q.6. What were the good & bad effects of strategy of Industrial growth pursued during period 1950-1990.

Q.7. Highlight the points of importance of Industrial development in an economy.)