UPSC 1999 Indian Economy Questions with Answers

Explanation

The National Renewal Fund (NRF) was established by the Government of India in1992 with the primary objective of safeguarding the interests of workers affected by industrial restructuring, technological upgrades, or the closure of unviable units. The NRF aimed to provide a social safety net through retraining, redeployment, and compensation to ensure a smooth transition for the workforce during economic reforms. The NRF’s key functions included:

Worker Retraining and Redeployment: Offering training programs to equip workers with new skills, facilitating their re-employment in emerging sectors. Voluntary Retirement Scheme (VRS) Support: Providing financial assistance to public sector enterprises to implement VRS for employees in cases of redundancy. Counseling Services: Assisting workers in coping with job transitions through counseling and guidance.

Explanation

Farmers get resources from various sources such as Primary Agricultural Cooperative Societies, Commercial Banks, District Central Cooperative Banks (DCCB), the lead banks such as SBI and PNB, IRDP and IFFCO. Farmers also get credit from informal sources such as private money lenders. Primary Agricultural Cooperative Societies (PACS) are grassroots-level cooperative institutions that provide short-term and medium-term loans to farmers for agricultural activities. Commercial Banks both public and private sector banks offer a range of credit products to farmers, including crop loans and investment loans. Regional Rural Banks (RRBs) were established to enhance rural credit, RRBs focus on providing credit to small and marginal farmers, agricultural laborers, and rural artisans. Despite the growth of institutional credit, many farmers still rely on private money lenders, especially in regions where institutional penetration is low. Options (b), (c) and (d) are incorrect:

NABARD and the Reserve Bank of India (RBI) play crucial roles in refinancing and regulating rural credit institutions but they do not provide direct loans to farmers. District Central Cooperative Banks (DCCBs) and Lead Banks facilitate credit but are not direct sources. Development programs like the Integrated Rural Development Programme (IRDP) and Jawahar Rozgar Yojana (JRY) aim to promote self-employment and generate wage employment, respectively, but do not directly provide agricultural credit. Large Scale Multi-purpose Adivasis Programme: This was a government program aimed at the socio-economic development of tribal areas but is not a credit source for farmers. IFFCO (Indian Farmers Fertilizer Cooperative Limited) is a fertilizer cooperative and does not directly provide credit to farmers. It primarily supplies fertilizers and agricultural inputs.

Explanation

The Union Government levies and collects income tax and shares its proceeds with the states based on the recommendations of the Finance Commission. This ensures a balanced revenue-sharing mechanism between the Union and State Governments to promote equitable development. The Constitution of India, under Article 270, mandates the sharing of income tax between the Union and States, excluding specific surcharges which are retained by the Union. As per Finance Commission recommendations, the distribution formula considers parameters such as population, area, and fiscal discipline to ensure fair allocation. This practice is pivotal for fostering fiscal federalism in India.

Explanation

Assertion (A) is true: The fiscal deficit is the difference between the government’s total expenditure and its total non-debt receipts (revenue receipts plus non-debt capital receipts). It represents the total borrowing requirement of the government. Budgetary Deficit can be termed as the excess of the total government expenditure over the total revenue generated in a financial year. The fiscal deficit is always greater than or equal to the budgetary deficit. This is because the fiscal deficit includes all borrowings, while the budgetary deficit only looks at the gap in the revenue account. The fiscal deficit includes borrowing to finance capital expenditure (investments in infrastructure, etc.), which is not part of the revenue account. Reason (R) is false: This is because the fiscal deficit is not solely borrowing from the Reserve Bank of India. It includes borrowing from the public, financial institutions, and external sources, as well as other liabilities like market loans and securities.

Explanation

Assertion (A) is true: Information technology (IT) has become a key sector in India’s economy, contributing significantly to GDP, exports, and employment. The growth of IT services, software development, and business process outsourcing (BPO) has positioned India as a global leader in the industry. Government initiatives, a large English-speaking work-force, and cost advantages have further boosted IT expansion. Reason (R) is false: While software exports are indeed a major component of India’s IT sector, the country has not traditionally had a strong base in hardware manufacturing. Unlike software, which flourished due to outsourcing, India’s hardware sector has remained underdeveloped due to import dependency, lack of infrastructure, and high production costs. Only in recent years have initiatives like "Make in India" and the Production Linked Incentive (PLI) scheme sought to strengthen domestic hardware manufacturing.

Explanation

Assertion (A) is true: Devaluation reduces the value of a country’s currency relative to foreign currencies, making its exports cheaper and more competitive in the global market. This can lead to an increase in the demand for exports. Reason (R) is true: As the local currency weakens against foreign currencies, goods from the devaluing country become cheaper for foreign buyers. This effectively reduces the inter-national price of these goods, resulting in increased demand for exports. For instance, after India’s 1991 devaluation, exports surged as Indian goods became more competitive globally. The Economic Survey (1991-92) confirmed that devaluation played a crucial role in boosting exports and improving India’s trade balance. Thus, Reason R correctly explains Assertion A.

Explanation

Employment Assurance Scheme (EAS) was launched on 2nd October, 1993, covering all the 1778 blocks under-Revamped Public Distribution System (RPDS). These blocks were identified mainly in DPAP, DDP, Hill and Tribal areas. The main objective of the EAS was also on the lines of JRY, i.e. to provide gainful employment during lean agriculture season in the form of manual works to all able bodied adults who were in need and desirous of working, but unable to find anything to do. The assurance of 100 days of employment was extended to men and women above 18 years and below 60 years of age, residing in the villages of the blocks covered by EAS. A maximum of two adults per family were to be provided assured employment of 100 days under the scheme. The secondary objective was to develop economic infrastructure and community assets and resources for sustained employment and devel-opment.

Explanation

Madhya Pradesh was the first Indian state to prepare and release its Human Development Report (HDR) in 1995, under the guidance of Professor Amartya Sen.The Madhya Pradesh HDR was a pioneering effort in India, focusing on various dimensions of human development within the state, including health, education, and standard of living. The report aimed to assess and improve the well-being of its citizens by analyzing these critical areas. This initiative set a precedent for other Indian states to develop their own HDRs, contributing to a more localized understanding of human development challenges and facilitating targeted policy interventions. The Human Development Index (HDI) was introduced in 1990 by the United Nations Development Programme (UNDP) through its Human Development Report (HDR). It was conceptualized by economist Mahbub ul Haq and Nobel laureate Amartya Sen. The HDI was created to shift the focus of development economics from purely economic growth (e.g., GDP) to a broader measure of human well-being, encompassing health, education, and living standards. It remains a key tool for assessing and comparing global development progress.

Explanation

Option (b) is correct: In the 1990s, poverty rates among various social and religious groups in India exhibited significant disparities. Government statistics from that period indicate that the Scheduled Tribes (STs) in states such as Bihar, Odisha (formerly Orissa), Madhya Pradesh, and Maharashtra experienced some of the highest levels of poverty. Several factors contributed to the high poverty rates among Scheduled Tribes in these states during the 1990s:

Geographical Isolation: Many ST communities resided in remote areas, limiting their access to essential services and economic opportunities. Limited Access to Education and Healthcare: Educational and healthcare facilities were often inadequate or inaccessible, hindering human capital development. Economic Marginalization: Dependence on traditional livelihoods, coupled with limited integration into the broader economy, exacerbated economic vulnerabilities.

Explanation

In India Persons Below Poverty Line(BPL) is classified based on entitlement of a prescribed food basket measured in calorie and then converted into monetary terms for easy implementation into policies and programmes. The Planning Commission constituted a task force under the chairmanship of YK Alagh in 1979 to construct a poverty line for rural and urban areas on the basis of nutritional requirements and related consumption expenditure. The expert group under Suresh Tendulkar in 2009 also followed the calorie approach based on a consumption basket but added health and education along the calorie consumption basket. Another Expert group was constituted in 2014 under C Rangarajan also followed a calorie approach but suggested adding clothing, house rent, conveyance and education, and a behaviorally determined level of other non-food expenses.