Planning, Economic Reforms and Development: RAS Prelims MCQs

Explanation

The Planning Commission of India was formed in March 1950. It was not created by the Constitution or a Parliamentary Act. Instead, it was established through an executive resolution of the Government of India. This made it a non-constitutional and non-statutory body designed to formulate five-year plans for the nation’s economic and social development.

Explanation

The National Development Council serves as the highest body for decision-making and deliberations on development matters in India. Established in 1952, its primary responsibility is to review and approve the Five-Year Plans prepared by the Planning Commission. It ensures that the planning process involves state-level participation, fostering a spirit of cooperative federalism in national development strategies.

Explanation

The Planning Commission focused on assessing resources and formulating development plans for effective utilization. However, the disbursement of statutory financial grants to state governments under Article 275 is the specific constitutional mandate of the Finance Commission, not the Planning Commission. The Planning Commission primarily recommended plan-specific grants, while the Finance Commission handled statutory transfers to ensure fiscal balance.

Explanation

India’s development strategy shifted across various planning periods. The First Plan prioritized agricultural stability and inflation control post-partition. The Second Plan focused on rapid industrialization via heavy industries. The Third Plan aimed for a self-generating economy. The Fifth Plan explicitly targeted poverty alleviation through the Garibi Hatao slogan, emphasizing social justice alongside economic growth to achieve national self-reliance.

Explanation

The First Five Year Plan was primarily modeled on the Harrod-Domar growth strategy, focusing on increasing savings and investments. It prioritized agriculture and irrigation to solve food shortages rather than heavy industries. Significant infrastructure projects like the Bhakra Nangal and Hirakud dams were launched during this period to expand irrigation capacity and support the agrarian economy’s recovery.

Explanation

At independence, India faced a severe agrarian crisis exacerbated by the partition, which transferred fertile lands to Pakistan. The primary goal of the First Five Year Plan was to stabilize the economy by addressing acute food shortages. By focusing on agriculture, the government aimed to ensure food security and provide a stable foundation for future industrial development efforts.

Explanation

The Second Five Year Plan emphasized heavy and basic industries to build a robust domestic capital base. This strategy was based on the belief that a strong industrial foundation would lead to rapid structural transformation. By producing machinery and industrial inputs domestically, planners intended to achieve long-term economic independence and reduce the nation’s reliance on imported capital goods. IV. The economy witnessed complete deregulation of the private sector. V. Compulsory family planning campaigns caused massive rural unrest. Which of the above statements are correct? (1) I, II, III, and V only (2) II, III, IV, and V only (3) I, III, IV, and V only (4) I, II, IV, and V only (5) Question not attempted 1 36. The Monopolies and Restrictive Trade Practices (MRTP) Act, 1969 was primarily aimed at: (1) Encouraging the formation of large domestic conglomerates to compete globally (2) Monopolizing foreign trade under the State Trading Corporation (3) Restricting the entry of multinational corporations into the agricultural sector (4) Preventing the concentration of economic power to the common detriment (5) Question not attempted 4 37. Consider the following statements regarding the "Licence Raj" system in India: I. It required private enterprises to obtain government approval to set up, expand, or change their product lines. II. It effectively eliminated corruption and bureaucratic delays in the industrial sector. Choose the correct option: (1) Statement I is correct and Statement II is incorrect. (2) Statement I is incorrect and Statement II is correct. (3) Both Statements I and II are correct. (4) Both Statements I and II are incorrect. (5) Question not attempted 1 38. Which of the following best describes the most significant negative consequence of the industrial licensing system (Licence Raj)? (1) It resulted in an overabundance of cheap imported consumer goods. (2) It stifled industrial competition, fostered inefficiencies, and hindered economies of scale. (3) It led to the rapid depletion of India’s foreign exchange reserves through massive outbound investments. (4) It caused a complete shift of private investment from manufacturing to agriculture. (5) Question not attempted 2 39. In the context of economic reforms, the MRTP Act was later replaced by a more modern legislation to promote market competition. Which Act replaced it? (1) The Essential Commodities Act (2) The Foreign Exchange Management Act (3) The Companies Act, 2013 (4) The Competition Act (5) Question not attempted 4 40. Consider the following economic milestones: I. Industrial Policy Resolution establishing the mixed economy framework II. Initiation of the First Five Year Plan III. Enactment of the MRTP Act IV. Nationalisation of 14 major commercial banks Which of the following represents the correct chronological sequence? (1) II, I, III, IV (2) I, II, III, IV (3) II, I, IV, III (4) I, II, IV, III (5) Question not attempted 4 41. Who were the Prime Minister and Finance Minister of India, respectively, when the New Economic Policy of 1991 was introduced? (1) Rajiv Gandhi and V.P. Singh (2) Chandra Shekhar and Yashwant Sinha (3) P.V. Narasimha Rao and Dr. Manmohan Singh (4) Atal Bihari Vajpayee and Jaswant Singh (5) Question not attempted 3 42. The immediate trigger for the introduction of the comprehensive economic reforms in 1991 was: (1) Severe balance of payments crisis and foreign exchange depletion (2) A significant crash in the domestic stock market coupled with financial panic (3) Widespread agrarian distress and peasant revolts (4) An unmanageable surplus in the fiscal budget (5) Question not attempted 1 established a state monopoly over arms and ammunition, atomic energy, and railway transport. II. Schedule A of the IPR 1956 contained 17 industries reserved exclusively for the state. III. The public sector was expected to serve as a model employer and reduce regional disparities. IV. The public sector units were largely successful in generating massive surplus revenues for the government budget. Which of the above statements are correct? (1) I, II, and III only (2) II, III, and IV only (3) I, III, and IV only (4) I, II, III, and IV (5) Question not attempted 1 71. The Green Revolution initially bypassed Eastern India (like Bihar, Bengal, Odisha) primarily because of: (1) A complete lack of agricultural land in the region (2) Cultural resistance to consuming wheat in eastern states (3) Legislative bans on chemical fertilizers enacted by several state governments in the region (4) Weak infrastructure, poor irrigation control, and fragmented landholdings (5) Question not attempted 4 72. The "Billion Litre Idea" is a term commonly associated with which monumental development in India’s economic history? (1) Operation Flood and the expansion of milk production (2) The expansion of petroleum refining capacity under the Third Plan (3) The National Drinking Water Mission (4) The massive scale-up of ethanol blending in the 1990s (5) Question not attempted 1 73. A major objective achieved through the nationalisation of banks in 1969 was the introduction of Priority Sector Lending (PSL). Which sector benefited most from this mandate initially? (1) Heavy Machinery and Steel (2) Information Technology and Software (3) Agriculture and Allied Activities (4) Civil Aviation and Tourism (5) Question not attempted 3 74. Match the Five Year Plans in List I with the growth models/strategies they were based on in List II. List I: (Five Year Plans) A. First Plan B. Second Plan C. Third Plan D. Eighth Plan List II: (Growth Models/Strategies) i. John Sandy and S. Chakravarty Model ii. Harrod-Domar Model iii. Mahalanobis Model iv. Rao-Manmohan Model (1) A-ii, B-iii, C-i, D-iv (2) A-iii, B-ii, C-iv, D-i (3) A-ii, B-iii, C-iv, D-i (4) A-i, B-iii, C-ii, D-iv (5) Question not attempted 1 75. Consider the following statements regarding the economic performance of India in the decade following the 1991 reforms (up to 2000): I. The share of the service sector in India’s GDP witnessed rapid expansion. II. The Information Technology (IT) and software services sector began to boom. III. India’s foreign exchange reserves rose to comfortable levels. IV. The manufacturing sector experienced explosive, double-digit growth continuously throughout the 1990s. V. The share of agriculture in the overall GDP continued to decline. Which of the above statements are correct? (1) I, II, III, and V only (2) I, II, IV, and V only (3) II, III, IV, and V only (4) I, III, IV, and V only (5) Question not attempted 1 76. Following the dismantling of the Licence Raj in 1991, industrial licensing was retained for a handful of specific sectors. Which of the following was NOT among the sectors requiring a compulsory license? (1) Alcohol and alcoholic drinks (2) Cotton textiles and apparel (3) Civil Aviation (4) Iron and Steel (5) Question not attempted 2 50. Consider the following reform measures undertaken in the 1990s: I. Deregulation of interest rates in the commercial banking sector. II. Reduction of peak customs and tariff rates. III. Move towards a market-determined exchange rate system. IV. Enactment of laws to completely nationalize the textile industry. Which of the above statements correctly represent the liberalisation era reforms? (1) I, II, and III only (2) II, III, and IV only (3) I, III, and IV only (4) I, II, III, and IV (5) Question not attempted 1 51. In the context of India’s economic reforms, the term "disinvestment" is most accurately defined as: (1) The total closure of loss-making public sector enterprises (2) The process of the government buying shares of private sector companies (3) Selling government equity in public sector units to private or public entities (4) Withdrawal of foreign direct investments and private equity from the domestic market (5) Question not attempted 3 52. The committee appointed in 1993 to advise the government on the disinvestment of public sector enterprises was chaired by: (1) Raja J. Chelliah (2) M. Narasimham (3) Vijay Kelkar (4) C. Rangarajan (5) Question not attempted 4 53. Identify the correct pair regarding the methods of privatisation used in India up to 2000. (1) Strategic Sale - Selling less than 50 percent of shares without transfer of management control (2) Minority Sale - Selling majority shares along with transfer of management control to a private entity (3) Asset Sale - Selling off the physical assets of a closed public sector unit (4) Golden Handshake - Nationalising sick private sector units (5) Question not attempted 3 54. Match the major economic reform committees of the 1990s in List I with their respective domains in List II. List I: (Reform Committees) A. Narasimham Committee I (1991) B. Chelliah Committee (1991) C. Rangarajan Committee (1993) D. Malhotra Committee (1993) List II: (Domains) i. Tax Reforms ii. Disinvestment of PSUs iii. Financial System / Banking Reforms iv. Insurance Sector Reforms (1) A-iii, B-i, C-ii, D-iv (2) A-i, B-iii, C-iv, D-ii (3) A-iii, B-ii, C-i, D-iv (4) A-ii, B-i, C-iii, D-iv (5) Question not attempted 1 55. Consider the following statements regarding the public sector reforms in the 1990s: I. The government introduced the "Navratna" policy in 1997. II. Navratna status granted greater operational and financial autonomy to selected profit-making PSUs. III. The primary motive of early disinvestment was raising revenues to bridge the fiscal deficit. IV. A Disinvestment Commission was set up in 1996 to formulate long-term strategies. V. Strategic sales involving transfer of management control became the dominant method of disinvestment immediately in 1991. Which of the above statements are correct? (1) I, II, III, and IV only (2) II, III, IV, and V only (3) I, II, IV, and V only (4) I, III, IV, and V only (5) Question not attempted 1 56. Consider the following statements regarding the Disinvestment Commission: I. It was constituted in 1996 under the and other intermediary tenures was the most successful component of land reforms in post-independence India. Reason (R): The abolition of intermediaries completely eradicated landlessness and poverty among agricultural laborers across the country. (1) Both A and R are true and R is the correct explanation of A. (2) Both A and R are true but R is not the correct explanation of A. (3) A is true but R is false. (4) A is false but R is true. (5) Question not attempted 3 29. The voluntary land reform initiative known as the Bhoodan Movement was spearheaded by: (1) Mahatma Gandhi (2) Jayaprakash Narayan (3) Acharya Vinoba Bhave (4) Ram Manohar Lohia (5) Question not attempted 3 30. Consider the following components of land reform policies in India up to 2000: I. Abolition of Intermediaries II. Tenancy Reforms (regulation of rent and security of tenure) III. Imposition of Land Ceilings IV. Consolidation of Landholdings Which of the above statements correctly represent the measures adopted under India’s land reform program? (1) I, II, and III only (2) I, III, and IV only (3) II, III, and IV only (4) I, II, III, and IV (5) Question not attempted 4 31. In the context of India’s land reforms, which states are generally recognized as having implemented tenancy reforms and land ceilings most successfully by the late 20th century? (1) Kerala and West Bengal (2) Bihar and Madhya Pradesh (3) Rajasthan and Uttar Pradesh (4) Punjab and Haryana (5) Question not attempted 1 32. The ‘20-Point Economic Programme’ designed to alleviate poverty and improve the standard of living of the masses was first launched during which period? (1) First Five Year Plan (1951) (2) The Emergency Period (1975) (3) After the Indo-Pak War (1971) (4) The New Economic Policy (1991) (5) Question not attempted 2 33. The declaration of National Emergency in 1975 was immediately preceded by a period of severe economic crisis. Which of the following was a major characteristic of this preceding crisis? (1) Deflationary trends and excess industrial capacity (2) High inflation driven by oil price shocks and crop failures (3) A massive surge in foreign direct investment causing rupee appreciation (4) Overproduction of foodgrains leading to a collapse in agricultural prices (5) Question not attempted 2 34. Match the key legislative enactments and events in List I with their respective years in List II. List I: (Events/Legislations) A. MRTP Act passed B. Foreign Exchange Regulation Act (FERA) passed C. Declaration of Internal Emergency D. Abolition of Privy Purses List II: (Years) i. 1969 ii. 1971 iii. 1973 iv. 1975 (1) A-i, B-iii, C-iv, D-ii (2) A-iii, B-i, C-iv, D-ii (3) A-i, B-ii, C-iii, D-iv (4) A-ii, B-i, C-iv, D-iii (5) Question not attempted 1 35. Consider the following statements regarding the economic impacts and policies during the Emergency period (1975-1977): I. Inflation was brought under control in the initial phase due to strict administrative measures. II. Trade union activities and strikes were severely restricted. III. Smugglers and black marketeers faced heavy crackdowns. (5) Question not attempted 1 64. Match the poverty alleviation and employment generation programs in List I with their key features or target groups in List II. List I: (Poverty Alleviation Programs) A. IRDP (Integrated Rural Development Programme) B. TRYSEM C. NREP (National Rural Employment Programme) D. Indira Awas Yojana List II: (Key Features/Targets) i. Providing rural housing to the marginalized and poor ii. Providing self-employment opportunities to the rural poor via asset creation iii. Training rural youth for self-employment iv. Generation of wage employment in rural areas (1) A-ii, B-iii, C-iv, D-i (2) A-iii, B-ii, C-i, D-iv (3) A-iv, B-iii, C-ii, D-i (4) A-ii, B-i, C-iv, D-iii (5) Question not attempted 1 65. Consider the following statements regarding poverty reduction strategies in India up to 2000: I. Early Five Year Plans relied heavily on the "trickle-down" effect of economic growth to reduce poverty. II. Due to the failure of the trickle-down effect, targeted poverty alleviation programs were introduced later. III. The post-1991 reform period saw a complete abandonment of all state-sponsored poverty alleviation schemes. Which of the above statements are correct? (1) I and II only (2) II and III only (3) I and III only (4) I, II, and III (5) Question not attempted 1 66. The famous political slogan "Garibi Hatao" (Eradicate Poverty) was translated into an explicit planning objective during which Five Year Plan? (1) Fifth Five Year Plan (2) Third Five Year Plan (3) Fourth Five Year Plan (4) Seventh Five Year Plan (5) Question not attempted 1 67. Which of the following best represents the shift in investment patterns following the economic reforms of the 1990s? (1) A sharp increase in the public sector’s share in gross capital formation (2) A complete and permanent elimination of private sector investment in core infrastructure (3) Relative decline in public sector share and rise in private sector investment (4) Restriction of foreign direct investment exclusively to the agricultural sector (5) Question not attempted 3 68. The following question consists of two statements -- Assertion (A) and Reason (R). Answer the question by selecting the appropriate option. Assertion (A): The First Five Year Plan primarily allocated resources to agriculture and irrigation rather than heavy industries. Reason (R): Post-independence India faced severe food shortages and massive refugee influxes, requiring immediate stabilization of the rural economy. (1) Both A and R are true and R is the correct explanation of A. (2) Both A and R are true but R is not the correct explanation of A. (3) A is true but R is false. (4) A is false but R is true. (5) Question not attempted 1 69. Identify the incorrect pair of heavy industries set up during the Second Five Year Plan and their collaborating country: (1) Bhilai Steel Plant - Soviet Union (2) Rourkela Steel Plant - Federal Republic of Germany (West Germany) (3) Bokaro Steel Plant - United States of America (4) Durgapur Steel Plant - United Kingdom (5) Question not attempted 3 70. Consider the following statements regarding public sector dominance between 1950 and 1990: I. The Industrial Policy Resolution of 1948 chairmanship of G.V. Ramakrishna. II. Its recommendations were binding and unconditionally implemented by the government. Choose the correct option: (1) Statement I is correct and Statement II is incorrect. (2) Statement I is incorrect and Statement II is correct. (3) Both Statements I and II are correct. (4) Both Statements I and II are incorrect. (5) Question not attempted 1 57. The process of globalisation in India heavily impacted the Small Scale Industries (SSIs). What was the most significant challenge faced by SSIs due to globalisation up to 2000? (1) Excessive domestic subsidies making them lazy (2) A complete prohibition on the export of high-demand SSI products as mandated by global trade bodies (3) Inability to compete with imported goods after removal of quantitative restrictions (4) Forced nationalisation of successful SSIs by state governments (5) Question not attempted 3 58. Which of the following policy measures is NOT typically associated with the process of globalisation in India? (1) Strict regulation and capping of foreign technology agreements (2) Reduction in import duties and tariffs (3) Convertibility of the Rupee on the current account (4) Incentivizing foreign portfolio investment and long-term institutional capital (5) Question not attempted 1 59. In July 1991, the Reserve Bank of India implemented a two-step devaluation of the Rupee. What was the primary intended effect of this measure? (1) To make imported luxury goods cheaper for domestic consumers (2) Significantly increase the international purchasing power and exchange value of the Rupee (3) To artificially inflate the value of the domestic stock market (4) Boost exports by lowering international prices of Indian goods and discourage imports (5) Question not attempted 4 60. Select the correct sequence reflecting the transition in India’s foreign exchange regulatory framework: (1) Foreign Exchange Management Act (FEMA) Foreign Exchange Regulation Act (FERA) (2) Foreign Exchange Regulation Act (FERA) Foreign Exchange Management Act (FEMA) (3) Monopolies and Restrictive Trade Practices Act (MRTP) Foreign Exchange Regulation Act (FERA) (4) Foreign Exchange Management Act (FEMA) Competition Act (5) Question not attempted 2 61. India’s integration into the global economy was formalized when it became a founding member of the World Trade Organization (WTO) in which year? (1) 1991 (2) 1993 (3) 1995 (4) 1999 (5) Question not attempted 3 62. The term "Hindu rate of growth", coined by economist Raj Krishna, refers to: (1) The rapid and sustained economic growth achieved during the liberalisation period of the 1990s (2) The exceptionally high growth rate of the agricultural sector during the Green Revolution (3) The specific growth rate of religious minority institutions funded by the state (4) Low annual economic growth of 3.5% experienced from the 1950s to 1980s (5) Question not attempted 4 63. Find the odd one out among the following committees. (1) Tarapore Committee (2) Y.K. Alagh Committee (3) D.T. Lakdawala Committee (4) Suresh Tendulkar Committee (3) Aerospace and defense equipment (4) Cigarettes and tobacco products (5) Question not attempted 2 77. Consider the following statements regarding the implementation of land ceilings in India up to 2000: I. It resulted in massive redistribution of surplus land to the landless across all Indian states. II. Implementation was severely hindered by loopholes, benami transfers, and protracted litigation. Choose the correct option: (1) Statement I is correct and Statement II is incorrect. (2) Statement I is incorrect and Statement II is correct. (3) Both Statements I and II are correct. (4) Both Statements I and II are incorrect. (5) Question not attempted 2 78. During the Emergency period (1975-1977), the government enacted the SAFEMA legislation to crack down on economic offenses. What does SAFEMA stand for? (1) State Agency for Foreign Exchange Management Act (2) Special Authority for Financial Enforcement and Management Act (3) Securities and Foreign Exchange Monitoring Agency Act (4) Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act (5) Question not attempted 4 79. The removal of "Quantitative Restrictions" (QRs) during the 1990s liberalisation process meant that: (1) Abolishing volume quotas on imported and exported goods (2) Limits on the number of private banks that could be established were lifted (3) Restrictions on the amount of domestic credit disbursed by the RBI were removed (4) Ceilings on corporate tax rates were withdrawn (5) Question not attempted 1 80. Consider the following economic events of the 1990s: I. Enactment of the Foreign Exchange Management Act (FEMA) II. Two-step devaluation of the Indian Rupee III. Establishment of the Disinvestment Commission IV. India becoming a member of the WTO Which of the following represents the correct chronological sequence? (1) II, IV, III, I (2) II, III, IV, I (3) IV, II, III, I (4) II, IV, I, III (5) Question not attempted 1 43. The New Economic Policy of 1991 was based on three main pillars commonly known as LPG. Which of the following is NOT one of these pillars? (1) Liberalisation (2) Privatisation (3) Globalisation (4) Localisation (5) Question not attempted 4 44. Match the components of the 1991 economic reforms in List I with their corresponding definitions in List II. List I: (Reform Components) A. Liberalisation B. Privatisation C. Globalisation D. Stabilisation measures List II: (Definitions) i. Short-term policies to control inflation and correct the BoP deficit ii. Integrating the national economy with the world economy iii. Removing unnecessary government controls and restrictions on industries iv. Transfer of ownership or management of public sector enterprises to the private sector (1) A-iii, B-iv, C-ii, D-i (2) A-i, B-ii, C-iii, D-iv (3) A-iii, B-i, C-ii, D-iv (4) A-ii, B-iv, C-i, D-iii (5) Question not attempted 1 45. Consider the following statements regarding the crisis management in 1991: I. India had to pledge its gold reserves to the Bank of England to secure an emergency loan. II. The International Monetary Fund (IMF) and World Bank provided loans with strict conditionalities. III. The reforms introduced were entirely structural and ignored macroeconomic stabilization. Which of the above statements are correct? (1) I and II only (2) II and III only (3) I and III only (4) I, II, and III (5) Question not attempted 1 46. Identify the incorrect statement regarding the liberalisation measures adopted in 1991. (1) The role of the public sector was diluted and many sectors were opened to private participation. (2) Foreign Direct Investment (FDI) limits were raised in many vital sectors. (3) Quantitative restrictions on imports were gradually phased out. (4) Industrial licensing was abolished for all industries without any exceptions. (5) Question not attempted 4 47. Following the industrial deregulation of 1991, industrial licensing was retained for a short list of industries. This was primarily due to reasons related to: (1) Strategic, security, and environmental concerns (2) Protection of domestic small scale industries from global competition (3) Revenue generation through license fees (4) Mandates issued by the World Trade Organization (5) Question not attempted 1 48. The following question consists of two statements -- Assertion (A) and Reason (R). Answer the question by selecting the appropriate option. Assertion (A): The New Economic Policy of 1991 significantly liberalised foreign direct investment (FDI) regulations. Reason (R): The government sought to attract foreign capital, technology, and integrate Indian industries with global supply chains. (1) Both A and R are true and R is the correct explanation of A. (2) Both A and R are true but R is not the correct explanation of A. (3) A is true but R is false. (4) A is false but R is true. (5) Question not attempted 1 49. As a result of the 1991 reforms, the number of industries reserved exclusively for the public sector was drastically reduced. Which of the following remained reserved for the public sector in the late 1990s?

Explanation

The development strategy for the Second Five Year Plan was formulated by the renowned statistician Prasanta Chandra Mahalanobis. This model advocated for a shift from agriculture to rapid industrialization, specifically focusing on the public sector’s role in developing heavy industries. The goal was to create a self-reliant economy capable of producing its own machines to drive sustained industrial growth.

Explanation

During the Second Five Year Plan, the Indian government established several major steel plants through international cooperation. The Bhilai plant was supported by the Soviet Union, Durgapur by the United Kingdom, and Rourkela by West Germany. However, the plan heavily prioritized capital-intensive heavy industries over consumer goods, leading to a significant concentration of resources in the public sector industrial base.

Explanation

The public sector dominated early planning because the private sector lacked the capital for heavy industries that take long to pay back.