Class 12 Economics Chapter 7 Question Answer | Indian Economy 1947-1990 | English Medium

Class 12 Economics Chapter 7 Question Answer | Indian Economy 1947-1990 | English Medium | ASSEB

Welcome to HSLC Guru. This study guide presents the complete ASSEB Class 12 Economics Chapter 7 — Indian Economy 1947-1990 with summary notes, textbook questions and answers, additional MCQs, fill in the blanks, true/false statements, and a glossary. The material is designed to help students of the Assam State School Education Board prepare effectively for the HS Second Year examination by providing concept clarity and exam-ready answers in the English Medium.

Chapter Summary

On the eve of independence in 1947, the Indian economy was in a deeply distressed condition after nearly two centuries of colonial rule. Per capita income was extremely low, and the growth rate of national income during the first half of the twentieth century was less than two per cent per annum. Agriculture was the dominant sector, supporting about 70 to 75 per cent of the population, yet productivity was extremely low because of outdated techniques, the zamindari system, lack of irrigation, fragmented holdings and absence of investment. The Great Bengal Famine of 1943, which claimed millions of lives, exposed the fragile nature of the colonial agrarian structure. The British policy of commercialisation of agriculture forced cultivators to grow cash crops such as indigo, jute and cotton for export rather than food grains for domestic consumption.

The colonial period also witnessed the systematic deindustrialisation of India. The traditional handicrafts sector, especially the world-famous Indian textile industry, was destroyed by the discriminatory tariff policy of the British, who allowed cheap machine-made British goods to flood Indian markets while imposing heavy duties on Indian exports. India was reduced to an exporter of raw materials and an importer of finished goods, creating a typical colonial pattern of trade. The demographic profile was equally alarming — high birth rates and high death rates, low literacy of about 16 per cent, very low life expectancy of around 32 years, and high infant mortality. Infrastructure such as railways, ports and the postal-telegraph system was developed mainly to serve British commercial interests rather than the welfare of Indians.

After independence, the founders of modern India had to choose an economic system from the three known models — capitalism, socialism, and the mixed economy. The capitalist model gave too much freedom to private enterprise and could lead to inequality, while pure socialism eliminated private property and individual incentive. India adopted the mixed economy model, where the public sector and the private sector would co-exist, each performing complementary roles. Economic planning through the Five-Year Plans was adopted as the chief instrument for transforming the economy. The Planning Commission was set up in 1950 with the Prime Minister as its Chairman, and the First Five-Year Plan was launched in 1951. The four common goals of the plans were Growth, Modernisation, Self-reliance and Equity.

Agriculture saw two major reforms — institutional land reforms and the technological Green Revolution. Land reforms included abolition of intermediaries (zamindars and jagirdars), tenancy reforms providing security to tenants, fixing of land ceilings to redistribute surplus land, and consolidation of holdings. The Green Revolution, launched in the mid-1960s, introduced High Yielding Variety (HYV) seeds, chemical fertilisers, pesticides, assured irrigation and modern machinery, making India self-sufficient in food grains. In industry, the Industrial Policy Resolutions of 1948 and 1956 gave a leading role to the public sector, classifying industries into three schedules. The small-scale sector was protected through reservations. Trade policy was inward-looking, based on import substitution, with high tariffs and quotas to protect domestic industry. The system of industrial licensing came to be known as the License Raj. The 1947-1990 phase achieved diversification, infrastructure creation and food self-sufficiency, but suffered from inefficiency, low growth, fiscal deficits and balance of payments problems, eventually leading to the 1991 reforms.

Textbook Questions and Answers

Very Short Answer Type Questions (1 Mark Each)

Q1. When did India attain independence?

Answer: India attained independence on 15th August, 1947.

Q2. When was the Planning Commission of India set up?

Answer: The Planning Commission of India was set up on 15th March, 1950.

Q3. Who was the Chairman of the Planning Commission?

Answer: The Prime Minister of India was the Chairman of the Planning Commission.

Q4. When was the First Five-Year Plan launched in India?

Answer: The First Five-Year Plan was launched on 1st April, 1951.

Q5. Name the four major goals of Five-Year Plans.

Answer: The four major goals of Five-Year Plans are Growth, Modernisation, Self-reliance and Equity.

Q6. What was the literacy rate of India on the eve of independence?

Answer: The literacy rate of India on the eve of independence was about 16 per cent.

Q7. What does HYV stand for?

Answer: HYV stands for High Yielding Variety (of seeds).

Q8. Name the economist who drafted the First Five-Year Plan.

Answer: The First Five-Year Plan was based on the Harrod-Domar model and is associated with K. N. Raj.

Q9. What is meant by mixed economy?

Answer: A mixed economy is one in which both the public sector and the private sector coexist, and economic decisions are taken by both market forces and the government.

Q10. When was the Industrial Policy Resolution of independent India adopted?

Answer: The first Industrial Policy Resolution was adopted in 1948 and the second one was adopted in 1956.

Q11. What is meant by Marketed Surplus?

Answer: Marketed surplus is that portion of agricultural produce which a farmer sells in the market after meeting his own consumption needs.

Q12. Define Subsidy.

Answer: A subsidy is a financial assistance given by the government to producers or consumers to encourage production or reduce the price of essential goods.

Q13. What is the full form of LPG (in the context of 1991 reforms)?

Answer: LPG stands for Liberalisation, Privatisation and Globalisation.

Q14. Name any two large-scale public sector industries set up in India during the planning era.

Answer: Bhilai Steel Plant and Bharat Heavy Electricals Limited (BHEL) are two large-scale public sector industries.

Q15. Define Per Capita Income.

Answer: Per capita income is the average income of a person in a country, calculated by dividing the national income by the total population.

Q16. What is meant by Buffer Stock?

Answer: Buffer stock is the stock of food grains procured by the government to ensure food security and stabilise prices.

Short Answer Type Questions (2-3 Marks Each)

Q1. Explain the demographic condition of India on the eve of independence.

Answer: On the eve of independence, India’s demographic profile reflected backwardness. The literacy rate was only about 16 per cent and female literacy was as low as 7 per cent. Life expectancy at birth was around 32 years. Infant mortality was as high as 218 per thousand live births. Both birth rates and death rates were very high. Public health services were almost absent and epidemics like cholera, plague and smallpox were common.

Q2. What is meant by deindustrialisation? How was it carried out by the British in India?

Answer: Deindustrialisation refers to the systematic decline of indigenous industries. In colonial India, this had two aspects — destruction of traditional handicrafts, especially textiles, and the failure to build a strong modern industrial base in their place. The British achieved this through discriminatory tariffs, free import of machine-made British goods, and the use of India as a captive market for finished products and a source of cheap raw materials.

Q3. Mention any three features of agriculture on the eve of independence.

Answer: (i) Agriculture supported about 70-75 per cent of the working population but productivity was extremely low. (ii) The zamindari system led to exploitation of cultivators, who had no incentive to invest in land. (iii) The commercialisation of agriculture forced farmers to grow cash crops, leaving inadequate land for food crops, which sometimes resulted in famines.

Q4. What is meant by Land Reforms? State any two of its measures.

Answer: Land reforms refer to changes in the ownership of land aimed at making the agrarian structure equitable and efficient. The two major measures were — (i) Abolition of intermediaries such as zamindars and jagirdars to bring tillers into direct contact with the government; and (ii) Imposition of a land ceiling, which fixed the maximum size of land an individual could own, the surplus being redistributed among the landless.

Q5. Explain briefly the Green Revolution in India.

Answer: The Green Revolution refers to the large increase in production of food grains in India during the late 1960s due to the use of High Yielding Variety (HYV) seeds, especially in wheat and rice. It involved the use of chemical fertilisers, pesticides, assured irrigation and modern machinery. As a result, India became self-sufficient in food grains and the marketed surplus increased considerably. Punjab, Haryana and Western Uttar Pradesh were the major beneficiaries.

Q6. What is meant by import substitution? Why was it adopted?

Answer: Import substitution is a trade policy that aims at replacing imports with domestic production. Goods which were being imported were now produced within the country. It was adopted to protect domestic industry from foreign competition, save scarce foreign exchange, and achieve self-reliance. The policy used tariffs and quotas as the main protective tools.

Q7. Distinguish between tariff and quota.

Answer: A tariff is a tax imposed on imported goods, which raises their prices and discourages consumption. It is a price-based restriction. A quota is a numerical limit on the quantity of a good that can be imported during a specific period; it is a quantity-based restriction. While a tariff earns revenue for the government, a quota does not.

Q8. What was the role of the public sector in India during the planning period?

Answer: The public sector played a leading role in (i) building heavy and basic industries that needed large investment; (ii) developing infrastructure like power, transport and communication; (iii) reducing regional inequalities by setting up industries in backward areas; (iv) ensuring equitable distribution of income and wealth; and (v) generating employment and providing essential goods at affordable prices.

Q9. Why is the small-scale industry sector considered important for India?

Answer: Small-scale industries are important because they (i) generate large-scale employment with relatively small capital, (ii) make use of locally available resources, (iii) help in equitable distribution of income and dispersal of industries to rural areas, and (iv) require less foreign exchange. The Karve Committee (1955) recommended their promotion as a way to achieve rural industrialisation.

Q10. Distinguish between Growth and Modernisation as goals of planning.

Answer: Growth refers to a quantitative increase in the country’s productive capacity, generally measured by GDP. Modernisation, on the other hand, refers to qualitative changes — the adoption of new technology, new production methods and new social attitudes such as gender equality. While growth concerns the size of output, modernisation concerns the quality and structure of the economy.

Q11. What is meant by Buffer Stock? Why is it maintained?

Answer: Buffer stock refers to the stock of food grains procured by the government, mainly through the Food Corporation of India, at a Minimum Support Price (MSP). It is maintained to (i) ensure food security during scarcity, (ii) stabilise food grain prices, and (iii) distribute food at affordable prices through the Public Distribution System (PDS).

Long Answer Type Questions (5-6 Marks Each)

Q1. Discuss the state of the Indian economy on the eve of independence.

Answer: When India achieved independence in 1947, the economy was stagnant, backward and underdeveloped due to nearly two centuries of British rule.

(i) Low Per Capita Income: The growth rate of national income was less than 2 per cent per year and per capita income grew at only 0.5 per cent per year, leaving the country trapped in poverty.

(ii) Agricultural Backwardness: Around three-fourths of the population depended on agriculture, but productivity was very low because of outdated technology, the exploitative zamindari system, fragmented holdings and lack of irrigation.

(iii) Deindustrialisation: The traditional handicrafts industry, including world-famous textiles, was destroyed by British policies, and a strong modern industrial base did not emerge to replace it. India remained an exporter of raw materials.

(iv) Adverse Trade Pattern: Foreign trade was restricted to a few items and was mostly with Britain. India exported primary products like jute, cotton and indigo and imported finished goods.

(v) Demographic Condition: Literacy was only 16 per cent, life expectancy 32 years, and infant mortality very high. Public health was poor.

(vi) Infrastructure: Railways, ports, and posts were developed only to serve British commercial interests, not Indian welfare. The economy thus presented a typical colonial picture of poverty, dependence and stagnation at independence.

Q2. Explain the goals of Five-Year Plans of India.

Answer: The four major goals of the Five-Year Plans of India are as follows —

(i) Growth: Growth means increase in the country’s capacity to produce the output of goods and services within the country. It implies a steady rise in Gross Domestic Product (GDP) over time. A higher growth rate enables the economy to provide more goods, services and employment to the people, raising the standard of living.

(ii) Modernisation: Modernisation refers to the adoption of new technology, methods of production and a change in social outlook. It includes mechanisation of agriculture, use of better machines in industry, and the recognition of equal rights for women so that they participate in nation-building.

(iii) Self-reliance: Self-reliance means avoiding undue dependence on foreign countries for goods, services, technology and capital. The first seven plans gave great importance to self-reliance to ensure that the political independence of the country was not endangered.

(iv) Equity: Equity ensures that the benefits of economic prosperity reach the poor sections of society. It involves reducing inequalities in income and wealth, eradicating poverty, and providing basic necessities such as food, shelter, education and health to every citizen.

These four goals are not always complementary; sometimes they may conflict, and policy makers must balance them.

Q3. Explain the major features of the Industrial Policy Resolution of 1956.

Answer: The Industrial Policy Resolution (IPR) of 1956 was the cornerstone of India’s industrial policy until 1991 and aimed at building a socialist pattern of society. Its main features were —

(i) Classification of Industries into Three Schedules: Schedule A contained 17 industries to be exclusively owned by the State, including arms, atomic energy, heavy machinery, iron and steel, and railways. Schedule B contained 12 industries where the State would progressively dominate but private participation was allowed. Schedule C included all the remaining industries left to the private sector but under State regulation.

(ii) Industrial Licensing: Private industries had to obtain licences from the government to start production, expand capacity, or change products. This was meant to direct investment into priority areas and backward regions.

(iii) Promotion of Small-Scale Industries: The Karve Committee (1955) emphasised the role of small-scale industries in employment generation and equitable growth. Many goods were reserved for exclusive production by SSI units.

(iv) Reduction of Regional Inequalities: Industries were encouraged in backward areas through tax concessions and subsidised electricity.

(v) Public Sector as Leader: The IPR 1956 made the public sector the engine of growth, especially in heavy and basic industries.

Q4. Examine the achievements and failures of land reforms in India.

Answer: Land reforms were introduced after independence to make the agrarian structure equitable and efficient.

Achievements: (i) The abolition of intermediaries like zamindars brought about 200 lakh tenants into direct contact with the government, ending exploitation. (ii) Tenancy reforms gave security of tenure and regulated rents in many states. (iii) Land ceiling laws led to redistribution of some surplus land among the landless. (iv) Co-operative farming and consolidation of holdings improved productivity in some regions, especially Punjab and Haryana. (v) Agricultural production became more market-oriented.

Failures: (i) The abolition of intermediaries was not complete in all states; many former zamindars retained large estates by claiming personal cultivation. (ii) The land ceiling laws were poorly enforced because of legal loopholes and benami transactions. (iii) Tenants in many states could be evicted easily and tenancy reforms did not benefit them fully. (iv) The lack of political will and unequal political power of the rural elite weakened reforms. Hence, although land reforms changed the legal structure of land ownership, they could not eliminate rural inequality completely.

Q5. Critically evaluate the Green Revolution in India.

Answer: The Green Revolution refers to the dramatic increase in food grain production in India after the mid-1960s through the use of HYV seeds, chemical fertilisers, pesticides, irrigation and modern machinery.

Positive Effects: (i) India became self-sufficient in food grains and no longer needed to import wheat under PL-480. (ii) Marketed surplus increased, providing food for the urban population. (iii) Farmers’ incomes rose, especially in Punjab, Haryana and Western UP. (iv) Buffer stocks were built up to deal with future shortages. (v) The agricultural sector was modernised through new technology.

Negative Effects: (i) The benefits were limited to a few crops, mainly wheat and rice. (ii) Only certain regions benefited, increasing inter-regional inequality. (iii) Large farmers gained more than small farmers, widening intra-rural inequality. (iv) Excessive use of fertilisers and pesticides damaged soil and water. (v) Ground water levels fell sharply due to over-irrigation. Hence the Green Revolution achieved food security but at significant social and ecological cost.

Q6. Discuss the role of the public sector in the Indian economy during 1947-1990.

Answer: The public sector was assigned the leading role in India’s planning era under the Industrial Policy Resolution of 1956. Its main contributions were —

(i) Building Heavy and Basic Industries: The State invested in steel, machine tools, fertilisers, atomic energy, oil and heavy chemicals — areas requiring huge capital and long gestation periods that the private sector could not handle.

(ii) Infrastructure Development: Power generation, railways, communication, roads and irrigation projects were taken up to provide a base for industrial growth.

(iii) Reducing Regional Inequalities: Public sector units were located in backward regions to spread industrialisation across the country.

(iv) Generating Employment: Government enterprises absorbed millions of workers and provided job security.

(v) Promoting Equity: By controlling key sectors, the State could ensure that economic power did not concentrate in a few hands.

Limitations: However, the public sector also suffered from over-staffing, low productivity, political interference, and chronic losses, leading to demands for privatisation in the 1991 reforms.

Q7. Critically evaluate the trade policy of India during 1947-1990.

Answer: India’s trade policy during 1947-1990 was inward-looking and based on import substitution. Domestic industry was protected from foreign competition by high tariffs and quotas (quantitative restrictions on imports). Protection was given to allow infant industries to grow.

Positive Aspects: (i) The policy enabled the growth of a wide industrial base. (ii) Many new industries such as electronics, automobiles and chemicals were established. (iii) Foreign exchange was saved and used for essential imports. (iv) The country achieved self-sufficiency in many goods.

Negative Aspects: (i) Excessive protection made domestic producers complacent and inefficient. (ii) The quality of Indian goods became inferior to international standards. (iii) Costs of production were high. (iv) Exports remained low and the foreign exchange crisis of 1991 indicated the failure of the inward-looking strategy. (v) The policy ignored the comparative advantage that India had in labour-intensive products. Hence, although the trade policy promoted industrialisation, it weakened the country’s external competitiveness.

Additional Practice — MCQs, Fill in the Blanks, True/False

Multiple Choice Questions

Q1. The First Five-Year Plan was launched in —

Q2. The Planning Commission was set up on —

(a) 15th August 1947 (b) 26th January 1950 (c) 15th March 1950 (d) 1st April 1951

Answer: (c) 15th March 1950.

Q3. Which of the following is NOT a goal of the Five-Year Plans?

(a) Growth (b) Modernisation (c) Privatisation (d) Equity

Answer: (c) Privatisation.

Q4. The Green Revolution in India is associated with —

(a) Cotton (b) Jute (c) HYV seeds of wheat and rice (d) Sugarcane

Answer: (c) HYV seeds of wheat and rice.

Q5. India adopted which type of economic system after independence?

(a) Capitalist (b) Socialist (c) Mixed (d) Traditional

Answer: (c) Mixed.

Q6. The Industrial Policy Resolution of 1956 classified industries into how many schedules?

(a) Two (b) Three (c) Four (d) Five

Answer: (b) Three.

Q7. The literacy rate of India on the eve of independence was approximately —

(a) 16% (b) 26% (c) 36% (d) 46%

Answer: (a) 16%.

Q8. Which of the following was the Chairman of the Planning Commission?

(a) President of India (b) Prime Minister (c) Finance Minister (d) Vice-President

Answer: (b) Prime Minister.

Q9. The system of industrial licensing came to be popularly known as —

(a) Permit System (b) License Raj (c) Quota Raj (d) Tariff Raj

Answer: (b) License Raj.

Q10. Which of the following is an example of import substitution?

(a) Importing cars from Japan (b) Producing cars in India to replace imports (c) Exporting tea to UK (d) Importing crude oil

Answer: (b) Producing cars in India to replace imports.

Q11. The Karve Committee (1955) is associated with —

(a) Heavy industries (b) Small-scale industries (c) Public sector enterprises (d) Land reforms

Answer: (b) Small-scale industries.

Q12. The Bhilai Steel Plant is located in —

(a) Jharkhand (b) Odisha (c) Chhattisgarh (d) West Bengal

Answer: (c) Chhattisgarh.

Q13. Buffer stock of food grains is maintained by —

(a) Reserve Bank of India (b) Food Corporation of India (c) Planning Commission (d) Ministry of Finance

Answer: (b) Food Corporation of India.

Q14. The Minimum Support Price (MSP) is the —

(a) Maximum price farmers can charge (b) Pre-announced price at which government purchases farm produce (c) Tax on agricultural goods (d) Subsidy on fertilisers

Answer: (b) Pre-announced price at which government purchases farm produce.

Fill in the Blanks

Q1. India achieved independence on __________.

Answer: 15th August 1947.

Q2. The First Five-Year Plan was based on the __________ model.

Answer: Harrod-Domar.

Q3. __________ refers to the systematic destruction of indigenous industries during colonial rule.

Answer: Deindustrialisation.

Q4. The Industrial Policy Resolution of __________ became the basis of India’s industrial policy until 1991.

Answer: 1956.

Q5. The use of HYV seeds, fertilisers and irrigation in Indian agriculture is called the __________.

Answer: Green Revolution.

True or False

Q1. Per capita income in India grew rapidly during British rule.

Answer: False. It grew at only about 0.5 per cent per year.

Q2. India adopted a mixed economic system after independence.

Answer: True.

Q3. The Green Revolution made India self-sufficient in food grains.

Answer: True.

Q4. The Planning Commission was a constitutional body.

Answer: False. It was a non-statutory, non-constitutional advisory body.

Q5. Trade policy during 1947-1990 was outward-looking and export-promoting.

Answer: False. It was inward-looking, based on import substitution.

Q6. The IPR 1956 reserved 17 industries exclusively for the public sector.

Answer: True. These were listed in Schedule A of the IPR 1956.

Q7. The Green Revolution benefited all states of India equally.

Answer: False. It mainly benefited Punjab, Haryana and Western Uttar Pradesh, increasing regional inequality.

Q8. Land ceiling laws were strictly enforced in all states of India.

Answer: False. Loopholes and benami transactions weakened enforcement in many states.

Q9. The First Five-Year Plan focused mainly on heavy industries.

Answer: False. The First Plan emphasised agriculture and irrigation; heavy industries were emphasised in the Second Plan (Mahalanobis model).

Q10. Per capita income grew very slowly during the colonial period.

Answer: True. It grew at only about 0.5 per cent per year.

Glossary

Term	Meaning
Mixed Economy	An economic system in which both the public sector and the private sector exist side by side.
Five-Year Plan	A document that gives the targets and allocation of resources of the economy for a five-year period.
Planning Commission	The advisory body set up in 1950 to formulate the Five-Year Plans of India.
Growth	An increase in the economy’s productive capacity, leading to a rise in GDP.
Modernisation	The use of new technology and the change of social outlook including women’s empowerment.
Self-reliance	Avoiding undue dependence on foreign countries for goods, services, technology and capital.
Equity	Fair distribution of benefits of growth so that the poor also share in prosperity.
Land Reforms	Changes in the agrarian structure to make it more equitable and productive.
Zamindari System	A land tenure system in which zamindars collected rent from cultivators on behalf of the British.
Green Revolution	The increase in food grain production due to use of HYV seeds, fertilisers and irrigation.
HYV Seeds	High Yielding Variety seeds that produce significantly higher output than ordinary seeds.
Marketed Surplus	The portion of agricultural produce sold by farmers in the market.
Import Substitution	A trade policy aimed at replacing imports with domestically produced goods.
Tariff	A tax imposed on imports of goods to make them more expensive.
Quota	A quantitative restriction on the amount of goods that can be imported.
License Raj	The system of industrial licensing that controlled private investment in India until 1991.
Public Sector	That part of the economy which is owned and controlled by the government.
Small-Scale Industry	An industry whose investment in plant and machinery is below a specified limit.
Deindustrialisation	The decline of indigenous industry, especially handicrafts, during colonial rule.
Per Capita Income	National income divided by total population of a country.
Buffer Stock	Government-held stock of food grains used to ensure food security and stabilise prices.
Minimum Support Price	The pre-announced price at which the government purchases farm produce from cultivators to assure them a minimum return.
Subsidy	Financial assistance given by the government to producers or consumers.
Tenancy Reform	A reform giving security of tenure and regulated rents to tenant cultivators.
Land Ceiling	The maximum size of land an individual can legally hold; surplus is redistributed.
Karve Committee	The 1955 committee that recommended promotion of small-scale industries in India.
License Permit Quota Raj	The combined system of licensing, permits and quotas that controlled private investment until 1991.
Five-Year Plan Goal — Equity	Ensuring fair distribution of the benefits of growth across sections and regions.