Planning and Economic Reforms Questions and Answers AP Inter 2nd Year Economics Chapter 7

Reviewing AP Inter 2nd Year Economics Study Material Chapter 7 Planning and Economic Reforms Questions and Answers can help students prepare confidently for exams.

AP Inter 2nd Year Economics 7th Lesson Planning and Economic Reforms Questions and Answers

Very Short Answer Questions

Question 1.
Distinguish between Liberlization and Privatization.
Answer:

Question 2.
Gadgil formula.
Answer:

1. The Gadgil Formula (1969), named after D.R. Gadgil, was used by the Planning Commission to allocate central plan assistance to States during Five-Year Plans.
2. It distributes funds based on criteria such as population, per capita income, performance, tax effort, and special problems of states.

Question 3.
Explain about ‘FEMA’.
Answer:

1. FEMA (Foreign Exchange Management Act), 1999 replaced the earlier FERA (1973) and came into force in June 2000.
2. Its main objective is to facilitate external trade and payments and to promote the orderly development and management of the foreign exchange market in India.

Question 4.
National Investment Fund.
Answer:

1. The National Investment Fund (NIF) was established in 2005 to receive proceeds from disinvestment of public sector enterprises.
2. Its funds are used to support government developmental schemes and programmes.

Question 5.
What is Mahalanobis model?
Answer:

1. The Mahalanobis Model, developed by P.C. Mahalanobis, was used in India’s Second Five-Year Plan (1956-61) and focused on rapid industrialization.
2. It gave priority to heavy and capital goods industries to promote long-term economic growth.

Question 6.
Mention any two WTO agreements signed by India.
Answer:
Two WTO agreements signed by India are:

1. Agreement on Agriculture (AoA)
2. Trade Related Intellectual Property Rights (TRIPs)

Short Answer Questions

Question 1.
Discuss any four failures of planning in India.
Answer:
1) Regional Disparities: The plans failed to achieve balanced regional development. Developed states like Goa, Sikkim, and Telangana have higher incomes, whereas BIMARU states (Bihar, Madhya Pradesh, Rajasthan, Uttar Pradesh) remain backward.

2) Unemployment: Despite the implementation of various employment schemes over the years, the plans have not been able to resolve the problem of unemployment.

As per the data, the unemployment rate stood at 5.6% (May 2025), with a slightly higher rate among women (5.8%) compared to men (5.6%), reflecting continued employment challenges.

3) Persistence of Poverty: Poverty remains a major challenge despite years of economic planning. According to the data, while the poverty rate was 16.22% in 2011 -12 under an earlier measure, using a new poverty line of $ 3.00 per day shows that about 75.2 million people still live below the poverty line, indicating the persistence of poverty.

4) Increasing Inequalities: Following the introduction of economic reforms like liberalization and privatization, inequalities in wealth and income have increased. The data shows that the top 10% of the population holds more than 50% of the total income, while the bottom 50% shares less than 15%, highlighting a significant gap between rich and poor.

Question 2.
Write a brief note on WTO.
Answer:
1) The World Trade Organization (WTO) is an inter-governmental organization that regulates international trade among member countries. It was established on January 1,1995, replacing GATT, under the Marrakesh Agreement signed in 1994. Its headquarters are in Geneva, Switzerland, and India is a founder member.

2. The WTO performs important functions such as facilitating trade, providing a platform for negotiations, settling trade disputes, monitoring trade policies, and offering technical assistance to member nations.

3. Member countries sign various agreements like Agreement on Agriculture (AoA), TRIPs, GATS, and TRIMs, which regulate different aspects of global trade.

4. The impact on India includes benefits such as increased exports, economic growth, and higher inflow of FDI and Fll, along with challenges like pressure on subsidies, issues related to patents, and increased competition for small-scale industries.

Question 3.
Briefly explain the major initiatives of NITI Aayog for Indian economic development.
Answer:
NITI Aayog has launched several key initiatives to transform India into a dynamic, knowledge based, and inclusive society through a decentralized and collaborative approach.

1) Sustainable Development Goals (SDGs): NITI Aayog aligned India’s development agenda with the United Nations’ SDGs and developed a National Indicator Framework to track progress on these goals.

2) Atal Innovation Mission (AIM): This initiative promotes innovation and entrepreneurship among youth through Atal Tinkering Labs, Incubation Centers, and Community Innovation Centers, strengthening the startup ecosystem.

3) Aspirational Districts Programme: Launched in January 2018, it focuses on the rapid development of 112 backward districts in areas like agriculture, infrastructure, education, health, and nutrition.

4) Strategic Planning Framework: NITI Aayog replaced Five-Year Plans with a flexible, data- driven framework including a Three-Year Action Agenda, Seven-Year Strategy, and Fifteen- Year Vision.

5) Digital Transformation: It promotes digital governance through initiatives like Digital India, Digital Payments, and Digital Health to improve efficiency and service delivery.

Question 4.
State the differences between planning commission and NITI Aayog.
Answer:
Differences between planning commission and NITI Aayog:

Question 5.
Discuss any four measures towards Globalization.
Answer:
Globalization refers to the process of integrating India’s domestic economy with the world economy by relaxing restrictions on international trade.

Four measures towards Globalization:
1) Devaluation of the Rupee: To boost exports and reduce trade deficit, the rupee was devalued in July 1991 in two stages (9% and 11%), making Indian goods cheaper in the global market.

2) Convertibility of Rupee in Current Account: refers to the facility that allows foreign exchange earnings to be freely converted into Indian currency for trade-related transactions. This system was introduced in stages from 1992, where initially 60% was converted at the market rate and 40% at the official rate, and it achieved full convertibility in 1993.

3) Reduction of Import Tariffs: The government reduced custom duties significantly (from 150% in 1991 to 10% by 2007) to promote international trade.

4) Removal of Quantitative Restrictions on Imports: Physical limits on imports were removed, with 2,144 goods freed from restrictions between 1997 and 2001, encouraging free trade.

Question 6.
Explain the difference between stabilization policies and structural adjustment measures under economic reforms.
Answer:
Difference between stabilization policies and structural adjustment:

Long Answer Questions

Question 1.
Explain major achievements of economic planning in India.
Answer:
Economic planning in India (1951-2017) through the Twelve Five-Year Plans brought structural transformation, modernization, and economic growth. India emerged as one of the world’s largest economies due to planned development.

1) Increased Economic Growth: Economic planning helped India overcome the slow “Hindu Rate of Growth” of about 3.5% during the early decades. Through investment, industrialization, and infrastructure development, the growth rate increased to around 7% by the Twelfth Plan. Several plans also achieved or exceeded their growth targets.

2) Agricultural Production and Food Security: Planning transformed agriculture through land reforms, irrigation expansion, and the Green Revolution. Foodgrain production increased from 50.8 million tonnes in 1950-51 to 275 million tonnes in 2016-17, making India largely self-sufficient in food. The Rainbow Revolution also boosted milk, fish, and egg production.

3) Industrial Progress: The Second Five-Year Plan laid the foundation for industrialization by promoting basic and capital goods industries. Coal and crude oil production increased significantly, while electricity generation rose from 5 bkw in 1951 to 1236 bkw in 2016-17, strengthening the industrial base.

4) Development of Infrastructure: Infrastructure expanded considerably. Railway networks, roads, and ports grew rapidly, improving connectivity and trade. Tele-density crossed 90% due to the telecom revolution. Bank nationalization and modern payment systems such as UPI enhanced financial inclusion and efficiency.

5) Social Services and Quality of Life: Planning improved education, health, and living standards. Literacy increased from 18.3% to about 74%, health indicators improved, and poverty declined from around 50% in the 1950s to 21.9% by 2011 -12.

6) Science, Technology, and Trade Development: India diversified exports from primary products to manufactured goods and IT services. The share of trade in GDP increased significantly. Major achievements were also made in space research, nuclear energy, biotechnology, and satellite technology, enhancing India’s global competitiveness.

Conclusion: Economic planning played a crucial role in promoting growth, food security, industrialization, infrastructure, social welfare, and technological advancement, laying the foundation for modern India’s development.

Question 2.
State the causes of regional imbalances and explain the measures taken during the plan period to achieve balanced regional development in India.
Answer:
Balanced regional development is a strategy that promotes equal development across all regions to reduce variations in indicators like Net State Domestic Product (NSDP) and per capita income.

I) Causes of Regional Imbalances:

1. Natural Resource Endowments: There are disparities in the availability of land, forests, and water resources, which lead to uneven development across regions.
2. Climatic Conditions: Differences in rainfall and extreme geographical conditions, such as desert regions of Rajasthan and flood-prone areas of Assam and Bihar, hinder uniform development.
3. Infrastructure Deficiencies: Many backward regions suffer from a lack of basic infrastructure like transport, power, irrigation, and communication facilities.
4. Historical Factors: Certain regions remained underdeveloped due to neglect and misgovernance during British rule.
5. Geographical Diversity: Difficult terrains such as hilly regions (North-East, Himalayas) and drought-prone areas (Bundelkhand, Vidarbha) create barriers to development.

II) Measures Taken During the Plan Period:

1. Resource Transfer through Central Assistance: The Central government provided greater financial assistance to backward states by increasing their share in fund allocation.
2. Special Category Status: Some states were given special category status to receive additional central assistance for development projects.
3. Backward Region Grant Fund (BGRF): Established in 2007, this fund aimed to develop 250 backward districts by providing targeted financial support.
4. Gadgil Formula: Introduced from the Fourth Plan, it allocated funds based on criteria like per capita income and special problems, ensuring support to poorer states.
5. Area-Based Development Programmes: Specific programmes like Drought Prone Area Development Programme (1973) and Hill Area Development Programme (1974) targeted regions with unique challenges.
6. Industrial Incentives and Infrastructure Development: The government promoted industrial corridors, Special Economic Zones (SEZs), and offered subsidies and tax concessions to attract industries and MSMEs to backward regions.

Question 3.
Discuss the measures taken under privatization as a part of economic reforms.
Answer:
Privatization refers to the transfer of ownership, management, or control of public sector enterprises (PSEs) to the private sector, either fully or partially. It was a major component of the 1991 economic reforms, introduced to improve efficiency, reduce government burden, and promote competitiveness in the economy.

Measures Taken under Privatization:
1. Disinvestment: Disinvestment involves the sale of a part of the government’s shares in PSUs to private investors or the public. Introduced through the Industrial Policy of 1991, it aimed to reduce the financial burden on the government and improve PSU performance through private participation.

2. Institutional Mechanisms: To implement privatization effectively, several institutions were created:

• Disinvestment Committee (1992) under Dr. C. Rangarajan recommended selling up to 49% of shares in most PSUs.
• In 1996, PSUs were classified into strategic and non-strategic sectors.
• In 1999, the Department of Disinvestment was established, later renamed DIPAM in 2016. These measures ensured systematic and transparent implementation of privatization.

3. National Investment Fund (NIF): Established in 2005, the NIF received proceeds from disinvestment and utilized them for developmental and social welfare programmes instead of routine government expenditure.

4. Transfer of Management and Control: Privatization also involved transferring management through contracts, leases, and franchises. This enabled private firms to introduce better technology, efficient management, and improved productivity.

5. Examples of Disinvestment: Major PSUs such as NTPC, Maruti Udyog Limited, Power Grid Corporation, Coal India Limited, and Shipping Corporation of India underwent disinvestment, reflecting the wide scope of privatization across sectors.

6. Overall Impact and Concerns: Privatization improved efficiency, competition, and reduced political interference. However, concerns remained regarding labour security, possible job losses, and’excessive profit orientation.

Conclusion: Privatization, through disinvestment, institutional reforms, and transfer of management, played a key role in enhancing efficiency and competitiveness in the Indian economy.

Multiple Choice Questions

Question 1.
Which five-year plan has poverty eradication as its objective?
1) Second
2) Fifth
3) Eight
4) Tenth
Answer:
2) Fifth

Question 2.
he term ‘Hindu rate of growth” was first used by:
1) Raj Krishna
2) Mahalanobis
3) K.N.Raj
4) Gadgil
Answer:
3) K.N.Raj

Question 3.
Which of the following measures can be called stabilization measure?
1) Delicensing
2) Disinvestment
3) Elimination of QRs
4) Rupee devaluation
Answer:
4) Rupee devaluation

Question 4.
Which statement best reflects the principle of globalization?
1) Subsidizing domestic agriculture to promote exports
2) Export tariff discrimination between developed and developing countries
3) Entering into trade agreements with member countries
4) Import substitution and export promotion through non-tariff restrictions
Answer:
3) Entering into trade agreements with member countries

Question 5.
The name associated with Rolling Plan in India was:
1) D.R. Gadgil
2) Dr. Manmohan Singh
3) Prof. Lakdawalla
4) Montek Singh Ahluwalia
Answer:
3) Prof. Lakdawalla

Question 6.
Bombay Plan was prepared in 1943 by:
1) M.N. Roy
2) Jayaprakash Narayana
3) M. Visweswaraiah
4) 8 Industrialists
Answer:
4) 8 Industrialists

Question 7.
Conditions that forced India to introduce economic reforms in 1991 did not included
1) Fiscal Deficit
2) Debt Burden
3) Unfavourable Balance of Payments
4) Fall in Aggregate Demand
Answer:
4) Fall in Aggregate Demand

Question 8.
BIMARU states do not include:
1) Uttar Pradesh
2) Maharashtra
3) Madhya Pradesh
4) Rajasthan
Answer:
2) Maharashtra

Question 9.
The Strategy Document prepared by NITI Aayog covers a period of:
1) 3 years
2) 5 years
3) 7 years
4) 15 years
Answer:
3) 7 years

Question 10.
Most Favoured Nation (MFN) principle of the WTO:
1) Allows preferential treatment among selected nations
2) Ruled out preferential treatment among trading nations
3) Imposes tariffs specific to certain products
4) Prefers certain nations over others in case of textile exports
Answer:
2) Ruled out preferential treatment among trading nations

Fill in the Blanks

Question 1.
20-point Economic Programme was revised in 2006 and aligned to ____________.
Answer:
National Common Minimum Programme

Question 2.
The amount allocated to each Member of parliament under MPLADS scheme is Rs ____________ crores (from 2011).
Answer:
5

Question 3.
The letter ‘B’ in DBT scheme stands for ____________.
Answer:
Benefit

Question 4.
The Department responsible for handling disinvestment in India is called ____________.
Answer:
DIPAM

Question 5.
The Mission launched by NITI Aayog to promote a culture of innovation and entrepreneurship is the ____________.
Answer:
Atal Innovation Mission (AIM)

One Word Answers

Question 1.
Name the institution which fosters cooperative federalism in economic development?
Answer:
NITI Aayog

Question 2.
Which is provided to implement the Externally Aided Projects (EAP’s)?
Answer:
Additional central assistance

Question 3.
Highest growth rate was achieved in which five year plan?
Answer:
11th plan

Question 4.
Which Account of the Balance of Payments allows full convertibility of rupee?
Answer:
Current Account

Question 5.
What is the theme of the twelfth five-year plan?
Answer:
Faster, Sustainable and more inclusive growth.