Current challenges in Indian Economy | Indian Economic Development Notes Class 12

Part B: Indian Economic Development Notes Class 12

Unit -3: Current challenges in Indian Economy

Current challenges in Indian Economy – Poverty

Q.1. Define poverty? What are its types? 2015, 2017

Ans: Poverty refers to a state in which an individual is unable to fulfill even the basic necessities of life. The two measures to determine the extent of poverty are: I. Relative poverty II. Absolute poverty

Absolute poverty refers to the total number of people living below poverty line.

Relative poverty refers to poverty of people in comparison to other people, regions or nations.

Q.2. Explain various cause of poverty in India.                   2015, 2016, 2018

Ans: Causes of poverty

  1. Underdevelopment of the Indian economy: The root cause of poverty is the under development of the Indian economy. The underdevelopment is caused by the relative backwardness of agriculture & industrial sector.
  2. Population explosion: Rapid growth of population, particularly among the poor, is responsible for the problem of poverty in the country.
  3. High level of un-employment: Poverty is caused by unemployment or low rates of wages.
  4. Inequalities of income: An important cause of poverty in India is the existence of large inequalities in distribution of national income & concentration of economic power.
  5. Social factors: Joint family system, laws of inheritance, strong belief in destiny & fate are some social factors that have presented individuals from taking initiative & risk.
  6. Inflation: The steep & continuous rise in price, particularly of essential commodities has added to the miseries of the poor.
  7. High illiteracy rate: Lower education result in lower income as there is a positive correlation between the two.

Q.3. What are various measures to remove poverty?                                     2016

Ans: Measure to remove poverty:

  1. Acceleration of economic growth: The first & foremost measure needed to remove poverty is accelerating the rate of economic growth.
  2. Reducing inequalities of income: High growth rate with reduced inequalities of income helps in removing poverty.
  3. Population control: High growth rate of population is the prime cause of poverty. So, in order to remove poverty, it is very essential that population growth rate be checked.
  4. Agricultural development: Removal of mass poverty in rural areas is possible only when due emphasis is given for agricultural development.
  5. More employment opportunities: Poverty can be eliminated by providing more employment opportunities. So that people are able to meet their basic needs.

Q.4. Mention various poverty alleviation programmes in India.                                2017

Ans: Poverty alleviation programmers (PAP) in India:

  1. Prime minister’s Rozgar Yojana (PMRY)
  2. Swarna Jayanthi Shahri Rozgar Yojana (SJSRY)
  3. Swarna Jayanthi Gram Swarozgar Yojana (SGSY)
  4. Sampoorna Grameen Rozgar Yojana (SGRY)
  5. National Rural Employment Guarantee Act 2005
  6. Pradhan Mantri Gramodaya Yojana (PMGY)

Q.5. What is Poverty line?

Ans: Poverty line is a cutoff point on the line of distribution, which usually divides the population of the country as poor & non poor.

Q.6. What are Minimum Needs programmes?

Ans: The third approach is to provide minimum basic amenities to the people. Food grains at subsidized rates, education, health, water supply & sanitation, mid day meal are some examples of minimum needs programme.

Current challenges in Indian Economy – Infrastructure and Energy

Q.1. What is infrastructure? What are its various types?                               2015, 2017

Ans: It refers to such core elements of economic & social change which serve as a support system to production activity in the economy. It is mainly divided into two parts: Economic and Social infrastructure.

Economic infrastructure: It refers to all such elements of economic change like- power, transport, communication etc. which serve as a support system to the process of economic growth.

Social infrastructure: It refers to core elements of social change like- schools, colleges, hospitals, banking etc. which serve as a support system to the process of social development of a country.

Q.2. Mention the importance or relevance of infrastructure in economic development.                              2016

Ans: Importance of Infrastructure:

  1. Infrastructure enhances productivity,
  2. Infrastructure induces investment.
  3. Infrastructure enhances size of the market.
  4. Infrastructure enhances ability to work.
  5. Infrastructure facilitates out sourcing.
  6. Infrastructure induces FDI.

Q.3. What is energy? Mention the sources of energy.

Ans. Energy is the life line of entire production activity. In fact any type of production activity cannot take place without energy.

There are mainly two sources of energy:

  1. Conventional sources of energy: These are that energy which is known to us & which is popularly in use since a very long time. For e.g. Coal, petroleum, natural gas & electricity.
  2. Non-conventional sources of energy: These are that energy which have been discovered in the recent past & which are yet to gain popularity for their use. For e.g. Solar energy, wind energy, bio-mass etc.

Q.4. Mention the emerging challenges of power generation in India.

Ans. a) inadequate generation of electricity, b) Less capacity utilization, c) Losses of electricity boards.

Q.5. Mention the measures undertaken to meet the challenges of power Generation in India.

Ans: Measures to improve power generation in India:

  1. Increase in production capacity,
  2. Improvement in plant load factor,
  3. Minimization of transmission & distribution losses,
  4. Improve the supply of inputs to power plants,
  5. Participation of private sector & encouragement to FDI in power generation.

Q.6. What is health? Mention the emerging challenges of health services in India.

Ans: It is a state of complete physical, mental & social well-being. A person’s ability to work depends largely on his good health. It enhances the quality of life. Problems of health services in India:

  1. Unequal distribution of health services.
  2. Control of communicable diseases.
  3. Poor management of health care.
  4. Privatization of health care services.
  5. Poor upkeep & maintenance.
  6. Poor sanitation level.

Current challenges in Indian Economy – Human Capital Formation

Q.1. What do you mean by human capital formation? What are its various sources? What are their importance? 2017

Ans: Human capital formation means the development of abilities and skills among the population of the country. Here, Human capital refers to the stock of skill, ability, expertise, education and knowledge involved in the people.

Sources of Human Capital Formation:                                    2015

1) Expenditure on education: Proper utility of man power depends on the system of education. Spending on education by individuals is similar to spending on capital goods.

2) Expenditure on Health: Health is an important input for a development of a nation.

3) On the job training: productivity of physical capital is substantially increased with the improvement in human capital. Due to this reason many firms provide on the job training to their workers.

4) Expenditure on Information: Expenditure is incurred to acquire information relating to labour market and other market. This information is necessary to make decisions regarding investment in human capital.

Importance of Human capital formation:

  1. Human Capital formation is very important for the growth of an economy.
  • Effective use of physical capital: Its growth and productivity depends on human capital formation.
  • Human capital formation raises the productivity and production.
  1. Inventions, innovations and technological improvement are all due to the extra knowledge acquired during education which provides lot of innovations and inventions.
  2. The knowledgeable, skilled and physically fit people help in the human capital formation.
  3. Increases life expectancy: Formation of human capital raises life expectancy of the people. This in turn, adds to the quality of life.
  4. Improves Quality of life: The quality of population depends upon the level of education health of a person and skill formation acquired by the people.
  5. Control of population growth: It has been observed that educated persons have smaller families as compared to illiterate families, So, spread of education is necessary to control the population growth rate.

Q.2. What are various causes for poor human capital formations in India?                           2015, 2016

Ans: Reasons for poor Human Capital formations are:

1) Insufficient Resources: The resources allocated to the formation of human capital have been much less than the resources required for meeting the educational & health needs of the country.

2) Serious Inefficiencies: There are a lot of wastages of society’s resources as capabilities of educated people are either not made use of.

3) High Growth of population: The continuous rise in population has adversely affected the quality of human capital.

4) Lack of proper manpower planning: There is an imbalance between the demands for the supply of human resources of various categories, especially in case of highly skilled personnel. The absence of such balancing has resulted in the wastage of resources.

Q.4. Write a brief note on Growth of Education Sector in India. Also mention its role in economic development.  2016

Ans: There has been considered growth in the field of Education. The number of schools increased from 230.7 thousands (1950-51) to 1,815.8 thousands (2019-19). The no. of teachers in the same period increased from 751 thousand to 8010 thousands & no of students from 23,800 thousands to 18, 22,700 thousands.

Role of education: Education in every sense is one of the fundamental factors of development. No country can achieve sustainable economic development without substantial investment in human capital. Some of the role of education in economic development are listed below:

  1. Education raises people’s productivity and creativity.
  2. It promotes entrepreneurship and technological advances.
  3. It plays a significant role in securing economic and social progress and improving income distribution.
  4. Its helps in curbing poverty.
  5. Education enriches people’s understanding of themselves and world.
  6. It improves the quality of their lives and leads to broad social benefits to individuals and society.

Q.7. Mention the various indicators of human development.                                    2016, 2017

Ans: The indicators of human development are:

  1. Life Expectancy.
  2. Adult Literacy Rate.
  3. Infant Mortality Rate.
  4. Percentage of the population below poverty line.
  5. GDP per capita
  6. Percentage of the population having access to improved sanitation
  7. Percentage of the population having access to improved water sources. 

Current challenges in Indian Economy – Rural Development

1. What do you mean by Rural Development? Mention two subjects relating to rural development. 2016

Ans: Rural Development is a continuous comprehensive socio-economic process, attempting to improve all aspects of rural life. Subjects relating to rural development are: Rural credit and agricultural marketing.

Q.2. What is agricultural diversification essential for sustainable livelihood?

Ans: Agricultural diversification is essential for rural people to generate supplementary gainful employment and realizing higher level of income.

Q.33. What is cooperative marketing?

Ans: Cooperative marketing refers to a system in which marketing societies are formed by farmers to sell the output collectively and to take advantage of collective bargaining.

Q.4. What are the 2 aspects of diversification of activities?

Ans: Diversification includes 2 aspects

  1. Diversification of crop production
  2. Diversification of productive activities.

Q.5. Which is the apex institution in rural financing?

Ans: National Bank for Agricultural and Rural Development (NABARD), established in 1982.

Q.6. Name three institutional sources of agricultural credit.

Ans: 3 institutional sources of agricultural credit are: i. Cooperative Credit Societies ii. Commercial Banks iii. Regional Rural Banks

Q.7. What is Micro-finance?

Ans: Micro finance is a credit scheme extended to the poor through Self Help Groups (SGHs)

Q.8. Why have Self Help Groups (SGHs) been set up?

Ans: The Self-Help Groups (SGHs) have been set up to give credit to the needy numbers to be repayable in small installments at reasonable interest rates.

Q.9. Why is minimum support price (MSP) fixed by the government?

Ans: Minimum support price is fixed by the govt. to safe guard the interest of farmers.

Q.10. What is rural credit? Mention its various sources.                                2015, 2016, 2017

Ans: Rural Credit: Rural Credit means provision of loans especially in production for agriculture and non-agricultural sectors. The loans have provided in rural areas to the farmers in order to purchase machineries, agricultural implements etc. On the basis time, rural credit can be classified as: short-term credit, medium-term credit and long-term credit

Sources of Rural Credit: Rural Credit availability can be broadly classified into 2 categories:

  1. Non-institution Sources: These are the traditional sources of agricultural credit in India. They include money lenders, relatives, traders, commission agents and land lords.
  2. Institutional Sources: They are cooperative credit, land development banks, commercial banks, regional rural banks, govt., national bank for agricultural and rural development (NBNR) and also self-help groups.

Q.11. What is Agricultural Marketing System? Mention various defects of Agricultural Market in India.                2015, 2017

Ans: Agricultural marketing is a process that involves the assembling, storage, processing, transportation, packaging, grading and distribution of different agricultural commodities across the country.

The existing system of Agricultural marketing has number of defects the following are some of the defects due to which the marketing system is not properly organized:

  1. Lack of storage facility for food grain and crops has damaged the products either by rats or insects or due to rain.
  2. Distress Sale: Most Indian farmers are poor and they have no capacity to wait for better price. They sell the commodities at whatever the price available immediately.
  3. Lack of transportation as a result farmer cannot reach nearly mandi’s to sell their produce at a fair price.
  4. Long chain of middleman or intermediaries between the cultivator and the consumer will also reduce the profit of the producer.
  5. There are also other defects like lack of institutional finance, lack of guiding etc.

Q.12. Mention various measures to improve agricultural marketing system.     

Ans: Measures to Improve Agricultural Marketing: Following are some of the measures to improve the system agricultural marketing in the country:

  1. Extension of storage facilities at the farm level and storage and warehousing facilities in the markets and consumption centers.
  2. Establishments of regulated markets.
  3. Improvement of transport facilities between the village and the mandi’s.
  4. Establishment of cooperation marketing societies.
  5. Provision of cheap credit, especially from institutional sources.
  6. Prompt supply of marketing information.

Q.13. What do you mean by the diversification of Agricultural Activity? Explain briefly.                               2015

Ans: This means the excess of people in agriculture can be given gainful employment in some other allied activities in agriculture and non-farm activities. This is done in order to overcome poverty, improve employment and make rural agricultural people fully employed.

Diversification includes two aspects.

  1. Diversification of crop production: This involves shift from single cropping system to multiple cropping system. The main aim is to promote shift from subsistence farming to commercial farming.
  2. Diversification of Productive Activities: As agricultural is already overcrowded, the major portion of the increasing labour force needs to find alternate employment opportunities in other non-farm sectors.

Q.14. Explain the increasing role of IT Industries in the development of agriculture?

Ans: Information Technology has revolutionized many sectors in Indian economy including agricultural sector. It has a significant impact on the agricultural sector as it circulates information regarding weather and soil condition for growing different crops. This has increased the productivity of agriculture. The aim for increasing the role of information technology is to make ever village a knowledge Centre, where IT provides a sustainable option of employment and livelihood.

Q.15. What is organic farming? Mention its merits and problems.

Ans: Meaning of Organic Farming: Organic farming is the process of producing food naturally. This method avoids the use of synthetic chemical fertilizers. It is very eco-friendly and very essential for sustainable development. It has a zero impact on environment.

Advantages of Organic Farming (Why its is superior to traditional farming)         2015, 2017

  1. It substitutes costlier Chemical fertilizers with cheaper organic inputs.
  2. It generates income through export as the demand, for organically grown crops are on the raise.
  3. It provides healthy food as organically grown food has more nutritional value.
  4. It can provide more employment opportunities in India.
  5. Organic food is a pesticide free and is produced in an environmentally sustainable way.

Problems of Organic Farming

  1. Organic farming needs to be popularized by creating awareness and willingness on the part of the farmers for adoption of new methods.
  2. There is no proper infrastructure and marketing facilities for these products alone.
  3. An appropriate agricultural policy should be brought in for organic farming.
  4. The fields from organic farming are less than modern agricultural farming in the initial years.

Q.16. What is Green Revolution? Mention its benefits.                                2017

Ans: Green Revolution: The Green Revolution in India refers to a period when Indian agriculture was converted into an industrial system due to the adoption of modern methods and technology such as the use of high yielding variety (HYV) seeds, tractors, irrigation facilities, pesticides, and fertilizers.

Objectives/Benefits of Green revolution

a) Introducing high yield varieties of seeds,

b) Making fertilisers and insecticide more widely available,

c) Manufacturing farm equipment,

d) Upgrading irrigation practices, and

e) Providing institutional support to farmers.

Current challenges in Indian Economy – Unemployment

Q.1. What do you mean by employment? Mention the need for creating employment. Mention two employment generation program of government of India.

Ans: Employment is an activity which enables a person to earn his means of living.

Necessity to create employment in formal sector because

  1. It provides various security benefits.
  2. It provides regular income.
  3. Helps in reducing poverty.

Employment generation programme of Govt. of India:                 2016

a) Jawahar Rozgar Yojana/Jawahar Gram Samriddhi Yojana.

b) Integrated Rural Development Programme (IRDP).

c) Sampoorna Gramin Rozgar Yojana (SGRY).

d) Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) 2005.

Q.2. What do you mean by full employment, self employment and wage employment?

Ans: Full employment is a situation in which all the workers who are capable of working and willing to work get an employment at a prevailing wage rate.

When the worker uses his own resources to work and make a living then we call it as Self Employment.

Wage employment is an arrangement in which a worker sells his labour and earns wages in return.

Q.3. What is Unemployment? Mention its reasons. What are its various types?

Ans: Unemployment: It means when a person is ready and willing to work at the prevailing rate of wage but does not get work.

Reasons for unemployment:                      2017, 2018

  1. Increase in population.
  2. Poverty and lack of proper education
  3. Lack of infrastructure facilities such energy, transport etc.
  4. Slow growth of industrialization.
  5. Lack of demand of industrial products and consumer durables due to high inflation.

Types of unemployment:                            2015, 2016, 2017

  1. Disguised unemployment is a situation when the no. of workers engaged in a job is much more than actually required. If some of them are withdrawn from job, total production will not get affected.
  2. Seasonal Unemployment-work in agriculture is seasonal, no employment opportunity for remaining months.
  3. Frictional Unemployment – when a person move from one job to other, but in the process of change may remains unemployed for sometimes.
  4. Structural unemployment- it occurs due to structural changes in the economy structural changes is of two types – Changes in technology and Change in demand.
  5. Cyclic Unemployment- Due to Business cycles.

Q.4. Name the two kinds of urban unemployment.

Ans:  1. Industrial unemployment, 2. Educated unemployment.

Q.5. What do you mean by industrial unemployment?

Ans: It refers to the unemployment among the illiterates who wish to work in industrial establishment

Q.6. Give the meaning of educated unemployment.

Ans: Educated unemployment refers to the unemployment among the Educated people.

Q.7. Give the meaning of work force.

Ans: The number of persons, who are actually employed at a particular time, are known as work force.

Q.8. What is meant by Casualisation of work force?

Ans: The process of moving from Self- Employment and regular salaried employment to casual wage work is known as Casualisation of Workforce.

Q.9. What is Informalisation of workforce?

Ans: Informalisation of workforce refers to a situation whereby the proportion of workforce in the informal sector to total workforce increases.

Q.10. What do you mean by formal sector establishment?

Ans: All the public enterprises and private establishments, which Employ 10 or more hired workers are called formal sector establishments.

Q.11. What do you mean by Informal sector Establishment?

Ans: All those private enterprises which hire less than 10 workers are called Informal sectors. E.g.: Workers who work in farms, owners of Small Enterprises, Agriculture labourers. Here they do not get regular income. No protection or regulation by government can be dismissed at any time. Live in slums, use outdated technology, and do not maintain accounts.

Current challenges in Indian Economy – Environment and Sustainable development

Q.1. What is meant by Environment? What does environment includes?

Ans: Environment is defined as the total planetary inheritance and the totality of all resources. Environment includes all the biotic and abiotic factors that influence each other.

Q.2. What do you mean by biotic elements and abiotic elements?

Ans: All living elements like birds, animals and plants, forests, fisheries etc. are biotic elements. Abiotic elements are those which includes non-living elements like air, water, land etc.

Q.3. Give the meaning of Renewable Resources and non-renewable resources of energy?

Ans: Renewal resources are those resources which can be used without the possibility of being exhausted, such as trees, fishes etc.

Non-renewal resources are those resources which get exhausted with extraction and use such as coal, gas etc.

Q.4. What happens when the rate of resource extraction exceeds that of their re-generation?

Ans: When the rate of resources extraction exceeds that of their re-generation then environment fails to perform its vital function of life substance and it lead to the situation of Environmental Crisis.

Q.5. What do you mean by the Carrying capacity of environment?

Ans: Carrying capacity of the environment implies that the resources extraction is not above the rate of regeneration of the resources and the wastes generated are within the assimilating capacity of the environment.

Q.6. What do you mean by Pollution? What are the causes of environmental pollution?             2016, 2017

Ans: Pollution is the Introduction of contaminates into an environment that causes instability, disorder, harm or discomfort to the ecosystem.

Causes of environmental pollution

a) Emission from industries causes air and water pollution.

b) Increased use of pesticides causes soil pollution.

c) Burning of fossil fuels from transportation and electricity production.

d) Noise and light pollution caused by household sources, social events, commercial and industrial activities and transportation.

Q.7. What is Global warming? What has caused Global Warming?

Ans: Global warming is the observed and projected increase in the average temperature of earth’s atmosphere and oceans.

The Global warming is due to increase in the Green-house gas concentrations, like water vapour, carbon-dioxide, methane and ozone in the atmosphere.

Q.8. Give the meaning of air pollution. What has lead to the Air pollution in urban areas? Mention any 1 measure to control air pollution in vehicles.

Ans: Air pollution is the presence of materials in air such concentration, which are harmful to man and his environment.

Promotion of cleaner fuels, like use of CNG instead of petrol or diesel can control air pollution in vehicles.

Increasing number of motor vehicles and concentration of industries in urban areas and has lead to air pollution in urban areas.

Q.9. What are various reasons for environmental crisis?

Ans: Reason for Environmental Crisis:

  1. Population explosion and Industrial revolution has increased the demand for environmental resources.
  2. The intensive and extensive extraction of both renewable and non-renewable resources has exhausted some of the vital resources.
  3. Due to affluent consumption and production standard of developed world, the waste generated is beyond the absorptive capacity of the environment.
  4. The development process has polluted environment, water and atmosphere and there is decline in air and water quality.

Q.10. Mention various functions of environment.

Ans: Functions of Environment

  1. It provides resources for production.
  2. Environment assimilates wastes.
  3. It sustains life by providing essential elements like sun, soil, air, water etc.

Q.11. What is Sustainable development? Explain the strategies for sustainable development. 2015, 2017

Ans: It is the development, which will allow all future generations to have a potential average quality of life, which is at least as high, which is being enjoyed by the current generation.

The following strategies should be adhered to, for sustainable development:

  1. Use of Non-conventional source of Energy like wind and solar says are cleaner and greener technologies, which can be effectively used to replace thermal and hydropower.
  2. Use of CNG as fuel in public transport system has lowered air pollution and the air has become cleaner. The use of LPG and Gobar Gas is being promoted which reduces air pollution.
  3. Establishment of Mini-Hydel plants in mountain regions to generate electricity through mini Hydel plants.

Q.12. What is meant by Bio diversity?

Ans: Bio diversity is defined as the variability among living organisms from all sources, including terrestrial, marine and other aquatic ecosystem and the ecological complexes of which they are a part.

Q.13. What do you mean by ozone depletion? What has lead to depletion of ozone layer?

Ans: It refers to destruction of ozone in the ozone layer, due to presence of chlorine from manmade chlorofluorocarbons and other forces. The problem of ozone depletion is cost by high levels of chlorine and bromine compounds in the stratosphere.

Q.14. Why have some resources become extinct?

Ans: Some resources have become extinct because their extinction has been above the rate of regeneration.

Q.15. How has the supply – demand relationship lead to degradation of environment?

Ans: The demand for resources has gone beyond the rate of regeneration (supply). It has increased the pressure on the absorption capacity of the environment and such several of the supply – demand relationship has lead to degradation of the environment.

Q.16. State the 2 major environmental issues that the world is facing today?

Ans: (i) Depletion of natural resources (ii) Environmental degradation

Q.17. What is carrying capacity?

Ans: Carrying capacity means 2 things.

  1. Resources extraction should remain below the rate of resource generations.
  2. Generation of wastes should remain within the absorption capacity of the environment. If these two conditions are not fulfilled, then it leads to the situations of environmental crises.

Q.18. What is absorbtive capacity?

Ans: It means the ability of the environment to absorb degradation.


Part A: Introductory Macro Economics


Part B: Indian Economic Development

  1. Development Experience (1947 – 1990)
  2. Economic Reforms since 1991
  3. Current challenges facing Indian Economy
  4. Development Experience of India: A Comparison with Neighbours

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