Question 1.
\nReforms were introduced during_____________
\nAnswer:
\n1991<\/p>\n
Question 2.
\nRBI regulates the ____ sector
\nAnswer:
\nFinancial<\/p>\n
![\"1st](\"https:\/\/kseebsolutions.guru\/wp-content\/uploads\/2021\/06\/KSEEB-Solutions.png\")
<\/p>\n
Question 3.
\nWTO was founded in_________
\nAnswer:
\n1995<\/p>\n
Question 4.
\nTax on the incomes of individuals is called______
\nAnswer:
\nDirect tax<\/p>\n
II. Answer the following questions in a word\/sentence (each question carries 1 mark)<\/p>\n
Question 1.
\nWhat is liberalization?
\nAnswer:
\nLiberalization refers to the removal of restrictions and opening up various sectors of the economy by giving freedom to invest.<\/p>\n
Question 2.
\nGive the meaning of privatization.
\nAnswer:
\nPrivatization implies the shedding of the ownership or management of a government-owned enterprise. Here, government companies are converted into private companies.<\/p>\n
Question 3.
\nWhat is globalization?
\nAnswer:
\nGlobalization refers to the integration of the economy of the country with the world economy. It is an outcome of the set of various policies that are aimed at transforming the world towards greater interdependence and integration.<\/p>\n
Question 4.
\nExpand IBRD.
\nAnswer:
\nInternational Bank for Reconstruction and Development.<\/p>\n
<\/p>\n
Question 5.
\nExpand GATT.
\nAnswer:
\nGeneral Agreement on Trade and Tariff.<\/p>\n
Question 6.
\nGive the meaning of Direct Tax.
\nAnswer:
\nDirect tax is that tax where the incidence and impact of taxation falls on the same person. The ‘ burden of tax cannot be transferred. For example, income tax.<\/p>\n
Question 7.
\nWhat do you mean by outsourcing?
\nAnswer:
\nIt is a process where a company hires regular service from external sources, mostly from other countries, which was previously provided internally or from within the country.<\/p>\n
Question 8.
\nWho regulates the financial sector?
\nAnswer:
\nThe financial sector is regulated b the Reserve Bank of India,<\/p>\n
III. Answer the following question in four sentences (each question carries two marks)<\/span><\/p>\n Question 1. Question 2. Question 3. Question 4. Question 5. IV. Answer the following question in twelve sentences (each question carries 4 marks)<\/span><\/p>\n Question 1. The various development policies require huge finance. But there was a scarcity of funds. Even though the revenues were very low, the government had to overshoot its revenue to meet the challenges like unemployment, poverty, and population explosion. The continued spending on development programs of the government did not generate additional revenue. At the same time, the government could not generate funds internally. When the government was spending a large share of its income on areas that do not provide immediate returns, there was a need to use the rest of its revenue in a highly efficient manner. The income from public sector undertakings was also not very high to meet the growing expenditure.<\/p>\n Further, the foreign exchange, borrowed from other countries and international banks was spent on meeting consumption needs. No sincere efforts were made to reduce expenditure and to increase our exports.<\/p>\n During the late 1980\u2019s government expenditure exceeded its income. Prices of many essential goods increased. Imports grew to a very large extent. Foreign exchange reserves declined considerably and the same fall short to finance our imports for more than two weeks. There was a shortage of funds even to pay interest to international lenders and at the same time, no country or international bank was ready to lend any more to India.<\/p>\n In this situation, India approached the International Bank for Reconstruction and Development and International Monetary Fund and received seven billion dollars as a loan to manage the crisis. To avail loans, these international banks expected India to liberalize and open up its economy by removing restrictions on the private sector, reduce the role of government in many areas and remove trade restrictions between India and other countries.<\/p>\n India had to agree to these conditions of IBRD and IMF and announced the new economic policy which included liberalization, privatization, and globalization.<\/p>\n Question 2. The main objectives of WTO are as follows:<\/p>\n The various WTO agreements cover trade in goods and services to facilitate international trade i.e., both bilateral and multilateral, through the removal of tariff and non-tariff barriers and providing greater market access to all the member countries.<\/p>\n India, being a founder member, has been in the mainframe in framing fair global rules, regulations, and safeguards and advocating the interests of the developing world. India has kept its commitments towards liberalization of trade, made in the WTO, by removing quantitative restrictions on imports and reducing tariff rates.<\/p>\n But, some economists argue that the usefulness of WTO to India is not much when compared to developed countries. The major portions of benefits are enjoyed by the rich countries. They also say that while developed countries file complaints about agricultural subsidies given in their countries, developing countries feel cheated as they are forced to open up their markets for developed countries but are not allowed to access the markets of developed countries, which is totally unfair to Indian producers.<\/p>\n Question 3. To protect Indian industries, the government was following quantitative restrictions on imports which encouraged tight control over imports. At the same time tariffs were very high. These policies reduced efficiency and competitiveness which led to slower growth in the manufacturing sector.<\/p>\n The main objectives of trade and investment policy were:<\/p>\n Import licensing was abolished except in the case of hazardous and environmentally sensitive industries. Quantitative restrictions on imports of manufactured consumer goods and agricultural products were also fully removed.<\/p>\n Export duties have been removed to increase the competitive position of Indian goods in the international markets.<\/p>\n A process of disinvestment was also initiated by selling part of the equity shares of public sector enterprises to the public.<\/p>\n Question 4. The financial sector in India is regulated by the Reserve Bank of India. The RBI decides the amount of money that the banks can keep with themselves, fixes interest rates, nature of lending to various sectors, etc.<\/p>\n The major objective of financial sector reforms is to reduce the role of RBI from the regulator to facilitator of the financial sector. That means the financial sector may be allowed to take decisions on many matters independent of RBI.<\/p>\n The financial sector reform policies led to the establishment of private sector banks both Indian and foreign. The foreign investment limit in banks was raised to around 50%. The banks which fulfill certain conditions have been given the freedom to set up new branches without the approval of the RBI. Foreign institutional investors (FII) like merchant bankers, mutual funds, and pension funds are now allowed to invest in Indian financial markets.<\/p>\n Question 5. As a form of economic activity, outsourcing has intensified in recent years due to the fast mode of the communication network. Many services like voice-based business processes, record keeping, accountancy, banking services, music recording, film editing, book transcription, clinical advice, or even teaching are being outsourced by companies in developed countries to India. The modem telecommunication links like the internet, the text, voice, and visual data in respect of these services are digitized and transmitted throughout the world. Most of the multinational corporations and small companies are outsourcing their services to India where they can be availed at a cheaper cost. The low wage rates and availability of skilled labor in India have made it a favorite destination for global outsourcing.<\/p>\n V. Answer the following questions in twenty sentences. (each question carries four marks)<\/span><\/p>\n Question 1. The following are the important areas of liberalization: (b) Financial sector reforms: The financial sector consists of financial institutions like commercial banks, investment banks, stock exchange operations, and the foreign exchange market.<\/p>\n The financial sector in India is regulated by the Reserve Bank of India. The RBI decides the amount of money that the banks can keep with themselves, fixes interest rates, nature of lending to various sectors, etc.<\/p>\n The major objective of financial sector reforms is to reduce the role of RBI from the regulator to facilitator of the financial sector. That means the financial sector may be allowed to take decisions on many matters independent of RBI.<\/p>\n The financial sector reform policies led to the establishment of private sector banks both Indian and foreign. The foreign investment limit in banks was raised to around 50%. The banks which fulfill certain conditions have been given the freedom to set up new branches without the approval of the RBI. Foreign institutional investors (FII) like merchant bankers, mutual funds, and pension funds are now allowed to invest in Indian financial markets.<\/p>\n (c) Tax reforms: These are the reforms that are concerned with the government\u2019s taxation and public expenditure policies which are collectively known as its fiscal policy. There are two types of taxes, direct and indirect.<\/p>\n Since 1991, there has been a continuous reduction in the taxes on individual incomes as it was felt that high rates of income tax were an important reason for tax evasion. It is now widely accepted that moderate rates of income tax encourage savings and voluntary disclosure of income.<\/p>\n The rate of corporation tax (tax on income of companies) which was very high earlier has been gradually reduced. A new tax called Goods and Services Tax (GST) has been introduced from 1.7.2017 to bring uniformity in indirect taxes.<\/p>\n In order to encourage better compliance on the part of taxpayers, many procedures have been simplified and the rates also substantially lowered.<\/p>\n (d) Foreign exchange reforms: During 1991, the Government took an immediate measure to resolve the balance of payments crisis, the rupee was devalued against foreign currencies. This led to an increase in the inflow of foreign exchange. It also set the tone to free the determination of rupee value in the foreign exchange market from government control. At present, the market forces i.e., demand and supply, determine the exchange rates.<\/p>\n (e) Trade and investment policy reforms: A new trade and investment policy under liberalization strategy were made to increase the international competitiveness of industrial production and foreign investments and technology into the economy. The aim was also to promote the efficiency of the local industries and the adoption of modem technologies.<\/p>\n To protect Indian industries, the government was following quantitative restrictions on imports which encouraged tight control over imports. At the same time, tariffs were very high. These policies reduced efficiency and competitiveness which led to slower growth of the manufacturing sector.<\/p>\n The main objectives of the Trade and Investment Policy were:<\/p>\n Import licensing was abolished except in the case of hazardous and environmentally sensitive industries. Quantitative restrictions on imports of manufactured consumer goods and agricultural products were also fully removed.<\/p>\n Export duties have been removed to increase the competitive position of Indian goods in the international markets. Question 2. The public sector investment in the agricultural sector, particularly in infrastructural development like irrigation, power, roads, market linkages, and research and extension has fallen during the reform period.<\/p>\n The removal of fertilizer subsidies has led to an increase in the cost of production, which has severely affected the small and marginal farmers.<\/p>\n This sector has been experiencing a number of policy changes such as reduction in import duties on agricultural products, removal of minimum support price, and lifting of quantitative restrictions on agricultural products.<\/p>\n These have adversely affected Indian farmers as they now have to face increased international competition. VI. Project-oriented question (5 Marks)<\/span><\/p>\n Question 1.
\nGive the meaning of industrial licensing.
\nAnswer:
\nIndustrial licensing is a system in which every entrepreneur had to get permission from Government officials to start a firm, close a firm, or decide the number of goods that could be produced.<\/p>\n<\/p>\n
\nMention four objectives of trade policy.
\nAnswer:
\nThe four objectives of trade policy are as follows:<\/p>\n\n
\nWhat is fiscal policy?
\nAnswer:
\nFiscal policy is the policy of the government in respect of taxation and public expenditure. Tax reforms are concerned with the reforms in government\u2019s taxation which we term generally public revenue which also includes non-tax revenue, the fiscal policy includes public revenue and public expenditure. The tax revenue consists of direct tax and indirect tax.<\/p>\n
\nWhat are the services of outsourcing?
\nAnswer:
\nThe major services of outsourcing are legal advice, computer service, advertisement, medical services, online teaching.<\/p>\n
\nWhat do you mean by disinvestment? (N-2018\u2019
\nAnswer:
\nDisinvestment refers to the sale of part of the equity shares of public sector enterprises to the general public. In other words, privatization of the public sector enterprises by selling off part of the equity of public sector undertakings to the public, in general, is called disinvestment. The main purpose of disinvestment is to improve the financial condition and facilitate modernization.<\/p>\n<\/p>\n
\nBriefly explain the background of economic reforms in India.
\nAnswer:
\nThere was a financial crisis that persisted since 1980. We know that to introduce various policies, the government has to generate funds from various sources like taxation, running public sector enterprises, etc. When the expenditure is more than the income, the government takes loans to balance the deficit from banks and also from people within the country and from international banks,<\/p>\n<\/p>\n
\nWrite a note on WTO.
\nAnswer:
\nThe World Trade Organisation was founded in 1995 as the successor organization to the General Agreement on Trade and Tariff which was established in 1948.<\/p>\n\n
<\/p>\n
\nWrite a note on Trade and Investment Policy reforms.
\nAnswer:
\nA new trade and investment policy under liberalization strategy was made to increase the international competitiveness of industrial production and foreign investments and technology into the economy. The aim was also to promote the efficiency of the local industries and the adoption of modem technologies.<\/p>\n\n
\nBriefly explain the financial sector reforms.
\nAnswer:
\nThe financial sector consists of financial institutions like commercial banks, investment banks, stock exchange operations, and foreign exchange markets.<\/p>\n
\nWrite a short note on outsourcing. (S-2018)
\nAnswer:
\nOutsourcing is a process in which a company hires regular service from external sources, usually from other countries, which was previously provided internally. It includes legal advice, computer service, advertisement, security, etc.<\/p>\n<\/p>\n
\nBriefly explain the important areas of liberalization. (S-2018)(Board Paper)
\nAnswer:
\nLiberalization was one of the reforms of the New Economic Policy of 1991. It was introduced to put an end to the restrictions and open up various sectors of the economy.<\/p>\n
\n(a) Deregulation of the industrial sector: The liberalization policy removed many restrictions enforced on the industrial sector. Industrial licensing was abolished for almost all but product categories like alcohol, cigarettes, hazardous chemicals, industrial explosives, electronics, aerospace and drugs, and pharmaceuticals. The only industries which are not reserved for the public sector are defense equipment, atomic energy generation, and railway transport. Many goods produced by the small-scale industries have now been deserved.<\/p>\n<\/p>\n<\/p>\n\n
\nA process of disinvestment was also initiated by selling part of equity shares of public sector enterprises to the public.<\/p>\n<\/p>\n
\nBriefly explain the effects of reforms on the agricultural sector. (N-2018) (Board Paper)
\nAnswer:
\nThe economic reforms of 1991 have not been able to benefit agriculture, where the growth rate is not up to the expected level.<\/p>\n
\nFurther, due to export-oriented policy strategies in agriculture, there has been a shift from production for the domestic market towards production for the export market focusing on cash crops in steel of production of food grains. This has resulted in an increase in the prices of food grains.<\/p>\n
\nGive appropriate examples for the following.<\/p>\n