CBSE Class 12

Here we are providing Class 12 Political Science Important Extra Questions and Answers Chapter 5 Challenges to and Restoration of Congress System. Political Science Class 12 Important Questions are the best resource for students which helps in class 12 board exams.

Class 12 Political Science Chapter 5 Important Extra Questions Challenges to and Restoration of Congress System

Challenges to and Restoration of Congress System Important Extra Questions Very Short Answer Type

Question 1.
What do you know about Lai Bahadur Shastri?
Answer:
Lai Bahadur Shastri was the country’s Prime Minister from 1964 to 1966. He participated in the freedom movement since 1930. He gave the famous slogan: ‘Jai Jawan, Jai Kisan’. After signing the Tashkent Agreement, Prime Minister Lai Bahadur Shastri suddenly expired in Tashkent on 10 January 1966.

Question 2.
How fourth general election jolted Congress? Imp.
Answer:
The results of the fourth general election (1967) jolted Congress at both the national and state levels. Though the Congress secured a majority of seats in the Lok Sabha, but with its lowest tally of seats since 1952. Congress lost the majority in seven states. In two other states, defections prevented it from forming the government.

Question 3.
Explain briefly the term ‘defection’.
Answer:
Defection means leaving one’s party or leader, under whose symbol or leadership one has found a berth in the legislature, not on grounds of principles or due to split in the party but in the quest for individual power or personal disillusionment or disgust.

Question 4.
Match the following meaningfully from the names in Column ‘A’ with the information in Column ‘B’. (C.B.S.E. 2017)

Answer:

Question 5.
Match the following: (C.B.S.E. Sample Paper 2018)

Answer:

Question 6.
Match the following leaders in List – A with the suitable statements in List – B: (C.B.S.E. 2017)

Answer:

Question 7.
Assess the role played by ‘defections’ on Indian politics. (C.B.S.E. 2019)
Answer:

1. Due to defections, the political system becomes unstable.
2. Due to defections, corruption increases in the political system.

Challenges to and Restoration of Congress System Important Extra Questions Very Short Answer Type (2 Marks)

Question 1.
In which year was the Fifth General Elections to Lok Sabha held? Imp. (C.B.S.E. 2014)
Answer:
The Fifth General Elections to Lok Sabha was held in 1971.

Question 2.
Who represented Congress (O) and Congress (R) after the split of the Congress Party? (C.B.S.E. 2014)
Answer:
Congress (O) was represented by the Syndicate under Morarji Desai and Congress (R) was represented by Requisition under Indira Gandhi.

Question 3.
What is meant by the term ‘Congress Syndicate’? Imp. (C.B.S.E. 2014)
Answer:
In the Indian National Congress, there was a group of senior leaders which was known as the ‘Syndicate.’ Due to differences between the Syndicate and Mrs. Indira Gandhi, there was a split in the Congress party in 1969.

Question 4.
Which major factor was responsible for the dramatic victory of Indira Gandhi in the 1971 elections? Imp. (C.B.S.E. 2015)
Answer:
The slogan of Garibi Hatao and the programs that followed it became a prime political strategy of building an independent nation-wide political support base. Thus, it became a major factor responsible for the dramatic victory of Indira Gandhi in the 1971 elections.

Question 5.
After the death of Lai Bahadur Shastri on 10th January 1966, how did Smt? Does Indira Gandhi becomes the next Prime Minister? (C.B.S.E. 2010)
Or
After the death of Lai Bahadur Shastri, which two leaders of the Congress party contested against one another to become the leader of the party. (C.B.S.E. 2013)
Answer:
There was a contest for Prime Ministership between Sint. Indira Gandhi and Morarji Desai and Smt. Indira Gandhi defeated Morarji Desai, by securing the support of more than two-thirds of the Congress MPs.

Question 6.
After which General Election in India did the Congress party lose its dominance for the first time at the center? (C.B.S.E. 2013)
Answer:
After the General Election of 1977, the Congress party lost its dominance for the first time at the center.

Question 7.
What is meant by ‘Congress I Syndicate’? (CB.S.E. 2013)
Answer:
In the Indian National Congress, there was a group of senior leaders which was known as the ‘Syndicate’.

Question 8.
Name the two main contenders who contested the election for the post of President of India in 1969. Imp. (C.B.S.E. 2013)
Answer:
Dr. Neelam Sanjiva Reddy and Sh. V.V. Giri.

Question 9.
Who was the official Congress candidate for the post of the President of India in 1969? Imp. (C.B.S.E. 2014)
Answer:
Mr. Neelam Sanjiva Reddy was the official Congress candidate for the post of the President of India in 1969.

Question 10.
Which two political parties were the major partners in the ruling alliance after the 1971 General Elections to the Lok Sabha? (C.B.S.E 2014)
Answer:
Congress (R) and the Communist Party of India were the two political parties who were the major partners in the ruling alliance after the 1971 General Elections to the Lok Sabha.

Question 11.
“The Practice of defection in Indian Politics is many a time expressed as the policy of-Aaya, Ram Gaya Ram!” Justify the statement. (C.B.S.E. 2019)
Answer:
It is very much true that the practice of defection in Indian politics is many times expressed as the policy of “Aaya Ram Gaya Ram” because greedy politicians and representative change their parties only for the greed of money or ranks only.

Choose the correct answer :

Question 12.
Prime Minister Pt. Jawaharlal Nehru passed away in :
(a) January 1964
(b) May 1965
(c) March 1964
(d) May 1964.
Answer:
(d) May 1964.

Question 13.
When Pt. Jawaharlal Nehru passed away, at that time Congress President was?
(a) K. Kamraj
(b) Lai Bahadur Shastri
(c) S.K. Patil
(d) Morarji Desai.
Answer:
(a) K. Kamraj.

Question 14.
Who was the founder of the Congress Socialist Party?
(a) C. Natarajan Amadurai
(b) K. Kamraj
(c) Ram Manohar Lohia
(d) S. Nijalingappa.
Answer:
(c) Ram Manohar Lohia.

Question 15.
Name the person with whom would you associate the following slogans. (Sample Paper 2019-20)
(a) Aya Ram and Gaya Ram.
(b) Total Revolution.
Answer:
(a) Gaya Lai
(b) Sh. Jai Prakash Narayan.

Challenges to and Restoration of Congress System Important Extra Questions Short Answer Type

Question 1.
Why was the general election of 1967 called a political earthquake for congress? Examine any four reasons. (C.B.S.E. 2019)
Answer:
Due to the following reasons, the general election of 1967 called the political earthquake for congress.

1. In the fourth general elections, the Congress party was defeated in many states due to the absence of a charismatic leader. Congress lost the majority in seven states.
2. Groupism and factionalism within the Congress party were mainly responsible for its defeat.
3. With the election of 1967, the phenomenon of coalition government began. In many states, United Fronts were formed.
4. After the 4th general election, the importance of ‘Syndicate’ increased within the Congress party. The syndicate was a group of leaders who controlled the Congress party.

Question 2.
Assess the economic situation of India before the general election of 1967. (C.B.S.E. 2019)
Answer:

1. Before the general election of 1967 the economic situation of India was very poor due to
   successive failure of monsoons and widespread drought.
2. There was a decline in agricultural production causing a serious food shortage.
3. It caused a drop in industrial production and exports. At the same time, there was a sharp rise in military expenditure. All this resulted in the depletion of foreign exchange.
4. Government was forced to devaluate the Indian rupee under the pressure from the U.S.

Question 3.
Explain any two reasons for the popularity of Indira Gandhi during the 1971 election. (C.B.S.E. 2014)
Answer:
The following are the reasons for the popularity of Indira Gandhi during the 1971 elections.
1. Charismatic personality. Mrs. Indira Gandhi became very popular due to her charismatic personality. Like Pt. Jawaharlal Nehru, Mrs. India Gandhi possessed an unparalleled personality. According to Frank Morris, “Mrs. Gandhi’s was not only the undisputed leader of the Congress party, but it was her party and she could dominate it in a way which none else had done. She was free to choose her colleagues who were her assistants and in her presence trembled and obeyed.” In the elections to the fourth Lok Sabha held in 1971, people voted for the Congress on account of the fact that it was being led by Mrs. Indira Gandhi.

2. Socialistic policies of Indira Gandhi’s government. The Socialist policies of Indira Gandhi’s government made her very popular among the masses. Mrs. Indira Gandhi launched a series of initiatives to give the government policy a let orientation. Some of them include nationalization of insurance, coal mines, oil industry; reserved many labour-intensive products for small-scale industries; kept checks on imports and exports as well as the belonging of urban land. Public distribution of food, land reforms, and provision of the house to the rural poor.

Question 4.
Analyze the consequences of the defeat of the official Congress candidate in the presidential election of 1969. (C.B.S.E. 2019)
Answer:
The grand Alliance political manifested itself openly at the time of the election of the President in 1969. In the Congress Parliamentary Board, Mrs. Indira Gandhi proposed to name Jagjiwan Ram for presidentship which was opposed by the Syndicate group. Instead, Mr. Morarji Desai proposed the name of Sanjiva Reddy who was selected. She disapproved of the choice and left the meeting in anger saying “You will have to bear the consequence of this.” In opposition to the official candidate of the Congress, V.V. Giri Independent candidate was elected President of India due to Mrs. Indira Gandhi. This led to the split in the Congress party.

Question 5.
What is meant by ‘Privy Purse’? Evaluate the role played by Indira Gandhi in the abolition of the Privy Purse. (C.B.S.E. 2019)
Or
What is meant by Privy Purses? Why did Mrs. Indira Gandhi insist on abolishing them in 1970? (Imp.) (C.B.S.E. 2009)
Answer:
When India got independence on 15 August 1947, there were about 565 princely states. Most of the Indian states were integrated with India and rulers of these princely states were given privy purse for their expenditure. Prime Minister Mrs. Indira Gandhi wanted to abolish the privy purse of former rulers of these princely states. The President of India issued the ordinance to abolish the Privy Purses in 1970 but the Supreme Court struck down the order of the President derecognizing the rulers en masse.

Chief Justice Hidayatullah observed that the President of India could not act as a Grand Moghul in doing away with the institution of rulership en masse. Hence, Constitutional Amendment Bill seeking to abolish Privy Purses for former rulers was introduced in the Parliament in September 1970. The Amendment Bill was passed by the Lok Sabha by a two-third majority. However, the Bill was not passed by the Rajya Sabha. Lok Sabha was dissolved and the election to the Lok Sabha was held in March 1971. Congress (R) emerged as the largest party having the majority of 352 in the House of 520. The Constitution was amended to remove legal obstacles for the abolition of privy purse.

Question 6.
The phrase ‘Aaya Ram, Gaya Ram’ signifies which concept? Explain its impact on the Indian political system. Imp. (C.B.S.E. 2009)
Answer:
The phrase ‘Aaya Ram, Gaya Ram’ signifies the concept of defection. Defection has greatly affected the Indian Political System. Prime Minister Morarji Desai had to resign in July 1979 as many members left the Janata Party. In January 1980, Haryana Chief Minister Bhajan Lai joined Congress (I) by leaving the Janata Party along with 35 members. The Himachal Pradesh Chief Minister Shanta Kumar had to resign in February 1980 because of heavy defection. Defections took place abundantly before and after the Lok Sabha elections in 1980 and it was all in favor of the Congress.

Question 7.
What does ‘defection’ stand for in Indian politics? Highlight any two demerits of this practice. (C.B.S.E. 2014)
Answer:
Meaning of Defection: Defection meant that an elected representative leaves the party or whose symbol he/she was elected and joins another party.

Demerits of Defection :

1. Political system becomes unstable due to defections.
2. Corruption increases due to defections.

Question 8.
How did the factional rivalry between the syndicate and Indira Gandhi result in the split of Congress in 1969? (C.B.S.E. Sample Q.P. 2017)
Answer:
The rout of the Congress in the 1967 general election in which congress emerged in low morale catalysed the process of open confession of factionalism. The Syndicate member began to ally themselves with Swatantra, Jan Sangh, and S.S.P. which later on emerged as Grand Alliance. The grand Alliance political manifested itself openly at the time of the election of the President in 1969. In the Congress Parliamentary Board, Mrs. Indira Gandhi proposed to name Jagjiwan Rani for presidentship which was opposed by the Syndicate group.

Instead, Mr. Morarji Desai proposed the name of Sanjiva Reddy who was selected. She disapproved of the choice and left the meeting in anger saying ‘You will have to bear the consequence of this.” In opposition to the official candidate of the Congress, VN. Girl Independent candidate was elected President of India due to Mrs. Indira Gandhi. This led to the split in the Congress party.

Challenges to and Restoration of Congress System Important Extra Questions Long Answer Type

Question 1.
What was factors till led to the popularity of Indira Gandhi’s government in the early 1970s? (C.B.S.E. Sample Paper 2018)
Or
Analyze any three-factor which enhanced the popularity of Indira Gandhi in the early 1970s. (C.B.S.E. 2014)
Or
Analyze any three major factors which led to the popularity of Indira Gandhi’s government in the early 1970s. ‘ Imp. (C.B.S.E. 2015)
Answer:
After the death of Prime Minister Lai Bahadur Shastri, Smt. Indira Gandhi became the Prime Minister of India in 1966. In the beginning Smt. Indira Gandhi was not a very strong and popular Prime Minister. But with the passage of time, she became very popular. The following factors were responsible for the popularity of Indira Gandhi’s Government in the early 1970s :

1. Charismatic Personality. Smt. Indira Gandhi became very popular due to her charismatic personality. Like Jawaharlal Nehru, Smt. Indira Gandhi possessed an unparalleled personality. According to Frank Morris, “Mrs. Gandhi’s was not only the undisputed leader of the Congress party, but it was her party and she could dominate it in a way which none else had done. She was free to choose her colleagues who were her agents or assistants and in her presence tremble and obey.” In the elections to the Fourth Lok Sabha, held in 1971, people voted for the Congress on account of the fact that it was being led by Mrs. Indira Gandhi.

2. Socialistic Policies of Indira Gandhi’s Government. The Socialist policies of Indira Gandhi’s Government made her very popular among the masses. Mrs. Indira Gandhi launched a series of initiatives to give the Government policy a left orientation. Smt. Indira Gandhi pursued a vigorous policy in 1969 of land reform and placed a ceiling on personal income, private property, and corporate profits.

In 1969, she ordered the nationalization of India’s fourteen largest banks. It was in fact a very bold step that made her very popular among the people. Mrs. Indira Gandhi supported the demand that the Government should abolish privy purses. But Morarji Desai called this move morally wrong and amounting to a breach of faith with the princes. However, ultimately privy purses were abolished.

3. Garibi Hatao. The fifth general elections to the Lok Sabha were held in February 1971. Mrs. Indira Gandhi gave a very popular slogan ‘Garibi Hatao’. By this slogan, she got the support of backward classes, Adivasis, unemployed youths, minorities, women, and Scheduled castes, and Scheduled tribes.

4. Strong Hold of Party. Smt. Indira Gandhi had a stronghold on her party.

5. Polarisation of Votes in 1971. The polarization of votes in the 1971s fifth general election went in the favour of Smt. Indira Gandhi.

6. Weak Opposition. Another reason for the popularity of Indira Gandhi was that the opposition was weak.

Question 2.
Analyze the circumstances that favored Indira Gandhi to become Prime Minister after the death of Lai Bahadur Shastri. Mention any four achievements of Indira Gandhi that made her popular as a prime minister. (C.B.S.E. 2016)
Answer:
After the sudden death of Mr. Lai Bahadur Shastri, Mrs. Indira Gandhi was elected the leader of the Congress Parliamentary Party and Mr. Morarji Desai was defeated. Mrs. Indira Gandhi became the leader of the Congress Party because she was wholeheartedly supported by the syndicate. The Syndicate had played an important role in the formation of Mrs. Gandhi’s first Council of Ministers. The leader of the Syndicate expected Mrs. Indira Gandhi to follow their advice. But Mrs. Indira Gandhi gradually started asserting her position within the Government and the party.

Following are the achievement of Indira Gandhi that made her popular as a prime minister.

After the death of Prime Minister Lai Bahadur Shastri, Smt. Indira Gandhi became the Prime Minister of India in 1966. In the beginning Smt. Indira Gandhi was not a very strong and popular Prime Minister. But with the passage of time, she became very popular.

The following factors were responsible for the popularity of Indira Gandhi’s Government in the early 1970s :
1. Charismatic Personality. Smt. Indira Gandhi became very popular due to her charismatic personality. Like Jawaharlal Nehru, Smt. Indira Gandhi possessed an unparalleled personality. According to Frank Morris, “Mrs. Gandhi’s was not only the undisputed leader of the Congress party, but it was her party and she could dominate it in a way which none else had done. She was free to choose her colleagues who were her agents or assistants and in her presence tremble and obey.” In the elections to the Fourth Lok Sabha, held in 1971, people voted for the Congress on account of the fact that it was being led by Mrs. Indira Gandhi.

2. Socialistic Policies of Indira Gandhi’s Government. The Socialist policies of Indira Gandhi’s Government made her very popular among the masses. Mrs. Indira Gandhi launched a series of initiatives to give the Government policy a left orientation. Smt. Indira Gandhi pursued a vigorous policy in 1969 of land reform and placed a ceiling on personal income, private property, and corporate profits. In 1969, she ordered the nationalization of India’s fourteen largest banks. It was in fact a very bold step that made her very popular among the people. Mrs. Indira Gandhi supported the demand that the Government should abolish privy purses. But Morarji Desai called this move morally wrong and amounting to a breach of faith with the princes. However, ultimately privy purses were abolished.

3. Garibi Hatao. The fifth general elections to the Lok Sabha were held in February 1971. Mrs. Indira Gandhi gave a very popular slogan ‘Garibi Hatao’. By this slogan, she got the support of backward classes, Adivasis, unemployed youths, minorities, women, and Scheduled castes, and Scheduled tribes.

4. Strong Hold of Party. Smt. Indira Gandhi had a stronghold on her party.

5. Polarisation of Votes in 1971. The polarization of votes in the 1971s fifth general election went in the favour of Smt. Indira Gandhi.

6. Weak Opposition. Another reason for the popularity of Indira Gandhi was that the opposition was weak.

Question 3.
Examine the major changes that the Country witnessed at the time of the fourth general election in 1967. Imp. (C.B.S.E. 2016)
Answer:
The Fourth General Elections were held in 1967. The Fourth General Election was very important because it changed the dynamics of Indian politics in many ways :

1. In the fourth general elections, the Congress party was defeated in many states due to the absence of a charismatic leader. Congress lost the majority in seven states.
2. Groupism and factionalism within the Congress party were mainly responsible for its defeat.
3. With the election of 1967, the phenomenon of coalition government began. In many states, United Fronts were formed.
4. Fourth general election encouraged defections. After the fourth election, large-scale defection took place. In Haryana, the story of Aaya Ram, Gaya Ram’ began.
5. 5. After the 4th general election, the importance of ‘Syndicate’ increased within the Congress party. The syndicate was a group of leaders who controlled the Congress party.

Question 4.
Read carefully the passage given below and answer the following questions: Imp. (C.B.S.E. 2015)

The New Congress had something that its big opponents lacked – it had an issue, an agenda, and a positive slogan. The Grand Alliance did not have a coherent political program. Indira Gandhi said that the opposition alliance had only one common program ‘Indira Hatao’. In contrast to this, she put forward a positive program captured in the famous slogan ‘Garibi Hatao’.
(i) Which Congress is being referred to as ‘the New Congress’?
Answer:
Congress (Requisitionists) is being referred to as ‘the New Congress’.

(ii) Highlight any two steps taken by Indira Gandhi to remove poverty.
Answer:
In order to remove poverty Indira Gandhi took the following steps :
(a) She laid stress on the growth of the public sector, the imposed a ceiling on rural landholdings and urban property, tried to remove income and opportunity disparities and the privileges of Princely States were abolished.
(b) The positive program ‘Garibi Hatao’ of Indira Gandhi provided support to the disadvantaged, particularly the landless laborers, Dalits, Adivasis, minorities, women, and the unemployed youth.

(iii) How far is it justified to call the ‘opposition alliance’ the ‘Grand Alliance’?
Answer:
It is justified to call the ‘opposition alliance’ as the grand alliance because all the major non-Communist, non-Congress opposition parties (SSP, PSP, Jan Sangh, Swatantra Party, and the Bharatiya Kranti Dal) formed an electoral alliance known as Grand Alliance. The sole purpose of this alliance was to end the era of Congress headed by Indira Gandhi in the fifth General Elections.

Question 5.
Assess any three challenges that the Congress Party had to face during the period from 1964 to 1971. (C.B.S.E. 2014)
Answer:
1. Problem of a Successor. The first challenge that Congress Party had to face was the loss of Pt. Jawaharlal Nehru. It was a huge blow to the Congress Party. After the death of Pt. Jawaharlal Nehru, Mr. Lai Bahadur Shastri became the Prime Minister.

After the death of Prime Minister Mr. Lai Bahadur Shastri, Mrs. Indira Gandhi became the Prime Minister of India. But there was a contest for prime ministership between Mrs. Indira Gandhi and Mr. Morarji Desai. The contest was resolved through a secret ballot among the congress MPs. Mrs. Indira Gandhi defeated Mr. Morarji Desai by securing the support of more than two-thirds of the Congress MPs.

2. The results of the Fourth General Elections (1967) jolted The Congress at both the national and state levels. Though the Congress secured a majority of seats in the Lok Sabha, it was its lowest tally of seats since 1952. In seven states, the Congress lost its majority, while in two other states, defections prevented it from forming the government.

3. Split in the Party. The rout of the Congress in 1967 General Elections in which Congress emerged in low morale catalyzed the process of open confession of factionalism. The Syndicate members began to ally themselves with Swatantra, Jan Sangh, and S.S.P. which later on emerged as the Grand Alliance. The Grand Alliance manifested itself openly at the time of presidential elections in 1969.

In The Congress Parliamentary Board, Mrs. Indira Gandhi proposed the name of Mr. Jagjivan Ram for presidentship which was opposed by the Syndicate group. Instead, Mr. Morarji Desai proposed the name of Mr. Neelam Sanjiva Reddy. She disapproved of the choice and left the meeting in anger saying, “You will have to bear the consequence of this.’ In opposition to the official candidate of the Congress, V.V. Giri, an independent candidate was elected as the President of India with Mrs. Indira Gandhi’s support. This led to a split in the Congress Party.

Question 6.
Read the given passage and answer the following questions. (C.B.S.E. Sample Paper 2018)

The Naxalite movement has used force to snatch land from the rich landowners and give it to the poor and the landless. Its supporters advocated the use of violent means to achieve their political goals. In spite of the use of preventive detention and other strong measures adopted by the West Bengal government run by the Congress Party, the

The naxalite movement did not come to an end. In later years, it spread to many other parts of the country. The Naxalite Movement has by now splintered into various parties and organizations. Some of these parties like the CPI-ML (Liberation) participate in open democratic politics. Nine states are affected by Naxalite violence. Most of these are very backward areas inhabited by Adivasis.
(a) Why was the Naxalite movement considered a threat to democracy?
Answer:
The naxalite movement supports the use of violent meAnswer: This lead to anarchy in the country. They challenge the Authority of the constitution.

(b) How the Naxalite movement came into existence?
Answer:
For this, see Q.No. 3, Chapter 15 (L.A.T.Q)

(c) Why the role of the Indian government has been criticized by various Human Rights Activist in dealing with Naxalites?
Answer:
Human Rights feels that the government violating constitutional values in dealing with Naxal Problem.

Question 7.
Read the given passage and answer the following questions :(C.B.S.E. Sample Paper 2018)

The year 1967 is considered a landmark year in India’s political and electoral history. The Congress party remained a dominant force throughout the country from 1952 onwards. This trend was to undergo significant changes with the 1967 elections… It was in the context of heightened popular discontent and the polarization of popular forces that the fourth general elections of the Lok Sabha and State assemblies were held in February 1967. The results jolted Congress at both the national and state levels. Many contemporary political observers described the elections as a political earthquake.
(a) Analyze the socio-economic and political context of the fourth general elections in India.
Answer:
In 1967, the economic condition of the country was not good due to the failure of monsoon, drought, food shortage, and shortage of foreign exchange. People started the protest against the government. Opposition parties also involve in their protest.

(b) Why the 1967 general elections were described as a ‘political earthquake’ by many political observers?
Answer:
The results of the fourth general election (1967) jolted Congress at both the national and state levels. Though the Congress secured a majority of seats in the Lok Sabha, but with its lowest tally of seats since 1952. Congress lost the majority in seven states. In two other states, defections prevented it from forming the government.

Question 8.
Analyze the issue Indira vs the Syndicate: What type of challenges did the issue pose before Indira Gandhi? (C.B.S.E. 2017)
Answer:
In the Indian National Congress, there was a group of leaders which was known as the ‘Syndicate’. This Syndicate controlled the organization of the Congress party. This group was led by K. Kamraj, former Chief Minister of Tamil Nadu and then the President of the Congress party. The syndicate included powerful state leaders like N. Sanjeeva Reddy of Andhra Pradesh, S.K. Patil of Bombay, Atulya Ghose of West Bengal, and S. Nigalingappa of Mysore. After the sudden death of Mr. Lai Bahadur Shastri, Mrs. Indira Gandhi was elected the leader of the Congress parliamentary party and Mr. Moraji Desai was defeated.

Mrs. Indira Gandhi became the leader of the Congress party because she was wholeheartedly supported by the syndicate. The Syndicate had played an important role in the formation of Mrs. Gandhi’s first Council of Ministers. The leader of the Syndicate expected Mrs. Indira Gandhi to follow their advice. But Mrs. Indira Gandhi gradually started asserting her position within the Government and the party. Ultimately, she sidelined the syndicate. The Syndicate members began to ally themselves with Swantantra, Jan Sangh, and S.S.P. which later on emerged as the Grand Alliance.

In Congress Parliamentary Board, Mrs. Indira Gandhi proposed the name of Chaudhary Jagjiwan Ram for the post of President which was opposed by the Syndicate group. Instead, Mr. Morarji Desai proposed the name of Sanjeeva Reddy as the official Congress candidate. In opposition to the official candidate of the Congress, Mr. V.V. Giri, an independent candidate was elected as the President of India because of the support of Mrs. Indira Gandhi. This led to the split in the Congress Party.

Question 9.
Describe any four steps taken by Indira Gandhi to implement the Garibi Hatao program. (C.B.S.E. 2018)
Answer:
The fifth general elections to the Lok Sabha were held in February 1971. Mrs. Indira Gandhi gave a very popular slogan ‘Garibi Hatao’. By this slogan, she got the support of backward classes Adivasis, unemployed youth, minorities, women and Scheduled castes and Scheduled tribes.
Following are the four steps taken by Indira Gandhi to implement the ‘Garibi Hatao Programme’.

1. Indira Gandhi focused on the growth of the public sector.
2. She imposed a ceiling on the rural landholding and urban property.
3. She stressed on the removal of dissipates in income and opportunity.
4. she abolish privy purse or Princely privileges.

Challenges to and Restoration of Congress System Important Extra Questions HOTS

Question 1.
What does ‘Aaya Ram-Gaya Ram’ stand for in Indian politics?
Answer:
After the fourth general election, the term ‘Aaya Ram, Gaya Ram’ originated in an amazing feat of floor-crossing achieved by Gaya Lai, an M.L.A. in Haryana. In 1967, he changed his party thrice in a fortnight. He left Congress and joined United Front and left United Front to join Congress and so on. Congress leader, Rao Birendra Singh brought him to Chandigarh press and declared ‘Gaya Ram was now Aaya Ram’.

Question 2.
What were the factors which led to the popularity of Indira Gandhi’s Government in the early 1970s?
Answer:
Following factors were responsible for the popularity of Indira Gandhi’s Government in the early 1970s :

1. Slogan of Garibi Hatao.
2. India defeated Pakistan in the 1971 war.
3. Emergence of Bangladesh as an Independent State.

Question 3.
What is meant by ‘Grand Alliance’?
Answer:
The fifth general elections to Lok Sabha were held in February 1971. With a purpose to defeat Mrs. Indira Gandhi, all the major non-Communist, non¬Congress opposition parties (SSP, PSP, Jan Sangh, Swatantra Party, and the Bharatiya Kranti Dal) formed an electoral alliance known as the Grand Alliance. The Grand Alliance did not have a coherent political program and was badly defeated in the elections.

Question 4.
What is meant by the term ‘Congress Syndicate’?
Answer:
In the Indian National Congress, there was a group of senior leaders which was known as the ‘Syndicate.’ Due to differences between the Syndicate and Mrs. Indira Gandhi, there was a split in the Congress party in 1969.

Question 5.
Why did the senior Congress leaders because they expected Mrs. Indira Gandhi to follow support Mrs. Indira Gandhi as Prime Minister their advice, of India in 1966?
Answer:
Senior Congress leaders supported Smt. Indira Gandhi as Prime Minister of India in 1966.

Here we are providing Class 12 Political Science Important Extra Questions and Answers Chapter 4 India’s External Relations. Political Science Class 12 Important Questions are the best resource for students which helps in class 12 board exams.

Class 12 Political Science Chapter 4 Important Extra Questions India’s External Relations

India’s External Relations Important Extra Questions Very Short Answer Type

Question 1.
Explain the two most important basic principles of India’s foreign policy. (Sample Paper, C.B.S.E. 1991, 1992, 2009)
Answer:

1. The most important basic principle of India’s foreign policy is Non-alignment.
2. The basic principle of India’s foreign policy is safeguarding national interests.

Question 2.
Explain the importance of ‘Peaceful Co-existence’ in the context of India’s foreign policy.
Answer:
In the present day world, the principle of Peaceful Co-existence is quite popular. India’s foreign policy is based on this principle. All countries in the world have a right to adopt their internal and external policies independently and all have a right of existence in accordance with their ideals. World peace can be maintained only by following the principle of Peaceful Co-existence. This principle is against the interference of one nation in the affairs of other nation.

Question 3.
Mention two conditions of the Shimla Agreement.
Answer:
Two important conditions of the Shimla Agreement were as given below:

1. Both the countries had resolved to solve their conflicts and confrontations through bilateral peaceful talks.
2. Both countries would not use force against each other’s territorial integrity.

Question 4.
Which two differences between India and China led to an army conflict
Answer:
The following two differences between India and China led to an army conflict in 1962:

1. A major dispute between India and China is the border dispute involving the determination of the 4,200 km long border at the foot of the Himalayas.
2. Chinese aggression on India border on October 20, 1962, and the continuous violations of our borders.

Question 5.
Highlight any two aspects of the Indian Foreign Policy which were greatly influenced by Pt. Jawaharlal Nehru. (C.B.S.E. 2018)
Answer:

1. Non-alignment. The main characteristic of India’s foreign policy is non-alignment. Pt. Nehru said-as as far as possible, we do not want to associate with power groups which caused two World Wars which can take place in future also.
2. Unification of Afro-Asian Countries. Pt. Nehru tries to unite Asian and African countries to strengthen economic and political relations.

Question 6.
Highlight the contribution made by Jawaharlal Nehru to the Foreign Policy of India. (Imp.) (C.B.S.E. 2014)
Answer:

1. The main contribution of Pt. Jawaharlal Nehru to the Foreign Policy of India is the policy of Non-Alignment.
2. Another contribution is the Principles of Panchsheel.

Question 7.
When and between whom was the Shimla Agreement signed? (C.B.S.E. 2012 Outside Delhi)
Answer:
Shimla Agreement was signed between Indian Prime Minister Smt. Indira Gandhi and Pakistani Prime Minister Zulfikar Ali Bhutto in July 1972.

Question 8.
Why did India not sign the Comprehensive Test Ban Treaty? (CTBT)? (C.B.S.E. 2012 Outside Delhi)
Answer:

1. India did not sign the Comprehensive Test Ban Treaty because according to India, this treaty was discriminatory.
2. India’s two neighbouring countries had nuclear weapons, therefore it was necessary for India to have a minimum deterrent.

Question 10.
How did the Sino-Indian conflict affect the opposition also? (Imp.) (C.B.S.E. 2015)
Or
How did the Sino-Indian conflict of 1962 affect the Communist Party of India? (C.B.S.E.2019)
Answer:
Sino-Indian conflict also affected the opposition in India. The growing rift between China and the Soviet Union created irreconcilable differences within the Communist Party of India (CPI). The pro-USSR faction remained within the CPI and moved towards closer ties with the Congress. The other faction was for some time closer to China and was against any ties with the Congress. In 1964, the leftist members of the Communist Party left the party and organised a separate party known as Communist Party of India (Marxist) or CPI (M). During the Sino- India war many leaders of CPI (M) were arrested for being pro-China.

India’s External Relations Important Extra Questions Very Short Answer Type (2 Marks)

Question 1.
In the formulation of foreign policy, what was Pt. Jawaharlal Nehru’s first priority?
Answer:
National interest was the first priority of Pt. Nehru.

Question 2.
What do you mean by Panchsheel? (Imp.) (C.B.S.E. 2009)
Answer:
The word ‘Panchsheel’ stands for five principles of conduct and behavior. India and China evolved five principles to maintain friendly ties between the two countries.

Question 3.
Give the full form of the NPT and CTBT. (C.B.S.E. 2009)
Answer:
NPT-Non Proliferation Treaty. CTBT-Comprehensive Test Ban Treaty.

Question 4.
Enumerate any two principles of; Nehru’s foreign policy. (C.B.S.E. 2013)
Answer:

1. Non-alignment is the basic principle of Nehru’s foreign policy.
2. Pt. Nehru has always raised his voice against caste and colour discrimination.

Question 5.
When was the first nuclear experiment undertaken by India? (C.B.S.E. 2009)
Answer:
India first undertook a nuclear experiment in 1974.

Question 6.
Mention any two principles of India’s foreign policy. (C.B.S.E. 2009)
Answer:

1. The most important basic principles of India’s foreign policy is non-alignment.
2. The basic principle of India’s foreign policy is safeguarding national interests.

Question 7.
Which two objectives Jawaharlal: Nehru wised; to achieve through the strategy of non-alignment? (ImP) (C.B.S.E. 2010:
Answer:

1. To preserve the hard-earned sovereignty.
2. To protect territorial integrity.

Question 8.
During the Nehru era, why did: some political parties and groups in our country believe that India should be more friendly with the bloc led by the U.S.? (C.B.S.E. 2010 )
Answer:
Some political parties and group in our country believe that India should be more friendly with the bloc led by the U.S. because it supports the value of democracy.

Question 9.
How the aim of India to respect the sovereign did find an eco in the Directive Principles of the state policy? (C.B.S.E. Sample Question P. 2017)
Answer:
India as a nation born in the backdrop of the world war and shadow of the cold war decided to respect the sovereignty of other nations and believe in world peace. The aim finds an eco in the Directive Principles of the State Policy.

Choose the correct answer:

Question 10.
“The foreign policy of a country is the outcome of her economic policy” these remarks were made by:
(a) Indira Gandhi
(b) Jawaharlal Nehru
(c) Morarji Desai
(d) Charan Singh.
Answer:
(b) Jawaharlal Nehru.

Question 11.
Bandung Conference was held in the year:
(a) 1954
(b) 1955
(c) 1956
(d) 1957
Answer:
(b) 1955.

Question 12.
Bangladesh emerged as an independent nation in:
(a) January 1972
(b) December 1971
(c) March 1971
(d) November 1971.
Answer:
(b) December 1971.

Question 13.
China made a sudden attack on India in:
(a) August 1962
(b) September 1962
(c) October 1962
(d) September 1965.
Answer:
(c) October 1962.

Question 14.
The Architect of Non-alignment is:
(a) Pt. Nehru
(b) Indira Gandhi
(c) Y. B. Chavan
(d) Atal Behari Vajpayee.
Answer:
(a) Pt. Nehru.

India’s External Relations Important Extra Questions Short Answer Type

Question 1.
List any four ‘Directive Principles of State Policy’ given in the Constitution of India for the promotion y y of International Peace and security. (Imp.) (C.B.S.E. 2010 Outside Delhi, 2013)
Answer:
Article 51 of Chapter IV of the Indian Constitution lays down certain principles which are the basis of Indian Foreign Policy. Following are the constitutional bases of the Indian foreign policy:

1. To promote international peace and security.
2. To establish just and respectable relations with various nations.
3. To foster respect for international law and treaty obligations in the dealings of organised people with one another.
4. To encourage the settlement of international disputes by arbitration.

Question 2.
What do you understand by Panchsheel? What are its main principles?
Answer:
Pt. Nehru formulated five principles of peaceful co-existence among the nations of the world. They were accepted first by the Chinese Prime Minister Chou-En-Lie. These principles are known as Panchsheel. They are:

• To respect the sovereignty and territorial integrity of each other.
• Non-aggression on each other.
• Non-interference in each other’s internal affairs.
• Peaceful settlement of disputes.
• To promote world peace.

Question 3.
Assess any four principles of India’s foreign policy. (Imp.) (C.B.S.E. 2008)
Answer:
1. Non-alignment: Non-alignment is the basic principle of India’s foreign policy. In fact, India
was the first country which initiated the policy of Non¬alignment which was adopted by most of the countries of Asia and Africa which attained independence in the post World War-II period.

2. Opposition to the Policy of Caste, Colour and Discrimination, etc. Another basic principle of India’s foreign policy is that it has always raised voice against the policy of caste, colour and discrimination.

3. Opposition to Imperialism: India has always opposed imperialism and colonialism. India regards imperialism to be injurious to world peace as it leads to war.

4. Faith in United Nations: India is a founding member of the United Nations and has full faith in the aims and principles of the United Nations. India believes that the United Nations is the only hope of world peace in the present age, so it should be strengthened.

Question 4.
Why did India distance herself from the two superpower camps? (C.B.S.E. 2018)
Answer:
1. First, India had to struggle against colonialism and imperialism. After getting freedom from imperialistic exploitations, faced the problem of economic reconstruction which could be accomplished in a peaceful atmosphere, So, India preferred not to join any group to avoid tension.

2. Secondly, India adopted the policy of non-alignment for peaceful co-existence for securing world peace and stability.

3. The policy of non-alignment was followed to elevate India’s prestige. If India gives it decision pertaining to international problems in a neutral way, both the power Blocs would respect its ideology, and the tension at the international level will lessen.

4. In order to preserve the hard-earned sovereignty, protect the territorial integrity and promote rapid economic development.

Question 5.
Suppose you are looking after the foreign policy of India. Which four values will you like to integrate into the foreign policy? (C.B.S.E. 2014)
Answer:

1. Policy of Non-Alignment
2. Faith in the principles of U.N.O.
3. Faith in peaceful co-existence.
4. Support and promotion of Human Rights in the world.

Question 6.
Explain briefly India’s Nuclear Policy. (C.B.S.E. 2014) (Textual Question)
Or
Analyse the Nuclear Policy of India. (C.B.S.E. 2019)
Or
Describe the Nuclear Policy of India, (C.B.S.E. 2013)
Answer:
India is against the policy of the nuclear experiment. In principle, India has stood for general and complete disarmament within the framework of the United Nations. Addressing the General Assembly, Mr Rajiv Gandhi, Prime Minister, asked nuclear powers to eliminate all nuclear weapons by the year 2010. India is the sixth country in the world enjoying atomic power by having undertaken successful atomic experiments in 1974. There are four Atomic Power Centres working in India. But this power is being utilised for peaceful and creative purpose and not for making atomic-bombs.

After India conducted nuclear tests in May 1998 the United States and other countries urged India to sign CTBT (Comprehensive Test Ban Treaty) unconditionally. But India reiterated its stand that since the treaty is discriminatory, it is not acceptable to the nation without any change.

Question 7.
Discuss the main irritants between India and China.
Or
Analyse any two courses of conflict between India and China. (C.B.S.E. 2019)
Answer:
The following are the main irritants between China and India:

1. India and China have a controversy over the McMohan Line, the borderline between India and China.
2. China invaded India on 20 October 1962 and later unilaterally declared a ceasefire on 21 November 1962. But China was able to capture thousands of miles of Indian territory which is still under Chinese possession.
3. China entered into military alliances with Pakistan, Bangladesh and Myanmar. These agreements pose a great threat to the security of India.
4. China always supported Pakistan against India.

Question 8.
Highlight the development of India’s Nuclear Programme. (C.B.S.E. 2011, Delhi)
Answer:

1. In the late 1940s, under the guidance of Homi J. Bhabha, the Nuclear programme was initiated.
2. The first nuclear explosion was undertaken by India in May 1974.
3. The second nuclear explosion was undertaken by India in 1998.
4. India signed the Civil Nuclear Treaty with the U.S.A. in 2005.

Question 9.
Explain any two factors responsible for Pakistan’s failure in building a stable democracy. (C.B.S.E. 2012 Outside Delhi)
Answer:

1. The social dominance of the military, clergy and landing aristocracy is responsible for overthrowing the democratic government. Wars with India have made military rulers and pro¬military groups very powerful. In spite of the fact that democracy has not succeeded in Pakistan, there have been strong pro-democratic sentiments in the country. Moreover, America and other Western countries have encouraged military rulers for their own interests.
2. Another factor responsible for Pakistan’s failure in building a stable democracy is a fundamentalist element working in Pakistan.

Question 10.
Before 1971, which two reasons were the source of resentment among j the people of East Pakistan (now Bangladesh) against West Pakistan. (Imp.) (C.B.S.E. 2013)
Or
Explain any two reasons for the j popular struggle in East Pakistan (Now Bangladesh) against West Pakistan during 1971. (C.B.S.E. 2014)
Answer:
Before 1971. following two reasons were a source of resentment among the people of East Pakistan (now Bangladesh) against West Pakistan.

1. East Bengal was not given fair treatment by the rulers of Pakistan and it was made virtually a colony.
2. The people of East Pakistan resented the domination of Western Pakistan and the imposition of Urdu language.
3. In an election held early in 1971 in Pakistan, Sheikh Mujibur’s Awami League got a majority in Pakistan Parliament. But he was not called to form the government and instead was arrested.

Question 11.
Describe any two major objectives of Nehru’s foreign policy.
Answer:
Following are the two major objectives of Nehru’s Foreign Policy:

1. To preserve the sovereignty of the country and protect territorial integrity.
2. To promote rapid economic development. The foreign policy of India was set by Jawaharlal Nehru. He played a significant role in the implementation of these policies from 1946 to 1964. He tried to achieve the aforementioned objectives through his policy of Non-alignment. In other words, he did not side with either power blocs like the U.S. and the former U.S.S.R.He followed the policy of peaceful coexistence. He maintained friendly relations with African countries which were newly independent. India also tried to maintain friendly and peaceful relations with its neighbours like Pakistan and China.

Question 12.
Explain the circumstances that forced the Tibetans to leave China. Highlight India’s role in helping the *• Tibetan refugees. (C.B.S.E. 2015)
Answer:
India’s policy of contentment crossed its limit when India gave its extra-territorial rights enjoyed in Tibet, to China by signing a trade-agreement on 29th April 1954. Both the countries at the time of agreement expressed their faith in the principles of Panchsheel. There was an armed uprising in Tibet protest against China’s infiltration in 1958. Chinese forces suppressed the movement. In 1959, the Dalai Lama crossed over to Indian border and sought asylum under the Indian Government. A large number of Tibetans had also sought refuge in India. Hence, Tibet became an issue of tension between India and China.

India’s External Relations Important Extra Questions Long Answer Type

Question 1.
Describe any four basic postulates of India’s foreign policy. (C.B.S.E. Sample Paper)
Or
Mention the main principles of India’s foreign policy. (C.B.S.E. 2005)
Answer:
The basic elements of India’s foreign policy today are the same what they were previously. The only difference is that idealism was emphasised more in the age of Nehru whereas realism got the upper hand in the Shastri-era. But a fine combination of idealism and realism in India’s foreign policy has been witnessed under the leadership of Mrs. Gandhi.
Following are the features of India’s foreign policy:
1. Non-alignment: The main characteristic of India’s foreign policy is non-alignment. India itself is a non-aligned country and so its foreign policy is also based on non-alignment.

2. Opposition to Imperialists and Colonialists: Since India itself remained a victim of British Imperialism, it has always opposed imperialism and colonialism. India regards imperialism to be injurious to world peace as it leads to war. So Indian leaders by visiting other countries and delivering speeches in the U.N. have tried to liberate slave countries from the clutches of imperialistic countries. India has always supported the national movements in the slave countries. Whenever imperialism tried to dominate, India strongly opposed it. When Holland, after the Second World War, tried to overpower Indonesia, India protested against it.

When England and France attacked Egypt to capture the Suez Canal in 1956, India sided with Egypt. In the same way, India strived to liberate countries like Malaya, Algeria, Congo and Morocco. India strongly protested against the United States of America when it tried to overpower Cuba.

3. Opposition to the Policy of Caste, Colour Discrimination, etc. India has always favoured the abolition of the caste system and it has tried to remove caste-ridden policies from the world also. India has consistently raised the question of the treatment of the people of Indian origin in the Union of South Africa and severely condemned the policy of racial segregation followed by the Government of South Africa. India also took up the cause of Negroes in the United States and the non-white population in Rhodesia.

4. Friendly Relations with other States: India is always ready to have friendly relations with other States of the world. India not only improved its friendly ties with Asian countries but with countries of the world also.

5. Unification of Afro-Asian Countries: India tries to unite Asian and African countries to strengthen economic and political relations. India believes that these countries can unitedly oppose colonialism and create an atmosphere for the freedom of other Asian and African countries.

6. Faith in Internationalism: One of the principles of India’s foreign policy is its passion for internationalism. India has full faith in all world organisations such as the U.N., UNESCO, ILO, etc.

7. Importance to the principles of the United Nations: Much importance has been attached to the principles of the United Nations in India’s foreign policy.

8. Respect for Human Rights: On December 10, 1948, the United Nations adopted the Universal Declaration of Human Rights. India has full regard for Human Rights. Almost all the important Human Rights have been included in the Chapters of Fundamental Rights and Directive Principles.

9. India is not Neutral in International Politics: Non-alignment is the very basis of India’s foreign policy but it does not stand for India’s non-participation in international politics. Since India has not joined any group, it adopts the policy of rational judgement. In the words of Pt. Nehru, “We can’t and won’t remain neutral when the freedom is in danger, justice is challenged or invasion is in progress.”

India is partial neither to Russia nor to America. That is why India, like other non-aligned countries, blamed the Soviet Union when the Korean war took place and also held America responsible in the Vietnam war.

10. Panchsheel. Panchsheel is another important contribution of India to international politics. The five principles called ‘Panchsheel’ are as given below:

• Nations should respect each other’s territorial unity and sovereignty.
• No nation should attack another nation.
• No nation should interfere in the internal affairs of another nation.
• All the countries of the world would be considered equal irrespective of all distinctions.
• All the countries should have peaceful and harmonious co-existence.

11. National Consensus: India’s foreign policy is based on a national consensus.

12. Faith in Disarmament: India has full faith in disarmament.

Question 2.
Explain the meaning of Non-alignment and distinguish it from neutrality.
Answer:
The world was divided into two Blocs after the Second World War: One bloc was headed by the United States of America whereas the Second Bloc was led by the Soviet Union. After independence, Pt. Nehru, the architect of India’s foreign policy, adopted non¬alignment as its base. He clearly pointed out that India, because of its manifold internal problems, could not afford to snap its relations with either of the two blocs, rather it needed assistance from both the blocs. A country with newly attained freedom could not interfere in international affairs. So, the policy of non-alignment was highly useful for the interest of India.

Meaning of Non-alignment: Following are the meanings derived from the policy of non-alignment:
1. Firstly, India will remain independent by not joining any group. It will not join even an organisation formed by different countries of the world.

2. The policy of non-alignment is an independent policy. A nation, by adopting it, can evade subordination of any group, and can easily form its opinion about any problem after its thorough analysis.

3. Non-alignment is a policy of peacefulness. In Congress convention held at Jaipur in 1948, it was stated, “The permanent feature of India’s foreign policy should be to have friendly and co-operative relations with all the nations so that it may remain aloof from those agreements which divide the world into opposed Blocs and endanger world peace.”

4. Non-alignment does not mean neutrality in international affairs.

5. India’s policy of non-alignment is a positive one. India wants to bridge the gap between eastern and western ideology. According to Pt. Nehru, “India’s policy of non-alignment doesn’t mean to follow a middle path. It is a positive as well as a creative policy which aims at achieving some objectives and the elimination of hatred and enmity between other countries.”

The distinction between Non-alignment and Neutrality: Non-alignment and Neutrality are two different concepts. The term neutrality refers to a situation in which a state does not take any side in a war. The term neutrality is basically concerned with war-like situations, whereas Non-alignment is concerned with both war and peace situations.

Neutrality is a term essentially used in International Law, whereas Non-alignment is a term basically used in international relations.

Non-alignment does not mean neutrality in international affairs: Pt. Nehru made it clear that non-alignment does not stand for remaining neutral to international problems. In 1949, while addressing American Congress, Pt. Nehru said, “When the freedom could be threatened and justice would be in peril when the security of a State would be jeopardised, we cannot remain indifferent, and we will not remain different, our policy is not one of indifference. Our policy is that there should be active efforts for world-peace and it should be given a firm foundation.”

Neutrality is a concept close to isolationism: Non-alignment does not mean non-involvement. It means non-aligned nations in world affairs.

In short, neutrality is a negative concept in the sense that it helps to avoid taking sides in a war while Non-alignment is a positive concept, in the sense that it affirms positive commitment to an independent foreign policy.

Question 3.
Do you agree with the statement that the foreign policy of independent India has pursued the dream of a peaceful world”? Support your answer with any three suitable arguments. (C.B.S.E. 2017)
Answer:
On the basis of the following arguments, we can say that “the foreign policy of independent India has pursued the dream of a peaceful world”.
1. Non-alignment:
Following are the meanings derived from the policy of non-alignment:

1. Firstly, India will remain independent by not joining any group. It will not join even an organisation formed by different countries of the world.
2. The policy of non-alignment is an independent policy. A nation, by adopting it, can evade subordination of any group, and can easily form its opinion about any problem after its thorough analysis.
3. Non-alignment is a policy of peacefulness. In Congress convention held at Jaipur in 1948, it was stated, “The permanent feature of India’s foreign policy should be to have friendly and co-operative relations with all the nations so that it may remain aloof from those agreements which divide the world into opposed Blocs and endanger world peace.”
4. Non-alignment does not mean neutrality in international affairs.
5. India’s policy of non-alignment is a positive one. India wants to bridge the gap between eastern and western ideology. According to Pt. Nehru, “India’s policy of non-alignment doesn’t mean to follow a middle path. It is a positive as well as a creative policy which aims at achieving some objectives and the elimination of hatred and enmity between other countries.”

2. Away from the Cold War: During the Cold War era, India’s foreign policy was based on the principle of non-alignment. It was long before India became free, Pt. Jawaharlal Nehru, who in charge of External Affairs in the Interim government, had declared Independent India would keep away from power blocs. In 1946, he declared again that India would follow an independent foreign policy.

He said, “We propose as far as possible, to keep away from the power politics of groups, aligned against one another, which have led in the past to world wars and which may again lead to disaster on an even wider scale.” It was, however, after the attainment of independence by India with unique historical experience, geographical situation, and two perceptions of its national interest by enlightened leadership that non-alignment as a policy came to occupy an important position in international relations.

3. Away from the military organisation: India did not join either of the two superpowers in the military organisation known as NATO and Warsaw Pact.

Question 4.
Examine the efforts taken by Jawaharlal Nehru for the promotion of Afro-Asian Unity. (C.B.S.E. 2019)
Answer:
Following are the efforts taken by Jawaharlal Nehru for the promotion of Afro-Asian Unity.

1. Pt. Jawahar Lai Nehru was marked by the establishment of contacts between India and newly independent states of Asia and Africa.
2. Nehru was an ardent advocate of Asian Unity and under his leadership, India convened the Asian Relations Conference in March 1947.
3. Efforts were made by India for the freedom of Indonesia from the clutches of the Dutch regime and in support of Indonesia’s freedom, India arranged an international conference in 1949.
4. India firmly opposed racism apartheid in South Africa.
5. India participated and co-operated in Afro-Asian conference held in the Indonesian city of Bandung in 1955.
6. Pt. Nehru a co-founder of the NAM-Non Aligned Movement and its first summit was held in Belgrade in September 1961.

Question 5.
Give any three suitable arguments in favour of India being a staunch supporter of the decolonisation process and in firm opposition to racialism. (C.B.S.E. 2017)
Answer:
The following argument will be given in support of India being a staunch supporter of the decolonisation process and in firm opposition to racialism:

1. Opposition to Imperialists and Colonialists.
2. The opposition of the Policy of Carte, colour discrimination etc.
3. Unification of Afro-Asian countries.

Note: For a detailed explanation,
(The basic elements of India’s foreign policy today are the same what they were previously. The only difference is that idealism was emphasised more in the age of Nehru whereas realism got the upper hand in the Shastri-era. But a fine combination of idealism and realism in India’s foreign policy has been witnessed under the leadership of Mrs Gandhi.
Following are the features of India’s foreign policy:
1. Non-alignment: The main characteristic of India’s foreign policy is non-alignment. India itself is a non-aligned country and so its foreign policy is also based on non-alignment.

2. Opposition to Imperialists and Colonialists: Since India itself remained a victim of British Imperialism, it has always opposed imperialism and colonialism. India regards imperialism to be injurious to world peace as it leads to war. So Indian leaders by visiting other countries and delivering speeches in the U.N. have tried to liberate slave countries from the clutches of imperialistic countries. India has always supported the national movements in the slave countries. Whenever imperialism tried to dominate, India strongly opposed it. When Holland, after the Second World War, tried to overpower Indonesia, India protested against it.

When England and France attacked Egypt to capture the Suez Canal in 1956, India sided with Egypt. In the same way, India strived to liberate countries like Malaya, Algeria, Congo and Morocco. India strongly protested against the United States of America when it tried to overpower Cuba.

3. Opposition to the Policy of Caste, Colour Discrimination, etc. India has always favoured the abolition of the caste system and it has tried to remove caste-ridden policies from the world also. India has consistently raised the question of the treatment of the people of Indian origin in the Union of South Africa and severely condemned the policy of racial segregation followed by the Government of South Africa. India also took up the cause of Negroes in the United States and the non-white population in Rhodesia.

4. Friendly Relations with other States: India is always ready to have friendly relations with other States of the world. India not only improved its friendly ties with Asian countries but with countries of the world also.

5. Unification of Afro-Asian Countries: India tries to unite Asian and African countries to strengthen economic and political relations. India believes that these countries can unitedly oppose colonialism and create an atmosphere for the freedom of other Asian and African countries.

6. Faith in Internationalism: One of the principles of India’s foreign policy is its passion for internationalism. India has full faith in all world organisations such as the U.N., UNESCO, ILO, etc.

7. Importance to the principles of the United Nations: Much importance has been attached to the principles of the United Nations in India’s foreign policy.

8. Respect for Human Rights: On December 10, 1948, the United Nations adopted the Universal Declaration of Human Rights. India has full regard for Human Rights. Almost all the important Human Rights have been included in the Chapters of Fundamental Rights and Directive Principles.

9. India is not Neutral in International Politics: Non-alignment is the very basis of India’s foreign policy but it does not stand for India’s non-participation in international politics. Since India has not joined any group, it adopts the policy of rational judgement. In the words of Pt. Nehru, “We can’t and won’t remain neutral when the freedom is in danger, justice is challenged or invasion is in progress.”

India is partial neither to Russia nor to America. That is why India, like other non-aligned countries, blamed the Soviet Union when the Korean war took place and also held America responsible in the Vietnam war.

10. Panchsheel: Panchsheel is another important contribution of India to international politics. The five principles called ‘Panchsheel’ are as given below:

1. Nations should respect each other’s territorial unity and sovereignty.
2. No nation should attack another nation.
3. No nation should interfere in the internal affairs of another nation.
4. All the countries of the world would be considered equal irrespective of all distinctions.
5. All the countries should have peaceful and harmonious co-existence.

11. National Consensus: India’s foreign policy is based on a national consensus.
12. Faith in Disarmament: India has full faith in disarmament. )

Question 6.
Analyse the impact on Sino-Indian relations since 1962 onwards. (C.B.S.E. 2017)
Answer:
Before the twentieth century, there was a limited political and cultural interaction between India and China. Till 1962, the relations between the two countries were not very strained. China attacked India on 20 October 1962 over a border dispute. China declared a unilateral ceasefire on 21 November 1962. By waging a war, China was able to capture thousands of miles of Indian territory which is still under Chinese possession.

Pt. Jawaharlal Nehru’s policy of ‘Peace’ was badly affected: Sino-Indian war of 1962 gave a negative impact on ‘Sino-Indian relations.’ China who gave the slogan of ‘Hindi Chini Bhai Bhai’ actually stabbed in the back of India and from that day the relations between India and China got strained. India, now, no more have faith in China. On the other hand, Beijing and Karachi established diplomatic relations. 1963 Pakistan cedes the trans-Karakoram tract to China, ending border disputes. China was showing protective and co-operative attitude towards Pakistan.

However, in 1976, Indo-China relations slightly improved. In 1976, Mr K.R. Narayanan and in 1978 and 1979, Mr Atal Behari Vajpayee visited China as ambassadors of peace and friendship. In 1988, Prime Minister Mr Rajiv Gandhi’s visit to China started a new era in Indo-China relations and diplomatic visits cultural exchange, co-operation in science and technology as well as trade relations made by both the countries further improved the relations of the two countries.

Question 7.
How far has India been successful in conducting its foreign policy peacefully and avoiding international conflicts? Explain with the help of examples. (C.B.S.E. 2017)
Answer:
In 1947 India won independence and joined comity of sovereign states and thereby qualified to participate as an actor in international politics and relations. The first prime minister of India Pt. Nehru left a deep impact on the foreign policy of India. Since independence, India is trying to conducting its foreign policy peacefully and avoiding inter-national conflicts. After the second world war, the whole world was divided into two major groups.

But India tactfully refused to be the member of any group and followed the policy of Non-alignment-means not to be aligned with or against any major power bloc. India always sided with truth-it may be Afghan problem or crises of Suez Canal. Both the big bloc’s US and USSR tried to have a friendly relation with India. India co-operated with all peace-loving nations and with the United Nations to promote international peace and prosperity without exploitation of one nation by another. India also gives full support to the principle of freedom of dependent peoples and opposition to racial discrimination in any form or kind.

Question 8.
Evaluate the impact of the Chinese invasion of 1962 indenting India’s image at home and abroad both. (C.B.S.E. 2019)
Answer:
The Chinese invasion of 1962 indenting India’s image at home and abroad can be evaluated in the following way:-

1. India had to approach the Americans and the British for military assistance to tide over the crises.
2. During the conflict, the Soviet Union remained neutral.
3. No-doubt, it induced a sense of humiliation. On the other hand, it also strengthened a spirit of nationalism among Indians.
4. Some of the top army commanders either resigned or were retired.
5. Then Defence Minister V. Krishna Menon resigned from the cabinet.
6. A no-confidence motion was moved against the government for the first time. Nehru’s own stature suffered a lot as he was criticised for his defence and foreign policy.

Question 9.
Read the following passage j carefully and answer the following | questions: (Imp.) (C.B.S.E. 2016) j

When India conducted its first nuclear test, it was termed as a peaceful explosion. India argued that it was committed to the policy of using nuclear power only for peaceful purposes. The period when the nuclear test was conducted was a difficult period in domestic politics. Following the Arab-Israel War of 1973, the entire world was affected by the Oil Shock due to the massive hike in the oil prices by the Arab nations. It led to the economic turmoil in India resulting in high inflation.
(i) When did India conduct its first nuclear test and why?
Answer:
India conducted its first nuclear test in 1974. India argued that it was committed to the policy of using nuclear power only for peaceful purposes.

(ii) Why was the period, when the nuclear test was conducted in India, considered to be a difficult period in domestic politics?
Answer:
The period when the nuclear test was conducted was a difficult period in the domestic politics of India. Due to the Arab-Israel War of 1973, the whole world was affected by the Oil-shock, which caused the massive hike in the oil-prices by the Arab-nations. This led to the economic turmoil in India also.

(iii) Which international event of the 1970s was responsible for high inflation in India?
Answer:
The Arab-Israel War of the 1970s caused the massive hike in the oil prices by the Arab nations was responsible for high inflation in India.

Question 10.
Two development strained this relationship. China annexed Tibet in 1950 and thus removed a historical buffer between the two countries. Initially, the government of India did not oppose this openly. But as more information came in about the suppression of Tibetan culture, the Indian government grew uneasy. The Tibetan spiritual leader, the Dalai Lama, sought and obtained political asylum in India in 1959. China alleged that the government of India was allowing anti-China activities to take place from within India. (Imp.) (C.B.S.E. 2016)

Read the above passage carefully and answer the following questions:

(i) What is meant by Tiistorical buffer?
Answer:
Buffer State which is weak and which is situated between two large and unfriendly nations. The function of such a buffer State is to keep the large unfriendly powers apart and thus minimise the chances of war between them.” Poland was a buffer State between Russia and Germany.

(ii) Why didn’t the Government of India oppose the annexation of Tibet by China?
Answer:
The government of India did not oppose the annexation of Tibet by China, because India government did not want to hamper its relations with China.

(iii) How far was it justified on the part of India to grant political asylum to the Dalai Lama and thousands of Tibetan refugees?
Answer:
It is justified on the part of India to grant political asylum to the Dalai Lama and thousands of Tibetan refugees because the information came in about the suppression of Tibetan culture by China.

Question 11.
Read the following passage and answer the following questions: (C.B.S.E. Sample Q.P. 2017)
Answer:
India wanted to generate atomic energy for peaceful purposes. Nehru was against nuclear weapons, so he pleaded with the superpowers for comprehensive nuclear disarmament. However, The nuclear arsenal kept rising. When Communist China conducted nuclear tests in October 1964, the five nuclear weapon powers, the USSR. USA, UK, France and Chine (Taiwan represented china) impost the Nuclear Non-proliferation Treaty (NPT) of 1968 on the rest of the world. India always considered the NPT as discriminatory and had refused to sign it. When India conducted its first nuclear test, it was termed as a peaceful explosion. India argued that it was committed to the policy of using nuclear power only for peaceful purposes.
1. What was the plea of Nehru with regard to nuclear energy?
Answer:
Nehru wanted to generate energy for peaceful purposes. He was against nuclear weapons. So he pleaded with superpowers for comprehensive nuclear disarmament.

2. when did India conducts its first nuclear test and why?
Answer:
India conducts its first nuclear test in 1974 to generate atomic energy for peaceful purpose.

3. Why India always considered the NPT as discriminatory and had refused to sign it?
Answer:
India refused to sign NPT because it is selectively applied to the Non-nuclear power and legitimised the monopoly of the five Nuclear Powers.

Question 12.
In spite of strongly Propagating for nuclear disarmament, India herself conducted a nuclear test. In 1998. Analyze the possible reasons behind such a development. Also, state any four important features of India’s Nuclear Policy. (C.B.S.E. Sample Paper 2018)
Answer:
Reasons behind the Nuclear test.

1. India surrounded by two Nuclear states like China and Pakistan.
2. China-Pakistan friendship is a major security threat for India.

Features of India’s Nuclear Policy: India is against the policy of nuclear experiment. In principle, India has stood for general and complete disarmament within the framework of the United Nations. Addressing the General Assembly, Mr Rajiv Gandhi, Prime Minister, asked nuclear powers to eliminate all nuclear weapons by the year 2010. India is the sixth country in the world enjoying atomic power by having undertaken successful atomic experiments in 1974. There are four Atomic Power Centres working in India. But this power is being utilised for peaceful and creative purpose and not for making atomic-bombs.

After India conducted nuclear tests in May 1998 the United States and other countries urged India to sign CTBT (Comprehensive Test Ban Treaty) unconditionally. But India reiterated its stand that since the treaty is discriminatory, it is not acceptable to the nation without any change.

India’s External Relations Important Extra Questions HOTS

Question 1.
What do you understand by the term ‘Non-alignment’ in the context of India’s foreign policy? (D.B. 1991)
Answer:
The main characteristic of India’s foreign policy is non-alignment. Non-alignment means that India will remain independent by not joining any group. Non-alignment is a policy of peacefulness. Non-alignment does not mean neutrality in international affairs. India’s policy of non-alignment is a positive one. India wants to bridge the gap between Eastern and Western ideologies.

Question 2.
What do you mean by Panchsheel? (C.B.S.E. 1991)
Answer:
The word ‘Panchsheel’ stands for five principles of conduct and behaviour. India and China evolved five principles to maintain friendly ties between the two states.

Question 3.
Explain two principles on the basis of which India has established its relations with its neighbours.
Answer:

1. India has established its relations with neighbouring countries on the principles of equality.
2. India has established its relations with other countries of the world on the basis of the principle of non¬alignment and promotion of world peace.

Question 4.
Mention two points of tension in India’s relations with Pakistan.
Answer:

1. Kashmir is a major issue of conflict between India and Pakistan. Pakistan considers Kashmir a disputed area whereas India considers Kashmir a part of India.
2. Pakistan is helping the terrorists of Kashmir with arms and other materials. Even training is given to terrorists in Pakistan.

Question 5.
What was the Shimla Agreement?
Answer:
On 3rd December 1971, Pakistan attacked India. India faced it bravely and defeated Pakistan very badly. One lakh Pak-soldiers surrendered and General Niazi signed the document of surrender. But Indian Prime Minister Mrs Indira Gandhi, without exploiting the defeat of Pakistan, held a summit conference at Shimla in June 1972 to discuss the problems of both the countries. Pak President Mr Bhutto and Indian Prime Minister Mrs Indira Gandhi participated in this conference. The agreement was reached between Mrs Gandhi and Mrs Bhutto on 3rd July 1972 which is known as the Shimla Agreement.

Here we are providing Class 12 Economics Important Extra Questions and Answers Chapter 3 Money and Banking. Economics Class 12 Important Questions are the best resource for students which helps in class 12 board exams.

Class 12 Economics Chapter 3 Important Extra Questions Money and Banking

Money and Banking Important Extra Questions Very Short Answer Type

Question 1.
What is meant by money? (C.B.S.E2010) (CBSE Outside Delhi2011,201 f (Comp.))
Answer:
Money can be defined as a generally acceptable medium that can be exchanged for goods and services, and can be used as a measure and store of value.

Question 2.
What is barter? (C.B.S.E 2013 (Comp))
Answer:
Barter is a system of exchange in which goods and services are directly traded for other goods and services without the mediation of money.

Question 3.
Define bank money.
Answer:
Bank money mainly means cheques and bank drafts.

Question 4.
Give two demerits of money.
Answer:
Demerits of money are:
(i) Increase in corruption
(ii) Inequality of income

Question 5.
Write secondary function of money.
Answer:
Secondary functions of money include:
(i) Store of value
(ii) Standard of deferred payments

Question 6.
What will be the effect of a rise in bank rate on money supply?
Answer:
A rise in bank rate will reduce the money supply.

Question 7.
Define money supply? (C.B.S.E 2018, C.B.S.E 2011)
Answer:
Money supply is the total stock of money of different types of money (currency in circulation and deposits) in an economy at any specific point of time.

Question 8.
What are the various money stock measures?
Answer:
M₁ ,M₂, M₃ and M₄ are the various money stock measures.

Question 9.
What are the constituents of money supply in narrow sense?
Or
State the components of money supply. (C.B.S.E 2010,2011 Comp), (C.B.S.E Outside Delhi 2013)
Answer:
The constituents of money supply in narrow sense are coins, currency notes and demand deposits.

Question 10.
What is a commercial bank?
Answer:
Commercial bank is a financial institution that accepts deposits from the public and advances loans to other people in order to earn profits.

Question 11.
What are the functions of commercial banks?
Answer:
The main functions of commercial banks are accepting deposits and advancing loans.

Question 12.
What are demand deposits? (C.B.S.E 2012,2013,2014)
Answer:
Demand deposits are those deposits in the banks, which can be withdrawn by drawing cheques on demand.

Question 13.
What are time deposits? (C.B.S.E Outside Delhi 2012,2014)
Answer:
Time deposits are those deposits of the public in banks which are deposited for a fixed period.

Question 14.
What is bank rate? (C.B.S.E 2009,2011 Comp.)
Answer:
Bank rate is that minimum rate at which the central bank discounts the first class bills and provides credit to the commercial banks.

Question 15.
Define ‘money multiplier’. (C.B.S.E Outside Delhi 2019)
Answer:
Money multiplier measures the amount of money that the banks are able to create in form of deposits with every initial deposit.

Question 16.
What is central bank?
Answer:
Central bank is the apex institution, which controls and regulates the quantity of money for the economic welfare of the public.

Question 17.
What is the main function of central bank?
Answer:
The main function of central bank is to design and control the monetary policy of its country.

Question 18.
What is meant by Statutory Liquidity Ratio? (C.B.S.E 2010,11)
Answer:
Statutory Liquidity Ratio (SLR) is the ratio of total demand and time deposits of commercial bank which it has to keep in the form of specified liquid assets.

Question 19.
What is meant by Cash Reserve Ratio? (C.B.S.E 2010, 11)
Answer:
Cash Reserve Ratio (CRR) is the ratio of bank deposits that the commercial banks must keep with the central bank as reserves.

Question 20.
What are the quantitative instruments of credit control?
Answer:
The quantitative instruments of credit control include:
(i) Bank Rate
(ii) Open Market Operations
(iii) Cash Reserve Ratio

Question 21.
What are the qualitative instruments of credit control?
Answer:
The qualitative instruments of credit control include:
(i) Marginal Requirements
(ii) Rationing of Credit
(iii) Moral Suasion
(iv) Direct Action

Money and Banking Important Extra Questions Short Answer Type

Question 1.
Briefly explain any two functions of money.
Answer:
Two functions of money are given below:
(i) Money as a Unit of value: Money acts as a convenient unit of account. The value of all goods or services can be expressed in monetary units. Money as a unit of value helps in measuring the value of exchange for various goods and services. For example, if the price of a pen is X 10 then a pen can be exchanged for ten monetary units. Therefore, money is a useful measuring rod of value provided the value of money or purchasing power remains constant.

(ii) Money as a Medium of Exchange: Money acts as an intermediary in the exchange transactions of goods and services. Money solves the problem of double coincidence of wants by acting as a medium of exchange for all goods and services. For example, if a vegetable grocer wants a cart but the cart manufacturer wants clothes, and not vegetables, then the grocer can use money to buy a cart.

Similarly, the cart manufacturer can then use the money to buy clothes. Thus, everyone’s wants can be satisfied as money acts as a medium of exchange. Money is also called a bearer of options or generalised purchasing power. This indicates the freedom of choice that the use of money offers. This function can only be performed properly if the value of money remains constant.

Question 2.
Give meaning of money. Explain the ‘store of value’ function of money. (C.B.S.E 2012,14,2017)
Answer:
Money can be defined as a generally acceptable medium that can be exchanged for goods and services, and can be used as a measure and store of value.

Money as a Store of value: Money is not a perishable item and its storage costs are also considerably low. Moreover, it is acceptable to anyone at any point of time. Thus, money acts as a store of value for individuals.

Under barter system, wealth in the form of goods like wheat, rice, cattle etc. deteriorate with the passage of time or involve heavy storage cost. However, wealth can easily be stored in the form of money for future use.

Question 3.
What is ‘Barter’? Explain ‘standard of deferred payment’ function of money. (C.B.S.E. 2012, 14)
Answer:
Barter is a system of exchange in which goods and services are directly traded for other goods and I services without the mediation of money. Money as a Standard of Deferred Payment: Deferred payments refer to those payments, which are made at some specific time in future.

Money acts as standard in terms of which future or deferred payments are stated because money maintains a constant value over a period of time. Under barter system, goods could not be used for future contracts due to the risk associated with j type, quality and value of the goods. Money exchange has no such problem.

Question 4.
Explain the evolution of money.
Answer:
Money is a generally acceptable medium that can be exchanged for goods and services, and can be used as a measure and store of value. Money has undergone a process of historical evolution spread over a long period of time. During this process of historical evolution, a variety of things had been used as money.

Commodities such as hides and skins of animals, domestic animals such as cattle, goats and agricultural products such as rice, wheat had been used as money in different stages of economic evolution. In more recent times, metallic coins and paper notes have been used as a medium of exchange.

Question 5.
Explain the significance of the unit of account function of money. (C.B.S.E Outside Delhi 2014)
Answer:
Money is to be a unit of value or a unit of account. The monetary unit is the unit in terms of which the value of all goods and services is measured and expressed. The value of each good or service is expressed as a price, which is the number of monetary units for which the good or service can be exchanged. If the price of a pen is ^ 10 then a pen can be had in exchange for ten monetary units. Therefore, money is a useful measuring rod of value only if the value of money itself remains constant.

Question 6.
Explain the problem of double coincidence of wants faced under barter system. How has money solved it? (C.B.S.E 2013)
Answer:
Double coincidence of wants requires that a person who is willing to exchange his or her goods j should find another person who is not only willing to buy the goods offered by the first person, but should also possess what the first person wants in exchange. Double coincidence of wants is hard to find. Money solves the problem of double, coincidence of wants by acting as a medium of exchange for all goods and services.

For example, if a vegetable grocer wants a cart but the cart  manufacturer wants clothes, and not vegetables, then the grocer can use money to buy a cart. The cart manufacturer can then use the money to buy clothes. Thus, everyone’s wants can be satisfied as money acts as a medium of exchange.

Question 7.
Explain “difficulty in storing wealth” problem faced in the barter system of exchange. (C.B.S.E Outside Delhi 2017)
Answer:
The value of money cannot be stored in the form of goods. This problem can be cited by an example. Suppose an American dancer comes to India to earn money by exhibiting her dance performances. Indians offer her grain, hay, horses, elephants, etc., happily. She returns to America with these items on a large ship. On the way, the cattle consumes the grain and fodder.

The sea route being long and due to the onslaughts of unfavourable climatic conditions, the cattle becomes ill and dies. She had no money when she reaches America, i.e., if money is preserved in the form of goods, which are perishable in nature, one is left with none. Therefore, perishable goods cannot be stored for long.

Question 8.
Give meaning of money supply. State its components. (C.B.S.E 2014,2017)
Or
Explain the concept of money supply. (C.B.S.E 2013 Comp.)
Answer:
Money supply is a stock variable. It is the total stock of different types of money (currency in circulation and deposits) available in an economy, at a specific point of time. In India, M₁ ,M₂, M₃, M₄ are the four alternative measures of money supply. They are defined as follows:
M₁ = CU + DD
M₂ = M₁ + Savings deposits with post office saving banks
M₃ = M₁ + Time deposits of commercial banks
M₄ = M₃ +Total deposits with post office savings organisations (excluding National Savings Certificates)
where, CU = Currency (notes and coins held by public)
DD = Net demand deposits held by the commercial banks

Question 9.
What is ideal supply of money?
Answer:
The ideal supply of money is that quantity in which the production capacity of the country can be fully utilised. In other words, that quantity of money which helps in achieving the full employment level and maximum output is called ideal supply of money.

Question 10.
State any two components of Ml measure of money supply. (C.8.S.E 2019)
Answer:
The two components of Ml measure of money supply:
(i) Currency: Currency is the main component of money supply. Currency consists of coins and
(ii) Demand Deposits: Demand deposits are also an important component of money supply, These are payable by the banks on demand from the account holder. For example: Current and Savings Account Deposits.

Question 11.
Explain the effect of an increase in bank rate on credit creation by commercial banks.
Answer:
The bank rate is the minimum rate at which the central bank discounts the first class bills of exchange and provides credit to the commercial banks.

Increase in the bank rate makes the borrowings from the central bank costlier than before. This reduces the lending or credit creation capacity of the commercial banks as they get funds at a higher interest rate from the central bank. Increase in bank rate also increases the rate at which commercial banks lend to the general public. Consequently, credit contracts in the economy.

Question 12.
Describe two main functions of commercial bank.
Answer:
The following are the main or primary functions of a commercial bank:

(i) Accepting Deposits: Commercial banks accept deposits from the public and lend this money I to companies and other people for investment projects. The banks offer interests on deposits j to the deposit holders. Deposits can be broadly into:

(a) Demand Deposits: These are, payable by the banks on demand from the account holder. For example: Current and Savings Account Deposits.
(b) Time Deposits: These deposits have a fixed period to maturity. For example: Fixed Deposits.

(ii) Advancing Loans: Extending loans is another important primary function of the commercial banks. After keeping a certain portion of the deposits as reserves, the bank gives the balance to  the borrowers in the form of loans and advances.

The rate at which banks lend out their reserve to investors is called the lending rate. Lending by commercial banks consists mainly of cash credit demand and short-term loans to the private investors and banks. The credit worthiness of a person is judged by his current assets or the collateral a security pledged for the repayment of a loan).

Question 13.
Give four agency functions of commercial banks.
Answer:
The agency functions of a commercial bank are as follows:
(i) To transfer funds from one place to another.
(ii) To collect funds on behalf of the customers.
(iii) To purchase and sell shares and debentures on behalf of the customers.
(iv) To provide income-tax consultancy.
(v) To pay bills and insurance premium as per customer’s direction.
(vi) To provide facility of travellers’ cheque and letter of credit.

Question 14.
Explain the lending function of commercial banks.
Answer:
Extending loans is one of the two primary function of the commercial banks. After keeping a certain portion .of the deposits as reserves, the bank gives the balance to borrowers in the form of loans and advances. The different types of loans and advances made by banks are as follows:

(i) Cash Credit: Cash credit is given to the borrowers against their current assets. The required amount of money is sanctioned on a consolidated basis to save time and effort. The amount is transferred into the borrower’s account that he can use according to his or her needs. The bank charges interest only on the amount withdrawn from the account.

(ii) Demand Loans: Demand loans are secured loans as they are made against security. The loan can be repaid in instalments.

(iii) Term Loans: Terms loans are long term loans, the maturity period for which is usually more than 3 years. The entire loan amount is credited into the account of the borrower. The bank charges interest on the entire loan amount.

(iv) Overdrafts: The banks provide overdraft facility, which allows their customers to withdraw more than the available amount in their current accounts up to an agreed limit. The banks charges interest on overdrawn amount.

(v) Discounting of Bills of Exchange: The banks provide instant loans by discounting the bills of exchange written during trade transactions. The banks deduct commission or interest and pay the value of bill to the holder.

Question 15.
Define Credit Multiplier.What role does it play in determining the credit creation power of the banking system? Use a numerical illustration to explain. (C.B.S.E 2019)
Answer:
Credit multiplier measures the amount of money that the banks are able to create in form of deposits with every initial deposit. Through the process of money creation, the commercial banks are able to create credit which is in excess of initial deposits.

The credit creation by banks depends on credit multiplier as it is inversely related to legal resenve ratio. It is legally compulsory for the banks to keep a certain minimum fraction of their deposits as reserve. The fraction is called legal reserve ratio and it is fixed by the central bank. Higher the credit multiplier, higher will be the total credit created and vice-versa.

Example: Suppose the legal reserve is 0.1 and initial deposit is ₹ 1,000.
Credit Multiplier \(=\frac{1}{0.1}=10\)
Thus,
Total credit created = 10 x 1,000 = ₹ 10,000
Now suppose legal reserve is 0.5 and the initial deposit is ₹ 1,000.
Credit Multiplier \(=\frac{1}{0.5}=2\)
Thus,
Total credit created = 2 x 1,000 = ₹ 2,000
It can be seen that with the same initial deposit, total credit creation decreases with a fall in the value of credit multiplier.

Question 16.
Explain the credit creation role of commercial banks with the help of a numerical example. (C.B.S.E Outside Delhi 2013)
Answer:
Money creation (credit creation) by the commercial banks is determined by:
(i) the amount of the primary deposits; and

(ii) the Legal or Cash Reserve Ratio (CRR), which is the minimum fraction of the total deposits with the commercial banks, which they are required to keep with the central bank.

It is assumed that all the money that goes out of banks is re-deposited into the banks. Suppose the cash reserve ratio (CRR) is 20 percent. Further assume that Bank A receives a primary deposit of ₹ 10,000. Bank A will keep 20 percent of ₹ 10,000 ( ₹ 2,000) as reserve and will lend out the balance ₹ 8,000, to the borrowers. People who receive ₹ 8,000 from Bank A will either spend the amount on goods or pay to the creditors.

The money will eventually come back to the banking system, say in Bank B. After keeping a reserve of ₹ 1 1,600 (20 percent of? 8,000), Bank B will lend out the balance ₹ 6,400, to the borrowers. Those who receive ₹ 6,400 from Bank B will spend the amount. Thus again, the money will come back to the banking system, say in Bank C.

After keeping a reserve of ₹ 1,280 (20 percent of ₹ 6,400), Bank C will lend out the balance ₹ 5,120, to the borrowers. This process of deposit turning into loan or investment, which again becomes a new deposit, goes on until the primary deposit of? 10,000 is completely exhausted. The total of all the deposits resulting from primary deposit will be 5 times of ₹ 10,000.
Given the primary deposit and the CRR, the total money creation can be estimated as:
Total Money Creation = Primary Deposit x\(\frac{1}{C R R}\)
= ₹ 10,000 x \(\frac{1}{0.2}\)
= ₹ 50,000

Question 17.
How does a central bank control the availability of credit by open market operation?
Answer:
Open market operation is the policy of the central monetary authority to sell and buy the government securities in the market. RBI purchases government securities from commercial banks and general public in a bid to increase the stock of high powered money in the economy. Similarly, RBI sells government securities to commercial banks and general public in a bid to decrease the stock of high powered money in the economy.

Question 18.
Describe any one method of quantitative credit control.
Answer:
Bank rate is the minimum rate at which the central bank discounts the first class bills of exchange and provides credit to the commercial banks. Higher bank rate reduces the lending capacity of the commercial banks as they get funds at a higher interest rate from RBI.

Consequently, credit contracts in the economy as public borrows less at high rate of interest. Similarly, lower bank rate increases the lending capacity of the commercial banks as they get funds at a lower interest rate from RBI. Consequently, credit expands in the economy as public borrows more at low rate of interest.

Question 19.
Explain the role of the Reserve Bank of India as the “lender of last resort”. (C.B.S.E 2018, C.B.S.E Outside Delhi 2019)
Answer:
During crisis, if commercial banks fail to meet the obligations of their depositors, the central bank plays a crucial role. The central bank stands by the commercial banks as a guarantor and advances necessary credit to the commercial banks against securities to ensure the solvency of the latter. This saves the commercial banks from possible breakdown.

Question 20.
Explain ‘Banker’s Bank’ function of central bank. (C.B.S.E 2012,2017, C.B.S.E Outside Delhi 2014, C.B.S.E Outside Delhi 2015.2019)
Answer:
Central bank act as banker to all other banks in the country just as commerical banks act as banker to general bank public. It performs following function:

• Making polices and regulation for commercial banks
• Maintaining cash reserve as deposit by the commercial banks
• Providing financial assistance to commercial banks during crisis

Question 21.
Explain ‘Government’s bank’ function of central bank. (C.B.S.E Outside Delhi 2015, C.B.S.E 2015,2017)
Answer:
Generally, central bank provides those services to the government which a commercial bank provides to his customers.
(i) As a banker to the government it makes transaction on the behalf of the government and government keeps its cash balance on current account with the central bank It accepts receipts and makes payments forthe government and carries out exchange, remittance and other banking operations.

(ii) As an agent, the central bank undertakes buying and selling of securities on behalf of the government.

(iii) As a financial advisor to the government, the central bank advises the government on important issues of economic policy such as deficit financing, devaluation of currency, trade policy and foreign exchange policy etc. and also guides the government from time to time.

Question 22.
Distinguish between a commercial bank and a central bank.
Answer:
Following are the points of distinction between the commercial banks and the central bank

Question 23.
Explain central bank’s function as currency authority. (C.B.S.E 2010)
Answer:
The central bank is the sole authority for the issue of currency in the country. All the currency issued by the central bank is its monetary liability. This means that the central bank is obliged to back the currency with assets of equal value. These assets usually consist of gold coin, gold bullion, foreign securities and the domestic government local currency securities. The country’s central government is authorized to borrow money from the central bank.

Question 24.
Explain how do ‘open market operations’ money creation by commercial banks. (C.B.S.E 2010,2011 Comp.)
Answer:
Open market operation is the policy of the central monetary authority to sell and buy the government securities in the market. RBI purchases government securities from commercial banks and general public in a bid to increase the stock of high powered money in the economy. Similarly, RBI sells government securities to commercial banks and general public in a bid to decrease the stock of high powered money in the economy.

Question 25.
Explain the components of Legal Reserve Ratio. (C.B.S.E 2012)
Answer:
Following are the components of Legal Reserve Ratio:
(i) Cash Reserve Ratio: Cash reserve ratio (CRR) is the minimum fraction of the total deposits with the commercial banks, which they are required to keep with the central bank.

(ii) Statutory Liquidity Ratio: Statutory Liquidity Ratio (SLR) is the minimum fraction of the total deposits with the commercial bank, which they are required to maintain in the form of specified liquid assets.

If CRR or SLR is high, banks are required to keep more part of their deposits in the form of reserves or securities and will have fewer funds to lend. This will contract credit. Similarly, if CRR or SLR is low, banks are required to keep less part of their deposits in the form of reserves or securities and will have more funds to lend. This will expand credit.

Question 26.
Explain the‘bank of issue’function of the central bank. (C.B.S.E 2015, Outside Delhi 2015)
Answer:
The central bank of a country is the sole note issue authority. In India, RBI as the central bank issues the notes of all denominations of the country except One Rupee note which is issued by the Ministry of Finance, Government of India. According to De Kock, the main reasons for granting power of issuing notes to central bank are:

• To maintain similarity in notes circulation and better regulation of currency
• To grant distinctive prestige to currency notes
• To avoid unnecessary credit creation by the commercial banks
• To make government inspection on issuing notes effective

Question 27.
Explain the role of reverse repo rate in controlling money supply. (C.B.S.E 2017)
Answer:
Reverse repo rate is the rate at which the RBI or Central Bank borrows from other commercial banks. It plays an effective role in controlling the money supply. For example, an increase in the reverse repo rate implies that the bank will get a higher rate of interest from the RBI on their lendings.

As a result, the banks will lend more to the RBI and less to the public thus, resulting in a decrease in the money supply. Similarly, in case the RBI decreases the reverse repo rate, the banks will get a lower rate of interest on their borrowings. As a result, they will lend more to public, which will in turn increase the money supply.

Question 28.
Distinguish between ‘Qualitative and Quantitative tools’ of credit control as may be used by a Central Bank. (C.B.S.E Outside Delhi 2019)
Answer:
Two types of methods are adopted by the central bank to control credit. These are quantitative methods and qualitative methods.
(a) Quantitative methods aim at controlling the cost and volume of credit created by commercial banks by using instruments like bank rate, open market operation and legal reserve ratios.

(b) Qualitative methods regulate the direction of flow of credit among various users rather than influencing just the availability of credit. Example: margin requirement, credit rationing, direct action and moral suasion.

Money and Banking Important Extra Questions Long Answer Type

Question 1.
Define money. Explain its main functions.
Answer:
Money can be defined as a generally acceptable medium that can be exchanged for goods and services, and can be used as a measure and store of value.
The following are the important functions of money:
(i) Medium of Exchange: Money acts as an intermediary in the exchange transactions of goods and services. Money solves the problem of double coincidence of wants by acting as a medium of exchange for all goods and services.

(ii) Unit of Value: Money acts as a convenient unit of account. The value of all the goods and services can be expressed in monetary units. Money as a unit of value helps in measuring the value of exchange for various goods and services.

(iii) Store of value: Money is not a perishable item and its storage costs are also considerably low. Moreover, it is acceptable to anyone at any point of time, Thus, money acts as a store of value for individuals.

(iv) Standard of Deferred Payments: Money acts as standard in terms of which future or deferred payments are stated because money maintains a constant value over a period of time.

Question 2.
What is meant by the supply of money? Discuss the factors which determine the supply of money.
Answer:
Money supply refers to the amount of money, which is in circulation in an economy at any given point of time.

Following factors determine the money supply:

• Monetary Standard: Money supply is affected by the monetary standard. If gold standard is adopted, there will be less supply of money. On the other hand, if paper currency system is adopted, money supply can be increased on the basis of demand.
• Production Volume: Volume of production also determines the money supply. If the level of production is high, the money supply will be more.
• Monetary Policy: Monetary policy of the government also affects the money supply. If the Central Bank increases the Cash Reserve Ratio there will be contraction in money supply.
• Fiscal Policy: Fiscal policy of the government determines the money supply. If government prepares deficit budget, money supply will increase.
• Other Factors: Banking habits, velocity of money, liquidity preference and the volume of money multiplier also determine the supply of money.

Question 3.
What are the various money stock measures?
Answer:
The various money stock measures are M₁, M₂, M₃, and M₄.
These are defined as follows:
M₁= C + DD + OD
C is currency held by the public. It consists of paper currency as well as coins. DD is the demand deposits in banks. Only the net demand deposits of banks are included in money supply because the part of demand deposits that represents inter-bank deposits held by one bank with another does not constitute demand deposits held by the public.OD is other deposits with the RBI.

OD includes demand deposits of Public Financial Institutions (like IDBI etc.), Foreign Central Banks and Government, the IMF, the World Bank, etc.

M₂ = M₁ + savings deposits with post office savings bank M₃ = M₁+ net time deposits of banks.
M₄ = M₃ + total deposits with post office savings organisation (excluding National Savings certificates)

Question 4.
Explain the main functions of central bank.
Answer:
The main functions of Central bank are as follows:
(i) Bank of Note Issue: In the modem time, issuing of notes is the main function of the central bank of every country in the world. Central bank has the monopoly in this regard. In India, RBI issues notes as a central bank of the country except one rupee note, which his issued by the ministry of finance, government of India.

(ii) Banker, Agent and Advisor to the Government: The central bank acts as a banker, agent and advisor to the government

(iii) Banker’s Bank: Central bank acts as a banker to all other banks in the country just as commercial banks act as a banker to general public.

(iv) Lender of the Last Resort: During crisis, central bank acts as a lender of the last resort. The central bank stands by the commercial banks as a guarantor and extends loans to ensure the solvency of the latter. This saves the commercial banks from possible breakdown.

(v) Custodian of the Foreign Exchange Reserve: The central bank acts as a custodian of the foreign exchange reserves of the country.

(vi) Custodian of Cash Reserve of the Commercial Banks: The central bank also keeps the cash reserves of the commercial banks.

(vii) Bank of Central Clearance, Settlement and Transfer: Central bank is an institution where all the transactions of commercial banks are cleared, settled, and transferred very easily.

(viii) Control of Credit: The central bank has got so many instruments to control credit like bank rate, open market operation, cash reserve ratio, credit rationing, moral suasion and direct actions.

Question 5.
Explain any two methods of credit control used by Central Bank. (C.B.S.E Outside Delhi 2013,2019)
Answer:
Methods of credit control used by central bank are as follows:
(i) Bank Rate: Bank rate is the minimum rate at which the central bank discounts the first class bills of exchange and provides credit to’the commercial banks. The central bank increases the bank rate to correct the situation of inflationary gap or excess demand in the economy, Higher bank rate reduces the lending capacity of the commercial banks as they get funds at a higher interest rate from the central bank.

Consequently, money supply contracts in the economy as the public borrows less at high rate of interest. Similarly, the central bank decreases the bank rate to correct the situation of deflationary gap or deficient demand in the economy, Lower bank rate increases the lending capacity of the commercial banks as they get funds at a lower interest rate from the central bank Consequently, money supply expands in the economy as public borrows more at low rate of interest.

(ii) Open Market Operations: Open market operation is the policy of the central monetary authority to sell and buy the government securities in the market. The central bank sells government securities to commercial -banks and general public in a bid to correct the situation of inflationary gap or excess demand.

This decreases the stock of high powered money in the economy. Similarly, the central bank- purchases government securities from commercial banks and general public in a bid to correct the situation of deflationary gap or deficient demand. This increased the stock of high powered money in the ecbnoitiy.

Question 4.
Explain the main functions of central bank.
Answer:
The main functions of Central bank are as follows:
(i) Bank of Note Issue: In the modem time, issuing of notes is the main function of the central bank of every country in the world. Central bank has the monopoly in this regard. In India, RBI issues notes as a central bank of the country except one rupee note, which his issued by the ministry of finance, government of India.

(ii) Banker, Agent and Advisor to the Government: The central bank acts as a banker, agent and advisor to the government

(iii) Banker’s Bank: Central bank acts as a banker to all other banks in the country just as commercial banks act as a banker to general public.

(iv) Lender of the Last Resort: During crisis, central bank acts as a lender of the last resort. The central bank stands by the commercial banks as a guarantor and extends loans to ensure the solvency of the latter. This saves the commercial banks from possible breakdown.

(v) Custodian of the Foreign Exchange Reserve: The central bank acts as a custodian of the foreign exchange reserves of the country.

(vi) Custodian of Cash Reserve of the Commercial Banks: The central bank also keeps the cash reserves of the commercial banks.

(vii) Bank of Central Clearance, Settlement and Transfer: Central bank is an institution where all the transactions of commercial banks are cleared, settled, and transferred very easily.

(viii) Control of Credit: The central bank has got so many instruments to control credit like bank rate, open market operation, cash reserve ratio, credit rationing, moral suasion and direct actions.

Question 5.
Explain any two methods of credit control used by Central Bank. (C.B.S.E Outside Delhi 2013,2019)
Answer:
Methods of credit control used by central bank are as follows:
(i) Bank Rate: Bank rate is the minimum rate at which the central bank discounts the first class bills of exchange and provides credit to the commercial banks.

The central bank increases the bank rate to correct the situation of inflationary gap or excess demand in the economy, Higher bank rate reduces the lending capacity of the commercial banks as they get funds at a higher interest rate from the central bank.

Consequently, money supply contracts in the economy as the public borrows less at high rate of interest. Similarly, the central bank decreases the bank rate to correct the situation of deflationary gap or deficient demand in the economy, Lower bank rate increases the lending capacity of the commercial banks as they get funds at a lower interest rate from the central bank Consequently, money supply expands in the economy as public borrows more at low rate of interest.

(ii) Open Market Operations: Open market operation is the policy of the central monetary authority to sell and buy the government securities in the market. The central bank sells government securities to commercial -banks and general public in a bid to correct the situation of inflationary gap or excess demand.

This decreases the stock of high powered money in the economy. Similarly, the central bank- purchases government securities from commercial banks and general public in a bid to correct the situation of deflationary gap or deficient demand. This increased the stock of high powered money in the economy.

Money and Banking Important Extra Questions HOTS

Question 1.
How does money solve the problem of double coincidence of wants? Explain with an example.
Answer:
Money acts as an intermediary in the exchange transactions of goods and services. Money solves services. For example, if a vegetable grocer wants a cart but the cart manufacturer wants clothes, and not vegetables, then the grocer can use money to buy a cart. Similarly, the cart manufacturer can then use the money to buy clothes. Thus, everyone’s wants can be satisfied as money acts as a medium of exchange.

Money is also called a bearer of options or generalised purchasing power. This indicates the freedom of choice that the use of money offers. This function can only be performed properly if the value of money remains constant.

Question 2.
What is the significance of centralised cash reserves with central bank?
Answer:
The significance of centralised cash reserves with central bank are:
(i) Banks get financial accommodation when required.
(ii) Central bank gets an opportunity to exercise control over the entire banking system of the country.

Here we are providing Class 12 Economics Important Extra Questions and Answers Chapter 2 National Income Accounting. Economics Class 12 Important Questions are the best resource for students which helps in class 12 board exams.

Class 12 Economics Chapter 2 Important Extra Questions National Income Accounting

National Income Accounting Important Extra Questions Very Short Answer Type

Question 1.
What is depreciation? (C.B.S.E. 2011), (2013 Comp.)
Answer:
Depreciation is the loss in the value of fixed capital due to normal wear and tear, foreseen obsolescence and normal rate of accidental damage. It is also known as consumption of fixed capital.

Question 2.
Define intermediate goods. (C.B.S.E. Outside Delhi 2011 Comp) (2013 Comp.))
Answer:
Intermediate goods are those goods, which are not meant for final consumption. These are raw materials used in the production of other goods, and services.

Question 3.
Define net exports.
Answer:
Net exports refer to the difference between the value of exports (X) and the value of imports (M) of a country during an accounting year.

Question 4.
What is saving?
Answer:
Saving is defined as that part of National Income, which is not spent on final consumption expenditure.

Question 5.
Give two examples of indirect taxes.
Answer:
Examples of indirect tax:
(i) Custom Duty
(ii) Excise Duty
(iii) Sales Tax

Question 6.
Define corporation tax.
Answer:
Corporation tax is a tax on the income of the corporations.

Question 7.
Define indirect tax.
Answer:
Indirect tax is a tax collected by an intermediary (seller) from the person who bears the ultimate economic burden of the tax (buyer). Its burden can be shifted by the tax payer on someone else.

Question 8.
How rate of saving is calculated?
Answer:
Rate of saving is calculated as:
\(\frac{\text { Net Domestic Saving }}{\text { Net Domestic Product }} \times 100\)

Question 9.
How rate of capital formation is estimated?
Answer:
Rate of capital formation is calculated as:
\(\frac{\text { Net Domestic Capital Formation }}{\text { Net Domestic Product }} \times 100\)

Question 10.
Give two examples of intermediate goods. (C.B.S.E. Outside Delhi 2013)
Answer:
Following are the two examples of intermediate goods:
(i) Cloth: Cloth is used as an intermediate good for manufacturing garments.
(ii) Steel: Steel is used as an intermediate good for manufacturing, say, bicycle.

Question 11.
Define a stock.
Answer:
Stock is an economic variable that is measured at a specific point of time. It is a static concept.

Question 12.
Define flow concept.
Answer:
Flow is an economic variable that is measured over a specific period of time. It is a dynamic concept.

Question 13.
Define a closed economy.
Answer:
A closed economy is the one, which does not undertake economic transactions with the rest of the world.

Question 14.
Define an open economy.
Answer:
An open economy is the one, which undertakes economic transactions with the rest of the world.

Question 15.
Is National Income a stock or flow variable?
Answer:
National Income is a flow variable because it is measured over a period of time.

Question 16.
What do you mean by money flow?
Answer:
Money flow refers to the flow of money value across different sectors in an economy.

Question 17.
State which of the following is a stock and which is a flow?
(i) Wealth
(ii) Cement Production
Answer:
(i) Wealth is a stock concept because it is measured at a point of time.
(ii) Cement production is a flow concept because it is measured over a period of time.

Question 18.
State whether the following is a stock or flow:
(i) Population of a country
(ii) Number of births
Answer:
(i) Population of a country is a stock concept because it is measured at a point of time.
(ii) Number of births is a flow concept because it is measured over a period of time.

Question 19.
Define flow variable. (C.B.S.E Outside Delhi 2012), (C.B.S.E 2011)
Answer:
Flow variables are the variables which are measured over a specific period of time.

Question 20.
What are stock variables? (C.B.S.E 2012), (C.B.S.E Outside Delhi 2011)
Answer:
Stock variables are those variables which are measured at a specific point of time.

Question 21.
What do you mean by circular flow?
Answer:
Circular flow is a pictorial illustration showing the flow of receipts of and payments for goods and . services, and factor of production across different sectors in an economy.

Question 22.
Give any two examples of flow concept. (C.B.S.E 2019)
Answer:
(i) National Income
(ii) Population growth
(iii) Investment .

Question 23.
What are leakages in circular flow?
Answer:
Leakages in the economy refer to the withdrawal of income from the process circular flow in the form of savings, taxes and imports from the foreign sector. For example: Savings.

Question 24.
What are injections into circular flow?
Answer:
Injections in the economy refer to the contribution of income into the process circular flow in the form of investment, government spending and exports to the foreign sector. For example: Investment.

Question 25.
Who supplies factor services in the circular flow?
Answer:
Household sector supplies factor services in the circular flow.

National Income Accounting Important Extra Questions Short Answer Type

Question 1.
Distinguish between goods and services.
Answer:
Goods are physical products, capable of being delivered to a purchaser. It involves the transfer of ownership from seller to buyer. For example: television, computers, car, etc. Services are all those economic activities essentially intangible that provide satisfaction of wants and are not necessarily linked to the sale of a product. For example: transportation, banking, insurance, etc.

Question 2.
What is the difference between final and intermediate good? (C.B.S.E Outside Delhi 2017), (C.B.S.E 2009,2017)
Answer:
Final goods are those goods which are ready for consumption or capital formation by final users. Intermediate goods, on the other hand, are those goods which not meant for final consumption. These are raw materials used in the production of other goods and services. For example: A chair is a final good, but wood, cane, foam, cloth, etc. used to produce chair are all intermediary goods.

Question 3.
Which among the following are final goods and which are intermediate goods? Give reasons. (C.B.S.E20I8)
(a) Milk purchased by a tea stall
(b) Bus purchased by a school
(c) Juice purchased by a student from the school canteen
Answer:
(a) Milk purchased by a tea stall is an intermediate good that will be used to produce the final good, that is, tea.

(b) Bus purchased by a school is a final product because it is used by the students and staff for final consumption. It is a kind of investment by the school as the school will use the bus for several years.

(c) Juice purchased by a student from the school canteen is a final product because it is ready for the final consumption.

Question 4.
Distinguish between consumer goods and capital goods. Which of these are final goods? (C.B.S.E 2010)
Answer:
Consumer goods are those goods which directly satisfy the wants of the consumer. These are used as final consumption goods. Consumer goods may be durable items, semi-durable items, non-durable and services. Capital goods, on the other hand, are those goods which are producer’s fixed assets, and are used in the production of other goods and services. Both, consumer goods and capital goods are final goods as these are meant for final use by the user.

Question 5.
Giving reasons, classify the following into intermediate and final goods:
(i) Machines purchased by a dealer of machines
(ii) A car purchased by a household
Answer:
(i) Machine purchased by a dealer of machines is a intermediate goods because this machine is used to produce other goods.
(ii) A car purchased by a household is a final good because this car is ready for the final consumption.

Question 6.
Giving reason identify whether the following are final expenditure or intermediate expenditure:
(i) Expenditures on maintenance of an office building
(ii) Expenditure on improvement of a machine in a factory
(iii) Computers installed in an office
(iv) Mobile sets purchased by a mobile dealer
(v) Furniture purchased by a school
(vi) Chalks, dusters etc. purchased by a school
Answer:
(i) Expenditure on maintenance of an office building is an intermediate expenditure as building will be used further for production activities.

(ii) Expenditure on improvement of a machine in a factory is a final expenditure as this machine is ready to be used by the labour who is the final user.

(iii) Computers installed in an office are final products as they are ready for final use and directly satisfy the users in the office.

(iv) Mobile sets purchased by a mobile dealer are intermediate products as they are purchased for resale.

(v) Furniture purchased by a school is a final product because it is used by the students and staff for final consumption. It is a kind of investment by the school as the school will use the furniture for several years.

(vi) Chalks, dusters, etc. purchased by a school are final products as they are used by the final users, that is, teachers.

Question 7.
Explain the circular flow of income. (C.B.S.E. 2013,2017)
Answer:
The circular flow with two-sector economy can be explained with the help of the following diagram:

The above diagram shows the two sectors in the economy-the household sector and the production sector. Household sector has the endowment of factors of production (land, labour, capital and entrepreneurship) and it sells them to the production sector which produces goods and services by using these factor inputs.

Production sector sells the goods and services it produces to the household sector. Thus, the output produced by the production sector is consumed by the household sector. It is called real flow, which involves flow of goods and services.

The production sector makes factor payment to the household sector in terms of wages for labour services, rent for land, interest for capital and profits to entrepreneurship. The household sector uses this income to incur expenditure on purchase of consumer goods and services produced by the production sector. This flow of money payments and expenditure is known as money flow.

Question 8.
What is real flow and money flow?
Answer:
Real flow refers to the flow of goods and services across different sectors in an economy. Households provide factors of production such as land, labour, capital and entrepreneur to the firms. The firms, in turn, provide the goods and services so produced to the households.

Money flow refers to the flow of money value across different sectors in an economy. Factor incomes such as rent, wages, interest and profit flow from production sector to household sector and the payment for consumption of final goods and services or consumption expenditure flow from household sector to production sector.

Question 9.
Giving reason, categorise the following into stock and flow:
(i) Capital
(ii) Saving
(iii) Gross Domestic Product
(iv) Wealth (C.B.S.E. 2013)
Answer:
(i) Capital is a stock concept because it is measured at a point of time.
(ii) Saving is a flow concept because it is measured over a period of time.
(iii) Gross Domestic Product (GDP) is a flow concept because GDP is measured over a period of time.
(iv) Wealth is a stock concept because it is measured at a point of time.

Question 10
Will the following be a part of domestic factor income of India? Give reasons for your answer.
(i) Old age pension given by the government
(ii) Factor income from abroad
(iii) Salaries of Indian residents working in Russian Embassy in India
(iv) Profits earned by a company in India, which is owned by a non-resident
Answer:
(i) Old age pension given by the government will not be a part of domestic factor income of India be-cause it is a transfer payment.

(ii) Factor income from abroad will not be a part of domestic factor income of India because it is a part of national factor income of India. Domestic factor income becomes national factor income by adding factor income from abroad to domestic income.

(iii) Salaries received by the Indian residents working in the Russian Embassy in India will be a part of the domestic factor income of India because these are the wages to Indian residents within the national territory of India.

(iv) Profits earned by a company in India, which is owned by a non-resident is not a part of domestic factor income of India because it is a retained earnings of resident company abroad. It is the part of factor income to abroad.

Question 11.
Explain the term ‘compensation of employees’ and its components. Giving reasons, state whether the following are treated as compensation of employees:
(i) Gifts by employers
(ii) Bonus
Answer:
Compensation of employees means the wages and salaries paid for mental and physical abilities of labourers in cash and kind. Following are the components of compensation of employees:

• Wages and salaries in cash
• Compensation in kind
• Employers’ contribution to social security schemes
• Pension on retirement

(i) Gifts by employers are treated as compensation of employees because it is a payment made in kind.
(ii) Bonus is the part of supplementary income and hence, treated as compensation of employees.

Question 12.
Give the meaning of factor income to abroad and factor income from abroad. Also give an example of each.
Answer:
Factor income from abroad is the sum total of factor incomes earned by normal residents of a country for abroad. For example, wages received by the Indian employees wonclng m American Embassy, Factor income to abroad means payments to foreigner for their goods and services. For example, wages to foreign technical export.

Question 13.
Why are exports included in the estimation of domestic product by the expenditure method? Can Gross Domestic Product be greater than Gross National Product?
Answer:
Expenditure method estimates expenditure on domestic products, that is, expenditure on final goods and services produced within the economic territory of the country. It includes expenditure by both residents and non-residents. Exports, though purchased by non-residents, are produced within the economic territory and therefore, a part of domestic product.

Gross Domestic Product can be greater than Gross National Product if factor income paid to the rest of the world is greater than the factor income received from the rest of the world, that is, when net factor income received from abroad is negative.

Question 14.
Define the problem of double counting in the computation of national income. State any two approaches to correct the problem of double counting. (C.B.S.E 2019)
Answer:
Double counting refers to counting of an output more than once while passing through various stages of production. The problem of double counting arises when the value of some goods and services are counted more than once while estimating national income. In measuring the national income, the value of only final goods and services is to be included. In other words, the problem of double counting arises when value of intermediate goods is also included along with the value of final goods.

Question 15.
How to Avoid Double Counting?
Answer:
There are two alternative ways of avoiding double counting
(a) Final Output Method: According to this method, the value of only final goods should be added to determine the national income.
(b) Value Added Method: Deduct intermediate consumption from value of output to arrive at value added.

Question 16.
Describe the precautions that should be taken while measuring National Income using income method. (C.B.S.E. Outside Delhi 2017)
Answer:
Following precautions should be taken while measuring the National Income using income method:

• The income from the illegal activities such as theft, smuggling and gambling should not be included in the National Income.
• Windfall gains such as lottery should not be included.
• Transfer payment such as unemployment allowance, old age pension, donation to the religious
  places, etc. should not be included in the National Income. ,
• The value of the production kept for self-consumption should be included in the National Income.
• The imputed rent of the house in which landlord himself is living should also be included.

Question 17.
Describe the precautions that should be taken while measuring National Income using product method. (C.B.S.E. Outside Delhi 2017)
Answer:
Following precautions should be taken while measuring the National Income using product method or value added method:

• The value of self-consumption output should be included in the National Income.
• Imputed rent on the owner occupied house should be taken into consideration while measuring the National Income.
• Value of the sale and purchase of second hand goods and property should not be included in National Income.
• The imputed value of the government, corporate and household own-production of fixed capital should be included in the National Income.

Question 18.
Describe the precautions that should be taken while measuring national income using expenditure method. (C.B.S.E. Outside Delhi 2017)
Answer:
Following precautions should betaken while measuring the national income using expenditure method:
(i) While calculating the total expenditure, only the final-expenditure must be included and not the intermediate expenditure. If both of these are included, the problem of double counting arises.

(ii) Expenditure on second hand goods should not be included in final expenditure since the production of old goods took place in previous years and not in the current year.

(iii) The expenditure on old or new shares should not be included in final expenditure because it is only a transfer of wealth, which has not affected production at all.

(iv) Only gross investment should be included in total expenditure. Gross investment also includes expenditure on depreciation.

(v) Factor income (property income, labour income, interest, rent, wages) received by domestic residents from foreign countries should be included in exports, Similarly, factor income paid by domestic territory to foreign residents should be included in imports.

Question 19.
Given nominal income, how can we find real income? Explain. (C.B.S.E. 2018)
Answer:
Real income is the value of current income at base year prices. Nominal income, on the other hand, is the value of income or output at current year prices. Given nominal income, real income can be calculated by taking the ratio of nominal income to the price index and multiplying the result by 100.
That is \( \text { Real Income }=\frac{\text { Nominal Incóme }}{\text { Price Index }} \times 100\)

Question 20.
“Gross Domestic Product (GDP) does not give us a clear indication of economic welfare of a country.” Defend or refute the given statement with valid reason. (C.B.S.E. 2019)
Answer:
The given statement is defended as GDP may not take into account:
(a) Non-monetary Exchanges: The value of these activities in an economy are not evaluated in monetary terms. For example, sen/ices of a housewife such as cooking, gardening, etc. are not included in GDP due to non-availability of data. However, such activities do influence the economic welfare.

(b) Externalities: It refers to the benefits or harms of an activity caused by a firm or an individual for which they are not paid or penalised. Externalities can be positive or negative.

(c) Distribution of GDP: It is possible that with rise in GDP, inequalities in distribution of income may also increase. That is, the gap between the rich and poor increases. GDP does not take into account changes in inequalities in the distribution of income.

Question 21.
“Higher Gross Domestic Product (GDP) means greater per capita availability of goods in the economy.” Do you agree with the given statement? Give valid reason in support of your answer. (C.B.S.E 2019)
Answer:
The given statement is not true. Higher Gross Domestic Product (GDP) does not necessarily mean greater per capita availability of goods in the economy. The level of economic welfare may not rise if with an increase in the level of Gross Domestic Product (GDP), the distribution of GDP becomes more unequal.

Since only a few people benefit from the increase in the level of income, rich are becoming richer and poor are becoming poorer. If GDP growth increases the gap between rich and poor, then it cannot be treated as an index of welfare for a country. Moreover, if the population growth rate is more than the rate of growth of GDP, the per capita availability of goods and services will actually decline.
Or
Explain the meaning of Real Gross Domestic Product and Nominal Gross Domestic Product, using a numerical example. (C.B.S.E 2019)
Answer:
Real GDP is the value of current income at base year prices. Nominal GDP, on the other hand, is the value
of income or output at current year prices. Given nominal income, real income can be calculated as:
\(\text { Real GDP }=\frac{\text { Nominal GDP }}{\text { Price Index }} \times 100\)

Suppose in the year 2010, a country produced 100 units of bread and the price was ₹ 10 per bread. So, the GDP at current price or Nominal GDP was 100 x ₹ 10 = ₹ 1,000.
In 201 I, the same country produced 10 units at ₹ 15 per bread. Therefore, the nominal GDP in 201 I was 10 x ₹ 15 = ₹ 1,650. However, Real GDP in 2011 calculated at the base year price will be I 10 x ₹10 = ₹1, 100.

Question 22.
Distinguish between ‘real’ gross domestic product and ‘nominal’ gross domestic product. Which of these is a better index of welfare of the people and why? (C.B.S.E Outside Delhi 2013)
Answer:
Following are the points of distinction between real and nominal Gross Domestic Product (GDP):

Real GDP offers a better perspective than nominal GDP when tracking economic output over a period of time. Real GDP increases only when there is an increase in the production of goods and services.

As a result, change in income and employment can be estimated, However, since nominal GDP is valued at current price, it can increase even if there is no change in the production of goods and service. It neglects the impact of inflation on production.

Question 23.
Explain ‘non-morietary exchanges’ as a limitation of using GDP as an index of welfare of a country. (C.B.S.E. 2017)
Answer:
GDP does not take into account those tr^nsidtidfts that are not expressed in monetary terms. This is a major limitation of GDP as an index of welfare of a country as these are many transactions which although are non-monetary in nature but add To the growth and development of the nation. For example, work done by a social worker or a homemaker, Here, a-homemaker adds to the welfare of the family by keeping them healthy, which in turn-adds to the welfare of the country.

However as such transactions are non-monetary in nature, these are not included while calculating the domestic income. In LDCs, there are various non-monetary: exchanges, particularly in the rural areas and household sector. Consequently, such transactions remain outside the domain of GNP leading to underestimation of the value of GNP. Thus GNP cannot be regarded as an index of economic welfare, as it ignores the household and the volunteer sector

National Income Accounting Important Extra Questions Long Answer Type

Question 1.
Distinguish between domestic product and national product giving suitable examples in support of your answer.
Answer:
Domestic product is defined as the market value of all the final goods and services produced by the factors of production located in the country during a period of one year.

On the other hand, national product is the market value of all the final goods and services produced by the factors of production located in the country during a period of one year plus Net Factor income from Abroad (NFIA). NFIA is the difference between the incomes of residents for factor services to the rest of the world and payments to the factor services of non-residents in the domestic territory during a period of one year,

National Product = Domestic Product + NFIA
Example: If the domestic product is ₹ 5,000 and Net Factor Income from Abroad is ₹ 100, then theNational product will be:
National Product = ₹ 5000 +₹ 100 = ₹ 5100

Question 2.
Will the following be included in domestic factor income of India? Give reasons for your answer.
(i) Profits earned by a foreign bank from its branches in India
(ii) Scholarships given by Government of India
(iii) Profits earned by a resident of India from his company in Singapore
(iv) Salaries received by Indians working in American Embassy in India
Answer:
(i) Profits earned by a foreign bank from its branches in India will not be included in domestic factor income of India because it is the factor income of a foreign country or it is the income of non resident in India.

(ii) Scholarships given by the government of India will not be included in domestic factor income because it is a transfer payment and does not contribute to the flow of goods and services.

(iii) Profits earned by a resident of India from his company in Singapore will not be included in domestic factor income of India because it is the income of the resident earned abroad.

(iv) Salaries received by Indians working in American Embassy in India will be included in domestic factor income of India because it is the income of the normal residents of India, earned within the domestic territory of India.

Question 3.
Explain the expenditure method of estimating National Income. (C.B.S.E. 2007)
Answer:
Expenditure method of estimating National Income calculates the sum total of the expenditure by all the .final users: of goods and sendees plus addition to the stock with the producers and distributors. According to this method, expenditures on consumption and investment goods and government expenditures are aggregated as follows:

(i) Consumption Expenditure (C): Consumption expenditure includes expenditure on all goods and services produced and sold to the final consumer during the year.

(ii) Investment Expenditure (I): Investment is the use of today’s resources to expand tomorrow’s production or consumption. Investment expenditure is expenditure incurred on by business firms on:
(a) New plants;
(b) Adding to the stock of inventories; and
(c) Newly constructed houses

(iii) Government Expenditure (G): Government expenditure includes all government expenditure on currently produced goods and services but excludes transfer payments while computing national income.

(iv) Net Exports (X – M): Net exports are defined as total exports minus total imports.
Under expenditure method, National Income is calculated by summing up the final consumption expenditure, expenditure by business on plants, government spending and net exports.
National Income = C + I + G + (X-M)

Question 4.
What is the problem of double counting? How can this problem be avoided?
Answer:
Double counting means estimating the value of goods and services more than once. This problem takes place when the output of all the producers is added up without considering the fact that output of one producer may be the input for the other producer. The problem of double counting should be avoided because it overestimates the national income.

To get rid of the problem of double counting, the value added method is used. Value added method estimates the contribution of each individual firm at different stages of production. It is assumed that every individual firm adds to the value of the product which it purchases from some other firm as intermediary’ goods. When we sum the value added by each individual firm at different stages of production, we attain the National Income without double counting.

The estimation of value added by an individual firm can be explained with the help of an example. Suppose there are four types of firms: farmer, thread manufacturer, cloth manufacturer and readymade garment manufacturer. Their value of output, intermediate consumption and value added are displayed in the table below:

Thus, the Gross Value Added by a Firm is the difference between the value of output and the value of intermediate consumption.

Question 5.
Giving reason explain how should the following be treated in estimating Gross Domestic Product at Market Price?
(i) Fees to a mechanic paid by a firm
(ii) Interest paid by an individual on a car loan taken from bank
(iii) Expenditure on purchasing a car for use by a firm (C.B.S.E 2014)
Answer:
(i) Fees to a mechanic by a firm will be included while estimating the GDPMP because the fee is being paid in return for the service provided by the mechanic.

(ii) Interest paid by an individual on a car loan taken from a bank will be included while estimating GDP_Mp because it is an income for the lending bank.

(iii) Expenditure on purchasing a car for use by a firm will be included while estimating GDP_Mp because the car is purchased by the firm for final use.

National Income Accounting Important Extra Questions HOTS

Question 1.
Are the following stocks or flows?
(i) Investment
(ii) Monetary expenditure
(iii) A hundred Rupee Note
(iv) A family’s consumption of salt
(iv) Services of a tutor
(vi) Production of cement
(vii) Machinery of a sugar mill.
Answer:
Flow is an economic variable that is measured over a specific period of time. Investment, monetary expenditure, a family’s consumption of salt, services of a tutor and production. Cement are flow concepts. Stock is an economic variable that is measured at a specific point of time. A hundred rupee note and machinery of a sugar mill are stock concepts.

Question 2.
Export receipts are not a part of net factor income from abroad. Why?
Answer:
Export receipts are not a part of net factor income from abroad because:
(i) Exports refer to the purchase of domestically produced goods by the rest of the world. Goods produced within the domestic territory of a country are to be treated as a part of GDP.

(ii) Export receipts refer to revenue of the firms from the sale of its output. These are not the receipts of factor incomes from abroad, which are to be in the form or rent, interest, profit and wages.

Here we are providing Class 12 Political Science Important Extra Questions and Answers Chapter 3 Politics of Planned Development. Political Science Class 12 Important Questions are the best resource for students which helps in class 12 board exams.

Class 12 Political Science Chapter 3 Important Extra Questions Politics of Planned Development

Politics of Planned Development Important Extra Questions Very Short Answer Type

Question 1.
Which are the two models of development? Which model of development was adopted by India? (C.B.S.E. 2013)
Answer:
The two models of development are liberal- capitalist model and the socialist model. The Socialist model was adopted by India.

Question 2.
Differentiate between the capitalist and the socialist models of development. (C.B.S.E. 2014)
Answer:
The difference between the capitalist and the socialist models of development are as follows:

1. The capitalist model believes in open competition in the market, while the socialist model emphasizes state control over the production and distribution system.
2. The capitalist model does not believe in granting permission or Licence System, while in the socialist model, permission or license is granted to the factory owner.

Question 3.
Mention any two merits of the Green Revolution. (Imp.) (C.B.S.E. 2013)
Answer:

1. The major achievement of the Green Revolution was to boost the production of major cereals viz. wheat and rice.
2. As a result of the Green Revolution, the crop pattern in India has undergone significant changes.

Question 4.
How many Five Year Plan has been completed so far?
Answer:
12 Five Year Plan has been completed so far. The term of the 12th Five Year Plan was from April 2012 to March 2017.

Politics of Planned Development Important Extra Questions Very Short Answer Type (2 Marks)

Question 1.
What is meant by planned develop¬ment? (Sample Paper)
Answer:
Planned development means to develop a design or plan for development.

Question 2.
Mention the main objective of the Second Five Year Plan. (Imp.) (Sample Paper, C.B.S.E. 2012 Outside Delhi)
Answer:
The main objective of the Second Five Year Plan was to enhance the growth of Industrial development.

Question 3.
Who was P.C. Mahalanobis? (Imp.) (C.B.S.E. 2009)
Or
What was significant about P.C. Mahalanobis? (C.B.S.E 2013)
Answer:
The second five-year plan was drafted by a team of economists and planners under the leadership of P.C. Mahalanobis.

Question 4.
Who was popularly known as the ‘Milkman of India’? (C.B.S.E. 2013)
Answer:
Verghese Kurien.

Question 5.
What was the ‘Bombay Plan’? (C.B.S.E. 2013)
Answer:
The ‘Bombay Plan’ was a joint proposal of big industrialists (1944) for setting up a planned economy in the country.

Question 6.
What is meant by Decentralised Planning? (Imp.) (C.B.S.E. 2012, 2014)
Answer:
Decentralized planning meant planning which is approachable by the common man. It involved people directly in the developmental activities through voluntary citizen’s organizations.

Question 7.
Differentiate between the main objectives of the First and the Second Five Year Plans.
Answer:
There was a big debate whether more importance should be given to Industries or Agriculture. The First Five-Year Plan stressed on development of agriculture while the Second Five- Year Plan stressed heavy industries.

Question 8.
What is meant by geopolitics? (C.B.S.E. 2012)
Answer:
Geo-politics means politics of land territory. According to G.N. Singh, “A science dealing with the influence exercised by physical geography in determining conditions of political life and relation between state.” According to Houshofer, “Geopolitics demonstrates the dependence of all political development on the permanent reality of the soil.”

Question 9.
How was Kerla’s plan based on decentralized planning? (C.B.S.E. Sample Q.P. 2017)
Answer:
Kerala’s plan was based on decentralized planning because peoples directly involved in development activities through voluntary citizen organizations. The officials took the initiative to involve people in making plans at the Panchayat, block, and district level.

Question 10.
Why does development have different meanings for different sections of the people? (C.B.S.E. 2017)
Answer:
Different sections of the people have different meanings of development. For example, the iron or resources lie in some of the most underdeveloped and pre-dominantly tribal districts of the Orissa state. The state government passed the Memorandum of Understanding (MoU) for the development and global demand for steel. The tribal people fear that the setting up of industries would cause displacement from their homes and livelihood. They were also having the fear that mining and industry would pollute the environment. So, they protested and demanded the cancellation of the agreement.

Choose the correct answer :

Question 11.
Who said, “Planning is a way of organizing and utilizing resources to maximum advantage in terms of defined social ends”?
(a) K.T. Shati
(b) Planning Commission of India
(c) Dr. Rajinder Prashad
(d) None of these.
Answer:
(b) Planning Commission of India.

Question 12.
In India, planning was conceived as the main instrument of:
(a) Political development
(b) Cultural development
(c) Social development
(d) Socio-economic development.
Answer:
(d) Socio-economic development.

Question 13.
How many plans have been completed so far in India?
(a) Twelve
(b) Six
(c) Eight
(d) Four.
Answer:
(a) Twelve.

Question 14.
The Planning Commission in India was set up in :
(a) 1953
(b) 1957
(c) 1960
(d) 1950.
Answer:
(d) 1950.

Question 15.
The Chairman of the National Development Council is :
(a) President of India
(b) Finance Minister of India
(c) Prime Minister of India
(d) Chief Minister of U.P.
Answer:
(c) Prime Minister of India.

Politics of Planned Development Important Extra Questions Short Answer Type

Question 1.
Critically examine the major outcomes of the Indian model of a mixed economy. (Imp.) (C.B.S.E. 2016)
Answer:

1. The foundations of India’s future economic growth were laid.
2. Mega dams like Bhakhra-Nangal and Hirakund for irrigation and power generation were undertaken.
3. Abolition of the colonial system of Zamindari.
4. The tenants who worked on someone else’s land were given greater legal security against eviction.

Question 2.
Describe the strategy adopted by the Government of India to promote the Green Revolution. (C.B.S.E. 2015)
Answer:
In the 1960s, India was facing a food crisis due to many reasons. India was dependent on the U.S.A. for food which was putting many limitations on India’s policies. Indian Government decided to make India self-sufficient in food. Hence the government adopted a new strategy for agriculture in order to increase food production. Since the mid-1960s, the traditional agricultural practices were gradually replaced by modern technology.

The use of high-yielding variety seeds and the increased use of fertilizers and irrigation are simply called Green Revolution or modern agricultural technology. As a result of the Green Revolution, the area under improved seeds has gone up from about 15 million hectares during 1970-71 to nearly 75 million hectares in 1995-96. The new varieties are of a short term duration and consequently, instead of growing one crop, two crops and sometimes even three crops are grown.

Question 3.
Write a note on the mixed economy.
Answer:
The economy is generally considered of two types. One is a capitalist economy and the other is a socialist economy. A mixed economy is based on the co-existence of these two types of economy.

In most of the poor countries of the world, a mixed economy prevails. A mixed economy is an economy where there is public and private ownership of the means of production. Production is undertaken for both welfare and profit motive. Production in the private sector is a for-profit motive while in the public sector, it is for a welfare motive. Thus, the pattern of mixed economy is the co-existence of public and private sector units.

Question 4.
Examine the major outcomes of the Green Revolution. (C.B.S.E. Sample Q.P. 2017)
Or
Evaluate any four benefits of the ‘Green Revolution’. (C.B.S.E. 2018)
Answer:

1. The major achievement of the Green Revolution was to boost the production of major cereals viz wheat and rice.
2. As a result of the Green Revolution, the crop pattern in India has undergone significant changes.
3. The green revolution largely increased the growth of the local manufacturing sector which created new jobs and contributed to the country’s GDP.
4. India became self-sufficient in food and India was in a position to pay back all loans it had taken from the World Bank for the purpose of the Green Revolution.

Question 5.
List any two merits and two demerits of the Green Revolution. (Imp.) (C.B.S.E. 2014)
Or
Explain any two merits and two demerits each of the Green Revolution. (C.B.S.E. 2015)
Answer:
Merits of Green Revolution

1. The major achievement of the Green Revolution was to boost the production of major cereals viz wheat and rice.
2. As a result of the Green Revolution, the crop pattern in India has undergone significant changes.
3. The green revolution largely increased the growth of the local manufacturing sector which created new jobs and contributed to the country’s GDP.
4. India became self-sufficient in food and India was in a position to pay back all loans it had taken from the World Bank for the purpose of the Green Revolution.

Demerits of Green Revolution

1. Green Revolution had widened the gap between poor and small farmers and rich landlords.
2. Green Revolution has proved beneficial to the medium category peasants because they can receive the advantage of mediation between small farmers and rich landlords.

Question 6. State any two differences between the First Five Year Plan and the Second Five Year Plan. (C.B.S.E. 2013)
Answer:

1. In the First Five Year Plan, priority was given to the development of agriculture. The target of increased production of foodgrains, jute, and cotton was mainly achieved by bringing more land under cultivation. But in the Second Five Year Plan (1956-61), the top priority was accorded to the setting up of ‘Socialistic Pattern of Society’ on the basis of Industrial Policy statement 1956. In the Second Plan, the major thrust was to accelerate the process of industrialization by laying emphasis on basic and heavy industries.
2. The success of the First Five Year Plan was primarily due to a good harvest in the last two years of the plan. During the Second Five Year Plan, prices increased by 30% against a decline of 13% during the First Plan.

Politics of Planned Development Important Extra Questions Long Answer Type

Question 1.
Describe briefly the composition and four functions of the Planning Commission of India. (Imp.) (C.B.S.E. 2011, Outside Delhi)
Or
How was the Planning Commission of India set up? Mention its scope of work. (C.B.S.E. 2010, Outside Delhi)
Answer:
The Planning Commission at the center is the apex body in the planning machinery of the country. The Planning Commission was set up in March 1950 by a resolution of the Government of India. In 1950, Planning Commission was set up under the chairmanship of Prime Minister Pt. Jawaharlal Nehru.

Organization of Planning Commission: The composition of the Planning Commission has kept on changing according to the requirements of the time and whims of the government. The first Planning Commission consisted of a Chairman, a Deputy Chairman and five members. The Prime Minister is the Chairman and the Planning Minister is the Deputy Chairman. First Planning Commission was essentially composed of politicians.

Later on, Pt. Nehru added certain members from the public such as administrators, economists, and technical experts. Thug, the Planning Commission came to combine the political and non-political men. In addition to Chairman and Deputy Chairman, there are ten to twelve other members. Among them, there are five to six ministers, e.g., Minister for Human Resources Development, Finance Minister, Home Minister, Minister of Agriculture, and Minister of State for Planning. Besides, there are a few more members.

The Commission is divided into three major parts:
(a) Programme Advisors
(b) General Secretariat and
(c) Technical Division.

Functions of the Planning Commission

The resolution which created the Planning Commission mentioned the following functions of the Planning Commission :

1. Assessment of Country’s Resources. To assess the material, capital, and human resources of the country, including technical personnel, and to investigate the possibilities of augmenting such of those resources as are found to be deficient in relation to the nation’s requirements.
2. Formulation of Plans. To formulate a plan for the most effective and balanced utilization of the country’s resources.
3. Determine Priorities. To define the stages of the Plan and propose the allocation of resources on the determination of priorities. The Ninth Plan has given priorities to the power sector, transport, and communications.
4. To indicate the factors which are tending to retard economic development and determine the conditions in view of the current social and political situation should be established for the successful execution of the plan.
5. To suggest machinery for securing the successful implementation of each stage of the plan.
6. To appraise from time to time the progress made in the execution of each stage of the plan and to recommend necessary adjustments in policy and measures as may be necessary for the light of such appraisal.
7. To make such interim recommendations on the basis of the prevailing economic conditions, current policies, etc., as may appear to be appropriate.
8. To examine such specific problems as may be referred to it for advice by the Central and State Governments.

Besides the above-mentioned functions, another most important task of the Planning Commission is that of formulating the plans for development and assessment of their performance. Originally, Planning Commission was set up as an expert advisory body only. But with the passage of time, the Planning Commission has built for itself a status of high prestige and commanding influence; In view of the enormous increase in the powers of the Planning Commission, it has come to be known as the Economic Cabinet.

In January 2015, NITI Aayog was established in place of the Planning Commission.

Question 2.
Elaborate any three arguments are given by the critics against the mixed model of the economy adopted by India. (C.B.S.E. 2019)
Answer:
Following are the arguments given by the critics against the mixed model of the economy adopted by India.

1. Critics argue that the planners have not provided sufficient space for the private sector to grow.
2. Enlarge public sector have their own interests as they invested more and they create hurdles for the private small sectors.
3. State policies also put restrictions on the export items and domestic market due to lesser competition do not have the incentive to improve their products. The state instead of helping the poor, help the private sector to make more profit and thus create a new ‘middle class’ with high salaries and perks.

Question 3.
Write a note on Niti Aayog.
Answer:
Niti Aayog with a new structure and focus on a policy is the replacement of 64 years old planning commission, which was seen as a vestige of the socialist era. The replacement of the Planning Commission with the new institution more relevant and responsive to the present economic needs and climate in the country had long been demanded and expected. Since 1990, the Government had been dismissive of the Planning Commission, because after the dismissal of licensed government this commission was working like an advisory-board only.

Former Prime minister Rajiv Gandhi had called the commission a bunch of jokers. Even Manmohan Singh and former planning commission Deputy Chairman like K.C. Pant tried some attempts to explore some changes. Former Centre-minister, Kamal Nath named this commission as ‘ArmChair Advisor’ and Parking plot for bureaucrats. Arun Maria, a member of the Planning Commission who headed the Boston Consulting Group (BCG) in India, recommended the changes in the structure, role function, and resources.

Narendra Modi, as the Chief-minister Gujrat had many times pointed the short-comings of the planning commission that is why in May 2014, Narendra Modi led the National Democratic Alliance government to announce the replacement of the 65 years old planning commission with a new institution called Niti Aayog. He called upon an important meeting of Chief-ministers in Delhi on 7 December 2014 and stressed upon greater participation of the state governments in policy-making stressing on India’s diversity and plurality, the Aayog will foster a spirit of co-operative federalism with the sole principle of developing a pro-people, pro-active and participative development agenda stressing on empowerment and equality.

Composition of Niti Aayog Niti Aayog-National Institution for transforming, India is composed to ensure greater participation of state governments in policy making-thus fostering co-operative federalism-and will be more attuned to the nation’s contemporary needs.

1. Chairperson- Prime-minister
2. Vice-Chair-person- Nominated by the prime- minister
3. Chief-Executive officer (C.E.O.) – nominated by prime-minister.
4. Governing Council-Chief ministers and Lt. Governors of Union Territories.
5. Regional Council (formed on a need basis)- Chief Ministers and Lt. Governors of Union-Territories
6. Full time-members- Maximum five-members.
7. Short term members- Two ex-officio-members
8. Ex-officio members-Four central ministers Special Invitees- Experts, specialists, practitioners with domain knowledge.

On January 5, 2015, the great economist Arvind Panagariya was appointed as Vice-chairman of the Niti Aayog and then Sindu Shree Khullar was appointed as the first CEO of the Niti Aayog. On December 29, 2015. Sh. Amitabh Kant appointed as CEO of Niti Aayog after the retirement of Sindushree Khullar on 5th August 2017. Sh Rajiv Kumar appointed as vice-chairman of Niti Aayog.

Departments

• It works like an assembly of interstates problems and their relations etc.
• It checks and plans long-term plans.
• Thirdly, it deals with direct benefit, transfer, and UIDAI.

Aims of Objectives: The objectives of the new body is to evolve a shared vision of national development priorities sectors and strategies. Being an incubator of ideas for effective governance would be the core mission of NITI Aayog. following are the objectives of the new national agenda’.

1. Recommend strategical and technical advice on elements of policy and economic matters.
2. Develop a mechanism for village level plans and aggregate these progressively at higher levels of government.
3. Serve as a ‘think-tank’ a directional and policy dynamo for the government and will provide suggestions for the economy including the private sector.
4. Create a knowledge, innovation, and entrepreneurial support system for national and international experts and other partners.
5. Offer a platform for the country’s development agendas.
6. Focus on the technology of implementation of programs and initiatives.

Working: National Institution for Transforming India is-

1. To evolve a shared vision of national development priorities sectors and strategies with the active involvement of states in the light of national objectives.
2. To foster co-operative feudalism through structured support initiatives and mechanisms with the states on a continuous basis, recognizing that strong states make a strong nation.
3. To develop mechanisms to formulate credible plans at the village level and aggregate these progressively at the higher levels of government.
4. To ensure, on areas that are specifically referred to it, that the interest of national security are incorporated in economic strategy and policy.
5. To pay special attention to the sections of our society that may be at risk of benefiting adequately from economic progress.

Niti Aayog will work under the supervision of chief-ministers and specialists in different fields. Aayog will ensure greater participation of state- governments in policy-making thus fostering co-operative federalism-and will be more attuned to the nation’s contemporary needs.

The first meeting of Niti-Aayog took place on 6th Feb 2015 and was attended by prime-minister, Narendra Modi, finance minister Arun Jaitly and vice-chairman Sh Arvind Panagariya. Other full-time members V.K. Saraswat, Nitin Gadkari, Thawar Chand Gehlot, G.N. Vajpayee, Rajiv Kumar, Rajiv Lal, R. Vaidyanathan Parath Sarthi Soam, Subeer Gokarn, Mukesh Burani, etc. also attended the meeting.

The second meeting of Niti Aayog took place on 15th July 2015, in which PM desired that center and states must move together to end poverty, states units should be the focus of all developments as a part of team India. The council held consultations on the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation, and Resettlement Act. The Prime-minister welcomed and thanked the chief minister for their participation and suggestions for the development of rural areas and greater prosperity for the farmers. He also asked for suggestions for the success of Betti Bachao, Betti Paradao Plan, Smartcity, Digital India, Skill India, Make in India Swach Bharat, etc. plannings.

The opposition criticized the decision to establish NITI Aayog calling it a gin mickey and renamed it as Anati ordurniti Aayog. However, the working of a new institution can be judged only after it has functioned for a sufficiently long time. The efficiency of the Niti Aayog will depend crucially on the quality of experts and how they are allowed to work, Also-the success of the ‘Niti Aayog’ lies in restoring the balance between the technical and political (federal) drivers of the planning process.

It is much too early to think on talk in terms of administrative capacities unless, it trickles down, achache din’ will hardly be felt by the common man. Niyat and Niti’ are inextricably intertwined, the best that can be said for the Aayog is that we should give it sufficient’ time to reveal itself and the out¬come contingent on it. The Aayog’s functioning could make or break the economic development of India in the future.

Question 4.
What was Green Revolution? Examine any two positives and two negative consequences of the Green Revolution. (Imp.)
Or
What was the Green Revolution? Which areas did it affect the most? Mention two positive and two negative consequences of the Green Revolution. (Sample Paper)
Answer:
In the 1960s, India was facing a food crisis due to many reasons. India was dependent on the U.S.A. for food which was putting many limitations on India’s policies. Indian Government decided to make India self-sufficient in food. Hence the government adopted a new strategy for agriculture in order to increase food production. Since the mid-1960s, the traditional agricultural practices were gradually replaced by modern technology.

The use of high-yielding variety seeds and the increased use of fertilizers and irrigation are simply called Green Revolution or modern agricultural technology. As a result of the Green Revolution, the area under improved seeds has gone up from about 15 million hectares during 1970-71 to nearly 75 million hectares in 1995-96. The new varieties are of a short term duration and consequently, instead of growing one crop, two crops and sometimes even three crops are grown.

The major benefits of the Green Revolution were experienced mainly in northern and northwestern India. Unprecedented enthusiasm has prevailed among farmers in Punjab, Haryana, Delhi, Rajasthan, and Western U.P. for the new wheat variety seeds and a situation developed in which the demand for seeds by farmers exceeded the supply.

Economic Results/Positive Consequences of the Green Revolution.

1. The major achievement of the Green Revolution was to boost the production of major cereals viz wheat and rice.
2. As a result of the Green Revolution, the crop pattern in India has undergone significant changes.
3. The green revolution largely increased the growth of the local manufacturing sector which created new jobs and contributed to the country’s GDP.
4. India became self-sufficient in food and India was in a position to pay back all loans it had taken from the World Bank for the purpose of the Green Revolution.
5. Green Revolution has helped the growth of capitalist farming in India and has led to the concentration of wealth in the hands of the top 10 percent of the rural population.

Political Results of the Green Revolution.

1. India became self-sufficient in food and thus India’s prestige increased in the world, especially in the third world.
2. Green Revolution was a big factor in making Smt. Indira Gandhi and Congress Party more powerful.

Two Negative Consequences of Green Revolution
(i) Green Revolution led to the concentration of wealth in the hands of the top 10 percent of the rural population. The green revolution had widened the gap between poor and small farmers and rich landlords.
(ii) Green Revolution has proved beneficial to the medium category peasants because they could receive the advantage of mediation between small farmers and rich landlords.

Question 5.
Assess any six outcomes of planning in India. (C.B.S.E. Sample Paper 2018)
Or
Assess the outcome of the early phase of planned development in India. (C.B.S.E. 2019)
Or
Describe any three outcomes of early initiatives for planned development in India. (C.B.S.E. 2019)
Answer:
After independence, India adopted economic planning for the development of the people of India. In fact, there was a consensus on the planned development.

For planned development, Planning Commission was set up in March 1950 by a simple resolution of the Government of India. The Planning Commission opted for Five Year Plans. The First Five Year Plan was started in 1951 with the main emphasis on agriculture including investment in Dam and irrigations. The Second Five Year Plan (1956-1961) stressed mainly heavy industries. Rapid industrialization was the main aim of the Second Five Year Plan. Following are the outcomes of planning in India:

1. Through planning the foundations of India is future economic growth were laid.
2. Some of the heavy industries were Started.
3. Planning enhances the economic growth of the country.
4. Land Reforms lake place through planning.
5. Through planning the growth of manufacturing was increasing.
6. India becomes self-sufficient in food.

im-1

Question 6.
Look at the above clipping of the Hindustan Times. You will agree that the agricultural conditions of India went from bad to worse in the 1960s. In the light of this, answer the following questions: (Sample Paper)
(a) How did India solve its problem of food shortage?
Answer:
India solved its problem of food shortage through Green Revolution. Agriculture was modernized and a good variety of seeds were used.

(b) Is India now sufficient in food production? State the reason for your answers.
Answer:
India is now almost self-sufficient in food production.

Question 7.
Study the cartoon given below carefully and answer the questions that follow: (C.B.S.E 2017)

im-2

(i) Identify and name the person who is holding the balancing beam between the public sector and the private sector.
Answer:
The person who is holding the balancing beam between the public sector and the private sector is India’s first prime-minister Pt. Jawahar Lai Nehru.

(ii) Why has a big tilt towards the public sector been shown in the cartoon?
Answer:
A big tilt towards the public sector has been shown in the cartoon because at that time most leaders were in favor of the public sector.

(iii) How did the over-emphasis on the public sector adversely affect the Indian economy?
Answer:
Due to lack of competition, the over-emphasis on the public sector adversely affect the Indian economy.

Note: The following questions are for the Visually Impaired Candidates only, in lieu of the above questions

(i) Distinguish between the public sector and the private sector with the help of at least one example each.
Answer:
In the public sector, the government is holding control over it e.g. Railway. Whereas in the private sector the real control lies with a private person or company and the example Reliance company.

(ii) Keeping in mind the Indian context, which type of economy would you prefer and why?
Answer:
Keeping in mind the Indian context, a mixed type of economy—public as well as private, is the most beneficial type of economy, through which both public and private sectors are benefited.

(iii) Globalisation has promoted which type of economic sector?
Answer:
Globalization has promoted the private type of economic sector.

Question 8.
Read the passage given below carefully and answer the questions that follow: (C.B.S.E. 2019)

India did not follow any of the two known paths to development Elements from both these models were taken and mixed together in India. That is why the Indian economy was described as a ‘mixed economy’.
(i) Name the two models/paths to development.
Answer:
Two models of the path to development are
(a) Capitalist Model
(b) Socialist model

(ii) Why was either of the two models not fully accepted by India? Give at least one major reason for each.
Answer:
Both the models are not fully accepted by India because in the capitalist model the development is entirely left to the private sector, whereas in the socialist model production is controlled by the state and private property is abolished. In India elements from both these models are taken and mixed and that is why it is called ‘mixed economy’.

(iii) Highlight any two features of India’s mixed economy based on the above said, two models.
Answer:
(a) For the mixed economy in India, first of all, the government nationalized the Banking system and also abolished the ‘privy purse’.
(b) India encourage industrialization for the economic growth of the country.

Politics of Planned Development Important Extra Questions HOTS

Question 1.
What is Planning?
Answer:
“Planning is,” defined by Terry, “selecting and relating of facts and the making and using assumptions regarding the future in visualization and formulation of proposed activities necessary to achieve the desired results.” Thus, Planning means to act with purpose or to make efforts to achieve pre-conceived objectives and goals. It implies co-ordination on means and ends.

Question 2.
Why is Planning Commission called an extra-constitutional body?
Answer:
The Planning Commission of India is not established by an Act of Parliament nor as part of a constitutional provision. It is established by a cabinet resolution in March 1950. That is why it is sometimes called an extra-constitutional body, which in theory is an advisory committee of the cabinet.

Question 3.
Name two main advantages of having Economic Planning. (D.B. 1991)
Answer:

1. Economic Planning awakens the feelings of national interests among the people.
2. Full exploitation of all resources is possible only in Economic Planning.
3. In Economic, Planning attempts are made to achieve the target within a definite period.

Question 4.
How many Five Year Plans have been completed so far?
Answer:
In India (till now) 12th Five Year Plans have been completed. The time period of the First Five Year Plan was 1951 to 1956. 2012 to 2017 was the time period of the 12th Five Year Plan.

Question 5.
In which year Planning Commission was established and who was the first chairman of the Planning Commission?
Answer:
The Planning Commission was set up in March 1950 by a resolution of the Government of India. Prime Minister Jawaharlal Nehru was the first Chairman of the Planning Commission.