Structure of the Indian Economy & Demographics (Part-I)

Total Questions: 50

1. According to the 1991 Census, the highest percentage of population in India is to be found in the age group of: [1995]

Correct Answer: (d) 5 to 14 years
Solution:The highest percentage of population in India in 1991 is in the age group of 5-14 years.

India has one of the largest proportions of population in the younger age groups in the world. 35.3% of the population of the country has been in the age group 0-14 years at the Census 2001. 41% of the population account for less than 18 years of age.
India is the most populous country in the world with 1.44 billion people. Surpassing China recently. It will continue to rise until reaching 1.52 billion by 2036, according to India's National Commission on Population. India has a huge advantage as well as challenges to tap the potential benefits of its large population with religious and ethnic diversities.
The Government of India has taken several steps to directly control the population growth. India was the first country to launch a national programme of family planning in 1952, that emphasised the necessity of reducing birth rates to stabilize the population.

2. Which of the following pairs are correctly matched? [1995]

1. Increase in Monetary expansion

2. Low import growth rate in India-Recession in Indian industry

3. Euro-issues-Shares held by Indian companies in European countries

4. Portfolio investment Foreign institutional investors.

Codes:

Correct Answer: (a) 1, 2 & 4
Solution:Euro issue includes issue of ADR (American Depositary Receipts) and GDR (Global Depositary Receipts). A scheme has been initiated during 1992 under which Indian companies are permitted to raise foreign currency resources through issue of Foreign Currency Convertible Bonds (FCCBs) and/or issue of ordinary equity shares through Global Depositary Receipts (GDRs)/American Depositary Receipts (ADRs) to foreign investors i.e. institutional investors or individuals (including NRIs) residing abroad.

3. Which one of the following is true regarding the Jawahar Rozgar Yojana (JRY)? [1995]

Correct Answer: (d) Under the scheme 30% of the employment generated is reserved for women
Solution:Though the people below the poverty line were the target group for employment, the preference was to be given to the Scheduled Castes, Scheduled Tribes and freed bonded labourers. Thirty percent of the employment opportunities were to be reserved for women in rural areas.

Steps Taken by the Government

  • Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA)
  • It is an employment scheme that was launched in 2005 to provide social security by guaranteeing a minimum of 100 days paid work per year to all the families whose adult members opt for unskilled labour-intensive work.
  • This act provides Right to Work to people.
  • Pradhan Mantri Kaushal Vikas Yojana (PMKVY): Launched in 2015 has the objective of enabling a large number of Indian youths to take up industry-relevant skill training that will help them in securing a better livelihood.
  • Start Up India Scheme, launched in 2016 aims at developing an ecosystem that promotes and nurtures entrepreneurship across the country.
  • It also aims to facilitate bank loans between Rs 10 lakh and Rs. 1 crore to at least one SC or ST borrower and at least one women borrower per bank branch for setting up a greenfield enterprise.

4. The Narasimham Committee for financial sector Reforms has suggested reduction in [1995]

Correct Answer: (b) SLR, CRR and Priority Sector Financing
Solution:Narasimham Committee for Financial Sector Reforms (1991) has suggested reduction in SLR, CRR and priority sector financing reducing it from 40% to 10%. Most of the suggestion of the committee were not implemented.

The purpose of the Narasimham Committee I was to study all aspects relating to the structure, organization, functions and procedures of the financial systems and to recommend improvements in their efficiency and productivity. The Narasimham Committee II was tasked with the progress review of the implementation of the banking reforms since 1992 with the aim of fürther strengthening the financial institutions of India. It focussed on issues like size of banks and capital Adequacy ratio among other things.

5. Corporation tax: [1995]

Correct Answer: (d) is levied by the Union and belongs to it exclusively.
Solution:Corporation tax is a direct tax levied, collected and appropriated by the Union or the central government. No part of this tax can be assigned to the states.
A corporate entity's net income or profit from its operations, whether domestic or international, is subject to the direct tax which is the corporation tax or corporate tax.
The Corporate Tax Rate is the amount of tax levied by the terms of the Income Tax Act of 1961.
Depending on the kind of business entity and the various revenues generated by each corporate entity, the corporate tax rate is based on a slab rate structure.
Corporate tax rates vary greatly amongst nations, with some having meager rates and being labeled as tax havens.

  • The effective corporate tax rate, or the rate a corporation pays, is typically lower than the statutory rate, which is the declared amount before any deductions because corporate taxes can be reduced by a variety of deductions, government subsidies, and tax loopholes.

6. One of the reasons for India's occupational structure remaining more or less the same over the years has been that: [1995]

Correct Answer: (a) investment pattern has been directed towards capital intensive industries.
Solution:Our economic planners are not emphasizing development of small scale industries in their plan strategies.

Occupational structure refers to the division of a country's working population among three primary sectors of the economy: primary, secondary, and tertiary. This structure provides insights into the types of jobs people engage in, their contribution to the GDP, and the evolution of a country's economy. As economies develop, the occupational structure often shifts from primary (agriculture-based) to secondary (manufacturing) and tertiary (services) sectors, which generally indicates progress and industrialization. There are three types of Occupations Sector that are mentioned below:
1. Primary Sector
The primary sector includes jobs directly involving natural resources. This sector includes agriculture, forestry, fishing, mining, and other similar activities. In developing countries, a large portion of the population is usually engaged in the primary sector, which typically contributes less to the GDP as compared to other sectors.
2. Secondary Sector
The secondary sector comprises manufacturing and industrial jobs that involve processing raw materials into finished products. Workers in this sector contribute to industries like textiles, steel production, automobile manufacturing, and construction. As economies move towards industrialization, the secondary sector often grows, creating jobs and contributing more significantly to the GDP.
3. Tertiary Sector
The tertiary sector, also known as the services sector, includes services rather than goods production. This sector encompasses jobs in healthcare, education, retail, banking, IT, and other service-oriented fields. As economies develop, the tertiary sector often becomes the largest employer, contributing the most to GDP due to higher productivity levels and value addition.

7. The main reason for low growth rate in India, inspite of high rate of savings and capital formation is: [1995]

Correct Answer: (d) high capital output ratio
Solution:Capital output ratio is the amount of capital needed to produce one unit of output.
It explains the relationship between level of investment and the corresponding economic growth lower capital output ratio Shows productivity of capital and technological progress.
  • Capital Output Ratio (COR) is the amount of capital required to produce one unit of output.
  • It is the relationship between the level of investment made in the economy and the consequent increase in Gross Domestic Product (GDP).
  • It also expresses the relationship between the value of capital invested and the value of output.

Example of COR

  • For example, investment in an economy is 32% of GDP, and the economic growth corresponding to this level of investment is 8%. Here, it means that an investment of Rs. 32 produces an output of Rs. 8. Therefore, the COR is 32/8 i.e., 4.
  • In other words, to produce one unit of output, 4 units of capital are needed.

8. Which one of the following is correct regarding stabilization and structural adjustment as two components of the new economic policy adopted in India? [1996]

Correct Answer: (a) Stabilization is a gradual, multi-step process while structural adjustment is a quick adaptation process
Solution:New Economic Policy was adopted in 1991 based on Rao-Manmohan model. Stabilization component of any economy is essentially a short-term programme while the structural readjustment component is a long term process.

The features of the New Economic Policy 1991 focused on liberalisation, privatisation, and globalisation, aiming to reduce government control, encourage private participation, attract foreign investment, and modernise India’s economic structure.

  • Fiscal Discipline: The government aimed to reduce the fiscal deficit to 3–4% in the medium term by cutting subsidies, limiting non-plan expenditure, and introducing tax reforms to enhance revenue.
  • Monetary Policy Reforms: A tighter monetary stance was adopted to curb imports and reduce current account deficits, including higher import credit costs and new tools like long-term securities and treasury bills.
  • Banking Sector Liberalisation: Banks were given autonomy to set deposit interest rates and decide maturity terms, ending earlier regulatory controls and fostering a more competitive and flexible banking environment.
  • Trade Policy Reforms: The rupee was devalued by 18% to boost exports, import restrictions for exporters were eased, and capital goods imports were liberalised without prior government approval.
  • Industrial Policy Reforms: Industrial licensing was abolished for most sectors; public sector exclusivity was reduced, and private entry was allowed in key industries, boosting competition and private sector involvement.
  • Reforming MRTP Act and Small Industries: The MRTP Act was amended to remove approval requirements for expansion by large firms; small enterprises could now sell up to 44% equity to bigger companies.
  • Foreign Direct Investment (FDI) Reforms: FDI caps were raised from 40% to 51% in key industries, and the Foreign Investment Promotion Board was created to fast-track foreign investment clearances.

9. One of the important goals of the economic liberalisation policy is to achieve full convertibility of the Indian rupee. This is being advocated because: [1996]

Correct Answer: (a) convertibility of the rupee will stabilize its exchange value against major currencies of the world
Solution:The full convertibility of the Indian currency means that the rupee is freely exchangeable into other international currencies and vice versa. Also, this would mean that international investors can buy and sell Indian assets at will. After 1994, the rupee has been partially convertible which means that the currency is changed freely into foreign currency for business and trade expenses. But it cannot be converted freely for acquiring overseas assets. Experts feel full convertibility of rupee would facilitate growth and higher foreign investments.

10. Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R): [1996]

Assertion (A): Though India's national income has gone up several fold since 1947, there has been no marked improvement in the per capita income level.

Reason (R): Sizeable proportion of the population of India is still living below the poverty line.

In the context of the above two statements which one of the following is correct?

Correct Answer: (b) Both A & R are true but R is not a correct explanation of A
Solution:There is no relation between the proportion of population of India living below the poverty line and Increase in India's national income.
National Income Meaning
  • National Income denotes the total worth of all final goods and services generated within a country during a specific time frame, typically over the course of one financial year.
  • From a macroeconomic perspective, national income plays a central role in measuring the economic performance and prosperity of a nation.
  • It is utilised in evaluating per capita income, understanding inequality, and comparing growth across countries. It also forms the basis for fiscal policy formulation, taxation, and welfare schemes.
  • Globally, institutions like the World Bank, the IMF, and the United Nations rely on national income statistics to assess global economic trends and design development frameworks.
  • In India, agencies such as the National Statistical Office (NSO) under the Ministry of Statistics and Programme Implementation (MoSPI) handle national income estimation.