BBA 2nd Sem. Increase National Income Indian Economy Notes

BBA 2nd Sem. Increase National Income Indian Economy Notes

BBA 2nd Sem. Increase National Income Indian Economy Notes :-



 Q. 1. How can national income and per capita income be increased?

Ans.  Suggestions to Increase National Income and Per Capita Income

  1. Population growth shouldibe checked effectively.
  2. small scale and cottage industries should be developed so that the pressure on agriculture
  3. Rural and agro based industries should be developed so that rural unemployment may be
  4. Best efforts should be made for the mechanisation of agriculture and the development of irrigation facilities.
  5. More and more natural resources should be explored and utilised.
  6. More and more infrastructural facilities should be developed.
  7. More emphasis should be laid on the expansion to education and health facilities so that the efficiency and technology should be invited.
  8. Foreign capital and technology should be invited.
  9. Due encouragement should be given to savings so that the rate of capital formation may be increased.
  10. Government should gear-up entire machinery and formulate its monetary, fiscal and foreign trade policies in the manner that a congenial atmosphere may be created for economic growth and development

Q. 2. Explain the importance (role) of agriculture in Indian economy.

Ans.          Role of Agriculture in Indian Economy

We can describe the role of agriculture in Indian economy in following ways :

  1. Source of Livelihood : Agriculture is the largest source of livelihood for the people Of India’ About 65% to 70% of our total working force IS engaged in agriculture.
  2. Source of National Income : Agriculture and allied occupations contributed nearly 250/0 or Gross Domestic Product (GDP).
  3. Importance for Industrial Development : Agriculture provides raw materials to sugar’ tea, cotton, jute, oil, food products, vanaspati industries etc. This all together account for about 500/0 of total income generate in the manufacturing sector in India.
  4. Supplier of Food : Agriculture feeds entire population of our country. It provides food for the people and fodder for the cattle.
  5. Importance in Internal Trade : Large number of traders deal in agricultural products only and get their livelihood.
  6. Importance in International Trade : Main agricultural items of export tea, sugar’ jute’ oil-seeds, tobacco, coffee, spices etc. constitute roughly 50% of our total exports, Exports of manufactured goods with agricultural content constitute another 20% or so. Thus, agriculture occupies a place of pride in India’s exports.
  7. Prosperity of Agriculture is the Prosperity of India Economy : As about of total working population of our country depends upon agriculture, 50% of our total exports is made up of aoricultural products; 26% of our national income comes from agriculture and about 50% of our industries depend upon agriculture for the supply of raw materials, it can well be concluded that the prosperity of agriculture is the prosperity of Indian economy.

Q. 3. Explain the cropping pattern in India.


Enumerate some significant facts about cropping pattern in India.

Ans.     Significant Facts about Cropping Pattern in India

1.    Food crops (wheat, rice, pulses, millets, vegetables and fruits etc.),

2.    Non-food crops (oil seeds, cotton, jute, mesta etc.) are grown on about 25% of total cropped area.

3.    Among food crops, cereals are produced on about 82% of total cropped area under food grains and pulses are produced on about 18% of such area.

4.    Among food crops, rice is the most important crop in India covering about 30% of total area under food grains. Wheat is the second most important crop cover about 18% of total area under food grains.

5.    Among non-food crops, oilseeds occupy about 10% of total cropped area and fibre crops, like cotton, jute and mesta 5% of total cropped area.  6.    Cash crops (groundnut, cotton, jute etc.) are grown on about 10% of total cropped area.

Q. 4. How can agricultural productivity be improved ?


Suggest some measures for the improvement of agricultural productivity in India.

Ans. Following are the measures to improve the agricultural productivity in India :

1. Land reform programmes should be implemented effectively.

2. Irrigation facilities should be improved and expanded.

3. Distribution of agricultural inputs such as seeds : fertilizers, finance and insecticides etc. should be strengthened.

4. Problems and deficiencies of marketing system of agricultural products should be overcome.

5. Research and development facilities should be developed and arrangements should be made to popularise their results.

6. Co-operative farming should be encouraged.

7. Crop insurance scheme should be expanded, intensified and popularised.

8. Rural industries and agrobased industries should be developed so that the pressure of population on agriculture may be minimised.

Q. 5. Explain the meaning and importance of land reforms in India.

Ans. Meaning of Land Reforms : Land reforms means include all the measures of improvement in land ownership and agricultural holdings. It involve the planning and reorganisation of land. Role or Importance or Need of Land Reforms

1. Helpful in Increasing Production and Productivity : Land reform measures help in increasing agricultural production and productivity by giving the rights of ownership to the actual tillers.

2. Social Justice and Equality : Land reform measures are a great tool of establishing and promoting social justice and equality.

3. More Rational Use of Land Resources : Land reform measures encourage most rational use of scarce land resources by imposing ceilings and by affecting consolidation of land.  4. To Curtail Econojnic Inequalities : Land reform measures help in redisiributing agricultural in fivour of less privileged classes and in improving the terms and conditions for land cultivation.


Q. 6. Write a short note on the abolition of intermediaries and zamindars in India.

Ans. Abolition of Intermediaries and Zamindars : At the time of independence, there were three types of land tenure system in India : Zamindari tenure, Ryotwari tenure and Mahalwari tenure,

1. Zannindari Tenure : Land was held by one person or a few persons who were responsible for the payment of land revenues. The system degenerated into absentee landlordism. Thus, an internjecliary grew between the state and actual tillers. Landlords were known for their extravagance on wine, women, and vices,

2. Ryotwari Tenure : Under this system, land might be held as single independent holding and
the holders were directly responsible to pay land revenue to the state. The ryot was at liberty to sub-let his lancl and enjoyed a permanent right of tenancy till he pays land revenue.

3. Mahalwari Tenure : Under this system, the village lands were held jointly by village conununities, the members of which were responsible for payment of land revenue to state. Village lunnberdar collected revenue and received 5% commission.

After independence, a number of laws were passed by State Governments to abolish these systerns. The first act was passed in 1948 in Chennai (Madras) by 1955; all states had passed such acts and as a result of these acts, about 60 lakh hectares of land has been distributed among landless farmers.


Q. 7. Write a short note on reforms in tenancy system in India.

Ans.          Reforms in Tenancy System

1. Regulation of Rent : Government took steps to regulate rent and to provide security of tenure (20% to 25% of gross produce) accordingly, several state Governments have laid down the limit of maximum rent.

2. Security of Tenure : To provide security of tenure, several state Governments have passed acts These acts have provided that tenants should not be enjected as long as they continue paying rent.

3. Right of Ownership to Tenants : In several states, tenants have been given right to purchase their holding, Purchase price will be determined either by tribunals appointed for the purpose or it Co be a certain multiple of land revenue.


Q. 8. State the meaning of agricultural holding.

Ans. Agricultural Holding : Agricultural holding means the size of land owned and cultivated by a farmer. It may bc defined on two basis : (a) On the basis of ownership, (b) On the basis of cultivation, On the basis of ownership, agricultural holding means the size of land owned by a farmer. On the basis of cultivation, agricultural hulling means the size of land cultivated by a farmer at a particular time.

Agricultural holding on the basis of ownership and cultivation may be the same as well as different. If a farmer cultivates all the lands owned by him, both the holdings will be equal. If a farmer is not capable in cultivating all the land owned by him and, therefore, allows other person or persons cultivate some of the land, holding on the basis of cultivation will be less. If a farmer cultivates the land owned other person or persons, holding on the basis of cultivation will be more.


Q. 9. State the tneaning of sub-division and fragrnentation of land. Give suitable example.

Ans.         Sub-division and Fragmentation

Sub-division of Land : Sub-division of land Incans the situation in which an agricultural holding is divided into certain pieces. Generally, this situation arises on the death of a person or dispute in a family. Example : Mr. A owns 300 acres of land and has 3 sons : X, Vand Z, On the death of Mr. A the land is divided into 3 parts and each of his sons gets 100 acres of land, It callecl sub-division of land. Similar situations may arise if a dispute arises in a family.

Fragmentation of Land : Fragmentation of land Incans the situation in which the holding of a farmer is scattered at different places. Example : Mr. A owns 300 acres of land out of which 100 acres is situated at one place. 50 acres at another place, 80 acres at third placc and the remaining 70 acres at fourth place. It is called fragmentation of land.


Q. 10. State the meaning and characteristics of co-operative farming.

Ans. Co-operative farming is concept of farming based on mutual co-operation and understanding. Under this form of farming, a Co-operative society is framed, membership of which is voluntary. Land of all the member farmers are pooled into a big farm. All the member farmers remain owners of their land but all the agricultural activities are carried out by Co-operative Society. Profits of the society are distributed among members on the basis ofsize of their holding. It has been defined by :

1. Planning Commission of India Thus : “Co-operative farming means pooling of land and joint management.”

Basic Features or Characteristics of Co-operative Farming

1. A society is framed by individual farmers to carry out agricultural activities.

2. Membership is voluntary and it works on democratic principles.

3. Holdings of all the member farmers are pooled into one big farm.

4. Entire land is cultivated as one unit member farmers remain owners of their individual holdings.

5.  All the agricultural activities are carried out under the supervision, management and control of society,

6. Profits of society are computed at a certain interval and are divided among farmers, on the basis of their holdings.

Q. 11. Differentiate between co-operative and collective farming Difference Between Co-operative and Collective Farming.



S.No. Basis of Difference Co-operative Farming Collective Farming
1. Ownership of land Ownership of land remains with individual farming. Ownership of land is collective and it rests with a management  conmmittee.
2. Member Ship Membership is voluntary at the discretion of individual farmers. Menibcrship is compulsory, All the farmers living in a particular area have to be a part of collective farming.
3. No. of Members Number of members are generally small. There may be a large number of members.
4. Size of holding Size of holding is relatively small. Size of holding is relatively large.
5. Right to get the land back Farmers may quit the sciety at any time and get their land back. Farmers cannot separate themselves from collective farming and cannot get their land back.
6. Work by Farming Farmers may or may not decide to work under co-operative farming. All the farmers have to work under collective farming.
7. Return to the Farmers Farmers get remuneration for their work and share in the surplus. Farmers get only the remuneration for their work.
8. Principles of Managements Co-operative are societies regulated and managed on the principles of democracy. Collective farming is regulated and managed on the principles of dictatorship.


Q. 12. What are the means of irrigation in India?

Ans.             Means of Irrigation in India

1. Major Irrigation Projects : Major irrigation projects mean and include all the means of irrigation which cover the cultivable area of 10,000 hectares-or more. It includes multi-purpose irrigatiori projects and large canals.

2. Medium Irrigation Projects : These projects mean and include all the means of irrigation which cover the cultivable area of 2,000 or more hectares but less than 10,000 hectares. It includes canals of medium size.

3. Minor Irrigation Projects : These projects mean and include all the means of irrigation which cover the cultivable area of less than 2,000 hectares. It includes wells, tubewells, tanks and small canals.

Q. 13. What are the main elements of green revolution?

Ans. Achievements of New Agricultural Strategy or Main Elements of Green Revolution Soon after independence, agriculture has got top priority from Indian planner, New schemes and programmes launched by Government are known as new agricultural strategy or main elements of green revolution. These elements may be enumerated as under :

1. Consumption of Chemical Fertilisers : Consumption of chemical fertilisers in the country has increased rapidly. It was only 1.9 kg per hectare in 1960-61 which has increased to about 89B kgs. per hectare in 2003-04.

2. Use of Improved Seeds : Many new varieties of seeds have been developed. In 1966-67, such seeds were used in 18 lakh hectares of land only while at present this area IS about 85 lakh hectares.

3. Irrigation Facilities : Total area under irrigation has increased 23 million hectares 1950-51 to about 97.3 million hectares by the end of 2003-04. Many minor and major irrigation plans are being worked.

4. Multi-Crop Programme : It was launched in 1967-68 to increasing agricultural production by taking two or more crops on a land in a year. About 65% oftotal land area of the country is under this programme.  5. Mechanisation of Agriculture : Farmers have been encouraged to do most of their works with the help of machines. As a result, number of tractors, pump sets, tillers other machines have increased many times.

6. Agricultural Credit : Government has put best efforts to provide agricultural credit to farmers at reasonable rate of interest. Recently, Kisan credit card scheme has been introduced to facilitate short term credit to the farmers„

7. Agricultural Marketing : Government have enacted necessary legislation with a view to safeguard the interests of farmers. Number of regulated markets in the country as on 31st March, 2002 was 7,062.

8. Agricultural Education and Research : First Agricultural university was opened in 1960 in
Pant Nagar. Today, there are 30 state agricultural universities. Indian Council of Agricultural Research (ICAR) is set-up to conduct research in agriculture. These efforts have launched : Green Revolution in Crops, Yellow Revolution in oil seeds, White revolution in milk, Blue Revolution in Fish production and Golden Revolution in horticulture.

9. Crop Insurance : To protect farmers against natural calamities selected crops are insured. In case loss caused to the farmers due to drought, flood etc., compensation is paid to them.


Q. 14. What are the main agricultural inputs?


Write a short note on agricultural inputs.

Ans. Agricultural inputs mean the factors and resources which help in increasing agricultural

1. Agricultural Land : Agricultural land means the land which is fit for cultivation. Total area of land of our country is 329 million hectares. Out of which around 141 million hectares (about 43%) of land is being used for cultivation.

2. High Yielding Variety Seeds (HW Seeds) : High yielding variety seeds are the seeds that help in increasing production.

Area covered under H YV Seeds is about 90% for the production of wheat. Establishment of
National Seeds Corporation (NSC) in 1663 and Stale Farms Corporation (SFC) in 1969 are another landmarks in this direction.

3. Irrigation Facilities : Availability of required water at appropriate times is an important agricultural input. Government is making best efforts to expand and diversify irrigation facilities nearly 1/2 agricultural land is still without irrigation facilities. To cover the gap between irrigation potential and its utilization Common Area Development Programme (CADP) was launched.

4. Fertilizers and Manures : Fertilizer is another important agricultural input. Government is making best efforts to encourage the use of chemical fertilizers in the country. Both the production and consumption of chemical fertilizers are continuously increasing.

5. Agricultural Implements and Machinery : Use of agricultural machinery has progressively increased number of tractors, pumps and scientific methods have increased all many times.

6. Plant Protection : Plant protection is an important input of agriculture. Crops must be protected against diseases and insects, Specific chemicals are used for plant protection.

7. Soil Conservation and Reclamation : Soil erosion takes place when the surface soil is washed away through rains and floods. One-fourth of total land area in the country is suffering from soil erosion. Remedies to the problem of soil prevention are growing plants, afforestation and contour bunding. Government of India has set up ‘Central Soil Conservation Board’ in 1952.

8. Crop Insurance : Agriculture involves Inany risks such as : drought, excessive rain, fire, theft, frost, hail and windstorm etc. Such problems can be solved with crop insurance. Insurance company undertakes full responsibility to compensate all the losses caused to crop due to any reason.


Q. 15. State the meaning of industrialisation.

Ans. Industrialisation : The term ‘Industrialisation’ has been derived from the world ‘Industry’ which means to manufacture or to produce something. ‘Industry’ Incans to increase utility or to create utility. The term ‘Industrialisation’ has been defined as under :

“Industrialisation” is a process in which changes of a series of a strategical production junctions are taking place. It involves those basic changes that accompany the mechanisation of an enterprise, the buildino of a new machinery, the opening of a new market and the exploitation of new areas as territory. This is a way and a process of deepening as well as widening of capital.” –Pei Kung Chang

Thus, industrialisation is a process in which capital is used extensively and intensively It encourages mechanisation and large scale production. It encourages mechnisation and large scale production. It opens new markets and exploits new territory,


Q. 16. What are the stages of industrialisation?

Ans.             Stages of Industrialisation

1. First Stage : At this stage, agriculture and allied activities dominate the economy. Most of the people of country engage themselves in these activities. Industrial development is almost nil.

2. Second Stage : This is the stage of industrial development. Raw material and primary products are transformed into finished goods. Mainly consumer goods agro-based and metal industries grow at this stage.

3. Third Stage : This is the stage of development of heavy and capital goods industries, machines, capital equipments and infrastructural facilities required for industrial development of a country, are produced in the country itself.

Q. 17. Explain interdependence between agriculture and industry.


“Agriculture and industry are complementary to each other.” Explain.

Ans. Interdependence between Agriculture and Industry : There are two main sectors of economic development of a country, industry and agriculture. Agricultural and industrial development are complementary to each other. Both depend upon each other. Agriculture cannot develop without industry and industry cannot develop without agriculture. A country can be prosperous only when both of these sectors are developed in balanced lilanner. These are the two legs upon which a country can stand and walk. These are the two blades of a scissors by which a country can solve its economic problems.

“Industrial development cannot be achieved without agricultural development because these two sectors can never he separated. One cannot prosper in the absence of another.” —Jawahar Lal Nehru


Q. 18. State the meaning and important features of industrial sickness.

Ans. Industrial Sickness : A sick unit is one which is unable in performing its normal production activities at reasonable profit on sustained basis. Such unit remains unable in meeting its business obligations on time. It has been defined as under :  “ A sick unit is one which has accumulated equal to or exceeding at the end of any financial yerar, its entire net worth and has also cash losses in such financial year immediately preceding such  financial year.”                                                             The Sick Industrial Companies Act, 1985 Features or Symptoms of Industrial Sicknoss

(i) Continuous decline in production ancl sales, (ii) Continuous decrease in working capital,(iii) Continuous difficulty in tuaking payments of raw materials, production overhead administration overheads, selling and distribution overheacls etc., (iv) Continuous difficulty in payments of excise duty, sales tax etc. (v) Dependence on external sources even for the rcpayjnent of short term loans,  (vi) Difficulty in maintaining regular stock of raw Inaterials. (vii) Diffjculty in making regular payments of provident fund contribution, insurance premium etc,


Q. 19. Write a short note on Board for Industrial and Financial Reconstruction (BIER).

Ans. Board for Industrial and Financial Reconstruction (BIFR). In 1985, government paw,cd Rick Industrial Companies (Special Provisions) Act (SICA) was established in January 1097, Establishment of this board is a great landmark in right direction.

The BIFR has been given wide ranging powers with respect to sick units : (i)All the companies (subject to few exceptions) whose net worth is eroded fully, fall under the purview of BIFR, (ii) Public sector units also have been brought under the purview of BIFR, (iii) Decisions of BIFR are binding on all concerned parties, (iv) BIFR will take all the necessary steps to detect sick units at an early stage, (v) Appropriate time may be given to sick units for rehabilitation. (vi) Sick unit may be allowed to merge or amalgamate with other industrial unit. (vii) Sick unit may be ordered to wind up, (viii) Adequate amount of loan may be sanctioned for a sick unit to give it an opportunity to rehabilitate, (ix) If it is found that there is a problem of mis-management in the sick unit BIFR may nominate one or more directors for such unit, (x) Any other course of action may be ordered for the sick unit,


Q. 20. State the meaning and importance of industrial policy.

Ans. Industrial Policy : Industrial policy means the formal announcements made by the government regarding industries. It includes fiscal policy, monetary policy, tariff policy and labour policy of the country.

Industrial Policy Determines the Following : (i) What are the main objectives of industrial development of the country? (ii). What is the attitude of government, towards the attainment of these objectives? (iii) What are the rules, regulations, and policies to control and regulate the
industrial undertakings of the country ?

Importance of Industrial Policy : (i) Helpful in fornnulating a plan prograrnmc of industrial development, (ii) Helpful in formulating rules and policies for the management and control of industrial undertakings. (iii) Helpful in establishing effective co-ordination between capital andPhysical resources on one hand and natural and social resources on the other hand. (iv) Helpful in establishing co-ordination between industrial and agricultural developrnent. (v) Helpful in establishing co-ordination between public and private sector, (vi) Helpful in maintaining regional balances, (vii) Helpful in exports and reducing the dependence or imports.


Q. 21. Write a short note on industrial policy, 1948,

Ans. Industrial Policy, 1948 : The draft of first industrial policy of india was presented by the commerce and industry minister Dr. Shyama Prasad Mukherjee on Aprial 6,1948. Salient features of the policy are as under :

1. Mixed Econogny : This policy laid the foundation of mixed economy in India. It provides that both tho public and private  sectors will work together under government supervision and control.

2. Categorisation of Industries : (i) First Category : comprised the manufacture of arms and anununition, atonnic energy and railway transport, These were to be the exclusive monopoly of central governinent.

(ii) Second Category : Connprised coal, iron and steel, aircraft manufacture, ship-building, manufacture of telephone, telegraph and wireless, mineral oils etc. Regarding these industries, it was provided that existing unclertakings would continue in private sector but new undertakings would be started by government.

(iii) Third Category : Connprised certain basic Industries. Is was provided that though private sector would be allowed to develop them but the government may plan and regulate them.

(iv) Fourth Category : Comprised all the remaining industries. These industries were left to private entrepreneurs, individuals and co-operatives.

3. Attitude towards Foreign Capital : The policy recognised the importance of foreign capital and enterprise to accelerate the rate of industrialisation in the country.

4. Role of Small Scale and Cottage Industries : The policy provided all the best efforts would be made for the development of small scale.


Q. 22. Write a short note on industrial policy, 1956.


State salient features of industrial policy, 1956.

Ans.            Industrial Policy, 1956

Second industrial policy of India was declared on April 30, 1956.

Salient Features of Industrial Policy, 1956

1. New Categorisation of Industries :

(i) Schedule A included 17 industries the future development of which would be an exclusive responsibility of the state. Existing private units would continue and the state may involve private sector in establishing new units also.

(ii) Schedule B included 12 industries in which government would increasingly establish new units. Private sector would be allowed to expand their existing units and set up new units also.

(iii) Schedule C included all the remaining industries. These industries were left open to private sector.

2. Encouragement to Small Scale and Cottage Industries : Policy provided that government would concentrate on improving the competitive strength of small scale and cottage industries by providing them direct assistance.

3. Co-ordination between Public and Private Sectors : It was provided that government would concentrate on improving the competitive strength of small scale and cottage industries by providing them direct assistance.

4. Attitude Towards Foreign Capital : Government accepted the need and role of foreign capital and technical knowledge in the industrial development of India.


Q. 23. Write a short note on industrial policy, 1991.


What are the salient features of industrial policy, 1991?

Ans. A draft of new industrial policy was presented in parliament on July 24, 1991. Salient features of this policy are as under :

1. De-reservation of Industries for Public Sector : Only 8 industries will continue to be so reserved : (i) Defence equipments. (ii) Atom power, (iii) Coal, (iv) Mineral oil (iv) iron ore, manganese, Gold, Silver etc., (vi) Copper, Zinc, etc., (vii) Mineral used in atom power, (viii) Railway transport (now this number is only 3).

2. Abolition of Industrial Licensing : New policy has abolished all industrial licensing, irrespective of the level of investment except for 18 industries related to security and strategic concerns (Now this number in only 6).

3. Freedom of Production According to Demand : Under new policy, Firms will be free to manufacture an article in response to market demand.

4. Abolition of Phased Manufacturing Programmes : There is no longer any need for enforcing the requirements under phased manufacturing programmes. However, various incentives currently available will continue.

5. Removal of Mandatory Convertibility Clause : Bank and financial institutions have so far been including a convertibilty clause in their lending operations for new projects (option of converting part of their loans into equity if necessary). Henceforth, financial institutions, will not be allowed to impose this clause.

6. Removal of Investment : Control on Large Business Houses. Since the enactment of MRTP Act all firms with assets above a certain size 100 crore since 1985) have been classified as MRTP firms. Now these firms will now not require prior approval for investment in delicensed industries.

7. Automatic Approval for Foreign Technology Agreements : In case of foreign technology and foreign investment agreements, except for a specified list firms will receive automatic approval with certain guidelines.

8. Automatic Approval for Foreign Equity upto 100% : In case of foreign investment, automatic permission will be available for foreign equity upto 51% equity shares in selected areas.

Q. 24. Write a short note on licensing policy.

Ans. Licensing Policy : Industrial licensing policy means a policy of the government under which a formal permission is to be obtained from government for the establishment of a new industrial unit or expansion of an existing unit.


Objectives of Licensing Policy in India

1. Regulation of lndustrial development so that the development may be promoted in desired direction.

2. Allocation of productive resources according to the and preferences of economic planning.

3. To protect small scale and cottage industries from the competition.

4. To check and prevent the monopoly and concentration of econornic power.

5. To encourage the establishment of new economic units.

6. To encourage the use of latest technology and methods.

7. To encourage new entrepreneurs to come forward.

8. To promote industrial development in the manner that sectoral and regional balances may be maintained.

Q. 25. State salient features of licencing policy, 1991.

Ans. New Licencing Policy, 1991 : In industrial policy, 1991, a number of changes were announced reoarding licencing policy. These changes are as under :

1. New policy has abolished all industrial licencing except for 6 industries related to security and strategic concerns.

2. Under new policy, only 3 industries will be reserved for public sector.

3. Permission will not be required to set up a new industrial undertaking.

4. Permission will not be required if an industry is being established in an area of more than 1 million population.

5. A new broad banding facility will be provided to existing units so that they may produce any commodity according to demand.

6. Existing units will not be required to obtain license for their expansion programmes.

7. System of phased manufacturing programmes has been abolished.


Q. 26. Describe main provisions of Monopolies and Restrictive Trade Practices Act (MRTP Act), 1969.

Ans. Monopolies and Restrictive Trade Practices Act, 1969—Main Provisions : Monopolies and restrictive trade practices was passed on December 17, 1969 and became effective as M R TP Act since June 1, 1970, Important provisions of this act are as follows :

1. Establishment of Monopolies and Restrictive Trade Practices Commission (MRTPC) : A commission known as MRTPC has been set up with two MRTPC has two important responsibilities :(i) To enquire into monopolies and restrictive trade practices, (ii) To advise government on, request, on the issues of economic concentration,

2. To Deal with Monopolistic and Restrictive Trade Practices : Monopolistic trade practices refer to the behaviour of an individual firm or a group of not than 3 firms which are able to control the market,

Restrictive trade practices refer to concerted action undertaken by a group of two or more firm to avoid competition.


Q. 27. State the meaning of small scale and cottage industries.

Ans. Small Scale and Cottage Industries : A small scale industry is one having investment in plant and machinery (Fixed Capital) upto 1 crore. Tiny industry is one having investment in Plant and machinery upto 25 lakh. It is important to mention here that capital investment for this purpose means the investment in plant and machinery and excludes the investment in land and building.

A Cottage industry is one which is run as full time or part time occupation mainly with the help of family Cottage industries are known as household industries also, In a cottage industry, capital investment is almost nil and most of the workers are performed by hand.


Q. 28. Explain the importance of small scale and cottage industries in Indian economy.

Ans.                Importance or Need of Small Scale and
Cottage Industries in Indian Economy

1. Vast Employment : Small scale and cottage industries use mainly labour intensive technique which provides more employment. In 2004-05, about 282.82. Lakh persons were employed in small scale industries.

2. Helpful in Exports : Contribution of small scale and cottage industries in the exports of our country has also been handsome. In 2002-03, exports of these industries was 86,013 crore which was of total exports.

3. Less Dependence on Imports : The industries are based on the resources and technique available in the country itself. It minimise the need of imports.

4. Suitable to the Economic Structure of Country : India is having abundant labour force but lack of capital. These industries are suitable to this structure because of more labour and less capital.

5. Essential for the Production of Artistic Goods : These industries are essential for the production of artistic goods.

6. Helpful in Equal Distribution of Income : Small scale and Cottage industries are helpful in just and equal distribution of income because they are owned by lakhs of persons and families.  7.Complimentary to Large Scale industries : Small Scale industries supply raw materials and Semi finished goods to large scale industries.

8. Cottage Industries. A Source of Rural Prosperity. They provide part time job to the people engaged in agriculture, village artisans and craftsmen. Development of these offers a solution to the twin problems of rural unemployment and poverty.


Q. 29. Write a note on the problems of small scale and cottage industries in India.

Ans.                    Problems of Small Scale and Cottage Industries

1. Problems of Raw Materials : (i) Raw materials available to these industries are of inferior
quality, (ii) These industries have to pay higher prices, (iii) Generally, these industries do not get raw materials on time,

2. Problem of Technique : In most of the cases, the methods and techniques of production adopted by small scale and cottage industries are old and of low technological level.

3. Problem of Marketing : Small producers do not have proper marketing organisation to sell their output at remunerative prices. Besides, they find it very difficult to complete with large scale producers.

4. Competition from Large Scale Industries : Large industries are organized on modern lines, they use latest technology and get many facilities. Small industries are not properly organized, they use out-dated technology and do not get much facilities. Therefore, small producers cannot stand against them in the market,

5. Problem of Management : Most of the small industries are managed by their owners themselves who are not necessarily efficient managers.  6. Lack of Research Facilities : There is a lack of research facilities. These entrepreneurs do not get complete information about their industry in time.

7. Bogus and Fictitious Units : Small scale and cottage units get a number of facilities from government Bogus and fictitious units are set up to avail these facilities,


Q. 30. Explain various steps taken by government to encourage small scale and cottage industries.

Ans.                Steps Taken by Government to Encourage                            

                             Small Scale and Cottage Industries

1. Establishment of Boards and Corporations : A number of institutions have been set up ‘by government organization to provide help and support to small scale and cottage industries.

2. Small Industries Development : SIDO works as nodal agency for formulating, coordinating and monitoring the policies and programmes for the promotion and development of small scale industries in the country.

3. National Small Industries Corporation (NSIC) : NSIC has been set up to provide training to small scale entrepreneurs. It also helps them in the exports of their products.

4. Marketing Facilities : ‘Central Cottage Industries Emporium’ provides help in marketing the products of cottage industries within and outside the country.

5. Establishment of Industrial Co-operative : Government is encouraging co-operative organization in this sector. At present over 45,000 industrial co-operative societies are working,

6. National Institute for Entrepreneurship and small Business Development : This institute is to provide training for small entrepreneurs and to co-ordinate the activities of various institutes and agencies engaged in training activities.

7. National Awards : To give the recognition and encouragement to small entrepreneurs, a
scheme of national awards has been introduced. First two awards carry a cash prize of 25,000 and 15,000 respectively.

8. Establishment of District Industries Centres. ‘District Industries Centres’ are set up to provide all possible help to small scale and cottage industries under a single root and developing these industries, particularly in rural and semi-urban areas. One centre is established in evelT district.

9. Establishment of Industrial Estates : Number of industrial estates have been developed’ Factory shades and building are developed with all modern facilities in these estates and given to small scale and cottage units on lease or rent.

10. Small Industries Development Bank of India (SIDBI) : This bank has been set up at national level to provide direct and direct finance to small industries.


Q. 31. Write a short note on small scale industries policy, 2000.


Enumerate salient features of small scale industries policy, 2000.

Ans. Comprehensive Policy Package on SSI and Tiny Sector announced by the Prime Minister on 30th August 2000.

1. Raising the exemption for excise duty limit from 50 lakh to One crore to improve the competitiveness of small scale sector.  2. Providing credit linked capital subsidy of 12 per against loans for technology upgradation in specified industries.

3. Conducting of the third census of small scale industries by the Ministry of SSI and ARI after a gap of 12 years. This census would also cover sickness and its causes.

4. Raising the limit of investment in industry related service and business enterprise from the present level 5.00 lakh to 10 lakh.

5. Continuation of the ongoing scheme of granting 75,000 to each small scale enterprise for obtaining ISO 9,000 certification till the end of the X Plan.

6. SSI associations encouraged to develop an operate testing laboratories. One time capital grant of 50 per cent will be given on reimbursement basis to such associations alter detailed examination of each case.

7. Raising of the limit for composite loans 10 lakh to 25 lakh.

8. Constitution of group under the cabinet secretary to suggest/recommend streamlining of inspection and reveal of redundant laws and regulations applicable to the sector.

9. Increasing the coverage of ongoing Integrated Infrastructure Development (IID) scheme to progressively cover all areas in the country with 50 per cent reservation for rural areas and 50 per cent of plots will be remarked for tiny sector.

10. Raising the family income eligibility limit OR 24,000 to 40,000 per annum. Under the Prime Minister’s Rozgar Yojana (PMRY) which finances setting up of micro enterprises and generates employment for the educated unemployed.


Full BBA Notes All Semester 

Montey Parjapati




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