AP Inter 2nd Year Economics Important Questions Chapter 7 Planning and Economic Reforms

Students must practice these AP Inter 2nd Year Economics Important Questions 7th Lesson Planning and Economic Reforms to boost their exam preparation.

AP Inter 2nd Year Economics Important Questions 7th Lesson Planning and Economic Reforms

Long Answer Questions

Question 1.
Define Planning and what are the objectives of planning.
Answer:
Planning or economic planning is an important feature of socialistic and mixed economic systems. As India is a mixed economy, it is following planned development strategy since 1951.

In common usage planning can be understood as a technique of a conscious effort made to achieve certain predetermined objectives.

In the view of Planning Commission of India, “Economic plan is a symbol of Independence and it provides a medium through which the society or its representatives can articulate a view of the country’s economic situation.”

An economic plan may be defined as an outline or broad statement of schemes or programmes designed to realise certain pre-determined economic objectives, in a particular order of priorities, according to a strategy with in a specified period of time. The technique that a government follows to achieve economic development through economic plans is called economic planning.

Objectives of planning: The following are the general objectives of planning in India are listed below.

To increase the annual growth rate of the economy
Increasing the per capita income and standard of living of the people.
Achieving speedy industrial development.
Self sufficiency in the production of food grains.
Removal of regional imbalances.
Eradication of poverty
Increasing employment opportunities in the country.
Removal of inequalities in the distribution of income and wealth.
To bring steady growth through price stabilisation.
To provide equal opportunities to all people in the society.

The following are the objectives of different five year plans, which are explained in the following table.

Plan	Period of plan	Objectives
I	1951-56	Agriculture and irrigation development
II	1956-’61	Development of large scale industries
III	1961-66	Self sufficiency in food grains production
IV	1969-74	Steady growth, self-reliance and gareebi hataavo.
V	1974-79	Poverty eradication and self reliance.
VI	1980-85	Poverty eradication through gainful employment.
VII	1985-90	Increase in food grains production and productivity
VIII	1992-97	Human resource development
IX	1997-02	Equality, economic growth with social justice
X	2002-07	Equality, social justice, enhancement in the quality of human resources
XI	2007-72	Inclusive growth
XII	2012-77	Faster, sustainable and more inclusive growth

Question 2.
Explain the objectives of Twelfth Five Year plan? [March 2017]
Answer:
The main objectives of Twelfth Five Year Plan (2012-17) with its central aim “Faster, sustainable and more inclusive growth” are discussed under the following heads.

A) Economic Growth:

Real GDP growth rate of 8.0 per cent.
The per capita income should grow at 6.5 per cent per annum.
Agriculture growth rate of 4.0 per cent.
10 per cent annual growth rate of manufacturing sector.
Industrial growth rate of 7.6 per cent.
Service sector growth rate of 9.0 per cent.
Every state must have higher average growth rate in the 12th plan than that achieved in the 11th plan.

B) Poverty and Employment:

Head-count ratio of consumption poverty to be reduced by 10 percentage points over the preceding estimates by the end of 12th Five Year Plan.
Generating 50 million new work opportunities in the non-farm sector and provide skill certification to equivalent numbers during the 12th Five Year Plan.

C) Education:

Increase in literacy to 85 per cent by 2017.
Mean years of schooling to increase to seven years by the end of 12th plan (Sarva Siksha Abhiyan)
Enhance access to higher education by creating 2 million additional seats for each age cohort aligned to the skill needs of the economy (RUSA).
Eliminate gender and social gap in school enrollment i.e., between boys and girls, SCs and STs, Muslims and the rest of population, by the end of 12th plan.

D) Health:

Reducing IMR to 25 and MMR to 1 per 1000 live births and improve child sex ratio (0-6 years) to 950 by the end of the 12th plan.
The outlay on health would include increased spending in related areas of drinking water and sanitation.
Reducing Total Fertility Rate to 2.1 per cent by the end of 12th plan.
Reducing under nutrition among the children aged 0-3 years to half of the NFHS – 3 levels by the end of the 12th plan.

E) Infrastructure, including rural infrastucture:

Increasing investment in infrastructure as a percentage of GDP to 9 per cent.
Increasing the gross irrigated area to 103 million hectares.
Providing electricity to all villages and reduce AT & C losses to 20 per cent by the end of 12th plan.
Connecting all villages with all weather roads by the end of 12th plan.
Upgrading national and state highways to the minimum two – lane standard.
Completing Eastern and Western dedicated Freight corridors by the end of 12th
Increasing the rural tele-density to 70 per cent.
Ensuring 50 per cent of rural population to have an access to 55 LPCD piped drinking water supply and 50 per cent of gram panchayats achieve Nirmal Gram Status by the end of 12th plan.

F) Environment and Sustainability:

Increase in forest and tree cover to 33 per cent.
Increase green cover by 1 million hectare every year during the 12th plan.
Add 30,000 MW of renewable energy capacity.
Reducing emmission intensity of GDP in line with the target of 20 per cent to 25 per cent reduction by 2020 over 2005 levels.
Clearing of all polluted rivers.

G) Service Delivery:

Providing access to banking services to 90 per cent Indian households by the end of the 12th plan.
Major subsidies and welfare related beneficiary payments to be shifted to direct cash transfer by the end of the 12th plan, using the Aadhar platform with linked bank accounts.

Question 3.
Briefly review the achievements and failures of the Eleven Five Year Plans. [Mar. ’19 (AP); Mar. 18]
Answer:
The following account shows the concrete achievements of the Five Year Plans.
Objectives: The important objectives of 1956 industrial policy are:
1) Increase in National and per capita income: The National income increased from Rs. 1.32 lakh crores at the beginning of first plan to Rs. 47.67 lakh crores by the end of the 11th plan, (at 2004-’05 base year prices).
Per capita income had risen to Rs. 3687 to Rs. 39,168 at 2004- 05 prices by the end of the 11th Plan.

2) Progress in Agriculture: As a result of an average 23 to 24 percent of plan expenditure on agriculture in each Five Year Plan and implementation of New Agricultural Strategy during 1960s the productivity and production of our agriculture increased remarkably. India achieved self sufficiency in food grains production. Food grains production increased from 51 million tonnes in 1950-’51 to 264 million tonnes in 2014. Similar trend can also be observed in case of non-food crops, cotton, oil seeds, sugarcane etc. But pulses production has not increased much.

3) Progress in Industry: Considerable progress is witnessed in the production of steel, aluminium, engineering goods, chemicals, fertilizers and petroleum products. Production of coal and iron ore, generation of electricity etc. also increased.

4) Development of infrastructure: There is a significant achievement in the creation of economic and social infrastructure, a prerequisite for faster economic growth.

Total literacy rate increased from 18.3 per cent in 1951 to 74 per cent in 2011. Male literacy is 82 and female literacy is 66 per cent.
India developed as a Health Tourist centre which means the health expense is very less.
The IMR, MMR and CMR have fallen.
There is a significant development in our transport i.e., Roadways, Railways, water ways and civil aviation.
Coal, electricity and petroleum are important sources of energy which achieved a remarkable growth during the plan period. Cement, tele communications, Banking, irrigation facilities etc. also improved significantly.

5) There is a decline in the imports if capital goods and diversification in our exports. Due to the implementation of new economic reforms in 1990s, Indian exports and imports went a drastic change. Export promotion and import substitution policy helped in reducing the imports and i ncreasing the exports. The value of our exports irom India increased from Rs. 606 cr ores in the first plan to Rs. 16,35,261 crores in the beginning of the 12th plan.

6) There is a significant achievement in the development of science and Technology and managerial cadres.

7) There is a huge development in the educational system. All India growth of student enrollment in higher education increases! from 34.0 lakhs to 146.25 lakhs during 1985 and 2010 with an annual average growth rate of 6.01, the total enrollment of students at all levels in 2011 is 169.7 lakhs. Total number of universities in 2011 are 573 and 33,023 colleges are functioning.

8) There is a tremendous development of the service sector during the plan period. It is contributing 57 per cent to our GDP.

Failures: The following are some of the failures of Indian Planning.

Still the problems of poverty and unemployment are existing.
Inspite of several measures taken under land reforms, still there exists inequalities regarding land, income and wealth. Distribution of surplus lands is not completed.
The objective of egalitarian society could not I be achieved so far.
The Plans failed to control black money and cc eruption.
We have to go a long way to reach the target of “Health to all”.
Plans failed to achieve balanced regional deve lopment. There are imbalances in development among the regions of India.

Question 4.
Explain the causes of regional imbalances in India. [Mar. 2018; May 2018, ’17]
Answer:
The coexistence of relatively developed and economic:ally underdeveloped states and even regions within each state is known as “Regional imbalances”.
Causes of Regional Imbalances: The following are the main causes of regional imbalances. They are:
1) Geographical causes: Physical geography controls economic growth in developing countries. For e.g.: Himachal Pradesh, Hill districts of UP, Northern Kashmir, etc. remain backward mainly because of their in accessibility.

2) Climatic conditions: Climate also plays an important role in the economic development of many regions in India. Regions with adverse climatic conditions reflected in low agricultural output and absence of large scale industries.

3) British Rule: Historically, the existence of backward regions started from the British rule in India. The British helped the development of only those regions which are endowed with conducive facilities to drain Indian wealth to their country. For e g.: pbees like Calcutta, Bombay, Madras, etc.

4) Concentration of Industries: New inve stments in the private sector has a tendency to concentrate in already well developed areas, thus reaping the benefits of external economies. Well developed areas offer the private investors certain basic advantages Viz. skilled labour, infrastructure, tra nsport, etc.

5) Scarcity of Natural resources: Certain regions are endowed with good natural resources where as certain areas are. not. Those regions with good natural resources e endowment are develop faster.

6) Lack of infrastructural facilities r, The regions where there are no proper roads, electricity, telecommunications, drinking water, education, medical, technical, training facility, banking facility, etc. tend to remain backward.

Question 5.
Explain the measures taken for balanced regional development. [March 2017]
Answer:
The problem of regional imbalance as is multidimensional and peculiar one. It is difficult to bring a balanced regional deve lopment. Steps are being taken in this direction from the second Five Year Plan, still a l ot is required to do. The following measures can help to attain a balance among the dif f erent regions in the matter of development. They are:

Transfer of funds from the c entral pool to backward states.
Starting of industries by the government in the backward regions, as the private sector has the bias towards; developed regions.
Providing infrastructural facilities like electricity, telecommunications, transport, water supply, etc. in the backward regions.
Encouragement to decenti alisation industries through regional planning and micro level planning.
Formation of Industrial E states in the backward areas.
Special policies to the regions where frequent floods and droughts occur.
Central assistance to de velop hill and tribal areas.
Encouraging the establishment of small scale industries in the backward regions.
Provision of subsidies, tax concessions, tax holidays, etc. also help in removing the regional imbalances.

Question 6.
Explain the role of International Trade in Economic Development.
Answer:
The role of international trade in economic development is significant. Economists found a positive relationship between international trade and level of economic growth.
International trade provides an urge to develop the knowledge and experience that makes development possible and to accomplish it.

International trade and Economic Development:
1) Increases output: International trade helps a countryto specialise in the production of a few goods i.e., division of labour. It exports those goods which it can produce cheaply in exchange for goods what other can produce cheaply. It gains from trade through increased output, national income which is useful to break vicious circle of poverty and promotes development.

2) Expands market: International trade widens the market and increases the inducement to invest.

3) Increases Employment: Due to international market opportunities, the developing countries started exploiting unutilised resources which will reduce unemployment and under employment. As people’s income rises, domestic savings and investments increase. Human resources can be utilised optimally.

4) Increases Internal and External Economies: Expansion of production activities and expanded market opportunities leads to a number of internal and external economies. This helps to reduce cost of production. These are the direct gains from international trade.

5) Indirect benefits: With the expansion of the market and the scope of specialisation, international trade helps in greater use of machinery, encourages inventions and innovations and raises labour productivity. It also makes available new products to the people and tempts them to work harder to save and accumulate capital.

6) Import of capital goods against Export of staple commodities: International trade helps to exchange domestic goods having low growth potential for the foreign goods which have high growth potential. This will boost the development process of the developing economies. For e.g.: India exports agricultural products to USA and imports modern machinery.

7) Educative Effect: International trade helps in importing skills, ideas, technical know how from developed economies and thus stimulates technical progress in under developed countries.

8) Basis for importation of Foreign capital: Capital is scarce in developing countries. If a country actively participates in international trade, the unused capital of rich countries will flow and utilised effectively in capital poor countries. Foreign capital not only helps in increasing employment, output and income but also smoothens the adverse balance of payments and inflationary pressures.

9) International trade is the best assurance for international peace.

Adverse effects of international trade:
1) As under developed countries attempt to cut costs to gain a price advantage, many workers may be paid low wages, substandard working conditions and even forced labour and abusive child labour.

2) According to critics, the increase of corporate farming in the developing countries increases pesticides and energy use and the host countries ignore costly, environmental standards.

3) According to Gunnar Myrdal, foreign trade has the strong Back wash Effects’ i.e., the trade is always in favour of developed nations and against the developing countries.

4) Capital for nation in the UDCs is badly effected by International Demonstration effect because of international trade.

5) According to Prebisch, there has been a secular deterioration in the terms of trade of less developed countries.

Question 7.
Define Globalisation. What are the essential conditions of globalisation?
Answer:
Integrating the domestic economy with the world economy is called globalisation. It is the process of integrating various economies of the world without creating any hindrances in the flow of goods and services, technology, labour etc. In simple words, globalisation is the process of opening up domestic economy doors to the rest of the world.
Thus, globalisation implies unrestrictive conditions of international trade among the countries in respect of

Goods and services
Capital inflow and outflow.
Free flow of technology and expertise
Free movement of gold among nations
Unrestricted flow of capital goods (machinery equipment) among countries etc.

Essential conditions of Globalisation: There are some essential conditions to be satisfied by the domestic economy as well as the firm for successful globalisation of the business. They are:
1) Business freedom: These should not be unnecessary government restrictions which come in the way of globalisation, like import restrictions or finance, foreign investment etc. Thus liberalisation is a pre condition for globalisation.

2) Infrastructure facilities: The extent to which an enterprise can develop globally from home country base depends on the infrastructural facilities like water, transport, electricity, finance etc.

3) Government support: Government support in the form of policy and procedural reforms, development of common facilities such as infrastructural facilities etc. are necessary for globalisation.

4) Resources: Resources often decide the ability of a firm to globalize. Resources include finance, technology, R & D capability, managerial expertise etc.

5) Competitiveness: The competitive advantages of the company such as low costs and price, product quality, product differentiation, technological superiority etc. is an important determinant of globalisation.

6) Orientation: A global orientation on the part of the business firms and suitable globalization strategies are essential for globalisation.

Question 8.
Explain the impact of Globalisation on Indian Economy.
Answer:
Globalisation is the process of integrating the domestic economy with the world economy. In simple words, it is the process of opening up of domestic eonomy doors to the rest of the world.

Impact of Globalisation on Indian economy:

India’s share in the world exports raised from 0.53 per cent in 1991 to 1.7 per cent by 2013.
Exports now finance more than 65 per cent of imports.
Foreign exchange reserves which were as low as one billion US dollars, grow upto 333 billion US dollars by the end of February 2015.
Control over the country’s current account deficit is observed.
The growing rate of external debt decreased drastically when compared to pre¬reform period.
International confidence in India has been restored.
Indian consumers are now enjoying a wide variety of quality goods at lower prices.
The employment growth rate actually declined from 2 per cent to 0.98 per cent after globalisation.
The pressure of Multi National Companies (MNCs), IMF and World Bank force the government to take decisions regarding the reforms actually leading to the closure of small and medium enterprises.
Globalisation widened the income inequalities among the people and even among regions too.

Short Answer Questions

Question 1.
Types of Planning
Answer:
Plans may be of any form’/ type as discussed below.
A) Five Year Plans: Five year plans are designed for a period of five years. Five year plan is an integral part of perspective plan. India is implementing Five Year Plans.

B) Annual plan: An annual plan is a part of five year plan. The targets are fixed annually. A detailed plan will be prepared yearwise.

C) Perspective plan: A perspective plan is a macro plan formulated for a period of 15 to 20 years keeping in view the long term needs and objectives.

D) Rolling plan: Rolling plan does not have a fixed period of time. It has only duration and moves forward. As it moves forward, the completed year will be deleted and the next year will be added. So, the plan rolls on continuously. This concept was introduced by Prof. Gunnar Myrdal. The then Janata government introduced rolling plan in 1978. Prof. D.T. Lakdawala was the Deputy Chairman of Planning Commission. But, it was discontinued in 1979 with the fall of Janata government.

Question 2.
Planning Commission.
Answer:
After Independence, onl5th March, 1950 the Planning Commission was set up by a resolution of the cabinet of the Government of India. It was established in accordance with article 39 of the Constitution of India, which is a part of Directive Principles of State Policy. It has autonomous status and acts as on a divisor to the government. It has no legal status, it’s office ‘Yojana Bhavan’ is in New Delhi. Prime Minister is its Chairman. Five full time members are also nominated. A Deputy Chairman coordinates all the waves of Planning Commission. The centred cabinet ministers of key portfolios were also these officio members.

The experts of various fields are also appointed as full time members. The NDA government, under the Prime Ministership of Mr. Narendra Modi, decided to replace Planning Commission with NITI Ayog from 1st January, 2015.

Question 3.
Explain the objectives of planning commission. [May, March 2017]
Answer:
Preparing plans for the most effective and balanced utilization of country’s man power, physical capital resources in the obligation of Planning Commission. The Planning Commission established in 1950, performs the following functions.

1) To make an assessment of the material, capital and human resources of the country and to examine whether they are sufficient to meet the requirements of the nation.

2) To define the stages, on the basis of priority, in which the plan should be carried out and purpose of the allocation of resources for due completion of each stage.

3) To indicate the factors that tend to retard economic development and to find feasible ways to overcome these factors.

4) To determine the conditions for the successful execution of the plan.

5) To determine the nature of the machinery required for securing the successful implementation of each stage of the plan in all its aspects.

6) To appraise from time to time the progress achieved in the execution of each stage of the plan and to recommend alternative policy measures when they are needed.

Question 4.
Explain at least three failures of plans.
Answer:
The following account shows the concrete achievements of the Five Year Plans.
Objectives: The important objectives of 1956 industrial policy are:
1) Increase in National and per capita income: The National income increased from Rs. 1.32 lakh crores at the beginning of first plan to Rs. 47.67 lakh crores by the end of the 11th plan, (at 2004-’05 base year prices).
Per capita income had risen to Rs. 3687 to Rs. 39,168 at 2004-’05 prices by the end of the 11th Plan.

2) Progress in Agriculture: As a result of an average 23 to 24 percent of plan expenditure on agriculture in each Five Year Plan and implementation of New Agricultural Strategy during 1960s the productivity and production of our agriculture increased remarkably India achieved self sufficiency in food grains production. Food grains production increased from 51 million tonnes in 1950-51 to 264 million tonnes in 2014. Similar trend can also be observed in case of non-food crops, cotton, oil seeds, sugarcane etc. But pulses production has not increased much.

3) Progress in Industry: A considerable progress is witnessed in the production of steel, aluminium, engineering goods, chemicals, fertilizers and petroleum products. Production of coal and iron ore, generation of electricity etc. also increased.

4) Development of infrastructure: There is a significant achievement in the creation of economic and social infrastructure, a prerequisite for faster economic growth.

Totcil literacy rate increased from 18.3 per cent in 1951 to 74 per cent in 2011. Male literacy is 82 and female literacy is 66 per cent.
India developed as a Health Tourist centre which means the health expense is very less.
The IMR, MMR and CMR have fallen.
There is significant development in our transport i.e., Roadways, Railways, water ways and civil aviation.
Coal, electricity and petroleum are important sources of energy which achieved a remarkable growth during the plan period. Cement, telecommunications, Banking, irrigation facilities etc. also improved significantly.

5) There is a decline in the imports of capital goods and diversification in our exports. Due to the implementation of new economic reforms in 1990s, Indian exports and imports went a drastic change. Export promotion and import substitution policy helped in reducing the imports and increasing the exports. The value of our exports from India increased from Rs. 606 crores in the first plan to Rs. 16,35,261 crores in the beginning of the 12th plan.

6) There is a significant achievement in the development of Science and Technology and managerial cadres.

7) There is a huge development in the educational system. All India growth of student enrollment in higher education increased from 34.0 lakhs to 146.25 lakhs during 1985 and 2010 with an annual average growth rate of 6.01, the total enrollment of students at all levels in 2011 is 169.7 lakhs. Total number of universities in 2011 are 573 and 33,023 colleges are functioning.

8) There is a tremendous development of the service sector during the plan period. It is contributing 57 per cent to our GDP.
Failures: The following are some of the failures of Indian Planning.

Still the problems of poverty and unemployment are existing.
Inspite of several measures taken under land reforms, still there exists inequalities regarding land, income and wealth. Distribution of surplus lands is not completed.
The objective of egalitarian society could not be achieved so far.
The plans failed to control black money and corruption.
We have to go a long way to reach the target of “Health to all”.
Plans failed to achieve balanced regional development. There are imbalances in development among the regions of India.

Question 5.
Reasons for Regional Imbalances in India. [Mar ’19 (AP); Mar ’18, ’17; May ’18]
Answer:
The coeXi jtence of relatively developed and economically under developed states and even regions within each state is known as “Regional imbalances”.
Causes of Regional Imbalances: The following are the main causes of regional imbalances. They are:
1) Geographical causes: Physical geography controls economic growth in developing countries. For e.g. Himachal Pradesh, Hill districts of UP, Northern Kashmir etc. remain backward mainly because of their inaccessibility.

4) Concentration of Industries: New investments in the private sector has a tendency to concentrate in already well developed areas, thus reaping the benefits of external economies. Well developed areas offer the private investors certain basic advantages viz. skilled labour, infrastructure, transport, etc.

5) Scarcity of Natural resources: Certain regions are endowed with good natural resources whereas certain areas are not. Those regions with good natural resources endowment are develop faster.

6) Lack of infrastructural facilities: The regions where there are no proper roads, electricity, telecommunications, drinking water, education, medical, technical, , training facility, banking facility, etc. tend to remain backward.

Question 6.
Enumerate 3 points in justification of privatization.
Answer:
Privatisation is one of the important point of “New Economic Reforms” introduced in 1990 under the Prime Ministership of late Sri P.V. Narasimha Rao and Finance Minister Dr. Manmohan Singh.

Privatisation is the process of transfering the ownership rights of public sector production units either fully or partially to the private individuals or companies.

3 Points in justification of privatisation: The following points justify / support privatisation.
A) Improvement in efficiency and productivity: The private sector introduces the profit oriented decision making process in the functioning of enterprise leading to improved efficiency and performance. Moreover, private ownership establishes a market for managers, which improves the quality of management.

B) Fixing responsibility is easier: In private sector, the responsibilities can be clearly fixed. So, the personnel are bound to follow them.

C) Succession planning: In the private sector enterprises, there will be no delay in decision making. The heir apparent is identified early.
Moreover in the private sector spot decisions may be taken which is necessary for the success of the business, remedial measures can be taken as early as possible to minimise or avoid losses.

Question 7.
Role of international trade. [Mar ’19 (AP); May ’17]
Answer:
The role of international trade in economic development is significant. Economists found a positive relationship between international trade and level of economic growth.

International trade provides an urge to develop the knowledge and experience that makes development possible and to accomplish it.

International trade and Economic Development:
1) Increases output: International trade helps a country to specialise in the production of a few goods i.e.: division of labour. It exports those goods which it can produce cheaply in exchange for goods what other can produce cheaply. It gains from trade through increased output, national income which is useful to break vicious circle of poverty and promotes development.

2) Expands market: International trade widens the market and increases the inducement to invest.

7) Educative Effect: International trade helps in importing skills, ideas, technical know how from developed economies and thus stimulates technical progress in under developed countries.

9) International trade is the best assurance for international peace.

2) According to critics, the increase of corporate farming in the developing countries increases pesticides and energy use and the host countries ignore costly environmental standards.

3) According to Gunnar Myrdal, foreign trade has the ‘strong Back wash Effects’ i.e. the trade is always in favour of developed nations and against the developing countries.

4) Capital for nation in the UDCs is badly effected by International Demonstration effect because of international trade.

5) According to Prebisch, there has been a secular deterioration in the terms of trade of less developed countries.

Question 8.
Objectives of GATT. [May 2018]
Answer:
During the Great Economic Depression of 1930s, the international trade was badly effected. Various countries imposed import restrictions to safeguard their economies. This led to a sharp decline in world trade. The allied powers continued their efforts to liberalised trade among nations. 23 Nations agreed to continue extensive tariff negotiations for trade concessions in general, which are incorporated in General Agreement on Tariffs and trade (GATT). This was signed on 30th October 1947 and came into force on 1st January 1948 when other nations also signed it.

The Objectives of GATT: The objectives of the GATT were based on the few fundamental principles in the cost of International Trade conduct.
A) Most Favoured Nation Principles (MEN): The basic principle of GATT is that all member nations have to accept the MFN clause. There should not be any preferential treatment among the member nations regarding the trade policy.

B) Protection through Tariffs only: Its fundamental component was negotiable balance of mutual tariff concessions among contracting parties. The bound tariff rates negotiated were generalized to all contracting parties.

C) All contracting parties of GATT must follow the principles of Non-discrimination, Reciprocity and Transparency.

D) Multilateral Negotiations: GATT acts as a platform to the member nations for multilateral negotiations. It organises and coordinates the negotiations made by its members.

E) Council of settlement of disputes: GATT acts as a destination for consultation, conciliation and settlement of disputes for the contracting parties.

From 1st January 1995, GATT disappeared and became a part of history as it was replaced by the World Trade Organisation (WTO).

Question 9.
Objectives of WTO. [May 2018]
Answer:
The signing of the Final Act of the Uruguay Round by the member nations of GATT in April, 1994 paved the way for the-setting up of the World Trade Organisation’ WTO. An agreement to this effect was signed by 104 nations. The WTO Agreement cause into force on 1st January, 1995. India is a founder member of the WTO. In 2013 there were 110 members in WTO. Geneva is its headquarters.

Objectives of WTO:
1) WTO aims at raising the standard of living, ensuring full employment and steady growth, expanding the production and trade in goods and services among the global nations.

2) To allow for the optimal use of the world’s resources in accordance with the objectives of sustainable development. This also considers growth environmental protection with economic.

3) To ensure the developing and least developed countries secure a share in the growth in international trade.

4) To convince the member countries for reciprocal and mutually advantageous arrangements through reduction of tariffs and other trade barriers.

5) To develop an integrated, more viable and durable multilateral trading system.

Question 10.
Differences between GATT and WTO. [Mar ’19 (TS)]
Answer:
The WTO is not an extension of GATT but a successor to the GATT. It completely replaces GATT and has a very different character. The following are the major differences between GATT and WTO.

GATT	WTO
1) It had no legal status.	1) It has legal status.
2)It was not created by the governments and legislatures.	2) It is created by international treaty ratified by the governments and legislatures of the member states.
3) It was not an agency of the United Nations Organisation (UNO)	3) It has cooperative relationship with the UNO
4) It had a set of rules and procedures relating to multilateral agreements of selective nature. There were separate agreements on separate issues which were not binding on members. Any member could stay out of an agreement.Only those who signed the agreement could be penalised on default.	4) The WTO agreements are permanent and binding on all members. Action can be taken against any defaulting member by all the member nations.
5) The GATT disputes settlement system was dialatory and not binding on the parties to the disputes.	5) The WTO dispute settlement mechanism is automatic, faster and binding on the parties.
6) The GATT was a forum where the member countries met once in a decade to discuss and solve world trade problems.	6) It is properly established, rule based World Trade Organisation where the decisions on agreements are time bound.
7) It had a small secretariate managed by a Director General.	7) It has a large secretariate and huge organisational set up.
8) The GATT rules applied to trade in goods only.	8) WTO covers note only trade in oods and services but also trade related aspects of intellectual property rights and number of other agreements.

Question 11.
Functions of WTO. [Mar. 2018; May ’17]
Answer:
Evolution of WTO: The signing of the Final Act of the Uruguay Round by the member nations of GATT in April, 1994 paved the way for the setting up of the ‘World Trade Organisation’ WTO. An agreement to this effect was signed by 104 nations. The WTO Agreement cause into force on 1st January, 1995. India is a founder member of the WTO. In 2013 there were 160 members in WTO. Geneva is its headquarters.
Functions of WTO: The following are the functions of WTO. They are:

WTO facilitates the implementation, administration and operation of world trade agreements.
WTO provides a forum for trade negotiations among the member nations.
It shall handle trade disputes.
It monitors national trade policies of the member countries.
It provides technical assistance and training to developing countries.
It maintains harmonious and cooperative relationship with IMF, IBRD and their affiliated agencies.

Very Short Answer Questions

Question 1.
Define plan. [May 2018]
Answer:
It is a technique of conscious effort made to achieve certain predetermined objectives.

Question 2.
What is Rolling plan [Mar ’19 (AP)]
Answer:
Rolling plan does not have a fixed peirod of time. It has only duration and moves forward. The completed year will be deleted and next year will be added. Thus, the plan rolls continuously. Gunnar Myrdal introduced this concept.

Question 3.
Concept of plan holiday.
Answer:
The gap that occurred in the implementation of planning process is called plan Holiday. There was plan holiday in India during 1966-’69 and 1990-92. Annual plans were implemented during plan holiday.

Question 4.
Define perspective plan.
Answer:
A perspective plan is macro plan formulated for 15 to 20 years, keeping in view the long term needs and objectives.

Question 5.
What is an Annual plan? Give an example.
Answer:
The annual plan is a yearwise plan which was implemented during 1966-’69 and 1990-’92 in India, during which period the implementation of 5 year plan is suspended.

Question 6.
Backward states in India.
Answer:
Bihar, Odisha, MP, UP, North eastern states are the backward states in India.

Question 7.
Define Regional Imbalances.
Answer:
The coexistence of relatively economically developed states and underdeveloped states and even regions within a state is known as Regional imbalances.

Question 8.
Balanced Regional Development.
Answer:
Development of states and regions within the state, according to their resource potentialities is called balanced Regional Development.

Question 9.
What is Liberalisation? [May 2017]
Answer:
The term ‘Liberalisation’ refers to relaxation of previous government’s restrictions in the areas of social and economic policies.

Question 10.
Explain the concept of privatisation.
Answer:
The general process of involving the private sector in the ownership or operation of a state owned enterprise is called “Privatisation”.

Question 11.
Define Globalisation. [May, March 2018]
Answer:
The process of integrating various economies of the world without creating any hindrances in the free flow of goods and services, technology, capital and labour is called globalisation.

Question 12.
Concept of TRIPS.
Answer:
TRIPS means “Trade Related Intellectual Property Rights”. It is an important agreement of WTO. It legally protects the intellectual property of an individual or a business firm of a nation against illegal usage by others.

Question 13.
What do you mean by TRIMS?
Answer:
TRIMS means “Trade Related Investment Measures”. It calls for national treatment of foreign investment and removal of quantitative restrictions.

Question 14.
The clause of MEN.
Answer:
Any concession given to any nation was automatically extended to all other member nations of GATT, according the clause of MFN.

Question 15.
Define Disinvestment. [May 2017]
Answer:
The sale of public sector equity to the private investors, labour is called disinvestment.

Question 16.
GATT
Answer:
To improve international trade conditions after the “Great Economic Depression” of 1930s, 23 nations agreed to continue extensive tariff negotiations for trade concessions in general, were incorporated in “General Agreement on Tariffs and Trade” – GATT. This was signed on 30th October, 1947 and came into force on 1st January, 1948.

Question 17.
WTO [March 2017]
Answer:
WTO means ‘World Trade Organisation’. GATT was replaced by WTO. The signing of the Final Act of the Uruguay Round by member nations of GATT in April 1994 paved the way for the setting up of WTO. The WTO came to function, on 1st January 1995.

Question 18.
Uruguay Round
Answer:
It is the VIII Round (1986-’93) of GATT negotiations. The signing of the Final Act of the Uruguay round led to the establishment of WTO, replacing GATT.

Question 19.
FDI.
Answer:
FDI means “Foreign Direct Investment”. In the FDI investor retains control over the investment made in a foreign country.

AP Inter 2nd Year Economics Important Questions 7th Lesson Planning and Economic Reforms

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