introduction to indian economy section 2 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (c)

The System of Memorandum of Understanding was introduced in the Public Sector Enterprises during the year 1987-88 in India. It was based on the report of the Arjuna Sengupta Committee (1984).

Answer: (b)

Only statement 2 is correct.

Statements 1 & 3 are wrong.

Answer: (c)

The rising population can be a virtue or can be vice with regards to the economic development of a country.

In India, the demerits of population growth outweigh its merits. Due to the large population size and its rate of growth, our per capita income continues to be stagnant at a low level. Since First Five Year Plan, our national income has increased about 11 times but our per capita income has increased only about three and half times, thanks to the rise in population.

Also, large population size has tended to reduce the landman ratio in India which reduces the productivity of land and labour. The growing population has also reduced the per capita availability of cereals and pulses.

Further, due to the high growth rate of the population, unemployment is assuming monstrous proportions. Lack of employment opportunities outside agriculture builds pressure on farming as a source of subsistence. Consequently, disguised unemployment in the farming sector is emerging as a serious challenge.

Answer: (c)

Indian agriculture is a structurally small farm and small farmer based. The overall average size of operational holding in India declined from 2.63 hectares in 1960-61 to 1.33 hectares in 2002-03. Over 80% of the landholdings in India are classified as small and marginal landholdings with a farm size of less than 2 ha.

This implies that over 80% of the farmers in India hold just 39% of the total cultivated land. The Law of inheritance leads to fragmentation of land among the inheritors of the land.

Again, the desire for land ownership could also be attributed to the fragmentation of land. Owning of land is more social status in India, than an economic exigency.

Answer: (b)

A salaried employee can claim a tax rebate under section 88. The amount of tax rebate is 20% of the gross qualifying amount (Rs.80000) or Rs.16000, whichever is lower.

If a person invests only in other securities, excluding shares, debentures and units of the infrastructure sector; then the maximum rebate is only Rs.12000 (20% of Rs.60000).

This rebate may be extended up to Rs.16000 on further investment up to Rs.20000 in shares and debentures. By investing in shares, debentures and infrastructure units a maximum rebate of Rs.16000 (i.e., 20% of Rs.80000) may be claimed.