NCERT Solutions for Class 11 Economics Chapter 2: Indian Economy 1950–1990 (NCERT 2026–27)
These Class 11 Economics Chapter 2 solutions cover Indian Economy 1950–1990 from the NCERT textbook Indian Economic Development. The chapter studies the goals of India’s five year plans — growth, modernisation, self-reliance and equity — and the development policies followed in agriculture (land reforms and the Green Revolution), industry (the IPR 1956, public sector and licensing) and trade (the inward-looking import-substitution strategy). It also weighs the merits and limitations of a regulated, mixed economy. Below you get step-by-step, exam-ready answers to all 19 NCERT exercise questions, plus key terms, extra practice, MCQs, Assertion–Reason and FAQs for the 2026–27 session.
Class: 11Subject: EconomicsBook: Indian Economic DevelopmentChapter: 2Title: Indian Economy 1950–1990Session: 2026–27
Chapter 2, Indian Economy 1950–1990, traces how independent India chose a mixed economy that combined the best of socialism and capitalism, with the Planning Commission (set up 1950, chaired by the Prime Minister) directing development through five year plans. The four common goals of the plans were growth, modernisation, self-reliance and equity. In agriculture, the State pursued land reforms (abolition of intermediaries, land ceilings, ‘land to the tiller’) and the Green Revolution (HYV seeds, fertiliser and irrigation), which made India self-sufficient in food grains. In industry, the Industrial Policy Resolution 1956 gave the public sector a leading role over the ‘commanding heights’ and regulated the private sector through industrial licensing (the ‘permit-licence raj’). Trade followed an inward-looking import-substitution strategy that protected domestic industry through tariffs and quotas. The chapter also evaluates the merits and limitations of this regulated regime, setting the stage for the 1991 reforms.
Key Concepts & Terms
Mixed economy: an economic system in which both the market and the government answer the three central questions (what, how and for whom to produce); the market supplies what it can produce well, while the government supplies essential goods and services that the market fails to provide.
Economic planning / Five Year Plan: a document that spells out how a nation’s resources should be used to achieve general goals and specific objectives within a fixed period (in India, five years). India borrowed five year planning from the former Soviet Union; the Planning Commission was set up in 1950.
Goals of planning:Growth (increase in the country’s capacity to produce goods and services, measured by steady rise in GDP); Modernisation (adoption of new technology and progressive changes in social outlook); Self-reliance (avoiding imports of goods that can be produced within India, to reduce dependence and protect sovereignty); Equity (ensuring the benefits of growth reach the poor and reducing inequality).
Land reforms: changes in the ownership of landholdings — abolition of intermediaries (zamindars, jagirdars), land ceiling (fixing the maximum land an individual can own) and conferring ownership on the actual tiller.
Green Revolution: the large increase in food grain production resulting from the use of High Yielding Variety (HYV) seeds, especially for wheat and rice, supported by fertiliser, pesticide and assured irrigation.
Marketable / marketed surplus: the portion of agricultural produce that is sold in the market by farmers rather than consumed by them.
Commanding heights of the economy: the key industries vital for the economy over which the government took complete control under the socialist pattern.
IPR 1956: the Industrial Policy Resolution of 1956, which classified industries into three categories (exclusively State-owned; State plus private supplementing; and largely private) and formed the basis of the Second Five Year Plan.
Import substitution: an inward-looking trade strategy that aims to replace imports with domestic production, protecting home industry from foreign competition through tariffs (taxes on imports) and quotas (limits on import quantity).
Permit-licence raj: the system in which no new industry could be started, and no existing one expanded or diversified, without a government licence; widely criticised for breeding inefficiency and lobbying.
Subsidy: monetary assistance given by the government for production activities (e.g. on fertilisers), used to encourage farmers to adopt new technology.
NCERT Exercises — Full Solutions
All questions below are reproduced verbatim from the NCERT textbook’s end-of-chapter Exercises. Answers are original, written in CBSE exam-ready style.
1. Define a plan.
ANSWERA plan is a document that spells out how the resources of a nation should be put to use to achieve certain goals within a specified period of time. It contains some general goals as well as specific objectives that are to be attained within a fixed duration.In India, plans were prepared for a period of five years and were therefore called five year plans (a practice borrowed from the former Soviet Union). A plan need not specify the output of every good and service; it is enough that it identifies the sectors in which the government plays a commanding role, leaving the rest to the market.
2. Why did India opt for planning?
ANSWERAfter independence, India’s leaders wanted to build an economic system that would promote the welfare of all rather than a few. They were attracted to socialism but did not favour the Soviet model in which the State owned all property; nor did they want unrestrained capitalism, which left the poor behind.They therefore chose a mixed economy guided by planning, so that the government could deliberately direct the country’s limited resources towards rapid growth, industrialisation, removal of poverty and reduction of inequality. Planning allowed the State to take charge of the commanding heights of the economy (such as power and irrigation) while the private sector operated within a planned framework.
3. Why should plans have goals?
ANSWERA plan must have clearly specified goals because resources are limited and choices have to be made about how to use them. Goals give direction to the plan and a yardstick against which its success or failure can be judged.India’s five year plans pursued four long-term goals — growth, modernisation, self-reliance and equity. Without such goals, planning would be aimless; the goals tell planners which sectors and objectives to emphasise, even though every plan need not give equal weight to all four (and some goals may even conflict, such as modern technology versus employment).
4. What are High Yielding Variety (HYV) seeds?
ANSWERHigh Yielding Variety (HYV) seeds are improved seeds that produce a much larger quantity of grain per unit of land than traditional seeds, especially for wheat and rice. Their introduction triggered the Green Revolution.However, HYV seeds require the use of fertilisers and pesticides in correct quantities as well as a regular and reliable supply of water (irrigation). Without these complementary inputs, the seeds do not give high yields, which is why their early benefit was restricted to better-irrigated, more affluent regions.
5. What is marketable surplus?
ANSWERMarketable surplus (also called marketed surplus) is the portion of agricultural produce that is sold in the market by the farmers instead of being consumed by the farmers themselves and their families.It is important for the economy because if a large share of increased output is consumed by farmers, the higher production makes little difference to the rest of the economy. A good marketed surplus — as happened during the Green Revolution — supplies food to the non-farm population, allows the government to build buffer stocks, and even lowered the relative price of food grains, benefiting low-income consumers.
6. Explain the need and type of land reforms implemented in the agriculture sector.
ANSWERNeed: At independence the land tenure system was dominated by intermediaries (zamindars, jagirdars) who merely collected rent from the actual tillers without contributing to farm improvement. This led to very low productivity, forcing India to import food, and there was neither growth nor equity in agriculture. Land reforms were needed to raise productivity and reduce inequality in land ownership.Types of land reforms implemented:(i) Abolition of intermediaries — about 200 lakh tenants were brought into direct contact with the government, freeing them from exploitation by zamindars and giving them ownership and the incentive to increase output.(ii) Land ceiling — fixing the maximum size of land that an individual could own, in order to reduce the concentration of land in a few hands and promote equity.(iii) Land to the tiller — making the actual cultivator the owner of the land, on the principle that ownership gives the tiller the incentive to invest and improve the land.Land reforms succeeded in Kerala and West Bengal, where governments were committed to the policy, but loopholes, court delays and benami registration limited success elsewhere.
7. What is Green Revolution? Why was it implemented and how did it benefit the farmers? Explain in brief.
ANSWERMeaning: The Green Revolution refers to the large increase in the production of food grains resulting from the use of High Yielding Variety (HYV) seeds, especially for wheat and rice, supported by fertilisers, pesticides and assured irrigation.Why it was implemented: At independence about 75% of the population depended on agriculture, yet productivity was very low due to old technology and poor infrastructure, and India had to import food from the USA. The Green Revolution was implemented to break this stagnation and make the country self-sufficient in food grains.How it benefited farmers: Production of wheat and rice rose sharply; a large marketed surplus was sold in the market; the relative price of food grains fell, helping low-income groups; the government could build buffer stocks for times of shortage. Government loans at low interest and fertiliser subsidies, plus research institutes, ensured that both small and large farmers gained, making India self-sufficient in food grains.
8. Explain ‘growth with equity’ as a planning objective.
ANSWERGrowth means an increase in the country’s capacity to produce goods and services, reflected in a steady rise in Gross Domestic Product (GDP). But growth by itself is not enough — a country can have high growth and modern technology and still have most of its people living in poverty.Equity ensures that the benefits of economic prosperity reach the poor sections of society and not only the rich, that every citizen can meet basic needs (food, decent housing, education, health care), and that the inequality in the distribution of wealth is reduced.‘Growth with equity’ therefore means raising total output while also distributing its benefits fairly, so that development improves the quality of life of all people. India’s plans aimed to combine the two rather than pursue growth alone.
9. Does modernisation as a planning objective create contradiction in the light of employment generation? Explain.
ANSWERModernisation means adopting new technology to increase the production of goods and services, along with progressive changes in social outlook (such as equal rights for women).Yes, modernisation can create a contradiction with employment generation. New, advanced technology is often capital-intensive and labour-saving — a single modern machine can do the work of many workers. So adopting such technology to raise output and efficiency may reduce the number of jobs, conflicting with the goal of employment generation in a labour-abundant country like India.This is why planners must balance the two goals — modernising production while also promoting labour-intensive small-scale industries and other measures so that growth in output does not come at the cost of large-scale unemployment.
10. Why was it necessary for a developing country like India to follow self-reliance as a planning objective?
ANSWERSelf-reliance means avoiding imports of goods that could be produced within India itself. The first seven five year plans gave it great importance for several reasons:(i) India had just emerged from two hundred years of foreign rule, so people naturally wished to reduce dependence on other nations, especially for essentials like food.(ii) It was feared that dependence on imported food, foreign technology and foreign capital could make India’s sovereignty vulnerable to foreign interference in its policies.(iii) Building domestic capacity in agriculture and industry would strengthen the economy and reduce the drain of scarce foreign exchange. For these reasons self-reliance was treated as a necessity for a newly independent developing country.
11. What is sectoral composition of an economy? Is it necessary that the service sector should contribute maximum to GDP of an economy? Comment.
ANSWERSectoral composition of an economy refers to the contribution made by each of the three sectors — agriculture, industry and services — to the total Gross Domestic Product (GDP). Together these contributions make up the structural composition of the economy.It is not necessary that the service sector should always contribute the maximum to GDP. Normally, as a country develops, the share of agriculture falls, that of industry rises, and at higher levels of development services contribute the most. However, the path of structural change differs from country to country — in some, agriculture contributes more to GDP growth and in others industry or services do.India’s case is peculiar: the service sector’s share rose to about 40.59% by 1990, exceeding agriculture and industry, even though India was still a developing country. A high service-sector share is therefore not essential and is not always a healthy sign if it grows without an adequate industrial base to support it.
12. Why was public sector given a leading role in industrial development during the planning period?
ANSWERThe public sector was given a leading role for several reasons:(i) At independence, Indian industrialists did not have the capital to undertake the large industrial investments needed for development.(ii) The market was too small to encourage private industrialists to take up major, risky projects even if they had the capital.(iii) The decision to develop the economy on socialist lines meant the State had to control the ‘commanding heights’ — the industries vital for the economy — with the private sector playing a complementary role.For these reasons the government took the lead in setting up heavy and basic industries, as laid down in the IPR 1956 and the Second Five Year Plan.
13. Explain the statement that green revolution enabled the government to procure sufficient food grains to build its stocks that could be used during times of shortage.
ANSWERThe Green Revolution sharply increased the production of wheat and rice. A good proportion of this extra output was available as marketed surplus — that is, it was sold by farmers in the market rather than consumed at home.Because a large quantity of food grains came to the market, its price fell relative to other goods, and the government was able to purchase (procure) sufficient food grains from this surplus.With these procured grains the government built up buffer stocks (a food stock) that could be released during times of food shortage, famine or natural calamity, thus ensuring food security for the country.
14. While subsidies encourage farmers to use new technology, they are a huge burden on government finances. Discuss the usefulness of subsidies in the light of this fact.
ANSWERArguments in favour of subsidies: Any new technology looks risky to farmers, so subsidies were necessary to encourage the adoption of HYV technology, especially by small farmers. Farming in India remains a risky and uncertain business and most farmers are poor; without subsidies they cannot afford fertilisers, seeds and other inputs. Removing subsidies would increase inequality between rich and poor farmers and violate the goal of equity.Arguments against subsidies: Some economists argue that once a technology becomes profitable and is widely adopted, subsidies have served their purpose and should be phased out. A large part of fertiliser subsidy actually benefits the fertiliser industry and the farmers of prosperous regions rather than the poor target group, and subsidies are a huge burden on government finances.Balanced view: The correct policy is not necessarily to abolish subsidies but to reform their targeting — ensure that only poor and needy farmers actually receive the benefit — so that subsidies continue to serve equity without becoming a wasteful drain on public finances.
15. Why, despite the implementation of green revolution, 65 per cent of India’s population continued to be engaged in the agriculture sector till 1990?
ANSWERNormally, as a country becomes more prosperous, the proportion of GDP contributed by agriculture and the proportion of population working in it both decline considerably, because the industrial and service sectors absorb the surplus workforce.In India between 1950 and 1990, the share of agriculture in GDP fell significantly, but the proportion of population depending on it hardly fell (from about 67.5% in 1950 to 64.9% by 1990). The reason is that the industrial and service sectors did not grow fast enough to absorb the people moving out of, or surplus to, agriculture.Hence a large part of the population had no choice but to remain in farming even though agricultural output could have been produced with fewer people. Many economists regard this failure to shift workers out of agriculture as an important shortcoming of the policies followed during 1950–1990.
16. Though public sector is very essential for industries, many public sector undertakings incur huge losses and are a drain on the economy’s resources. Discuss the usefulness of public sector undertakings in the light of this fact.
ANSWERUsefulness of PSUs: At independence the public sector was essential because private industrialists lacked the capital and the market was too small for large projects. PSUs set up heavy and basic industries, diversified the industrial base, generated employment, promoted balanced regional development and provided essential goods and services (like defence and infrastructure) that the private sector could not. The public sector is meant to promote the welfare of the nation, so it should be judged by its contribution to welfare, not only by the profits it earns.The criticism: Many PSUs continued to operate in areas where the private sector could function equally well (for example, telecommunications, bread manufacturing) and monopolised them, leading to poor quality and long waiting times. Several incurred huge, continuing losses but could not be closed, becoming a drain on the nation’s limited resources. Some were originally sick private firms nationalised to protect jobs.Conclusion: PSUs are useful where the private sector cannot or should not operate (defence, essential public services), but the State should withdraw from areas the private sector can manage efficiently and concentrate its resources on socially important services. The remedy is reform and better evaluation, not blind continuation of loss-making units.
17. Explain how import substitution can protect domestic industry.
ANSWERImport substitution is an inward-looking trade strategy that aims to replace imports with domestic production — for example, producing vehicles within India instead of importing them. To do this, the government protects domestic industries from foreign competition in two ways:(i) Tariffs — a tax imposed on imported goods, which makes imported goods more expensive and discourages their use, so consumers prefer cheaper domestic products.(ii) Quotas — limits on the quantity of goods that can be imported, which directly restrict the inflow of foreign goods.Both measures restrict imports and shield home producers from foreign competition. The idea was that the industries of a developing country could not yet compete with goods from developed economies, but if protected they would learn to compete over time, while also saving scarce foreign exchange from being spent on imports.
18. Why and how was private sector regulated under the IPR 1956?
ANSWERWhy: Under the goal of the State controlling the commanding heights of the economy and building a socialist pattern of society, the private sector had to be kept under control so that its activities remained complementary to those of the public sector and the quantity of goods produced did not exceed what the economy required.How — through licensing: Even where industries were left to the private sector, they were controlled through a system of licences. No new industry could be started, and no existing industry could expand output or diversify its production, unless a licence was obtained from the government.Licensing was also used to promote balanced regional development — it was easier to get a licence to set up a unit in a backward area, and such units were given concessions such as tax benefits and electricity at lower tariffs. Licences to expand were granted only if the government was convinced the economy needed a larger quantity of those goods. This regulatory regime later came to be called the ‘permit-licence raj’.
19. Match the following:
ANSWER
Term
Match
Description
1. Prime Minister
C
Chairperson of the planning commission
2. Gross Domestic Product
D
The money value of all the final goods and services produced within the economy in one year
3. Quota
B
Quantity of goods that can be imported
4. Land Reforms
E
Improvements in the field of agriculture to increase its productivity
5. HYV Seeds
A
Seeds that give large proportion of output
6. Subsidy
F
The monetary assistance given by government for production activities
Answer: 1–C, 2–D, 3–B, 4–E, 5–A, 6–F.
Extra Practice Questions
Short Answer Type Questions
Q1. When was the Planning Commission set up and who was its chairperson?
ANSWERThe Planning Commission was set up in 1950 with the Prime Minister of India as its Chairperson. With its formation, the era of five year plans began in India.
Q2. What is meant by ‘growth’ as a goal of planning?
ANSWERGrowth means an increase in the country’s capacity to produce goods and services. It implies a larger stock of productive capital, larger supporting services like transport and banking, or greater efficiency of capital and services. A good indicator of growth is a steady increase in Gross Domestic Product (GDP).
Q3. Why is Mahalanobis called the architect of Indian planning?
ANSWERPrasanta Chandra Mahalanobis, a famous statistician, laid down the basic ideas of Indian planning that formed the basis of the Second Five Year Plan, where planning in the real sense began. Because the Second Plan was based on his ideas, he is regarded as the architect of Indian planning. He also founded the Indian Statistical Institute and the journal Sankhya.
Q4. What is a land ceiling? What was its purpose?
ANSWERLand ceiling means fixing the maximum size of land that an individual could own. Its purpose was to reduce the concentration of land ownership in a few hands and thereby promote equity in the agricultural sector. Big landlords, however, delayed and evaded it through court cases and benami transfers.
Q5. What were the two forms of protection used under the import-substitution policy?
ANSWERThe two forms of protection were tariffs and quotas. Tariffs are taxes on imported goods that make them more expensive, while quotas fix the quantity of goods that can be imported. Both restrict imports and protect domestic firms from foreign competition.
Long Answer Type Questions
Q1. Explain the four goals of India’s five year plans.
ANSWERIndia’s five year plans pursued four long-term goals. Growth is the increase in the country’s capacity to produce goods and services, shown by a steady rise in GDP; it is necessary so that more people can enjoy a richer and more varied life. Modernisation is the adoption of new technology to raise output, together with progressive changes in social outlook such as equal rights and opportunities for women. Self-reliance means avoiding imports of goods that can be produced within India, in order to reduce dependence on other countries (especially for food) and protect national sovereignty. Equity ensures that the benefits of growth reach the poor as well as the rich, that everyone can meet basic needs, and that inequality in wealth is reduced. All plans did not give equal weight to all four goals; planners had to balance them because, with limited resources, the goals could even conflict.
Q2. Critically evaluate the achievements and limitations of India’s industrial policy during 1950–1990.
ANSWERAchievements: The share of industry in GDP rose from 13% in 1950–51 to 24.6% in 1990–91, with an annual industrial growth of about 6%. The industrial base became well diversified, no longer confined to cotton textiles and jute. The public sector built heavy and basic industries; protection enabled indigenous industries (electronics, automobiles) to develop; and the promotion of small-scale industries created employment and opportunities for people without capital. Limitations: Many public sector undertakings ran continuing losses yet could not be closed, draining national resources, and operated in areas the private sector could have managed. The licensing system (the permit-licence raj) was misused by big industrialists to block competitors, and industrialists spent more effort obtaining licences than improving products. Excessive protection created a captive market, so producers had no incentive to improve quality. These problems, in a changing global scenario, eventually led to the new economic policy of 1991.
Q3. Describe the land reforms undertaken after independence and assess how far they succeeded.
ANSWERAfter independence, agriculture suffered from a tenure system dominated by intermediaries (zamindars, jagirdars) who collected rent without improving the land, keeping productivity low. To address this, the government undertook three main land reforms. Abolition of intermediaries brought about 200 lakh tenants into direct contact with the government, freeing them from exploitation and giving them ownership and the incentive to raise output. Land ceiling fixed the maximum land an individual could own, to reduce the concentration of ownership and promote equity. The overall aim was ‘land to the tiller’, since ownership gives the cultivator the incentive to invest in the land. Assessment: The reforms had partial success. Abolition of intermediaries ended the hated zamindari system and aided growth, but some former zamindars retained large holdings through loopholes, tenants were evicted, and the poorest labourers and sharecroppers gained little. Land ceiling laws were delayed in courts and evaded through benami registrations. Reforms succeeded notably in Kerala and West Bengal, which had committed governments, but elsewhere inequality in landholding largely continued.
MCQs & Assertion–Reason
1. The Planning Commission of India was set up in the year:
(a) 1947 (b) 1948 (c) 1950 (d) 1956
2. Which of the following is NOT one of the four goals of India’s five year plans?
For each Assertion–Reason question, choose: (A) Both true and the Reason correctly explains the Assertion; (B) Both true but the Reason is not the correct explanation; (C) Assertion true, Reason false; (D) Assertion false, Reason true.
A-R 1. Assertion: India adopted a mixed economy after independence.
Reason: Indian leaders sought an alternative that combined the best features of socialism and capitalism.
A-R 2. Assertion: Modernisation as a goal of planning may conflict with employment generation.
Reason: Modern technology is often labour-saving and can reduce the number of jobs.
A-R 3. Assertion: HYV seeds alone are enough to bring about the Green Revolution.
Reason: HYV seeds require regular irrigation and correct quantities of fertiliser and pesticide to give high yields.
A-R 4. Assertion: The public sector was given a leading role in industrial development after independence.
Reason: Indian industrialists lacked the capital and the market was too small for large private projects.
A-R 5. Assertion: The proportion of population dependent on agriculture fell sharply between 1950 and 1990.
Reason: The industrial and service sectors could not absorb the people working in agriculture.
Answer key: 1-(A), 2-(A), 3-(D), 4-(A), 5-(D).
Exam Tips & Common Mistakes
How to score full marks in this chapter
Memorise the four goals of planning (growth, modernisation, self-reliance, equity) and be ready to define each with an example. Learn the key dates and bodies — Planning Commission (1950, PM as chairperson), IPR 1948 and 1956, Karve Committee (1955). For agriculture, separate the three land reforms (abolition of intermediaries, land ceiling, land to the tiller) from the Green Revolution (HYV seeds + irrigation + fertiliser). Always use the chapter’s own data points (industry’s GDP share rose from 13% to 24.6%; ~65% of population in agriculture till 1990) to strengthen long answers, and present discuss-type questions (subsidies, PSUs) with both sides plus a balanced conclusion.
Common mistakes to avoid
Confusing the goals of planning with the 1991 reforms (liberalisation, privatisation, globalisation belong to Chapter 3).
Saying HYV seeds work alone — they need assured irrigation, fertiliser and pesticide.
Mixing up tariffs (a tax on imports) with quotas (a quantity limit on imports).
Forgetting that the population dependent on agriculture did not fall much (it stayed around 65%) even though agriculture’s GDP share fell.
Treating discuss-type questions on subsidies and PSUs one-sidedly — always give both arguments and a conclusion.
Writing IPR 1956 as 1948 or vice-versa, and mis-dating the Planning Commission.
Frequently Asked Questions
What is Chapter 2 of Class 11 Economics (Indian Economic Development) about?
Chapter 2, Indian Economy 1950–1990, explains the goals of India’s five year plans (growth, modernisation, self-reliance and equity) and the development policies followed in agriculture (land reforms and the Green Revolution), industry (IPR 1956, the public sector and licensing) and trade (import substitution), along with the merits and limitations of this regulated, mixed economy.
What are the four goals of India’s five year plans?
The four common goals are growth (rise in the capacity to produce, measured by GDP), modernisation (use of new technology and progressive social change), self-reliance (avoiding imports of goods producible at home) and equity (fair distribution of the benefits of growth). Different plans gave different weight to these goals.
How many exercise questions are there in Class 11 Economics Chapter 2?
The end-of-chapter Exercises section of Chapter 2 contains 19 questions, including a ‘Match the following’ question. All of them are reproduced verbatim and answered step by step on this page.
