(a) Examine the factors that facilitated commercialisation of Indian agriculture during the British rule. (10 marks)

(b) Do you think that the 'new guarantee' system was better than the 'old guarantee' system in the history of Railways in India? Giv

Question

Answer the following questions in about 150 words each:

(a) Examine the factors that facilitated commercialisation of Indian agriculture during the British rule. (10 marks)

(b) Do you think that the 'new guarantee' system was better than the 'old guarantee' system in the history of Railways in India? Give reasons. (10 marks)

(c) Analyse the relevance of Gadgil formula in reducing horizontal imbalance of fiscal health. (10 marks)

(d) Explain the principal causes of deceleration in industrial growth during the mid-1960s to mid-1970s. (10 marks)

(e) Distinguish between absolute measure and relative measure of poverty. What kind of measure is used in estimating poverty in India? (10 marks)

UPSC Answer Check · Accepted Answer

(a) Commercialisation of agriculture under British rule. Land revenue was heavy and fixed in cash (Permanent Settlement, ryotwari, mahalwari), forcing cultivators to sell crops for money. Railways (from 1853), roads, canals and ports, and the Suez Canal (1869), linked the interior to world markets. Industrialising Britain demanded raw materials (cotton, jute, indigo, oilseeds, wheat), and the American Civil War (1861–65) created a cotton boom. The state and European capital promoted plantations of indigo, tea and coffee. A uniform currency, courts and property rights spread the money economy, while moneylenders and traders advanced credit against cash crops. The decline of handicrafts also pushed more people onto land. Commercialisation was largely forced or distress-driven: peasants kept little of the gain, stayed indebted, food-crop area per head fell, and farm incomes were exposed to world prices.

(b) Old and new guarantee systems. Under the old guarantee (1849–69), companies raised capital in London on a government-guaranteed return of 4.5 to 5 per cent, received free land, and shared surplus profits equally with the state, which could buy the lines after 25 or 50 years. Assured returns gave them little reason to economise; construction costs per mile were high and the state paid heavily when earnings fell short, feeding the drain of wealth. After 1869 the state built lines directly, and the new guarantee from about 1880 reduced the guaranteed return to about 3 to 4 per cent and gave the state most of the surplus (about three-quarters or more). It was better for the exchequer, since it cut the guarantee burden, raised the state's share of profits and improved control. But it still depended on private British capital and gave weak incentives for efficiency, so the gain was limited; the real change came with state purchase and management, as with the East Indian Railway in 1925.

(c) Gadgil formula and horizontal imbalance. Horizontal imbalance means differences in fiscal capacity and needs among states. The Gadgil formula (1969) replaced discretionary, scheme-based grants with a rule for central Plan assistance: after a share for special-category states, the rest was distributed by population (60 per cent), per capita income (10), tax effort (10), continuing irrigation and power projects (10) and special problems (10). The 1991 Gadgil–Mukherjee revision used population 55, per capita income 25, fiscal management 5 and special problems 15. It helped reduce imbalance by giving more to populous and poorer states, rewarding tax effort and fiscal discipline, and making transfers transparent. Its limits: it covered only Plan assistance, not the larger tax devolution by the Finance Commission; the population weight favoured large states; the income weight was small at first; and it ceased to operate when the Planning Commission was replaced by NITI Aayog in 2015. Finance Commission criteria now serve this purpose.

(d) Industrial deceleration, mid-1960s to mid-1970s. Industrial growth, about 7 per cent a year in the first three Plans, fell to about 4 per cent. Causes: public investment, especially in infrastructure, was cut after 1965–66, which also reduced private investment; the 1965 war, the droughts of 1965–67 and the withdrawal of foreign aid brought a balance-of-payments crisis, import compression and a rupee devaluation in 1966; agricultural stagnation depressed demand for manufactures; the licensing and import-control regime limited competition, new capacity and modernisation, and the 1973 oil shock added to the stress. Ahluwalia (1985) attributes the stagnation largely to falling public investment and inward-looking policies. The deceleration was therefore structural and policy-driven, not only external.

(e) Absolute and relative poverty. Absolute poverty means being below a fixed minimum standard of living, usually a consumption basket for basic needs, which does not change with average income; the poverty line is a fixed real amount. Relative poverty is defined against the distribution, for example below 50 or 60 per cent of median income, so the line rises as incomes rise and it also reflects inequality; it is used in developed countries. India uses an absolute measure: a consumption expenditure poverty line, originally anchored in calorie norms (2,400 kcal rural, 2,100 kcal urban) and, after the Tendulkar Committee, a basket of goods and services (₹816 a month rural and ₹1,000 urban in 2011–12, about ₹27 and ₹33 a day), with the Rangarajan Committee's higher lines (₹32 and ₹47 a day). Multidimensional indices, such as NITI Aayog's MPI, supplement it.

(a) Examine the factors that facilitated commercialisation of Indian agriculture during the British rule. (10 marks) (b) Do you…

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