Indian Economy and Policy

Which of the following statements correctly explains the reason why Indian textile industry is one of the leading textile industries in the world?

Directions: Read the given passage carefully and answer the questions that follow.

Since ancient times, India has been well known for its textile goods. During the colonial regime, the traditional textile industry of India had virtually decayed. However, in the early nineteenth century, the modern textile industry took birth in India when the first textile mill was established at Fort Gloster near Calcutta in 1818. It is among one of the industries which were earliest to come into existence in India. This industry provides one of the most basic needs of people and holds importance; maintaining sustained growth for improving the quality of life. It has an image of being a self-reliant industry, from the production of raw materials to the delivery of finished products, with substantial value-addition at each stage of processing, which forms a major contribution to the country's economy. India's textile industry is one of the leading textile industries in the world.

The onset of economic liberalisation in India

Directions: Read the passage below and answer the question that follows:

Whichever way one looks at it, the fact remains that real estate has been the most profitable INVESTMENT in India over the last 30 years. It has consistently been the most lucrative business. In spite of all our socialist proclamations all these years, the truth is that unearned income from property, particularly capital gains from the appreciation of property has outperformed income from any other source.

Property prices only have gone one way up. Year after year, the rise is relentless. Each time one feels that the limit must have been reached, property prices only rise further. The result is that owning one's own home is a distant dream for most middle class Indians. This phenomenon is not only confined to the big metro cities, but inordinate price rises have swept through most smaller towns too.

The rise is so phenomenal and the damage to the psyche so great, that nobody believes that prices will ever come down. Even in this day and age of free market economics, nobody believes that supply can ever exceed demand to bring prices down. Few within the country understand what is happening to the real estate market, and visitors from overseas, describe the situation as just mad.

The only reason for this horrendous state of affairs is the complete bungling by both the central government and the state governments. Though the land is a state subject under the Constitution, at the behest of the majority of states, the Urban Land Ceiling Act was passed by Mrs. Gandhi almost 20 years ago. This compounded the problem of rising urban land prices due to excessively rigid rent control laws by state governments.

The result is that it is virtually impossible to get tenants, protected by the Rent Control Acts, to vacate premises. Therefore transactions in land are virtually frozen. When transactions in lands do take place, several governmental permissions are needed, particularly under the Urban Land Ceiling Act - at a huge cost in terms of money (usually illegal) and time. Obviously if there is not enough supply or very little supply, then even with a little demand, prices must go up inordinately. These very simple laws of supply and demand are taught to the students of economics in their very first lesson. The whole liberalisation process is based on the avowed philosophy of doing away with unnecessary controls, which do not work and only distort the markets. It has worked wonders with the economy. But the one area in which there is no sign of liberalisation is real estate. Clearly, there can be no excuses for this. If liberalisation as a policy is sound, then there is no reason why it should not work in the real estate markets too. The truth is that worldwide, including in major cities like London and New York, once rent control was abolished, there were major property booms which led to an over supply and a crash in prices. Surely the same thing can and must happen in Bombay and Delhi too.

The only excuse made for not abolishing controls in the field 'of real estate', is that it may not be ‘politically acceptable’. The question must be asked ‘politically acceptable’ to whom? It is only the politicians who would lose a major source of revenue. It is high time that a vociferous demand is raised and politicians are forcefully told that it is the astronomical real estate prices that are not politically acceptable either.

The major source of income from the real estate market is

Directions: Read the passage below and answer the question that follows:

Whichever way one looks at it, the fact remains that real estate has been the most profitable INVESTMENT in India over the last 30 years. It has consistently been the most lucrative business. In spite of all our socialist proclamations all these years, the truth is that unearned income from property, particularly capital gains from the appreciation of property has outperformed income from any other source.

Property prices only have gone one way up. Year after year, the rise is relentless. Each time one feels that the limit must have been reached, property prices only rise further. The result is that owning one's own home is a distant dream for most middle class Indians. This phenomenon is not only confined to the big metro cities, but inordinate price rises have swept through most smaller towns too.

The rise is so phenomenal and the damage to the psyche so great, that nobody believes that prices will ever come down. Even in this day and age of free market economics, nobody believes that supply can ever exceed demand to bring prices down. Few within the country understand what is happening to the real estate market, and visitors from overseas, describe the situation as just mad.

The only reason for this horrendous state of affairs is the complete bungling by both the central government and the state governments. Though the land is a state subject under the Constitution, at the behest of the majority of states, the Urban Land Ceiling Act was passed by Mrs. Gandhi almost 20 years ago. This compounded the problem of rising urban land prices due to excessively rigid rent control laws by state governments.

The result is that it is virtually impossible to get tenants, protected by the Rent Control Acts, to vacate premises. Therefore transactions in land are virtually frozen. When transactions in lands do take place, several governmental permissions are needed, particularly under the Urban Land Ceiling Act - at a huge cost in terms of money (usually illegal) and time. Obviously if there is not enough supply or very little supply, then even with a little demand, prices must go up inordinately. These very simple laws of supply and demand are taught to the students of economics in their very first lesson. The whole liberalisation process is based on the avowed philosophy of doing away with unnecessary controls, which do not work and only distort the markets. It has worked wonders with the economy. But the one area in which there is no sign of liberalisation is real estate. Clearly, there can be no excuses for this. If liberalisation as a policy is sound, then there is no reason why it should not work in the real estate markets too. The truth is that worldwide, including in major cities like London and New York, once rent control was abolished, there were major property booms which led to an over supply and a crash in prices. Surely the same thing can and must happen in Bombay and Delhi too.

The only excuse made for not abolishing controls in the field 'of real estate', is that it may not be ‘politically acceptable’. The question must be asked ‘politically acceptable’ to whom? It is only the politicians who would lose a major source of revenue. It is high time that a vociferous demand is raised and politicians are forcefully told that it is the astronomical real estate prices that are not politically acceptable either.

Why do small and medium scale industries look for help from India's machine tool industry?

Directions: Read the passage below and answer the question that follows:

Now another aspect of the complete scenario: imports.
Today the import duty on a complete machine is 30% for all practical purpose, whereas the import duty on raw materials and components ranges from 35.85%. The story does not end here. After paying such high import duties on component, once a machine is made, it suffers excise duty from 5% – 10% (including on the customs duty already paid). At the time of sale, the machine tools suffer further taxation, i.e. central sales tax or State sales taxes which range from 4% – 16%. This much for the tax angle. Another factor, which pushes the cost of manufacture of machine tools, is the very high rate of interest payable to banks ranging up to 22%, as against 4%–7% prevailing in advanced countries.

The production of machine tools in India being not of the same scale as it is in other countries, the price which India\'s machine tool builders have to pay for components is more or less based on pattern of high pricing applicable to the prices of spares.

The machines tool industry in India has an enviable record of very quick technology absorption, assimilation and development. There are a number of success stories about how machine tool builders were of help at the most critical times. It will be a pity, in fact a tragedy, if we allow this industry to die and disappear from the scene.

It is to be noted that India is at least 6500 km away from any dependable source of supply of machine tools. The Government of India has always given a great deal of importance to the development of small scale and medium scale industries. This industry has also performed pretty well. Today, they are in need of help from India\'s machine tool industry to enable them to produce quality components at reduced costs. Is it anybody\'s case that the needs of the fragile sector (which needs tender care) will be met from 6500 km away?

Then, what is it that the industry request from the Government? It wants a level playing field. In fact, all of us must have a deep introspection and recognize the fact that the machine tool industry has a very special place in the country from the point of strategic and vital interest of the nation. Most important, it requests for the Government\'s consideration and understanding. It is therefore high time that the government gives the due attention to this industry which has a good potential.

Directins: Which of the following statements are true?

Statement (I) The vital role of India's machine tool industry has not been duly recognized by the Government.Statement (II) Small–scale industry's performance can be further improved with the help from the Indian machine tool industry. Statement (III) The author of the passage has not discussed all the factors which are responsible for high cost of Indian machines.

Directions: Read the passage below and answer the question that follows:

Now another aspect of the complete scenario: imports.
Today the import duty on a complete machine is 30% for all practical purpose, whereas the import duty on raw materials and components ranges from 35.85%. The story does not end here. After paying such high import duties on component, once a machine is made, it suffers excise duty from 5% – 10% (including on the customs duty already paid). At the time of sale, the machine tools suffer further taxation, i.e. central sales tax or State sales taxes which range from 4% – 16%. This much for the tax angle. Another factor, which pushes the cost of manufacture of machine tools, is the very high rate of interest payable to banks ranging up to 22%, as against 4%–7% prevailing in advanced countries.

The production of machine tools in India being not of the same scale as it is in other countries, the price which India\'s machine tool builders have to pay for components is more or less based on pattern of high pricing applicable to the prices of spares.

The machines tool industry in India has an enviable record of very quick technology absorption, assimilation and development. There are a number of success stories about how machine tool builders were of help at the most critical times. It will be a pity, in fact a tragedy, if we allow this industry to die and disappear from the scene.

It is to be noted that India is at least 6500 km away from any dependable source of supply of machine tools. The Government of India has always given a great deal of importance to the development of small scale and medium scale industries. This industry has also performed pretty well. Today, they are in need of help from India\'s machine tool industry to enable them to produce quality components at reduced costs. Is it anybody\'s case that the needs of the fragile sector (which needs tender care) will be met from 6500 km away?

Then, what is it that the industry request from the Government? It wants a level playing field. In fact, all of us must have a deep introspection and recognize the fact that the machine tool industry has a very special place in the country from the point of strategic and vital interest of the nation. Most important, it requests for the Government\'s consideration and understanding. It is therefore high time that the government gives the due attention to this industry which has a good potential.

Indian customers are very environment sensitive.

Directions: Read the following passage and answer the question that follows.

Google is placed precarious and risky state as it depends 99% on search advertising for its revenue. Slowly and surely Google is going to loose its dominant position as China, Europe and India will have there own companies which well understand the local geography  and are surely likely to succeed to at least some degree in reducing the clout of Google. Google has added tens of new applications through Google Labs, but all of them turn out to be just incremental and no blockbuster product has been introduced which could turn the Industry Dynamics towards it.

Google is towards open sourcing, I think the opposite could help them; by going after revenues. For instance, they could enter the OS and Desk Top applications market by offering a full fledged Desk Top version of MS Office and charge 20% less than Microsoft. They already have a Cloud Version of Office software and they could convert the Design to a Desk Top version in about a month.

This gambit could create an additional source of income for Google and could seriously challenge the position of Microsoft.

The main source of Google`s income is

Directions: Read the following passage and answer the question that follows.

Google is placed precarious and risky state as it depends 99% on search advertising for its revenue. Slowly and surely Google is going to loose its dominant position as China, Europe and India will have there own companies which well understand the local geography  and are surely likely to succeed to at least some degree in reducing the clout of Google. Google has added tens of new applications through Google Labs, but all of them turn out to be just incremental and no blockbuster product has been introduced which could turn the Industry Dynamics towards it.

Google is towards open sourcing, I think the opposite could help them; by going after revenues. For instance, they could enter the OS and Desk Top applications market by offering a full fledged Desk Top version of MS Office and charge 20% less than Microsoft. They already have a Cloud Version of Office software and they could convert the Design to a Desk Top version in about a month.

This gambit could create an additional source of income for Google and could seriously challenge the position of Microsoft.

Google is inclined to open sourcing.

Directions: Read the following passage and answer the question that follows.

Google is placed precarious and risky state as it depends 99% on search advertising for its revenue. Slowly and surely Google is going to loose its dominant position as China, Europe and India will have there own companies which well understand the local geography  and are surely likely to succeed to at least some degree in reducing the clout of Google. Google has added tens of new applications through Google Labs, but all of them turn out to be just incremental and no blockbuster product has been introduced which could turn the Industry Dynamics towards it.

Google is towards open sourcing, I think the opposite could help them; by going after revenues. For instance, they could enter the OS and Desk Top applications market by offering a full fledged Desk Top version of MS Office and charge 20% less than Microsoft. They already have a Cloud Version of Office software and they could convert the Design to a Desk Top version in about a month.

This gambit could create an additional source of income for Google and could seriously challenge the position of Microsoft.

What do we glean about the current situation of the Kancheepuram silk saree industry?

Directions: Read the following short passage and answer the question. 

The silk industry in Kancheepuram is one of the fastest growing industries in India. The industry currently employs more than 30,000 weavers in the art of saree making. This was not the scenario in the past. The industry had to compete with the synthetic fiber industry in many aspects. One of the major drawbacks of the silk industry in Kancheepuram was the lack of support from technology. The industry was on the brink of extinction due to the obsolescence of the designs and design making procedures. This is because, design adds splendor to a saree and forms an integral part of its exquisiteness. The recent developments in the designing field show the introduction of computerized Jacquard borders in Kancheepuram silk saree. The use of new technologies has not only helped in creating new and complex designs but also reduced the time involved in the process. There has been an increase in the exports.

How has the use of new technologies helped the saree industry of Kancheepuram?

Directions: Read the following short passage and answer the question. 

The silk industry in Kancheepuram is one of the fastest growing industries in India. The industry currently employs more than 30,000 weavers in the art of saree making. This was not the scenario in the past. The industry had to compete with the synthetic fiber industry in many aspects. One of the major drawbacks of the silk industry in Kancheepuram was the lack of support from technology. The industry was on the brink of extinction due to the obsolescence of the designs and design making procedures. This is because, design adds splendor to a saree and forms an integral part of its exquisiteness. The recent developments in the designing field show the introduction of computerized Jacquard borders in Kancheepuram silk saree. The use of new technologies has not only helped in creating new and complex designs but also reduced the time involved in the process. There has been an increase in the exports.