Question

Directions for questions 15 to 20: Read the passage below and answer the question that follows.

A major problem of Indian industrial and commercial development was the supply of capital. Until 1850, British capital was shy of Indian adventure. The risks and unknown factors were too great, and prospects in other directions too bright. The working capital of the agency houses after 1813 at first consisted mainly of the savings of the Company's servants. Their cries of woe when these houses fell as in the crisis of 1831 were loud and poignant. Indian capital was also shy for different reasons. It needed to acquire confidence in the new regime, and outside the presidency towns, to acquire the habit of investment. Investment for large-scale production for 'enabling' works like railways was an unfamiliar and suspected practice. Thus the first big developments came when European capital was coaxed into the country by government guarantees or went of its own free will to develop industries with which it was already familiar as in the case of jute or coal. Indian capital followed where it was in touch with European practice as in Bombay and dealing with familiar products like cotton. These considerations throw into all the greater relief the achievement of the Tatas in developing iron and steel. Thus the major part of the capital provided was British with a steadily increasing Indian proportion from 1900. As late as 1931-32 the capital of companies registered abroad was nearly four times that of companies registered in India. But this is not an exact guide because it leaves out of account the stock in British companies held by Indians, as well as government stocks. Speaking generally it may be said that the capital of the cotton industry was mainly Indian, that of the iron and steel industry entirely so, that of the jute industry about half and half, while the coal and plantation industries were mainly British, together with that used for the building of railways, irrigation, and other public works. Management in the cotton and steel industries was mainly Indian though European technicians were freely employed, that of the jute, coal, and the plantation industries being European, the jute men in particular being Scotch. Their capital, apart of course from government enterprise, operated through joint-stock companies and managing agencies. The latter arose through the convenience found by bodies of capitalists seeking to develop some new activity and lacking any Indian experience, of operating through local agents. It arose in the period after 1813 when private merchants took over the trade formerly monopolized by the Company. The money would be found in Britain to promote a tea garden, a coal mine, or a jute mill, but the management would be confided to a firm already on the spot. The managing agency was the hyphen connecting capital with experience and local knowledge.

Until 1914 the policy of the government continued in the main to be one of 'enabling' private capital and enterprise to develop the country. Direct promotion was confined to public utilities like canals and railways. The line between enabling and interfering action became distinctly blurred, however, in the case of the cotton industry and there was a tendency for enabling action to pass over into the positive promotion of particular projects. This was most noticeable in the time of Lord Curzon with his establishment of an imperial department of agriculture with a research station at Pusa and a department of commerce and industry presided over by a sixth member of the Viceroy's Council. The first World War began the transition to a new period of active promotion and positive support. As the conflict lengthened there arose a demand for Indian manufactured goods. India failed to take full advantage of this opportunity, partly because of uncertainty as to the future and partly because the means for sudden expansion were lacking. The outcome of this situation was the appointment of an industrial commission in 1916 under pressure from London. The commission criticized the unequal development of Indian industry which had led to the missing of her war opportunity. A much closer co-operation with industry was planned through provincial departments of industry. Increased technical training and technical assistance to industry was proposed while it was suggested that the Central government should set up a stores department which should aim at making India self-sufficing in this respect. The commission's report was only partially implemented, but a stores department and provincial industrial departments were created and something was done towards promoting technical assistance. The importance of the report and its aftermath was that it marked the transition from the conception of Indian economy in broadly colonial terms with freedom for private enterprise to the conception of India as an autonomous economic unit.

The following can be inferred from the passage:

I. Industrial development of a country requires supply of external capital
II. Investment in uncertain industries is more when government provides guarantees against failure
III. Lack of indigenous technical expertise can be a constraining factor in a country's economic development
IV. Enabling infrastructure like railways would have to be provided necessarily by the government
V. Market development for the final products is an important prerequisite for industrial development

• A. I and II
• B. I, III and IV
• C. II, III and V
• D. III, IV and V

Hint:

Check each statement (I to V) against the passage individually; keep only the ones the passage directly states or clearly supports, and reject any that add an idea the passage never raises.

Answer 1

The Correct Option is A

Step 1: Understanding the Question:
We are told to pick which of the five statements (I to V) can genuinely be pulled out of the passage on capital supply in early Indian industry, and then match that set to the right option.

Step 2: Key Formula or Approach:
Test each statement against the passage using one rule: keep it only if the passage states it or leads to it directly; drop it if it needs an extra assumption the passage never makes.

Step 3: Detailed Explanation:
Statement I says industrial growth needs outside capital. The passage opens by calling the supply of capital "a major problem" and then shows British and European money starting off jute, coal, and iron and steel before Indian money joined in, so I stands.
Statement II says government guarantees pull in money for risky ventures. The passage says this in almost the same words: European capital came in "when... coaxed into the country by government guarantees." So II stands.
Statement III claims a lack of local technical skill can hold back a country's growth. The passage only says European technicians worked in cotton and steel and that jute, coal, and plantation management was European. That is a staffing fact about specific firms, not a general statement about national development, so III does not hold.
Statement IV claims railways would necessarily need government funding. The passage says direct government promotion was "confined to" canals and railways, describing what happened, not ruling out any other route. "Necessarily" is too strong a word for what the text supports, so IV does not hold.
Statement V talks about market size for finished goods being a must for industrial growth. The passage never discusses market or demand conditions for products, only capital and management, so V cannot be pulled from this text.
Since only I and II survive this check, the matching option is the one that lists exactly I and II.

Step 4: Final Answer:
Only statements I and II can be inferred from the passage, so the answer is option 1. \[ \boxed{\text{Option 1: I and II}} \]