SECTION A – MACRO ECONOMICS
1. Read the following statements: Assertion (A) and Reason (R). Choose the correct option from those given below:
Assertion (A): The government can reduce the deflationary gap by purchasing government securities in the open market.
Reason (R): The Central Bank purchases government securities in the open market to increase the lending capacity of commercial banks.
Options: A. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B. Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
C. Assertion (A) is true, but Reason (R) is false.
D. Assertion (A) is false, but Reason (R) is true.
Answer:
A. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
Explanation:
When the government purchases securities, it injects money into the economy, increasing the money supply and decreasing interest rates. This can help reduce the deflationary gap. The Central Bank’s purchase of government securities increases the lending capacity of commercial banks, which in turn boosts aggregate demand.
2. “The Cabinet led by Prime Minister has decided that the Central Government will provide free food grains to 81.35 crore (approx.) beneficiaries under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) for a period of five years with effect from 1st January, 2024.”
Based on the aforesaid statement, identify the budgetary objective the government is trying to achieve and choose the correct option:
A. Reallocation of resources
B. Economic stability
C. Redistribution of income
D. Economic instability
Answer:
C. Redistribution of income
Explanation:
The government is providing free food grains to economically weaker sections, which is a measure to redistribute income and support those below the poverty line.
3. To arrive at the value of Gross Value Added at Market Price (GVAMP) ______ must be added to Gross Value Added (GVA) at Basic Prices.
(Choose the correct option to fill up the blank)
A. Product Taxes
B. Net Product Taxes
C. Production Taxes
D. Net Production Taxes
Answer:
A. Product Taxes
Explanation:
To arrive at GVAMP, product taxes are added to GVA at basic prices. These taxes include sales tax, excise duties, and other similar taxes that are levied on products.
4. Under the _______ exchange rate system, market forces automatically adjust the surplus and deficit in the Balance of Payments account.
(Choose the correct option to fill up the blank)
A. fixed
B. flexible
C. managed floating
D. dirty floating
Answer:
B. Flexible
Explanation:
In a flexible exchange rate system, exchange rates are determined by market forces of supply and demand. These rates adjust automatically to correct surpluses and deficits in the Balance of Payments.
5Q.From the given diagrams, identify the correct option that indicates the ‘Reference Line’ passing through the origin drawn at a particular angle.
(i) (ii) (iii) (iv)
Options:
- A. (i)
- B. (ii)
- C. (iii)
- D. (iv)
For Visually Impaired Candidates:
Under the Keynesian theory, ‘Reference Line’ is a straight line passing through the origin drawn at an angle of _____.
(Choose the correct option to fill up the blank)
Options:
- A. 25°
- B. 45°
- C. 55°
- D. 75°
Answer:
For the first question, without the actual diagrams, it is impossible to accurately identify which option corresponds to the “Reference Line.” Typically, the reference line is a straight line at a 45-degree angle to the horizontal axis in Keynesian theory.
For the second question, the correct answer is:
- B. 45°
6. As per the data presented in the Union Budget 2023-24, the total receipts of the government other than borrowings and the total expenditure are estimated at ₹ 27.2 lakh crore and ₹ 45 lakh crore respectively.
The value of the ________ deficit would be ₹ 17.8 lakh crore.
(Choose the correct option to fill up the blank)
Options:
A. Revenue
B. Fiscal
C. Budgetary
D. Primary
Answer:
B. Fiscal
Explanation:
The fiscal deficit is the difference between the total expenditure and the total receipts (excluding borrowings). In this case, ₹ 45 lakh crore (expenditure) – ₹ 27.2 lakh crore (non-borrowed receipts) = ₹ 17.8 lakh crore, which represents the fiscal deficit.
7. Read the following statements carefully:
Statement 1: The maximum value of Marginal Propensity to Consume (MPC) can be unity.
Statement 2: As the income of an economy increases, the proportionate increase in the level of consumption is always more than the increase in the level of income.
In light of the given statements, choose the correct option from the following:
Options:
A. Statement 1 is true and Statement 2 is false.
B. Statement 1 is false and Statement 2 is true.
C. Both Statements 1 and 2 are true.
D. Both Statements 1 and 2 are false.
Answer:
A. Statement 1 is true and Statement 2 is false.
Explanation:
- Statement 1 is true: The maximum value of MPC can be unity (1), meaning that all of the additional income is consumed.
- Statement 2 is false: As income increases, the increase in consumption typically does not proportionately exceed the increase in income. Consumption tends to increase, but at a diminishing rate, i.e., the marginal propensity to consume usually decreases as income rises.
8. In a two-sector economy, Aggregate Demand can be determined by adding ______.
(Choose the correct option to fill up the blank)
Options:
A. Autonomous Consumption, Induced Consumption and Induced Investment
B. Autonomous Consumption, Autonomous Investment and Induced Investment
C. Autonomous Consumption and Autonomous Investment
D. Autonomous Consumption, Induced Consumption and Autonomous Investment
Answer:
D. Autonomous Consumption, Induced Consumption and Autonomous Investment
Explanation:
In a two-sector economy (households and firms), aggregate demand (AD) consists of:
- Autonomous Consumption: Consumption independent of income level.
- Induced Consumption: Consumption that changes as income changes.
- Autonomous Investment: Investment that does not depend on the level of income.
Thus, the correct combination is Autonomous Consumption, Induced Consumption and Autonomous Investment.
9. Read the following statements carefully:
Statement 1: Foreign grants-in-aid receipts do not lead to any claim on the government.
Statement 2: Disposal of equity by the Public Sector Undertakings in the market may lead to a decrease in the assets of the government.
In light of the given statements, choose the correct option from the following:
Options:
A. Statement 1 is true and Statement 2 is false.
B. Statement 1 is false and Statement 2 is true.
C. Both Statements 1 and 2 are true.
D. Both Statements 1 and 2 are false.
Answer:
B. Statement 1 is false and Statement 2 is true.
Explanation:
- Statement 1 is false: Foreign grants-in-aid often do involve obligations or commitments, and they could influence the recipient country’s financial and fiscal policies, potentially leading to a claim on the government in terms of the government’s response or policy changes.
- Statement 2 is true: Disposal of equity by Public Sector Undertakings (PSUs) does indeed reduce the government’s ownership and can lead to a decrease in government assets as the shares are transferred to the private sector.
10Q.Based on the given diagram:
The trade under the current account during January 2024 reflects a _________ of USD _____ billion. (Choose the correct option to fill up the blank)
Options:
- A. Surplus, 0.74
- B. Surplus, 3.85
- C. Deficit, 0.74
- D. Deficit, 3.85
For Visually Impaired Candidates:
________ indicates the situation of Current Account Deficit in the Balance of Payments Account.
Options:
- A. Receipts > Payments on current account
- B. Receipts = Payments on current account
- C. Receipts < Payments on current account
- D. Receipts < Payments on capital account
11 (A.)On the basis of the given data, estimate the value of Domestic Income
(NDPFC)
| S. No. | Items | Amount (₹ in crore) |
|---|---|---|
| i | Household Consumption Expenditure | 800 |
| ii | Gross Business Fixed Capital Formation | 150 |
| iii | Gross Residential Construction Investment | 120 |
| iv | Government Final Consumption Expenditure | 170 |
| v | Excess of Imports over Exports | 20 |
| vi | Inventory Investment | 140 |
| vii | Gross Public Investment | 500 |
| viii | Net Indirect Taxes | 70 |
| ix | Net Factor Income From Abroad (-) | -50 |
| x | Consumption of Fixed Capital | 40 |
Answer for Question 11(A):
To calculate Domestic Income (NDPFC), we use the following formula:Domestic Income (NDPFC)=Household Consumption Expenditure+Gross Investment+Government Expenditure+Net Factor Income from Abroad−Consumption of Fixed Capital\text{Domestic Income (NDPFC)} = \text{Household Consumption Expenditure} + \text{Gross Investment} + \text{Government Expenditure} + \text{Net Factor Income from Abroad} – \text{Consumption of Fixed Capital}Domestic Income (NDPFC)=Household Consumption Expenditure+Gross Investment+Government Expenditure+Net Factor Income from Abroad−Consumption of Fixed Capital
Step-by-Step Calculation:
Given:
- Household Consumption Expenditure (C) = ₹800 crore
- Gross Business Fixed Capital Formation = ₹150 crore
- Gross Residential Construction Investment = ₹120 crore
- Government Final Consumption Expenditure (G) = ₹170 crore
- Excess of Imports over Exports (X – M) = ₹20 crore (Exports – Imports)
- Inventory Investment = ₹140 crore
- Gross Public Investment = ₹500 crore
- Net Indirect Taxes = ₹70 crore
- Net Factor Income from Abroad = ₹-50 crore (Net exports)
- Consumption of Fixed Capital (Depreciation) = ₹40 crore
Now, Gross Investment is the sum of:
- Gross Business Fixed Capital Formation = ₹150 crore
- Gross Residential Construction Investment = ₹120 crore
- Inventory Investment = ₹140 crore
- Gross Public Investment = ₹500 crore
Gross Investment=150+120+140+500=910 crore\text{Gross Investment} = 150 + 120 + 140 + 500 = 910 \, \text{crore}Gross Investment=150+120+140+500=910crore
Now, we can compute the Domestic Income (NDPFC):NDPFC=800+910+170+(−50)−40\text{NDPFC} = 800 + 910 + 170 + (-50) – 40NDPFC=800+910+170+(−50)−40 NDPFC=800+910+170−50−40=1,790 crore\text{NDPFC} = 800 + 910 + 170 – 50 – 40 = 1,790 \, \text{crore}NDPFC=800+910+170−50−40=1,790crore
Final Answer:
Domestic Income (NDPFC) = ₹1,790 crore
11B.State the steps pertaining to the estimation of National Income under the income method.
Answer for Question 11(B):
Steps for Estimating National Income under the Income Method:
The Income Method of estimating National Income calculates the total income earned by the factors of production in the economy. The steps are as follows:
1. Identifying the Factors of Production:
- Factors of production include land, labor, capital, and entrepreneurship. The income earned by each of these factors is considered to estimate National Income.
2. Calculate the Income from Each Factor:
- Wages/Salaries (Income earned by labor): This includes all forms of compensation to workers, such as wages, salaries, bonuses, etc.
- Rent (Income earned by land): Rent is the payment to landowners for the use of their land or other immovable property.
- Interest (Income earned by capital): This is the income received by owners of capital (machinery, tools, etc.) in the form of interest.
- Profit (Income earned by entrepreneurs): This is the income generated by entrepreneurs from their business activities after accounting for costs and expenses.
3. Add Net Indirect Taxes:
- Net Indirect Taxes = Indirect Taxes (such as GST, Excise Duty, Sales Tax) – Subsidies
- Indirect Taxes are taxes on goods and services, paid by producers but passed on to consumers.
- Subsidies are government payments to encourage consumption or production, which need to be subtracted.
4. Adjust for Depreciation (Consumption of Fixed Capital):
- Depreciation refers to the wear and tear or reduction in the value of physical capital assets like buildings, machinery, and equipment over time.
- Consumption of Fixed Capital needs to be subtracted to account for the fact that part of the income is used up in replacing depreciated capital.
5. Add Net Factor Income from Abroad (NFIA):
- Net Factor Income from Abroad = Income earned by residents from abroad – Income earned by foreign residents within the domestic economy.
6. Summing the Total Income:
- After calculating the income from all the factors of production and adjusting for indirect taxes, subsidies, depreciation, and net factor income from abroad, we get the National Income.
Formula for National Income (Income Method):
National Income=Wages+Rent+Interest+Profit+Net Indirect Taxes−Depreciation+Net Factor Income from Abroad\text{National Income} = \text{Wages} + \text{Rent} + \text{Interest} + \text{Profit} + \text{Net Indirect Taxes} – \text{Depreciation} + \text{Net Factor Income from Abroad}National Income=Wages+Rent+Interest+Profit+Net Indirect Taxes−Depreciation+Net Factor Income from Abroad
Summary of Steps:
- Identify factor incomes (wages, rent, interest, profits).
- Calculate net indirect taxes (subtract subsidies from taxes).
- Adjust for depreciation (subtract consumption of fixed capital).
- Add Net Factor Income from Abroad (income from abroad minus income paid to foreigners).
- Sum up all components to get the National Income.
Question 12:“Tax revenue collection of the government may be categorized under two
heads.”
State and explain the two heads of tax revenue
“Tax revenue collection of the government may be categorized under two heads.”
- State and explain the two heads of tax revenue.
Answer:
Tax revenue collection of the government is generally categorized under two heads:
- Direct Taxes:
- Definition: These are taxes that are directly levied on individuals or organizations and are paid directly to the government.
- Examples:
- Income Tax: Tax on individual or corporate income.
- Wealth Tax: Tax on an individual’s wealth or property.
- Characteristics:
- These taxes are progressive, i.e., the rate increases as the income increases.
- The burden of the tax cannot be shifted to others, and the taxpayer directly bears the burden.
- Indirect Taxes:
- Definition: These are taxes levied on goods and services and are collected by an intermediary (such as a retailer) from the consumer.
- Examples:
- GST (Goods and Services Tax): Tax on goods and services sold for domestic consumption.
- Excise Duty: Tax on the production or sale of goods.
- Characteristics:
- The burden of the tax can be shifted from the producer or seller to the consumer.
- Indirect taxes are generally regressive in nature because they affect everyone equally, regardless of income.
Question 13:
(I) “Foreign Portfolio Investment (FPI) witnessed a sharp turnaround during 2023-24 with net FPI inflows of US$ 32.4 billion.” In which sub-account and on which side of the Balance of Payments account will the above transaction be recorded? Give reasons in support of your answer.
(II) State the meaning of ‘Balance of Payments Deficit’.
Answer:
(I) Sub-account and Side of Balance of Payments for FPI Inflows:
- Sub-account: Capital Account (under the Financial Account section).
- Side of Balance of Payments:Credit side (inflow of funds into the country). Reason:
- Foreign Portfolio Investment (FPI) refers to investments made by foreign investors in the financial assets of a country (stocks, bonds, etc.). These are recorded in the capital account under the Financial Account section of the Balance of Payments.
- Since the inflow of foreign capital is bringing money into the country, it is recorded on the credit side of the Balance of Payments.
(II) Meaning of ‘Balance of Payments Deficit’:
- Balance of Payments Deficit refers to a situation where a country’s total payments to foreign countries exceed its total receipts from foreign countries during a specific period. In other words, a country spends more on imports, foreign investments, or foreign aid than it earns from exports or foreign investments.
- A deficit indicates that the country is borrowing capital or using its reserves to pay for the excess imports or payments.
Question 14:
(A) “Saving curve can be derived from the consumption curve.” Justify the statement, citing valid steps with the help of a well-labelled diagram.
(B) For visually impaired candidates: “Saving curve can be derived from the consumption curve.” Justify the statement, citing valid steps.
OR
For two hypothetical economies A and B, the value of Marginal Propensity to Consume (MPC) stands at 0.6 and 0.8 respectively. Assuming for both the economies, Autonomous Consumption (c̅) to be ₹40 crore and Investment Expenditure (I) to be ₹100 crore. Calculate:
(I) Break-even level of income for Economy A (II) Equilibrium level of income for Economy B
Answer:
(A) Saving Curve Derived from the Consumption Curve:
- The saving curve can be derived from the consumption curve because saving is the difference between income and consumption.
- Steps to Derive the Saving Curve:
- Consumption Function (C): The consumption function shows the relationship between income (Y) and consumption (C).
- C = c̅ + cY, where:
- c̅ is Autonomous Consumption (consumption when income is zero),
- c is the Marginal Propensity to Consume (MPC),
- Y is the income.
- C = c̅ + cY, where:
- Saving Function (S): Saving (S) is defined as the difference between income and consumption.
- S = Y – C = Y – (c̅ + cY)
- Simplifying, S = Y(1 – c) – c̅
- The Saving Curve is obtained by plotting the saving function for different levels of income (Y).
- Consumption Function (C): The consumption function shows the relationship between income (Y) and consumption (C).
- Diagram (for reference):
- The Consumption Curve is an upward-sloping straight line starting from Autonomous Consumption (c̅).
- The Saving Curve starts from negative savings at low levels of income and increases as income rises. The slope of the saving curve depends on the Marginal Propensity to Save (MPS), which is the complement of the MPC.
(B) Calculating the Break-even Level of Income for Economy A and Equilibrium Level of Income for Economy B:
(I) Break-even Level of Income for Economy A:
- Break-even level of income occurs where Income (Y) = Consumption (C), i.e., no savings are made.
- C = c̅ + cY
- Set C = Y, because at break-even, savings = 0.
- c̅ = ₹40 crore, c = 0.6
(II) Equilibrium Level of Income for Economy B:
- Equilibrium level of income occurs where Income (Y) = Aggregate Expenditure (AE), i.e., total consumption and investment. AE=C+IAE = C + I AE = c̅ + cY + I At equilibrium, Y = AE: Y = c̅ + cY + I Y – cY = c̅ + I Y(1 – c) = c̅ + I Y = \frac{c̅ + I}{1 – c} Substituting values:
- c̅ = ₹40 crore, c = 0.8, I = ₹100 crore
Question 15:
Based on the given text about the Union Finance Minister’s statement on investments in infrastructure, explain the working process of the increase in investment on the National Income, assuming the Marginal Propensity to Save (MPS) as 20%.
Answer:
When the government increases capital investment (like infrastructure spending), it directly raises aggregate demand in the economy. This leads to a multiplier effect that increases national income.
The multiplier is calculated as: Multiplier=1MPS\text{Multiplier} = \frac{1}{\text{MPS}}
Given:
- MPS = 20% or 0.20
Multiplier=10.20=5\text{Multiplier} = \frac{1}{0.20} = 5
If the government increases capital investment by ₹1,000 crore: Change in National Income=Investment×Multiplier\text{Change in National Income} = \text{Investment} \times \text{Multiplier} Change in National Income=1,000×5=₹5,000 crore\text{Change in National Income} = 1,000 \times 5 = ₹5,000 \, \text{crore}
Thus, the total increase in National Income due to the ₹1,000 crore increase in investment is ₹5,000 crore.
Question 16:
Over the centuries, money has evolved in various forms. Discuss two forms of money and their evolution.
(II) Do you agree with the statement about the importance of digital currency (like CBDC)?
Answer:
(I) Two Forms of Money:
- Commodity Money:
- Definition: Money that has intrinsic value, such as gold, silver, or cowrie shells, which were used as a medium of exchange.
- Evolution: Over time, these commodities became standardized in terms of weight and purity, and they were used for trade and exchange.
- **Fiat Money
:**
- Definition: Money that has no intrinsic value but is declared legal tender by a government (such as paper currency).
- Evolution: Modern economies moved from commodity money to fiat money issued by central banks. This type of money is not backed by a physical commodity like gold but has value because the government declares it as legal tender.
(II) Importance of Digital Currency (CBDC):
- Agree with the statement: The introduction of Central Bank Digital Currency (CBDC) is a significant development for modern economies due to the following benefits:
- Reduced dependency on cash: With digital currency, transactions can be done electronically, reducing the need for physical cash.
- Lower transaction costs: CBDC can reduce the costs involved in currency printing, transportation, and handling.
- Efficient payments system: CBDCs offer faster, more secure transactions and can be integrated with digital banking systems.
- Cybersecurity concerns: As digital currency is dependent on technology, it is susceptible to cyber-attacks.
- Technology readiness: Implementing CBDC requires advanced infrastructure and technology, which may not be available in all regions.
17AQ.(I) On the basis of the following hypothetical data
| Year | Nominal GDP (₹ crore) | Nominal GDP Adjusted to Base Year Prices (₹ crore) |
|---|
| 2020 | 3,000 | 4,000 |
| 2023 | 4,000 | 4,500 |
Calculate the percentage change in Real Gross Domestic Product in the
year 2023 using 2020 as the base year.
(II) “The public investment on the construction of a multi-lane flyover may
reduce traffic congestion.”
On the basis of the above statement, discuss its likely impact on Gross
Domestic Product (GDP) and welfare in an economy
Answer Table
| S. No. | Answer |
|---|---|
| (I) | Formula to calculate percentage change in Real GDP: Percentage change in Real GDP=Real GDP in 2023−Real GDP in 2020Real GDP in 2020×100\text{Percentage change in Real GDP} = \frac{\text{Real GDP in 2023} – \text{Real GDP in 2020}}{\text{Real GDP in 2020}} \times 100Percentage change in Real GDP=Real GDP in 2020Real GDP in 2023−Real GDP in 2020×100 Real GDP for 2023 = ₹4,500 crore Real GDP for 2020 = ₹4,000 crore 4,500−4,0004,000×100=5004,000×100=12.5%\frac{4,500 – 4,000}{4,000} \times 100 = \frac{500}{4,000} \times 100 = 12.5\%4,0004,500−4,000×100=4,000500×100=12.5% Therefore, the percentage change in Real GDP for 2023 using 2020 as the base year is 12.5%. |
| (II) | Impact on GDP: Public investment in infrastructure, such as the construction of a multi-lane flyover, directly contributes to Gross Domestic Product (GDP) by increasing government expenditure and boosting the construction sector. The increased demand for labor and materials further stimulates economic growth. Impact on Welfare: Reduced traffic congestion leads to increased efficiency in transportation, saving time for commuters and reducing vehicle wear and tear. This results in higher productivity in the economy, increased standard of living, and greater welfare for the population as a whole. Improved transport infrastructure also reduces costs for businesses, promoting economic activities. |
17BQ.(I) “Basis of classification of final goods into consumption and capital goods
depend on the economic nature of its use.”
Defend or refute the statement, with the help of a suitable example.
(II) ‘Natural calamities in the hill states of India have led to massive destruction
of capital assets.’
Identify the type of loss (depreciation or capital loss) indicated in the aforesaid
statement. Give valid reasons in support of your answer.
Answer Table
| S. No. | Answer |
|---|---|
| (I) | Defend the Statement: The classification of final goods into consumption goods and capital goods is based on the economic nature of their use. – Consumption goods are those that are used directly by households to satisfy their immediate needs, such as food, clothing, and entertainment. These goods are consumed within the same period of production. – Capital goods, on the other hand, are used to produce other goods and services, contributing to future production. Examples include machinery, equipment, and buildings used for industrial production. For instance, a machine used in a factory to produce products is classified as a capital good, while the final product made by the machine is classified as a consumption good if sold for final consumption. Thus, the classification is based on whether the good is used for final consumption or for future production. |
| (II) | The loss described in the statement refers to a capital loss. Capital loss occurs when physical assets or capital goods, such as infrastructure, machinery, or buildings, are destroyed due to events like natural disasters, accidents, or other irreversible events. In this case, natural calamities in the hill states of India have resulted in the destruction of capital assets (like roads, buildings, and infrastructure). This is different from depreciation, which is the gradual reduction in the value of capital assets due to usage and wear over time. Natural disasters result in a sudden and irreversible loss of capital assets, which is classified as a capital loss because the assets are permanently destroyed, not merely devalued. |
SECTION B – INDIAN ECONOMIC DEVELOPMENT
18Q.Read the given image carefully:
Choose the correct option which indicates the combination of vital functions performed by the environment.
i. Sustains life
ii. Provides aesthetic services
iii. Generates waste
iv. Provides only renewable resources
Options:
A. (i) and (ii)
B. (ii) and (iii)
C. (i) and (iv)
D. (i) and (iii)
Answer:
A. (i) and (ii)
The environment sustains life by providing essential resources like air, water, and food. It also provides aesthetic services through beautiful landscapes and natural surroundings that enhance human well-being.
Question 2 (For Visually Impaired Candidates):
Identify which of the following is not a correct function of the environment:
(i) Elimination of waste
(ii) Sustenance of life
(iii) Provide aesthetic services
Alternatives:
A. (i) only
B. (ii) only
C. (ii) & (iii)
D. (i) & (ii)
Answer:
A. (i) only
The function “Elimination of waste” is not a direct function of the environment. Waste management is performed by living organisms and human systems, while the environment helps in the assimilation of natural waste.
19. Read the following statements carefully:
Statement 1: The British policies led to the collapse of India’s world-famous handicraft industries.
Statement 2: During the colonial rule in India, the contribution of the industrial sector to Gross Value Added (GVA) increased significantly.
In light of the given statements, choose the correct option from the following:
Options: A. Statement 1 is true and Statement 2 is false.
B. Statement 1 is false and Statement 2 is true.
C. Both Statements 1 and 2 are true.
D. Both Statements 1 and 2 are false.
Answer:
A. Statement 1 is true and Statement 2 is false.
The British colonial policies led to the destruction of India’s handicraft industries, while the industrial sector remained underdeveloped due to British control over the economy.
20. Read the following statements: Assertion (A) and Reason (R). Choose the correct option from those given below:
Assertion (A): The Education Commission (1964–66) had recommended that at least 4% of Gross Domestic Product (GDP) be spent on education.
Reason (R): The Union and State Governments have been stepping up expenditures in the education sector over the years to fulfil the objective of attaining cent per cent literacy.
Options: A. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B. Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
C. Assertion (A) is true, but Reason (R) is false.
D. Assertion (A) is false, but Reason (R) is true.
Answer:
A. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
The Education Commission (1964–66) recommended a 4% GDP expenditure on education, and the Union and State governments have been steadily increasing their educational investments towards achieving the goal of 100% literacy.
21. In the post-independence era, the policymakers of India adopted an economic system that fundamentally implies the coexistence of ______ and ________.
(Choose the correct option to fill up the blank)
Options: A. small and large-scale industries
B. small and medium-scale industries
C. public and private sector
D. private and foreign sector
Answer:
C. public and private sector
The Indian economy was based on a mixed economic model, with both public and private sectors coexisting and contributing to economic growth.
22. The institutional structure of rural banking in contemporary India consists of a set of multi-agency institutions, namely, _________________
(Choose the correct option to fill up the blank)
(i) Regional Rural Banks (ii) Cooperative Banks
(iii) Land Development Banks (iv) Commercial Banks
Options: A. (i) and (iv)
B. (i), (iii) and (iv)
C. (i), (ii) and (iii)
D. (i), (ii), (iii), and (iv)
Answer:
D. (i), (ii), (iii), and (iv)
The rural banking structure includes all four institutions: Regional Rural Banks, Cooperative Banks, Land Development Banks, and Commercial Banks.
23. Identify which of the following statement is incorrect about the financial sector reform introduced in 1991?
(Choose the correct option)
Options: A. Enabled the establishment of private sector banks, Indian as well as foreign
B. Foreign investment limit in banks was raised to around 74%
C. Foreign Institutional Investors were allowed to invest in Indian financial markets
D. Change in the role of the Reserve Bank of India from facilitator to regulator
Answer:
B. Foreign investment limit in banks was raised to around 74%
The 1991 reforms did enable private sector banks and allowed foreign institutional investors, but the foreign investment limit in banks was not raised to 74%, it remained at 49%.
24. China’s demographic problem of 4-2-1, resulted in a higher proportion of elderly individuals compared to the younger population. This was primarily due to the implementation of ______.
Options: A. Great Leap Forward Campaign
B. Great Proletarian Cultural Revolution
C. One Child Norm
D. Special Economic Zones
Answer:
C. One Child Norm
The one-child policy implemented by China led to an aging population with fewer younger people to care for the elderly, creating the “4-2-1” demographic structure.
25. ______ was set up in 1974 by the Indian government to address two major environmental concerns viz. water and air pollution.
(Choose the correct option to fill up the blank)
Options: A. State Pollution Control Board
B. Central Pollution Control Board
C. Brundtland Commission
D. Montreal Protocol
Answer:
B. Central Pollution Control Board
The Central Pollution Control Board (CPCB) was set up in 1974 to address water and air pollution and to enforce pollution control standards in India.
26. “Assuming in a hypothetical economy, Real Gross Domestic Product recorded a growth rate of 9% during a fiscal year. However, the economy faced a significant challenge in terms of creating an adequate number of employment opportunities.”
Identify the situation indicated in the given statement and choose the correct option.
Options: A. Casualisation of workforce
B. Informalisation of workforce
C. Formalisation of workforce
D. Jobless growth
Answer:
D. Jobless growth
The term “jobless growth” refers to an economic situation where GDP grows, but employment does not grow at a commensurate rate, leading to high unemployment despite economic growth.
27. During the period 1951-2016, __________ led to an increase in the milk production in India by about ten times.
(Choose the correct option to fill up the blank)
Options: A. Green Revolution
B. Golden Revolution
C. Operation Flood
D. Industrial Revolution
Answer:
C. Operation Flood
Operation Flood, also known as the “White Revolution,” significantly increased India’s milk production by introducing dairy farming on a large scale.
28(A).
Critically appraise the disinvestment policy initiated by the government during the reforms of 1991.
Answer:
The disinvestment policy was aimed at reducing government ownership in public sector enterprises to improve efficiency and generate revenue. While it helped to reduce fiscal deficits and encouraged private sector participation, it also led to concerns about asset sales and the weakening of public sector entities in crucial sectors like infrastructure and manufacturing.
28(B).
‘Globalisation is an essential outcome of liberalisation of an economy’. Justify the given statement with a valid explanation.
Answer:
Globalisation is closely linked to economic liberalisation, as the latter involves removing trade barriers, allowing foreign investment, and deregulating markets. These changes encourage global integration, bringing economies closer and facilitating the flow of goods, services, and capital across borders.
29.
‘To measure the extent of development in an economy, liberty indicators should be considered along with other socio-economic parameters.’
Do you agree with the given statement? Give valid reasons in support of your answer.
Answer:
Yes, liberty indicators, such as freedom of speech, civil rights, and political freedom, are essential for measuring the quality of life and the development of an economy. Economic growth alone does not ensure the well-being of citizens unless accompanied by freedoms that enable them to make choices and live dignified lives.
30.
‘The reform process implemented in the late 1970s, commonly known as China’s open-door policy, encompassed a wide range of reforms across sectors like agriculture, investment, industry etc. These reforms played a pivotal role in driving the rapid growth of the Chinese economy over subsequent decades.’
In the light of the given text, discuss any two reforms responsible for the rapid economic growth of China.
Answer:
- Agricultural Reforms: The open-door policy allowed private farming and the introduction of the household responsibility system, which incentivized farmers and led to increased agricultural productivity.
- Foreign Direct Investment (FDI): China welcomed foreign investment, especially in Special Economic Zones (SEZs), fostering rapid industrialization and technological advancement.
31(A).
‘Under the Delhi Declaration, the G-20 nations pledged to reach global net zero emissions approximately by mid-century and to triple global renewable energy capacity by 2030.’
Discuss briefly the rationale behind the commitment by G-20 nations in the direction of achieving sustainable development.
Answer:
The G-20 nations’ commitment to net-zero emissions and increased renewable energy capacity reflects a global recognition of the need to combat climate change. These measures aim to transition towards a greener, more sustainable energy system that reduces environmental degradation and fosters long-term economic growth.
31(B).
‘It would be unclear to say that, the growth of human capital lays the ground for economic growth of a nation.’
Do you agree with the given statement? Support your answer with valid illustrations.
Answer:
Yes, the growth of human capital is essential for economic growth. An educated and skilled workforce drives innovation, increases productivity, and enhances competitiveness in the global economy. For instance, countries like South Korea and Singapore have invested in human capital and reaped substantial economic benefits.
- (I) Interpret the given picture based on the Saansad Adarsh Gram Yojana
(SAGY) initiated by the Government of India.
Answer: The Saansad Adarsh Gram Yojana (SAGY), launched by the Government of India in 2014, is a rural development initiative aimed at creating model villages, or Adarsh Gram, that become self-sustained and empowered. Under the scheme, each Member of Parliament (MP) is responsible for adopting a village in their constituency and developing it as a model village with basic facilities like clean drinking water, sanitation, education, and health services.
- The picture likely depicts the development of rural infrastructure, like improved roads, sanitation, or community buildings, with active participation from the community members.
- The aim of the scheme is not just physical infrastructure development but also to promote social and economic equality, empowerment of women, education, healthcare, and environmental sustainability in the chosen villages.
- MPs play a crucial role in guiding and motivating the people of the village and ensuring the active participation of the local government and other stakeholders for effective implementation of the scheme.
The focus is to make these villages models of excellence in terms of sustainable development, inclusive growth, and improved living standards for all residents.
(II) State any two examples of allied activities.
Answer:
- Dairy Farming: This is an allied activity in agriculture, where farmers engage in the production of milk and other dairy products along with crop cultivation to enhance their income and improve livelihoods.
- Poultry Farming: Poultry farming, which involves the breeding and raising of chickens, ducks, and other birds for meat and egg production, is another allied activity that supplements farmers’ income and provides nutritional benefits to rural communities.
For Visually Impaired Candidates in lieu of 32 (I):
Explain briefly the Saansad Adarsh Gram Yojana (SAGY) initiated by the Government of India.
Answer: The Saansad Adarsh Gram Yojana (SAGY) was launched in 2014 by the Government of India to promote the overall development of rural areas by making them self-reliant and model villages. Under this initiative, Members of Parliament (MPs) are tasked with adopting a village in their constituency and developing it as a model village or Adarsh Gram.
The main objectives of the scheme are:
- Comprehensive rural development: This includes the provision of basic amenities like sanitation, drinking water, education, healthcare, roads, and electricity.
- Social empowerment: SAGY aims to empower rural populations by improving social justice, women’s empowerment, and community participation.
- Sustainable development: The program also focuses on promoting environmentally sustainable practices in agriculture and other sectors.
Through this initiative, MPs guide and work with local governments and communities to implement development programs that cater to the needs of rural populations.
33. Read the following text carefully:
Employment generation has remained one of the top challenges of Indian policymakers, and over the years, this has only become more complex. India has experienced more or less consistent growth in the structure of the output of the economy, especially after the economic reforms which is measured by gross value added. However, the trend in employment did not reveal a consistent and clear pattern.
These complexities have led to a wide variation in the conclusions drawn by experts and various studies on workforce and employment.
Two major sources of data on the workforce and employment have been the
(i) decennial population census and
(ii) nationwide quinquennial surveys on employment and unemployment by the erstwhile NSSO under the Ministry of Statistics and Programme Implementation (MoSPI), Government of India.
The nationwide Employment and Unemployment (E&U) surveys have been replaced by the Periodic Labour Force Survey (PLFS) conducted by the National Statistical Office (NSO) of MoSPI, which started in the year 2017–18. According to NSO, the PLFS data measure the dynamics in labour force participation, workers to population ratio, and the employment status along with related, important parameters for both rural and urban areas.
Labour force includes persons who were either working (or employed) or those available for work (or unemployed). Some persons in the labour force are abstained from work for various reasons. Deducting that number from the labour force gives the number of actual workers. These workers are further categorised as persons who are engaged in any economic activity as self-employed or regular wage/salaried and casual labour. The difference between the labour force and the workforce gives the number of unemployed persons.
The size of the labour force in the country has increased from 485.3 million in the year 2017–18 to 497.4 million in the year 2018–19. The next year, the labour force increased by 8 per cent and reached 537.9 million. This increase was witnessed across male and female populations as well as rural and urban households.
Questions and Answers:
(I) State any two major sources of data on the workforce and employment.
Answer:
- Decennial Population Census
- Nationwide Quinquennial Surveys on Employment and Unemployment (E&U) by the erstwhile NSSO, now replaced by the Periodic Labour Force Survey (PLFS) conducted by NSO.
(II) ‘The labour force encompasses a broader category than the workforce.’ Defend or refute the statement, giving valid reasons in support of your answer.
Answer:
Defend the statement.
The labour force includes individuals who are either currently employed or available for work (i.e., unemployed but actively seeking employment). This category is broader than the workforce, which refers only to the individuals who are actually working (i.e., employed). The difference between the labour force and the workforce is the number of unemployed individuals who are actively looking for work. Therefore, the labour force includes both employed and unemployed individuals, while the workforce only includes those who are currently employed.
(III) ‘Workers can be categorized into different types depending on their status.’ In the light of the given statement, state any one type of employment.
Answer:
One type of employment is Self-employment.
Self-employed workers work for themselves rather than for an employer, and they are not paid a salary or wages but earn income through their own business or trade.
34(A).
**(I) ‘Under the Industrial Policy Resolution (IPR) 1956 in India, the system of industrial licensing was introduced to promote regional equality.’ Justify the given statement with valid arguments.
Answer:
The Industrial Policy Resolution (IPR) of 1956 aimed at promoting regional equality by introducing industrial licensing. This system was designed to control the location and scale of industrial development, particularly to avoid the concentration of industries in already developed regions, like the western and southern parts of India. By introducing licensing, the government could ensure that industries were established in less-developed and backward regions, thus promoting regional industrial growth and balanced economic development across the country. The policy also emphasized public sector investment in areas where private industry was less willing to venture, further supporting regional equality.
34(B).
(II) Discuss briefly the estimates made by notable scholars regarding the national income and per capita income during the colonial rule in India.
Answer:
During the colonial period, various scholars have estimated India’s national income and per capita income, highlighting the exploitative nature of British rule.
- Dadabhai Naoroji, one of the first to estimate India’s national income, argued in his work “Poverty and Un-British Rule in India” (1901) that British colonial policies led to the drain of wealth from India, which negatively impacted national income growth.
- RC Dutt estimated that India’s per capita income during British rule was much lower than it would have been under conditions of self-rule. His estimates, made in the late 19th century, indicated that India’s per capita income was stagnant or declining due to British exploitation of India’s resources.
- Findlay Shirras and other economists also estimated India’s national income and per capita income, which pointed to the severe impoverishment of India under British rule due to the exploitation of its resources and labour.
These estimates consistently indicated that India’s per capita income during the colonial period was far below potential due to the economic policies designed to benefit the British Empire at the cost of India’s development.
OR
(I) ‘During the colonial period, India’s foreign trade was characterized by a large export surplus, however, this did not result in any flow of gold or silver into India.’ Justify the given statement with valid arguments.
Answer:
The statement is true. During the colonial period, India was a major exporter of raw materials like cotton, opium, and indigo, while it imported finished goods from Britain. This led to an export surplus in terms of trade balance. However, this surplus did not result in an inflow of gold or silver into India for several reasons:
- The British colonial system took a large portion of India’s wealth in the form of taxes, revenue, and drain of wealth, which was sent to Britain.
- The British Empire ensured that India’s export surplus was used to pay for British imports, rather than allowing gold or silver to enter India.
- The British imposed policies such as the “Drain of Wealth” theory, where India’s wealth was siphoned off to Britain, contributing to the impoverishment of India despite an export surplus.
Thus, India’s foreign trade during the colonial period was beneficial to Britain but detrimental to India’s economy, as the export surplus did not translate into tangible benefits like gold or silver inflows.
(II) Explain the rationale behind choosing ‘Self-reliance’ as a central planning objective in India’s development strategy.
Answer:
Self-reliance was chosen as a central planning objective in India’s development strategy to ensure economic independence and reduce the country’s dependence on foreign nations. After independence, India was wary of becoming overly reliant on foreign nations for critical resources, technology, and capital.
The rationale behind self-reliance included:
- Political Independence: India wanted to ensure that it had control over its own economy and was not subject to external political or economic pressures.
- Industrialization and Development: Self-reliance aimed at promoting indigenous industries, fostering technology transfer, and boosting domestic manufacturing. By reducing dependency on foreign imports, India could focus on building a strong industrial base.
- Reducing External Debt: By relying on its own resources, India sought to limit borrowing from foreign countries and international financial institutions, reducing external debt and associated vulnerabilities.
- Employment Generation: Focusing on self-reliance would stimulate local industries and create employment opportunities, especially in sectors like agriculture, manufacturing, and infrastructure development.