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### Economics (Code No. 58/2/1)

Time allowed : 3 hours
Maximum Marks: 80

General Instructions:

(i) This question paper comprises two sections – A and B. All questions are compulsory.

(ii) Question numbers 1 – 10 and 18 – 27 are very short-answer questions carrying 1 mark each. They are required to be answered in one word or one sentence each.

(iii) Question numbers 11 – 12 and 28 – 29 are short-answer questions carrying 3 marks each. Answers to them should not normally exceed  60 – 80 words each.

(iv) Question numbers 13 – 15 and 30 – 32 are also short-answer questions carrying 4 marks each. Answers to them should not normally exceed  80 – 100 words each.

(v) Question numbers 16 – 17 and 33 – 34 are long answer questions carrying 6 marks each. Answers to them should not normally exceed  100 – 150 words each.

(vi) Answers should be brief and to the point. Also the above word limit be adhered to as far as possible.

(vii) There is no overall choice. However, an internal choice has been provided in 2 questions of one mark, 2 questions of three marks, 2 questions of four marks and 2 questions of six marks. Only one of the choices in such questions have to be attempted.

(viii) In addition to this, separate instructions are given with each section and question, wherever necessary.

### Section – A

#### (Macroeconomics)

1. If the entire additional income of an economy is consumed, the value of investment multiplier will be _________. (Choose the correct alternative)

(A) zero (0)

(B) not defined (∞)

(C) one (1)

(D) ten (10)

2. A car purchased by a household is a _________. (Choose the correct alternative)

(A) single use capital good

(B) single use consumer good

(C) durable consumer good

(D) semi-durable consumer good

OR

GNP deflator is represented by which of the following formulae? (Choose the correct alternative)

(A)

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(B)

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(C)

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(D)

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Gross National Product (GNP) Deflator is an economic metric accounting for the effects of inflation in the economy’s current year’ GNP. It does so by conversion of its output to a level which is relative to the base period.

3. Name the two components of Aggregate Demand in a closed economy.

Answer: Aggregate Demand refers to the total demand for finished goods and services in the economy over a specific period. It also refers to a country’s Gross Domestic Product (GDP) demand. The two components of Aggregate Demand in a closed economy are Investment Expenditure (I) and Consumption Expenditure (C).

4. _________ is the agent and adviser to the Government of India. (Fill in the blank with correct answer)

Answer: The Reserve Bank of India (RBI) acts as an agent and adviser to the Government of India.

5. State whether the following statement is true or false :

‘‘To reduce inflation, the Central Bank should reduce Cash Reserve Ratio (CRR).’’

Answer: False, at times of high inflation, to reduce it, the Central Bank; i.e., RBI raises the Cash Reserve Ratio (CRR) to reduce the amount of money left with the banks for sanctioning loans.

6. Government expenditure incurred on defense items is a type of _________ expenditure in the Government Budget. (Fill in the blank with correct answer)

7. State whether the following statement is true or false :

‘‘Under a managed floating exchange rate system, the Government directly controls the exchange rate.’’

Answer: False, Managed Floating Exchange Rate is the combination of the fixed rate system (the managed part) and the flexible rate system (the floating part). Therefore, Government does not have direct control over the exchange rate.

8. ‘Charity from Abroad’ will be recorded on _________ (credit/debit) side of the Balance of Payment accounts. (Fill in the blank with correct answer)

Answer: Credit Side of the Balance of Payment Accounts

9. Give any two examples of non-tax revenue receipts.

Answer: The receipts of the government from all sources other than the tax receipts are known as Non-tax Revenue. Two examples of Non-tax Revenue Receipts are Penalties and Fees.

10. Suppose in a hypothetical economy, the income rises from ₹500 crores to ₹600 crores. As a result, the consumption expenditure rises from ₹400 crores to ₹500 crores. Marginal propensity to consume in such a case would be _________. (Choose the correct alternative)

(A) 0·8

(B) 0·4

(C) 1·0

(D) 0·6

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=\frac{100}{100}=1.0

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11. ‘‘Gross Domestic Product (GDP) is not the best indicator of the economic welfare of a country.’’ Defend or refute the given statement with valid reasons.

Answer: GDP or Gross Domestic Product is the total value of all the final goods and services produced within the domestic boundaries of a country during a year. The given statement is correct and can be defended with the help of the following points:

1. Distribution of GDP: Sometimes a higher GDP results in a rise in inequalities in the income distribution among people. Inequality in income distribution refers to a rise in the gap between the rich and the poor. Gross Domestic Product does not consider the change in the income distribution of a country. Therefore, in some cases, a rise in GDP does not mean an increase in the welfare of people.
2. Non-Monetary Exchanges: There are many activities such as kitchen gardening, housewife services, etc., in an economy that is not measured in monetary terms, but influences the economic welfare of people. These activities are not included in the determination of GDP because of the lack of data available. Therefore, it might be possible that there is no rise in GDP, but actually, it has increased from the non-monetary exchanges.
3. Change in Prices: Sometimes the GDP of an economy increases because of the increase in the price of the goods and services, but not because of the rise in physical output of goods and services. In these cases, taking GDP as an index to measure welfare is not reliable.

12. Discuss the working of the adjustment mechanism if, Aggregate Demand (AD) is greater than Aggregate Supply (AS).

Answer: Aggregate Demand refers to the total demand for finished goods and services in the economy over a specific period. It also refers to a country’s Gross Domestic Product (GDP) demand. Aggregate Supply is the total supply of finished goods and services in the economy over a specific period. When the planned spending of an economy; i.e., Aggregate Demand is more than the planned output; i.e., Aggregate Supply, then the AD (C + I) curve lies above the 45° line. It would mean that the consumers and firms collectively would be buying more goods than the willingness of the firms to produce. Because of this, the planned inventory of the firms would fall below the desired inventory level.

For bringing back the inventory to the desired level, the firms would resort to an increase in employment and output until the economy gets back at output level OY, where AD ultimately becomes equal to AS and there is no more tendency to change.

OR

If in an economy:

Change in initial investment

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= ₹1,000 crores,

Marginal propensity to save (MPS) = 0·2.

Find the value of the following :

(a) Investment multiplier (K)

(b) Change in final income

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Answer: According to Keynes, an initial increment in the investment increases the final income by many times, and the relationship between an initial increment in investment and the resulting increase in the aggregate demand is expressed through a multiplier; i.e., Investment Multiplier.

Multiplier (k) is the ratio of an increase in the national income because of an increase in the investment. It can also be calculated with the help of MPC as there is a direct relationship between MPC and the value of the multiplier, which is ‘Higher the MPC, more will be the value of the multiplier’. The formula for calculating k with the help of MPC is:

Or

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a)

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k=\frac{1}{0.2}

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k = 0.5

b) Another formula for calculating Investment Multiplier is:

Therefore, Change in final income

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will be:

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5=\frac{\Delta{Y}}{1,000}

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\Delta{Y}=₹5,000~Crores

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13. What role does credit multiplier play in determining the credit creation capacity of the banking system? Use a numerical illustration to explain.

Answer: Credit Multiplier or Money Multiplier measures the amount of money that the banks are able to create in the form of deposits with every unit of money it keeps as reserves. The Money Multiplier plays a great role in the banking system of the economy as every time the government needs to kick-start the economy, the multiplier helps decide what proportion of stimulation should be applied and in what manner.

Commercial banks’ credit creation depends on the credit multiplier as it is inversely related to Legal Reserve Ratio (LRR). A higher value of credit multiplier means higher total credit creation and vice-versa.

For example, Let us suppose the Legal Reserve Ratio (LRR) is 0.2 and the initial deposit is ₹2,000.

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Credit~Multiplier=\frac{1}{0.2}=5

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Total Deposits=Initial Deposits x Money Multiplier

Total Credit Created = 5 x ₹2,000 = ₹10,000

Therefore, with the same initial deposit; the total credit creation increases with an increase in the value of the credit multiplier.

OR

Elaborate any two instruments of credit control, exercised by the Reserve Bank of India.

Answer: When there are fluctuations in an economy, the Central Bank (RBI) controls the money supply and credit in its best interest. As the RBI holds the sole monopoly in the issue of currency, it can control money supply and credit. Two of the instruments used by the RBI for credit control are as follows:

1. Repo(Repurchase) Rate: The rate at which a country’s central bank (in the case of India, RBI) lends money to commercial banks to meet their short-term financial needs is known as the repo rate. The central bank advances loans to commercial banks against approved securities or eligible bills of exchange. If there is an increase in the repo rate, it will increase the cost of borrowing from the central bank, which ultimately forces the commercial banks to increase their lending rates, discouraging the borrowers from taking loans from the commercial banks and vice-versa.
2. Bank Rate(or Discount Rate): The rate at which a country’s central bank (in the case of India, RBI) lends money to commercial banks to meet their long-term financial needs is known as the bank rate. Bank Rate has the same effect on credit as that of Repo Rate. Simply put, if there is an increase in the Bank Rate, it will increase the cost of borrowing from the central bank, which ultimately increases the lending rates by commercial banks, discouraging the borrowers from taking loans.

14. ‘‘US dollar has recorded a jump of 0·75 paise per dollar (p/$) in the last one month; this situation might bring smiles and sorrows to different types of traders (exporters and importers).’’ Justify the given statement. Answer: Conversion of the currency of one country into the currency of another country and the rate at which one currency is exchanged for another is called the Foreign Exchange Rate or Foreign Rate of Exchange. The situation of a jump in the US Dollar might bring smiles and sorrow to different people. A jump in US Dollar means appreciation of the US Dollar and depreciation of home currency (₹). It means that to buy one unit of US Dollar ($), people have to pay more units of Indian Rupee (₹). It will be good news for the exporters of the domestic country as the domestic products will now become cheaper in the market and they will be able to sell more in the foreign market. However, it will bring sorrow to the importers of the domestic country as the imports will now decline because the foreign goods will become more expensive.

Hence, a jump in the US Dollar of 0.75 paise per dollar will increase exports and reduce imports.

15. ‘‘The Government Budget of a country cannot have fiscal deficit without the existence of revenue deficit.’’ Defend or refute the given statement.

Answer: A Budgetary Deficit can be termed as the excess of the total government expenditure over the total revenue generated in a financial year. A budgetary deficit happens when the government spends more money than what is generated through revenue collection, including direct or indirect taxes. Based on the deficit incurred, has been divided into three forms, i.e., Revenue Deficit, Fiscal Deficit, and Primary Deficit. The revenue deficit refers to the excess of revenue expenditure over revenue income in a financial year. However, the fiscal deficit refers to the excess of total expenditure over total receipts/income, excluding borrowings, in a fiscal year.

The given statement, ‘‘The Government Budget of a country cannot have fiscal deficit without the existence of revenue deficit.’’ is refuted. A country can have fiscal deficit without revenue deficit in two cases; viz.:

1. When the revenue budget is balanced and the capital budget of the economy shows a deficit.
2. When the revenue budget is in surplus but the deficit in capital budget of the economy is greater than this surplus.

16. (a) ‘‘Circular flow of income in a two-sector economy is based on the axiom that one’s expenditure is other’s income.’’ Support your answer with valid reasons.

Answer: The circular flow of income is an economic model that reflects how money or income flows through the different sectors of the economy. A simple economy assumes that there exist only two sectors; i.e., Households and Firms. Households are consumers of goods and services and the owners of the factors of production (land, labour, capital, and enterprise). However, the firm sector produces goods and services and sells them to households.

In the circular flow of income (two-sector economy), there is an exchange of goods and services between the two players, i.e., the firms and households, which leads to a certain flow of money in the economy. Households provide the firms with the factors of production namely, Land (Natural Resources), Labour, Capital, and Enterprise that generates goods and services, and consumers spend their income on the consumption of these goods and services. The firms then make factor payments to households in the form of rent, wages, interest, and profit. This flow of goods and services and factors payments between firms and households reflects the circular flow of money in an economy.

Therefore, the statement, ‘‘Circular flow of income in a two-sector economy is based on the axiom that one’s expenditure is other’s income.’’ is true.

(b) Distinguish between ‘value of output’ and ‘value added’.

Answer: Value of Output is the estimated monetary value of all goods and services, including changes in stock and production for self-consumption whereas Value-added refers to the addition in the value of a raw material or intermediate good by an organization during the production process. In simple terms, it is the excess of the value of output over the value of intermediate consumption. The major difference between the value of output and value added is the inclusion of intermediate consumption. Intermediate Consumption is the expenditure incurred by a production unit on secondary inputs like power, raw material, etc., and is included in the value of output but excluded from value added.

OR

Using the following data of an imaginary economy, calculate and compare the Real Gross Domestic Product (GDP) for the given years :

Answer: GDP Deflator measures the average price level of the goods and services of an economy that make up GDP.

The formula for calculating GDP Deflator is as follows:

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Nominal GDP is the Gross Domestic Product of a country of a given year, estimated on the basis of the price of the goods and services of the same year. Real GDP is the Gross Domestic Product of a country of a given year, estimated on the basis of the price of the goods and services of a base year.

To determine the Real GDP for the periods 2015-16 and 2016-17, we will assume the Nominal GDP and Real GDP for the period 2014-15 to be 10,000 each.

Now, in 2015-16 Nominal GDP has increased by 8.4%. Therefore, the Nominal GDP for 2015-16 will be,

Nominal GDP (2015-16) = 10,000 + (8.4% x 10,000)

= 10,840

Now, the Real GDP for the period 2015-16 will be,

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Real~GDP=\frac{10,840}{140}\times{100}

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Real GDP (2015-16) = 7,742 (approx)

Similarly, in 2016-17 Nominal GDP increased by 9%. Therefore, the Nominal GDP for 2016-17 will be,

Nominal GDP (2016-17) = 10,840 + (9% x 10,840)

= 11,815

Now, the Real GDP for the period 2016-17 will be,

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Real~GDP=\frac{11,815}{125}\times{100}

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Real GDP (2015-16) = 9,452 (approx)

It shows that with an increase of 0.6% in the Nominal GDP Rate, the Real GDP has increased by 22.08%.

17. In the given figure, what does the gap ‘KT’ represent? State and discuss any two fiscal measures to correct the situation.

Answer: In the above-given Income and Aggregate Demand graph, KT represents the inflationary gap.

An inflationary Gap is a gap by which the actual aggregate demand exceeds the aggregate demand required for the establishment of full employment equilibrium. This gap or excess demand happens due to the rise in money supply and availability of credit at easy terms. The inflationary gap can occur because of various reasons such as a rise in the propensity to consume, reduction in taxes, increase in investment, increase in government expenditure, deficit financing, etc.; and can have an impact on the output, employment, and general price level.

The fiscal measures (fiscal measures or policies are the measures of the Central Government) to correct the situation of inflationary gap or excess demand are as follows:

1. Decrease in Government Spending: Government spends a huge amount of money on infrastructural and administrative activities. To control the situation of inflationary gap, it should reduce its expenditure to the maximum possible limit. It should give more emphasis on the reduction of expenditure on defense and unproductive works. It is because expenditure on these activities rarely helps in the growth of a country. Hence, a reduction in government spending will reduce the level of aggregate demand in the economy and will ultimately help in correcting inflationary pressures in the economy.
2. Increase in Taxes: When there is an inflationary gap, the Government increases the tax rates and even imposes some new taxes to reduce the level of aggregate expenditure in the economy. The rise in taxes ultimately helps in controlling the situation of excess demand or inflationary gap.

For Visually Impaired Candidates:

What is meant by deflationary gap? State and discuss any two fiscal measures to correct the situation of deflationary gap.

Answer: When the planned aggregate expenditure of an economy falls short of aggregate supply at the full employment level, the situation of deficient demand rises, which as a result gives rise to a deflationary gap. Hence, the deflationary gap is a gap by which the actual aggregate demand of an economy falls short of the aggregate demand required for the establishment of full employment equilibrium. The deflationary gap can occur because of various reasons such as a decrease in the propensity to consume, an increase in taxes, a rise in imports, a fall in investment expenditure, a decrease in government expenditure, etc., and can have an impact on the output, employment, and general price level.

The situation of deflationary gap happens because of a decrease in the money supply and availability of credit. The fiscal measures (fiscal measures or policies are the measures of the Central Government) to correct the situation of deflationary gap or deficient demand are as follows:

1. Increase in Government Spending: Government spends money on infrastructural and administrative activities. To control the situation of the deflationary gap, it should increase its expenditure on different public works such as the construction of flyovers, buildings, roads, etc., so that it can provide income to people hired for these public works. Hence, an increase in government spending will increase the level of aggregate demand and will ultimately help in correcting the situation of deflationary gap or deficient demand.
2. Decrease in Taxes: When there is a deflationary gap, the Government decreases the tax rates and even abolishes some of the existing taxes. The decrease in taxes raises the purchasing power of people which as a result increases their disposable income, increasing their ability to spend more on investment and consumption. Hence, a decrease in taxes raises the level of aggregate demand and helps in controlling the situation of deflationary gap or deficient demand.

### Section – B

(Indian Economic Development)

18. In the year _________, the Indian Government made education free and compulsory for all children between 6 – 14 years. (Choose the correct alternative)

(A) 2001

(B) 2009

(C) 2003

(D) 2007

OR

Which one of the following organisations regulates the health sector in India? (Choose the correct alternative)

(A) ICMR

(B) UGC

(C) AICTE

(D) RBI

19. State whether the following statement is true or false :

‘‘Land ceiling means fixing the minimum limit of land holding for an individual.’’

Answer: False, Land ceiling means fixing the maximum limit of land held by an individual or a family.

20. Identify and match the correct sequence of alternatives of organisations given in Column I with their respective functions in Column II :

Choose the correct alternative from the following :

(A) a-(ii), b-(i), c-(iii), d-(iv)

(B) a-(ii), b-(iv), c-(iii), d-(i)

(C) a-(ii), b-(iii), c-(iv), d-(i)

(D) a-(ii), b-(iv), c-(i), d-(iii)

Answer: (D) a-(ii), b-(iv), c-(i), d-(iii)

21. Mao initiated the ‘Great Leap Forward’ in the year ___________. (Choose the correct alternative)

(A) 1951

(B) 1955

(C) 1958

(D) 1962

22. Name the apex institution for rural financing in India.

Answer: NABARD (National Bank for Agriculture and Rural Development) is an apex regulatory body that sees overall regulation of regional rural banks and apex cooperative banks in India.

23. ___________ policy was implemented in the first seven five-year plans of India, to protect domestic industries. (Fill in the blank with the correct answer)

Answer: Trade (Import Substitution) Import Substitution is a policy of replacement or substitution of imports by domestic production.

24. __________ is an example of a commercial source of energy. (Choose the correct alternative)

(A) Firewood

(B) Coal

(C) Agricultural waste

(D) Dried dung cakes

25. State whether the following statement is true or false :

‘‘Proportion of people living below poverty line is more in India as compared to Pakistan.’’

26. Name any one Maharatna company.

Answer: A Maharatna Company in India is a company that gets the status by the central government. One of the Maharatna Companies in India is Bharat Petroleum Corporation Limited.

27. Which of the following is NOT an advantage of organic farming? (Choose the correct alternative)

(A) Cheap inputs

(B) Attractive returns on investment

(C) Greater possibilities for import

(D) High nutritional value

Answer: (C) Greater possibilities for import

28. ‘‘Power sector in India has major challenges to face.’’ Discuss the given statement with valid reasons.

Answer: Electricity or Power is a critical component of infrastructure and is often identified with the progress in modern civilization. During the last four decades of planning, Power development in India has been significant; however, power generation is still insufficient as compared to the required power. Because of this, in recent years, India is facing a serious power crisis. Some of the problems faced by the power sector in India are as follows:

1. Inadequate Electricity Generation: The installed capacity of India to generate electricity is not enough to feed an annual economic growth of 7-8%. It is only able to add 20,000 MW per year and to fulfill the growing requirements of power, the commercial energy supply needs to grow at about 7%.
2. Shortage of Inputs: The foundation of India’s power sector; i.e., the Thermal Power Plants is facing a shortage of raw materials and coal supplies.
3. Limited Role of Private and Foreign Entrepreneurs: The role of private sector power generators and foreign investors is limited. They are yet to play a major role in Power Infrastructure.
4. Poor performance of State Electricity Boards (SEBs): The responsibility of distributing electricity is in the hands of SEBs. They incur losses exceeding ₹20,000 crores, because of transmission and distribution losses, wrong electricity pricing, and other operational inefficiencies. Besides, a major portion of this loss is because of free power supply to agriculture and power theft.

OR

‘‘India has failed to implement the recommendations of Education Commission of 1964 – 66.’’ Give valid arguments in support of the given statement.

Answer: The given statement is correct, investment made in the education system of India has been a complete failure. In fact, in 1952, the spending on the education system was 0.6% of the nation’s GDP which rose to only 4% in 2014. The spending is shorter than the proposed 6% target by the Education Commission, 1964. Besides, the increase in education expenditure throughout this period has irregularly risen and fallen. If the government has spent the targeted percentage of GDP on the education system of India, the present education system would have been a lot better. Therefore, it is essential for the government to take the necessary steps in this regard.

29. ‘‘Recently the Government of India has decided to merge MTNL and BSNL on account of rising losses.’’ Justify the steps taken by the Government of India.

Answer: The motive of the Indian Government behind the merger of MTNL and BSNL (the two loss-incurring businesses) are as follows:

• Achievement of higher economic and functional efficiency: As both businesses are incurring losses which might be due to a lack of efficient management, by merging them the Government aims at achieving proper and functional efficiency in the company by combining their resources (human and capital). With higher efficiency, the companies can ultimately help in economic efficiency and growth.
• Minimise possible losses: Both businesses are incurring losses which can be minimised by combining them, their funds, resources, skilled personnel, etc. In simple terms. the resources lacking in one business can be rectified by the better resources of the other.
• Increase Competitiveness: Individually both businesses are not providing any competitiveness among other businesses in the industry. By combining them and their resources, the Government aims at increasing competitiveness in the industry.

30. Discuss briefly, how institutional reforms (land reforms) have played a significant role in transforming Indian agriculture.

Answer: Land Reforms are the change in the ownership of landholdings. These measures have been introduced by different developing and underdeveloped nations to attain a rational land distribution pattern and viable farming structure. Land reform is one of the measures of promoting growth in the agricultural sector.

The land reform measures taken by the Government in transforming the Agricultural Sector of India are:

1. Abolition of Intermediaries: For abolishment of intermediaries and making tillers, the owners of land, the Indian Government took numerous steps. The idea behind Land to the Tiller was to ensure that the ownership of land would give incentives to the actual tillers for making improvements in the land and increasing output. To make improvements on the land, the tenants do not have any incentives as the owner of the land gets more benefit from the output. Once the tillers get ownership of the land, they will be able to make a profit from the increased output. With this measure, 200 lakh tenants got in direct contact with the government.
2. Land Ceiling: Land Ceiling means fixing the maximum limit of land held by an individual or a family. If an individual or a family owns land above the specified limit, it will be taken away from them by the government and would be alloted to small farmers and landless cultivators. The basic aim behind the land ceiling was the reduction of the concentration of land ownership in a few hands. This measure helped in promoting equity in the agricultural sector.

OR

‘‘Import restrictions were imposed in India with the dual objective to save foreign exchange reserves and to be self-sufficient.’’ Justify the given statement with valid arguments.

Answer: The given statement, ‘‘Import restrictions were imposed in India with the dual objective to save foreign exchange reserves and to be self-sufficient.’’ is appropriate because the risk of drain of foreign exchange reserves on the import of luxury goods made it compulsory to restrict imports in India. Thus, import restrictions aimed at two major things:

1. Saving the scarce foreign exchange by putting restrictions on the volume of imports.
2. Protecting domestic industries from foreign competition through import substitution; i.e., substituting imports with domestic production.

In the early post-independence, with the help of import restrictions, the government of India helped it move towards the objective of self-reliance.

31. Comment upon any two salient features of occupational structure of India on the eve of Independence.

Answer: Distributing working people across primary, secondary, and tertiary sectors of the economy is known as Occupational Structure. The primary sector consists of production units that exploit natural resources like water, land, etc. For example, mining, fishing, forestry, etc. The secondary sector consists of production units that transform one good into another good. For example, construction companies, power generation companies, etc. The tertiary or service sector consists of production units that are engaged in producing services. For example, finance, education, transport, etc.

The salient features of the occupational structure of India on the eve of Independence are as follows:

1. Predominance of Primary Occupation: Largest share of the workforce; i.e., 70-75% were found in the agricultural sector. However, the manufacturing and service sector accounted for 10% and 15-20% respectively.
2. Regional Variation: On the eve of independence, regional variation was growing. There was a decline in the dependence of the workforce on the agricultural sector in the states of Andhra Pradesh, Tamil Nadu, Karnataka, Kerala, West Bengal, and Maharashtra. However, the increase in the manufacturing and service sectors in these states was good. Also, during the same time, the share of the workforce in the agricultural sector in the states of Orissa, Punjab, and Rajasthan increased.

32. Compare and analyse the given data of India and China with valid reasons :

Answer: The given table related to the data of India and China shows the following aspects about its population growth and sex ratio:

1. The annual growth rate of the population in China is less (0.5%) than the growth rate in India (1.2%) because of the “One Child Policy” in China. India too wanted to spread awareness among people related to family planning measures, but the decreasing rate of population is China is more than the decreasing rate in India.
2. The number of females per 1000 males in India is less (929) than the number of females per 1000 males in China (941). It is because in India people prefer a son (male) as their child instead of a daughter (female).

33. Define the following :

(a) Carrying capacity of environment

(b) Bio-composting

(c) Sustainable Development

(d) Absorptive capacity of the environment

a) Carrying Capacity of Environment: Environment is termed as the total planetary inheritance and the totality of all resources. Simply put, it is the sum total of all the external sources that surround us and includes all biotic and abiotic factors that influence each other. Carrying Capacity means that the resource extraction should not go above the rate of resource regeneration. It also means that the waste generated should not go above the absorption capacity of the environment.

b) Bio-composting: The use of chemical fertilizers for increasing agricultural production has put an adverse effect on large areas of productive land and has also contaminated water bodies. Because of the use of chemical fertilizers the demand for irrigation has been increasing every year. Besides, the demand for organic food has also been rising, and to meet those demands the farmer have now again started to use Bio-compost (compost made from different types of organic wastes). Hence, Bio-composting is a process in which different types of organic wastes are converted into natural manure.

c) Sustainable Development: The development process that helps in meeting the needs of present generation without compromising the ability of future generations to meet their needs is known as Sustainable Development. The basic purpose behind sustainable development is to ensure that for the future generation, the present generation should leave stock of quality of life. The origin of the term ‘Sustainable Development’ is in the International Union for the Conservation of Natural Resources (IUCN) 1980 World Commission Strategy report.

d) Absorptive Capacity of Environment: Environment is termed as the total planetary inheritance and the totality of all resources. Simply put, it is the sum total of all the external sources that surround us and includes all biotic and abiotic factors that influence each other. The absorptive capacity of the environment is the environment’s ability to absorb degradation without causing any environmental damage.

34. (a) Comment upon the informalisation of labour force in India.

(b) Define the worker-population ratio.

a) In recent years there has been unprecedented growth in the informal and unorganised sectors of India. Here, almost the whole agricultural sector and a large part of industrial and service sector units fall under the category of the informal sector. People employed in this sector are generally not entitled to get regular salary and other social security benefits. Therefore, Informalisation of the Workforce refers to a situation where the workforce in the informal sector increases to the total workforce of the country. According to the composition of the workforce in India, it has been divided into two categories; Formal or Organised Sector and Informal or Unorganised Sector. The Formal Sector consists of jobs that have specific working hours and fixed wages; whereas, the Informal sector is where the workers or employees don’t have fixed working hours and wages.

Besides, after keeping in view to the growth of the informal sector and the various disadvantages attached to it, in recent times, the Indian Government has initiated its modernisation and provision of social security measures to the workers.

b) Worker-population Ratio is the ratio of total number of workers to the total population and is generally expressed in terms of percentage. The formula for calculating the worker-population ratio is:

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OR

Critically examine the results of Poverty Alleviation Programmes implemented in India since independence.

Answer: Poverty is a particular issue that affects many countries around the world. There can not be a universally acknowledged definition of poverty. Broadly it can be said that: Poverty refers to a state in which an individual is unable to fulfill even the basic necessities of life. The minimum requirements include food, clothing, shelter, education, and health facilities. To remove poverty, the Government of India has taken various approaches such as Growth-orientation Approach, Minimum Needs Programme, and Poverty Alleviation Programmes.

Poverty Alleviation Programmes is the second approach initiated by the Government of India from the Third Five Year Plan and has been progressively enlarged since then. As the total number of poor people has remained the same over the last two decades because of the growth of the population, the Government of India has specifically designed anti-poverty programmes under this approach for the generation of both self-employment and wage employment.

Because of the poverty alleviation programmes, the percentage of absolute poor people in some of the states of India has fallen below the national average of poverty. In spite of the fallen level of poverty, the problems of hunger, illiteracy, and malnourishment continued to exist in India and the reason behind these problems are as follows:

• Lack of radical change in the ownership of assets.
• Inadequate resource allocation for the programmes.
• The Government officials who are responsible for the implementation of these programmes were ill-motivated and are not properly trained.
• Lastly, as there is an unequal distribution of land and other assets, various benefits from these programmes have been appropriated by the non-poor.

Hence, it can be concluded that even though the poverty alleviation programmes helped in reducing poverty in India, the Government has not been able to achieve the desired results because of the improper implementation of these programmes.

### Economics (Code No. 58/2/1)

Time allowed : 3 hours
Maximum Marks: 80

General Instructions:

(i) This question paper comprises two sections – A and B. All questions are compulsory.

(ii) Question numbers 1 – 10 and 18 – 27 are very short-answer questions carrying 1 mark each. They are required to be answered in one word or one sentence each.

(iii) Question numbers 11 – 12 and 28 – 29 are short-answer questions carrying 3 marks each. Answers to them should not normally exceed  60 – 80 words each.

(iv) Question numbers 13 – 15 and 30 – 32 are also short-answer questions carrying 4 marks each. Answers to them should not normally exceed  80 – 100 words each.

(v) Question numbers 16 – 17 and 33 – 34 are long answer questions carrying 6 marks each. Answers to them should not normally exceed  100 – 150 words each.

(vi) Answers should be brief and to the point. Also the above word limit be adhered to as far as possible.

(vii) There is no overall choice. However, an internal choice has been provided in 2 questions of one mark, 2 questions of three marks, 2 questions of four marks and 2 questions of six marks. Only one of the choices in such questions have to be attempted.

(viii) In addition to this, separate instructions are given with each section and question, wherever necessary.

### Section – A

#### (Macroeconomics)

1. If the entire additional income of an economy is consumed, the value of investment multiplier will be _________. (Choose the correct alternative)

(A) zero (0)

(B) not defined (∞)

(C) one (1)

(D) ten (10)

2. A car purchased by a household is a _________. (Choose the correct alternative)

(A) single use capital good

(B) single use consumer good

(C) durable consumer good

(D) semi-durable consumer good

OR

GNP deflator is represented by which of the following formulae? (Choose the correct alternative)

(A)

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(B)

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(C)

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(D)

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Gross National Product (GNP) Deflator is an economic metric accounting for the effects of inflation in the economy’s current year’ GNP. It does so by conversion of its output to a level which is relative to the base period.

3. Name the two components of Aggregate Demand in a closed economy.

Answer: Aggregate Demand refers to the total demand for finished goods and services in the economy over a specific period. It also refers to a country’s Gross Domestic Product (GDP) demand. The two components of Aggregate Demand in a closed economy are Investment Expenditure (I) and Consumption Expenditure (C).

4. _________ is the agent and adviser to the Government of India. (Fill in the blank with correct answer)

Answer: The Reserve Bank of India (RBI) acts as an agent and adviser to the Government of India.

5. State whether the following statement is true or false :

‘‘To reduce inflation, the Central Bank should reduce Cash Reserve Ratio (CRR).’’

Answer: False, at times of high inflation, to reduce it, the Central Bank; i.e., RBI raises the Cash Reserve Ratio (CRR) to reduce the amount of money left with the banks for sanctioning loans.

6. Government expenditure incurred on defense items is a type of _________ expenditure in the Government Budget. (Fill in the blank with correct answer)

7. State whether the following statement is true or false :

‘‘Under a managed floating exchange rate system, the Government directly controls the exchange rate.’’

Answer: False, Managed Floating Exchange Rate is the combination of the fixed rate system (the managed part) and the flexible rate system (the floating part). Therefore, Government does not have direct control over the exchange rate.

8. ‘Charity from Abroad’ will be recorded on _________ (credit/debit) side of the Balance of Payment accounts. (Fill in the blank with correct answer)

Answer: Credit Side of the Balance of Payment Accounts

9. Give any two examples of non-tax revenue receipts.

Answer: The receipts of the government from all sources other than the tax receipts are known as Non-tax Revenue. Two examples of Non-tax Revenue Receipts are Penalties and Fees.

10. Suppose in a hypothetical economy, the income rises from ₹500 crores to ₹600 crores. As a result, the consumption expenditure rises from ₹400 crores to ₹500 crores. Marginal propensity to consume in such a case would be _________. (Choose the correct alternative)

(A) 0·8

(B) 0·4

(C) 1·0

(D) 0·6

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11. ‘‘Gross Domestic Product (GDP) is not the best indicator of the economic welfare of a country.’’ Defend or refute the given statement with valid reasons.

Answer: GDP or Gross Domestic Product is the total value of all the final goods and services produced within the domestic boundaries of a country during a year. The given statement is correct and can be defended with the help of the following points:

1. Distribution of GDP: Sometimes a higher GDP results in a rise in inequalities in the income distribution among people. Inequality in income distribution refers to a rise in the gap between the rich and the poor. Gross Domestic Product does not consider the change in the income distribution of a country. Therefore, in some cases, a rise in GDP does not mean an increase in the welfare of people.
2. Non-Monetary Exchanges: There are many activities such as kitchen gardening, housewife services, etc., in an economy that is not measured in monetary terms, but influences the economic welfare of people. These activities are not included in the determination of GDP because of the lack of data available. Therefore, it might be possible that there is no rise in GDP, but actually, it has increased from the non-monetary exchanges.
3. Change in Prices: Sometimes the GDP of an economy increases because of the increase in the price of the goods and services, but not because of the rise in physical output of goods and services. In these cases, taking GDP as an index to measure welfare is not reliable.

12. Discuss the working of the adjustment mechanism if, Aggregate Demand (AD) is greater than Aggregate Supply (AS).

Answer: Aggregate Demand refers to the total demand for finished goods and services in the economy over a specific period. It also refers to a country’s Gross Domestic Product (GDP) demand. Aggregate Supply is the total supply of finished goods and services in the economy over a specific period. When the planned spending of an economy; i.e., Aggregate Demand is more than the planned output; i.e., Aggregate Supply, then the AD (C + I) curve lies above the 45° line. It would mean that the consumers and firms collectively would be buying more goods than the willingness of the firms to produce. Because of this, the planned inventory of the firms would fall below the desired inventory level.

For bringing back the inventory to the desired level, the firms would resort to an increase in employment and output until the economy gets back at output level OY, where AD ultimately becomes equal to AS and there is no more tendency to change.

OR

If in an economy:

Change in initial investment

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= ₹1,000 crores,

Marginal propensity to save (MPS) = 0·2.

Find the value of the following :

(a) Investment multiplier (K)

(b) Change in final income

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Answer: According to Keynes, an initial increment in the investment increases the final income by many times, and the relationship between an initial increment in investment and the resulting increase in the aggregate demand is expressed through a multiplier; i.e., Investment Multiplier.

Multiplier (k) is the ratio of an increase in the national income because of an increase in the investment. It can also be calculated with the help of MPC as there is a direct relationship between MPC and the value of the multiplier, which is ‘Higher the MPC, more will be the value of the multiplier’. The formula for calculating k with the help of MPC is:

Or

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a)

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k = 0.5

b) Another formula for calculating Investment Multiplier is:

Therefore, Change in final income

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will be:

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13. What role does credit multiplier play in determining the credit creation capacity of the banking system? Use a numerical illustration to explain.

Answer: Credit Multiplier or Money Multiplier measures the amount of money that the banks are able to create in the form of deposits with every unit of money it keeps as reserves. The Money Multiplier plays a great role in the banking system of the economy as every time the government needs to kick-start the economy, the multiplier helps decide what proportion of stimulation should be applied and in what manner.

Commercial banks’ credit creation depends on the credit multiplier as it is inversely related to Legal Reserve Ratio (LRR). A higher value of credit multiplier means higher total credit creation and vice-versa.

For example, Let us suppose the Legal Reserve Ratio (LRR) is 0.2 and the initial deposit is ₹2,000.

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Total Deposits=Initial Deposits x Money Multiplier

Total Credit Created = 5 x ₹2,000 = ₹10,000

Therefore, with the same initial deposit; the total credit creation increases with an increase in the value of the credit multiplier.

OR

Elaborate any two instruments of credit control, exercised by the Reserve Bank of India.

Answer: When there are fluctuations in an economy, the Central Bank (RBI) controls the money supply and credit in its best interest. As the RBI holds the sole monopoly in the issue of currency, it can control money supply and credit. Two of the instruments used by the RBI for credit control are as follows:

1. Repo(Repurchase) Rate: The rate at which a country’s central bank (in the case of India, RBI) lends money to commercial banks to meet their short-term financial needs is known as the repo rate. The central bank advances loans to commercial banks against approved securities or eligible bills of exchange. If there is an increase in the repo rate, it will increase the cost of borrowing from the central bank, which ultimately forces the commercial banks to increase their lending rates, discouraging the borrowers from taking loans from the commercial banks and vice-versa.
2. Bank Rate(or Discount Rate): The rate at which a country’s central bank (in the case of India, RBI) lends money to commercial banks to meet their long-term financial needs is known as the bank rate. Bank Rate has the same effect on credit as that of Repo Rate. Simply put, if there is an increase in the Bank Rate, it will increase the cost of borrowing from the central bank, which ultimately increases the lending rates by commercial banks, discouraging the borrowers from taking loans.

14. ‘‘US dollar has recorded a jump of 0·75 paise per dollar (p/$) in the last one month; this situation might bring smiles and sorrows to different types of traders (exporters and importers).’’ Justify the given statement. Answer: Conversion of the currency of one country into the currency of another country and the rate at which one currency is exchanged for another is called the Foreign Exchange Rate or Foreign Rate of Exchange. The situation of a jump in the US Dollar might bring smiles and sorrow to different people. A jump in US Dollar means appreciation of the US Dollar and depreciation of home currency (₹). It means that to buy one unit of US Dollar ($), people have to pay more units of Indian Rupee (₹). It will be good news for the exporters of the domestic country as the domestic products will now become cheaper in the market and they will be able to sell more in the foreign market. However, it will bring sorrow to the importers of the domestic country as the imports will now decline because the foreign goods will become more expensive.

Hence, a jump in the US Dollar of 0.75 paise per dollar will increase exports and reduce imports.

15. ‘‘The Government Budget of a country cannot have fiscal deficit without the existence of revenue deficit.’’ Defend or refute the given statement.

Answer: A Budgetary Deficit can be termed as the excess of the total government expenditure over the total revenue generated in a financial year. A budgetary deficit happens when the government spends more money than what is generated through revenue collection, including direct or indirect taxes. Based on the deficit incurred, has been divided into three forms, i.e., Revenue Deficit, Fiscal Deficit, and Primary Deficit. The revenue deficit refers to the excess of revenue expenditure over revenue income in a financial year. However, the fiscal deficit refers to the excess of total expenditure over total receipts/income, excluding borrowings, in a fiscal year.

The given statement, ‘‘The Government Budget of a country cannot have fiscal deficit without the existence of revenue deficit.’’ is refuted. A country can have fiscal deficit without revenue deficit in two cases; viz.:

1. When the revenue budget is balanced and the capital budget of the economy shows a deficit.
2. When the revenue budget is in surplus but the deficit in capital budget of the economy is greater than this surplus.

16. (a) ‘‘Circular flow of income in a two-sector economy is based on the axiom that one’s expenditure is other’s income.’’ Support your answer with valid reasons.

Answer: The circular flow of income is an economic model that reflects how money or income flows through the different sectors of the economy. A simple economy assumes that there exist only two sectors; i.e., Households and Firms. Households are consumers of goods and services and the owners of the factors of production (land, labour, capital, and enterprise). However, the firm sector produces goods and services and sells them to households.

In the circular flow of income (two-sector economy), there is an exchange of goods and services between the two players, i.e., the firms and households, which leads to a certain flow of money in the economy. Households provide the firms with the factors of production namely, Land (Natural Resources), Labour, Capital, and Enterprise that generates goods and services, and consumers spend their income on the consumption of these goods and services. The firms then make factor payments to households in the form of rent, wages, interest, and profit. This flow of goods and services and factors payments between firms and households reflects the circular flow of money in an economy.

Therefore, the statement, ‘‘Circular flow of income in a two-sector economy is based on the axiom that one’s expenditure is other’s income.’’ is true.

(b) Distinguish between ‘value of output’ and ‘value added’.

Answer: Value of Output is the estimated monetary value of all goods and services, including changes in stock and production for self-consumption whereas Value-added refers to the addition in the value of a raw material or intermediate good by an organization during the production process. In simple terms, it is the excess of the value of output over the value of intermediate consumption. The major difference between the value of output and value added is the inclusion of intermediate consumption. Intermediate Consumption is the expenditure incurred by a production unit on secondary inputs like power, raw material, etc., and is included in the value of output but excluded from value added.

OR

Using the following data of an imaginary economy, calculate and compare the Real Gross Domestic Product (GDP) for the given years :

Answer: GDP Deflator measures the average price level of the goods and services of an economy that make up GDP.

The formula for calculating GDP Deflator is as follows:

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Nominal GDP is the Gross Domestic Product of a country of a given year, estimated on the basis of the price of the goods and services of the same year. Real GDP is the Gross Domestic Product of a country of a given year, estimated on the basis of the price of the goods and services of a base year.

To determine the Real GDP for the periods 2015-16 and 2016-17, we will assume the Nominal GDP and Real GDP for the period 2014-15 to be 10,000 each.

Now, in 2015-16 Nominal GDP has increased by 8.4%. Therefore, the Nominal GDP for 2015-16 will be,

Nominal GDP (2015-16) = 10,000 + (8.4% x 10,000)

= 10,840

Now, the Real GDP for the period 2015-16 will be,

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Real GDP (2015-16) = 7,742 (approx)

Similarly, in 2016-17 Nominal GDP increased by 9%. Therefore, the Nominal GDP for 2016-17 will be,

Nominal GDP (2016-17) = 10,840 + (9% x 10,840)

= 11,815

Now, the Real GDP for the period 2016-17 will be,

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Real GDP (2015-16) = 9,452 (approx)

It shows that with an increase of 0.6% in the Nominal GDP Rate, the Real GDP has increased by 22.08%.

17. In the given figure, what does the gap ‘KT’ represent? State and discuss any two fiscal measures to correct the situation.

Answer: In the above-given Income and Aggregate Demand graph, KT represents the inflationary gap.

An inflationary Gap is a gap by which the actual aggregate demand exceeds the aggregate demand required for the establishment of full employment equilibrium. This gap or excess demand happens due to the rise in money supply and availability of credit at easy terms. The inflationary gap can occur because of various reasons such as a rise in the propensity to consume, reduction in taxes, increase in investment, increase in government expenditure, deficit financing, etc.; and can have an impact on the output, employment, and general price level.

The fiscal measures (fiscal measures or policies are the measures of the Central Government) to correct the situation of inflationary gap or excess demand are as follows:

1. Decrease in Government Spending: Government spends a huge amount of money on infrastructural and administrative activities. To control the situation of inflationary gap, it should reduce its expenditure to the maximum possible limit. It should give more emphasis on the reduction of expenditure on defense and unproductive works. It is because expenditure on these activities rarely helps in the growth of a country. Hence, a reduction in government spending will reduce the level of aggregate demand in the economy and will ultimately help in correcting inflationary pressures in the economy.
2. Increase in Taxes: When there is an inflationary gap, the Government increases the tax rates and even imposes some new taxes to reduce the level of aggregate expenditure in the economy. The rise in taxes ultimately helps in controlling the situation of excess demand or inflationary gap.

For Visually Impaired Candidates:

What is meant by deflationary gap? State and discuss any two fiscal measures to correct the situation of deflationary gap.

Answer: When the planned aggregate expenditure of an economy falls short of aggregate supply at the full employment level, the situation of deficient demand rises, which as a result gives rise to a deflationary gap. Hence, the deflationary gap is a gap by which the actual aggregate demand of an economy falls short of the aggregate demand required for the establishment of full employment equilibrium. The deflationary gap can occur because of various reasons such as a decrease in the propensity to consume, an increase in taxes, a rise in imports, a fall in investment expenditure, a decrease in government expenditure, etc., and can have an impact on the output, employment, and general price level.

The situation of deflationary gap happens because of a decrease in the money supply and availability of credit. The fiscal measures (fiscal measures or policies are the measures of the Central Government) to correct the situation of deflationary gap or deficient demand are as follows:

1. Increase in Government Spending: Government spends money on infrastructural and administrative activities. To control the situation of the deflationary gap, it should increase its expenditure on different public works such as the construction of flyovers, buildings, roads, etc., so that it can provide income to people hired for these public works. Hence, an increase in government spending will increase the level of aggregate demand and will ultimately help in correcting the situation of deflationary gap or deficient demand.
2. Decrease in Taxes: When there is a deflationary gap, the Government decreases the tax rates and even abolishes some of the existing taxes. The decrease in taxes raises the purchasing power of people which as a result increases their disposable income, increasing their ability to spend more on investment and consumption. Hence, a decrease in taxes raises the level of aggregate demand and helps in controlling the situation of deflationary gap or deficient demand.

### Section – B

(Indian Economic Development)

18. In the year _________, the Indian Government made education free and compulsory for all children between 6 – 14 years. (Choose the correct alternative)

(A) 2001

(B) 2009

(C) 2003

(D) 2007

OR

Which one of the following organisations regulates the health sector in India? (Choose the correct alternative)

(A) ICMR

(B) UGC

(C) AICTE

(D) RBI

19. State whether the following statement is true or false :

‘‘Land ceiling means fixing the minimum limit of land holding for an individual.’’

Answer: False, Land ceiling means fixing the maximum limit of land held by an individual or a family.

20. Identify and match the correct sequence of alternatives of organisations given in Column I with their respective functions in Column II :

Choose the correct alternative from the following :

(A) a-(ii), b-(i), c-(iii), d-(iv)

(B) a-(ii), b-(iv), c-(iii), d-(i)

(C) a-(ii), b-(iii), c-(iv), d-(i)

(D) a-(ii), b-(iv), c-(i), d-(iii)

Answer: (D) a-(ii), b-(iv), c-(i), d-(iii)

21. Mao initiated the ‘Great Leap Forward’ in the year ___________. (Choose the correct alternative)

(A) 1951

(B) 1955

(C) 1958

(D) 1962

22. Name the apex institution for rural financing in India.

Answer: NABARD (National Bank for Agriculture and Rural Development) is an apex regulatory body that sees overall regulation of regional rural banks and apex cooperative banks in India.

23. ___________ policy was implemented in the first seven five-year plans of India, to protect domestic industries. (Fill in the blank with the correct answer)

Answer: Trade (Import Substitution) Import Substitution is a policy of replacement or substitution of imports by domestic production.

24. __________ is an example of a commercial source of energy. (Choose the correct alternative)

(A) Firewood

(B) Coal

(C) Agricultural waste

(D) Dried dung cakes

25. State whether the following statement is true or false :

‘‘Proportion of people living below poverty line is more in India as compared to Pakistan.’’

26. Name any one Maharatna company.

Answer: A Maharatna Company in India is a company that gets the status by the central government. One of the Maharatna Companies in India is Bharat Petroleum Corporation Limited.

27. Which of the following is NOT an advantage of organic farming? (Choose the correct alternative)

(A) Cheap inputs

(B) Attractive returns on investment

(C) Greater possibilities for import

(D) High nutritional value

Answer: (C) Greater possibilities for import

28. ‘‘Power sector in India has major challenges to face.’’ Discuss the given statement with valid reasons.

Answer: Electricity or Power is a critical component of infrastructure and is often identified with the progress in modern civilization. During the last four decades of planning, Power development in India has been significant; however, power generation is still insufficient as compared to the required power. Because of this, in recent years, India is facing a serious power crisis. Some of the problems faced by the power sector in India are as follows:

1. Inadequate Electricity Generation: The installed capacity of India to generate electricity is not enough to feed an annual economic growth of 7-8%. It is only able to add 20,000 MW per year and to fulfill the growing requirements of power, the commercial energy supply needs to grow at about 7%.
2. Shortage of Inputs: The foundation of India’s power sector; i.e., the Thermal Power Plants is facing a shortage of raw materials and coal supplies.
3. Limited Role of Private and Foreign Entrepreneurs: The role of private sector power generators and foreign investors is limited. They are yet to play a major role in Power Infrastructure.
4. Poor performance of State Electricity Boards (SEBs): The responsibility of distributing electricity is in the hands of SEBs. They incur losses exceeding ₹20,000 crores, because of transmission and distribution losses, wrong electricity pricing, and other operational inefficiencies. Besides, a major portion of this loss is because of free power supply to agriculture and power theft.

OR

‘‘India has failed to implement the recommendations of Education Commission of 1964 – 66.’’ Give valid arguments in support of the given statement.

Answer: The given statement is correct, investment made in the education system of India has been a complete failure. In fact, in 1952, the spending on the education system was 0.6% of the nation’s GDP which rose to only 4% in 2014. The spending is shorter than the proposed 6% target by the Education Commission, 1964. Besides, the increase in education expenditure throughout this period has irregularly risen and fallen. If the government has spent the targeted percentage of GDP on the education system of India, the present education system would have been a lot better. Therefore, it is essential for the government to take the necessary steps in this regard.

29. ‘‘Recently the Government of India has decided to merge MTNL and BSNL on account of rising losses.’’ Justify the steps taken by the Government of India.

Answer: The motive of the Indian Government behind the merger of MTNL and BSNL (the two loss-incurring businesses) are as follows:

• Achievement of higher economic and functional efficiency: As both businesses are incurring losses which might be due to a lack of efficient management, by merging them the Government aims at achieving proper and functional efficiency in the company by combining their resources (human and capital). With higher efficiency, the companies can ultimately help in economic efficiency and growth.
• Minimise possible losses: Both businesses are incurring losses which can be minimised by combining them, their funds, resources, skilled personnel, etc. In simple terms. the resources lacking in one business can be rectified by the better resources of the other.
• Increase Competitiveness: Individually both businesses are not providing any competitiveness among other businesses in the industry. By combining them and their resources, the Government aims at increasing competitiveness in the industry.

30. Discuss briefly, how institutional reforms (land reforms) have played a significant role in transforming Indian agriculture.

Answer: Land Reforms are the change in the ownership of landholdings. These measures have been introduced by different developing and underdeveloped nations to attain a rational land distribution pattern and viable farming structure. Land reform is one of the measures of promoting growth in the agricultural sector.

The land reform measures taken by the Government in transforming the Agricultural Sector of India are:

1. Abolition of Intermediaries: For abolishment of intermediaries and making tillers, the owners of land, the Indian Government took numerous steps. The idea behind Land to the Tiller was to ensure that the ownership of land would give incentives to the actual tillers for making improvements in the land and increasing output. To make improvements on the land, the tenants do not have any incentives as the owner of the land gets more benefit from the output. Once the tillers get ownership of the land, they will be able to make a profit from the increased output. With this measure, 200 lakh tenants got in direct contact with the government.
2. Land Ceiling: Land Ceiling means fixing the maximum limit of land held by an individual or a family. If an individual or a family owns land above the specified limit, it will be taken away from them by the government and would be alloted to small farmers and landless cultivators. The basic aim behind the land ceiling was the reduction of the concentration of land ownership in a few hands. This measure helped in promoting equity in the agricultural sector.

OR

‘‘Import restrictions were imposed in India with the dual objective to save foreign exchange reserves and to be self-sufficient.’’ Justify the given statement with valid arguments.

Answer: The given statement, ‘‘Import restrictions were imposed in India with the dual objective to save foreign exchange reserves and to be self-sufficient.’’ is appropriate because the risk of drain of foreign exchange reserves on the import of luxury goods made it compulsory to restrict imports in India. Thus, import restrictions aimed at two major things:

1. Saving the scarce foreign exchange by putting restrictions on the volume of imports.
2. Protecting domestic industries from foreign competition through import substitution; i.e., substituting imports with domestic production.

In the early post-independence, with the help of import restrictions, the government of India helped it move towards the objective of self-reliance.

31. Comment upon any two salient features of occupational structure of India on the eve of Independence.

Answer: Distributing working people across primary, secondary, and tertiary sectors of the economy is known as Occupational Structure. The primary sector consists of production units that exploit natural resources like water, land, etc. For example, mining, fishing, forestry, etc. The secondary sector consists of production units that transform one good into another good. For example, construction companies, power generation companies, etc. The tertiary or service sector consists of production units that are engaged in producing services. For example, finance, education, transport, etc.

The salient features of the occupational structure of India on the eve of Independence are as follows:

1. Predominance of Primary Occupation: Largest share of the workforce; i.e., 70-75% were found in the agricultural sector. However, the manufacturing and service sector accounted for 10% and 15-20% respectively.
2. Regional Variation: On the eve of independence, regional variation was growing. There was a decline in the dependence of the workforce on the agricultural sector in the states of Andhra Pradesh, Tamil Nadu, Karnataka, Kerala, West Bengal, and Maharashtra. However, the increase in the manufacturing and service sectors in these states was good. Also, during the same time, the share of the workforce in the agricultural sector in the states of Orissa, Punjab, and Rajasthan increased.

32. Compare and analyse the given data of India and China with valid reasons :

Answer: The given table related to the data of India and China shows the following aspects about its population growth and sex ratio:

1. The annual growth rate of the population in China is less (0.5%) than the growth rate in India (1.2%) because of the “One Child Policy” in China. India too wanted to spread awareness among people related to family planning measures, but the decreasing rate of population is China is more than the decreasing rate in India.
2. The number of females per 1000 males in India is less (929) than the number of females per 1000 males in China (941). It is because in India people prefer a son (male) as their child instead of a daughter (female).

33. Define the following :

(a) Carrying capacity of environment

(b) Bio-composting

(c) Sustainable Development

(d) Absorptive capacity of the environment

a) Carrying Capacity of Environment: Environment is termed as the total planetary inheritance and the totality of all resources. Simply put, it is the sum total of all the external sources that surround us and includes all biotic and abiotic factors that influence each other. Carrying Capacity means that the resource extraction should not go above the rate of resource regeneration. It also means that the waste generated should not go above the absorption capacity of the environment.

b) Bio-composting: The use of chemical fertilizers for increasing agricultural production has put an adverse effect on large areas of productive land and has also contaminated water bodies. Because of the use of chemical fertilizers the demand for irrigation has been increasing every year. Besides, the demand for organic food has also been rising, and to meet those demands the farmer have now again started to use Bio-compost (compost made from different types of organic wastes). Hence, Bio-composting is a process in which different types of organic wastes are converted into natural manure.

c) Sustainable Development: The development process that helps in meeting the needs of present generation without compromising the ability of future generations to meet their needs is known as Sustainable Development. The basic purpose behind sustainable development is to ensure that for the future generation, the present generation should leave stock of quality of life. The origin of the term ‘Sustainable Development’ is in the International Union for the Conservation of Natural Resources (IUCN) 1980 World Commission Strategy report.

d) Absorptive Capacity of Environment: Environment is termed as the total planetary inheritance and the totality of all resources. Simply put, it is the sum total of all the external sources that surround us and includes all biotic and abiotic factors that influence each other. The absorptive capacity of the environment is the environment’s ability to absorb degradation without causing any environmental damage.

34. (a) Comment upon the informalisation of labour force in India.

(b) Define the worker-population ratio.

a) In recent years there has been unprecedented growth in the informal and unorganised sectors of India. Here, almost the whole agricultural sector and a large part of industrial and service sector units fall under the category of the informal sector. People employed in this sector are generally not entitled to get regular salary and other social security benefits. Therefore, Informalisation of the Workforce refers to a situation where the workforce in the informal sector increases to the total workforce of the country. According to the composition of the workforce in India, it has been divided into two categories; Formal or Organised Sector and Informal or Unorganised Sector. The Formal Sector consists of jobs that have specific working hours and fixed wages; whereas, the Informal sector is where the workers or employees don’t have fixed working hours and wages.

Besides, after keeping in view to the growth of the informal sector and the various disadvantages attached to it, in recent times, the Indian Government has initiated its modernisation and provision of social security measures to the workers.

b) Worker-population Ratio is the ratio of total number of workers to the total population and is generally expressed in terms of percentage. The formula for calculating the worker-population ratio is:

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OR

Critically examine the results of Poverty Alleviation Programmes implemented in India since independence.

Answer: Poverty is a particular issue that affects many countries around the world. There can not be a universally acknowledged definition of poverty. Broadly it can be said that: Poverty refers to a state in which an individual is unable to fulfill even the basic necessities of life. The minimum requirements include food, clothing, shelter, education, and health facilities. To remove poverty, the Government of India has taken various approaches such as Growth-orientation Approach, Minimum Needs Programme, and Poverty Alleviation Programmes.

Poverty Alleviation Programmes is the second approach initiated by the Government of India from the Third Five Year Plan and has been progressively enlarged since then. As the total number of poor people has remained the same over the last two decades because of the growth of the population, the Government of India has specifically designed anti-poverty programmes under this approach for the generation of both self-employment and wage employment.

Because of the poverty alleviation programmes, the percentage of absolute poor people in some of the states of India has fallen below the national average of poverty. In spite of the fallen level of poverty, the problems of hunger, illiteracy, and malnourishment continued to exist in India and the reason behind these problems are as follows:

• Lack of radical change in the ownership of assets.
• Inadequate resource allocation for the programmes.
• The Government officials who are responsible for the implementation of these programmes were ill-motivated and are not properly trained.
• Lastly, as there is an unequal distribution of land and other assets, various benefits from these programmes have been appropriated by the non-poor.

Hence, it can be concluded that even though the poverty alleviation programmes helped in reducing poverty in India, the Government has not been able to achieve the desired results because of the improper implementation of these programmes.