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CBSE Class 12 Economics Solved Question Paper 2020 – Set 3 (58/3/2)

Last Updated : 06 Apr, 2023
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Economics (Code No. 58/3/2) 

Time allowed : 3 hours
Maximum Marks: 80

General Instructions: 

Read the following instructions very carefully and strictly follow them : 

(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 should 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. Deflationary gap indicates _________ (excess/deficient) demand in an economy. (Fill in the blank with correct answer) 

Answer: deficient 

2. Which of the following is not a non-tax revenue receipt? (Choose the correct alternative) 

(A) Goods and Services Tax

(B) External grants

(C) Dividends and profits 

(D) Disinvestment 

Answer: (A) Goods and Services Tax

3. If the exchange rate of the home currency rises, the value of exports of the economy is likely to ________. (Fill in the blank with correct answer)

Answer: fall

4. State, whether the following statement is true or false : 

‘‘Government budget is an annual statement showing actual receipts and actual payments of the government for the last fiscal year.’’

Answer: False.

Government Budget is an annual statement that shows item-wise estimates of the receipts and expenditures during a fiscal year. 

5. Name the components of money supply. 

Answer: The two components of the money supply are as follows:

  1. Demand deposits with the banks such as savings and current account.
  2. Time deposits with the bank such as Fixed deposits and recurring deposits.

6. State, whether the following statement is true or false : 

‘‘The official reserve transactions are taken as the accommodating item in Balance of Payment (BOP).’’ 

Answer: True

7. State the meaning of Involuntary Unemployment. 

Answer: Unemployment in which people who are willing and able to work at the existing wage rate do not get work is known as Involuntary Unemployment. While calculating the total unemployment in an economy, only involuntary unemployment is considered.

OR

Average Propensity to Save (APS) is the ratio of ________ and ________. (Fill in the blanks with the correct answer) 

Answer: Total Savings and Total Income

Average~Propensity~to~Save(APS)=\frac{S}{Y}

8. Define Autonomous items of Balance of Payment account.

Answer: Economic transactions that occur due to economic motives or are determined by the maximization of profits are known as Autonomous Items. These transactions do not help in maintaining BoP identity; i.e., are not affected by positive or negative BoP. Another name for Autonomous Items is Above the Line.

9. Primary deficit can be zero if _________. (Fill in the blank with the correct alternative) 

(A) Fiscal deficit = Interest payments

(B) Fiscal deficit < Interest payments

(C) Fiscal deficit > Interest payments

(D) Revenue deficit < Fiscal deficit 

Answer: (A) Fiscal deficit = Interest payments

10. Under Statutory Liquidity Ratio, commercial banks are required to keep a fraction of _________ in the form of liquid assets. (Choose the correct alternative) 

(A) Total deposits 

(B) Term deposits

(C) Total demand and term deposits

(D) Current deposits 

Answer: (A) Total deposits 

11. Distinguish between a ‘Current account deficit’ and a ‘Trade deficit’. 

Answer: Current Account Deficit is a deficit that arises when the total of the debit side of the current account is more than the total of the credit side. Simply put, it arises when the foreign exchange receipts in the current account fall short of the foreign exchange payments. This deficit indicates the net outflow of foreign exchange.

Trade Deficit is a deficit when the payments for the value of import of visible items are more than the receipts for the value of export of visible items.

Difference between Current Account Deficit and Trade Deficit

Basis

Current Account Deficit

Trade Deficit

Meaning

Current Account Deficit is a deficit that arises when the foreign exchange receipts in the current account fall short of the foreign exchange payments. A currentTrade Deficit is a deficit when the payments for the value of import of visible items are more than the receipts for the value of export of visible items.

Includes

It includes all visible goods and services and unilateral transfer.It includes only all visible goods.

Arises when

Autonomous Current Receipts < Autonomous Current PaymentsImports > Exports

OR

‘‘Balance of Payment (BoP) is always balanced in the accounting sense.’’ Defend or refute the given statement with valid reasons.

Answer: Balance of Payment (BoP) is a statement of all transactions between entities in one country and the outside world over a specified time period, such as a quarter or a year. It lists all interactions between residents of one country and residents of other countries that involve businesses, organizations, or governments. Balance of Payments includes all the economic transactions, which involve the transfer of holding or title of goods, and services.

The given statement, ‘‘Balance of Payment (BoP) is always balanced in the accounting sense.’’ is defended. It is because the balance of payments accounting uses the double-entry bookkeeping system like Trial Balance while recording the transactions between the domestic country and the rest of the world. Just like a typical business, a BoP also has two sides Credit Side and Debit Side. However, if there is any difference or deficit/surplus created through autonomous transactions, they are corrected by the corresponding deficit/surplus in the accommodating transaction.

12. From the following data, calculate (a) Revenue deficit and (b) Fiscal deficit:

 

Answer: The revenue deficit refers to the excess of revenue expenditure over revenue income in a financial year. It mainly focuses on the revenue aspects of the government, like revenue expenditure and revenue income/receipts. The formula for calculating revenue deficit is:

Revenue Deficit = Revenue Expenditure – Revenue Receipts

The fiscal deficit refers to the excess of total expenditure over total receipts/income, excluding borrowings, in a fiscal year. It mainly focuses on the borrowings of the government. The formula for calculating fiscal deficit is:

Fiscal Deficit = Total Expenditure – Total Receipts (except borrowings)

OR

= (Revenue Expenditure + Capital Expenditure) – (Revenue Receipts + Capital Receipts excluding Borrowings)

In the given question, with the help of the given figures, the revenue and fiscal deficit are:

Revenue Deficit = Revenue Expenditure – (Tax Revenue + Non-tax Revenue)

= 3,700 – (1,200 + 2,000)

= 3,700 – 3,200

Revenue Deficit = ₹500 Crores

Fiscal Deficit = (Revenue Expenditure + Capital Expenditure) – (Tax Revenue + Non-tax revenue + Recovery of Loans + Disinvestment)

= (3,700 + 500) – (1,200 + 2,000 + 145 + 120)

= 4,200 – 3,465

Fiscal Deficit = ₹735 Crores

13. ‘‘To boost the falling demand in the economy, the Reserve Bank of India recently reduced the Bank Rate.’’ Elaborate the rationale behind the steps taken by the Central Bank.

Answer: 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. 

When the demand in the economy falls, to boost the demand, the Central Bank (Reserve Bank of India) reduces the bank rate. By reducing the bank rate, the Central Bank reduces the cost of borrowings from it. This increases the capacity of commercial banks to give loans to the public. Therefore, commercial banks now reduce their lending rates because of which borrowers can now take more loans from the banks, increasing the demand for money, and ultimately increasing the flow of money in the economy. 

Hence, to boost the falling demand in the economy, the Central Bank has reduced the bank rate to encourage borrowers in taking loans from commercial banks.

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

Graph

 

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 defence 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.

15. Calculate Gross Value Added at Market Price (GVAMP) from the following data:

 

Answer: The value added by each production company is also called Gross Value Added at Market Price (GVAMP). 

Gross Value Added at Market Price (GVAMP) = Value of Output – Intermediate Consumption

or

= Sales + Change in Stock – Intermediate Consumption

In the given question domestic sales and exports are given separately; therefore, we will add them to obtain Sales value.

Hence, Gross Value Added at Market Price will be,

Gross Value Added at Market Price (GVAMP) = (Domestic Sales + Exports + Change in Stock) – Single Use Producer Goods

= [200 + 10 + (-10)] – 120

= 200 – 120

GVAMP = ₹80 Lakhs

OR

The value of the Nominal Gross National Product (GNP) of an economy was ₹2,500 Crores in a particular year. The value of GNP of that country during the same year, evaluated at the price of base year was ₹3,000 Crores.
Calculate the value of GNP deflator of the year in percentage terms. Has the price level risen between the base year and the year under consideration?

Answer: GNP can be of two types: Real GNP and Nominal GNP. Real GNP 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. However, Nominal GNP 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. The formula for calculating Real GNP and Nominal GNP is,

GNP~Deflator=\frac{Nominal~GNP}{Real~GNP}\times{100}

The Real GNP and Nominal GNP in the given question are ₹3,000 Crores and ₹2,500 Crores respectively. Therefore, the GNP Deflator will be,

GNP~Deflator=\frac{Nominal~GNP}{Real~GNP}\times{100}

GNP~Deflator=\frac{2,500}{3,000}\times{100}

GNP Deflator = 83.33%

Conclusion: No, the price level has reduced from the base year to the year under consideration by 16.67%.

16. Answer the following questions based on the data given below : 

(i) Planned level of investment = ₹200 crore

(ii) C = 100 + 0·8 Y

(a) Determine the equilibrium level of income. 

(b) Calculate the saving and consumption expenditure at equilibrium level of National Income. 

Answer:

a) Keynesian theory says that in an economy, the equilibrium level of income is determined when the aggregate demand (represented by C + I curve) is equal to the aggregate supply (represented by C + S curve).

Aggregate Demand consists of two components; viz., Consumption Expenditure (C) and Investment Expenditure (I). The consumption expenditure varies directly with the income level; however, the investment expenditure is assumed to be independent of the income level.

Aggregate Supply refers to the total output of national income’s goods and services and is depicted by a 45° line.

In the given question, the planned investment is ₹200 Crores, and C = 100 + 0.8Y. Therefore the equilibrium level of income will be,

Y = C + I

Y = (100 + 0.8Y) + 200

Y = 300 + 0.8Y

Y – 0.8Y = 300

0.2Y= 300

At equilibrium, Y = ₹1,500 Crores

b) The saving and consumption expenditure at the equilibrium level of National Income will be,

Saving Expenditure:

S=-\bar{C}+(1-b)Y

S = -100 + (1-0.8)1,500

S = -100 + (0.8 x 1,500)

S = -100 + 1,200

S = ₹1,100 Crores

Consumption Expenditure:

Y = C + S

1,500 = C + 1,100

C = ₹400 Crores

17. Define the problem of double counting in the estimation of National Income. Discuss two approaches to correct the problem of double counting. 

Answer: To calculate the National Income of an economy, only the value of final goods and services is to be considered. However, along with the value of final goods, the value of intermediate goods is also included which gives rise to the problem of double counting. A situation in which the value of output when passing through its production stages, is counted more than once, is known as Double Counting. A product passes through various stages of production before reaching the final stage. When the value of a product is calculated at each stage of production, it is more likely to add the cost of input more than once. This situation leads to double counting. 

For example, A farmer produces wheat in his fields and sells it for ₹200 to a flour mill. The miller then converts the wheat into flour and sells is to a baker for ₹500. Ultimately, the baker prepares biscuits from that flour and sell them to the consumers for final consumption at a price of ₹700. 

For Farmer, wheat is the final product (₹200) and he has not spent any intermediate cost. Therefore, the value added at this stage is ₹200 (₹200-₹0). 

For the Miller, flour is the final product (₹500) and he has spent ₹200 on wheat as an intermediate good . Therefore, the value added at this stage is ₹300 (₹500-₹200).

For the Baker, biscuit is the final product (₹700) and he has spent ₹500 on flour as an intermediate good. Therefore, the value added at this stage is ₹200 (₹700-₹500). 

Double Counting

 

By adding the value of outputs of the farmer, miller, and baker, the Value of Output = 200+500+700 = ₹1400.

However, these values of output consists of the value of an intermediate good. 

The value of flour (₹500) consists of the value of wheat (₹200). Similarly, the value of biscuits (₹700) consists of the value of flour (₹500). It shows that the value of wheat and flour are counted twice. Once as the value of output and the other time as an intermediate good. This leads to the problem of Double Counting. 

There are two alternates available for avoiding double counting. 

1. Final Output Method: The method of Final Output says that only the value of the final goods should be added to the determination of national income. In the above example, using the method of final output, only the value of Biscuit; i.e., ₹700 at which these are sold to the final consumers will be taken during the calculation of national income. 

2. Value Added Method: The method of Value Added says that the sum of value added at each stage of production of the final good should be added in the determination of national income. In the above example, the sum of value added at each producing unit by the farmer, miller, and baker worth ₹200, ₹300, and ₹200 respectively should be added. Therefore, the value to be taken for the determination of national income will be ₹700 (₹200+₹300+₹200).

OR

Define the following : 

(a) Capital Goods

(b) Gross Domestic Product

(c) Flow Variables

(d) Income from property and entrepreneurship

Answer:

a) Capital Goods: Capital goods are physical assets that an organization uses in the process of production to manufacture products and services that consumers will use later. Capital goods are also known as tangible goods as they are physical in nature. It involves buildings, machinery, equipment, vehicles, tools, etc. Capital goods are not finished goods; rather, they are used to make finished goods.

b) Gross Domestic Product: 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. Gross in GDP means that depreciation is included in the monetary value of goods and services. Domestic signifies that goods and services included in GDP are produced within the domestic boundaries of the country. However, product means that only final goods and services will be included. GDP is often used as an index to measure the welfare of people.

c) Flow Variables: The economic variables which are measured over a period of time are known as flow variables. For example, national income.

d) Income from Property and Entrepreneurship: Income from Property and Entrepreneurship or Operating Surplus is another term used in factor payments. It is the sum total of income from property and income from entrepreneurship. Operating Surplus arises in both government and private enterprises, but does not arise in the general government sector as in this sector it works with the motive of social welfare. These components are used in determining national income through Income Method.

The three components of ‘Income from Property and Entrepreneurship’ are as follows:

  • Rent/Royalties
  • Interest
  • Profit

Section – B

(Indian Economic Development)

18. Fixing of maximum land holding (ownership) for an individual is known as ___________ . (Fill in the blank with correct answer) 

Answer: Land Ceiling

19. The first Industrial Policy Resolution in Independent India was introduced in the year ___________ . (Choose the correct alternative) 

(A) 1948

(B) 1950

(C) 1954

(D) 1956

Answer: (A) 1948

20. Central Pollution Control Board (CPCB) has identified ___________ categories of large and medium industries as polluting industries (Choose the correct alternative) 

(A) 15

(B) 17

(C) 19

(D) 13

Answer: (B) 17

21. _________ and _________ currency notes of old Mahatma Gandhi series were banned as legal tender money on 8th November, 2016 (Choose the correct alternative) 

(A) ₹50 and ₹100

(B) ₹500 and ₹1000

(C) ₹500 and ₹2000

(D) ₹500 and ₹200

Answer: (B) ₹500 and ₹1000

22. State the meaning of the term ‘Livestock’.

Answer: The domesticated animals that are raised for the production of labour and commodities like goats, cattle, etc., is known as Livestock. These animals are generally raised in an agricultural set-up.

23. Define ‘Human Capital Formation’. 

Answer: The process of adding the stock of skilled and capable people in the country over a time period is known as Human Capital Formation. Simply put, human capital formation means the development of abilities and skills among a country’s population. This process is associated with an investment in human beings and their development as productive and creative resources. The major sources of Human Capital Formation are Expenditure on Education, Expenditure on Health, Expenditure on Migration, On-the-Job-Training, and Expenditure on Information.

OR

Identify the correct sequence of alternatives given in Column II by matching them with their respective years in Column I :

 

Choose the correct alternative from the following :

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

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

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

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

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

Jan Dhan Yojana: 2014
Task Force on projections of the Minimum Needs and Effective Consumption Demand: 1979
Mahatma Gandhi National Rural Employment Guarantee Act: 2005
Study Group formed by the Planning Commission for Poverty: 1962

24. State the meaning of ‘Commune’. 

Answer: A system of collective farming in which people are made to cultivate the farm lands in China is known as Commune. This system comes under Great Proletarian Cultural Revolution.

25.  ‘‘Google in India has hired 4000 graduate students.’’

The given statement deals with formal sector/informal sector employment. (Pick the correct type of employment). 

Answer: Formal Sector

26. __________ is one of the taxes eliminated after implementation of Goods and Services Tax (GST). (Fill in the blank with correct answer)

Answer: Value Added Tax (VAT)

27. Arrange the following events in chronological order and choose the correct alternative : 

(i) Establishment of People’s Republic of China

(ii) Creation of Pakistan

(iii) First Five-Year Plan of India

(iv) First Five-Year Plan of China

Alternatives :

(A) (i), (iv), (ii), (iii)

(B) (iii), (ii), (i), (iv)

(C) (ii), (i), (iii), (iv)

(D) (iv), (iii), (ii), (i)

Answer: (C) (ii), (i), (iii), (iv)

1949 – Establishment of People’s Republic of China
1947- Creation of Pakistan
1951 – First Five-Year Plan of India
1953 – First Five-Year Plan of China

28. ‘‘Rapid increase in economic growth surely trickles down to the people under the absolutely poor category.’’ Defend or refute the given statement with valid arguments. 

Answer: A poor person is an individual who lives a difficult life as he is not able to afford the necessities of life, which morally degrade him. He is incapable of acting like a human being. He feels demoralized by how society treats him. 

The given statement, ‘‘Rapid increase in economic growth surely trickles down to the people under the absolutely poor category.’’ is refuted because of the following reasons:

  • The growth in population has resulted in very low growth in the per capita income of the country.
  • Also, the green revolution has increased the regional disparity and the gap between poor and rich farmers.
  • Ultimately, the rich have grabbed the benefits of economic growth.

29. ‘‘It is necessary to create employment in the formal sector rather than in the informal sector.’’ Defend or refute the given statement with valid arguments. 

Answer: Employment is an activity that enables an individual to earn means of living.

The Formal/Organised Sector consists of all the public and private sector enterprises that employ 10 or more hired workers. Whereas, Informal/Unorganised Sector consists of all the private enterprises that hire less than 10 employees.

The given statement, ‘‘It is necessary to create employment in the formal sector rather than in the informal sector.’’ is true and can be defended with the help of the following points:

  • The formal sector of employment provides greater job security as compared to the informal sector of employment.
  • People get better social security benefits under the formal sector of employment as compared to the informal sector of employment.

OR

State and discuss any two challenges in the Power sector of India. 

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 fulfil 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. 

30. ‘‘India, China and Pakistan have travelled more than seven decades of developmental path with varied results.’’ Explain the given statement with valid arguments. 

Answer: The development strategies of India, China, and Pakistan are very similar. All three nations started their developmental activities at the same time. The people of India and Pakistan got independence in 1947, while the People’s Republic of China was established in 1949. India announced its first Fiver-Year Plan in 1951, Pakistan in 1956, and China in 1953. 

Even though these nations started their developmental activities together, they achieved different results. Hence, the given statement, ‘‘India, China, and Pakistan have travelled more than seven decades of the developmental path with varied results.’’ is true, and this can be confirmed with the following points:

Till the late 1970s India, China, and Pakistan were able to maintain the same level of low development. But, over the last three decades, these countries have taken different development levels:

  1. India’s performance has been moderate over the years. A major portion of India still depends on agriculture. There has been a lack of infrastructure. Besides, more than one-fourth of India’s population lives below the poverty line.
  2. Pakistan’s performance was low because there was political instability, overdependence on remittances, and foreign aid there. Besides, the performance in agriculture in Pakistan was also volatile.
  3. China has raised the rate of growth in the economy with the help of the market system and by putting stress on the Alleviation of Poverty.

31. Discuss briefly the rationale behind choosing ‘Modernisation’ as a planning objective for the Indian economy.

Answer: The planning commission proposed that India should formulate a plan for a period of 5 years for its development and economic growth, known as the Five Year Plan. Till now, twelve five-year plans have been completed in India. Under the influence of then Prime Minister Pt. Jawahar Lal Nehru, India established its first five-year plan inspired by the Soviet Union. The basic goals behind the Five Year Plan are growth, modernisation, self-reliance, and equity.

Modernisation refers to the incorporation of technology into the economy. It helps in raising the standard of living of people in society. Inventions, advancements, and innovations in technology play a vital role in the growth of our economy and increasing its output. Modernisation includes:

  1. Adopting New Technology: The main aim of modernisation is to increase the production of goods & services by using new technology. For example, the introduction of technology in agriculture resulted in increased output, and over the years, the Indian economy has also witnessed a rise in the IT sector due to modernisation.
  2. Change in Social Outlook: Modernisation also needs changes in social outlooks, such as women empowerment or providing equal rights to women. A society can be more prosperous or civilised if it uses the talent of women employees in the workplace.

32. ‘‘Agriculture sector appears to be adversely affected by the economic reform process.’’ Explain the given statement. 

Answer: The economic condition of India in 1991 was pathetic. The government was unable to generate revenues from the sources like taxation. The income from public enterprises was also low. However, the government has to spend more on various issues like unemployment, overpopulation, and poverty, which increases the need to introduce economic reforms in India. Economic Reforms are the set of economic policies that aims to accelerate the pace of growth and development in the economy.  

The Economic Reform process has adversely affected the agriculture sector in the following ways:

  1. Reduction of Public Investment: There has been a decline in public investment in the agriculture sector involving irrigation, power, market ties, roads, research, and advancement.
  2. Liberalisation and Reduction in Import Duties: There have been several policy changes influencing this sector, which include (a) lowering of import taxes on agricultural goods (b) Elimination of minimum and fair support prices (c) removing quantitative constraints on agricultural products. Due to growing international competition, all of these policies had a negative impact on Indian farmers.
  3. Removal of Subsidy: Lifting of fertilizer subsidies increased production costs, which adversely impacted the small and marginal farmers.
  4. Shift towards Cash Crops: Agricultural production has switched from food crops to export crops as a result of export-oriented policy measures.

OR

India is often called the ‘Outsourcing Destination’ of the world. Discuss the prime reasons for this name given to India. 

Answer: Outsourcing means contracting out non-core and regular activities in which a company lacks competence to other agencies in order to benefit from their experience, knowledge, and efficiency. It is a business practice, known as contracting out or business process outsourcing in which one company hires another company or an individual, such as a service provider or vendor, or a third party to perform tasks, handle operations, or provide services that are normally or previously performed by the company’s own employees. 

India is often called the outsourcing destination of the world because of the following reasons:

  1. Easy availability of cheap labour: The wage rate of labour in India is lower as compared to the rate in other developed countries, because of which various MNCs outsource their business in India.
  2. Availability of skilled manpower: The proportion of skilled manpower is more in India which increases the faith of MNCs in outsourcing their business activities.
  3. Favourable Government policies: The MNCs also get different types of lucrative offers from the Indian Government like tax concessions, tax holidays, etc., which encourages them in working with the Indian workforce.
  4. International worthiness: International worthiness and credibility of India are good, which makes it a suitable destination for outsourcing business activities.

33. (a) ‘‘Ujjwala Yojana has been a game changer for rural India.’’ State any three conventional fuels being targeted under the LPG cylinder distribution scheme (Ujjwala Yojana). 

(b) ‘‘The Indian Health System needs a stronger dose of public expenditure to cure itself.’’ Justify the given statement with valid 
arguments. 

Answer: 

a) Pradhan Mantri Ujjwala Yojana (PMUY) is a scheme that aims at safeguarding the health of women and children by providing them with clean cooking fuel (LPG) so that their health doesn’t get compromised in smoky kitchens or they don’t have to wander in unsafe areas for collecting firewood. As conventional sources of energy cause pollution in the environment, by providing free LPG gas cylinders to rural households, the Ujjwala Yojana scheme has become a game changer for rural India. The three conventional fuels being targeted under this scheme are Firewood, Coal, and Agricultural Waste and Dried Dung.

b) The State of the Indian Health System is continuously improving since independence but the improvement is unreasonably slow. It has been a victim of a relatively low public expenditure. As compared to other developing countries, the health expenditure of India as a percentage of GDP is very low (around 4.7% of the total GDP in the year 2014-15). Therefore, it is essential for the Indian Health System to get a stronger dose of public expenditure to cure itself.

OR

(a) Why are less women found in regular salaried employment? 

(b) Analyse the recent trends in sectoral distribution of workforce in India: 

Trends in Employment Pattern

 

Answer:

a) Regular Salaried Employees are the workers who are engaged by someone or by a business enterprise and are paid wages on a regular basis. For example, teachers, employees at a firm, professors, etc. These workers are hired on a permanent basis and get various social benefits like provident fund, pension, health insurance, etc. India’s workforce consists of just 22.8% regular salaried employees among which women workers are very low. 

As various skills and high literacy level are required in regular salaried jobs, lesser women are found here. Besides, the lack of mobility among women in India because of social constraints is also a reason behind less women in regular salaried jobs.

b) With the given information about the trends in employment patterns, it can be concluded that the proportion of the workforce in India in the primary sector is rapidly decreasing from 64% to 60%, and ultimately to 48.9%. However, the employment share of both secondary and service sectors has increased by approximately 9% (in the last 11 years) and 7% (in the last 17 years), respectively. 

34. (a) “Human Capital Formation gives birth to innovation, invention and technological improvements.” Do you agree with the given statement? Support your answer with valid arguments. 

(b) Critically evaluate the role of rural banking system in the process of rural development in India.

Answer: 

a) Human Capital Formation is the process of addition made to the stock of skilled and capable people in the country over a time period. Yes, the given statement “Human Capital Formation gives birth to innovation, invention and technological improvements” is correct as this process not only increases the productivity of the available human resource but also helps in stimulating innovation among them, which ultimately helps in creating the ability to adopt new technologies. 

Simply put, by making investments in education, one can create the ability to adopt new technologies, and facilitate invention and innovation. It is because educated human resource usually moves towards modern technologies and innovation.

b) Rural Development is a continuous and comprehensive socio-economic process which attempts to improve all aspects of rural life.

The banking system has rapidly expanded in a way that it had a positive effect on rural farm and non-farm output, income and employment. After the green revolution, with the help of credit facilities provided to the farmers, they can easily avail a variety of loans to meet their production needs. Besides, the possibility of a buffer stock of grains, famines have now become an event of the past. 

However, in spite of the advantages of the rural banking system, there are various problems faced by the country’s agricultural credit structure in rural banking. Some of these problems are as follows:

  1. Insufficiency: The demand for rural credit in the country is still more than its availability.
  2. Inadequate Coverage of Institutional Sources: The institutional credit arrangements of the country have failed to cover its complete proportion of rural farmers.
  3. Inadequate Amount of Sanction: The loan amount sanctioned to the rural farmers is also inadequate because of this, the farmers often divert their loan money for unproductive purposes ultimately diluting the basic aim of these loans.


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