12 Eco Material Eng

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05 DAYS WORKSHOP OF PGT-ECONOMICS OF JAIPUR REGION
(FROM 17-10-2022 TO 21-10-2022)
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Economics syllabus XII (22-23)
MACROECONOMICS (PART-A) MARKS
National Income and Related Aggregates: 10
What is Macroeconomics? Basic concepts in macroeconomics: consumption goods, capital goods,
final goods, intermediate goods; stocks and flows; gross investment and depreciation. National
Income and Related Aggregates, Circular flow of income (two sector model); Methods of
calculating National Income: Value Added or Product method, Expenditure method, Income
method. Aggregates related to National Income: GNP, NNP, GDP, NDP - at MP and FC; Real and
Nominal GDP, GDP and Welfare
Money and banking: 6
Meaning and functions, supply of money - Currency held by the public and net demand deposits
held by commercial banks, Money creation by the commercial banking system. Central bank and
its functions (example of the Reserve Bank of India): Bank of issue, Govt. Bank, Banker's Bank,
Control of Credit through Bank Rate, CRR, SLR, Repo Rate and Reverse Repo Rate, Open Market
Operations, Margin requirement.
Determination of Income and Employment: 12
Aggregate demand and its components. Propensity to consume and propensity to save (average
and marginal), Short-run equilibrium output; investment multiplier and its mechanism. Meaning
of full employment and involuntary unemployment. Problems of excess demand and deficient
demand; measures to correct them - changes in government spending, taxes and money supply.
Government Budget and the Economy: 6
Government budget - meaning, objectives and components. Classification of receipts: revenue
receipts and capital receipts. Classification of expenditure – revenue expenditure and capital
expenditure. Balanced, Surplus and Deficit Budget: measures of government deficit.
Balance of Payments: 6
BOP account - meaning and components. BOP: Surplus and Deficit, Foreign exchange rate -
meaning of fixed and flexible rates and managed floating. Determination of exchange rate in a free
market, Merits and demerits of flexible and fixed exchange rate, Managed Floating exchange rate
system
Indian economy development (PART-B)
Development Experience (1947-90) and Economic Reforms since 1991: 12
A brief introduction of the state of Indian economy on the eve of independence. Indian economic
system and common goals of Five-Year Plans. Development Experience (1947-90) and Economic
Reforms since 1991: Main features, problems and policies of agriculture (institutional aspects and
new agricultural strategy), industry (IPR 1956; SSI – role & importance) and foreign trade,
Economic Reforms since 1991: Features and appraisals of liberalisation, globalisation and
privatization, Economic Reforms since 1991: Concepts of demonetization and GST.
Current challenges facing Indian Economy: 20
Human Capital Formation: How people become resource; Role of human capital in economic
development; Growth of Education Sector in India
Rural development: Key issues - credit and marketing - role of cooperatives; agricultural
diversification; alternative farming - organic farming
Employment: Growth and changes in work force participation rate in formal and informal
sectors; problems and policies
Sustainable Economic Development: Meaning, Effects of Economic Development on Resources
and Environment, including global warming
Development Experience of India: 8
A comparison with neighbors, India and Pakistan, India and China Issues: economic growth,
population, sectoral development and other Human Development Indicators
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MACRO ECONOMICS
UNIT –1 (10 Marks)
NATIONAL INCOME AND RELATED AGGREGATES
Macro Economics: It studies economic problems at the level of an economy as a whole. It
studies aggregate economic units Like -
National Income, Aggregate Demand, General price level, GDP, Government Budget etc.
Circular flow: refers to flow of income and goods and services across different sectors of the
economy.
Real flow: Flow of factor services from household sector to producer sector and the flow of
goods and services from producer sector to household sector.
Real Flow In a 2-sector Economy
Goods Produced and sold by the Firms
House Hold Sector Producer Sector
Factor Services (Land, Labour, Capital and Entrepreneurship)

Rendered by the Household
Money flow: Flow of factor payments by the producer sector to household sector and flow of
money from household sector to producing sector.
Money Flow In a 2-sector Economy
Payments for factor services
House Hold Producer

Sector Sector
Expenditure on the purchase of goods
Investment: Increase in the stock of capital during the year.

Depreciation: Fall in the value of fixed assets due to wear and tear, accidental damage and
expected obsolescence.
Gross investment = Net investment +Depreciation
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Difference between Intermediate and Final Good
Intermediate Goods Final Goods
These goods remain within the boundary These goods are outside the boundary
line of production and are not ready for line of production and are ready for use
use by their final users. by their final users.
These goods may be resold. These goods are not resold.
Value addition is possible Value addition is not possible.
These goods are NOT included in the These goods are included in the
estimation of national income. estimation of national income.
Example-Milk used by tea seller Example-Milk used by household.
Consumer goods
Finished Capital goods
Difference between Consumption good and Capital good

(Classification of goods depends on end use)
Consumption Good Capital Good
1. It is used by consumer for 1. It is used by producer for production.
consumption.
2. Used for Consumer satisfaction 2. Used for profit generation
3. Example: Durable like car used by 3. Example: machines, road, bridge Car
household, Non-durable Like Clothes used
As a taxi.
Difference between Stock Variable and Flow Variable

Stock Variable Flow Variable
1. Stock is measured at point of time. 1. Flow is measured during a period of
time. Like per hour, per day, per year.
2. Stock is static concept. 2. It is dynamic concept.
3. It does not have a time dimension 3. It has time dimension
4. Example: Wealth, capital, Money 4. Example: Investment, Income,
Supply
Concept of Domestic (Economic) Territory
Domestic territory is a geographical territory administered by a government within which
persons, goods and capital circulate freely. It includes-
1-Political frontiers including territorial waters and air space.
2-Embassies, consulates, military bases etc. located abroad but including those locates within the
political frontier.
3-Ships, aircrafts etc., operated by the residents between two or more countries.
4-Fishing vessels, oil and natural gas rigs etc. operated by the residents in the international waters
over which the country enjoys the exclusive rights or jurisdiction.
Resident (normal resident):- Normal resident is a person or an institution who ordinarily

resides in that country and whose center of economic interest lies in that country.
The Centre of economic interest implies: -
(1) The resident lives or is located within the economic territory.
(2) The resident carries out the basic economic activities of earnings, spending and
accumulation from that location.
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Relation between national product and Domestic product.
Domestic product concept is based on the production units located within domestic (economic)
territory, operated both by residents and non-residents.
National product concept based on resident and includes their contribution to production both
within and outside the domestic (economic) territory.
Difference between Domestic Income and National Income.

Domestic Income National Income
1.It is the sum total of factor incomes 1.It is the sum total of factor incomes
generated within the domestic territory generated by residents of a country
of a country residents and non-Residents within the domestic territory and rest
(foreigners). of the world.
2.It does not include NFIFA (Net factor 2.It includes NFIFA (Net factor income
income from abroad) from abroad)
Difference between Factor Income and Transfer Income.

Factor Income Transfer Income
1.It is earned by factor of production 1.It is received by normal people,
like rent, interest, wages and profit. organization or Country like gifts, grants
and donations.
2.It is earned due to some 2. It is received without any production
production process. process.
3.It is included in national income. 3. It is not included in national income
4.Eg. Rent, interest, profit, wages Eg. Scholarship, gifts, grants, donations,
aid.
REAL GDP AND NOMINAL GDP

Nominal GDP
Nominal Gross Domestic Product is a way of measuring the market value of all final goods and
services produced in an economy at current market prices in a Financial Year.
Real GDP
Real Gross Domestic Product is a way of measuring the market value of all final goods and services
produced in an economy at base year (constant) prices in a Financial Year.
Basis for
Nominal GDP Real GDP
Comparison
The nominal GDP is the
sum total of the economic The real GDP is the sum-total of the
Meaning output produced in a year economic output produced in a year
valued at the current valued at base price.
market price.
Based on Current market price. Base year market price.
How does The nominal GDP does The real GDP takes inflation into
inflation not take inflation into account. It is called inflation-
affect it? account. adjusted GDP.
From the nominal GDP,
Growth of From the real GDP, we can explore
we cannot analyse
the economy economic growth easily
economic growth easily.
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Limitations of GDP as the measure of Economic Welfare
GDP is the best indicator of economic welfare. But there are many reasons it is not an adequate
measure of it. There are many reasons to support this argument.
1.Non-Monetary Exchanges: -These activities are non-monetary and non-market transactions.

For example: - 1. Services of Housewife. 2. Kitchen gardening
3. Services of family members to each other. 4. Own account production
These activities are left out from GDP on account of the non-availability of data and the problem
of evaluation. However, such activities contribute to the economic welfare.
2.Externalities: - It refers to the Positive or Negative effect of any Economic activity without
paying price or penalty of it.
Activities resulting in benefits are called positive externalities and increase in welfare and
activities resulting in harm are called negative externalities and resulting in decrease in welfare.
GDP does not consider such externalities.
For example, construction of a flyover results in flow of goods and services and counted in GDP.
But the flyover, reduces the transport cost and journey time to those who have not contributed
into its construction.
On the other hand, a plastic factory provides employment in the locality. It is counted in GDP, but
the negative externalities such as pollution spread by it making people sick are not counted.
3.Distribution of GDP: -The GDP does not take into account the unequal distribution of income
in a country. It may possible with rise of GDP, unequal distribution of GDP may also rise. It means
the income of rich people rises by many folds than the common man. Overall GDP would seem to
rise, but richer are getting richer, poorer are getting poorer.
4.Composition of GDP:-The GDP Consists of both Consumer and Capital Goods. But Consumer
goods Contributes directly for the welfare whereas the Capital goods contributes indirectly.
CONCEPTS OF NATIONAL INCOME
Gross and Net:

Gross - Net = Depreciation
Note: Other names of depreciation are:
(a) Consumption of fixed capital (b) Capital consumption allowance (c) Current replacement
cost.
Domestic Income and National Income

NFIA = Factor Income earned by Residents from rest of the world (ROW) – Factor Payments to
Non-Residents within Domestic territory.
NFIA= FIFA-FITA
National Income = Domestic Income + NFIA (Net Factor Income from Abroad)
Factor Cost and Market Price:

1. Factor Cost (FC): It refers to amount paid to factors of production for their contribution in
the production process.
2. Market Price (MP): It refers to the price at which product is actually sold in the market. The
difference between these two is Net Indirect Taxes (NIT) which is included in MP and excluded
from FC.
NIT = IT – Subsidies.
Market Price (MP)= Factor Cost (FC)+ Net Indirect taxes (NIT)
Factor Cost (FC)= Market Price (MP)- Net Indirect taxes (NIT)
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Aggregate of National Income
1. Gross Domestic Product at Market Price (GDPMP): GDPMP is defined as the gross market value
of the final goods and services produced within the domestic territory of a country during an
accounting year by all production units.
2. Gross Domestic Product at Factor Cost (GDPFC): GDPFC is defined as the gross factor value
of the final goods and services produced within the domestic territory of a country during an
accounting year by all production units excluding Net Indirect Tax.
GDPFC = GDPMP – Net Indirect Taxes
3. Net Domestic Product at Market Price (NDPMP ).

NDPMP is defined as the net market value of all the final goods and services produced within the
domestic territory of a country by its normal residents and non-residents during an accounting
year.
NDPMP =GDPMP – Depreciation
4. Net Domestic Product at Factor Cost (NDPFC ).

NDPFC refers to a total factor income earned by the factor of production within the domestic
territory of a country during an accounting year.
NDPFC = GDPMP – Depreciation – Net Indirect Taxes
NDPFC is also known as Domestic Income or Domestic factor income.
5. Gross National Product at Market Price (GNPMP).

GNPMP refers to market value of all the final goods and services produced by the normal
residents of a country during an accounting year.
GNPMP = GDPMP + Net factor income from abroad
It must be noted that GNPMP can be less than GDPMP when NFIA is negative. However, GNPMP will
be more than GDPMP when NFIA is positive.
6. Gross Domestic Product at Factor Cost (GDPFC) or Gross National Income: GNPFC refers to
gross factor value of all the final goods and services produced by the normal residents of a
country during an accounting year.
GDPFC = GNPMP – Net Indirect Taxes
7. Net National Product at Market Price (NNPMP ).

NNPMP refers to net market value of all the final goods and services produced by the normal
NNPMP = GNPMP – Depreciation
8. Net National Product at Factor Cost (NNPFC ).

NNPFC refers to net money value of all the final goods and services produced by the normal
NNPFC = GNPMP – Depreciation – Net Indirect Taxes
It must be noted that NNPFC is also known as National Income.
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METHODS TO CALCULATE NATIONAL INCOME
(A) PRODUCT METHOD/ VALUE ADDED METHOD
1. Sale = Price x Quantity
Or
Sale = Domestic sale + Exports
2. Value of output = Sales + Change in stock

(Change in stock = Closing stock – opening stock)
3.Gross value added (GDPMP) = Value of output – Intermediate cost
4. NNPFC or NI = GDPMP – Consumption of fixed capital (Depreciation) + Net Factor Income from
Abroad – Net indirect Taxes
PRECAUTIONS TO BE TAKEN WHILE CALCULATING NATIONAL INCOME BY

PRODUCT METHOD
➢ Avoid double counting of production.
➢ Include the output produced for self-consumption.
➢ Avoid the sale and purchase of second-hand goods.
➢ Exclude the value of intermediate consumption.
➢ Include the value of services rendered in sales.
(B) INCOME METHOD/FACTOR PAYMENT METHOD

1.Compensation of employees (COE) = Wages and salaries in cash + Wages and salaries in kind
+Employer’s contribution in social security scheme + Retirement pension
2.Operating surplus (OS)= Income from Property + income from entrepreneurship

➢ (Income from property = Rent + Royalty + Interest)
➢ (Income from entrepreneurship = Profit)
➢ (Profit = Corporate tax +Corporate savings / Net retained earnings / Undistributed profit
+Dividend
3.Mixed Income (MI) = Income of the self employed

NDPFC = COE + OS + MI
NNPFC = NDPFC + Net factor income from abroad
PRECAUTIONS TO BE TAKEN WHILE CALCULATING NATIONAL INCOME BY INCOME

METHOD
➢ Avoid double counting of income.

➢ Avoid transfer payments.
➢ Income from owner occupied house to be included.
➢ Commission Earned should be Included.
➢ Avoid illegal income.
➢ Contribution to social security scheme by employees must be avoided
➢ Income from windfall gains (like from lotteries) must be avoided as it is not factor income.
(C) EXPENDITURE METHOD:
1. Private final consumption expenditure (C)

2. Government final consumption expenditure (G)
3. Net Exports (X-M)
4. Gross Domestic Capital Formation (I)
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(Gross Domestic Capital Formation = Gross domestic fixed capital formation + change in stock/
inventory investment)
GDPMP = C+ I+ G + (X-M)
NNPFC = GDPMP- Depreciation + Net factor income from abroad - Net indirect taxes
NOTE:
❖ If Capital Formation (Investment) is given as Net domestic capital formation, we arrive at NDPMP
❖ Capital Formation = Investment
PRECAUTIONS TO BE TAKEN WHILE CALCULATING NATIONAL INCOME BY EXPENDITURE

METHOD
➢ Avoid double counting of expenditure by not including expenditure on intermediate goods.

➢ Expenditure on Transfer Payment must be avoided.
➢ Expenditure on the purchase of second-hand goods must be avoided.
➢ Expenditure on non-productive activity (like expenditure on shares and bonds) must be
avoided.
Practice Questions/Answers: -
Q1. Define externalities. Give an example of negative externality. What is its impact on welfare?
Ans. Externalities refer to the benefits or harms a firm or an individual cause to another for
which they are not paid.
Examples of negative externalities are:
(i)River pollution created by an oil refinery has disastrous effects on aquatic life.
(ii) It reduces the overall welfare of the society and creates negative externality.
Q2. Explain how ‘non-monetary exchanges’ are a limitation in taking domestic product as an
index of welfare?
Ans. The non-monetary exchanges which take place in the informal sectors are not included in the
calculation of GDP since money is not being used. For example, Service of a housewife, kitchen
gardening, etc. This results in an under estimation of GDP. Hence, GDP calculated in the standard
manner may not give us a clear indication of the productive activity and actual welfare of the
country.
Q3.‘‘Final goods include only those goods which are consumed by the households.’’ Defend or
refute the given statement with valid reason.
Ans. Final goods include only those goods which are consumed by the households. The given
statement is refused as final goods are the goods which have crossed the boundary line of
production and are ready to use by consumers and producers (includes capital goods). These
goods can be further classified as final consumer goods and final producer goods.
Q4. ‘All producer goods are not capital goods. Do you agree?
Ans. Yes, I agree that all producer goods are not capital goods, because producer goods include
(i) Goods which are used as raw material like wood, used to make furniture.
(ii) Goods which are used as fixed assets like plant and machinery.
Capital goods include only fixed assets of the producers. These are durable goods. On the other
hand, goods used as raw material are not capital goods as these are not repeatedly used in the
process of production. Thus, all producers’ goods are not capital goods.
Q5. Distinguish between Real Gross Domestic Product and Nominal Gross Domestic Product.
Which of these is a better index of welfare of the people and why?
Or
Distinguish between Real and Nominal Gross Domestic Product.
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Q6. Money flows are opposite to real flows. How?
Q7. Calculate GNP at market price, NDP at factor cost

Items Rupees in crores
GDPmp 5500
Depreciation 75
Indirect taxes 250
Subsides 120
Net factor income from abroad 400
[Ans. GNPmp=5900, NDPfc =5295]
Q8. Calculate national income and GDPmp

Items In crores
Wages and salaries 1000
Undistributed profits 35
Dividend 45
Rent 100
Interest 120
Profit 130
Mixed income 300
Employees contribution to social security Schemes 100
Consumption of fixed capital 50
Indirect taxes 100
Subsidies 75
Net factor income from abroad (-)20
Sales 600
[ Ans. NDPfc= 1650cr, NNPfc=1630Cr, GDPmp=1725Cr]
Q9. Will the following be included in domestic factor income of India? Give reasons for your
answer.
(i)Profit earned by a foreign bank from its branches in India.
(ii)Scholarships given by Government of India.
(iii)Profits earned by a resident of India from his company in Singapore.
(iv)Salaries received by Indians working in American Embassy in India.
Ans:
(i) Profit earned by a foreign bank is included in domestic product of India because the bank’s
branches are located in the Indian domestic territory.
(ii) A scholarship is a transfer payment because no service is provided in return. So, it is not
Included in domestic income.
(iii) A profit earned by an Indian company in Singapore is not included in domestic product of
India because company is located outside the economic (domestic) territory of India.
(iv)Salaries received by Indians working in American Embassy in India are not included because
the embassy is treated as a part of American domestic territory and not of India.
Q10. Will the following be included in National Income of India? Give reasons for your answer.
(i)Financial help given to flood victims.
(ii)Profits earned by an Indian bank from its branches abroad.
(iii)Salaries paid to non-resident Indians working in Indian Embassy in America.
Ans.
(i)Financial help is a transfer payment because no factor service is provided in return. It is
therefore, not included in national income.
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(ii)Profit earned by an Indian bank from its branches abroad is factor income from abroad and so
included in national income.
(iii)Salaries paid to NRI’s working in Indian Embassy in America is factor income paid to abroad.
It is deducted from India’s national income. So it is not included in India’s national income.
Q11. Whether following items are included in calculation of national income or not and why:
A. Destruction of building and machinery by earthquake.
Ans: Not included, It is capital loss.
B. Purchase of cold drinks by a school canteen from the manufacturers.
Ans: Not included because it is intermediate consumption for the canteen.
C. Purchase of new shares.
Ans: Value of share whether it is new or old is not included in NI because it is only a transfer of
ownership.
D. Wealth tax.
Ans: It should not be included in NI because it is a compulsory transfer payment and paid from
past savings of the taxpayers.
E. Bonus
Ans: It is included because it is a part of compensation of employees which is paid cash.
F. Interest on debentures.
Ans: It is not included in national income because it is are ward of savings and does not produce
any productive goods and services. It is a transfer payment.
G. Dividend received on shares.
Ans: It is included if profit is not given, because it is a part of profit
H. Expenditure on feeding beggars.
Ans: It is not included in NI because it is an expenditure without any productive return.
I. Expenditure by govt on providing free education.
Ans: It should be included in NI because the government expenditure on the free services is
considered as a part of government final consumption expenditure.
UNIT-2 (4 Marks)
MONEY AND MONEY SUPPY
BARTER SYSTEM
The direct exchange of goods with other goods is called barter system. It is called commodity for
commodity economy. (C-C Economy)
Problems (Limitation) of Barter system: -
1. Absence of common measure of value: -
2. Lack of divisibility: -
3. Problem of storing wealth: -
4. Lack of a system of deferred payments: -
5. Problems of double coincidence of wants: -
Meaning of money: - Money is anything which is accepted as medium of exchange.
FUNCTIONS OF MONEY
1. Medium of exchange:
➢ It means that money acts as an intermediary for exchange of goods and services.
➢ Medium of exchange function removes problem of double coincidence of wants in barter system.
➢ Money separates the act of sales and purchase of goods and services.
➢ Money as a medium of exchange saves time as well as labour, facilitates multilateral trade,
expands size of market and promotes competition in it.
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2. Measure of value or unit of account:
➢ Money is a single unit of account. All the values of goods and services (price) is expressed in
terms of money.
➢ It acts as a yardstick of standard measure of value to which all other things can be compared.
➢ It provides a basis for bookkeeping, estimating national income, cost, revenue, profit and losses.
3. Standard of deferred payment: -

➢ Deferred payment means those payment which are to be made in future.
➢ Deferred payments like loans, wages and salaries, cheques are measured in terms of money and
are paid in money.
➢ Sale and purchase of shares and other credit instrument further help in capital formation and
economic development of an economy.
4. Store of value:
➢ Store of value means shifting of purchasing power from its present to future use.
➢ Money provides security to individual to meet unpredictable emergencies and to pay debts.
➢ Therefore because of its general acceptability, stable value, easy storage and low storage
cost, money performs a function of store of value
5. Transfer of value:
➢ Transfer of value means transferring value of durable and immovable goods from one place to
other.
➢ Money, being most liquid and generally acceptable agent, performs this function most effectively.
➢ Anyone can sell his fixed property and capital with money at any particular place and can purchase
another property and capital at another place.
SUPPLY OF MONEY: -
Supply of money is a stock concept. It refers to total stock of money held by the people in form of
cash, coins and demand deposits with banking system of a country at a point of time.
Demand deposits=saving account deposits +current account deposits
RBI maintains a minimum reserve of Rs. 200 crores in the form of gold and foreign securities. Of
this reserve, value of gold must be Rs. 115 crores.
MEASURES OF MONEY SUPPLY: -

M1= C + DD + OD
Where: - C-Currency held by public in cash.
DD- Demand deposits of public with banks.
OD- Other deposit with RBI.
• Demand deposit of public financial institution,
• Demand deposits of foreign banks and foreign govt.
• Demand deposits of international financial institution (IMF and World bank)
M1 is called narrow money.

For information -Other money supply measures
M2= M1 + Deposits with post office saving bank account
M3= M1 + Net time deposits with commercial banks (broad Money)
M4 = M3 + Total deposits with post offices
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FORMS OF MONEY: -
• Fiat Money: - is that money which is issued by order/ authority of the government. Eg. Notes and
coins.
• Fiduciary Money: - is that money which is accepted as a medium of exchange because of the trust
between the payer and payee. Eg. cheques, drafts etc.
• Full bodied Money: - refers to when commodity value of a money equal to money value of money.
• Credit Money: - refers to when commodity value of a money is less than money value of money.
High Powered Money: -

It is the sum total of :-(a) currency held by people, (b) Vault cash of the commercial banks, (c)cash
reserve of the commercial banks with RBI. It is also called monetary base.
Money/credit creation by the commercial banking system

Commercial banks cannot print money, but they influence the money supply through the process
of credit creation using demand deposits.
The power of commercial banks which enables them to expand their deposits through loans is
called Credit creation. It results in multiple expansion of banks demand deposits.
Money creation by the bank is determined through-
1. The amount of initial deposit.
2. Legal Reserve ratio or Reserve Ratio.
Why deposits are kept as Cash Reserves?

Commercial banks accept deposits. They give interest on these deposits. Deposits held by banks
are used for giving loan. They lend money and earn interest for making interest payments of
deposits and meeting their expenses; after that whatever is left is their profit.
Banks do not use the whole of deposit for lending. They keep a certain fraction of their deposits
as Reserves. This fraction is called ‘The Reserve Ratio’ or ‘Legal Reserve Ratio’.
Bank keep a fraction of deposit, Because Banks know two things by his experience
1. All the depositors do not approach the banks for withdrawal of money at the same time.
2. There is a constant flow of new deposits into the banks.
1
Total credit creation =Legal Reserve Ratio 𝑋 Initial Deposit
Role of money Multiplier in determining Credit creation

The credit creation depends on Money Multiplier. There is direct relationship between money
multiplier and credit creation. Lower the money multiplier, lesser will be credit creation and
higher the multiplier more will be credit creation
Process of Credit Creation through an Example:
Suppose initial deposit in banks is ₹10,000 and LRR is 20%. As required, the banks keep 20%,
i.e., ₹2000 as cash. Suppose the banks lend the remaining ₹8000 to the borrowers. Which
becomes secondary deposits. The Bank again keep 20%, i.e., ₹1600 as cash and lend ₹6400,
which is also 80% of the last deposit the money again comes back to the bank leading to a fresh
deposit.
Rounds Deposits Loans Legal Reserve Ratio
Initial Deposit 10,000 8000 2000
1 8000 6400 1600
2 6400 5120 1280
- - - -
- - - -
Total 50,000 40,000 10,000
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1
Credit multiplier=Legal Reserve Ratio
1
= 𝑋 100=5
20
1
Total credit creation =Legal Reserve Ratio 𝑋 Initial Deposit
1
=20% 𝑋 10000
1
=0.2 𝑋 10000 = 50000
The money goes on multiplying in this way, and ultimately total money creation is ₹50,000. i.e.,
five times the initial deposit.
CENTRAL BANK: -
MEANING: An apex body that controls, operates, regulates and directs the entire banking and
monetary structure of the country.
FUNCTIONS OF CENTRAL BANK:
1) Currency authority or bank of issue: Central bank is a sole authority to issue currency in the
country. Central Bank is obliged to back the currency with assets of equal value (usually gold coins,
gold bullions, foreign securities etc.,) Advantages of sole authority of note issue:
a) Uniformity in currency circulation

b) Better supervision and control
c) It is easy to control credit
d) Ensures public faith
e) Stabilization of internal and external value of currency
2) Banker to the Government: As a banker it carries out all banking business of the Government
and maintains account for keeping cash balances of the government. Accepts receipts and makes
payments for the government. It also gives loans and Advances to the government.
3) Banker’s bank and supervisor: Acts as a banker to other banks in the country—
a) Custodian of cash reserves: - Commercial banks must keep a certain proportion of cash reserves
with the central bank (CRR)
b) Clearing house: - Since the Central Bank holds the cash reserves of commercial banks it is easier
and more convenient to act as clearing house of commercial banks.
4) Lender of last resort: - When commercial banks fail to need their financial requirements from
other sources, they approach Central Bank which gives loans and advances
5) Custodian of foreign exchange reserves.

Another important function of Central Bank is the custodian of foreign exchange reserves. Central
Bank acts as custodian of country’s stock of gold and foreign exchange reserves. It helps in
stabilizing the external value of money and maintaining favorable balance of payments in the
economy.
6) Controller of money supply and credit: - Central Bank or RBI plays an important role during
the times of economic fluctuations. It influences the money supply through quantitative and
qualitative instruments. Former refers to the volume of credit and the latter refers to regulate the
direction of credit.
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QUANTITATIVE INSTRUMENTS:
i) Bank Rate: - It refers to the rate at which the central bank lends money to commercial banks
for long term.
Central Bank increases the bank rate during inflation (excess demand) and reduces the same in
times of deflation (deficient demand)
ii) Open Market Operations: It refers to the buying and selling of securities by the Central Bank
from/ to the public and commercial banks.
It sells government securities during inflation/excess demand and buys the securities during
deflation/deficient demand.
iii) Legal Reserve Ratio: R.B.I. can influence the credit creation power of commercial banks by
making changes in CRR and SLR
iii)Cash Reserve Ratio (CRR): It refers to the minimum percentage of net demand and time
liabilities to be kept by commercial banks with central bank.
Reserve Bank increases CRR during inflation and decreases the same during deflation
iv) Statutory Liquidity Ratio (SLR): It refers to minimum percentage of net demand and time
liabilities which commercial banks required to maintain with themselves in legal assets. (Currency
,Gold, Bonds)
SLR is increased during inflation or excess demand and decreased during deflation or deficient
demand.
QUALITATIVE INSTRUMENTS:
i)Margin Requirements: It is the difference between the amount of loan and market value of
the security offered by the borrower against the loan. Margin requirements are increased during
inflation and decreased during deflation.
ii)Moral suasion: It is a combination of persuasion and pressure that Central Bank applies on
other banks in order to get them act in a manner in line with its policy.
iii)Selective credit controls: Central Bank gives direction to other banks to give or not to give
credit for certain purposes to particular sectors.
Central Bank increases the bank rate/ Repo Rate/ Reverse Repo Rate/ Cash Reserve Ratio
/Statutory Liquidity Ratio-during inflation and reduces the same in times of deflation
During inflation-Rise in bank rate/ Repo Rate/ Reverse Repo Rate/ Cash Reserve Ratio
/Statutory Liquidity Ratio
Rise in Market Rate of Interest → Rise in Cost of Credit → Fall in demand for Credit → Fall in
Supply of Money → Inflation is controlled
During deflation-Fall in bank rate/ Repo Rate/ Reverse Repo Rate/ Cash Reserve Ratio
/Statutory Liquidity Ratio
Fall in Market Rate of Interest → Fall in Cost of Credit → Rise in demand for Credit → Rise in
Supply of Money → deflation is controlled
6-Open Market Operations: It refers to the buying and selling of securities by the Central Bank
It sells government securities during inflation/excess demand and buys the securities during
deflation/deficient demand.
Sale of Securities → Soaks Liquidity and leads to fall in cash reserves of the comm. Banks →
Fall in Credit creation → Fall in Money Supply → Inflation is controlled
Purchase of Securities → Release Liquidity and leads to rise in cash reserves of the comm.
Banks → Rise in Credit creation → Rise in Money Supply → Deflation is controlled
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QUALITATIVE INSTRUMENTS:
1.MARGIN REQUIREMENTS: It is the difference between the amount of loan and market value
of the security offered by the borrower against the loan.
Margin requirements are increased during inflation and decreased during deflation.
Rise in Margin Requirement → Fall in demand for credit → Fall in supply of money by comm.
Banks→ Fall in Money supply →Inflation is controlled
2.Moral suasion: It is a combination of persuasion and pressure that Central Bank applies on
other banks in order to get them act in a manner in line with its policy.
3.Selective credit controls: Central Bank gives direction to other banks to give or not to give
credit for certain purposes to particular sectors.
Practice Questions/Answers
1. In India coins are issued by-
(a) Reserve bank of India (b) State bank of India
(c) Ministry of finance (d) Ministry of rural development
Ans-(c) Ministry of finance
2. Electronics transfer of money in terms of credit /debit entries of the account holders in the
banks is called:-
(a) E- marketing (b) E-business (c) E- money (d) E-banking
Ans- E- money
3. In case of credit money

(a)Money value = commodity value (b) Money value >commodity value
Money value < commodity value (d) None of these
Ans-(b) Money value >commodity value
4. Cash cards are example of –

(a)Paper money (b) plastic money (c) fiat money (d) fiduciary money
Ans- (b) Plastic money
5. Which of the following is correct?

(a) Supply of money is a stock concept.
(b) Supply of money does not include stock of money held by the government.
(c) Supply of money does not include stock of money held by the banking system of a country.
(d) All of these
Ans-(d) All of these
6. What is money supply? State M1 measurement of money.

7. Discuss the ‘store of value’ function of money.
8. What do you mean by high powered money?
9. How does RBI classify the supply of money?
10-Distinguish between ‘face value’ and ‘intrinsic value of money’.
Ans: -Face value refers to what is inscribed/ written on the note or coin. Eg. Hundred rupees on
a note, Ten rupee on coin.
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Intrinsic value refers to market value of the material with which money is made of. It means the
cost of material of which a coin or note is made of.
11- Distinguish between near money and money.

Ans: Money refers to medium of exchange (notes/ coins) proclaimed by the central bank of the
country on behalf of government.
Whereas near money refers to chequable deposits which can be liquidated whenever needed. It
means all such instruments which are sometimes used like money as a medium of exchange or
for the store of value or for the transfer of the value from one individual to another.
12. Differentiate between net demand deposits and gross demand deposits.
Ans: - Gross demand deposits includes the inter-banking claims ,ie. claims of one bank against
another.
Whereas net demand deposits banking do not includes inter- bank claims. Only net demand
deposits are taken as a part money supply.
13. Define bank rate.

14. What is meant by Cash Reserve Ratio (CRR)?
15. Give the meaning of SLR (Statutory liquidity ratio)?
16. What will be the effect of a rise in bank rate on money supply?
17. What do you mean by open market operations (OMO)?
18. What are the qualitative instruments of credit control?
19. Distinguish between ‘Qualitative and Quantitative tools’ of credit control as may be used by a
Central Bank.
20. What are the quantitative instruments of credit control?
21. How does a central bank control the availability of credit by open market operation?
22. Explain the role of reverse repo rate in controlling money supply.
Unit-3 (12 Marks)

Determination income and employment
Aggregate demand (AD): Meaning:

Aggregate demand refers to the total demand for final goods and services in the economy.
Alternatively, aggregate demand is the total expenditure in the economy.
OR
Thus Aggregate Demand may be defined as the sum total of expenditure on the domestically
produced goods and services during the period of an accounting year
Components of AD:
Thus, the main components of aggregate demand in a four sector economy are:
1. Household (or private) consumption demand. (C) 2. Private investment demand. (I)
3. Government demand for goods and services. (G) 4. Net export demand. (X-M)
AD = C + I + G+(X-M)
1. Household (Private) Consumption Demand (C):

It is defined as ‘Value of goods and services that households are able and willing to buy.’
2. Private Investment Demand (I):
This refers to planned (ex-ante) expenditure on creation of new capital assets by private
entrepreneurs.
3. Government Demand for Goods and Services (G): It refers to government planned (ex-ante)
expenditure on purchase of consumer and capital goods.
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4. Net Exports (Exports-Imports) Demand: Net export is the difference between export of goods
and services and import of goods and services.
determination of income (output) and employment in two sectors (Household and Firm)
economy, include in aggregate demand (AD) only two broad components of demand such as
consumption demand (C) and investment demand (I).
AD = C + I
AGGREGATE DEMAND (AD) = CONSUMPTION(C) + INVESTMENT (I)
Consumption Expenditure(C):-
➢ it refers to ex-ante (planned) consumption expenditure to be incurred by all households on
purchase of goods and services during an accounting year
➢ It depends on the level of disposable income of the households called personal disposable income
➢ Higher the level of personal disposable income, higher is private consumption expenditure, and
vice versa
Consumption function- it refers to functional relationship between consumption and national
income.
C =f(Y),
C=a+b(Y)
Where
C=Consumption a= autonomous consumption Y=National Income b=MPC
Consumption schedule
Y(Income) C (Consumption)
0 10 Autonomous consumption
20 20 Breakeven point(Y=C)
40 30
60 40
80 50
100 60
➢ There is direct relation between Consumption and Income.

➢ Consumption never becomes zero. It remains always positive because we have to consume
something even at zero level of income.
➢ Break-even point-It refers to the point at which consumption is equal to the national income. At
this point saving is zero (0).
➢ Psychological law of consumption: It states that there is a common tendency for people to spend
more on consumption when income increases, but not to the same extent as the rise in income
because a part of the income is also saved.
C= Ã + B(Y)
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Investment (I):
➢ Expenditure on purchase of Intermediate goods as well producer goods.
➢ Investment means increase in the stock of capital goods
Investment is of two types-
➢ (I)Induced Investment-Change with the national income in other words depends on the national
income.
➢ (II)Autonomous Investment-It does not depend on the national income. So, it is also called
independent investment. It is related to the social welfare in the govt. sector
Induced investment Autonomous investment

Y I Y I
0 0 0 10
20 20 20 10
40 30 40 10
60 40 60 10
80 50 80 10
100 60 100 10
AGRREGATE DEMAND:-
Income(Y) Consumption(C) Investment(I) AD=C+I
0 100 100 200
100 150 100 250
200 200 100 300
300 250 100 350
400 300 100 400
500 350 100 450
600 400 100 500
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Aggregate Supply- It refers to the total value of final goods and services that all the producers
are willing to supply in an economy in a given period of time.
(Aggregate Supply and National income are the same thing.)
Components of Aggregate Supply (AS)
AS(Y)=C+S
1- Private Consumption Expenditure (C) 2- Savings
Savings:-It refers to that portion of income which is not spent on the purchase of goods and
services at the given level of income.
Saving function- it refers to functional relationship between saving and national income.
S =f(Y)
S = -a + (1-b) Y
Note-There is direct relation between saving and Income.
Y C S
(Income) (Consumption) (Saving)
0 10 -10 Autonomous consumption
=(Negative saving)
20 20 0 Breakeven point(Y=C)
40 30 10 Positive saving
Determination of Equilibrium Level of Income & Employment:

An economy is in equilibrium when aggregate demand for goods and services is equal to
aggregate supply during a period of time.
So, equilibrium is achieved when:
AD = AS … (1)
We know, AD is the sum total of Consumption (C) and Investment (I):
AD = C + I … (2)
Also, AS is the sum total of consumption (C) and saving (S):
AS = C + S … (3)
Substituting (2) and (3) in (1), we get:
C+S=C+I
Or,
S=I
It means, there are Two Approaches for determining the equilibrium level of income and
employment in the economy:
Two Approaches for Determination of Equilibrium Level:
The two approaches to determine equilibrium level of income, output and employment in the
economy are:
1. Aggregate Demand-Aggregate Supply Approach (AD-AS Approach)
2. Saving-Investment Approach (S-I Approach)
It must be kept in mind that AD, AS, Saving and Investment are all planned or ex- ante variables.
I - Aggregate Demand and Aggregate Supply Approach (AD=AS Approach)

According to this approach the equilibrium level of the economy is determined when aggregate
demand is equal to the aggregate supply. AD=AS
It can be explained with the help of the schedule and diagram.
Schedule showing determination of equilibrium
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Y(Incom C(Consumptio Investment S(Savin AD AS=Y=C
e) n) (I) g) =C +S
+I
0 10 20 -10 30 0
20 20 20 0 40 20
40 30 20 10 50 40
60 40 20 20 60 60
80 50 20 30 70 80
100 60 20 40 80 100
In diagram-
1. The economy is in equilibrium at point ‘E’ where (C + I) curve intersects the 45° line.
2. OY is the equilibrium level of Income corresponding to point E.
When AD>AS:If aggregate demand is greater than aggregate supply, i.e. AD > AS, flow of goods
and services in the economy tends to be less than their demand. The existing stocks of the
producers would be sold out to rebuild the desired stock, the producers would plan the greater
production. AS would increase to become equal to AD. This is how AS equals AD.
When AD < AS: It means that consumers are buying less goods than firms are willing to produce.
As a result, the planned inventory would rise. To clear the unwanted increase in inventory, firms
plan to decrease the employment and output until the economy is back at output level OY, where
AD becomes equal to AS.
SAVING - INVESTMENT APPROACH (S-l Approach):According to this approach, the
equilibrium level of income is determined at a level, when planned saving (S) is equal to planned
investment (I).
Let us understand this with the help of following diagram-
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In diagram
1. The economy is in equilibrium at point ‘E’ where saving and investment curves intersect each
other.
2. OY is the equilibrium level of income corresponding to point E.
S>I: It means that households are not consuming as much as the firms expected them to. As a
result, the inventory rises above the desired level. To clear the unwanted increase in inventory,
firms would plan to reduce the production till saving and investment become equal to each
other.
S<I: It means that households are consuming more and saving less than what the firms expected
them to. As a result, planned inventory would fall below the desired level. To bring the inventory
back to the desired level, firms would plan to increase the production till saving and investment
become equal to each other.
Difference between Full Employment and Under-Employment Equilibrium
(i) Full Employment Equilibrium:

When equilibrium between AD and AS takes place at full employment of resources, it is called
full employment equilibrium. There are no unused resources. There is no involuntary
unemployment.
The situation of full employment equilibrium has been illustrated in Fig. AS is expressed by 45°
line whereas the line AD represents aggregate demand. Both the curves intersect at point E
which yields full employment equilibrium.
(ii) Under-employment equilibrium:

Under-employment equilibrium means equality between aggregate demand and ‘aggregate
supply but at less than full employment’. In other words, in producing the output, economy’s
some resources are underemployed. OM1 is the under-employment equilibrium level of income
which is less than OM full employment equilibrium level of income. Under-employment
equilibrium gives rise to deflationary gap shown as EB in the Fig. Additional investment
expenditure equal to the level of EB (i.e., deflationary gap) is required to reach full employment
equilibrium.
In case, when AD>AS (S<I)
➢ It means buyers are planning to buy more than what the sellers are planning to produce.
➢ Inventory starts falling.
➢ So the producers expand production.
➢ Income level starts rising till AD=AS
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In case, when AD<AS (S>I)
➢ It means that buyers would be willing to buy less than what the producers are willing to
produce.
➢ Planned inventory rises.
➢ So the firms reduce production till the economy is back in equilibrium AD=AS
Meaning of Investment Multiplier :

Investment multiplier is a ratio between change in income and change in investment.
K = ΔY/ ΔI
Relation between MPC and Multiplier
K=1/1−MPC or K=1/MPS
There is direct or positive relation between MPC and investment multiplier.
It means if MPC increases than K will also increase and if MPC decreases than K will also
decreases
If the value of MPC is minimum i.e. 0 than K will also minimum i.e. 1
If the value of MPC is max. i.e. 1 than K will also max. i.e. ∞
Working of Multiplier
Investment multiplier works on the fact that the expenditure of one person is income of another
person.
Investment multiplier and its mechanism: -
Multiplier is the ratio between change in income and changes in investment.
It shows the number of times income would rise as a result of an initial rise in investment.
Following table explains how the multiplier process works. It is based on the given value that I =
Rs. 1000 Crore and MPC = 0.9.
Round ∆I ∆Y Induced change in Leakage/Saving
consumption [MPC
(∆ Y)]
1 1000 1000 900 (= 0.9 x 1000) 100
2 --- 900 810 (= 0.9 x 900) 90
3 --- 810 729 (= 0.9 x 810) 81
And so on …
∆I= ∆Y= 9000 1000
1000 10000
PROPENSITY TO CONSUME AND PROPENSITY TO SAVE:-

The relationship between consumption and income is called propensity to consume or
consumption function.
C = f (Y).
Consumption function may be represented by an equation.
C = a + b (Y)
C=Consumption, Y=Income.
a =Consumption at zero level of income b=MPC (slope of the consumption curve)
The consumption equation shows the level of consumption for various level of income.
Propensity to consume is of two types:
(i) APC:-ratio of total consumption to total income.
APC=C/Y.
(ii) MPC:- Marginal propensity to consume is the ratio of change in consumption to change in
income
MPC=∆C/∆Y
(ii) APS:-Average propensity to save is the ratio of saving to income
APS=S/Y.
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(iv) MPS:-Marginal propensity to save is the ratio of change in saving to change in income
MPS=∆S/∆Y.
There is relationship between APC and APS.
APC+APS=1 or APC=1-APS or APS=1-APC
There is relationship between MPC and MPS.
MPC+MPS=1 or MPC= 1-MPS or MPS=1-MPC
Meaning of involuntary unemployment and full employment.

➢ Involuntary unemployment refers to a situation in which people are ready to work at prevailing
wage rate, but do not find work.
➢ Full employment refers to a situation in which no one is unemployed i.e.…there is no involuntary
unemployment.
➢ Ex ante investment is the planned investment which the planner intends to invest at different level
of income and employment in the economy.
➢ Ex ante savings refers to the planned saving at different level of income in the economy.
➢ Ex post investment refers to the realised or actual investment in an economy during the year. It is
the total of planned investment and unplanned investment.
➢ Ex post savings refers to the realised or actual savings in an economy during the year. It is the total
of planned savings and unplanned savings.
Excess Demand (Inflationary Gap):

Excess Demand-When in an economy, aggregate demand exceeds “aggregate supply (AD>AS) at
full employment level”, the demand is said to be an excess demand.
Inflationary gap is the gap showing excess of current aggregate demand over ‘aggregate demand
at the level of full employment’. It is called inflationary because it leads to inflation (continuous
rise in prices)
Excess Demand:- Inflationary Gap (AD>AS) (ADP= Planned AD >ADF =Full Employment AD)
Reasons or causes for excess demand:

(a) Increase in household consumption demand due to rise in propensity to consume.
(b) Increase in private investment demand because of rise in credit facilities.
(c) Increase in public (government) expenditure.
(d) Increase in export demand.
(e) Decrease in Imports
Measures to control the excess demand:

We can control the excess demand with the help of the following policy:
(A) Monetary Policy (B) Fiscal Policy
(A) Monetary Policy: Monetary policy is the policy of the central bank of a country to control
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money supply and availability of credit in the economy. The central bank can take the following
steps:
Quantitative Instruments or General Tools of Monetary Policy: These are the instruments of
monetary policy that affect overall supply of money/credit in the economy. These instruments
do not direct or restrict the flow of credit to some specific sectors of the economy. They are as
under
1-Bank Rate: - It refers to the rate at which the central bank lends money to commercial banks
for long term.
2-Repo Rate – The rate at which the RBI offers short period loans to the commercial banks by
buying the govt. securities in open market.
3-Reverse Repo Rate- The rate at which the RBI accept deposits from the commercial banks
(through govt. securities). It is a Reverse Repurchase Rate.
4- Cash Reserve Ratio (CRR): It refers to the minimum percentage of net demand and time
liabilities to be kept by commercial banks with central bank.
5-Statutory Liquidity Ratio (SLR): It refers to minimum percentage of net demand and time
liabilities which commercial banks required to maintain with themselves in legal assets.
(Currency, Gold, Bonds)
❖ Central Bank increases the bank rate/ Repo Rate/ Reverse Repo Rate/ Cash Reserve Ratio
/Statutory Liquidity Ratio-during inflation
Rise in bank rate/ Repo Rate/ Reverse Repo Rate/ Cash Reserve Ratio /Statutory Liquidity
Ratio
Rise in Market Rate of Interest → Rise in Cost of Credit → Fall in demand for Credit → Fall in
Supply of Money → Inflation is controlled
It sells government securities during inflation/excess demand
Sale of Securities → Soaks Liquidity and leads to fall in cash reserves of the comm. Banks →
Fall in Credit creation → Fall in Money Supply → Inflation is controlled
7-MARGIN REQUIREMENTS: It is the difference between the amount of loan and market value
Margin requirements are increased during inflation.
Banks→
Fall in Money supply →Inflation is controlled
(B) Fiscal Policy: A general government can take the following steps:
Revenue Policy (Increase Taxes):
-During inflation the government impose higher amount of taxes causing the decrease in
purchasing power of the people.
-It is so because to control excess demand we have to reduce the amount of liquidity from the
economy.
Expenditure Policy -Government invest huge amount on public works like roads, buildings,
irrigation works, etc.
During inflation, government should curtail (reduce) its expenditure on public works like roads,
buildings, irrigation works thereby reducing the money income of the people and their demand
for goods and services.
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Increase in Public Borrowing/Public Debt:
This measure means that government should raise loans from public and hence borrowing
decreases the purchasing power of people by leaving them with lesser amount of money. So,
government should resort to more public borrowing during excessive demand.
Deficient Demand or Deflationary Gap:

Deficient Demand- When in an economy, aggregate demand falls short of aggregate supply
(AD<AS) at full employment level, the demand is said to be a deficient demand.
Deflationary gap is the gap showing Demand deficient of current aggregate demand over
‘aggregate Demand at the level of full employment’. It is called deflationary because it leads to
deflation (continuous fall in prices).
Reasons or causes for deficient demand:

(a) Decrease in household consumption demand due to fall in propensity to consume.
(b) Decrease in private investment demand because of fall in credit facilities.
(c) Decrease in public (government) expenditure.
(d) Decrease in export demand.
(e) Increase in Imports.
Measures to Control the deficient demand:

We can control the deficient demand with the help of the following policies:
(A) Monetary policy (B) Fiscal policy
Let us discuss it in detail:
(A) Monetary Policy: Monetary policy is the policy of the central bank of a country of controlling
money supply and availability of credit in the economy. The central bank takes the following
steps:
(i) Quantitative Instruments or General Tools of Monetary Policy: These are the instruments
of monetary policy that affect overall supply of money/credit in the economy. These instruments
do not direct or restrict the flow of credit to some specific sectors of the economy. They are as
under:
Central Bank decreases the Bank rate/ Repo Rate/ Reverse Repo Rate/ Cash Reserve Ratio
/Statutory Liquidity Ratio-during deflation
Fall in Bank rate/ Repo Rate/ Reverse Repo Rate/ Cash Reserve Ratio /Statutory Liquidity
Ratio
Fall in Market Rate of Interest → Fall in Cost of Credit → Rise in demand for Credit → Rise in
Supply of Money → deflation is controlled
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RBI buy government securities during deflation/deficient demand.
Purchase of Securities → Release Liquidity and leads to rise in cash reserves of the comm.
Banks → Rise in Credit creation → Rise in Money Supply → Deflation is controlled
7-MARGIN REQUIREMENTS: It is the difference between the amount of loan and market value
Margin requirements are increased during inflation and decreased during deflation.
Banks→
Fall in Money supply →Inflation is controlled
(B) Fiscal Policy: A general government can take the following steps:
Revenue Policy (Decrease Taxes):
-During Deflation the government reduce amount of taxes causing the increase in purchasing
power of the people.
-It is so because to control deficient demand we have to increase the amount of liquidity in the
economy.
Expenditure Policy - During deflation, government should increase its expenditure on public
works like roads, buildings, irrigation works thereby increasing the money income of the people
and their demand for goods and services.
Decrease in Public Borrowing/Public Debt:
This measure means that government should reduce borrowing from public .
EXCESS DEMAND DEFICIENT DEMAND

REASONS REASONS
Increase in consumption. Decrease in consumption.
Increase in Autonomous consumption. Decrease in Autonomous consumption.
Increase in Government expenditure. Decrease in Government expenditure.
Increase in money Supply. Decrease in money Supply.
EFFECT EFFECT
1.Rise in price of goods 1. Fall in price of goods
2.Producer gets abnormal profit 2.Producer incurs losses
3.Purchasing power decreases 3.Purchasing power increases
4.wage price spiral 4.low level equilibrium trap
MEASURES EXCESS DEMAND DEFICIENT DEMAND

FISCAL POLICY (BY GOVERNMENT)
1.GOVERNMENT EXPENDITURE Decrease(˅) Increase(˄)
2.GOVERNMENT Increase(˄) Decrease(˅)
REVENUE(TAXES)
3.PUBLIC BORROWINGS Increase(˄) Decrease(˅)
4.DEFICIT FINANCING Stop Starting
MONETARY POLICY (BY THE RBI)
1. Bank Rate Increase(˄) Decrease(˅)
2. Repo Rate Increase(˄) Decrease(˅)
3. Reverse Repo Rate Increase(˄) Decrease(˅)
4. Open Market Operations Sale of Securities Purchase of Securities
5. CRR (Case Reserve Ratio) Increase(˄) Decrease(˅)
6. SLR (Statutory Liquidity Ratio) Increase(˄) Decrease(˅)
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7. Margin Requirement. Increase(˄) Decrease(˅)
Questions /Answers
1. Suppose the economy is in the grip of recession due to COVID-19. To overcome the recession,
the government undertakes a new project with huge investment. Justify the step undertaken by
the government.
Answer: - The government has taken a good the step in the right direction to deal with the
problem of recession. The high investment project will generate large employment opportunities,
which in turn will lead to higher incomes, due to which the demand for goods and service will
increase, lending to more production, more employment, more income generation etc.
OR
Increase Investment » increase Employment opportunity » increase income » increase Demand of
goods and services » Increase production » Increase investment
2. Indian economy is in the grip of rising prices, is adversely affecting the poor. Suggest two
measures to promote social welfare.
Answers:-
First way- Would be to tax the incomes of the richer section heavily and utilize the revenue thus
raised on many welfare schemes, like free education, free meals, free medical services etc.
Second Way- Rationalization of government expenditure towards the poor section of the society
which increase their welfare.
3.Mumbai: India’s economic recovery has been swift since the unlock began — with cars,
motorcycle, and television sets flying off the shelves — holding out promise of a return to 9%
economic growth if the administration executes flawlessly on policy decisions, said Aditya Puri,
the outgoing chief executive of HDFC Bank. The Economic Times Oct 21,
2020,
State and discuss any two fiscal measures that may be taken by the Government of India to correct
the situation indicated by Aditya Puri, the outgoing chief executive of HDFC Bank.
Answer: Revenue Policy (Decrease in Taxes) :
(i) Revenue policy is expressed in terms of taxes.
(ii) During deflation the government will impose lower amount of taxes so that purchasing
power of the people be increased.
(iii) It is so because to control deficient demand we have to increase the amount of liquidity in
the economy.
(B) Expenditure Policy (Increase in Expenditure):
(i) Government has to invest huge amount on public works like roads, buildings, irrigation
works, etc.
(ii) During deflation government should increase its expenditure on public works like roads,
buildings, irrigation works thereby increasing the money income of the people and their demand
for goods and services.
4. The government of India has introduced 20 Lac crore rupees packages for the economy during
the period of Covid-19. What are the implication of this statement?
Answer- 20 Lac Crore rupees packages expected increase the cash flow in the economy. It means
increase in AD for Goods and services. It is hoped that increase in AD would break the slow
industrial growth in the economy. With the rise in industrial production, GDP growth rate is also
expected to rise.
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5. All govt. departments told to cut expenses by 60% amid corona virus outbreak.
Each department has to make the “savage cuts” by redoing the Budget maths.-
-Business Standard
Based on the information given in news article explain the impact of the cuts in expenditure of
government department on the economy of the country.
Answer- Cuts in government expenditure will reduce revenue expenditure. Hence revenue deficit
will be reduced and the tax amount can be diverted for increasing capital expenditure which will
create further job opportunities and employment.
6. The aggregate demand in an economy is equal to aggregate supply. Can it be said that economy
has achieved full employment equilibrium?
Answer- No, it is not necessary that when AD=AS then there is full employment equilibrium as
AD=AS can be at full employment, below full employment or above full employment.
UNIT-4 (6 Marks)
GOVERNMENT BUDGET AND THE ECONOMY
MEANING OF BUDGET
It is the statement of the estimated receipts and expenditure of the Government during the
period of the financial year.
OBJECTIVES OF GOVERNMENT BUDGET: -
1.REDISTRIBUTION OF INCOME AND WEALTH: -

➢ Government tries to reduce inequalities of income and wealth in the economy through taxes and
expenditure to increase welfare.
➢ Government imposes high rate of tax on higher income group and low rate of tax on lower income
group. Government spent its income for the welfare of poor in the form of free education, medical,
cheaper housing etc.
2. Reallocation of Resources: - Govt. uses budgetary policy to allocate resources in the manner
such that there is a balance between the goals of profit maximization and social welfare. Gov. can
influence allocation of resources through: -
(i) Tax concession or subsidies: To encourage investment Gov. can give tax concession
subsidies to the producer. For example, Govt. discourage the production of liquor, tobacco
products etc. by imposing heavy taxes and encourage the use of Khadi Products by giving
subsidies.
(ii) Directly producing goods and services: if private sector does not take interest, gov can
directly undertake the production.
3. Economic Stability: - Government Budget is a tool to prevent economy from the inflation or
deflation and to maintain economic stability. Policy of surplus budget during inflations and deficit
budget during deflation helps to maintain stability of prices in the economy.
4. Managing Public Enterprises: - There are large number of public sector undertakings in the
economy. In Budget, Government makes various provisions to manage public sector undertakings.
5. Economic Growth: - The growth rate of the country depends on rate of saving and investment.
For this purpose, budgetary policy aims to mobilize sufficient resources for investment in the
economy. Therefore Govt. makes various provisions in the budget to raise overall rate of saving
and investment.
COMPONENTS OF BUDGET- The government budget is divided into two parts:
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REVENUE BUDGET-Revenue budget includes revenue receipts and revenue expenditure of the
government.
CAPITAL BUDGET – Capital budget includes capital receipts and capital expenditure of the
government.
REVENUE RECEIPTS: are those receipts which neither create liabilities nor reduce assets to the
government.
(A) Tax revenue:
Tax: - Tax is a compulsory payment to govt. without expectation of direct benefit to the tax
payers. There are mainly two type of taxes: -
Direct Tax Indirect tax

1. These taxes are imposed on These taxes are imposed on Goods
income and wealth. and services.
2. Its burden cannot be shifted Its burden can be shifted
3. The incidence of tax and impact of The incidence of tax and impact of
tax goes on same person. tax goes on different persons.
4. It is progressive in nature It is regressive in nature.
5-Example: income tax, corporate GST (CGST & SGST), Custom duty,
tax, wealth tax
(B)Non-tax revenue: Sources other than taxes are

1. Fees: - Paid to govt. for services which are generally for public interest. (Ex-School fees,
2. Platform ticket)
3. License and permit: - Paid to Govt. for granting the permission of doing certain things of
activities. Like driving license fees
4. Fines and Penalties: Those payments which are imposed on law breakers. (Ex. Traffic challan,
Late payment fee)
5. Escheats: It refers to claim of government on the property of a person who dies without
leaving behind any legal heir or a will.
6. Gifts and Grants: For example, Government receives gifts and grants from public, foreign
government and organizations.
7. Interest from state govt. etc.
8. Profits and dividend from Govt. enterprises and Govt. departmental enterprises like rail.
9. Special assessment: it refers to the payment made by owners of those properties whose value
has appreciated due to development activities of the government.
REVENUE EXPENDITURE: Neither creates assets nor reduces any liability of the government.
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EXAMPLE: Salaries, pensions, interest payments, subsidies, grants to state governments and
others, etc.
CAPITAL RECEIPTS: which either create liability for the government or cause reduction in
assets of the government.
(1) BORROWINGS: The government can borrow money from
➢ Open market (general public)
➢ Reserve Bank of India
➢ International organizations (like IMF, World Bank, etc.)
➢ Foreign governments.
Borrowings by the govt. are capital receipts as borrowings create liability for the government.
(2) RECOVERY OF LOANS AND ADVANCES:
➢ To state governments, foreign governments, public sector enterprises, private companies, etc.
➢ It is a capital receipt as it reduces the financial assets of the govt.
(3) DISINVESTMENT:
➢ It means selling of the shares of the public sector enterprises to private sector.
➢ It is a capital receipt as it reduces the assets of the government.
➢
CAPITAL EXPENDITURE: Either create asset or reduce liability of the government.
EXAMPLE: Expenditure on purchasing asset, land and buildings, equipment, purchase of shares,
repayment of loan, construction of roads, flyovers, etc.
EXPLANATION BOX
ITEMS EFFECT ON ASSET EFFECT ON LIABILITY
Revenue receipts No change No change
Revenue expenditure No change No change
Capital receipts Reduces Increases
Capital expenditure Increases Reduces
Types of Budget
Balance Budget: - A govt. budget is said to be balanced budget in which total receipts are equal
to Total Expenditure
Total Receipts = Total Expenditure
GOVT. RECEIPTS = GOVT. EXP
Surplus Budget: - Budget in which govt. receipts is greater than govt. expenditure.
GOVT. RECEIPTS > GOVT. EXP
Deficit Budget: - Budget in which govt. expenditure in greater than govt. receipts.
GOVT. RECEIPTS < GOVT. EXP
Budget Deficit: - It refers to a situation when Budget expenditure of the govt. is greater than
Budget receipts.
Budget Deficit = Total Expenditure-Total Receipts (when TE > TR)
Where Total expenditure = Revenue expenditure +capital expenditure
Total receipts = Revenue receipts +capital receipts
Types of Budget Deficit

A. Revenue Deficit: - It is excess of governments revenue expenditure (RE) over revenue
receipts (RR) during a Fiscal year.
Revenue Deficit = Revenue Expenditure (RE) - Revenue Receipts (RR)
Implication of Revenue Deficit
i) Increased revenue deficit shows the warning to govt. to reduce its day to day expenditure.
ii) Increased revenue deficit raises the loan liability of the govt.
iii) A high revenue deficit warns the Gov.to cut its expenditure or to increase tax and non tax
receipts.
iv) It increases inflationary pressure in the Economy.
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Measures to Reduce Revenue Deficit
(i)Reduce Expenditure: Government should take serious steps to reduce unproductive
expenditure.
(ii) Increase Revenue: Government should increase its receipts from various sources of tax and
non-tax.
Fiscal Deficit: - Fiscal deficit is the excess of total expenditure (revenue+ capital) over total
receipts excluding borrowings (revenue receipts + capital receipts other than borrowings)
during a given Fiscal year.
Implication/Significance: -
1. Fiscal deficit raises the inflation. Government take loan from RBI to meet its borrowings. It
increases the money supply in the economy. So, inflation arises.
2. It increases the dependence on foreign country because gov also borrows from ROW
3. It effects the future growth and development because borrowings increase the financial
burden for future generations. It adversely affects the future growth.
4. It indicates greater borrowings and liability which may cause of a country in a debt trap.
Measures to Reduce Fiscal Deficit

1. Increase capital receipts other than borrowing.
2. Reduce non-development expenditure
3. Increase other revenue sources.
Primary Deficit: - It is the difference between fiscal deficit and interest payment.
Primary Deficit = Fiscal Deficit – Interest payments
Implication/Significance: -
1.It indicates govt. borrowing on account of current year expenditure and current year receipts.
QUESTIONS
1-Government budget is a:
(A) Statement of actual receipts of the government during a fiscal year.
(B) Statement of actual annual expenditure of the government during a fiscal year.
(C) Statement of estimated annual receipts and estimated annual expenditure of the government
during a fiscal year.
(D) None of these
2-Which of the following is the objective of a government budget?

(A) Redistribution of income and wealth (B) Re allocation of resources
(C) To accelerate GDP (D) all of the above
3-Government budget shows estimated expenditure of the government in terms of

(A) Consumption expenditure (B) Investment expenditure
(C) Transfer payments (D) All of these.
4-Public goods are those goods

(A) Which satisfy collective needs of the people?
(B) Which satisfy needs of the government?
(C) Which are available only to those people who are below poverty line
(D) None of these?
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5-Revenue budget includes
(A) Revenue receipts of the government (B) Revenue expenditure of the government
(C) Capital receipts of the government (D) Both A and B
6-The focus of government budget is

(A) To maximize fiscal deficit (B) To minimize fiscal deficit
(C) To maximize expenditure (D) To maximize revenue
7. The focus of government budget is offered by the government

(A) To increase the production of certain goods
(B) To discourage the production of certain goods
(C) To increase the consumption of certain goods
(D) Both A and C
8. Budget receipts refer to

(A)Estimated capital receipts of the government from old sources during a fiscal year
(B)Estimated money receipts of the government from all sources during a fiscal year
(C)Actual capital receipts of the government from all sources during a fiscal year
(D)Actual money receipts of the government from all sources during a fiscal year
9. Those receipts which do not create any corresponding liability for the government are called
(A) Revenue receipts (B) Capital receipts (C) General receipts (D) Both A and B
10. Capital receipts:

(A) Do not create any liability for the government
(B) Do not cause any reduction in assets of the government
(C) Cause reduction in assets of the government
(D) Both A and B
11. Borrowing by the government is

(a) A revenue receipts (b) Capital receipt (c) Revenue expenditure (d) Capital expenditure
12 Tax is:
(A) An optional payment (B) A compulsory payment (C) Legal payment (D) Both B and C
13 In case of indirect taxes

(A) The final burden of the tax is bone by the person on whom it is imposed
(B) The burden of tax can be shifted to any other person
(C) The burden of tax cannot be shifted to any other person
(D) Both A and C
14. Purchase of shares is related to

(A) Revenue receipts (B) Revenue expenditure (C) Capital receipts (D) Capital expenditure
15 Estimated expenditure of the government which causes a reduction in liabilities of the

government is called
(A)Revenue expenditure (B) Capital expenditure
(C) Plan expenditure (D) Non plan expenditure
16 which of the following is an item of revenue expenditure

(A) Constructions of a school (B) Interest payment
(C) Repayment of loan (D) Expenditure on land and building
17 Disinvestment refers to
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(A) Addition to the existing stock of capital (B) Withdrawal of existing investment
(C) Balancing the existing stock of capital (D) None of these
18 Which of them is a Plan Expenditure?

(A) Expenditure on salaries
(B) Expenditure on subsidies
(C) Expenditure on relief to the earthquake victims
(D) Expenditure on the construction of a hospital
19. In case of budget deficit

(a) Budget expenditure of the government equals to budget receipts of the government
(b) Budget expenditure of the government more than budget receipts of the government
(c) Budget expenditure of the government less than budget receipts of the government
(d) None of these
20. Excess of revenue expenditure over revenue receipts is called

(A) Revenue deficit (B) Fiscal deficit (C) Primary deficit (D) None of these
21. Revenue deficit can be managed through

(A) Borrowing from RBI (B) Disinvestment
(C) Borrowing from the general public (D) All of these
22. Fiscal deficit is an estimate of

(A) Instability of the economy (B) Borrowing by the government
(C) Growth of the economy (D) All of these
23. Gross fiscal deficit :

(A) Borrowing from RBI + borrowing from abroad + net borrowing at home
(B) Borrowing from the government + borrowing from RBI + borrowing from abroad
(C) Borrowing from the government + borrowing from abroad + net borrowing at home
(D) Borrowing from the government + borrowing from abroad
24. Fiscal deficit :

(A) Total expenditure - total receipts
(B) Total expenditure - total receipts other than borrowing
(C) Total expenditure - total revenue receipts
(D) Total expenditure - total receipts other than interest payment
25. Primary deficit=

(A) Revenue deficit - interest payment (B) Fiscal deficit - interest payment
(C) Revenue deficit + interest payment (D) Fiscal deficit + interest payment
ANWERS (Multiple choice questions)

Q ANS Q ANS Q ANS Q ANS Q ANS
1 C 6 B 11 B 16 B 21 D
2 D 7 D 12 D 17 B 22 B
3 D 8 B 13 B 18 D 23 A
4 A 9 A 14 D 19 B 24 B
5 D 10 C 15 B 20 A 25 B
Fill in the blanks

1. Primary deficit is the difference between______ and interest payment.
2. If in an economy the estimated receipts of the government during a year are lesser than the
estimated expenditure the budget would be called ------------------- budget.
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3. Dividends received from public sector undertakings are a part of the government's
(Capital receipts/ Non -tax revenue receipts)
4. GST is an/a ___ _______tax (Direct / Indirect)
5. Fees license and permit are____________ revenue receipts (Tax /Non tax)
6. _______does not create any asset for the government. (Revenue expenditure /capital
expenditure)
7. _________ budget focus on GDP growth by way of public investment. (Revenue /Capital)
Answer Key
1 Fiscal deficit 2. Deficit 3 Non tax revenue receipts
4. Indirect 5.Non tax 6. Revenue expenditure 7. Capital
True or false: State whether the following statements are true or false:
1. Revenue budget impacts assets liability status of the government.
2. Regressive tax system causes a greater real burden on the poor then the rich.
3. Revenue receipts lead to liabilities of the government.
4. Borrowing by the government is a capital receipt.
5. Tax is not a legal payment.
6. Non-Planned expenditure is not related to budgetary expenditure of the government.
7. Specific tax is not a value added tax.
8. Budget is presented by the finance minister for its approval by the parliament.
9. In a balanced budget government receipts are greater than government expenditure.
10. Surplus budget is not desired during periods of depression
11. High fiscal deficit points to the lack of fiscal discipline in the country.
Answer key
1 False 2.True 3.False 4. True 5.False
6. False 7.True 8.True 9. False 10. True 11. True
1-Deficit budget a sign of government inefficiency. Justify.

Answer: - No, Deficit budget is not a sign of government inefficiency. Infect, budgetary deficit may
be a planned strategy of the government during periods of depression when the government
needs to increase expenditure. It is only when expenditure increases that there is an increase in
aggregate demand which is required to combat depression.
2-Government raises it expenditure on producing public goods. Which economic value does it
reflect? Explain.
Answer: - When the government raises its expenditure on producing public goods. It has two
implications in terms of its economic value. First, it raises the level of Social Welfare as the people
are provided with more of roads, Park besides better law and order and defence of the country
Second it is expected to generate employment so that the growth process become inclusive.
3. What are the implications of revenue deficit? State two measures to reduce the deficit.
Answer: -
➢ Revenue deficit is related to revenue expenditure and revenue receipt of the government. High
revenue deficit gives a warning to the government either to cut its expenditure.
➢ To balance the revenue budget there are two measures
By increasing taxes It is possible when government will impose more direct and indirect tax on
people but it's not Helping tool as it is difficult to force the poor people to pay high taxes.
By reducing subsidy Government can control revenue deficit by reducing subsidy on those items
which are not significant for the weaker section of the society,
4-What one step can be taken through market to reduce the consumption of product harmful for
health?
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Answer: - Introducing heavy tax on such a product will substantially increase price of the
product which is expected to reduce its demand/ consumption.
5- Giving reasons classify the following into direct and indirect tax:
(i) Personal income tax (ii) Goods and services tax (iii) Corporation tax
Answer: -
(i) It is a direct tax because it falls directly on individuals. Its impact (liability to pay) and
incidence (actual burden) fall on the same person, i.e., its burden cannot be shifted.
(ii) It is an indirect tax because its impact (liability to pay) and incidence (actual burden) lie on,
i.e., payer and bearer of the tax is different people.
(iii) It is a direct tax because it falls directly on firms. Its impact (liability to pay) and incidence
(actual burden) fall on the same person, i.e., its burden cannot be shifted.
6- Categorise the following into revenue expenditure and capital expenditure. Give reasons.
(i) Grants to state governments (ii) Payment of salaries to staff of government hospitals
(iii) Purchase of cranes for the construction of flyovers (iv) Repayment of loan from IMF
Answer: -
(i) It is revenue expenditure because it neither creates any asset nor reduces liability of the
government.
(ii) It is revenue expenditure because it neither creates any asset nor reduces any liability of the
government.
(iii) It is a capital expenditure because it increases asset of the government.
(iv) It is a capital expenditure because it reduces the liability of the government.
7-Categories the following into revenue expenditure and capital expenditure. Give reasons.
(i) Investment in shares (ii) Subsidies
(iii) Construction of school building (iv) Defence services expenditure
(v) Repayment of loan with interest (vi) Grants to state governments for creation of assets
Answer: -
(i) It is a capital expenditure because it creates asset of the government.
(ii) It is revenue expenditure because it neither creates any asset nor reduces any liability of the
government.
(iii) It is a capital expenditure because it creates asset of the government.
(iv) It is revenue expenditure because it neither creates any asset nor reduces any liability of the
government.
(v) Repayment of the principal amount of loan is a capital expenditure because it reduces
liability of the government, but interest amount will be revenue expenditure because it neither
creates any asset nor reduces any liability of the government.
(vi) It is revenue expenditure because it neither creates any asset nor reduces liability of the
Central Government (since grants are given for creation of assets of state governments).
8-In the Government of India's budget, the finance minister proposed to raise the excise duty on
cigarettes. He also proposed to increase income tax on individual earning more than one crore per
annum. Identify and explain the types of taxes proposed by the finance minister. Was the objective
only to earn revenue for the government? What possible welfare objectives could the Government
is considering?
Answer: -
➢ Excise duty Indirect tax
➢ Indirect tax is a tax where the payer and the bearer of the tax are different people.
➢ Income tax Direct tax
➢ Direct tax is a tax where the payer and bearer of the tax is the same person.
Besides the objective of raising more revenue, the proposals also serve some welfare objectives:
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➢ Allocation of resources. Raising excise duty on cigarettes will make them more expensive. The
price rises expected to discourage cigarette smoking, which will positively impact the health of
people and raise their welfare.
➢ Redistribution of income: Raising income tax on income above 1 crore will reduce the gap between
the rich and poor people. In other words, income inequalities will reduce.
9-Do disinvestment and loan proceeds from abroad constitute revenue receipts of the
government? Give reason.
Answer:
(i) No, Disinvestment is capital receipts of the government as it leads to reduction in assets.
(ii) No "loan proceeds from abroad" are capital receipts of the government as it increases the
liabilities of the Government.
10-A large share of ……………………….. in fiscal deficit indicates that a large part of borrowing is
being used to meet the government's consumption expenditure needs rather than investment.
(Fill in the blank)
Answer: -Revenue deficit
11.-What is meant by surplus budget?
Answer: -Surplus budget is that budget in which government receipts are more than the
government expenditure.
12-Suppose you are a member of the "Advisory Committee to the Finance Minister of India". The
finance Minister is concerned about the rising Revenue Deficit in the budget. Suggest any one
measure to control the rising Revenue deficit of the government.
Answer: -
Measure to Control Revenue deficit: (any one)
(a) To reduce government administrative expenses.
(b) To reduce the burden of subsidy.
(c) To increase taxation.
13-"Fiscal deficit indicates the total borrowing requirements of the government from all sources."
Elucidate.
Fiscal deficit is the difference between the Government's budgetary expenditure and its budgetary
receipts excluding borrowings.
Answer: -The fiscal deficit will have to be financed through borrowings. Therefore,
Fiscal Deficit = Borrowings From the financing side:
Fiscal Deficit = Net borrowing at home Borrowing from RBI + Borrowing from abroad
Thus, it indicates the total borrowing requirements of the government from all sources.
14-"A large fiscal deficit leads to a higher revenue deficit in future.”Do you agree with the
statement? Give reasons in support of your answer.
Answer: -Yes, a large fiscal deficit leads to a higher revenue deficit in future.
Reason: A large fiscal deficit means large number of borrowings. This creates a large burden of
repayment of loans in future and interest payments. More interest payments will increase revenue
expenditure. Hence, revenue deficit in future will increase.
15-"Governments across nations are too much worried about the term fiscal deficit". Do you think
that fiscal deficit is necessarily inflationary in nature? Support your answer with valid reasons.
Answer: -The term fiscal deficit is the difference between the government's total expenditure and
its total receipts (excluding borrowing). Such borrowings are generally financed by issuing new
currency which may lead to inflation. However, if the borrowings are for the infrastructural
development-al purposes this may lead to capacity building and may not be inflationary
16. From the following data calculate Fiscal Deficit.
Solution:
Items (₹ in billion)
(i)Capital receipts net of borrowings 95
(ii)Capital Receipt 68
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(iii)Revenue Expenditure 160
(iv)Interest Payment 20
(v)Borrowings 32
(vi)Tax Revenue 50 Fiscal
(vii)Non-tax Revenue 10
deficit=Borrowings=₹ 32billion
17-.In a government budget, if revenue receipts are ₹100 crore, capital receipts are ₹50 crore and
revenue deficit is ₹25 crore, how much is the revenue expenditure?
Solution: Revenue deficit = Revenue expenditure - Revenue receipts
25 = Revenue expenditure - 100
Revenue expenditure = 25+ 100
= ₹125 crore
18-From the following data about a government budget find:

(a) Revenue deficit (b)Fiscal deficit and (c)Primary deficit:
Items (₹in
billion)
(i)Tax revenue 47
(ii)Capital receipts 34
(iii)Non-tax revenue 10
(iv)Borrowings 32
(v) Revenue expenditure 80
Solution: (vi)Interest payments 20
(a) Revenue deficit = Revenue expenditure –Revenue receipts (Tax revenue + Non-tax revenue)
=80-(47+10)
=80-57
=₹ 23 billion
(b) Fiscal deficit = Borrowings = ₹32 billion
(c) Primary deficit = Fiscal deficit - Interest payments

=32-20
=₹12 billion
19- “Through its budgetary policy government allocates resources in accordance with the
requirements of the country.” Do you agree with the given statement? Support your answer with
valid reasons.
Answer: -The given statement is true.
Reallocation of resources refers store-distribution of resources from one use to another. The
government reallocates resources with a view to balance the goals of profit maximization (by
firms) and social welfare (by government). Production of goods which are injurious to health is
discouraged through taxation. On the contrary, production of socially useful goods is encouraged
through subsidies. If the private sector does not take initiative in certain activities, government
directly controls the mike water supply, sanitation etc.
Unit-5 (6 Marks)
BALANCE OF PAYMENTS
Meaning of BOP
The balance of payments of a country is a systematic record of all economic transactions
between residents of a country and residents of foreign countries during a given period of time.
Structure of Balance of Payment Accounting

A balance of payments statement is a summary of a Nation‘s total economic transaction
undertaken on international account. There are two types of account.
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1. Current Account: It records the following 03 items.
(a) Visible items: It includes value of exports and imports of goods.
Balance of trade(Merchandise): Balance of trade is the difference between the money value of
exports and imports of material goods (visible item)
BOT= Value of Export of goods-Value of Imports of goods
(b)Invisible Items: It includes value of exports and imports of services. E.g. Shipping, insurance,
communication, Banking, medical tourism etc.
(c) Unilateral transfers: Unilateral transfers are one sided payments/receipts of a country
from/to rest of the world. Ex. Gifts, Grants, Donations.
Current account Balance of BOP= Balance of Visible items + Balance of Invisible Items+
Balance of
Unilateral transfers
Note- All the Exports/Receipts are recorded in credit side(Positive side) of BOP Current
Account.
All the Import/Payments are recorded in debit side(Negative side) of BOP Current Account.
2.Capital Account: It records all those transactions, between the resident of country and the
rest of the world, which cause a change in the assets and liabilities of the residents of country
and Government.
Components of Capital account

(1) Borrowing and lending: It may be
a. Market Borrowing – Borrowing at international market rate of interest.
b. External Assistance - Borrowing at concessional (less than market rate) rate of interest.
(2) Investments: It involves transactions of investments. There are two types of investments
abroad.
(i) Foreign Direct Investment: Foreign direct investment relates to ownership of enterprises in
domestic economy by rest of the world.
(ii) Portfolio Investment (FII): Portfolio investment basically refers to foreign institutional
investment. It is investment by rest of world in shares and bonds of the domestic companies.
3.NRI Deposits , Banking capital, Short term trade credit.
Differences between Current Account and Capital Account

Current Account Capital Account
it refers to an account which records all It r it records all those transactions,
the transactions relating to exports and between the resident of country and the rest
imports of goods and services and of the world, which cause a change in the
unilateral transfers during a given assets and liabilities of the residents of
period of time. country and Government.
Bring a change in the current level of a Bring a change in the capital stock of a
country’s income. country.
It is a flow concept. It is stock concept.
It includes visible, invisible items and It includes borrowings, lending’s and
unilateral transactions investment to and from rest of the world
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Differences between Autonomous items and Accommodating items of BOP
Autonomous items Accommodating items

1. Refers to those international Refer to the transactions that are
economic transactions which take undertaken to cover deficit or surplus in
place due to some economic autonomous transactions.
motive such as profit
maximization.
2. Independent of the state of BOP These are undertaken to maintain the
Account balance in BOP account.
3. Take place on both current and Take place only on capital account.
capital accounts.
4 These are also known as ‘above the These are also known as ‘below the line
line items. items.
Disequilibrium in the Balance of Payments

1.Surplus BOP –
Current account balance + capital account balance > Zero (positive)
2.Deficit BOP –
Current account balance + capital account balance < Zero (negative)
Causes of Disequilibrium of BOP
1. Economic factors: Large scale development expenditure, cyclical fluctuations.
2. Political factors: Political instability.
3. Social factors: Changes in tastes, preferences and fashions.
FOREIGN EXCHANGE RATE
1. Foreign Exchange: Foreign exchange refers to all the currencies of the rest of the world other
than the domestic currency of the country. For example, in India, US dollar is the foreign
exchange.
2. Foreign Exchange Rate: The rate at which one currency is exchanged for another is called
foreign exchange rate. Eg – 1$ = ₹ 80
3. Foreign exchange market: Foreign exchange market is the market where the national
currencies are converted, exchanged or traded for one another.
Types of Foreign Exchange Rate System
1. Fixed exchange rate System: Fixed Exchange rate system refers to the system in which the
rate of exchange for a currency is fixed by the government. There are two systems of exchange
rate
(i) Gold standard system of exchange rate: According to this system, gold was taken the
common unit of parity between currencies of different countries. Each country defined value of
its currency in terms of gold. E.g. 1 pound= 2g of gold and 1$ = 1g of gold. Then exchange rate
would be 1 £ = 2 $
(ii) The Bretton Woods system: Under this system, all currencies were related to U.S. dollar
which ultimately was convertible into gold. IMF worked as central institution in controlling the
system.
Merits of fixed exchange rate system-
1. Stability in the exchange rate
2. Promotes international investments
3. Promotes international Trade
4. Prevent Speculative Activities
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Demerits of fixed exchange rate system-
1. Huge gold reserves required
2. Discourage Venture capital
3. Restricts Economic growth
4. Fixed Exchange rate may not be the equilibrium rate
2. Flexible exchange rate system:

Flexible Exchange rate system refers to the system in which the rate of exchange for a currency
is determined by the market forces of Demand and supply of foreign exchange.
The exchange rate at which demand for foreign currency is equal to its supply is called par rate
of exchange, normal rate or equilibrium rate of foreign exchange.
Merits of flexible exchange rate system-

1. Gold reserves not required
2. Promotes International mobility of capital
3. Promotes Venture Capital in the international market.
4. Maintains equilibrium level.
Demerits:
1. Instability in the Exchange Rate.
2. Speculative Activities increases.
3. Creates Inflationary Situation.
Determination of flexible Exchange Rate

It is the Rate which is determined by the demand and supply of the currencies in the foreign
exchange market.
R= f(D,S) where R= exchange rate; D= demand of foreign currencies; S= supply of foreign
currencies
Sources of Demand for Foreign Exchange:
(i) Import of goods and services
(ii) Tourism
(iii) Remittances by foreigners working in India
(iv) Repayments of interest and loans
(v) Extension of loans to foreigners.
Sources of supply for foreign exchange

(i) Export of goods and services
(ii) Foreign tourists in India
(iii) Remittances by Indian working abroad
(iv) Foreign direct investment by multinational companies
(v) Purchase of shares by foreign investors
(vi) Deposits by Non-resident Indians
Determination of equilibrium rate of Foreign exchange (Flexible)

Equilibrium rate of exchange is established at a point where the quantity demanded and the
quantity supplied of foreign exchange are equal. This can be shown through the following
diagram
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Y S$
Rate
P
E
D$
O X
Q
Demand and supply of $
Point E indicates equilibrium exchange rate where demand for dollar equals to that of the supply
of dollar.
Managed Floating Rate System:

It refers to system in which foreign exchange rate is determined by the market forces and central
bank influences the exchange rate through intervention in the foreign market.
It is hybrid of a fixed exchange rate and flexible exchange rate. in this system central bank
interfere in foreign exchange market to control fluctuations. It is also known as a dirty floating.
Currency Depreciation (Domestic): It refers to decrease in the value of domestic currency in

terms of foreign currency. It makes the domestic currency less valuable. For example if 1$= Rs.
80 and it become 1$= Rs. 85 than it will be called depreciation of rupee In terms of Dollar.
In the case of depreciation of domestic currency the demand of domestically produced goods
will increase in rest of the world because they become cheaper in rest of the world. So the export
of the country will increase and the goods made in rest of the world become expensive so their
demand will decrease and import will decrease.
Currency Appreciation: it refers to increase in the value of domestic currency in terms of

foreign currency. It makes the domestic currency more valuable. For example if 1$= Rs. 80 and it
become 1$= Rs. 75 then it will be called appreciation of rupee In terms of Dollar.
In the case of appreciation of domestic currency the demand of abroad produced goods will
increase in the country because they become cheaper. So the import of the country will increase
and the goods made in the country become expensive so their demand will decrease and export
will decrease.
Devaluation of domestic currency: it refers to reduction in the value of domestic currency by
the government. On the other hand, depreciation refers to fall in the value of domestic currency
in terms of foreign currency by the market forces of demand and supply.
Revaluation of domestic currency- it refers to increase in the value of domestic currency by the
government. On the other hand, Appreciation refers to rise in the value of domestic currency in
terms of foreign currency by the market forces of demand and supply.
Questions
1. What is the meaning of balance of payments?
2. Distinguish between current account and capital account.
3. What is the meaning of balance of trade?
4. Distinguish between autonomous and accommodating items.
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5. What do you mean by deficit in BOP account? Write its reasons.
6. What is exchange rate? Explain its three types.
7. Discuss the major reasons of demand of foreign exchange.
8. Discuss the major sources of supply of foreign exchange.
9. What is devaluation and revaluation of currency?
10. What is depreciation and appreciation of currency?
Indian Economic Development

Unit-6 (12 Marks)
Development Experience (1947-1990) and Economic Reforms Since 1991
Chapter-1 INDIAN ECONOMY ON THE EVE OF INDEPENDENCE
Indian economy before British rule-
➢ Agriculture was the main source of livelihood.
➢ India was known for handicraft industry.
Dada Bhai Naoroji, William Digby, Findlay Shirras, VKRV Rao, R C Desai were the notable
estimators of India’s per Capita Income and National Income.
Features of Indian economy on the Eve of Independence.
1. Agriculture sector on the eve of independence

➢ During colonial rule economy was primarily agricultural
➢ 85% people dependents on agricultural
➢ It suffered stagnation
➢ Agriculture productivity became low
Causes of stagnation of agriculture sector

➢ Permanent settlement or Zamindari system.
➢ Profits accruing out of agriculture sector went to the zamindars Instead of cultivators
➢ Zamindar collected rent regardless of the economic condition of the cultivators
➢ Revenue settlement was responsible for zamindar attitude.
➢ If they fails to do so, they may lost their rights.
➢ Both British govt. and Zamindars did nothing for the betterment of farmers.
➢ Low level of productivity due to Low level of technology, Lack of irrigation facilities
Commercialization of Agriculture–
➢ It means production of crops for sale in market rather than for self consumption. Like jute , cotton
etc .
➢ Farmers were given higher price for producing cash crops like cotton or jute, to feed raw material
to the British base industries.
➢ This resulted in shortage of food grains, which cause to frequent famines in India.
➢ Although farmers are getting higher price for their crops but their economic condition did not
improve.
2. Industrial Sector – Like agriculture, industrial sector of India could not develop.
(A) DE-industrialization of Indian handicraft industry : Two-fold motive of British govt were
-
(i) Mere exporter of raw material – To get raw material from India at cheap rates to be used by
upcoming modern industries in Britain.
(ii) Importer of finished goods – To sell finished products of British industries in Indian market at
high price.
(B) Reasons for Decay of indigenous handicraft industries -
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(i) Discriminatory Tariff Policy – This policy allowed (a) Free export of raw material from India
and free import of finished goods from Britain; (b) Heavy duty was imposed on the export of
Indian handicrafts.
(ii) Indian market was full of cheap finished goods from Britain and domestic goods couldn’t
compete with foreign cheap goods.
Adverse effect of decline of handicraft industry – Due to decline of handicraft industry there
was a high level of unemployment in country and resulted in over crowd of agriculture sector.
Many people engaged in agriculture sector due to this unemployment and to find livelihood in
agriculture sector. Second, Indian people depend on import of finished goods from Britain.
(C) Slow Growth of Modern Industry –

The growth rate of the new industrial sector and its contribution to the GDP remained very small
Modern Industries began to setup in India in the second half of nineteenth century, this
development was confined to the setting up cotton and jute textile mills These industries were
setup in the western part of the country, Maharashtra and Gujrat.
(D)Lack of capital goods industries- The Tata iron and steel company {IISCO}was incorporated
in 1907.There was no any capital good industry at that time.
(E) Limited role of the Govt. - The public sector was remained confined only to the railways,
power generation, communication, ports and some other departmental undertakings.
3. Foreign Trade - India was a trading nation before the advent of colonial rule. But due to
restrictive policies adopted by the colonial government, India’s foreign trade was affected
adversely. Foreign Trade conditions on the eve of independence were as follows:
(i) Export of primary products and import of finished goods – Exporter of primary products
such as raw silk, cotton, wool, sugar, indigo, jute etc. and importer of finished consumer goods like
cotton, silk, woollen clothes and capital goods like light machinery produced in Britain.
(ii) Monopoly control of Britain on foreign trade – More than half (>50%) foreign trade was
restricted to Britain. Opening of Suez Canal in 1869 gives speed to foreign trade with Britain.
(iii) Drain of Indian wealth – Due to excess exports of raw material from India to Britain, India
has a huge export surplus. However, export surplus was used to:
(a) Expenditure on office setup by British Govt. in India;
(b) Meet expenses of war fought by British government;
(c) To import invisible items.
4. Occupational structure on the eve of independence -

Occupational structures refers to distribution of working population across primary , secondary
and tertiary sectors.
Some following observations are -:
(1) Agriculture - the principal source of occupation on the eve of independence, about 70-75%
of working population was engaged in agriculture .
(2) Industry - A insignificant source of occupation, barely 10% of the working population in
India was engaged in manufacturing industries, mining , etc
(3) Services – only 15-20% of population was enganged in tertiary sector.
(4) Regional variation – The states of Tamilnadu, AndhraPradesh, Maharashtra, Kerala,
Karnataka and West Bengal witnessed a decline in dependency of workforce on agriculture sector.
However, at the same time states such as Orissa, Rajasthan and Punjab reported increase in the
share of workforce in agriculture.
5. Demographic conditions on the eve of Independence -
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First official Census of population of British India was made in 1881. 1921 is the year of great
divide. Before 1921 India was in the first stage of demographic transition. The second stage of
transition began after 1921. The features of demographic conditions were as follows:
(i) High birth and death rate- Birth rate refers to number of children born per thousand in a
year. Death rate refers to number of people dying per thousand persons in a year. Both birth rate
and death rate were very high as 48 and 40 per thousand respectively.
(ii) High infant mortality rate – It refers to infants dying before reaching one year of age per
thousand live births in a year. It was 218/1000.
(iii) Low life expectancy ratio – It refers to the average number of years for which people are
expected to live. It is based on the birth year, demographic factors, its age and gender. The life
expectancy was 44 years at the eve of independence.
(iv) Low literacy rate – Total literacy was less than 16 percent. Female literacy was about 7 %.
(v) Low standard of living and widespread poverty
(vi) Poor state of health facilities – Public health care facilities either unavailable or
inadequate. As a result air and water borne diseases were widespread.
6. Infrastructure on the eve of independence -

Under infrastructure, we include all those industries and services which are used to develop other
industries. Development of infrastructure during colonial rule was not to provide better facilities
to general public but serve the British interest only. We include the following under infrastructure:
(i)Railway – Railways introduce in 1850. First passenger train ran between Mumbai to Thane in
1853. Railway were developed to transport finished goods from Britain to the interior of the
colonial INDIA to widen the size of markets for the British products in India .
The railways were developed:
(a) To have effective check on the vast Indian economic territory,
(b) To make huge profit by linking railways with Indian ports.
(ii) Roads – Built primarily for the purpose of mobilizing the army within the country and send
raw material to the nearest port.
(iii) Communication System – Post and telegraph were developed to maintain law and order in
country. First stamp was released in 1952 and first telegraph line was started in 1953.
(iv)Ports- ports were developed to handle export of raw material to Britain and import of
finished goods from Britain.
Features of Indian Economy on the Eve of Independence –

(i) Colonial economy – Britishers exploited Indian economy to
(a)Facilitate growing British industries with the supply of raw materials from India;
(b)To encourage commercialization of agriculture.
(ii) Semi-feudal economy –

(a) The land settlement system gave birth to feudal relations between landlord and tenants.
(b) Establishment of modern industries led to creation of two classes – capitalist and labourers.
(iii) Backward Economy – The main reasons of backwardness are:

(a) Low level of productivity; (b) Low per capita income;
(c) Traditional methods of agriculture; (d) High birth rate and death rate;
(e) Mass illiteracy.
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(iv) Stagnant Economy – An economy with very low growth rate is termed as stagnant economy.
India’s growth of aggregate real output was (first half of 20th century) was less than 2% and Per
Capita Output was only 0.5%.
(v)Bleak Industrialization- industrial sector in India was well known for handicraft. But it was
destroyed by the discriminatory British policy. By the time of independence, small scale and
cottage industry were almost ruined. For capital goods requirements, we were dependent upon
import from Britain.
(vi)Limited Urbanization- At the time of independence bulk of the population of India lived in
villages. In 1948 , only 14% of population lived in urban areas while 86 % lived in rural areas.
Rural population lacked opportunities outside agriculture. This compounded their poverty.
8. Positive contribution of British rule -

(i) Introduction of Railways (ii) Better Education system
(iii) Effective administration. (iv) Modernisation of Monetary system
(v) Better means of communication (post and telegraph) and transportation
CHAPTER-2 INDIAN ECONOMY 1950-1990
Types of Economy –
Market or Capitalist Socialist or Centrally Mixed Economy

Economy Planned Economy
Factors of production Factors of production Government and private
owned and operated owned and operated by individuals owned and
by individuals. government. operated factors of
production;
Main motive to earn Main motive is social Main motive is both social
profit. welfare. welfare and to earn profit.
All decision taken by All decision taken by Govt. and the market forces
Market demand and Government/Government decide together what, how
supply (Price Committee or Commission. and for whom to be
Mechanism). produced.
➢ As a result, India adopted Mixed Economy System with best features of both capitalist and socialist
economy. Now India would be a socialist economy, with a strong public sector, but also with
private property and democracy.
➢ Planning – it is a plan to allocate limited resources which have alternative uses in an economy to
get pre-determined objective in given time.
➢ Plan period in India - India has completed 12 Five Year Plans and the Time Period of 12th Plan
was 2012-2017.
➢ Indian Planning Commission - The Planning Commission of India was established on 15th
March 1950. Chairman of planning commission is Prime Minister.
➢ The Planning Commission of India has now been dissolved in 2015 and replaced with National
Institution for Transforming India (NITI) Aayog.
Objectives / Common Goals of Planning in India –

(I) Growth – Increase in country’s capacity for production of goods and services. GDP is the
indicator of growth. Contribution of Primary, Secondary and Tertiary sector in GDP is known as
structural composition.
➢ An increase in stock of productive capital;
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➢ An increase in supporting services like infrastructure;
➢ An increase in the efficiency of productive capital and services.
(ii) Modernisation – To adopt new technology with change in social outlook i.e. women also have
same rights as men.
➢ Adoption of New Technology
➢ Change in Social Outlook
(iii) Self-reliance – Non-dependency on ROW for capital and new technology as well as self-
reliance in food grain production. To promote economic growth and modernization five-year plan
stressed on use of own resources in order to reduce our dependence on foreign countries.
(iv) Economic equity – Every Indian should meet basic needs like Food , shelter , Housing,
education ,health and sanitation, Improve standard of living of weaker section of society and
reducing regional inequalities and promote social justice. It is important to ensure that benefits of
economic prosperity are availed by all sections of society.
AGRICULTURE FEATURES, PROBLEMS, POLICIES AND LAND REFORMS
Importance of Agriculture in Indian Economy –
1. Main source of employment 2. Base of Industrialisation – As a supplier of raw material.
3. Supply of food grains 4. Importance in Foreign Trade
5.Contribution to Domestic Trade
Land Reforms - Land reforms refer to change in the ownership of holdings.

➢ It was done with the purpose of increasing agricultural production
➢ For equity in agriculture
Land Reform Measures –

1. Abolition of Intermediaries – Intermediaries, popularly known as Zamindars have been
abolished. Ownership rights have been given to the actual tillers. This has been done with a view
to stopping exploitation by the zamindars. Farmers are directly contacted with government.
2. Cooperative Farming – This was encouraged to enhance to bargaining power of small farmers.
Together they can by inputs at lower rates and can sell their products at a high price.
3.Tenancy Reforms.
Shortcomings of Land Reforms

➢ In some areas former zamindars continued to have large land holdings.
➢ In some cases, tenants were evicted and zamindars claim to be sole cultivators.
➢ Even after getting the ownership of land, the poorest of the agricultural labourers did not benefit
from land reforms.
Land Ceiling –
➢ Fixation of maximum size of land which would be owned by an individual.
➢ The concentration of land ownership in a few hands can be reduced.
➢ The progress was very slow and highly unsatisfactory due to poor enforcement of land ceiling law.
Data show that only less than 2% land has been declared surplus and only 1% of the total
cultivated area actually has been distributed among landless labourers. The reason behind the
failure of land ceiling law was:
➢ A large number of exemptions were granted from land ceiling law.
➢ Zamindars and big landlords succeeded to transferring a large area of land under the control of
their relatives.
➢ State delayed its implementation.
Consolidation of Land Holdings (Chakbandi) – Under this policy, a farmer is given one
consolidated land holding equal in area to all his split land holdings.
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New Agricultural Strategy : Green Revolution -
➢ Strategy related to increase agricultural production and productivity by using modern
technology and inputs like HYV seeds, pesticides and insecticides etc.
➢ Dr. Norman E Borlaug – Father of Green revolution
➢ Dr. M. S. Swaminathan – Father of Green revolution (In India)
Phases:
I Phase( Mid 1960s up to mid-1970s): The use of HYV seeds was restricted to the more affluent
states such as Punjab, Andhra Pradesh and Tamil Nadu. Further, the use of HYV seeds primarily
benefited the wheat growing regions only.
II Phase (Mid-1970s to mid-1980s): The HYV technology spread to a larger number of states
and benefited more variety of crops.
Achievements of Green Revolution –

1. Rise in Production and Productivity – As a result food grain production increased from 81.0
million tonnes in third five-year plan to 118.1 million tonnes in fifth five-year plan.,
2. Increase in Income / Marketable Surplus – Green revolution resulted in marketable surplus. It

refers to that part of agricultural produce which is sold in the market by the farmers after meeting
their own consumption requirements.
3. Change in Farmer’s Outlook – Commercialization of agriculture has caused a change in outlook

of the farmers. Now farmers are considering agriculture as a source of earning instead of
subsistence.
4. Buffer Stock of Food Grains – India is able to procured sufficient amount of food grains to build
a stock which can be used in tough times.
5. Decrease in the price of food grains
6. Benefit to low Income Group – As a result in the decrease in the price of food grains, those
people, who were spending a large proportion of their income on food grains, now had to spend
less.
7. Rural prosperity- After the green revolution, Rural people were able to maintain their living
standard and able to satisfy at least basic needs.
Shortcomings of Green revolution –
1. Increase in disparities between small and big farmers – The gulf between poor and rich
farmer has substantially risen over time. Poverty is widespread and indebtedness was extremely
high. Green revolution increases the economic inequality.
2. Risk of pest attack – The HYV crops are more prone to attack by pests. So, there was a risk that
small farmers who adopted this technology could lose everything in a pest attack.
3. Limited crops – Revolutionary rise in output is stick mainly with production of food grains.
There has been no similar rise in production of pulses and commercial crops like jute, cotton, tea
etc.
4. Regional imbalances – It was not uniform across all regions. In states like Tamilnadu, Haryana,
Maharashtra, Punjab, it made a remarkable impact. But in eastern UP, Bihar, MP and Odisha, its
impact was relatively insignificant.
5. Limited Farming Population – The benefits of green revolution eluded the marginal and small
farmers as inputs are beyond the reach of these farmers.
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Agricultural Subsidies- To assure availability of fertilizers and use of new technology at
reasonable price government is providing subsidy. India has been providing two types of
subsidies – (a) subsidy in agricultural inputs, (b) subsidy on food supplies to PDS. A current debate
is whether subsidy should be continue or not. Arguments are put forward both in favour and
against subsidy.
Favour –
1. Agriculture is a risky business.
2. Farmers are poor and can’t afford new technology and seeds.
3. Eliminating subsidy will increase income inequality.
4. Encourage use of new technology and HYV package.
Against –
1. Main benefit is taken by big farmers.
2. Technology is now adopted by all so it should be eliminated.
3. It does not benefit the target group and creating a huge burden on government.
CRITICAL APPRISAL OF AGRICULTURAL REFORMS
Advantages/Merits:
1. Land reforms and Green revolution are great achievements of India.
2. Substantial increase in agricultural productivity between 1950 to 1990.
3. India is now self-sufficient in food grain production.
4. Abolition of Zamindari system.
Drawbacks/Limitations:
1. Population depends upon agriculture is not decreased significantly.
2. Output Increases but workforce engaged in agricultural sector is not decreases and marginal
productivity of labour still negative in agricultural sector.
3. Industry and service sector failed to absorb agriculture sector workforce.
INDUSTRIAL POLICY, FEATURES AND PROBLEMS

➢ At the time of independence, India had a weak industrial base, poorly developed infrastructure.
➢ The variety of industries were very limited. Cotton and textile industries were mainly developed
in India.
➢ Only two well managed iron and steel firms – one in Jamshedpur and other in Kolkata.
INDUSTRIAL POLICY RESOLUTION, 1956

➢ On 30th April, 1956, a second Industrial Policy Resolution was adopted in India. IPR-1956 has the
following objectives:
➢ Development of machine building industrialization.
➢ Increase in rate of industrial development.
➢ Reduction in income and wealth inequality.
➢ Classification of industries into public and private sectors,
➢ Stress on the role of cottage and small-scale industries.
➢ Reduction in regional disparities,
CLASSIFICATION OF INDUSTRIES:- According to IPR-1956, the industries were reclassified in to
three categories.
Schedule A– In this schedule, 17 industries were included. (like Arms and Ammunition, Atomic
Energy, Railway Transport, Air Transport, Heavy and Core Industries, Oil Industries, Shipping
Industries, Iron and Steel Industries, Coal, Aircraft, Electricity Generation and Distribution).
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In the above 17 industries, Arms and Ammunition, Atomic Energy, Railway Transport, Air
Transport, Govt. will have its monopoly. New units of rest industries will be established by govt.,
whereas old privately-owned units will operate.
Schedule B – In this schedule, 12industries were included. (like Road Transports, Sea Transport,
Machine Tools, Fertilizers, Synthetic Rubber, Chemical Pulp, Aluminum, Minerals, Carbonizations
of coal, Antibiotic Drugs etc.) These industries will be established by govt. but if private sector
wants to establish unit, will be allowed.
Schedule C – Rest all industries, which have not been placed under schedule A and B, open for
private sector. This will be controlled by the government through licensing system under
Industrial (Development and Regulation) Act – 1951.
OUTCOMEs OF IPR-1956
➢ Scope of the public sector in India got widened.
➢ A clear-cut classification of industries done first time.
➢ Provision of compulsory licensing was enacted.
➢ The policy paved the way of development of public sector in India.
INDUSTRIAL LICENSING-. Industrial licensing was necessary for –

➢ To set up new industries.
➢ To expansion of existing one.
➢ To diversification of products.
As per under licensing system:
➢ No new industry was allowed to setup unless a license is obtained.
➢ Easy to obtained license for industrial setup in backward regions. These types of setups have also
given certain concession like tax benefits, water and electricity at low tariff etc.
➢ License to expand production or diversification of products was given only if the govt. was
convinced that there is a need of large quantity of goods in economy.
SMALL SCALE SECTOR IN INDIA
In 1955, the Village and Small-Scale Industries Committee (Karvey Committee) recognized the
importance of above said industries in rural development.
Cottage Industry - These industries are mostly traditional, producing traditional products by
employing traditional methods.
Small Scale Industries - These are defined in relation to capital investment in machines and
buildings. Presently, this limit is 5 crores. Some examples of small-scale industries are – Bakery
products, school stationary, water bottle, belt, paper bags, small toys, beauty products etc.
Features of small Scale Industries

1. Ownership is in single hand 2. Management involved in activities;
3. Labour intensive, Flexibility 4. Utilisation of locally available resources.
Role of Small Sector in Indian Economy

1. Provide Economic equality 2. Production of artistic goods;
3. Provide employment. 4. Provide more goods for exports.
Important points related to Small Scale Industries

➢ Government reserved a large number of products (836 in many steps) for small scale industries
to protect them from large scale industries.
➢ Various types of concession given to the SSIs such as lower excise duty, bank loan at a lower rate,
tax benefits, water and electricity supply at a lower rate etc.
PRINCIPAL FEATURES OF THE STRATEGY OF INDUSTRIAL GROWTH DURING 1950-90
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➢ Public sector played a crucial role in industrialization.
➢ Private sector played a secondary role.
➢ Focused on Import substitution and self reliance target achievement.
➢ Domestic industries to be protected.
➢ Large scale industries were developed with a view to develop infrastructure.
➢ Small Scale industries were developed with a view to achieve objectives of equity and
employment.
CRITICAL APPRAISAL OF INDUSTRIAL DEVELOPMENT (1950-90)
POSITIVE /GOOD EFFECT / GAINS

1. Economic Growth – Contribution of industrial sector in GDP increases from 11.8% in 1950-51
to 24.6% in 1990-91. The 6% annual growth rate of industrial sector with structural reforms
during the period is also admirable.
2. Diversification – There is diversification of industries with Industrial development. Indian

industries are now included a wide range of consumer as well as engineering goods.
3. Establishment of large-scale industries: Establishment of Large-Scale Industries during the

period of 1950-90.
4. Promotion of small-scale industries – It gave opportunity to people with small capital to get
in to production process. SSI made substantial achievement to achieve growth with social justice
and equity in addition to employment generation.
NEGATIVE / BAD EFFECTS / LOSS

1. Monopoly of Public Sector – Industries, which can be handles with the private operators (like
telecommunication, hotel industry etc.) also given to the public sector which channelize precious
fund to these industries.
2. Inward Looking Trade Strategy – This policy stopped industries to develop a strong export
sector and focused only to develop domestic industries.
3. Lack of Competition – Due to excessive protection to the domestic industries and restrictions
on imports, domestic industries failed to achieve international standard of product quality.
4. Licensing Policy – It was misused by some industrial houses to get license not for production
but for to prevent competitors from starting new firms.
INWARD LOOKING TRADE STRATEGY /(IMPORT SUBSTITUTION STRATEGY)

In the first seven plans, trade was characterised by what is commonly called an inward-
looking trade strategy. Technically, this policy is called Import Substitution Policy.
Import Substitution - It refers to a policy of replacement or substitution of imports by domestic

production. In other words, it is a process to produce the alternate or close substitute of imported
goods in the country itself.
Export Promotion – It is a strategy to earn foreign exchange by promoting the export of domestic
goods and making domestic industry competitive in the international market
Need for Import Substitution –
1. Scarcity of foreign exchange
2. Un-favourable balance of Trade,
3. Need for industrial development,
4. To protect domestic goods
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Objectives of ILTS - The three definite objectives of this policy was:
1. Savings of Foreign Exchange Reserve;
2. Increase in self-sufficiency.
3. Utilisation of Foreign Exchange Reserves in importing developmental goods.
Protection from imports through Tariffs and Quotas –

Tariffs – It refers to taxes imposed on imported goods. The basic aim for imposing heavy duty on
imported goods was to make them more expensive and discourage their use.
Quotas – it refers to fixing maximum limit (quantity) on the imports of a commodity by a domestic
producer.
Chapter-3 Liberalisation, Privatisation and Globalisation: An Appraisal
In 1991, the government of India initiated a series of economic reforms due to a financial crisis
and pressure from international organisations like World Bank and IMF. These reforms came to
be known as the New Economic Policy (NEP).
Need for Economic Reforms

1. Fall in foreign exchange reserves: In 1991, India met with a foreign exchange or external debt
crisis.
(A)The government was not able to make repayments on its borrowings from abroad.
(B)The foreign exchange reserves declined to a level that was not adequate-
➢ To finance imports for more than two weeks and
➢ To pay the interest that needs to be paid to international lenders.
2. Financial crisis: The origin of the financial crisis can be traced from the inefficient management
of the Indian economy in the 1980s.
(A) Development policies required that even though the revenues were very low, the government
had to overshoot its revenue to meet challenges like unemployment, poverty and population
explosion. The continued spending on development programmes of the government did not
generate additional revenue.
(B)Moreover, the government was not able to generate sufficient revenue from internal sources
such as taxation.
(C)The income from public sectors undertakings (PSUs) was also not very high to meet the
growing expenditure.
Hence our foreign exchange, borrowed from other countries and international financial
institutions, was spent on meeting consumption needs.
3.Mounting government debts: In the late 1980s, government expenditure began to exceed its
revenue by such large margins that meeting the expenditure through borrowings became
unsustainable.
4.Adverse Balance of Payments: Imports grew at a very high rate without matching growth of
exports. Slow growth of exports was due to low quality and high prices of Indian goods in the
international market. Also, no sufficient attention was given to boost exports to pay for the
growing imports.
5.Rising prices of essential goods: Prices of many essential goods rose sharply due to
inefficiencies in private as well as public sector production and high tariffs even on essential
imports.
To manage the economic crisis in 1991, India approached the International Bank for
Reconstruction and Development (IBRD), popularly known as World Bank and the International
54 | P a g e
Monetary Fund (IMF) and received $7 billion as loan. For availing the loan, India was required to
liberalise and open up the economy by
➢ Reducing the role of the government in many areas (or Liberalisation),
➢ Removing restrictions on the private sector (or Privatisation) and
➢ Removing trade restrictions between India and other countries (Globalisation).
➢ India agreed to the conditions of World Bank and IMF and announced the New Economic Policy
(NEP) in July 1991.
The New Economic Policy

This set of policies can broadly be classified into two groups:
❖ The stabilisation measures – these are short term measures to correct weaknesses in balance of
payment and to bring inflation under control.
❖ The structural reform measures – these are long term measures to improve efficiency of economy
and increase international competitiveness. The three broad components of NEP are –
Liberalisation, Privatisation and Globalisation.
Liberalisation :It refers to the removal or reduction of government controls and restrictions from
various sectors of the economy.
Need for Liberalisation: Prior to 1991, there were large number of government restrictions on the
entry and growth of private enterprises. Liberalisation was introduced to put an end to these
restrictions and open various sectors of the economy.
(1) Industrial Sector Reforms:

The various measures under industrial policy reforms include:
• Reduction in Industrial Licensing: Industrial licensing was abolished for almost all products
except alcohol, cigarettes, hazardous chemicals, industrial explosives, electronics, aerospace,
drugs and pharmaceuticals.
• De-reservation of public sector: The only industries which are now reserved for the public
sector are a part of defence equipment, atomic energy generation and railway transport.
• De-reservation of small-scale industries: Many goods produced by small-scale industries
have now been de-reserved.
• Removal of price control: In many industries, the market has been allowed to determine the
prices.
(2) Financial Sector Reforms (Banking Sector Reforms): Financial sector includes financial
institutions such as commercial banks, investment banks, stock exchange operations and
foreign exchange market. The financial sector in India is regulated through various norms
and regulations by the Reserve Bank of India (RBI). The RBI decides the amount of money
that the banks can keep with themselves, fixes interest rates, nature of lending to various
sectors, etc.
The reforms included under financial sector are:

➢ The role of RBI was shifted from regulator to facilitator of financial sector. This means that the
financial sector was allowed to take decisions on many matters without consulting the RBI.
➢ The reform policies led to the establishment of private sector banks, Indian as well as private.
➢ Foreign investment limit in banks was raised to around 50 percent.
➢ Those banks which fulfil certain conditions have been given freedom to set up new branches
without the approval of the RBI and rationalise their existing branch networks.
➢ Foreign Institutional Investors (FII), such as merchant bankers, mutual funds and pension funds
are now allowed to invest in Indian financial markets.
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(3) Tax Reforms (or Fiscal Policy Reforms): Tax reforms are concerned with the reforms in
government’s taxation and public expenditure policies. (Government’s taxation and public
expenditure policies are collectively known as its fiscal policy.)
Types of taxes: There are two types of taxes:

1. Direct taxes: consist of taxes on incomes of individuals, as well as, profits of business
enterprises. The burden of such taxes cannot be shifted. E.g. Income tax, wealth tax, corporate tax
etc.
2. Indirect taxes: are the taxes levied on commodities and services. The burden of these taxes can
be shifted to the consumers. E.g. GST
(Before 1990, tax rates were very high for both direct and indirect taxes)
The major tax reforms made are:

➢ Since 1991, there has been a continuous reduction in the taxes on individual incomes as it was felt
that high rates of income tax were an important reason for tax evasion.
➢ The rate of corporation tax, which was very high earlier, has been gradually reduced.
➢ Efforts have also been made to reform the indirect taxes, in order to facilitate the establishment
of a common national market for goods and commodities.
➢ In order to encourage better compliance on the part of taxpayers, many tax procedures have been
simplified and the rates also substantially lowered.
➢ Recently, the Indian Parliament passed a law, Goods and Services Act 2016, to simplify and
introduce a unified indirect tax system in India. This law came into effect from July 2017. This is
expected to generate additional tax revenue for the government, reduce tax evasion and create
‘one nation, one tax and one market.’
Note: ‘Goods and Services Tax’ is a comprehensive Indirect Tax which has replaced
many indirect taxes in India. The Goods and Services Tax Act was passed in the
parliament on 29th March, 2017 to simplify and introduce a unified indirect tax
system in India. The Act came into effect in 1st July, 2017. It is a comprehensive,
multi-stage, destination-based tax that is levied on every value addition. GST has
been identified as one of the most important tax reforms post-independence. The
government of India
implemented GST following the credo of ‘One Nation and One Tax’ and wanting a
unified market in order to ensure the smooth flow of goods and services across the
country. GST has replaced 17 indirect taxes (like Value Added Tax, Service Tax,
Excise duty, Sales Tax etc) 23 cesses of the Centre and States, thereby eliminating
the need for filing multiple returns and investments. It has rationalised the tax
treatment of goods and services along the supply chain from producers to
consumers.
(4) Foreign Exchange Reforms: Before 1991, Fixed exchange rate system was followed by the
RBI.
The major reforms made in the foreign exchange market are:
A. In 1991, as an immediate measure to resolve the balance of payment crisis, the rupee was
devalued against foreign currencies. (Devaluation refers to reduction in the value of domestic
currency with respect to foreign currency.) This led to increase in the inflow of foreign exchange
by making exports cheaper and more competitive.
B. It also led to freeing the determination of rupee value in the foreign exchange market from
government control. Now markets determine exchange rates based on the demand and supply of
foreign exchange.
(5) Trade and investment Policy Reforms: (Before 1991, India was following Import
substitution policy with high tariffs and quotas-a regime of quantitative restrictions on imports.
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These policies reduced efficiency and competitiveness which led to the slow growth of the
manufacturing sector.)
Trade and Investment policy reforms include:

A. Dismantling of quantitative restrictions (Quotas) on imports and exports- Quantitative
restrictions on imports of manufactured consumer goods and agricultural products were also
fully removed from April 2001.
B. Reduction tariff rates– Export duties have been removed to increase the competitive position of
Indian goods in the international markets and import duties have also been reduced.
C. Removal of licensing procedures for imports – Import licensing was abolished except in case of
hazardous and environmentally sensitive industries.
Privatisation: It implies shedding of the ownership or management of a government owned

enterprise and its transfer to the private sector.
Privatisation can be done in two ways:
(A) by withdrawal of the government from ownership and management of public sector companies
(Disinvestment)
(B) by outright sale of public sector companies (Complete privatisation)
Disinvestment :-Privatisation of the public sector undertaking by selling off part of the equity of
PSEs to the private sector/ public is known as disinvestment.
A. Improve financial discipline and facilitate modernisation.
B. It was also felt that private capital and managerial capabilities would be effectively utilized to
improve the performance of the PSU’s.
C. It was felt that privatisation could provide strong impetus (encouragement) to the inflow of FDI.
Note:
Strategic Disinvestment Sale: It refers to the sale of 51% or more stake of a PSU to the
private sector who bids the highest with the objective of improving efficiency so the
management control is with strategic partner.
Purpose of privatization/disinvestment: According to the government the purpose of
sale was mainly to-
Navraratnas (profit making PSU’s)

❖ In order to improve efficiency of PSUs, infuse professionalism and enable them to compete more
effectively in the liberalised global environment, the government choose nine PSUs and declared
them as maharatnas, navratnas and miniratnas
❖ They were given greater managerial and operational autonomy in taking various decisions to
run the company efficiently and thus increase their profits.
❖ Greater operational, financial and managerial autonomy has also been granted to profit making
enterprises referred to as miniratnas
❖ Few examples of public enterprises with their status are as follows
❖ Maharatnas - Indian Oil Corporation (IOCL), Steel Authority of India Limited (SAIL)
❖ Navratnas - Hindustan Aeronautics Limited (HAL), Mahanagar Telephone Nigam Limited
(MTNL)
❖ Miniratnas- Bharat Sanchar Nigam Limited (BSNL), Airport Authority of India (AAI) and Indian
Railway Catering and Tourism Corporation Limited (IRCTC).
Globalisation: Globalisation means integrating the economy of the country with the world
economy through removal of barriers on international trade and capital movements.
➢ It is an outcome of the set of various policies that are aimed at transforming the world towards
greater interdependence and integration.
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➢ It involves creation of network and activities transcending economic, social and geographical
boundaries.
➢ In short, Globalisation implies turning the world into one whole or creating a borderless world.
Outsourcing: Outsourcing is one of the important outcomes of the globalisation process.

Outsourcing refers to the hiring of regular services by a company from external sources, mostly
from other countries, which was previously provided internally or from within the country. E.g.
legal advice, computer service, advertisement, security- each provided by respective departments
of the company.
Outsourcing has intensified in recent times because of:

A. The growth of fast modes of communication, particularly the growth of Information Technology
(IT).
B. With the help of modern telecommunication links including the internet, the text, voice and
visual data in respect of these services is digitalised and transmitted in real time over continents
and national boundaries.
Factors that have made India one of the favourite outsourcing destination in the post
reform period are:
➢ Availability of skilled manpower in India and
➢ The low wage rates.
Some of the services outsourced to India include:

A. Voice-based business processes (popularly known as BPO or call centres)
B. Record keeping
C. Accountancy
D. Banking services
E. Music recordings
F. Film editing
G. Book transcription
H. Clinical advice etc
With increasing population and government’s inability to provide employment, outsourcing

services have proved to be a boon for countries like India which has skilled manpower available
at cheaper rates. Thus, India has been benefited from outsourcing in terms of generating
employment opportunities as well as it contributes to the GDP and foreign exchange reserves of
our country.
The developed countries are opposing it because the domestic workers have been replaced by the
workers in developing countries. It has resulted in the loss of jobs in favour of developing
countries. The domestic workers are struggling to find jobs especially with low skills. This is
leading to inequalities between the highly skilled persons and the lower ones (as highly skilled
persons are willing to work at lower wages).
Effects of Globalisation: The process of globalisation through liberalisation and privatisation

policies has produced positive as well as negative results both for India and other countries.
Positive effects: Globalisation resulted in -
1) Greater access to global markets;
2) High (advanced) technology and
3) Increased possibility of large industries of developing countries to become important players in
the international arena.
Negative effects: Globalisation has been criticised by some scholars because according to them:
1) Globalisation is a strategy of the developed countries to expand their markets in other countries.
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2) It has compromised the welfare and identity of people belonging to poor countries.
3) Market-driven globalisation has widened the disparities among nations and people.
World Trade Organisation (WTO):

WTO was founded in 1995 as the successor organisation to the General Agreement on Trade and
Tariff (GATT). GATT was established in 1948 with 23 countries as the global trade organisation to
administer all multilateral trade agreements by providing equal opportunities to all countries in
the international market for trading purposes.
Aim (Functions) of WTO:

1) To establish a rule-based trading regime in which nations cannot place arbitrary restrictions on
trade.
2) To enlarge production and trade of services.
3) To ensure optimum utilisation of world resources.
4) To protect the environment.
5) To facilitate international trade (bilateral and multilateral) through removal of tariff as well as
non- tariff barriers and providing greater market access to all member countries.
Relation between WTO and India: As an important member of WTO, India has been in the
forefront of framing fair global rules, regulations and safeguards and advocating the interests of
the developing world. India has kept its commitments towards liberalisation of trade, made in
the WTO, by removing quantitative restrictions on imports and reducing tariff rates.
Some scholars question the usefulness of India being a member of WTO. According to them:
1) A major volume of international trade occurs among the developed nations.
2) Developing countries feel cheated as they are forced to open their markets for developed
countries but are not allowed to access to the markets of developed countries.
Indian Economy During Reforms: An Assessment:
Positive effects of reforms:

1) The growth of GDP increased from 5.6% during 1980-91 to 8.2 % during 2007-12. During the
reform period, the growth of agriculture has declined, while the industrial sector reported
fluctuations, the growth of the service sector has gone up. This indicates that this growth is mainly
driven by growth in the service sector.
2) The foreign investment, which includes foreign direct investment (FDI) and foreign institutional
investment (FII) has increased from about US $100 million in 1990-91 to US $ 36 billion in 2016-
17.
3) There has been an increase in the foreign exchange reserves from about US $ 6 billion in 1990-91
to about US $ 321 billion in 2014-15. India is one of the largest foreign exchange reserve holders
in the world.
4) India is seen as a successful exporter of auto parts, engineering goods, IT software and textiles in
the reform period.
5) Rising prices have also been kept under control.
Negative effects of reforms:

The NEP has been widely criticised for not being able to address some of the basic problems
facing our economy especially in the areas of employment, agriculture, industry, infrastructure
development and fiscal management.
1. Insufficient Growth and Employment - Though the GDP growth rate has increased in the
reform period, scholars point out that the reform led growth has not generated sufficient
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employment opportunities in the country other than the service sector. This is known as ‘Jobless
growth’.
2. Neglect Agriculture - Reforms have not been able to benefit agriculture. The growth rate in
the agriculture sector has been decelerating in the reform period because:
➢ Public investment in agriculture sector especially in infrastructure, which includes irrigation,
power, roads, market linkages and research and extension has fallen in the reform period.
➢ The removal of fertiliser subsidy has led to increase in the cost of production, which has severely
affected small and marginal farmers.
➢ A number of policy changes such as reduction in import duties on agricultural products, removal
of minimum support price and lifting of quantitative restrictions on agricultural products have
adversely affected Indian farmers as they have to face increased international competition.
➢ The export-oriented policy strategies in agriculture have resulted in a shift from production of
food grains for the domestic market towards production of cash crops for exports there by putting
immense pressure on prices of food grains.
3. Inadequate Reforms in Industry: Industrial growth has also recorded a slowdown during
the reform period because of decreasing demand of industrial products due to various reasons
such as:
➢ Domestic manufacturers are facing competition from cheaper imports, which have replaced the
demand for domestic goods.
➢ The infrastructure facilities, including power supply, have remained inadequate due to lack of
investment.
➢ A developing country like India still does not have access to developed countries’ markets
because of non- tariff barriers. (For e.g. Although all quota restrictions on exports of textiles and
clothing have been removed in India, USA has not removed their quota restrictions on import of
textiles from India and China.)
➢ Effect of disinvestment: The assets of PSEs have been undervalued and sold to the public sector.
This means that there has been a substantial loss to the government. Moreover, the proceeds
from disinvestment were used to offset the shortage of government revenues rather than using
it for the development of PSEs and building social infrastructure in the country.
4. Fiscal Policy and Reforms: Economic reforms have placed limits on the growth of public
expenditure, especially in social sectors.
➢ The tax reductions in the reform period, aimed at yielding larger revenue and to curb tax
evasion, have not resulted in increase in tax revenue for the government.
➢ The reform policies involving tariff reduction have reduced the scope for raising revenue
through custom duties.
➢ Tax incentives provided to foreign investors to attract foreign investment, has further reduced
the scope for raising tax revenues.
TOPIC: GOODS & SERVICE TAX (GST)

➢ GST: The full form of GST is goods and services tax. It is an indirect tax which has replaced many
indirect taxes in India. The goods and service tax Act was passed in the parliament on 29th March
2017. The Act came into effect on 1st July 2017.
➢ Goods and service law in India is a comprehensive multi-stage. destination based tax that is levied
on every value addition. In simple words, GST is an Indirect Tax levied on the supply of goods and
services. This law has replaced many indirect laws that previously existed in India. GST is one
Indirect law for the entire country.
COMPONENTS OF GST:
➢ There are three taxes applicable under this system: CGST, SGST.IGST.
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➢ CGST is collected by central government on an intra state sales eg ;transactions happening
within Maharashtra.
➢ SGST is collected by State Government on an intra state sales eg: transactions happening within
Maharashtra.
➢ IGST is collected by the central government for the interstate sale eg: Maharashtra and Tamil
Nadu
GST RATES: - 0%, 5%, 12%, 18%, 28%
COMPOSITION OF GST COUNCIL:

As per Article 279A of the amended constitution the GST council which will be a joint forum of
the Centre and
States, shall consist of the following members:
➢ The Union Finance Minister… .............................................................. Chairperson
➢ The Union Minister of State Incharge of Revenue or Finance… ...........Member
➢ The Ministers incharge of Finance or Taxation or any other
➢ Minister nominated by the State Government .................................. Members.
WHAT CHANGES HAS GST BROUGHT IN?

In the pre-GST regime, every purchase including the final consumer paid tax on tax. This Tax on
tax is a cascading effect of taxes. GST has removed this Cascading effect as the tax is calculated
only on the value Addition at each stage of the transfer of ownership. This indirect tax system
under GST has improved the collection of taxes as well as boosted the development of the Indian
economy by removing the indirect tax barriers between States and integrating the country
through a uniform tax rate.
ADVANTAGES:
1. MITIGATION OF CASCADING EFFECT:
Under the GST administration, the final tax would be paid by the consumer for the goods
and services purchased. It is levied only on the value of the good or service.
2. ABOLISTION OF MULTIPLE LAYERS OF TAXATION:
The different indirect taxes like Central Excise, Service tax, sales tax etc. are consolidated
into one tax and that is GST. Instead of paying different taxes at different laves , now
consumer pays only one tax.
3. RESOURCEFUL ADMINISTRATION BY THE GOVERNMENT:
Previously Government had to collect several taxes and that was a complicated
procedure. However Under the GST establishment, the collection of tax has become easy
and it could be managed efficiently with the available resources.
4. EASE OF DOING BUSINESS:
With the implementation of GST, the difficulties in indirect tax compliance has been
reduced. Earlier companies faced problems concerned to registration of VAT, excise
customs etc. the benefits of GST helped the companies to carry out their business with
ease.
DISADVANTAGES:
1. IT INFRASTRUCTURE:
Most of the procedure of the GST is done on-line. Only a few states have implemented
the E-Governance model and therefore they face a lot of problem to comply with the
procedure of GST.
2. INCREASE IN BURDEN OF COMPLIANCE:
GST administration states that companies are required to register in all the states they
operate in. this increases the burden on the business of excessive compliance.
3. PETROLEIUM PRODUCTS DON’T FALL UNDER THE GST SLAB:
Petrol and petroleum products have not been included in the scope of GST until now.
States levy their taxes on this sector.
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4. COACHING OF TAX OFFICERS:
The government officers are not properly trained for the practical usage and
implementation of the GST Administration. It requires a lot of knowledge of
information technology.
CONCLUSION:
GST in India is a sweeping reform and the benefits of GST has changed the way
businesses are conducted. Businesses are being included in the formal economy through
GST implementation. It has provided long term returns for the Indian economy on a
large scale which have been welcomed as a new change by all
TOPIC: DEMONESTISATION
➢ Demonetisation is referred to as the process of stripping a currency unit of its status to be used as
a legal tender. In simple words, demonetisation is the process by which the demonetised notes
cease to be accepted as legal currency for any kind of transaction.
➢ After demonetisation is done, the old currency is replaced by a new currency, which may be of the
same denomination or may be of a higher denomination.
➢ The impact of changing the legal tender status of a currency unit has a huge impact on the
economic transactions that take place in an economy.
➢ Demonetisation can cause unrest in an economy or it can help in stabilizing the economy from
existing problems. Demonetisation is usually taken by a country for various reasons.
Demonetisation in India
➢ Demonetisation in India has taken place three times till now, namely in the years of 1946, 1978
and 2016. Let us have a look at all the three events.
➢ Demonetisation 1946 : The first demonetisation event happened in 1946, at that time the
denominations of Rs.1000 and Rs.10000 were removed from circulation.
➢ There was a visibly low impact of the demonetisation as the higher denomination currencies were
not available to the common people.
➢ In 1954, these notes were again introduced with an additional denomination of 5000.
➢ Demonetisation in 1978 : The second demonetisation in India took place in 1978, at that time the
Prime Minister was Morarji Desai. During the second demonetisation the denominations of 1000,
5000 and 10000 were taken out of circulation.
➢ The whole purpose of demonetisation was to reduce the circulation of black money in the country.
The announcement was made by Morarji Desai over the radio.
➢ Demonetisation in 2016: The latest demonetisation was announced on 8th of November, 2016 by
the Prime Minister Narendra Modi.
➢ During this demonetisation the notes that were taken out of circulation were the denominations
of 500 and 1000. PM Modi also introduced new currency of denominations 500 and 2000 after
demonetisation.
Objectives of Demonetisation:- The objectives of demonetisation are as follows:

1. To stop the circulation of black money in the market.
2. To help in reducing the interest rates of the prevalent banking system
3. To help in creation of cashless economy
4. To formalise the informal Indian Economy.
5. To remove counterfeit notes from the market.
6. To help reduce anti-social activities and their finances.
Benefits of demonetization:-
1. Increased savings :- People tend to to deposit their cash with bank and less store at home. This
help them save more.
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2. Lower lending rates :- money moves from people to bank and financial Institution. Bank and
financial institution have a lower cost of funds which translate into lower leading rates.
3. Better economy:- people deposit their cash with the bank which is used in development project.
4. Curbing anti-social activities :- usually, anti-social elements like smugglers and terrorist use
cash as a mode of transaction. Demonetisation allowed to government an opportunity to get a
better control over the unaccounted money in the economy and curb anti-social activities.
5. Reducing counterfeit currency notes and promotes cashless economy.
Unit-7 (20 Marks)

Current challenges facing Indian economy
HUMAN CAPITAL FORMATION: How people become resource; Role of human

capital in economic development; Growth of Education Sector in India
RURAL DEVELOPMENT: Key Issues- credit and marketing - role of cooperatives;
agricultural diversification; alternative farming- organic farming.
EMPLOYMENT: Growth and changes in work force participation rate in formal and
informal sectors, problems and policies.
SUSTAINABLE ECONOMIC DEVELOPMENT: Meaning, Effects of Economic
Development on Resources and Environment, including global warming.
CHAPTER-4 HUMAN CAPITAL FORMATION

Physical capital -refers to all those inputs which are required for further production, like plant and
machinery, factory, buildings, raw materials, etc.
Human capital refers to the stock of skill, ability, expertise, education and knowledge involved in the
people.
Physical Capital Human Capital
It is tangible It is intangible.
It is separable from its owners. It cannot be separated from its owners.
It is perfectly mobile between the Its mobility is restricted by nationality and

countries. culture.
It though depreciates with ageing but can be

It depreciates over time due to
made up
constant use
through continuous investment in education
or due to change in technology.
and health.
It creates private benefit as well as social

It creates only private benefit.
benefit.
Human Capital formation: Human capital formation means the development of abilities and
skills among the population of the country.
Sources of Human Capital Formation:

(1) Expenditure on education:
➢ Proper utility of man power depends on the system of education, training. It develops critical
thinking and innovative ideas of the people.
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➢ Investment in education is not only highly productive but also it gives increasing return and
accelerates economic growth of all the resources.
(2) Expenditure on Health:

➢ Expenditure on vaccination, curative medicines, (i.e. medical intervention) and awareness
during the time of illness is very important.
➢ Provision of clean drinking water and good sanitation.
➢ Increases the physical capacity of human being and it raises the supply of healthy and
productive labour force.
(3) On the job training:

➢ It increases the skill and efficiency of the workers and leads to an increase in productivity.
➢ It is of two types -In campus & off Campus
➢ Such training keeps the employees updated with latest changes in their fields.
(4) Migration-
➢ People migrate from one place to another for better opportunities like income, Living standard,
Education, Health facilities.
➢ It includes transportation cost, social cost, psychic cost (cost of increased stress and change in
socio-cultural set-up.
(5) Expenditure on Information: -
➢ Expenditure for acquiring information relating to labour market and other market.
➢ It involves amount spent on seeking information about educational institutions, education
standard, their educational needs and cost of education.
➢ It is necessary to make decisions regarding investment in human capital as well as for efficient
utilization of the acquired human capital stock.
Importance of Human capital formation & Economic Growth

1. Human Capital formation is very important for the growth of an economy.
➢ Effective use of physical capital
➢ Increase in GDP & Per capita income
2. Inventions, innovations and technological improvement are all due to the extra knowledge
acquired during education.
3. The knowledgeable, skilled and physically fit people increase human capital formation which
increases the speed of economic growth.
4. Increases life expectancy & quality of life.
Reasons for Low/poor Human Capital formations are:

1) Insufficient Resources
2) High Growth of population
3) Lack of proper manpower planning
4) Brain drains
5) Lack of Implication of govt. policies at mass level.
Human Capital & Human Development

Sr.No Human Capital Human Development
1 It considers education & It is based on the Idea that

health as a means to increase education & health are integral
labour productivity to human well being
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2 investment in education and investments in education and
health is considered to be health is taken to be
unproductive, if it does not productive, even if it does not
increase output of goods & leads to higher output
services
3 In the human capital, human In human development,
beings as a means to an end. Human beings is an end itself.
STATE OF EDUCATION SECTOR IN INDIA

1. Growth of Education Sector in India: The number of schools increased from 230.7 thousands
(1950-51) to 1,500(2020-21). The no. of teachers in the same period increased from 751
thousand to 9700 thousands & no of students from 23,800 to 2, 50,000.
2. Gross Enrolment Ratio: Gross Enrolment Ratio (GER) is the total percentage of enrolment of
all eligible children in different stages of education like in primary education, secondary
education, higher education. GER in elementary education increased steadily from 19.2% in
1950-51 to 98.7% in 2019-20.
3. Literacy Rate: The literacy rate has increased from 16% in 1947 to 74.04% in 2011.
4. Elementary Education in India: Elementary Education in India means eight years of
schooling from the age of six i.e., primary & middle school education together, is called
Elementary Education. In December 2002, the government of India made free and compulsory
education, a fundamental right of all children in the age group of 6-14 years.
5. Primary Education Schemes: Government has made number of schemes to make “Education
for all” The following are the few schemes
(i) Sarva Shiksha Abhiyan (SSA): It was launched in 2001 to universalize & improve the quality of
Elementary Education in India through community ownership of Elementary Education. The SSA is
being implemented in partnership with states to address the needs of children in age group of 6-14
years.
(ii) National Programme for Education of Girls at Elementary Education (NPEGEL): The programme
is aimed at enhancing girl’s education by providing additional support for development of a model girl
child friendly school.
(iii) Samagra Shiksha Abhiyan: Launched in 2018, with aim of improving school effectiveness measured
in terms of equal opportunities and equitable learning outcomes.
(iv) Mid-day Meal Scheme – Launched in 1995, In this scheme, prepared food is provided to students of
class 1 to 8 to improve their nutrition and regular attendance in schools.
(v) Right to Education Act: Launched in 2009 and started in April, 2010. It provides free and compulsory
education to the children of age group of 6-14 years up to class 8.
(vi) NIPUN BHARAT MISSION (National Initiative for Proficiency in reading with understanding and
Numeracy Bharat Programme) : Started in July, 2021. It is related with Reading with Understanding
and Numeracy skill.
6. Secondary Education:
(i) Secondary Education, which starts with classes IX and X leads to senior secondary classes XI and XII
aims to in cooperate basic skills & analytical abilities. It provides a stepping stone to higher professional
and technical education.
(ii) National education policy (NEP) –It was started in July 2020 with the aim of equitable and inclusive
education. It assures that no child should be denied access to a quality education because of their
socio-cultural background.
(iii) Skill India – launched in July 2015 with aims at vocational training and certification of more than 40
crores Indian youth for a better livelihood and respect in the society.
7. Different Education Institutions:
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(i) University Grants Commission (UGC) takes measures for promotion and coordination of university
education and determination and maintenance of standards in teaching, examination and research in
universities and allocation and disbursement of grants to them.
(ii) NCERT: (National Council of Educational Research and Training): It assist Central and State
Government for Education Policies and Programmes.
(iii) Institutions for higher education Indian council of Medical Research (ICMR)
(iv) All India Council for Technical Education (AICTE) is the apex body in the field of Technical Education.
Weakness/ Challenges of the Education Sector:

1) High Illiteracy: According to 2011 census, the literacy rate of 74.04 percent is still far off the 100 percent
mark.
2) Gender Bias: Education in India is gender biased. The enrolment of girls in both primary and upper
primary classes is much below the boys.
3) Low Quality Education: The quality of the education is fairly low.
4) Lack of Vocational and Technical Training: Too much emphasis on general education neglecting the
Vocational and Technical Education.
5) Low Level of Government Expenditure: Actual level of expenditure is only 3.46% compared to the
desired level of 6%
Practice Questions
Q.1 What factors contribute to human capital formation?
Q.2 Mention two government organizations each that regulate the health and education sectors.
Q.3. What role can the government play in human capital formation in India?
Q.4. Bring out the need for on-the-job-training for a person.
Q.5. Why do so many children dropout from different levels of education in India?
Q.6. Explain the relationship between human capital and economic growth.
Chapter-5 Rural development
Rural development is a strategy to improve social and economic condition of rural areas
Key Issues of Rural Development:

1. Land Reforms.
2. Development of human resources.
3. Infrastructure development -electricity, irrigation, credit, marketing, transport, construction of
village Road.
4. Alleviation of Poverty: Special measures for alleviation of poverty and bringing the significant
improvement in the living condition of the weaker section.
Rural Credit:
➢ Growth of rural economy depends on agriculture, the time gestation between crop sowing and
realisation of income after production is quite long,
➢ Farmers borrow from various sources to meet their initial investment on seeds, fertilizers,
implements and other family expenses.
➢ At the time of independence moneylenders and traders exploited small and marginal farmers
and landless labourers by lending to them on high interest rate and by manipulating the
accounts to keep then in debt trap.
➢ A major change occurs after 1969 when India adopted social banking and multiagency approach
to adequately meet the needs.
Types of Rural Credit :

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1. Short term Credit – It is given for agricultural needs of the farmers like seeds, fertilizers,
pesticides etc upto 1 Year.
2. Mid term Credit- It is given for agricultural needs of the farmers like for purchase of new
tools, machinery etc. upto 5 Year.
3. Long term Credit - It is given for agricultural needs of the farmers like Purchase of Land,
Tube well, Permanent construction on Land upto 20 Year.
National bank for Agriculture and Rural Development (NABARD) : It was set up on 12 July,
1982 as an Apex body to coordinates the activities of all Institutions involved in the rural financial
system. Its objective is to promote strength of credit institutions like Commercial banks, RRBs,
Cooperative Banks etc. It also provide financial assistance to non-farm sectors in rural areas.
Self-help groups
➢ The SHGs promote saving in small proportions by a minimum contribution from each member.
Self-help group pooled money, credit is given to the needy members to be repayable in small
instalments at reasonable interest rates. These types of credit provisions are generally
referred to as micro credit programs.
➢ Initially SHGs were started to empower the women. ‘Kudumbashree’ is a women-oriented
community-based poverty reduction programme being implemented in Kerela.
➢ SHGs have emerged to fill the gap in the formal credit system because the formal credit
delivery mechanism has not only proven inadequate but has also not been fully integrated into
the overall rural social and community development.
Rural Banking
➢ Rapid expansion of the banking system had a positive effect on rural farm and men from output
income and employment it helps farmers to avail services and credit facilities and a variety of
loans for meeting their production needs.
➢ Other former institution has failed to develop a culture of deposit mobilisation lending to
worthwhile borrowers and effective loan recovery agriculture loan default rates have been
chronically higher many farmers are deliberately refusing to pay back loans.
Agricultural market System
Agricultural marketing is a process that involved the assembling storage, processing,
transportation, packaging, grading and distribution of different agricultural commodities across
the country.
There are four measures that improve the marketing aspects
1. Regulation of market to create orderly and transparent marketing condition.
2. Provision of physical infrastructure facilities like roads, railways, warehouses, godown,
cold storage and processing unit.
3. Cooperative marketing in realising fair prices of farm products taken by the government
initiative. It is system in which the farmers pool their marketable surplus of crops and
distribute the sale proceeds on the basis of each individual shares.
Benefits:
• Increases bargaining strength of farmers.
• Direct dealings with final buyers.
• Fullfill immediate requirement of cash.
• Ex. Milk Cooperatives (AMUL in Gujarat), PURVI in Assam,
NAFED: National Agricultural Cooperative Marketing Federation of India

Limited is the apex Cooperative Marketing Organisation dealing in
Procurement, distribution, export and import of selected agricultural
commodities.
4.Policy instruments
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(i). Assurance of minimum support prices(MSP) for Agricultural Products
(ii). Maintenance of buffer stock of wheat and rice by Food Corporation of India.
(iii). Distribution of food grains and sugar group PDS.
These instruments are aimed at protecting the income of the farmers and providing food grains
at a subsidised rate to the poor. Such an event will help in reducing the price risk of farmer and
would also expect the market for products
Diversification
➢ Diversification includes two aspects-
➢ Change in cropping pattern.
➢ Shift of the workforce from agriculture sector to other allied activities and non-
agriculture sector.
➢ Much of the agricultural employment activity are concentrated in the Kharif season.
During the Rabi season it becomes difficult to find gainful employment in the areas where
there are inadequate irrigation facilities, so diversification into other sectors is essential-
• To provide supplementary gainful employment,
• To enable them higher level of income
• To enable rural people to overcome poverty and other troubles.
Non-Farm Activities
Animal husbandry: - Animal husbandry is that branch of agriculture which is concerned with
the breeding, rearing and caring for farm animals-
➢ India owns one of the largest livestock populations in the world.
➢ livestock production provides increased stability in income food security transport fuel and
nutrition for family.
➢ Livestock sector provides alternate livelihood options to over 70 million small and marginal
farmers including landless labourers.
➢ A significant number of women also find employment in this sector.
Dairying: - Dairying is the business of production, storing and distributing milk and its
products.
➢ The performance of Indian Dairy Sector over the last three decades has been quite
impressive.
➢ Successful implementation of Operation Flood, India ranks first in the world in milk
production.
➢ Operation Flood or white revolution was started by a National Dairy development board in
1970 under the expert guidance of then chairman doctor Varghese Kurien.
Fisheries
➢ The water bodies are considered as mother or provider as they provide life giving source to
the fishing community.
➢ Fish production from inland sources contributes about 49% to the total fish production and
the balance 51% comes from the Marine sector.
➢ The total fish production accounts for 1.4 % of its total GDP.
➢ Kerala, Gujarat, Maharashtra and Tamil Nadu are the major producer of Marine Products.
➢ The overall socio-economic status of fishermen is comparatively lower than that of the other
backward sector of the economy. Some of the major problems faced by these communities-
(I). wide spread under employment.

(ii). Low per capita earnings.
(iii). Absence of mobility of labour to other sectors.
(iv). High illiteracy rate and indebtedness.
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Horticulture: -
Horticulture refers to the science or art of cultivating fruits, vegetables, tuber crops, flowers,
medicinal and aromatic plants, species and plantation crops. These crops play a vital role in
providing food and nutrition besides addressing employment concern. The Period between
1991-2003 is called Golden Revolution as investment in Horticultural became highly productive
and immerge as sustainable livelihood options.
➢ India has blessed with a varying climate and soil condition.
➢ It is an important factor for potential diversification and value addition in agriculture
➢ It has been estimated that this sector provides employment to around 19 % of total labour
force.
➢ This sector is highly productive and the sector emerged as a sustainable livelihood option.
➢ India has emerged as a world leader in producing a variety of fruits, vegetables, mangoes,
bananas, coconuts, cashew nuts and number of spices.
➢ Horticulture has improved economic condition of many farmers and has become a means of
improving livelihood for many unprivileged classes.
Organic Farming: - It refers to the farming without the use of chemical fertilizers and
pesticides which restores, maintains and increases ecological balance.
Organic agriculture offers a means to substitute costlier agriculture inputs with locally produced
organic inputs that are cheaper and thereby generate good returns on investment organic
agriculture generate income through exports as the demand for organically grown crops is on a
rise.
Advantages/benefits
1. Environment friendly as it is free from the use of Chemicals
2. Sustains Soil Fertility because Organic farming discards the use of chemical fertilizers.
3. Healthier and Tastier Food
4. Inexpensive Technology.
5. Generates Income from Exports because of huge international demand for organic crops.
Limitations
1. In the initial years, Organic Farming offers lesser yield than the conventional farming.
2. Due to the low yield per hectare therefore it is costly.
3. The crops have shorter life span.
4. Only seasonal crops can be grown.
Practice Questions
Q 1. Define rural development.
Q 2. Name the key initiatives required for infrastructural development in rural areas.
Q3. Define credit.
Q 4. What is the function of micro-credit programme?
Q 5. Classify rural credit.
Q 6. Why are moneylenders a popular source of rural credit?
Q 7. What is agricultural marketing?
Q 8 . What is cooperative marketing?
Q 9. What is agricultural diversification?
Q 10. What is sustainable development?
Q 11. Why is rural development important?
Q 12. What efforts has the government made for rural development?
Q 13. Discuss the changes that have taken place in Indian agriculture and rural
sector since initiation of reforms.
Q 14. What are the limitations of non-institutional sources of credit?
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Q 15 Critically evaluate the role of the rural banking system in the process of rural development
in India.
Ans: The rural banking system had a positive effect on rural farm and non farm output, income
and employment. But all is not well with our banking system. Some of the shortcomings of our
banking system are as follows:
a) A number of farmers cannot avail credit in absence of security or collateral required.
b) The commercial banks failed to encourage the habit of thrift/saving among farmers.
c) Increased defaulter’s rate and financial unfeasibility of the rural banks due to not repaying
of borrowed loans by the farmers.
d) Biasing by banks in lending loans.
Q 16. Mention some obstacles that hinder the mechanism of agricultural marketing.
Ans: Following are some obstacles that hinder the mechanism of agricultural marketing:
i. Faulty weighing.
ii. Manipulation in accounts.
iii. Inadequate information of market prices and market conditions. Being ignorant,
farmers sell their product at lower prices.
iv. Lack of adequate finance.
v. Inadequate means of transportation and communication.
vi. The farmers lack access to proper storage facilities to store their produce for future sell
at better prices.
vii. The farmers cannot avail agricultural credit, leading to their exploitation by the
moneylenders and Mahajan’s.
viii. Multiplicity of middlemen.
Q 17. Explain the policy instruments introduced by the government to safeguard the interests of
farmers.
Ans: Government has developed certain policy instruments to safeguard the interests of farmers.
These instruments are:
(i) Fixation of Minimum Support Price (MSP): MSP is announced before the sowing season and
assures agricultural producers against any sharp fall in farm prices. It provides long-term
guarantee to the farmer.
• Buffer Stock: The Food Corporation of India purchases wheat and rice from the
farmers in states where there is surplus production and maintain it as buffer stock.
Buffer stock is maintained by the government to stabilise prices. It helps in making
the food grains available in the deficit areas and hence, resolves the problem of food
shortage during adverse weather conditions or during the periods of calamity.
• Public Distribution System (PDS): The PDS operates through fair price shops, also
known as ration shops. The government offers essential commodities like wheat,
rice, sugar, kerosene, edible oils, coal, cloth, etc. at a price below the market price to
poor section of the society.
Q 18. Explain the various non-institutional sources of rural credit in India.

Ans: The various non-institutional sources of rural credit in India are:
(i) Moneylenders: Moneylenders typically offer small personal loans to farmers at high rates
of interest. They charge high interest rates due to the level of risk involved. They lend to
people with limited access to banking activities.
(ii) Traders and Commission Agents: Traders and commission agents are also non-
institutional source of agricultural finance. They advance loans to agriculturists for
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productive purposes against their crops without any legal agreement. They force them to
sell their produce at low prices and charge heavy commission for themselves.
(iii) Landlords: Small and marginal farmers mostly depend on landlords for credit in order
to satisfy their day-to-day requirements; However, with the abolition of zamindari system,
this source has lost its importance to a large extent.
(iv) Relatives: Sometime the farmers have to borrow from their relatives and friends to
meet their financial crisis. This type of loan does not carry interest.
Q 19. ‘Information technology plays a very significant role in achieving sustainable development
and food security’ -comment.
Ans: IT plays a very significant role in achieving sustainable development and food security. In
the following ways:
1) With the help of IT, weather conditions can be forecast.
2) IT provides information on emerging technologies, soil conditions for growing various crops
etc.
3) Now days, the farmers can consult Kisan Call Centres and various web sites providing
valuable information regarding measures to improve farm productivity and quality of farm
inputs, seeds, fertilizers and various modern techniques.
4) It has potential of employment generation in rural areas.
Q.20 Critically assess the institutional source of credit.
CHAPTER-6 EMPLOYMENT: GROWTH, INFORMALISATION

AND OTHER ISSUES
KEY WORDS
➢ ECONOMIC ACTIVITIES – All activities which contribute to gross national product through
production of goods and services are called economic activities.
➢ WORKER - A worker is an individual who is doing some productive employment to our living
➢ WHAT IS EMPLOYMENT:- Employment is an indicator of that situation in which workers is
engaged in some productive activity for earning his living.
➢ FORMAL SECTOR – It is an organize sector which include all the public sector enterprises and
private enterprises which employ 10 or more workers.
➢ INFORMAL SECTOR – It is an unorganized sector of an economy which includes all those
private sector enterprises which employ less than 10 workers.
➢ LABOUR SUPPLY:- It refers to the amount of labour that are willing to offer corresponding to
a particular wage rate.
➢ WORKFORCE- refers to the number of persons actually working thus workforce does not
account for those who are willing to work.
➢ LABOUR FORCE- refers to the number of persons actually working and willing to the work.
➢ The difference between labour force and work force is the total number of unemployed
persons
➢ JOBLESS GROWTH: - If economic growth is driven by better technology but it fails to improve
the rate of participation in economy, such a growth is called “jobless Growth”
WORKERS AND EMPLOYMENT:-

(Data from Annual Reports, Ministry of Labour, Government of India, Delhi.)
➢ During 2017-18, India had about a 471 million (47.1 Crore) strong workforce.
➢ Since majority of our people reside in rural areas,
➢ The rural workers constitute about 75% of this 471 million.
➢ Men form the majority of workforce in India.
➢ Women workers account for 33% of the rural workforce, whereas in urban areas, they are just
20% of the workforce.
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PARTICIPATION OF PEOPLE IN EMPLOYMENT
Worker-population ratio is an indicator which is used for analysing the employment situation
in the country.
➢ This ratio is useful in knowing the proportion of population that is actively contributing to the
production of goods and services of a country.
➢ If the ratio is higher, it means that the engagement of people is greater; if the ratio for a country
is medium, or low, it means that a very high proportion of its population is not involved directly
in economic activities.
➢ Population is defined as the total number of people who reside in a particular locality at a
particular point of time.
Total number of workers in India

Worker-Population ratio= ------------------------------------------- X 100
Total population in India
GENDER WORKER-POPULATION RATIO IN INDIA (2017-18)

RURAL URBAN TOTAL
MEN 51.7 52.1 52.1
WOMEN 17.5 17.5 16.5
TOTAL 35.0 33.9 34.7
SOURCE-Data from Annual Reports, Ministry of Labour, Government of India, Delhi
In urban areas, the proportion is about 33.9% whereas in rural India, the ratio is about 35%.
Why is there such a difference?
➢ Rural areas have limited resources to earn a higher income and participate more in the
employment market. Many do not go to schools, colleges and other training institutions. Even if
some go, they discontinue in the middle to join the workforce;
➢ Urban areas, a considerable section is able to study in various educational institutions. Urban
people have a variety of employment opportunities. They look for the appropriate job to suit
their qualifications and skills. In rural areas, people cannot stay at home as their economic
condition may not allow them to do so.
Compared to females, more males are found to be working?

➢ The difference in participation rates is very large in urban areas: for every 100 urban females,
only about 14 are engaged in some economic activities. In rural areas, for every 100 rural
women about 18 participate in the employment market.
➢ It is common to find that where men are able to earn high incomes, families discourage female
members from taking up jobs.
TYPE OF LABOUR-
➢ Self – Employed labour – An arrangement in which a worker uses his own resources to make a
living is known as self-employed. He owns and operates an enterprise to earn his livelihood.
➢ Hired-Workers- Those people who are hired by other on paid wages or salaries as a reward
for their services are called hired workers. Hired workers can be of two types:
(I) Casual Workers: Those people who are not hired by their employers on a regular or
permanent basis and do not get social security benefits are called casual workers.
(II) Regular Workers: These types of workers are hired on permanent basis by the employer.
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SELF-EMPLOYED AND HIRED WORKERS:
Distribution of Employment by Gender (2017-18)
Male Workers Female Workers
Self-employed 52% 52%
Regular Salaried Employees 24% 21%
Casual Wage Labourers 24% 27%
Let us take three workers from the construction industry –

➢ A cement shop owner (Self–Employed labour)-Workers who own and operate an
enterprise to earn their livelihood are known as self-employed. Thus the cement shop owner
is self-employed. About 52% workforce in India belongs to this category.
➢ A construction worker (Casual Workers)- The construction workers are known as casual
wage labourers; they account for 25%of India’s workforce. Such labourers are casually
engaged in others’ farms and, in return, get income for the work done.
➢ A civil engineer (Regular Workers)- of a construction company. Workers like the civil
engineer working in the construction company account for 23% of India’s workforce. When
a worker is engaged by someone or an enterprise and paid his or her wages on a regular basis,
they are known as regular salaried employees.
➢ Salaried employment, men are found to be so engaged in greater proportion. They form 18
percent whereas women form only 10 percent. One of the reasons could be skill requirement.
Since regular salaried jobs require skills and a higher level of literacy, women might not have
been engaged to a great extent.
Formal and Informal Sector

Sr. no. Formal/Organised Sector Informal/Unorganised Sector
All the public sector establishments and All the other than organised sector
1. those private sector establishments including self-employed are called
which employ 10 hired workers or informal sector.
more are called formal sector.
2. Workers are entitled for social security Workers are not entitled for social
benefits. Workers get regular income, security benefits. Workers do not get
Pension, paid holidays, medical benefits regular income, Pension, paid
etc. holidays, medical benefits etc.
3. Protected from Labour laws and and Not protected from Labour laws and
Trade unions trade unions.
Informalisation of workforce refers to the situation when proportion of workforce in the

informal sector tends to increase and that in the formal sector tends to decrease.
Indicators of Informalisation :
1. Absence of maternity benefits
2. Absence of provident fund
3. Absence of gratuity and pension.
4. Absence of equal salary for equal work in the private sector.
5. Absence of social security benefits, labour laws and trade unions. Etc.
Casualisation of the workforce is the situation where the percentage of casually hired workers in
the total workforce tends to rise over time.
Distribution of Employment by Region (2017-18)
Rural Workers Urban Workers
Self-employed 58% 47%
Regular Salaried Employees 13% 38%
Casual Wage Labourers 29% 15%
SOURCE-Annual Report of Periodic Labour Force Survey 2017-18, National Statistical, NEW DELHI
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EMPLOYMENT IN FIRMS, FACTORIES AND OFFICES
Distribution of Workforce by Industry, 2017-2018

Industrial Category Place of Residence Sex TOTAL
Rural Urban Male Female
Primary Sector 59.8 6.6 40.7 57.1 44.6
Secondary Sector 20.4 34.3 26.5 26.5 24.4
Tertiary/ Service 19.8 59.1 32.8 32.8 31.0
Sector
Total 100.0 100.0 100.0 100.0 100.0
SOURCE-Annual Report of Periodic Labour Force Survey 2017-18, National Statistical, NEW DEHL
GROWTH AND CHANGING STRUCTURE OF EMPLOYMENT

➢ During the period 1950–2010, Gross Domestic Product (GDP) of India grew positively and was
higher than the employment growth However, there was always fluctuation in the growth of
GDP. During this period, employment grew at a stable rate of about 2 per cent.
➢ In 2010, out of about 29 million formal sector workers, about 18 million workers were
employed by the public sector. Here also men form the majority, as women constitute only
about one-sixth of the formal sector workforce.
➢ We learnt that there are about 471 million (2017-2018) workers in the country. 7% from
formal sector the rest 93 percent are in the informal sector.
➢ Out of 29 million formal sector workers, only 6 million, that is, only 17 percent are women. In
the informal sector, male workers account for 69 per cent of the workforce.
Trends in Employment Pattern (Sector-wise and Status-wise), 2011-2018 (in %)
SECTORS 2011-12 2017-18

PRIMARY 48.9 44.6
SECONDARY 24.3 24.4
SERVICES 26.8 31.0
TOTAL 100.0 100.0
SOURCE-Annual Report of Periodic Labour Force Survey 2017-18, National Statistical,
NEW DELHI Trends in Employment Pattern (Sector-wise), 2011-2018 (in %)
STATUS 2011-12 2017-18

Self–Employed Workers 52 52.2
Regular Workers 18 22.8
Casual Workers 30 25.0
TOTAL 100.0 100.0
SOURCE-Annual Report of Periodic Labour Force Survey 2017-18, National Statistical,
NEW DELHI
UNEMPLOYMENT :-
➢ Unemployment refers to a situation where all able and willing persons may not find work.
➢ National Sample Survey Organisation’s (NSSO) defines unemployment as a situation in which
all those who, owing to lack of work, are not working.
➢ Economists define unemployed person as one who is not able to get employment of even one
hour in a day.
There are three sources of data on unemployment :-
(I) Reports of Census of India,
(II) NSSO Reports of Employment
(III) Directorate General of Employment and Training Data of Registration with
Employment Exchanges.
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NATURE OF UNEMPLOYMENT IN INDIA
➢ OPEN UNEMPLOYMENT – It refers to that situation where in although they worker is willing
to work and he has the necessary ability to work yet he does not get work. He remains
unemployed for full time and fails to get any work casual or full time.
➢ FRICTIONAL UNEMPLOYMENT – Frictional unemployment is a temporary phenomenon. It
results when some workers are temporarily out of work while changing jobs. It can also be due
to strikes or lock outs.
➢ STRUCTURAL UNEMPLOYMENT- It is cause by a decline in demand for a product in a
particular industry. it result in reduction in its man power requirement.
➢ SEASONAL UNEMPLOYMENT – It occurs in case of Agriculture, ice-cream factory woolen
factories etc., which are seasonal occupation. They have busy seasons and they have stack
seasons. In the off seasons, there is no work the result is seasonal unemployment.
➢ DISGUISED/HIDDEN UNEMPLOYMENT– It is a situation where workers are apparently
employed but their marginal productivity is Zero or negative.
ADVERSE EFFECT OF UNEMPLOYMENT

SR NO Economic effects Social effect
1 Waste of human power Creation of social problems
2 Increase in economic disparity Exploitation of labour
3 Industrial conflicts High inequality
4 Increase in poverty adverse effect on Political instability

capital formation
CAUSES OF UNEMPLOYMENT IN INDIA

SR NO General Causes: Specific Causes:
1 Rapid increase in population Increase in pressure of population
2 Slow pace of development Shortage of capital
3 Inadequate economic planning Social status
4 Seasonal nature of agriculture Shortage of secondary education
Measures to eradicate unemployment in India
General measures Specific Measures

Control population Rural unemployment Industrialization in rural areas
Increase investment Diversification of farm activity
Manpower planning Increase Multiple cropping
Employment Urban Practical form of education
oriented planning unemployment
Development of Fuller utilisation of production
entrepreneur’s capacity
qualities.
Employment Investment in small scale
generation program industries
Practice Questions:
1. Why do rural areas have more participation in worker population ratio?
2. How NSSO does define unemployment?
Answer- NSSO defines unemployment as a situation in which all those who, owing to lack of work,
are not working but either seek work through employment exchanges, intermediaries, friends or
relatives or by making applications to prospective employers or express their willingness or
availability for work under the prevailing condition of work and remuneration.
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3. Write any four aims of Employment generation programmes.
Answer-- (i) Alleviating poverty, (ii) Providing educational services,
(iii) Providing health services, (iv) Providing employment.
4. How slow economic growth does affect the problem of unemployment?
5. How does growth of population affect the problem of unemployment?
6. "75%of total workforce belongs to Rural areas while only 25% belongs to Urban areas"Does this
imply that the Rural economy contributes to GDP more than Urban areas?
7. What is jobless growth?
8. Explain the NREGA started by govt. of India.
Answer-National Rural Employment Generation Act-
➢ This act is based on the principle of 'right to work', launched in 2005. Under this Act, all those
who are willing to undertake unskilled manual work at the minimum wage are offered
employment for a minimum period of 100 days.
➢ Those seeking employment are to report in those rural areas where the employment
programme is being launched. This programme is becoming extremely popular in the rural
areas.
➢ This programme was later in 2008 renamed as Mahatma Gandhi National Rural Employment
Guarantee Act (MGNREGA)
9. Analyse the graph and answer the following questions:

(A)Why is the percentage of casual wage laborers more in rural areas?
(B)Why is the percentage of regular salaried employees more in urban areas?
100%
15
29
80%
60% 47 13
40%
58
20% 38
0%
Urban Workers Rural Workers
Casual wage labourers Regular salaried employees Self-employed
(A) People in rural areas have less skills and less educational opportunities that is why they
get engaged in casual wage labour, which requires less skills and more physical strength.
➢ Compared to urban people who have more education are mainly engaged in regular salaried
work which requires skill and expertise and many are engaged in industries.
(B) In urban areas, people look for skilled jobs in offices and factories while in rural areas,
family farms are the most attractive means of employment.
➢ In rural areas nonfarm opportunities are limited, accordingly people do not show preference
to acquire skills and training for nonfarm occupation they prefer to rather stay in family
farms as self employee.
10. Analyse and answer the following questions.
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100%
24 22
80%
24 21
60%
40%
52 52
20%
0%
MALE FEMALE
Casual wage labourers Regular salaried employees Self-employed
(A) Why is percentage of wage-employment higher in women?

➢ In a country like India, women's education is still a far cry and owing to a low level of
education but high compulsion to do a job to make a sustainable living for the family,
women are ready to work even at low wages.
(B) Why is self-employment the most significant source of livelihood in India?
➢ Literacy rate is low implying the acquisition of skill for wage jobs.
➢ Owing to diverse social environment across different regions, mobility of workers is low.
➢ India is an underdeveloped economy generating less jobs owing to lower level of
investment.
11. What can you conclude from the following data?

GENDER WORKER- POPULATION RATION IN INDIA (2017-18)
RURAL URBAN TOTAL
MEN 51.7 52.1 52.1
WOMEN 17.5 17.5 16.5
TOTAL 35.0 33.9 34.7
From the data given above we can conclude
(1) High Dependency Ratio: Overall rate of participation in the country is not very high,
implying not many people are engaged in production activity. It points to a high dependency
ratio in the country.
(2) High Rate of Participation, but Low Level of Productivity in Rural Areas: Rate of
participation is higher in rural areas compared with urban areas. Implying that a larger
percentage of the population is engaged in production activity in rural areas. But, given the
fact that the contribution of rural economy to GDP is lower than that of urban economy,
higher rate of participation in rural areas only points to lower productivity, lower level of
income and greater poverty in the rural India.
(3) High Rate of Participation for Women in Rural Areas: Rate of participation for women is
higher in rural areas compared with urban areas.
Following observations support this fact:
➢ In rural areas, poverty compels women to avoid education and seek employment. Thus,
employment (even without education) is a priority.
➢ When employment (and not education) is a priority, women tend to seek employment at an
early age. This also raises the rate of participation in the rural areas.
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➢ In urban areas, on the other hand, high priority for education implies low priority for jobs at
an early age. This keeps the rate of participation relatively low
12. Analyze and Conclude

100%
22
80%
19.5 63.3
60%
40%
58.5
20% 28.9
0% 7.8
Rural Workforce Urban Workforce
Tertiary Sector Secondary Sector Primary Sector
Observations:
(1) While those living in urban areas are engaged largely in secondary and tertiary sectors, those
in the rural areas find the primary sector as their preferred source of employment.
(2) Tertiary sector is taking a lead over secondary sector as a source of employment in urban
areas.
Conclusions:
(1) In India, trade, commerce, banking, insurance, health, education, tourism and related services
are developing faster than manufacturing and allied production activities.
This may largely be explained in terms of globalisation of the economy, besides the fact that
people in urban areas are becoming increasingly conscious of their quality of life, spending
the bulk of their income on a variety of services (like health, education and tourism).
(2) There is a significant lack of non-farm job opportunities in the rural areas. Which is why the
rural population is engaged more in the primary sector. Lack of mobility (or limited mobility)
may be another reason why people in the rural areas are engaged more in the primary sector.
CHAPTER-7 Environment and Sustainable development

Environment is defined as the total planetary inheritance and the totality of all resources.
It includes all biotic and abiotic factors that influence each other.
Functions and role of environment:
● Environment supplies resources-renewable and non-renewable
● Environment sustains life by providing genetic and bio diversity
● Environment assimilates waste
● Environment enhance quality of life
Some concepts about environment:
● Carrying capacity of Environment: - It implies that the resources extraction is not above
the rate of regeneration of the resources and the wastes generated are within the
assimilating capacity of the Environment.
● Absorptive capacity: It means the ability of the environment to absorb degradation.
● Renewable resources: Those resources which can be used without the possibility of the
resources becoming depleted or exhausted.
● Non-renewable resources: Those resources which get exhausted with extraction and use.
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Global environment issues:
Global Warming
➢ Global warming is a gradual increase in the average temperature of the earth’s lower
atmosphere as a result of the increase in greenhouse gases since the Industrial Revolution.
➢ Global warming is human-induced.

➢ It is caused by man-made increases in carbon dioxide and other greenhouse gases through the
burning of fossil fuels and deforestation.
➢ Some of the longer-term results of global warming are melting of polar ice with a resulting rise
in sea level and coastal flooding, extinction of species, frequent tropical storms; and an
increased incidence of tropical diseases.
➢ A UN Conference on Climate Change, held in Kyoto, Japan, in 1997, resulted in an international
agreement to fight global warming and the goal of achieving “stabilization of greenhouse gas
concentrations in the atmosphere.”
Long term results of global warming

• Increase in atmospheric temperature
• Melting of polar ice caps which rises sea level and coastal flooding
• Disruption of drinking water
• Extinction of species
• Frequent tropical storms and tropical diseases.
Ozone Depletion
➢ Ozone depletion refers to the phenomenon of reductions in the amount of ozone in the
stratosphere.
➢ The problem of ozone depletion is caused by high levels of chlorine and bromine compounds
in the stratosphere.
➢ The origins of these compounds are chlorofluorocarbons (CFC), used as cooling substances in
air conditioners and refrigerators. As a result of depletion of the ozone layer, more ultraviolet
(UV) radiation comes to Earth and causes damage to living organisms.
➢ UV radiation seems responsible for skin cancer in human beings.
➢ The Montreal Protocol is an international treaty designed to protect the ozone layer by phasing
out the production of numerous substances believed to be responsible for ozone depletion. The
treaty was opened for signature on September 16, 1987, and entered into force on January 1,
1989
Dichotomy of the threat to India’s Environment

The threat to India’s environment poses a dichotomy- threat of poverty induced
environmental degradation and at the same time, threat of pollution from rapidly growing
industrial sector.
Challenges to India’s environment
Land degradation: Deterioration in the quality of land, its topsoil, vegetation, and/or water
resources, caused usually by excessive or inappropriate exploitation.
Factors responsible of land degradation:
➢ Deforestation
➢ High use unsustainable fuel wood
➢ High fodder extraction and over extraction
➢ Shifting cultivation
➢ Encroachment into forest lands
➢ Forest fires
➢ Non-adoption of adequate soil conservation measures
➢ Improper crop rotation
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➢ Over use of agro-chemicals (fertilizer and pesticides)
Chipko or Appiko movement:

➢ The first recorded event of Chipko however, took place in village Khejarli, Jodhpur district, in
1730 AD, when 363 Bishnois, led by Amrita Devi sacrificed their lives while protecting green
Khejri trees, considered saved by the community by hugging them from the local ruler.
➢ The modern Chipko movement started in the early 1970s in the Garhwal Himalayas of
Uttarakhand, took place on March 26, 1974, when a group of peasant women in Reni village,
Hemwalghati, in Chamoli district, Uttarakhand, India, acted to prevent the cutting of trees and
reclaim their traditional forest rights that were threatened by the contractor system of the
state Forest Department.
➢ In 1987, the United Nations released the Brundtland Commission Report, which defines
sustainable development as ‘development which meets the needs of the present, without
compromising the ability of future generations to meet their own needs.
Steps and strategies to achieve Sustainable development:
➢ Limiting the human population to a level of within carrying capacity of environment
➢ Input efficient techniques should be used
➢ Rate of extraction of renewable resources should not exceed rate of regeneration
➢ Control over pollution
➢ Encourage conservation of natural resources and necessary recycling
➢ Investment in renewable sources of energy such as solar, wind, etc.
➢ Avoiding the imposition of added costs or risks on future generations, etc.
Strategies for sustainable development in India:
• Use of non-conventional sources of energy:

● Tidal energy
● Solar energy
● Biomass energy
● Wind energy
• Use of LPG and Gobar gas in rural areas
• Use of CNG in urban areas for transportation
• Mini-hydel plants in mountainous regions
• Traditional knowledge and practices
● Use of traditional treatment system- Ayurveda, Unani, folk system, etc.
● Use of herbal medicinal properties
● Use of traditional fertilizers
• Bio-composting
• Bio-pest control
● Use of pesticides based on plant products-Neem
● Mixed cropping and growing different crops in following years on same land
● Awareness spreading about various animals and birds which help in controlling pests-
snakes, owls, peacocks, Lizards, etc
PRACTICE QUESTIONS
Q. 1 Define Environment.
Q. 2 Explain global warming in brief.
Q. 3 Define sustainable development.
Q. 4 Name the two environment issues facing world today.
Q. 5 what is meant by renewable resources?
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Q. 6 Define biotic element of environment.
Q. 7 Define absorptive capacity of environment.
Q. 8 what role does the CPCB play in maintaining the environment?
Q.9 Explain the supply demand reversal of environment resources?
Ans-
➢ Prior to industrialization pace of life was slow, demand for natural resources did not exceed
supply.
➢ As industrialization progressed there was increase in human wants, exponential growth in
demand for natural resources.
➢ Supply of resources has suffered a reversal from abundance to paucity.
Q. 10 Explain four function of environment.
Q.11.How can sustainable development aim to decrease the absolute poverty? Explain.
Q.12Describe a few policy instruments designed to promote environment planning in India.
Q.13 How do the following factors contribute to the environment crisis in India? What problem
do they pose for the government?
CHAPTER-8 COMPARATIVE DEVELOPMENT EXPERIENCES OF INDIA

AND ITS NEIGHBOURS
➢ Development Strategy of different countries reflects the integration of economic, social and
environmental objectives of countries towards the maximization of human welfare etc.
➢ For the development of a country, it is required to form some Regional and Economic Groups
like SAARC (The South Asian Association for Regional Cooperation), ASEAN (The Association
of Southeast Asian Nations), European Union, G-8, G-20, BRICS etc.
DEVELOPMENTAL PATH-INDIA, CHINA AND PAKISTAN

➢ All the three nations- India, Pakistan and China have started towards their developmental
path at the same time.
➢ India and Pakistan became independent nations in 1947.
➢ The People's Republic of China was established in 1949.
➢ The three countries had started their planning strategies in similar ways. India announced its
first Five Year Plan for 1951–56
➢ Pakistan announced its first five-year plan, now called the Medium-Term Development Plan,
in 1956.
➢ China announced its First Five Year Plan in 1953.
➢ India and Pakistan adopted similar strategies, such as creating a large public sector and
raising public expenditure on social development.
➢ All the three countries had similar growth rates and per capita incomes till the 1980s.
China:
After the establishment of the People's Republic of China under one party rule, all critical sectors
of the economy, enterprises and lands owned and operated by individuals were brought under
government control.
The Great Leap Forward (GLF):
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➢ Campaign initiated in 1958 aimed at industrializing the country. People were encouraged to
set up industries in their backyards.
➢ Commune system - People collectively cultivated lands towards the welfare of members. In
rural areas, communes were started.
➢ GLF got setback due to Famine (killed around 30 million people) in China and conflict with
Russia.
The Great Proletarian Cultural Revolution:

➢ Mao Zedong introduced in 1965, under which students and professionals were sent to work
and learn from the countryside.
➢ The present day fast industrial growth in China was the result of industrial reforms
introduced in 1978.
➢ China introduced reforms in phases. In the initial phase, reforms were initiated in agriculture,
foreign trade and investment sectors. In the later phase, reforms were initiated in the
industrial sector.
➢ Enterprises owned by the government are known as State Owned Enterprises—SOEs. In India
it is called Public Sector enterprises
Dual pricing:
➢ This means fixing the prices in two ways: farmers and industrial units were required to buy
and sell fixed quantities of inputs and outputs on the basis of prices fixed by the government
and the rest were purchased and sold at market prices.
➢ To attract foreign investors, Special Economic Zones (SEZ) were set up.
➢ SEZ is an area in a country that is subject to different economic regulation than other regions
with in the same country.
PAKISTAN:
➢ Pakistan follows the mixed economy model with co-existence of public and private sector.
➢ Pakistan introduced import substitution-based industrialization. This policy combined tariff
protection for manufacturing of consumer goods together with direct import controls on
competing imports.
➢ In Pakistan nationalization of capital goods industries took place in the 1970s.
➢ In 1988, industrial reforms were initiated in the country which led to a favourable climate for
new investments.
DEMOGRAPHIC INDICATORS (2017-18):
Country Estimated Annual Density Sex Ratio Fertility Urbanization

Population Growth of (per sq. km.) Rate
(in million) Population
India 1352 1.03 455 924 2.2 34
China 1393 0.46 148 949 1.7 59
Pakistan 212 2.05 275 943 3.6 37
➢ When compared to India, Pakistan, China’s density is the lowest. Population growth is highest
in Pakistan.
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➢ One child norm introduced in China in the late 1970s as the major reason for low population
growth. After a few decades in China, there will be more elderly people in proportion to young
people. This led China to allow couples to have two children.
➢ The fertility rate is low in China and very high in Pakistan and Urbanization is high in China.
GROSS DOMESTIC PRODUCT AND SECTORS

Annual Growth of Gross Domestic Product (%) 2015-17
Country 1980-90 2015-17 Remarks
India 5.7 7.3 Growth rate increased
China 10.3 6.8 Growth rate decreased
Pakistan 6.3 5.3 Growth rate declined due to political

instability and Economic crisis.
➢ China has the second largest GDP (PPP) of $22.5 trillion, India’s GDP (PPP) is $9.03 trillion
and Pakistan’s GDP is $ 0.94 trillion roughly about 11 per cent of India’s GDP. India’s GDP is
about 41 per cent of China’s GDP. China was able to maintain near double-digit growth but
now it is decreasing.
➢ In China due to topographic and climatic conditions, the area suitable for cultivation is
relatively small. Government encouraged people to leave their fields and follow other
activities such as handicrafts, commerce and transport etc.
➢ In both India and Pakistan, the contribution of agriculture to GVA was 16 and 24 per cent,
respectively.
Sectoral Share of Employment and GVA (%) in 2018-2019
Sector Contribution to GVA Distribution of Workforce
India China Pakistan India China Pakistan
Agriculture 16 7 24 43 26 41
Industry 30 41 19 25 28 24
Services 54 52 57 32 46 35
Total 100 100 100 100 100 100
➢ In China, manufacturing and service sectors contribute the highest to GDP at 41 and 52 per
cent, respectively whereas in India and Pakistan, it is the service sector which contributes the
highest by 54 and 57 percent of GDP respectively.
➢ China’s growth is mainly contributed by the manufacturing and service sectors and India’s
growth by the service sector.
INDICATORS OF HUMAN DEVELOPMENT

Some Selected Indicators of Human Development, 2017-2019
Items India China Pakistan
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Human 0.645 0.761 0.557
Development Index
(HDI)
Rank (based on HDI) 130 87 154
Life Expectancy at 69.7 76.9 67.3

Birth (years)
Mean years of 6.5 8.1 5.2

Schooling (%aged
15 and above)
Gross National 6681 16057 5005

Income per capita
(PPP US$)
Percentage of 21.9* (for the year 1.7**(for the year 24.3*(for the year
People living Below 2011) 2015) 2011)
Line (National)
Infant Mortality 29.9 7.4 57.2

Rate (per 1000 live
births)
Maternal Mortality 133 29 140

Rate (per 1 lakh
births)
Population using at 60 75 60
least basic
Sanitation (%)
Population using at 93 96 91
least basic drinking
Water Source (%)
Percentage of 37.9 8.1 37.6

Undernourished
Children
➢ China is moving ahead of India and Pakistan. This is true for many indicators — income
indicators such as GDP per capita, or proportion of population below poverty line or health
indicators such as mortality rates, access to sanitation, literacy, life expectancy or
malnourishment.
➢ China and Pakistan are ahead of India in reducing the proportion of people below the poverty
line and also their performance in sanitation.
➢ In China, for one lakh births, only 29 women die whereas in India and Pakistan, about 133 and
140 women die respectively.
DEVELOPMENT STRATEGIES — AN APPRAISAL

➢ The reforms were initiated in China in 1978, Pakistan in 1988 and India in 1991.
➢ China did not have any compulsion to introduce reforms as dictated by the World Bank and
International Monetary Fund to India and Pakistan. Maoist vision of economic development
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based on decentralization, self-sufficiency and shunning of foreign technology, goods and
capital had failed.
➢ In China, establishment of infrastructure in the areas of education, health, land reforms, long
existence of decentralized planning and existence of small enterprises helped positively in
improving the social and income indicators in the post-reform period.
➢ Experts point out that in China, each reform measure was first implemented at a smaller level
and then extended on a massive scale.
➢ In Pakistan, scholars argued that the reform process led to worsening of all the economic
indicators. It was very clear that compared to the 1980s, the growth rate of GDP and its sectoral
constituents have fallen in the 1990s.
➢ The reasons for the slow-down of growth and re-emergence of poverty in Pakistan’s economy,
was that, agricultural growth and food supply situation were based not on an institutionalized
process of technical change but on good harvest. When there was a good harvest, the economy
was in good condition, when it was not, the economic indicators showed stagnation or negative
trends.
➢ During the last few years, Pakistan has recovered its economic growth and has been sustaining.
Agriculture recorded growth rate far from satisfactory level, industrial and service sectors
grew at 6.8 and 5.7 per cent respectively.
Practice questions
1. Name any two indicators of the Human Development Index.
2. Name any two indicators of comparative development.
3. Name any two areas of development where India has topped Pakistan.
4. Name two areas of development where Pakistan has topped India.
5. What was the commune system of farming?
6. In which sector of the economy has China surpassed both India and Pakistan?
7. Do you agree with the statement that India has failed to grow as fast as China because it has
failed to check the growth rate of its population? Write your views in brief.
8. While FDI in retail has proved to be growth friendly in China, why should there be opposition
to it in India? Give your opinion.
Ans. It is an undisputed fact that foreign direct investment in wholesale or retail is growth
friendly. After all, it is an investment and increases the production capacity of the nation. The
opposition to FDI is not because it may be a roadblock in the process of growth. It is because it
may generate unwarranted competition for the retail traders in India. They may be
marginalized and finally driven out of the market. Such a situation may reduce the
opportunities of self-employment in the country and may also lead to concentration of
economic power in the hands of foreign investors.
9. Define the Liberty indicator. Give some examples of Liberty indicators.

Ans. Liberty indicators refers to such indicators as the freedom of expression and the liberty
to participate in the state administration. Such indicators are often omitted in the
construction of HDI. Even when the scale of such indicators is much higher in India then China
and Pakistan. Omission of these indicators leads to lower HDI rating of India compared to
Pakistan and China.
10. “India, China and Pakistan have travelled more than 7 decades of developmental path with
varied results.” Explain the given statement with valid arguments.
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Ans. India, China, and Pakistan are very similar in their plans for the development of the
country and they follow the almost similar form of strategies with similar growth rates and also
comparable with their per capita income.
● India, Pakistan, and China are mostly dependent on agriculture which adds to the GDP of the
country and is their main source of livelihood.
● In China, the manufacturing and service sectors contribute the highest to GDP and in India
and Pakistan the service sector which contributes the highest GDP.
● The three countries had started planning their development strategies on the five-year plans
and they have been trying to adopt different means which will enhance their own domestic
economies.
CASE STUDY BASED QUESTIONS

CASE STUDY - 1
After that implementation of the 1991 economic reforms India emerged as a success story of
globalization. While on the one hand India is able to sustain its rapid economic growth on the
other hand India is struggling to provide basic services and infrastructures to its population.
Recent estimates show that there is a rapid decline in poverty in India. The Indian government's
planning commission (currently NITI Aayog) estimated that the annual Everest decline in poverty
was 2.2% between 2004-05 and 2011-12 from my poverty head count ratio of 37.2% to 21.9%
(planning commission 2013.). As per the UNDP global Multidimensional poverty index 2020, In
2005-06, over 640 million people across India work in multidimensional poverty; with the
successful implementation of social protection policies, 273 million people move out of
Multidimensional poverty for a 10-year period.
1. In India, poverty line is determined by the.................(NITI Aayog/ ministry of finance)

on the basis of data collected by NSSO.
2. When the number of poor are estimated as a proportion of people below poverty line,
it is known as:
(a) Head count ratio
(b) Poverty ratio
(c) Relative poverty
(d) Per capita income
3. The estimates showing decline in poverty in India in the above paragraph
indicate............... (absolute/ relative) poverty.
4. In India, the planning commission (now NITI Aayog) uses ................... (Monthly per capita
expenditure /Multidimensional poverty index) as the basis for estimating poverty line in the
country.
Case study -2
Kerala, a state on India’s southwest coast that has emphasized poverty reduction and human
development, is an important case in point. By the mid-1990s, Kerala’s fertility rate had fallen
to just 1.7 births per woman and has remained low, implying a slowly falling population over
time (in the absence of in-migration). Thus Kerala’s fertility rate was until recently less than
that of China, but unlike China, the dramatic reductions in fertility in Kerala were achieved
without coercion, let alone China’s huge direct economic incentives for lowered fertility. Norms
of behaviour can be highly influential, and multiple equilibria resulting from different expected
norms of behaviour are possible. Amartya Sen has observed that there is much evidence that
the sharp decline in fertility rates that has taken place in the more literate states in India
has been much influenced by public discussion of the bad effects of high fertility rates,
especially on the lives of young women and also on the community at large. If the view
has emerged in, say, Kerala or Tamil Nadu that a happy family in the modern age is a small
family, much discussion and debate have gone into the formation of these perspectives.
The success of Kerala suggests that fertility reduction may depend not on rapid economic
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growth or even, in its absence, on draconian governmental policies but rather on grassroots
human development emphasizing women’s empowerment, in which civil society plays a
leading role.
Give the answer to the following question on the basis of given comprehension.
1. Do you agree that women Empowerment plays an important role in controlling population
growth? Give your opinion on the basis of Kerala's example.
Ans. Yes, the given statement is absolutely correct. Women empowerment inculcates various
essential things like, economic freedom and opportunities, social acceptability, political
existence, better opportunity to have higher education, better health sensitivity etc. These
things empower the women in the society and create an awareness towards self-progress and
other important issues like population control etc. Kerala's example proves it.
2. What was the difference between India and China's population policy?
*********************************************************************************************************
SAMPLE QUESTION PAPER-1 (2022-23)

ECONOMICS (030) CLASS XII
M.M. 80 TIME: 3 HOURS
GENERAL INSTRUCTIONS:
1. Question No. 1-10 and Question No. 18 – 27 are 1-mark questions and are to be answered in
one word/sentence.
2. Case Based Questions are Question No. 7-10 and Question No. 24-27.
3. Question No. 11-12 and Question No. 28 – 29 are 3 marks questions and are to be answered
in 60 - 80 words each.
in 80-100 words each.
in 100-150 words each
सामान्य निर्देश :
क) प्रश्न संख्या 1-10 और 18-27 प्रत्येक का 1 अंक हैं। सभी प्रश्नों के उत्तर एक वाक्य में र्देिा हैं।
ख) के स आधाररत प्रश्न(CBQ) प्रश्न संख्या 7-10 और प्रश्न संख्या 25-27 हैं।
ग) प्रश्न संख्या 11-12 और 28-29 प्रत्येक के 3 अंक हैं। प्रत्येक का उत्तर सामान्यत :60-80 शब्र्दों में र्देिा हैं।
घ) प्रश्न संख्या 13-15 और 30-32 प्रत्येक के 4 अंक हैं। प्रत्येक का उत्तर सामान्यत :80-100 शब्र्दों में र्देिा हैं।
ङ) प्रश्न संख्या 16-17 और 33-34 प्रत्येक के 6 अंक हैं। प्रत्येक का उत्तर सामान्यत :100 -150 शब्र्दों में र्देिा हैं।
SECTION A – MACRO ECONOMICS

Q1. In which one of the following situations, there will be unplanned increase in inventory of
unsold goods?
a) Aggregate Demand > Aggregate Supply
b) Aggregate Demand = Aggregate Supply
c) Aggregate Demand < Aggregate Supply
d) None of these
निम्ननिनित में से ककस नथिनत में, नििा निके माि की सूची में अनियोनित वृनि होगी?
a. समग्र मांग (AD > समग्र पूर्ति AS
b. समग्र मांग (AD = समग्र पूर्ति AS
c. समग्र मांग (AD < समग्र पूर्ति AS
87 | P a g e
d. इिमें से कोई िहीं
Q2. Read the following statement carefully and choose the correct alternative among those given
below:
Statement 1: GNP Deflator measures the average level of prices of all goods and services that
make up GNP.
Statement 2: GNP Deflator is measured as the ratio of GDP at constant prices to GDP at current
prices.
Alternatives:
(a) Both the statements are true
(b) Both the statements are false
(c) Statement 1 is true and Statement 2 is false
(d) Statement 1 is false and Statement 2 is true
निम्ननिनित कििों को ध्यािपूविक पक़िए और िीचे कर्दए गए नवकल्पों में से सही नवकल्प का चयि कीनिए:
किि 1: सकि घरे िू उत्पार्द अपनथिनतकारक उि सभी वथतुओं और सेवाओं की कीमतों के औसत थतर को मापता है
िो िीएिपी ििाते हैं।
किि 2: सकि राष्ट्रीय उत्पार्द अपनथिनतकारक को नथिर कीमतों पर िीडीपी के मौिूर्दा कीमतों पर िीडीपी के अिुपात
के रूप में मापा िाता है।
नवकल्प:
(a) र्दोिों किि सत्य हैं
(b) र्दोिों ियाि गित हैं
(c) किि 1 सत्य है और किि 2 गित है
(d) किि 1 गित है और किि 2 सत्य है
Q3. To issue currency notes which system is followed by Reserve Bank of India (RBI)?
भारतीय ररज़वि िैंक के द्वारा करें सी िोट छापिे के निए कौिसी व्यवथिा का उपयोग ककया िाता है
(A) Minimum reserve system (न्यूितम कोष प्रणािी

(B) CRR( िकर्द आरनित अिुपात
(C) High powered money उच्च शनि मुद्रा
(D) Fiscal policy( रािकोषीय िीनत
Q4. The difference by which actual Aggregate Demand exceeds the Aggregate Demand, required
to establish full employment equilibrium is known as ……. (inflationary gap/deflationary gap).
यकर्द वाथतनवक समथत मांग , पूणि रोिगार के निए आवश्यक समथत मांग से अनधक हो तो उिके िीच का अंतर
.................... ( थिीनतक अंतराि / अवनथिनतक अंतराि ( कहिाता है|
Q5. The impact of “Excess Demand” under Keynesian theory of income and employment in an
economy are:
कीन्स की आय और रोिगार अवधारणा के अिुसार आनधक्य मांग का अििव्यवथिा पर क्या प्रभाव पड़ता है ?
(a) decrease in income, output, employment and general price level
(आय , उत्पार्दि , रोिगार और कीमत थतर में कमी(
(b) decrease in nominal income, but no change in real output
(मौकद्रक आय में कमी िेककि वाथतनवक उत्पार्दि में कोई पररवतिि िही(
(c) increase in income, output, employment and general price level
(आय , उत्पार्दि , रोिगार और कीमत थतर में वृनि (
(d) no change in output/employment but increase in general price level.
(उत्पार्दि और रोिगार में कोई पररवतिि िही िेककि सामान्य कीमत थतर में वृनि(
Q6. A government budget shows a primary deficit of 4000 Crore. Expenditure on interest
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payment is 900 Crore. What will be the value of fiscal deficit?
a) 3100 Cr. b) 4900 Cr c) 36000 Cr d) 900 Cr
सरकार का ििट 4000 करोड़ का प्रािनमक घाटा प्रर्दर्शित करता हैI रािकोषीय घाटे का मूल्य क्या होगा िि ब्याि
पर होिे वािा व्यय 900 करोड़ है|
अ) 3100 Cr. ब) 4900 Cr स) 36000 Cr द) 900 Cr
Q7. In the given figure, what does the gap ‘ao’ represent?
कर्दए गए रे िानचत्र मे 'ao' का अंतर क्या र्दशिता है ?
(a) Autonomous investment थवायत निवेश (b) Autonomous consumption थवायत उपभोग
(c) Inflationary gap थिीनतक अंतराि (d) deflationary gap अपथिीनतक अंतराि
below:
Statement 1 : Supply of money does not include stock of money held by the government.
Statement 2 : Net demand deposits are not a part of money supply.
Alternatives:
किि 1 : मुद्रा की आपूर्ति में सरकार द्वारा रिे गए धि का थटॉक शानमि िहीं है।
किि 2 : शुि मांग, िमा मुद्रा आपूर्ति का नहथसा िहीं है।
नवकल्प:
(b) र्दोिों किि गित हैं
below:
Statement 1 : Appreciation of foreign currency induces FDI from rest of the world.
Statement 2 : Appreciation of foreign currency implies depreciation of domestic currency.
Alternatives:
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किि 1 : नवर्देशी मुद्रा की अनधमूल्यि शेष नवश्व से प्रत्यि नवर्देशी निवेश को प्रेररत करती है।
किि 2 : नवर्देशी मुद्रा के अनधमूल्यि का तात्पयि घरे िू मुद्रा के मूल्यह्रास से है।
नवकल्प:
(b) र्दोिों किि गित हैं
Q10. Under which system gold was taken as common unit of parity between currencies of different
countries in circulation?
(a) Bretton woods system of exchange rate.

(b) Gold standard system of exchange rate.
(c) Flexible exchange rate system.
(d) Managed floating system of exchange rate.
ककस प्रणािी के तहत प्रचिि में नवनभन्न र्देशों की मुद्राओं के िीच सोिे को समािता की सामान्य इकाई के रूप में
निया गया िा?
(a) नवनिमय र्दर की ब्रेटि वुड्स प्रणािी।
(b) नवनिमय र्दर की थवणि मािक प्रणािी।
(c) िचीिी नवनिमय र्दर प्रणािी।
(d) नवनिमय र्दर की प्रिंनधत फ्िोटटंग नसथटम।
Q11. State giving valid reasons whether the following statements are true or false:
(i) Trade deficit is always a great cause of worry for an economy.
(ii) “Indians investing in assets abroad” will be recorded under debit side of capital account
in balance of payments.
वैध कारण िताते हुए िताएं कक निम्ननिनित किि सही हैं या गित:
(i) व्यापार घाटा हमेशा एक अििव्यवथिा के निए चचंता का एक िड़ा कारण होता है।
(ii) "नवर्देशों में संपनत्त में निवेश करिे वािे भारतीयों" को भुगताि संतुिि में पूंिी िाते के डेनिट पि के तहत र्दिि
ककया िाएगा।
Q12. Giving reasons explain how the following are treated in estimating national income.
(i) Expenditure by government on providing free education.
(ii) Payment of income tax by a producing unit.
कारण िताते हुए समझाइए कक राष्ट्रीय आय का अिुमाि िगािे में निम्ननिनित के साि ककस प्रकार का व्यवहार
ककया िाता है।
(i) मुफ्त नशिा पर सरकार द्वारा व्यय।
(ii) एक उत्पार्दक इकाई द्वारा आयकर का भुगताि।
Q13. How Reverse Repo Rate and Cash Reserve Ratio help to control money supply or credit in
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the economy.
ररवसि रे पो रे ट और िकर्द आरनित अिुपात अििव्यवथिा में मुद्रा आपूर्ति या क्रेनडट को नियंनत्रत करिे में कै से मर्दर्द
करते हैं?
Q14. Read the following report carefully and answer questions

Along with the weakening of global economic activity, inflation the world over also remained
muted in 2019. Inflation softened in advanced and emerging economies reflecting a slack in
consumer demand. From the supply side, lower energy prices in 2019 also contributed to
softening of inflation. In India, inflation slightly rose to 4.1% in April-December 2019, after a sharp
decline from 5.9% in 2014 to 3.4% in 2018.
वैनश्वक आर्ििक गनतनवनध के कमिोर होिे के साि-साि, र्दुनिया भर में मुद्राथिीनत भी 2019 में मौि रही। उन्नत और
उभरती अििव्यवथिाओं में मुद्राथिीनत में िरमी आई, िो उपभोिा मांग में कमी को र्दशािती है। आपूर्ति पि से, 2019
में ऊिाि की कम कीमतों िे भी मुद्राथिीनत में िरमी में योगर्दाि कर्दया। भारत में, 2014 में 5.9% से 2018 में 3.4%
की तेि नगरावट के िार्द अप्रैि-कर्दसंिर 2019 में मुद्राथिीनत िोड़ी ि़िकर 4.1% हो गई|
(i) Due to weakening of global economic activity, level of aggregate demand ………….. in the
economy.
a. Increases b. decreases c. remains constant d. none of these
(ii) Impact of above situation under theory of income and employment in an economy is:
a. decrease in income
b. decrease in nominal income but no change in real output
c. increase in income, output and employment
d. no change in output/ employment but increase in general price level
(iii) Inflation leads to wage – price spiral. (true / false)

(iii) ……………. In Government expenditure is required to combat inflation.
a)decreases b) increases
c)Either decrease or increase d)Neither decrease or increase
(i) वैनश्वक आर्ििक गनतनवनध के कमिोर होिे के कारण, अििव्यवथिा में कु ि मांग का थतर ……………..
a. ि़िता है b. घट िाती है c. नथिर रहता है d. इिमें से कोई िहीं
(ii) एक अििव्यवथिा में आय और रोिगार के नसिांत के तहत उपरोि नथिनत का प्रभाव है:
a. आय में कमी
b. िाममात्र की आय में कमी िेककि वाथतनवक उत्पार्दि में कोई िर्दिाव िहीं
c. आय, उत्पार्दि और रोिगार में वृनि
d. उत्पार्दि/रोिगार में कोई पररवतिि िहीं िनल्क सामान्य मूल्य थतर में वृनि
(iii) मुद्राथिीनत मिर्दूरी-मूल्य सर्पिि की ओर िे िाती है। ( सही/गित )
(iv) सरकारी िचि में ……………….. मुद्राथिीनत का मुकाििा करिे की आवश्यकता है।
a) वृनि b) कमी c) या तो वृनि या कमी d) ि तो वृनि और ि ही कमी
Q15. Explain Inflationary Gap with Causes and consequences. Give any two solutions to cover the
gap.
थिीनतक अंतराि को कारणों और पररणामों के साि समझाइए। थिीनतक अंतराि को हटािे के निए कोई र्दो
समाधाि र्दीनिए।
OR
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State which of the following statements are true or false. Give valid reason.
(a) According to Keynesian theory of employment, the state of full employment is obtained only
when the economy is in equilibrium.
(b) In a two sector economy, if consumption is equal to income, average propensity to save will
be zero.
िताएं कक निम्ननिनित में से कौि सा किि सत्य या गित है। कारण िताएं।
(a) रोिगार के कीिेनसयि नसिांत के अिुसार, पूणि रोिगार की नथिनत तभी प्राप्त होती है िि अििव्यवथिा संतुिि में
हो।
(b) र्दो िेत्र की अििव्यवथिा में, यकर्द िपत आय के िरािर है, तो औसत िचत प्रवृनत्त शून्य होगी।
Q16. A.) How can the government impact allocation of resources through its budgetary policy?
B.) What are the three deficits of government budget. Explain any three implication of
Fiscal deficit.
a) सरकार अपिी ििटीय िीनत के माध्यम से संसाधिों के आवंटि को कै से प्रभानवत कर सकती है?
b) सरकारी ििट के तीि घाटे क्या हैं। रािकोषीय घाटे के ककन्हीं तीि निनहतािों की व्याख्या कीनिए।
Q17. Calculate GNPmp by Income method and Expenditure method from following:
निम्ननिनित से आय नवनध और व्यय नवनध द्वारा GNPmp की गणिा करें :
Items Rs in Crores
Net Exports / शुि नियाित 10
Rent / ककराया 20
Private Final Consumption 400
Expenditure / नििी अंनतम उपभोग व्यय
Interest / ब्याि 30
Dividends / िाभांश 45
Undistributed Profits / अनवभानित िाभ 5
Corporate Tax / निगनमत कर 10
Govt. Final Consumption Expenditure / 100
सरकार का अंनतम उपभोग व्यय
Net Domestic Capital Formation / शुि 50
घरे िू पूंिी निमािण
Compensation of Employees / 400
कमिचाररयों को मुआविा
Consumption of Fixed Capital / अचि 10
पूंिी की िपत
Net Indirect Taxes / शुि अप्रत्यि कर 50
NFIA विदे श ों से प्राप्त शुद्ध साधन आय (-)10
SECTION B – INDIAN ECONOMIC DEVELOPMENT

Q18. Read the following Assertion (A) and Reason (R). Choose the correct alternative:
Assertion : Distribution of goods among people in capitalist economy happens on the basis of
purchasing power.
Reason: Market forces govern the central decisions of capitalist economy.
Alternatives:
(a) Both Assertion and reason are true and R is the correct explanation of A.
(b) Both Assertion and reason are true and R is not the correct explanation of A.
(c) Assertion is true and Reason is false.
(d) Assertion is false and Reason is true.
निम्ननिनित अनभकिि (A) और कारण (R) को पक़िए। सही नवकल्प का चयि करें :
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अनभकिि A : पूंिीवार्दी अििव्यवथिा में िोगों के िीच वथतुओं का नवतरण क्रय शनि के आधार पर होता है।
कारण R : िािार की ताकतें पूंिीवार्दी अििव्यवथिा के कें द्रीय निणियों को नियंनत्रत करती हैं।
नवकल्प:
(a) किि और कारण र्दोिों सत्य हैं और R, A की सही व्याख्या है।
(b) किि और कारण र्दोिों सत्य हैं और R, A की सही व्याख्या िहीं है।
(c) किि सत्य है और कारण गित है।
(d) किि गित है और कारण सत्य है।
Q19. Land reforms are known as ……………………. (institutional / technical)

भूनम सुधारों को ……………….. (संथिागत/तकिीकी) के रूप में िािा िाता है।
OR
………….. is a strategy to save foreign exchange by encouraging domestic production of such
goods which the country has been importing from rest of the world. (Import substitution /
Import Liberalisation).
……………… ऐसी वथतुओं के घरे िू उत्पार्दि को प्रोत्सानहत करके नवर्देशी मुद्रा को िचािे की रणिीनत है निसे र्देश
र्दुनिया के िाकी नहथसों से आयात करता रहा है। (आयात प्रनतथिापि/आयात उर्दारीकरण) ।
Q20. Monetary benefits of education ……………………… the cost of education. (exceed / are less
than).
नशिा के मौकद्रक िाभ , नशिा की िागत ……………….. । (से अनधक हैं / से कम हैं)
Assertion : Alternative Marketing channels are a ray of hope for small and marginal farmers.
Reason : Current market channels have not been able to defend the interest of small and
marginal farmers from the middlemen.
Alternatives:
नवकल्प:
Q22. The number of people who are able to work and willing to work at the existing wage rate is
known as
a) Labour Supply b) Labour Force c) Work force d) Participation Rate
मौिूर्दा मिर्दूरी र्दर पर काम करिे में सिम और काम करिे के इच्छु क िोगों की संख्या ………………. के रूप में
िािा िाता है
a) श्रम आपूर्ति b) श्रम िि c) कायि िि d) भागीर्दारी र्दर
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Q23. Environment Protection act was passed in year 1986. (True / False)
पयािवरण संरिण अनधनियम वषि 1986 में पाररत ककया गया िा। (सही /गित)
Q24. The relative success of China is credited to ……………………… stability in China. (Social /
Political).
चीि की सापेनिक सििता का श्रेय चीि में ………………… नथिरता को िाता है। (सामानिक / राििीनतक)।
OR
In the strategy of growth of India and Pakistan ………… sector was assigned the secondary role of
pushing the process of growth. (Public / private).
भारत और पाककथताि के नवकास की रणिीनत में …………… सेक्टर को नवकास की प्रकक्रया को आगे ि़िािे की
माध्यनमक भूनमका सौंपी गई िी। ( सावििनिक / नििी)।
Assertion : Great Proletarian Cultural Revolution was launched to address economic recession.
Reason : Great Leap Forward failed to accelerate the pace of development.
Alternatives:
अनभकिि (A) : आर्ििक मंर्दी को र्दूर करिे के निए महाि सविहारा सांथकृ नतक क्रांनत शुरू की गई िी।
कारण R: ग्रेट िीप िॉरवडि नवकास की गनत को तेि करिे में नविि रहा।
नवकल्प:
Q26. Central Pollution Control board addresses the issues related to air pollution only. ( True /
False).
कें द्रीय प्रर्दूषण नियंत्रण िोडि के वि वायु प्रर्दूषण से संिंनधत मुद्दों को संिोनधत करता है। ( सही / गित)
Q27. Pakistan growth rate deteriorated due to excessive dependence of remittances. ( True /
False).
प्रेषण की अत्यनधक निभिरता के कारण पाककथताि की नवकास र्दर िराि हुई। ( सही / गित)
Q28. Read the case study carefully and answer questions

Education is a key element of human capital theory because it is viewed as the primary means of
developing knowledge and thus is a way of quantifying the quality of labour. Many studies have
stressed on the essential role of education as the main factor in increasing human capital and
encouraging economic growth, by helping individuals acquire knowledge, opening doors to job
opportunities, developing social interactions, being aware of the rights, improving health and
reducing poverty.
While India has made substantial progress in getting children enrolled in schools, this has not led
to children getting quality education. There is growing acknowledgement by public authorities
and governments across India that there is learning crisis in the country's public schools. At the
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same time, there is more willingness on the part of authorities to invest substantial human and
financial resources in improving the quality of education.
नशिा मािव पूंिी नसिांत का एक प्रमुि तत्व है क्योंकक इसे ज्ञाि के नवकास के प्रािनमक साधि के रूप में र्देिा िाता
है और इस प्रकार यह श्रम की गुणवत्ता को मापिे का एक तरीका है। कई अध्ययिों िे मािव पूंिी को ि़िािे और आर्ििक
नवकास को प्रोत्सानहत करिे में मुख्य कारक के रूप में नशिा की आवश्यक भूनमका पर िोर कर्दया है, निससे व्यनियों
को ज्ञाि प्राप्त करिे, िौकरी के अवसरों के द्वार िोििे, सामानिक संपकि नवकनसत करिे, अनधकारों के िारे में िागरूक
होिे, थवाथ्य में सुधार और गरीिी को कम करिे में मर्दर्द नमिती है। .
ििकक भारत िे िच्चों को थकू िों में र्दानििा कर्दिािे में पयािप्त प्रगनत की है, इससे िच्चों को गुणवत्तापूणि नशिा िहीं नमि
रही है। भारत भर में सावििनिक प्रानधकरणों और सरकारों द्वारा इस िात को थवीकार ककया िा रहा है कक र्देश के
पनब्िक थकू िों में सीििे का संकट है। साि ही, नशिा की गुणवत्ता में सुधार के निए पयािप्त मािव और नवत्तीय संसाधिों
का निवेश करिे के निए अनधकाररयों की ओर से अनधक इच्छा है।
i) Apart from education, which of the following is a tool for human capital formation?
a. On the job training
b. Investment in infrastructure
c. Industrial growth
d. Agriculture growth
ii) ............................. (Right to education / Education cess) is the legislative measure towards
ensuring education at elementary level.
iii) ............................. (NCERT / AICTE) designs text material for students up to senior secondary
level.
i) नशिा के अिावा, निम्ननिनित में से कौि मािव पूंिी निमािण का एक उपकरण है?
a. िौकरी के प्रनशिण पर b.िुनियार्दी ढांचे में निवेश
c. औद्योनगक नवकास d. कृ नष नवकास
ii) ......................... (नशिा का अनधकार / नशिा उपकर) प्रारं नभक थतर पर नशिा सुनिनित करिे के निए
नवधायी उपाय है।
iii) ......................... (एिसीईआरटी / एआईसीटीई) वररष्ठ माध्यनमक थतर तक के छात्रों के निए पाठ्य
सामग्री तैयार करता है।
Q29. There is a mismatch between “GDP growth” and “employment growth” in India. How do
you justify this statement?
भारत में "िीडीपी वृनि" और "रोिगार वृनि" के िीच एक िेमेि है। आप इस किि को कै से सही ठहराते हैं?
Q30. Critically Evaluate the role of rural banking system in the process of rural development in
India with appraisal?
मूल्यांकि के साि भारत में ग्रामीण नवकास की प्रकक्रया में ग्रामीण िैंककं ग प्रणािी की भूनमका का आिोचिात्मक
मूल्यांकि करें ?
Q31. How has the shift from inward looking strategy to outward looking strategy impacted
India’s exports in the post NEP era?
एिईपी के िार्द के युग में आवक कर्दििे वािी रणिीनत से िाहरी कर्दििे वािी रणिीनत में िर्दिाव िे भारत के नियाित
को कै से प्रभानवत ककया है?
Q32. Answer the following questions on basis of following data:

(i) Comment upon the population growth rates among three countries.
(ii) Which country has most skewed sex- ratio?
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निम्ननिनित आँकड़ों के आधार पर निम्ननिनित प्रश्नों के उत्तर र्दीनिए:
(i) तीि र्देशों में ििसंख्या वृनि र्दर पर रटप्पणी कीनिए।
(ii) सवािनधक नवषम चिंगािुपात वािा र्देश कौि सा है?
COUNTRY ESTIMATED ANNUAL GROWTH OF SEX RATIO

POPULATION POPULATION (%) चिंग अिुपात
अिुमानित ििसंख्या ििसंख्या की वार्षिक वृनि (%)
INDIA 1311 1.2 929
CHINA 1371 0.5 941
PAKISTAN 188 2.1 947
OR
Compare and analyse the given data of distribution of workforce (in 2018-19) with valid
reasons:
कायििि के नवतरण के कर्दए गए डेटा (2018-19 में) की वैध कारणों से तुििा और नवश्लेषण करें :
COUNTRY AGRICULTURAL (%) INDUSTRY (%) SERVICES (%)
कृ नष (%) उद्योग (%) सेवाएं (%)
INDIA 43 25 32
CHINA 26 28 46
PAKISTAN 41 24 35
Q33. A. Why did RBI have to change its role from controller to facilitator of financial sector in
India?
B. Write a critical review of NEP 1991.
A. आरिीआई को भारत में नवत्तीय िेत्र के नियंत्रक से अपिी भूनमका क्यों िर्दििी पड़ी?
B. NEP 1991 की आिोचिात्मक समीिा निनिए।
Q34. A. Do you agree with a view that environmental degradation is an avoidable opportunity
cost of development?
B. Sustainable development is a process to be adopted as a daily life activity? Explain.
A. क्या आप इस नवचार से सहमत हैं कक पयािवरणीय िरण नवकास की एक पररहायि अवसर िागत है?
B. सतत नवकास एक र्दैनिक िीवि गनतनवनध के रूप में अपिाई िािे वािी प्रकक्रया है? समझािा।
………………………………………………………………………………………………………………………………………………
SAMPLE QUESTION PAPER -2

Time Duration: 1:30 Hrs CLASS-XII Max. Marks : 80
समय अवधि: 1:30 Hrs कक्षा-बारहव ीं अधिकतम अींक: 80
1-This question paper contains two sections:

Section A – Macro Economics
Section B – Indian Economic Development
2. This paper contains 20 Multiple Choice Questions type questions of 1 mark each.
3. This paper contains 4 Short Answer Questions type questions of 3 marks each to be answered in 60 to
80 words.
4. This paper contains 6 Short Answer Questions type questions of 4 marks each to be answered in 80 to
96 | P a g e
100 words.
5. This paper contains 4 Long Answer Questions type questions of 6 marks each to be answered in 100 to
150 words.
निदे श-
1. इस प्रश्न पत्र में र्दो िंड हैं:
खडं अ – समनि अििशास्त्र
खडं ब – भारतीय आर्ििक नवकास
2. इस पेपर में 1 अींक के 20 बहुववकल्प य प्रकार के प्रश्ि हैं।
3. इस पेपर में 3 अींकों के 4 लघु उत्तरीय प्रकार के प्रश्ि हैं जििका उत्तर 60 से 80 शब्दों में ददया िािा है ।
4-इस पेपर में 4 अंकों के 6 िघु उत्तरीय प्रकार के प्रश्न हैं नििका उत्तर 80 से 100 शब्र्दों में कर्दया िािा है।
5. इस पेपर में 6 अंकों के 4 र्दीघि उत्तरीय प्रकार के प्रश्न हैं नििका उत्तर 100 से 150 शब्र्दों में कर्दया िािा है।
Q-1 Read the following statements carefully: 1
Statement 1: The increase in aggregate income will lead to increased consumption or
saving:
it is not possible for savings and consumption to decrease when income increases.
Statement 2: Aggregate consumption increases with increase in aggregate income but the
increase in consumption is less than the increase in the income. Aggregate consumption
decreases with decrease in aggregate income but the decrease in consumption is less than
the decrease in the income.
a. Statement 1 is true and statement 2 is false
b. Statement 1 is false and statement 2 is true
c. Both statements 1 and 2 are true
d. Both statements 1 and 2 are false
निम्ननिनित कििों को ध्याि से प़िें:
किि 1: कु ि आय में वृनि से उपभोग या िचत में वृनि होगी। आय ि़ििे पर िचत और उपभोग में कमी संभव िहीं है।
किि 2: सकि आय में वृनि के साि सकि उपभोग में वृनि होती है िेककि उपभोग में वृनि आय में वृनि से कम होती
है। कु ि आय में कमी के साि सकि उपभोग कम हो िाती है िेककि उपभोग में कमी आय में कमी से कम होती है।
a. किि 1 सत्य है और किि 2 असत्य है।
b. किि 1 गित है और किि 2 सत्य है।
c. किि 1 और 2 र्दोिों सत्य हैं।
d. किि 1 और 2 र्दोिों असत्य हैं।

Q-2 Write a component of demand for foreign exchange. 1
नवर्देशी मुद्रा की माँग का एक घटक निनिए।
Q-3 Narrow money refers to- 1
M4,M1 (b) M3, M4 (C) M1,M2 (d) M2 , M3
संकीणि मुद्रा से आपका क्या तात्पयि हें ?

M4,M1 (b) M3, M4 (C) M1,M2 (d) M2 , M3
Q4 Read the following statements carefully: 1
Statement 1: Export and import of goods and services will be included in the balance
of trade.
Statement2: Borrowing form IMF by India will be recorded on credit side of capital
97 | P a g e
account.
In the light of the given statements, choose the correct alternative:
a) Statement 1 is true and statement 2 is false
b) Statement 1 is false and statement 2 is true
c) Both statements 1 and 2 are true
d) Both statements 1 and 2 are false
निम्ननिनित कििों को ध्यािपूविक पक़िए:

किि 1: वथतुओं और सेवाओं के नियाित और आयात को व्यापार संतुिि में शानमि ककया िाएगा।
किि 2: भारत द्वारा IMF से उधार िेिा पूंिी के क्रेनडट पि पर र्दिि ककया िाएगा
िाता।
कर्दए गए कििों के आिोक में, सही नवकल्प चुनिए:
a) किि 1 सत्य है और किि 2 असत्य है
b) किि 1 असत्य है और किि 2 सत्य है
c) किि 1 और 2 र्दोिों सत्य हैं
d) किि 1 और 2 र्दोिों असत्य हैं
Q-5 National income refers to— 1
(a)NNPmp (b) NNPfc (c) NDPmp (d) GDPfc
राष्ट्रीय आय से क्या तात्पयि हें?
(अ)NNPmp (ब) NNPfc (स) NDPmp (द) GDPfc
Q-6 If the ratio of marginal propensity to consume and marginal propensity to save is 8 : 2, 1
identify the change in income:
a) Increase in income will be greater than increase in investment.

b) Decrease in income will be greater than decrease in investment.
c) Change in income is equal to change in investment.
d) Both A and B
यकर्द सीमांत उपभोग प्रवृनत्त और सीमांत िचत प्रवृनत्त का अिुपात 8 : 2 है, तो आय में पररवतिि की पहचाि कीनिए।
a) आय में वृनि निवेश में वृनि से अनधक होगी।
b) आय में कमी निवेश में कमी से अनधक होगी।
c) आय में पररवतिि निवेश में पररवतिि के िरािर होगा।
d) ए और िी र्दोिों
Or
अथवा
If in an economy the value of Autonomous Investment is ₹ 5 Crore and Consumption
function is 𝐶 = 10 + 0.75𝑌 ., the relative aggregate demand function would be:
a) 𝐴𝐷 = 5 + 0.75𝑌
b) 𝐴𝐷 = 10 + 0.75𝑌
c) 𝐴𝐷 = 15 + 0.75𝑌
d) 𝐴𝐷 = 5 + 0.50𝑌
98 | P a g e
यकर्द ककसी अििव्यवथिा में थवायत्त निवेश का मूल्य ₹ 5 करोड़ है और उपभोग ििि C=10+.75Y तो समग्र माँग
ििि होगा –
a) 𝐴𝐷 = 5 + 0.75𝑌
b) 𝐴𝐷 = 10 + 0.75𝑌
c) 𝐴𝐷 = 15 + 0.75𝑌
d) 𝐴𝐷 = 5 + 0.50𝑌
Q-7 Credit money refers to – 1
(a) Credit money = Commodity money
(b) Credit money < Commodity money
(c) Credit money> Commodity money
(d) None of these
साि मुद्रा को क्या अिि हें
(अ(मोकद्रक मूल्य = वथतु मूल्य (ि( मोकद्रक मूल्य < वथतु मूल्य
(स( मोकद्रक मूल्य > वथतु मूल्य (र्द( इिमे से कोई िहीं
Q-8 Export of goods is 200 cr and balance of trade is (-) 100 Cr Calculate Value of Import of goods. 1
Or
What is a foreign exchange rate?
वथतुओं का नियाित 200 करोड़ रुपये और व्यापार संति

ु ि (-( 100 करोड़ है वथतुओं के आयात के मूल्य की गणिा करें ।
अिवा
नवर्देशी नवनिमय र्दर क्या है?
Q-9 Read the following statement -Assertion (A) and Reason (R). Choose one of the correct 1
alternatives given below:
Assertion (A): In a situation of excess demand, there is under employment in an

economy.
Reason (R): Excess demand raises the nominal value of the output.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
explanation of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the
correct explanation of Assertion (A).
c) Assertion (A) is true but Reason (R) is false.
d) Assertion (A) is false but Reason (R) is true.
99 | P a g e
निम्ननिनित किि को प़िें - अनभकिि (A) और कारण (R)। िीचे कर्दए गए नवकल्पों में से एक सही नवकल्प
चुिें:
अनभकिि (A) : अनधक मांग की नथिनत में अििव्यवथिा में अल्प रोिगार होता है।
कारण (R) : अनधक मांग से उत्पार्दि का मौकद्रक मूल्य ि़ि िाता है।
नवकल्प:
क) अनभकिि (A) और कारण (R) र्दोिों सत्य हैं और कारण (R) अनभकिि (A) की सही
व्याख्या है।
ख) किि (A) और कारण (R) र्दोिों सत्य हैं और कारण (R) अनभकिि (A) की सही व्याख्या
िहीं है।
ग) अनभकिि (A( सही है िेककि कारण (R( गित है।
घ) र्दावा (A( गित है िेककि कारण (R( सही है।
Q-10 1
Read the following statement -Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:
Assertion (A): Aggregate Demand is deficient when it is less than Aggregate Supply
corresponding to full employment in the economy.
Reason (R): Government has increased the expenditure for the development as well as
welfare projects in the economy.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
c) Assertion (A) is true but Reason (R) is false.
d)Assertion (A) is false but Reason (R) is true.
निम्ननिनित किि को प़िें - अनभकिि (A) और कारण (R)। िीचे कर्दए गए नवकल्पों में से एक सही नवकल्प चुि:ें
अनभकिि (A): मांग में कमी ति होती है िि अििव्यवथिा में पूणि रोिगार के अिुरूप समग्र पूर्ति से समग्र मांग कम
होती है।
कारण (R): सरकार िे अििव्यवथिा में नवकास के साि-साि कल्याणकारी पररयोििाओं के निए व्यय में वृनि की है।
नवकल्प:
क( अनभकिि (A) और कारण (R) र्दोिों सत्य हैं और कारण (R) अनभकिि (A) की सही व्याख्या है।
ि( किि (A) और कारण (R) र्दोिों सत्य हैं और कारण (R) अनभकिि (A) की सही व्याख्या िहीं है।
ग( अनभकिि (A) सही है िेककि कारण (R) गित है।
घ( र्दावा (A) गित है िेककि कारण (R) सही है।

Q-11 Draw the circular flow of income of open economy? 3
िुिी अििव्यथिा के आय के चक्रीय प्रवाह का नचत्र ििाईये ?
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Q-12 What is depreciation and appreciation of foreign currency. 3
OR
What is devaluation and revaluation of foreign currency.
नवर्देशी मुद्रा का मूल्यह्रास और मूल्यवृनि क्या है।
अिवा
नवर्देशी मुद्रा का अवमूल्यि और पुिमूिल्यि क्या है।
Q-13 In an economy if the saving function is 𝑆 = (−)10 + 0.20𝑌 and ex-ante investments are 4
240 Crore. Estimate the increase in investment required to double the present level of
equilibrium income.
एक अििव्यवथिा में यकर्द िचत ििि S=(-)10+0.20Y है और प्रत्यानशत निवेश 240 करोड़ है। संतुिि आय के वतिमाि
थतर को र्दोगुिा करिे के निए आवश्यक निवेश में वृनि का अिुमाि िगाएं।
Q-14 As per the following new press releases by RBI 0n 05Aug 2022 4
Date : Aug 05, 2022
Monetary Policy Statement, 2022-23 Resolution of the Monetary Policy Committee

(MPC) August 3-5, 2022
On the basis of an assessment of the current and evolving macroeconomic situation,

the Monetary Policy Committee (MPC) at its meeting today (August 5, 2022) decided to:
Increase the policy repo rate under the liquidity adjustment facility (LAF) by 50 basis
points to 5.40 per cent with immediate Identify the likely cause and the consequences
behind, this type of action plan of the Reserve Bank.
05अगथत 2022 को आरिीआई द्वारा निम्ननिनित िई प्रेस नवज्ञनप्तयों के अिुसार

कर्दिांक: अगथत 05, 2022
मौकद्रक िीनत विव्य, 2022-23 मौकद्रक िीनत सनमनत (एमपीसी( का संकल्प 3-5 अगथत, 2022
मौकद्रक िीनत सनमनत (एमपीसी( िे आि (5 अगथत, 2022( अपिी िैठक में वतिमाि और नवकनसत व्यापक आर्ििक
नथिनत के आकिि के आधार पर निणिय निया: चिनिनध समायोिि सुनवधा (एिएएि( के तहत पॉनिसी रे पो र्दर में
50 आधार की वृनि तत्काि के साि 5.40 प्रनतशत की ओर इशारा करता है
ररज़वि िैंक की इस प्रकार की कायि योििा के संभानवत कारण और उसके पीछे के पररणामों की पहचाि करें ।
Q-15 Discuss the lenders last resort function and Bank of banks function of reserve bank of 4
India.
ररज़वि िैंक के अंनतम आश्रयर्दाता के कायि एवम िेंको का िैंक कायि को समझाइए
Q-16 Calculate (a( Gross National Product at Market Price by Income method, and (b( 6
National income by Expenditure method on the folowing data:-
1. Net exports 10
2. Rent 20
3.Private final consumption expenditure 400
101 | P a g e
4. Interest 30
5.Dividend 45
6. Undistributed profit 5
7. Corporate tax 10
8. Gorenment final consumption expenditure 100
9. Net domestic capital formation 50
10. Compensation of employees 400
11. Consumption of fixed capital 10
12. Net indirect tax 50
13. Net factor income from abroad (-( 10
निम्ननिनित आंकड़ो से (अ( आय नवनध द्वारा सकि रानष्ट्रय उत्पार्द िाज़ार मूल्य पर एवम (ि( व्यय नवनध
द्वारा रानष्ट्रय आय की गणिा ककनिये :-
निवि नियाित 10
िगाि 20
नििी अंनतम उपभोग व्यय 400
ब्याि 30
िाभांश 45
निगम के अनवतररत िाभ 5
निगम कर 10
सरकारी अंनतम उपभोग व्यय 100
निवि गेरुिू पूंिी निमािण 50
कमिचाररयों के पाररश्रनमक 400
थिाई पूंिी का उपभोग 10
निवि अप्रत्यि कर 50
नवर्देशो से शुि साधि आय (-(10
Q-17 Answer the following- 6
a) Elaborate the objective of “Provision of Public Goods” in the Government budget.

b) Identify the examples of tax revenue receipts from the following figure.
102 | P a g e
Or
a) If fiscal deficit is 35% then calculate primary deficit in percent with the help of given figure.
a) यकर्द रािकोषीय घाटा 35% है तो कर्दए गए नचत्र की मर्दर्द से प्रनतशत में प्रािनमक घाटे की गणिा करें ।
b) Distinguish between revenue expenditure and capital expenditure of the

government, with suitable examples.
ि( उपयुि उर्दाहरणों के साि सरकार के रािथव व्यय और पूि
ं ीगत व्यय के िीच अंतर करें ।
Q-18 _____ is the portion of agricultural produce which is sold in the market by the farmers, after 1
meeting their self-consumption requirements. (Fill in the blank with correct alternative)
a) Trade Surplus
b) Marketable Surplus
c) Producer Surplus
d) Consumer Surplus
———————————कृ नषगत उत्पार्दों का वह भाग है िो ककसािों द्वारा थव-उपभोग की ज़रूरत को पूरा करिे
के िार्द िाज़ार में िेचा िाता है।
अ( व्यापार अनतरे क
ि( नवपणियोग्य अनतरे क
स( उत्पार्दक अनतरे क
र्द( उपभोिा अनतरे क
Q-19 Before the advent of Green Revolution in 1960’s, India was primarily dependent on _____for 1
the supply of food grains. (Fill in the blank with correct alternative)
१९६० के र्दशक में हररत-क्रांनत के आगमि से पूवि , भारत िाद्यान्नों की आपूर्ति के निए मुख्यतः————पर निभिर
िा।
a) United States of America (USA) संयुि राज्य अमेररका
b) Britain (United Kingdom) नब्रटेि
c) Mexico मैनक्सको
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a) Union of Soviet Socialist Republics (USSR) सोनवयत संघ
or अिवा
Prior to India's independence, the stagnation in the agricultural sector was mainly caused
by _____. (Fill up the blank with correct alternative)
a) investment in technology
b) investment in agriculture facilities
c) advanced infrastructural facilities
d) land settlement system
भारत की थवतंत्रता से पहिे, कृ नष िेत्र में नथिरता का प्रमुि कारण—————————िा ।
अ( तकिीकी में निवेश
ि( कृ नषगत सुनवधाओं में निवेश
स( आधारभूत सुनवधाओं का उन्नयि
र्द( भू-िंर्दोिथत व्यवथिा
Q-20 What of the following are major event of the pre-1978 period of development in China? 1
I. Great Leap Forward
II. Great Proletarian Cultural Revolution
III. Special Economic Zone
IV. Economic Reforms
Alternatives:
(a) I and II (b) II and III
(c) I, II and IV (d) I, III and IV
Or
Under ________________, peasants pooled their land to create larger fields that could yield
greater output .
(a) Commune system (b) Joint farming system
(c) Great Proletarian Cultural (d) None of these
चीि में 1978 से पहिे के नवकास की प्रमुि घटिाएं निम्ननिनित में से क्या हैं?
। ग्रेट िीप िॉरवडि
II. महाि सविहारा सांथकृ नतक क्रांनत
III. नवशेष आर्ििक िेत्र
IV. आर्ििक सुधार
नवकल्प:
(क( I और II (ि( नद्वतीय और तृतीय
(ग( I, II और IV (घ( I, III और IV

अिवा
…………………………………….के अंतगित ककसािों िे िडे िेतों का सृिि करिे के निए अपिी भूनम एकनत्रत
की निससे अनधक उत्पार्दि हो सके .
(क( कम्यूि प्रणािी (ि( संयि

ु कृ नष प्रणािी
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(ग( महाि सविहारा सांथकृ नतक (घ( इिमें से कोई िहीं
Q-21 Which of the following organizations enforces rules and regulations regarding technical/ 1
engineering education in the country?
(a) UGC (b) AICTE (c) ICMR (d) NCERT
निम्ननिनित में से कौि सा संगठि र्देश में तकिीकी / इं िीनियटरं ग नशिा के संिंध में नियमों और नवनियमों को िागू
करता है?
(a) UGC (b) AICTE (c) ICMR (d) NCERT

Q-22 From the set of statements given in column I and II, choose the correct pair of 1
statements:
Column I Column II
A. Reforms introduced in China (i) 1976
B. First five year plan in Pakistan (ii) 1955
C. India (iii) Has the most skewed sex
ratio
D. Introduction of commune system in China (iv) 1976
Alternatives:
(a) A – (i) (b) B – (ii)
(c) C – (iii) (d) D – (iv)
थतंभ I और II में कर्दए गए कििों के समूह में से, कििों की सही िोड़ी चुनिए:
थतंभ I थतंभ II
A. चीि में शुरू ककए गए सुधार (i) 1976
B. पाककथताि में पहिी पंचवषीय योििा (ii) 1955
C. भारत (iii) सिसे नवषम चिंग अिुपात है

घ. चीि में कम्यूि प्रणािी का पररचय (iv) 1976
नवकल्प:
(a) A – (i) (b) B – (ii)
(c) C – (iii) (d) D – (iv)

Q-23 Read the following statement carefully. 1
Statement 1: Credit provisions by the SHGs are known as Macro-credit programmes.
Statement 2: These loans are offered without any security and at a moderate rate of interest.
(a) Statement 1 is true and statement 2 is false
(b) Statement 1 is false and statement 2 is true
(c) Both statements 1 and 2 are true
(d) Both statements 1 and 2 are false
निम्ननिनित किि को ध्यािपूविक पक़िए।

किि 1 एसएचिी द्वारा ऋण प्रावधािों को मैक्रो-क्रेनडट कायिक्रमों के रूप में िािा िाता है।
किि 2: ये ऋण नििा ककसी प्रनतभूनत के और मध्यम ब्याि र्दर पर कर्दए िाते हैं।
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(a) किि 1 सत्य है और किि 2 असत्य है
(b) किि 1 असत्य है और किि 2 सत्य है
(c) किि 1 और 2 र्दोिों सत्य हैं।
(d) किि 1 और 2 र्दोिों असत्य हैं

Statement 1: China has a very high density of population.
Statement 2: It is very large in terms of geographical area.
किि 1: चीि में ििसंख्या का घित्व िहुत अनधक है।
किि 2: भौगोनिक िेत्र की र्दृनि से यह िहुत िड़ा है।


Q-25 _____________ refers to a situation in which a person is actively seeking a job but is unable to find 1
work.
(a) Unemployment (b) Underemployment
(c) Jobless (d) None of these
Or
The use of ______________ is focused under the Ujjwala Yojana.

(a) LPG (b) CNG
(c) Gobar gas (d) Solar power
.....................................एक ऐसी नथिनत को संर्दर्भित करता है निसमें एक व्यनि सकक्रय रूप से िौकरी की तिाश
कर रहा है िेककि काम िोििे में असमिि है।
(क( िेरोिगारी (ि( अल्परोिगार (ग( िेरोिगार (घ( इिमें से कोई िहीं
अिवा
उज्ज्विा योििा के तहत ____________ का उपयोग कें कद्रत है.
(क( एिपीिी (ि( सीएििी
(ग( गोिर गैस (घ( सौर ऊिाि

Statement 1: Economic crises occurs when carrying capacity of the environment is
challenged.
Statement 2: This happens when waste generation is below the absorptive capacity of the
environment.
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किि 1: आर्ििक संकट ति होता है िि पयािवरण की वहि िमता को चुिौती र्दी िाती है।
किि 2: यह ति होता है िि अपनशि उत्पार्दि पयािवरण की अवशोषण िमता से िीचे होता है।

Statement 1: Pakistan has experienced a phenomenal rise in its growth rate.
Statement 2: Domestic investment and FDI has been shrinking in Pakistan.

किि 1: पाककथताि िे अपिी नवकास र्दर में अभूतपूवि वृनि का अिुभव ककया है।
किि 2: पाककथताि में घरे िू निवेश और एिडीआई नसकु ड़ रहा है।

Q-28 Explain the given picture as a problem for human capital formation in India? 3
र्दी गई तथवीर को भारत में मािव पूंिी निमािण के निए एक समथया के रूप में समझाइए|
Q-29 Defend or refute the following statement with valid explanation: 3

‘Credit is the lifeline of farming activity in India.’
Or
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Diversification of crop production is the need of the hour for Indian agriculture.
Comment.
मान्य थपिीकरण के साि निम्ननिनित किि का िचाव या िंडि करें :
'क्रेनडट भारत में कृ नष गनतनवनध की िीवि रे िा है।
अिवा
िसि उत्पार्दि का नवनवधीकरण भारतीय कृ नष के निए समय की मांग है। रटप्पणी।
Q-30 Compare and analyse the given data of distribution of workforce (in 2018-19) with valid reasons: 4
वैध कारणों के साि कायििि के नवतरण (2018-19 में( के कर्दए गए आंकड़ों की तुििा और नवश्लेषण करें :
Country दे श Agriculture कृवि Industry उद्योग Services सेवाएँ

(%) (%) (%)
India भारत 43 25 32
China च ि 26 28 46
Pakistan पाककस्ताि 41 24 35
Q-31 When was Karve committee constituted? Explain lPR- 1956. 4 4
Or
What do you mean by import substitution? Why it was adopted by India ? Give valid
reasons.
कावे सनमनत का गठि कि ककया गया ? आईपीआर-१९५६ की व्याख्या कीनिये ।

अिवा
आयात-प्रनतथिापि से आप क्या समझते है ? भारत िे इसे क्यों अपिाया? वैध कारण निनिये ।
Q-32 State giving valid reasons, whether the following statements are true or false: 4
a) Global warming is a wake-up call to save environment.
b) Check on population growth in India will lead to a check on environmental
pollution.
मान्य कारण िताइए कक निम्ननिनित किि सत्य हैं या असत्य:
क( ग्िोिि वार्मिंग पयािवरण को िचािे के निए एक वेक-अप कॉि है।
ि( भारत में ििसंख्या वृनि की िांच से पयािवरण प्रर्दूषण पर अंकुश िगेगा।
Q-33 Define the following 6
a)Jobless growth
b) What is meant by casualization of workforce?
c) What is meant by disguised unemployment?
Or
Discuss the following as source of human Capital formation:
a) Health infrastructure
b) Expenditure on migration
निम्न पररभानषत करें
(क( रोिगार नवहीि वृनि
ि( कायििि के आकनथमककरण से क्या अनभप्राय है?
ग( प्रच्छन्न िेरोिगारी का क्या अिि है?

अिवा
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मािव पूंिी निमािण के स्रोत के रूप में निम्ननिनित पर चचाि कीनिए:
(क( थवाथ्य अवसंरचिा
(ि( पिायि पर व्यय
Q-34 Q34. Read the following text carefully and answer the given questions on the basis of the
same and common understanding:
In a 40 minutes long speech Prime Minister Narendra Modi announced the
demonetisation of existing notes of ₹500 and ₹ 1000 during a televised address on
Tuesday evening.
Modi announced that the notes of ₹500 and ₹1000 “will not be legal tender from
midnight tonight “ and these will be “just worthless pieces of paper. PM also argued people
to join this mahayojana against the ills of corruption.
Demonetisation for us means that Reserve Bank of India has withdrawn the old ₹500
and ₹1000 notes as an official mode of payment. Demonetisation is the act of stripping a
currency unit of its status as legal tender.
In this scenario the reasons given by Modi was tackle black money in the economy
and lower the cash circulation in the country. In his speech Modi also said that this step
will eliminate fake currency and dodgy funds.
The Economic times said that due to demonetisation it pushed India towards
cashless economy, brought an end of black money , curbed terrorist funding and raised tax
receipts of the Government .
-“What the demonetisation and why was it done “-The Economic times-
Nov09, 2020
a) Define demonetisation. What are the purposes behind demonetisation?
b) Describe the effects of 2016 demonetisation.
िीचे कर्दए गए गध्यांश को सावधानिपूविक प़िकर , इसके आधार पर अपिी समझ के अिुसार पूछे गए प्रश्नों
के उत्तर र्दीनिए-
मंगिवार की रात में र्देश के प्रधािमंत्री श्री िरें द्र मोर्दी िे एक टेनिनवज़ि पर ४० नमिट के अपिे
सम्िोधि में प्रचनित ₹ ५०० व १००० के िोटों को नवमुकद्रत कर कर्दया ।
मोर्दी िे घोषणा की कक आि आधी रात से ही ₹५०० व १००० के िोट वैध मुद्रा िहीं रहेंगे अि
ये मात्र काग़ज़ के मूल्यहीि टुकड़े ही रहेंगे । प्रधािमंत्री िे ििता से आह्वाि ककया की भ्रिाचार की िीमारी
के ऩििाफ़ इस महायोििा का नहथसा ििें।
िोटिंर्दी से हमारा तात्पयि है कक भारतीय ररज़वि िैंक िे ₹५०० व ₹१००० को मािक िेि र्देि से
िाहर कर कर्दया है। ककसी भी मौकद्रक इकाई को वेध्य मुद्रा से अिग करिे कीप्रकक्रया नवमुकद्रकरण कहिाती है
3
।
3
इसे र्दृनिगत रिते हुए मोर्दी िे र्देश िताया कक अििव्यवथिा में कािेधि पर िके ि कसिे, रोकड़
िेिर्देि कम करिे में मर्दर्द नमिेगी साि ही अपिे उद्बोधि में कहा कक िािी मुद्रा पर अंकुश िगािे और
पैंतरे िाज़ी पर िके ि डाििे में भी यह कर्दम उनचत रहेगा।
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र्द इकोिोनमक टाइम्ज़ िे िताया कक िोटिंर्दी से भारत में रोकड़ िेिर्देि और कािेधि में िहां कमी
हुई वहीं आतंकी फ़ं चडंग में भी कमी आई और सरकारी कोष में कर रािथव ि़िा है।
अ( िोटिंर्दी को पररभानषत कीनिये । इसके पीछे क्या उद्देश्य रहे हैं ?
ि( २०१६ की िोटिंर्दी के प्रभाव िताईये ।
SAMPLE QUESTION PAPER-3 (2022-23)

ECONOMICS (030) CLASS 12
TIME: 3 HOURS M.M.: 80
सामान्य निर्देश :
1. प्रश्न पत्र के र्दो भाग है –
अ . भाग A समनि अििशास्त्र ( 40 अंक (
ि . भाग B भारतीय अििव्यवथिा का नवकास ( 40 अंक (
2. इस प्रश्न पत्र में 20 िहुनवकल्पीय\अनत सूक्ष्म उत्तरीय प्रकार के प्रश्न हैं, िो 1-1 अंक के है|
3. इस प्रश्न पत्र में 4 िघु उत्तरीय प्रकार के प्रश्न है िो 3-3 अंकों के है, नििके उत्तर 60-80 शब्र्दों में र्देिे है |
4. इस प्रश्न पत्र में 6 िघु उत्तरीय प्रकार के प्रश्न है िो 4 -4 अंकों के है, नििके उत्तर 80 -100 शब्र्दों में र्देिे है |
5. इस प्रश्न पत्र में 4 र्दीघि उत्तरीय प्रकार के प्रश्न है िो 6 -6 अंकों के है, नििके उत्तर 100-150 शब्र्दों में र्देिे है |
1. The question paper contains two parts
a. Part A – Macro Economics 40 marks
b. Part B – Indian Economic development 40 marks
2. This paper contains 20 Multiple Choice Questions/Single Statement type questions of 1
mark each.
3. This paper contains 4 Short Answer Questions type questions of 3 marks each to be answered
in 60 to 80 words.
4. This paper contains 6 Short Answer Questions type questions of 3 marks each to be
answered in 80 to 100 words
5. This paper contains 4 Short Answer Questions type questions of 3 marks each to be
answered in 100 to 150 words
SECTION - A
(MACRO ECONOMICS)
1. िकारात्मक िाह्यताओं का एक उर्दाहरण र्दीनिए I

1. Give one example of negative externalities. (1)
2. वानणज्यक िैंकों द्वारा साि निमािण की प्रकक्रया निधािररत की िाती है? (सही उत्तर का चुिाव कीनिये(
Credit creation by commercial banks is determined by (Choose the correct alternative)

(1)
a. Cash Reserve Ratio (CRR) िगर्द कोषािुपात (CRR)

b. Statutory Liquidity Ratio (SLR) तरिता वैधानिक अिुपात ( SLR)
c. Initial Deposits प्रािनमक िमाएँ
d. All the above इिमें से सभी
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3. मुद्रा पूर्ति के M1 माप के र्दो घटकों के िाम िताइये I
State the two components of M measure of Money Supply.
1 (1)
4. समग्र पूर्ति को पररभानषत कीनिए I
Define aggregate supply. (1)
5. गृहथि द्वारा नवर्देशी मुद्रा की मांग के कोई र्दो स्त्रोत िताइए I

Name any two sources of demand for foreign exchange by households in an economy.
(1)
6. सरकारी ििट मे प्रािनमक घाटा शून्य कि होता है .............(सही नवकल्प का चुिाव कीनिये( (1)
Primary deficit in a government budget will be zero when _______. (Choose the correct
alternative)
a. Revenue deficit is zero रािथव घाटा शून्य होिे पर

b. Net interest payments are zero शुि ब्याि का भुगताि शून्य होिे पर
c. Fiscal deficit is zero रािकोषीय घाटा शून्य होिे पर
d. Fiscal deficit is equal to interest payment रािकोषीय घाटा ब्याि के भुगताि के िरािर होिे पर
7. भारतीय ररिवि िेंक द्वारा िारी एक ररपोटि के अिुसार, उपभोिा मूल्य सूचकांक के आधार पर मापी गई मुद्राथिीनत
की र्दर नपछिे वषि की तुििा मे 8% से नगरकर 5% एचपी गई है I निम्न मे से कौिसा किि सत्य है ?
According to a report forwarded by the Reserve Bank of India, there was a fall in rate of inflation as
measured by Consumer Price Index (CPI) on a year-on-year basis to 5% from 8% in the previous year.
Which of the following statements represents the situation? (1)
a. CPI has fallen\ CPI में कमी हुई है
b. CPI has risen at a rate lower than the preceding year\ CPI में नपछिे वषि की तुििा मे धीमी र्दर से वृनि
हुई है
c. CPI is constant \CPI नथिर है
d. None of the above इिमे से कोई िही
8. प्रत्यि कर से आप क्या समझते हैं ? (1)
What do you mean by a direct tax?
अिवा /OR
अप्रत्यि कर से आप क्या समझते हैं ?
What do you mean by an indirect tax?
9. मुद्रा गुणक को पररभानषत कीनिये I
Define ‘Money Multiplier’. (1)
10. प्रभावी मांग को पररभानषत कीनिये I
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Define effective demand. (1)
11. राष्ट्रीय आय की गणिा कीनिए, यकर्द सीमान्त उपभोग प्रवृनत (MPC) 0.8 और प्रारनम्भक निवेश मे पररवतिि
1000 करोड़ है I
Calculate change in final income, if Marginal Propensity to Consume (MPC) is 0·8 and change in initial
investment is Rs1,000 crores. (3)
12. रोिगार के कीन्स नसिांत के आधार पर “मांग आनधक्य” का अििव्यवथिा पर क्या प्रभाव पड़ता है?
(3)
State the impact of ‘‘Excess Demand’’ under the Keynesian theory on employment, in an
economy.
अथवा /OR
निम्न का अिि थपि कीनिए / State the meaning of the following:

a. पूव-ि नियोनित िचत / Ex-Ante Savings
b. पूणि रोिगार / Full Employment
c. स्वायक्त उपभोग / Autonomous Consumption
13. िीचे कर्दए गए विव्यों को रािथव प्रानप्तयों और पूंिीगत प्रानप्तयों मे कारण िताते हुए वगीकृ त कीनिए I
Classify the following statements as revenue receipts or capital receipts. Give valid reasons in support
of your answer. (4)
a) िा़ि पीनड़तों को अंतरािष्ट्रीय निगम द्वारा प्राप्त आर्ििक सहायता
Financial help from a multinational corporation for victims in a flood affected area.
b) सावििनिक िेत्र के उपक्रम द्वारा , Y िमि िो की एक नििी िमि है को िेचे गए शेयर I
Sale of shares of a Public Sector Undertaking (PSU) to a private company, Y Ltd.
c) थटेट िेंक ऑि इंनडया द्वारा सरकार को कर्दये गए िाभांश I
Dividends paid to the Government by the State Bank of India.
d) अंतरािष्ट्रीय मुद्रा कोष से प्राप्त उधार I
Borrowings from the International Monetary Fund (IMF).
14. नथिर और प्रवाह चर को उर्दाहरण सनहत समझाए I (4)
Distinguish between stock and flow variables with suitable examples.
15. कें द्रीय िैंक द्वारा साि नियंत्रण के निए काम मे निए िािे वािे ‘गुणात्मक और मात्रात्मक उपायों’ में अंतर थपि
कीनिए I (4)
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Distinguish between ‘Qualitative and Quantitative tools’ of credit control as may be used by a
Central Bank.
16. निम्न नथिनतयों के समायोिि की प्रकक्रया को समझाये I (6)
Discuss the adjustment mechanism in the following situations:
(a) समग्र मांग समग्र पूर्ति से कम होिे पर / Aggregate demand is lesser than Aggregate Supply.
(b) पूवि निवेश पूवि िचत से अनधक होिे पर / Ex-Ante Investments are greater than Ex-Ante Savings.
17. निम्न को पररभानषत कीनिए / Define the following: (6)
1. Value Addition / मूल्य वृनि

2. Gross Domestic Product / सकि घरे िू उत्पार्द
3. Flow Variables / प्रवाह चर
4. Income from property and entrepreneurship / उधमी और संपनत से प्राप्त आय
अथवा / OR
निम्न आंकड़ों की सहायता “सरकारी अंनतम उपभोग व्यय: और थवनियोनितों की नमनश्रत आय का पररकिि कीनिए I
क्र. स. मद रूपए
I राष्ट्रीय आय 7100
II सरकारी अंनतम उपभोग व्यय ?
III सकि घरे िू पूंिी निमािण 1000
IV थवनियोनितों की नमनश्रत आय ?
V शुि अप्रत्यि कर 200
VI नवर्देशों से प्राप्त शुि कारक आय 100
VII नििी अंनतम उपभोग व्यय 4000
VIII नथिर पूंिी का उपभोग 300
IX िाभ 120
X वेति और मिर्दूरी 1500
XI शुि नियाित 500
XII प्रचािि अनधशेष 3000
Given the following data, find the values of ‘Government Final Consumption Expenditure’ and
‘Mixed Income of Self- Employed’ :
S.
Particulars Amount (in Rs Crores)
No
I National Income 7,100
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Ii Government Final Consumption Expenditure ?
Iii Gross Domestic Capital Formation 1,000
Iv Mixed-Income of Self-Employed ?
V Net Indirect Taxes 200
vi Net Factor Income from Abroad 100
vii Private Final Consumption Expenditure 4,000
viii Consumption of Fixed Capital 300
Ix Profits 120
X Wages and Salaries 1,500
Xi Net export 500
xii Operating Surplus 3,000
SECTION - B
(INDIAN ECONOMIC DEVELOPMENT)
18. निम्न मे से ककस समयकाि मे भारत मे ििांकककी संक्रमण की र्दूसरी अवथिा प्रारम्भ हुई िी ? (1)
(अ) 1921 के िार्द (ि( 1921 से पहिे (स(1921 से (र्द( इिमे से कोई िहीं
In which of the following time periods did the second stage of demographic transition in India
begin?
(a) After 1921 (b) Before 1921 (c ) From 1921 (d) None of these
19. इं डथरी पॉनिसी रे सोिुशि 1956, उद्योगों को ककतिे भागों मे वगीकृ त करता है ? (1)
(अ) 2 (ब) 5 (स) 3 (द) 4
The Industrial Policy Resolution, 1956 classified industries into …………
(a) 2 (b) 5 (c ) 3 (d) 4
20. भारत की ककन्ही र्दो िवरत्न कं पिीज़ के िाम निनिए I (1)
Name any two Navratna companies in India.
21. िािाडि द्वारा ककए िािे वािा प्रमुि कायि कौिसा है ? (1)
State the major function performed by NABARD.
22. कृ नषगत सुधार क्या है ? (1)
What are agrarian reforms?
23. चीि िे ककस वषि “वि चाइल्ड पॉनिसी” को िंर्द ककया ? (1)
(अ) 2013 (ब) 2016 (स ) 1980 (द) 1990
In which year China discontinued its ‘one child policy?’
(a) 2013 (b) 2016 (c ) 1980 (d) 1990
24. पयािवरण को पररभानषत कीनिये I (1)
Define the environment.

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OR/ अथवा
‘ग्िोिि वार्मिंग’ क्या है ?
What is Global warming?
25. निम्न मे से कौिसा र्देश नब्रक्स का सर्दथय िहीं है ? (1)
(अ) ब्राज़ील (ब) रूस (स) चीन (द) स्वीटजरलेंड
Which of the following countries is not part of BRICS?
(a) Brazil (b) Russia (c ) China (d) Switzerland
26. नवर्देशी व्यापार के मात्रात्मक प्रनतिंधो से आप क्या समझते हो? (1)
What do you mean by quantitative restrictions?
27. िाज़ार अनधशेष क्या है? (1)
What is marketable surplus?
28. मािव पूंिी निमािण मे ककया गया कम निवेश भारत मे वतिमाि मे िेरोिगारी की समथया के निए कै से नज़म्मेर्दार है ? (3)
How is low investment in Human Capital Formation responsible for the existing problem of
unemployment in the country?
29. मनहिाओं के थवाथ्य से संिनन्धत समथयों पर नवशेष ध्याि र्देिे की आवश्यकता क्यों है ? (3)
Why has women’s health become a matter of great concern?
OR/ अथवा
थपि कीनिये की कै से थवाथि िोगों के िीवि की गुणवत्ता और आर्ििक नवकास मे एक सकारात्मक प्रभाव डािता है
I
Explain how health has a positive impact on the quality of life and overall economic
development.
30. महात्मा गांधी राष्ट्रीय ग्रामीण रोिगार गारं टी थकीम का संिेप में वणिि कीनिये| क्या यह अपिे उद्देश्यों को पूरा करिे
में सिि रही है? (4)
Explain the Mahatma Gandhi National Rural Employment Guarantee Scheme. Is the scheme
successful to achieve its goals?
31. (अ) चीि के सुधारात्मक प्रयासों मे र्दौहरी कीमत प्रणािी की भूनमका को थपि कीनिये I (4= 2+2)
Discuss the dual pricing policy in the reform process of China.
(ब) भारत, चीि और पाककथताि िे अपिे र्देश मे आर्ििक प्रयासों को एक साि शुरू ककया, यद्यपी चीि, भारत
और पाककथताि से िहुत आगे है, क्यों ?
Why has China far ahead in the growth process even though India, China and Pakistan
started with the strategy of economic development around the same time?
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32. भारत मे श्रम के आकनथमकरण / अनियनमनतकरण में वृनि क्यों हो रही हैं? कोई चार कारण िताइये I (4)
Why is the casualization of the workforce increasing in India? State any four reasons.
अथवा / OR
ग्रामीण िेत्र में ककस तरह की िेरोिगारी र्देििे को नमिती है? इसके प्रमुि कारण कौि कौिसे हैं ?
What type of unemployment exists in rural areas? What are the main reasons responsible for it?
33. िई आर्ििक िीनत के रूप मे नििीकरण का एक आिोचिात्मक मूल्यांकि निनिए I (6)
Critically evaluate the policy of privatization as part of the New Economic Policy.
34. िागवािी क्या है ? यह नपछड़े वगों के िीवि थतर को ि़िािे मे ककस तरह सहायक है ? इस िेत्र के द्वारा ककि
चुिोनतयों का सामिा ककया िा रहा है? (6)
What is horticulture? How has it become a means of improving livelihood for the unprivileged
classes? What are the challenges being faced in this sector?
अथवा / OR
िाज़ार प्रणािी को सुधारिे के निए सरकार क्या कर्दम उठा रही है ?
What measures have been initiated by the government to improve the market system?
SAMPLE QUESTION PAPER- 4 (2022-23)
SUBJECT: - ECONOMICS (030) CLASS 12

TIME: 3 HOURS M.M. – 80
1. This question paper contains two sections:
Section A – Macro Economics, Section B – Indian Economic Development
3. This paper contains 4 Short Answer Questions type questions of 3 marks each to be answered in 60
to 80
words.
to 100
words.
5. This paper contains 4 Long Answer Questions type questions of 6 marks each to be answered in 100
to 150
words.
सामान्य वनदे श:
1. इस प्रश्न पत्र में द खोंड हैं :
खोंड ए - समवि अर्थ शास्त्र, खोंड बी - भारतीय आवर्थक विकास
2. इस प्रश्न-पत्र में 20 बहुविकल्पीय प्रश्न हैं , विनमें से प्रत्येक 1 अोंक का है ।
3. इस प्रश्न-पत्र में 4 लघु उत्तरीय प्रश्न हैं , विनमें से प्रत्येक के 3 अोंक हैं , विनका उत्तर 60 से 80 शब् ों में दे ना है ।
4. इस प्रश्न-पत्र में 6 लघु उत्तरीय प्रश्न हैं , विनमें से प्रत्येक के 4 अोंक हैं , विनका उत्तर 80 से 100 शब् ों में दे ना है ।
5. इस प्रश्न-पत्र में 6-6 अोंक ों के 4 दीघथ उत्तरीय प्रश्न हैं विनका उत्तर 100 से 150 शब् ों में दे ना है ।
Q. NO. SECTION A – MACRO ECONOMICS MARKS

खंड अ - समष्टि अर्थशास्त्र
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1 Read the following statements carefully: 1
Statement 1: Under deflationary gap, involuntary unemployment occurs in the
economy.
Statement 2: In a state of underemployment equilibrium, there is no excess
capacity in
the economy.
In the light of the given statements, choose the correct alternative from the
following:
ननम्ननलनखत कथनों को ध्यान से पढें:

कर्न 1: अपथिीनत अंतराि के तहत, अििव्यवथिा में अिैनच्छक िेरोिगारी होती है।
किि 2: अल्परोिगार संतुिि की नथिनत में, अििव्यवथिा में कोई अनतररि िमता िहीं होती है।
कर्दए गए कििों के आिोक में, निम्ननिनित में से सही नवकल्प का चयि कीनिए:
(ए( किि 1 सत्य है और किि 2 गित है
(िी( किि 1 गित है और किि 2 सत्य है
(सी( किि 1 और 2 र्दोिों सत्य हैं
(डी( किि 1 और 2 र्दोिों गित हैं
2 Nikita, an economics teacher was discussing the concepts of following with the 1
students. “Make in India programme will cause rise in _________ of foreign
exchange and hence _________ in the balance of payment situation of the country.”
(a) Supply, degradation (b) Demand, improvement
(c) Supply, improvement (d) Demand, degradation.
अििशास्त्र की नशनिका निककता छात्रों के साि अिुसरण की अवधारणाओं पर चचाि कर रही िीं।
"मेक इि इंनडया कायिक्रम नवर्देशी मुद्रा के _________ में वृनि करे गा और इसनिए र्देश के
भुगताि संतुिि की नथिनत में _________ होगा।"
(ए( आपूर्ति, नगरावट (िी( मांग, सुधार
(सी( आपूर्ति, सुधार (डी( मांग, नगरावट।
3 Which one of the following is used for credit creation? 1
(a) K = 1/LRR (b) K = 1/SLP
(c) K = 1/Bank Rate (d) K = 1/ Repo Rate
निम्ननिनित में से ककसका प्रयोग साि सृिि के निए ककया िाता है?
(ए( के = 1/एिआरआर (िी( के = 1/एसएिपी
(सी( के = 1/िैंक र्दर (डी( के = 1/ रेपो र्दर
Statement 1: Imports of crude oil by India will have a favourable impact on
balance of
payment of alternative:
Statement 2: Import of goods are recorded on the debit side of current account
as it
leads to outflow of foreign exchange.
following:
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किि 1: भारत द्वारा कच्चे तेि के आयात के नवकल्प का भुगताि संतुिि पर अिुकूि प्रभाव पड़ेगा:
किि 2: माि के आयात को चािू िाते के डेनिट पि में र्दिि ककया िाता है क्योंकक इससे नवर्देशी
मुद्रा का िनहवािह
होता है।
5 Read the following statements carefully:
Statement 1: Real flow and money flow are one or the same thing, presented in
a
different form.
Statement 2: In money flow, there is no involvement of goods in its physical
form.
following: 1

किि 1: वाथतनवक प्रवाह और धि प्रवाह एक या एक ही चीि है, निसे एक अिग रूप में प्रथतुत
ककया िाता है।
किि 2: मुद्रा प्रवाह में, माि के भौनतक रूप में कोई भागीर्दारी िहीं होती है।
OR / अर्वा
Which is Not a factor service:
(a) Land (b) labour (c) rent (d) capital
कौन सा कारक सेवा नहीं है:

(ए) भनू म (बी) श्रम (सी) नकराया (डी) पजंू ी
6 If C= 100+0.75Y then the corresponding saving function will be expressed as
(a) S=100+0.5Y (b) S=-100+0.75Y (c) S=-100+0.25Y (d) S= 75+0.25 Y
यकर्द C= 100+0.75Y तो संिंनधत िचत ििि को इस प्रकार व्यि ककया िाएगा 1

(ए( एस=100+0.5 Y (िी( एस=-100+0.75 Y (सी( एस=-100+0.25 Y (डी( एस=
75+0.25 Y
OR / अिवा
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______________ refers to actual or realised saving in an economy during a
year
(a) Ex-ante saving (b) APS (c) MPS (d) Ex-post saving
______________ एक वषि के र्दौराि अििव्यवथिा में वाथतनवक या वाथतनवक िचत को संर्दर्भित
करता है
(ए( पूव-ि पूवि िचत (िी( एपीएस (सी( एमपीएस (डी( पूवि-पोथट िचत
7 Consider the following statements:
I. M1 is a broad concept of money.
II. M2 is a narrow concept of money. 1
III. M3 includes both M1 and time deposit of public with bank.
Which of the following is true with respect to the concept of money supply?
(a) I and II (b) III only
(c) II and III (d) I , II and III
निम्ननिनित कििों पर नवचार करें:
I. M1 पैसे की एक व्यापक अवधारणा है।
II. M2 पैसे की एक संकीणि अवधारणा है।
III. एम3 में एम1 और िैंक में ििता की सावनध िमा र्दोिों शानमि हैं।
मुद्रा आपूर्ति की अवधारणा के संिंध में निम्ननिनित में से कौि सा सत्य है?
(ए( I और II (िी( के वि III
(सी( II और III (डी( I, II और III
8 Current account records all payments to rest of the world as________ and all
receipts from rest of the world as______
(a) Credit, Debit (b) Debit, Credit
(c) Debit, Debit (d) Credit, Credit
चािू िाता शेष नवश्व के सभी भुगतािों को ________ के रूप में और शेष नवश्व से सभी प्रानप्तयों 1
को ________ के रूप में र्दिि करता है

(ए( क्रेनडट, डेनिट (िी( डेनिट, क्रेनडट
(सी( डेनिट, डेनिट (डी( क्रेनडट, क्रेनडट
OR / अर्वा
An Indian real estate company received rent from google in New York. This
transaction would be recorded on___________ side of ____________account.
(a) credit, current (b) debit, capital
(c) credit, capital (d) debit, current
एक भारतीय ररयि एथटेट कं पिी को न्यूयॉकि में गूगि से ककराया नमिा। यह िेि-र्देि
_________ िाते के ___________ तरि र्दिि ककया िाएगा।
(ए( क्रेनडट, चािू (िी( डेनिट, पूंिी
(सी( क्रेनडट, पूंिी (डी( डेनिट, चािू
9 If AD >AS national income will 1
(a) Increase (b) Decrease
(c) Not change (d) May increase or decrease
यकर्द AD>AS राष्ट्रीय आय होगी
(ए( वृनि (िी( कमी
(सी( पररवतिि िहीं (डी( ि़ि या घट सकता है
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10 1
Column 1 Column 2
A) APS negative i) =1, <1, >1
B) APC ii) 0-1
C) MPC iii) 1-b
D) MPS iv) Y<C
(a) A-iv, B-i, C-ii, D-iii (b) A-i, B-ii, C-iii, D-iv
(c) A-ii, B-iii, C-iv, D-i (d) A-iii, B-iv, C-i , D-ii
कॉलम 1 कॉलम 2
(ए( एपीएस िकारात्मक i) =1, <1, >1
िी( एपीसी ii) 0-1
सी( एमपीसी iii) 1-b
डी( एमपीएस iv) Y<C
(ए) ए-iv, बी-आई, सी-ii, डी-iii (बी) ए-आई, बी-ii, सी-iii, डी-iv
(सी) ए-ii, बी-iii, सी-iv, डी-आई (डी) ए-iii, बी-iv, सी-आई, डी-ii
11 The value of the Nominal Gross National Product (GNP) of an economy was Rs. 3
2500 cr in a particular year. The value of GNP of that country during the same
year, evaluated at the price of base year was Rs. 3000 cr. 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?
एक अििव्यवथिा के िाममात्र सकि राष्ट्रीय उत्पार्द (िीएिपी( का मूल्य एक नवशेष वषि में रु 2500
करोड़ है उसी वषि के र्दौराि उस र्देश के सकि घरे िू उत्पार्द का मूल्य, आधार वषि की कीमत पर
मूल्यांकि ककया गया रु 3000 करोड़ िा प्रनतशत के रूप में वषि के िीएिपी नडफ्िेटर के मूल्य की
गणिा करें । क्या आधार वषि और नवचाराधीि वषि के िीच मूल्य थतर में वृनि हुई है?
12 When price of foreign currency rises, its demand falls. Explain why? 3
OR
Distinguish between autonomous and accommodating transactions in Balance
of Payments Accounts.
िि नवर्देशी मुद्रा की कीमत ि़िती है, तो इसकी मांग नगरती है। समझाओ क्यों?
अिवा
भुगताि संतुिि िातों में थवायत्त और समायोििकारी िेिर्देि के िीच अंतर करें ।
13 If an economy plans to increase its income by ₹ 2,000 crore and the Marginal 4
Propensity to Consume is 75%. Estimate the increase in investment required to
achieve the targeted increase in income.
यकर्द कोई अििव्यवथिा अपिी आय में 2,000 करोड़ रुपये की वृनि करिे की योििा ििा रही है
और सीमांत उपभोग प्रवृनत्त 75% है। आय में िनित वृनि को प्राप्त करिे के निए आवश्यक निवेश
में वृनि का अिुमाि िगाएं |
14 How can 'Jan-Dhan Yojana' be used as an instrument to increase supply of 4

money by the commercial banks?
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वानणनज्यक िैंकों द्वारा धि की आपूर्ति ि़िािे के निए 'िि-धि योििा' को एक साधि के रूप में
कै से उपयोग ककया िा सकता है?
15 Read the following text carefully, and answer the following Questions.
Reserve Bank of India (RBI) is the central bank of the country. RBI is a statutory
body. It is responsible for the printing of currency notes and managing the supply
of money in the Indian economy. It plays multifaceted role by executing multiple
functions such as overseeing monetary policy, issuing currency, managing foreign
exchange, working as a bank of government and as banker of scheduled
commercial banks, among others. It also works for overall economic growth of 1
the country. 1
1
Q1. Define a central bank.
1
Q2. Who issues the one-rupee notes and coins in the country?
Q3. RBI acts as the banker to the central government and commercial banks act
as banker to the state governments. (T/F)
Q4. When commercial banks fail to meet their financial requirements from other
sources; the central bank provides them funds through discounting of approved
securities and due to this central bank is said to be the_________________.
OR
“Money as a store of value helps to shift purchasing power from present to the
future”. Explain
निम्ननिनित पाठ को ध्याि से प़िें और निम्ननिनित प्रश्नों के उत्तर र्दें।
भारतीय ररिवि िैंक (RBI) र्देश का कें द्रीय िैंक है। आरिीआई एक वैधानिक निकाय है। यह
भारतीय अििव्यवथिा में करेंसी िोटों की छपाई और पैसे की आपूर्ति के प्रिंधि के निए निम्मेर्दार
है। यह कई कायों को निष्पाकर्दत करके िहुआयामी भूनमका निभाता है िैसे कक मौकद्रक िीनत की
र्देिरे ि, मुद्रा िारी करिा, नवर्देशी मुद्रा का प्रिंधि करिा, सरकार के िैंक के रूप में काम करिा
और अिुसूनचत वानणनज्यक िैंकों के िैंकर के रूप में काम करिा। यह र्देश के समग्र आर्ििक नवकास
के निए भी काम करता है।
प्रश्न 1. कें द्रीय िैंक की पररभाषा र्दीनिए।
प्रश्न 2. र्देश में एक रुपये के िोट और नसक्के कौि िारी करता है?
प्रश्न 3. RBI कें द्र सरकार के िैंकर के रूप में कायि करता है और वानणनज्यक िैंक राज्य सरकारों के
िैंकर के
रूप में कायि करता है। (सत्य/असत्य(
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प्रश्न 4. िि वानणनज्यक िैंक अन्य स्रोतों से अपिी नवत्तीय आवश्यकताओं को पूरा करिे में नविि
रहते हैं;
कें द्रीय िैंक उन्हें थवीकृ त प्रनतभूनतयों की छू ट के माध्यम से धि प्रर्दाि करता है और इसके
कारण कें द्रीय
बैंक को _________ कहा जाता है।
अर्वा
"मूल्य के भंडार के रूप में पैसा क्रय शनि को वतिमाि से भनवष्य में थिािांतररत करिे में मर्दर्द
करता है"। समझाओ
16 A) Distinguish between domestic income and National income. 3

3
B) State and discuss any two precautions to be considered while estimating
national income by Expenditure Method.
ए( घरे िू आय और राष्ट्रीय आय के िीच अंतर।
ि( व्यय नवनध द्वारा राष्ट्रीय आय का आकिि करते समय ध्याि में रििे वािी ककन्हीं र्दो
सावधानियों का उल्िेि कीनिए और उि पर चचाि कीनिए।
17 A) The government of India has introduced the GST across the country. Explain 3
its likely effect on the make in India program which is considered a key program
of the government.
3
B) Classify the following statements into revenue receipts and capital receipts
give valid reasons in support of your answer.
1. Financial help from a multinational corporation for victims in a flood affected
area.
2. Sale of shares of a public sector undertaking to a private company
3. Dividend paid to the government by the state bank of India
ए) भारत सरकार िे पूरे र्देश में िीएसटी की शुरुआत की है। सरकार का एक प्रमुि कायिक्रम मािे
िािे वािे मेक इि
इंनडया कायिक्रम पर इसके संभानवत प्रभाव की व्याख्या कीनिए।
िी( निम्ननिनित कििों को रािथव प्रानप्तयों और पूंिीगत प्रानप्तयों में वगीकृ त करें और अपिे उत्तर
के समििि में वैध
कारण र्दें।
1. िा़ि प्रभानवत िेत्र में पीनड़तों के निए एक िहुराष्ट्रीय निगम से नवत्तीय सहायता
2. एक सावििनिक िेत्र के उपक्रम के शेयरों की एक नििी कं पिी को निक्री
3. भारतीय थटेट िैंक द्वारा सरकार को िाभांश का भुगताि

िंड ि - भारतीय आर्ििक नवकास
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18 What was the growth rate of per capita income in India on the eve of 1
Independence?
(a) 0.9% (b) 0.5% (c) 1.2% (d) 3%
थवतंत्रता की पूवि संध्या पर भारत में प्रनत व्यनि आय की वृनि र्दर क्या िी?
(ए) 0.9% (बी) 0.5% (सी) 1.2% (डी) 3%
19 Inward looking trade policy aimed at : 1
(a) Substituting imports with domestic production

(b) Substituting exports of consumer goods with capital goods
(c) Follow an open economy model
(d) Restrictions on movement of currency flows
OR
---------refers to the designing and shaping the socio-economic processes in such

a way so as to achieve an objective.
(a) Economic Growth (b) Economic Development
(c) Economic Planning (d) Economic Process
आवक र्देििे वािी व्यापार िीनत का उद्देश्य:

(ए( घरे िू उत्पार्दि के साि आयात को प्रनतथिानपत करिा
(िी( पूंिीगत वथतुओं के साि उपभोिा वथतुओं के नियाित को प्रनतथिानपत करिा
(सी( एक िुिी अििव्यवथिा मॉडि का पािि करें
(डी( मुद्रा प्रवाह की आवािाही पर प्रनतिंध

अिवा
------------- सामानिक-आर्ििक प्रकक्रयाओं को इस तरह से नडिाइि और आकार र्देिे के निए
संर्दर्भित करता है ताकक एक उद्देश्य प्राप्त ककया िा सके ।
(ए( आर्ििक नवकास (िी( आर्ििक नवकास
(सी( आर्ििक योििा (डी( आर्ििक प्रकक्रया
20 Which one of the following was Not the impact of one-child policy norm? 1
(a) population growth reduced
(b) Burden of old aged people increased
(c) Working population reduced in China arresting the economic growth
(d) There was unrest among the people
OR
The fertility rate is very high in
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(a) Pakistan (b) India (c) China (d) USA
निम्ननिनित में से कौि-सा एक-िाि िीनत मािर्दंड का प्रभाव िहीं िा?
(ए( ििसंख्या वृनि कम हो गई
(िी( वृि िोगों का िोझ ि़ि गया
(सी( आर्ििक नवकास को नगरफ्तार करिे वािे चीि में कामकािी आिार्दी कम हो गई
(डी( िोगों में अशांनत िी

अिवा
प्रििि र्दर िहुत अनधक है
(ए( पाककथताि (िी( भारत (सी( चीि (डी( यूएसए
21 Agricultural diversification means: 1
(a) Scientific farming (b) Large scale farming (c) Co-operative farming
(d) Production of variety of grains and plans on the same land
कृ नष नवनवधीकरण का अिि है:

(ए( वैज्ञानिक िेती (िी( िड़े पैमािे पर िेती (सी( सहकारी िेती
(डी( एक ही भूनम पर नवनभन्न प्रकार के अिाि और योििाओं का उत्पार्दि

22 Identify demographic indicator from the following: 1
(a) urbanisation (b) GNP
(c) mean years of schooling (d) percentage of undernourished children
निम्ननिनित में से ििसांनख्यकीय संकेतक की पहचाि करें:
(ए( शहरीकरण (िी( िीएिपी (सी( थकू िी नशिा के वषि (डी( कु पोनषत िच्चों
का प्रनतशत

Statement 1: Self-employed is a major source of livelihood in both the rural
areas and urban areas.
Statement 2: In rural areas rural people work on their plots of land and in
urban areas urban people have their own resource to work.
following:

किि 1: ग्रामीण िेत्रों और शहरी िेत्रों र्दोिों में थवरोिगार आिीनवका का एक प्रमुि स्रोत है।
किि 2: ग्रामीण िेत्रों में ग्रामीण िोग अपिे भूिंडों पर काम करते हैं और शहरी िेत्रों में शहरी
िोगों के पास काम
करिे के निए अपिा संसाधि होता है।
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Statement 1: After a few decades, in China, there will be more elderly people in
proportion to young people.
Statement 2: China has allowed couples to have two children.
following:

किि 1: कु छ र्दशकों के िार्द, चीि में युवा िोगों के अिुपात में अनधक िुिुगि िोग होंगे।
किि 2: चीि िे र्दंपनत्तयों को र्दो िच्चे पैर्दा करिे की इिाित र्दे र्दी है।
25 Which of the following is not considered as an element of environment? 1
(a) Air (b) Land (c) Weather (d) Electricity
OR
An increase in real income along with equitable distribution is called:
(a) economic growth (b) economic development
(c) sustainable development (d) none of these
निम्ननिनित में से ककसे पयािवरण का तत्व िहीं मािा िाता है?

(ए( वायु (िी( भूनम (सी( मौसम (डी( निििी
अिवा
समाि नवतरण के साि वाथतनवक आय में वृनि को कहा िाता है:
(ए( आर्ििक नवकास (िी( आर्ििक नवकास
(सी( सतत नवकास (डी( इिमें से कोई िहीं
Statement 1: National Bank for Agriculture and Rural Development (NABARD)
was set up in 1980.
Statement 2: National Bank for Agriculture and Rural Development (NABARD) is
an apex body to coordinate the activities of all institutions involved in the rural
financing system.
following:
किि 1: राष्ट्रीय कृ नष और ग्रामीण नवकास िैंक (िािाडि( की थिापिा 1980 में की गई िी।
125 | P a g e
किि 2: राष्ट्रीय कृ नष और ग्रामीण नवकास िैंक (िािाडि( ग्रामीण नवत्त व्यवथिा में शानमि सभी
संथिािों की
गनतनवनधयों के समन्वय के निए एक शीषि निकाय है।
Statement 1: For the year 2019, Human Development Index (HDI) ranking of
India is higher as compared to China and Pakistan.
Statement 2: For the year 2019, Human Development Index (HDI) ranking of
China is higher as compared to India and Pakistan.
following:

किि 1: वषि 2019 के निए, भारत की मािव नवकास सूचकांक (HDI) रैं ककं ग चीि और
पाककथताि की तुििा में
अनधक है।
किि 2: वषि 2019 के निए, चीि की मािव नवकास सूचकांक (HDI) रैं ककं ग भारत और
पाककथताि की तुििा में
अनधक है।
28 Do you agree with a view that environmental degradation is an avoidable 3
opportunity cost of development? Write your observations as a student of
economics.
क्या आप इस नवचार से सहमत हैं कक पयािवरण िरण नवकास की एक पररहायि अवसर िागत है?
अििशास्त्र के छात्र के
रूप में अपिे अविोकि निनिए।
29 What is seasonal unemployment? Suggest measures for reducing this kind of 3
unemployment in India?
OR
What do you mean by rural development? Bring out the key issues in rural
development.
मौसमी िेरोिगारी क्या है? भारत में इस प्रकार की िेरोिगारी को कम करिे के उपाय सुझाइए?
अिवा
ग्रामीण नवकास से आप क्या समझते हैं ? ग्रामीण नवकास के प्रमुि मुद्दों को उिागर करें ।
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30 Do you agree with the statement that India has failed to grow as fast as China, 4
because it has failed to check the growth rate of its population? Write your views
in brief.
क्या आप इस किि से सहमत हैं कक भारत चीि की तरह तेिी से नवकास करिे में नविि रहा है,
क्योंकक वह अपिी ििसंख्या की वृनि र्दर को रोकिे में नविि रहा है? अपिे नवचार संिेप में
नििें।
31 As a form of economic activity, outsourcing has intensified in recent times. Most 4
MNCs, and even small companies, are outsourcing their services to India. Defend
or refute the above statement.
OR
“The process of globalisation through liberalisation and privatisation policies has
produced positive, as well as, negative results for India and other countries.”
Defend or refute the above statement.
आर्ििक गनतनवनध के रूप में, हाि के कर्दिों में आउटसोर्सिंग तेि हो गई है। अनधकांश िहुराष्ट्रीय
कं पनियाँ और यहाँ तक कक छोटी कं पनियाँ भी अपिी सेवाओं को भारत में आउटसोसि कर रही हैं।
उपरोि किि का िचाव या िंडि करें ।
अिवा
"उर्दारीकरण और नििीकरण की िीनतयों के माध्यम से वैश्वीकरण की प्रकक्रया िे भारत और अन्य
र्देशों के निए सकारात्मक, साि ही िकारात्मक पररणाम कर्दए हैं।" उपरोि किि का िचाव या
िंडि करें ।
32 “Human capital formation give birth to innovation, invention and technological 4
improvement” Do you agree with the given statement? Support your answer with
valid argument.
"मािव पूंिी निमािण िवाचार, आनवष्कार और तकिीकी सुधार को िन्म र्देता है" क्या आप कर्दए
गए किि से सहमत हैं? अपिे उत्तर का समििि वैध तकों के साि कीनिए।
33 A) Explain the role of micro-credit in meeting credit requirements of the poor. 3
B) Why is agricultural diversification essential for sustainable livelihoods? 3
OR
A) How do you evaluate Start-ups in India as a solution to the problem of
unemployment? Write two observations.
B) "The gap between the growth of GDP and Employment is widening." State the
trend which highlight this phenomenon.
ए) गरीिों की ऋण आवश्यकताओं को पूरा करिे में सूक्ष्म ऋण की भूनमका की व्याख्या करें ।

िी( थिायी आिीनवका के निए कृ नष नवनवधीकरण क्यों आवश्यक है?
अिवा
ए( िेरोिगारी की समथया के समाधाि के रूप में आप भारत में थटाटि-अप का मूल्यांकि कै से करते
हैं? र्दो प्रेिण
निनिए।
िी( "िीडीपी और रोिगार के नवकास के िीच की िाई चौड़ी हो रही है।" उस प्रवृनत्त का उल्िेि
कीनिए िो इस पररघटिा को उिागर करती है।
34 Read the following text carefully and answer the given questions on the basis of
the same and common understanding:
For overall economic development of the country government needs to focus on
the development of agriculture sector as 49% of the population is engaged in
primary sector. Green revolution was one such initiative taken by the government
which has increased the production of food grains like wheat and rice. Green
revolution was possible due to the use of HYV seeds, irrigation facilities and
fertilizers. This made India not only self-reliant but also helped it to become an
127 | P a g e
exporter of food grains. But effects of Green Revolution were more prominent in
few states like Punjab, Haryana and Tamil Nadu. It was widened the gap between
rich and poor in the ruler India. 3
A) Why was Green revolution implemented and how did it benefit the farmers? 3
B) Write any three Drawbacks of green revolution?
निम्ननिनित पाठ को ध्याि से प़िें और उसी और सामान्य समझ के आधार पर कर्दए गए प्रश्नों के
उत्तर र्दें:
र्देश के समग्र आर्ििक नवकास के निए सरकार को कृ नष िेत्र के नवकास पर ध्याि र्देिे की िरूरत है
क्योंकक 49% आिार्दी प्रािनमक िेत्र में िगी हुई है। हररत क्रांनत सरकार द्वारा की गई एक ऐसी
पहि िी निसिे गेहं और चावि िैसे िाद्यान्नों के उत्पार्दि में वृनि की है। HYV िीिों, चसंचाई
सुनवधाओं और उविरकों के उपयोग के कारण हररत क्रांनत संभव हुई। इसिे भारत को ि के वि
आत्मनिभिर ििाया िनल्क उसे िाद्यान्नों का नियाितक िििे में भी मर्दर्द की। िेककि पंिाि, हररयाणा
और तनमििाडु िैसे कु छ राज्यों में हररत क्रांनत के प्रभाव अनधक प्रमुि िे। इसिे शासक भारत में
अमीर और गरीि के िीच की िाई को चौड़ा ककया।
क( हररत क्रांनत क्यों िागू की गई और इससे ककसािों को क्या िाभ हुआ?
(ि( हररत क्रांनत के कोई तीि र्दोष निनिए?
SAMPLE QUESTION PAPER- 5 (2022-23)
SUBJECT: - ECONOMICS (030) CLASS 12

TIME: 3 HOURS M.M. – 80
1. This question paper contains two sections:
Section A – Macro Economics, Section B – Indian Economic Development
to 80
words.
to 100
words.
5. This paper contains 4 Long Answer Questions type questions of 6 marks each to be answered in 100
to 150
words.
सामान्य निर्देश:
1. इस प्रश्न पत्र में र्दो िंड हैं:
िंड ए - समनि अििशास्त्र, िंड िी - भारतीय आर्ििक नवकास
2. इस प्रश्न-पत्र में 20 िहुनवकल्पीय प्रश्न हैं, नििमें से प्रत्येक 1 अंक का है।
3. इस प्रश्न-पत्र में 4 िघु उत्तरीय प्रश्न हैं, नििमें से प्रत्येक के 3 अंक हैं, नििका उत्तर 60 से 80 शब्र्दों में र्देिा है।
4. इस प्रश्न-पत्र में 6 िघु उत्तरीय प्रश्न हैं, नििमें से प्रत्येक के 4 अंक हैं, नििका उत्तर 80 से 100 शब्र्दों में र्देिा है।
5. इस प्रश्न-पत्र में 6-6 अंकों के 4 र्दीघि उत्तरीय प्रश्न हैं नििका उत्तर 100 से 150 शब्र्दों में र्देिा है।
Q. SECTION A – MACRO ECONOMICS MARK

NO खंड अ - समष्टि अर्थशास्त्र S
.
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1 Which among is the direct tax? 1
(A) Income tax
(B) Gift and Corporation tax
(C) Wealth tax
(D) All of these
प्रत्यि कर में से कौि सा है?
(ए( आयकर
(िी( उपहार और निगम कर
(सी( धि कर
(डी( ये सभी
2 Foreign exchange transactions which are independent of other transactions in the 1
balance of payment account are called…
(a) current transactions (b) capital transactions

(c) autonomous transactions (d) accommodating transactions
नवर्देशी मुद्रा िेिर्देि िो भुगताि संतुिि िाते में अन्य िेिर्देि से थवतंत्र हैं, कहिाते हैं…
(ए( चािू िेिर्देि (िी( पूंिी िेिर्देि (सी( थवायत्त िेिर्देि (डी( समायोिि िेिर्देि
3 The ratio of total deposits that a commercial bank has to keep with Reserve Bank of 1
India is called …
(a) statutory liquidity ratio ( b) deposit ratio

(c) cash reserve ratio (d) legal reserve ratio
एक वानणनज्यक िैंक को भारतीय ररिवि िैंक के पास रिे िािे वािे कु ि िमाओं के अिुपात को
क्या कहते हैं?...
(ए( वैधानिक तरिता अिुपात (िी( िमा अिुपात (सी( िकर्द आरनित अिुपात (डी( कािूिी
आरनित अिुपात
4 foreign exchange rate refers to 1

(a) the price of one currency in terms of gold in the domestic market
(b) the price of one currency in relation to other currencies in the international
money market
(c) the price of domestic currency in relation to foreign currency in the international
money market
(d) both b and c
नवर्देशी नवनिमय र्दर को संर्दर्भित करता है

(ए( घरे िू िािार में सोिे के संर्दभि में एक मुद्रा की कीमत
(िी( अंतरराष्ट्रीय मुद्रा िािार में अन्य मुद्राओं के संिंध में एक मुद्रा की कीमत
(सी( अंतरराष्ट्रीय मुद्रा िािार में नवर्देशी मुद्रा के संिंध में घरे िू मुद्रा की कीमत
129 | P a g e
(डी( िी और सी र्दोिों
5 Read the following statements carefully and choose the correct alternative from 1
the following :
Statement 1 – Intermediate goods are not required to enter into further stage of
production or resale to change their form.
Statement 2 – Measurement of GDP includes only the aggregate value of final
goods.
(a) Both the statements are true.

(b) Both the statements are false.
(c) Statement 1 is true and 2is false.
(d) Statement 2 is true and 1 is false.
OR
Read the following statements carefully and choose the correct alternative from
the following :
Statement 1 – Inventory investment is a component of gross domestic capital
formation.
Statement 2 – Gross investment excludes depreciation.
(a) Both the statements are true.

(b) Both the statements are false.
(c) Statement 1 is true and 2is false.
(d) Statement 2 is true and 1 is false.
निम्ननिनित कििों को ध्यािपूविक पक़िए और निम्ननिनित में से सही नवकल्प का चयि कीनिए:
किि 1 - मध्यवती वथतुओं को अपिा रूप िर्दििे के निए उत्पार्दि या पुिर्विक्रय के आगे के चरण में
प्रवेश करिे की आवश्यकता िहीं है।
किि 2 - सकि घरे िू उत्पार्द के मापि में के वि अंनतम माि का कु ि मूल्य शानमि होता है।
(ए( र्दोिों किि सत्य हैं।
(िी( र्दोिों ियाि झूठे हैं।
(सी( किि 1 सत्य है और 2 गित है।
(डी( किि 2 सत्य है और 1 गित है।

या
निम्ननिनित कििों को ध्यािपूविक पक़िए और निम्ननिनित में से सही नवकल्प का चयि कीनिए:
किि 1 - मािसूची निवेश सकि घरे िू पूंिी निमािण का एक घटक है।
किि 2 - सकि निवेश में मूल्यह्रास शानमि िहीं है।
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(ए( र्दोिों किि सत्य हैं।
(िी( र्दोिों ियाि झूठे हैं।
(सी( किि 1 सत्य है और 2 गित है।
(डी( किि 2 सत्य है और 1 गित है।

6 What is a fiscal measure of correcting deficient demand? 1
(A) Increase in public expenditure and decrease in taxes
(B) Decrease in public debt
(C) Deficit financing
(D) All of these
मांग की कमी को ठीक करिे का एक रािकोषीय उपाय क्या है?
(ए( सावििनिक व्यय में वृनि और करों में कमी
(िी( सावििनिक ऋण में कमी
(सी( घाटा नवत्तपोषण
(डी( ये सभी
7 If legal reserve ratio is 20% the value of money multiplier would be. 1
(a) 2 (b) 3 (C)5 (D)4
यकर्द कािूिी आरनित अिुपात 20% है तो धि गुणक का मूल्य होगा।
(ए( 2 (ब ( 3 (स ( 5 (ड ( 4
8 Give the meaning of balance of payment. 1

भुगताि संतुिि का अिि िताइए।
9 Suppose in a hypothetical economy, the income rises from ₹ 5,000 crores to ₹ 6,000 1
crores. As a result, the consumption expenditure rises from ₹ 4,000 crores to ₹ 4,600
crores. Marginal propensity to consume in such a case would be ______
(A) 0.8
(B) 0.4
(C) 0.2
(D) 0.6
माि िीनिए एक काल्पनिक अििव्यवथिा में, आय ₹ 5,000 करोड़ से ि़िकर ₹ 6,000 करोड़ हो िाती
है। पररणामथवरूप, िपत व्यय ₹ 4,000 करोड़ से ि़िकर ₹ 4,600 करोड़ हो गया। ऐसे मामिे में
उपभोग करिे की सीमांत प्रवृनत्त ______ होगी
(ए( 0.8
(िी( 0.4
(सी( 0.2
(डी( 0.6
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10 The value of multiplier is: 1
(A) 1/MPC
(B) 1/MPS
(C) 1/1−MPS
(D) 1/MPC−1
गुणक का माि है:

(ए( 1 / एमपीसी
(िी( 1 / एमपीएस
(सी( 1/1−एमपीएस
(डी( 1/एमपीसी−1
11 Find out net value added at market Prices: 3
s.no. ITEMS IN Rs.
(i) Intermediate cost 10000
(ii) Change in stock 1000
(iii) Output sold 750
(iv) Price per unit of output 40
(v) Import duty 2000
(vi) Consumption of fixed capital 3000
िािार कीमतों पर िोड़ा गया शुि मूल्य पता करें :
s.no. ITEMS IN Rs.
(i) Intermediate cost 10000
(ii) Change in stock 1000
(iii) Output sold 750
(iv) Price per unit of output 40
(v) Import duty 2000
(vi) Consumption of fixed capital 3000
12 Distinguish between current account and capital account. 3

चािू िाते और पूंिी िाते में अंतर थपि कीनिए।
13 What is involuntary unemployment? 4

अिैनच्छक िेरोिगारी क्या है?
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14 Given consumption function C = 100 + 0.75Y (where C = consumption expenditure 4
and y = National Income and investment expenditure ₹ 1000. Calculate:
(i) Equilibrium level of National Income
(ii) Consumption expenditure at equilibrium level of National Income
कर्दया गया उपभोग ििि C = 100 + 0.75Y (िहाँ C = उपभोग व्यय और y = राष्ट्रीय आय और
निवेश व्यय ₹ 1000। गणिा करें :
(i) राष्ट्रीय आय का संतुिि थतर
(ii) राष्ट्रीय आय के संतुिि थतर पर उपभोग व्यय

15 Explain the following functions of the central bank 2+2
(i) Authority of currency issue (ii) banker to the government.
कें द्रीय िैंक के निम्ननिनित कायों की व्याख्या करें
(i) मुद्रा िारी करिे का अनधकार (ii) सरकार का िैंकर।
16 (a) Distinguish between Real GDP and Nominal GDP. Which of these is a better 3+3
index of welfare of the people and why?
(b) What are externalities? Give an example of a positive externality and its impact
on welfare of the people.
(ए( वाथतनवक िीडीपी और िाममात्र िीडीपी के िीच अंतर करें । इिमें से कौि िोगों के कल्याण का
िेहतर सूचकांक है और क्यों?
(िी( िाह्यता क्या हैं? सकारात्मक िाह्यता और िोगों के कल्याण पर इसके प्रभाव का एक उर्दाहरण
र्दीनिए।
17 Is the following a revenue receipt or a capital receipt in the context of 3+3

government budget and why?
(i) Tax receipts
(ii) Disinvestment
निम्ननिनित सरकारी ििट के संर्दभि में रािथव प्रानप्त या पूंिी प्रानप्त है और क्यों?
(i) कर प्रानप्तयां
(ii) नवनिवेश
18 The real motive behind the development of infrastructure under the colonial regime 1
was :
(a) to provide basic amenities to the people

(b) to subserve various colonial interests
(c) to develop Indian economy
(d) (d) all of the above
औपनिवेनशक शासि के तहत िुनियार्दी ढांचे के नवकास के पीछे असिी मकसर्द िा:
(ए( िोगों को िुनियार्दी सुनवधाएं प्रर्दाि करिे के निए
(िी( नवनभन्न औपनिवेनशक नहतों को पूरा करिे के निए
(सी( भारतीय अििव्यवथिा को नवकनसत करिे के निए (डी( उपरोि सभी
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19 Which of the following is incorrect regarding small scale industries? 1
(a) Karve committee for village and small-scale industries was set up in 1951.
(b) Small scale industries are more labour intensive.
(c) Small scale industries were given concessions such as lower excise duty
(d) None of the above.1
OR
Industrial policy resolution -1956, classified the Indian industries into
………………categories.
(a) 2
(b) 4
(c) 3
(d) 5
िघु उद्योगों के संिंध में निम्ननिनित में से कौि सा गित है?
(ए( गांव और छोटे पैमािे के उद्योगों के निए कवे सनमनत 1951 में थिानपत की गई िी।
(िी( िघु उद्योग अनधक श्रम प्रधाि हैं।

(सी( िघु उद्योगों को कम उत्पार्द शुल्क िैसी ररयायतें र्दी गईं
(डी( उपरोि में से कोई िहीं।

या
उद्योग िीनत संकल्प, 1956, भारतीय उद्योगों को ……………… श्रेनणयों में वगीकृ त करता है।
(ए( 2 (िी( 4 (सी( 3 (डी( 5

20 Choose the correct alternative showing chronological order of the following events 1
(i) Great Leap Forward launched,
(ii) economic reforms in Pakistan
(iii) great proletarian cultural Revolution
(iv) peoples Republic of China
निम्ननिनित घटिाओं के कािािुक्रनमक क्रम को र्दशाििे वािे सही नवकल्प का चयि करें
(i) ग्रेट िीप िॉरवडि िॉन्च
(ii) पाककथताि में आर्ििक सुधार
(iii) महाि सविहारा सांथकृ नतक क्रांनत
(iv) पीपुल्स ररपनब्िक ऑि चाइिा

Choose the correct alternative:
(a) (i), (iv), (ii), (iii)
(b) (iv),(i),(iii),(ii)
(c) (iii),(i),(ii),(iv)
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(d) (ii),(i),(iii),(iv)
21 Consider the following statements: 1

1.The Sustainable Development Goals were first proposed in 1972 by a global think
tank called the 'Club of Rome'
2. The Sustainable Development Goals have .to be achieved by 2030.
Which of the statements given above is/are correct?
A) 1 only
B) 2 only
C) Both 1 and 2
D) neither 1 nor 2
निम्ननिनित कििों पर नवचार करें :
1.सतत नवकास िक्ष्यों को पहिी िार 1972 में 'क्िि ऑि रोम' िामक एक वैनश्वक चिंक टैंक द्वारा
प्रथतानवत ककया गया िा।
2. सतत नवकास िक्ष्यों को 2030 तक हानसि करिा है।
ऊपर कर्दए गए कििों में से कौि-सा/से सही है/हैं?
ए( के वि 1
िी( के वि 2
सी( 1 और 2 र्दोिों
डी( ि तो 1 और ि ही 2
22 Introduction of economic reforms in Pakistan took place in 1
(a) 1978 (b) 1998 (c) 1988 (d) 1991
पाककथताि में आर्ििक सुधारों की शुरुआत हुई|
(ए( 1978 (ब ( 1998 (स ( 1988 (ड ( 1991
23 Assertion (A): Human capital treats human beings as means to an end. 1
Reason (R): Human capital formation decreases by way of investment in education

and health.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the
correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.
अनभकिि (A) : मािव पूंिी मािव को साध्य के साधि के रूप में मािती है।
कारण (R) : नशिा और थवाथ्य में निवेश के माध्यम से मािव पूंिी निमािण कम हो िाता है।
(ए( र्दोिों किि (ए( और कारण (आर( सत्य हैं और कारण (आर( र्दावा (ए( का सही थपिीकरण है।
(िी( र्दोिों अनभकिि (ए( और कारण (आर( सत्य हैं और कारण (आर( अनभकिि (ए( की सही व्याख्या
िहीं है।
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(सी( र्दावा (ए( सच है िेककि कारण (आर( गित है।
(डी( र्दावा (ए( गित है िेककि कारण (आर( सच है।

24 In term of the sectoral contribution to GDP, economy of China is relying more on 1
(a) Primary sector (b) Secondary sector (c) Tertiary sector (d) none of these
सकि घरे िू उत्पार्द में िेत्रीय योगर्दाि के संर्दभि में, चीि की अििव्यवथिा अनधक निभिर है|
(ए( प्रािनमक िेत्र (िी( माध्यनमक िेत्र (सी( तृतीयक िेत्र (डी( इिमें से कोई िहीं
25 The ozone layer is depleting due to high levels of ______ & _______ compounds in the 1
stratosphere:
a) Carbon and methane
b) Chlorine and bromine
c) Methane and nitrogen
d) Sulphur and carbon
समताप मंडि में ______ और _______ यौनगकों के उच्च थतर के कारण ओिोि परत का ह्रास हो रहा
है:
ए( काििि और मीिेि
िी( क्िोरीि और ब्रोमीि
सी( मीिेि और िाइरोिि
डी( सल्िर और काििि
26 Which of the following statements is true about unemployment? 1
a. Seasonal unemployment occurs when there are more people working in a job than
is required
b. Open unemployment occurs when there are more people working in a job than is
required
c. Disguised unemployment occurs when there are more people working in a job than
is required
d. Educated unemployment occurs when there are more people working in a job than
is required
Or
Diversification of agriculture implies……
A. Shift of workforce from agriculture to other allied activities and change in
cropping pattern
B. Commercialization of agriculture.
C. Use of modern technology
D. None of these
निम्ननिनित में से कौि सा किि िेरोिगारी के िारे में सही है?
एक। मौसमी िेरोिगारी ति होती है िि िौकरी में आवश्यकता से अनधक िोग काम करते हैं
िी। िुिी िेरोिगारी ति होती है िि िौकरी में िरूरत से ज्यार्दा िोग काम करते हैं
सी। प्रच्छन्न िेरोिगारी ति होती है िि िौकरी में आवश्यकता से अनधक िोग काम करते हैं
डी। नशनित िेरोिगारी ति होती है िि िौकरी में आवश्यकता से अनधक िोग काम करते हैं
या
136 | P a g e
कृ नष के नवनवधीकरण का तात्पयि है……
ए. कृ नष से अन्य संिि गनतनवनधयों में कायििि का थिािांतरण और िसि पैटिि में पररवतिि
B. कृ नष का व्यावसायीकरण।
C. आधुनिक तकिीक का प्रयोग
D. इिमें से कोई िहीं

27 In China, commune system is related to: 1
(a) agriculture (b) industry (c) service (d) None of these
चीि में, कम्यूि नसथटम संिंनधत है:
(ए( कृ नष (िी( उद्योग (सी( सेवा (डी( इिमें से कोई िहीं

28 “The soul of India lives in villages" Comment on the necessary components of rural 3
development in the light of M.K. Gandhi’s statement.
"भारत की आत्मा गांवों में िसती है" एम.के . गांधी के किि के आिोक में ग्रामीण नवकास के आवश्यक
घटकों पर रटप्पणी कीनिए।
29 Given the fact that organic farming offers lower yield than conventional farming, 3
should it be promoted in our country where millions of people are not getting enough
to eat? Write your observations in brief.
इस त्य को र्देिते हुए कक िैनवक िेती पारं पररक िेती की तुििा में कम उपि र्देती है, क्या इसे हमारे
र्देश में ि़िावा कर्दया िािा चानहए िहां िािों िोगों को िािे के निए पयािप्त िहीं नमि रहा है? अपिे
अविोकि संिेप में नििें।
30 Answer the following questions on the basis of the following data 4

Demographic Indicators 2017-18
(I) Comment upon the population growth rates among the three countries
(ii) Which country has less density among the countries give appropriate reason?
निम्ननिनित आँकड़ों के आधार पर निम्ननिनित प्रश्नों के उत्तर र्दीनिए:
ििसांनख्यकीय संकेतक 2017-18
Country Estimated Annual Density Sex Fertility Urbanization

Population Growth of Ratio Ratio
(per sq.
Population
(in km)
million)
India 1352 1.03 455 924 2.2 34
China 1393 0.46 148 949 1.7 59
Pakistan 212 2.05 275 943 3.6 37
137 | P a g e
(I) तीि र्देशों में ििसंख्या वृनि र्दर पर रटप्पणी करें
(ii) र्देशों के िीच ककस र्देश का घित्व कम है, उनचत कारण िताएं।
31 (a) What was the purpose of land ceiling? 4
(b) What were the objectives behind the introduction of GST?
OR
Do you think the Navaratna policy of the government helps in improving the
performance of public sector undertakings in India?
(क( भूनम सीचिंग का उद्देश्य क्या िा?
(िी( िीएसटी की शुरूआत के पीछे क्या उद्देश्य िे?

या
क्या आपको िगता है कक सरकार की िवरत्न िीनत भारत में सावििनिक िेत्र के उपक्रमों के प्रर्दशिि को
िेहतर ििािे में मर्दर्द करती है?
32 Empowerment of women related to employment of women. Comment. 4
OR
Analyse the recent trends in sectoral distribution of workforce in India. Trends in
Employment pattern (sector wise) 1993- 2012(in percentage)
Sector 1993-94 1999-2000 2011-2012
Primary 64 60.4 48.9
Secondary 16 15.8 24.3
Service 20 23.8 26.8
मनहिाओं के रोिगार से संिनं धत मनहिाओं का सशनिकरण। रटप्पणी निनिए|

या
भारत में कायििि के िेत्रीय नवतरण में हाि के रुझािों का नवश्लेषण करें । रोिगार पैटिि में रुझाि
(िेत्रवार( 1993- 2012 (प्रनतशत में(
33 Define sustainable development. Explain briefly its features. 2+4
सतत नवकास को पररभानषत कीनिए। इसकी नवशेषताओं को संिेप में समझाइए।
34 Read the following text carefully and answer the given questions on the basis of the 6
same and common understanding:
Now a days, privatization is being seen as a solution towards the problems of public
enterprises as these enterprises on being transferred from the public to the private
hands will become less politicized which as a result will help in ceasing the
administrative corruption. It will also help in increasing the tax revenue from profit
and strengthening the public treasury. The advantages of privatization can be
perceived from both microeconomic and macroeconomic impacts that privatization
exerts. Globalization has intensified interdependence and competition between
economies in the world market. This is reflected in interdependence in regard to
trading in goods and services and in movement of capital. As a result domestic
economic developments are not determined entirely by domestic policies and market
conditions, rather they are influenced by both domestic and international policies and
economic conditions. It is thus clear that a globalizing economy, while formulating and
138 | P a g e
evaluating its domestic policy cannot afford to ignore the possible actions and
reactions of policies and developments in the rest of the world. This constrained the
policy options available to the government which implies loss of policy autonomy to
some extent, in decision making at the national level.
a) What, in your opinion are the advantages of privatizing public enterprises?

b) Do you think there is any influence of international policies on the domestic
development of an economy?
निम्ननिनित पाठ को ध्याि से प़िें और उसी और सामान्य समझ के आधार पर कर्दए गए प्रश्नों के उत्तर र्दें:
आिकि, नििीकरण को सावििनिक उद्यमों की समथयाओं के समाधाि के रूप में र्देिा िा रहा है क्योंकक
इि उद्यमों को ििता से नििी हािों में थिािांतररत करिे पर राििीनतकरण कम हो िाएगा निसके
पररणामथवरूप प्रशासनिक भ्रिाचार को समाप्त करिे में मर्दर्द नमिेगी। यह िाभ से कर रािथव को ि़िािे
और सावििनिक ििािे को मििूत करिे में भी मर्दर्द करे गा। नििीकरण के िाभों को नििीकरण के सूक्ष्म
आर्ििक और व्यापक आर्ििक प्रभावों र्दोिों से मािा िा सकता है।
वैश्वीकरण िे नवश्व िािार में अििव्यवथिाओं के िीच अन्योन्याश्रयता और प्रनतथपधाि को तेि कर कर्दया है।
यह वथतुओं और सेवाओं के व्यापार और पूंिी की आवािाही के संिंध में अन्योन्याश्रयता में पररिनित
होता है। पररणामथवरूप घरे िू आर्ििक नवकास पूरी तरह से घरे िू िीनतयों और िािार की नथिनतयों से
निधािररत िहीं होते हैं, िनल्क वे घरे िू और अंतरािष्ट्रीय िीनतयों और आर्ििक नथिनतयों र्दोिों से प्रभानवत
होते हैं। इस प्रकार यह थपि है कक एक वैश्वीकरण अििव्यवथिा, अपिी घरे िू िीनत का निमािण और
मूल्यांकि करते समय शेष नवश्व में िीनतयों और नवकास की संभानवत कक्रयाओं और प्रनतकक्रयाओं की उपेिा
िहीं कर सकती है। इसिे सरकार के निए उपिब्ध िीनत नवकल्पों को िानधत कर कर्दया, निसका अिि है
कक राष्ट्रीय थतर पर निणिय िेिे में कु छ हर्द तक िीनत थवायत्तता का िुकसाि।
क( आपकी राय में सावििनिक उद्यमों के नििीकरण के क्या िाभ हैं?

ि( क्या आपको िगता है कक ककसी अििव्यवथिा के घरे िू नवकास पर अंतरािष्ट्रीय िीनतयों का कोई प्रभाव
पड़ता है?
MARKING SCHEME SAMPLE PAPER -1
1. C
2. C
3. A
4. INFLATIONARY GAP
5. D
6. A
7. B
8. C
9. A
10. B
11. (i) Trade deficit occurs when our import exceed our export, it reflects our dependence on rest
of the world and the need for foreign exchange to cope with high imports is a great cause of
worry for an economy.
(ii) Yes because it causes flow of foreign exchange from our country to rest of the world, so it is
under debit side of capital account.
139 | P a g e
12. (i) Yes because expenditure on these services is a part of government final consumption
expenditure.
(ii) No because all taxes are transfer payments.
13. Reverse repo rate is a rate at which RBI accept deposits from commercial banks. It is also called
reverse repurchase rate. It is signed by both the party stating that the security will be
repurchased on a given date at predetermined price. When reverse repo rate is lowerd, banks
are discourage to park the surplus funds with the RBI, this leads to rise in credit supply by the
commercial bank so supply of money is increased to control deflation.
Cash reserve ratio is minimum percentage of bank total deposit required to be kept with RBI.
When supply of money has to be increased CRR is lowered and when the supply of money
should be reduced CRR is raised.
14. (i) b (ii) a (iii) true (iv) a
15. Inflationary gap – definition, Diagram, causes and consequences. Any two relevant monetary or
fiscal measures.
OR
(a) False, keynes discusses equilibrium independent of the condition of full employment. There
may or may not be a situation of full employment at the point of equilibrium because
equilibrium. Equilibrium simply refers to a situation when the desired AD is equal to
desired AS, no matter what the level of employment is. Equilibrium occur even when there
is underemployment in the economy, what matters is that the planned level of output must
match with the planned level of expenditure on the output.
(b) True, we know that Y is equal to C + S. When C is equal to Y, S will be zero thus
APS =S/Y is equal to 0/Y = 0.
16. (A) Government can offer subsidies on goods the production of which is essential for poor section of
society.
The government can grant tax holiday to induce investment in production of essential goods like life
saving drugs.
The government can impact allocation of resource by shifting its own investment from inefficient to
efficient unit of production.
High taxation can be imposed on such goods the production of which is harmful to the society like
cigarette and liquor.
The government can make larger allocations for its support price policy in favour of food crops.
(B) three deficits – RD, FD, PD . Any three implication of FD - inflationary spiral, National debt, vicious
circle of high-fiscal deficit and low GDP growth, crowding out and erosion of government credibility.
17. Expenditure method
GDPmp = C+I+G+X-M
NDPmp = 400 + 50 + 100 + 10
NDPmp = 560
GNPmp = NDPmp + dep + NFIA
GNPmp = 560+10+ (-10)
GNPmp = 560 crores
Income method
NDPfc = COE + OS + MI
NDPfc = 400 + ( 20+ 30 + 45+5+10 )
NDPfc = 510
GNPmp = NDPfc + dep + NFIA + NIT
GNPmp = 510 + 10 + (-10) + 50
GNPmp = 560 crores
INDIAN ECONOMY
18. A
19. INSTITUTIONAL OR IMPORT SUBSTITUTION
20. EXCEED
21. A
22. B
140 | P a g e
23. TRUE
24. POLITICAL OR PRIVATE
25. A
26. FALSE
27. TRUE
28. (i) a (ii) right to education (iii) NCERT
29. GDP growth in India happens to be faster than employment growth. Even when production
activity is expanding, job opportunities continue to be low. This is situation of jobless growth,
it occurs when we rely more and more on labour saving Western technology which does not
suit the needs and means of country where unemployment is an alarming social challenge. The
country lacks investment capital and we are force to depend more and more on FDI. Foreign
investment in India is link with foreign technology which is efficient but the one which uses
less of labour.
30. Rural banking in India has significantly expanded overtime. Its advantages are
1. Establishment of NABARD has made a substantial difference in institution of rural credit. 2.
Institutional credit has liberated the farmers from the dead trap of mahajans and
moneylenders.
But deficiencies of rural banking system are
1. Banking credit or institution credit has often being tied to collateral or security because of
this large section of small and marginal holders are left out.
2. Owing to political populism, the government has often shown lack of strictness in the
recovery of loans.
3. Apart from commercial bank, most financial institutions failed to develop a culture of saving
for the future among the farming families.
31. Inward looking strategy places focus on import substitution and outward looking strategy
focus on export promotion. Inward looking strategy protects domestic industry from foreign
competition, taking advantage of this situation - the domestic producers avoid diversification
and this led to loss of competitiveness in the global market, so export does not rise.
When the economy shifted to outward looking policy then industry exposed to international
competition, changes were brought in domestic industry by way of upgradation of production
technology and managerial techniques.
32. (i) The rate of growth of population is the highest in Pakistan, which stands at 2.1% per annum.
The corresponding rates for India and China are 1.2% and 0.5%. The low rate of growth of
population in case of China is on account of its successful implementation of 'One Child policy' ,
introduced in 1979. The growth rate of population continues to be fairly high in India (1.2 %)
and alarmingly high in Pakistan.
(ii) INDIA has most skewed sex ratio. It reflects strong preference for male child by Indian
families.
OR
The percentage of workforce engaged in agriculture sector is the highest in case of India which
stands at 43%. The percentage of workforce engage in industries is highest in China which
stands have 28%. The percentage of workforce engaged in service sector is highest in China
which is 46%. These observations point to a fact that China is far ahead of India and Pakistan in
industrialising its production activity which is the sign of long period growth and development
and also sign of fast growth compared to India and Pakistan. Pakistan has taken over India as
regards the growth of service sector which points to rapid urbanization in Pakistan.
33. A. RBI was expected to shift is role from being regulated to facilitator of financial sector as it
was a step towards free play of market forces so as to revitalise the financial sector, making it
more vibrant and efficient. Commercial banks were now allowed to decide their own interest
rates structure and this led to substantial rise and institution funding of the production units in
the economy.
B. NEP 1991 - Positive impact of NEP is evident in terms of substantial rise in level of economic
activity in the economy. As indicated by sustained rise in GDP the negative impact is evident in
terms of secular imbalance and concentration of economic power. Agriculture sector suffered a
141 | P a g e
neglect while the industrial sector have gain momentum. Growth process is largely confined to
urban sector of the economy.
34. A. Opportunity cost is a sacrifice made for enjoying an opportunity. This may be categorised as
avoidable and unavoidable. It is unavoidable when wheat is grown on a piece of land in place of
rice. Loss of output of rice is an avoidable opportunity cost of producing wheat. Opportunity
causes avoidable when for example excessive smoke is emitted because of the poor
maintenance of the vehicles. Other examples of avoidable opportunity cost are- deforestation
due to illegal tree felling, water pollution and loss of aquatic life due to drainage of industrial
waste into rivers, illegal construction of residential house is causing excessive exploitation of
water resources. Development process become sustainable only when this available
opportunity cost is actually avoided.
B. Sustainable development is achieved when environmental pollution is combated and
Environmental degradation is stopped.
In our daily life activity we can contribute to tackle environmental pollution when we stop
littering the roads and public places, we maintain our vehicles according to the specified
standard so that emission of smoke is minimised, we start relying more on public transport so
that other vehicle traffic is reduced and pollution is minimised. Likewise we can contribute to
minimise environmental degradation when we recycle the waste particularly water and paper,
we do not built our residential houses in unauthorised areas and as producers we use only the
environment friendly technique relating to production and disposal of industrial waste.
Q-1 a) Both statements 1 and 2 are true 1
Q-2 Imports of goods. Investment in foreign countries (any One) 1
Q-3 c 1
Q4 b) Statement 1 is false and statement 2 is true 1
Q-5 b 1
Q-6 d)Both A and B or c)𝐴𝐷 = 15 + 0.75𝑌 1
Q-7 c 1
Q-8 Balance of trade = value of Exports –value of Imports 1

-100==200-M
-M= -100-200
-M= -300
Value of import =300
Or
It refers to the rate at which currency of one country is exchanged with the currency of
another country. Example - 1$=82 Rs
Q-9 d)Assertion (A) is false but Reason (R) is true. 1
Q-10 c)Assertion (A) is true but Reason (R) is false. 1
142 | P a g e
Net Transfer payment
Q-11 3
External Sector Net Factor Payment
GOVT.
wing
Borro
Payments
Receipts
Transfer
Imports
Payments
Savi ng
Ta x e s
Export
Saving Saving
PRO DUCER FM HOUSEHOLD
Loans Borrowing
Factor Payments (Rent, Wages, Interest, Profit)
Household Consumption Expenditure
Govt. Purchase
Taxes
Subsidies
Q-12 Depreciation –refers to a situation when domestic currency loses its value in relation to a 3
foreign currency.so you need more domestic currency to buy foreign currency.
Appreciation – refers to a situation when domestic currency gains its value in relation to
a foreign currency.so you need less domestic currency to buy foreign currency.
OR
Devaluation-of currency occurs when the value of domestic currency deliberately reduced
by the government by raising exchange rates. The market forces of demand and supply
play no role whatsoever.
Revaluation- of currency occurs when the value of domestic currency deliberately

increased by the government by reducing exchange rate. The market forces of demand and
supply play no role whatsoever.
Q-13 Given MPS = 0.20 4
I = 240 Crore
At equilibrium S=I
240= -10+0.20Y
250=0.20Y
Y=1250
For double Y, Increase in Y= 1250
K=5
ΔY
K= ΔI
1250
5= ΔI
1250
ΔI = 5
143 | P a g e
Change in investment = 250
Q-14 It is the situation of inflationary gap or excess demand . The causes behind this is the 4
excess supply of money and huge demand of credit. People have more money and no
possibility of increasing production in an economy.
Now if RBI raises repo rate it increases the cost of credit. This leads to fall in demand
of credit. People avoid the loans due to high rate of interest and postpone there demand.
Due to less demand inflation will be controlled. (The rate at which the RBI offers short
period loans to the commercial banks by buying the govt. securities in open market. In fact,
It is a Repurchase Rate.)
Q-15 (a(Lender’s last resort means when a commercial bank fails to get its financial 4
requriement from market or other commercial banks or from any other source than RBI
lends the money to that bank against securities , when bank approaches to the RBI.
(a) Bank of banks function mean all banks work under the supervision and
guidance of the apex bank. RBI guide, monitor and regulated all the actions of
the commercial banks by various monetay tools.
Q-16 (a) Income Method 6
Gross National Product at Market Price
=Compensation of employees + Rent+ Interest+ Dividend+
Undistributed profit+ Corporate tax+ Consumption of fixed capital+
Net indirect tax+ Net factor income from abroad
= 400+20+30+45+5+10+10+50+-10
= 560
(b) Expenditure Method

National Income
= Private final consumption expenditure+ Gorenment final
consumption expenditure+ Net domestic capital formation+
Consumption of fixed capital+ Net exports- Net indirect tax+ Net
factor income from abroad- Consumption of fixed capital
= 400+100+50+10+10-10-50-10
= 500
Q-17 a)Supply and demand forces in a market economy do not allow enough production of 6
public goods. These are those goods which satisfy collective needs of the people. Law &
order and defense of the country are important examples of public goods. It is through
budgetary allocation of funds that these goods are sufficiently provided to the people.
b.1)Examples of tax revenue receipt are income tax, union exercise duty corporation tax
GST.
Or
A)Primary deficit = Fiscal deficit-Interest payment.
= 35 %-20 %
= 15%.
144 | P a g e
The significance of primary deficit is that it reflects borrowings on account of current
year expenditure exceeding the current year receipts of the government. Interest
payment on the accumulated borrowings is not accounted for.
B.
Revenue Expenditure Capital Expenditure

Revenue expenditure does not impact Capital expenditure impacts asset-
asset-liability status of the government. liability status of the government.
Assets and liabilities are not increased Assets are raised. Or Liabilities are
or decreased lowered.
Capital expenditure (public investment)
(ii) Difference in Significance: focuses on GDP growth. It directly
Revenue expenditure (subsidies and contributes to GDP growth.
law & order) focuses on welfare of the High capital expenditure by the
people. It does not directly contribute to government points to the lack of private
GDP growth. investment in the economy. Capital
High revenue expenditure by the expenditure by the government is
government (by way of subsidies or raised when the economy is suffering
old-age pensions) points to poverty of from deflationary gap.
the people or backwardness of the Examples:-
economy (a) Construction of Roads,
Examples:-
(b) Expenditure on machinery.
(a) Expenditure on payment of interest. (c) Expenditure on purchase of shares.
(b) Expenditure on payment of salaries. (d) Expenditure on purchase of
(c) Expenditure on payment of pension. building.
(d) Expenditure on payment of (e) Expenditure on purchasing
subsidies. computers.
(e) Expenditure on collection of taxes. (f) Expenditure on building a bridge.
(f) Expediture on scholarships
Q-18 b) Marketable Surplus 1
Q-19 a) USA. Or d) Land settlement system 1
Q-20 (c) I, II and IV 1

Or
(a) Commune system
Q-21 (b) AICTE 1
Q-22 (c) C – (iii) 1
Q-23 (b) Statement 1 is false and statement 2 is true 1
Q-25 (a) Unemployment 1
Q-26 (a) Statement 1 is true and statement 2 is false 1
145 | P a g e
Q-28 Brain drain is a serious threat to the to the process of human capital formation in the 3
country. Those who migrate are persons of high caliber such as scientist, doctors,
engineers, etc. This slow down the process of capital formation in domestic country.
Q-29 The given statement is true. Credit is the lifeline of farming activity in india because most 3
farming families in India are small & marginal holders and they seldom have enough
funds for the diverse farming operations.
Or
Diversification of crop production involves a shift from single cropping system to multi-
cropping system. It involves a shift in cropping pattern from food grain to cash crops. In
India, agriculture is still dominated by subsistence farming and farmers give prime
importance to cereals in cropping system. Multi-cropping system reduces the
dependence of farmers on one or two crops as they are engaged in growing variety of
crops.
To augment farmers’ income and to minimize their risks, there is a need to resort to crop
diversification.
Q-30 As evident from the above table, the percentage of workforce engaged in agricultural 4
sector is the highest in case of India, which stands at 43%. The corresponding rate
for China and Pakistan are 26% and 41% respectively.
The percentage of workforce engaged in industry is the highest in China, which
stands at 28%. The corresponding rates for India and Pakistan are 25% and 24%
respectively.
The percentage of workforce engaged in services sector is again the highest in
China, which stands at 46%. The corresponding rates for India and Pakistan are
32% and 35% respectively.
These observations point to a fact that China is far ahead of India and Pakistan in
industrializing its production activity which is a sign of long period growth and
development.
Higher percentage of workforce in service sector in China is also a sign of its faster
growth compared to India and Pakistan. However, the fact should also be not
ignored that Pakistan has taken over India as regards the growth of services
sector. This points to rapid urbanization in Pakistan.
Q-31 4
In 1955. 1
Explanation: Industries were divided into 3 categories in Industrial policy Resolution of
1956. (1+1+1)
Schedule A - Industries that are exclusively owned by the state.
Schedule B - Industries can be under the private sector, but the starting of the new units
will be under the public sector control.
Schedule C - Some industries will be under the private sector, but these have to take a
license from the public sector.
Or
It is a process to produce the alternative or close substitutes of imported goods country
itself. 1
It was adopted by India due to following reasons: any three (1+1+1)
- due to scarcity of foreign exchange.
- due to unfavourable balance of trade.
146 | P a g e
- for self-sufficiency purpose
- for industrial development.
Q-32 a) True. Global warming is a wake-up call to save environment because it causes 4
consistent increase in global temperature leading to loss of biotic and abiotic
components of environment.
b) True. Because, India is sustaining excessive population, much in excess of what
our resources permit us. It leads to excessive exploitation of resources as well as
excessive environmental pollution.
Q-33 a) Jobless growth is a situation when the level of output in the economy tends to rise 6
owing to innovative technology without any perceptible rise in the level of
employment.
b) Casualization of workforce refers to a situation when people tend to find
employment more in unorganized (or informal) sector of the economy, and less in
organized (or formal) sector of the economy.
c) Disguised unemployment refers to a situation in which more people are
engaged in a given job than are actually needed.
Or
a) Health Expenditure: - Expenditure on health makes a man more efficient and,
therefore, more productive. His contribution to the production process tends to rise. He
adds more to GDP of the nation than a sick person.
b) Expenditure on Migration: - Migration contributes to human capital formation
as it facilitates utilization of inactive skills of the people, or it facilitates better
utilization of the skills. Gains of migration (in terms of higher salaries ) are greater
than the cost of migration.
Q-34 a)Demonetisation is the act of stripping a currency unit of its status as legal tender.
Purposes
1 to tackle black money in the economy.
2 for lower the cash circulation in the country.
3 control over fake currency circulation.
4 to eliminate dodgy funds. (Any three )
b)
1 control on corruption
2 decrease in tax evasion
3 end of black money
4 pushed India towards cashless economy. (Any three )
Q. NO. Description MARKS
1 Pollution created by factories/vehicles 1
2 (d) All of the above 1
3 Currency held by public and demand deposits held by banks. 1
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4 Aggregate Supply refers to the estimated money value of all the final goods and 1
services planned to be produced in an economy.
5 For import, for tourism in abroad 1
6 (d) Fiscal Deficit is equal to interest payment 1
7 (b) CPI has risen at a rate lower than the preceding year 1
8 Direct taxes are those taxes which cannot be shifted to the other person/entity. 1
Their monetary burden is borne by those on whom they are levied.
OR
Indirect taxes are those taxes which can be shifted to another person/entity.
Their monetary burden is ultimately borne by final users of goods and services,
rather than the person on whom the tax is levied.
9 Money multiplier is the number by which total deposits can increase due to a 1
given change in deposits. It is inversely related to legal reserve ratio.
10 Effective demand refers to the Aggregate demand corresponding to full 1

employment level of output.
11 Investment Multiplier (K) = 1/1−MPC=1/1−0.8 3

K=1/0.2=5
Also, K=ΔY/∆I
5=ΔY/1000
ΔY = Rs5,000 crores
Change in final income = 5,000 crores
12 In case of ‘Excess Demand’ under the Keynesian Theory, there will be no change 3
in the employment as the economy is already working at the full employment.
Thus, there is no further scope of creation of employment.
OR
Ex-Ante Savings - refers to the planned savings, at different levels of income in

an economy.
Full employment – refers to a situation of no involuntary unemployment.
Autonomous consumption - refers to the minimum level of consumption for
survival even at a zero level of income.
13 a. Revenue receipt of the government, as it is neither creating any 4

liability nor reducing any assets for the government.
b. Capital receipt of the government, as it is reducing the assets of
the government.
c. Revenue receipt of the government, as it is neither creating any
liability nor reducing any assets for the government.
d. Capital receipt, as it is increasing the liability of the Government.
14 Any economic variable which is measured at a point of time is known as stock, 4

e.g. capital, etc.
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Whereas, any economic variable measured during a period of time is known as
flow, e.g. income, etc. (any other relevant example)
15 The tools used by the Central bank to control money supply can be quantitative 4
tools or qualitative tools. Quantitative tools control the extent of money supply
by changing the CRR or bank rate or open market operations. Qualitative tools
include persuasion by the Central bank in order to make commercial banks
discourage or encourage lending which is done through moral suasion, margin
requirement, etc.
16 6
a. When Aggregate Demand is lesser than Aggregate Supply
(AD S)means buyers are planning to buy more output as to what
producers are planning to produce.
It will lead to rise in planned inventories above the desired level.
The producers in turn will produce less, which will reduce the
income level i.e. AS. This process will continue till AD becomes
equal to AS.
b. Ex-ante investments are greater than ex-ante saving (I > S)means
buyers are planning to buy more output as to what producers are
planning to produce. It will lead to fall in planned inventories
below the desired level. As a result the producers will raise
production, leading to increase in income till savings becomes
equal to investments.
17. 6
a. Value addition – is the excess of value of output over the value of

intermediate consumption.
b. Gross Domestic Product – is the money value of all final goods
and services produced in an economy during an accounting year.
c. Flow variables - are those economic variables which can be
measured over a period of time e.g.national income, money
creation etc.
d. Income from property and entrepreneurship - are incomes
earned by property owners. It includes, rent and royalty, profit,
interest. It can also be termed as Operating Surplus.
OR
Government final Consumption Expenditure= i-iii - vii -xi + v + viii – vi

= 7100-1000-4000-500+200+300-100
= Rs2,000crores
Mixed Income of Self Employed = i - x – xii – vi
= 7100 - 1500 - 3000 – 100
= Rs 2500 crore
18 (a) After 1921 1
19 (c ) 3 1
20 ONGC, BPCL etc. 1
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21 Coordinate the activities of all institution providing rural credit. 1
22 Various policies and programmers initiated by the govt. in agriculture. 1
23 (b) 2016 1
24 All the surroundings that have an impact on human being. 1
OR
It refers to gradual increase in the temperature of the earth’s atmosphere
25 (d) Switzerland 1
26 It refers to quotas that specify the quantity of goods which can be imported. 1
27 The portion of agriculture product which is sold by the farmer in the market. 1
28 Low level of income in the economy result in low level of saving which 3
adversely affects the level of investment. Or any other relevant answer
29 Women’s health in India is the matter of great concern because of the following 3
reasons-
(i) Approximately 50% of total women are suffering from

anaemia and related disease.
(ii) Maternal mortality rate is high
Or any other relevant answer
OR
(I) Increase the efficiency of workers

(II) Minimum loss of production due to leave taken by worker in illness
(III) Increase the enrollment of children in the school
30 MGNREGA launched in 2nd feb. 2006… initially implemented in 200 4
districts.This act is based on the principle of 'right to work', launched in
2005. Under this Act, all those who are willing to undertake unskilled
manual work at the minimum wage are offered employment for a
minimum period of 100 days.
This programme was later in 2008 renamed as Mahatma Gandhi National
Rural Employment Guarantee Act (MGNREGA).
NREGA is a successful programme because it is providing the employment
to all the rural people for 100 days and the works have been done under
the programme are productive and creation of assets.
31 (a) China’s dual policy.. 4
(i) Farmers and industries units are required to buy and sell fixed
quantities of inputs and outputs on the basis of price fixed by the
govt.
(ii) For other transaction, the inputs and output were purchased at
market price.
(b)
(i) Availability of cheap labour which gave China a cost advantage
(ii) The great Leap forward Campaign launched in 1958
(iii) Focus of export oriented policy…
150 | P a g e
32 (i) Slow growth of employment in the organized sector
(ii) Privatization and disinvestment in public sector
(iii) Small and marginal farmer shifting to casual work…
OR
4
Disguised and seasonal unemployment are the two types in rural areas…
And relevant answer
33 Critically evaluate the policy of privatization Merits :-
1. Improvement in the efficiency of management

2. Financial discipline
3. Reduction in deficit
4. Competitiveness
5. Diversification of production 6
Demerit :--
1. Neglect of social interest

2. Monopolistic control
3. Hindrance in achieving the objective of full employment.
4. Less scope of development of infrastructure
34 Horticulture refers to the science or art of cultivating fruits, vegetables, tuber crops,
flowers, medicinal and aromatic plants, species and plantation crops. These crops play
a vital role in providing food and nutrition besides addressing employment concern.
The Period between 1991-2003 is called Golden Revolution as investment in
Horticultural became highly productive and immerge as sustainable livelihood options.
-India has blessed with a varying climate and soil condition. 6
-It is an important factor for potential diversification and value addition in agriculture
-It has been estimated that this sector provides employment to around 19 % of total
labour force.
- This sector is highly productive and the sector emerged as a sustainable livelihood
option.
- India has emerged as a world leader in producing a variety of fruits, vegetables,
mangoes, bananas, coconuts, cashew nuts and number of spices.
- Horticulture has improved economic condition of many farmers and has become a
means of improving livelihood for many unprivileged classes.
And relevant answer…….

OR
1. Regulated market
2. Cooperative agricultural marketing societies
3. Provision of warehousing facilities
4. Subsidies transport
5. Dissemination of information
6. Minimum support price (MSP) policy.
Q. NO. SECTION A – MACRO ECONOMICS MARKS
1 (a) Statement 1 is true and statement 2 is false 1
2 (c) Supply, improvement 1
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3 (a) K = 1/LRR 1
4 (b) Statement 1 is false and statement 2 is true 1
5 (b) Statement 1 is false and statement 2 is true

OR
(c) rent 1
6 (c) S=-100+0.25Y
OR
(d) Ex-post saving 1
7 (c) II and III 1
8 (b) Debit, Credit

OR
(a) credit, current 1
9 (a) Increase 1
10 (a) a-iv, b-i, C-ii, D-iii 1
11 Given that 1
GNP=₹2500 Cr and real GNP=₹3000 Cr
𝑁𝑜𝑚𝑖𝑛𝑎𝑙 𝐺𝑁𝑃 1
GNP deflator = 𝑅𝑒𝑎𝑙 𝐺𝑁𝑃 𝑋100
= 2500 / 3000 x 100 1
= 83.33 %
No, the price level has reduced from base year to current year by 16.67 %.
12 Demand curve of foreign exchange is downward sloping due to inverse relationship 3
between demand for foreign exchange and foreign exchange rate.
when foreign exchange rate increases less foreign exchange is demanded. Due to the
rise in the price of foreign exchange the foreign goods become more costly ( for
India) as a result import will reduces. Thus the demand for foreign exchange will also
decrease.
Sources of Demand for foreign exchange :
1. To make the payment for imports of goods and services.
2. Repayment of international loans.
3. To make investment in rest of the world.
4. For giving gifts and grants to other country.
5. To purchase assets like land , shares , bonds etc. in the foreign countries.
OR
Autonomous Items Accommodating Items

1.It refers to those international economic 1.It refers to the transactions that are
transactions, which take place due to some undertaken to cover deficit or surplus
economic motive such as profit in autonomous transactions.
maximization.
2.Autonomous transactions are 2.Accomodating transactions are
independent of the state of BOP account. undertaken to maintain the balance in
BOP account.*
3.Autonomous transactions take place on 3.Accomodating transactions take
both current and capital accounts. place only on capital account.
4.These items are also known as ‘above the 4.These items are also known as
line items’. ‘below the line items’.
*( If there is current a/c deficit in the BOP then it is settled by capital inflow from
abroad)
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13 MPS = 0.25, K=4, K=change in income/change in investment,
Since K= 4
4=2000/change in investment
Required investment is = Rs. 500 crore
14 A large section of the population in India does not have their bank accounts. 'Jan- 4
Dhan Yojana' prompts people to open their bank accounts. When more and more
accounts are opened then some of the cash balances with the people (or idle cash
lying with the people) is bound to reach the banking system as cash deposits or
primary deposits. This increase enables commercial banks to increase their
cash reserves with the central bank. If ACR (additional cash reserves with the RBI) =
Rs. 10,000 and if CRR = 4%, then the additional demand deposits the banks can
create = ¼% 25 x Rs.10, 000 = Rs. 2, 50,000.
This is how 'Jan-Dhan Yojana' may be used as an instrument to increase supply of
money by the commercial banks.
15 1. Central bank is an apex body that controls, operates, regulates and directs the 1
entire banking and monetary structure of the country.
2. Ministry of Finance.
3. False
4. lender of last resort 1
OR
1
Money has a general acceptability, and its value remains stable.
(1) It can be easily stored for future use. 1
(2) It is the most convenient and economical means to store earnings and wealth.
(3) Hence, it helps to shift the purchasing power from the present to the future.
16 Basis Domestic Income National Income 3

It is money value of all final
It is money value of all final
goods and services produced
goods and services produced by
1. Meaning within the domestic territory of
normal residents of a country
a country during a period of
during a period of one year.
one year.
It is a domestic concept as it It is a national concept as it
2. Concept does not include net factor includes net factor income
income from abroad. earned from abroad.
Components of domestic Components of national income
3.
income are : are :
Component
NDPFC=COE+OS+MI NNPFC=COE+OS+MI+NFIA
B) i) Expenditure on second hand goods is not to be included in the final
consumption expenditure as the production of these goods might not be

attributed to the current year.
ii) Expenditure on ‘intermediate goods’ are not to be considered, to avoid
the problem of double counting of value of goods and service.
153 | P a g e
17 A) GST will help to create a common national market for India which will improve 3
the business environment in the country. The average tax burden on companies
will come down and it will help in reducing prices.

Fall in prices will lead to increased demand for goods and services.
This will boost domestic and foreign investment in India.
B) 1. Revenue receipts as it does not create any assets for the government
2. Capital receipts as it reduces assets of a government 3
3. Revenue receipts as it does not create any asset for the government
18 (b) 0.5% 1
19 (a) Substituting imports with domestic production 1
OR
(c) Economic Planning
20 (d) There was unrest among the people 1
OR
(a) Pakistan
21 (d). Production of variety of grains and plans on the same land 1
22 (a) urbanisation 1
23 (a) Statement 1 is true and statement 2 is false 1
24 (c) Both statements 1 and 2 are true 1
25 (d) Electricity 1
OR
(a) economic growth
28 Opportunity cost is the sacrifice made for enjoying an opportunity. This may be 3
categorized as:
Opportunity cost is avoidable when, for example excessive smoke is emitted (than
the permissible-limit), because of the poor maintenance of the vehicles. Other
examples of avoidable opportunity cost are: (i) Deforestation occurring due to illegal
tree-felling, (ii) Water pollution and loss of aquatic life due to drainage of industrial
waste into the rivers, (iii) Il legal construction of residential houses, causing
excessive exploitation of water resources of a particular region, (iv) Illegal mining
leading to extinction of water bodies, and so on.
29 It refers to a situation where a number of persons are not able to find job in a 1
particular season. It occurs in case of agriculture, ice cream factories, woolen
Factories etc. Following measures may be suggested to reduce seasonal
unemployment:
(i) promotion of multiple cropping i.e., raising more than one crop on the same piece
of land in a year.
154 | P a g e
(ii) Development of activities allied to agriculture as animal husbandry, dairy
farming, horticulture etc. to provide extra employment throughout the year
(iii) Public investment in rural areas in such fields as irrigation, drainage, flood 1
control, land etc.
OR
Rural development means an 'action - plan' for the economic and social growth of the 1
rural areas. The action - plan is to focus on the lingering and emerging challenges in
rural areas.
The principal lingering challenges of rural development are:
(i) Challenges of rural credit, and
(ii) Challenges of rural marketing.
Emerging challenges of rural development include basically:
(i) Exploring options of sustainable livelihood, other than farming, and
(ii) The challenge of organic farming.
30 It is true that China has succeeded in controlling the growth rate of its population, 4
while India has failed. Owing to unbridled growth of population, the government in
India has failed to reduce the BPL population. This has led to a huge expenditure by
way of food subsidy, besides the expenditure related to health, housing and education
of the BPL population. While, all such expenditures are welfare-oriented, these are
non-productive. Such expenditures do not add to production capacity of the nation,
rather they tend to erode it. Accordingly, growth process is adversely affected. This
is one of the important reasons why India is lagging behind China in the area of
economic growth.
31 The given statement is correct. In recent times, outsourcing has intensified because of 4
the growth of fast modes of communication, particularly the growth of Information
Technology (IT). Today, voice-based business processes (popularly known as BPO
or call centers), record keeping, accountancy, banking services, music recording, film
editing or even teaching are being outsourced by companies in developed countries
to India where they can be availed at a cheaper cost with reasonable skill and
accuracy. Thus, low wage rates and availability of skilled manpower in India made it
a destination for global outsourcing after 1991.
OR
The given statement is true to its character. Some scholars argue that globalisation
should be seen as an opportunity in terms of:
(i) Greater access to global markets,
(ii) High technology and,
(iii) Increased possibilities of large industries of developing countries to become
important players in the international arena.
On the contrary, the critics argue that
(i) Globalisation is a strategy of the developed countries to expand their markets in
other countries. According to them, it has compromised the welfare and identity of
people belonging to poor countries.
(ii) Market-driven globalisation has widened the economic disparities among nations.
(iii) It has increased the income and quality of further consumption of only high-
income groups.
32 The given statement is correct. 4
Human capital formation not only increase the productivity of available human
resources but also stimulates innovation and creates ability to adopt new technology.
Investment in education creates ability to adopt newer technology, facilitates
invention and innovation since educated workforce generally adapts to modern
technologies and innovation.
33 A) Micro-credit refers to small loans (available through SHGs) and meant for the 3
impoverished people. These loans are offered without any security and at a moderate
rate of interest. Presently, more than seven lakh SHGs are operating across different
rural areas. Credit provisions by the SHGs are known as Micro-Credit Program.
155 | P a g e
These programs are becoming popular among small borrowers owing to their
'informal credit delivery mechanism' involving minimum legal formalities.
B) Agricultural diversification refers to the allocation of farm's productive resources
to diverse areas of crop output, so as to reduce market risk. Owing to changes in the
relative price structure, if one crop fetches low revenue, the other may fetch high.
Thus, diversification helps stabilization of farm income by lowering the market risk.
Diversification also minimizes risk occurring due to monsoon failure.
OR
A) .(i) Start-up are expected to generate opportunities of self- employment, and are
therefore, solution to the problem of unemployment. (ii) Start-ups are to be aided 3
with technical and financial support by the government. Accordingly, these are
expected to encourage the use of latent resources (particularly entrepreneur skill and
small savings) . When latent resources are used, employment opportunities are bound
to arise.
B) This trend is termed as 'Jobless growth'. Jobless growth refers to a situation when
the economy is able to produce more goods and services without a proportionate
increase in employment opportunities. There is a situation when there is an overall
acceleration in the growth rate of GDP in the economy without corresponding
expansion in employment opportunities.
34 A) Green revolution was implemented in India to overcome the shortage of food- 3
grain availability in the post-independence period. Green revolution has increased
the production and productivity in the agriculture sector which was otherwise
very low. It helped in improving the income of the farmers by creating
marketable surplus, increased employment and output.
B) i. The use of HYV seeds was restricted to the more affluent states such as Punjab,
Andhra Pradesh and Tamil Nadu.
ii. Further, the use of HYV seeds primarily benefited the wheat growing regions
only.
3
iii. It increased the disparities between small and big farmers—since only the big
farmers could afford the required inputs
iv. The HYV crops were also more prone to attack by pests
MARKING SCHEME SAMPLE PAPER-5
Q.N ANSWERS MARKS
1 (D) All of these 1
2 C 1
3 C 1
4 D 1
5 D or C 1
6 (D) All of these 1
7 C 1
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8 Balance of payment is statement of accounts recording all economic transactions 1
of a country with rest of the world in an accounting year
9 (D) 0.6 1
10 (B) 1/MPS 1
11 NVA at MP = (iv)*(iii)+(ii)-(i)-(vi) 3
= 40*750+1000-10000-3000
= 18000
12 The basic difference between the current account and the capital account of balance 3
of payment is one current account includes receives and payment of foreign
exchange on account of all items of exports and imports visible as well as invisibles.
Capital account includes receipts and payments of foreign exchange only on
account of change in ownership of assets across the borders. Capital account does
not involved trading of goods and services across the border .
13 The involuntary unemployment refers to a situation in which the workers are 4

willing to work at the prevailing wage rates but the jobs are not available to them.
14 (i) The consumption function and investment are given as 4

C = 100 + 0.75Y …(1)
I = 1,000 …(2)
Equilibrium level of National Income is determined as:
Y = C + 1 … (3)
Substituting appropriate values in (3); we get
Y= 100 + 0.75Y + 1000
Y – 0.75Y= 1,100
0.25 Y = 1,100
= 4,400
Thus, the equilibrium level of National Income is ₹ 4,400.
(ii) Substituting Y = 4400 in (1); we get
C= 100 + 0.75(4,400)
= 100 + 3,300 = 3,400
Thus, the consumption expenditure at equilibrium level of National Income is ₹
3,400.
15 Authority of currency issue the central bank is the sole note-issuing authority in 4
the country. Often the central bank divides its function into two departments
banking department and issue department. It is the issue department that is
responsible for not issuing. It issues currency to cope with the demand for it, with
depends upon the level of economic activity in the economy.
Bankers to the government; As a banker to government it keeps the account

from all government banks and manage government treasuries .The loans are
given to the government without any interest for short term. It also transfers
government funds. It also buys and sells securities treasury bills on behalf of the
government. Being The Apex Bank of the country it advises the government from
time to time on economic financial and monetary matters
157 | P a g e
16 (a) Real GDP is national income at constant prices and measure real change 3+3
in output.
Nominal GDP is national income at current prices and does not measure
real change in output.
Real GDP is true indicator as it measure real change in output unaffected

by change in prices
(b) Externalities are the benefits or harms of an activity caused by a

firm or an individual, for which they are not paid or penalized.
Example and its impact: Use of public parks by the people for pleasure for
which no payments are made by the public. It increases welfare through
positive effect on health.
17 (i) Tax receipts are revenue receipts for the government because neither they 3+3
create a liability nor they lead to reduction in any assets.
(ii) Disinvestment refers to the withdrawal of existing investment, e.g. the
government of India is undertaking disinvestment by selling its shares in Maruti
Udyog Ltd. It is a capital receipt for the governments as it reduces the assets of the
government.
18 C 1
19 A or C 1
20 B 1
21 C 1
22 C 1
23 C 1
24 B 1
25 B 1
26 C or A 1
27 A 1
28 The development of villages is essential for the overall development of the country 3
as the majority of Indians live in villages. That development of the country is not
possible without the development of its villages.” “If villages are prosperous, self-
reliant and with good facilities, the country will be prosperous. It will help achieve
the dream of Atmanirbhar Bharat (self-reliant India) and making India a five
trillion-dollar economy,”
29 It is not denying the fact that organic farming is environment-friendly. But the hard 3
fact cannot be denied that organic farming is less productive compared with
conventional farming (using chemical fertilizers, insecticides and pesticides). We
must strike a balance between environment and productivity. The planners and
politicians in the country must see to it that environmental degradation is
158 | P a g e
minimised without suffering a substantial loss of productivity. Rejection of
conventional farming in favour of organic farming should not push us to a point
where food problem becomes an emerging challenge
30 (i)As evident from the table the rate of growth of population is the highest in 4
Pakistan which stands at 2.1% per annum the corresponding rates for India and
China are 1.2% and 0.5% respectively the low rate of growth of population in case
of China is on account of its successful implementation of one child policy
introduced in 1979 the growth rate of population continuous to be fairly high in
India 1.2% and alarmingly high in Pakistan 2.1%
Answer (ii) China has low density of population compared with India and Pakistan
it is because of a very large geographical area of China then India and Pakistan it is
estimated to be 148 persons per square kilometer in China compared to 455 and
275 persons (per square kilometer) in India and Pakistan, respectively
31 (a) to reduce the concentration of land ownership in a few hands. 4
(b) subsume most indirect taxes into a single taxation system , reduce the need
for multiple documentation , widen the tax base in India. ( any other relevant
objective)
OR
Yes , as it give greater managerial and operational autonomy in taking decision ,

increase competitiveness and profit .
32 Ans. It is since ages that the women have suffered gender- discrimination. Men have 4
been getting priority in matters relating to education, health, inheritance, marriage
and policies. Empowerment of women aims at achieving gender equality. Of all the
measures related to empowerment of women, employment of women is of central
significance. Employment makes the women economically independent. This
enhances their ability as decision- makers in all of walk of life. Once the women are
independent decision- makers, they can always strive for gender equality. It is,
therefore, required that the participation of women is raised, particularly in
secondary and tertiary sectors of the economy.
OR
The given data indicates that over the given period, the proportion of workforce in
primary sector has gone down significantly. Whereas, the employment share of
both secondary sector and the service sector has increased gradually. While the
share of secondary sector has gone up by approximately 9% recently, the
corresponding figure for service sector has gone up by approximately 7.1 %. This
also shows that dependency on agriculture remained high as secondary and service
sector was not created in of employment
33 Sustainable development refers to the development strategy to meet the needs of 2+4
the present generation without compromising the needs of future generations. It
enables all generations (present and future) to make best use of the resources.
Features of sustainable development
( i ) sustainable rise in per capita income ( real ) and economic welfare
( ii ) ability of future generations to meet their needs
( iii ) rational use of environmental resources
159 | P a g e
( iv ) control on pollution
34 (a) reduce corruption , increase income , improve management , better customer 6

service ( any other relevant point )
(b) Influence positively as well as adversely while making policies. any other
relevant point
160 | P a g e
161 | P a g e

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House Hold Sector Producer Sector

Factor Services (Land, Labour, Capital and Entrepreneurship)

House Hold Producer

Expenditure on the purchase of goods

Investment: Increase in the stock of capital during the year.

Difference between Consumption good and Capital good

Difference between Stock Variable and Flow Variable

Resident (normal resident):- Normal resident is a person or an institution who ordinarily

Difference between Domestic Income and National Income.

Difference between Factor Income and Transfer Income.

REAL GDP AND NOMINAL GDP

1.Non-Monetary Exchanges: -These activities are non-monetary and non-market transactions.

CONCEPTS OF NATIONAL INCOME

Gross and Net:

Domestic Income and National Income

Factor Cost and Market Price:

3. Net Domestic Product at Market Price (NDPMP ).

4. Net Domestic Product at Factor Cost (NDPFC ).

5. Gross National Product at Market Price (GNPMP).

7. Net National Product at Market Price (NNPMP ).

8. Net National Product at Factor Cost (NNPFC ).

It must be noted that NNPFC is also known as National Income.

2. Value of output = Sales + Change in stock

3.Gross value added (GDPMP) = Value of output – Intermediate cost

PRECAUTIONS TO BE TAKEN WHILE CALCULATING NATIONAL INCOME BY

(B) INCOME METHOD/FACTOR PAYMENT METHOD

2.Operating surplus (OS)= Income from Property + income from entrepreneurship

3.Mixed Income (MI) = Income of the self employed

PRECAUTIONS TO BE TAKEN WHILE CALCULATING NATIONAL INCOME BY INCOME

➢ Avoid double counting of income.

(C) EXPENDITURE METHOD:

1. Private final consumption expenditure (C)

PRECAUTIONS TO BE TAKEN WHILE CALCULATING NATIONAL INCOME BY EXPENDITURE

➢ Avoid double counting of expenditure by not including expenditure on intermediate goods.

Q7. Calculate GNP at market price, NDP at factor cost

Q8. Calculate national income and GDPmp

Meaning of money: - Money is anything which is accepted as medium of exchange.

3. Standard of deferred payment: -

MEASURES OF MONEY SUPPLY: -

M1 is called narrow money.

High Powered Money: -

Money/credit creation by the commercial banking system

Why deposits are kept as Cash Reserves?

Role of money Multiplier in determining Credit creation

FUNCTIONS OF CENTRAL BANK:

a) Uniformity in currency circulation

5) Custodian of foreign exchange reserves.

3. In case of credit money

4. Cash cards are example of –

5. Which of the following is correct?

6. What is money supply? State M1 measurement of money.

11- Distinguish between near money and money.

13. Define bank rate.

Unit-3 (12 Marks)

Aggregate demand (AD): Meaning:

1. Household (Private) Consumption Demand (C):

➢ There is direct relation between Consumption and Income.

Induced investment Autonomous investment

Note-There is direct relation between saving and Income.

Determination of Equilibrium Level of Income & Employment:

I - Aggregate Demand and Aggregate Supply Approach (AD=AS Approach)

Let us understand this with the help of following diagram-

Difference between Full Employment and Under-Employment Equilibrium