Notes

Eco-1 Development

Q1 Define Development

Development means the growth of an economy along with improvement in non-economic

goals such as health, education, peace

Development is a comprehensive term which include increase in real per capita income,
improvement in living standard of people, reduction in poverty, illiteracy, crime rate, etc.

Q2 What may be development for one may not be development for the other.’ Explain by
giving examples.

It is true that development for one may not be development for the other.

(i) More wages means development for a worker, but it can go against the entrepreneur.

(ii) A rich farmer or trader wants to sell food grains at a higher price but a poor worker wants to
purchase it for low prices.

(iii) Construction of a dam means more and cheap power, but people, who will lose their
habitat will demonstrate.

(iv) To get more electricity, the industrialists may want more dams. But this may submerge the
agricultural land, and disrupt the lives of the people.

Q3 Define per capita income

Per capita income is the measurement of money earned per person in a certain zone. In layman
terms, we can say that “Per Capita income is the Income supposedly earned by a single person
in a country.” It is calculated by dividing country's national income by its population
Q4 What is the main criterion used by the World Bank in classifying different countries? What
are the limitations of this criterion, if any?

Ans: The main criterion used by the World Bank to classify different countries is through the per
capita income or average income of a person in a country.

Limitations of this criterion:

This criteria does not inform about how the average income is distributed among the people in
the individual countries. Two countries with the same per capita income might be very different
with regard to income distribution. It is possible that one might have equitable distribution of
income while the other might have great disparities between the rich and the poor.

Q5 Define IMR,NAR AND LR

Infant Mortality Rate (or IMR) indicates the number of children that die before the age of one
year as a proportion of 1000 live children born in that particular year.

(ii) Literacy Rate measures the proportion of literate population in the 7 years and above age
group.

(iii) Net Attendance Ratio is the total number of children of age group 6-10 years attending
school as a percentage of the total number of children in the same age

Group

Q6 Why Kerala has low IMR?

Kerala has low IMR because:-

(i) It has a very high literacy rate and literate people take care of their children better as
compared to illiterate.

(ii) Literate people also have high earning capacity so they can afford basic necessities for their
children.

Kerala has a low Infant Mortality Rate

Kerala has a low Infant Mortality Rate because it has adequate provision of basic health and
educational facilities.
Q7 Why per capita income is calculated in dollars?

Per capita income in all countries is calculated in dollars because the dollar is the standard
international currency. According to statistics, it is the most valued and used currency in the
world, it acts as the base for all exporting and importing pricing. The common currency system
uses USD as the ultimate common dominator to bring homogeneity when one is studying other
countries' GDP. Additionally, international business has led to purchasing power parity issues
thus using the international currency eliminates these issues.

Q8 Define sustainable development.

Sustainable development refers to the process economic development where resources are
used judiciously to satisfy needs of not only present generation but also to conserve them for
the use of future generations. Sustainable development takes places without depleting the
present natural resources.

Q9 Why does Kerala have a better Human Development Index ranking in comparison to
Punjab? Explain with three reasons.

Answer:

Kerala has a better Human Development Index ranking in comparison to Punjab even though
Punjab has a higher per capita income in comparison to Kerala because of the following
reasons.

• Education: Kerala has a higher level of literacy rate than Punjab. In fact, the literacy rate
of Kerala is the highest in India. In Kerala, the literacy rate is ninety-one per cent which is
almost as high as that of China. This is mainly because education has been made available to
everyone in Kerala whether they are upper caste or the lower caste. There is no bias in the field
of education, which is one of the major reasons why Kerala has a better HDI than Punjab.

• Health care: The health care facilities in Kerala are far better than those in Punjab.
Kerala has over 2700 government medical hospitals, with 330 beds per 1,00,000 population
which is the highest in India, making it achieve a higher ranking in the HDI.
• Politics: The political parties in Kerala have taken steps for genuine welfare of the
people and have invested intelligently and methodologically in the field of health and
education. The government of Kerala has even worked for the land reforms in the State to
support the people

Ch2 Sectors of Indian Economy

Q1 Give reasons for the rising importance of Tertiary sector in India.

Answer

The importance of the Tertiary sector is rising because of the following reasons.

(i) This sector provides basic services such as hospitals, educational institutions, post and
telegraph services, police stations, courts, municipal corporations, defence, banks, insurance
etc. which are basic for the development of the country.

(i) This sector provides services such as transport, trade, storage etc. which help in the
development of the agriculture or the Primary sector and the industries or the Secondary
sector.

(iii) Increasing income level has created demands for many more services like eating out,
tourism, shopping, private hospitals. private schools etc.

(iv) Over the last decade, or so, certain new services such as those based on information and
communication technology have become important and essential.

(v) The production of these services has been rising rapidly.

Q2 What do you understand by disguised unemployment? Explain with an example each from
the urban and rural areas.

Answer:

Disguised unemployment is a kind of unemployment in which people seem to be employed but

are actually unemployed. This is the situation of underemployment, where people are
apparently working but all of them are made to work less than their potential. This situation is
also known as Hidden Unemployment. Such a situation arises when more people are engaged
in a work than required.

For example:

• In rural areas, this type of unemployment is often seen in the agricultural sector. Here, if
in a family five members are working on the same piece of land and that land only requires
three workers then the extra two workers are said to be in a situation of disguised
unemployment.

• In urban areas, this type of unemployment can be seen mostly in service sectors where
workers like painters, plumbers, electricians are unable to find work on a daily basis and work
less than their potential.

Q3 Define Underemployment

t is a situation in which more workers are working in an activity than required. The people who
are actually engaged in such an activity appear to be employed, but are not fully employed. ...
(iv) This type of unemployment can also be called underemployment because workers perform
below their productivity level

Q4How more employment can be created

The ways by which more employment can be created in a country like India are:

(i) If more dams are built and canal water is provided to all the small farmers, a lot of
employment can be generated in agriculture sector.

(ii) Providing cheap credit facilities and crop insurance can result in more employment.

(iii) More money should be spent in transport and storage, because then more people can be
employed.

(iv) The government/banks can provide loan at cheap rates to improve irrigational facilities.

(v) Technical training, vocational guidance to unemployed youth for self employment.

Q5 Write a note on nrega

The Central government in India made a law for the Right to work in 200 districts of India is
called National Rural Development Guarantee Act 2005 (NREGA, 2005). It is also known as
Mahatma Gandhi National Rural Development Guarantee Act 2005 is an Indian labour law and
social security measures that guarantees work. People who are able to and are in need of work
are guaranteed 100 days of employment in a year by the government under this Act and the
government give unemployment allowances to the people, if they fails to provide employment.

1. the objective of implementing the NREGA 2005 i.e., National Rural Employment
Guarantee Act 2005 is to implement the right to work.

2. The Act has to be implemented in 200 districts.

3. Under this Act, all those who are able to, and are in need of work have been guaranteed
100 days of employment in a year by the government.

4. If the government fails in its duty to provide employment, it will give unemployment
allowance to the people.

5. The types of work that would in future help to increase the production from land will be
given preference under this Act.
Q6 Distinguish between organized sector with that of unorganized sector
Q7 Distinguish between Public sector and Private sector?

Q8 Workers are exploited in the unorganized sector. Do you agree with this view.? Give
reasons in support of your answer.
Answer:
Yes, workers are exploited in the unorganized sector. This would be clear from the following
points:

1. There is no fixed number of working hours. The workers normally work 10 – 12 hours
without paid overtime.
 2. They do not get other allowances apart fro the daily wages.
3. Government rules and regulations to protect the labourers are not followed there.
4. There is no job security.
5. Jobs are low paid the workers in this sector are generally illiterate, ignorant and
unorganized. So they are not in a position to bargain or secure good wages.
6. Being very poor they are always heavily in debt. So, they can be easily made to
accept lower wages

Q9 How can workers in the unorganised sector be protected ? Explain.

i) Government can fix the minimum wages rate and working hours.
(ii) Government can provide cheap loans to the self employed people.
(iii) Government can provide cheap and affordable basic services like education, health, food to
these workers.
(iv) Government can frame new laws which can provide provision for overtime, paid leave,
leave due to sickness, etc.

Eco ch 3 MONEY AND CREDIT

Q1 What is meant by double coincidence of wants?

Answer:

Double coincidence of wants means when both parties have agreed to sell and buy each other’s
commodities.

Both parties, the seller and buyers have to agree to sell and buy each others commodities.
Goods are directly exchanged without the use of money.

Q2 How does money act as a medium of exchange?

Answer:

Money acts as a medium of exchange as it acts as an intermediate in the exchange process and
transactions. A person holding money can easily exchange it for any commodity or services that
he or she might want.
Q3 WHAT IS DEMAND DRAFT?

A demand draft is a negotiable instrument similar to a bill of exchange. A bank issues a demand
draft to a client, directing another bank or one of its own branches to pay a certain sum to the
specified party. A demand draft can also be compared to a cheque. However, demand drafts
are difficult to countermand. The drawer is the person requesting the demand draft; the bank
paying the money is the drawee; and the party receiving the money is the payee. For example,
a small business owner purchases products from another company on credit.The bank issues
the draft, making it the drawee.

A demand draft is a way to initiate a bank transfer that does not require a signature, as is the
case with a check. A demand draft is a prepaid instrument; therefore, you cannot stop payment
on it in the case of fraud or mis-intended recipient

Features of demand draft:

• DD is payable on demand.

• It is an unconditional order for payment.

• It bears no stamp.

• The draft can be negotiated by endorsement and delivery.

• The purchaser of the DD need not be a customer of a bank.

• DD is drawn by a banker on its branch or upon another bank.

• DD is not payable to bearer.

Q4 define cheque

A cheque is a paper instructing the bank to pay a specific amount from the person's account to
the person in whose name the cheque has been issued.

Q5 Explain loan activities of banks

Banks are financial intermediaries which offer loan for a wide range of economic activities.

1) They keep small proportions of the deposits with them as cash.

2) These deposits are used to offer loans to the borrowers. The bank thus intermediates
between those who have surplus funds (depositors) and those who are in need of the funds
(borrowers).

3) Banks charge a higher interest rate on loans than what they offer on deposits. The difference
between what is charged from borrowers and what is paid to depositors is their main source of
income.

The banks offer various types of loans to the borrowers which are categorized as Priority sector
loans, corporate loans, Housing loans, Personal loans, student loans, etc. These loans are
offered at different interest rates by the banks.

Q6 explain positive and negative effects of loan on development

• Credit plays a crucial role in a country’s development. By sanctioning loans to

developing industries and trade, banks provide them with the necessary aid for improvement.

• This leads to increase in the production, profits and employment. However, caution
must be exercised in the case of loans from the informal sector which include high interest
rates that may be more harmful than good.

• For this reason, it is important that the formal sector gives out more loans so that
borrowers are not duped by moneylenders, and can ultimately contribute to national
development.

• For example- A loan given to a fresh post-graduate for setting up a business might
contribute to employment generation, infrastructure development in the near future

Q7 Define terms of credit.

Terms of credit are the requirements need to be satisfied for any credit arrangements. It
includes interest rate, collateral, documentation and mode of repayment. However the terms
of credit vary depending upon the nature of lender, borrower and loan.

Four terms of credit are as listed below:

1. Interest rates: While borrowing or lending loans, rate of interest is decided by both the
parties and is specified in the document.
2. Collateral: It is an asset that the borrower owns like house, shop, land etc. It is against
such assets as a guarantee that loan is given to the borrower.

3. Documentation required: The borrower before lending money check all the documents
related to the employment record and income that is earned by the borrower.

4. Mode of repayment: It is related to the ways and duration in which the loan can be
repaid by the borrower. Long term loans can be repaid in annual, six monthly or monthly
installments.

Q8 Why do we need to expand formal sources of credit in India?

There is a great need to expand formal sector of credit in India because: There is no
organisation to supervise the credit activities of lenders in informal sector. The rate of interest
charged by the informal sector is very high as compared to formal sector. People who might
wish to start a business by borrowing may not do so because of high cost of borrowing in
informal sector. The higher interest rate of borrowing can mean that the amount to be repaid
is greater than the income of the borrower in informal sector.

Q9 Role of rbi and functions of rbi

The Reserve Bank of India is the Central Bank of India, which means it is at the apex of the
banking structure of the economy. It is one of the main governing body and regulatory body in
India and helps the government in its role as a business facilitator.

Functions of the RBI

• The issuer of Currency: The RBI is the only authorized body that can issue currency in
the country. So they print, distribute and regulate the flow of currency in the economy.

• Banker to the Government: Even the Central and State government need basic
bankingfunctions. The RBI provides them with these facilities like depositing monies,
remittances etc. It can also make advances and provide loans to the government whenever
necessary.

• Banker to other Banks: The Reserve Bank of India also supervises all other commercial
banks in the country. It provides financial assistance to these banks like short-term loans and
advances. The RBI also will dictate interest rates and the CRR limits to the commercial banks.
• Regulator of Foreign Exchange: It is the function of the RBI to maintain the value of the
rupee in the global economy. It does so by acting as the custodian of foreign exchange reserves
in the country. It maintains enough reserves to battle against fluctuations.

• Controls Credit in the Economy: This can be said to be the primary function of the
Reserve Bank of India, the control of credit and money in the market. It uses qualitative and
quantitative methods to either expand or contract the available credit in the economy
according to circumstances.

Q10 Role of SHGS.

SELF Help Group are small groups of 15-20 members of rural people in particular women
belonging to one neighbouhood who meet and saves regularly. The members of the group can
take small loan to meet their needs on low interest rate.

Functioning:

• Most of the decisions regarding the savings and loan activities are taken by the group
members.

• The group decides as regards the loans to be granted- the purpose, amount, interest to
be

charged, repayment schedule etc.

• Group is responsible for the repayment of the loan.

• Any case of non-repayment of loan, by any one member is followed up seriously by

other members in the group.

• The SHG help borrowers overcome the problem of collateral.

• They provide timely loans for a variety of purposes and at a reasonable interest rate.

• The group provrdes a platform to discuss and act on a variety of social issues such as
health, nutrition, domestic violence, etc.
Q11 Difference between formal and informal sectors of loan

Eco ch 4 Globalisation

Q1 define mnc with example

An MNC is a company that owns or controls production in more than one nation. MNCs set up
offices and factories for production in regions where they can get cheap labour and other
resources. This is done so that the cost of production is low and the MNCs can earn greater
profits.

Mnc in India coca cola

Indian mncs asian paints, Tata motors

Q2 How are local companies benefitted by collaborating with multinational companies?

Explain with examples.

Answer:

When local companies enter into a joint venture with MNCs:

1. First, the MNCs provide money for additional investments for faster production.

2. Second, MNCs bring with them the latest technology for enhancing and improving the
production.

3. Some Indian companies have gained from successful collaborations with foreign
companies.

Globalization has enabled some companies to emerge as multinationals.

4. Parakh Foods was a small company which has been bought over by a large American
Company — Cargill Foods. Parakh foods had built a large marketing network in various parts of
India as a well- reputed brand. Parakh Foods had four oil refineries whose control has now
shifted to Cargill. Cargill is now the largest manufacturer of edible oil in India making five million
pouches daily.

Question 3How has foreign trade been integrating markets of different countries in the
world? Explain with examples.

Or

“Foreign trade integrates the markets in different countries.” Support the statement with
arguments.

Answer:

(i) Foreign trade creates opportunities for producers to reach beyond domestic markets.
Producers can compete in markets located in other countries of the world. Similarly, for the
buyers, import of goods from another country leads to expanding choice of goods beyond what
is domestically produced. Buyers can thus choose from a wide range of products to suit their
individual tastes.
(ii) With the opening of trade, goods travel from one market to another. Choice of goods in the
market rises. Prices of similar goods in two markets tend to become equal, and producers in the
two countries now closely compete against each other even though they are separated by
thousands of miles. Foreign trade, thus, results in connecting the markets or integration of
markets in different countries.

For example., There are endless number of footwear brands available in the Indian market. A
consumer who is aware of international trends can choose between a local brand like Bata,
Lakhani and international brands like Adidas, Nike, Reebok etc.

Q4 Define globalization. Write factors that enables globalization

Globalisation means unification or integration of the domestic economy with the world
economy through trade, capital and technological flows. Factors that supported globalisation in
India are as follows :

(a) Reduction of trade barriers with a view to allowing free flow of goods to and from other
countries.

(b) Involvement of various local producers with MNCs in various ways.

(c) Some of the large Indian companies like Tata Motors, Infosys (IT), Ranbaxy, Asian Paints etc.
emerged as MNCs and start working globally.

Q5 What are the various ways in which MNCs set up, or control, production in other
countries?

Multinational Corporations (MNCs) set up their factories or production units close to markets
where they can get desired type of skilled or unskilled labour at low costs along with other
factors of production. After ensuring these conditions MNCs set up production units in the
following ways :

• Jointly with some local companies of the existing country.

• Buy the local companies and then expand its production with the help of modern
technology.

• They place orders for small producers and sell these products under their own brand
name to the customers worldwide.
Q6 What is meant by trade barrier?

Answer

Trade barriers are nothing but the type of measures which are introduced by government or
public authorities to make imported goods or services less competitive than locally produced
goods and services. Not everything that prevents or restricts trade can be charecterished as a
trade barrier.

Q7 Define liberalisation and its importance

Liberalization is any process whereby a state lifts restrictions on some private individual
activities. Liberalization occurs when something which used to be banned is no longer banned,
or when government regulations are relaxed.

1) Economic liberalization has opened up the Indian economy to the foreign investors.

2) It has also opened up the economy to the foreign companies who now have greater access to
the Indian markets.

3) It has increased foreign trade.

4) It has increased the job opportunities for the people.

Q8 What is WTO ? Write its functions.

World Trade Organisation (WTO) is an organisation with 160 members (2014), and it aims to
liberalise the international trade. At the international level, the WTO has pressured developing
countries to liberalise trade and investment.

Importance:

• To improve the standard of living of people in the member countries.

• To ensure full employment.

• To increase the trade of services.

• To ensure optimum utilization of world resources.

• To protect the environment.

Functions:

• To implement of rules and provision reviewing of trade policy.

• To provide a platform for member countries to decide future strategies related to trade
and stuff.

• To ensure optimum use of the world resources.

• To administer rules and regulations related to dispute settlement.

Q9 Explain Positive and negative Impacts of Globalisation on the Indian Economy

Positive Impacts of Globalisation on the Indian Economy

o Increased investments in Indian markets by MNCs have led to the growth of the Indian
economy. In many fields such as automobiles, smartphones, soft drinks, fast foods and
garments, MNCs have created a vast choice of products for consumers.

o Local companies supplying raw materials to MNCs have developed and prospered. Many
Indian companies such as Tata Motors and Ranbaxy have become multinational companies
themselves.

o Globalisation has opened many new opportunities for companies in the service sector,
especially IT companies. These companies offer their cheap but efficient consulting services to
many nations. This has also created millions of jobs in India.

o Technology has been transferred to developing countries. It has enabled the production
of quality goods in the international market. During the post-reform period, Indian export share
in the international market has increased from 0.5% to 1%. Because of the flow of MNCs’
capital in foreign currency, the availability of foreign exchange increased to a great extent.

o Outsourcing is the major outcome of the globalisation process. A company hires regular
services mostly from outside the country or within the country such as BPOs or call centres,
banking services, teaching and maintenance of accounts.

Negative Impacts of Globalisation on the Indian Economy

o Growth has been witnessed only in few selected areas in the service sector such as
hospital services, information and technology, and telecommunication.

o To earn maximum profits, MNCs employed Indian workers at extremely low wages. Only
in urban areas, the standard of living has improved. Their income and the quality of
consumption also increased. This has led to inequalities of income in the country.

o To deal with the pressure of competition from MNCs, many Indian companies have
begun to employ workers on a temporary basis so that they do not have to pay the workers for
all 12 months of a year. This has resulted in companies making large profits, but workers not
getting their share of benefits

Negative Impacts of Globalisation on the Indian Economy

o Growth has been witnessed only in few selected areas in the service sector such as
hospital services, information and technology, and telecommunication.

o To earn maximum profits, MNCs employed Indian workers at extremely low wages. Only
in urban areas, the standard of living has improved. Their income and the quality of
consumption also increased. This has led to inequalities of income in the country.

o To deal with the pressure of competition from MNCs, many Indian companies have
begun to employ workers on a temporary basis so that they do not have to pay the workers for
all 12 months of a year. This has resulted in companies making large profits, but workers not
getting their share of benefits

Q10 The impact of globalisation has not been uniform.” Explain this statement.

Answer:

The impact of globalisation has not been uniform because it has benefitted only the rich and
developed countries. The developing countries are only a source of setting industries and
getting cheaper labour and the entire profits are earned by the developed countries. Many
small manufacturers with low capital have not been able to withstand the competition from the
large MNC’s. Workers are now employed flexibly in the face of growing competition. This has
reduced their job security.

Q11 Explain the need for fair globalization.

Fair globalisation means that the benefits of the globalisation must be shared by all equally.
Globalisation has two sides - the positive and the negative. If a balance has to be brought about
we should strive towards fair globalisation.

For fair globalisation, government can have a great role:

The government can support those producers who are very small and cannot compete with
them.

If very necessary, government can still use some trade barrier for protection of some small
producers.

Fair globalisation would create opportunities for all and also ensures that the benefits of
globalization are shared by all.

(i) Government can play a major role in making this possible. Its policies must protect the
interest of rich and poor both.

(ii) Labour laws are properly implemented and the workers get their rights.

(iii) It can support small producers by putting some restrictions or barriers.

(iv) It can negotiate at the WTO for fairer rules.

Q12 How would flexibility in labour laws help companies? Explain

Flexibility in labour laws will help companies in being competitive and progressive. In recent
years, government has allowed companies to ignore many of the labour laws in force. Instead
of hiring workers on a regular or permanent basis, companies can hire workers flexibly for short
periods when there is intense pressure of work.

The companies can negotiate wages and terminate employment, depending on market
conditions. This will lead to an increase in the company’s competitiveness.