EXCEED GULF 2025 (10th CLASS)

IMPORTANT QUESTIONS
ECONOMICS

Globalisation and The Indian Economy

Q1. What do you understand by Globalisation? Explain in your own words.

Ans. Globalisation is a process of integrating the economy of a country with the economies of other
countries under conditions of free flow of trade, capital and movement of persons across borders. It
also includes –

●​ Export and import of techniques of production.

●​ Migration of people from own country to another.
●​ Increase in foreign trade

Q2. Globalisation and technology

●​ Rapid technological advancement has been a major factor in boosting the globalisation
process.
●​ Several advances in transportation technology have enabled much faster and lower-cost
delivery of commodities over great distances.
●​ Developments in information and communication technology (IT) have eased service
delivery across countries.
●​ Telecommunications facilities (telegraph, telephone, mobile phones, fax) and satellite
communication devices are used to communicate and access information quickly around the
world.
●​ Through the internet, one can obtain and share information on almost any topic.
●​ The internet also allows us to send instant electronic mail (e-mail) and talk (voice-mail)
across the world at negligible costs.

Money and Credit

Q1. In situations with high risks, credit might create further problems for the borrower.
Explain.

Ans. Whenever a person takes credit, it involves an interest rate on the loan and if it is not paid back,
then the borrower is forced to give up his collateral or asset which he/she used as the guarantee, to the
lender. The result is the debt trap.

Whether credit would be useful or not depends on the risks in the situation and whether there is some
support in case of loss.

For example, credit taken by farmers for cultivation could create problems at some time. Basically,
crop production involves high costs on inputs such as HYV seeds, fertilizers, pesticides, irrigation, etc.
Mainly loan is taken by a farmer at the beginning of the season and it is repaid after the harvest. But in
some cases, failure of the crop results in impossible loan payment conditions. Then, in order to repay
the loan sometimes, they become bound to sell part of their lands, making their situation worse than
before.

There are cases in India, where non repayment of loans leads to farmer’s suicides, example,

Why do we need to expand formal sources of credit in India? [CBSE SQP, 2020]

Ans. We need to expand formal sources of credit in India:

●​ To reduce dependence on informal sources of credit because the latter charge high interest
rates and do not benefit the borrower much.
●​ The Reserve Bank of India supervises the functioning of formal sources of loans. In contrast,
there is no organisation which supervises the functioning of informal source of loans or the
credit activities of lenders in the informal sector.
●​ After taking loans from informal lenders sometimes, leads the borrowers to debt trap because
of the high interest rates.

Thus, it is necessary to the formal sources of credit expand their lending especially in rural areas, so
that the dependency on the formal sources of credit are increased, which would benefit the
development of the country on a wider scale.

Answer by CBSE marking Scheme:

(i) To save people from exploitation of informal sector.​

(ii) Formal sectors charge a low interest rate on loans.​
(iii) To save from debt trap.​
(iv) It provides cheap and affordable credit.​
(v) RBI also supervises the formal sector credit through various rules and regulations which ensures
that banks give loans to small cultivators, small borrowers etc. and not just to profit making business
and traders.

Q. 6. What is the basic idea behind the SHGs for the poor? Explain in your own words.

Ans. SHGs are established not only to meet the financial requirement of the members of the group but
also provide a platform to discuss and act on a variety of social issues such as health, nutrition,
domestic violence etc.

There are some main objectives of SHGs, which are as followed –

●​ It organises the rural poor, especially women, into small Self-Help Groups. O It collects
saving of the members.
●​ It provides loans without collateral.
●​ It provides timely loans for various purposes.
●​ It provides loans at reasonable rate of interest and on easy terms.
●​ It also provides a platform to discuss and act on a variety of social issues such as education,
health, nutrition, domestic violence, etc.

What are the reasons why the banks might not be willing to lend to certain
borrowers?

Ans. The Banks might not be willing to lend certain borrowers due to the following reasons:

●​ Banks require proper and legal documents and collateral as security against loans.
●​ The borrowers who have not repaid previous loans, the banks might not be willing to
lend them further.
●​ Those entrepreneurs, who are going to invest in a business with high risks, the
banks might not be willing to lend money.
●​ One of the main objectives of a bank is to earn more profits after meeting a number
of expenses. For this purpose, it has to adopt judicious loan and investment policies
which ensure fair and stable return on the funds.
. In what ways does the Reserve Bank of India supervise the functions of Banks?
Why is this necessary?

Ans. The Reserve Bank of India supervises the functions of banks in various ways:

●​ RBI holds a part of the cash reserve of the commercial banks. RBI mainly ensures
that the banks maintain a minimum cash balance out of the deposits they receive.
●​ The commercial banks have to submit information to RBI on how much they are
lending, to whom, and at what interest rate, etc.
●​ RBI monitors the functioning of banks so that banks give loans not just to profit
making businesses and traders but also to small cultivators, small scale industries,
small borrowers etc.

Q Manav needs a loan to set up a small business. On what basis will Manav decide
whether to borrow from the bank or the moneylender? Discuss.

Ans. It would be Manav’s decision to borrow money from the bank or the money lender on the
basis of the following terms of credit:

(i) Interest rate: Which source carries low interest rate.

(ii) Documentation and collateral: Which source have lower documentation requirement.

(iii) Mode of repayment: Easier mode of repayment.

Thus, Manav will prefer to borrow from that organisation which has easier terms and
conditions of lending.

Choose the most appropriate answer.

(i) In a SHG, most of the decisions regarding savings and loan activities are taken by

(a) Bank

(b) Members
(c) Non-government organisation

Ans. (b) Members

(ii) Formal sources of credit does not include

(a) banks

(b) Cooperatives

(c) Employers

Ans. (c) Employers

Sectors of the Indian Economy

QMake a list of all kinds of work that you find adults around you doing for a living.
In what way can you classify them? Explain your choice.

Ans. We classify the different kinds of work in which people around us are engaged on the
basis of:

1.​ Nature of activity

2.​ Employment condition
3.​ Ownership of business units

On the Basis of Nature of Activity:

1.​ Primary Sector: Agricultural Labourer, Small farmers, Honey collector etc.
2.​ Secondary Sector: Industrial labour, Potter, Shoe maker, Weaver etc.
3.​ Tertiary Sector: Teacher, Doctor, Postman, Lawyer, Tailor, Police constable, Clerk in
a bank, Driver of local politician.

On the Basis of Employment Condition:

 1.​ Organized: Teacher in a Government School, Doctor in a Government Hospital,
Government Lawyer, Clerk in bank, People working in a factory, Police constable etc.
2.​ Unorganized: Agricultural labour, small scale farmer, Tailor, Potter, Cobbler, Driver of
a local politician, Domestic servant, Hawker.

On the Basis of Ownership:

1.​ Private: Agricultural labour, small scale farmers, small scale weavers, Potter, Teacher
in a private school, Lawyer, People working in a factory, Shopkeeper etc.
2.​ Public: Government Teacher, People engaged in Government Companies, Doctor in
a Government Sector, Police constable, Postman.

Q What do you understand by disguised unemployment? Explain with an example

each from the urban and rural areas.

Ans. Disguised unemployment is the situation in which people are apparently working but all
of them are made to work less than their potential. In such a situation more people are
engaged in a work than required.

Example from Rural Area: There are seven people in a family and all are engaged on their
agricultural plot. If four of them are withdrawn from that agricultural plot there is no reduction
in output. Then these four people are said to be disguisedly unemployed.

Example from Urban Area: This type of unemployment could be seen mostly in service sector.
A family has all its member working in one shop or a small business, but it could actually be
managed by few members.

Q Workers are exploited in the unorganised sector. Do you agree with this view?
Give reasons in support of your answer.

Ans. Yes, I agree with this view. The reasons are:

 ●​ Jobs are poorly paid. The workers in the unorganised sectors are either illiterate,
ignorant or unorganised.
●​ Apart from the daily wages, they do not get other allowances.
●​ There are no fixed working hours. The workers mainly work from 10-12 hours without
being paid overtime.
●​ The rules and regulations applied by the government to protect the labourers are not
followed in their case.
●​ As they are poor, they are mainly in under heavy debt.

Thus, it becomes easier for others to exploit them on lower wages.

QExplain the objective of implementing the NREGA 2005.

Ans. The objective of implementing NREGA 2005 (National Rural Employment Guarantee
Act) is to provide the ‘Right to Work’. Its main features are:

(i) 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.

(ii) One-third of the proposed jobs were reserved for women.

(iii) If government fails to provide employment, it will give unemployment allowances to the
people.

(iv) Preference is given to those jobs, which in future would help to increase the production
from land.

Q The workers in the unorganised sector need protection on the following issues:
wages, safety and health. Explain with examples.

Answer.

The unorganised sector is characterised by small and scattered units which are largely
outside the control of the government. There is no provision for overtime, paid leave. Here
employment is subject to high degree of insecurity. A large number of people doing small jobs
such as selling on the street or doing repair work come under the unorganised sector.

Wages: They are low and irregular. There is also no provision for overtime, paid leave, etc.

Safety: Construction workers could get injured while working and they need to work under​
safety conditions.

Health: Long working hours and unhygienic working environment affect the health of the​
workers adversely.

Q Difference between unorganised & organised sector?

QDifference between private & public sector?

Why is credit a crucial element in economic development?

Or,

Why cheap and affordable credit is important for a country?

Ans. Credit is a crucial element in the economic development of a country because:

1.​ It helps to meet the ongoing expenses of production.

2.​ It helps in increasing earnings and encourages people to invest in agriculture, engage in
business, and set up small industries.
3.​ It helps in completing production on time.
4.​ Cheap credit will end the vicious cycle of a debt trap.
5.​ Cheap and easy credit would inspire better investment in technology and would increase
competition.

'A bank is a place that will lend you money if you can prove that you do not need it.' Justify the
above statement in relation to the banks' requirements to ensure the security of the funds they
lend.
Ans.

●​ Every loan agreement specifies an interest rate that the borrower must pay to the lender
along with the principal amount.
●​ In addition, lenders may demand collateral against loans to ensure the security of the
money they lend.
●​ Collateral is an asset that the borrower owns and uses as a guarantee to a lender until
the loan is repaid.
●​ If the borrower fails to repay the loan, the lender has the right to sell the asset or
collateral to obtain payment.
●​ Interest rate, collateral, documentation requirement, time period, and mode of repayment
together comprise the terms of credit which can vary from loan to loan.

QCompare and Contrast the conditions for taking loans from formal and informal sources.
Suggest an alternative source that you think is best for the rural poor.

Ans.

Formal Sources of Credit Informal Sources of Credit

i. Credit is provided by banks and cooperatives. i. Credit is provided by moneylenders,

friends, relatives, etc.

ii. Rate of interest is low. ii. Rate of interest is high.

iii. No unfair means adopted to take back the money if no iii. Unfair measures are adopted.
re-payment is done.
 iv. Supervised by RBI. iv. Not supervised

v. Have to adhere to terms of credit i.e., collateral, rate of v. Other conditions like cultivating land
interest, mode of payment, and documents during harvest time, etc.

Explain the role of Self-Help Groups (SHGs) in rural society.

Ans. The role of Self-Help Groups (SHGs) in rural society are:

1.​ Members of SHGs can take small loans from the group itself to meet their needs.
2.​ The group charges less rate of interest on these loans.
3.​ After a year or two, it becomes eligible for availing loan from the bank.
4.​ The group is responsible for the repayment of the loan.
5.​ Any case of non-repayment of a loan by any one member is followed up seriously by
other members of the group.
6.​ The SHGs help borrowers overcome the problem of lack of collateral.
7.​ They can get timely loans for a variety of purposes and at a reasonable interest rate.
8.​ SHGs help women to become financially self-reliant.
9.​ The regular meetings of the group provide a platform to discuss and act on a variety of
social issues such as health, nutrition, domestic violence, etc.

Note: expect MCQ;s & short answers questions from Development.