UNDERSTANDING ECONOMIC DEVELOPMENT

CHAPTER-1 DEVELOPMENT

1. Development of a country can generally be determined by

(i) its per capita income
(ii) its average literacy level
(iii) health status of its people
(iv) all the above
Ans: (iv) all the above

2. Which of the following neighbouring countries has better performance in terms of human
development than India?

(i) Bangladesh
(ii) Sri Lanka
(iii) Nepal
(iv) Pakistan
Ans: (ii) Sri Lanka
3. Assume there are four families in a country. The average per capita income of
these families is Rs 5000. If the income of three families is Rs 4000, Rs 7000 and Rs
3000 respectively, what is the income of the fourth family?
(i) Rs 7500
(ii) Rs 3000
(iii) Rs 2000
(iv) Rs 6000
Ans: (iv) Rs 6000

4. What is the main criterion used by the World Bank in classifying different countries?
What are the limitations of this criterion, if any?
Ans: Per Capita Income is the main criterion used by the World Bank in classifying different
countries. The limitations of this criterion are:
  It doesn’t show the distribution of income.
 It also ignores other factors such as infant mortality rate, literacy level, healthcare, etc.

5. In what respects is the criterion used by the UNDP for measuring development
different from the one used by the World Bank?
Ans: The World Bank only uses per capita income for measuring development while UNDP
uses many other factors like infant mortality and healthcare facility education level which help
in improving the quality of life and in making the citizens more productive.

6. Why do we use averages? Are there any limitations to their use? Illustrate with your
examples related to development.
Ans: We use averages because they are useful for comparing differing quantities of the
same category. For example, to compute the per capita income of a country, averages
have to be used because there are differences in the incomes of diverse people. However,
there are limitations to the use of averages. This does not show the distribution of things
between people. For example, if a country has a very high per capita income then we
can’t say that citizens living in that country are very rich because we do not know about
the distribution of wealth in that country. Some people might be richer while other people
are very poor in that country.

7. Kerala, with lower per capita income has a better human development ranking than
Punjab. Hence, per capita income is not a useful criterion at all and should not be used to
compare states. Do you agree? Discuss.
Ans: No, I do not agree with the statement that per capita income is not a useful criterion at
all. Kerala, with lower per capita income, has a better human development ranking than
Punjab because, human development ranking is determined using a combination of factors
such as health, education, and income. So, this does not imply that per capita income is not
useful. Rather, per capita income is one of the development factors and can not be neglected.
The World Bank uses per capita income as the criterion for measuring development and
comparing states. However, this criterion has certain limitations because the determination of
the Human Development Index (HDI) is done using this criterion along with some other
development factors like health, education, etc.
8. Find out the present sources of energy that are used by the people in India. What
could be the other possibilities fifty years from now?
Ans: The present sources of energy that are used by the people of India are electricity, coal,
crude oil, cow dung, and solar energy. Other possibilities fifty years from now, could include
ethanol, bio-diesel, nuclear energy, and better utilisation of wind energy, especially with the
imminent danger of oil resources running out.

9. Why is the issue of sustainability important for development?

Ans: The issue of sustainability is important for development because development must be
in tandem with the future. If natural resources are not sustained, then development will
stagnate after a point of time. Exploiting resources unethically will ultimately undo the
development that a country may have achieved. This is because, in the future, those
resources will not be available for further progress.

10. “The Earth has enough resources to meet the needs of all but not enough to satisfy
the greed of even one person”. How is this statement relevant to the discussion of
development? Discuss.
Ans: “The Earth has enough resources to meet the needs of all but not enough to satisfy
the greed of even one person”. This statement is relevant to the discussion of development
since both resources and development go hand in hand. For the sustainability of
development, the maintenance of resources is also crucial. As the statement claims, the
Earth has enough resources- renewable and non-renewable to satisfy everyone’s needs;
however, these need to be used to keep the environment protected and clean so that a
balance of production and use is maintained, and shortages are avoided.

11. List a few examples of environmental degradation that you may have observed
around you.
Ans: A few examples of environmental degradation:
 Deforestation
 Soil erosion
 Falling levels of groundwater
 Depletion of the ozone layer and combustion from automobiles causing extreme
  air pollution
 Water Pollution

12. For each of the items given in Table 1.6, find out which country is at the top and which
is at the bottom.
Table 1.6 Some Data Regarding India and its Neighbours for 2004

Gross HDI
Per Capita Life Literacy Rate
Enrolment Rank in
Country Income in Expectancy for 15+ yrs
Ratio for three the
US$ at birth population
levels world
Sri Lanka 4390 74 91 69 93
India 3139 64 61 60 126
Myanmar 1027 61 90 48 130
Pakistan 2225 63 50 35 134
Nepal 1490 62 50 61 138
Bangladesh 1870 63 41 53 137

Ans:
(i) Per Capita Income in US$: Top country – Sri Lanka; Bottom country – Myanmar
(ii) Life Expectancy at birth: Top country – Sri Lanka; Bottom country – Myanmar
(iii) Literacy Rate for 15+ years population: Top country – Sri Lanka; Bottom country –
Bangladesh
(iv) Gross Enrolment Ratio for three levels: Top country – Sri Lanka; Bottom country –
Pakistan
(v) HDI Rank in the world: Top country – Sri Lanka; Bottom country – Nepal
13. The following table shows the proportion of adults (aged 15-49 years) whose BMI is
below normal (BMI <18.5 kg/m2) in India. It is based on a survey of various states for the
year 2015-16. Look at the table and answer the following questions.

State Male Female

Kerala
8.5 10
Karnataka
17 21
Madhya
28 28
Pradesh
All States 20 23

a. Compare the nutritional level of people in Kerala and Madhya Pradesh.

Ans: The nutritional status of the populace of Kerala is superior to that of Madhya Pradesh.
b. Can you guess why around one-fifth of people in the country are undernourished even
though it is argued that there is enough food in the country? Describe in your own words.
Ans: Despite claims that there is enough food in the nation, one-fifth of the population suffers
from undernourishment for the following reasons:
 The difference in food grain distribution through the Public Distribution System (PDS).
 The impoverished people in the nation cannot afford wholesome meals.
 People with lower levels of education experience unemployment, which makes it
difficult for them to pay for food, which is a basic need.
 At the fixed-price stores, the ration is not distributed properly.

CHAPTER -2 SECTORS OF THE INDIAN ECONOMY

1. Fill in the blanks using the correct option given in the bracket:

i. Employment in the service sector ______ increased to the same extent as production.
(has/has not)

ii. Workers in the _____ sector do not produce goods. (tertiary/agriculture)

iii. Most of the workers in the _____ sector enjoy job security. (organised/unorganised)

iv. A _____ proportion of labourers in India are working in the unorganised sector.
(large/small).

v. Cotton is a _____ product and cloth is a _______ product. (natural/manufactured)

vi. The activities in primary, secondary, and tertiary sectors are ______.
(independent/interdependent)

Ans:

i. Has not

ii. Tertiary

iii. Organised

iv. Large

v. Natural

v. Interdependent

2. Choose the most appropriate answer.

a. The sectors are classified into public and private sectors on the basis of:

i. Employment conditions

ii. The nature of economic activity

iii. Ownership of enterprises

iv. Number of workers employed in the enterprise

Ans: Option iii) ownership of enterprise

b. Production of a commodity, mostly through the natural process, is an activity in _____

sector.

i. Primary

ii. Secondary

iii. Tertiary

iv. Informative technology

Ans: Option i) Primary

c. GDP is the total value of ______ produced during a particular year.

i. All goods and services

ii. All final goods and services

iii. All intermediate goods and services

iv. All intermediate and final goods and services

Ans: Option ii) All final goods and services

d. In terms of GDP, the share of the tertiary sector in 2003 is _____

i. Between 20 per cent and 30 per cent

ii. Between 30 per cent and 40 per cent

iii. Between 50 per cent and 60 per cent

iv. 70 percent

Ans: Option iii) between 50 per cent and 60 per cent

3. Match the following:

S/ S/
Problems faced by farming sector Some possible measures
No. No.
1. Unirrigated land a. Setting up agro-based mills
Cooperative marketing
2. Low prices for crops b.
societies
Procurement of food grains by
3. Debt burden c.
government
Construction of canals by the
4. No job in the off-season d.
government
Compelled to sell their grains to the local Banks to provide credit with
5. e.
traders soon after harvest low interest

Ans:

S/No. Problems faced by farming sector S/No. Some possible measures

Construction of canals by the
1. Unirrigated land d.
government.
Procurement of food grains by
2. Low prices for crops c.
the government.
Banks provide credit with low
3. Debt burden e.
interest.
4. No job in the off season a. Setting up agro-based mills
Compelled to sell their grains to the local
5. b. Cooperative marketing societies.
traders soon after harvest

4. Find the odd one out and say why.

i. Tourist guide, dhobi, tailor, potter

ii. Teacher, doctor, vegetable, vendor, lawyer

iii. Postman, cobbler, soldier, police constable

iv. MTNL, Indian Railways, Air India, SAHARA Airlines, All India Radio

Ans:

i. Tourist guide, appointed by the government.

ii. Vegetable vendor, since it does not require a formal education.

iii. Cobbler - workers in the public sector, his profession belongs to the private sector.

iv. SAHARA Airlines is a private enterprise, others are government undertakings.

5. A research scholar looked at the working people in the city of Surat and found the
following.

Nature of Percentage of
Place of work
employment working people
In offices and factories registered with the
Organised 15
government
Own shops, offices, clinics in the marketplace
--- 15
with formal licence
People working on the street, construction
--- 20
workers, domestic workers
Working in small workshops usually not
--- ---
registered with the government

Complete the table. What is the percentage of workers in the unorganised sector in this city?

Ans:

Nature of Percentage of Working

Place of Work
Employment People
In offices and factories registered with the Organised 15
government
Own shops, offices, clinics in the marketplace
Organised 15
with formal licence
People working on the street, construction
Unorganised 20
workers, domestic workers
Working in small workshops usually not
Unorganised ---
registered with the government

The worker percentage of the unorganised sector in the city is 70%.

6. Do you think the classification of economic activities into primary, secondary, and tertiary
is useful? Explain how.

Ans: Yes, classification of economic activities into primary, tertiary, and secondary is very
much useful since it can give information on how and where the people of a country are
employed.

It also helps in ascertaining, which sector of economic activity is contributing more or less in
the GDP of the country and per capita income.

For example: Suppose if the tertiary sector is developing much faster compared to the primary
sector, it means agriculture is depleting. We can observe that the agriculture profession is
getting unpopular or regressive, if we classify economic activities for smooth administration as
well as development.

7. For each of the sectors that we came across in this chapter, why should one focus on
employment and GDP? Could there be other issues which should be examined? Discuss.

Ans: Each sector should focus on employment and GDP since these determine the size of a
country’s economy. Focus on employment and GDP will definitely help in determining two
important things, that is, per capita income and productivity.

So, in each sector, employment rate, status, and its contribution towards the GDP, which helps
to understand how a particular sector is functioning and what can be done to initiate future
growth.
Other related issues which need to be examined are as follows:

 Balanced regional development

 Equality in income and wealth among all the citizens of the country.
 Modernization of technology.
 How to eradicate poverty
 Self-reliance of the country
 To have surplus food production in India.

8. Make a long 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:

S/
Nature of work Nature of activity Sector
No.
1 Bank Clerk Tertiary Organised
2 Freelancer cartoonist Tertiary Unorganised
3 Construction worker Secondary Unorganised
4 Doctor in AIIMS Tertiary Organised
5 DTC bus driver Tertiary Organised
6 Farmer Primary Unorganised
7 Guest house receptionist Tertiary Unorganised
8 Tailoring shop Tertiary Unorganised
9 Public sector factory supervisor Secondary Organised

We have classified them according to the nature of the activity and whether they are working
in an organised or unorganised sector. This gives us information on how and where people are
employed.

9. How is the tertiary sector different from other sectors? Illustrate with a few examples.

Ans: The tertiary sector is different from the other 2 sectors because the other two sectors
produce goods, the only difference is that this sector does not manufacture goods by
themselves. The activities under this sector help in developing the primary and secondary
sectors. These activities support the manufacturing process.
Example: communication, banking, storage, insurance, transport, trade etc. Hence, these are
called the service sector.

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

Ans: Disguised unemployment is when the people who are visibly employed but they are
actually unemployed. This kind of situation is called Hidden Unemployment.

For example:

 In rural areas, this kind of employment is found in the agriculture sector, suppose in a
family of 9 people everyone is engaged and doing work in the same agricultural area. If
4 people are removed from it, there will be no reduction in the result. Hence, these 4
people are actually disguisedly employed.
 In urban areas, this kind of unemployment can be seen in service sectors, for example,
in a family where all the members are working in a small business which can be
managed by a less number of people.

11. Distinguished between open unemployment and disguised unemployment.

Ans:

Open Unemployment Disguised Unemployment

If a country’s labour does not get an In Disguised unemployment, people who are
opportunity for adequate employment, this visibly employed but actually don’t have full
situation is called open unemployment. employment.
This type of unemployment is found in the It is generally found in the unorganised sector
industrial sector of our country. This is also where work is not continuously available or
among the landless agricultural labourers in many labourers are employed for the same
rural areas. amount of work.

12. “Tertiary sector is not planning any significant role in the development of Indian
economy”. Do you agree? Give reasons in support of your answer.

Ans: No, I don’t agree with this statement. The tertiary sector has contributed immensely in
the last two decades in the Indian economy. The information technology field has grown, and
the GDP share of the tertiary sector has grown from 40% in 1973 to 50% in 2003.

13. Service sector in India employs two different kinds of people. Who are these?

Ans: The service sector in India employs:

  The people who are there in this service may directly help in the production of goods.
For example, people in transportation, storage, communication, finance etc.
 The people involved in these services are not directly helping in the production of
goods. For example, teachers, doctors, barbers, cobblers, lawyers, etc. They are called
ancillary workers which means that those who are giving their services to the primary
sector providers.

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

Ans: Yes, I agree workers are exploited in the unorganised sector:

 Having no fixed number of working hours. The workers work 10-12 hours without paid
overtime.
 They do not get extra allowances apart from the daily wages.
 Government rules and regulations for the protection of labourers are not followed.
 No job security.
 Jobs are low paid and the workers in this sector are illiterate, ignorant, and unorganised.

15. How are the activities in the economy classified on the basis of employment conditions?

Ans: On the basis of employment conditions, the activities in the economy are classified into
organised and unorganised sectors.

 Organised Sector: This sector covers those enterprises that are registered by the
government and have to follow rules and regulations. Example: Reliance, GAIL etc.
 Unorganised Sector: It consists of small and scattered units which are not in control of
the government. They do not follow any rules and regulations made by the government.
Example: Casual workers in construction, shops etc. There is no job security.

16. Compare the employment conditions prevailing in the organised and unorganised
sectors.

Ans: Employment conditions in the organised and unorganised sectors are quite different.

 The organised sector consists of companies registered under government, so it offers

job security, paid holidays, pension, health and other benefits, fixed working hours and
extra pay for overtime work.
 Unorganised sector is a host of opportunities, there is no job security as well.
 No paid holidays or pensions or retirement, no benefits of provident fund or health
insurance, no fixed work timings and no guarantee of a hygienic work environment.
17. Explain the objectives of implementing the NREGA 2005.

Ans: The objectives of implementing NREGA 2005 are listed below:

a. To increase income and employment of people.

b. Every state will be able to develop tourism, regional craft, IT etc.

c. Central government made a law to implement, right to work in 200 districts.

d. NREGA aims to provide 100 days of employment.

18. Using examples from your area, compare and contrast the activities and functions of the
private and public sectors.

Ans:Public Sector:

 Public welfare is the main objective.

 It is managed as well as controlled by the government.
 It provides education, health, food, and security to the people like Indian railways, Post
office, etc.

Private Sector:

 Maximum profit in terms of earning is the main objective.

 It is managed and controlled by an individual or group of individuals.
 It provides consumer goods to the people; Reliance, TISCO.

19. Discuss and fill the following table giving one example each from your area.

Well-Managed Organisation Badly-Managed Organisation

Public sector
Private sector

Ans:

Well-Managed Organisation Badly-Managed Organisation

Public sector Delhi Metro Rail Corporation Air India
Private
Reliance Jio Telecom Satyam
sector
20. Give a few examples of public sector activities and explain why the government has
taken them up.

Ans:

 Public sector activities, that is, provision of water, electricity, and modes of transport.
The government has taken up this because water and power are needed by everyone.
 If we leave the work of providing electricity and water to the private companies, then
the latter may exploit this opportunity.
 They may sell these at higher rates which the masses cannot afford.
 To make sure that all the basic amenities such as water and electricity are available for
all, the government supplies all these at low and affordable rates.

21. Explain how the public sector contributes to the economic development of a nation.

Ans: Public sector contributes to the economic development of a nation:

 It promotes rapid economic development by creating and expanding the infrastructure.

 It creates employment opportunities.
 It generates financial resources for development.
 It ensures equal income and wealth, hence a balanced regional development.
 It encourages the development of small, medium, and large industries.
 It ensures easy availability of goods at affordable rates.

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

Ans: Workers in the unorganised sector require protection in terms of wages. Labourers who
are employed as vendors or repair men etc. do not have fixed income. They hardly get
employed throughout the year.

 Safety: Workers in the unorganised sector are not provided with safe drinking water or a
clean environment. Example: Working in mining, chemical industries is hazardous.
 Health: Leave is not granted if there is a health issue. Medical aid is not available, e.g.,
Construction workers.

23. A study in Ahmedabad found that out of 15,00,000 workers in the city, 11,00,000 worked
in the unorganised sector. The total income of the city in this year (1997-1998) was Rs 60,000
million. Out of this 32,000 million was generated in the organised sector. Present this data
as a table. What kind of ways should be thought of for generating more employment in the
city?
Ans:

Organised Unorganised
Total
Sector Sector
Number of workers 4,00,000 11,00,000 15,00,000
Income (Rs) 32,000 million 28,000 million 60,000 million

 The larger portion of workers is working in the unorganised sector, the per capita
earning of those in organised sector is more.
 The government should encourage the businessmen in the unorganised sector to
change them into the organised sector.
 Government needs to bring some incentives so that more industries will be started in
the organised sector.

24. The following tables gives the GDP in Rupees (Crores) by the three sectors:

Year Primary Secondary Tertiary

195
80,000 19,000 39,000
0
200
3,14,000 2,80,000 5,55,000
0

i. Calculate the share of the three sectors in GDP for 1950 and 2000.

ii. Show the data as a bar diagram similar to Graph 2 in the chapter.

iii. What conclusions can we draw from the bar graph?

Ans: i. In 1950,

Total share of sectors in GDP = (8000+19000+39000) = 138,000 crore

Share of Primary sector = 80000138000×10080000138000×100 = 57.97%

Share of Secondary sector = 19000138000×10019000138000×100 =13.76%

Share of Tertiary sector = 99000138000×10099000138000×100 =28.26%

In 2000,

Total share of sectors in GDP = (314000+280000+555000) = 1149000

Share of Primary sector = 3140001149000×1003140001149000×100 = 27.32%

Share of Secondary sector = 2800001149000×1002800001149000×100 = 24.36%

Share of Tertiary sector = 5550001149000×1005550001149000×100 = 48.30%

ii. Bar graph

Bar Graph

iii. The conclusion drawn is that the share of the tertiary sector in the GDP has approximately
doubled, the primary sector has halved. The secondary sector has increased by 10% in the last
5 years.
 Chapter 3-MONEY AND CREDIT

1. In situations with high risks, credit might create further problems for the borrower.
Explain.
Ans:In situations with high risks, credit might create further problems for the borrower, also
known as a debt-trap. Taking credit involves an interest rate on the loan, in case if this is not
paid back on time, then the borrower is forced to give up his asset used as the guarantee, to
the lender while taking loan. If a farmer takes a loan for crop production and it fails to produce
crops, then the loan payment becomes impossible. To repay the loan, the farmer will have to
sell a part of his land making the situation quite worse than before. Hence, a situation with
high risks, if the risk is affecting a borrower badly, then he will end up losing more in financial
terms, than he would have without the loan.

2. How does money solve the problem of double coincidence of wants? Explain with an
example of your own.
Ans: In a barter system, where goods are exchanged directly without the use of money, double
coincidence of wants is an important and essential feature. Money Serves as a medium of
exchange, it also removes the need for double coincidence of wants and the difficulties
associated with the barter system. For example, now it is not necessary for a farmer to search
for a book publisher who will buy his cereals and at the same time sell him books. Now, he has
to find a buyer for his cereals. Farmers now can exchange their cereals for money, and can
purchase any goods or services which they need.

3. How do banks mediate between those who have surplus money and those who need
money?
Ans: Banks keep a small portion of deposits informed of cash (15%) for themselves, to pay the
depositors on demand. Banks use the major portion of these deposits to give loans to those
people who need money. In this way banks mediate between those who have surplus money
and those who need money.

4. Look at a 10 rupee note. What is written on top? Can you explain this statement?
Ans: “Reserve Bank of India” and “Guaranteed by the Government” are written on top.
In India, the Reserve Bank of India (RBI) issues currency in the country on behalf of the central
government. This statement means that the currency is authorized and guaranteed by the
Central Government. Law legalizes the use of rupee in India as a medium of payment, which
cannot be refused in setting transactions in India.

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

Ans: We need to expand formal sources of credit in India because:
To reduce dependency on informal sources of credit because the latter charge high interest
rates also, they do not benefit the borrower much.
 Affordable and cheap credit is essential for a country's development.
 Co-operatives and banks need to increase their lending especially in rural areas.

6. What is the basic idea behind the SHGs for the poor? Explain in your own words.
Ans: The basic objective behind the SHGs is to provide financial resources to the poor people
by organizing the rural poor, particularly women, into small Self-Help Groups. They even
provide loans at a reasonable rate of interest without collateral.
The main objectives of the SHGs are:
 To organize rural poor people particularly women into small Self-Help Groups.
 To collect the savings of their members.
 To provide loans without collateral.
 To provide timely loans for various purposes.
 To provide loans at responsible interest rates and easy terms.
 Provide a platform to discuss on various issues and act on a variety of social issues like
education, health, nutrition, domestic violence etc.

7. What are the reasons why the banks might not be willing to lend to certain borrowers?
Ans: The banks may not lend certain borrowers due to the following reasons:
 Banks require some necessary documents and collateral as security against loans, some
persons fail to meet these requirements.
 The borrowers who did not repay their previous loans, the banks do not lend them
further.
 The banks may not be willing to lend loans to those entrepreneurs who are going to
invest in their business with high risks.
 One of the main objectives of a bank is to earn more profits. For this purpose, they
adopt judicious loan and investment policies which guarantee fair and stable return on
the funds.

8. 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 all the functions of banks in several ways:
 The commercial banks need to hold a part of their cash, as a reserve with their RBI. RBI
ensures that the banks maintain a minimum cash balance limit, from the deposits they
receive.
  RBI observes and ensures that the banks are giving loans not only to profit making
businesses owners and traders, also to small industries, small scale cultivators, small
borrowers etc.
 The commercial banks need to submit complete information, regarding how much they
are lending, to whom, and at what interest rate etc.to the RBI.
It is required to ensure equality in the economy of the country, especially small depositors,
farmers, small scale industries, small borrowers etc. In this process, RBI acts as the lender to
the last resort to the banks.

9. Analyse the role of credit for development.

Ans: Affordable and Cheap credit is important, it plays a crucial role in the country’s
development. Many of us, including businessman, common people, borrow money, so there is
a huge demand for loans to carry-out various economic activities. The credit helps us to fulfil
the expenses required for their production which further develop their business. Now,
Farmers can grow crops, businessmen can do their business, set up industries etc.

10. 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: On the basis of the following terms of credit, Manav will decide whether to borrow from
the bank or the money lender:
 How cheap is the rate of interest the bank is giving on loan?
 Documentation required by the banker and requirements for the availability of
collateral.
 How flexible is the EMI option, that is, direct cash or account transfer?
 Depending on these factors, Manav has to decide whether to borrow money from the
bank or the moneylender.

11. In India, about 80 percent of farmers are small farmers, who need credit for cultivation.
(a) Why might banks be unwilling to lend to small farmers?
(b) What are the other sources from which the small farmers can borrow?
(c) Explain with an example how the terms of credit can be unfavourable for the small farmer.
(d) Suggest some ways by which small farmers can get cheap credit.
Ans:
a) Farmers, at times they fail to repay the loan amount on time, because of the uncertainty of
the crop. Hence, banks may not be willing to lend to small farmers.
b) After banks, the small farmers may borrow money from local money lenders, agricultural
traders, cooperatives, big landlords, SHGs etc.
c) The terms of credit can be unfavourable for the small farmer – For example: Ram, a small
farmer borrows money from a local moneylender at 3% to grow rice. But unfortunately, the
crop is hit by drought and it fails. As a result, Ram has to sell a part of his land to repay the
loan. Now, the condition becomes quite worse than before.
d) The small farmers can get a credit at low interest rate from different sources like – Banks,
Agricultural Cooperatives, and SHGs.

12. Fill in the blanks:

i) Majority of the credit needs of the _______ households are met from informal sources.
ii) ________ costs of borrowing increase the debt-burden.
iii) ________ issues currency notes on behalf of the Central Government.
iv) Banks charge a higher interest rate on loans than what they offer on _________.
v) ________is an asset that the borrower owns and uses as a guarantee until the loan is
repaid to the lender.
Ans:
(i) poor
(ii) high
(iii) Reserve Bank of India
(iv) deposits
(v) Collateral

13. 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:
Option (b) Members.

(ii) Formal sources of credit does not include

(a) Banks.
(b) Cooperatives.
(c) Employers.
Ans:
Option (c) Employers
 CHAPTER 4-GLOBALISATION AND THE INDIAN ECONOMY

1. What do you understand about globalization? Explain in your own words.

Ans: The term "globalization" refers to the process of integrating a country's economy with
the economies of other countries under the conditions of free trade, money, and people move
across national borders.

It involves:

 An increase in international trade.

 The export and import of products manufactured and associated techniques.
 Capital and financial flows from one country to another.
 Human migration from one country to another.

2. What was the reason for putting barriers to foreign trade and foreign investment by the
Indian government? Why did it wish to remove these barriers?
Ans: To protect indigenous producers from international competition, the Indian government
erected barriers to foreign trade and foreign investment, especially when industries were only
starting to emerge in the 1950s and 1960s. Import competition would have been a death blow
to expanding industry at the time. As a result, India only authorized imports of necessary
products.
The government wanted to abolish these obstacles in 1991's New Economic Policy because it
believed domestic producers were ready to compete with foreign companies.
Foreign competition, it was believed, would actually increase the quality of goods produced by
Indian industry. This judgment was also backed by a number of influential international
organizations.
3. How would flexibility in labor laws help companies?
Ans: Companies will be more competitive and progressive if labor rules are more flexible.
Companies can negotiate compensation and fire employees based on market factors if labor
rules are relaxed. The company's competitiveness will improve as a result of this.
4. What are the various ways in which MNCs set up, or control, production in other
countries?
Ans: Multinational Corporations (MNCs) locate their factories or production units in markets
where they can obtain the appropriate type of skilled or unskilled labour, as well.
As other production inputs, at affordable costs. MNCs establish production units in the
following methods after ensuring these conditions:
 In collaboration with a few current country's local businesses.

 Purchase local businesses and use contemporary technology to expand their operations.
 They place orders with small producers and offer the products to customers all over the
world under their own brand name.
5. Why do developed countries want developing countries to liberalize their trade and
investment? What do you think the developing countries demand in return?
Ans: Developed countries desire developing countries to liberalize trade and investment so
that their multinational corporations (MNCs) can set up factories in less-expensive developing
countries and enhance profits with reduced production costs and the same selling price.
In exchange, emerging countries should seek some form of protection for native producers
against import competition, in my opinion. Charges should also be imposed on multinational
corporations trying to establish a presence in developing countries.

6. “The impact of globalization has not been uniform.” Explain this statement.
Ans: “Globalization has not had a uniform impact.” It has benefited only trained and
professional people in cities, not the unskilled. Globalization has benefited the industrial and
service sectors far more than agriculture. It benefited multinational corporations at the
expense of domestic producers and the industrial working class. Competition from cheaper
imports has affected small producers of goods including batteries, capacitors, plastics, toys,
tyres, dairy products, and vegetable oil.

7. How has liberalization of trade and investment policies helped the globalization process?
Ans: Liberalization of trade and investment policies has aided globalization by facilitating
cross-border commerce and investment. To protect indigenous industry, numerous emerging
countries had previously erected obstacles and restrictions on foreign imports and
investments. These countries, on the other hand, have lowered the obstacles in order to boost
the quality of their local commodities. As a result, liberalization has aided the development of
globalization by allowing enterprises to make their own import and export decisions. As a
result, national economies have become more integrated into a single composite whole.
8. How does foreign trade lead to an integration of markets across countries? Explain with
an example.
Ans: Foreign trade allows both manufacturers and consumers to enter markets outside of
their own countries. Merchandise is transported from one country to another. Competition
reigns supreme among producers from many countries, as well as purchasers. As a result,
cross-border trade leads to market integration.
During the Diwali season, for example, Indian shoppers can choose between Indian and
Chinese ornamental lights and bulbs. As a result, this presents an opportunity to grow your
business.
9. Globalization will continue in the future. Can you imagine what the world would be like
twenty years from now? Give reasons for your answer.
Ans: After twenty years, the globe will have undergone a positive transformation
characterized by healthy rivalry, improved production efficiency, increased volume of output,
revenue, and employment, higher living standards, and greater access to information and
contemporary technology.
The following are the reasons for the above-mentioned points of view. These are the factors
that favor globalization:
 Human resource availability, both in terms of quantity and quality.
 Major countries have a diverse resource and industrial base.
 Increasing the number of entrepreneurs.
 Domestic market is expanding.
10. Suppose you find two people arguing: One is saying globalization has hurt our country’s
development. The other is telling, globalization is helping India develop. How would you
respond to these organizations?
Ans: India's benefits of globalization include:
 An increase in the number of commodities and services traded.
 Private foreign capital inflows and the economy's export orientation
 Increases output volume, income, and employment.
 CHAPTER 5 CONSUMER RIGHTS

1. Why are rules and regulations required in the marketplace? Illustrate with a few
examples.
Ans: Rules and regulations are required in the marketplace to safeguard the consumers from
exploitation by sellers and unfair trade practices. Sellers sometimes abdicate responsibility for
a poor-quality product. They charge more than the retail price, cheat in weighing items, and
sell adulterated or defective goods. As a result, rules and regulations are needed to protect
scattered buyers from powerful and fewer producers who monopolise markets. For example, a
grocery shop owner might sell expired products and then blame the consumers for not
verifying the expiry dates before purchasing the items.

2. What factors gave birth to the consumer movement in India? Trace its evolution.

Ans: There are numerous factors that gave birth to the consumer movement in India. These
are as follows: -
(i) It began as a "social force" to safeguard and promote consumer interests against unfair and
unethical trading practices.
(ii) In the 1960s, extreme food shortages, hoarding, adulteration of food and black marketing
led to the consumer movement to organise.
(iii) Till the 1970s, consumer organisations were mostly busy publishing articles and conducting
exhibitions.
(iv) Recently, there has been an increase in the number of consumer groups who
are concerned about ration shops abuses and overcrowding of public transportation vehicles.
(v) The Consumer Protection Act, commonly known as COPRA, was implemented by the Indian
government in 1986. This was a major step towards the consumer movement in India, which
provides easy and fast compensation to consumer grievances.

3. Explain the need for consumer consciousness by giving two examples.

Ans: Many consumers pay whatever the seller requests without bothering to verify the MRP.
While it is a good attitude to have faith in your local shopkeeper, but one should always check
the MRP. Some people never look at the expiry date on a medicine's package. This can be
hazardous to the patient who is going to consume the medicine, even life-threatening. These
instances show that consumer awareness is extremely important. Being aware of your rights
as a consumer when purchasing goods or services is known as consumer consciousness.
Examples:
(i) Consumers often bargain with sellers for additional discounts below the MRP (Minimum
Retail Price).
(ii) Most sweet retailers do not weigh sweets with the weight of the container because of
conscious consumers.
4. Mention a few factors which cause exploitation of consumers.
Ans: Factors that cause exploitation of consumers are:
(i) Buyers are unaware of their rights as consumers.
(ii) Inadequate and ineffective monitoring of rules and regulations.
(iii) The quantity purchased per individual is comparatively insignificant.
(iv) Customers are dispersed throughout large areas.

5. What is the rationale behind the enactment of the Consumer Protection Act 1986?
Ans: The rationale behind the enactment of COPRA (Consumer Protection Act) in 1986 was to
create a separate department of consumer affairs in both the federal and state governments,
and it has given us the ability to represent ourselves in a consumer court.
6. Describe some of your duties as consumers if you visit a shopping complex in your
locality.
Ans: When I visit a shopping complex, some of my duties/responsibilities as a consumer
includes: -
(i) Checking the expiration dates of the products I want to buy.
(ii) Paying only the maximum retail price (MRP) printed on the goods.
(iii) Attempting to prevent shopkeepers from bribing me with defective products.
(iv) Filing a complaint with a consumer forum or court if a seller refuses to take responsibility
for an adulterated or flawed product.

7. Suppose you buy a bottle of honey and a biscuit packet. Which logo or mark you will have
to look for and why?
Ans: Before buying food items, we should look for the logo of the Agmark symbol, which is
government-certified and guarantees the quality of the product.
8. What legal measures were taken by the government to empower the consumers in India?
Ans: In India, the government has taken numerous legal steps to empower consumers. These
are as follows: -
(i) The first and foremost is the COPRA (Consumer Protection Act) in 1986. This was a major
step towards the consumer movement in India, which provides easy and fast compensation to
consumer grievances.
(ii) The Right to Information Act was passed in October 2005, giving citizens access to all the
information about the functioning of government departments.
(iii) A consumer can also appeal in state and federal courts under COPRA, even if his case has
been dismissed at the district level. As a result, consumers now have the right to represent
themselves in consumer courts.

9. Mention some of the rights of consumers and write a few sentences on each.
Ans: Consumer rights are as follows: -
(i) Right to Choose: - Any consumer who receives a service in any capacity, regardless of age,
gender, or service type, has the right to choose whether or not to continue receiving that
service. A consumer has the right to choose any of the different brands of a product (such as a
refrigerator) sold in the market.
(ii) Right to Seek Redressal: - Consumers have the right to seek redressal when they are
subjected to monopolistic practices (unfair trade) or exploitation. It also includes the
consumer's right to genuine grievances.

(iii) Right to Be Heard: - This means that the interests of consumers will receive due
consideration in suitable forums. It also involves the right to be represented in a variety of
forums set up to look after the interests of consumers.

(iv) Right to Represent: - As a result of this act, consumers have the ability to represent
themselves in consumer courts.
(v) Right to Safety: - This refers to the right to be protected from the marketing of goods and
services that are dangerous to one's health and property. Consumers should acquire quality
marked products such as ISI, AGMARK, and others before making a purchase.

10. By what means can the consumers express their solidarity?

Ans: Consumers can express their solidarity for one another by joining consumer groups that
write articles or organize exhibitions to protest against exploitation by traders. These
organisations provide advice to individuals on how to approach a consumer court, and
they even defend cases for consumers in court. The government provides financial assistance
to such organisations to raise public awareness. Consumer solidarity will be strengthened even
more if everyone participates.

11. Critically examine the progress of the consumer movement in India.

Ans: In India, there has been a substantial change in consumer awareness. Since its
beginnings, the consumer movement in the country has progressed significantly. The
consumer movement did not have much strength before the enactment of COPRA (Consumer
Protection Act) in 1986, but it has been significantly empowered since then. The establishment
of consumer courts and consumer organisations was a significant step. In contemporary India,
however, the consumer redressal procedure is complicated, costly, and time-consuming. It is
time-consuming to file cases, attend court hearings, hire lawyers, and complete other
procedures. There are about 700 consumer organisations in India, but only about 20-25 of
them are well-organized and run efficiently.
12. Match the following.

Availing details of ingredients of a

(i) (a) Right to safety
product

(ii) Agmark (b) Dealing with consumer cases

(iii Accident due to faulty engine in a

(c) Certification of edible oil and cereals
) scooter

Agency that develops standards for goods

(iv) District Consumer Court (d)
and services

(v) Consumers International (e) Right to information

Global level institution of consumer welfare

(vi) Bureau of Indian Standards (f)
organisations
Ans:

(i) Availing details of ingredients of a

(e) Right to information
product

(ii) Agmark (c) Certification of edible oil and cereals

(iii) Accident due to faulty engine in a

(a) Right to safety
scooter

(iv) District Consumer Court (b) Dealing with consumer cases

(v) Global level institution of consumer welfare

Consumers International (f)
organisations

(vi) Agency that develops standards for goods and

Bureau of Indian Standards (d)
services
13. Say True or False.
(i) COPRA applies only to goods.
Ans: False
(ii) India is one of the many countries in the world which has exclusive courts for consumer
redressal.
Ans: True
(iii) When a consumer feels that he has been exploited, he must file a case in the District
Consumer Court.
Ans: True
(iv) It is worthwhile to move to consumer courts only if the damages incurred are of high
value.
Ans: True
(v) Hallmark is the certification maintained for the standardisation of jewellery.
Ans: True
(vi) The consumer redressal process is very simple and quick.
Ans: False
(vii) A consumer has the right to get compensation depending on the degree of the damage.
Ans: True