UNDERSTANDING ECONOMIC DEVELOPMENT

Economics NCERT Solution

Class X
ENGLISH NCERT SOLUTION
Economics: Understanding Economic Development

NCERT Solution

INDEX
Chapter No. Chapter Name Page No.
Chapter 1 Development 1-4
Chapter 2 Sectors of the Indian Economy 5-12
Chapter 3 Money and Credit 13-17
Chapter 4 Globalisation and the Indian 18-21
Economy
Chapter 5 Consumer Rights 22-25

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 Chapter 1 – Development

Question 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. (i) its per capita income

Question 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

Question 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

Question 4: What is the main criterion used by the World Bank in classifying different countries? What are
the limitations of this criterion, if any?

Answer: The main criterion used by the World Bank in classifying different countries is the per capita income
or average income of a person in a country.
Limitations of this criterion:
It does not tell us about how this average income is distributed among the people in the individual countries.
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Two countries with the same per capita income might be very different with regard to income distribution.
One might have equitable distribution of income while the other might have great disparities between the rich
and the poor.

Question 5: In what respects is the criterion used by the UNDP for measuring development different from
the one used by the World Bank?

Answer: The criterion used by the UNDP for measuring development is different from the one used by the
World Bank in the sense that it uses a combination of factors such as health, education and income as
indicators of development. It does not rely solely on per capita income, as is the case with the World Bank.

Question 6: Why do we use averages? Are there any limitations to their use? Illustrate with your own
examples related to development.
Answer: 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. Even
though they are useful for comparison, they may also hide disparities. For example, the infant mortality rate of
a country does not differentiate between the male and female infants born in that country. Such an average
tells us nothing about whether the number of children dying before the age of one are mostly boys or girls.

Question 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.
Answer: Kerala, with lower per capita income has a better human development ranking than Punjab.
However, it would be wrong to say that per capita income is not a useful criterion at all. Per capita income is
certainly not the only criterion and it has its limitations. But this does not imply that it is not useful at all. To
counter the inadequacy of this average, the human development index is used. The human development
index uses a combination of development factors (such as health, education, income) for comparison. Thus,
per capita income is one of the development factors, and cannot be done away with. Also, per capita income
is useful for comparing the money index of states.

Question 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?
Answer: The present sources of energy that are used by the people of India are electricity, coal, crude oil,
cowdung and solar energy. Other possibilities fifty years from now, could include ethanol, bio-diesel, nuclear
energy and a better utilisation of wind energy, especially with the imminent danger of oil resources running
out.
Question 9: Why is the issue of sustainability important for development?
Answer: 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.
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Question 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.

Answer: “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 with a view to keeping the environment protected and
clean so that a balance of production and use is maintained, and shortages are avoided.

Question 11: List a few examples of environmental degradation that you may have observed around you.

Answer: Environmental degradation manifests itself in different ways. Deforestation, falling levels of ground
water, soil erosion, water pollution, burning of fossil fuels, the hole in the ozone layer and combustion from
automobiles causing extreme air pollution especially in urban areas are some of the examples of
environmental degradation.

Question 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
Literacy Enrolment
Per Capita Life Rate for Ratio for HDI Rank
Income in Expectancy 15+ yrs three in the
S.No. Country US$ at birth population levels world
1 Sri Lanka 4390 74 91 69 93
2 India 3139 64 61 60 126
3 Myanmar 1027 61 90 48 130
4 Pakistan 2225 63 50 35 134
5 Nepal 1490 62 50 61 138
6 Bangladesh 1870 63 41 53 137
Answer: Table 1.6
(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+ yrs 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

Question 13: The following table shows the proportion of undernourished adults in India. It is based on a
survey of various states for the year 2001. Look at the table and answer the following questions.

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State Female Male
Kerala 22 19
Karnataka 36 38
Madhya Pradesh 43 42
All Sates 37 46
(i) Compare the nutritional level of people in Kerala and Madhya Pradesh.

Ans. The nutritional levels of people in Kerala and Madhya Pradesh are different. While 22% and 19% men and
women respectively are undernourished in Kerala, the respective percentages of male and female
undernourshment in Madhya Pradesh are 43% and 42%. This implies that Kerala has more well nourished
people than Madhya Pradesh. Also, the undernourishment average for Madhya Pradesh is greater than that
for the entire country, while that for Kerala is lower than the national average.

(ii) Can you guess why around 40 per cent 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 the presence of adequate food in the country, around 40% of Indians are undernourished. This is
because of the erratic and unsystematic distribution of food. Some states in the country ensure smooth
running of ration shops and other forms of Public Distribution System (PDS). This ensures that no one has to
go without food, especially the poor for whom ration shops provide foodgrains at subsidised rates. However,
on account of excess exports and inconsistent food supply to the masses, nearly 40% of the Indian people are
undernourished.

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 Chapter 2 – Sectors of the Indian Economy

Question 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 / agricultural)
(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)

Answer:

(i) Employment in the service sector has not increased to the same extent as production.
(ii) Workers in the tertiary sector do not produce goods.
(iii) Most of the workers in the organized sector enjoy job security.
(iv) A large proportion of laborers in India are working in the unorganized sector.
(v) Cotton is a natural product and cloth is a manufactured product.
(vi) The activities in primary, secondary and tertiary sectors are interdependent.

Question 2: Choose the most appropriate answer.

(a) The sectors are classified into public and private sector 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
(b) Production of a commodity, mostly through the natural process, is an activity in ______________ sector.

(i) primary

(ii) secondary

(iii) tertiary

(iv) information technology

(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

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(d) In terms of GDP the share of tertiary sector in 2003 is _________.
(i) between 20 per cent to 30 per cent
(ii) between 30 per cent to 40 per cent
(iii) between 50 per cent to 60 per cent
(iv) 70 per cent
Answer:
(a) (iii)
(b) (i)
(c) (ii)
(d) (iii)

Question 3: Match the following:

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

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

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

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

Question 4: Find the odd one out and say why.

(i) Tourist guide, dhobi, tailor, potter

Ans. Tourist guide

He is appointed by the government, while dhobi, tailor and potter belong to the private sector.

(ii) Teacher, doctor, vegetable vendor, lawyer

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Ans. Vegetable vendor
His is the only profession that does not require a formal education.

(iii) Postman, cobbler, soldier, police constable

Ans. Cobbler
The rest are workers in the public sector, while his profession is part of the private sector.

(iv) MTNL, Indian Railways, Air India, SAHARA Airlines, All India Radio

Ans. SAHARA Airlines

It is a private enterprise, while the rest are government undertakings.

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

Percentage of
Nature of working
Place of work employment people
In offices and factories Organized 15
registered with the
government
Own shops, office, – 15
clinics in marketplaces
with formal license
– 20
People working on the
street, construction
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?
Answer:

Percentage of
Nature of working
Place of work employment people
In offices and factories Organized 15
registered with the
government
Own shops, office, Organized 15
clinics in marketplaces
with formal license

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 Unorganised 20
People working on the
street, construction
workers, domestic
workers
Unorganised 50
Working in small
workshops usually not
registered with the
government
Question 6: Do you think the classification of economic activities into primary, secondary and tertiary is
useful? Explain how.
Answer: The classification of economic activities into primary, secondary and tertiary is useful on account of
the information it provides on how and where the people of a country are employed. Also, this helps in
ascertaining as to which sector of economic activity contributes more or less to the country’s GDP and per
capita income. If the tertiary sector is developing much faster than the primary sector, then it implies that
agriculture is depleting, and the government must take measures to rectify this. The knowledge that the
agricultural profession is becoming unpopular or regressive can only come if we know which sector it belongs
to. Hence, it is necessary to classify economic activities into these three basic sectors for smooth economic
administration and development.

Question 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.
Answer: For each of the sectors that we came across in this chapter, one should focus on employment and
GDP because these determine the size of a country’s economy. A focus on employment and GDP helps
determine two important things—per capita income and productivity. Hence, in each of the three sectors,
employment rate and status as well as its contribution to the GDP help us understand how that particular
sector is functioning and what needs to be done to initiate further growth in it.
Question 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.
Answer: Attempt this question on your own.

Question 9: How is the tertiary sector different from other sectors? Illustrate with a few examples.
Answer: The tertiary sector is different from the other sectors because it does not manufacture or produce
anything. For this reason, it is also known as the service sector. It aids the primary and secondary sectors in
development. The tertiary sector involves services like transport, storage of goods, communications, banking
and administrative work.
Question 10: What do you understand by disguised unemployment? Explain with an example each from the
urban and rural areas.
Answer: Disguised unemployment is a form of underemployment where one has a job but the work is divided.
It is not apparent as compared to someone without a job who is clearly unemployed. In rural areas, this can be
seen in the farming community where all members of a family might be working on a farm even though so
many hands are not required. They do so because of lack of another job. In urban areas, disguised

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unemployment can be seen in the service sector where painters, plumbers, repair persons and those doing
odd jobs have work but they may not find daily or regular employment.

Question 11: Distinguish between open unemployment and disguised unemployment.

Answer: Open unemployment is when a person has no job in hand and does not earn anything at all.
Disguised unemployment, on the other hand, is mostly found in the unorganised sector where either work is
not consistently available or too many people are employed for some work that does not require so many
hands. This is the essential difference between open unemployment and disguised unemployment.

Question 12: “Tertiary sector is not playing any significant role in the development of Indian economy.” Do
you agree? Give reasons in support of your answer.
Answer: “Tertiary sector is not playing any significant role in the development of the Indian economy”. This
statement is not true. The tertiary sector has contributed vastly to the Indian economy, especially in the last
two decades. In the last decade, the field of information technology has grown, and consequently, the GDP
share of the tertiary sector has grown from around 40% in 1973 to more than 50% in 2003.

Question 13: Service sector in India employs two different kinds of people. Who are these?
Answer: Service sector in India employs two different kinds of people. These are primary and ancillary
workers. Primary workers include those who directly provide services while ancillary workers are composed of
those who give services to the service providers. For example, consultants make available their services to
consultancy firms etc.

Question 14: Workers are exploited in the unorganized sector. Do you agree with this view? Give reasons in
support of your answer.
Answer: Workers are exploited in the unorganized sector. I agree with this view. The unorganized sector does
not offer any job security. Neither does it allow for scope of trade or workers’ unions. Workers can be easily
exploited in this scenario. They cannot afford to rebel against an employer’s tyranny as the latter can fire them
at any time.
Question 15: How are the activities in the economy classified on the basis of employment conditions?
Answer: On the basis of employment conditions, activities in the economy are classified as organised and
unorganised. The organised sector offers job security and employment benefits, while the unorganised sector
is marked by low wages and lack of job security. In rural areas, the unorganised sector comprises landless
agricultural labourers, sharecroppers and artisans. In urban areas, this group contains small-scale industry
workers, construction workers, street vendors, rag-pickers, etc.
Question 16: Compare the employment conditions prevailing in the organised and unorganised sectors.
Answer: The employment conditions prevailing in the organised and unorganised sectors are vastly different.
The organised sector has companies registered with the government and hence, it offers job security, paid
holidays, pensions, health and other benefits, fixed working hours and extra pay for overtime work. On the
other hand, the unorganised sector is a host of opposites. There is no job security, no paid holidays or
pensions on retirement, no benefits of provident fund or health insurance, unfixed working hours and no
guarantee of safe work environment.
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Question 17: Explain the objective of implementing the NREGA 2005.
Answer: The objective of implementing the NREGA 2005 was to provide 100 days of guaranteed employment
to those people in rural India who can work, and are in need of work. This Right to Work has been
implemented in 200 districts. If the government is unable to provide this employment, then it has to give
unemployment allowances to the people.

Question 18: Using examples from your area compare and contrast the activities and functions of private
and public sectors.
Answer: Attempt this question on your own.

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

Topics Well-managed organization Badly-managed organization

Public sector
Private sector
Answer:

Topics Well-managed organization Badly-managed organization

Public sector Delhi Metro Rail Air India
Corporation
Private sector Reliance Mobile Satyam
Question 20: Give a few examples of public sector activities and explain why the government has taken
them up.
Answer: A few examples of public sector activities are provision of water, electricity and some modes of
transport. The government has taken these up because water and power are needed by everyone. If the work
of providing electricity and water is left to private enterprises, the latter might exploit this opportunity and sell
these at rates which the masses cannot afford. Hence, to ensure that basic amenities like water and power are
available for all, the government supplies these at low and affordable rates.

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

Answer: The public sector contributes to the economic development of a nation by not mere financial profits.
The public sector plays a vital role in contributing to the Human Development Index via its functioning in
health and education services. Also, by buying food grains at a “fair price” from farmers, providing electricity,
water, postal services at low rates, the government ensures that the people have a good living. It utilises taxes
and grants to pay for the same. Thus, it plays a vital role in adding to the economic development of a nation,
based on its human development situation.

Question 22: The workers in the unorganized sector need protection on the following issues: wages, safety
and health. Explain with examples.
Answer: The workers in the unorganized sector need protection on the following issues: wages, safety and
health. In the construction sector, laborers are employed on a daily basis. Hence, they have no job security.
Here, wages too differ from time to time. Consequently, the government has set up a minimum wages act to

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protect such workers from economic exploitation.
The same problem exists for miners working in private mining companies. Their safety is secondary to the
company’s profits, and as a result, many miners suffer grievous injuries (and many a times, even die) due to
inadequate safety gear and norms. Governments of most nations have now laid down strict rules for private
enterprises to ensure workers’ safety.
Most companies in the unorganized sector do not provide health insurance to their employees. Some of these
might be involved in dangerous factory production that may harm a worker’s health in the long term. These
workers need to be protected against the tyranny of the employer, and it is here that the government steps in.

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

Organized Sector Unorganized Sector Total

No. of workers 4,00,000 11,00,000 15,00,000
Income (Rs.) 32,000 million 28, 000 Million 60,000 million
Ways to generate more employment in the city of Ahmadabad have to be provided by the government,
especially in the unorganized sector. As the table shows, the organized sector’s earnings are much higher than
that of the unorganized sector even though the latter employs almost 80% of the city workers. More
companies need to be brought under the roof of the organized sector so that workers from the unorganized
sector are attracted to jobs there, with higher and more secure wages. For this, the government must provide
loans and aid to companies transferring from unorganized to organized sectors.

Question 24: The following table gives the GDP in Rupees (Crores) by the three sectors:

Year Primary Secondary Tertiary

1950 80,000 19,000 39,000
2000 3,14,000 2,80,000 5,55,000
(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?

Answer:
(i) In 1950,
primary sector = 57.97%, secondary sector = 13.77%, tertiary sector = 28.26%
In 2000,
primary sector = 27.33%, secondary sector = 24.37%, tertiary sector = 48.30%

ii).

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(iii) We can draw the conclusion that the share of the tertiary sector in the GDP has almost doubled, while that
of the primary sector has almost halved. The secondary sector has grown by about 10% in the last five years.

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 Chapter 3 – Money and Credit

Question 1: In situations with high risks, credit might create further problems for the borrower. Explain.
Answer: In situations with high risks, credit might create further problems for the borrower. This is also known
as a debt-trap. Taking credit involves an interest rate on the loan and if this is not paid back, then the
borrower is forced to give up his collateral or asset used as the guarantee, to the lender. Thus, in situations
with high risks, if the risks affect a borrower badly, then he ends up losing more than he would have without
the loan.
Question 2: How does money solve the problem of double coincidence of wants? Explain with an example
of your own.
Answer: Money solves the problem of double coincidence of wants by acting as a medium of exchange.
Double coincidence of wants implies a situation where two parties agree to sell and buy each other’s
commodities., i.e., what one party desires to sell is exactly what the other party wishes to buy. Money does
away with this tedious and complex situation by acting as a medium of exchange that can be used for one and
all commodities. For example, if an ice-cream vendor wants a bicycle but the bicycle manufacturer wants
clothes, and not ice-creams, then the vendor can use money to obtain a bicycle. He does need to adhere to
the bicycle man’s needs because money acts as the common medium of exchange. Similarly, the bicycle
manufacturer can then use the money to buy clothes.

Question 3: How do banks mediate between those who have surplus money and those who need money?
Answer: A bank mediates between those who have surplus money and those who need money by allowing
both to open accounts with it. Banks only keep about 15% of cash reserves to provide to people who come to
withdraw money on a daily basis. Those with surplus money are encouraged to invest with the bank and are
paid a certain rate of interest for the same. Those who need loans are required to pay an interest on their
loans. The difference between payment to lenders and receipt from borrowers comprises the bank’s earnings.
Thus, the bank acts as a beneficiary for those with surplus money as well as those who need money.
Question 4: Look at a 10 rupee note. What is written on top? Can you explain this statement?
Answer: A ten rupee note has “Reserve Bank of India” written at the top, along with a statement “guaranteed
by the central government”, following it. It is a promissory note and can only be issued by the Reserve Bank of
India which supervises all money-related functions in the formal sector, in India. The statement on the ten
rupee bank note relates to this idea that the RBI is the central organ in the working of money-related
activities.
Question 5: Why do we need to expand formal sources of credit in India?
Answer: We need to expand formal sources of credit in India for two main reasons. Firstly, to reduce
dependence on informal sources of credit because the latter charge high interest rates and do not benefit the
borrower much. Secondly, they will be able to provide loans to a larger group of people who trust government
sanctioning more than a private loaning system.
Question 6: What is the basic idea behind the SHGs for the poor? Explain in your own words.
Answer: The basic idea behind the SHGs for the poor is to provide them with a vista for self-help in financial
areas. A self-help group is a small group comprising people in the rural areas who collect their savings, and

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loan these out to members on an interest rate lower than that charged by the informal sector. If the SHG
functions well for over a year, then it becomes eligible for loans from banks. Such loans are then used for
creating self-employment opportunities for the poor. Thus, they become economically upgraded, and are not
dependent on moneylenders anymore.
Question 7: What are the reasons why the banks might not be willing to lend to certain borrowers?
Answer: Banks might not be willing to lend to people who cannot provide collateral, who do not have steady
earnings or jobs, and who have a history of non-repayment of loans. In such cases, banks do not have a
guarantee as to whether or not the loans will be repaid by the persons concerned. It has to be understood
that banks only mediate between those who have surplus money and those who need money. Banks in fact
borrow the money deposited with them, and lend it out to persons requiring money. They would thus be
unwilling to advance the money to individuals from whom repayment is uncertain.

Question 8: In what ways does the Reserve Bank of India supervise the functioning of banks? Why is this
necessary?
Answer: The Reserve Bank of India monitors the amount of money that banks loan out, and also the amount
of cash balance maintained by them. It also ensures that banks give out loans not just to profiteering
businesses but also to small cultivators, small scale industries and small borrowers. Periodically, banks are
supposed to submit information to the RBI on the amounts lent, to whom and at what rates of interest.
This monitoring is necessary to ensure that equality is preserved in the financial sector, and that small
industries are also given an outlet to grow. This is also done to make sure that banks do not loan out more
money than they are supposed to, as this can lead to situations like the Great Depression of the 1930s in the
USA, which greatly affected the world economy as well.

Question 9: Analyse the role of credit for development.

Answer: 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 increased production,
employment and profits. However, caution must be exercised in the case of high risks so that losses do not
occur. This advantage of loans also needs to be manipulated and kept under an administrative hold because
loans from the informal sector 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.
Question 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.
Answer: Manav needs a loan to set up a small business. Manav will decide on whether to borrow from the
bank or the moneylender on the basis of various factors. Firstly, he must have a collateral or asset which can
guarantee his loan. If he lacks such an asset, Manav cannot get a loan from a bank. In this scenario, he will
have to go to a moneylender, even though the latter charges a higher interest rate. Secondly, if Manav is not
aware of the banes of borrowing from the informal sector, he might not even consider taking a bank loan.
Thirdly, if there are no banks in or near his area of residence or work, then Manav will borrow from a
moneylender.

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Question 11: In India, about 80 per cent 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.
Answer:
(a) Banks might be unwilling to lend to small farmers for lack of a collateral or asset on the part of the farmers.
(b) The other sources from which the small farmers can borrow are moneylenders, relatives or friends, self-
help groups and cooperative banks.
(c) The terms of credit can be unfavorable for the small farmer if he has a bad crop, and is forced to either
surrender his collateral (if he borrowed from a bank) or sell off a part of his land (if he borrowed from the
informal sector), in order to repay his loan.
(d) Self-help groups and cooperative banks do not require a collateral as a guarantee; hence, they can provide
cheap credit to the small farmers.
Question 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.
Answer:
(i) Majority of the credit needs of the poor households are met from informal sources.
(ii) High costs of borrowing increase the debt-burden.
(iii) Reserve Bank of India issues currency notes on behalf of the Central Government.
(iv) Banks charge a higher interest rate on loans than what they offer on deposits.
(v) Collateral is an asset that the borrower owns and uses as a guarantee until the loan is repaid to the lender.
Question 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.
(ii) Formal sources of credit does not include
(a) Banks.
(b) Cooperatives.
(c) Employers.
Answer:
(i) (b)
(ii) (c)
Long Questions
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Question 1: The following table shows people in a variety of occupations in urban areas. What are the
purposes for which the following people might need loans? Fill in the column.

Occupations Reason for needing a Loan

Construction worker ……………………….
Graduate student who is ………………………
computer literate
A person employed in ………………………
government service
Household maid ………………………
Small trader ………………………
Autorickshaw driver ………………………
A worker whose factory has ………………………
closed down
Migrant labourer in Delhi ………………………
Next, classify the people into two groups based on whom you think might get a bank loan and those who
might not. What is the criterion that you have used for classification?
Answer:

Occupations Reason for needing a Loan

Construction worker To meet living expenses
Graduate student who is To pursue higher education
computer literate
A person employed in For an offspring’s wedding
government service
Household maid To meet living expenses
Small trader To buy new machinery
Autorickshaw driver To buy an autorickshaw
A worker whose factory has To meet living expenditure
closed down while still unemployed
Migrant laborers in Delhi To buy a house

Those who might get a bank loan Those who might not get a bank loan
Graduate student Construction worker
A person employed in government Migrant labourer in Delhi
service
Small trader Household maid
Autorickshaw driver A worker whose factory has closed
down
The criterion I have used for the aforementioned classification is firstly, whether the borrower has the
potential to repay the loan or not. Those with job security will certainly get a loan because they have the
capability to give repayment instalments. The second basis of classification is whether the borrower has a

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collateral or not, on which to guarantee his/her loan. These two are the basic prerequisites for getting a loan
from a bank.

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 Chapter 4 – Globalization and the Indian Economy

Question 1: What do you understand by globalisation? Explain in your own words.

Answer: Globalisation in today’s world has come to imply many things. It is the process by which the people of
the world are unified into a single society and function together. This term is also often used to refer to
economic globalisation: the integration of national economies into the international economy through trade,
foreign direct investments, capital flows, migration and the spread of technology.

Question 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?
Answer: Barriers to foreign trade and foreign investment were put by the Indian government to protect
domestic producers from foreign competition, especially when industries had just begun to come up in the
1950s and 1960s. At this time, competition from imports would have been a death blow to growing industries.
Hence, India allowed imports of only essential goods.
Later, in the 1990s, the government wished to remove these barriers because it felt that domestic producers
were ready to compete with foreign industries. It felt that foreign competition would in fact improve the
quality of goods produced by Indian industries. This decision was also supported by powerful international
organisations.
Question 3: How would flexibility in labour laws help companies?
Answer: Flexibility in labour laws will help companies in being competitive and progressive. By easing up on
labour laws, company heads can negotiate wages and terminate employment, depending on market
conditions. This will lead to an increase in the company’s competitiveness.

Question 4: What are the various ways in which MNCs set up, or control, production in other countries?
Answer: The various ways in which MNCs set up, or control, production in other countries are by buying out
domestic companies or making the latter work for them. Sometimes, MNCs buy mass produce of domestic
industries, and then sell it under their own brand name, at much higher rates, in foreign countries. MNCs look
towards developing nations to set up trade because in such places, the labour and manufacturing costs are
much lower.
Question 5: Why do developed countries want developing countries to liberalise their trade and
investment? What do you think should the developing countries demand in return?
Answer: Developed countries want developing countries to liberalise their trade and investment because then
the MNCs belonging to the developed countries can set up factories in less-expensive developing nations, and
thereby increase profits, with lower manufacturing costs and the same sale price. In my opinion, the
developing countries should demand, in return, for some manner of protection of domestic producers against
competition from imports. Also, charges should be levied on MNCs looking to set base in developing nations.

Question 6: “The impact of globalisation has not been uniform.” Explain this statement.
Answer: “The impact of globalisation has not been uniform”. The truth of this statement can be verified if we
observe the impact of MNCs on domestic producers and the industrial working class. Small producers of goods
such as batteries, capacitors, plastics, toys, tyres, dairy products and vegetable oil have been hit hard by
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competition from cheaper imports. Also, workers are now employed “flexibly” in the face of growing
competition. This has reduced their job security. Efforts are now on to make globalisation “fair” for all since it
has become a worldwide phenomenon.
Question 7: How has liberalisation of trade and investment policies helped the globalisation process?
Answer: Liberalisation of trade and investment policies has helped the globalisation process by making foreign
trade and investment easier. Earlier, several developing countries had placed barriers and restrictions on
imports and investments from abroad to protect domestic production. However, to improve the quality of
domestic goods, these countries have removed the barriers. Thus, liberalisation has led to a further spread of
globalisation because now businesses are allowed to make their own decisions on imports and exports. This
has led to a deeper integration of national economies into one conglomerate whole.

Question 8: How does foreign trade lead to integration of markets across countries? Explain with an
example other than those given here.
Answer: Foreign trade leads to integration of markets across countries by the processes of imports and
exports. Producers can make available their goods in markets beyond domestic ones via exports. Likewise,
buyers have more choice on account of imports from other countries. This is how markets are integrated
through foreign trade. For example, Japanese electronic items are imported to India, and have proved to be a
tough competition for less-technologically-advanced companies here.

Question 9: Globalisation will continue in the future. Can you imagine what the world would be like twenty
years from now? Give reasons for your answer.
Answer: Globalisation will continue in the future. Twenty years from now, the world will be more globally
connected and integrated into one international economy, if this process continues on a fair and equitable
basis. Trade and capital flows will increase alongside the mobility of labour. This will occur because
liberalisation will get augmented and MNCs will converge with other companies producing the same goods.

Question 10: Supposing you find two people arguing: One is saying globalisation has hurt our country’s
development. The other is telling, globalisation is helping India develop. How would you respond to these
organisations?
Answer: Globalisation has hurt our country’s development because: firstly, it has led to the annihilation of
small producers who face stiff competition from cheaper imports. Secondly, workers no longer have job
security and are employed “flexibly”.
Globalisation is helping India develop on account of the following reasons: firstly, the competition it entails
has led to rise in the quality of products in the market. Secondly, it has made available a wider variety of goods
in the market, for the buyer to choose from. Now, imported goods are easily available alongside domestic
products.
Question 11: Fill in the blanks.
Indian buyers have a greater choice of goods than they did two decades back. This is closely associated with
the process of ______________. Markets in India are selling goods produced in many other countries. This

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means there is increasing ______________ with other countries. Moreover, the rising number of brands that
we see in the markets might be produced by MNCs in India. MNCs are investing in India because
_____________. While consumers have more choices in the market, the effect of rising _______________ and
______________has meant greater ________________among the producers.
Answer: Indian buyers have a greater choice of goods than they did two decades back. This is closely
associated with the process of globalisation. Markets in India are selling goods produced in many other
countries. This means there is increasing trade with other countries. Moreover, the rising number of brands
that we see in the markets might be produced by MNCs in India. MNCs are investing in India because of
cheaper production costs. While consumers have more choices in the market, the effect of rising demand and
purchasing power has meant greater competition among the producers.

Question 12: Choose the most appropriate option.

(i) The past two decades of globalisation has seen rapid movements in

(a) goods, services and people between countries.

(b) goods, services and investments between countries.

(c) goods, investments and people between countries.

(ii) The most common route for investments by MNCs in countries around the world is to

(a) set up new factories.

(b) buy existing local companies.

(c) form partnerships with local companies.

(iii) Globalisation has led to improvement in living conditions

(a) of all the people

(b) of people in the developed countries

(c) of workers in the developing countries

(d) none of the above

Answer:
(i) (b)
(ii) (b)
(iii) (d)

Question 12: Match the following.

S.No.

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(i) MNCs buy at cheap rates from small producers (a) Automobiles
(ii) Quotas and taxes on imports are used to regulate (b) Garments, footwear, sports
trade items
(iii) Indian companies who have invested abroad (c) Call centres
(iv) IT has helped in spreading of production of services (d) Tata Motors, Infosys, Ranbaxy
(v) Several MNCs have invested in setting up factories in (e) Trade barriers
India for production

Answer:

S.No.
(i) MNCs buy at cheap rates from small producers (b) Garments, footwear, sports items
(ii) Quotas and taxes on imports are used to regulate (e) Trade barriers
trade
(iii) Indian companies who have invested abroad Tata Motors, Infosys, Ranbaxy
(iv) IT has helped in spreading of production of services (c) Call centres
(v) Several MNCs have invested in setting up factories (a) Automobiles
in India for production

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 Chapter 5 – Consumer Rights
Question 1: Why are rules and regulations required in the marketplace? Illustrate with a few examples.
Answer: Rules and regulations are required in the marketplace to protect consumers. Sellers often abdicate
responsibility for a low-quality product, cheat in weighing out goods, add extra charges over the retail price,
and sell adulterated/ defective goods. Hence, rules and regulations are needed to protect the scattered buyers
from powerful and fewer producers who monopolise markets. For example, a grocery shop owner might sell
expired products, and then blame the customer for not checking the date of expiry before buying the items.

Question 2: What factors gave birth to the consumer movement in India? Trace its evolution.
Answer: The factors that gave birth to the consumer movement in India are manifold. It started as a “social
force” with the need to protect and promote consumer interests against unfair and unethical trade practices.
Extreme food shortages, hoarding, black marketing and adulteration of food led to the consumer movement
becoming an organised arena in the 1960s. Till the 1970s, consumer organisations were mostly busy writing
articles and holding exhibitions. More recently, there has been an upsurge in the number of consumer groups
who have shown concern towards ration shop malpractices and overcrowding of public transport vehicles. In
1986, the Indian government enacted the Consumer Protection Act, also known as COPRA. This was a major
step in the consumer movement in India.

Question 3: Explain the need for consumer consciousness by giving two examples.
Answer: There is a need for consumer consciousness so that the buyers themselves can take action against
cheating traders. The ISI and Agmark logos are certifications of good quality. Consumers must look for such
certifications while buying goods and services. Secondly, to be able to discriminate and make informed
choices, a consumer needs to have an adequate knowledge of the goods or services purchased by him/her.

Question 4: Mention a few factors which cause exploitation of consumers.

Answer: Exploitation of consumers is caused by a variety of factors. Producers are always looking for easy
ways to increase profits. Adulterated or low-quality goods have less production costs, and if the consumer is
unaware or illiterate, it is easy to cheat him/her. Also, shopkeepers brush off their responsibility by claiming
that the manufacturer is to blame. Consumers feel helpless in this situation. Often, when the consumers are
known not to check the retail price of a commodity on its packing, sellers add extra charges to the same. In
places where there is no awareness of consumer rights and the COPRA, consumer exploitation is rampant.

Question 5: What is the rationale behind the enactment of Consumer Protection Act 1986?
Answer: The rationale behind the enactment of Consumer Protection Act of 1986 is to protect the consumer
against unethical and unfair trade practices. Also, it recognises the consumer’s right to be informed, right to
choose, right to seek redressal and right to represent himself/herself in consumer courts.

Question 6: Describe some of your duties as consumers if you visit a shopping complex in your locality.
Answer: Some of my duties as a consumer if I visit a shopping complex include checking expiry dates of the
products I wish to purchase, paying only the maximum retail price printed on the goods, preventing

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shopkeepers from duping me with defective products, and registering a complaint with a consumer forum or
court in case a seller refuses to take responsibility for an adulterated or flawed product.

Question 7: Suppose you buy a bottle of honey and a biscuit packet. Which logo or mark you will have to
look for and why?
Answer: While buying a bottle of honey or a biscuit packet, the logo or mark one will have to look for is ISI or
Agmark. These are logos certifying the quality of goods in the market. Only those producers are allowed to use
these marks who follow certain quality standards set by the organisations issuing these certifications. Thus, if
a bottle of honey or a biscuit packet has one of these logos on it, then it implies that the product is of good
quality.
Question 8: What legal measures were taken by the government to empower the consumers in India?
Answer: Legal measures taken by the government to empower consumers in India are plenty. First and
foremost being the COPRA in 1986. Then, in October 2005, the Right to Information Act was passed, ensuring
citizens all information about the functioning of government departments. Also, under COPRA, a consumer
can appeal in state and national courts, even if his case has been dismissed at the district level. Thus,
consumers even have the right to represent themselves in consumer courts now.

Question 9: Mention some of the rights of consumers and write a few sentences on each.
Answer: Some of the rights of consumers include the right to be informed, the right to choose, the right to
seek redressal and the right to representation in consumer courts. Under the RTI Act of 2005, consumers can
now even get information regarding the working of government departments. The right to choose allows a
consumer to choose if he wishes to continue or discontinue the use of a service he purchased. The right to
seek redressal permits a consumer to complain against unfair trade practices and exploitation.

Question 10: By what means can the consumers express their solidarity?
Answer: Consumers can express their solidarity by forming consumer groups that write articles or hold
exhibitions against traders’ exploitation. These groups guide individuals on how to approach a consumer
court, and they even fight cases for consumers. Such groups receive financial aid from the government to
create public awareness. Participation of one and all will further strengthen consumer solidarity.

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

Answer: The consumer movement in India has evolved vastly since it began. There has been a significant
change in consumer awareness in the country. Till the enactment of COPRA in 1986, the consumer movement
did not bear much force, but ever since its inception, the movement has been empowered substantially. The
setting up of consumer courts and consumer groups has been a progressive move. However, in contemporary
India, the consumer redressal process is quite complicated, expensive and time-consuming. Filing cases,
attending court proceedings, hiring lawyers, and other procedures make it cumbersome. In India, there are
over 700 consumer groups of which, unfortunately, only about 20-25 are well-organised and functioning
smoothly.

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Question 12: Say True or False.
(i) COPRA applies only to goods.
(ii) India is one of the many countries in the world which has exclusive courts for consumer redressal.
(iii) When a consumer feels that he has been exploited, he must file a case in the District Consumer Court.
(iv) It is worthwhile to move to consumer courts only if the damages incurred are of high value.
(v) Hallmark is the certification maintained for standardisation of jewellry.
(vi) The consumer redressal process is very simple and quick.
(vii) A consumer has the right to get compensation depending on the degree of the damage.
Answer:
(i) False
(ii) True
(iii) True
(iv) True
(v) True
(vi) False
(vii) True

Question 13: Match the following.

(i) Availing details of ingredients (a) Right to safety

of a product
(ii) Agmark (b) Dealing with consumer cases
(iii) Accident due to faulty engine (c) Certification of edible oil and
in a scooter cereals
(iv) District Consumer Court (d) Agency that develops
standards for goods and services
(v) Consumers International (e)Right to information
(vi) Bureau of Indian Standards (f)Global level institution of
consumer welfare organisations

Answer:

(i) Availing details of ingredients (e)Right to information

of a product
(ii) Agmark (c) Certification of edible oil and
cereals
(iii) Accident due to faulty engine (a) Right to safety
in a scooter
(iv) District Consumer Court (b) Dealing with consumer cases
(v) Consumers International (f)Global level institution of
consumer welfare organisations
(vi) Bureau of Indian Standards (d) Agency that develops
standards for goods and services

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https://www.edufever.com/ Page 4
 15

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