INDIAN ECONOMY NOTES FOR FIRST TERM  CLASS XII (2021-22) 

CASE STUDY

I. Read the following hypothetical text and answer question that follow:-

India’s Micro, Small and Medium Enterprises (MSME) sector is poised for a mega transformation in 2020, with the launch of an Alibaba-like e-marketplace, trendy yet affordable khadi products to appeal to the masses and digital data-based credit ratings to help entrepreneurs avail loans. However, the MSME sector is often considered the bulwark of the economy as it contributes around to the GDP and to the Indian exports. There is an urgent need of major reforms and policy interventions towards ensuring timely availability of low-cost credit, improving ease of doing business and technological upgradation, to take on the formidable challenge of creating millions of jobs, ensure equitable distribution of national income and achieving large-scale import substitution. The World Bank has recently approved loan worth million to address the immediate liquidity and credit needs of India’s MSME sector that has been severely impacted by the Covid-19 crisis. This will give a push to the Atmanirbhar Bharat vision of the government.

Q.1. Identify which of the following is not an advantage of the MSME sector?

(A) It is suited for the utilization of local resources.
(B) It is helpful in creation of employment opportunities.
(C) It requires more capital than labour.
(D) It ensures equitable distribution of income in the country.

Ans. Option (C) is correct.

Read the following Explanation: MSMEs don’t require heavy capital investment as they produce simple products by using simple technologies mainly labour-intensive production techniques.

Q. 2. MSME sector suffered to a large extent in COVID-19 pandemic situation due to______

(A) Liquidity crunch
(B) Obsolete technology
(C) Government Interventions
(D) All of the above

Ans. Option (A) is correct.

Read the following Explanation: The World Bank. has recently. approved loan worth $750  million to address the immediate liquidity and credit needs of India’s MSME sector that has been severely impacted by the Covid-19 crisis.

Q. 3. Read the following statements – Assertion (A) and. Reason (R).

Assertion (A): Small scale industries ensure a more equitable distribution of national income and wealth.

Reason (R): The ownership of small-scale industries is more wide spread than the ownership of large-scale industries.

Select the correct alternative from the following:

(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of the Assertion (A).
(B) Both Assertion (A) and Reason (R) are true, but Reason is not the correct explanation of the Assertion .
(C) Assertion (A) is true, but Reason is false.
(D) Assertion (A) is false, but Reason is true.

Ans. Option A is correct.

Read the following Explanation: The ownership of small scale industries is with one individual in sole-proprietorship or it can be with a few individuals in partnership.

Q. 4 ______ are the largest employer of the labour force in India.

(A) Agricultural Sector
(B) Small Scale Industries
(C) Cottage Industries
(D) Service Sector

Ans. Option (A) is correct.

Read the following Explanation: The agricultural sector is the largest employer in the Indian economy. Nearly 51% of the population is engaged in this section in one way or the other.

CASE STUDY

II. Read the following hypothetical text and answer the questions that follow:

The performance of Indian economy during the period of first seven five-year plans (1950-1990) was satisfactory if not very impressive. On the eve of independence, India was an industrially backward country, but during this period of first seven plans our industries became far more diversified, with the stress being laid on the public investments in the industrial sector. The policy of import substitution led to protection of the domestic industries against the foreign producers but we failed to promote a strong export surplus. Although public sector expanded to a large extent but it could not bring desired level of improvement in the secondary sector. Excessive government regulations prevented the natural trajectory of growth of entrepreneurship as there was no competition, no innovation and no modernization on the front of the industrial sector. Many public Sector Undertakings (PSUs) incurred huge losses due to operational inefficiencies, red-tapism, poor technology and other similar reasons. These PSUs continued to function because it was difficult to dose a government undertaking even it is a drain on country’s limited resources. On the Agricultural front, due to the measures taken under the Green Revolution. India more of less became self-sufficient in the production of food grains.
So, the needs for reform of economic policy was widely felt in the context of changing global economic scenario to achieve desired growth in the country.

Q.1. Which of the following was not a reason for the public sector to play a major role in the initial phase of Indian Economic Planning?

(A) Private entrepreneurs lacked sufficient capital for investment.
(B) Government aimed at social welfare.
(C) The market was big enough to encourage private industrialists for investment.
(D) The government wanted to protect the indigenous producers from the foreign competition.

Ans. Option (C) is correct.

Q.2. Inward looking trade strategy aimed at_______

(A) Protecting domestic industries from international competition
(B) Industrialization
(C) Improving performance of public sector
(D) None of the above

Ans. Option (A) is correct.

Read the following Explanation:- The policy of import substitution led to protection of the domestic industries against the foreign producers.

Q.3. Mechanization of the Indian agriculture was one of the causes of ______ in India.

(A) Green Revolution
(B) White Revolution
(C) Yellow Revolution
(D) None of the above

Ans. Option (A) is correct.

Read the following Explanation:- This necessitated the “Green Revolution”, which was largely due to the advent of technology, improved water supply and better agricultural practices. In addition, the increase in agricultural mechanization and the use of crop protection systems have also contributed to the emergence of “Green Revolution” in India.

Q. 4. Read the following statements : – Assertion (A) and Reason (R).

Assertion (A): Many public sector undertakings incurred huge losses due to operational inefficiencies.

Reason (R): Red-tapism was one of the reasons for continuation of such enterprises.

Select the correct alternative from the following:-

(A) Both Assertion (A) and Reason are true, and Reason is the correct explanation of the Assertion .
(B) Both Assertion (A) and Reason (R) are true, but Reason is not the correct explanation of the Assertion (A).
(C) Assertion (A) is true, but Reason (R) is false.
(D) Assertion (A) is false, but Reason (R) is true.

Ans. Option (A) is correct.

Read the following Explanation:- Red-tapism refers the practice of requiring excessive paperwork and tedious procedures before official action can be considered or completed.

CASE STUDY

III. Read the news report given below and answer the questions that follow:

In a 40 minute long speech Prime Minister Narendra Modi announced the demonetization of existing notes of  500 and during a televised address on Tuesday evening.
Modi announced that the notes of 500 and 1,000 “will not be legal tender from midnight tonight” and these will be “just worthless pieces of paper. PM also urged people to ‘join this mahayojna against the ills of corruption.
Here is a guide for you explaining everything about the move.

What is demonetization of currency?

Demonetization for us means that Reserve Bank of India has withdrawn the old  500 and 1,000 notes as an official mode of payment. According to Investopedia, demonetization is the act of stripping a currency unit of its status as legal tender.

What was the reason?

The reasoning given by Modi was:

(A) To tackle black money in the economy.
(B) To lower the cash circulation in the country which “is directly related to corruption in our country, ” according to PM Modi.
(C) To eliminate fake currency and dodgy funds which have been used by terror groups to fund terrorism in India.
(D) The move is estimated to scoop out more than 5 lakh crore black money from the economy, according to Baba Ramdev, a staunch Modi supporter.

Q.1. Why is demonetisation termed as the mahayojna by the Prime Minister?

(A) It is to curb the ills of corruption.
(B) It is to tackle the black money.
(C) It is to digitalise the economy.
(D) All of the above.

Ans. Option (A) is correct.

Q. 2. What is not the benefit of demonetization:

(A) To lower the cash circulation.
(B) To tackle black money in the economy.
(C) To eliminate fake currency
(D) Growth of revenue in States and Union Territories

Ans. Option (D) is correct.

Q.3. Demonetisation is an act of currency unit of its status as legal tender.

(A) Stripping
(B) Covering
(C) Clothing
(D) Removing

Ans. Option (A) is correct.

Explanation: Demonetisation is a situation where the Central Bank of the country (Reserve Bank in India) withdraws the old currency notes of certain denomination as an official mode of payment.

Q.4. How much black money is the move estimated to scoop out?

(A) 4 lakh crore
(B) 5 lakh crore
(C) 6 lakh crore
(D) 7 lakh crore

Ans. Option (B) is correct.

CASE STUDY

IV. Read the following hypothetical case study carefully and answer the questions follow on the basis of the same.

Since ages, farmers in India have taken recourse to debt. In the earlier times the same was from informal sources. Since independence with the efforts of the government, formal sector has actively come into picture. Farmers borrow not only to meet their investment needs but also to satisfy their personal needs. Uncertainty of income caused by factors likes crop failure caused by irregular rainfall, reduction in ground water table, locust/other pest attack, etc. These reasons push them into the clutches of the private money lenders, who charge exorbitant rates of interest which add to their miseries.

Various governments in India, at different times for different reasons, introduced debt relief/waiver schemes. These schemes are used by governments as a quick means to extricate farmers from their indebtedness, helping to restore their capacity to invest and produce, in short to lessen the miseries of the farmers across India. The costs and benefits of such debt relief schemes are, however, a widely debated topic among economists.

Some economists argue that such schemes are extremely beneficial to the poor and marginalised farmers while others argue that these schemes add to the fiscal burden of the government, others believe that these schemes may develop the expectation of repeated bailouts among farmers which may spoil the credit culture among farmers.

Q.1. Uncertainty of income for farmers in India is majorly caused by_______.

(A) Irregular rainfall
(B) Unavailability of loans
(C) locust/other pest attack
(D) All of the above

Ans. Option (D) is correct.

Read the following Explanation: Uncertainty of income caused by factors likes crop failure caused by:
(i) irregular rainfall,
(ii) reduction in ground water table,
(iii) locust/other pest attack, etc.

Q.2. Some economists argue that debt waiver schemes are extremely beneficial to the poor and marginalised farmers, as these schemes reduce the burden of

(A) Indebtedness
(B) Personal Expenditure
(C) Crop failure
(D) None of the above

Ans. Option is correct.

Read the following Explanation: Various governments in India, from time to time for various reasons, introduced debt relief/waiver schemes. These programs are being used by governments as a quick way to get farmers out of their debt, helping to restore their investment and productivity potential, in short reducing the plight of farmers across India.

Q.3. The rural banking structure in India consists of a set of multi-agency institutions is expected to dispense credit at cheaper rates for agricultural purposes to farmers.

(A) Regional Rural Banks
(B) Small Industries Development Bank of India
(C) Both (A) and (B)
(D) None of the above

Ans. Option (A) is correct.

Read the following Explanation: The institutional structure of rural banking today consists of a set of multiagency institutions, which are:

(i) Commercial banks
(ii) Regional Rural Banks (HHBs)
(iii) Co-operatives and Land development banks
Recently, Self-Help Groups (henceforth SHGs) have also emerged.

Q.4._______is the most prominent body responsible for providing loans term land development .

(A) Regional Rural Banks

(B) Land Development Banks

(C) Both (A) and (B)
(D) None of the above

Ans. Option (B) is correct.

Read the following Explanation: Land development bank provides long-term funds for various agriculture related projects besides development of land and business.

CASE STUDY

V. Read the following news report and answer the Question.

New Delhi: Prime Minister Narendra Modi on Saturday launched the Ayushman Bharat Scheme via video-conferencing to extend health insurance. coverage to all residents of Jammu and Kashmir. The Prime Minister’s Office said the scheme will ensure universal health coverage, and focus on providing financial risk protection and ensuring quality and affordable essential health services to all individuals and communities.

Union Home Minister Amit Shah and the Union Territory’s Lieutenant Governor, Manoj Sinha, also spoke on the occasion.

The scheme will provide free-of-cost insurance cover to all residents of the UT of Jammu and Kashmir, the PMO said, adding that it will extend financial cover of upto 5 lakhs per family on a floater basis to all residents of the UT.

There is provision for operational extension of the ‘Pradhan Mantri Jan Arogya Yojana’ (PM-JAY) to approximately 15 lakh additional families, the PMO statement said, adding that the scheme will operate on insurance mode in convergence with PM-JAY.

The benefits of the scheme will be portable across the country. The hospitals empanelled under the PM-JAY scheme shall provide services under this scheme as well, the PMO said.

Q. 5. What does the Ayushman Bharat Scheme provide?

(A) Better health care facility
(B) Cheaper health care facility

(C) Health Insurance
(D) All of the above

Ans. Option (C) is correct.

Read the following Explanation: Ayushman Bharat Pradhan Mantri Jan Arogya Yojana of the Government Mantri Jan Arogya yojana of the Government of India is a national health insurance scheme of India is a national health insurance scheme of the state that aims to provide free access to healthcare for low income earners in the country.

Q. 6. What is the main benefit of the scheme?

(A) Bring a lot of people in the purview of health care.
(B) Make health care affordable for the rich in India.
(C) Alleviating poverty in India.
(D) Improving the education in India.

Ans. Option (A) is correct.

Read the following Explanation: The scheme is launched to ensure universal health coverage, and focus on providing financial risk protection and ensuring quality and affordable essential health services to all individuals and communities.

Q.7. The financial cover under the scheme is of per family.

(A) 5 Lakhs
(B) 15 Lakhs
(C) Lakhs
(D) 20 Lakhs

Ans. Option (A) is correct.

Q. 8 _________ is the other name of the

(A) PM-JAY
(B) PM-JAI
(C) PM-AJAY
(D) None of the above

Ans. Option (A) is correct.

Read the following Explanation: The scheme will operate on insurance mode in convergence with PM-JAY.

CASE STUDY

VI Read the following hypothetical case study carefully and answer the questions follow on the basis of the same.
Five–Year Plans of India
From: Wikipedia, the free Encyclopedia
The Twelfth Plan completed its term in March 2017. Prior to the Fourth Plan, the allocation of state resources was based on schematic patterns rather than a transparent and objective mechanism, which led to the adoption of the Gadgil formula in 1969. Revised versions of the formula have been
used since then to determine the allocation of central assistance for state plans. The new government led by Narendra Modi, elected in 2014, has announced the dissolution of the Planning Commission, and it is replacement by a think tank called the NITIA ayog (anacronym for National Institution for Transforming India).

ANSWER THE FOLLOWING QUESTIONS:

1.Planning commission was renamed as _______________in_ ____________ year.
Ans: NITIA AYOG in 2015
2.Who was the last Deputy Chairman of Planning?
Ans: Montek Singh Ahluwalia.
3.Who announced the replacement of planning commission and when?
Ans: The new government led by Narendra Modi, has announced the replacement in
2014.
4. Who was the first chairman of planning commission?
Ans: Prime Minister Jawaharlal Nehru

CASE STUDY

VII Read the following hypothetical case study carefully and answer the questions follow on the basis of the same.

Traditionally, economic theory has given emphasis on physical capital accumulation as the most robust source of economic growth, at least in the short run, with exogenous technical progress being the long run determinant of growth. The exogeneity of technical progress in the neoclassical growth model and the difficulty of explaining the long term growth( because of diminishing returns of physical capital) have restricted the analytical capacity of the neoclassical model and it’s empirical verification. Human capital theory suggests that individuals and society derive economic benefits from investments in people( Sweetland1996), Education has consistently been emerged as the prime human capital, but Becker(1993) and Schultz(1997) have argued that health and nutritional expenditure is also a part of human capital investment. This is because education is perceived to contribute to health and nutritional improvements. Education, health, nutrition, water and sanitation complement each other, with investments in any one contributing to better outcomes in the others(worldBank,2001). In models of economic growth, human capital in the form of schooling or enrolment has been given a central place while the role of health has remained peripheral.

Source:- International journal of Economic Sciences and Applied Research.

Q. Economic development depends upon which of the following components?

1. Development of Physical Capital
2.  Development of Human Capital
3. Development of Working Capital
4.  All of these.

Answer : d) All of these.

Q. Economic growth depends upon

1. Development of Physical Capita
2.  Development of Human Capital
3. Development of Working Capital
4.  All of these

Answer : Development of Physical Capital

Q. Human capital is ———(broader/narrower) concept as compared to human development.

Answer : Broader
Q. Training is an important component of human capital formation process. Which of the following are types of on-job-training?
a) On-campus Training

b) Off-campus Training

c) Both a) and b)

d) None of these.

Answer : c) Both a) and b)

CASE STUDY

VIII Read the following hypothetical case study carefully and answer the questions follow on the basis of the same.

Prime Minister Narendra Modi’s second budget in seven months disappointed investors who were hoping for big bang stimulus to receive growth in Asia’s third largest economy. The fiscal plan delivered by Finance Minister Nirmala Sitaraman proposed tax reductions for individuals and wider deficit targets, but failed to provide specific steps to fix a struggling financial sector, improve infrastructure and create jobs. Stocks slumped, reflecting the subdued sentiment. “ Far from being a game changer , the budget provides little in terms of short term growth stimulus” said Priyanka Kishore, head of India and South-East Asia economics at Oxford Economics Ltd. In Singapore.” While Income tax cuts will provide some relief on the consumption front, the multiplier effect is low and the overall stance of the budget is not explanatory. The focus now shifts to RBI’s interest rate decision on February 6,2020. However, having already cut Interest rates five times last year and with inflation exceeding 7%, well above the central bank’s target, there’s limited scope for Governor Shaktikant Das to ease more.

Q. A direct tax cut in government budget helps to stimulate economic growth by

a) increasing disposable income

b) increasing production activity

c) increasing demand

d) both a) and c)

Answer : d) both a) and c)
Q. Decreasing tax is a fiscal measure to deal with————–( inflationary gap/deflationary gap) situation in an economy.

Answer : Deflationary gap

Q. What will be impact on credit creation ability of commercial banks if government reduces income tax slabs?
a) there will be more credit creation in the economy
b) there will be less credit creation in the economy
c) there will be no impact on the creation
d) It depends upon the behavior of the targeted population.

Answer : d) It depends upon the behavior of the targeted population.

Q. Currency held by the public is a component of————-measures of money supply.

Answer :  Demand deposits

Q. Government expenditure on Mid-Day Meal scheme running in government (state run) schools is a type of …………………….. expenditure in government budget.

Answer : Revenue

Land development bank provides long-term funds for various agriculture related projects besides development of land and business. The borrowing capacity of a member is generally determined according to the number of shares he holds in the bank. The loans granted by land development bank is repayable within 20 to 30 years. Normally, loans are granted up to 50% of the value of the land or up to 30 times the revenue.

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