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Class 12 - Economics
Sample Paper - 10 (2023-24)

Maximum Marks: 80
Time Allowed: : 3 hours

General Instructions:

1. This question paper contains two sections:

Section A – Macro Economics
Section B – Indian Economic Development
2. This paper contains 20 Multiple Choice Questions type questions of 1 mark each.
3. This paper contains 4 Short Answer Questions type questions of 3 marks each to be answered in 60 to 80 words.
4. This paper contains 6 Short Answer Questions type questions of 4 marks each to be answered in 80 to 100 words.
5. This paper contains 4 Long Answer Questions type questions of 6 marks each to be answered in 100 to 150 words.

SECTION A – MACRO ECONOMICS

1. Statement I: Borrowing and lending money in international money market is a part of current account in BoP.
Statement II: Autonomous transactions are are independent of the state of country’s BoP.
a) Both the statements are false.
b) Both the statements are true.
c) Statement I is true and statement II is false.
d) Statement II is true and statement I is false.
2. Given CRR = 4% and SLR = 16%, the value of money multiplier is:
a) 25
b) 5
c) 8.33
d) 6.25
3. If Marginal Propensity to Save (MPS) is equal to zero, it indicates that the National Income of the economy will be
________.
a) < 1
b) not defined (∞)
c) 0
d) 1
4. In a ________ the central banks do not intervene in the foreign exchange market.
a. Completely flexible exchange rate system, i.e. clean floating
b. Fixed exchange rate system
c. Both (a) and (b)
d. Managed floating exchange
a) Option (a)
b) Option (d)
c) Option (b)
d) Option (c)
5. Can the value of APS be negative?
a) False.

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b) Can’t say
c) Insufficient information
d) True.
6. During excess demand, Central Bank will
a) increase margin requirement
b) keep margin requirement zero
c) decrease margin requirement
d) keep margin requirement constant
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7. If the value of Average Propensity to Consume (APC) is 0.8 and National Income is ₹4,000 crore, the value of savings
will be ________.
a) ₹ 500 crores
b) ₹ 100 crores
c) ₹ 800 crores
d) ₹ 200 crores
8. Investment in macroeconomics is
a) Addition to the stock of capital
b) Division of the stock of capital
c) Reduction in the stock of capital
d) Updating the stock of capital
9. LRR and money creation has ________.
a) No relation
b) Both positive relation and negative relation
c) positive relation
d) negative relation
10. In the diagram below, at exchange rate OP1, there is

a) Equilibrium
b) Either Excess demand and Excess supply
c) Excess demand
d) Excess supply
11. How is net export different from net factor income from abroad?
12. Which transactions determine the balance of trade? When is balance of trade in surplus?

OR

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Foreign exchange rate in India is on the rise recently. What impact is it likely to have on exports and how?
13. Explain the meaning of the deflationary gap with the help of a diagram.
14. Measure the level of ex-ante aggregate demand when autonomous investment and consumption expenditure (A) is ₹ 50
crores, and MPS is 0.2 and level of income (Y) is ₹ 4000 crores. State whether the economy is in equilibrium or not (cite
reasons).

OR

Complete the following table :

Income Saving Marginal Propensity to Consume Average Propensity to Consume

0 -20 - -
50 -10 - -
100 0 - -

150 30 - -
200 60 - -
15. Explain any two functions of Central Bank.
16. Answer the following questions:
1. i. What precautions should be taken while calculating national income by Expenditure Method?
ii. Compute National Income from the following:
(₹ in crores)

(i) Mixed income of self-employed 2,500

(ii) Net factor income from abroad (-) 50
(iii) Rent 500
(iv) Consumption of fixed capital 400

(v) Profits 300

(vi) Compensation of employees 1,600
(vii) Net indirect taxes 500

(viii) Net current transfers from abroad 150

(ix) Net exports (-) 40
(x) Interest 500
2. OR
i. Find Net Value added at market price:
(i) Output sold (units) 800

(ii) Price per unit of utput (Rs.) 20

(iii) Excise duty (Rs.) 1600

(iv) Import duty (Rs.) 400

(v) Net Change in Stock (Rs.) (-)500

(vi) Depreciation (Rs.) 1000

(vii) Intermediate Cost (Rs.) 8000

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ii. Find Net Value Added at Factor Cost.
S.no. Items (Rs. In lakhs)
(i) Durable use Producer Goods with a Life Span of 10 Years 10

(ii) Single-use Producer Goods 5

(iii) Sales 20
(iv) Unsold Output Produced During the Year 2

(v) Taxes on Production 1

17. Answer the following questions:
1. Distinguish between Revenue Expenditure and Capital Expenditure with the help of example:
2. State the basis of classifying government receipts into revenue receipts and capital receipts. Give an example of each.
SECTION B – INDIAN ECONOMIC DEVELOPMENT
18. Labour force refers to:
a) The number of persons usually unemployed
b) The number of persons employed forcefully
c) The number of persons usually employed or willing to be employed
d) None of these
19. System under which people collectively cultivated land is known as
a) Cultivated
b) Commune
c) GLF
d) None
20. Land reforms were successful in ________ and ________ because these states had government committed to the policy
of land to the tiller.
a) None of these
b) Kerala; West Bengal
c) Punjab; Andhra Pradesh
d) Tamil Nadu; Uttar Pradesh
21. A shift from crop farming to other areas of productive activity with a view to raising income known as

a) None
b) Diversification of productive activity
c) Both
d) Diversification of crop production
22. Assertion (A): Multinational companies are expanding their economic control, Indian economy is suffering a sort of
economic colonialism.
Reason (R): Multinational companies are exploiting the Indian markets to sell their products and in the process,
domestic producers are marginalized owing to their poor competitive strength.
a) Both A and R are true and R is the correct explanation of A.

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b) Both A and R are true but R is not the correct explanation of A.
c) A is true but R is false.
d) A is false but R is true.
23. Following are the educationally backward states except for ________.
a) Rajasthan
b) Uttar Pradesh
c) Bihar
d) Mizoram
24. Introduction of Economic Reforms in China took place in the year ________.
a) 1991
b) 1996
c) 1978
d) 1988
25. The atmospheric concentrations of carbon dioxide and CH4 have increased by ________ percent and ________ percent
respectively above pre-industrial levels since 1750.
a) 40, 140
b) 21, 139
c) 40, 160
d) 32, 150
26. In the Swadeshi Movement against the British, started in 1905, Indians started ditching British goods for Indian
products.
Which of the following would have been the likely impact of the movement?
P. rise in import of raw materials
Q. fall in imports from Britain
R. rise in production of goods in India
S. rise in export tariffs
a) only P and S
b) only Q and R
c) only P and R
d) only R and S
27. Select the correct combination between the following columns.
Column A Column B

(a) Socialism (i) Coexistence of both public and public sector

(ii) Produced goods are distributed on the basis of purchasing power of the
(b) Capitalism
people.

(c) Mixed economic system (iii) What, how and for whom to produce

(d) Central problems of an economic (iv) Produced goods are distributed on the basis of need and not
system affordability.
a) (a) - (ii), (b) - (iv), (c) - (i), (d) - (iii)
b) (a) - (iv), (b) - (i), (c) - (ii), (d) - (iii)
c) (a) - (iv), (b) - (ii), (c) - (i), (d) - (iii)
d) (a) - (i), (b) - (iv), (c) - (ii), (d) - (iii)
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papers with their own name and logo.
28. How do the Illiteracy factor contribute to the environmental crisis in India? What problem do they pose for the
government?

OR

Explain how the use of Non-conventional sources of energy can have a favourable impact on the environment?
29. What is unemployment? What are the most common types of unemployment found in India?
30. Give a chronology of different Five Year Plans of India.
31. State industrial sector reforms included in the policy of liberalisation under economic reforms.

OR

Discuss the achievements of economic reforms.

32. How do government organisations facilitate the functioning of schools and hospitals in India?
33. Answer the following questions:
1. i. Discuss the importance of credit in rural development.
ii. Why is it important to develop proper storage facilities in rural areas?
2. OR
i. What kind of institutional and technology alternatives would you suggest for reducing the crisis in Indian
agriculture?
ii. Write a short note on-
a. MSP (Minimum Support Price)
b. Buffer Stock
c. PDS (Public Distribution System)
34. Read the following text carefully and answer the questions given below:
Foreign direct investment
Unlike India, FDI makes China a global player. In 2000, in cumulative terms, China was world’s fifth-largest recipient of
FDI, after the United States (USD1.3 trillion), the United Kingdom (USD497 billion), Benelux Economic Union states
(USD482 billion) and Germany (USD480 billion). But for 2004, China was to clock the second largest FDI inflow of
USD62 billion―next only to the United States which makes this FDI inflows the most critical as also most visible
indicator of its sustained and rapid economic development. Even India is expected to emerge as the next hot spot for FDI
inflows. Amongst others, the UNCTAD-DITE Global Investments Prospects Assessment 2004, estimates for 2004-2007
put China and India at the top two ranks followed by the US as third. This, however, remains rather ambitious, especially
for India. Even for China, while it is expected to continue to leapfrog, it is likely to stay at its second position and may
not surpass the US for a very long time.
But there are indicators that FDI inflows to China (even India) will continue unhindered. For example, China today
accounts for over 10% of US foreign trade destinations and China owns USD167 billion of US securities issued by the
Federal Government. During the year 2000, the total US corporate revenue generated from China was USD7.2 billion,
compared to USD4.6 billion from Mexico, USD3.5 billion from Singapore, and USD1.85 billion from Brazil. Though
China faced some phases when FDI had gone down yet it has gradually witnessed rise from USD2.7 billion for 1984 to
USD62 billion by 2004, largely staying within the range of USD45 to USD60 billion on an average year.
By comparison, India’s FDI has been generally sluggish and, for the early 1990s India’s contracted FDI stood at
USD0.15 billion for 1991, USD0.23 billion for 1992, USD0.57 billion for 1993, USD0.95 billion for 1994, and USD1.96
billion for 1995. But from there, India’s FDI has experiences some acceleration and rose to USD3.4 billon for 2002 and
USD4.3 billion for 2003; and some experts also question calculation methods and suspect underplaying of India’s FDI
statistics. For year 2004, India’s FDI was estimated to exceed a rather impressive USD8 billion. And, given this new
enthusiasm of the United Progressive Alliance, the government has been talking of absorbing an FDI of USD15 billion

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for 2005 and USD30 billion for 2007 to reach a total of USD150 billion of fresh FDI in next ten years.
Among the reasons cited to explain India lagging behind, is the argument that China had decided to open up to FDI back
in 1979 and created special economic zones (SEZs) in coastal regions that had the clear advantage of geographical
proximity to Hong Kong—the hub of capital investment in Asia —, and that China had the added advantage of its
political system, cheap labour and special incentives for foreign investors as for its armed forces which were to become
major players in China’s opening up experiments. Also important is overseas Chinese contributions. Non-resident
Indians and overseas Chinese have been distinct categories in FDI inflows into their respective homelands. Beginning
only from the early 1990s, while non-resident Indians do contribute a little to India’s FDI, overseas Chinese are known to
present a unique example by contributing over two-thirds of the whopping inflows of FDI into China.
Questions:
i. Discuss the reason for India's FDI being sluggish compared to that of China.
ii. Analyse the growth of the Chinese Economy focusing on the role of SEZs towards boosting FDI.

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Class 12 - Economics
Sample Paper - 10 (2023-24)

Solution

SECTION A – MACRO ECONOMICS

1. (d) Statement II is true and statement I is false.
Explanation: Statement II is true and statement I is false.
2. (b) 5
Explanation: Money multiplier = 1

CRR+SLR

= 1

4+16
= 1

20
=5
3. (b) not defined (∞)
Explanation: not defined (∞)
4. (a) Option (a)
Explanation: Completely flexible exchange rate system, i.e. clean floating
5. (d) True.
Explanation: Value of APS is negative when consumption expenditure is greater than income.For example , if income =
Rs.1000, consumption = 1200.
Then, saving = - 200. (negative saving)
APS = - 200/1000= - 0.2
6. (a) increase margin requirement
Explanation: Margin requirement is the difference between the market value of securities provided by the borrower and
the amount of loan granted to him.
7. (c) ₹ 800 crores
Explanation: ₹ 800 crores Y=C+S (Consumption is 3200 cr. so Savings is 800 cr.)
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8. (a) Addition to the stock of capital
Explanation: Investment is a flow concept.
9. (d) negative relation
Explanation: negative relation
10. (d) Excess supply
Explanation: At exchange rate OP, there is more supply of foreign currency than demand, this represents the situation of
excess supply.
11. Net export refers to the difference between exports and imports during an accounting year.
Net Exports = Exports - Imports
Net factor income from abroad refers to:
Factor income earned by our residents from the rest of the world - Factor income earned by non-residents from the
domestic territory of our country.
12. Balance of trade is defined as the difference between the value of imports and exports of only physical goods or visible
items.
Following transactions determine the balance of trade:
i. Import of goods.
ii. Export of goods.

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Balance of trade is in surplus when exports exceed imports.

Surplus Balance of Trade = Exports - Imports

OR

The foreign exchange rate is the price of one currency in terms of another. The foreign exchange rate affects exports.
When the foreign exchange rate is on the rise, it implies that the price of the Indian rupee has increased in terms of the
currency of another country (say American Dollar). As a result, the purchasing power of the foreign currency (Dollar)
decreases and one Dollar can be exchanged for fewer rupees. Now, Indian goods become costly in foreign markets and
exports to become costly. This results in a decrease in exports to foreign countries. For example, if the value of the rupee
in terms of US Dollar increases say ₹ 60 to ₹ 55 per dollar, Indian exporter will lose ₹ 5 per dollar. This works as a
disincentive (obstacle) to the exporter and export is likely to fall.
13. Deficiency of demand creates a deflationary gap in the economy. The deflationary gap may be defined as an excess of
aggregate supply over aggregate demand at the full employment level. Thus,
Deflationary gap = Equilibrium level of expenditure - Planned aggregate expenditure.
It is a situation when lack of demand leads to deflationary pressures in the economy. Inducement to invest is hurt. Low
investment leads to low output. Implying low-income, and low demand once again.
Following is the diagram showing the deflationary gap:

In the above diagram, E is the equilibrium point but the current actual demand is less than the full employment level of
income. The gap between E and K is a deflationary gap.
14. Given, Consumption expenditure (A) = ₹ 50 Crores
MPS = 0.2
So, MPC = 1 – MPS
= 1 - 0.2
= 0.8
Y = 4000 Crores
As we know, the equilibrium level of national income in the two-sector model is determined where, AS = AD or I = S
We know that AD = A + mpc(Y) ... (1)
Putting the values in equation (1)
AD = 50 + 0.8 × 4000
= 50 + 3200
= ₹ 3250 Crores (level of ex-ante aggregate demand)
But, ₹ 3250 < ₹ 4000
Result: AD of ₹ 3250 crores are less than Income of ₹ 4000 crores i.e AD < Y. Hence, the economy is not in equilibrium.
Because the economy only struck in equilibrium when planned AD is equal to planned AS or Y.

OR

Income Saving Marginal Propensity to Consume Average Propensity to Consume

0 -20 - -

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50 -10 0.8 1.2
100 0 0.8 1
150 30 0.4 0.8
200 60 0.4 0.7
Formulae used:
i. Consumption = Income(Y) - Saving(S)
ii. Marginal Propensity to Consume(MPC)
Change in Consumption
=
Change in Income

iii. Average Propensity to Consume(APC)

Consumption
=
Income

15. i. Banker's bank: Central Bank keeps the cash balances of Commercial Banks and issues loans to them on requirements
in the same manner as the Commercial Bank does for its customers. A Central Bank has almost the same relationship
with the other Commercial Banks of the country that the Commercial Banks have with the common public. That is
why the Central Bank is also called banker's bank.
ii. Banker to the Government: Central bank functions as a banker to the government—both central and state
governments. It carries out all banking business of the government. Government keeps their cash balances in the
current account with the central bank. Similarly, central bank accepts receipts and makes payment on behalf of the
governments. Also, the central bank carries out exchange, remittance and other banking operations on behalf of the
government. Central bank gives loans and advances to governments for temporary periods, as and when necessary and
it also manages the public debt of the country. Remember, the central government can borrow any amount of money
from RBI by selling its rupees securities to the latter.
16. Answer the following questions:
1. i. Precautions to be taken while calculating national income by Expenditure Method are:
1. Only expenditure on final goods and services should be considered. To avoid double counting, intermediate
expenditure should not be included.
2. Expenditure on the purchase of new/old shares, debentures etc. are excluded as they are simply paper claims
and no productive services are rendered by these receipts.
3. Government expenditure on transfer payments is not to be included.
4. Expenditure on second-hand goods should be ignored as they have already been counted for when they were
originally produced/purchased.
5. Gross investment is part of total expenditure.
ii. National Income = Domestic income+ net factor income from abroad
= Rent + Compensation of employees + Interest + Profits + Mixed income of self-employed + Net factor income
from abroad
= 500 + 1,600 + 500 + 300 + 2,500 + (-) 50
= 5,400 - 50
= ₹ 5,350 crores
2. OR
i. NVAmp = (i × ii) + v - vii - vi
= (800 × 20) + (-500) - 8000 - 1000 = Rs.6500.
ii. Depreciation = = Rs 1 lakh
Value of Durable Goods 10
=
Life Span 10

Net Value Added at Factor Cost(NVAFC) = Sales + Unsold Output Produced During the Year - Single use Producer
Goods - Depreciation on Durable use Producer Goods - Taxes on Production
= 20 + 2 - 5 - 1 - 1 = Rs. 15 lakhs

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17. Answer the following questions:

1. Revenue Expenditure Capital Expenditure

1. These expenditure increase the government
1. These expenditure do not increase govwrnment assets.
assets.
2. These expenditure do not cause any reduction in government 2. These expenditure cause reduction in
liability. government liability.
3. Example : Transfer payment by government, expense on health 3. Example : Repayment of loan by government,
and education, expense on security. establishment of factories.
2. The basis of classifying government receipts into revenue receipts and capital receipts is whether the receipt creates
liability or reduces financial assets. Accordingly, revenue receipts are the receipts that neither create liabilities nor
cause a reduction in financial assets. Capital receipts are the receipts that either create liabilities or cause a reduction in
assets.
An example of a revenue receipt is a tax while an example of capital receipt is a loan from the public.
SECTION B – INDIAN ECONOMIC DEVELOPMENT
18. (c) The number of persons usually employed or willing to be employed
Explanation: It refers to the number of persons actually working or willing to work. It is not related to the wage rate.
19. (b) Commune
Explanation: Under the commune system, the farmers were encouraged to cultivate land collectively and not individually.
20. (b) Kerala; West Bengal
Explanation: Kerala; West Bengal
21. (b) Diversification of productive activity
Explanation: Diversification of production is the one aspect of agriculture diversification.
22. (a) Both A and R are true and R is the correct explanation of A.
Explanation: Multinational companies are expanding their economic control, Indian economy is suffering a sort of
economic colonialism since Multinational companies are exploiting the Indian markets to sell their products and in the
process, domestic producers are marginalized owing to their poor competitive strength.
23. (d) Mizoram
Explanation: Mizoram has a literacy rate of 91.58% according to the 2011 census. It is the second-highest state in India in
terms of literacy.
24. (c) 1978
Explanation: In December 1978, the Eleventh Central Committee of the Communist Party of China put the reform of the
economy at the head of the agenda for its third plenum.
25. (a) 40, 140
Explanation: The National Oceanic and Atmospheric Administration released its annual index of 20 key greenhouse
gases. It shows, the atmospheric concentrations of carbon dioxide and CH4 have increased by 40 per cent and 140 per cent
respectively above pre-industrial levels since 1750.
26. (b) only Q and R
Explanation: only Q and R
27. (c) (a) - (iv), (b) - (ii), (c) - (i), (d) - (iii)
Explanation: (a) - (iv), (b) - (ii), (c) - (i), (d) - (iii)
28. Man, if illiterate will not use the resources judiciously that will ultimately lead to overuse or misuse of scarce resources.
The resources can be judiciously and efficiently exploited (with minimum waste) only when people are aware of and
skillful in utilizing the resources. Otherwise, lack of knowledge and skills may lead to excessive extraction of resources
and, thereby, its misuse. Thus, the government should take measures to create awareness and spread technical knowledge
among people about various efficient and economizing methods.

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OR

Thermal and hydro power plants on which India depends for its power needs have and adverse impact on the environment.
Non conventional sources like wind power and solar rays are greener energy resources and are also cleaner. Latest
technological devices like wind mills should be provided in areas where the wind speed is high so that these sources can
be used to generate electricity with putting the environment at risk.
29. Unemployment is a situation in which the people who are willing to work at the prevailing wages are unable to find jobs.
The most common types of unemployment found in India are:
i. Seasonal Unemployment: This type of unemployment takes place when people are not able to find jobs during some
months of the year. The situation of seasonal unemployment arises mainly in the agricultural sector people are busy
during sowing, harvesting, weeding and threshing. However, there are certain months in which they do not get much
work.
ii. Disguised Unemployment: In disguised unemployment, more than required persons are engaged in a job. This type of
unemployment usually happens among family members engaged in agricultural activity.
30. Chronology of different Five Year Plans announced so far is given below:
Plan Time Period
1st Plan 1951-1956
2nd Plan 1956-1961
3rd Plan 1961-1966
Three one year Plan 1966-1969 (It is also known as plan holiday)
4th Plan 1969-1974
5th Plan 1974-1979
One year Plan 1979-1980
6th Plan 1980-1985
7th Plan 1985-1990
One year Plan 1990-1992
8th Plan 1992-1997
9th Plan 1997-2002
10th Plan 2002-2007
11th Plan 2007-2012
12th Plan 2012-2017
31. Following were the changes made in the industrial policy under economic reforms:
i. Industrial Licensing- Industrial licensing was abolished for all industries except five industries viz., alcohol,
cigarettes, hazardous chemicals, industrial explosives and defence equipment.
ii. Public sector- Almost the whole of the economy was left open to the private sector. The number of industries
exclusively reserved for the public sector has been reduced to three e.g., defence equipment, atomic energy and rail
transport.
iii. Small scale sector- The investment limit of small scale industries has been increased to one crore with a view to
modernise them.
iv. Competition Act- MRTP Act was replaced by the competition Act which scrapped the threshold limit of assets in
delicensed industries. Mergers and acquisitions were allowed.

OR

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Following are the achievements of economic reforms:
i. Increase in Growth Rate- Overall level of economic activity has trended up as indicated by an impressive increase in
the growth rate of GDP. The rate of growth of India's GDP used to be about 4% in the pre-reform period. This has
jumped to about 8% presently.
ii. Increase in Competitiveness of Industrial Sector- New Economic Policy has increased the competitiveness of the
Indian industry. The new economic policy aims to remove the protective environment of the economy and to make
productive enterprises competitive. Economic reforms have resulted in an increase in the efficiency of public sector
enterprises.
iii. Control of Inflation- Owing to a greater flow of goods and services in the economy, LPG policies brought a check on
the rate of inflation. It has controlled inflation from 16.8% to 6%.
iv. The decline in Deficit of Balance of Payments- New Economic Policy aims to boost exports and to encourage
foreign direct investment in India. As a result, foreign exchange reserves have increased.
v. End of Government Restrictions- New Economic Policy aims to remove all types of controls. Producers are free to
decide their scale and level of production. All price and distribution controls have been removed.
vi. Limited Role for the Government- New Economic Policy gives greater freedom to economic agents to make their
own decisions. There is a very limited role for the government. As a result of lesser government role, there is a fall in
the fiscal deficit.
32. The following government organisations facilitate the functioning of schools in India:
i. University Grants Commission (UGC): It is the apex body for controlling the working of various universities in the
country. It provides funding to the universities and formulates rules and regulations regarding higher education in the
country.
ii. National Council of Educational Research and Training (NCERT): This body is engaged in developing content and
textbooks up to the level of senior secondary.
iii. All India Council of Technical Education (AICTE): This body formulates and enforces rules and regulations related
to technical (engineering) education in India.
The government organisation facilitating the functioning of hospitals in India is Indian Council of Medical Research
(ICMR) This body formulates and enforces rules and regulations related to medical education in India. It also regulates
the health sector.
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their own name and logo.
33. Answer the following questions:
1. i. The only factor which can ensure higher productivity in agriculture in rural economy is Capital. It can grow only if
it has an adequate flow of finance. Provision of rural credit enables a farmer to buy fertilisers, improved seeds of
organic pesticides and equipment. All these inputs help him to increase his agricultural productivity and income.
Credit is the lifeline of farming activity. Because:
i. Most farming families in India are small and marginal holders, producing just enough for subsistence. They
seldom generate surplus for further investment.
ii. Gestation period between sowing and harvesting is quite long. This necessitates borrowing for the purchase of
inputs.
So, the importance of credit in rural development can be perceived as a means to break the vicious circle of low
capital, low productivity and low savings of the rural poor.
ii. Farmers are forced to sell their crops at very low prices to traders because of the fear of it getting damaged from
fire, rodents or pests due to lack of proper storage. It is essential to develop proper storage facilities in rural areas so
that farmers are not compelled to sell their produce immediately after the harvesting of crops and can wait for
a better price for their produce in the market. This enhances the bargaining power of the farmers. The government

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and cooperative societies have taken some important steps towards the provision of such facilities. As a result,
many godowns and warehouses have been built at the village and mandi-town level.
2. OR
i. Due to poor returns to cultivation, agriculture is becoming a non viable occupation. Technological interventions
such as the green revolution proved neutral to land size in terms of output, but were not neutral in terms of
resources, making it a costly imperative for marginal and small farmers. Many financial products were also
introduced to address uncertainties, but they ended up adding to risks. The immediate solution is reducing costs.
The technology is knowledge centric rather than product centric. To revive farming and farmer, it is necessary to
introduce alternative technology and institutional structures. We need a technology that builds on local resources
and further strengthens the existing social capital. It is possible through structures that empower the farmers at the
grassroots and organize them into federations. Self help groups can prove helpful in solving the problem of rural
credit along with technologies that reduce costs and risks. And the successful experiments indicate that this is
possible.
ii. 1) Minimum Support Price is the price at which government purchases crops from the farmers, whatever may be
the price for the crops. Minimum Support Price is an important part of India’s agricultural price policy.
The MSP helps to incentivize the framers and thus ensure adequate food grains production in the country. I gives
sufficient remuneration to the farmers, provides food grains supply to buffer stocks and supports the food security
programme through PDS and other programmes.
2) Buffer stock is the stock of food grains (e.g., wheat,rice etc.) procured by the government through Food
Corporation of India (FCI). It is created in order to distribute food grains in deficit areas and among poorer section
of society at an affordable price.
Government has created buffer stock for the following reason
(i) Food grains like wheat and rice and procured by the government through FCI from surplus states. This food
grains is then stored in granaries.
(ii) Government has created buffer stock to distribute these food grains in deficit areas and among the poor section
of society at much lower price than market price.
(iii)It helps to resolve the problem of shortage of food during adverse weather condition.
3) Public distribution system (PDS) is an Indian food security system. Established by the Government of India
under Ministry of Consumer Affairs, Food, and Public Distribution and managed jointly with state governments in
India, it distributes subsidized food and non-food items to India's poor. Major commodities distributed include
staple food grains, such as wheat, rice, sugar, and kerosene, through a network of public distribution shops (also
known as ration shops) established in several states across the country. Food Corporation of India, a Government-
owned corporation, procures and maintains the PDS.
34. i. Unlike India, China is a global player in the FDI market. Whereas India’s FDI has been generally sluggish till the early
1990s but later in the 21st century improved. In 2000, China was the world’s fifth-largest recipient of FDI. The
possible reasons for this difference are:
a. The Chinese reform process began more strongly and comprehensively during the 1980s when India was in a mid-
stream of a rather slow growth process.
b. The global exposure of the Chinese economy had been far wider than the Indian economy.
ii. China had been introducing economic reforms in phases. In the initial phase, reforms were initiated in the agriculture,
foreign trade, and investment sectors. In the later phase, reforms were initiated in the industrial sector. To attract
foreign investors, special economic zones (SEZs) were set up. These SEZs were judiciously set up in coastal regions
for its advantage of geographical proximity to Hong Kong—the hub of capital investment in Asia. China also has an
upper hand in its political system, cheap labour, and special incentives for foreign investors. Besides, the overseas
Chinese contribute over two-thirds of the inflows of FDI into the Chinese economy.

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