15 DAYS CHALLENGE

Money and Credit

&
Globalization and
The Indian
Economy
Consider the following statements on the meaning of communal
politics. Communal politics is based on the belief that:

1. One religion is superior to that of others.

2. People belonging to different religions can live together
happily as equal citizens.
3. Followers of a particular religion constitute one
community.
4. State power cannot be used to establish the domination
of one religious group over others.

Which of the statements is/are correct?

a. A, B, C, and D

b. A, B, and D

c. A and C

d. B and D
The Constitution permits the state to interfere in religious
matters to ensure equality within and among religious
communities. In which of the following situations did the
state interfere in a religious matter?

A. Ban on religious festival celebration

B. Ban on inter-caste marriage

C. Ban on religious institutions

D. Ban on untouchability
HOMEWORK STARS
 LESSON OUTCOMES

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IDENTIFICATION
MONEY and
credit
 What is Money?How money acts as a medium of
exchange?

Money can be defined as a medium of exchange used to

pay for commodities and services. Money can be used
as notes, coins and demand deposits.

Money as a Medium of Exchange

In our daily life, we do so many transactions involving money.

Goods are being bought and sold in exchange of money. For eg.
A stationeries shopkeeper sells stationery for money, with this
money the shopkeeper buys clothes.
 Double coincidence of wants

Barter
System

When both parties agrees to buy each other commodities,

it is called double coincidence of wants.
Evolution of Money

Money is something that can act as a medium of exchange in transactions

 What do you understand by the Double
Coincidence of Wants?

What is the Barter system? What are the limitations of the

Barter system?

What is money? How does money eliminate the need for a

double coincidence of wants?

Why is money called a medium of exchange?

 Forms of Currency

Currency Deposits and

Cheque

Paper Notes Coins

 Modern currency is not made of precious metal such as gold, silver and copper
1. It is accepted as a medium of exchange because the currency is authorised by the
government of the country
Currency
In India, the Reserve Bank of India issues currency notes on behalf of the central
government

● The other form in which people hold money is as deposits with

Deposits with Banks banks
● At a point of time, people need only some currency for their
day-to-day needs

★ The deposits in the bank accounts can be

Demand deposits withdrawn on demand, these deposits are called
demand deposits

● A cheque is a paper instructing the bank to pay a specific

CHEQUE amount from the person’s account to the person in whose
name the cheque has been issued.
 What are the two forms of modern currency? Why
is the modern currency accepted as a medium of
exchange?

What are Demand Deposits? How is money safe in banks?

Explain.
Which one of the following is the important
characteristic of modern form of currency?

A It is made from precious metal

B It is made from thing of everyday use

C It is authorised by the commercial banks

It is authorised by the Government of the

D country
 Sandeep has surplus money, so he opens a
bank account and deposits in it. Whenever he
needs money, he can go to his bank and
withdraw from there. This kind of deposit with
the banks are known as

A Demand deposit

B B. Fixed deposit

C C. Term deposit

D. Surplus deposit
D
 LOAN ACTIVITIES OF BANKS

Get Give

Banks pay lower interest Banks charge a higher Main source of

rate on deposits interest rate on loans income
 Maximum
Banks mediate
between those who Total Amount
have surplus funds (the Amount
depositors) and those
who are in need of
these funds (the
borrowers).
Banks use the major portion
of the deposits to extend
loans
15%
Banks hold about 15 percent of their There is huge demand for loans
deposits as cash for various economic
activities.

To pay the depositors who might

come to withdraw money from the
bank on any given day
 Two different Credit situations
Positive Role of Credit
Salim a shoemaker, took loans to meet the
expenses for a big order & promised to repay
it. At the end of the month, Salim is able to
deliver the order, make a good profit, and
repay the money that he had borrowed.
● Salim obtains credit to meet the working
capital needs of production.
● The credit helps him to meet the ongoing
expenses of production, complete
production on time, and thereby increase
his earnings.
● Credit therefore plays a vital and positive
role in this situation.
Negative Role of
Credit
Swapna, a small farmer took loan from
moneylender to meet the expenses of
cultivation. The crop failed last year & takes a
fresh loan for cultivation. However, her earning
is not sufficient to cover the past loan. She
falls into a Debt Trap.
In Swapna’s case, the failure of the crop made loan
repayment impossible.
● She had to sell part of the land to repay the loan.
She falls in a ‘Debt-Trap’
● Credit, instead of helping Swapna improve her
earnings, makes her worse off.
● Credit in this case pushes the borrower
into a situation from which recovery is very painful.
 TERMS OF CREDIT
Interest rate, collateral and documentation requirement, and the mode of
repayment together comprise what is called the terms of credit.

INTEREST Borrower must pay to the lender along with the repayment of the
RATE principal. .

Collateral is an asset that the borrower owns (such as land,

COLLATERAL building, vehicle, livestocks, deposits with banks) and uses this
as a guarantee to a lender until the loan is repaid.

DOCUMENTATI
ON REQUIRED PAPERWORK,( verification)

Mode of
Payment
Installment/ Lump Sum Cash/ Gold/ Property
Which one of the following is not included in the
terms of credit?

A Rate of Interest

B Mode of payment

C Rate of saving

D Collateral
PAGE 45
 What do you mean by the term ‘collateral’? Why do
banks ask for collateral while giving loans?

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

What are the main terms of credit?

 How do the deposits with the banks become their
source of income?

'Business is all about solving people's problems - at a profit.’

Why is credit a crucial element in economic development?

Or
Why cheap and affordable credit is important for a country?

State the potential negative economic implications

that would arise in an economy in the absence of the
concept of credit.
 Loan
Formal sector
Credit
Formal sector Credit are loans
from banks and cooperatives
The Reserve Bank of India
supervises the functioning of
formal sources of loans.
Informal sector
Credit
The informal lenders include
moneylenders, traders,
employers, relatives and
friends, etc
There is no organisation which
supervises the credit activities of
lenders in the informal sector.
 Formal Sources of Credit Informal Sources of Credit

The formal sources of loans are followed The informal sources include all small
by laws and regulations registered by the and scattered units that are typically
government. beyond the control of the government.

Authorized by the government Unauthorized sources

Supervised by Reserve Bank of India or

Not supervised by any authority
RBI

Charge low-interest rates Charge high-interest rates

The main aim is social welfare The main aim is profit earning

Examples: Workers, moneylenders,

Examples: Cooperatives and Banks
relatives and friends, merchants, etc.
Cooperative societies

● Major source of cheap credit in rural areas

● Members pool their resources for cooperation in certain

areas

● Farmers cooperatives, weaver cooperatives, industrial

workers cooperatives etc

● Deposits from members as collaterals

● Borrow from Bank against these collaterals and lend to the

members

● Once the fund is repaid another round of borrowing-lending

takes place

● Krishak cooperatives functions in a village near

Sonpur. It has 2300 farmers as members.
Significance of RBI in the Indian economy:

● In India, the Reserve Bank of India issues currency notes on behalf of the
Central Government.
● It supervises the functioning of formal sources of loans.
● The banks maintain a minimum cash balance out of the deposits they
receive.The RBI monitors that the banks actually maintain the cash balance.
● The RBI sees that the banks Periodically, bgive loans not just to
profit-making businesses and traders but also to small cultivators,
small-scale industries, small borrowers, etc.
● Banks have to submit information to the RBI on how much they are lending,
to whom, at what interest rate, etc.
Why do poor people take loans from informal sector?

● Limited availability of Banks in rural areas.

● People in rural areas face problems with regard to
documentation.
● The absence of collateral is one of the major
reasons which prevents the poor from getting bank
loans.
● Rural people get easy loans from richer
households through informal ways.
● Poor people can approach the moneylenders even
without repaying their earlier loans.
 Self-Help Groups for the Poor

❖ SHG has 15-20 members belonging to a particular region

❖ Saving per member varies from Rs 25 to Rs 100 or more depending on the ability of the
people to save.
❖ Members can take small loans from the group to meet their needs
❖ The group charges interest on these loans which is less than moneylenders
❖ After a year or two they become eligible for availing loans from bank
❖ Loan is sanctioned in the name of the group and is meant to create self employment
opportunities for the members.
Why SHG?

★ SHGs help borrowers overcome the problem of lack of

collateral.
★ They can get timely loans for a variety of purposes and at
a reasonable interest rate
★ SHGs are the building blocks of organisation of the
rural poor.
In a SHG most of the decisions regarding loan
activities are taken by

A Banks

B Member

C Non-government organizations

D Cooperatives
 Explain the significance of The Reserve Bank of
India in the Indian economy.

In what ways RBI supervises the functioning of banks?

Compare and Contrast the conditions for taking loans

from formal and informal sources. Suggest an alternative
source that you think is best for the rural poor.

“The credit activities of the informal sector should

be discouraged.” Support the statement with
arguments.
Rohan has taken a loan of Rs.5 lakhs from the bank to purchase a house at a 12% rate of interest.
He has to submit papers about the new house and salary records to the bank. What is this process
called?

A Interest Rate

B Collateral

C Principal Amount

D Installments
Most agricultural laborers like Mohan depend upon loans from the informal sector.
Which of the following statements about this sector is correct

A There is govt. bodies to supervise the informal sector

B Money lenders ask for a reasonable rate of interest

C Cost of informal loans to the borrower is quite high

D Money lenders use fair means to get their money back

Which of the following is evident from the
graph

A Informal source of Credit is highest

B Formal sources of credit is higher

C Loan through Cooperatives are higher

D None of the above

Find the Incorrect option

A Demand deposit share the essential

features of money

B With demand deposit payments can be

made without cash

C
Demand deposits are a safe way of money
transformation

D Demand deposit facility is like a cheque

Which of the following mediums of exchanges cannot be legally
refused in settling transactions in India?

A Dollar

B Euro

C Yen

D Rupee
 GLOBALISATION
AND
THE INDIAN ECONOMY
WHAT IS GLOBALISATION?

Globalisation is this process of rapid integration or interconnection between countries under

conditions of free flow of trade and capital and movement of persons across borders

More and more goods and services, investments and technology are moving between
countries
● As consumers in today’s world, some of us have a wide choice of goods and services before us.
The latest models of digital cameras, mobile phones and televisions made by the leading
manufacturers of the world are within our reach. Every season, new models of automobiles can be
seen on Indian roads. In a matter of years, our markets have been transformed!

● Companies crossed the native country boundary in search of raw materials, cheap labour and
other resources to reduce the production cost and earn maximum profits.
● Sometimes such businesses will look for government policies that look after their interests.

● An MNC is a company that owns or controls production in more than one nation. These companies
produce and market goods and services all over the world. e.g. Coca-Cola, Pepsi, Honda, Nokia.

● The production process is divided into parts and spread out across the globe as per resource
availability. Example: India – raw material, China – cheap labour, India-highly qualified people to
handle customers' technical queries.
What is a MNC?

❏ A MNC is a company that owns or controls

production in more than one nation.
❏ MNCs set up offices and factories for production in
regions where they can get cheap labour and other
resources.
What does MNCs do?

❖ MNCs look for locations around the

world which would be cheap for their
production
❖ Foreign investment by MNCs in these
countries will rise and also foreign trade
between countries will increase.
❖ A large part of the foreign trade is also
controlled by MNCs

MNCs are playing a major role

in the globalisation process.
For Example
★ For instance, the car manufacturing plant
of Ford Motors in India not only produces
cars for the Indian markets, it also exports
cars to other developing countries and
exports car components for its many
factories around the world.

★ activities of most MNCs involve substantial

trade in goods and also services.

The result of greater foreign investment

and greater foreign trade has been
greater integration of production and
markets across countries
There are a variety of ways as mentioned below, in which MNCs are spreading
their production and interacting with local producers in various countries across the
globe.

● By setting up partnerships with local companies

● By using the local companies for supplies
● By closely competing with local companies or buying them up

MNCs set up production jointly with local companies which benefits local
companies in the following ways:
● First, MNCs can provide money for additional investments, like buying new
machines for faster production.
● Second, MNCs might bring with them the latest technology for production.
 Foreign Trade and Integration of Markets
● Foreign trade creates an opportunity to sell goods and competes with producers from
other countries.

● It also enables a buyer to take advantage of a variety of choices by importing the goods.

● Each producer can compete closely with the competitor even if they are a very long
distance away. Example: Effect of Chinese toy manufacturers over Indian toy
manufacturers. Indian toy manufacturers sold toys at high rates. Chinese manufacturers
found the opportunity to sell plastic toys at low rates hence gaining the market for their
products. This has led to decreased sales for Indian toy manufacturers.
Movement across the world

Movement Of Goods Movement Of investment Movement Of technology

Movement of people

In past
decade
Movement of people between countries. People usually
Movement of
move from one country to another in search of better
people is less
income, better jobs or better education.
due to
Restriction
FACTORS THAT HAVE ENABLED GLOBALISATION
1 Technology

Rapid improvement in technology stimulated the globalisation process

Transportation technology

The past fifty years have seen several improvements

in transportation technology. This has made much
faster delivery of goods across long distances
possible at lower costs
Information and communication Technology.

★ Technology in the areas of telecommunications, computers,

Internet has been changing rapidly.

★ Telecommunication facilities
(telegraph, telephone
including mobile phones, fax)
are used to connect one
another around the world, to
communicate from remote Internet also allows
areas. us to send instant
This has been facilitated by electronic mail
satellite communication devices. (e-mail) and talk
(voice-mail) across
the world at
negligible costs.
2 Foreign Trade Policy Liberalisation of foreign trade and foreign
investment policy

Trade barrier

Tax on imports is an example of trade barrier. It is

called a barrier because governments can use trade
barriers to increase or decrease foreign trade and to
balance domestic production
The Indian government, after Independence put barriers to
foreign trade and foreign investment to protect the producers
within the country from foreign competition
 1991: Indian Policy changes

★ The government decided that the time had come for Indian producers to
compete with producers around the globe.

competition improve performance & quality of domestic producers

★ This decision was supported by powerful international organisations

★ Indian Government opened Domestic market for international trade

★ Barriers on foreign trade and Investment were removed to

ease import and export
Impact of Liberalization

★ Barriers to foreign trade and foreign investment were

partially removed.
★ Goods could be imported and exported easily.
★ Foreign companies could Set-up factories and offices
here.
★ Indian producers got opportunities to compete with
producers around the globe.
Why did the Indian government liberalize trade regulations in 1991?

A
Government wanted foreign exchange equivalent to
Indian Currency

B
Government wanted to maintain good relations with
Western Countries.

C
Government wanted Indian producers to compete in
the World Market.

D
Government wanted to provide socio-economic
justice to all
Identify the correct statements about globalisation

(i) Removal of barriers by the government

(ii) Foreign companies are allowed to set up factories
(iii) Has enabled all companies to increase their investments
(iv) Has lessened foreign investment and foreign trade

A i & ii

B ii & ii

C i & iii

D ii & iv
When was G20 Found and what to lead its Formation?

A In 1919 after the First World War

B In 1945 after the second World War

C In 1999 after the Asian financial crisis

D None of the Above

Given Below are the Agendas of G-20: Find the odd one
out

A Law and Order

B Climate Change

C Sustainable Development

D Anti Corruption
Green Development, Climate Finance &
LiFE. Accelerated, Inclusive & Resilient
Growth. Accelerating progress on SDGs.
One of the themes in the G20 Agenda is the concept of
LiFE- The abbreviation of LiFE is

A Living life for Enhancement

B Lifestyle For Environment

C Law and Order for Enhancement

D Logic for Environment

LiFE (Lifestyle for Environment), which
highlights the importance of
environmentally sustainable and
responsible lifestyle choices, both at the
individual and national level, in creating a
cleaner, greener, and bluer future.
The idea of LiFE was Pronounced by which leader during
COP 2021

A Donald Trump

B Xi Jinping

C Narendra Modi

D Rishi sunak
he concept of 'Lifestyle for the
Environment (LiFE) was introduced by
Prime Minister Narendra Modi at COP26
in Glasgow on 1st November 2021
India assumed the G20 Presidency on the 1st of December 2022
from which Country?

A Indonesia

B China

C Brazil

D Turkey
India assumes the G20
Presidency on the 1st of
December 2022 from Indonesia
and will convene the G20
Leaders' Summit for the first time
in the country in 2023.
State True or False

The Group of Twenty was strengthened and upgraded to the level

of Heads of State and during the global financial crisis of 2007 and
got designated as the ‘premier forum for international economic
cooperation’.

A True

B False
Government of India has initiated many activities -What is the
Main key element of these Initiatives

A Taking the G20 closer to the public

B Sustainable development

C Green India

D Skill Up Nation
Which of the following is a key theme for
the G 20 summit in 2023?

One Earth, One Family, One

Future
The summit's theme, “Vasudhaiva
Kutumbakam” or “One Earth, One Family,
One Future” is rooted in ancient Sanskrit
texts and the goal of sustainable
development.
The G20 consists of two parallel tracks: the Finance Track
and the Sherpa Track.Who Leads the Finance Track.

A Home Minister

B Center Bank Governors only

C
Finance Minister and Central Bank
Governors

D Speaker of Upper House

The G20 consists of two parallel
tracks: the Finance Track and the
Sherpa Track. Finance Ministers
and Central Bank Governors lead
the Finance Track while Sherpas
lead the Sherpa Track. The G20
process from the Sherpa side is
coordinated by the Sherpas of
member countries, who are
personal emissaries of the
Leaders
G-20 Logo Depicts which of the following

A Vasudhaiva Kutumbakam

B Kudumbashree

C Vasudhaiva Natakam

D Prabanja Kutumbakam
Which of the Following Country is not a Member of G-20

A Indonesia

B China

C Vietnam

D Germany
3830 3216
For which three of the following reasons are loans made available to SHG
members?

A. Meeting working capital needs

B. Releasing mortgaged land
C. Personal loans for child’s marriage
D. Acquiring assets like sewing machine
E. Buying properties

Options:

A. A, B and D
B. A, B ,C and D
C. A and D
D. A,B,C,D and E
Where do banks get the money to extend loans?

A. Reserve bank of India

B. Foreign banks

C. Deposits made by customers

D. Government
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