JKBOSE 9th Class Social Science Solutions Chapter 2 Understanding the Indian Economy

Economic Activity : That activity which gives an income is called an Economic Activity.

Economy : When economic activities are carried out in a framework then it is called an economy.

Secondary Activities : Secondary activities are those activities in which primary goods are used to produce some other commodity.

Primary Activities : Primary activities of an economy are those activities which are associated directly with land and water e.g. farming, hunting, fishing, etc.

Tertiary Activities : All those activities which link the producers and consumers are called tertiary activities. Retail stores, wholesale shops and banks are some of its examples.

Private Sector : The private sector is owned and controlled by individuals or a group of individuals with the objective of profit making.

Public Sector : Public sector are controlled and owned by the government with the aim of social welfare in general.

Unemployment : It is a situation in which a section of people, who are able and willing to work but do not find gainful work.

Disguised unemployment : It is a situation in which more people are engaged in an activity than the required one.

Main cause of unemployment : Population growth is the main cause of unemployment in India.

Gross Domestic Product : It is the value of all final goods and services produced within a country during a particular year.

Organised Sector : Organised sector covers those enterprises or places of work where the terms of employment are regular and therefore people have assured work.

Unorganised Sector : It is characterised by small and scattered units which are largely outside the control of the government.

Poverty : Poverty refers to a situation in which a section of society is unable to meet its basic need.

Food Security : It means availability, accessibility and affordability of food to all people at all time.

Industry : Group of firms is called industry.

Employment : Employment is a relationship between two parties, usually based on a contract where one party, which may be a corporation, for profit organization, co-operative or other entity is the employer and the other is the employee.

Disguised unemployment : It is a type of hidden unemployment, where people seems to be working but they do not contributed to the actual production.

Under employment : It is a situation, where people work at a Job, which is below their capacity and skill set and education.

Food security : The state of having reliable access to a sufficient quantity of affordable, nutritious food.

Famine : Extreme scarcity of food is famine.

Buffer stock : A reserve of a commodity that can be used to offset price fluctuation.

Subsidy : A sum of money granted by the state or a public body to help an industry or business keep the price of a commodity or service law.

Minimum Support Price : It is a form of market intervention by the govt. of India to insure agricultural producers against any sharp fall in farm prices.

Mixed economy : It is a system, in which private and public sector work together.

Ans.— Gross domestic product is the value of all final goods and services produced within a country during a particular year. It is the sum of production in the three sectors gives what is called Gross Domestic product of a country.

Calculation of GDP can be understand with the help of a example.

For Example, a farmer who sells rice to a flour mill for Rs.10 per kg. The mill grinds the wheat and sell the the flour to biscuit company for Rs.15 per kg. The biscuit company uses the flour and other things such as sugar, milk and oil to make 10 packets of biscuit. It sells buiscuit in the market to the consumers for

Rs.150 (Rs.15 per packet). Biscuits are the final goods, that is, good that reach the consumers. Thus the value of final goods and services produced in each sector during a particular year provides the total production of the sector for that year. And the production in the three sector gives what is called the Gross Domestic product.

Sectors	% GDP Share
Primary Sector	13.68
Secondary Sector	27.03
Tertiary Sector	59.29

Ans.— A multinational corporation is a company that owns or controls production in more than one nation.

Globalization is the process by which the economies of countries around the world become increasingly integrated overtime. MNGs are agents of globalization. Globalization gives business access to markets that would have been difficult to reach in past. Because of the internet, customers from anywhere in the world can order products from companies anywhere else in the world, and have those products delivered by aeroplane in just a few weeks. This is naturally a tremendous advantage to business, who stand to increase their potential customer base by millions by reaching out to foreign buyers. Globalization allows businesses to access labour at cheaper prices. So it is tone that globalization has made the world one big market.

I. Resources of different countries are used for producing goods and services they are able to do most efficiently.

II. Consumers to get much wider variety of products to choosen from.

III. Consumers get the product they want at more competitive prices.

Ans.— Following are the various forms of unemployment :

1. Seasonal Unemployment : Seasonal unemployment happens when people are not able to find jobs during some months at the year and is generally found in the agricultural sector of the economy.

2. Disguised unemployment : It refers to that unemployment which is not open for everyone and remains concealed. This usually happens among family members engaged in agricultural activity. The work requires the service of five people but engaged eight people in such a situation, even if many workers are withdrawn, the same work can be continued by few workers.

3. Educated Unemployment : Many youth with matriculation, graduation and post graduation degrees are not able to find job. This is called educated unemployment.

Ans.— Poverty refers to a situation in which a section of society is unable to meet its basic need. These needs includes minimum human needs in respect of food, clothing, housing, education andw health.

Following are the anti-poverty measures undertaken by the government of India.

1. MGNREGA 2005. Mahatma Gandhi National Rural Employment Guarantee Act is a scheme implemented by the government of India at national level and of the magnitude not seen anywhere in world. The scheme guarantees unskilled wage employment of 100 days to one person in every rural household at minimum wage. The scheme is implemented in all the districts of the country to create employment and hence reduce poverty. The state government are required to give unemployment allowance of 1/3. The wage if not able to provide employment with in 15 days of their registration.

2. National Food for work Programme (NFWP). The scheme was launched in 2004 in 150 most backward districts of the country to remove poverty. It is implemented as 100 percent centrally sponsored scheme and food grains are provided free of cost to the states.

3. Prime Minister Rozgar Yojna (PMRY). This scheme was started in 1993 to create self-employment opportunities for educated unemployment youth in rural areas and small towns.

4. Rural employment Generation Programme (REGP). This programme was launched in 1995. Under this programme one can get assistance in the form of loans to establish small business.

5. Swarnajayanti Gram Swarozgar Yojna (SGSY). This programme was launched in 1999 to bring the assisted poor families above the poverty line by organising them into self help groups through a mix of bank credit and government subsidy.

6. Antodaya Anna Yojna (AAY). This scheme was launched in December 2000 to provide food grains at highly subsidised rates to the poor families below the poverty line.

Ans.— Food security means availability, accessibility and affordability of food to all people at all times.

Targeted PDS. In June 1997 the Government of India launched the TPDS with the focus on poor replacing the RPDS. The allocation to the food grains to the state/UT’s was made by the Govt. of India on the basis of average consumption in the past i.e. average annual off take of food grains for the PDS during the past 10 years at the time of introduction of TPDS.

1. Availability of food. It means food production withing the country, food imports and the previous years stock stored in government granaries.

2. Accessibility. It means food is within reach of very person.

3. Affordability. It implies that an individual has enough money to buy sufficient, safe and nutritious food to meet ones dietary needs.

Ans.— 1. Primary Sector Activity : Production of wheat, vegetable, milk, marble and coal are some examples of primary activities.

2. Secondary Sector Activity :Paper from wood, bread from wheat and nails and steel bars made from iron are the examples of secondary activities.

3. Tertiary Sector Activity : Retail stores, wholesale shops, and banks are some of its examples.

Ans.— People as resource is away of referring to a country’s working people in terms of their existing productive skills and abilities. Looking at the population from this productive aspect emphasizes its ability to contribute to the creation of the GNP. Like other resources population also is a resource a human resource.

Ans.— Poverty line may be defined as a line which differentiates between poor and non poor. The line as such may not be a marked line but the value expressions that state the limits of poverty. The limits of poverty may be in terms of income and consumption.

Ans.— Buffer stock is the stock of food grains, namely wheat and rice produced by the government through FCI.

Ans.— Food for work programme was launched in 2004 in 150 most backward districts of the country. The programme is open to all rural poor who are in need to wage employment and desire to do manual unskilled work.

Ans.— economic activities.

Ans.— secondary sector.

Ans.— all final goods and services.

Ans.— globalization.

Ans.— education, health.

Ans.— unemployment.

Ans.— poverty.

Ans.— 2400, 2100.

Ans.— Minimum Support Price.

Ans.— Primary sector.

Ans.— Dairy.

Ans.— service sector.

Ans.— Unorganized Sector.

Ans.— poor.

(i) Basic sector

(ii) Service sector

(iii) Agriculture and related sector

(iv) Natural sector.

Ans.— (iii) Agriculture and related sector.

(i) Public sector

(ii) Private sector

(iii) Mixed sector

(iv) All of the above.

Ans.— (i) Public sector

(i) To earn profits

(ii) Not just to earn profits

(i) Public sector

(ii) Private sector

(iii) Mixed sector

(iv) All of the above.

Ans.— (ii) Private sector.

(i) National Rural Employment Guarantee Act.

(ii) National Rural Employed Goods Act.

(iii) Natural Rural Employment Guarantee Act.

(iv) None of these.

Ans.— (i) National Rural Employment Guarantee Act.

(i) Primary sector

(ii) Tertiary sector

(iii) Industrial sector

(iv) Factory sector.

Ans.—  (ii) Tertiary sector.

(i) Service sector

(ii) Industiral sector

(iii) Factory sector

(iv) Working sector.

Ans.— (i) Service sector

(i) Primary

(ii) Secondary

(iii) Tertiary

(iv) All of the above.

Ans.— (i) Primary.

(i) Service sector

(ii) Primary sector

(iii) Secondary sector

(iv) None of these

Ans.— (i) Service sector.

(i) Sugar

(ii) Sweets

(iii) Sharbat

(iv) None of these

Ans.— (i) Sugar.

(i) It flourishes trade in the domestic market

(ii) Goods and services are produced for internal market.

(iii) It gives no opportunity for the production to reach beyond the domestic market.

(iv) Investment is done to expand trade within the domestic market.

Ans.— (iii) It gives no opportunity for the production to reach beyond the domestic market.

Ans.— An activity which generates income to a person is called economic activity.

Ans.— An economy is the sum total of all economic activities as the people, society or country.

Ans.— It is the value of all final goods and services produced with in a country during a particular year.

Ans.— Organised sector is that sector where the terms of employment are regular and therefore people have assured work. Workers in the organised sector enjoy security of employment.

Ans.— The Unorganized sector is characterised by small and scattered units which are largely outside the control of the govt.

Ans.— Primary activites of an economy are those activities which are associated directly with land and water e.g. farming, hunting, fishing etc.

Ans.— Secondary activities are those activities in which primary goods are used to produce some other commodity.

Ans.— All those activities which link the producers and consumers are called tertiary activities.

Ans.— For the rural area 2400 calories and for the urban area 2100 calories have been fixed for per person per day in India.

Ans.— The Poverty line is estimated periodically normally every five year by conducting sample survey. These surveys are carried out by the National Sample Survey Organisation. (NSSO).

Ans.— Roughly 29 Crore people in India live in poverty.

Ans.—The poorest section of the society might be insecure most of the times while persons above the poverty line might also be food insecure when the country faces national disaster.

Ans.— During calamity production of food grains decreases. It creates a shortage of food in the affected areas which may cause a situation of starvation.

Ans.— A massive starvation might take a turn of famine.

Ans.— Year 1941 shows a drastic decline in food availability.

Ans.— The globalisation means unification or integration of the domestic economy with the world economy by interaction and interdependence.

Ans.— Liberalisation means reducing government interference in economic activities and encouraging privatisation.

Ans.—  Privatisation means encouraging private sector and discouraging Public Sector.

Ans.— At first the government has encouraged investors from abroad to invest in India and second to remove restrictions on import of goods and reduce taxes on imported goods.

Ans.— A MNCs is a company that owns or controls production in more than one nation.

Ans.— The health of a person helps him to realise his potential and the ability to fight illness.

Ans.— In Economics, any commodity which is produced and subsequently consumed by the consumer, to satisfy its current wants or needs, is a consumer goods or final goods.

Ans.—  Intermediate goods are goods, such as partly finished goods, used as inputs in the production of other goods including final goods.

Ans.— It is a situation, when a person has no job in hand and does not earn anything at all.

Ans.— A multinational corporation has facilities and other assets in at least one country other than its home country.

Ans.— Age group of 6 to 14 years.

Ans.— Mahatma Gandhi National Rural Employment Guarantee Act.

Ans.— In December 2000.

Ans.— SDRF: State Disaster Response Fund. REGP: Rural Employment Generation Programme. TPDS Targeted Public distribution System. PMRY: Pradhan Mantri Rozgar Yozana.

Ans.— These are the following:

(i) Rural Works Programme : This programme aims at construction of roads rail links. health centres etc. in rural areas.

(ii) Integrated Dry Land Agricultural Development : Under this, programmes likes soil conservation, devleopment of land and water harvesting system are undertaken.

Ans.— Disguised unemployment : It is a situation in which more people are engaged in an activity than the required numbers. For example, for weeding one acre of wheat or paddy field only 4 persons are required, but if 6 workers come and do the same work then the additional 2 person are underemployed.

Technical unemployment : If unemployment occurs owing to changes in technology it is referred to as technical unemployment. For example, when computer drastically reduces the need for skilled workers in an economy it means they are technically unemployed.

Ans.— The tertiary sector has become the largest producer in India over the last 30 years because of the following reasons :

(i) The development of agriculture and industry leads to the development of services such as trade, transport storage etc.

(ii) In any country, certain basic services, such as hospitals, education institutions, post and telegraph services, police stations, etc., are required.

(iii) Rise in income level results in more demand for services such as caling out, tourism shopping, etc.

(iv) Growth of knowledge results in emergence of new services such as those based on information and communication technology.

Ans.— (i) Primary sector contriutes more than 40% to the GDP of India.

(ii) Its employment share in more than 60%.

(iii) It is the most labour intensive sector of Indian economy.

Organised sector	Unorganised sector
(i) The sector is registered by the government.	(i) The sector is not registered by the Rugovernment.
(ii) The terms of employment are regular.	(ii) The terms of employment are not regular.
(iii) This sector various laws governed by factories act, minimum wage act, etc.	(iii) This sector Thi act. is not governed by any
(iv) This sector includes banks, hospitals, schools, etc.	(iv) This sector includes a large number of people who are employed on their own doing small jobs.

Ans.— Organised sector covers those places of work where the terms of employment are regular. Worker in the organised sector enjoy security of employment. They are expected to work for only fixed number of hours. They also get several other benefits from the employers such as paid leave, provident fund, gratuity etc. In contrast, the unorganised sector is characterised by small and scattered units which are largely outside the control of the government. Jobs here are low-paid and often not regular. There are no extra benefits.

Ans.— The objective of MGNREGA 2005 is to enhance the livelihood security of the people in rural areas by generating employment through works that develop the infrastructure base of that area. MGNREGA addresses the cause of chronic poverty such as drought, deforestation, and soil erosion. Under MGNREGA, 2005, all those who are able to and are in need of work have been guaranteed 100 days of employment in a year by the government. If the government fails to provide employment, it will give unemployment allowances to the unemployed people.

Ans.— Two measures to reduce the problem of unemployment in India are as follows :

1. Development of Rural Areas : This will help in reducing unemployment in rural areas, where the bulk of unemployment is found. Use of labour-intensive techniques in industries is an option that has so far been considered in smallscale and rural industries only. Local construction projects such as small and medium irrigation and drainage works, construction of storage facilities, roads, etc. should be taken up. Better irrigation facilities, expansion of animal husbandry, development of cottage and small industries, agroprocessing and manufacturing units based on agricultural products can generate employment.

2. Training for Productive Work : Problem of unemployment can be reduced by providing training for productive work. This will increase the marketable skills and flexibility to learn new things and innovation.

Ans.— Disguised unemployment is a situation of underemployment where more people are working than the number of people required for that task. For example in rural areas there are more people engaged in agriculture that what is necessary. So, even if remove few people production will not be affected. In urban areas, there are thousands of casual workers who work for daily wages. In garment industry large number of people are employed at meagre salary.

Ans.— Open unemployment is a situation in which a person who is able and willing to work at existing wage rate cannot get work. This kind of unemployment exists due to lack of resources. Open unemployment exists among the educated unemployed. Generally this type of unemployment can be seen in the urban areas. On the other hand disguised unemployment is a situation in which more people are engaged in an economic activity than the numbers of workers required. The absence of alternative employment opportunities leads to this situation. Disguised unemployment exists generally in the agricultural sector.

Ans.— Usually the Indicator relates to the level of income and consumption. But now poverty is looked through other social Indicators like illiteracy level, lack of general resistance due to malnutrition, lack of access to health care, lack of job opportunities, lack of access to safe drinking water, sanitation etc.

Ans.— The National Rural Employment Guarantee Act provides 100 days assured employment every year to every rural household in 200 districts, later, the Scheme will be extended to 600 districts. Now this scheme is launched in all the districts of the country.

Ans.— National Food for Work Programme which was launched in 2004 in 150 most backward districts of the country. The programme is open to all rural poor who are in need of wage employment and desire to do manual unskilled work. It is implemented as a 100 per cent centrally sponsored scheme and food grains provided free of cost to the states.

Ans.— Prime Minister Rozgar Yojana was launched in 1993. The aim of the programme is to create self employment opportunities for educated unemployed youths in rural areas and small towns. They are helped in setting up small business and Industries.

Ans.— Although a large section of people suffer from food and nutrition insecurity in India. The worst affected groups are landless people with little or no land to depend upon traditional, artisans, providers of traditional services, petty selfemployed workers and destitutes including beggars. In the urban areas, the food insecure families are those whose working members are generally employed in ill paid occupations and casual labour market.

Ans.— The Introduction of Rationing in India dates back to the 1940s against the back drop of the Bengal famine. The rationing system was revived in the wake of an acute food shortage during 1960’s prior to the Green Revolution. In the wake of high incidence of poverty levels, as reported by the NSSO in the Mid1970’s three food intervention programme were introduced.

(i) PDS (Public Distribution System)

(ii) ICDS (Integrated Child Development Services)

(iii) FFW (Food for Work).

Ans.— Following are the main limitations of the public distribution system :

(i) Irregular opening of shops.

(ii) Poor quality foodgrains.

(iii) Insufficient stock.

(iv) Resorting of PDS dealers to malpractices.

Ans.— Under public distribution system or the PDS, the Government has opened more than 4-6 lakhs ration shops all over the country to distribute food grains and other essential goods to the poor people at reasonable rates.

Ans.— Targated public distribution system was introduced to adopt the principle of targeting the ‘poor in all areas’. In order to ensure availability of minimum quantity of food grains to the families living below the poverty line, the govt. launched the TPDS system in June 1997. It was Intended to benefit about 6 crore poor families in the country for whom a quantum of 72 lakh tonnes of food grains. was earmarked annually at the rate of 10 kg per family per month.

Ans.— Following are the main functions of the FCI :

(i) The Food Cooperation of India or FCI purchases wheat and rice from the farmers in the states, where there is surplus production.

(ii) It also builds the buffer stock.

Ans.— Disguised unemployment is a situation of underemployment, where people are working but all of them are working below their potential. This kind of underemployment is hidden in contrast to someone who does not have a job and is clearly visible as unemployed.

For example in rural areas there are more people engaged in agriculture than what is necessary. So, even if remove few people, production will not be affected.

Ans.— The counting of various goods and services by each economic sector is a comprehensive process. To get around this problem, economists suggest that the values of goods and services should be used. However, only the value of final goods and services is taken into account. The valve of intermediate goods is not taken into account. Let us say, a farmer produces cotton and sells if for ₹ 5000 to a thread making factory which in turn sells the thread at 8000 to a cloth mill which sells the cloth at the final value of 10,000. This final value will be taken into consederation for calculating the value of goods and services in the three sectors.

Ans.— The tertiary sector is different from the primary and secondary sectors.. These are activities that help in the development of the primary and secondary sectors. These activities, by themselves, do not produce a good but they aid or support the production process. For example, goods that are produced in the primary or secondary sector would need to be transported by trucks, or trains and then sold in wholesale and retail shops which are provided by the tertiary sector. Since the activities of tertiary sector generate services reather then goods, the tertiary sector is also known as service sector which includes essential services that does not directly help in the production of goods. Doctors, engineers, teachers, lawyers, chartered accountants, etc. fall in this category. Internet cafe, ATM booths, call centers have also become important in the tertiary sector.

Ans.— Public sector contributes to economic development of a nation by providing several things to the society at a reasonable cost which the private sector cannot provide. Public sector spends large amount of money on construction of roads, bridges, railways, harbours, electricity generation and irrigation facilities through dams etc. which is beyond the capacity of the private sector. It also encourages private sector enterprises, farmers and traders through subsidies and support prices. It also contributes to the economic development of a nation by providing education and health facilities to the general public. Thus, the public sector plays a vital role in the economic development of a nation and works for the welfare of the people. The private sector generally, has neither the resources nor the will to take up such large programmes of development for the welfare of the people.

Ans.— The workers in an unorganised sector need protection on issues such as wages, safety and health. The small and scattered units of unorganised sector are largely outside the control of the government. There are rules and regulations, but they are not followed. Jobs are low paid and often not regular. There is no provision for overtime, paid leave, holidays, leave due to sickness, etc. Employment is not secure. People can be asked to leave without any reason. A lot also depends on the whim of the employer.

1. Wages : Wages are low in the unorganised sector. Workers here are not paid any allowances like dearness allowance or compensatory allowance. They are not paid for extra hours they put in. They do not get paid leave or holiday.

2. Safety : No safety measures are taken in the unorganised sector for the protection of the workers. This results in injuries or death of labourers in factories, construction places, etc.

3. Health : Workers are not provided any medical facilities in the unorganised sector. Working conditions are not hygienic. As a result they tend to fall ill. No medical insurance facilities are available to the workers. So they do not have  access to good health facilities. Sometimes long-term illness cost them their jobs as well as their lives.

Thus protection and support to the unorganised sector workers is necessary on issues such as wages, safety and health for their economic and social development.

Ans.— Public sector : The Public sector is that sector of economy in which the government owns most of the assets and provides all the services e.g. Railways, Post office and telegraph are examples of services provided by the public sector.

(i) Activities in the private sector are guided by the motive to earn profits.

(ii) It is unable to provide facilities to people at resonable rate.

(iii) Private sector is not guided by welfare of the people.

Ans.— A remarkable fact about India is that while there has been a change in the share of the three sectors in the GDP, a similar shift has not taken place in employment. More than half of the workers in the country are still working in the primary sector, mainly in agriculture forming only one-third of the GDP. In contrast to this, the secondary and tertiary sectors produce three fourth of the produce whereas they employ less than half the people. In addition, production in the service sector rose by eleven times but employment in the service sector rose less than three times.

Ans.— Public Distribution System. The food procured by the FCI is distributed through government regulated ration shops among the poorer section of the society. This is called the Public Distribution System.

(i) PDs protects that people from high prices.

(ii) PDs distributes food grains to poor people at reasonable rates.

(iii) PDs discourages black marketing and hoarding.

(iv) PDs help in food security.

Ans.— Following are the main limitations of Public Distribution System :

(i) The Public Distribution System has been working for many years but still hunger is prevailing in the Indian society.

(ii) As most of godowns have more stock than their capacity this leads to deterioration in grain quality.

(iii) The Food Corporation of India godowns are overflowing with foodgrains. In 2002 the stock of wheat and rice was 63 million tonnes which was much more than the minimum stock. There is a general consensus that high level of buffer stock of food grains is very undesirable and can be wasteful.

(iv) Due to incentive by the govt. most of the states are producing only rice and wheat. The intensive utilisation of water in the cultivation of rice has led to environmental degradation and fall in the water level, threatening the sustainablility of the agricultural development in many states.

Ans.— Following are the main reasons for why is there a need for food security in India :

(i) There is a continuous tendency on the part of traders in India to hoard food grains and to accentuate the shortage of food grains in order to push up the prices for reaping extraordinary profit. Thus, this speculation and hoarding has created artificial crisis of foodgrains in the country.

(ii) The population of India is increasing at a very fast rate. The population of India has increased from 361 millions in 1951 to about 1027 millions in 2001.

(iii) Most of the food grains are produced only by some states like Haryana, Punjab, Uttar Pradesh and Andhra Pradesh, So, it is very difficult to transfer food grains from one region to another.

Ans.— (i) Public Distribution System is the most important step taken by the government of India towards ensuring food security. In the beginning the coverage of PDS was universal with no discrimination between the poor and non-poor. Over the years, the policy related to PDS has been revised to make it more efficient and targeted.

(ii) In 1992 Revamped Public Distribution System (RPDs) was introduced in 1700 blocks in the country. The target was to provide the benefits of PDs to remote and backward areas.

(iii) From June 1997, in a renewed attempt, Targeted Public Distribution System (TPDs) was introduced to adopt the principle of targeting the ‘poor in all areas’. It was for the first time that a differential price policy was adopted for poor and non-poor.

(iv) Further, in 2000 two special schemes were launched viz, Antyodaya Anna Yojana, (AAY) and the Annapurna Scheme (APS) with special target groups of ‘poorest of the poor’ and ‘Indigent Senior Citizens’, respectively. The functioning of these two schemes was linked with the existing network of the PDS.

Ans.— Following are the two methods by which poverty line is estimated in India :

1. Income Method. Under income method, a minimum per capita income is fixed like in 2010-11 the income was fixed at 707 per capita per month, and in urban areas it was 1360. If any family has less than the fixed income, it is considered as below the poverty line. This method is used to distribute food at subsidized price through PDS.

2. Expenditure Method. (i) Under this method the minimum nutritional food requirement for survival is estimated. The total minimum food requirement is firstly measured in calories. The calories is then converted into money value i.e. in Rs.

(ii) A minimum amount which is required for clothes and other requirements is added to the money value of food. This total amount is considered as poverty line.

(iii) All the families which spend less than the poverty line are considered as below the poverty line families. In India, the daily minimum nutritional requirement for a person has been fixed at 2400 calories in rural areas, and 2100 calories in urban areas.

Ans.— There are many reasons for poverty in India.

(i) One historical reason is the low level of economic development under the British Colonial administration. The policies of the Colonial government ruined traditional handicrafts and discouraged development of industries like textile.

(ii) With the spread of irrigation and the Green Revolution many job opportunities were created in the agricultural sector. But the effects were limited to some parts of India.

(iii) Another reason of high poverty rate has been the huge income inequalities. One of the major reasons for this is the unequal distribution of land and other resources.

(iv) There has been a rapid increase in population which leads to low growth rate of per capita income. Thus high growth of population in India leads to poverty.

(v) Underutilized resources in India leads to poverty.

(vi) There is a lack of well developed infrastructure such as transportation, banking, warehousing, roads, water, power, health are highly deficient which leads to poverty.

(vii) Many socio-cultural and economic factors are also responsible for poverty in India.

(viii) The high level of indebtedness is both the cause and effect of poverty.

Ans.— There are a variety of ways in which the MNCs are spreading their production and interaction with local producers in various countries across the globe. Following are the ways in which MNCs have spread their production :

(1) MNCs investment is to buy up local companies and then expand production.

(2) Large MNCs in developed countries place orders for production with small producers. Then sell these under their own names.

(3) Large MNCs have tremendous power to determine price, quality, delivery and labour conditions of distant producers.

(4) This kind of production process leads to co-operation of different countries.

Ans.— “Globalisation and competition among producers has been of advantage to the consumers.” It is a true statement globalisation and competition definetly producers both at local and foreign label has been of advantage to consumers, particularly the well-off sections in the urban areas. There is greater choice before these consumers who now enjoy improved quality and lower prices for several products. As a result, these people today, enjoy much higher standards of living than was possible earlier.

Ans.— In Indian economy globalisation and greater competition among producersboth local and foreign producers-has been of advantage to consumers, particularly the well-off sections in the urban areas. There is a greater choice before these consumers.

MNCs have increased their investments in India, as a result of it, new jobs have been created. Also, local companies supplying raw materials, etc. to these industries have prospered. Gloabalisation has also created new opportunities for companies providing services, particularly those involving Information technology (IT).

In India, for a large number of small producers and workers globalisation has posed major challenges. Small manufacturers have been hit hard due to competition. Several units have shut down rendering many workers jobless. Many works are denied their fair share of benefits brought about by globalisation.

Ans.— MNCs control production in the following ways :

(i) MNCs set up production where it is close to the markets, where there is labour available at low cost and where the availability of other factors of production is assured.

(ii) MNCs might look for government policies that look after their interest.

(iii) MNCs set up factories or production units at places where there is a hope to earn profits.

(iv) MNCs control production by placing orders for production with small producers.

Ans.— The government can make the benefits of globalisation available to all sections of the society in the following ways :

(i) The government can ensure that labour laws are properly implemented and the workers get their rights.

(ii) It can support small producers to imporve their performance till the time they become strong enough to compete.

(iii) If necessary the government can use trade and investment barriers.

(iv) The government can negotiate at the WTO for ‘fairer rules’.

Ans.— Foreign trade leads to integration of markets across the countries. For example, Chinese toys in India and Indian readymade garments in other countries lead to integration of markets. Due to foreign trade goods travel from one market to another. Choice of goods in the market rises. Prices of similar goods in the two markets tend to become equal. The Indian producer of readymade garments can sell their product not only in domestic market but also in other countries. Thus, foreign trade lead to integration of markets across countries.

Ans.— Globalisation means integrating the economy with the world economy. Globalisation holds that the Indian economy must be closely related to the world economy so that there is a largely unrestricted exchange of goods, technology and experience between them and relatively free flow of capital from developed countries to India. In pursuance of this policy India is affected in the following way :

(i) The quantitative restriction has been increasingly done with.

(ii) Rates of import duty have been reduced.

(iii) Restriction on free flow of foreign private investment have been largly removed or greatly related.

Ans.— The following are the main differences between formal and informal sources of credit :

Formal Sources	Informal Sources
(i) Formal sources of credit are banks and co-operatives.	(i) Informal sources of credit are moneylenders, employers traders, relatives and friends.
(ii) Formal sources charge less rate of interest on loans.	(ii) Informal sources charge higher rate of interest on loans.
(iii) Lower rate of interest results in more income and better condition for the borrower.	(iii) Higher rate of interest results in less income for the borrowers. As a result they fell in debt-trap.
(iv) RBI supervises the functioning Roof formal sources of credit.	(iv) There is no organisation which supervises the functioning of informal sources of credit.
(v) Rules and regulations are followed by the formal sources of credit.	(v) No rules and regulations are followed by the informal sources of credit. They do whatever is in their interest.

Ans.— Two impacts of W.T.O. on the Indian Economy are as follows :

(i) W.T.O. gives an opportunity to India for trading with other member countries of the world. Greater competition among producers both local and foreign producers has been of advantage to consumers, particularly the well-off sections in the urban areas. There is greater choice before the consumers who now enjoy improved quality and lower prices for several products. As a result of it these people are enjoying much higher standard of living than was possible earlier.

(ii) Due to the membership of W.T.O. it is expected that the technology from developed countries will be available to India at a reduced cost.