Indian Economy Mixed Quiz: Set 7

The correct answer is A, agriculture. On a small family holding every member of the household may work on the land even though the work needs far fewer hands; if some of them were withdrawn, total output would not fall. Their labour is therefore adding nothing, which is what disguised or hidden unemployment means.

Option B, information technology, and option C, banking, are organised service activities where posts are sanctioned and surplus workers are not carried in this way. Option D, mining, is organised and capital intensive for the most part. The other forms of unemployment are worth learning alongside: seasonal unemployment, where work exists only in certain months, which also afflicts agriculture, and open unemployment, where a person willing to work at the going wage finds none at all. Papers ask all three definitions in rotation.

The correct answer is A, the primary sector. Mining takes a product straight out of nature without changing its form, exactly as farming, fishing and forestry do, and every activity of that kind is placed in the primary sector.

Option B, the secondary sector, would be correct only after the ore is processed: turning iron ore into steel is manufacturing and therefore secondary. Option C, the tertiary sector, covers services such as transport, trade and banking, which produce no goods of their own. Option D, the quaternary sector, is a modern extension used for knowledge based services such as research and software, and it does not appear in the standard threefold classification that examinations use. Candidates most often place mining wrongly in the secondary sector because it is heavy industrial work, so remember the test: if the product is taken directly from nature, it is primary.

The correct answer is A, P. C. Mahalanobis. The statistician who founded the Indian Statistical Institute gave the Second Plan its framework, in which investment was directed towards heavy and basic industries such as steel, machinery and power on the argument that they would build the capacity to produce everything else.

Option B, Harrod and Domar, gave the model behind the First Plan, which connects the rate of growth to saving and the capital output ratio. Option C, M. Visvesvaraya, wrote Planned Economy for India in 1934 and is the pioneer of the idea, but no plan is based on a model of his. Option D, V. K. R. V. Rao, is remembered for the first scientific estimate of national income in independent India. The First and Second Plan models are the single most repeated pair from this chapter.

The correct answer is B, 30. Sensex, short for ‘Sensitive Index’, tracks 30 large, well-established and actively traded companies listed on the BSE, chosen from different sectors of the economy. It was launched in 1986 with 1978–79 as its base year, when its value was set at 100, and it is calculated by the free-float market capitalisation method, which counts only the shares available for trading. When people say ‘the market rose today’, they usually mean the Sensex or the Nifty went up. The BSE, founded in 1875 and located on Dalal Street in Mumbai, is Asia’s oldest stock exchange. Option A is wrong because the Sensex has never been a 20-stock index. Option C is wrong because 25 is not its size either; the count has stayed at 30 since 1986. Option D is wrong because ten companies would be too few to represent the whole market. Exam tip: Sensex has 30 companies on the BSE, base 1978–79 = 100; Nifty has 50 companies on the NSE.

The correct answer is B, M3. M3 is called broad money or aggregate monetary resources. It equals M1 plus the time deposits of the public with banks, so it measures almost all the money available in the economy. The Reserve Bank of India uses four measures, M1 to M4, introduced in 1977, and M3 is the one most often used to track money supply. Liquidity falls as we move from M1 to M4, because time deposits and post office deposits cannot be spent as quickly as cash. Option A is wrong because M2 is M1 plus the savings deposits with post office savings banks. Option C is wrong because M4 is M3 plus total post office deposits, excluding National Savings Certificates. Option D is wrong because M1 is narrow money: currency with the public, demand deposits with banks and other deposits with the RBI. Exam tip: M1 is narrow money and M3 is broad money or aggregate monetary resources; M1 is the most liquid and M4 the least.

The correct answer is B, Tendulkar Committee. The expert group headed by Suresh Tendulkar, which reported in 2009, recommended measuring poverty through MPCE on the Mixed Reference Period. Under this method, spending on five rarely bought items, namely clothing, footwear, durable goods, education and institutional medical care, is recorded over the last 365 days, and all other items over the last 30 days. Tendulkar also moved away from the old calorie norm and used one poverty line basket for rural and urban India, covering spending on health and education. By this method, India's poverty ratio came to 21.9 per cent in 2011-12. A is wrong, because the Lakdawala group of 1993 used the Uniform Reference Period and state-wise poverty lines. C is wrong, because the Dandekar and Rath study of 1971 based poverty on an intake of 2,250 calories a day. D is wrong, because the Alagh task force of 1979 fixed calorie norms of 2,400 rural and 2,100 urban. Exam tip: Alagh 1979 calories, Lakdawala 1993 URP, Tendulkar 2009 MRP, Rangarajan 2014.

The correct answer is B, 100 days. The Mahatma Gandhi National Rural Employment Guarantee Act, passed in 2005, guarantees one hundred days of wage employment in a financial year to every rural household whose adult members volunteer to do unskilled manual work.

Options A, C and D are plausible round numbers with no basis in the Act. Two further details are asked as often as the number itself. First, the unit of the guarantee is the household, not the individual, so the hundred days are shared among the adults of one family. Second, if work is not provided within fifteen days of the demand, an unemployment allowance becomes payable by the state government. It is these enforceable claims that make the law a rights based measure rather than a welfare programme that the government may or may not run.

The correct answer is C, minimum support price. The MSP is announced before sowing so that farmers know the lowest price at which the government will buy their crop. The Union Government fixes it on the recommendation of the Commission for Agricultural Costs and Prices (CACP), set up in 1965, and the final approval comes from the Cabinet Committee on Economic Affairs. It is announced separately for kharif and rabi crops, while sugarcane gets a fair and remunerative price instead. Wheat was the first crop brought under MSP, in 1966-67, at the start of the Green Revolution. Option A is wrong because a buffer stock is grain the government holds for food security, and no "buffer price" is announced for farmers. Option B is wrong because the issue price is the rate at which the Food Corporation of India sells grain to the States for the public distribution system. Option D is wrong because "fair sustenance price" is not an official price at all. Exam tip: MSP is recommended by the CACP and approved by the CCEA; sugarcane gets the FRP instead.

The correct answer is B, the Third Plan. The plan of 1961 to 1966 was overwhelmed by the war with China in 1962, the war with Pakistan in 1965 and a severe drought, so instead of a new five year plan the government ran three annual plans from 1966 to 1969, a stretch called the plan holiday.

Option A, the Second Plan, ran its course from 1956 to 1961 and laid the base of heavy industry, despite a foreign exchange crisis. Option C, the Fourth Plan, is the one that began in 1969 after the holiday ended, so it is the result rather than the cause. Option D, the Fifth Plan, was ended a year early in 1978 by a new government and was followed by a rolling plan, which is a different break and a frequent source of confusion.

The correct answer is C, FRBM Act. The Fiscal Responsibility and Budget Management Act, 2003 is a fiscal reform: it binds the Union government to cut its fiscal and revenue deficits and to report on its borrowing. It deals with the government's budget, not with banks and financial markets. Financial sector reforms after 1991 began with the Narasimham Committee on the financial system, which asked for sound banking rules. Banks had to keep capital in proportion to their risky assets, the capital adequacy ratio based on the Basel norms, and to recognise bad loans honestly as non-performing assets (NPAs) instead of hiding them in their books. Option A is wrong because capital adequacy norms were a core banking reform. Option B is wrong because clear rules for NPAs were part of the same reform. Option D is wrong because the SARFAESI Act, 2002 lets banks seize and sell the security of defaulting borrowers without going to court, a major step to recover bad loans. Exam tip: banking reforms = capital adequacy, NPA norms, SARFAESI; FRBM = fiscal discipline of the government.

The correct answer is A, the primary sector. Agriculture and its allied activities still give work to the largest number of Indians, even though the sector's contribution to national income is far smaller than that share of employment would suggest.

Option C, the tertiary sector, is the strong distractor, because services do contribute the largest share of national income; but income share and employment share are two different questions, and papers set them side by side precisely to catch the candidate who has learned only one line. Option B, the secondary sector, absorbed a large part of the workforce in the countries that industrialised early, which India has not repeated on the same scale. Option D, the quaternary sector, is a later refinement covering knowledge services. The mismatch between output and employment is the reason productivity and incomes per worker in agriculture remain low.

The correct answer is A, 2nd Oct 2014. Prime Minister Narendra Modi launched the Swachh Bharat Mission on 2 October 2014, Mahatma Gandhi's 145th birth anniversary, at Rajpath in New Delhi. Its target was a clean and open defecation free (ODF) India by 2 October 2019, Gandhiji's 150th birth anniversary, mainly by building household and community toilets and improving waste management. The mission has two parts, Swachh Bharat Mission (Gramin) for villages and Swachh Bharat Mission (Urban) for towns and cities. Its logo is Gandhiji's round spectacles with the words "Swachh Bharat". B is wrong because 14 November is Children's Day, Jawaharlal Nehru's birthday, and 2015 is also the wrong year. C is wrong because 14 November 2014 was Children's Day, not the launch date. D is wrong because by 2 October 2015 the mission had already completed its first year. Exam tip: Swachh Bharat = 2 October 2014, target ODF India by 2 October 2019, logo = Gandhiji's spectacles; the Swachh Survekshan ranks cities on cleanliness.

The correct answer is C, the Fifth Plan. Running from 1974 to 1979, it took the removal of poverty and the attainment of self-reliance as its twin objectives, and it is remembered by the slogan Garibi Hatao. It was terminated a year ahead of schedule in 1978 and a rolling plan was introduced in its place.

Option A, the Third Plan, aimed at a self-reliant and self-generating economy and ended in the plan holiday. Option B, the Fourth Plan, is remembered for the phrase growth with stability and for the nationalisation of major banks in 1969. Option D, the Sixth Plan, continued the attack on poverty and began the move away from rigid controls, which is why it is offered here. Learning one phrase for each plan is the quickest way to clear this family of questions.

The correct answer is D, Gas and water supply. The Index of Industrial Production (IIP) covers only three sectors: mining, manufacturing and electricity. It is a monthly index released by the National Statistics Office under the Ministry of Statistics and Programme Implementation, and it shows how fast the volume of industrial output is rising or falling compared with a base year. Manufacturing carries by far the largest weight in the index, so a slowdown in factories pulls the IIP down quickly. Gas and water supply are counted in the wider industry sector of national income, together with electricity, but they are not part of the IIP basket, and that is the trap in this question. Option A is wrong because mining is one of the three sectors of the IIP. Option B is wrong because electricity is also a sector of the IIP. Option C is wrong because manufacturing is the biggest part of the index. Exam tip: IIP = mining + manufacturing + electricity; the index of eight core industries is a separate, smaller index.

The correct answer is C, the tertiary sector. Banking and insurance create no physical product; they support production and trade by providing credit, moving money and covering risk, and such support activities are the core of the tertiary or service sector.

Option A, the primary sector, covers activities that draw on nature directly, and option B, the secondary sector, covers the transformation of those products into manufactured goods. Option D, the unorganised sector, belongs to the other classification altogether, the one based on the conditions of employment; a bank is in fact a typical organised sector employer, with fixed hours, provident fund and job security. Note that a single word can decide the sector: growing sugarcane is primary, making sugar from it is secondary, and selling or financing that sugar is tertiary.

The correct answer is A, Morris D. Morris. The American economic historian Morris David Morris built the Physical Quality of Life Index in the 1970s for the Overseas Development Council, and set it out in his 1979 book on measuring the condition of the world’s poor. He wanted a simple measure of well-being that did not depend on income alone. The PQLI uses three indicators, each scored from 0 to 100 and given equal weight: basic literacy, infant mortality and life expectancy at age one. Their average gives a country a score out of 100. Kerala was often cited as a place where a high PQLI came with a low income. Option B is wrong because the UNDP publishes the Human Development Index, which came later, in 1990. Option C is wrong because Mahbub-ul-Haq designed the HDI, not the PQLI. Option D is wrong because the index has a known author, Morris D. Morris. Exam tip: PQLI, Morris D. Morris, 1979, three indicators; HDI, Mahbub-ul-Haq and the UNDP, 1990.

The correct answer is B, the Prime Minister of India. The office of Prime Minister carries the chairmanship of NITI Aayog, exactly as it carried the chairmanship of the Planning Commission before 2015 and as it carries the chairmanship of the Governing Council and of the National Development Council.

Option A, the President, is the constitutional head of the Union but has no role in this executive body. Option C, the Union Finance Minister, may serve as an ex officio member drawn from the Council of Ministers, but does not chair the institution. Option D, the Governor of the Reserve Bank, heads the central bank and its monetary work and is unconnected with NITI Aayog. Remember that the working head of the body is the vice-chairperson, while the administrative head is a chief executive officer of the rank of secretary.

The correct answer is B, the conditions and terms of employment. An enterprise belongs to the organised sector when it is registered with the government and follows labour laws, so that employment is regular and secure and workers get fixed hours, paid leave, provident fund and medical benefits. Where none of this holds, the unit is in the unorganised sector.

Option A, ownership of assets, is the basis of the public and private classification. Option C, the nature of the activity, is the basis of the primary, secondary and tertiary classification. Option D has no place in any of these. The whole chapter turns on keeping the three bases apart, because an activity can be described under all three at once: a government owned steel plant is secondary by activity, organised by employment conditions and public by ownership.

The correct answer is A. The Governing Council brings together the Prime Minister, the chief ministers of all the states, the chief ministers of union territories that have legislatures and the lieutenant governors of the remaining union territories, so that the Union and the states can settle priorities in one room.

Option B, the governors of states, is wrong because the council rests on elected heads of government, not on the constitutional heads of states. Option C, judges of the Supreme Court, belong to the judiciary and cannot sit on an executive policy body. Option D, the Finance Commission, is a separate constitutional body under Article 280 that recommends the sharing of taxes between the Union and the states. The composition of the Governing Council is the clearest proof of the cooperative federalism the institution claims to practise.

The correct answer is A, ownership. In the public sector the government owns the assets and provides the services, and the aim is public welfare rather than profit; in the private sector ownership rests with individuals or companies and profit is the motive.

Option B, the number of workers, matters for definitions such as that of a factory under labour law, but not for this division. Option C, the use of machinery, distinguishes capital intensive from labour intensive production, another idea altogether. Option D, location, has no bearing on ownership. The reason the government takes up railways, roads, irrigation, power and ports is that these need heavy investment and return it slowly, so private firms would not build them at prices ordinary people could pay; they also carry benefits for the whole economy that a private balance sheet does not capture.