Sectors of Economy is an important part of Economy and its syllabus. Previous Year Question (PYQ) papers are invaluable resources for aspirants preparing for competitive exams like the Union Public Service Commission (UPSC) examinations. In this article we present important PYQ on Sectors of Economy.
PYQ on Sectors of Economy
Q- Which of the following activities constitute real sector in the economy? (2022)
- Farmers harvesting their crops
- Textile mills converting raw cotton into fabrics
- A commercial bank lending money to a trading company
- A corporate body issuing Rupee Denominated Bonds overseas
(a) 1 and 2 only
(b) 2, 3 and 4 only
(c) 1, 3 and 4 only
(d) 1, 2, 3 and 4
Answer- Option A
EXPLANATION
The real sector of an economy encompasses crucial activities that significantly contribute to economic output, primarily represented by sectors essential for the growth of GDP. This includes activities such as farmers harvesting crops and textile mills processing raw cotton into fabrics, as highlighted in points 1 and 2.
Within the real sector, entities include nonfinancial corporations, households, and nonprofit institutions serving households. From a monetary and financial statistics perspective, households and nonprofit institutions serving households are sometimes combined into a subsector referred to as “Other resident sectors.”
However, activities such as commercial banks lending money to trading companies and corporate bodies issuing Rupee-denominated bonds overseas do not fall within the purview of the real sector. Therefore, points 3 and 4 are inaccurately characterized as part of the real sector.
Q- In India, which one of the following compiles information on industrial disputes, closures, retrenchments and lay-offs in factories employing workers? (2022)
- Central Statistics Office
- Department for Promotion of Industry and Internal Trade
- Labour Bureau
- National Technical Manpower Information System
Answer- Option C
EXPLANATION
Since its establishment in 1920, the Labour Bureau has been responsible for gathering, organizing, analyzing, and sharing labor-related data at both the national and state levels. The bureau compiles statistics on various aspects of labor, including industrial disputes, closures, retrenchments, and lay-offs.
Q- With reference to the casual workers employed in India, consider the following statements: (2021)
1. All casual workers are entitled to employees Provident Fund Coverage
2. All casual workers are entitled to regular working hours and overtime payment
3. The government can by notification specify that an establishment or industry shall pay wages only through its bank account.
Which of the above statements are correct?
a) 1 and 2 only
b) 2 and 3 only
c) 1 and 3 only
d) 1, 2 and 3
Answer- Option D
EXPLANATION
Statement 1 is correct. A casual worker is someone employed under a temporary contract with limited benefits and job security, lacking a stable relationship with an employer. The Supreme Court has ruled that casual workers are entitled to social security benefits under the Employees’ Provident Funds and Miscellaneous Provisions Act, as per its inclusive definition of an employee.
Statement 2 is correct. Casual workers should enjoy the same rights as regular workers, as per Supreme Court guidelines that classify casual labor as a form of employment. In India, employees are entitled to regular working hours and overtime payment according to the Minimum Wages Rules, 1950.
Statement 3 is correct. The Payment of Wages (Amendment) Act 2017 empowers the Government to mandate that wages for employees of industrial or other establishments must be paid through cheque or direct bank account credit.
Q- Consider the following statements (2021)
Other things remaining unchanged, market demand for a good might increase if
1. Price of its substitute increases
2. Price of its complement increases
3. The good is an inferior good and income of the consumers increases
4. Its price falls
Which of the above statements are correct?
a) 1 and 4 only
b) 2, 3 and 4
c) 1, 3 and 4
d) 1, 2 and 3
Answer- Option A
EXPLANATION
The following relationships exist between demand and the price of products under changing economic conditions:
- Demand for a product rises if the price of one of its substitutes increases, and it decreases if the price of one of its substitutes decreases.
- Demand for a product increases if the price of one of its complements decreases. For instance, demand for ice cream increases if the price of fudge sauce decreases.
- Demand for an inferior good decreases when income rises, while demand for a normal good increases with rising income.
- When the price of a good falls, its demand increases.
Q- Which one of the following effects of creation of black money in India has been the main cause of worry to the Government of India? (2021)
a) Diversion of resources to the purchase of real estate and investment in luxury housing
b) Investment in unproductive activities and purchase of precious stones, jewellery, gold etc.
c) Large donations to political parties and growth of regionalism
d) Loss of revenue to the State Exchequer due to tax evasion
Answer- Option D
EXPLANATION
Black money encompasses all earnings acquired through illegal activities as well as legal income that is deliberately concealed from tax authorities. Its existence leads to financial leakage since untaxed unreported income results in revenue loss for the government. Moreover, these funds typically evade inclusion in the banking system, posing challenges for legitimate small businesses and entrepreneurs in securing loans.
Q- Which of the following factors/policies were affecting the price of rice in India in the recent past? (2020)
(1) Minimum Support Price
(2) Government’s trading
(3) Government’s stockpiling
(4) Consumer subsidies
Select the correct answer using the code given below:
(a) 1, 2 and 4 only
(b) 1, 3 and 4 only
(c) 2 and 3 only
(d) 1, 2, 3 and 4
Answer- Option D
EXPLANATION
Several domestic factors influence the prices of rice in India. These include the intensity of the seasonal monsoon across the country and the production levels of both Basmati and non-Basmati rice varieties. Another factor is the ratio of full and broken kernels during the milling process of paddy.
The government’s policies regarding trading and the Minimum Support Price (MSP) of rice also play a significant role, as they can lead to stock diversion from the open market, subsequently driving up prices for consumers. Additionally, rice tenders conducted by organizations like the Food Corporation of India (FCI) and consumer subsidies provided by the government can impact rice prices. Moreover, the government’s stockpiling practices, particularly when stock levels are low, can constrain its ability to mitigate price rises. Finally, climatic shocks, such as erratic weather patterns, can have short-term effects on rice production and prices due to changes in demand.
Q- In India, which of the following can be considered as public investment in agriculture? (2020)
(1) Fixing Minimum Support Price for agricultural produce of all crops
(2) Computerization of Primary Agricultural Credit Societies
(3) Social Capital development
(4) Free electricity supply to farmers
(5) Waiver of agricultural loans by the banking system
(6) Setting up of cold storage facilities by the governments.
In India, which of the following can be considered as public investment in agriculture?
Select the correct answer using the code given below:
(a) 1, 2 and 5 only
(b) 1, 3, 4 and 5 only
(c) 2, 3 and 6 only
(d) 1, 2, 3, 4, 5 and 6
Answer- Option C
EXPLANATION
Subsidies such as fixing Minimum Support Prices for agricultural products and providing free electricity to farmers, as well as concessions like the waiver of agricultural loans by the banking system, are not categorized as public investment in agriculture. Therefore, statements 2, 3, and 6 are correct codes as subsidies and incentives are not considered as public investment.
However, additional information provided highlights recent government initiatives in agriculture under the Aatam Nirbhar Bharat Abhiyan announced in May 2020. These initiatives include the creation of an Agri Infra Fund of Rs 1 lakh crore for post-harvest infrastructure, a scheme for establishing 10,000 farmer producer organizations, a special drive to issue Kisan Credit Cards (KCC) to 25 million farmers who do not possess them, and the development of a digital agri-stack to facilitate online marketplaces and smart agriculture.
Q- With reference to the Indian economy after the 1991 economic liberalization, consider the following statements : (2020)
(1) Worker productivity (Rs per worker at 2004-05 prices) increased in urban areas while it decreased in rural areas.
(2) The percentage share of rural areas in the workforce steadily increased.
(3) In rural areas, the growth in the non-farm economy increased.
(4) The growth rate in rural employment decreased.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 3 and 4 only
(c) 3 only
(d) 1, 2 and 4 only
Answer- Option B
EXPLANATION
The data presented by NITI Aayog’s report indicates an increase in worker productivity for both rural and urban areas. In rural regions, productivity rose from Rs. 37,273 in 2004-05 to Rs. 101,755 in 2011-12, while in urban areas, it increased from Rs. 120,419 in 2004-05 to Rs. 282,515 in 2011-12. Therefore, statement 1 is incorrect.
Moreover, the report highlights a gradual shift towards urbanization, resulting in a decrease in the rural share of the workforce from 77.8% in 1993-94 to 70.9% in 2011-12. This decline continued from 76.1% in 1999-00 to 70.9% in 2011-12. Additionally, the growth rate of rural employment declined, turning negative during the period of 2005-12. Consequently, statement 2 is incorrect, while statement 4 is correct.
Q- In a given year in India, official poverty lines are higher in some states than in others because (2019)
0(a) poverty rates vary from State to State
(b) price levels vary from State to State
(c) Gross State Product varies from State to State
(d) quality of public distribution varies from State to State
Answer- Option B
EXPLANATION
The poverty line varies between states due to differences in price levels. It is determined by the income and consumption patterns of the population, which differ across regions. Additionally, the poverty line is influenced by the cost of the consumption basket, which varies from state to state.
Q- The economic cost of food grains to the Food Corporation of India is Minimum Support Price and bonus (if any) paid to the farmers plus (2019)
(a) transportation cost only
(b) interest cost only
(c) procurement incidentals and distribution cost
(d) procurement incidentals and charges for godowns
Answer- Option C
EXAPLANATION
The economic expense associated with the acquisition of food grains by the Food Corporation of India (FCI) encompasses the Minimum Support Price (MSP) along with any bonus provided to farmers, in addition to the incidental expenses incurred during procurement and the costs associated with distribution. FCI’s economic expenditure comprises three primary elements: procurement expenses, procurement price, and distribution costs. Procurement incidentals refer to the initial expenditures accrued during the procurement process, while distribution costs encompass various expenses such as freight charges, handling fees, storage costs, losses incurred during transportation, and establishment expenses.
Q- Increase in absolute and per capita real GNP do not connote a higher level of economic development, if (2018)
(a) industrial output fails to keep pace with agricultural output.
(b) agricultural output fails to keep pace with industrial output.
(c) poverty and unemployment increase.
(d) imports grow faster than exports.
Answer- Option C
EXPLANATION
Economic growth refers to the augmentation of real national income or output within an economy. Conversely, economic development signifies advancements in the quality of life and living standards, encompassing factors like literacy rates, life expectancy, and access to healthcare.
When economic growth is accompanied by positive transformations such as poverty alleviation, decreased unemployment rates, reduced income and wealth disparities, enhanced literacy rates, and improved health and sanitation standards, it constitutes economic development.
Q- Despite being a high saving economy, capital formation may not result in significant increase in output due to (2018)
(a) weak administrative machinery
(b) illiteracy
(c) high population density
(d) high capital-output ratio
Answer- Option D
EXPLANATION
The Capital Output Ratio (COR) represents the proportion of capital formation needed to achieve a certain percentage increase in GDP. It reflects the relationship between investment and the resultant output within a specific timeframe. COR indicates the amount of capital necessary to produce a single unit of output. When the capital-to-output ratio is elevated, a substantial increase in output may not necessarily be realized despite higher capital formation.
Q- Consider the following statements : (2017)
(1) Tax revenue as a percent of GDP of India has steadily increased in the last decade.
(2) Fiscal deficit as a percent of GDP of India has steadily increased in the last decade.
Which of the statements given above is/are correct ?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer- Option D
EXPLANATION
Tax to GDP ratio witnessed a consistent decline during the decade spanning from 2001 to 2011, primarily due to the repercussions of the sub-prime crisis from 2007 to 2010, followed by a gradual recovery. Contrary to the assertion, there was a continuous growth trend in tax to GDP ratio throughout the decade from 2006 to 2016, with the exception of a brief decline observed from 2008 to 2010.
Therefore, statement 1 is inaccurate. Similarly, fiscal deficit to GDP ratio experienced a decrease between 2009 and 2011 during the decade from 2001 to 2011. However, in the subsequent decade from 2006 to 2016, fiscal deficit to GDP ratio exhibited a steady decline from 2011 to 2016, contrary to the claim made in statement 2. Hence, statement 2 is also incorrect.
Q- With reference to pre-packaged items in India, it is mandatory to the manufacturer to put which of the following information on the main label, as per the Food Safety and Standards (Packaging and Labelling) Regulations, 2011? (2016)
(1) List of ingredients including additives
(2) Nutrition information
(3) Recommendations, if any, made by the medical profession about the possibility of any allergic reactions
(4) Vegetarian/non-vegetarian
Select the correct answer using the code given below.
(a) 1, 2 and 3
(b) 2, 3 and 4
(c) 1, 2 and 4
(d) 1 and 4 only
Answer- Option C
EXPLANATION
Every food package is required to display specific information on its label, including the food’s name, list of ingredients with additives, nutritional details, and declaration of being vegetarian or non-vegetarian.
Additionally, the label must include the manufacturer’s name and address, net quantity, date of manufacture or packing, batch identification, best before/use by date, country of origin (for imported food), and instructions for use. However, it is not mandatory for food packets to include information about allergic reactions as diagnosed by medical professionals, hence Statement 3 is incorrect.
Q- With reference to the Indian economy, consider the following statements: (2015)
(1) The rate of growth of Real Gross Domestic Product has steadily increased in the last decade.
(2) The Gross Domestic Product at market prices (in rupees) has steadily increased in the last decade.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer- Option B
EXPLANATION
The decline in the rate of growth of Real Gross Domestic Product (GDP) from 8-9% to 5-6% was attributed to various factors including the recession in 2008 and other subsequent challenges. Hence, statement 1 is incorrect. Major challenges contributing to this decline included a surge in capital inflows, a spike in global commodity prices leading to inflation, the global financial crisis, and a downturn in international trade.
Q- In the ‘Index of Eight Core Industries’, which one of the following is given the highest weight? (2016)
(a) Coal production
(b) Electricity generation
(c) Fertilizer production
(d) Steel production
Answer- Option B
EXPLANATION
The Index of Eight Core Industries (ICI) is a monthly production volume index that evaluates the combined and individual performance of production in eight essential industries, including Coal, Crude Oil, Natural Gas, Refinery Products, Fertilizers, Steel, Cement, and Electricity. This index is compiled and released by the Office of the Economic Adviser (OEA) under the Department of Industrial Policy & Promotion (DIPP) within the Ministry of Commerce & Industry. On the other hand, the Index of Industrial Production (IIP) is a composite index indicating the growth rates across various industry groups within a specific timeframe. It measures the growth rate of industry groups categorized by broad sectors such as Mining, Manufacturing, and Electricity, as well as use-based sectors like Basic Goods, Capital Goods, and Intermediate Goods. Notably, the eight core sector industries covered by the ICI collectively account for approximately 40% of the items included in the IIP.
Q-The Fair and Remunerative Price (FRP) of sugarcane is approved by the (2016)
(a) Cabinet Committee on Economic Affairs
(b) Commission for Agricultural Costs and Prices
(c) Directorate of Marketing and Inspection, Ministry of Agriculture
(d) Agricultural Produce Market Committee
Answer- Option A
EXPLANATION
The fair and remunerative prices for sugarcane are established based on the suggestions put forth by the Commission for Agricultural Costs and Prices (CACP). These prices are officially declared by the central government, with the announcements being made by the Cabinet Committee on Economic Affairs (CCEA).
Q- Which of the following brings out the ‘Consumer Price Index Number for Industrial Workers’? (2015)
(a) The Reserve Bank of India
(b) The Department of Economic Affairs
(c) The Labour Bureau
(d) The Department of Personnel and Training
Answer- Option C
EXPLANATION
The Consumer Price Index Numbers for Industrial Workers is crafted to gauge the fluctuation in prices of a specific assortment of goods and services consumed by a specified demographic, namely industrial workers. This index is formulated for industrial workers dwelling in 70 key industrial hubs across the nation. The indices are computed and published on a monthly basis, utilizing weights derived from the Working Class Family Income and Expenditure Survey, along with current prices of chosen items collected from 226 markets dispersed across these 70 centres. Using these centre indices, the All-India index, essentially a weighted mean, is calculated.
Q- Disguised unemployment generally means (2013)
(a) large number of people remain unemployed
(b) alternative employment is not available
(c) marginal productivity of labour is zero
(d) productivity of workers is low
Answer- Option C
EXPLANATION
Disguised unemployment refers to a situation where a larger number of individuals are employed in a task than actually necessary, commonly observed in sectors like agriculture where entire families are involved in activities. Essentially, it implies that the surplus labor could be eliminated without any adverse impact on productivity, indicating that their marginal productivity is negligible or zero.