CBSE Sample Papers for Class 12 Economics Set 3 with Solutions

Students must start practicing the questions from CBSE Sample Papers for Class 12 Economics with Solutions Set 3 are designed as per the revised syllabus.

CBSE Sample Papers for Class 12 Economics Set 3 with Solutions

Time Allowed: 3 Hours
Maximum Marks: 80

General Instructions:

1. This question paper contains two sections
   Section A- Macroeconomics
   Section B- Indian Economic Development
2. This paper contains 20 Multiple Choice Questions of 1 Mark each.
3. This paper contains 4 Short Answer Questions of 3 Marks each to be answered in 60 to 80 words.
4. This paper contains 6 Short Answer Questions of 4 Marks each to be answered in 80 to 100 words.
5. This, paper contains 4 Long Answer Questions of 6 Marks each to be answered in 100 to 150 words.

Section A
(Macroeconomics)

Question 1.
“During the outbreak of the second wave of Covid-19 in the country, India received medical equipments from many countries.” On which account and which side it will be recorded? (1)
(a) Capital account, credit side
(b) Current account, credit side
(c) Capital account, debit side
(d) Current account, debit side
Answer:
(b) The given is an example of uni-lateral transfers received. So, it will be recorded on the credit side of current account of BoP.

Question 2.
“Consumption curve is a straight line”, due to (1)
(a) zero income level
(b) constant marginal propensity to consume
(c) inverse in consumption
(d) All of the above
Answer:
(b) constant marginal propensity to consume

Question 3.
Process of credit creation by commercial banks comes to an end when (1)
(a) fresh deposits with banks become zero
(b) reserve ratio become zero
(c) money multiplier becomes zero
(d) total money reserves become equals to initial deposit
Answer:
(d) total money reserves become equals to initial deposit

Question 4.
Statement I Repayment of loan taken from IMF will be recorded on debit side. Statement II Surplus in BoP refers to a state where debit side exceeds credit side. (1)
Alternatives
(a) Statement I is true and Statement II is false
(b) Statement I is false and Statement II is true
(c) Both the statements are true
(d) Both the statements are false
Answer:
(a) Surplus is the situation of excess of receipts over expenditures. In BoP, it happens when the balance of credit side exceeds the balance of debit side.

Question 5.
Complete the table

Alternatives
(a) 4,000,10,400,4,000,4,000
(b) 2,000,5,200,2,000,2,200
(c) 2,000,3,000,3,000,2,200
(d) 4,000,5,200,3,000,4,000
Answer:
(b) Gross Value Added = Value of Output Intermediate Consumption
(i) Baker 1,000 = Value of Output – 1,000
Value of Output = 2,000
(ii) Total Value of Output
1,000 + 2,000 + 2,200 = 5,200
(iii) Total Intermediate Consumption = Farmer + Baker + Retail Seller 3,000 = 0 + 1,000+ Retail Seller
∴ Retail Seller = 2,000
(iv) Total of Value Added
= 1,000 + 1,000 + 200 = 2,200

Question 6.
If the value of Average Propensity to Consume (APC) is 0.8 and national income is ₹ 4,000 crore, the value of savings will be …… (1)
(a) ₹ 100 crore
(b) ₹ 200 crore
(c) ₹ 800 crore
(d) ₹ 500 crore
Answer:
(c) APS = 1 – APC = 1 – 0.8 = 0.2

Question 7.
As a custodian of nation’s reserves, RBI keeps (1)
(a) reserves of foreign currencies
(b) reserves of gold
(c) reserves of foreign treasury bills
(d) All of the above
Answer:
(d) RBI is the apex financial institution of India. It is a custodian of nation’s reserves.
It keeps reserves of foreign currencies (US $, UK etc). gold, foreign government’s bills and bonds, SDR (Special Drawing Rights), etc.

Question 8.
If Marginal Propensity to Save (MPS) is 0.25 and initial change in investment is ₹ 250 crore, then the final change in income would be (1)
(a) ₹ 1,000 crore
(b) ₹ 1,200 crore
(c) ₹ 500 crore
(d) ₹ 3,500 crore
Answer:

Question 9.
Consumption function is the functional relationship between
(i) consumption
(ii) aggregate demand
(iii) national income
(iv) aggregate supply
Codes
(a) (i) and (ii)
(b) (ii) and (iii)
(c) (i) and (iii)
(d) (ii) and (iv)
Answer:
(c) (i) and (ii) and

Question 10.
What does the following image indicate about the balance of payments? (1)

(a) Surplus in balance of payments
(b) Deficit in balance of payments
(c) Balanced BoP
(d) None of the above
Answer:
(b) Deficit in balance of payments

Question 11.
Find net value added at market price. (3)

Or GNP is the estimated value of the total worth of production and services earned by the normal residents of a country. But to find out NNP, why should we deduct depreciation from GNP?
Answer:
Sales = Output Sold × Price Per Unit
= 800 × 20=₹ 16,000 crore
Now, Value of Output = Sales + Change in Stock
= 16,000 + (-500) = ₹ 15,500 crore
Now, GVA _MP = Value of Output – Intermediate Cost
= 15,500 – 8,000 = ₹ 7,500 crore
Hence, NVA _MP = GVA_MP – Depreciation
= 7,500 – 1,000 = ₹ 6,500 crore
Or
The productive power of physical capital stock of a country diminishes gradually because of the wear and tear in the process of production. When the machine becomes totally unproductive, it has to be replaced by new machine. So, a sum of money is set aside every year into depreciation account and new machine can be purchased by utilising this accumulated sum.
So,.depreciation is deducted from GNP in order to get the more accurate measure of the sustainable production of goods and services in a country in a given year to find NNP.

Question 12.
“Inflation in country X is higher than inflation in country Y, and the exchange rate between the two countries is fixed”.
What is likely to happen to the trade balance between the two countries? (3)
Answer:
The exchange rate is one of the most important determinants of a country’s trade. It plays a vital role in the country’s level of trade. As per the above condition, it is favourable for country X to import goods and on the other hand, for country Y export is favourable. As a result, exports of couptry Y to country X will increase, hence imports of country X will increase.
In such a situation, the goods produced in country X would be expensive. So, its exports would fall and imports will rise leading to a deficit in trade balance.

Question 13.
Keynesian theory tell us that inflationary gap emerges only when full employment is reached. But, in India we often find high rate of inflation along with high rate of unemployment. How do you explain this paradox? (4)
Answer:
Keynesian theory is related to the problem of developed economies. In these economies, unemployment occurs because of the lack of Aggregate Demand (AD). Lack of AD leads to a cut in planned output. Accordingly, lay-off occurs and excess capacity emerges. In such situations, increase in expenditure (implying increase in AD) would lead to increase in planned output, without any increase in the price level. The inflationary gap would emerge only when A D continues to rise even when excess capacity is totally exhausted and full employment is reached.

In developing countries like india, unemployment occurs not because of the lack of AD, but because of the lack of production capacity or the lack of capital. Unlike developed countries, there is no excess capacity in less developed countries like India. Accordingly, price level starts rising following increase in AD, even when there is unemployment in the economy.

Question 14.
An economy is in equilibrium. Calculate the investment expenditure from the following. (4)
National Income = ₹ 800
Marginal Propensity to Save = 0.3
Autonomous Consumption = 100
Answer:
As the economy is in equilibrium
∴ Y = A D
i.e. Y = C + 1
or, C = C + b Y
or Y = C + bY + 1 …..(i)

National Income (Y) = ₹ 800
Marginal Propensity to Save (MPS) = 0.3
Marginal Propensity to Consume
(M P C) = 1 – MPS = 1-0.3 = 0.7
Autonomous consumption (C) = 100
From (i) 800 = 100 + 0.7(800) + l
700 = 560 + l
l = 140

Question 15.
“Credit creation is inversely related to the reserve deposit ratio”. (4)
Justify the given statement, using a hypothetical example.
Or
“The central bank acts as the banker’s bank and performs the function of a supervisor in the financial system”. Explain the function of central bank highlighted in the above statement.
Answer:
Reserve deposit ratio is the minimum reserves which a commercial bank have to maintain as per the instructions of the central bank. It means that higher the reserve deposit ratio, less credit can be created by banks and vice-versa.

i.e. Credit Creation = \(\frac{1}{\text { Reserve Ratio }}\)

Thus, based on the above illustration, we can conclude that there exists an inverse relation between reserve and credit creation.
Or
A central bank is a bank of other commercial banks of the country. It maintains same relation with the commercial banks as commercial banks have with general public.
(1) As a banker’s bank
(a) It grants loans to the commercial banks to fulfil their needs of funds and also accepts their deposits. Thus, it also acts as a custodian of cash reserve (deposits) of commercial banks.
(b) It also provides ‘clearing house’ facility to the commercial banks as it holds cash reserves of all banks, which makes it easier and convenient for central bank to provide this facility.
(ii) As a supervisor, it regulates and controls the working of commercial banks. The regulation may include their licensing, branch expansion, liquidity of assets, etc.

Question 16.
(i) Government incurs expenditure to popularise yoga among the masses. Analyse its impact on gross domestic product and welfare of the people. (3)
(ii) Explain the precautions that are taken while estimating national income by value added method. (3)
Answer:
(i) The expenditure incurred by the government to popularise yoga among the masses will increase the government final consumption expenditure. With a rise in this component, the domestic income of the country will also rise.
So, the expenditure incurred by the government to popularise yoga will lead to an increase in the gross domestic product of the country.
This expenditure will also increase the welfare of the people, as is enumerated below
(a) As more and more people practise yoga, their health and immunity will improve. This will help in increasing their working capacity.
(b) As people’s health improve, so government’s expenditure on the curative aspect of health issues will decrease.
(c) People will develop a positive outlook and their well-being will increase in general.
(ii) While using value added method for computing national income, the following precautions should be taken
(a) The value of intermediate goods should not be included.
(b) Purchase and sale of second hand goods should be excluded.
(c) Imputed value of self-consumed goods should be included.
(d) Own account production of goods should be included.
(e) Value of self-consumed services should not be included in the estimation of national income.
(f) Imputed rent on the owner occupied house is also taken into the account.

Question 17.
(i) From the given information, determine the following
(a) Capital expenditure (3)
(b) Total expenditure (2)

(ii) State any two sources of non-tax revenue receipts.
Or
(i) Explain the allocation function of government budget.
(ii) “Government raises its expenditure on producing public goods”. Which economic value does it reflect? Explain.
Answer:
(i) (a) Fiscal Deticit = Revenue Deficit + (Capital Expenditure – Non-debt creating Capital Receipts)
12,000 = 9,000 + Capital Expenditure – 10,000
Capital Expenditure = 12,000 – 9,000 + 10,000
= ₹ 13,000 crore

(b) Total Expenditure = Pevenue Expenditure + Capital Expenditure = Revenue Deficit + Revenue Receipts + 13,000
= 9,000 + 6,000 + 13,000
∴ Total Expenditure = 28,000 crore

Section B
(Indian Economic Development)

Question 18.
“Green revolution was a major reason of rise in productivity of farming”. What is/ are the advantage(s) of conventional farming methods? (1)
(a) Higher output
(b) Cost effective
(c) Wider range
(d) All of these
Answer:
(d) All of these

Question 19.
The other name of World Bank is …… . (1)
(a) Integrated Bank for Reconstruction and Development (IBRD)
(b) International Bank for Resource and Development (IBRD)
(c) International Bank for Recopstruction and Development (IBRD)
(d) Integrated Bank for Resource and Development (IBRD)
Answer:
(c) International Bank for Reconstruction and Development (IBRD)
(ii) Two sources of non-tax revenue receipts are
(a) Fees
(b) Grants/donation
Or
(i) The government does the allocation of resources in such a manner that there is a balance between the goals of profit maximisation of PSUs. and social welfare in an economy. This allocation is done with the help of government budgetary policy. The government allocates the resources in accordance with the social and economic priorities of the country.

Government encourages the production of certain commodities by giving tax reliefs and providing necessary infrastructural requirements. On the other hand, it discourages production of hazardous and harmful goods by imposing heavy taxes.

(ii) The economic value that is reflected in the rise in the production of public goods is the value of ‘social welfare’. The major objective of the budgetary policy of the government is to enhance the welfare of the society at large. For this, it performs the allocative function. The allocative function is concern
ed with allocating the resources between private and public sectors.
As the public goods cannot be provided by the private sector through the market mechanism, hence the need for providing such goods is to be fulfilled by the government.

Question 20.
Unemployment is a situation in which people who are …… and …… to work but are not getting work. (1)
(a) incapable and willing
(b) capable and not willing
(c) incapable and not willing
(d) capable and willing
Answer:
(d) capable and willing

Question 21.
India, China and Pakistan all have either very high population or high growth rate of population. Which of the following reason(s) is/are responsible for this? (1)
(i) Fertility rate
(ii) Illiteracy
(iii) Poverty
(iv) Birth Rate
Codes
(a) (i) and (iii)
(b) (ii) and (iii)
(c) (iii) and (iv)
(d) (i) and (iv)
Answer:
(a) Fertility rate is calculated as the number of children borne by a women in the reproductive age of 15-45 years, which is generally high in Asian countries, also poverty encourages bigger family size, to have more number of working hands.

Question 22.
Select the correct combination between the following columns (1)

Codes
(a) A-(i)
(b) B-(ii)
(c) C-(iii)
(d) D-(iv)
Answer:
(a) A-(i)

Question 23.
Statement I The emergence of Self Help Groups (SHGs) ensured the reduction in the fissures of the formal credit system.
Statement II The borrowings from SHGs mainly confined to consumption purposes by its members.
Alternatives
(a) Statement I is true and Statement II is false
(b) Statement I is false and Statement II is true
(c) Both the statements are true
(d) Both the statements are false
Answer:
(c) Both the statements are true

Question 24.
Look at the picture given below and identify the process (1)

(a) Human formation
(b) Human capital formation
(c) Human development
(d) Both (b) and (c)
Answer:
(d) Both (b) and (c)

Question 25.
The main objective of the Great Leap Forward (GLF) campaign initiated by China in 1958 aimed at (1)
(a) sending students and professionals to work and learn from the countryside
(b) encouraging people to collectively cultivate lands
(c) industrialising the country on a massive scale
(d) All of the above
Answer:
(c) industrialising the country on a massive scale

Question 26.
Which of the following were prominent features of the Indian economy on the eve of independence?
I. Agriculture as the dominant sector
II. Widespread poverty and low living standards
III. Industrialisation and modern infrastructure
IV. Strong presence of foreign capital
Codes
(a) I and II
(b) II and III
(c) I and IV
(d) III and IV
Answer:
(a) I and II

Question 27.
Assertion (A) Economists emphasise on the need for expanding educational opportunities, as it accelerated development process.
Reason (R) Educated people facilitates adaption of new technology and stimulated innovation. (1)
Alternatives
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A)
(c) Assertion (A) is true, but Reason (R) is false
(d) Assertion (A) is false, but Reason (R) is true
Answer:
(a) Both Assertion (A) and Reason (R) are true and Reason ( R ) is the correct explanation of Assertion (A)

Question 28.
“The Prime Minister urged to increase the rural income by increasing non-farm activities”. Explain how non-farm sector can lead to rise in income of people in rural sector? (3)
Answer:
The non-farm sector, particularly in rural areas is being accorded wide recognition in recent years for the following reasons
(i) Check on Unregulated Migration A planned strategy of rural non-farm development may prevent many rural people from migrating to urban industrial and commercial centres.
(ii) Employment Generation Non-farm rural industries are generally less capital-intensive and more labour absorbing. Thus, they can play a critical role in employment growth in rural areas.
(iii) Reducing Inequalities Ryral income distribution in much less unequal in areas where a wide network of non-farm avenues of employment exists.

Question 29.
Defend of refute the statement with valid explanation.
“It is necessary to replace the private moneylenders by institutional sources of credit.” (3)
Or
According to the National Sample Survey Office’s (NSSO’s) data, the share of regular salaried workers in employment was on the rise in 2017-18 with respect to 2011-12. For the year 2017-18, the proportion of regular salaried workers rose to 13.1 % in 2017-18 for rural areas, and 47 % for urban areas. State any three reasons for this observed trend across rural-urban areas?
Answer:
I defend the given statement. It has been considered necessary to replace the private moneylenders by institutional sources of credit because
(i) The supply of credit was irregular and depended largely on personal relations between the borrower and the lender.
(ii) The moneylenders often took advantage of the ignorance and helplessness of the cultivator to exploit him.
(iii) Since, the borrower was generally illiterate, the moneylender often resorted to downright cheating such as failure to record the repayments in full.
Or The given data shows that the regular salaried employees are more in urban areas than in fural areas.
This is due to the following reasons
(i) Education and Training Regular salaried employment requires certain educational qualifications and professional skills. Education and training facilities are not as good in rural areas as in urban areas. Therefore, chances of regular employment are higher for urban people.
(ii) Infrastructure Large companies including MNCs are concentrated in the urban areas due to the presence of economic infrastructure and availability of modern facilities like banks, transport, communication, etc.
(iii) Agriculture Rural population is primarily engaged in agricultural sector and is not willing to take the risk of leaving their farms for regular salaried employment. This is also a reason for regular salaried employment to be less prevalent in rural areas.

Question 30.
On the basis of the figure given below, explain what type of unemployment can this industry result in? Suggest for two measures for reducing this kind of unemployment? (4)

Source business/economy/study-flags-labour-issuesin-sugarcane-producing-state-7268274/
Answer:
The given figure reflects sugarcane industry which is often characterised by seasonal unemployment.
Seasonal unemployment refers to the form of unemployment in which a worker is employed only during a particular season and then is laid off. It occurs in case of agriculture, ice-cream factories, woollens factories, etc., which have a seasonal demand. They have busy seasons and slack seasons. In the off-season, there is no work and the result is seasonal unemployment. (1)
Following measures may be suggested to reduce seasonal unemployment (any three)
(i) Promotion of multiple cropping, i.e. raising more than one crop on the same piece of land in a year by use of irrigation, facilities fertilisers, mechanisation, etc.
(ii) Development of activities allied to agriculture such as animal husbandry, dairy farming. horticulture, etc., to provide extra employment throughout the year.
(iii) Public investment in rural areas in such fields as irrigation, drainage, flood control, land and environment, improvement of rural roads. schools, hospitals, etc.
(iv) Development of industries in rural areas. (3)

Question 31.
The traditional handicrafts industries were ruined under the British rule. Do you agree with this view? Give reasons in support of your answer. (4)
Answer:
The traditional handicraft industry in India enjoyed worldwide reputation but the British misrule in India led to the decline of Indian handicraft industry. The Britishers adopted the following policies to systematically destroy the handicraft industry
(i) Discriminatory Tariff Policy of the State The Britishers followed a discriminatory tariff policy by allowing tariff free exports of raw material i from India (to provide for the requirements of their industries in Britain) and tariff free import of British industrial products (to promote British goods in India), but placed a heavy duty on the export of handicraft products. So, Indian handicraft products started loosing their domestic as well as foreign markets.
(ii) Competition from Machine-made Products Machine-made products from Britain were cheap and better in quality than the handicraft products. This competition forced many handicrafters to shut down their business.
(iii) Introduction of Railways in India The Britishers introduced railways in India to expand the market of its low priced industrial products. Consequently, the demand of high-priced handicraft products started to fall, thus leading to the downfall of handicraft industry.

Question 32.
State whether the following statements are true or false, with valid arguments
(i) The percentage share of agricultural sector in the exports of the country declined in the period 1950-1990. (2)
(ii) The Gulf crisis and the collapse of Soviet Block was responsible, to a certain extent for the economic crisis of 1991. (2)
Or
“Composition of foreign trade of any country tells us about the nature of commodities that are exported and imported.”
What can you state about the composition of foreign trade at the time of independence? (4)
Answer:
(i) The given statement is true. The share of agricultural sector has fallen because of the reasons enumerated below
(a) During this period, there was substantial growth in Indian industrial sector. With growth in industrial sector, the domestic demand of agricultural products increased as they were being used as raw material in the factories.
(b) During this period, there was a tremendous increase in the population of the country. As population grew, the domestic demand for agricultural products also grew.
(ii) The given statement is true. The Gulf crisis and the collapse of Soviet Block was definitely responsible, to a certain extent, for the economic crisis of 1991, as is explained below
(a) Gulf Crisis US declared war with Iraq in early 1991 because of Saddam Hussein’s attempt to take over Kuwait. Iraq and Kuwait were our big suppliers of oil. With an ongoing war, ships found it hard to reach the Persian Gulf. Also, many oil wells were burnt. This led to rise in oil prices (doubling in a few months).
(b) Collapse of Soviet Block Since 1960, Soviet Union was our biggest export destination. By 1991, it split into 15 nations (Russia, Ukraine, etc). This significantly affected our exports.
With import bill rising (Gulf crisis) and exports falling (collapse of Soviet Union), our foreign exchange position got worsened.
Or India’s foreign trade at the time of independence is described as below
(i) The British followed a typical colonial pattem of trade in India, where it was made to serve their interests.
(ii) India exported raw materials to the home country of the British for their expanding industries.
(iii) India was also developed as a market for the finished goods of the British industries.
During the colonial period, Britain held a monopoly over India’s imports and exports. Hence, the major part of foreign trade was restricted to Britain only, while the rest was permitted to trade with nations like Ceylon (Sri Lanka), Persia (Iran) and China. India was a massive exporter during the colonial period.
Thus, India was reduced to being a source of food for the British, a supplier of raw materials for the British industries and a market for their finished products.

Question 33.
(i) “Kisan Credit Card caters to the credit needs of rural population”. Explain how? (3)
(ii) “Unemployment is an economic as well as a social problem”. Comment. (3)
Or
(i) How has population explosion and the advent of industrial revolution resulted in environmental crisis?
(ii) “Human capital formation gives birth to innovation, invention and technological improvements”. Do you agree with the given statement? Support your answer with valid arguments.
Answer:
(i) Kisan Credit Card (KCC) scheme is an example of credit facility which was introduced by the government in 1988-99. It facilitates access to credit from commercial banks and Regional Rural Banks (RRBs). Under the scheme, the eligible farmers are provided with a kisan card and passbook from the relevant bank.
The farmers can make withdrawaks and repayments of cash within the credit limit as specified in the Kisan Credit Card (KCC).
(ii) Unemployment is both an economic and a social problem. Unemployment is an economic problem in the sense that unemployed persons will be consumers only without being a producer. Non-utilisation of human resources due-to unemployment involves double cost of maintenance and loss of output.
Unemployment is a social problem in the sense that it causes enormous suffering to unemployed
workers due to thier reduced or nil income. Many social evils like dishonesty, immorality. drinking, gambling, robbery, etc. are the outcome of unemployment. It causes social disruption in the society and the government has to incur a heavy unproductive expenditure on law and order.
Or
(i) With population explosion and with the advent of industrial revolution, to meet the growing needs of the expanding population, the demand for resources for both production and consumption went beyond the rate of regeneration of the resources and the pressure on the absorptive capacity of the environment increased tremendously. We are now faced with increased demand for environmental resources and services but their supply is limited due to overuse and misuse. Hence, the environmental issues of waste generation and pollution have become critical today.
(ii) Yes, I agree with the given statement. Human capital is believed to be positively related to economic growth though, it is difficult to establish a relation of cause and effect from the growth of human capital to economic growth. But we can see that human capital formation is related to economic growth in the following manner
(a) Higher Productivity of Physical Capital Human capital increases productivity of physical capital as specialised and skilled workers can handle machines or techniques better than the unskilled workers. This increased productivity and production leads to economic growth.
(b) Innovative Skills Human capital facilitates. innovation of new methods and techniques of production and this increases the rate of economic growth in the form of increase in GDP.
(c) Higher Rate of Participation and Equality Human capital formation leads to a higher employment rate. With increase in employment, the productivity rises. Also, increase in employ- ment opportunities increases the level of income and this helps in reducing inequalities of wealth.

Question 34.
Read the following text carefully and answer the given questions on the basis of the same and common understanding.
The 20th century included the inception of modern family planning, which restricted the fertility of hundreds of millions of couples around the world. Due to concerns about the world’s unprecedented rate of population growth in the mid-20th century, some aid agencies and international organisations began to support the establishment of family planning programs.
About 40 years later, in the mid-1990s, large-scale family planning programs were active in 115 countries. China’s One Child Policy (OCP) is the largest among the World’s family planning programs. In the 1970 s, after two decades of explicitly encouraging population growth, policy-makers in China began enacting a series of measures to curb it. The OCP was formally initiated in 1979 and firmly established across the country in 1980 .

It was the first time that family planning policy became formal law in China. Differing from birth control policies in many other countries, the OCP assigned a compulsory general ‘one-birth’ quota to each couple, though its implementation has varied considerably across regions for different ethnicities at different times. The policy affected millions of couples and lasted more than 30 years. According to the World Bank, the fertility rate in China dropped from 2.81 in 1979 to 1.51 in 2000 . The reduced fertility rate is likely to have affected the Chinese labour market profoundly. In 1979, the Chinese government formally initiated the OCP to alleviate social, economic, and environmental problems such as the high unemployment rate and scarcity of land resources.

As opposed to many family planning policies in other countries, the OCP was compulsory rather than voluntary. As the name suggests, the policy restricted a couple to having only one child. However, there were some exemptions.

The birth quota varied according to residence (urban/rural) and ethnicity (Han/non-Han).

Since Han ethnicity is by far the largest in China, accounting for 93 % of the population, the policy mainly restricted the fertility of people with Han ethnicity. In general, Han households in urban regions were only allowed to have one child, while most households in rural areas could have a second child if their first was female (this exception is called the “one-and-a-half-child policy”). Meanwhile, in most regions, households of non-Han ethnicity were allowed to have two or three children, regardless of gender.

In March 1991, to show resoluteness, the central government listed family planning among the three basic state policies in China’s Eighth Five Year Plan passed by the National People’s Council. The Eighth Five Year Plan explicitly set a goal of reducing the natural growth rate of the
country’s population to less than 1.25 % on average during the following decade.
To achieve such a challenging objective, national leaders employed a “responsibility system” to induce subnational or provincial officials to set high fine rates.
(i) Enumerate the effects of the policy of one child norm in China. (2)
(ii) Comment on the growth rate trends witnessed in China and India in the last two decades.
Answer:
(i) The important implications of the one child norm are (any two)
(a) Low population growth.
(b) Decline in the sex ratio.
(c) After a few decades, there will be more elderly people in proportion to young people.
(d) It helped China in better management of human capital.
(ii) China has the second largest GDP (PPP) of 22.5 trilion, whereas India’s GDP (PPP) is 9.03 trillion.
When many developed countries were finding it difficult to maintain a growth rate of even 5 %, China was able to maintain near double-digit growth for more than two decades.
Its growth rate in 1980-90 was 10.3 % and for 2005-2013, it was 10.2 %. In the 1980-90, China was having double-digit growth and India was stuck at 5.7 % decadal growth rate.
This rate showed improvement in 2005-2013 at 7.6 %, but still it was far behind China’s growth rate.
As far as sectorwise contribution to growth is concerned, in 2019, contribution of agriculture to GDP in China was 7 % while in India it was 16 %.
On the other hand, manufacturing contributes the highest to GDP in China at 41 %, whereas in India service sector contributes the highest at around 54 %. Thus, China’s growth is mainly contributed by the manufacturing sector and India’s growth by service sector.
In the last two decades, the growth of agriculture sector has declined in both the countries.
In the industrial sector, China has maintained a double-digit growth rate, whereas for India industrial growth rate has declined.
In the case of service sector, China has been able to raise its rate of growth in 2005-13. while service sector growth in India has stagnated.