IGNOU BECE-145 Solved Question Paper PDF Download

IGNOU BECE-145 Previous Year Solved Question Paper in Hindi

IGNOU BECE-145 Previous Year Solved Question Paper in English

Q1. How is development distinct from growth ? What are the factors necessary for the success of market based approach to development ? What is the rationale behind the state led development strategy ?

Ans. Growth and development are two closely related but distinct concepts in economics.

Growth vs. Development

• Growth: Growth is a quantitative concept. It refers to the increase in a country’s real national income or per capita income over a period of time. It is primarily measured by indicators like Gross Domestic Product (GDP) or Gross National Product (GNP). The focus is on the increase in output, and it does not necessarily imply an improvement in the quality of life.
• Development: Development is a qualitative and multi-dimensional concept. It includes growth along with progressive changes in social, economic, and institutional structures. The aim of development is not just to increase income but to improve the quality of life. It encompasses poverty reduction, decreased inequality, better education and health facilities, greater opportunities, and freedom. According to Amartya Sen, development is an expansion of ‘capabilities’—the freedom for people to live the lives they value.

In essence, while growth may be a necessary condition for development, it is not a sufficient one. Development is “growth plus change.”

Factors for Success of Market-Based Approach: A market-based approach, where economic decisions are primarily made by private individuals and firms, requires several factors to be successful:

• Stable Macroeconomic Environment: Low inflation, a stable exchange rate, and sustainable fiscal policies create a predictable environment for investment and trade.
• Rule of Law and Protection of Property Rights: A strong legal framework that enforces contracts and protects property rights is crucial to encourage investment.
• Competition: Policies that encourage competition in markets are necessary to prevent monopolies and promote efficiency.
• Infrastructure: The availability of efficient infrastructure, such as transport, communication, and energy, reduces the costs of production and trade.
• Human Capital: An educated and healthy workforce is essential for innovation and productivity.
• Control of Corruption: A transparent and accountable governance system ensures that markets function fairly.

Rationale for State-Led Development Strategy: Many developing countries, including India post-independence, adopted a state-led development strategy. The primary rationale behind this was:

• Market Failures: It was believed that the market alone could not address problems like the provision of public goods (e.g., defense, roads), externalities (e.g., pollution), and information asymmetry.
• Need for Large-Scale Investment: The development of heavy industries and infrastructure required massive investments, which the private sector was either unable or unwilling to undertake. The state could coordinate and direct investment into these strategic areas.
• Infant Industry Argument: State protection (e.g., through tariffs) was deemed necessary to shield domestic industries from global competition, allowing them to mature and become competitive.
• Equity and Social Justice: The state aimed to ensure a more equitable distribution of the benefits of development and reduce regional disparities, which could not be left to market forces alone.

Under this strategy, the state controlled the ‘commanding heights’ (strategic industries) and allocated resources through planning, as seen in India’s Five-Year Plans.

Q2. State the reasons for disparities in regional development. What steps can be taken to reduce regional disparities in growth and development ?

Ans. Regional disparity refers to the significant differences in economic development, income, and standards of living among various regions or states within a country. In India, this has been a major challenge, with some states (e.g., Maharashtra, Gujarat) being far more developed than others (e.g., Bihar, Uttar Pradesh).

Reasons for Regional Disparities:

• Historical Factors: British colonial policies focused on developing port cities and regions that supplied raw materials, while other areas were neglected. This historical advantage put some regions ahead even after independence.
• Geographical Factors: The geography of a region, such as its terrain, climate, and availability of natural resources, greatly influences its development. For instance, hilly, flood-prone, or drought-stricken areas are more difficult to develop.
• Differences in Infrastructure: The uneven distribution of infrastructure like roads, railways, ports, power, and communication directly affects economic activity. Regions with better infrastructure attract more investment.
• Level of Human Capital: Regional differences in education and health facilities create variations in the quality of human capital. States with an educated and healthy populace experience higher productivity and growth.
• Agglomeration Economies: Industries and businesses tend to concentrate in regions where an industrial base already exists. This provides benefits of access to skilled labor, suppliers, and markets, which further develops the developed regions and leaves backward regions behind.
• Political and Administrative Factors: Political instability, poor governance, and a bias in public investment in favor of certain regions also contribute to disparities.

Steps to Reduce Regional Disparities: A multi-pronged approach is needed to reduce regional disparities in growth and development:

• Targeted Public Investment: The government should prioritize public investment in infrastructure (roads, power, irrigation), education, and health in backward regions. NITI Aayog’s ‘Aspirational Districts Programme’ is a step in this direction.
• Fiscal Incentives: Tax holidays, subsidies, and other financial incentives should be provided to attract private investment in backward areas.
• Resource Transfers: The transfer of resources from the Centre to the states through the Finance Commission’s recommendations should be designed to reduce disparities by allocating more funds to backward states.
• Specific Area Development Programmes: Special programs and policies should be formulated for regions with specific geographical challenges, such as hilly, tribal, drought-prone, and border areas.
• Improving Governance: It is crucial to improve the quality of governance, transparency, and accountability in lagging states to ensure the effective implementation of development schemes.
• Skill Development: Emphasis should be placed on establishing skill development and vocational training centers in backward regions to make the local population employable.

Coordinated implementation of these measures can promote balanced regional development and ensure equal opportunities for all citizens of the country.

Q3. What does the population pyramid depict ? How does it differ between the developing and the developed countries ? When does a country signify to have entered a phase of ‘demographic dividend’ ? What are its implications for economic planning ?

Ans. The Population Pyramid: A population pyramid is a graphical representation that shows the distribution of various age groups in a population. It is also called an age-sex pyramid. In this graph, age groups (usually in 5-year intervals) are plotted on the Y-axis, and the percentage or number of the population is shown on the X-axis. Males are typically shown on the left and females on the right. The shape of the pyramid provides vital information about a country’s demographic structure, including its birth rate, death rate, and life expectancy.

Difference between Developing and Developed Countries: The shape of the population pyramid differs significantly between developing and developed countries:

• Developing Countries: These countries typically have an ‘expansive’ or classic pyramid shape. The base is wide, indicating a high birth rate . Each successive bar gets narrower as the age group increases, reflecting a high death rate and low life expectancy. This signifies a young population.
• Developed Countries: These countries have a ‘constrictive’ or beehive-like shape. The base is narrow, indicating a low birth rate . The middle and upper parts are wider, signifying a low death rate and high life expectancy. This represents an aging population.

Demographic Dividend: A country signifies its entry into the ‘demographic dividend’ phase when the proportion of its working-age population (15-64 years) becomes significantly larger than the dependent-age population (0-14 years and 65+ years). This situation arises when fertility rates fall, leading to fewer children, but the large generation from the past is still in the workforce. This provides a “window of opportunity” for accelerated economic growth as there are more people working than dependents, which can boost the rate of savings and investment.

Implications for Economic Planning: The demographic dividend phase has crucial implications for economic planning:

• Job Creation: Planners must focus on creating sufficient employment opportunities to absorb the large workforce. If jobs are not created, this dividend can turn into a ‘demographic disaster.’
• Investment in Human Capital: It is essential to invest heavily in education, skill development, and vocational training to enhance the productivity of the workforce.
• Healthcare: Investing in health services is critical to keep the workforce healthy and productive.
• Infrastructure Development: Investment in infrastructure like energy, transport, and communication must be scaled up to support growing economic activity.
• Social Security: Planners must also plan for the future when this large workforce cohort will retire. This requires building pension and social security systems.

In short, the demographic dividend is not automatic. It requires the right policies and strategic planning to be harnessed.

Q4. Distinguish between Government and Governance. Bring out the essential constituents of the term ‘Governance’. In what way is good governance different from governance ?

Ans. Government and governance are two concepts that are often used interchangeably but have significant differences in their meaning.

Government vs. Governance:

• Government: The government is a formal institution or body that has the authority to make, enforce, and interpret laws for a country or territory. It is a tangible structure comprising organs like the legislature, executive, and judiciary. The government focuses on ‘who’ governs (the actors) and ‘what’ (the structures). It is a key instrument of governance, but it is not synonymous with governance.
• Governance: Governance is a broader concept that refers to the ‘process’ of governing. It includes the mechanisms, processes, and institutions through which citizens and groups articulate their interests, exercise their legal rights, meet their obligations, and mediate their differences. Governance involves not just the government, but also the private sector and civil society (e.g., NGOs). It is focused on ‘how’ a country is governed.

Essential Constituents of ‘Governance’: According to the United Nations, there are eight major constituents of governance that determine its quality:

1. Participation: All citizens should have a voice in decision-making, either directly or through legitimate intermediate institutions.
2. Rule of Law: Legal frameworks should be fair and enforced impartially, especially for the protection of human rights.
3. Transparency: Decisions should be taken in a transparent manner and information should be freely available to the public.
4. Accountability: Government institutions, the private sector, and civil society organizations must be accountable to those who are affected by their decisions.
5. Responsiveness: Institutions and processes should try to serve all stakeholders within a reasonable timeframe.
6. Consensus-oriented: Governance should try to build broad consensus by mediating the different interests in society.
7. Equity and Inclusiveness: All members of society should feel that they have a stake in it and do not feel excluded. Special attention should be given to the welfare of the most vulnerable.
8. Effectiveness and Efficiency: Processes and institutions should produce results that meet the needs of society while making the best use of resources.

Good Governance vs. Governance: ‘Governance’ is a neutral term that simply describes the process of governing, whether it is good or bad. In contrast, ‘Good Governance’ is a normative or evaluative concept. Good governance occurs when the process of governing adheres to the principles of the eight constituents listed above. It ensures that the process of governance is participatory, transparent, accountable, efficient, and equitable. In short, governance is the ‘process’, while good governance is the ‘quality’ of that process which serves the public interest.

---

Section—B

Q5. What is meant by Balance of Payment of a country ? What are its components ?

Ans. Balance of Payment (BoP): A country’s Balance of Payment is a systematic statement or record of all economic transactions between the residents of that country and the rest of the world during a given period (usually a year). It is a comprehensive account of a country’s sources (inflows) and uses (outflows) of foreign exchange. In theory, the BoP always balances due to the double-entry bookkeeping system, meaning total credits (receipts) must equal total debits (payments).

Components of the Balance of Payment: The BoP is mainly divided into the following accounts:

1. Current Account: This account records the trade in goods and services, income, and current transfers.
   • Trade in Goods: This includes the export and import of merchandise (visible items). Exports are recorded on the credit side and imports on the debit side. The difference between them is the ‘Balance of Trade’.
   • Trade in Services: This includes the export and import of services (invisible items) such as transportation, banking, insurance, tourism, and software services.
   • Income: This includes investment income (like profits, dividends, interest) received from abroad and paid to foreigners, as well as compensation of employees.
   • Current Transfers: These are one-way transactions with nothing received in return, such as remittances sent by citizens working abroad, gifts, and grants.
2. Capital Account: This account records capital transfers and the acquisition/disposal of non-produced, non-financial assets. It includes items like debt forgiveness and transfer of assets by migrants.
3. Financial Account: This account records transactions in financial assets and liabilities. Its main sub-components are:
   • Foreign Direct Investment (FDI): Investment made to establish a lasting business interest in the country.
   • Foreign Portfolio Investment (FPI): Investment in financial assets like shares and bonds.
   • Loans: External Commercial Borrowings (ECBs) and other government or private loans.
   • Banking Capital: Changes in the foreign assets and liabilities of commercial banks.
4. Errors and Omissions: This is a balancing item that adjusts for any statistical discrepancy arising from the transactions recorded in all other accounts of the BoP.

Q6. Define inequality distinguishing between ‘inequality in outcome’ and ‘inequality in opportunity. Do you agree that the inequality has increased over the recent years in India ? Why ?

Ans. Definition of Inequality: Inequality refers to the unequal distribution of income, wealth, resources, and opportunities among individuals or groups in a society. It is a multi-dimensional concept that includes economic, social, and political dimensions.

Distinction between ‘Inequality of Outcome’ and ‘Inequality of Opportunity’:

1. Inequality of Outcome: This refers to the most commonly understood form of inequality, related to differences in the end results of people’s lives. It primarily includes inequality of income (differences in the money earned by different individuals or households) and inequality of wealth (differences in the ownership of property, stocks, and other assets). This inequality can be a result of individual effort, talent, and luck, as well as structural factors.
2. Inequality of Opportunity: This refers to inequality arising from circumstances beyond an individual’s control. It includes differences in access to education, healthcare, employment, and justice based on factors like gender, caste, ethnicity, place of birth, or family background. Inequality of opportunity is considered more pernicious as it prevents individuals from reaching their full potential, regardless of how talented or hardworking they are. It creates an unequal starting point in the race of life.

In short, inequality of opportunity is inequality at the ‘starting line’, while inequality of outcome is inequality at the ‘finish line’.

Increase of Inequality in India: Yes, most economists and reports agree that inequality, both of income and wealth, has increased in India in recent years, particularly after the economic reforms of 1991.

Reasons for the Increase:

• Skill-biased Growth: Economic growth has been primarily driven by high-skill service sectors like IT and finance, leading to a rapid rise in incomes for educated and skilled workers, while the incomes of less-skilled workers in agriculture and the informal sector have lagged.
• Formal vs. Informal Sector Divide: Workers in the formal sector enjoy better wages, social security, and job protection, while the vast majority working in the informal sector face low pay and precarious conditions.
• Declining Labor Share: The share of profits in national income has increased while the share of wages has fallen, widening the gap between owners of capital and labor.
• Regional Disparities: Growth has been concentrated in a few states and urban centers, increasing inequality with rural and backward regions.
• Inadequate Progressive Taxation: The tax system has not been effective in taxing wealth and inheritance, which accentuates the accumulation of wealth at the top.

Q7. How is Human Capital defined ? How is Human Development different from Human Capital ? To which economist, the credit of getting the importance of human capital recognized attributed ?

Ans. Definition of Human Capital: Human Capital refers to the stock of knowledge, skills, competencies, experiences, and health embodied in individuals that holds economic value. It is an intangible asset that can be enhanced through investments in education, training, and healthcare. It is considered a factor of production, much like physical capital (e.g., machinery) and land. A more highly skilled and healthier workforce is more productive, fostering innovation and economic growth.

Difference between Human Development and Human Capital: Although both concepts focus on education and health, their perspectives and objectives are fundamentally different:

• Perspective: The human capital perspective is focused on productivity . It views people as a means or an input for economic growth. Investment in education and health is important because it makes workers more productive, leading to higher incomes and output.
• Objective: The human development perspective is focused on human well-being and capabilities. It considers people as the ultimate end of development. According to this view, education and health are valuable in themselves because they enable people to live long, healthy, creative lives and to expand their choices. Income is just one of those choices.

In short, human capital asks, “What can people do to increase production?”, while human development asks, “What can production do for people?”. Human development is a much broader concept that includes human capital but is not limited to just productivity.

Credited Economist: The credit for bringing the importance of human capital to the forefront of economic thought is largely attributed to the Nobel Prize-winning economist Theodore Schultz . In his works in the 1960s, he argued that investment in education and skills was as important for economic growth as investment in physical capital. Gary Becker is another prominent economist who made significant contributions to this field.

Q8. In what respect ‘Infrastructure’ determines the course of development of a country ?

Ans. Infrastructure forms the backbone of any country’s economic and social development. It is the set of fundamental facilities and systems that serve a country, city, or other area, and are necessary for its economy to function. Infrastructure determines the course of development in several key respects:

1. Enhances Productivity: Physical infrastructure, such as power, irrigation, and transport, directly boosts the productivity of agriculture and industry. A reliable power supply helps factories run without interruption, while irrigation increases agricultural yield.
2. Reduces Transaction Costs: Efficient transport (roads, railways, ports) and communication networks make the movement of goods and information faster and cheaper. This facilitates trade and makes markets more efficient.
3. Integrates Markets: Infrastructure connects remote and rural areas to national and international markets. This enables producers to reach a wider audience for their goods and provides consumers with more choices.
4. Attracts Investment: Both domestic and foreign investors prefer to invest in regions where good quality infrastructure is available. Strong infrastructure is a signal of a favorable business environment.
5. Builds Human Capital: Social infrastructure, including schools, colleges, and hospitals, is critical for the development of human capital. An educated and healthy population is essential for innovation and economic growth.
6. Improves Quality of Life: Basic amenities like clean drinking water, sanitation, and housing directly improve the health, well-being, and quality of life of citizens.
7. Promotes Regional Balance: Strategic development of infrastructure can help reduce regional disparities by integrating backward regions into the mainstream of development.

In essence, infrastructure is not just an outcome of development, but a key driver of it. Its quality and availability directly determine the pace, direction, and inclusiveness of a country’s development trajectory.

Q9. How is ‘Infrastructure’ defined ? State the nine constituents of infrastructure as categorized by Prof. V. K. R. V. Rao.

Ans. Definition of Infrastructure: Infrastructure is defined as the set of fundamental physical and organizational structures and facilities needed for the operation of a society or enterprise. It acts as a “wheel” for the economy, facilitating the smooth functioning of all other sectors of production—agriculture, industry, and services.

Infrastructure can be broadly divided into two categories:

• Physical (or Economic) Infrastructure: This includes facilities that directly support economic activities, such as energy (power), transport (roads, railways, ports, airports), communication, and irrigation.
• Social Infrastructure: This includes facilities that indirectly contribute to economic development and improve the quality of life, such as education (schools, colleges), health (hospitals), drinking water supply, and sanitation.

Prof. V. K. R. V. Rao’s Categorization: The eminent Indian economist, Prof. V. K. R. V. Rao, provided a comprehensive definition of infrastructure and categorized its nine key constituents that are crucial for a country’s development. According to him, these constituents are:

1. Irrigation: Vital for increasing agricultural productivity.
2. Energy: Power and other sources for industry and domestic use.
3. Transport: Road, rail, water, and air routes for the movement of goods and people.
4. Communications: Postal, telephone, and digital networks for the exchange of information.
5. Banking, Finance, and Insurance: Financial services to facilitate economic activities and manage risk.
6. Science and Technology: For innovation and technological advancement.
7. Education: For human resource development and skill formation.
8. Health and Family Welfare: To ensure a healthy and productive workforce.
9. Public Administration and Defence: To provide the necessary framework for maintaining law and order and ensuring the country’s security.

Rao’s classification highlights the broad scope of infrastructure, encompassing not just economic and social aspects but also institutional support.

Q10. Explain structural shift in employment in Indian context.

Ans. A structural shift in employment refers to the change in the share of employment across the three main sectors of the economy over time: primary (agriculture and allied activities) , secondary (industry and manufacturing) , and tertiary (services) . The traditional path of economic development involves the labor force moving progressively from agriculture to industry, and then from industry to services.

Structural Shift in the Indian Context: India’s experience of structural shift has been somewhat different and unique compared to the traditional path:

1. Shift in GDP: Since independence, the share of agriculture in India’s GDP has declined sharply (from around 50% to about 15-17% now), while the share of the services sector has increased dramatically (now over 50%). The share of industry has grown but has remained relatively stagnant.
2. Slow Shift in Employment: In contrast to the shift in GDP, the change in the employment structure has been much slower. Even today, around 45-50% of India’s workforce is still employed in agriculture, despite its much smaller contribution to GDP. This indicates widespread disguised unemployment and low productivity in agriculture.
3. Bypassing Industry: Contrary to the traditional development path where labor moves from agriculture to industry, a large part of the labor in India has moved directly from agriculture to the services sector. India never experienced a major manufacturing employment boom, as was seen in East Asian countries. This phenomenon is sometimes called “premature deindustrialization.”
4. Dualistic Nature of the Services Sector: The employment growth in the services sector has been dualistic. On one hand, there has been growth in high-productivity sectors like IT, finance, and business services. On the other hand, much of the employment growth has occurred in low-productivity, informal service areas such as retail trade, repair, and domestic services, which absorb the workers moving out of agriculture.

In summary, the structural shift in Indian employment is characterized by a continued high dependence on agriculture, a weak industrial employment base, and a direct leap to the services sector. This raises concerns about “jobless growth” and the lack of good-quality jobs.

Q11. What are the major reforms introduced in the 9905 to characterize the change in development approach as one of ‘Pro-market’ ?

Ans. In 1991, India faced a severe Balance of Payments crisis, which forced the country to rethink its development strategy. As a result, India moved away from its earlier state-controlled, inward-looking development strategy to a new ‘Pro-Market’ or market-oriented approach. The major reforms that characterized this shift are collectively known as the Liberalization, Privatization, and Globalization (LPG) reforms.

The major ‘Pro-market’ reforms introduced were:

1. Abolition of Industrial Licensing (Delicensing): The ‘License Raj’ was dismantled, and the requirement for an industrial license was abolished for most industries, except for a few strategic sectors. This lowered entry barriers for the private sector and promoted competition.
2. Trade Liberalization: Tariffs on imports were drastically reduced, and quantitative restrictions (quotas) on most goods were removed. The aim was to open up Indian industry to global competition and increase efficiency.
3. Promotion of Foreign Investment: Rules for Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) were liberalized. FDI was allowed through the automatic route in many sectors, increasing the inflow of capital and technology.
4. Public Sector Reforms and Privatization: The number of sectors reserved for Public Sector Undertakings (PSUs) was reduced. The government began to disinvest its equity in several PSUs, increasing the role of the private sector.
5. Financial Sector Reforms: The Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR) for banks were reduced, giving them more funds to lend. Private sector banks were allowed entry, increasing competition in the banking sector.
6. Currency Devaluation and Convertibility: The rupee was devalued to boost exports. Subsequently, the rupee was made fully convertible on the current account, making foreign trade and transactions easier.

These reforms changed the role of the state in the Indian economy from a controller to a facilitator, allowing market forces to play a larger role in the allocation of resources.

---

Section—C

Q12. Write short notes on any two of the following in about 00 words each : (a) Mixed Economy (b) Democracy Index (c) Incremental Capital-Output Ratio (ICOR) (d) Urban Unemployment

Ans. (a) Mixed Economy

A mixed economy is an economic system that combines elements of both the public sector (controlled by the government) and the private sector (controlled by private individuals and firms). It blends aspects of capitalism (market mechanism) and socialism (state intervention). In this system, the private sector operates for profit, but the government regulates the economy to ensure social welfare and correct market failures. India is a classic example of a mixed economy. After independence, India reserved heavy industries and strategic sectors for the public sector while leaving others, like agriculture and consumer goods, to private enterprise.

(b) Democracy Index

The Democracy Index is an annual index compiled by the Economist Intelligence Unit (EIU) that measures the state of democracy in 167 countries worldwide. It is based on 60 indicators grouped into five categories: electoral process and pluralism, functioning of government, political participation, political culture, and civil liberties. Based on the scores across these categories, each country is classified as one of four types of regimes: ‘full democracy’, ‘flawed democracy’, ‘hybrid regime’, or ‘authoritarian regime’. The index provides a snapshot of a country’s political health.

(c) Incremental Capital-Output Ratio (ICOR)

The Incremental Capital-Output Ratio (ICOR) is an economic metric that measures the marginal amount of investment capital necessary to generate the next unit of production. It is calculated as the ratio of investment to the change in Gross Domestic Product (GDP) (ICOR = Investment / ΔGDP). A lower ICOR indicates greater efficiency of investment, meaning more output can be generated with less capital. In economic planning, planners use the ICOR to estimate the level of investment required to achieve a target growth rate.

(d) Urban Unemployment

Urban unemployment refers to the situation where individuals living in urban areas are actively seeking work but are unable to find employment. Compared to rural unemployment, it is often characterized by a higher proportion of educated unemployed, as educational attainment is higher in urban areas. The main types of urban unemployment include industrial unemployment (due to business cycles, technological changes, or factory closures) and educated unemployment. Furthermore, migration from villages to cities also puts pressure on the urban labor market, increasing unemployment. Open unemployment is more prevalent in urban centers.