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Directions (81-88): Read the following passage Unlike in the 1980s when the pick-up in growth was
carefully and certain words in the passage are printed accompanied by deterioration in fiscal deficit and
in bold letters to help you locate them easily while current account, the sharp increase in growth between
answering some of these questions. 2005-06 and 2007-08 happened with the stability
parameters at desired levels. Also, booming external
The Indian economy is currently passing through
environment provided good support.
phase of relatively slow growth. However, this should
To assess whether the high growth phase can
not cloud the fact that over the nine-year period
be replicated, we need to understand the factors that
beginning 2005-06, the average annual growth rate was
led to the slowdown since 2011-12. Complicating the
7.7 per cent. Against this background, the relevant
analysis of this period is the revision of national income
question is whether India has the capability to grow at
numbers with new base. The two sets of numbers
to per cent in sustained way. In short, what is the
present somewhat differing picture. According to the
potential rate of growth of India?
earlier series, the growth rate of the Indian economy fell
Normally, potential growth is measured using
below per cent in 2012-13 and 2013-14. But the new
trends with some filters. In one sense, these are
series shows decline below per cent only in 2012-
backward-looking measures, since they depend on
13. For 2013-14, the new series records growth rate
historically observed data. In the case of measuring
of 6.6 per cent, as against 4.7 per cent according to the
capacity utilisation in manufacturing, the maximum
earlier estimate. For 2014-15 and 2015-16, there is only
capacity is very often taken as the maximum output
one set of numbers, that is, according to the new series.
achieved in the recent period. Perhaps, in the case of
For both the years the growth rate is above per cent.
determining the potential rate of growth of the
These are good growth rates under any circumstance,
economy also, one can take the maximum growth rate
let alone the current global situation. Anyway, we have
achieved in the recent past as the lowest estimate of the
come down from the growth rate of 9-plus per cent
potential. However, this assumption will be valid only if
which we had seen earlier.
there is reason to believe that the maximum growth
rate achieved in the recent past was not one-off event
and that the growth rate achieved was robust and
replicable.
India achieved growth rate of 9.5 per cent in
2005-06, followed by 9.6 per cent and 9.3 per cent in
the subsequent two years. After declining bit in the
wake of international financial crisis, the growth rate
went back to 8.9 per cent in 2010-11. In many ways the
growth rate achieved in the high phase period of 2005-
06 to 2007-08 was robust. The domestic savings rate
during this period averaged 34.9 per cent of GDP.
Similarly, the gross capital formation rate averaged 36.2
per cent. The current account deficit (CAD) remained
low with an average of 1.2 per cent of GDP. Agricultural
growth during this period averaged per cent, and the
annual manufacturing growth rate was 11 per cent. The
capital flows were large but as the CAD remained low,
the accretion to reserves amounted to $144 billion.
Inflation during the period averaged 5.2 per cent. The
combined fiscal deficit of the Centre and States was 5.2
per cent of GDP, well below the stipulated per cent.
Thus on many dimensions the growth rate was robust.
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Three sets of reasons are attributed for the Q81. In context of the given passage, which of the
slowdown. First, the external environment had following is/are the reason for economic
deteriorated sharply. The recovery from the crisis of slowdown of India?
2008 was tepid One country after another in the (a) Jaunty recovery from the crisis of 2008
developed world came under pressure. Strangely, (b) Court’s verdict to stop production of coal.
however, international commodity prices including (c) Domestic barriers like draught, inflation etc.
crude oil prices remained high until couple of years (d) Various barriers introduced by the
ago. All this had an adverse impact on developing government.
countries, including India. However, it would be wrong (e) All of these
to attribute the slowdown in India primarily to external Q82. According to the given passage, what does ‘ease of
factors. The domestic factors are the key. Second, there doing business imply?
were severe supply bottlenecks. Agricultural production (a) End of bureaucracy
fell sharply in 2009-10 because of severe drought. (b) Eliminating nepotism
This triggered an inflation which lasted for several (c) Availability of funds
years thereafter. Coal output fell. Iron ore output fell, (d) Eliminating Red tapism
partly because of court decisions. The third set of (e) Not clear from the passage
reasons is basically non-economic which led collectively Q83. On what factors does incremental capital output
to weakening of investment. multitude of issues ratio NOT depend?
relating to scams and perceived delays in decision- (a) Technology
making created an element of uncertainty in the minds (b) Skilled labour
of investors. New investments began to fall. (c) Better education system
The rise in investment rate must be supported (d) Low fiscal deficit
by rise in the domestic saving rate. An increase in (e) It depends on all the given options
investment rate supported by widening current Q84. On the basis of the given passage, which of the
account deficit is not sustainable and is fraught with following options cannot be inferred?
serious consequences. Only current account deficit in (a) Corruption is one of the reasons for the
the region of to 1.5 per cent is sustainable. economic slowdown of India
Incremental capital output ratio is catch-all variable (b) There is dissimilitude between the
which is influenced by host of factors. Obviously, it calculations based on new base and the
depends on technology. It also depends upon the skill of previous one.
the labour force which in turn depends on the quality of (c) The Indian economy experienced great
the education system. Another catch-all expression robust throughout the previous decade.
“ease of doing business” is also relevant (i.e.) (d) Fiscal deficit below six percent is proviso.
bureaucratic hurdles which impede speedy execution (e) Nature also played an important role in
of projects need to be removed. Thus improving the slowing down Indian economy.
productivity of capital needs action on several fronts. Q85. According to the given passage, which of the
Making prediction about the future is always following option is the best reason which supports
hazardous. Many things can go wrong. The Indian the author’s conclusion that ‘high growth is very
economy in the recent past has shown that it has the much in the realm of possibility’?
resilience to grow at to per cent. Therefore (a) Flourishing service, agricultural and
achieving the required investment rate to support such manufacturing sectors of India.
high growth is very much in the realm of possibility. (b) Policy reforms introduced by the current
However, we need to overcome the current phase of government.
declining investment rate. Investment sentiment is (c) Increasing growth rate and investment rate
influenced by non-economic factors as well. An (d) India’s potential to grow at high rate
environment of political and social cohesion is (e) None of these
imperative. Equally, we can get the incremental capital- Q86. On the basis of your reading, choose an
output ratio (ICOR) to lower level. Raising the appropriate title for the passage.
productivity of capital will require policy reforms (a) The Indian economy: The phase of sluggish
including administrative reforms as well as firm-level growth.
improvements. The “potential” to grow at to per (b) India’s potential.
cent at least for decade exists. We have to make it (c) India’s promising past results.
happen. (d) Can India grow fast: An introspection
(The topic of the Passage asked in the exam was (e) Ease of doing business
based on the economic changes in the last 50 years)
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Directions (87-88): Choose the word/group of words jurisdiction extending to multifarious activities. When
which is MOST SIMILAR in meaning to the word/group the euro was created as common currency, Britain
of words printed in bold as used in the passage. opted out of it. The European Central Bank sets
Q87. ACCRETION
common monetary policy stance for all member
(a) Adherence
(b) Accumulation countries. This itself has been source of irritation to
(c) Approval many member countries. This came out prominently at
(d)Devaluation the time of the Greek crisis. With the loss of one
(e)Upsurge instrument of control namely, the exchange rate
Q88. IMPEDE variation the entire burden of adjustment had to be
(a) Delay through employment and output changes. As one
(b) Violate
commentator put it, the EU has moved up its aspiration
(c) Defer
(d) Taint from the idea of ‘common’ market to ‘single’ market. It
(e) Diagnose is this transition which half of Britain has resented. The
Directions (89-95): Read the following passage complex set of regulations emanating from Brussels
carefully and answer the questions given below it. has made at least section of the British people feel that
Certain words have been printed in bold to help you to they have lost ‘independence’. Some of the elite of
locate them while answering some of the questions. Britain who voted to ‘leave’ feel this way. They think
Brexit has evoked spate of comments. These
that control has moved to unelected bureaucrats in
comments fall into broadly two categories. The first set
Brussels. What has induced the ‘non-elite’ to vote for
of comments focusses on the short-term and medium-
Brexit was the EU’s migration policy. The free
term impact of Brexit on the U.K., Europe and the rest of
movement of people has been the last straw that broke
the world including India. The second goes into the
the camel’s back. The low-paid jobs in the U.K. have
reasons behind this decision of the British. Globalisation
been taken over by migrants predominantly from
has been interpreted in many ways. In broad terms,
Eastern Europe. In an economy which has been growing
globalisation denotes the free movement of goods,
slowly (even though the U.K. is better performer than
services, capital, funds, ideas, technology and people
other European countries in recent years), this has
across countries. Many people think globalisation is
come as shock. The spirit of ‘nationalism’ still runs
recent phenomenon. This is not true. This has been
high. The poor in Britain feel that they have been
going on for centuries. What has made it unique in
cheated by the migrants. Absorbing migrants is not new
recent times is the speed of the movement. Great Britain
for Britain. The Asian and African migrants constitute
and many other countries in Europe have reached the
significant proportion of the population. All this
present level of economic development only because of
happened when the economy was strong and growing.
this free movement. In both demographic and
But this is not the situation now, and the resentment is
geographic terms, Britain is small country. It is not the
in one sense natural. However, looked at globally, the
size of the domestic market that determined its growth.
poor in the countries from which people migrate have
London could not have emerged as the financial centre
benefited. The British have also gained to the extent
of the world but for the free flow of capital.
that the free movement of people has enabled highly
The gamut of financial services offered by
skilled professionals to find positions all over Europe.
London is geared to meet world demand and not that of
The ‘leave’ vote thus was motivated by two
Britain alone. Even after the exit from the EU, Britain
considerations: one, the degree of integration that the
cannot remain as an isolated island. It has to be part of
EU was trying to impose, and two, the migration policy
an international trade regime which allows for free
which allowed free movement of people across
trade. What then could have motivated little more
countries. Globalisation is not really the devil. If the EU
than 50 per cent of the population to come out of the
arrangement had been restricted only to free movement
EU? It has something to do with the nature of the
of goods, services, capital and funds, it could not have
relationship within the EU. The EU has evolved over the
led to any deep resentment. It is the attempt at greater
last seven decades. From loose arrangement, it has
economic integration that has been interpreted as loss
become tight bureaucratic organisation with its
of sovereignty and resented. Globalisation, with its
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emphasis on efficiency (since goods and services will (c) Britain’s refusal to accept euro as its currency
get produced at the least cost centres), can lead to even after common monetary policy stance for
greater inequality theoretically. all the members.
Within country also, the more efficient including (d) The migration policy which allowed free
movement of people across countries.
professionals gain disproportionately. This situation (e) The increase of inequality in economically
gets worse if economies are growing slowly. The U.S. strong countries which has generated new
has always prided itself on saying that the system they nationalism.
have is ‘people’s capitalism’. Inequalities do not matter Q91. Which of the following is one of the reasons for
much when economies are growing strongly and when major section of British people to vote against
new entrants to the labour force find employment European Union?
(a) Low wages due to the abundance of labour
easily. Countervailing measures are needed to take care
force migrating from Asian countries to the
of the adverse impact of globalisation. For this reason, Britain.
we cannot throw the baby out with the bathwater. The (b) Slow economic growth and incompetence of
developed countries face serious dilemma. They have the new technologies because of which they
reached stage in their development when further are becoming more financially weak.
growth will be slow. This will have implications for (c) The jurisdiction enjoyed by the unelected
absorbing the labour that gets added to the market. officials in Brussels.
(d) The spirit of nationalism among the some
Complicating the situation is technological development
sections of British people.
which is increasingly labour-saving. New technologies (e) Discrimination of Britain by other member
have twofold impact. First, they reduce the demand countries because of both demography and
for labour in general. Second, in particular they make geography.
unskilled and semi-skilled work redundant. They Q92. Which of the following statement is false regarding
demand new skills for which retraining may be needed. the impact of globalization?
(i) Globalization that stresses on productivity
Distribution of income has thus become an issue which
leads to inequality.
needs to be dealt with directly. Brexit is not blow (ii)Globalization has been attributed as the
against globalisation per se. Labour does not stand in primary reason for the loss of supremacy in
the same category as capital, even though both are British people by the author.
factors of production. Migration hurts when the (iii) Globalization is major factor which helped
economy is at low ebb. Britain, along with other London in becoming financial center of the
developed countries, faces basic problem of coping World.
with growth potential which is far lower than the
growth rate they had seen before 2008.
Q89. To what aspect this article is devoted by the
author?
(a) Impact of Brexit on U.K and Europe.
(b) Impact of globalization.
(c) Motivation behind the vote against greater
economic integration.
(d) The implications of Brexit on the migration in
Britain.
(e) Countervailing measures that are needed to
take care of the adverse impact of
globalisation.
Q90. What has been the reason for the infuriation of the
member countries of European Union?
(a) Technological development which is
increasingly labour-saving.
(b) The increase in the EU’s propensity towards
single market.