SMS 02 Sets Economics

ECONOMICS (030) Class XII Session 2023-24 Time: 3 Hours General Instructions: 1. This question paper contains two sections: Section A ~ Macro Economics Section B — Indian Economic Development Max. Marks: 80 2. This paper contains 20 Multiple Choice Questions type questions of 1 mark each 3. This paper contains 4 Short Answer Questions type questions of 3 marks each to be answered in 60 to 80 words 4. This paper contains 6 Short Answer Questions type questions of 4 marks each to be answered in 80 to 100 words. 5. This paper contains 4 Long Answer Questions type questions of 6 marks each to be answered in 100 to 150 words. Multiple Choice Questions (Q1 to Q10) L Section A -Macro Economics 1x 10-10 Read the following statements carefully Statement 1: A tax system that is progressive applies higher tax rates to higher levels of income. Statement 2: A regressive tax is one where the average tax burden decreases with income, In the light of the given statements, choose the correct altemative from the following (a) Statement 1 is false and statement 2 is true (b) Statement 1 is true and statement 2 is false (c) Both statements 1 and 2 are false (d) Both statements | and 2 are true Ans: (d) Both statements 1 and 2 are true Assertion (A): Highway and road works announced in Kerala, Tamil Nadu, West Bengal and Assam in budget 2021. Reason (R): Such announcement will increase revenue expenditure of the government Choose one of the correct alternatives given below’ (a) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A) (b) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (a) (©) Assertion (A) is false but Reason (R) is true 3. 4 (d) Assertion (A) is true but Reason (R) is false Ans: (€) Assertion (A) is truc but Reason (R) is false Read the following figure carefully and choose the correct pair from the alternatives given below: Government Budget Revenue Budget B Revennc x Receipts t t Capital Capital Receipts Expenditure (a) A- Revenue expenditure; B - Fiscal deficit (b) A- Revenue expenditure; B - Fiscal budget (©) A~ Capital budget; B - Revenue expenditure (@) A- Revenue expenditure; B - Capital budget Ans: () A-- Revenue expenditure; B - Capital budget Fiscal policy is a tool used by the government to stabalise the economy and promote economicPage 2 growth.” ‘How does fiscal policy aim to stabilise the economy? (@) By controlling interest rates (b) By regulating international trade (©) By managing government spending and taxation (@) By controlling the money supply Ans (c) By managing government spending and taxation S, While financing @ deficit, under which measure 8 government can print more currency”? {a) Disinvestment (b) By issuing bonds (©) Deficit financing (@) None of these Ans: (©) Deficit financing 6. On the basis of the given bars, identify the percentage change in the collection of GST in February 2019-20 Trends in GST Collection in @ Crore sso (a) Negative (6) 8.10% Ans: (b) 85% (d) 8.20% % (a) Negative 7. Flow of Goods and Services and factors of production across different sect as’ (2) Monetary Flow (b) Circular flow (©) Capital Flow (6) Real flow Ans: (8) Real flow a barter economy is known Find the missing figures and choose the correct option. Income [Consu-;ac [ay |MPC mption (Marginal Propensity to Consume) 0 30 [= 200 (38050 @.. [025 400 | 400 «ii... [200 [0.2 600 [45050 [200 .. payments on current account (c) Receipts on current account = payment on current account (@) None of these Ans: (©) Receipts on current account = payment on current account Short Answer Questions (QUI toQ12) 3.x 2=6 11. “Foreign Institutional Investors (FIIs) remained net seller in the Indian capital markets over the last few weeks” —The Economie Times State and discuss the likely effects of the given statement on foreign exchange rate with reference to the Indian Economy. Ans: Selling of securities by Foreign Institutional Investors (Flls) in Indian capital market will lead to fall in the supply of foreign currency in the economy. This situation might lead to excess demand of foreign curreney at the prevailing foreign exchange rate. AS a result, a new equilibrium rate of foreign exchange will be determined which will be higher than the prevailing forcign exchange rate, leading to depreciation of domestie currency, 12, Calculate intermediate consumption from the following: | @ in lakhs) ()_| Value of output 2,000 Gi)_[ Depreciation 40 (iii) | Subsidy 10 (ivy | Sales tax 30 (W)_| Net Value Added at factor eost | 1,600 or IF the Real GDP is €300 and Nominal GDP is €330, Page 3 ‘calculate the Price Index (base = 100). Ans: Intermediate consumption = ()- [(v) + (iv) = (itt) + Gi] 2,000 - [1,600 + 30 - 10+ 40] 3340 lakhs or eal GP = Nominal GDP Real GDP = "Price Index * 100 300 = pS x 100 = 300 Price Index = $32 100 z110 Short Answer Questions (QI3 to QI5) 4x 3=12 13, Explain the concept of “Excess demand’ with the help of a diagram Ans: Excess demand refers to a situation where aggregate demand exceeds output at full employment level of income. It is graphically denoted by “inflationary gap’. It is inflationary because it sets in motion the AD forces that cause inflation. y AD: oO FQ Income AB" Taflationary Gap at the level of full employment level of income (OF) Explaining it with the help of a diagram. We notice that at the level of full employment AF denotes aggregate demand and BF denotes output.Page 4 14, ‘Thus, AF - BF = AB, which denotes the inflationary gap (Excess Demand) at the level of full employment Explain the concept of “deficient demand’ with the help of a suitable diagram, or Explain any one fiscal and two monetary measures to correct the deflationary gup. Ans: Deflationary gap is conceptually denoted by “Deficient Demand’. It refers to a situation when AD is less than ‘output at full employment income level ‘We can prove it graphically with the help ofa diagram, In the given diagram, point X denotes the point of equilibrium and OM denotes the equilibrium output. Full Employment income is denoted by OE ii AD M r Incomefontput We observe that atthe full employment ineome (OF), aggregate demand is bF and output is aF. This implies aggregate demand (bF) is less than output (aF) at Full employment level by the distance ‘ab’ which denotes deflationary gap or + One fiscal measure to be taken by the government to correct the deflationary gap is to increase the government’s expenditure which will directly increase aggregate demand and thereby help in correeting the deflationary gap. + A monetary measure to correct the deflationary gap could be lowering down the CRR. This will thereby increase funds available for credit creation with the commercial banks. On account of this, their credit ereation capacity rises, leading to an increase in the borrowings from the banks and aggregate demand rises, + Another monetary measure could be lowering down the Bank Rate, so that borrowings by commercial banks from the Central Bank becomes cheaper, so they will now borrow more and pass on these funds ata lower rate of interest to the borrowers to increase the AD and thereby correct the deflationary g 15, Explain the concept and working of multiplier with the help of a suitable schedule. Ans: (@) Multiplier is a measure of the effect of a change in investment on national income. If investment is increased by 25 crores and as a result increase in income over time is 715 crores. The value of multiplier is AY _15 ar Be (b) Analysing how the multiplier works, we have to remember that the operation of the multiplier is based on an important fact that “one person's expenditure is another person's income’. Let us suppose that we are given AT = & 100 crores and MPC = 0.80, Lot us understand the operation of the multiplier with the help of the following schedule: Working of Investment Multiplier Roun |ipom (A)| Bapnatnne ac | Sener AS, wave) S somefero sos), | toot Explanation’ First Round Increase: Investment means expenditure on producer goods, so an investment of €100 crores raises the income of the producers of these goods by £100 crores Second Round Increase: Given that MPC = 0.8, people spend 80% of increase in income, ie., 780 crores (100 x 0.8) on consumption. This raises the income of the producers of consumer goods by 280 crores. This is the second round increase. It is equal to 80% of the first round increase. Total increase in income at the end of secondround, stands at 7180 crores (100 + 80). ‘Thitd Round Increase: Given that MPC = 0.8, people again spend 80% of 380 crores, i.c., %64 crores on consumption. This leads to another increase in the income of 264 crores of the producers of consumer goods. This is the third round inerease and the total increase in income at the end of this round is 2244 crores (100 + 80 + 64), All Rounds of Increase We observe that in this way national income goes on increasing round after round. But the increase in each round is restricted to 80% of the inerease in previous round. The absolute inerease goes on becoming smaller and smaller with every successive round and atime comes when no more inetease is possible, Le., increase in income is reduced to zero. On the basis of the above schedule we infer that, the overall AY = 2500 crores, which is partially used for consumption, ie, AC = 2400 craves and partially used for saving, ic., AS = 100 crores. This proves that national income increases in several rounds and this increase stops when 41 = AS. Inthe given case erease in national income stops when AT = AS i.e., 2100 erores is equal to 2100 crores. Long Answer Questions (Q16 to Q17) 6 x 2=12 16, (a) Distinguish between stock and flow variables with suitable examples. (b) Calculate Gross Domestic Produet at factor cost from the following data Zz in crores) ional product at | 3,750 @ [Grosso factor cost Gi)_| Compensation of employees | 2,000 Giiy_[ Net exports (O50 Giv)_| Profit 700 (¥)__[ Net domestic eapital formation | 1,000 [(viy_ [Opening stock 150 (ii) [Closing stock 200 (iii) [ Gross fixed capital formation | 1,050 (ix)_| Interest 600 (x)_| Rent 400 (xi)_[ Factor income from abroad [20 or Explain the precautions that should be taken while estimating national income by value added method. Ans : (a) Stock refers to any economic variable which measured at a point of time. It does not call for 4 time dimension. Whereas ‘Flow’ refers to any economic variable which is measured during a period of time. Italways ealls fora time dimension. For example capital isa stock variable and eapital formation/investment is a flow variable. (b) NDP, = (ii) + iv) + (i) +0) 2,000 + 700 + 600 + 400 = 23,700 GDP, = NDP,_ (by Income Method) + CFC *CFC =GDCF ~ NDCF |GFCF + A Stock) ~ NDCF 1,050 + (200 — 150)] ~ 1,000 = 1,100 ~ 1,000 =2100 GDP, = NDP,.+ CFC .700-+ 100 3,800 crores: or ‘The precautions that should be taken in estimating national income by the value added method are’ (a) Take the value added/value of final output by each production unit instead value of output, in order to avoid the “problem of double-counting” (b) Include the value of ‘own-account production’ in the measurement of NI. It includes the: (i) Imputed value of ‘production for self= consumption,” which can be estimated and thereby included (ii) Services provided by owner- occupied houses should be imputed and thereby cluded (ii) Imputed value of the free services produced by the general government and private non-Page 6 profit institutions serving households should be included. (©) Do not include the sale of second-hand goods, because they are not produced in the current year, and their value has already been included when they were sold for the first time. However the value of the services rendered by the commission agents involved in the transaction, must be included. 17. Read the following text carefully and discuss briefly the relevant function of the Central Bank, indicated ‘The Reserve Bank of India (RBI) is the central bank of India whose primary function is to manage and govern the financial system of the country. It is a statutory body established in the year 1935 under the Reserve Bank of India Act, 1934. The central bank regulates the issue and supply of the Indian rupee. It also looks after the central government's money. The central bank plays the role of the bankers’ bank and regulates the banking sector. Italso plays an important role in India’s development story by supporting the government in its developmental projects and policies. ‘Ans: The two functions of central bank (RBI) are (a) The Central Bank is the sole authority forthe issue of currency in the country. Notes issued by it are circulated as legal tender money. It has its issue department which issues notes and coins. Coins are manufactured in the government mint but they are put into circulation through the central bank. While issuing currency notes, a minimum fixed amount of gold and foreign currencies is kept by the Central Bank. The monopoly of issuing notes vested in the central bank ensures uniformity in the notes issued, which helps in facilitating exchange and trade within the country. By having a monopoly of note issue, the central bank can restrict or expand the supply of eash according to the requirements of the economy. (b) The central bank also acts as a banker to the Government, As the banker to the Government, the central bank provides a large number of routine banking functions to the government like maintaining the balances, arranging and managing funds of the government and so on. It also holds the surplus cash reserves of the government, Central bank also acts as a financial Multiple Choice Questions (Q18 to Q27) 18. Statement 1 19. advisor to the government as well. Section B -Indian Economic Development 1x We Environment is able to perform its functions easily as long as the demand on these funetions is within its carrying capacity Statement 2: The Environment (Protection) Act was in passed 1990. In the light of the given statements, choose the correct alternative from the following’ (a) Statement | is fulse and statement 2 is true (b) Statement | is true and statement 2 is false (c) Both statements | and 2 are false (4) Both statements | and 2 are true Ans: (b) Statement | is true and statement 2 is false Assertion (A): Disguised unemployment is present in India. Reason (R): Agricultural productivity at the margin is close to zero. In the light of the given statements, choose the correct alternative from the following (a) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A) (b) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (a) (©) Assertion (A) is false but Reason (R) is true (@) Assertion (A) is true but Reason (R) is false Ans: (b) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)20. 21. 2. 23. Jobless growth leads to unemployment because (a) GDP growth is slow (b) Labour refuses to migrate (©) Growth is due to technology (d) Labour is very expensive Ans: (c) Growth is due to technology “Green revolution was a major reason of rise in productivity of farming”. What is/are the advantage(s) of conventional farming methods? (a) Higher output (b) Cost effective (©) Wider range (@) Allof these Ans: (d) Allof these Due to the recent efforts of which intemational body the Indian government, initiated the modemization of informal sector? (a) WTO (b) World Bank (©) G20 (@) International Labour ganisation Ans: (d) International Labour ganisation When extraction is above the rate of regeneration of the resource and the wastage are outside the absorptive capacity of the environment, then environment fails to perform its one of the vital funetion. What is that function? (a) It supplies resources (b) It assimilates waste (©) It sustains life (d) It provides aesthetic services Ans : (©) The environment is able to perform its functions as long as the demand on these functions is within its carrying capacity. When demand crosses environment’s carrying capacity then environment fails to perform its vital function of life sustenance and this results in an environmental erisis, Page 7 24, Along with horticultural erops, golden revolution 28. ‘caused an inerease in the produetion of, (a) milk () honey (©) livestock (@) dry fruits Ans: (b) honey Small Finance Banks had mobilised deposits of 82,488 crores and extended credit of 90,576 ctores to small and marginal farmers and Micro, Small and ‘Medium Enterprises (MSMEs) by the end of FY 2019-20. How will it affect the economy? (a) Beonomie strengthening of rural areas, (b) Financial inclusion of people (©) Growth of MSMBs and agriculture sector become faster (@) All of these Ans: (d) All of these 26. From the given image, it is clear that outsourcing from India is not always an advantage for developed ‘countries. Select the reason(s) for the same. Re] oe (a) Leads to managerial interference (b) Leads to unemployment in their country (e) Neither (a) nor (b) (q) Both (a) and (b) Ani (q) Both (a) and (b)Page 8 27. From the set of events/systems given in Column | and corresponding relevant fact given in Column II, choose the cortect pair of statement Column I [Column 11 ‘A. [Economie reforms in| (i) [1988 China | B. [Great Leap Forward] (ji) | 1968 Campaign C. | Great Profetarian Cultural | (ii) Between Revolution 1980 - 1984 D. | Special Economic Zones | (iv) | 1975 Alternatives: (a) C-Gii) (b) D-(ivy (©) A-@) (@) B-Gi) Ans: (d) B- (ii) Short Answer Questions (Q28 0 Q29) 3. X2=6 28. Elaborate the exploitative nature of the colonial government in India with the help of suitable examples Ans: Under the colonial government in India, the economic policies were concerned only about protecting and promoting British economic interest rather than with the need 10 develop the economy of the country and its inhabitants, + Stagnation was found in the agricultural seetor 29. which was already burdened with surplus labour. + The rule of the colonial government also led to the decline and collapse of India’s world famous handicraft industries, + The industrial sector was erying for the modernisation, capacity building, diversification and vying for increased public investment. + Not only that foreign trade was oriented to feed the industrial revolution in Britain, + Inadequate public health facilities, frequent occurrence of natural calamities and famines converted the helpless Indians into paupers + On the infrastructure front there was urgent need for upgradation and expansion. + Rampant poverty and unemployment was the cry of the day + Commercialisation of Indian agriculture, also adversely affected the ‘self-sufficient” nature of the village economy. ‘Thus the above examples throw ample light on the exploitative nature of the colonial goverment in India. Why were the benefits of Groen Revolution restricted to few states and few crops in initial stages of planning? How did the government promote regional equality in industrial development? Ans : ‘The new agricultural strategy - “Green Revolution” implied use of high yielding varieties of seeds which required reliable irrigation and financial resources to buy better inputs. The strategy was thus restricted to the more alluent states of Punjab, Andhra Pradesh and Tamil Nadu. Further, the use of HYV seeds primarily benefited the wheat growing regions only. ‘Thus, the benefit of the Green Revolution was initially restricted to few states and the crops of wheat and rice only. on ‘The Industrial Policy w: equality by the government (a) The industries in backward regions were given certain concessions such as tax benefits and electricity at lower tariff. (b) The industrial licensing policy was used to promote industries in backward regions. It was easier 10 obtain a license in an economically used to promote regionalhort Answer Questions (Q30 to Q32) backward region 4x3=12 30, (a) Interpret the given picture on account of current environmental challenges. (b) What do you mean by biocomposting? How is it helpful in promoting sustainable development? ‘Ans: (@) The given image indicates towards the environmental challenge of ‘deforestation’ and “global warming" Global warming isa gradual increase in theaverage temperature of the earth’s lower atmosphere as a result in the increase in greenhouse gases. It also shows that the trees are the actual lungs of the planet and not the industries. But with the developmental process, these lungs are dying and this is a wake up call for all of us. (b) Biocomposting is the process of converting all biodegradable items into organic manure. Biocomposting offers the benefits of resource cfficieney by ereating a useful product from organic waste. Compost has the ability to help regenerate poor soils. Itencourages the production of beneficial microorganisms which regencrate the fertility of the soil, promoting higher yields of agricultural crops. Its _costeffectiveness remedies soils contaminated by hazardous waste, suppresses plant diseases and pests. It reduces or eliminates the need for chemical fertilizers. Page 9 31. Evaluate the role of the rural banking system in India, or “Is it possible to develop Information Technology as ‘an alternate livelihood option”? Give reasons. Ans: While evaluating the role of the rural banking system in India it is observed. + The rapid expansion of the banking system after the green revolution had a beneficial effect on the rural farm and non-farm output. It further boosted the income and employment level in the economy. + This facilitated the farmers to utilize the banking services and credit facilities. + They could now procure a variety of loans for meeting their various needs related to farm and non-farm output + On account of this famines became events of the distant past + Food security had been attained due to the abundant buffer stocks of grains being available. + Excepting the commercial banks, other formal institutions failed to develop a culture ‘of ‘deposit—mobilisation’, ie., lending to borrowers, who were worthwhile and also ‘emphasised effective loan recovery. But loan defaulting has been a grave concern in the agriculture sector, Deliberate refusal of the farmers to pay back loans is said to be the reason. Hence it isto be pondered as to why the expansion and promotion of the banking sector has taken a backseat afier the reforms, The main reason is said to be the attitude of the banks. They have certainly to bring about a change in their approach from mere lenders to institutions built upon warm/positive relationship between themselves and the borrowers. At the same time the habit of thrift isto be inculeated alongwith the efficient utilization of financial resources also to be enhanced among the farmers. It is certainly possible to develop Information Technology as an alternate livelihood option in the light of these reasons’ (a) The role of IT is justified by the increased ability of the governments to predict areas of food insecurity and vulnerability through its use (b) It also has a positive impact on the agriculture sector as it spreads the information regarding emerging technologies, their applications, prices, ‘weather and soil conditions ete.Long Answer Questions (Q33 to Q34) Page 10 (6) Italso has a potential of employment generation in rural areas (@) The initiative of private sector Tike the Sri Ratan Tata Trust alongwith support from government hhas made it possible to develop this sector as a sustainable livelihood option 32. Enlist all the factors involved in the introduction of the economic reforms by way of the announcement of the New Economic Policy (NEP). Ans: Enlisting the factors involved in the introduction of the economic reforms, which culminated in the announcement of the New Economic Policy (NEP) in 1991 (In the late 1980's government expenditure began to exceed its revenue by huge margins, ie., & situation of deficit arose (Expenditure > Revenue). Borrowings to meet the expenditure became unsustainable. Gi) Income from Public Sector Undertakings (PSU) ‘was also not high to meet the growing expenditure (iii) Prices of many essential goods were very high. (iv) Imports grew at a very high rate without a matching growth of exports. (v) Foreign exchange reserves had declined to such a level that was not adequate to finance imports for ‘mote than two weeks. (vi) Foreign exchange was insufficient to pay the Interest to international lenders. Thus in the light of the above factors, the New Economic Policy (NEP) was introduced in India. The government initiated a variety of reform policies which fell under three heads-liberalisation, privatisation and globalisation 6x2=12 33. Suggest measures to make the rural areas in India more vibrant (Include two success stories of rural development experiments carried out in India) or The following table shows distribution of workforce in India for the year 1972-73. Analyse it and give reasons for the nature of workforce distribution, Place of | Workforce (in millions) Residence_| Male Female | Total Rural 125, a 195 Urban [32 7 39 Ans : Indeed there is a dire need to make the rural areas in India more vibrant ‘This could be done through: + Diversification into various new fields like poultry, fisheries, vegetables and fruits .. etc. + Linking up rural production centres with the urban and foreign market, in order to fetch higher returns on the investment for the products, + Not only that the elements of infrastructure like credit and marketing, agricultural policies, fricndly towards the farmers, constant dialogue between farmers and state are essentially the steps required to reap the potential of the rural sector to the optimum. Success stories of rural development experiments like the following shall be trend setters (a) Implementation of ‘Operation Flood’ in Gujarat boosted up the milk production in the country by more than eight times (during 1951-2014). () Tamil Nadu Women in Agriculture (TANWA) is a project initiated in Tamil Nadu to train women. in latest agricultural techniques so as to boost agricultural productivity and family income. (©) Farm Women’s Groups are creating savings in their groups by acting like mini banks through micro-credit societies. It is the accumulated savings which help in promoting small scale household activities like vermicompost, ‘mushroom cultivation ... ete. + ‘Kudumbashree’- The poor women’s bank was started in 1995 in Kerala, asa small savings bank for poor women to promote their savings. Such ‘banks have risen to such heights to be considered as the largest informal banks in Asia, in terms of the savings mobilised and the participation rate. (any two) or ‘On the basis of the information provided in the given table we notiee:34. (The total workforce in India in the year 1972- 73 was 234 million that includes 195 million ‘workforce of rural and 39 million of the urban population. This indicates a greater involvement of rural workforce comprising of 83 % of the {otal workforce as compared to 17% of the urban workforce. This is because & majority of rural population was engaged in agricultural and allied sectors, i) The rural workforce comprises of 64% of the male workforce and 36% of female workforce. In contrast, the urban workforce comprises of about 82% of male workforce and 18% of female workforce. The participation of males in both rural as well as in the urban areas is higher than the females because of the lack of opportunities available 10 women for acquiring education, Also, families often discouraged female members to take up job and, consequently, women were confined to household work only. (ii) Comparing urban female workforce with that of the rural female workforce, we can conclude that the females in the rural areas formed 36 % of the workforce, whereas, the females in the urban areas formed only 18% of the workforce. In the tural areas, despite a majority of the population was engaged in farming and allied activities, agricultural sector had low productivity Consequent to the low productivity, rural people had low eamings that further led to widespread poverty in the rural areas. Thus, it can be concluded by analysing the given data that Indian economy suffered from low productivity, acute unemployment and widespread poverty, disguised unemployment in agricultural sector and ow female participation rate in the worktoree 30 years ago. Read the following text carefully and answer the given questions on the basis of the same and common understanding The China-Pakistan Beonomic Corridor (CPEC) has, deepened the decades-long strategic relationship between the two nations. But it has also sparked criticism for burdening Pakistan with mountains of debt and allowing China to use its debt-trap diplomacy to gain access to strategic assets of Pakistan, The foundations of CPEC, part of China’s Belt and Road Initiative, were laid in May 2013. At the time, Pakistan was reeling under weak economic growth. Page 11 China committed to play an integral role in supporting Pakistan's economy. Pakistan and China have a strategic relationship that ‘oes back decades. Pakistan turned to China at a time when it needed a rapid increase in external financing to meet critical investments in hard infrastructure, particularly power plants and highways. CPEC’s early harvest projects met this need, leading to a dramatic inerease in Pakistan's power generation capacity, bringing an end to supply-side constraints that had made rolling blackouts a regular occurrence across the country Pakistan leaned into CPEC, leveraging Chinese financing and technical assistance in an attempt 10 end power shortages that had paralysed its country’s economy. Years later, China’s infiuence in Pakistan has increased at an unimaginable pace China as Pakistan’s Largest Bilateral Creditor: China’s ability to exert influence on Pakistan's economy has grown substantially in recent years, mainly due to the fact that Beijing is now Islamabad’s largest ereditor. According to documents released by Pakistan’s Finance Ministry, Pakistan’s total public and publicly guaranteed external debt stood at $44.35 billion in June 2013, just 9.3 per cent of which was owed to China. By April 2021, this extemal debt hiad ballooned to $90.12 billion, with Pakistan owing 27.4 per cent - $24.7 billion - of its total external debt to China, according to International Monetary Fund (MF) Additionally, China provided financial and technical expettise to help Pakistan build its road infrastructure, expanding north-south connectivity to improve the efficiency of moving goods from Karachi all the way to Gilgit-Baltistan (PoK). These investments were critical in better integrating the country’s ports, especially Karachi, with urban centers in Punjab and Khyber-Pakhtunkhwa provinees. Despite power asymmetries between China and Pakistan, the latter still has tremendous agency in determining its own policies, even if such policies come at the expense of the long-term socio- conomic welfare of Pakistani citizens. (a) Outline and discuss any two economic advantages of China Pakistan Economie Corridor (CPEC) accruing to the economy of Pakistan. (b) Analyse the implication of bilateral ‘debt- trap’ situation of Pakistan vis-a-vis the Chinese economy, Ans:Page 12 (a) ‘The two economic advantages of China Pakistan Economic Corridor (CPEC) accruing to the ‘economy of Pakistan are: (i) China provided finaneial and technical expertise to help Pakistan build its road infrastructure, supporting employment and income in the economy (ii) CPEC has led toa massive inerease in power ‘generation capacity of Pakistan. It has brought an end to supply-side constraints in the nation, which had made blackouts a regular phenomenon across the country. (b) China has become famous for its “debt-trap diplomacy’ in revent times. Under this, China provides financial and technical expertise! assistance to help various nations to bring them under its direct or indirect influence. The first and the foremost implication of the diplomacy is that Beijing has now become Islamahad’s largest creditor. According to documents released bby Pakistan’s Finance Ministry, its total public ‘external debt stood at $4.35 billion in June 2013, Just 9.3 per cent of which was owed to China. By ‘April 2021, this external debt had ballooned to $90.12 billion, with Pakistan owing 27.4 per cent - $24.7 billion - of its total extemal debt to China, according to International Monetary Fund (IMF). apacoso

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