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GNDU Question Paper-2022
B.A 5
th
Semester
ECONOMICS
(Economics of Development)
Time Allowed: Three Hours Max. Marks: 100
Note: Attempt Five questions in all, selecting at least One question from each section. The
Fifth question may be attempted from any section. All questions carry equal marks.
SECTION-A
1. Explain briefly the Social Technological Dualism.
2. Discuss in detail the characteristics of underdeveloped countries.
SECTION-B
3. Critically examine the Solow's model of long run growth.
4. Discuss in detail Harrod-Domar's growth model.
SECTION-C
5. Critically examine the Rostow's stages of economic growth.
6. Discuss in detail Export Promotion and Import Substitution.
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SECTION-D
7. Explain in detail the various types of planning.
8. Discuss in detail the Choice of Technique.
GNDU Answer Paper-2022
B.A 5
th
Semester
ECONOMICS
(Economics of Development)
Time Allowed: Three Hours Max. Marks: 100
Note: Attempt Five questions in all, selecting at least One question from each section. The
Fifth question may be attempted from any section. All questions carry equal marks.
SECTION-A
1. Explain briefly the Social Technological Dualism.
Ans: Social-Technological Dualism: An Easy Narrative to Clarify a Difficult Concept
Imagine, then, you are seated in a college classroom. Walking in, your sociology teacher
says, "Today we're going to discuss a very interesting topic called Social-Technological
Dualism." You and your buddies give perplexing looks; what on Earth does that mean? Not
to panic. By the time this explanation ends, you will not only grasp it but also be able to
clearly communicate it to others.
☀ Earth Let us begin with a straightforward example.
Consider a period before cellphones, say the early 1990s. People wrote letters, used
landlines, or personally visited to exchange messages. Interactions in life were more
intimate and life itself slowed down. Now, leap right forward to today. Just a swipe on a
smartphone allows you to order food, schedule meetings, video call someone abroad, or
even discover love.
Our way of life has obviously changed with technology. The important question is, then,
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whether society shapes technology or technology shapes society. Here is where Social-
Technological Dualism finds application.
Define Social-Technological Dualism.
A theory aiming at clarifying the interaction between society and technology is social-
technological dualism "Duelism" is the word for two distinct but linked elements. Social-
technological dualism then holds that society and technology interact, much as two sides of
the same coin influence one another.
Which came first—the chicken or the egg—is like posing the age-old question: In sociology,
too, we wonder: Does technology shape society or does it develop in response to social
needs?
Two significant perspectives of this dualism are:
. According to technological determinism, society is shaped by technology.
. Social constructivist theory holds that society shapes technology.
. Allow us to grasp both of these using relevant scenarios.
Technological Determinism: When Technology Lead the Dance
Imagine a group of people trailing a robot walking ahead. People stand for society; the robot
stands for technology. Under this perspective, society follows whatever road technology
chooses.
For instance: development of the Internet
The internet did not only assist researchers or scientists when it first emerged. It altered the
entire planet, including our shopping, learning, communication, and even employment. This
demonstrates how technology can alter social behavior, relationships, employment, even
values.
Consider online courses taken during the COVID-19 epidemic. Pupils began studying from
home. Zoom let teachers pick their teaching style. This reveals how the internet plus video
calling apps changed society.
Key Belief: According to technological determinists, social changes are mostly caused by
technology.
2. Social Constructivism – Now turn the scene around when society owns the remote
control. The people are walking ahead this time and guiding the robot. According to this
perspective, the demands of society, values, and culture help to define the development
and application of technology.
For instance: EV development
Why are businesses today manufacturing electric vehicles? Not only because they can but
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also since society is more conscious of climate change. People want better choices with
regard to environment. Thus, the evolving attitude of society helped to produce the
technology.
Social constructivists hold that people, culture, economy, politics, and social values all help
to create and shape technology; it does not just happen.
What then is the dualism then?
Here comes the "dualism" component.
Social-technological dualism holds that both sides have some truth. It does not say either
only technology shapes society or only society generates technologies. Rather, it contends
that both influence one another.
Like cellphones altering our communication style, new technologies can revolutionize
society.
Simultaneously, though, social needs, values, and beliefs shape the evolution of new
technologies (such as designing apps for online learning during COVID).
Hence, it resembles a cycle:
Modern society creates fresh technologies →
Technology alters society →
Society changes and requests fresh ideas →
More people create technologies.
And the cycle is still running.
A basic comparison: the artist and the mirror
. Imagine technology as a mirror; society is the artist in that regard.
. Sometimes the mirror reflects what society is doing—that of technology molded by
society.
. The mirror occasionally shows something fresh that alters the artist's painting style—
society shaped by technology.
. Neither the artist nor the mirror is working alone; both affect one another.
Actual Stories of Social-Technological Dualism
Let's make it much more sensible:
Social Media Sites
. People wanted faster and more extensive communication, thus social media was created.
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. Social media has, however, changed our interactions, perceptions of ourselves (including
influencers, followers), and of reality (filters, likes, etc.).
. Before 2020, working from home was not a major trend.
. Remote working was mandated by COVID-19, a social event, forcing society.
. Technology changed with Zoom, Teams, remote tools.
. Nowadays, society has evolved; hybrid working cultures are rather common.
See indeed. Both society and technology had roles.
Why should one pay attention to this?
Knowing social-technical dualism will enable us:
. Think critically; we do not just embrace technology. Why was it developed, we wonder?
From what standpoint does it help?
. Recognize social changes; they help to explain why our culture, way of life, and
relationships differ from those of fifty years ago.
. Future planning calls for better solutions (such as ethical artificial intelligence, clean
energy tech, etc.), if we know how society and technology interact.
Exam Tip: Keep in mind these three main ideas while writing on Social-Technological
Dualism:
It speaks to the interaction between society and technology.
Two points of view exist: Social constructivism and technological determinism.
The dualism holds that both affect one another in an ongoing cycle.
To make your response rich and relevant, include actual examples from your life, such as the
internet, social media, electric cars, or online learning.
Final Thought: The continuous dialogue
There is no one clear winner to Social-Technological Dualism theory. It more resembles a
continuous dialogue between society and technology. One speaks then the other answers.
From the apps on our phones to the policies of our schools, businesses, and even our
relationships, taken together they create the world we live in now.
Next time someone asks, "Does society change because of technology or vice versa?" You
could boldly state: " Both. They vary from one another.
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2. Discuss in detail the characteristics of underdeveloped countries.
Ans: Appreciating the Features of Developed Countries
Consider two fictional nations: Developia and Struggland.
Tall buildings, clean roads, fast internet, and people leading comfortable lives abound in
Developmentia. Children attend classes; hospitals are equipped; and there are many
employment possibilities. Conversely, Struggland boasts inadequate roads, children working
in fields rather than in classrooms, people battling to access basic healthcare, and families
largely dependent on farming to survive.
Struggland reflects what analysts refer to as a "underdeveloped nation."
What precisely, though, does "underdeveloped" mean?
Understanding of Underdeveloped Nation
An underdeveloped nation is one in which most people live in poverty, economic
development is slow, and fundamental services including infrastructure, health, and
education are either lacking or weak. Usually depending on agriculture, these nations
struggle with unemployment and illiteracy and show great population increase.
Let us now examine, one by one, the salient features of underdeveloped nations—like
chapters in the history of Struggland.
Characteristics of Underdeveloped Nations
1. One has low per capita income.
The people of Struggland make rather meager incomes. Comparatively to people in
developed nations like Developia, each person's income is rather low on average. Most
families cannot afford appropriate food, accommodation, education, or medical attention
from this low income.
2. Elevated Poverty Rate
Many of the people in Struggland live below the poverty level. Many households battle daily
to afford even two meals a day. Less jobs exist, and those who work usually make less than
they need to survive.
3. Depending on Agriculture
Most of Struggland's population are farmers. Still, they rely on rain for water, use
conventional tools, and sometimes suffer losses from floods or other storms. There are few
businesses to offer substitute employment and agriculture is not particularly profitable.
4. Great Rate of Population Increase
The population of Struggland is rising rather quickly. Land, schools, hospitals, and food
supplies all suffer under this load. Why is this so? Low education, ignorance, and inadequate
access to family planning techniques define this.
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5. Unemployed widely and underemployed
Though many residents of Struggland wish to work, there are not enough employment
available. Underemployment is the phenomena whereby some people work but do not earn
enough. For instance, a man employed full-time on a farm as a helper makes just ₹100 daily.
Not sufficient is what I mean.
6. Low Literacy and Bad System of Instruction
Not all people in Struggland can afford education. Many of schools lack appropriate
buildings, books, or teachers. Consequently, a good number of people are illiterate. Poor
skills resulting from illiteracy restrict people's capacity to better their life.
7. Inadequate Medical Facilities and Health Standards
There are few and far between hospitals in Struggland. Doctors are few; medicines are
expensive. Infant death is thus high and life expectancy is low. Many times, people suffer
with poor hygiene, diseases, and malnutrition.
8. Inadequate Infrastructure
Internet is a luxury; the roads are damaged; electricity is erratic. In Struggland, even finding
daily clean drinking water presents a challenge. This bad infrastructure influences daily life
and slows down economic development.
9. Low Level of Industry Development
Struggland lacks a lot of manufacturers. Like most goods, including cars, phones, or clothing,
most are imported. Less industries mean less employment and less income generating as
well.
10. Technological Reversement
Bullocks rather than machinery is used in farming. Cooking still takes wood instead of gas or
electricity. Every work becomes more difficult and less effective without technology.
11. Political Unrest and Dishonesty
Struggland suffers from unstable political conditions, poor government policies, and
crooked leaders quite a bit. Political unrest causes development plans to fall short and
discouragement of foreign investors.
12. Financial Inequality
While most of Struggland residents live in poverty, some are quite wealthy. Rich and poor
live in rather different worlds. Social tensions and disturbance result from this inequality.
Exam Tip— Advice from a Professor
"Always keep in mind; underdevelopment is not only financial." It's about lack of
possibilities, bad quality of living, and slow advancement. Make your responses relevant on
tests by using practical comparisons.
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Final Thought: Could Struggland developia?
Indeed, it can but requires strong leadership, improved education, technological
advancement, and health reforms. Once underdeveloped nations like South Korea and
Singapore grew by means of planning, education, and diligence.
Hence, underdevelopment is not permanent. Even Struggland can become a rich country
with the correct policies and actions.
SECTION-B
3. Critically examine the Solow's model of long run growth.
Ans: Analyze Critically the Solow Model of Long-Run Growth
A Basic Narrative to Help You Grow
A Simple Story
Imagine a little community. The village farmers work the ground with simple implements.
They save part of their harvest over time and use it to purchase improved tools or create
irrigation systems. This helps them to produce more crops going forward.
Consider now this village as an economy.
• The tools are capital
• The crops are output
• The labor force is people
The Solow Growth Model is all about the saving and investment process that raises output.
1. Solow's Growth Model
Designed by Robert Solow during the 1950s, this model is also known as the Solow-Swan
Model. It clarifies how over time economic growth results from:
• Financial accumulation of capital
• Growth in the labor force
• Advancing technology
This neoclassical model uses mathematics and logic to explain how economies evolve over
time and holds that markets automatically adapt.
Two Fundamental Assumptions of Solow Model
Examining the fundamental presumptions of the model will help us to grasp its dynamics:
The model makes use of a production function akin to this:
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𝑌 = 𝐹 (𝐾,𝐿 )
Where:
• Y = GDP output
• K = Capital
• L = Labor
If you double labor as well as capital, output will likewise double.
Diminishing Returns:
Eventually, the additional output will drop if you keep raising capital while maintaining labor
the same.
• Closed Economy — no foreign trade or investment.
• Savings result in investments; all of them are capital investments.
• Technology is exogenous: it comes from outside and develops consistently.
3. Solow Model Working Mechanisms
Let us observe in this model the development of the economy.
Step 1: Capital Accumulation
• Some people save a portion of their salary.
• That saving turns into investment, so augmenting the capital.
• More production follows from more capital.
But remember!
Capital loses value (machines wear out), so we must invest just to keep the present level.
Java Capital Per Worker and Output Diagram
Axes:
• X-axis: Capital per worker (k)
• Y-axis: Output per worker / Investment per worker
Cues:
1. Y: the output curve
2. sY, the investment curve
3. (δ + n)k: Depreciation plus population increase curve
Where:
• sY = Investing or savings
• δk = Depravity
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• nk = Capital increase required for additional employees
The economy approaches a steady-state, in which case:
Investment = depreciation + capital for newly hired workers
Step 2: Steady-State
This is the essence of the Solow model.
Using the steady-state:
Investment = Depreciation + Capital required for population increase
At this point:
• Though per capita output stays constant, the economy still grows.
• We need technological advancement to develop personally even more.
Step 3: The Function of Technology
Solow included A (technology) into the production process:
𝑌 = 𝐹 (𝐾,𝐿,𝐴 )
So now:
Thanks to better tools, machines, and techniques, output per worker can rise even in a
steady-state.
The sole source of long-term per capita increase becomes technology.
Model Summary of Features
Feature
Explanation
Growth Source
Capital, Labor, Technology
Long-run Growth
Only from Technology
Role of Savings
Crucially Important for More Capital
Diminishing Returns
Covers labor and capital
Steady-State Economy
Brings growth per worker under control
Policy Role
Limited in long-run without tech improvement
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Solow Model Criticism: The Other Side of the Story
Solow's model is not perfect even if it was a turning point in growth theory. Let's examine its
restrictions closely.
1. Technology Comes From Outside
Solow takes technology as merely "appears" from outside, like magic!
But in truth:
• Research, investment, education, etc. define innovation.
It's better to show how technology is developed than merely assume it will flourish.
Endogenous growth theory—like Romer's model—improved this also.
2. Human Capital Has No Place Here
Solow treats all work the same. But we know that:
• An unskilled worker and a competent engineer do not equally contribute.
For productivity, health, training, and education count.
Key to modern development, human capital is neglected in the model.
3. Closed Economy Assumption
Solow makes no foreign investment or trade assumption.
But today:
Nations seek loans from one another.
Trade brings knowledge and ideas as well as technologies.
Migration alters the workforce.
Thus, the model is not fit for globalized economies.
4. Puzzle of Savings and Investment
Solow argues that since they have less capital, poor nations should develop faster.
Nonetheless:
Some underdeveloped nations remain underdeveloped even with great savings.
More important are institutions, corruption, wars, and policies.
Real-life development depends on factors other than only labor and capital.
5. No Short-Run Reason
Solow focuses just on long-term patterns. Yet:
• What about short-run shocks like recessions?
• Regarding unemployment and inflation, what then?
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• Solow's model cannot adequately explain transient macroeconomic behavior.
Why Solow Still Matters — Despite Critics’ Reversals
Though imperfect, the Solow model was revolutionary because:
• It distinguished long-run from short-run development clearly.
• It demonstrated the value of advancing technology.
• It gave a neat, sophisticated structure for considering growth.
• Many modern policies — including R&D and educational investments — still draw
inspiration from ideas anchored in Solow’s perspective.
Final Notes: From Solow, What Might We Learn?
Remember our little community?
They expanded by means of better tools, increased saving, and personnel training. But soon,
better tools were insufficient — fresh ideas were needed.
Solow advises us exactly in this regard:
Development transcends mere addition of people or machinery.
It’s about applying greater ideas, wiser knowledge, and creativity.
Although Solow provided us a road map for long-term development, it is not the entire
trip.
We also must investigate other theories for a whole picture.
4. Discuss in detail Harrod-Domar's growth model.
Ans: Simple Interpretation of the Harrod-Domar Growth Model
The Origin of the Model: The Story
See a nation like a large machine. Two things are needed for this machine to develop and
maintain seamless operation:
• Fuel is investment—money used for roads, factories, machinery, etc.
• Efficiency, sometimes known as capital-output ratio, is the machine's use of this fuel
to generate more products.
Two economists, Sir Roy Harrod (from the UK) and Evsey Domar (from the USA), were
attempting to address a straightforward question in the early 20th century:
How can a nation develop its economy steadily without swings?
They thus developed a basic mathematical model—now known as the Harrod-Domar
Growth Model—to address this.
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The Model's Principal Idea
The Harrod-Domar model states:
The level of investment and the way that it is applied determine the degree of economic
growth.
In simple terms:
• More investment results in more development.
• More growth corresponds with better use of capital.
It makes straightforward connections between savings, investments, and economic
development.
Standard Assumptions of the Model
Let us first clarify the basic presumptions of the model before we enter equations or
diagrams:
1. The economy solely considers capital to create goods; it does not directly take labor
(workers) into account.
2. Your output will be more the more capital you possess.
3. There is a fixed capital-output ratio, which means that you must have a fixed amount
of factories or machines to generate a given amount of goods.
4. Savings turn into investments since individuals save money to be used for such
purposes.
Important Ideas and Formula
Two main elements are these:
1. The capital-to-produce one unit of output (goods or services) ratio (v) indicates how
much capital—machines, buildings—is required.
For instance, if you require ₹5 lakh worth of machinery to generate ₹1 lakh worth of
goods, then Capital-Output Ratio (v) = 5.
2. The savings ratio (s) indicates the proportion of national income saved—and hence
accessible for investment.
Savings Ratio (s) = 0.2 or 20% if citizens in a nation save ₹20 out of every ₹100 they
earn.
The Harrod-Domar Equation
The national income (G) grows at rate:
G = S ÷ V
Where:
G = Rate of economic growth
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S = Ratio of Savings
V = Capital-output ratio
Higher savings or a smaller capital-output ratio will result in faster development.
Basic Diagram: Development Based on Harrod-Domar's Claims
Assuming a constant capital-output ratio, explanation is:
As investment rises (moving right), growth rises (moving up).
Model's Various Growth Types
Harrod and Domar also discussed three kinds of development:
1. Actual Growth (Ga): The rate of economic development the present one is
experiencing.
2. Warranted Growth (Gw): The rate of change that maintains everything steady—no
overproduction or unemployment.
3. Natural Growth (Gn): With present population and technology, the maximum
growth the economy can attain.
The Issue of Insecurity
Harrod identified a significant problem:
The economy gets unstable if the real development deviates from the expected increase.
The following takes place:
• Should Actual Growth exceed Warranted Growth, overheating, inflation, and
shortages follow.
• Should Actual Growth fall below Warranted Growth, unemployment and slowdown
result.
This makes the Harrod-Domar model somewhat "knife-edge"; if the balance is lost, things go
bad rapidly.
Policy Recommendations Derived from the Model
Especially in developing nations, the Harrod-Domar model offers some sensible guidance to
governments:
1. Promote saving since more investments follow from more savings.
2. Boost investment: Make technological, industrial, and infrastructure-related
investments.
3. Make good use of capital; aim to lower the capital-output ratio.
4. Steer clear of instability by ensuring that development is steady rather than either
too quick or too slow.
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Usefulness in Developing Nations
Following World War II, this model gained popularity. Many recently independent nations
including India, Ghana, and others planned their economies using it.
Why was that helpful?
• It was straightforward and understandable.
• It concentrated on investment, which these nations most desperately needed.
• It enabled governments to create five-year agendas.
Model Critics
Though practical, the Harrod-Domar model is also criticized:
1. Ignores labor and just considers capital. Still, workers' labor is vital.
2. Presumes fixed capital efficiency. In actual life, machinery grows more efficient and
technology advances.
3. Innovation has no place in the model. It ignores startups, fresh ideas, or
entrepreneurship.
4. The model supposes the economy is always on a knife-edge, which is too extreme
and creates an instability issue.
Relatively to the Solow Model
Later, economist Robert Solow developed the Solow Growth Model, which enhanced
Harrod-Domar by:
• Considering labor as one of the elements.
• Letting changing efficiency (technology).
• Showing how not only capital but also technology determines long-term
development.
In Synopsis
According to the Harrod-Domar Growth Model:
Growth = Savings ÷ Capital-Based Ratio
• More savings lead to more investment, which results in more growth.
• A reduced capital-based ratio implies more effective utilization of capital and more
growth.
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SECTION-C
5. Critically examine the Rostow's stages of economic growth.
Ans: Opening
Imagine yourself observing a nation develop, much as a child matures. The youngster first
depends on others, then picks skills, gets an education, starts a job, and at last finds a steady
and comfortable life. Economist Walt Whitman Rostow clarified in his theory "The Stages of
Economic Growth," published in 1960, this concept of development in stages.
Starting from a traditional, backward economy and rising into a modern, industrialized, and
consumption-driven society, Rostow thought all nations go through five basic stages of
development. His approach was among the first attempts to justify economic growth as a
linear process, applicable to every nation.
Let's travel through this path like a narrative of a nation rising.
First stage: the conventional society
Here is the beginning. At this stage, a nation is like an olden small village community. The
most of them are farmers. Their crops depend on the environment, they labor hard in the
fields, and they employ basic tools. There is no industry, no technology, and rather little
education.
This stage is dominated by agriculture. People use crude tools, without machinery, and they
live in rural surroundings. There are not any scientific or creative inventions. Power is
possessed by chiefs or landlords. The economy has low output and is unchanging.
Imagine a rural village where people grow crops using bulls and wooden ploughs. They
neither invest in companies nor offer products on markets. They just grow what their bodies
require.
Stage 2: Preconditions for Take-Off
This represents the awakening stage. People start to slowly change. Some start to think that
hard effort, education, and science can help things to get better. New roads, railroads, or
educational systems could be brought by outside assistance—from colonizers or foreign
investors.
During this stage, communication and transportation begin to advance. There is investment
in infrastructure and education. Businesspeople and entrepreneurs begin to rise. Political
transformations occur, bringing national cohesion. New approaches of farming start to show
up.
For instance, a young farmer in our community gets a bank loan to better his land after
learning about chemical fertilizers. A road opens to link the community to surrounding
markets. Progress is gradually taking hold.
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Stage 3: Take-Off
This marks the turning point. The nation "takes off" much as a rocket. Industries are
beginning to flourish quickly. There are built factories. Spending rises in line with this.
Employment is generated. National policy turns mostly on the state of the economy.
Take-off is characterized by fast expansion in a few important sectors, such as steel or
textiles. Around 10–15% of national income is invested, and there is a big increase in savings
and investment. Rural residents migrate into cities in search of employment. Capital
markets and banking systems are formed. Social and political systems support development.
For instance, our village has grown to be a small town nowadays. Opening a textile factory
employs hundreds of people. More youngsters show up for class. Banks come open. Tractor
purchases are made by farmers. Growth is evident.
Stage 4: Drive to Maturity
By now the economy is more varied and steady. Development permeates all fields.
Technological development is accelerating. The nation is not depending on one or two
industries anymore. People's wages climb.
In this stage, modern technologies are applied in all spheres. There is harmonized expansion
in the service and industrial sectors. The quality of life improves. National welfare,
education, and health become priorities. The nation begins to export products and services.
For instance, the town turns into a city. It now boasts hospitals, colleges, a university,
shopping centers, and contemporary transportation. People work in services, banks,
corporations, and software companies. The economy maintains itself.
Fifth stage: Age of High Mass Consumption
This is the last one. People have more than only needs. They value conveniences including
TVs, cars, holidays, and air conditioning. From heavy industry, the economy moves toward
services including tourism, health, and education.
At this stage, there is high consumption and income. Consumer products and welfare
services are emphasized. Poverty is low and literacy is high. A strong middle class exists.
Welfare programs are available for pensions, unemployment, and health.
For instance, now our city resembles New York or London. Consumers purchase goods for
luxury as much as for need. They take vacations, use cellphones, and make stock market
investments. The government gives quality of living and healthcare first priority.
Critical Analysis (Objectives & Arguments)
Let us now discuss Rostow's theory's shortcomings as well as strengths.
There are several benefits. The model is straightforward and understandable. It provides a
clear framework to grasp the evolution of economies. It is positive and looking ahead. It
holds that every nation has room for development. It serves as a guide for policy policies,
enabling governments to determine the present stage of development and guide their
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future accordingly. It concentrates on industrialization and investment, emphasizing the
need of industry, savings, and investments for development.
However, there are criticisms as well. The theory is too Western-centered. It makes the
presumption that every nation will grow like America or Europe, which is untrue generally. It
ignores cultural and social aspects, such as religion, caste systems, and customs, which also
influence development. The theory is not appropriate for every nation. Under political
unrest or corruption, poor nations could not follow this road. It assumes linear
development, but development doesn't usually follow neat, unambiguous phases. Countries
can skip, slide back, or remain mired in their past. It places excessive focus on financial
aspects and mostly ignores environment, health, or inequality in favor of money and
business.
Endpoint
The theory of Rostow is like a storybook for economic development. It shows us how a
nation might go from poverty and farming to factories, cities, and at last a rich, comfortable
life. It provides direction and optimism. But not every nation follows the same road; just as
no child grows up the same way.
Although it helps one to grasp the general trend of development, it has to be adjusted
carefully. Important also are social, political, and cultural variations. Every country cannot
benefit from the same formula applied elsewhere.
Still, Rostow's approach is among the most well-known and hotly debated economic
theories since it reminds us that development is a trip rather than a destination.
6. Discuss in detail Export Promotion and Import Substitution.
Ans: Export Promotion and Import Substitution: A Simple Story-Based Argument
Introduction: Two Approaches to Advance the GDP
Think of a nation called Econoland. It's a developing nation working to raise its citizens'
quality of living. Econoland's government has two options for expansion of its economy:
• Export Promotion (EP) – Emphasize international goods sales.
• Import Substitution (IS) – Focus on making things at home rather than purchasing
from overseas.
Each of these two approaches has historical significance, benefits, and drawbacks; they are
like two separate roads guiding economic development.
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1. Export Promotion: Definition
Export promotion is the encouragement of home businesses to create goods and services
for export, so facilitating foreign market sales. The primary goal is to increase industrial
development by means of foreign exchange.
Let's say Econoland boasts talented artists capable of creating exquisite handcrafted
carpets. The government assists carpet manufacturers in selling their products overseas, in
the USA, UK, or Japan rather than just within their own nation. These days, foreign
purchasers pay for those carpets in dollars, euros, or yen. Now earning foreign currencies,
Econoland can use them to purchase goods it does not manufacture, such as oil or highly
sophisticated machinery.
Export Promotion Strategy Graph:
Home Industry → Quality Production → Export to Foreign Markets → Exchange Earnings →
Economic Development
2. What is Substituting Importance?
Specification: Definition
Import substitution is the process of encouraging the manufacture of imported goods inside
a nation to reduce reliance on those goods.
Picture Econoland importing a lot of foreign apparel. Because imported clothing was less
expensive, local fabricators were not doing well. The government taxes imported clothing
heavily and supports local businesses to produce better and less expensive clothing. People
in Econoland begin buying locally instead of foreign clothing. This generates self-reliance,
saves foreign money, and creates jobs.
Import Substitution Strategy Diagram:
Heavy imports → High tariffs on imports + Local industry support → Domestic production
increases → Less import → More self-reliance
3. Three Main Goals of Both Approaches
Feature
Export Promotion
Import Substitution
Primary
Objective
Get foreign currency
Cut imports and foster
independence
Focus
Outward: foreign markets
Inward: home markets
Government Role
Trade fairs, exporter subsidies, etc.
Protection using tariffs, quotas, etc.
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Feature
Export Promotion
Import Substitution
Example
Products
Textiles, electronics, computers,
software
Steel, vehicles, clothing
4. Historical Background: 1950s–1970s Country Used Import Substitution
Many nations, including Mexico, Brazil, and India, embraced import substitution following
their independence in order to safeguard their own industries. The plan was to lower
foreign reliance and strengthen an industrial base.
Later nations including South Korea, Singapore, and China turned toward export promotion
(1980s onward). To generate products for worldwide markets, they made investments in
infrastructure, technology, and education. They are among the richest nations in Asia
nowadays.
5. Export Promotion: Benefits and Drawbacks
Benefits:
• Brings foreign currency
• Boosts work in export industries
• Promotes competitiveness and quality
• Helps businesses become worldwide competitive
Drawbacks:
• Excessive reliance on outside markets
• Sensitive to changes in price and world demand
• May overlook household needs
6. Import Substitution: Benefits and Drawbacks
Benefits:
• Grows regional businesses
• Lessens reliance on foreign goods
• Saves foreign currencies
• Supports independence
Drawbacks:
• Lack of rivalry might result in low quality
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• Industries could start to be lazy and ineffective
• Over time it could separate the economy
7. Practical Illustrations
Export Promotion Example:
South Korea concentrated on ships, electronics, cars (Hyundai, Samsung). The government
offered exporters low-interest loans, tax breaks, and training courses. It's a top exporter in
the world today.
Import Substitution Example:
India outlawed many imports and encouraged local manufacture of textiles, steel, and
automobiles between 1950 and 1980. Lack of competition resulted in poor quality goods
even if it helped create a strong industrial base.
8. A Balanced Approach – Combining Both
Most contemporary economies combine both ideas.
• They encourage exports to earn foreign currencies.
• They also substitute imports for important sectors including defense, agriculture, or
medications.
Balanced Strategy Diagram:
Import substitution → Self-Reliant Economy ←→ Economic Development ←→ Export
Promotion
India followed import substitution from 1950–1980.
From 1991 onward, India opened its economy and began emphasizing export promotion
following the financial crisis.
India exports today textiles, drugs, software, and more.
9. Important Government Support Policies
For Export Promotion:
• Export subsidies
• Special economic zones (SEZs)
• Raw material import free from duties
• Using trade fairs for promotion
For Import Substitution:
• High import taxes
• Value licensing
• Government public sector industry investment
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• Support to MSMEs
10. In Essence, What Can We Learn?
The narrative of Export Promotion and Import Substitution shows us that although in
different ways, both policies seek to boost the economy. Export Promotion is about
reaching the world; Import Substitution is about building from within.
In actual life, a smart nation understands when to compete internationally and when to
safeguard its industries. Like a student getting ready for tests, occasionally you need support
(IS) and occasionally you have to perform on the world scene (EP).
SECTION-D
7. Explain in detail the various types of planning.
Ans: Knowledge of Planning: The Basis of Success
Consider wanting to plan a large birthday celebration for your closest friend. You cannot
simply wake up hoping everything will work out. You have to plan ahead, make decisions on
what to do, who to invite, what to order, and how to arrange décor. Planning is this mental
process of considering the future and choosing our course of action.
Whether in personal activities, companies, or even governments, planning is a rather crucial
phase of life. It guides our goal-setting, helps us determine the best approach to get at
them, and helps us prevent squandering money and time.
Planning is not only one thing, though, and it is not just one approach. There are several
kinds of planning, each with particular use. Allow me to guide you to grasp these kinds of
planning in an easy and entertaining approach.
1. Strategic Planning: The Big Picture Plan
Consider strategic planning as the road map for a lengthy trip. You choose where you want
to go, how long the trip will be, and what main stops you wish to make along the way before
you even begin packing your bags.
Strategic planning in an organization or company is the process of establishing the major,
significant goals that will guide the whole group for years. A company might decide, for
instance, "In the next five years, we want to become the top mobile phone brand in our
country."
This kind of planning begs major issues:
• Long run, what do we wish to accomplish?
• In three, five, or ten years from now where do we wish to be?
• Which assets and shortcomings should we give thought?
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Usually conducted by top officials, strategic planning emphasizes the future. It guides all else
as well.
2. Tactical Planning: Middle-Level Actions
Tactical planning is like choosing the daily paths and stops for food, rest, or sightseeing once
you have your road trip map—strategic plan.
Tactical planning divides the major strategic objectives into doable actions. Managers in a
company follow the overall strategy and determine how best to accomplish aspects of it. If
the objective is to become the leading phone brand, for instance, tactical planning will
concentrate on introducing new models, enhancing marketing, or boosting sales in specific
markets.
It addresses queries like:
• How will several departments cooperate to forward the main objective?
• This year what projects or chores should we work on?
• What tools are required?
Usually spanning months or a year, tactical plans assist to organize several teams and cover
a smaller time span.
3. Operational Plans: Daily Activities
Once you know the daily paths, operational planning is like organizing your bags each
morning, ensuring you have snacks, charged your phone, and checked your car before you
drive.
Operational planning is about the minute daily tasks carried out to complement the tactical
agenda. It covers particular routines, schedules, and procedures.
Operational planning in a company may refer to:
• Arranging staff rotations.
• Ordering resources required for manufacturing.
• Creating daily sales targets.
This kind of planning provides solutions:
• Today or this week what has to be done?
• For every chore, who owns it?
• How will daily success be assessed?
Usually lower-level managers or supervisors handle operational planning.
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4. Contingency Planning: Designed for the Unanticipated
Imagine yourself on your road trip when all of a sudden your car breaks down or a strong
storm develops. Unexpected issues should not cause your whole trip to fall apart. You
therefore create a backup plan, maybe calling a mechanic or choosing a different path.
Contingency planning in organizations is getting ready for unanticipated events or crises. It
entails looking ahead and asking "What if things don't go as planned?"
As a result:
• What happens should a supplier fall short on schedule?
• Should prices rise suddenly, what would happen?
• What happens should a key worker leave the business?
Contingency plans enable companies to react fast to problems without panics. It functions
for your plans like a policy of insurance.
5. Financial Management – Handling the Funds
Consider the money you will need for the road trip: gasoline, food, tickets, hotel stays. You
might run out of money midway if you neglect a proper budget.
Making sure there is enough money to carry out your ideas and apply it sensibly is the
essence of financial planning. This entails in a company budgeting, income and expense
projections, and fund investment decisions.
For every activity, Financial planning questions include:
• what is the required financial outlay?
• Where will the funds originate?
• How might we best use or save money?
This is absolutely vital since without money even the best ideas can fail.
6. Development Strategy – Designed to Grow
Imagine your birthday celebration is a great success and now you wish to organize even
more grandiose celebration with more friends and activities next year. Development
planning is about getting ready to grow and enhance.
Growth planning in companies is mostly concerned with ways to boost sales, reach more
clients, or enter new markets. It entails researching possibilities, hazards, and tools to
enable seamless growth.
Answers from growth planning:
• How might our market share grow?
• We can provide what fresh goods and services?
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• Should we visit fresh countries or sites?
It's like dreaming bigger and organizing to realize that dream.
7. Human Resource Planning: Individualized Approach for People
Your plan won't work no matter how brilliant it is if you don’t have the correct people to
implement it. Imagine planning your road trip by yourself, free from friends or assistance; it
could be quite difficult!
Human resource planning is essentially ensuring that a company has the correct personnel
with the correct skills at the correct moment. It entails hiring, guiding, and growing staff
members.
Questions addressed here include:
• We should have how many staff members?
• Which competencies are needed for forthcoming initiatives?
• How could we inspire and retain staff members?
Good human resource planning guarantees that the team is prepared and competent to
reach the objectives.
8. Making Future Leaders Ready: Succession Planning
Consider succession planning as getting someone ready to take over the driving wheel
should you become tired or sick on your road trip.
Succession planning in companies is the process of selecting and preparing individuals to
take over important leaders or staff members down road. This ensures the stability of the
company even in the case of significant personnel departure.
Answered by succession planning are:
• Should a leadership position become vacant, who can cover for?
• How should we equip next managers?
• In what ways might we guarantee seamless transitions?
It's like creating a safety net for the next direction of the company.
Why Various Planning Approaches Count?
Though they all serve a purpose, every kind of planning contributes differently. It's like
several phases of your road trip or several parts of a machine:
• Strategic planning points to the destination.
• Roads are chosen by tactical planning.
• Daily driving is under control by operational planning.
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• Contingency planning lets one be ready for surprises.
• Managing the money is done by financial planning.
• Planning for growth lets the trip get more grandiose.
• Planning of human resources arranges the team.
• Succession planning shapes upcoming drivers.
Should any of these components be absent or weak, the trip may fall short. But success
becomes much simpler when all kinds of planning complement each other.
8. Discuss in detail the Choice of Technique.
Ans: Method of Approach in Economics: A Basic Narrative to Clarify
Consider yourself the proprietor of a little workshop producing handcrafted wooden
furniture. You have to choose daily how to manufacture your chairs and tables: should you
spend in machines that increase production but pay a lot of money upfront or use
traditional hand tools and skilled carpenters? Economists refer to this daily choice you make
as precisely what they call the "Choice of Technique."
The choice of technique is the process of choosing which approach or method to apply in
manufacturing goods and services. In economics, this is a vital issue since the method you
use determines the cost of manufacturing, the number of employees you must hire, the
quality of the product, and finally, the level of competitiveness your company will be with.
In what precisely is technique?
Let's define what "technique" in this context means before we delve further. In
manufacturing, technique refers essentially to the process or method applied to transform
raw materials into completed goods. One could consider:
• Manual labor, sometimes known as hand work,
• With basic tools,
• Using technology and machinery,
• Alternatively all of these combined.
Every technique differs in terms of the resources it employs, particularly the balance
between labor (human work) and capital (machines, buildings, equipment).
Why Is Technique Choice Crucial?
This decision is important since various methods have different expenses, efficiencies,
effects on the economy and society. As a result:
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• While using machines might generate goods more quickly, they also demand large
financial outlay.
• In some places where labor is plentiful and wages are low, hand labor could be less
expensive.
• While some methods are better for mass production, others could be better for
manufacturing customized or premium goods.
Selecting the appropriate approach will help you decide whether your company thrives or
fails, whether a nation grows rapidly or slowly, and even influence employment rates.
Factors Affecting the Method of Choice
Imagine now that you are seated here choosing which method to apply in your furniture
company. What, in your opinion, influences your choice? The following is a basic list of the
primary elements economists weigh:
Labor's Cost vs. Capital's Cost
You might decide to automate manufacture even if hiring experienced workers is quite
costly and machines are rather reasonably priced. Conversely, if machines are expensive and
labor is cheap, hand labor may be more cost-effective. For instance, labor-intensive
methods are usually favored in low-income developing nations where salaries are low.
Resource Availability
Should some machinery or raw supplies prove difficult to find, your approach may have to
change. For instance, you might rely more on hand work than electric equipment if the
power is erratic.
Production Scale: Size
Automated, capital-intensive methods may be more effective if your intended production
volume is high. Labor-intensive approaches could be better for small-scale or customized
manufacturing.
Degree of Technological Development
Furthermore important is the technology that is now at hand. New approaches become
feasible as technology develops and might be more affordable or effective.
Government Policies and Guidelines
Sometimes governments support the application of specific strategies by means of tax
incentives or subsidies. Environmental rules may also limit particular approaches.
Demand for Quality
Labor-intensive methods may be selected for quality reasons in some products that demand
accuracy or workmanship difficult for machines to replicate.
Social and Cultural Aspects
Some societies respect maintaining traditional handicraft skills. Sometimes social elements
affect the inclination for labor-intensive approaches to generate more jobs.
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Capital-Intensive and Labor-Intensive Methodologies: Types
To grasp better, consider two main groups of production methods:
• Capital-Intensive Technique: Comparatively to labor, this capital-intensive technique
makes more use of machinery, tools, and technologies. Consider high-tech sectors or
automated manufacturers. Though the initial outlay is high, it can yield a lot in less
time.
• Labor-Intensive Technique: Relative to machinery, this labor-intensive technique
employs more human effort. Where labor costs are low, it could be cheaper but
slower. For furniture or handwoven textiles, for instance.
Selecting one of these methods mostly depends on the elements we covered, particularly
the capital and labor costs.
Simple Explanation of Isoquants and Isocost Lines
Now, economists use two tools — isoquants and isocost lines — to more technically grasp
the choice of technique; but, don't worry; I'll keep it simple.
• Isoquant displays every combination of capital and labor that generates the same
output level. See it as a map's curve, where any point indicates you, say, 100 chairs.
• With a given budget, isocost line displays all possible combinations of labor and
capital you could afford. It resembles your expenditure cap.
Where the isocost line just touches the isoquant, you will be able to generate your intended
output at the lowest cost. This point indicates the ideal mix of capital and labor, so guiding
your best approach.
A Practical Illustration
Let us vividly depict this with a narrative:
Two carpenters, Asha and Ramesh, both want to begin furniture building in a small
community. Since labor is cheap, Asha chooses to employ hand tools and contract local
workers. Though the production is slow, she does not need much money upfront.
Ramesh borrows money to purchase machines accelerating wood cutting and assembly.
Although he pays a lot of upfront expenses, production is constant and quick.
Asha's business may suffer if labor's cost rises while Ramesh's machine-based approach
appeals more. On the other hand, Ramesh's approach might not be the best one should the
cost of machines rise or electricity becomes erratic.
Both methods have advantages and drawbacks; the decision will rely on the particular
circumstances.
How Technological Choice Affects Economic Situation?
Economies evolve and change with time, and with them do the methods of choice:
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• Wages often rise as nations grow, which lessens the appeal of labor-intensive
industries.
• Technological developments increase efficiency and help machines to be less
expensive.
• Environmental issues force businesses to embrace greener, sometimes more capital-
intensive approaches.
For instance, many developing nations' textile sectors began as labor-intensive but changed
to capital-intensive methods as wages rose and technology advanced.
Consumer Preferences and Market Demand: Their Roles
Sometimes consumers' preferences affect the method of choice:
• Labor-intensive techniques might be better if consumers want handcrafted,
distinctive furniture.
• Mass-produced, less expensive furniture is what consumers want, thus capital-
intensive methods could be more suited.
In the big picture, why does choice of technique matter?
The technique chosen influences not only the particular companies but also:
• Labor-intensive approaches generate more employment.
• Economic Growth: Productivity can rise using capital-intensive approaches.
• More capital use could help to concentrate income among capital owners.
• Sustainability: A few methods are greener for the surroundings.
To reach social and economic objectives like lower unemployment or support of
modernization, governments often try to influence this decision.
In essence, the technique you choose is like choosing a road.
Consider the selected technique as your road map on a trip. Everybody has no one "best"
road; it will rely on your starting point, destination, available resources, and future
roadblocks.
In economics, knowing how and why producers choose different approaches helps clarify
the structure of industries, the pattern of employment, and the rate of development in
many nations.
Therefore, consider the methods used in a factory or a craft shop the next time you visit
them; it's an amazing mix of human choice, technology, and economics! The major decisions
behind them also deserve thought.
“This paper has been carefully prepared for educational purposes. If you notice any mistakes or
have suggestions, feel free to share your feedback.”
