Which of the following activities constitute real sector in the economy ? 1. Farmers harvesting their crops 2. Textile mills converting raw cotton into fabrics 3. A commercial bank lending money to a trading company 4. A corporate body issuing Rupee Denominated Bonds overseas Select the correct answer using the code given below :
- (a) 1 and 2 only ✓ UPSC's answer
- (b) 2, 3 and 4 only
- (c) 1, 3 and 4 only
- (d) 1, 2, 3 and 4
Why the answer is (a)
• The real sector produces actual goods and services — agriculture, industry and services like transport — as opposed to the financial sector, which deals in money, credit and securities.
• Farmers harvesting crops (1) and textile mills converting cotton to fabric (2) are real-sector production.
• A bank lending to a trading company (3) and a corporate issuing rupee-denominated bonds overseas (4) are financial-sector transactions that move funds rather than produce goods.
• The distinction matters in national accounts and in analysing 'real' versus 'financial' shocks.
• Hence 1 and 2 only, option (a).
Why the other options are wrong
- (b) 2, 3 and 4 only
- Bank lending and bond issuance are financial, not real, sector activities.
- (c) 1, 3 and 4 only
- Lending and bond issuance belong to the financial sector.
- (d) 1, 2, 3 and 4
- Activities 3 and 4 are financial-sector transactions.
Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2022, held on 5 June 2022. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.