Economics 2021 Paper I 50 marks 150 words Compulsory Explain

Q5

Answer the following questions in about 150 words each: (a) Explain Rosenstein-Rodan's view that economic underdevelopment is the outcome of a massive coordination failure. (10 marks) (b) Explain how gender sensitive human development index can be constructed. (10 marks) (c) Show that the economic integration is the pre-requisite to establish covered interest rate parity. (10 marks) (d) Under what condition Real Exchange Rate is synonymous to 'terms of trade' ? Discuss. (10 marks) (e) Do you agree whether sustainable use of energy ensures economic sustainability ? Explain. (10 marks)

हिंदी में प्रश्न पढ़ें

निम्नलिखित प्रत्येक प्रश्न का उत्तर लगभग 150 शब्दों में दीजिए । (a) आर्थिक-अविकास एक विशाल समन्वय की असफलता का परिणाम है । रोजेनस्टीन-रोडां के इस दृष्टिकोण की व्याख्या कीजिए । (10 अंक) (b) लिंग संवेदनशील मानव विकास सूचकांक किस प्रकार निर्मित किया जा सकता है, व्याख्या कीजिए । (10 अंक) (c) दर्शाइए कि आच्छादित ब्याज दर समानता स्थापित करने के लिये आर्थिक एकीकरण एक पूर्वापेक्षा है । (10 अंक) (d) वास्तविक विनिमय दर किस दशा में 'व्यापार की शर्त' की पर्याय होती है ? चर्चा कीजिए । (10 अंक) (e) क्या आप इस से सहमत हैं कि ऊर्जा का धारणीय उपयोग आर्थिक धारणीयता को सुनिश्चित करता है ? व्याख्या कीजिए । (10 अंक)

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Directive word: Explain

This question asks you to explain. The directive word signals the depth of analysis expected, the structure of your answer, and the weight of evidence you must bring.

See our UPSC directive words guide for a full breakdown of how to respond to each command word.

How this answer will be evaluated

Approach

The directive 'explain' demands clear exposition of theoretical mechanisms across all five parts. Allocate approximately 30 words per mark (150 words × 5 parts = 750 total). Structure each part with: (a) define the core concept, (b) explain the mechanism/logic, (c) conclude with significance. For (a), emphasize the 'big push' coordination problem; for (b), contrast standard HDI with GDI/GEM; for (c), derive the CIRP condition; for (d), specify the price index condition; for (e), address the energy-growth nexus with caveats.

Key points expected

  • (a) Rosenstein-Rodan's 'big push' theory: indivisibilities, complementarities, and why private coordination fails due to external economies—citing the 30% investment threshold
  • (b) Gender-sensitive HDI construction: GDI adjusts HDI for gender inequality in achievements; GEM measures agency/empowerment; need for gender-disaggregated data on health, education, income
  • (c) Covered Interest Rate Parity derivation: (F-S)/S = i_d - i_f, requiring free capital mobility, no capital controls, and integrated financial markets for arbitrage to function
  • (d) RER = Terms of Trade condition: when price indices are identical (P_d/P_f = export prices/import prices), specifically under single-good or identical basket assumptions
  • (e) Energy-growth nexus: Jevons paradox, renewable transition constraints, India's energy intensity decline; distinguish between energy sustainability and broader economic sustainability

Evaluation rubric

DimensionWeightMax marksExcellentAveragePoor
Concept correctness25%12.5Precise definitions across all parts: (a) correctly identifies external economies and coordination failure; (b) distinguishes GDI from GEM; (c) states CIRP formula accurately; (d) specifies exact mathematical condition for RER-TOT equivalence; (e) nuances the energy-sustainability relationship without conflationBroadly correct definitions with minor errors—e.g., confuses GDI with GEM, or states CIRP without specifying covered vs. uncovered, or oversimplifies RER-TOT conditionFundamental conceptual errors: describes Rosenstein-Rodan as purely capital shortage theory, omits gender adjustment mechanism in (b), confuses CIRP with UIP, or treats energy sustainability as sufficient for economic sustainability
Diagram / model15%7.5For (a): sketches the big push diagram with multiple equilibria (low-level trap vs. development equilibrium); for (c): illustrates covered interest arbitrage with domestic/foreign asset returns; clear, labeled axes and equilibrium pointsMentions diagrams without clear sketch, or draws generic production possibility curves without specific relevance to coordination failure or interest parityNo diagrams where appropriate (especially for (a) and (c)), or incorrect diagrams that misrepresent the theoretical models
Quantitative reasoning20%10For (c): derives CIRP formula step-by-step showing no-arbitrage condition; for (d): specifies RER = (E×P_f)/P_d and TOT = P_x/P_m, then proves equality when P_d=P_x and P_f=P_m; mentions 30% investment threshold in (a)States formulas without derivation, or presents numerical examples without showing logical connection to theoretical conditionsAbsent quantitative treatment where required; garbled formulas; confuses nominal and real exchange rate in (d); no mention of investment thresholds
Indian / empirical examples20%10Cites India's gender development index trends (GDI value ~0.947 vs HDI ~0.644); references India's capital account management and CIRP deviations during 2013 taper tantrum; mentions India's energy intensity decline (3.3% annually) and renewable targets; uses NITI Aayog's SDG gender indexGeneric references to 'developing countries' without India-specific data, or outdated statistics without contextual relevance to the specific theoretical pointNo empirical grounding; irrelevant examples; factually incorrect data (e.g., confusing India's HDI rank with GDI value)
Policy implication20%10For (a): state-led investment coordination, planning commission role; for (b): gender budgeting, Beti Bachao Beti Padhao linked to HDI metrics; for (c): capital account liberalization cautions; for (d): exchange rate management for trade competitiveness; for (e): Energy Conservation Act 2001, PAT scheme, net-zero commitmentsVague policy references without specificity to Indian institutional mechanisms, or conflates policy instruments across unrelated domainsNo policy discussion; purely theoretical treatment; or proposes inappropriate policies (e.g., import substitution for CIRP establishment)

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