Economics 2021 Paper II 50 marks Examine

Q8

(a) Define capital account convertibility. Examine Tarapore Committee (I and II) recommendations on capital account convertibility of rupee. (20 marks) (b) Analyse the effects of TRIPS Agreement on Indian agriculture. (15 marks) (c) How does the New Economic Policy change the structure of employment in India? Evaluate. (15 marks)

हिंदी में प्रश्न पढ़ें

(a) पूँजी खाते की संपरिवर्तनीयता को परिभाषित कीजिए। रुपये की पूँजी खाते की संपरिवर्तनीयता पर तारापोर समिति (I एवं II) की अनुशंसाओं का परीक्षण कीजिए। (20 अंक) (b) भारतीय कृषि पर ट्रिप्स (टी० आर० आई० पी० एस०) समझौते के प्रभावों का विश्लेषण कीजिए। (15 अंक) (c) नई आर्थिक नीति ने किस प्रकार भारत में रोजगार के ढाँचे को परिवर्तित किया है? मूल्यांकन कीजिए। (15 अंक)

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Directive word: Examine

This question asks you to examine. 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 'examine' for part (a) requires critical analysis of Tarapore Committee recommendations with evidence; parts (b) and (c) use 'analyse' and 'evaluate' respectively, demanding causal reasoning and balanced judgment. Structure: brief introduction defining CAC, then allocate ~40% word/time to part (a) covering definition and both Tarapore reports with preconditions; ~30% each to (b) analysing TRIPS effects on seed patents, farmer rights and agro-biodiversity, and to (c) evaluating NEP's impact on formal/informal sector employment, casualization and gender dimensions. Conclude with integrated policy lessons on sequencing reforms.

Key points expected

  • Part (a): Precise definition of capital account convertibility (freedom to convert local financial assets into foreign assets and vice versa); First Tarapore Committee (1997) three-stage roadmap with preconditions (fiscal deficit ≤3.5%, inflation ≤3-5%, NPAs reduction); Second Tarapore Committee (2006) revised preconditions including ERM II-style monitoring band and strengthened financial sector
  • Part (a): Critical assessment of why full CAC remains unimplemented in India despite recommendations—2008 global financial crisis lesson, volatility of capital flows, 'impossible trinity' constraints
  • Part (b): TRIPS Agreement effects—transition from sui generis PPVFR to patent regime; impact on seed prices (Monsanto-Mahyco BT cotton case); farmer's privilege vs. breeder's rights; bio-piracy concerns (turmeric, neem, basmati cases); Article 27.3(b) debate
  • Part (c): NEP (1991) employment structure changes—decline of organized sector employment, rise of informalization, casualization of workforce, feminization of agriculture, jobless growth phenomenon 1990s-2000s, sectoral shift from agriculture to services bypassing manufacturing
  • Part (c): Evaluation of NEP employment outcomes using NSSO/PLFS data—elasticity of employment with respect to growth, rising informal sector share (90%+ workforce), precarious employment, critique of trickle-down assumptions

Evaluation rubric

DimensionWeightMax marksExcellentAveragePoor
Concept correctness22%11Accurately distinguishes CAC from current account convertibility; correctly identifies both Tarapore Committees' specific preconditions (1997: fiscal, inflation, NPA targets; 2006: ERM II reference, financial market development); precisely explains TRIPS Article 27.3(b), UPOV 1991 vs. PPVFR 2001; correctly defines informal sector, casual labour, and organized/unorganized sector classification for employment analysisBasic definition of CAC correct but confuses some preconditions between two committees; generic mention of TRIPS without specific articles; understands informal sector but conflates with unorganized sector; misses distinction between employment structure and unemploymentConfuses CAC with current account convertibility or currency convertibility generally; cites Tarapore Committee without specifying I or II; describes TRIPS as only beneficial or only harmful without nuance; treats NEP employment effects as purely positive or purely negative without structural analysis
Diagram / model14%7Uses 'impossible trinity' diagram showing CAC trade-offs with exchange rate stability and monetary autonomy; Lewis dual-sector model diagram for structural transformation; capital flow volatility cycle diagram; employment elasticity trend graph with structural break post-1991Mentions impossible trinity without diagram; describes Lewis model verbally; generic trend description without visual representation; no integration of diagrams with specific question partsNo diagrams or models; or irrelevant diagrams (AD-AS, Phillips curve) not applied to CAC, TRIPS or employment structure; diagrams drawn but not explained or linked to analysis
Quantitative reasoning16%8Cites specific Tarapore precondition numbers (fiscal deficit 3.5%, inflation 3-5%, gross NPA 5%, CRR 10%); uses employment elasticity data (0.12 in 1990s vs. 0.50 in 1980s); informal sector share figures (93% workforce); seed price increase data post-TRIPS; capital flow volatility indicesRound-number approximations of preconditions; general statement that employment growth lagged output growth without specific elasticity; mentions informal sector majority without precise percentage; no quantitative TRIPS impact dataNo quantitative data; or invented statistics; confuses percentages across different indicators; treats all three parts without any numerical grounding
Indian / empirical examples24%12For (a): 1997 East Asian crisis impact on CAC postponement, 2006 committee response to changed context, 2013 taper tantrum relevance; For (b): specific bio-piracy cases (turmeric patent revoked 1997, neem patent 2000, basmati patent 2001), BT cotton seed price escalation, farmer suicide data linkage, Protection of Plant Varieties and Farmers' Rights Act 2001; For (c): NSSO 55th, 61st, 68th, PLFS rounds showing informalization, sectoral employment shares, decline of public sector employment, rise of contract labour, gig economy precursorsMentions 1997 Asian crisis and 2008 crisis generally; knows TRIPS affected seeds but no specific cases; describes informal sector growth without survey round specifics; misses PPVFR 2001 as Indian responseNo Indian-specific examples; generic developing country references; or incorrect examples (e.g., citing WTO creation 1995 as NEP); treats question as theoretical without empirical grounding
Policy implication24%12For (a): argues for calibrated CAC with macroprudential framework, capital flow management measures, sequencing with domestic financial deepening; For (b): recommends strengthening PPVFR, benefit-sharing mechanisms, sui generis system for TK protection, farmer seed rights; For (c): suggests universal social security for informal workers, skill development for manufacturing absorption, MGNREGA as safety net, need for employment-intensive growth strategy; integrates all three parts on sequencing market reforms with institutional safeguardsGeneric statement that CAC should be cautious; mentions need to protect farmers without specific mechanisms; suggests more jobs needed without structural policy; treats each part in isolation without integrated conclusionNo policy recommendations; or contradictory recommendations (full CAC immediately, complete patent abolition); purely descriptive without evaluative policy stance; ignores government's actual policy responses to these issues

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