Q5
Answer the following questions in about 150 words each: (a) Critically examine 'per capita' GDP as a crude indicator of development. (10 marks) (b) Explain managed floating and sterilized interventions for exchange rate. (10 marks) (c) Discuss how carbon trading is helpful in reducing environmental degradation. (10 marks) (d) "Higher tariffs do not increase employment, they just redistribute the unemployed." Do you agree with the statement? Explain. (10 marks) (e) Explain how the equilibrium terms of trade are determined by using offer curves of the trading partners. (10 marks)
हिंदी में प्रश्न पढ़ें
निम्नलिखित प्रत्येक प्रश्न का उत्तर लगभग 150 शब्दों में दीजिए : (a) विकास के सन्दर्भ में 'प्रति व्यक्ति' जी० डी० पी० एक अपरिष्कृत सूचक है। आलोचनात्मक व्याख्या कीजिए। (10 अंक) (b) विनिमय दर के प्रबन्धित चल तथा निष्फल हस्तक्षेपों को समझाइए। (10 अंक) (c) कार्बन व्यापार किस प्रकार पर्यावरण अवनयन को कम करने में सहायक होता है? विवेचना कीजिए। (10 अंक) (d) "उच्च प्रशुल्क रोजगार में वृद्धि न करके मात्र बेरोजगारों का पुनर्वितरण करते हैं।" क्या आप इस कथन से सहमत हैं? समझाइए। (10 अंक) (e) समझाइए कि किस प्रकार व्यापार के भागीदारों के लिए अर्पण वक्रों की सहायता से सन्तुलित व्यापार की शर्तें तय होती हैं। (10 अंक)
Directive word: Critically examine
This question asks you to critically 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 'critically examine' for part (a) demands balanced analysis with judgment, while parts (b)-(e) require explanation, discussion, and evaluation. Allocate approximately 30 words per mark across all five parts—roughly 30 words each for (a)-(e). Structure each sub-part with a precise definition, core theoretical exposition, critical nuance (where asked), and brief concluding assessment. Prioritize conceptual precision over exhaustive coverage given severe word constraints.
Key points expected
- For (a): Per capita GDP ignores income distribution (Gini coefficient), non-market activities, environmental externalities, and human development dimensions (HDI); cite India's rank disparity (GDP vs HDI) or Bhutan's GNH as counter-indicator
- For (b): Managed floating as hybrid regime with central bank intervention bands; sterilized intervention using OMOs to neutralize monetary base effects—distinguish from unsterilized intervention
- For (c): Cap-and-trade mechanism, carbon price discovery, Coase theorem application; reference India's PAT scheme, carbon markets under Energy Conservation Act 2022, or EU ETS linkage debates
- For (d): Stolper-Samuelson theorem, specific factors model, employment redistribution across sectors; immiserizing growth possibility; reference India's auto tariff debates or Trump's steel tariffs
- For (e): Offer curves (reciprocal demand curves) showing export-import willingness; equilibrium at intersection determining terms of trade; Mill's equation of international demand; offer curve shifts with growth/technical change
Evaluation rubric
| Dimension | Weight | Max marks | Excellent | Average | Poor |
|---|---|---|---|---|---|
| Concept correctness | 25% | 12.5 | Precise definitions across all parts: distinguishes real vs nominal per capita GDP limitations; correctly identifies sterilization mechanics (OMOs, sterilization bonds); accurately describes cap-and-trade vs baseline-and-credit; properly applies specific factors model for tariffs; draws correct offer curve geometry with elasticities | Generally accurate definitions with minor errors—conflates managed float with dirty float, vague on sterilization mechanism, generic carbon trading description, tariff-employment link oversimplified, offer curves drawn but elasticities unmentioned | Fundamental conceptual errors—treats per capita GDP as sufficient indicator, confuses sterilized with unsterilized intervention, describes carbon tax as trading, assumes tariffs raise aggregate employment, misdraws offer curves or confuses with indifference curves |
| Diagram / model | 20% | 10 | Clean offer curve diagram for (e) with proper axis labels (exportables/importables), community indifference curves tangent, equilibrium terms of trade ray; optional but precise tariff-employment sectoral diagram for (d); all diagrams integrated with text | Basic offer curve sketch present but poorly labeled or missing community indifference tangency; diagrams mentioned but not drawn for other parts; some disconnect between diagram and explanation | No diagrams where essential (offer curves); or diagrams with inverted axes, missing equilibrium points, or completely unrelated curves; text references diagrams not provided |
| Quantitative reasoning | 15% | 7.5 | Numerical illustration where applicable—elasticity of offer curves determining terms of trade stability; approximate carbon price ranges (e.g., EU ETS €80-100/tonne); India's per capita GDP vs HDI rank numerical gap; sterilization magnitude implications | Qualitative mention of quantitative relationships without numbers; vague reference to 'high' or 'low' elasticities; no specific price or rank data | No quantitative dimension; or incorrect numerical claims (e.g., tariffs always raise employment by X%); confuses stocks and flows in sterilization discussion |
| Indian / empirical examples | 20% | 10 | Specific Indian evidence: HDI rank 134 vs GDP rank 5 (2024) for (a); RBI's 2013 taper tantrum sterilization via MSS bonds for (b); PAT scheme, National Carbon Market launch 2023 for (c); steel/aluminium tariff protection effects 2018-2024 for (d); India's terms of trade deterioration post-1991 or commodity boom impacts for (e) | Generic Indian references without specificity—mentions 'India's development challenges' or 'RBI intervention' without episode; carbon markets mentioned without scheme names; tariffs discussed without sectoral detail | No Indian examples; or factually wrong examples (e.g., India has pure carbon tax, not trading); irrelevant international examples substituted where Indian context is essential |
| Policy implication | 20% | 10 | Clear policy takeaways: need for multidimensional indices (SDG dashboard) beyond GDP; optimal intervention rules under managed float; carbon market design challenges (price floors, offset integrity); active vs passive labor market policies for trade adjustment; strategic trade policy for terms of trade improvement | Generic policy conclusions—'government should focus on inclusive growth' without mechanism; 'carbon trading is good' without design caveats; policy implications stated but not derived from analysis | No policy implications; or contradictory recommendations (e.g., abandon GDP entirely while using it for fiscal targets); policy prescriptions unrelated to theoretical analysis provided |
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