NTA UGC NET/JRF Exam, December-2022 Economics (Shift-II)

The Human Development Index (HDI) is calculated using three indicators : life expectancy, education, and standard of living.

The HDI score for India in 2022 was 0.644, which placed India 134th out of 193 countries in the United Nation's 2023-24 Human Development Report (HDR). This places India in the category of 'medium human development'.

Here are some of the indicators that contribute to the HDI:
Life expectancy: In 2022, India's life expectancy at birth increased from 67.2 to 67.7 years.
Expected years of schooling : In 2022, India's expected years of schooling reached 12.6.
Mean years of schooling : In 2022, India mean years of schooling increased to 6.57.
Gross National Income (GNI) percapita. In 2022, India's GNI per capita increased from $6,542 to $6,951.
The HDI is calculated by aggregating three indicators : health, education and standard of living. The indicators are normalized to a scale of 0 to 1, and then combined using geometric and arithmetic means.
The HDI can be used to compare countries and stimulate debate about policy priorities. However, it doesn't reflect all aspects of Human development, such as inequalities, poverty, and human security.

Some statements about the Finance Commission of India:
• Recommendations:
The Finance Commission makes recommendations to the president of India on matters such as the distribution of tax proceeds between the center and states, and the principles for grants in aid to states. The commission's recommendations are advisory nature and are not binding on the government.

Constitution :
The Finance Commission is a statutory body established under Article 280 of the Constitution. The First Finance Commission was set up in 1950.

Parliament :
The Commission recommendations are presented to the House of Parliament along with an explanatory memorandum on the governments actions on them.

Disqualification :
A member of the Finance Commission may be disqualified of they are mentally unsound, an undischarged insolvent, or have been convicted of an immoral offense.

Fiscal deficit:
The 15ᵗʰ Finance Commission recommended that the center reduce is its fiscal deficit to 4% of GDP by 2025- 26.

Grants-in-aid
The Finance Commission recommends the principles for grants-in-aid toi the states from the centre's consolidated fund.

(1) Statement A is wrong. No, product taxes will raise prices more under monopoly than under competition.
(2) Yes, a tax on capital income tends to be progressive, while a tax on wage income tends to be regressive.
(3) The tax incidence depends on the relative price elasticity of supply and demand when supply is more elastic than demand, buyers bear most of the tax burden.
When demand is more elastic than supply, producers bear most of the cost of the tax. Tax revenue is larger the more inelastic the demand & supply are.
(4) A unit tax causes a parallel downward shift in a supply curve because the amount of tax is the same at all prices.
(5) Yes, the imposition of a tax an a good or service increase the price and decreases the quanity.

Correct statements:
(4) A competitive market can secure efficient resource use in the provision of private goods but market failure occurs in that of social goods.
(2) To seek efficient provision of social goods, a political process of budget determination is needed.
(3) Corrective action may be needed when consumer choice is based on false advertising.
(4) There are mixed cases between the extreme of purely private and purely social goods.

The Reserve Bank of India (RBI) uses a number of monetary measures to control inflation, including:
Repo rate : The rate at which the RBI lends money to commercial banks. Raising the repo rate makes borrowing more expensive, which discourages spending and investment, and slows down inflation.
Cash reserve ratio (CRR): The RBI increases the CRR to impact the money supply in the economy.
Statutory liquidity ratio (SLR): The RBI increases the SLR to impact the money supply in the economy.
Reverse repo rate : The RBI increases the reverse repo rate to impact the money supply in the economy.

Money market include markets for such instruments as bank accounts, including term certificates of deposit; interbank loans (loans between banks); money market mutual funds; commercial paper;
Treasury bills, and securities lending and repurchase agreement (repos).
Important points -
(1) Treasury bills is an instrument of short-term borrowing by the government with absence of default risk.
(2) RBI uses refinance to relieve liquidity shortage in the system.
(3) The RBI has switched over from daily fixed rate repos auction system to discriminatory price acution repos.

Some causes and consequences of poverty include-
(1) Lack of education
(2) Climate change
(3) Child labor
(4) Conflict
(5) Inaccessible healthcare
(6) Poor Infrastructure
(7) Population growth
(8) Unemployment
(9) Low wages

Measurement of income inequality is done by :
(1) Gini coefficient is a typical measure of income inequality. The coefficient varies between 0 and 1, with 0 representing perfect equality and 1 perfect inequality.
(2) A Lorentz curve is a graph that measures income inequality by comparing the cumulative share by income earned by different segments of the population.
(3) The Palma ratio is a measure of inequality that divides the share received by the richest 10% by the share of the poorest 40%.
Higher values indicate higher inequality. Inequality is measured here in terms of income before taxes and benefits.

Statements for Schumpeter's theory of development
(1) Innovation is central.
(2) Diffusion is complementary
(3) Capitalism will evolve into socialism
(4) New products replace old ones.
(5) Entrepreneurs are motivated by more by more than just gain.
According to Schumpeter, the growth of the economic system can only be gradual, continuous, and slow as a result of changes in the supply of productive resources.

Environmental economics is a sub-field of economics that studies the relationship between the economy and the environment. Some features of environmental economics include:

(1) Focus on sustainability : Environmental economics focuses on how to allocate scarce resources to meet human needs while also preserving the environment.

(2) Valuation of non-market goods : Environmental economics places a value on non-market goods and services, such as clean air, water, and natural resources.

(3) Policy creation: Environmental economics creates policies and incentives to advocate for sustainable development and minimize damage to the environment.

(4) Transnational approach - Environmental economics often requires a transnational approach because some environmental goods are not limited to a single country.

(5) Study of environmental damage : Environmental economics studies how alternative environmental policies deal with environmental damage, such as air pollution, water quality, toxic substances, solid waste, and global warming.

Study of externalities - Environmental economics studies externalities, which are the additional costs of doing business that are not paid by the business or its consumers.