1. Home
  2. |  
  3. Civil Services |  

IAS Prelims Exam: Economic Survey 2015-16 Questions: Structural Changes in India’s labour markets

Apr 14, 2016 12:55 IST

    To study Economic Survey is very important because UPSC in its IAS Prelims Exam used to ask various terms which are associated with the issues of Indian Economy. As per the recent trend, the subject Economy has important place in General Studies Paper I of IAS Prelims Exam in which around 15 to 25 questions used to ask every year. So, the aspirants need to study very hard to cover all the topics of GS Paper I of IAS Prelims Exam. Here, we have developed Multiple Choice Questions on one of the chapters of Economic Survey 2015-16 i.e. - Structural Changes in India’s labour markets.

    1. Consider the following statements regarding the increasing use of contract labour supplied by specialised staffing companies in India:

    I. It allows large firms to grow.
    II. It leads to raise aggregate productivity.
    III. It leads to diminish aggregate productivity.

    Which of the following statement(s) is/are correct?

    a. Only I

    b. I and II

    c. II and III

    d. All of the above

    Answer: b

    Explanation: To exploit its demographic dividend, India must create millions of “good”— safe, productive, well-paying—jobs. These tend to be in the formal sector. There are various constraints on formalisation of labour sector and the various development programmes which are having several challenges to face in India. The large firms get benefit from the contract labour supply. The increasing use of contract labour supplied by specialised staffing companies, which allows large firms to grow, raising aggregate productivity.

    2. Consider the following statements regarding the employment growth between 1989 and 2010 in India:

    I. Informal firms account for most employment growth and nearly all the increase in the number of establishments since 1989.
    II. Of the 10.5 million new manufacturing  jobs  created  between 1989 and 2010, only 3.7 million—about 35 percent—were in the formal sector.
    III. After 2000, the informal sector establishment counts flatten and employment actually falls, while formal sector employment picks up.

    Which of the following statement(s) is/are correct?

    a. Only I

    b. I and II

    c. II and III

    d. All of the above

    Answer: d

    Explanation: Two things you will notice regarding the growth of employment between 1989 and 2010. First, informal firms account for most employment growth and nearly all the increase in the number of establishments since 1989. Of the 10.5 million new manufacturing jobs created between 1989 and 2010, only 3.7 million—about 35 percent—were in the formal sector. This pattern is  even  starker when looking at growth in establishment counts: total establishments increased  by 4.2 million from 1989-2010, but the formal sector accounted for only 1.2 per cent of this growth. Second, trends seem somewhat different after 2000: informal sector establishment counts flatten and employment actually   falls, while formal sector employment picked up.

    3. Which of the following statements is incorrect regarding the employment sector in India?

    a. The informal sector must be credited with creating jobs and keeping unemployment low.

    b. By most measures informal sector jobs are much worse than formal sector ones—wages are, on average, more than 20 times higher in the formal sector, though informal  sector  wages  have grown somewhat faster between 1989-2010.

    c. By most measures formal sector jobs are much worse than informal sector ones—wages  are, on average, more than 20 times higher in the informal sector, though informal  sector wages have grown somewhat faster between 1989-2010.

    d. Formal sector jobs also score better on some non-pecuniary grounds.

    Answer: c

    Explanation: The informal sector should thus be credited with creating jobs and keeping unemployment low. Yet, by most measures informal sector jobs are much worse than formal sector ones—wages are, on average, more than 20 times higher in the formal sector, though informal sector wages have grown somewhat faster between 1989-2010. Formal sector jobs also score better on some non-pecuniary grounds. For example, they allow workers to build employment history - which is important for gaining access to cheaper formal credit.

    4. In order to stay small enough to be exempt from some labour laws, the firms adopts some strategies. Which of the following such strategies are correct?

    a. One popular strategy is to hire contract workers, which has two key benefits like the firm essentially subcontracts the work of following regulations and “managing” inspectors  to the contract labour firm.

    b. The other benefit is because contract workers are the employees of the contractor and are not considered workmen in the firm, the firm stays small enough to be exempt from some labour law.

    c. Both a and b

    d. Neither a nor b

    Answer: c

    Explanation: The slow pace of labour reform has encouraged firms to resort to other strategies to negotiate “regulatory cholesterol”. One popular strategy is to hire contract  workers, which has two key benefits: first, the firm essentially subcontracts the work of following regulations and “managing” inspectors to the contract labour firm. Second, because contract workers are the employees of the contractor and are not considered workmen in the firm, the firm stays small enough to be exempt from some labour law.

    5. Which of the following is correct?

    a. PRODY is a measure of the “quality” of a particular product.

    b. EXPY is an analogous measure for the “quality” of a country’s export mix.

    c. EXPY is calculated as the average of PRODY for all products a country exports, and is a good predictor of subsequent economic growth.

    d. All of the above

    Answer: d


    Explanation: PRODY and EXPY are indexes that measure the quality of export mix or baskets. PRODY is a measure of the “quality” or “sophistication” of a particular product. EXPY is an analogous measure for the “quality” or “sophistication” of a country’s export mix or baskets. EXPY is calculated as the average of PRODY for all products a country exports, and is a good predictor of subsequent economic growth.

    6. Consider the following statements regarding the Indian apparel industry:

    I. It is labour-intensive, with 30 per cent of costs from wages and only 2-3 per cent of costs are due to capital-intensive inputs like power.  
    II. India is ceding market share in the global apparel industry to countries like Bangladesh and Vietnam.
    III. Formal sector apparel firms are about 15 times more productive than their informal sector counterparts.

    Which of the following statement(s) is/are correct?

    a. Only I

    b. I and II

    c. II and III

    d. All of the above

    Answer: d

    Explanation: It is labour-intensive, with 30 per cent of costs from wages and only 2-3 per cent of costs are due to capital-intensive inputs like power.  And yet India is ceding market share in the global apparel industry to countries like Bangladesh and Vietnam. Formal sector apparel firms are about 15 times more productive than their informal sector counterparts.

    7. Consider the following statements regarding the significance of the apparel industry:

    I. The apparel industry typically employs many female workers: for instance about 70 percent of the employees of India's largest apparel exporter are women.
    II. The apparel manufacturers locating majorly in urban areas can help address the low rates of female labour force participation that prevent India from achieving its full economic potential.
    III. Most explanations of low labour force participation in India focus on supply-side factors like cultural norms that frown on women working outside the home.

    Which of the following statement(s) is/are correct?

    a. Only I

    b. I and II

    c. I and III

    d. All of the above

    Answer: c

    Explanation: The apparel industry typically employs many female workers: for instance about 70 percent of the employees of India's largest apparel exporter are women. The apparel manufacturers locating majorly in urban areas can help address the low rates of female labour force participation that prevent India from achieving its full economic potential. Most explanations of low labour force participation in India focus on supply-side factors like cultural norms that frown on women working outside the home. Less attention has been given to demand-side explanations, which essentially emphasise that a key determinant of female labour force participation (LFP) is the availability

    8. Consider the following statements regarding EPF:

    I. The EPF, which was created by The Employees ‘Provident Funds & Miscellaneous Provisions Act, 1952, is a fund to which most workers must involuntarily contribute at least 12 per cent of their basic salary.
    II. The money goes into an account managed by the Employees Provident Fund Organisation (EPFO) and is meant to provide a lump sum benefit to workers upon retirement.
    III. Employers must also contribute 12 per cent of their employees’ basic although about 70 per cent of the employers’ contribution goes into the Pension Scheme (EPS) while about 30 per cent goes into the EPF.

    Which of the following statement(s) is/are correct?

    a. Only I

    b. I and II

    c. I and III

    d. All of the above

    Answer: d

    Explanation: The EPF, which was created by The Employees’ Provident Funds & Miscellaneous Provisions Act, 1952, is a fund to which most workers must involuntarily contribute at least 12 per cent of their basic salary. The money  goes into an account managed by the Employees Provident  Fund  Organisation (EPFO) and is meant to provide a lump sum  benefit to workers upon retirement. Employers must also  contribute 12 per cent of their employees’ basic although about 70 per cent of the employers’ contribution goes into the Pension Scheme (EPS) while about 30 per cent goes into the EPF.  

    9. Consider the following statements regarding the competitive labour market:

    i. A tax on labour will increase the effective wage paid by the company.
    ii. A tax on labour will reduce the effective wage received by the employee.
    iii. If labour demand is relatively less elastic than labour supply, the tax incidence will fall more heavily on the employer.

    Which of the following statement(s) is/are correct?

    a. Only I

    b. I and II

    c. I and III

    d. All of the above

    Answer: b

    Explanation: A tax on labour will increase the effective wage paid by the company. A tax on labour will reduce the effective wage received by the employee. If labour demand is relatively more elastic than labour supply, the tax incidence will fall more heavily on the employee not on the employer.

    Click here for Questions of Various chapters of Economic Survey 2015-16

    Register to get FREE updates

      All Fields Mandatory
    • (Ex:9123456789)
    • Please Select Your Interest
    • Please specify

    • ajax-loader
    • A verifcation code has been sent to
      your mobile number

      Please enter the verification code below

    This website uses cookie or similar technologies, to enhance your browsing experience and provide personalised recommendations. By continuing to use our website, you agree to our Privacy Policy and Cookie Policy. OK
    X

    Register to view Complete PDF