School Social Studies Gap Book (Classes VI-X themes) · Chapter 11

Economics for Classes IX-X: Development, HDI, Sectors, Money and Credit, Globalisation, Food Security

What to remember

Development means different things to different people. A fair measure uses more than income: the Human Development Index (HDI) of UNDP combines health (life expectancy), education (years of schooling) and standard of living (per capita income).
The economy has primary (agriculture and allied), secondary (industry) and tertiary (services) sectors. Services give the largest share of GDP, but most workers still depend on agriculture and the unorganised sector.
Money works as a medium of exchange; credit is a loan with terms (interest, collateral, documents, repayment). Food security means availability, accessibility and affordability of food for all, supported by buffer stock, the Public Distribution System (PDS) and the National Food Security Act, 2013.

Development

Different people have different developmental goals. A landless labourer may want more days of work and fair wages; a prosperous farmer may want a high price for crops; a girl may want equal opportunity. A goal that is good for one may be harmful for another.
Common goals: income, equal treatment, freedom, security, respect, and a good environment. Development is therefore both material and non-material.
National income is the total value of goods and services produced in a country in a year. Per capita income = total income / total population. Example: if a country has income of Rs 4,00,000 crore and population of 100 crore, per capita income is Rs 4,000.
Limit of average income: it hides inequality. Two countries may have the same average income but very different distribution among people.
Other indicators of development: literacy rate, infant mortality rate (deaths of infants below one year per 1,000 live births), life expectancy at birth, net attendance ratio in school, access to drinking water and sanitation, and public facilities (health, school, ration shops).
States with a lower per capita income can have better human development if public facilities are well run (Kerala is the usual example; it has high literacy and low infant mortality).
Human Development Index: published in the Human Development Report of the United Nations Development Programme (UNDP). The idea was developed by Mahbub ul Haq with Amartya Sen's capability approach.

HDI dimension	Indicator
Long and healthy life	Life expectancy at birth
Knowledge	Mean years and expected years of schooling
Decent standard of living	Gross national income per capita (in purchasing power terms)

HDI values range from 0 to 1; closer to 1 means higher human development. Countries are grouped as very high, high, medium and low human development.

Sustainable development: meeting the needs of the present without harming the ability of future generations to meet theirs. Non-renewable resources such as groundwater and fossil fuels must be used with care.

Sectors of the Indian economy

Sector	Activities	Examples
Primary (agriculture and allied)	Use natural resources directly	Farming, dairy, fishing, forestry, mining
Secondary (industry)	Turn raw materials into goods	Cotton to cloth, sugarcane to sugar, steel making
Tertiary (services)	Support primary and secondary and give services	Transport, banking, trade, teaching, IT, health care

GDP (Gross Domestic Product) is the value of all final goods and services produced within a country in a year. Only final goods are counted; intermediate goods (such as wheat bought by a baker as raw material) are not counted again, to avoid double counting.
Over time, the share of the tertiary sector in GDP has become the largest, while the share of agriculture has fallen. However, the share of employment in agriculture has not fallen as much. This shows that too many people depend on agriculture.
Underemployment (disguised unemployment): more people work on a farm than needed; some could be moved out without lowering output.
Organised sector: registered with the government; follows rules; has fixed hours, job security, benefits. Unorganised sector: small, scattered, not under government control; low and irregular wages, little security. Most workers in India are in the unorganised sector and need protection.
Public sector is owned by the government (railways, post office); private sector is owned by individuals or companies (profit motive).
Employment guarantee: the Mahatma Gandhi National Rural Employment Guarantee Act, 2005 gave rural households a legal right to 100 days of paid work per year. In December 2025 it was replaced by the Viksit Bharat - Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025 (VB-G RAM G), which provides 125 days (check the latest official position). It supports livelihood and builds rural assets.

Money and credit

Barter and money

In barter, goods are exchanged for goods. It needs a double coincidence of wants: each party must want what the other has. This is a serious difficulty.
Money removes this problem. It acts as a medium of exchange, a unit of account, a store of value.
Modern forms of money: currency (paper notes and coins) and deposits in banks. Paper notes are issued by the Reserve Bank of India (RBI), except the one-rupee note, which is issued by the Government of India. The Indian law makes rupee notes legal tender: no one in India can refuse to accept payment in rupees.
Demand deposits: money in a bank account that can be withdrawn on demand; payments can be made by cheque, card or digital transfer without cash.
Banks keep a small part of deposits as cash and lend out a major part. They earn by charging a higher interest on loans than they pay on deposits.

Loans and credit

Credit is an agreement in which the lender gives money, goods or services now and expects repayment later, with interest.

Terms of credit: interest rate, collateral (security against the loan, such as land, building, vehicle, livestock or deposits), documentation, and mode of repayment.
Example: a loan of Rs 10,000 at 10% simple interest per year costs Rs 1,000 interest after one year, so repayment is Rs 11,000.
Credit can help production and raise income, but if the crop or business fails, the borrower may fall into a debt trap.

Formal credit	Informal credit
Banks and cooperative societies	Moneylenders, traders, employers, relatives, friends
Under RBI supervision	No supervision
Lower interest rates	Often very high interest
Needs documents and collateral	Easy access but exploitative

RBI supervises banks and controls the supply of money and credit. It is the central bank and bankers' bank. It makes sure banks actually give loans to small borrowers and do not hold back credit.
Self-Help Groups (SHGs): small groups of 15-20 members, mostly women, who save regularly and give small loans to members at reasonable interest, with no collateral in many cases. They also help women to become independent. Andhra Pradesh has a strong SHG movement, supported by State programmes. In Bangladesh, the Grameen Bank (Muhammad Yunus) is a well-known example of small loans to the poor.
Cheap, affordable credit for all is an important part of development.

Globalisation

Globalisation is the rapid integration of economies through trade, investment and technology across countries.

Multinational Corporations (MNCs): companies that own or control production in more than one country. They set up factories where costs are low, and markets are large. Investment by them is foreign direct investment (FDI).
Forces behind globalisation: improved transport and communication (IT and telecom), liberalisation of trade and investment, and international agreements.
Liberalisation: removing barriers set up by government, for example reducing import tariffs and quotas. India adopted liberalisation policies in 1991.
Trade barriers: tariff (a tax on imports) and quota (a limit on the number of goods imported).
World Trade Organisation (WTO): set up in 1995; it makes rules of international trade. Developing countries argue that rules are not always fair.
Special Economic Zones (SEZs): areas with world-class facilities and tax benefits to attract foreign and domestic investors.
Effects: more choice and lower prices for consumers; more jobs in some services and industries; higher competition for small producers who lack technology and capital; pressure on workers' wages and conditions in the unorganised sector.
Fair globalisation: the government can protect workers, support small producers, negotiate fair trade rules and invest in infrastructure.

Food security

Food security means that food is available at all times, everyone has the means to buy acceptable food, and there is no hunger.

Dimensions: availability (production, imports, stocks), accessibility (food within reach of every person), affordability (people have enough money to buy safe and nutritious food).
Who is food-insecure: landless labourers, small farmers, traditional craftspeople, the urban poor, people hit by natural disasters, women and children, and people in tribal and remote regions.
Hunger: chronic hunger (a long-term lack of enough food) and seasonal hunger (linked with farming cycles).
Famine example: Bengal famine of 1943. Amartya Sen argued that famines can occur even if food exists, because people lose the power to buy it.
Green Revolution (mid-1960s) raised wheat and rice production using high-yielding seeds, fertiliser and irrigation, mainly in some regions.
Buffer stock: stock of foodgrains (mainly rice and wheat) bought by the government through the Food Corporation of India (FCI, set up 1965). Farmers get a pre-announced Minimum Support Price (MSP). The stock is used to meet shortages and for the PDS.
Public Distribution System (PDS): the government distributes foodgrains and some essential items at subsidised issue prices through fair price shops (ration shops). Ration card types: Antyodaya Anna Yojana (for the poorest), BPL (below poverty line) and APL (above poverty line); the names vary in practice by State.
National Food Security Act, 2013: gives legal right to subsidised foodgrains to up to 75% of the rural and 50% of the urban population (priority households and Antyodaya households).
Other food-related schemes: mid-day meal scheme in schools and the Integrated Child Development Services (ICDS). Cooperatives and NGOs also help in supply of food and nutrition.
Problems: leakages, poor quality, storage losses, regional imbalance and dependence on a few crops.

Classroom angle

Use local examples: the weekly market for primary, secondary and tertiary activities; a class bank or SHG role play for money and credit; a ration shop visit for food security; charts comparing sector shares; mini surveys of family occupations. Ask pupils to calculate per capita income and interest from simple numbers to link economics with maths.

Exam traps

Per capita income is total income divided by population; it is an average and hides inequality.
HDI has three dimensions (health, education, income); it is published by UNDP, not by the World Bank or IMF.
GDP counts final goods only, not intermediate goods.
The tertiary sector has the largest GDP share, but not the largest employment share.
Notes are issued by RBI, but the one-rupee note is issued by the Government of India.
Formal credit is under RBI supervision; informal credit is not.
WTO started in 1995; liberalisation in India is linked with 1991.
MSP is for farmers' crops; issue price is the price at ration shops.

One-liners

1. Per capita income = total income / population.
2. HDI has three dimensions: health, education and income.
3. HDI is a UNDP index with values between 0 and 1.
4. Primary sector: agriculture, mining, fishing; secondary: manufacturing; tertiary: services.
5. GDP counts only final goods and services.
6. Underemployment means more workers than the work needs.
7. Double coincidence of wants is the problem of barter.
8. RBI issues currency notes except the one-rupee note.
9. SHGs usually have 15 to 20 members, mostly women.
10. FDI is investment by MNCs in other countries.
11. FCI was set up in 1965 to manage buffer stock.
12. The National Food Security Act was passed in 2013.

Practice questions

Per capita income of a country is calculated as
1. Total exports divided by imports
2. Total population divided by total income
3. Total income multiplied by population
4. Total income divided by total population
Answer
D. Total income divided by total population
Per capita income = total income / population.
A country has a total income of Rs 6,00,000 crore and a population of 120 crore. Its per capita income is
1. Rs 7,200
2. Rs 4,000
3. Rs 2,000
4. Rs 5,000
Answer
D. Rs 5,000
6,00,000 / 120 = 5,000 (crore cancels).
The main weakness of using average income as a measure of development is that it
1. Is too hard to calculate
2. Hides inequality in how income is shared
3. Counts only villages
4. Includes only exports
Answer
B. Hides inequality in how income is shared
An average does not show how income is distributed.
The Human Development Index is published by
1. UNDP
2. World Bank
3. WTO
4. IMF
Answer
A. UNDP
UNDP publishes it in the Human Development Report.
Which set correctly lists the three dimensions of HDI?
1. Health, education and standard of living
2. Literacy, crime and population
3. Roads, rail and ports
4. Exports, imports and savings
Answer
A. Health, education and standard of living
HDI combines life expectancy, schooling and income.
The HDI value lies between
1. -1 and 1
2. 1 and 10
3. 0 and 100
4. 0 and 1
Answer
D. 0 and 1
The index is scaled from 0 to 1.
In 5,000 live births, the infant mortality rate is 30 per 1,000. How many infant deaths are expected?
1. 100
2. 150
3. 15
4. 300
Answer
B. 150
5,000 / 1,000 x 30 = 150.
Which statements about development are correct? 1. Different people can have different development goals. 2. Development includes non-material goals such as respect and security.
1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2
Answer
C. Both 1 and 2
Development has both material and non-material aspects, and goals differ.
Sustainable development means
1. Using all resources quickly
2. Meeting present needs without harming future generations
3. Banning all industry
4. Increasing only exports
Answer
B. Meeting present needs without harming future generations
It balances present use with care for future needs.
Which of the following belongs to the primary sector?
1. Cloth manufacturing
2. Banking
3. Teaching
4. Dairy farming
Answer
D. Dairy farming
Dairy and other direct use of natural resources are primary activities.
Converting cotton into cloth is an activity of the
1. Primary sector
2. Secondary sector
3. Tertiary sector
4. Public sector only
Answer
B. Secondary sector
Manufacturing is the secondary sector.
Transport, banking and teaching belong to the
1. Primary sector
2. Secondary sector
3. Tertiary sector
4. Informal sector only
Answer
C. Tertiary sector
They provide services.
In a year the GDP is 200 units, of which the primary sector contributes 40 units. The primary sector's share is
1. 20%
2. 40%
3. 10%
4. 50%
Answer
A. 20%
40 / 200 x 100 = 20%.
Output of primary, secondary and tertiary sectors is 30, 50 and 120 units. The share of the tertiary sector is
1. 70%
2. 50%
3. 40%
4. 60%
Answer
D. 60%
Total = 200; 120 / 200 x 100 = 60%.
A baker buys wheat worth Rs 50, makes flour worth Rs 70 and sells bread worth Rs 100. Which value is counted in GDP for this chain?
1. Rs 100
2. Rs 50
3. Rs 220
4. Rs 120
Answer
A. Rs 100
Only the final good (bread) is counted; counting intermediates would double count.
Disguised unemployment (underemployment) means
1. More people are working than needed, so some could leave without lowering output
2. Workers are paid more
3. Work is available all year
4. No one is working
Answer
A. More people are working than needed, so some could leave without lowering output
Extra workers add nothing to output.
On a farm, 5 family members work, but only 3 are needed. How many are disguised unemployed?
1. 1
2. 3
3. 5
4. 2
Answer
D. 2
5 - 3 = 2 extra workers.
Which statements about the unorganised sector are correct? 1. Wages are often low and irregular. 2. It is registered and regulated by the government.
1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2
Answer
A. 1 only
The unorganised sector is not regulated and has little security.
The Mahatma Gandhi National Rural Employment Guarantee Act was passed in
1. 2019
2. 2005
3. 1991
4. 2013
Answer
B. 2005
The Act dates from 2005.
The difficulty of barter, where both parties must want what the other has, is called
1. Legal tender
2. Collateral
3. Inflation
4. Double coincidence of wants
Answer
D. Double coincidence of wants
Money removes this need.
In India, currency notes other than the one-rupee note are issued by
1. The Finance Ministry
2. The Reserve Bank of India
3. Commercial banks
4. State governments
Answer
B. The Reserve Bank of India
RBI issues notes; the one-rupee note is issued by the Government of India.
Rupee notes and coins that no one in India can refuse as payment are
1. Demand deposits
2. Collateral
3. Legal tender
4. Bonds
Answer
C. Legal tender
Legal tender must be accepted for settling debts.
Money held in a bank account that can be withdrawn on demand is called
1. Demand deposit
2. Collateral
3. Barter
4. Fixed capital
Answer
A. Demand deposit
Demand deposits can be used for payments by cheque or transfer.
An asset such as land or a vehicle pledged by a borrower as security for a loan is
1. Interest
2. Deposit
3. Subsidy
4. Collateral
Answer
D. Collateral
Collateral protects the lender if the borrower does not repay.
A loan of Rs 20,000 is taken at 10% simple interest per year. Amount to repay after one year is
1. Rs 30,000
2. Rs 20,200
3. Rs 22,000
4. Rs 21,000
Answer
C. Rs 22,000
Interest = 20,000 x 10/100 = 2,000; total = 22,000.
Interest on Rs 5,000 at 12% simple interest for one year is
1. Rs 600
2. Rs 120
3. Rs 500
4. Rs 1,200
Answer
A. Rs 600
5,000 x 12 / 100 = 600.
Which of these is a feature of formal credit?
1. Supervised by the RBI
2. Always very high interest
3. No documents ever needed
4. Given only by moneylenders
Answer
A. Supervised by the RBI
Banks and cooperatives are supervised by the RBI.
Which statements about informal credit are correct? 1. It is not supervised by the RBI. 2. Interest rates are often higher than for formal credit.
1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2
Answer
C. Both 1 and 2
Moneylenders and traders are unregulated and often charge high interest.
A Self-Help Group of 20 members saves Rs 100 per member each month. Total savings in 12 months are
1. Rs 2,000
2. Rs 20,000
3. Rs 12,000
4. Rs 24,000
Answer
D. Rs 24,000
20 x 100 = 2,000 per month; 2,000 x 12 = 24,000.
A typical Self-Help Group has about
1. 2-3 members
2. 15-20 members
3. 100 members
4. 500 members
Answer
B. 15-20 members
SHGs are small groups of 15 to 20, mostly women.
The Grameen Bank of Bangladesh, known for small loans to the poor, is linked with
1. Adam Smith
2. Amartya Sen
3. Mahbub ul Haq
4. Muhammad Yunus
Answer
D. Muhammad Yunus
Yunus founded the Grameen model of microcredit.
A bank lends Rs 1,00,000 at 8% simple interest per year. Interest in one year is
1. Rs 80,000
2. Rs 8,000
3. Rs 18,000
4. Rs 800
Answer
B. Rs 8,000
1,00,000 x 8 / 100 = 8,000.
The debt trap arises when
1. A bank offers lower interest
2. A borrower cannot repay and the loan keeps growing
3. A loan is paid in advance
4. Savings increase
Answer
B. A borrower cannot repay and the loan keeps growing
Failure to repay leads to growing debt and loss of assets.
Integration of the economies of countries through trade, investment and technology is called
1. Barter
2. Nationalisation
3. Globalisation
4. Subsidisation
Answer
C. Globalisation
This is the standard meaning of globalisation.
A company that owns or controls production in more than one country is a
1. Multinational Corporation
2. Public sector unit
3. Self-Help Group
4. Cooperative
Answer
A. Multinational Corporation
That is the definition of an MNC.
Investment by a foreign company in a factory in India is called
1. Tariff
2. Barter
3. Subsidy
4. Foreign direct investment
Answer
D. Foreign direct investment
FDI is direct investment in production in another country.
A tax on imported goods is a
1. Quota
2. Tariff
3. Subsidy
4. Dividend
Answer
B. Tariff
A tariff is a tax on imports; a quota is a quantity limit.
The WTO was established in
1. 1995
2. 1965
3. 1947
4. 2005
Answer
A. 1995
The World Trade Organisation began in 1995.
Which statements about globalisation are correct? 1. It can give consumers more choice. 2. It poses no challenge for small producers.
1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2
Answer
A. 1 only
Small producers often face tough competition.
Special Economic Zones are set up mainly to
1. Run ration shops
2. Issue currency
3. Attract investment with good facilities and tax benefits
4. Store buffer stock
Answer
C. Attract investment with good facilities and tax benefits
SEZs offer facilities and incentives to investors.
Food security means
1. Food that is only imported
2. Availability, accessibility and affordability of food for all
3. Free food for the rich
4. Only storing grain
Answer
B. Availability, accessibility and affordability of food for all
These three dimensions define food security.
The Food Corporation of India was set up in
1. 2013
2. 1991
3. 1947
4. 1965
Answer
D. 1965
FCI was set up in 1965 for procurement and stocking of foodgrains.
Which pair is correct?
1. Issue price - price paid to farmers
2. Buffer stock - stock of paper notes
3. PDS - a type of bank loan
4. MSP - price paid to farmers for procured crops
Answer
D. MSP - price paid to farmers for procured crops
The Minimum Support Price is announced for farmers; issue price is charged at ration shops.
The Government buys 10 quintals of wheat at an MSP of Rs 2,000 per quintal. The payment is
1. Rs 2,000
2. Rs 2,00,000
3. Rs 20,000
4. Rs 12,000
Answer
C. Rs 20,000
10 x 2,000 = 20,000.
The National Food Security Act was passed in
1. 2019
2. 2005
3. 2009
4. 2013
Answer
D. 2013
It gives a legal right to subsidised foodgrains.

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