KSLU Solved Question Papers
Economic Theory and Public Finance
Previous Year Question Paper with Solution
B.A. LL.B. (Five Years) · Sem 3
2017 Dec Examination
munotes.in
Mumbai
B.A. LL.B. (Five Years) Sem 3 Economic Theory and Public Finance 2017 Dec Question Paper with Solutions
First published on munotes.in on 21 October 2026.
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Contents
The questions below are the paper as Karnataka State Law University set it at the 2017 Dec examination, in the order it was set.
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2017 Dec examination, reproduced as Karnataka State Law University set them, in the order it set them. Long reading passages are shortened to their first and last lines and our summary; the original paper prints them in full. Only the answers are ours. See the original question paper.
Duration 3 hours · Total marks 100 · 13 questions answered
How to use this volume
Solve the paper first, under exam conditions and against the clock. Then read the answers here and mark your own. Reading a solution before attempting the question feels productive and teaches very little, because recognising an answer is not the same as being able to write one.
Q1What is economic development ? Discuss the various factors affecting economic development.[16]
Answer
For full marks, cover: a short meaning of economic development; the two groups of determinants, economic and non-economic; under economic factors: natural resources, capital formation (with the Harrod-Domar link between saving and growth), technology, human resources, entrepreneurship, structural change and the farm surplus, the size of the market, and foreign trade and capital; under non-economic factors: social attitudes, population, institutions and governance, political stability, education and health, and the role of the State; Indian evidence for each; how the factors depend on one another; and a conclusion.
Meaning
Economic development is a sustained rise in real income per head that comes with a change in the structure of the economy. It also brings less poverty and better health, education and living conditions. Development does not happen by chance. It depends on a set of forces, usually divided into economic factors and non-economic factors. Both groups are needed, and the weakness of one can cancel the strength of the other.
A. Economic factors
1. Natural resources. Fertile land, water, minerals, forests and a good climate give a country its starting base. Coal and iron ore made steel possible in many countries, and rivers made irrigation and power possible. Yet resources are only potential wealth. Japan developed with few natural resources, while some countries rich in oil or minerals have stayed poor. What matters is the ability to use resources well, which needs capital, skill and sound institutions.
2. Capital formation. Capital formation means adding to the stock of machines, buildings, roads, dams and equipment. It is made possible by saving, which frees resources from present consumption, and by investment, which turns them into capital goods. The Harrod-Domar model gives a simple link: the growth rate equals the saving ratio divided by the capital-output ratio. Suppose a country saves and invests 30 per cent of its income. It needs 4 rupees of capital for each extra rupee of output. It can then grow at 7.5 per cent a year. Poor countries save little because their incomes are low, which keeps them in what Nurkse called the vicious circle of poverty. India's gross fixed capital formation was 30.0 per cent of GDP in 2025-26, a high rate for a country at its level of income.
3. Technological progress. Technology decides how much output a given amount of labour and capital can produce. Better seeds, machines, methods of management and digital systems all raise productivity. Robert Solow studied the United States from 1909 to 1949. He attributed about seven-eighths of the growth in output per man-hour to technical change in the broad sense. Poor countries need not invent everything. They can adopt and adapt what others have already developed, which is a great advantage if they have the skills to absorb it.
4. Human resources. A country's people are its most important resource. Their number, health, skills and education decide how well other resources are used. Spending on schools, colleges, hospitals and training is therefore investment in human capital. It yields returns in higher productivity for many years.
5. Entrepreneurship. Someone must see an opportunity, bring together land, labour and capital, and bear the risk. Joseph Schumpeter placed the innovating entrepreneur at the centre of development. Such a person introduces new goods, new methods, new markets and new forms of organisation. Where enterprise is scarce, the State or co-operatives often have to fill the gap.
6. Structural change and the farm surplus. Development moves workers from low-output farming to industry and services, where output per worker is higher. This shift needs a surplus from agriculture: food for the towns, raw materials for factories, and savings and tax revenue for investment. In India about two-fifths of the workforce is still in agriculture but produces only about a fifth of output. So raising farm productivity and creating jobs outside farming remain central.
7. Size of the market. Firms invest only when they expect to sell. In a poor country low incomes mean a small market, and that discourages large-scale production. Rosenstein-Rodan argued for a big push of investment in many industries together, so that the workers of each become buyers for the others. A wider market also allows economies of scale.
8. Foreign trade and foreign capital. Exports earn the foreign exchange needed to import machines, fuel and technology. Trade widens the market beyond the home country. Foreign investment brings capital and know-how, though it also carries risks such as sudden outflows. India's opening of trade and investment after 1991 shows how this factor can raise growth.
B. Non-economic factors
1. Social attitudes and values. Development needs people who value work, thrift, education and new ideas. Customs that waste savings on ceremonies, or that keep groups out of certain work, slow it down. Barriers based on caste and gender waste talent. Low participation of women in paid work is one such loss for India.
2. Population. Rapid population growth absorbs the gains of growth and raises the number of dependants. A falling birth rate has the opposite effect: for some decades the share of working-age people rises, which can be a demographic dividend. India's total fertility rate fell to 1.9 in 2023, below replacement. The dividend will come only if the larger workforce is educated, healthy and employed.
3. Institutions and governance. Secure property rights, contracts that courts will enforce, honest administration and a stable currency give people the confidence to save and invest. Corruption, delay and arbitrary rules raise the cost and risk of every project. Good institutions are often the difference between countries with similar resources.
4. Political stability and a will to develop. Investors need to believe that policies will not change suddenly. Peace and order are essential, since war and unrest destroy capital and drive away skilled people. A government and a people determined to develop can make sacrifices that others will not.
5. Education and health. These are both causes and results of development. A literate and healthy worker learns faster and produces more. Female education also lowers fertility and improves child health. India's female literacy rose from 18.3 per cent in 1951 to 73.0 per cent in 2011. This change has helped bring down the birth rate.
6. The role of the State. In poor countries the market alone may not provide roads, power, schools or social security. The State fills these gaps through public investment, regulation and welfare. India's Directive Principles commit the State to reduce inequality and to promote the welfare of the people.
C. Indian evidence at a glance
| Factor | Indian position |
|---|---|
| Capital formation | Gross fixed capital formation 30.0 per cent of GDP, 2025-26 |
| Structural change | About two-fifths of workers in farming, producing about a fifth of output |
| Population | Total fertility rate 1.9 in 2023, below replacement |
| Education | Female literacy 18.3 per cent in 1951, 73.0 per cent in 2011 |
| Human development | HDI rank 130 of 193 in the 2025 report |
| Poverty | Multidimensional poverty down from 55.3 per cent in 2005-06 to about 11.28 per cent |
D. The factors depend on one another
The factors work as a system, not one by one. Capital without skilled workers lies idle, and skilled workers without capital leave or stay unemployed. Technology cannot be absorbed without education, and enterprise cannot work without secure property. A large population becomes an asset only with jobs, schools and health care. Each improvement makes the others easier, and each weakness drags the others down. This is why successful countries have raised saving, skills, infrastructure and institutions together.
Conclusion. Economic development is determined first by economic factors. These are natural resources, capital formation, technology, human resources, enterprise, structural change, the size of the market and foreign trade. Non-economic factors matter as much: social attitudes, population, institutions, political stability, education, health and the role of the State. No single factor is enough. India's high investment, falling fertility and rising literacy show progress, while low farm productivity and its HDI rank show the work still ahead.
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