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Economics · 2023 · 3 marks
CBSE 2023 · Region 1 · Set 2 · Q29
Explain the position of informal institutions as a source of credit in rural India.“Dr. Khurana, a dentist, ran his clinic in an economically backward area. He was earning a comparatively low income. So, he decided to move to a city and spent a huge amount for the same.”Identify and explain the type of expenditure incurred by Dr. Khurana, which directly contributed to the process of human capital formation.
Explain the position of informal institutions as a source of credit in rural India.
“Dr. Khurana, a dentist, ran his clinic in an economically backward area. He was earning a comparatively low income. So, he decided to move to a city and spent a huge amount for the same.”
Identify and explain the type of expenditure incurred by Dr. Khurana, which directly contributed to the process of human capital formation.
Marking-scheme solution
Informal sources of credit in rural India i.e. money lenders and traders generally exploit the landless labourers, small and marginal farmers and by charging a much higher interest rates on loans as compared to formal sources. They also tend to manipulate the accounts which pushes the poor farmers into “Debt Trap”.
The expenditure incurred by Dr. Khurana on shifting his clinic from economically backward area to the city comes under the category of “Expenditure on migration”.
Expenditure on migration is the source of human capital formation. People migrate in search of jobs that fetch them higher salaries. Technically qualified persons like engineers and doctors, migrate to other areas because of higher incomes and better opportunities.
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CBSE Class 12 Economics past-paper question from the 2023board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.