UPSC Prelims 2024 Q47: Indian Economy – Indian Economy
With reference to physical capital in Indian economy, consider the following pairs:
Items - Category
1. Farmer's plough - Working capital
2. Computer - Fixed capital
3. Yarn used by the weaver - Fixed capital
4. Petrol - Working capital
How many of the above pairs are correctly matched?
- (a) Only one
- (b) Only two
- (c) Only three
- (d) All four
Answer: (b) Only two
Explanation
Physical capital — fixed vs working
| Type | Meaning | Examples |
|---|---|---|
| Fixed capital | Tools, machines and buildings used many times over years | Plough, computer, loom, tractor, factory |
| Working capital | Raw materials and money used up in one production cycle | Yarn, petrol, seeds, clay, cash in hand |
Checking the pairs:
| Pair | Correct? | Right category |
|---|---|---|
| 1. Farmer's plough – Working capital | No | Fixed — used season after season |
| 2. Computer – Fixed capital | Yes | Fixed |
| 3. Yarn used by the weaver – Fixed capital | No | Working — used up in weaving |
| 4. Petrol – Working capital | Yes | Working — consumed when used |
Answer: (b) Only two.
Why each option is right or wrong
- (a) Incorrect. Two pairs (computer–fixed and petrol–working) are correct.
- (b) CORRECT. Only computer (fixed) and petrol (working) are right; a plough is fixed and yarn is working capital.
- (c) Incorrect. Plough and yarn are both wrongly classified.
- (d) Incorrect. Two of the four pairs are wrong.
Key point
Fixed capital lasts many years (plough, computer); working capital is used up (yarn, petrol, seeds).
Remember
A plough is fixed capital; yarn is working capital.
Common mistakes
- Calling a plough working capital because a farmer uses it for work; it lasts for years, so it is fixed.
- Treating yarn as fixed because the weaver always has some; each lot is used up, so it is working capital.
- Confusing physical capital with human capital (skills and knowledge).
Exam tip
Ask: is it used up in one round of production? Yes = working capital; no = fixed capital.
Sources
- NCERT Class IX — Economics, Ch 1 (The Story of Village Palampur)
- NCERT Class XII — Introductory Macroeconomics, Ch 2 (National Income Accounting)