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Q47 (IAS/2024) Economy › Basic Concepts & National Income › Business finance basics Official Key

With reference to physical capital in Indian economy, consider the following pairs : 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 ?

Result
Your answer: —  ·  Correct: B
Explanation

Tools, machines, buildings can be used in production over many years, and are called fixed capital.[1] Raw materials and money in hand are called working capital. Unlike tools, machines and buildings, these are used up in production.[1]

Analyzing each pair:
1. **Farmer's plough - Working capital**: INCORRECT. A plough is a tool used over many years, making it fixed capital, not working capital.
2. **Computer - Fixed capital**: CORRECT. A computer is a machine/tool used over multiple years in production.
3. **Yarn used by the weaver - Fixed capital**: INCORRECT. Yarn is mentioned as a raw material used by the weaver[1], and raw materials are working capital as they are consumed in production.
4. **Petrol - Working capital**: CORRECT. Petrol is consumed during production, similar to raw materials, making it working capital.

Only pairs 2 and 4 are correctly matched, hence **only two** pairs are correct.

Sources
  1. [1] Economics, Class IX . NCERT(Revised ed 2025) > Chapter 1: The Story of Village Palampur > Organisation of Production > p. 2
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Q. With reference to physical capital in Indian economy, consider the following pairs : 1. Farmer's plough - Working capital 2. Computer - …
At a glance
Origin: From standard books Fairness: High fairness Books / CA: 10/10 · 0/10
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This is a textbook 'Sitter' directly lifted from NCERT Class IX (The Story of Village Palampur). It proves that ignoring foundational NCERTs for high-level reference books is a fatal error. The question tests the most basic definition of 'Factors of Production' with zero ambiguity.

How this question is built

This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.

Statement 1
In the Indian economy's classification of physical capital, is a farmer's plough classified as working capital or fixed capital?
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Economics, Class IX . NCERT(Revised ed 2025) > Chapter 1: The Story of Village Palampur > 7. Sale of Surplus Farm Products > p. 10
Presence: 4/5
“This year Tejpal Singh plans to use his earnings to buy another tractor. Another tractor would increase his fixed capital. Like Tejpal Singh, other large and medium farmers sell the surplus farm products. A part of the earnings is saved and kept for buying capital for the next season. Thus, they are able to arrange for the capital for farming from their own savings. Some farmers might also use the savings to buy cattle, trucks, or to set up shops. As we shall see, these constitute the capital for non-farm activities.”
Why this source?
  • Gives a direct classroom example: buying another tractor 'would increase his fixed capital', treating farm machinery as fixed capital.
  • By analogy, durable farm implements used across seasons are grouped with tractors as fixed capital rather than short-term inputs.
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 1: Fundamentals of Macro Economy > 2. Capital Goods: > p. 6
Presence: 5/5
“And while acting as an input it does not get transformed and remains as it is. (Wear and tear of tractor happens over a long period of time but we cannot say that the tractor is getting transformed or consumed) In strict sense the economists consider only the physical capital as the capital but in today's world intangible capital is increasingly becoming important. So, capital can be divided into three categories. • (i) Physical Capital (capital goods)• (ii) Financial Capital (money)• (iii) Intellectual Capital (patents, copyrights etc.)”
Why this source?
  • Defines physical capital (capital goods) as items that act as inputs without being transformed and only suffer long-term wear and tear.
  • This durability criterion distinguishes fixed capital (durable tools/equipment) from consumable working inputs.
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 1: Fundamentals of Macro Economy > 1.5 Private Sector > p. 5
Presence: 5/5
“But from an economic point of view, only the physical capital goods are considered as capital. So, capital includes the building, machinery, equipment etc. The return for the capital is called "Interest".• 3. Natural Resources: Natural resources include land and raw materials which are naturally available and are not produced through manmade processes. The return for the natural resources is called "Rent". • 4. Labour: It is the human labour which may be physical or mental i.e., it can be unskilled, semi-skilled or skilled. When a human being provides his labour to the enterprise, in return he/she expects "wages". The labour (who is providing the labour services) is a human being and belongs to the household sector.”
Why this source?
  • States that from an economic point of view capital includes buildings, machinery and equipment — the standard category for farm implements.
  • Places machinery/equipment squarely within physical (fixed) capital, implying farm tools belong to fixed capital.
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Statement analysis

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