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

How many of the above pairs are correctly matched?

1. Only one
2. Only two
3. Only three
4. All four

Explanation

Pair 1 is incorrect

• Fixed capital, comprising long-term assets like buildings and machinery, forms the foundation for sustained growth while working capital addresses short-term financial needs for day-to-day operations. A farmer’s plough is a tool used repeatedly over many years in agricultural production. Therefore, it is correctly categorised as fixed capital rather than working capital.

Pair 2 is correct

• Computers are used over an extended period for various functions in production, education, business operations, etc. Hence, a computer is correctly categorised as fixed capital.

Pair 3 is incorrect

• Yarn is a raw material consumed in the production of textiles. It is typically consumed in the production process and does not last beyond the product’s completion. Therefore, yarn used by a weaver is considered working capital, not fixed capital.

Pair 4 is correct

• Petrol is a consumable resource used up during the operation of vehicles, machinery, etc. It is generally consumed within a short period, making it an example of working capital.

Answer: (b) Only two; Difficulty Level: Easy