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IIFT 2019 Question Paper | VARCs

IIFT Previous Year Paper | IIFT VARC Questions | Question 11

The best way to boost your IIFT prep is to practice the actual IIFT Question Papers. 2IIM offers you exactly that, in a student friendly format to take value from this. In the 2019 IIFT, varc was a mixed bag of questions of varying difficulty, with some routine questions and the others were very demanding. Some beautiful questions that laid emphasis on Learning ideas from basics and being able to comprehend more than remembering gazillion formulae and shortcuts.

Much debate surrounds which kind of political system best achieves a functioning market economy with strong protection for property rights. People in the west tend to associate a representative democracy with a market economic system, strong property rights protection, and economic progress. Building on this, we tend to argue that democracy is good for growth.
However, some totalitarian regimes have fostered a market economy and strong property rights protection and have experienced rapid economic growth. Five of the fastest-growing economies of the past 30 years - China, South Korea, Taiwan, Singapore, and Hong Konghad one thing in common at the start of their economic growth: Undemocratic governments. At the same time, countries with stable democratic governments, such as India, experienced sluggish economic growth for long periods. In 1992, Lee Kuan Yew, Singapore's leader for many years, told an audience, "I do not believe that democracy necessarily leads to development. I believe that a country needs to develop discipline more than democracy. The exuberance of democracy leads to undisciplined and disorderly conduct which is inimical to development."

However, those who argue for the value of a totalitarian regime miss an important point: If dictators made countries rich, then much of Africa, Asia, and Latin America should have been growing rapidly during 1960 to 1990 , and this was not the case. Only a totalitarian regime that is committed to a market system and strong protection of property rights is capable of promoting economic growth. Also, there is no guarantee that a dictatorship will continue to pursue such progressive policies. Dictators are rarely benevolent. Many are tempted to use the apparatus of the state to further their own private ends, violating property rights and stalling economic growth. Given this, it seems likely that democratic regimes are far more conducive to long-term economic growth than are dictatorships, even benevolent ones. Only in a well-functioning, mature democracy are property rights truly secure. Nor should we forget Amartya Sen's arguments where he says that states, by limiting human freedom, also suppress human development and therefore are detrimental to progress.
While it is possible to argue that democracy is not a necessary precondition for a free market economy in which property rights are protected, subsequent economic growth often leads to the establishment of a democratic regime. Several of the fastest-growing Asian economies adopted more democratic governments during the past three decades, including the East Asian economies of South Korea and Taiwan, Thus, although democracy may not always be the cause of initial economic progress, it seems to be one consequence of that progress.

Question 11 : The necessary condition for economic growth is :

  1. Democracy and market economy
  2. Totalitarian regime and protection of property rights
  3. Benevolent dictatorship
  4. Market economy and protection of property rights

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Explanatory Answer

The passage observes that a market economic system, strong property rights protection, and economic progress usually tend to be associated with democracies. But some totalitarian regimes have fostered a market economy and strong property rights protection and have experienced rapid economic growth. The necessary condition for growth, thus, is a market economy and strong property rights protection.


The question is " The necessary condition for economic growth is : "

Hence, the answer is 'Market economy and protection of property rights'

Choice D is the correct answer.

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