Sandhya,
For me, it seems that instruction should involve lots of variety, delivered in interesting and engaging methods. In that setting, the grading is similarly based on a variety of components, with the most important information assessed at a higher point value. For instance, although busy work in class or homework can be helpful, that has a very low overall weight in the final grade. Daily quizzes and tests may have a larger weight, but not so much larger that it overshadows graded activities that reflect an accurate measure of learning. Setting up a grading system intially involves some trial and error, past history, and institutional policies. And a good grading system will involve tweaking over time to insure accuracy.
Barry Westling