The correct answer is: Only conclusion II follows.
The statement says that the present examination system does not measure the real merit of the students. It does not say that examinations should be abolished. It is possible that there are other methods that can be used to measure the real merit of the students, without abolishing examinations altogether.
Conclusion I is a hasty generalization. Just because the present examination system does not measure the real merit of the students, it does not follow that all examinations should be abolished.
Conclusion II is a logical consequence of the statement. The statement says that the present examination system does not measure the real merit of the students. Therefore, it is necessary to replace it with other methods that would measure the real merit of the students.