UCT QUESTION AND ANSWER FOR ECONOMY

1.   Which of the following statements related to the Human Development Index is/are correct?

1.   It measures the social and economic development of the nations.

2.   The HDI assigns equal weight to all dimension indices such as knowledge and understanding, a long and healthy life, and an acceptable standard of living.

3.   HDI includes dimensions of participation, gender and equality to make it more inclusive.

      Select the correct answer using the codes given below:

(a)  1 and 2 only           (b) 2 and 3 only

(c)  1 only                      (d) All of the above

2.   Which of the following statements related to Rural Electrification is/are correct?

1.   Electricity Act, 2003 mandates that state governments have the responsibility of providing electricity to rural areas. 

2.   Under Saubhagya Scheme, beneficiaries will be identified using the Socio Economic and Caste Census (SECC) 2011 data in rural areas only.

      Select the correct answer using the codes given below:

(a)  1 only                      (b) 2 only

(c)  Both 1 and 2          (d) Neither 1 nor 2

3.   Consider the following initiatives with reference to the Skill India:

1.   Deendayal Antyodaya Yojana 

2.   Pradhan Mantri Kaushal Vikas Yojana

3.   Udaan

4.   SANKALP and STRIVE

      Which of the above stated schemes are related to skill development?

(a)  1, 2 and 3 only       (b) 2, 3 and 4 only

(c)  3 and 4 only           (d) All of the above

4.   RBI adopted a new Monetary Policy framework called “Inflation Targeting”. Under this new framework:

1.   Controlling prices will be a priority for RBI above the other monetary policy objectives.

2.   There will be a preset and publicly displayed target for the annual rate of inflation.

3.   RBI will be accountable and will have to explain to the government the causes and steps it intends to take and within what timeframe if it misses the inflation target.

      Which of the above statements is/are correct?

(a)  1 only                      (b) 2 only

(c)  2 and 3 only           (d) All of the above

5.   The Quintile Income Ratio is one of the measures of inequality. It is a ratio of

(a)  Average income of richest 5% of population to that of the poorest 5%

(b) Average income of richest 20% of population to that of the poorest 20%

(c)  Average income of richest 15% of population to that of the poorest 15%

(d) Average income of richest 10% of population to that of the poorest 10%

6.   Consider the following statements with respect to National Agriculture Market (eNAM):

1.   Small Farmers Agribusiness Consortium is the lead agency for implementing eNAM.

2.   It promotes the removal of information asymmetry between buyers and sellers.

3.   It promotes real time price discovery based on actual demand and supply.

      Which of the above statements is/are correct?

(a)  1 and 2 only

(b) 2 and 3 only

(c)  1 and 3 only

(d) All of the above

7.   Recently, government announced the launch of Vande Bharat Express which is related to:

(a)  Indigenously developed semi high-speed train.

(b) Indigenously developed high speed train.

(c)  A science express covering rural areas

(d) It is an express representing the freedom fighters of the country.

8.   Recently, the government has announced Pradhan Mantri Kisan Samman Nidhi (PM-KISAN), which is related to:

(a)  Insurance scheme for farmers.

(b) Assured indirect income support to farmers.

(c)  Assured direct income support to small farmers only.

(d) Assured direct income support to small and marginal farmers.

9.   Business correspondents are bank representatives which help villagers to open bank accounts. Which of the following entities are eligible for appointment of Business Correspondents (BCS) for banks?

1.   NGOs/MFls set up under Societies/Trust Acts

2.   Retired teachers

3.   Retired Bank employees

      Select the correct answer using the codes given below:

(a)  3 only

(b) 1 and 2 only

(c)  2 and 3 only

(d) All of the above

10. Which of the following statement correctly defines the process of Cheque Truncation?

(a)  These are the instruments that facilitate purchase of goods and services, including financial services, remittance facilities, etc., against the value stored on such instruments.

(b) It is the process of transferring the electronic image of the cheque to the paying branch through the clearing house, along with relevant information.

(c)  It is the real time transfer of funds to the beneficiary account.

(d) None of the above

11. Why GNI per capita in purchasing power parity (PPP) international dollars is used as a parameter in calculation of Human Development Index?

(a)  GNI per capita (PPP $) reflects people’s living standards uniformly across the nations, irrespective of the exchange rate.

(b) GNI per capita reflects average national income and how that income is spent.

(c)  GNI per capita (PPP $) helps in better calculation of Gender inequality.

(d) None of the above

12. Consider the following statements related to the different committees on estimation of poverty in India:

1.   Rangarajan Committee: It states for estimation of poverty based on behaviorally determined level of non-food expenses rather than food expenses.

2.   Tendulkar Committee: It states for estimation of poverty based on a uniform poverty line basket (PLB) across rural and urban India.

      Which of the above statements is/are correct?

(a)  1 only                      (b) 2 only

(c)  Both 1 and 2          (d) Neither 1 nor 2

13. Which of the following services is/are provided by the White Label ATMs?

1.   Request for a Cheque Book

2.   Mini/short statement

3.   Regular bill payments

4.   Acceptance of deposits

      Select the correct answer using the codes given below:

(a)  1, 2 and 4 only       (b) 2, 3 and 4 only

(c)  1 and 2 only           (d) All of the above

14. What is systemically important Non-Banking Financial Company?

(a)  These are the NBFCs involved in agricultural activity, industrial activity and trading activity.

(b) These are the NBFCs whose asset size is of Rs.100 cr or more as per last audited balance sheet.

(c)  These are the NBFCs which are regulated by RBI.

(d) None of the above

15. Which of the following statements related to Index of Industrial Production is/are correct?

1.   It measures the short-term changes in the volume of production of a basket of industrial products during a given period with respect to that in a chosen base period.

2.   The IIP index is computed and published by the Central Statistical Organisation (CSO) on quarterly basis.

3.   The base year of IIP is 2011-12.

      Select the correct answer using the codes given below:

(a)  1 only

(b) 1 and 3 only

(c)  2 and 3 only

(d) All of the above

16. Which of the following works of the organisations associated with power is/are correctly matched?

1.   Central Electricity Authority: It grants licences for inter-State transmission and trading.

2.   Central Electricity Regulatory Commission: It specifies the technical standards for construction of electrical plants, electric lines and connectivity to the grid.

3.   Power Finance Corporation Ltd: It is the nodal agency to facilitate the development of Ultra Mega Power Projects.

      Select the correct answer using the codes given below:

(a)  1 and 2 only

(b) 3 only

(c)  2 and 3 only

(d) All of the above

17. Which of the following statement correctly describes the phenomenon referred to as ‘crowding-out’?

(a)  Reduction in public sector spending owing to rise in private sector spending.

(b) Increase in public sector revenue owing to growth in private sector.

(c)  Reduction in private sector spending owing to increased interest rate.

(d) Increase in private sector revenue owing to increased public expenditure.

18. Consider the following statements related to Unemployment:

1.   Disguised Unemployment is a situation where in a large section of the labour force does not get a job that may yield them regular income.

2.   Open Unemployment is a situation in which more people are doing work than actually required.

3.   Seasonal Unemployment is the one that occurs during certain seasons of the year.

4.   Cyclical Unemployment caused by trade cycles at regular intervals.

      Which of the above statements is/are correct?

(a)  1 and 2 only           (b) 2, 3 and 4 only

(c)  3 and 4 only           (d) 1, 3 and 4 only

19. Arrange the following sources of power in descending order of their contribution in installed Power Capacity in India:

1.   Wind Energy

2.   Thermal energy

3.   Hydro-energy

4.   Nuclear energy

      Select the correct answer using the codes given below:

(a)  2>1>3>4                 (b) 2>3>1>4

(c)  3>1>2>4                 (d) 2>3>4>1

20. Agricultural Produce Market Committee (APMC) is a statutory market committee responsible for:

1.   Ensuring transparency in pricing system and transactions taking place in market area.

2.   Providing market-led extension services to farmers.

3.   Promoting agricultural processing including activities for value addition in agricultural produce

4.   Setup and promote public private partnership in the management of agricultural markets

      Which of the above statements is/are correct?

(a)  1, 2 and 3 only

(b) 2, 3 and 4 only

(c)  1 and 3 only

(d) All of the above

21. The central government notifies MSPs based on the recommendations of the CACP.  Based on which of the following parameters Minimum Support Price are announced?

1.   Cost of inputs such as seeds, fertilizer, etc.

2.   The implied cost of family labour.

3.   Implied rent on land and interest on capital assets.

4.   Tax on the production.

      Select the correct answer using the codes given below:

(a)  1 and 3 only          

(b) 1, 2 and 4 only

(c)  1, 2 and 3 only

(d) All of the above

22. Consider the following statements regarding Deendayal Antyodaya Yojana:

1.   It seeks to alleviate rural poverty only, through sustainable livelihood enhancements and improved access to financial services.

2.   It is a flagship programme of the Ministry of Skill Development.

3.   It is a centrally sponsored scheme.

      Which of the above statements are correct?

(a)  1 and 2 only           (b) 2 and 3 only

(c)  1 and 3 only           (d) All of the above

23. All the agricultural and horticultural commodities for which Minimum Support Price (MSP) are not fixed and are generally perishable in nature are covered under:

(a)  Market Intervention Scheme

(b) National Agriculture Market scheme

(c)  Price Supports Scheme

(d) Paramparagat Krishi Vikas Yojana

24. Which of the following applications related to agriculture and their objectives is/are correct?

1.   Kisan Suvidha – It provides information on weather, knowledge on fertilizers, seeds, machinery etc.

2.   Akashganga – It aims to provide agricultural, medical, and education information to villagers by establishing networked facilitation booths’ in the villages.

      Select the correct answer using the codes given below:

(a)  1 only                      (b) 2 only

(c)  Both 1 and 2          (d) Neither 1 nor 2

25. Which of the following best describes Pigovian Subsidies?

(a)  Subsidies provided in agriculture sector including fertilizers.

(b) Subsidies provided by government for promoting exports.

(c)  Subsidies provided to an activity on the grounds that the activity generates positive externalities.

(d) Subsidies provided in form of Direct Benefit Transfer.

26. Consider the following statements regarding ‘Footloose Industries’:

1.   They are not dependent on any specific raw material, weight losing or otherwise.

2.   They require good transport link and skilled manpower.

      Which of the statements given above is/are correct?

(a)  1 only                      (b) 2 only

(c)  Both 1 and 2          (d) Neither 1 nor 2

27. Which of the following initiatives have been taken to improve the ‘Ease of doing business’ environment in the country?

 1.  Passage of Insolvency and Bankruptcy Code

2.   Demonetisation

3.   Allotment of Director Identification Number

      Select the correct answer using the code given below:

(a)  1 and 3 only           (b) 2 and 3 only            

(c)  1 and 2 only           (d) 1, 2 and 3

28. What is Purchasing Managers’ Index?

(a)  It is an indicator of the economic health of the manufacturing sector.

(b) It is an indicator of the economic health of the service sector.

(c)  It is an indicator of the health of the Skill India Mission.

(d) None of the above

29. Consider the following statements regarding the Reverse Repo Rate:

1.   It is the rate of interest at which bank borrows funds from RBI in short term.

2.   The banks use the reverse repo rate facility to deposit their short term excess funds with the RBI and earn interest on it.

3.   An increase in reverse repo rate means that banks earns higher returns by lending to RBI.

      Which of the above statements is/are correct?

(a)  1 and 3 only           (b) 2 and 3 only

(c)  All of the above     (d) None of the above

30. Consider the following statements related to the Pradhan Mantri Kisan Samman Nidhi:

1.   The scheme aims at providing income support to all the farmer families having cultivable land.

2.   This income support will be transferred directly into the bank accounts of beneficiary farmers, in three equal installments of Rs. 2,000 each.

3.   PM-KISAN would provide assured supplemental income to the most vulnerable farmer families.

      Which of the above statements is/are correct?

(a)  1 and 2 only

(b) 2 and 3 only

(c)  All of the above

(d) None of the above

31. Consider the following statements about the shell companies:

1.   Shell companies typically refer to companies without active business operations or significant assets.

2.   These companies have been created for money laundering.

3.   These companies have been defined under companies Act, 2013 to bring legality in the system.

      Which of the above statements are correct?

(a)  1 only

(b) 2 and 3 only

(c)  1 and 2 only

(d) All of the above

32. Which of the following Government authority conducted the Operation Clean Money in India?

(a)  The Union Government of India through demonetization

(b) Enforcement Directorate

(c)  The Reserve Bank of India

(d) The Income Tax Department, Ministry of Finance

33. Which of the following statements related to the Countervailing Duty are correct?

1.   It is imposed to safeguard the domestic industry against the unfair trade subsidies provided by local governments of exporting nations.

2.   It is equal to the custom duty paid by the manufacturers when the same is produced in the home country.

3.   It is aimed to neutralize the effect of subsidies in the exporting country on price.

      Select the correct answer using the codes given below:

(a)  1 and 2 only           (b) 2 and 3 only

(c)  1 and 3 only           (d) All of the above

34. Which of the following stock exchanges of the world have been accorded the status of Designated Off-shore Securities Market by the US?

1.   Bombay Stock Exchange

2.   Malta Stock Exchange

3.   London Stock Exchange

      Select the correct answer using the codes given below:

(a)  2 and 3 only           (b) 1 and 2 only

(c)  3 only                      (d) All of the above

35. Which of the following statements defines the differences between an interim budget and a full budget?

1.   Interim budget deals with the expenditure account of the Government only, unlike the Full Budget that deals with both revenue and expenditure accounts.

2.   Full budget needs a Parliamentary Appropriation bill, whereas Interim budget can be passed without an Appropriation Bill.

3.   Vote on Account and Interim budget is one and the same things.

      Select the correct answer using the codes given below:

(a)  1 and 2 only            (b)          2 and 3 only

(c)  All of the above     (d) None of the Above

36. Why GDP Deflator is a better measure for inflation than all the other indices of the Economy?

1.   GDP Deflator is a much broader aspect of measuring inflation in an economy than the CPI or the WPI.

2.   Changes in consumption patterns or structural transformation are automatically reflected in the deflator which is not the case with other inflation measures. 

3.   It can be used to track the monthly inflation with broader dimensions.

      Select the correct answer using the codes given below:

(a)  1 only                      (b) 2 only

(c)  1 and 2 only           (d) All of the above

37. A rapid increase in the rate of inflation is sometimes attributed to the “base effect”. What is “base effect”?

(a)  It is the impact of drastic deficiency in supply due to failure of crops.

(b) It is the impact of the surge in demand due to rapid economic growth.

(c)  It is the impact of the price levels of previous year on the calculation of inflation rate.

(d) None of the above

38. Consider the following statements regarding Call money market mechanism:

1.   It is an inter-bank money market where funds are borrowed and lent for 14 days.

2.   No collateral is required to borrow money from this market.

3.   The interest rate in this market depends upon the demand and supply of the funds on a particular day which is market determined.

      Which of the above statements are correct?

(a)  1 and 2 only           (b) 2 and 3 only

(c)  1 and 3 only           (d) All of the above

39. The Securities Exchange board of India regulates:

1.   Money Market

2.   Capital Market

3.   Mutual funds

4.   Depositories

      Which of the above statements are correct?

(a)  1 and 2 only           (b) 1, 2 and 3 only

(c)  2, 3 and 4 only       (d) All of the above

40. Which of the following statements regarding Basel Accord is/are correct?

1.   The purpose of the accords is to ensure that financial institutions have enough capital on account to meet obligations and absorb unexpected losses.

2.   Reserve bank of India sets up the regulations for India.

      Select the correct answer using the codes given below:

(a)  1 only                      (b) 2 only

(c)  Both 1 and 2          (d) Neither 1 nor 2

41. Consider the following statements regarding core inflation and headline inflation:

1.   Headline inflation is the total inflation for the period comprising a basket of commodities.

2.   Core inflation removes volatile commodities i.e., food and beverages and fuel.

3.   Consumer price index is the measure of headline inflation.

      Which of the above statements are correct?

(a)  1 and 2 only

(b) 2 and 3 only

(c)  1 and 3 only

(d) All of the above

42. Which of the following would count as a measure of fiscal stimulus?

(a)  A government paying its employees on time.

(b) The central bank cutting the interest rates drastically.

(c)  Corporations investing heavily in building capacities such as new factories.

(d) A government cutting the tax rates drastically.

43. Which of the following statements related to Most Favoured Nation Status is incorrect?

1.   Under this each of the UN member countries should treat all the other members equally as trading partners.

2.   The mechanism has been prepared by Bretton Woods organisations.

3.   It allows countries to set up a free trade agreement that applies only to goods traded within the group

      Select the correct answer using the codes given below:

(a)  1 and 2 only           (b) 3 only

(c)  1 and 3 only           (d) All of the above

44. Which among the below has the potential to produce highest inflationary effects?

(a)  Borrowing from foreign governments to finance the fiscal deficit.

(b) Helicopter-drop i.e. printing large sums of money and distributing it to the public in order to stimulate the economy.

(c)  Farm-loan waivers.

(d) 7th Pay Commission raise.

45. Which of the following forms the part of the Direct Action under the qualitative measures taken by RBI to control monetary policy?

1.   RBI controls the Credit granted / allocated by commercial banks.

2.   RBI charge a penal rate of interest over and above the Bank rate.

3.   RBI act on psychological means and informal means of selective credit control.

      Select the correct answer using the codes given below:

(a)  1 and 2 only           (b) 1 and 3 only

(c)  2 only                      (d) None of the above

46. Which of the following indexes have been launched by NITI Aayog?

1.   Financial Inclusion Index 

2.   Performance on Health Outcomes index

3.   SDG India Index

4.   Composite Water Management Index

      Select the correct answer using the codes given below:

(a)  1, 2 and 3 only       (b) 2, 3 and 4 only

(c)  1, 3 and 4 only       (d) All of the above

47. Which of the following is/are the implications of the implementation of RBI’s Prompt Corrective Action on Banks?

1.   It leads to restrictions on branch expansion.

2.   It curbs banks autonomy in lending and deposit of money.

3.   It affects their ability to raise capital from the market. 

      Select the correct answer using the codes given below:

(a)  2 only                      (b) 1 and 2 only

(c)  None of the above      (d)     All of the above

48. Large number of foreigners coming to India to watch Indian Premier League (IPL) matches would count as:

(a)  Import                     (b) Export

(c)  Investment             (d) Production

49. Which of the following statements defines the term Marginal Rate of Transformation?

(a)  It is defined as the ratio of number of units of good sacrificed to produce one additional unit of other good.

(b) It indicates the various combinations of goods and services which can be produced by full and efficient utilisation of all resources of an economy.

(c)  It is the cost of alternative opportunity given up.

(d) None of the above

50. Consider the following subsidies provided in agriculture:

1.   Income support to farmers during crop failure.

2.   Subsidies for research and development.

3.   Incentives to farmers to protect environment.

      The above types of subsidies come under which of the box in WTO?

(a)  Green Box               (b) Amber Box

(c)  Blue Box                  (d) Red Box


ANSWERS AND EXPLANATIONE

1. Ans: A

Exp: Statement 1 and 2 is correct: The Human Development Index (HDI) is a tool developed by the United Nations to measure and rank countries’ levels of social and economic development. The computed HDI of a country is a geometric mean of normalized indexes of each of the life aspects that are examined – knowledge and understanding, a long and healthy life, and an acceptable standard of living. The HDI assigns equal weight to all three dimension indices.

Statement 3 is incorrect: HDI does not include participation, gender and equality. The HDI is designed to reflect average achievements in three basic aspects of human development – leading a long and healthy life, being knowledgeable and enjoying a decent standard of living. Instead of bringing additional dimensions and indicators into the HDI, other composite indices were introduced – Inequality-adjusted HDI, Gender inequality index, and gender development index. 

2. Ans: D

Exp: Statement 1 is incorrect: Under the Electricity Act, 2003, the central and state governments have the joint responsibility of providing electricity to rural areas.  The 2003 Act also mandates that the central government should, in consultation with the state governments, provide for a national policy on (i) stand-alone power systems for rural areas (systems that are not connected to the electricity grid), and (ii) electrification and local distribution in rural areas.  

Statement 2 is incorrect: Saubhagya, seeks to ensure universal household electrification, that is, in both rural and urban areas.  Under Saubhagya, beneficiaries will be identified using the Socio Economic and Caste Census (SECC) 2011 data.  The identified poor households will get free electricity connections.  Other households not covered under the SECC, will be provided electricity connections at a cost of Rs 500.  This amount will be collected by the electricity distribution companies in 10 instalments.

3. Ans: D

Exp :  Skill India is a campaign launched by hon’ble Prime Minister of India on 15th July 2015 with an objectives of training over 40 crore people in the country under different skills by 2022.

Skill development schemes are:

1.   National Skill Development Mission.

2.   National policy for Skill Development and Enterpreneurship- 2015.

3.   Pradhan Mantri Kaushal Vikas Yojana (PMKVY).

4.   Rural India Skill.

5.   Skill Loan scheme.

6.   Deendayal Antyodaya Yojana 

7.   SANKALP and STRIVE

4. Ans: D

Exp : Inflation targeting is a monetary policy regime in which a central bank has an explicit target inflation rate for the medium term and announces this inflation target to the public. The assumption is that the best that monetary policy can do to support long-term growth of the economy is to maintain price stability. The central bank uses interest rates, its main short-term monetary instrument.

An inflation-targeting central bank will raise or lower interest rates based on above-target or below-target inflation, respectively. The conventional wisdom is that raising interest rates usually cools the economy to rein in inflation; lowering interest rates usually accelerates the economy, thereby boosting inflation. The first three countries to implement fully-fledged inflation targeting were New Zealand, Canada and the United Kingdom in the early 1990s, although Germany had adopted many elements of inflation targeting earlier.

5. Ans: B

Exp: The Quintile Income Ratio is one of the measures of inequality. It is a ratio of average income of richest 20% of population to that of the poorest 20%

6. Ans: D

Exp: Statement 1 is correct: National Agriculture Market (eNAM) is a pan-India electronic trading portal which networks the existing APMC mandis to create a unified national market for agricultural commodities.

Small Farmers Agribusiness Consortium (SFAC) is the lead agency for implementing eNAM under the aegis of Ministry of Agriculture and Farmers’ Welfare, Government of India.

Statement 2 is correct: Vision of eNAM is :

·    To promote uniformity in agriculture marketing by streamlining of procedures across the integrated markets;

·    Removing information asymmetry between buyers and sellers and;

·    Promoting real time price discovery based on actual demand and supply. Hence statement 3 is correct;

Mission eNAM is

Integration of APMCs across the country through a common online market platform to facilitate pan-India trade in agriculture commodities, providing better price discovery through transparent auction process based on quality of produce along with timely online payment.

7. Ans: A

Exp: Train 18, which was recently named Vande Bharat Express by Railway Minister Piyush Goyal, has been manufactured by the Integral Coach Factory, Chennai. This is the Railways’ first indigenous train.

It became India’s fastest train by hitting speeds of over 180 kmph during a trial run on a section of the Delhi-Mumbai Rajdhani route.

8. Ans: D

Exp: Assured direct income support to small and marginal farmers.

Pradhan Mantri Kisan Samman Nidhi announced to provide assured income support to small and marginal farmers. Under this programme, vulnerable landholding farmer families, having cultivable land upto 2 hectares, will be provided direct income support at the rate of Rs. 6,000 per year.

This income support will be transferred directly into the bank accounts of beneficiary farmers, in three equal instalments of Rs. 2,000 each. This programme will be funded by Government of India. Around 12 crore small and marginal farmer families are expected to benefit from this.

9. Ans: D

Exp: Business correspondents are bank representatives. They help villagers to open bank accounts. Business Correspondents get commission from bank for every new account opening, every transaction made via them, every loan-application processed etc. The Business Correspondent carries a mobile device and helps villagers in banking transactions. (Deposit money, take money out of savings account, loans etc.). The villager gives his thumb impression or electronic signature, and gets the money.

As per the RBI guidelines, the following entities are eligible for appointment of Business Correspondents (BCS) for banks:

·      NGOs/MFls set up under Societies/Trust Acts

·      Societies registered under Mutually Aided Cooperative Societies Acts or the Cooperative Societies Acts of States

·      Section 25 companies that are stand alone entities or in which NBFCs, banks, telecom companies and other corporate entities or their holding companies did not have equity holdings in excess of 10 per cent

·      Post offices

·      Retired bank employees,

·      Ex-servicemen

·      Retired government employees.

·      Individual kirana / medical / fair price shop owners Individual Public Call Office (PCO) operators

·      Agents of Small Savings Schemes of Government of India/Insurance Companies Individuals who own petrol pumps

·      Retired teachers

·      Authorised functionaries of well run Self Help Groups (SHGs) linked to banks Non deposit taking NBFCs (non-banking finance companies) in the nature of loan companies whose micro finance portfolio is not less than 80 per cent of their loan outstanding in the financially excluded districts as identified by the Committee on Financial Inclusion.

·      RBI has now permitted banks to engage any individual, including those operating Common Service Centres (CSCs) as BC, subject to banks’ comfort level and their carrying out suitable due diligence as also instituting additional safeguards as may be considered appropriate to minimise the agency risks.

10. Ans: B

Exp: Truncation is the process of stopping the flow of the physical cheque issued by a drawer at some point by the presenting bank en-route to the paying bank branch. In its place an electronic image of the cheque is transmitted to the paying branch through the clearing house, along with relevant information like data on the MICR band, date of presentation, presenting bank, etc. Cheque truncation thus obviates the need to move the physical instruments across bank branches, other than in exceptional circumstances for clearing purposes. This effectively eliminates the associated cost of movement of the physical cheques, reduces the time required for their collection and brings elegance to the entire activity of cheque processing.

11. Ans: A

Exp: The HDI attempts to make an assessment of 189 diverse countries and territories, with very different price levels. To compare economic statistics across countries, the data must first be converted into a common currency. Unlike market exchange rates, PPP rates of exchange allow this conversion to take account of price differences between countries. In that way GNI per capita (PPP $) better reflects people’s living standards uniformly. In theory, 1 PPP dollar (or international dollar) has the same purchasing power in the domestic economy of a country as US$1 has in the US economy.
The current PPP conversion rates have been introduced in May 2014. They were based on the 2011 International Comparison Programme (ICP) Surveys, which covered 199 economies from all geographical regions and from the OECD.

GNI per capita only reflects average national income. It does not reveal how that income is spent, nor whether it translates to better health, education and other human development outcomes.

12.  Ans:  B

Exp: Statement 1 is incorrect:  The Methodology recommended by the Expert Group (Rangarajan) for estimation of poverty is that the poverty line should be based on certain normative levels of adequate nourishment, clothing, house rent, conveyance and education, and a behaviorally determined level of other non-food expenses.

Statement 2 is correct: Tendulkar Committee (2009): In 2005, an expert group to review methodology for poverty estimation, chaired by Suresh Tendulkar, was constituted by the Planning Commission to address the following three shortcomings of the previous methods: (i) consumption patterns were linked to the 1973-74 poverty line baskets (PLBs) of goods and services, whereas there were significant changes in the consumption patterns of the poor since that time, which were not reflected in the poverty estimates; (ii) there were issues with the adjustment of prices for inflation, both spatially (across regions) and temporally (across time); and (iii) earlier poverty lines assumed that health and education would be provided by the State and formulated poverty lines accordingly.

It recommended four major changes: (i) a shift away from calorie consumption based poverty estimation; (ii) a uniform poverty line basket (PLB) across rural and urban India; (iii) a change in the price adjustment procedure to correct spatial and temporal issues with price adjustment; and (iv) incorporation of private expenditure on health and education while estimating poverty.   The Committee recommended using Mixed Reference Period (MRP) based estimates, as opposed to Uniform Reference Period (URP) based estimates that were used in earlier methods for estimating poverty.

It based its calculations on the consumption of the following items: cereal, pulses, milk, edible oil, non-vegetarian items, vegetables, fresh fruits, dry fruits, sugar, salt & spices, other food, intoxicants, fuel, clothing, footwear, education, medical (non-institutional and institutional), entertainment, personal & toilet goods, other goods, other services and durables. The Committee computed new poverty lines for rural and urban areas of each state.  To do this, it used data on value and quantity consumed of the items mentioned above by the population that was classified as poor by the previous urban poverty line.  It concluded that the all India poverty line was Rs 446.68 per capita per month in rural areas and Rs 578.80 per capita per month in urban areas in 2004-05.

13.  Ans: C

Exp: Broadly, ATMs differ from WLAs in two ways:

·    In case of a White Label ATM, the logo displayed on the ATM machine and in the ATM premises pertain to the WLA operator instead of a bank.

·    Cash deposits are not accepted at WLAs as it is not permitted by the RBI at present.

In addition to cash withdrawals, WLAs offer many other services to bank customers. Some of these services may include:

•    Account Information

•    Mini/Short Statement

•    PIN change

•    Request for a Cheque Book

Some of the services which are not available at WLA’s are:

·    Acceptance of deposits are not permitted

·    Regular bill payments are not permitted

·    Purchase of Re-load vouchers for mobiles are not permitted

14. Ans: B

Exp: NBFCs whose asset size is of Rs.100 cr or more as per last audited balance sheet are considered as systemically important NBFCs. The rationale for such classification is that the activities of such NBFCs will have a bearing on the financial stability in our country.

15. Ans: B

Exp: Statement 1 is correct: The all India index of Industrial Production (IIP) is a composite indicator that measures the short-term changes in the volume of production of a basket of industrial products during a given period with respect to that in a chosen base period.

Statement 2 is incorrect: It is compiled and published monthly by the Central Statistical Organization (CSO), Ministry of Statistics and Programme Implementation six weeks after the reference month ends.

Statement 3 is correct: The Central Statistics Office (CSO) revised the base year of the all-India Index of Industrial Production (IIP) from 2004-05 to 2011-12 in 2017. Revisions in the IIP are necessitated to maintain representativeness of the items and producing entities and also address issues relating to continuous flow of production data.

16. Ans: B

Exp: Central Electricity Authority: It specifies the technical standards for construction of electrical plants, electric lines and connectivity to the grid.

Central Electricity Regulatory Commission: It grants licence for inter-State transmission and trading.

Power Finance Corporation Ltd: It is the nodal agency to facilitate the development of Ultra Mega Power Projects. . The Ultra Mega Power Projects would use Super Critical Technology with a view to achieve higher thermal efficiency, which results in fuel saving and lower greenhouse gas emissions.

17. Ans: C

Exp : In economics, crowding out is argued by some economists to be a phenomenon that occurs when increased government involvement in a sector of the market economy substantially affects the remainder of the market, either on the supply or demand side of the market.

A situation when increased interest rates lead to a reduction in private investment spending such that it dampens the initial increase of total investment spending is called crowding out effect.

18. Ans: C

Exp: Statement 1 is incorrect: Disguised unemployment is a situation in which more people are doing work than actually required. Even if some are withdrawn, production does not suffer. In other words it refers to a situation of employment with surplus manpower in which some workers have zero marginal productivity.

Statement 2 is incorrect: Open unemployment is a situation where in a large section of the labour force does not get a job that may yield them regular income. This type of unemployment can be seen and counted in terms of the number of unemployed persons. The labour force expands at a faster rate than the growth rate of economy. Therefore all people do not get jobs.

Statement 3 is correct: It is unemployment that occurs during certain seasons of the year. In some industries and occupations like agriculture, holiday resorts, ice factories etc., production activities take place only in some seasons. So they offer employment for only a certain period of time in a year. People engaged in such type of activities may remain unemployed during the off-season.

Statement 4 is correct: It is caused by trade cycles at regular intervals. Generally capitalist economies are subject to trade cycles. The down swing in business activities results in unemployment. Cyclical unemployment is normally a shot-run phenomenon.

19. Ans: B

Exp:

Fuel MW % of Total
Total Thermal 2.23.027 63.9%
Caol 1.91.0093 54.7%
Lignite  6.360 1.8%
Gas 24.937 7.2%
Oil 638 0.2%
Hydra (Renewable) 45.399 13.0%
Nuclear 6.780 1.9%
RES* (MNRE) 74.082 21.2%
Total 349.288  

As of 31.01.2019

20. Ans: D

Exp: Agricultural Produce Market Committee (APMC) is a statutory market committee constituted by a State Government in respect of trade in certain notified agricultural or horticultural or livestock products, under the Agricultural Produce Market Committee Act issued by that state government.

APMCs are intended to be responsible for:

·    ensuring transparency in pricing system and transactions taking place in market area;

·    providing market-led extension services to farmers;

·    ensuring payment for agricultural produce sold by farmers on the same day;

·    promoting agricultural processing including activities for value addition in agricultural produce;

·    Publicizing data on arrivals and rates of agricultural produce brought into the market area for sale; and

·    Setup and promote public private partnership in the management of agricultural markets

21. Ans: C

Exp: The central government notifies MSPs based on the recommendations of the CACP.  These recommendations are made separately for the Kharif marketing season (KMS) and the Rabi marketing season (RMS).  Post harvesting, the government procures crops from farmers at the MSP notified for that season, in order to ensure remunerative prices to farmers for their produce.

The CACP calculates cost of production at three levels: (i) A2, which includes cost of inputs such as seeds, fertilizer, labour; (ii) A2+FL, which includes the implied cost of family labour (FL); and (iii) C2, which includes the implied rent on land and interest on capital assets over and above A2+FL.

22. Ans: C

Exp: Deendayal Antodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM) is a flagship programme of the Ministry of Rural Development (MoRD) that seeks to alleviate rural poverty through building sustainable community institutions of the poor.

The centrally sponsored programme is implemented in partnership with the State governments.

23. Ans: A

Exp: All the agricultural and horticultural commodities for which Minimum Support Price (MSP) are not fixed and are generally perishable in nature are covered under Market Intervention Scheme (MIS).

24. Ans: A

Exp: AKASHGANGA is conceived to spread information technology among rural masses particularly among those dealing with selling milk. and local milk cooperative societies.

25. Ans: C

Exp: A Pigovian subsidy or Pigouvian subsidy is a subsidy provided to an activity on the grounds (i.e., with the explicit rationale) that the activity generates external benefits (i.e., positive externalities).

26. Ans: C

Exp: Footloose industry is a general term for an industry that can be placed and located at any location without effect from factors such as resources or transport.  These industries usually requires a very small production space, are usually less polluting and but requires highly skilled workers.

27. Ans: A

Exp: Major initiatives taken by the government in the last couple of years to improve ‘Ease of Doing Business’ in India.

Passage of Insolvency and Bankruptcy Code: The new Bankruptcy law is supposed to significantly reduce the average time taken for the insolvency process to complete, which currently is 4.3 years.

Time for registering companies reduced: The government has made the process for registering a company faster by reducing the time taken from almost 10 days in December 2014 to 5 days in December 2015.

Easier processes for incorporation: To make the process of registering and incorporating companies faster, the government has done away with the requirement of reserving a name, and integrated the processes related to allotment of Director Identification Number (DIN), appointment of directors etc in a single form (INC – 29) for incorporation of a company.

Integration of processes through eBiz portal: The eBiz platform of the Department of Industrial Policy and Promotion (DIPP) integrates several processes across (government) departments to make the process of incorporating a company simpler. One can apply for Permanent Account Number (PAN), Tax Deduction Account Number (TAN), EPFO (Employees’ Provident Fund Organization) and ESIC (Employee’s State Insurance Corporation) and incorporation of company through the eBiz portal.

Doing away with requirement for minimum paid up capital: The minimum paid-up share capital requirement was Rs 1 lakh for a private company and Rs 5 lakh for a public company.  This requirement has now been done away with for incorporating private as well as public companies in India.

Making tax laws simpler: The government has accepted most of the first set of recommendations of Easwar Committee for simplification of tax laws. The most important of those being exemption to non-residents from mandatorily having a PAN for lower tax deduction at source, hiking the turnover limit for availing presumptive taxation benefits from Rs1 crore to Rs 2 crore, and deferment of Income Computation and Disclosure Standards (ICDS).

28. Ans: A

Exp: The Purchasing Managers’ Index (PMI) is an indicator of the economic health of the manufacturing sector. The PMI is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. The purpose of the PMI is to provide information about current business conditions to company decision makers, analysts and purchasing managers.

Purchasing Managers Indexes (PMI) are economic indicators derived from monthly surveys of private sector companies. 

29. Ans: B

Exp: Statement 1 is incorrect: Reverse repo rate is the rate of interest at which RBI borrows funds from the bank. RBI does this to reduce the liquidity in the banking system. At present the reverse repo rate is 6%.

Statement 2 and 3 are correct: Repo rate or repurchase rate is the rate at which RBI   lends money to banks, when banks face shortage of funds. These are short term, usually overnight borrowings. When RBI reduces repo rate , banks get money at cheaper rate, and when increases  borrowings from RBI becomes more expensive.

30. Ans: B

Exp: Statement 1 is incorrect: Landholder Farmer families with total cultivable holding upto 2 hectares shall be provided a benefit of Rs.6000 per annum per family. It is not for all the farmers.

Statement 2 is correct: It is payable in three equal installments, every four months.

Statement 3 is correct: The scheme aims to supplement the financial needs of the farmers in procuring various inputs to ensure proper crop health and appropriate yields, commensurate with the anticipated farm income.

31. Ans: C

Exp: Statement 3 is incorrect: Shell companies are not defined under Companies Act, 2013, however, are regulated by acts like-

·    Benami Transaction (Prohibition) Amendment Act, 2016

·    Prevention of Money Laundering Act, 2002

About Shell companies

Shell companies include multiple layers of companies that have been created for the purpose of diverting money or for money laundering. Most shell companies do not manufacture any product or deal in any product or render any service. They are mostly used to make financial transactions. Generally, these companies hold assets only on paper and not in reality. These companies conduct almost no economic activity.

32. Ans: D

Exp: Operation Clean Money was conducted by the Income Tax Department to bring out illegal wealth during demonetization. It involved e-verification of large cash deposits using data analytics during demonetization.

33. Ans: C 

Exp: Statement 1 is correct: It is imposed to safeguard domestic industry against unfair trade subsidies provided by local governments of exporting nations. It is basically country specific.

Statement 2 is incorrect: It is generally equal to excise duty paid by manufacturers when same product is produced in home country.

Statement 3 is correct: It is mainly levied to neutralize effect of subsidies in exporting country on price and domestic market of importing country.

34. Ans: D

Exp: Designated off-shore Securities Market (DOSM) is a status accorded by the US Securities Exchange Commission (US SEC) to various bourses of the countries across the world.

Bombay Stock Exchange was accorded the status last year only. 

Implications for the DOSM status—

·    It allows the sale of security to the US investors through trading value of BSE without requiring the registration of such securities

·    It will enhance the demand for Indian Depository Receipts.

35. Ans: D 

Exp:  All the above statements are incorrect.

Statement 1 is incorrect: Both Full as well as the Interim Budget deals with revenue as well as expenditure accounts of the Government of India.

It is the vote on account that deals only with the expenditure side of the Government like paying salaries, ongoing programmes in various sectors etc — with no changes in the taxation structure, until a new government takes over and presents a full Budget that is revised for the full fiscal.

Statement 2 is incorrect, as both the Full Budget as well as the interim budget need parliamentary approval via passage of an Appropriation Bill, as provided by Article 114(3) of the Constitution of India, which states that no amount can be withdrawn from the Consolidated Fund of India without enactment of a law.

Statement 3 is incorrect: Vote on Account means that the government seeks the approval of Parliament for meeting expenditure. The reasons for presenting a Vote on Account are—

·    There is little time to get approvals from Parliament for various grants to ministries and departments and to debate these as well as any provisions for changes in taxation.

·    It would be the prerogative of the new government to signal its policy direction, which is often reflected in the Budget. The reasoning is that there is little time to get approvals from Parliament for various grants to ministries and departments, and to debate these as well as any provisions for changes in taxation.

36. Ans: C

Exp: Statement 1 is correct: GDP deflator reflects the prices of all domestically produced goods and services in the economy whereas, other measures like CPI and WPI are based on a limited basket of goods and services, thereby not representing the entire economy (the basket of goods is changed to accommodate changes in consumption patterns, but after a considerable period of time). Another important distinction is that the basket of WPI (at present) has no representation of services sector. The GDP deflator also includes the prices of investment goods, government services and exports, and excludes the price of imports.

Statement 2 is correct: Changes in consumption patterns or the introduction of new goods and services or structural transformation are automatically reflected in the deflator which is not the case with other inflation measures.

Statement 3 is incorrect : However WPI and CPI are available on monthly basis whereas deflator comes with a lag (yearly or quarterly, after quarterly GDP data is released). Hence, monthly change in inflation cannot be tracked using GDP deflator, limiting its usefulness.

37. Ans: C

Exp: The base effect refers to the impact of the rise in price level (i.e. last year’s inflation) in the previous year over the corresponding rise in price levels in the current year (i.e., current inflation): if the price index had risen at a high rate in the corresponding period of the previous year leading to a high inflation rate, some of the potential rise is already factored in, therefore a similar absolute increase in the Price index in the current year will lead to a relatively lower inflation rates. On the other hand, if the inflation rate was too low in the corresponding period of the previous year, even a relatively smaller rise in the Price Index will arithmetically give a high rate of current inflation

38. Ans: B

Exp:  Statement 1 is incorrect, call money market is an inter-bank money market where funds are borrowed and lent for ONE day, and not 14 days.

It is also known as over-night borrowing (money at call) and for a period of 14 days (short notice).

No collateral is required to borrow from this market, and funds are usually raised from this market upto 3 days.

39. Ans: C

Exp:  SEBI plays an important role of regulating all the players operating in the Indian capital markets. It attempts to protect the interest of investors and aims at developing the capital markets by enforcing various rules and regulations.

Money market is regulated by RBI. Rest are regulated by SEBI.

40. Ans: A

Exp: Statement 2 is incorrect, as regulations are set by Basel Committee on Bank supervision (BCBS)

The BCBS was founded in 1974 as a forum for regular cooperation between its member countries on banking supervisory matters. The BCBS describes its original aim as the enhancement of “financial stability by improving supervisory knowhow and the quality of banking supervision worldwide.” Later on, it turned its attention to monitoring and ensuring the capital adequacy of banks and the banking system.

41. Ans: D

Headline inflation is the total inflation for the economy, core inflation excludes transitory price volatility as in case of some commodities. It reflects inflation trend in economy.

Consumer price index: The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them.

42. Ans: D

Exp: Statement (a) is incorrect because fiscal stimulus is an emergency measure where government spending is more than the ordinary situation. Here a government paying its employees on time is a routine affair.

Statement (b) is incorrect because fiscal stimulus is about governmental actions not related to monetary authority. Though, it will count as economic stimulus if not fiscal stimulus.

Statement (c) is incorrect because business activity relates to private investment while fiscal stimulus is about public investments.

Statement (d) is correct because fiscal stimulus is additional government spending or tax cuts designed to increase aggregate demand when the economy is not performing up to its potential. Cutting the tax rates drastically counts as fiscal stimulus since it will ensure more money remains in the hands of both consumers and corporations. They can use it to consume and invest which would prop up the demand and put economy in a virtuous cycle.

43. Ans: A

Exp: India on February 15, 2019 revoked the Most Favoured Nation status bestowed on Pakistan in 1996 in retaliation to the terror attack in Pulwama.

According to the MFN principle of the WTO’s General Agreement on Tariffs and Trade (GATT) — to which India is a signatory/contracting party — each of the WTO member countries should “treat all the other members equally as ‘most-favoured’ trading partners.”

Revoking it means India can levy whatever import tariffs it wants. India can now make it very expensive for Pakistan to export its goods to India. Pakistan has always retained this right.

44. Ans: B

Exp: All the options above have the potential to create inflation in the economy but helicopter-drop has the highest potential since pure doling out of cash can be least productive.

45. Ans: C

Exp: Qualitative method:

·    Margin requirements: It is the difference between the market value of loan and the security value of loan. At the time of inflation the margin requirement value decreases by RBI for discouraging people and commercial banks for approaching more and more amount of loan. On the other hand at the time of deflation the RBI increases the value of margin just to encourage issuing of more amount of loan to the commercial banks and general public.

·    Moral suasion: It refers to written or oral advices given by central bank to commercial banks to restrict or expand credit.

·    Direct Action: Sometimes the RBI directly takes action against the commercial banks. It takes action to such type of commercial banks who are not following the rules regulation of RBI. It cancels their registration or nationalization of commercial banks.

·    Rationing of credit: It is the related to limiting the amount of credit, which is issued by all the commercial banks. RBI fixes the size of issuing the credit according to the requirement of the country.

46. Ans: B

Exp: Ministry of Finance will release an Annual Financial Inclusion Index (FII) which will be a measure of access and usage of a basket of formal financial products and services that includes savings, remittances, credit, insurance and pension products. The index will have three measurement dimensions; (i) Access to financial services (ii) Usage of financial services and (3) Quality. NITI Aayog has developed the ‘Healthy States, Progressive India’ Report also known as the ‘Health Index’ in February 2018. The Composite Water Management Index was also launched in June 2018. The ‘School Education Quality Index (SEQI)’, ‘SDG India Index’ and the ‘Digital Transformation Index’ (DTI) which will measure states’ progress in respective sectors are in the works.

47. Ans: D

Exp: PCA norms allow the regulator to place certain restrictions such as halting branch expansion and stopping dividend payment. It can even cap a bank’s lending limit to one entity or sector. Other corrective action that can be imposed on banks include special audit, restructuring operations and activation of recovery plan. Banks’ promoters can be asked to bring in new management, too. The RBI can also supersede the bank’s board, under PCA.

48. Ans: B

Exp: It would count as exports for money earned will be in the foreign currency. Whatever good and services that are to be consumed by the foreigners is equivalent to those good and services exported. The only difference is that they are consumed within the territory of India.

49. Ans: A

Exp: Marginal rate of transformation is the ratio of a number of units of a good sacrificed to produce an additional unit of another commodity.

50. Ans: A

Exp: WTO subsidies

Green Box

Green Box contains those types of subsidies that don’t distort trade or that cause only minimum distortion. Hence they are permitted subsidies and thus are non-reducible subsidies. The Green box subsidies are provided by governments through variety of programmes like the provision of income support to farmers during crop failure, incentives to farmers to protect environment, subsidies for research and development, food aid to the poor people etc. These subsidies are provided through programmes; without influencing (decoupled) the current level of production and prices.  Member countries thus can give green box subsidies without limits; provided they comply with relevant criteria.

Amber Box

Nearly all domestic support measures considered to distort production and trade (with some exceptions) fall into the amber box. These include measures to support prices, or subsidies directly related to production quantities.

Blue box

This is the “amber box with conditions” — conditions designed to reduce distortion. Any support that would normally be in the amber box, is placed in the blue box if the support also requires farmers to limit production (details set out in Paragraph 5 of Article 6 of the Agriculture Agreement).

At present there are no limits on spending on blue box subsidies. In the current negotiations, some countries want to keep the blue box as it is because they see it as a crucial means of moving away from distorting amber box subsidies without causing too much hardship. Others wanted to set limits or reduction commitments, some advocating moving these supports into the amber box.