Indian Economy (UPSC Prelims) [2013-2022] – Previous Year Questions

Government can reduce the coupon rates on its borrowing by way of IIBs:

• This statement is correct. Inflation-Indexed Bonds (IIBs) are bonds where the principal and interest payments are adjusted for inflation. This means that the government can offer a lower coupon rate on these bonds compared to traditional bonds because investors are protected against inflation.

IIBs provide protection to the investors from uncertainty regarding inflation:

• This statement is correct. IIBs are designed to protect investors from inflation risk. The principal and interest payments on these bonds are linked to an inflation index, such as the Consumer Price Index (CPI). If inflation rises, the principal and interest payments also increase, thus providing a hedge against inflation.

The interest received as well as capital gains on IIBs are not taxable:

• This statement is incorrect. The interest received on IIBs is taxable as per the investor’s marginal tax rate. Moreover, capital gains arising from the sale of IIBs are also taxable. Long-term capital gains (if IIBs are held for more than 12 months) are taxed at 10% (without indexation) or 20% (with indexation), while short-term capital gains are taxed as per the investor’s marginal tax rate.

Source: http://arthapedia.in/index.php/Inflation_Indexed_Bonds_(IIBs)

The real sector of the economy refers to the part of the economy that produces goods and services, rather than the part that is concerned with buying and selling on the financial markets. In other words, it is the part of the economy that produces tangible, measurable output.

• Farmers harvesting their crops: This is a real sector activity as it involves the production of tangible goods (agricultural produce).
• Textile mills converting raw cotton into fabrics: This is also a real sector activity as it involves the production of tangible goods (fabrics).
• A commercial bank lending money to a trading company: This is not a real sector activity. It is a financial sector activity as it involves the provision of financial services (lending money).
• A corporate body issuing Rupee Denominated Bonds overseas: This is also not a real sector activity. It is a financial sector activity as it involves raising funds through financial instruments (bonds).

“Indirect transfers” refer to situations where a foreign company owns shares in another foreign company, and those shares derive a substantial portion of their value from assets located in India. In such cases, the transfer of these shares between two foreign entities is considered an indirect transfer of Indian assets, and may be subject to taxation in India.

This concept gained prominence after the 2012 Vodafone case, where the Supreme Court of India ruled that Vodafone was not liable to pay taxes on its purchase of Hutchison Whampoa’s stake in Hutchison Essar, an Indian company. Following this, the Indian government amended the Income Tax Act in 2012 to introduce the concept of taxing indirect transfers retrospectively from 1962.

Acquiring new technology is capital expenditure.

• This statement is correct. Capital expenditure (CapEx) refers to the funds used by a company to acquire, upgrade, or maintain long-term assets such as property, technology, equipment, or buildings. Acquiring new technology falls under the category of capital expenditure as it involves purchasing a long-term asset that will benefit the company for more than one accounting period.

Debt financing is considered capital expenditure, while equity financing is considered revenue expenditure.

• This statement is incorrect. Financing, whether through debt or equity, is not classified as either capital expenditure or revenue expenditure. Instead:

• • Debt financing is when a company borrows money and pays interest on the borrowed funds. The borrowed money can be used for various purposes, including capital expenditure or working capital.
  • Equity financing is when a company raises money by selling shares of the company to investors. The funds raised through equity financing can also be used for various purposes, including capital expenditure or working capital.

Revenue expenditure, on the other hand, refers to the ongoing costs incurred by a company in its normal course of business, such as salaries, rent, utilities, and office supplies.

A share of household financial savings goes towards government borrowings.

• In India, households invest in various financial instruments, including bank deposits, pension funds, insurance schemes, and government securities.
• A portion of these savings is indeed channeled into government borrowings through the purchase of government bonds and securities, thereby helping the government to finance its deficit and undertake public expenditures​​.

Dated securities issued at market-related rates in auctions form a large component of internal debt.

• The Indian government raises funds through the issuance of dated securities, which are long-term government bonds with a fixed maturity date.
• These securities are issued at market-related rates, determined by the dynamics of demand and supply in the market. The government conducts auctions for these securities, attracting bids from various financial institutions and investors.
• These dated securities constitute a significant portion of the government’s internal debt, which represents the debt owed by the government to domestic creditors​​.

Source: https://compass.rauias.com/current-affairs/analysis-public-debt-india/#:~:text=Central%20government’s%20debt%20stood%20at,over%20the%20next%20financial%20year.

Tight monetary policy of the US Federal Reserve could lead to capital flight.

• This statement is correct. A tighter monetary policy by the US Federal Reserve, such as raising interest rates, can lead to capital flight from emerging markets to the US as investors seek higher returns.
• This process is exacerbated by the dominant role of the US dollar in international transactions, making the effects of US monetary policy significant on a global scale​​​​.

Capital flight may increase the interest cost of firms with existing External Commercial Borrowings (ECBs).

• This statement is correct. When capital flows out of an emerging market, it can depreciate the local currency, thereby increasing the cost of servicing external debt denominated in foreign currencies for firms with existing ECBs.
• Furthermore, as capital flows back to the US due to higher interest rates, emerging markets may face increased borrowing costs and a tightening of financial conditions​​​​.

Devaluation of domestic currency decreases the currency risk associated with ECBs.

• This statement is incorrect. A devaluation of the domestic currency actually increases the currency risk associated with External Commercial Borrowings (ECBs) because it would require more local currency to service the same amount of debt denominated in a foreign currency, thus increasing the cost of servicing the debt for borrowers​​.

Credit rating agencies are regulated by the Reserve Bank of India (RBI) –

• This statement is incorrect. Credit rating agencies in India are primarily regulated by the Securities and Exchange Board of India (SEBI) under the SEBI Regulations, 1999, as part of the SEBI Act, 1992​​​​.

The rating agency popularly known as ICRA is a public limited company –

• This statement is correct. ICRA Limited, originally named Investment Information and Credit Rating Agency of India Limited, is a public limited company and became a public entity in April 2007. It is noteworthy that ICRA’s largest shareholder is Moody’s Investors Service​​.

Brickwork Ratings is an Indian credit rating agency –

• This statement is correct. Brickwork Ratings (BWR), established in 2007 and headquartered in Bangalore, is indeed an Indian credit rating agency. It provides a wide range of rating services and is accredited as an external credit assessment agency (ECAI) by RBI​​.

National Credit Framework

Fitch cuts India GDP growth forecast for this fiscal to 6%

The Governor of RBI is the Chairman of BBB –

• This statement is incorrect. The Banks Board Bureau (BBB) is chaired by a government-appointed chairman, not the Governor of the Reserve Bank of India. The current chairman, as of the last update, is Bhanu Pratap Sharma​​.

BBB recommends for the selection of heads for Public Sector Banks –

• This statement is correct. One of the primary functions of the BBB is to recommend candidates for the positions of CEOs, executive directors, and non-executive chairpersons in Public Sector Banks (PSBs) and financial institutions​​​​.

BBB helps the Public Sector Banks in developing strategies and capital raising plans –

• This statement is correct. Besides recommending leadership appointments, the BBB advises PSBs on strategies for their growth and development, including capital raising plans​​​.

Read also: https://compass.rauias.com/economy/financial-services-institutions-bureau/

Convertible Bonds pay a lower rate of interest:

• Convertible bonds are a type of bond that the holder can convert into a specified number of shares of common stock in the issuing company or cash of equal value.
• Because of this conversion feature, convertible bonds typically have lower interest rates than comparable bonds without the conversion option.
• The reason for this is that the conversion feature provides additional value to the bondholder.
• If the company’s stock price increases significantly, the bondholder can convert the bond into stock and potentially make a profit. This potential for additional return compensates for the lower interest rate.

The option to convert to equity affords the bondholder a degree of indexation to rising consumer prices:

• While convertible bonds do not directly provide protection against inflation (rising consumer prices), they do offer an indirect form of protection.
• Here’s how: If a company’s stock price increases (which could be due to a variety of factors, including inflation), the value of the convertible bond will also increase if the bondholder chooses to convert the bond into stock.
• In this way, the bondholder has the potential to benefit from the appreciation of the company’s stock price, which could be influenced by inflation.
• Therefore, the bondholder has a degree of protection against rising consumer prices.
• However, it’s important to note that this is not a direct form of inflation protection like you would get with some other types of investments (like Treasury Inflation-Protected Securities, or TIPS, in the U.S., for example).

The Reserve Bank of India (RBI) is the central bank of India and is responsible for maintaining price stability in the country by controlling inflation. The RBI uses various monetary policy tools to achieve this goal, such as adjusting the repo rate (the rate at which it lends to commercial banks), managing the money supply, and conducting open market operations.

The RBI’s primary objectives include:

• Maintaining price stability
• Ensuring adequate flow of credit to productive sectors
• Promoting financial stability
• Developing a sound and efficient financial system

The other options listed are not directly responsible for controlling inflation and maintaining price stability in India:

• The Department of Consumer Affairs focuses on consumer protection and welfare.
• The Expenditure Management Commission was set up to suggest reforms in government expenditure and subsidies.
• The Financial Stability and Development Council coordinates India’s financial sector regulators and monitors macro-prudential regulation.

Reserve Bank of India

In India, the Labour Bureau is responsible for compiling information on industrial disputes, closures, retrenchments, and lay-offs in factories employing workers.

The Labour Bureau is an attached office of the Ministry of Labour and Employment.

It is responsible for collecting, compiling, and disseminating labor statistics, including data on industrial relations, labor laws, and working conditions.

Some of the key functions of the Labour Bureau include:

• Conducting surveys and collecting data on labor-related issues
• Publishing reports on labor statistics, such as the Consumer Price Index for Industrial Workers (CPI-IW) and wage rate indices
• Maintaining an industrial relations database covering strikes, lockouts, retrenchments, and closures
• Monitoring the implementation of labor laws and regulations

Both “Rapid Financing Instrument (RFI)” and “Rapid Credit Facility (RCF)” are related to International Monetary Fund (IMF).

Both “Rapid Credit Facility (RCF)” and “Rapid Financing Instrument (RFI)” provide rapid and concessional financial assistance to low income countries facing an urgent BoP need.

The Coal Controller’s Organization (CCO) plays a critical role in India’s coal sector, governed by the Ministry of Coal. The roles and responsibilities of the CCO include a wide range of functions aimed at regulation, monitoring, and statistical analysis within the coal industry.

Major Source of Coal Statistics:

• The CCO acts as the principal source of coal statistics in the Government of India. It collects, compiles, and maintains detailed statistical data on coal production, distribution, and other related metrics across both private and public sector coal mines in India​​​​.

Monitoring of Captive Coal/Lignite Blocks:

• The CCO is responsible for overseeing the development of captive coal and lignite blocks. This involves monitoring their progress to ensure that these resources are developed efficiently and sustainably, aligning with the country’s energy goals​​​​.

Handling Objections to Government Notifications:

• It addresses any objections to the government’s notifications regarding the acquisition of coal-bearing areas. This involves hearing grievances or concerns related to such notifications, providing a platform for dispute resolution in the context of coal-bearing land acquisitions​​​​.

Other Key Duties:

• The CCO has several other critical functions.
• These include approving mine plans and mine closure plans, granting permissions for mine openings and re-openings, monitoring compliance with mine closure plans, and implementing and monitoring the washery reject policy.
• Additionally, the CCO plays a role in the administrative and account-related matters of the coal sector, providing support to various national and international agencies​​​​.

Restructuring of Coal Controller Organisation

The nominal exchange rate measures the current value of a currency against another. For example, $ 1 = Rs 70. Hence, an increase in Nominal Effective Exchange Rate (NEER) indicates the appreciation of rupee.

The real exchange rate is represented by the following equation: real exchange rate = (nominal exchange rate) X (domestic price/ foreign price).

So, while the nominal exchange rate tells how much foreign currency can be exchanged for a unit of domestic currency, the real exchange rate tells how much the goods and services in the domestic country can be exchanged for the goods and services in a foreign country.

Thus, Real Exchange rate is directly corelated to Prices of domestic goods. If the prices of domestic Goods is higher, the Real Exchange rate would also be higher.

In case of higher Real Exchange rate, Domestic Goods are costlyà Export of Domestic Goods will reduce.

Foreign Goods are cheaper Import of Foreign Goods will increase.

Thus, overall trade competitiveness of a country reduces.

Gujarat has the largest solar park in India.

• This statement is incorrect. According to the Ministry of New and Renewable Energy (MNRE), the Bhadla Solar Park in Rajasthan is the largest solar park in India, with a total capacity of 2,245 MW.

Kerala has a fully solar-powered International Airport.

• This statement is correct. Cochin International Airport in Kerala is the world’s first fully solar-powered airport. It has a 12 MWp solar power plant comprising over 46,000 solar panels laid across 45 acres near the cargo complex.

Goa has the largest floating solar photovoltaic project in India.

• This statement is incorrect. The largest floating solar photovoltaic project in India is located at Ramagundam in Telangana, with a capacity of 100 MW. It is being developed by the National Thermal Power Corporation (NTPC).

Initiatives for Solar Energy

If the inflation is too high, Reserve Bank of India (RBI) is likely to sell government securities, rather than buying G-Secs. Hence , the first statement is incorrect. By elimination method, the correct answer would be (b).

Price of its substitute increases:

• If the price of a substitute good increases, consumers will likely switch to the relatively cheaper good, increasing its demand. This statement is correct.

Price of its complement increases:

• When the price of a complement increases, the demand for the main good usually decreases because the overall cost of consuming both goods together increases. This statement is incorrect.

The good is an inferior good and income of the consumers increases:

• For an inferior good, as consumers’ income increases, they tend to buy less of the inferior good and switch to higher-quality alternatives. Therefore, if income increases, the demand for an inferior good will decrease. This statement is incorrect.

Its price falls:

• When the price of a good falls, its demand generally increases as more consumers are willing and able to purchase it at the lower price. This statement is correct.

They are supervised and regulated by local boards set up by the State Governments.

• This statement is incorrect. Urban Cooperative Banks are supervised and regulated by the Reserve Bank of India (RBI), not by local boards set up by State Governments. The RBI’s Urban Banks Department is vested with the responsibility of regulating and supervising primary (urban) cooperative banks​​.

They can issue equity shares and preference shares.

• Recent reforms have indeed allowed cooperative banks, including Urban Cooperative Banks, to issue equity or preference shares, subject to certain conditions and approvals. This change is part of efforts to strengthen their capital base​​.

They were brought under the purview of the Banking Regulation Act, 1949 through an Amendment in 1966.

• Urban Cooperative Banks were brought under the purview of the Banking Regulation Act, 1949, through an amendment in 1966. This was a significant move that aimed to bring these banks under a regulatory framework similar to that governing other commercial banks in the country​​.

Source: https://compass.rauias.com/current-affairs/regulation-urban-cooperative-banks/

Actions of the United States Federal Reserve:

• The U.S. Federal Reserve’s monetary policies can have a significant impact on global financial markets, including India.
• For instance, the Fed’s decisions on asset purchases and interest rate policies can lead to spillover effects in emerging markets like India, affecting the flow of foreign portfolio investments and influencing Indian bond yields​​.

Actions of the Reserve Bank of India (RBI):

• The RBI’s monetary policy, including decisions on the policy repo rate and open market operations, directly impacts the liquidity in the market and subsequently the yields on government securities.
• The RBI’s role in managing the country’s monetary policy and regulating the financial system plays a crucial part in determining bond yields​​.

Macroeconomic Variables (Inflation and Interest Rates):

• Macroeconomic factors, including inflation rates and the overall economic outlook, are key determinants of bond yields. Expectations around inflation and economic growth influence investor sentiment and demand for government securities, thereby affecting yields.
• Furthermore, the short-term interest rates set by the central bank are a critical factor, as they directly influence the cost of borrowing and the yield on bonds​​.

Source: https://compass.rauias.com/current-affairs/what-is-bond-yield/

Improves the competitiveness of the domestic exports in foreign markets:

• This statement is correct. When a currency is devalued, domestic goods and services become cheaper for foreign buyers. This can lead to an increase in demand for domestic exports because they are more competitively priced in the global market.

Increases the foreign value of domestic currency:

• This statement is incorrect. Devaluation means that the domestic currency has been made weaker compared to foreign currencies. Therefore, it decreases the foreign value of the domestic currency, not increases it. This means that you need more of the domestic currency to buy foreign currencies.

Improves the trade balance:

• This statement is incorrect. Improving the trade balance depends on the elasticity of demand for exports and imports. If the increase in volume of exports due to lower prices (caused by devaluation) and the decrease in imports because of higher foreign prices lead to a higher value of exports relative to imports, then the trade balance can improve. However, this is known as the Marshall-Lerner condition, and it depends on the specific elasticities of demand for exports and imports. It’s not a guaranteed outcome of devaluation.

• The primary concern regarding the effects of black money in India has been its significant impact on the loss of revenue to the State Exchequer due to tax evasion.
• The Government of India has been proactive in addressing this issue through various measures aimed at curbing black money, both domestically and stashed abroad.
• One of the pivotal steps taken by the government was the implementation of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
• This act was specifically designed to tackle the issue of black money stored outside the country.
• As a result of the government’s systematic actions, substantial undisclosed income has been brought to tax, leading to the levy of penalties and the raising of significant demand in various cases related to undisclosed foreign income and assets​​.
• Furthermore, the government has also focused on widening the tax base and enhancing direct tax collections as part of its efforts to combat black money.
• Notable initiatives like demonetization were aimed at flushing out black money, converting the non-formal economy into a formal one, and expanding the tax base.
• This initiative saw a remarkable increase in enforcement actions, a surge in the number of e-returns filed by individual taxpayers, and a significant boost in direct tax collections, highlighting the government’s commitment to tackling the issue of black money​​.
• These efforts underscore the government’s main concern with black money: its detrimental impact on the country’s revenue and the formal economic sector.
• By implementing stringent measures and leveraging data analytics for enforcement actions, the government aims to minimize tax evasion and enhance compliance, thereby safeguarding the State Exchequer’s interests.

Source: https://pib.gov.in/PressReleasePage.aspx?PRID=1739186

Expansionary Policies:

• When the government or the central bank (in India’s case, the Reserve Bank of India) decides to pump more money into the economy, it’s usually through lowering interest rates or increasing the money supply.
• This makes borrowing cheaper and encourages spending and investment.
• It is a well-acknowledged economic principle that such policies can increase aggregate demand, potentially leading to inflation if the supply does not match up​​.

Fiscal Stimulus:

• This is about the government spending more or cutting taxes to boost economic activity.
• The idea is that when the government spends more, directly or through subsidies, it increases overall demand. For instance, government expenditure, as part of aggregate demand, can push prices up if it outpaces supply capabilities.
• The Reserve Bank of India’s reports and forecasts often reflect on the impacts of government spending and fiscal deficits on the economy.
• However, it’s broadly understood in economic theory that fiscal stimulus, by boosting consumption and investment, can contribute to demand-pull inflation​​.

Inflation-indexing Wages:

• This practice involves adjusting wages based on inflation rates to maintain the purchasing power of consumers.
• It’s a bit more complex because while it’s designed as a response to inflation, indexing wages to inflation can perpetuate it by ensuring that consumer demand remains high, even as prices rise.
• The reviewed material didn’t explicitly address inflation-indexed wages in the Indian context, but the concept is globally recognized as a potential factor in sustaining or escalating demand-pull inflation due to its impact on maintaining or even increasing consumer spending power.

Higher Purchasing Power:

• This naturally leads to increased demand. When people have more disposable income—be it through wage increases, tax cuts, or other means—they tend to spend more.
• This increased spending can drive prices up, especially if the supply side doesn’t keep pace.
• The RBI’s analysis on economic conditions, consumer confidence, and spending patterns indirectly touches on how variations in purchasing power, through mechanisms like fiscal policies and credit expansion, can impact inflation and demand​​.

Rising Interest Rates:

• Interestingly, this factor typically works in the opposite direction of demand-pull inflation.
• Higher interest rates make borrowing more expensive and can cool down an overheated economy by slowing down spending and investment.
• This is often used as a tool to combat inflation, not cause it.
• Therefore, while rising interest rates are a critical part of monetary policy, they are generally aimed at controlling, not increasing, demand-pull inflation.

Source: https://www.rbi.org.in/Scripts/PublicationsView.aspx?id=21343

• Repayment of public debt typically doesn’t directly lead to inflation. It’s a neutral action where the government is fulfilling its debt obligations, which doesn’t inherently increase the money supply or demand within the economy.
• Borrowing from the public to finance a budget deficit involves the government issuing securities, such as bonds, to raise funds. This method doesn’t immediately increase the money supply since it’s reallocating existing money from investors to the government. While it might influence interest rates and investment behaviors, its direct inflationary effect is limited compared to other methods​​.
• Borrowing from banks to finance a budget deficit can be somewhat inflationary since it might lead to an increase in the money supply if banks create new deposits in the process of lending to the government. However, this impact is moderated by the central bank’s monetary policy and regulatory frameworks, which aim to manage liquidity and control inflation​​.
• Creation of new money to finance a budget deficit, also known as monetizing the debt, is the most directly inflationary method among the options. When the central bank or the government creates new money to cover a budget deficit, it directly increases the money supply without a corresponding increase in goods and services, potentially leading to inflation. This action can dilute the value of money, leading to price increases across the economy​​.

Increase in the Cash Reserve Ratio (CRR) in the banks:

• The CRR is the percentage of depositors’ balances banks must hold as reserves with the central bank.
• Increasing the CRR would actually decrease the money multiplier because banks have less money to lend out.
• Higher reserves mean banks can support fewer deposits through lending, which decreases the money creation process.

Increase in the Statutory Liquidity Ratio (SLR) in the banks:

• Similar to the CRR, the SLR is the percentage of deposits that banks must maintain in the form of liquid assets themselves, not with the central bank.
• Increasing the SLR also reduces the money multiplier by reducing the amount of funds available for banks to lend out.

Increase in the banking habit of the people:

• When more people start using banking services, depositing their money in banks instead of holding it as cash, banks have more funds to lend out.
• This increases the base for the money multiplier effect, as each deposited unit can be lent and re-deposited several times, expanding the money supply in the economy.

Increase in the population of the country:

• While an increasing population might lead to a higher demand for money and possibly more deposits and lending activities, it does not directly affect the money multiplier mechanism.
• The impact would depend on the banking habits of the population and other economic factors.

Statement 1 is correct.

• The Water Credit Initiative indeed leverages microfinance tools to provide small, affordable loans for water and sanitation to those in need.
• This approach is designed to overcome the barrier of affordable financing, allowing individuals and families to access water and sanitation solutions.
• This initiative has been proven effective over more than 15 years, significantly impacting millions of lives by making water and sanitation loans accessible to those who need them the most​​.

Statement 2 is incorrect.

• Water Credit is an innovation of Water.org, a global nonprofit organization co-founded by Gary White and Matt Damon.
• Water.org works to bring water and sanitation to the world through affordable financing, such as small loans, and has been doing so for over 30 years.
• The organization focuses on creating market-driven financial solutions to the global water crisis​​.

Statement 3 is correct.

• By providing access to affordable financing, Water Credit empowers individuals and families living in poverty to finance long-term water and sanitation solutions on their own, reducing their reliance on day-to-day struggles for water or the need for direct subsidies.
• The initiative recognizes people as consumers with autonomy and supports them in defining their own futures, with a high loan repayment rate indicating its sustainability and effectiveness​​.

Source:

• https://water.org/solutions/watercredit/
• https://water.org/about-us/

Retail investors can invest in Treasury Bills and Government of India Debt Bonds in the primary market through a demat account.

• Retail investors have multiple channels to invest in these securities in the primary market, utilizing the non-competitive bidding facility offered by NSE.

Source: https://www.nseindia.com/products-services/non-competitive-bidding-how-to-invest-g-sec

The ‘Negotiated Dealing System-Order Matching’ (NDS-OM) is indeed a government securities trading platform of the Reserve Bank of India (RBI).

• It is designed for the secondary market transactions, where retail investors, upon successful registration, can access this platform for buying or selling government securities.

Source: https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=51883

Regarding the ‘Central Depository Services Ltd. (CDSL)

• It is not jointly promoted by the Reserve Bank of India and the Bombay Stock Exchange.
• CDSL was established by the Bombay Stock Exchange (BSE) along with other Indian financial institutions, banks, and investment companies.

Source: https://www.cdslindia.com/Downloads/InvestorRels/AnnualReports/CDSL%20AR%202019%20FULL%20FILE%209.00%20PM.pdf

Lending to Governments for Financing Budgetary Deficits:

• The Reserve Bank of India (RBI) has traditionally provided liquidity to the government to smoothen temporary mismatches between revenue and expenditure, against government securities.
• However, this practice has evolved with a clear distinction between debt management and monetary management to avoid the inflationary implications of financing government deficits directly.
• The management of public debt, which includes issuing new debt to the non-government sector to offset the liquidity impact of fiscal deficits, has seen a shift towards minimizing the central bank’s direct financing of government deficits due to its inflationary potential​​.

Providing Liquidity to Banks in Crisis (Lender of Last Resort):

• The RBI’s role as the lender of last resort is primarily aimed at ensuring the stability of the banking sector by providing liquidity to solvent but illiquid banks to avert systemic crises.
• This function is foundational to central banking and is exercised to prevent bank panics by supplying liquidity at a penalty rate to discourage banks from taking excessive risks.
• The lender of last resort function has evolved to cover not only commercial banks but also other financial institutions, reflecting the expanding role of central banks in maintaining financial stability beyond just the banking sector​​.

Lending to Trade and Industry-Bodies:

• While the RBI plays a significant role in regulating and supervising the financial sector, including direct interventions in times of crisis, its function as a lender of last resort does not typically extend to lending directly to trade and industry bodies.
• The primary focus is on maintaining the stability of the financial system, with interventions aimed at liquidity support for the banking sector rather than direct financial support to non-bank entities​​​​​​.

Source: https://www.rbi.org.in/scripts/PublicationReportDetails.aspx?ID=454

https://www.rbi.org.in/Scripts/PublicationReportDetails.aspx?ID=249

All casual workers are entitled to Employees Provident Fund (EPF) coverage:

• This statement is correct as the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, does not distinguish between different types of employees regarding EPF coverage.
• The Supreme Court of India has also affirmed that casual workers are entitled to social security benefits under the EPF Act, reinforcing the inclusivity of the Act towards all categories of workers​​.

All casual workers are entitled to regular working hours and overtime payment:

• The statement is correct finds its basis in labor laws, specifically the Minimum Wages Act, 1948, and the Factories Act, 1948, which regulate working hours and stipulate provisions for overtime payment across various types of employment, including casual workers.
• Workers are entitled to overtime pay at specified rates if they work beyond the standard working hours​​.

The government can by a notification specify that an establishment or industry shall pay wages only through its bank account:

• This statement is correct as per amendments made to the Payment of Wages Act, 1936, by the Payment of Wages (Amendment) Act, 2017, which allows the government to mandate payment of wages through banking channels.
• This provision aims to promote transparency and efficiency in the disbursement of wages​​.

Source: https://compass.rauias.com/current-affairs/the-problem-associated-with-the-indian-informal-sector/

The Governor of the Reserve Bank of India (RBI) is appointed by the Central Government.

• This statement is correct. According to Section 8 of the RBI Act, 1934, the Governor and Deputy Governors of the RBI are appointed by the Central Government.

Certain provisions in the Constitution of India give the Central Government the right to issue directions to the RBI in public interest.

• This statement is incorrect. There are no provisions in the Constitution of India that specifically give the Central Government the right to issue directions to the RBI. However, the RBI Act, 1934, does provide for such provisions.

The Governor of the RBI draws his power from the RBI Act.

This statement is correct. The powers and functions of the RBI Governor are derived from the RBI Act, 1934. The Act empowers the Governor to manage the affairs of the bank and exercise all powers that can be exercised by the RBI.

Reserve Bank of India

How to Become RBI Governor?

Cut in tax rates accompanied by increase in interest rate:

• Cutting tax rates is a fiscal policy aimed at increasing disposable income for consumers and investment capacity for businesses, which can stimulate economic growth.
• However, increasing interest rates is a monetary policy tool typically used to combat inflation or cool down an overheating economy, not actions typically taken during a recession when the goal is often to encourage borrowing and spending.

Increase in expenditure on public projects:

• This is a classic fiscal policy approach used to combat recessions. By increasing expenditure on public projects, the government injects money into the economy, creating jobs, and stimulating demand through increased spending.
• This approach is based on Keynesian economic theory, which advocates for increased government expenditures and lower taxes to stimulate demand and pull the economy out of a recession.

Increase in tax rates accompanied by reduction of interest rate:

• Increasing tax rates during a recession would likely reduce disposable income for consumers and investment for businesses, potentially deepening the recession.
• Reduction of interest rates is a common monetary policy measure to stimulate economic activity by making borrowing cheaper, encouraging spending and investment.
• The combination of these two policies sends mixed signals and could be counterproductive, with the tax increase potentially offsetting the stimulative effect of lower interest rates.

Reduction of expenditure on public projects:

• Reducing government expenditure on public projects during a recession would likely lead to a decrease in overall demand in the economy.
• This is because such spending cuts reduce the amount of government-induced economic activity, potentially worsening the recession.

Source: https://compass.rauias.com/current-affairs/k-shaped-economic-recovery-in-india/

Cutting Statutory Liquidity Ratio (SLR):

• The SLR is the minimum percentage of total deposits that banks have to maintain in liquid assets like cash, gold or approved securities
• As per the RBI Act, the floor SLR rate is 18%
• Cutting the SLR injects more liquidity into the banking system as it allows banks to lend out more of their deposit funds instead of parking them in liquid assets to fulfill SLR norms
• So lowering SLR rates enables more credit expansion and money supply – an expansionary measure

Source: https://rbi.org.in/Scripts/FAQView.aspx?Id=87

Increasing Marginal Standing Facility (MSF) Rate:

• The MSF is a credit facility banks can access overnight by pledging government securities
• It allows banks to borrow from the RBI at a penal rate of interest above the repo rate
• Increasing the MSF rate makes it more expensive for banks to borrow funds
• This tightens overall liquidity conditions as banks will borrow less – a contractionary measure

Source: https://rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=10598

Cutting Repo Rate and Bank Rate:

• The repo rate is the key policy rate at which RBI lends short term funds to banks
• Cutting the repo rate reduces short term borrowing costs and allows easier availability of credit
• The bank rate is the long term lending rate at which RBI provides loans to commercial banks
• Reducing both rates injects more liquidity and stimulates demand and economic growth – expansionary measures

Sources: https://rbi.org.in/Scripts/FAQView.aspx?Id=104

https://rbi.org.in/Scripts/FAQView.aspx?Id=60

As per the Controller of Certifying Authorities (CCA) in India the term “Public Key Infrastructure” (PKI) in India is used in the context of Digital security infrastructure.

PKI is crucial for the growth of e-commerce and e-governance by ensuring trust in electronic environments.

It achieves this through the use of digital signatures based on asymmetric key cryptography, providing authentication, integrity, and non-repudiation for electronic transactions.

The Information Technology Act, 2000, underpins the legal framework for digital signatures and PKI, recognizing digital signatures as having the same legal status as handwritten signatures.

The Act also establishes the CCA’s role in licensing and regulating Certifying Authorities (CAs) that issue digital signature certificates​​​​​​.

Source: https://www.cca.gov.in/mutual_recognition.html

Not depending on short-term foreign borrowings:

• The Government of India and the Reserve Bank of India (RBI) have taken several measures to ensure financial stability and to mitigate the impact of external shocks.
• This includes focusing on maintaining adequate liquidity in the system, facilitating bank credit flows, and easing financial stress to enable the normal functioning of markets.
• By ensuring a robust financial system, these measures indirectly help in reducing reliance on short-term foreign borrowings by enhancing the domestic financial ecosystem’s resilience​​.
• Over-dependence on short-term debt flows makes India susceptible to volatility/contagion. Hence the need to increase the proportion of stable long-term debt.

Opening up to more foreign banks:

• The regulatory environment and financial sector policies are designed to ensure financial stability, safeguard against vulnerabilities, and promote economic well-being.
• This includes a focused approach to reduce the compliance burden and ensure a streamlined and efficient regulatory environment​​.
• RBI says global financial firms amplify crisis risks. Building large domestic banks is a better option to withstand crises. So allowing more foreign banks may not help.

Maintaining full capital account convertibility:

• The government’s focus has been more on ensuring macro-economic stability, promoting growth, and implementing supply-side reforms rather than specifically on maintaining full capital account convertibility.
• The economic strategies highlighted in the government’s documents include a mix of demand and supply-side measures, fiscal support, and emphasis on supply-side reforms such as deregulation of sectors, simplification of processes, and removal of legacy issues like ‘retrospective tax’.
• These measures are aimed at improving the resilience of the Indian economy and are part of a broader strategy to deal with economic uncertainties​​.

Source:

• https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=1793826
• https://pib.gov.in/PressReleasePage.aspx?PRID=1615349
• https://m.rbi.org.in/Scripts/BS_SpeechesView.aspx?Id=630

Short-term Credit Delivery to the Agriculture Sector:

• The role of District Central Cooperative Banks (DCCBs) in delivering short-term credit to the agriculture sector is significant within the cooperative banking structure.
• DCCBs, along with State Cooperative Banks (StCBs) and Primary Agricultural Credit Societies (PACS), form a three-tier structure that plays a crucial role in providing agricultural credit.
• The cooperative sector, including DCCBs, is integral to agricultural financing, but quantitatively stating that DCCBs deliver more credit compared to others without specific data is not directly supported​​​​.

Funding Primary Agricultural Credit Societies (PACS):

• DCCBs are a critical part of the cooperative credit structure that provides funding to PACS.
• PACS operate at the grassroots level, directly interfacing with farmers and rural communities, and depend on the higher-tier financing provided by DCCBs (and StCBs, indirectly through DCCBs).
• The strengthening and diversification of PACS, as outlined by government initiatives, underscore the importance of DCCBs in supporting these societies​​​​.

A loan system of the World Bank

• This option is incorrect. The Gold Tranche or Reserve Tranche is not related to the loan systems provided by the World Bank.

One of the operations of a Central Bank

• This option is also incorrect. The Gold Tranche has nothing to do with the operations or functions of a country’s Central Bank.

A credit system granted by WTO to its members

• This option is incorrect. The WTO does not provide any credit system called Gold Tranche to its members.

A credit system granted by IMF to its members

• This option is correct. As per the IMF, the Gold Tranche refers to financial resources or credit that the IMF provides to its members.
• As per IMF: “Each member of the Fund is assigned a quota that determines its financial commitment and voting power. A member pays its subscription to the Fund equal to its quota with 25 percent paid in Special Drawing Rights or currencies chosen by the member, and 75 percent paid in its own currency.”
• “The Reserve Tranche is the foreign currency component of a member’s quota, minus Fund holdings of the member’s currency in excess of this Reserve Tranche component.“

Source: https://www.imf.org/external/np/exr/facts/gold.htm

To reduce it by Rs 1,00,000

• This option is incorrect. Withdrawal of cash from a demand deposit account does not directly reduce the aggregate money supply in the economy.

To increase it by Rs 1,00,000

• This option is also incorrect. Only the composition of money supply changes, it does not directly increase the overall money supply.

To increase it by more than Rs 1,00,000

• This option is incorrect as withdrawal does not increase overall money supply.

To leave it unchanged

• This option is correct as per RBI definition of money supply components.
• As per the RBI: “When cash is withdrawn from a bank account, there is a decrease in deposits (a component of money supply), but there is a corresponding increase in cash-in-hand (also a component of money supply).“
• So there is only a shift between deposit money and currency money. The total money supply remains unchanged.

Source: https://mospi.gov.in/102-monetary-and-financial-statistics

Statement 1 is correct.

• RBI states: “The interest coverage ratio gives an indication regarding the debt servicing capacity of the borrower with respect to payment of interest.”
• The interest coverage ratio looks at current year earnings (EBIT) vs current year interest payments. This examines the present earnings cushion to service debt in the same period. A lower ratio indicates higher default risk in near term as earnings may be inadequate to cover interest dues.

Statement 2 is correct.

• RBI states: “A trend analysis of interest coverage ratio would also throw light on the stability or improvement/deterioration in debt servicing capacity over the years.”
• Analyzing interest coverage ratio trend gives insight into debt repayment capacity strengthening or worsening over time. For instance, a declining ratio means business growth has not kept pace with rising interest obligations. This highlights intensifying risks going forward.

Statement 3 is incorrect.

• RBI states: “The higher the ratio, the better is the company’s ability to service its debt.”
• A higher ratio signifies company’s earnings are adequately covering or exceeding interest payments. This allows comfortable servicing of debt.

Source: https://rbi.org.in/Scripts/BS_ViewMasCirculardetails.aspx?id=9908#8

Statement 1 is correct.

• The CPI has a higher weightage for food items compared to the WPI.
• Specifically, food, beverages, and tobacco together have a significant weight in the CPI basket.
• For example, in the CPI-Combined, food items have a weightage of around 48.24%, whereas in the WPI, food articles have a lower weightage of 26.07%.
• This reflects the higher importance given to food items in the consumption basket of individuals, as captured by the CPI​​.

Source: https://www.rbi.org.in/SCRIPTS/PublicationsView.aspx?id=17450

Statement 2 is correct.

• The WPI primarily measures price changes at the wholesale level and focuses on goods only.
• It does not include services, which are a significant part of the consumer expenditure basket.
• On the other hand, the CPI captures the prices of both goods and services, reflecting the actual expenditure pattern of households.
• This is why a quarter of the CPI-combined consists of non-tradable items like services that are not included in the WPI​​.

Source: https://www.rbi.org.in/SCRIPTS/PublicationsView.aspx?id=17450

Statement 3 is incorrect.

• The RBI primarily uses the CPI as its measure of inflation for policy decisions, including the setting of key policy rates.
• The transition to using the CPI as the nominal anchor for monetary policy was formalized in an agreement between the Government of India and the RBI, recognizing CPI-combined inflation as the key measure.
• This shift emphasizes the RBI’s focus on retail inflation in its monetary policy framework, reflecting the direct impact of inflation on consumers​​​​.

Source: https://www.rbi.org.in/Scripts/PublicationsView.aspx?id=21343

Minimum Support Price (MSP):

• The government sets MSP for various crops, including rice, to ensure farmers a minimum profit regardless of market fluctuations.
• This policy aims to encourage farming of certain crops and ensure food security.
• The government procures rice at MSP, influencing its market supply and price​​.

Government’s Trading and Stockpiling:

• The Food Corporation of India (FCI) conducts e-auctions of rice under the Open Market Sale Scheme (Domestic) as part of market intervention to control the price of rice and wheat.
• This action is aimed at checking inflationary trends in prevailing retail prices​​.
• Additionally, the Price Stabilization Fund (PSF) aims to maintain strategic buffer stocks of various commodities, including rice, to discourage hoarding and unscrupulous speculation, thus stabilizing prices​​

Consumer Subsidies:

• The government also provides rice at subsidized rates to consumers under various schemes.
• For instance, the distribution of fortified rice across Government Schemes like the Targeted Public Distribution System (TPDS), Integrated Child Development Services (ICDS), and others, is done to enhance nutrition and ensure affordability of rice to the vulnerable sections of society.
• The entire cost of rice fortification is borne by the Government of India as part of food subsidy​​.

Source: https://pib.gov.in/Pressreleaseshare.aspx?PRID=1814826

Indo-Sri Lanka Trade:

• The trade between India and Sri Lanka has indeed increased over the years, demonstrating consistent growth.
• In 2021, India exported $4.87B to Sri Lanka, with the main exports including refined petroleum, semi-finished iron, and light rubberized knitted fabric.
• This growth in exports from India to Sri Lanka has been at an annualized rate of 10.1% over the last 26 years.
• Conversely, Sri Lanka exported $1B to India, with main exports including animal food, pepper, and special purpose ships, showing an annualized growth rate of 14.4% over the same period​​​​​​.

Source: https://oec.world/en/profile/bilateral-country/ind/partner/lka

https://www.adb.org/publications/deepening-economic-cooperation-between-india-and-sri-lanka

https://diplomatist.com/2020/03/03/india-sri-lanka-trade-relations/

India-Bangladesh Textile Trade:

• Textile and apparel sectors play a significant role in the trade relationship between India and Bangladesh.
• India specializes in the upstream segment, supplying intermediate inputs like silk, cotton, yarn, and fabrics to Bangladesh.
• Bangladesh then utilizes these inputs in its strong downstream final apparel segment, exporting finished goods worldwide, including to India.
• This relationship is bolstered by significant value chain linkages between the two countries, though tariffs, nontariff barriers, and industrial policies in India can inhibit the growth of these linkages​​​​.

Source: https://oec.world/en/profile/bilateral-country/ind/partner/bgd

https://openknowledge.worldbank.org/entities/publication/9bbc6705-0471-5ac4-929d-ab5f887cbc95

Nepal as India’s Largest Trading Partner in South Asia:

• Bangladesh emerges as India’s largest trading partner in South Asia, followed by Sri Lanka and Nepal.
• India’s exports to Bangladesh were significantly higher than its imports, resulting in a substantial trade balance in favor of India.
• Specifically, India exported goods worth approximately $12,203.96 million to Bangladesh, against imports of $2,021.24 million, bringing the total trade to $14,225.17 million and a trade balance of $10,182.68 million in favor of India​​.

Source: https://commerce.gov.in/about-us/divisions/foreign-trade-territorial-division/foreign-trade-south-asia/

• Statement 1 is correct. Commercial Papers (CPs) are indeed short-term, unsecured promissory notes issued at a discount to face value, primarily by corporations to fund their short-term liabilities. They are issued for maturities between a minimum of 7 days and a maximum of up to one year from the date of issue​​.
• Statement 2 is incorrect. Certificates of Deposit (CDs) are actually short-term, negotiable, and interest-bearing financial instruments issued by banks and financial institutions, not specifically by the RBI, and they can be issued to individuals, corporations, companies, trusts, funds, and associations. CDs have a fixed term and are typically intended to be held until maturity, offering higher interest rates than savings accounts​​.
• Statement 3 is correct. Call Money is indeed a form of short-term borrowing and lending among banks and financial institutions, where the funds are borrowed and lent on an overnight basis or for a short period. This is used to maintain liquidity and meet short-term mismatches in funds​​.
• Statement is incorrect. Zero-Coupon Bonds are issued at a discount and do not pay interest (coupon) during their life but are redeemed at their face value at maturity. They can be issued by various entities, not just Scheduled Commercial Banks, and are not limited to short-term maturities nor exclusively issued to corporations​​.

Source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12592

Statement 1 is incorrect.

• While the government does procure cereals, pulses, and oilseeds at MSP, the extent of procurement can vary significantly across different crops and states.
• The procurement is not “unlimited” but is influenced by various factors, including market prices, demand-supply dynamics, and the government’s strategic stock requirements.
• The procurement is also concentrated in certain states, with significant variations in the quantity procured across the country.
• For instance, rice and wheat have historically seen higher levels of procurement compared to other crops, and procurement levels are notably higher in states like Punjab, Haryana, and Madhya Pradesh​​.

Source: https://prsindia.org/theprsblog/msp-and-public-procurement

Statement is incorrect.

• The MSP is intended to act as a safety net to protect farmers against excessive market price fluctuations, ensuring them a minimum profit for their harvest.
• However, the MSP is not designed to cap market prices or prevent them from rising above the MSP level.
• Market prices can and do rise above the MSP, influenced by market demand, supply constraints, and other economic factors. The government or its agencies undertake procurement at MSP primarily when market prices fall below the MSP to support farmers’ incomes​​​​.

Source: https://www.myscheme.gov.in/schemes/pss

It is the investment through capital instruments essentially in a listed company.

• FDI is allowed both in listed and unlisted companies in India.
• As per DPIIT’s Consolidated FDI Policy guidelines, FDI is permitted under automatic route in most sectors without approval, for both listed and unlisted companies.

Source: https://www.makeinindia.com/sites/default/files/2020-06/D-sectors_l_0.pdf

It is a largely non-debt creating capital flow.

• As per DPIIT definition, FDI means investment by non-resident entity into Indian companies by way of equity instruments.
• It involves purchase of stakes and equities into companies and establishing a lasting interest.
• Hence it does not lead to creation of debt that requires repayment of principal or interest.

Source: https://dpiit.gov.in/sites/default/files/FDI-PolicyCircular-2020-29October2020_0.pdf

It is the investment which involves debt-servicing.

• As explained above, FDI does not lead to creation of debt and hence does not involve debt-servicing obligations.

It is the investment made by foreign institutional investors in the Government securities.

• Foreign investments in Indian debt instruments like Government securities, corporate bonds etc. are called Foreign Portfolio Investments (FPI).
• FPIs involve only financial assets, whereas FDIs involve direct business interest and controlling ownership.

Crude oil – According to the U.S. Energy Information Administration (EIA), “West Texas Intermediate (WTI) crude oil is of very high quality and is considered a sweet crude oil”. It is a specific grade of crude oil used as a benchmark for oil pricing.

Source: https://www.eia.gov/energyexplained/oil-and-petroleum-products/prices-and-outlook.php

Bullion – Bullion refers to gold and silver in bar or ingot form. It does not refer to a type of oil. According to the EIA glossary, “Bullion refers to refined gold and silver in bar or ingot form.”

Rare earth elements – Rare earth elements are 17 metallic elements used in various technologies. According to the US Geological Survey, “The rare earth elements are a group of 17 elements with unique chemical properties that are key ingredients in modern technologies.” No relation to oil.

Source: https://www.usgs.gov/news/interior-releases-2018-s-final-list-35-minerals-deemed-critical-us-national-security-and

Uranium – Uranium is a heavy metal used as fuel in nuclear power plants. As per the EIA, “Uranium is a radioactive element used to produce fuel for nuclear power plants.” It is not related to crude oil.

Source: https://www.eia.gov/energyexplained/nuclear/uss-nuclear-industry.php

• Statement 1 is correct: Quantitative restrictions on imports by foreign investors are prohibited.

The TRIMS agreement explicitly “prohibits investment measures that restrict imports to an amount related to the level of local production”. This includes “measures which restrict a firm’s ability to import in relation to a certain amount of local content”

Source: https://www.wto.org/english/docs_e/legal_e/18-trims.pdf

• Statement 2 is incorrect: They apply to investment measures related to trade in both goods and services.

The TRIMS agreement applies only to trade in goods. As per the WTO, TRIMS:”does not apply to measures that concern services”

Source: https://www.wto.org/english/tratop_e/invest_e/invest_info_e.htm

• Statement 3 is correct: They are not concerned with the regulation of foreign investment.

As per the WTO, “The TRIMS Agreement does not apply to measures that are not trade-related investment measures, such as general conditions for foreign direct investment”

The Inter-Creditor Agreement (ICA) framework was introduced by the Reserve Bank of India in 2018 to streamline the resolution process for stressed assets.

Key points regarding the ICA framework:

1. It aimed to resolve stressed loans of Rs 50 crore or above under a consortium lending arrangement.
2. It tried to speed up the resolution process through a majority decision among lenders instead of requiring 100% approval.
3. The goal was to resolve huge bad loans and recover capital locked in non-performing assets.

The World Bank’s ‘Ease of Doing Business Index’ does not include a sub-index for “Maintenance of law and order”.

The index captures regulations that impact business activity in a country across 10 key indicators:

1. Starting a business
2. Dealing with construction permits
3. Getting electricity
4. Registering property
5. Getting credit
6. Protecting minority investors
7. Paying taxes
8. Trading across borders
9. Enforcing contracts
10. Resolving insolvency

While law and order impacts business environment, it is not a specific regulatory measure. The existing indicators directly measure aspects of business regulation.

• The Banks Board Bureau (BBB) is an autonomous body of the Government of India.
• One of the key functions of the BBB is to recommend selection and appointment of Chairman and Managing Directors of public sector banks.
• The BBB recommends names to the Appointments Committee of the Cabinet (ACC) which takes the final decision.

Banks Board Bureau (BBB):

As mentioned earlier, the BBB recommends names of candidates to the ACC for appointment of PSB Chairmen. This has been its mandate since its establishment in 2016 for PSB reforms.

Reserve Bank of India (RBI):

• RBI is the central bank and banking regulator. It does not directly appoint the chairpersons of public sector banks.

Union Finance Ministry:

• While the Finance Ministry oversees functioning of PSBs, appointments are based on BBB recommendations as part of autonomous process.

Management of the concerned bank:

• The bank management does not select its own chairman. Appointments follow due selection process via BBB.

Transportation cost only:

• Transportation is only one component of economic cost to FCI. As per the FCI Annual Report, it also incurs costs on storage, handling, interest etc.

Interest cost only:

• While interest cost is part of economic costs, FCI also incurs major operational expenditures like handling, storage and distribution where substantial public resources are utilized.

Procurement incidentals and distribution costs:

• As per the latest FCI Annual Report, after MSP its major expenditures are on procurement incidentals and distribution costs like loading, unloading, packaging etc. These reflect key operational costs.

Procurement incidentals and godown charges:

• Godown/storage charges are separate from incidentals as per FCI expenditure accounting norms.

The proportion of literates in the population.

• It relates more closely to human capital, which encompasses the skills, knowledge, and experience possessed by individuals, rather than social capital which is about relationships and trust within a society.

The stock of its buildings, other infrastructure, and machines

• It represents physical capital. Physical capital consists of tangible, man-made objects that facilitate economic production.

The size of the population in the working age group

• It could be considered a component of demographic or human capital, focusing on the potential labor force, rather than the social and relational aspects that define social capital.

The level of mutual trust and harmony in the society

• It directly correlates with the concept of social capital. Social capital revolves around interconnected networks of relationships, levels of trust, and resources or benefits gained and transferred through social ties and participation. High levels of trust among network participants foster a sense of mutual obligation and allow them to be more effective in pursuing shared objectives​​.

Social capital is of significant importance for societal well-being, influencing employment levels in communities, academic performance, physical health, economic growth, and rates of crime in communities. It is enhanced through both formal social participation, like political or religious involvement, and informal social ties, such as interactions with family, friends, and neighbors​​.

Social capital is vital for the smooth functioning and overall well-being of a society, highlighting the importance of mutual trust and harmony as its core elements.

The ceiling laws were aimed at family holdings and not individual holdings:

• Ceiling laws, part of the land reform efforts, were designed to limit the maximum amount of land that could be owned by individuals or families.
• These laws aimed to redistribute surplus land above the ceiling to landless and marginal farmers.
• The implementation varied across states, with some focusing on individual limits while others considered family holdings as the unit for applying ceilings​​​​.

The major aim of land reforms was providing agricultural land to all the landless:

• This is one of the key objectives of land reforms, which was to redistribute land to the landless and marginal farmers to ensure equitable access to land resources.
• The aim was to address rural poverty and improve socio-economic conditions for the rural poor​​​​.

It resulted in cultivation of cash crops as a predominant form of cultivation:

• While land reforms aimed to redistribute land and improve agricultural productivity, they were not specifically designed to promote the cultivation of cash crops.
• The impact on the type of crops cultivated would vary based on multiple factors, including regional agricultural practices and market demands​​.

Land reforms permitted no exemptions to the ceiling limits:

• In practice, there were exemptions and variations in how ceiling laws were implemented across different states.
• Some types of land or uses were exempt from these ceilings, and enforcement varied, which sometimes allowed landowners to retain or legally reclassify land to avoid redistribution​​​​.

Statement 1 is correct. Purchasing power parity exchange rates are calculated by comparing prices of a standardized basket of commonly consumed goods across countries. This helps generate parity benchmarks to compare real income levels.

Statement 2 is Incorrect. As per latest World Bank data, India has become the 3rd largest economy in terms of Gross Domestic Product measured through purchasing power parity valuation of country currencies.

Poverty Rates:

• Poverty rates refer to the percentage of population living below the predefined poverty line in that state.
• Poverty rates themselves do not determine the poverty lines. They are the outcome based on the benchmark.
• Hence, variation in poverty rates does not define state-level differences in poverty thresholds.

Price Levels:

• Differing price levels of commodities across states determine the local costs faced by representative low consumption households specific to those states.
• State-specific price indices shape differences in minimum living standards and expenditure abilities. This is the primary factor causing differential poverty line benchmarks.

Gross State Product:

• While GSP does indicate varying development levels, poverty lines rely directly on household consumption patterns, not aggregate income metrics like GSP.
• So GSDP itself does not directly necessitate separate state-level poverty lines.

Public Distribution System:

• Quality, efficiency and scope of PDS also does not alter methodology for calculating benchmark poverty thresholds across states.

Curbing Imports/Promoting Exports:

• RBI directly intervenes in forex market to reduce volatility in rupee’s value in line with trade fundamentals.
• Curbing non-essential imports and promoting exports improves trade balance and rupee stability.

Encouraging Rupee Denominated Masala Bonds:

• RBI takes steps to allow Indian firms to raise overseas funds through masala bonds denominated in rupees instead of dollars, reducing dollar demand.

Easing ECB Norms:

• RBI periodically eases external commercial borrowing guidelines to enable higher forex inflows to boost liquidity and reduce volatility.

Expansionary Monetary Policy:

• As per RBI intervention framework, this type of policy which often weakens currency is NOT used to defend a sliding rupee.

Increase in the Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR):

• Both CRR and SLR are regulatory tools used by central banks to control the amount of funds that banks can lend.
• An increase in either ratio requires banks to hold more funds as reserves, thereby reducing the portion of deposits that can be lent out.
• This decrease the money multiplier because it limits the banking sector’s capacity to create additional money through lending​​​​.

Increase in the Banking Habit of the Population:

• When more people choose to deposit their money in banks rather than holding it in cash, the base for banks to lend and create additional money increases.
• This behavior can lead to an increase in the money multiplier because it enhances the capacity of banks to lend more, thus potentially increasing the overall money supply in the economy​​.

Increase in the Population of the Country:

• While not directly influencing the money multiplier, an increase in the population could indirectly affect it if the growing population leads to increased deposits in the banking system.
• However, the direct relationship is more nuanced and depends on other factors such as the banking habits of the population, economic policies, and the regulatory environment​​.

Advances:

• These refer to the loans and credit facilities sanctioned and disbursed to the bank’s customers. For example – home loans, business loans, credit cards etc.
• It represents the bank’s core asset that earns interest income over the tenure of the loans. Hence it’s a key income-generating asset on the balance sheet.

Deposits:

• These represent the deposits like saving accounts, current accounts, fixed deposits etc maintained by customers at the bank.
• The bank owes this money to depositors. Hence, it’s a financial obligation or liability – not an asset earning income for the bank.

Investments:

• This includes investments made by the bank in securities, bonds, shares, debentures and other financial market instruments from its capital and deposits.
• These earn interest, dividend or trading gains for the bank. Hence, it’s an asset.

Money at Call/Short Notice:

• This refers to short term lending by the bank to other banks for tenures like overnight borrowing.
• The borrowing bank pays interest on such lending. So, it’s an earning asset for the lending bank.

Most of India’s external debt is owed by governmental entities.

• According to the Reserve Bank of India, the government and central bank portion of the external debt is a significant but not the majority part of the total external debt.
• The government debt and central bank debt as distinct segments, with a considerable portion of the external debt also attributed to non-governmental sectors such as deposit-taking corporations (excluding the central bank), other financial and non-financial corporations, and direct intercompany lending​​​​.
• This indicates that while the government is a major borrower, the majority of external debt is also significantly contributed by non-government entities.

All of India’s external debt is denominated in US dollars.

• India’s external debt is not exclusively in US dollars; it is held in a mix of currencies.
• The diversification across different currencies like the US dollar, Indian rupee, Japanese yen, Special Drawing Rights (SDRs), and Euros is a strategic approach to mitigate currency exchange risks.
• The US dollar does constitute a significant portion of the external debt, but a substantial part is also in other currencies​​.

Certificate of Deposit:

• A debt instrument issued by banks and financial institutions to raise funds for short term. Does not allow stock market participation.

Commercial Paper:

• An unsecured money market instrument issued by firms to meet short term credit needs. Not related to stock market investment.

Promissory Note:

• A financial instrument involving an unconditional promise by one party to another for payment of a definite sum. Does not facilitate stock investment.

Participatory Note:

As per SEBI, these are “Offshore Derivative Instruments” issued by registered foreign portfolio investors (FPIs) to overseas investors to facilitate participation in Indian stocks/derivatives without direct registration.

IT Sector Earnings:

• India’s IT service exports have steadily risen to around $150 billion per year. This provides a large stream of USD and other foreign currency into the economy.
• It reduces the dependence on volatile foreign portfolio flows that are riskier from a currency stability perspective.
• The increased forex reserves from IT export earnings make India less susceptible to the risk of a potential currency crash.

Government Expenditure:

• Higher fiscal spending by the government drives up imports, widens current account deficit (CAD) and leads to depletion of forex reserves, which precipitate a currency crash.
• As fiscal deficit rises, foreign investors often withdraw capital from India wary of depreciation risks. This compounds currency crash risks.

Remittances from Abroad:

• India receives over $80 billion in worker remittances annually from Indians residing overseas.
• This leads to a positive impact on India’s balance of payment position and forex reserves, reducing dependence on volatile FPI inflows.
• It provides a buffer against sudden capital outflows that make the rupee more resilient when global risk sentiment worsens.

Statement 1:

• The 2nd Five Year Plan focused on heavy and basic industries like steel, chemicals, machinery.
• The aim was to substitute imports and build indigenous industrial capacity through state intervention.
• It marked a shift from consumer goods of 1st Plan, indicating the “determined thrust”.

Statement 2:

• The 4th Plan document stated its goal was to “attack economic and social inequality”.
• It recognized the unequal distribution of incomes was a serious issue needing redressal.
• Policies included land reforms, curb on monopolies and more rural spending.

Statement 3:

• The nationalization of major banks took place in 1969 and banking reforms were added in 4th and subsequent Plans.
• Hence financial sector was NOT included for the first time in the 5th Plan. It was already an element of prior Plans too.

Formation:

• AIIB was founded in 2016 to support infrastructure development in Asia.

Members:

• It has 103 approved members globally from within and outside Asia. Major members include China, India, Russia, South Korea, UK, Germany etc.

Shareholding:

• China holds highest share of 26.61%, making it the largest shareholder.
• India has 7.60% voting shares, and is the 2nd biggest shareholder.

Headquarters:

• Located in Beijing, China.

Focus Areas:

• Sustainable infrastructure like transport, energy, urban development etc.
• Connectivity and regional integration among Asian economies.

Total Funds:

• Has $100 billion in capital to fund infrastructure projects.

Capital Adequacy Ratio (CAR) is the amount that banks have to maintain in the form of their own funds to offset any loss that banks incur if the account-holders fail to repay dues.

• This statement is correct. CAR refers to the minimum capital as a percentage of risk-weighted assets that banks are required to hold. It is set by the Reserve Bank of India (RBI).
• CAR ensures that banks have sufficient capital buffers to absorb potential losses from their lending and investing activities without becoming insolvent.
• The capital acts as a cushion against credit, market and operational risks. If account holders default on their loans, resulting in losses for the bank, the capital helps absorb these losses so banks can continue functioning.

CAR is decided by each individual bank.

• This statement is incorrect. CAR is not determined by individual banks.
• RBI sets the CAR requirements that apply uniformly to all commercial banks. It is currently mandated at 9%.
• Banks do not have autonomy in deciding their own CAR. They have to comply with RBI regulations and maintain the prescribed CAR or face supervisory action.

The opportunity cost is zero.

• This option is incorrect because even if a service is provided for free by the government, there are still costs associated with producing and delivering that service.
• These costs represent the alternative uses of the government’s resources that are foregone in order to provide the service​​​​.

The opportunity cost is ignored.

• While it may seem that the opportunity cost is ignored in decision-making processes, it is not accurate.
• Governments consider the benefits and costs of different allocations of resources, including the opportunity costs of public projects​​.

The opportunity cost is transferred from the consumers of the product to the tax-paying public.

• This option is correct because when the government provides a service for free, it uses tax revenue to cover the costs.
• The resources used for the service could have been used for other purposes, representing an opportunity cost borne by the tax-paying public, not the direct consumers of the service​​​​.

The opportunity cost is transferred from the consumers of the product to the Government.

• This option is incorrect because while the government bears the immediate financial cost of providing the service, the broader opportunity cost is ultimately borne by the society or tax-paying public through the use of public funds that could have been allocated elsewhere​​​​.

Agricultural growth slower than industry:

• This, by itself, does not negate the benefits of GDP growth in raising incomes and living standards. It is a natural outcome of industrialization.

Industrial growth slower than agriculture:

• This can constrain advance of manufacturing sector which provides more income growth opportunities. But overall GDP and income growth can still improve living standards.

Poverty and unemployment increase:

• As per Amartya Sen’s and other economists’ works, if GDP growth is accompanied by rise in poverty and joblessness, it clearly does NOT signify improvement in economic development and human capabilities.

Imports outgrowing exports:

• While some imports are essential for growth, if net exports are highly negative it indicates weak domestic production systems to meet local demand. This reduces income flows within the economy.

Human capital formation refers to the process of improving the qualifications, attributes, skills, knowledge, and health of the labor force, which enhances its productivity and thus contributes to the economic growth of a country. Let’s analyze the statements based on this understanding:

• Individuals of a country to accumulate more capital: This statement not correct in the context of human capital formation. The accumulation of more capital typically refers to physical or financial capital rather than human capital. Human capital formation is more about enhancing the capabilities and productivity of individuals rather than directly increasing capital in its traditional sense.
• Increasing the knowledge, skill levels, and capacities of the people of the country: This statement is correct about the concept of human capital formation. It involves investing in education, training, and health care to improve the workforce’s overall productivity and efficiency.
• Accumulation of tangible wealth: Tangible wealth, like land, buildings, or machinery, is not directly related to human capital formation. While investments in human capital can lead to broader economic growth and potentially increase tangible wealth indirectly.
• Accumulation of intangible wealth: This statement is correct. Intangible wealth, such as knowledge, skills, and health, directly results from investments in education, training, and healthcare, which are key components of human capital.

The Reserve Bank of India manages and services Government of India Securities but not any State Government Securities.

• This statement is incorrect.
• The RBI indeed manages and services both Central and State Government securities.
• The RBI, as an agent of the Government, manages and services these securities through its public debt offices located in various places.
• Additionally, it’s specified that the RBI undertakes receipts and payments for the Central Government and manages the public debt of the Union, including transactions for State Governments under agreements with them.
• This includes issuing both treasury bills and bonds or dated securities on behalf of the Central Government while the State Governments issue only bonds or dated securities, which are called the State Development Loans (SDLs)​​​​.

Treasury bills are issued by the Government of India and there are no treasury bills issued by the State Governments.

• This statement is correct.
• Treasury bills, as short-term debt instruments, are issued exclusively by the Government of India. They are utilized to meet short-term liquidity needs of the government and are not issued by State Governments.
• Treasury bills are issued in three tenors: 91 days, 182 days, and 364 days, and they are zero-coupon securities, meaning they pay no interest but are issued at a discount and redeemed at face value at maturity​​.

Treasury bills are issued at a discount from the par value.

• This statement is correct.
• Treasury bills are indeed issued at a discount to their face value and are redeemed at the face value upon maturity. The difference between the issue price and the face value represents the earnings for the investors. This method of issuing at a discount effectively makes treasury bills a zero-coupon security​

• Weak administrative machinery and illiteracy can indeed impede economic growth and capital formation efficiency, but they do not directly relate to the capital-output ratio’s role in mediating the relationship between capital formation and output increase.
• High population density could lead to various economic challenges, including pressure on resources and infrastructure, but its direct impact on capital formation translating into output is more complex and involves factors such as labor market dynamics, which is not specifically about the capital-output ratio.
• High capital-output ratio directly pertains to the efficiency of converting capital into output. A high capital-output ratio signifies that a significant amount of capital is needed to produce a small increase in output, which can result in lower returns on investment and potentially slower economic growth, as it indicates that investments are not being efficiently translated into additional output​.

The Cabinet Committee on Economic Affairs (CCEA) has approved the Minimum Support Price (MSP) for several crops for both the Rabi and Kharif seasons for the years 2023-24 and 2024-25.

For the Rabi season 2024-25, MSPs have been approved for the following crops:

• Wheat
• Barley
• Gram
• Lentil (Masur)
• Rapeseed & Mustard
• Safflower​​.

For the Kharif season 2023-24, MSPs have been approved for these crops:

• Paddy (Common and Grade A)
• Jowar (Hybrid and Maldandi)
• Bajra
• Ragi
• Maize
• Tur (Arhar)
• Moong
• Urad
• Groundnut
• Sunflower Seed
• Soybean (Yellow)
• Sesamum
• Nigerseed
• Cotton (Medium Staple and Long Staple)​

Capital infusion into public sector banks by the Government of India has steadily increased in the last decade.

• It is incorrect. As per RBI reports on Trends and Progress of Banking in India, the capital infusion into public sector banks has fluctuated year-on-year based on capital and regulatory requirements. It has not seen a steady increase.

To put the public sector banks in order, the merger of associate banks with the parent State Bank of India has been affected.

• It is correct. As per RBI notifications, the merger of 5 associates and Bharatiya Mahila Bank with SBI was effected in 2017 to consolidate the banking operations and improve efficiency.

Merchant Discount Rate (MDR) refers to the fee charged to a merchant by a bank for providing debit and credit card payment facilities. It is usually a percentage of the transaction amount that the merchant pays the bank.

A) The incentive given by a bank to a merchant for accepting payments through debit cards pertaining to that bank. (Incorrect)

• As per RBI, Merchant Discount Rate (MDR) is a charge, not an incentive to the merchants.

B) The amount paid back by banks to their customers when they use debit cards for financial transactions for purchasing goods or services. (Incorrect)

• Banks do not pay any amount back to customers specifically for using debit cards for purchases as per RBI.

C) The charge to a merchant by a bank for accepting payments from his customers through the bank’s debit cards.

• As per RBI notification, MDR is a fee charged to merchants by the bank for providing debit/credit card payment facility when customers use cards to make purchases.

D) The incentive given by the Government to merchants for promoting digital payments by their customers through Point of Sale (PoS) machines and debit cards. (Incorrect)

• MDR is not an incentive by the Government. It is charged by banks.

Cereal grains hulled – Hulled cereal grains are exempt from GST, indicating that basic food grains that have undergone minimal processing to remove the outer husk or shell without further processing are not subject to GST​​​​.

Chicken eggs cooked – While specific details on “cooked” chicken eggs are not mentioned in the exemption lists directly, fresh eggs and other primary food products are typically exempt from GST. The exemption generally applies to unprocessed or minimally processed food items​​. The Third Schedule of exemption Notification covers “all types of eggs”.

Fish processed and canned – Processed and canned fish do not specifically appear on the exemption lists; exemptions are more common for fresh or unprocessed food items. Processed foods, including canned items, usually attract GST at various rates depending on the processing involved​​. “Fish processed, cured/ frozen/ packed” attract 5% GST.

Newspapers containing advertising material – Newspapers, even those containing advertising material, are exempt from GST. This exemption supports the dissemination of information and encourages reading and literacy​​.

It is introduced as a part of the Income Tax Act.

• This statement is incorrect. The equalization levy was introduced in Budget 2016 as a separate, standalone chapter in the Finance Act, not as part of the Income Tax Act.

Non-resident entities that offer advertisement services in India can claim a tax credit in their home country under the “Double Taxation Avoidance Agreements”.

• This statement is also incorrect. The equalization levy is not covered under Double Taxation Avoidance Agreements that India has with other countries. Therefore, foreign companies cannot claim a tax credit for this levy in their home country.

Debt to GDP Ratio Recommendation by FRBM Review Committee:

• The Fiscal Responsibility and Budget Management (FRBM) Review Committee, led by N.K. Singh, indeed recommended a combined debt to GDP ratio of 60% for the general (combined) government by 2023, which includes 40% for the Central Government and 20% for the State Governments.
• This target was set to ensure fiscal consolidation and to anchor fiscal policy in India towards long-term sustainability.
• The committee’s recommendations are intended to guide India’s fiscal discipline efforts by setting specific targets for debt and deficits, ensuring that fiscal policies are conducted within prudent limits​​​​.

Central Government vs. State Governments’ Domestic Liabilities:

• The correct distribution, as recommended, is a 40% debt to GDP ratio for the Central Government and 20% for the State Governments, not 21% and 49% respectively.
• This was part of the committee’s broader recommendations for achieving fiscal sustainability and reducing the overall debt burden of the country​​.

Mandatory Central Government Consent for State Borrowing:

•  According to Article 293(3) of the Constitution, a state cannot raise any loan without the consent of the Government of India if there is still outstanding any part of a loan made to the state by the Government of India or in respect of which a guarantee has been given by the Government of India.​

The eligibility criteria for joining the National Pension System (NPS) are as follows:

All Citizen Model:

• Any citizen of India, whether resident, non-resident, or an Overseas Citizen of India (OCI), can join the NPS, provided they are between 18 and 70 years of age at the time of submitting the application.
• They must comply with the Know Your Customer (KYC) norms as per the Subscriber Registration Form (SRF). Hindu Undivided Families (HUFs) and Persons of Indian Origin (PIOs) are not eligible to subscribe to NPS​​​​.

Central Government/CABs:

• The Central Government introduced NPS for all Central Government employees (excluding Armed Forces) from January 1, 2004.
• Thus, all Central Government employees joining on or after January 1, 2004, are mandatorily covered under the NPS scheme.
• This is also extended to the employees of Central Autonomous Bodies (CABs) joining on or after January 1, 2004​​.

State Governments/SABs:

• Employees of State Governments or Union Territories that have adopted NPS are covered under this scheme, as well as employees of State Autonomous Bodies that have adopted NPS​​.

Corporate Model:

• This is applicable if an individual works in a corporate entity that has adopted the NPS scheme. The eligibility criteria include being a citizen of India (resident, non-resident, or OCI), aged between 18 and 70 years, and compliance with KYC norms.
• This model is available to various entities, including companies, cooperative societies, public sector enterprises, partnership firms, LLPs, proprietary concerns, trusts, societies, foreign companies, and international organizations operating in India​​.

• The Bureau of Indian Standards (BIS) does require BIS-ISI certification for automotive tyres and tubes. This certification is obligatory under the Pneumatic Tyres and Tubes for Automotive Vehicles (Quality Control) Order, 2009, as per the Ministry of Commerce and Industry, Department for Promotion of Industrial Policy and Promotion (LR Section) after consulting the Bureau of Indian Standards. Manufacturers of automotive vehicles – tubes for pneumatic tyres are obligated to obtain ISI Mark Certification​​​​​​.
• AGMARK is not a quality Certification Mark issued by the Food and Agriculture Organisation (FAO). Instead, it is a certification mark in India used on agricultural products to assure quality. AGMARK is managed by the Directorate of Marketing and Inspection, an agency of the Government of India under the Ministry of Agriculture.

• Pan-India Electronic Trading Portal for Agricultural Commodities: e-NAM is indeed a pan-India electronic trading portal. It networks the existing Agricultural Produce Market Committee (APMC) mandis to create a unified national market for agricultural commodities​​​​.
• Access to Nationwide Market and Better Price Realization: The scheme provides farmers with access to a nationwide market, enabling them to sell their produce to buyers across India. It also facilitates better price discovery through a transparent auction process based on the quality of the produce, thereby ensuring that farmers receive prices commensurate with the quality of their produce​​​

The Scheme for Sustainable Structuring of Stressed Assets (S4A) was introduced by the Reserve Bank of India (RBI) in 2016 as part of a broader effort to tackle the issue of non-performing assets (NPAs) in the Indian banking system. The primary goal of the S4A was to help resolve the issue of high levels of stressed assets in banks’ balance sheets, especially those arising from large corporate borrowers.

Background and Key Features of S4A:

• Rising NPAs in Indian Banks: Before the introduction of S4A, Indian banks, particularly public sector banks, were grappling with a rising tide of NPAs. This was largely due to slowdown in certain sectors of the economy and some instances of financial mismanagement in big corporate entities.
• Objective: The S4A aimed to ensure the long-term viability of stressed borrowers with a sustainable portion of debt, and provide banks with an avenue for recovering their loans.
• Eligibility Criteria: The scheme was applicable to projects that had started commercial operations and where the total exposure of all institutional lenders in the account was more than ₹500 crore. Moreover, the scheme was intended for those cases where the stress was due to operational or financial difficulties of the corporate borrower, rather than any fraudulent activity.
• Debt Restructuring: Under S4A, banks were allowed to bifurcate the existing debt of stressed companies into ‘sustainable’ and ‘unsustainable’. The sustainable portion was that part of the debt which could be serviced by the company even in its stressed condition, while the unsustainable part was the portion that could not be serviced.
• Conversion into Equity Instruments: Banks were given the option to convert the unsustainable portion of the debt into equity or equity-like instruments. This was intended to give banks a stake in the future upside of the company’s performance while easing the debt burden on the company.
• Operational and Financial Flexibility: The scheme provided operational and financial flexibility to the stressed company, enabling it to continue its operations and potentially return to profitability.

• To supply credit to small business units: This is one of the primary objectives of Small Finance Banks. They are aimed at providing financial services to small business units, small and marginal farmers, micro and small industries, and other unorganized sector entities, which are often underserved by traditional banks.
• To supply credit to small and marginal farmers: This is also correct. Small Finance Banks are specifically tasked with providing financial services to small and marginal farmers, among others, who may not have access to adequate banking services.
• To encourage young entrepreneurs to set up business particularly in rural areas: While this is a desirable outcome, it is not explicitly stated as a primary objective of Small Finance Banks. The main focus of SFBs is more on providing access to financial services to underserved sections of the society, which may indirectly encourage entrepreneurship.

Share of agriculture in GDP – This has declined not increased after liberalization, as India shifted focus to industry and services. The share of GDP from agriculture fell from around 30% in 1990 to less than 20% today. Hence this statement is incorrect.

Share of India’s exports in world trade – India opened up its protected economy in 1991. Export restrictions got reduced, which increased India’s trade competitiveness globally. Its share in global merchandise exports thus doubled from 0.5% in 1990 to over 1% by 2010. So statement 2 is correct.

FDI inflows increased – Economic reforms and easing of foreign investment rules led to a massive increase in annual FDI inflows, set to touch $70-80 billion in 2022, up from basically zero before 1991. Hence statement 3 is correct.

Forex reserves increased – Due to robust capital account inflows, India built up its foreign exchange reserves substantially from less than $1 billion in 1990 to over $500 billion presently. So statement 4 is correct.

It will replace multiple taxes collected by multiple authorities and will thus create a single market in India:

• This statement is correct. The implementation of the Goods and Services Tax (GST) in India replaced a myriad of indirect taxes such as VAT, service tax, excise duty, etc., with a single unified tax system. This change simplified the tax structure, reduced the complexity of tax compliance, and helped in creating a more unified national market.

It will drastically reduce the ‘Current Account Deficit’ of India and will enable it to increase its foreign exchange reserves:

• This statement is incorrect. While GST can potentially improve tax compliance and revenue collections, its direct impact on the Current Account Deficit (CAD) is not as straightforward. The CAD is influenced by various factors including trade balance, external debts, and foreign exchange inflows and outflows. GST primarily affects domestic taxation and may not have a significant direct impact on the CAD or foreign exchange reserves.

It will enormously increase the growth and size of economy of India and will enable it to overtake China in the near future:

• This statement cannot be stated as a direct consequence of implementing GST. While GST can contribute to economic efficiency and potentially support growth by creating a more streamlined tax system, predicting that it will enable India to overtake China’s economy in the near future is speculative and depends on many other economic factors and policies.

Tax revenue as a percent of GDP of India:

• The tax-to-GDP ratio in India has improved from 10.7% in BE 2022-23 to 11.1% in RE 2022-23 and BE 2023-24​​.
• However, India’s tax-to-GDP ratio is significantly lower compared to some similar-sized economies. For instance, in FY 2021–22, India’s tax-to-GDP ratio stood at just 11.7%, with direct taxes contributing 6.1% and indirect taxes the remaining 5.6%​​.
• While there has been an improvement in the tax-to-GDP ratio, it is important to note that the ratio has not been consistently increasing over the last decade. The ratio has fluctuated over the years, with improvements seen in recent years due to factors such as effective data-sharing between tax authorities and tightened compliance monitoring, which have contributed to robust GST collections​​.

Fiscal deficit as a percent of GDP of India:

• The fiscal deficit is estimated to be 5.9% of GDP in BE 2023-24​​.
• The government is on a path of fiscal consolidation, intending to bring the fiscal deficit below 4.5% of GDP by 2025-26​​.
• The revised estimate of the fiscal deficit is 6.4% of GDP in RE 2022-23​​.
• The fiscal deficit as a percent of GDP has seen significant fluctuations over the last decade, particularly due to the impact of the COVID-19 pandemic and other economic challenges. The government has been focusing on reducing this deficit in recent years.

The money which is tendered in courts of law to defray the fee of legal cases.

• This refers to money offered to pay court fees/fines, but has nothing to do with legal tender money. Court payments and legal tender are separate concepts. Hence this is incorrect.

The money which a creditor is under compulsion to accept in settlement of his claims.

• Legal tender refers to money that by law must be accepted as payment for debts or else the debt is no longer considered owed. It is money that a creditor is mandated to accept when offered as payment by a debtor.

• This means if you owe someone money, like a credit card bill or a loan, the entity you owe money to must accept the legal tender money you provide. They cannot refuse it as a valid form of repayment. This compulsion on creditors is the key aspect that defines what constitutes legal tender money.

The bank money in the form of cheques, drafts, bills of exchange, etc.

• While these are forms of bank money or payment instruments, things like cheques, drafts etc. are typically NOT considered legal tender money.

The metallic money in circulation in a country.

• Legal tender can include metallic/coin money but is not limited to just this. Paper currency is also a form of legal tender. So this definition is incomplete.

The ‘Prohibition of Benami Property Transactions Act, 1988 (PBPT Act)’ was enacted in India to combat benami transactions.

1. A property transaction is not treated as a benami transaction if the owner of the property is not aware of the transaction: This statement is incorrect. A benami transaction typically involves a situation where a property is bought by an individual (the benamidar) but is held for the benefit of someone else who has provided the payment (the beneficial owner). The knowledge or awareness of the owner of the property is not a determining factor in whether a transaction is classified as benami. A transaction can be considered benami even if the owner of the property is unaware, as long as the property is held by someone else and paid for by another person.
2. Properties held benami are liable for confiscation by the Government: This statement is correct. Under the PBPT Act, properties held in a benami transaction are liable to be confiscated by the government. The Act aims to curb illegal transactions and prevent tax evasion by holding properties under fictitious names or by individuals who are not the actual beneficiaries.
3. The Act provides for three authorities for investigations but does not provide for any appellate mechanism: This statement is incorrect. The PBPT Act does provide for appellate mechanisms. The Act sets up authorities at various levels for the investigation of benami transactions, including the Initiating Officer, the Approving Authority, and the Administrator. Additionally, it provides for an appellate mechanism in the form of the Adjudicating Authority and the Appellate Tribunal for hearing appeals against the decisions of these officers.

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has specific roles and a defined composition.

1. It decides the RBI’s benchmark interest rates: This statement is correct. The primary function of the MPC is to determine the policy interest rate (repo rate) required to achieve the inflation target set by the Government of India.
2. It is a 12-member body including the Governor of RBI and is reconstituted every year: This statement is incorrect. The MPC consists of six members – three officials of the Reserve Bank of India and three external members nominated by the Government of India. The RBI Governor is the ex-officio Chairperson of the MPC. It is not a 12-member body, nor is it reconstituted every year.
3. It functions under the chairmanship of the Union Finance Minister: This statement is incorrect. The MPC does not function under the chairmanship of the Union Finance Minister. As mentioned earlier, the Governor of the RBI is the ex-officio Chairperson of the MPC.

The National Nutrition Mission, also known as Poshan Abhiyaan, aims to improve the nutritional health of children, adolescents, lactating mothers, and pregnant women. The key objectives of the National Nutrition Mission include:

1. Prevention and reduction of stunted growth and under-nourishment among children between 0 to 6 years by 2% per year.
2. Reduction of anaemia among children aged between 6 – 59 months and women and adolescent females aged between 15 – 49 years by 3%.
3. Reduction of low birth weight of a baby by 2%​​​​​​.

While consumption of nutritious cereals and food is encouraged, the promotion of specific food items like millets, eggs etc. is not an explicitly stated goal.

key provisions of the Trade Disputes Act of 1929:

• Establishment of Tribunals:
  • The Act made provisions for the establishment of Courts of Inquiry and Boards of Conciliation.
  • This created a system of tribunals to investigate and settle industrial disputes.
• Restrictions on Strikes and Lockouts:
  • Required a 15-day written notice before initiating strikes or lockouts in public utility services (e.g., posts, railways, water, and electricity).
  • Declared any strike or lockout illegal if it pursued objectives other than the furtherance of a trade dispute within the trade or industry.
  • Imposed significant restrictions on the ability of workers to strike, especially without prior notice.
• Focus on Dispute Resolution:
  • The main object of the Act was to provide a formal mechanism for the resolution of industrial disputes.
  • Aimed to ensure continuity of public utility services by regulating strikes and lockouts.

Its purpose is to promote entrepreneurship among SC/ST and women entrepreneurs.

• This statement is correct. Facilitating credit to SC, ST and women entrepreneurs to enable them set up greenfield enterprises is specified as the main objective of Stand Up India Scheme.

It provides for refinance through SIDBI.

• This statement is correct. The scheme offers refinance window via SIDBI to banks and financial institutions for providing financial support to borrowers eligible under this scheme.

The dual goals of Stand Up India Scheme are:

1. Promoting inclusive entrepreneurship amongst marginalized communities
2. Providing integrated refinance credit via SIDBI

By aiding SC, ST and Female entrepreneurs with initial capital needs and refinance assistance, the scheme combines social empowerment with financial inclusion.

Core Banking Solutions refers specifically to networking the IT systems and branches of a bank:

• It enables seamless integration of the back-end computerization and technology infrastructure across all the bank’s branches.
• This networking allows customers to easily access their bank accounts as well as avail various banking services from any branch across the country, regardless of where they opened the account.
• Essentially, account access and services are unified rather than restricted to just the home branch. This offers flexibility and convenience to customers.

Whereas, RBI control over banks or takeover of weak banks relate to completely different concepts:

• They have nothing to do with mainstream core banking solutions that deal with connecting technology to unify delivery of retail banking services.

Globally Important Agricultural Heritage Systems:

• GIAHS is an initiative started by the Food and Agriculture Organisation (FAO) of the United Nations along with various global partners.
• It was started in 2002 to identify and safeguard traditional agricultural systems and their associated landscapes, agricultural biodiversity and related knowledge systems that have stood the test of time.
• These traditional heritage agricultural systems are sustained by local communities and their ecologically sustainable techniques that have endured centuries of agricultural development and modernization.
• The GIAHS recognition is conferred on such complex socio-ecological production landscapes that combine agricultural biodiversity, resilient ecosystems and valuable cultural heritage.
• The aim is to dynamically conserve the sites while also fostering the associated indigenous local knowledge and community practices instead of displacing them.
• As of 2023, a total of 86 agricultural heritage sites are recognized as GIAHS across 26 countries like India, Japan, Philippines, Algeria etc. These represent microcosms of Biocultural Diversity across environments.
• GIAHS preserves unique agricultural heritage production sites as well as empowers indigenous communities as custodians of treasured local knowledge and ecofriendly practices refined over ages.

• GIAHS aims to:

  • Identify and safeguard traditional farming systems, eco-friendly practices, local wisdoms, indigenous landscapes, and agricultural biodiversity associated with communities’ cultural heritage.
  • The emphasis is on recognizing value of ancient localized knowledge systems, community practices, sustainability, rather than displacing them with modern technology or maximizing just productivity and GI tags.

The Food Safety and Standards (Packaging and Labelling) Regulations, 2011 clearly define the mandatory packaging and labelling requirements for pre-packaged food products in India.

As per these regulations, manufacturers have to mandatorily provide the following information on the product label:

1. List of Ingredients: List of all ingredients and food additives used, with their vegetarian/non-vegetarian status and exact percentages. This enables consumers to check for potential allergens or restrictions as per dietary preferences or religious beliefs.
2. Nutrition Information: Nutritional composition of the food products including calories, carbohydrates, proteins, fats etc. Essential to help consumers make informed choices.
3. Vegetarian/Non-Vegetarian symbol: Green/Brown dot symbol identifying whether the product is vegetarian or non-vegetarian. Critical religious marker.

However, the regulation does NOT mandate any recommendations by medical professionals about possibility of allergic reactions to certain ingredients.

It is an organ of NITI Aayog.

• This statement is incorrect. The Financial Stability and Development Council (FSDC) is an independent regulatory body established in 2010.
• It is not a part or organ of NITI Aayog, which is a policy think tank that provides strategic policy advice to the government.

It is headed by the Union Finance Minister.

• This statement is correct. As per its composition outlined, the FSDC is chaired by the Union Finance Minister of India.

It monitors macroprudential supervision of the economy.

• This statement is correct. Ensuring financial stability and macroprudential supervision of the economy is a key objective of the FSDC.

In summary, the FSDC is an independent statutory institution headed by the Finance Minister. It is not connected to NITI Aayog in any administrative capacity.

• Mining operations by multinational companies: This refers to foreign companies extracting resources. It has no linkage with tax avoidance issues which Base Erosion and Profit Shifting (BEPS) aims to tackle.
• Curbing of tax evasion by multinational companies: Correct. Discussions around reforming international tax laws to curb BEPS techniques applied by MNCs to artificially shift profits and avoid taxes is the relevant context.
• Exploitation of genetic resources: Access to biological/genetic resources again relates to domain of environmental regulations rather than corporate taxes and profit shifting loopholes. No connection to BEPS.
• Environmental costs in development projects: This pertains to ensuring ecological preservation in infrastructure plans. It is also an unrelated aspect with respect to BEPS discussions around corporate tax avoidance.

The purposes of the Marginal Cost of Funds based Lending Rate (MCLR) system introduced by the Reserve Bank of India (RBI) are as follows:

1. To improve transparency in the methodology followed by banks for determining the interest rates on advances: The MCLR system makes the process of interest rate determination more transparent by linking the lending rates to the marginal cost of funds. This method considers the current cost of deposits, which makes the rate setting process more explicit and clear.
2. To ensure availability of bank credit at interest rates which are fair to the borrowers as well as the banks: By basing the lending rates on the marginal cost of funds, MCLR aims to provide a more equitable system where the interest rates are fair both to the borrowers and the banks. It ensures that the borrowers benefit from lower rates when the cost of funds for banks goes down and that the banks are able to cover their costs and maintain a healthy margin.

Bitcoins are tracked by the Central Banks of the countries.

• This statement is incorrect. Bitcoins operate on a decentralized network using blockchain technology. Central banks, which are typical of traditional fiat currencies, do not track or control Bitcoin. Bitcoin transactions are verified by a network of nodes and recorded on a public ledger known as the blockchain.

Anyone with a Bitcoin address can send and receive Bitcoins from anyone else with a Bitcoin address.

• This statement is correct. Bitcoin operates on a peer-to-peer network, allowing individuals to send and receive Bitcoins to and from anyone else who has a Bitcoin address, without the need for an intermediary like a bank.

Online payments can be sent without either side knowing the identity of the other.

• This statement is correct. Bitcoin transactions can be made without disclosing the identity of the parties involved. While Bitcoin addresses are recorded on the blockchain, these addresses do not directly reveal the identity of the users. This anonymity is one of the features that distinguish Bitcoin from traditional banking systems.

Reducing Revenue Expenditure:

• Revenue expenditure relates to recurring government costs like salaries, maintenance expenses etc.
• Reducing these large regular non-capital expenses is the most direct way to lower overall spending and hence fiscal deficit without hurting growth-focused capital investments.

Introducing New Welfare Schemes:

• Additional schemes will expand the number of beneficiaries entitled to state support and subsidies. This will only bloat government expenditure further and increase the deficit.

Rationalising Subsidies:

• Review and optimization of leakage-prone subsidies across sectors like fuel, fertilizers where lot of benefits leak to unintended beneficiaries. Plugging these gaps can generate major savings in wasteful spending every year, reducing expenditure and deficit.

Reducing Import Duty:

• While this impacts trade balance positions, it does not address issue of high fiscal deficits driven by excess government expenditure over revenues.

Mobile telephone companies and supermarket chains that are owned and controlled by residents are eligible to be promoters of Payment Banks.

• This statement is correct – the RBI guidelines explicitly permit large mobile phone companies, supermarket chains, and tech firms headquartered in India to apply for a Payment Bank license.
• The aim is to leverage their widespread networks and customer bases to further financial inclusion by providing banking access.
• For example, Paytm Payments Bank, Airtel Payments Bank.

Payment Banks can issue both credit cards and debit cards.

• This statement is incorrect – RBI prohibits Payment Banks from issuing their own credit cards to customers.
• They are only allowed to issue debit cards, prepaid payment instruments like mobile wallets.
• This is because Payment Banks cannot undertake lending activities. Credit card issuing requires lending money.

Payment Banks cannot undertake lending activities.

• This statement is correct.
• As per RBI guidelines, Payment Banks are explicitly barred from lending, bill discounting or any form of direct/indirect lending activities.
• This includes advances, mortgages, credit cards etc.
• It is a key regulatory restriction on their operations.

To bring the idle gold lying with Indian households into the economy (Correct).

• The gold schemes aim to mobilize thousands of tonnes of idle gold held by Indian households by incentivizing them to invest into bonds or deposit it to earn interest, rather than keeping unproductive assets locked up.

To promote FDI in the gold and jewellery sector (Incorrect)

• The gold schemes do not aim to promote and regulate FDI investments into domestic gold/jewelry industry.

To reduce India’s dependence on gold imports (Correct)

• Channelizing existing domestic household gold holdings for financial savings instruments will lower the economy’s dependence on massive gold imports to satisfy demand.

• WTO affairs: (Correct) The amber, blue and green boxes are WTO terminology classifying domestic agricultural subsidies based on trade distortion under the Agreement on Agriculture. This is an integral part of WTO affairs.
• SAARC affairs: (Incorrect) SAARC refers to regional cooperation between South Asian countries. SAARC discussions have no bearing on classification of agriculture subsidies using WTO’s amber/blue/green box framework.
• UNFCCC affairs: (Incorrect) UNFCCC refers to the UN agency dealing with climate change related matters. The amber/blue/green box categorization is irrelevant to environment/climate change negotiations.
• India-EU negotiations on FTA: (Incorrect) Bilateral trade agreement talks between India and EU focus on reducing tariffs and market access. The amber, etc boxes pertain to multilateral WTO trade rules on domestic subsidies – hence unrelated here.

In summary, the amber/blue/green box system is specifically used in World Trade Organization matters regarding agriculture subsidies and support.

The Pradhan Mantri MUDRA Yojana was launched in 2015 with the key purpose of:

• Expanding access to credit for small and micro business enterprises across manufacturing, trading and services sectors – who find it challenging to access formal credit facilities from banks and financial institutions.
• It creates a responsible ecosystem where credit help fuel the entrepreneurial drive and business growth of these small entrepreneurs / MSMEs operating truck stores, small shops, food stalls, repair shops etc. thereby boosting income generation and job creation at the grassroots economic level.
• The scheme allows banks to classify such loans under Priority Sector Lending requirements – thus incentivizing banks to undertake such lending and bring small business owners into the formal credit system.

Therefore, ‘bringing the small entrepreneurs into formal financial system’ encapsulates the principal motive behind the MUDRA initiative.

It is the ratio of the value of imports to the Gross Domestic Product of a country: This ratio compares the total value of a country’s imports to its overall Gross Domestic Product (GDP). A high ratio suggests that a significant portion of the GDP is dedicated to purchasing goods and services from abroad, whereas a lower ratio indicates a smaller dependence on imports in relation to the size of the economy. While this metric provides insight into the relative scale of a country’s imports, it does not directly relate to the concept of ‘import cover.’

It is the total value of imports of a country in a year: This option refers to the aggregate monetary value of all goods and services that a country imports over a one-year period. It’s a measure of the total import activity but does not consider the country’s ability to sustain these imports under changing economic conditions. This figure is important for understanding the scale of a country’s importation but is not the same as ‘import cover.’

It is the ratio between the value of exports and that of imports between two countries: This ratio, often referred to as the trade balance, measures the difference between the value of goods and services a country exports and the value of what it imports. A trade surplus occurs if exports exceed imports, while a trade deficit occurs if imports are greater than exports. This ratio is crucial for understanding trade relationships and the balance of trade but does not reflect ‘import cover.’

It is the number of months of imports that could be paid for by a country’s international reserves: ‘Import cover’ refers to this concept. It measures the duration (typically in months) that a country can continue to import goods and services using its existing foreign exchange reserves, without any additional income. This measure is a key indicator of a country’s financial stability and resilience to external economic shocks. A higher import cover suggests a stronger buffer against external risks, such as sudden stops in capital inflows or export revenue declines.

The Ujwal DISCOM Assurance Yojana (UDAY) has been specifically designed by the Government of India for:

• Financial turnaround and operational revival of debt-ridden power distribution companies (DISCOMs)

Key measures under UDAY:

• State governments take over 75% of DISCOM debt and issue securities to pay back loans
• Remaining 25% debt gets converted into low interest state guaranteed DISCOM bonds
• This restructuring reduces the interest cost burden on DISCOMs improving their financial health so they can provide reliable power supply.

The International Finance Corporation, which offers these bonds, is an arm of the World Bank.

• This statement is correct. The IFC or International Finance Corporation is the private sector investment arm of the World Bank Group.

They are the rupee-denominated bonds and are a source of debt financing for the public and private sector.

• This statement is correct. IFC Masala bonds are Indian rupee denominated bonds (not dollar, euro etc.) aimed at channelizing overseas funds into productive investments across public and private sectors in India.

About IFC Masala Bonds

1. Definition: Masala bonds are rupee-denominated bonds issued outside India but denominated in Indian Rupees.
2. Term Origin: The term “Masala” is a Hindi word meaning spices, used by the IFC to evoke the culture and cuisine of India.
3. Currency Risk: Unlike dollar-denominated bonds, where the borrower bears the currency risk, Masala bonds shift this risk to the investors.
4. First Issuance: The first Masala bond was issued by the World Bank-backed IFC in November 2014, raising 1,000 crore rupees to fund infrastructure projects in India.
5. Green Masala Bonds: In August 2015, the IFC issued its first Green Masala Bond, raising 3.15 billion rupees for private sector investments in climate change initiatives in India.
6. Listing: These bonds were listed on the London Stock Exchange.
7. Total Issuance: As of the available information, the IFC had issued Masala bonds totaling 99 billion rupees in offshore issuances.
8. Purpose: These bonds support private sector investment in India.
9. Significance: The issuance of Masala bonds by the IFC has been crucial in the internationalization of the Indian rupee and attracting international investors to Indian markets​​​​​​​​.

The capital budget consists of capital expenditures by the central government on:

• Acquisition of fixed assets like roads, infrastructure, government buildings, machinery etc.
• Investments made to augment the productive capacity of the economy.

It does not include the following:

• Loans received or borrowings from internal or external sources like foreign governments. This is part of the overall annual borrowings.
• Loans and Advances given out to State governments or Union Territories. This comes under detailed Demands for Grants.

In summary, the capital budget only captures expenses related to new capital assets creation and investments. Borrowings or lending do not feature in it.

IMF’s Special Drawing Rights (SDR) is an unique international reserve asset created by IMF. Its value is calculated daily as a weighted sum of a basket of major globally traded currencies.

Currently, the SDR basket comprises:

• US Dollar
• Euro
• Chinese Renminbi
• Japanese Yen
• British Pound

In 2015, the IMF had included China’s currency Renminbi into the SDR basket for the first time recognizing its importance in global trade and finance.

The other options like Russian Rouble, South African Rand or Indian Rupee are not being considered for addition by IMF into its elite reserve asset basket.

• The International Monetary and Finance Committee (IMFC) is an advisory body of the Board of Governors of the International Monetary Fund (IMF).
• It has 24 members, drawn from the pool of 187 governors of the IMF, and its structure mirrors that of the IMF’s Executive Board with its 24 constituencies, representing all member countries of the Fund.
• The IMFC meets twice a year, during the Spring and Annual Meetings of the IMF, to discuss matters of common concern affecting the global economy and advise the IMF on the direction of its work.
• The committee operates by consensus and has no formal decision-making powers.
• However, it plays a key role in providing strategic direction to the IMF’s work and policies, including responses to events that may disrupt the international monetary and financial system​​.
• The World Bank participates in IMFC meetings as an observer, along with other institutions like WTO.

The Pradhan Mantri Fasal Bima Yojana (PMFBY) is a significant initiative by the Indian government to provide comprehensive insurance coverage against crop loss due to non-preventable natural risks. Launched in 2016 and administered by the Ministry of Agriculture and Farmers Welfare, the PMFBY replaced the National Agricultural Insurance Scheme (NAIS) and Modified National Agricultural Insurance Scheme (MNAIS)​​.

Key features of the PMFBY include:

1. Premium Rates: Farmers pay a maximum premium of 2% for Kharif crops, 1.5% for Rabi food and oilseed crops, and 5% for commercial/horticultural crops. The remaining premium is shared between the Central and State Governments​​.
2. Risk Coverage: The scheme provides coverage from the pre-sowing phase to the post-harvest period, thereby ensuring comprehensive risk protection against crop failure due to various natural calamities, pests, and diseases​​.
3. Claims and Settlement: PMFBY includes provisions for individual farm level assessment and settlement of claims for localized calamities (like hailstorm, landslide, inundation, cloud burst, and natural fire) and post-harvest losses due to cyclone, cyclonic/unseasonal rains, and hailstorm for crops kept in the field for drying up to 14 days​​.
4. Technology Utilization: The scheme employs remote sensing technology, smartphones, and drones for quick estimation of crop losses, ensuring timely settlement of claims. A Crop Insurance Portal has been developed to streamline administration, transparency, and delivery of services​​.
5. Voluntary Participation: Initially mandatory for loanee farmers, the scheme was made voluntary for all farmers in 2020, allowing greater flexibility and inclusivity​​​​.

The PMFBY aims to stabilize the income of farmers, encourage the adoption of innovative practices, and ensure a continuous flow of credit to the agricultural sector. It also focuses on increasing awareness among all stakeholders and ensuring the early settlement of claims to provide timely financial assistance to the farming community.

• Labour-augmenting technological progress: Refers to technology advancements that increase productivity per unit of labour input. But steel ploughs themselves do not boost labour productivity in farming directly.
• Capital-augmenting technological progress: As explained, steel ploughs augment the productivity potential of that unit of capital input on farms. More output per same number of ploughs.
• Capital-reducing technological progress: Steel ploughs in fact allow MORE capital input usage on farms. They do not reduce capital/plough requirements.

In summary, steel ploughs exemplify technology progress that increases output per capital input, not labour (as labour hours may remain the same).

• Develop national strategies for conservation and sustainable use of biodiversity: This describes the objective of the UN Convention on Biological Diversity. Not related to Basel-III banking regulations.
• Improve banking sector’s ability to deal with financial stress and improve risk management: This accurately states the core aims of Basel-III banking accords – to bolster banks’ resilience, stability and risk mitigation capabilities to weather economic crises.
• Reduce greenhouse gas emissions but places burden on developed countries: Describes goal of the Kyoto Protocol which specifically targets emissions reductions by developed countries. Unrelated to Basel-III banking reforms.
• Transfer technology to replace CFCs and reduce ozone depletion: Matches the objective of the Montreal Protocol concerning protection of ozone layer. Entirely unrelated to Basel-III banking accords.

In summary, Basel-III accords were specifically formulated by global banking regulators after the 2008 financial crisis to improve the banking sector’s stability and ability to manage risks.

• Providing housing loan to poor people at cheaper interest rates: While financial assistance for housing/home loans for economically weaker sections is a social welfare initiative, it is NOT the direct purpose of the PMJDY scheme per se. PMJDY focuses specifically on expanding regular bank accounts and financial services.
• Promoting women’s Self-Help Groups in backward areas: Facilitating self-help groups and women’s empowerment programs in rural/backward areas helps further financial inclusion. However, the principal target of PMJDY is giving all households access to banking, not just promoting specific community/women groups.
• Promoting financial inclusion in the country: PMJDY was launched precisely with the stated vision and mission of universal financial inclusion for India’s unbanked population. Introducing them to formal financial channels is the central theme.
• Providing financial help to the marginalized communities: While marginalized groups are covered under PMJDY for basic banking access, the scheme is not designed as financial assistance or grants for vulnerable communities per se. It is centered around financial INCLUSION rather than monetary help.

In summary, The foundational objective of the Pradhan Mantri Jan-Dhan Yojana – promoting nationwide financial inclusion and banking access, which is distinct from loan assistance, helping SHGs or grants.

• Goods and services – This refers to a country’s real physical resources and output in the economy. While vital for economic health and exports, the availability of goods and services domestically does not directly fulfill a country’s need for internationally accepted liquid global currencies.
• Gold and silver – While precious metals have historically been linked to definitions of money and liquidity, nowadays most international transactions and payments are denominated and settled in dollars, euros, yen etc. So the money supply of just gold and silver is too limited.
• Dollars and other hard currencies – This accurately reflects modern global understanding of monetary liquidity i.e. readily available supply of major stable globally accepted currencies like the dollar and euro that are constantly demanded for cross-border payments and investments. Shortage of convertible money leads to international illiquidity issues.
• Exportable surplus – This relates more to an excess in a country’s export capacity versus its imports. Having an export surplus supports balance of payments but does not automatically assure availability of internationally recognized currencies needed for payments.

• Reducing revenue expenditure: Revenue expenditure like government employee salaries, administrative costs, subsidies etc. account for a major chunk of annual spending. Reducing this significantly lowers current expenditure, thereby directing lowering deficits without impacting development capital expenditure.
• Introducing new welfare schemes: While important for social welfare, new schemes entail substantial government spending on beneficiary coverage, operational costs etc. This bloats the expenditure side, increases fiscal deficit and interest obligations – hence counterproductive.
• Rationalizing subsidies: Review & optimization of subsidies across fuel, food, fertilizer areas to target only needy beneficiaries can save 10s of billions in wasteful subsidies annually. Lower subsidy payout directly reduces expenditure and lowers deficit.
• Expanding industries: While essential for growth & jobs, industry expansion does not check rising deficits directly. It expands production, tax revenues over the longer term. However, deficits are a short-term annual fiscal challenge requiring direct expenditure rationalization.

In summary, reducing revenue expenditure and rationalizing subsidies are precise policy actions that can curb the high annual government expenditure driving repeated budget deficits.

• It has increased the share of States in the central divisible pool from 32 percent to 42 percent. This statement is correct. The 14th Finance Commission did raise the share of states in the central tax pool (central divisible pool) from 32% during previous 13th FC period, to 42%, thereby substantially increasing it.
• It has made recommendations concerning sector-specific grants. This statement is correct. Apart from raising states’ share of central taxes, the 14th Finance Commission introduced features like sector-specific grants targeted for development of priority sectors like health, education etc.

• Slowing economic growth rate: (Correct) When tax collection growth lags behind GDP growth, the tax-to-GDP ratio falls. This directly signals that economic expansion is slowing. Lower taxes to GDP means income and output growth rates are decelerating.
• Less equitable distribution of national income: (Incorrect) The tax-GDP ratio metric does not directly correlate or provide clear indication regarding income equality or inequality trends in the country. Equity is dependent on various fiscal factors like subsidies, transfers etc. beyond just taxes.
• A falling tax-GDP ratio points specifically to slower GDP growth compared to historical trends.
• However it does not unambiguously reflect any changes in income distribution or equality, which depends on broader fiscal policies.

The Eight Core Industries index tracks production performance of major sectors in the Indian economy. These sectors carry the following weights:

1. Electricity generation – highest weight of 19.85%
2. Steel production – 17.92% weight
3. Cement production – 11.33% weight
4. Coal production – 10.33% weight
5. Refinery Products – 28.04% weight
6. Crude Oil – 8.98 % weight
7. Natural Gas – 6.88% weight
8. Fertilizers – 6.67% weight

• Cabinet Committee on Economic Affairs: The CCEA gives final approval on the FRP of sugarcane based on the CACP’s recommendations. As it is a Cabinet committee, only CCEA has authority to approve the sugarcane FRP.
• CACP recommends the FRP after analyzing various cost factors involved in sugarcane production.
• But the final approval authority rests with the CCEA chaired by the Prime Minister.
• Commission for Agricultural Costs and Prices: CACP recommends the FRP after analyzing production costs and other factors. However, it does not have authority to approve the final FRP.
• Directorate of Marketing and Inspection: They have a role in implementing regulated agricultural market policies. But they are not involved in determining commodity pricing like the FRP.
• Agricultural Produce Market Committee: APMCs facilitate trade operations in produce markets. They do not analyze production costs or set price floors for commodities.

• The Asian Development Bank: Publishes the ‘Asian Development Outlook’ report which studies the economic outlook specifically for the Asia Pacific region.
• The European Bank for Reconstruction and Development: Publishes the ‘Regional Economic Prospects’ report which analyzes the economies of the developing European and Central Asian regions.
• The US Federal Reserve Bank: Publishes many reports and statistics related to the US economy and financial system. But does not issue Global Economic Prospects.
• The World Bank: The World Bank prepares and publishes the Global Economic Prospects report biannually which provides forecasts global economy, developments across key countries and regions.

• India’s GDP growth rate increases drastically: A 0.5% SLR cut has marginal impact on GDP growth. It leads to slight monetary easing but not drastic enough to significantly alter GDP.
• Foreign Institutional Investors may bring more capital into our country: An SLR cut can improve market sentiment and equity investment attractiveness at the margin, but FII inflows are dependent on various macro factors, not just 50bps SLR change.
• Scheduled Commercial Banks may cut their lending rates: With lower SLR requirements, banks have greater liquidity to advance loans. This can lead banks to reduce interest rates on loans to attract borrowers.
• It may drastically reduce the liquidity to the banking system: A lower SLR injects MORE lendable liquidity into the banking system as banks need to invest less in securities.

• Essential Commodities Act, 1955: This enables the government to regulate production, distribution and prices of key commodities. It focuses more on controlling inflation and availability rather than directly regulating agriculture markets.
• Agricultural Produce Market Committee (APMC) Act enacted by States: The APMC Acts established markets and rules for trading of agri-products. APMCs provide infrastructure and oversee operations of agriculture markets within a state.
• Agricultural Produce (Grading and Marking) Act, 1937: This provides standardization through grading and quality certification of agri goods. It helps farmers get fair prices. But it does not have direct relevance to governance of agriculture markets.
• Food Products Order, 1956 and Meat and Food Products Order, 1973: These orders allow the government to regulate production and quality control specifically for milk/dairy and meat products. The scope does not cover general regulation of agriculture markets.
• The APMC Act formulated by each State government explicitly sets up systems to regulate agriculture markets and facilitate trading within their jurisdiction.

• The Reserve Bank of India (RBI): RBI tracks several consumer price indices and inflation data, but does not specifically publish the Consumer Price Index Numbers for Industrial Workers (CPI-IW).
• The Department of Economic Affairs: They advise policy decisions for the Finance Ministry, but are not responsible for compiling and releasing price indices.
• The Labour Bureau: The Labour Bureau is an attached office of the Ministry of Labour and Employment. They specifically monitor, compile and publish the CPI-IW on a monthly basis.
• Department of Personnel and Training: This department handles civil services matters related to employee management, training etc. CPI calculation is not its function.

In summary, the Labour Bureau is the specific office under the Labour Ministry that has the mandate for generating and publishing the CPI-IW every month.

• Being able to convert rupee notes into gold: This refers to “gold convertibility” or the gold standard, where a currency can be converted or redeemed for actual gold directly. However, it does not accurately address the definition of rupee convertibility, which involves free exchange of rupee and foreign currencies. So it is incorrect.
• Allowing the value of rupee to be fixed by market forces: While this describes the floating exchange rate system, which is the regime in India, it is not the same as rupee convertibility. Rbi and regulators could theoretically still impose restrictions on currency conversions with a market-decided exchange rate. So it falls short in explaining rupee convertibility.
• Freely permitting the conversion of rupee to other currencies and vice versa: By stating the rupee can be freely exchanged for foreign currencies without restrictions, it fully covers the scope of what a convertible currency means.
• Developing an international market for currencies in India: Having international market infrastructure for currency trading in India enables and eases exchange between rupee and foreign currencies. But it does not automatically mean there are no regulatory curbs on currency exchange, like may still exist for the rupee. Hence, it does not cover the concept of rupee convertibility.

1. The rate of growth of Real Gross Domestic Product has steadily increased in the last decade: The data shows that the growth rate of India’s Real GDP has not steadily increased over the last decade. The annual GDP growth rate varied significantly, with fluctuations both upward and downward. For example, the GDP growth rate was 8.26% in 2016, followed by 6.80% in 2017, 6.45% in 2018, 3.87% in 2019, -5.83% in 2020 (likely due to the COVID-19 pandemic), 9.05% in 2021, 7.00% in 2022, and 6.5% for 2023​​. Therefore, this statement is incorrect.
2. The Gross Domestic Product at market prices (in rupees) has steadily increased in the last decade: The nominal GDP of India at market prices has indeed increased over the last decade. For instance, the GDP in 2013 was $1.856 trillion, and it increased each year to reach $3.385 trillion in 2022 and $3.732 trillion in 2023​​​​. This trend reflects an overall increase in the GDP at market prices in rupees.

• Human Rights Commission: An independent statutory body, not replaced by NITI Aayog.
• Finance Commission: A constitutional body deciding tax devolution between center and states. Still functioning as before, not replaced.
• Law Commission: An executive body responsible for legal reform in India. Also still operating, was not replaced by NITI Aayog.
• Planning Commission: Formulated India’s 5-year plans and policy direction since 1950. In 2015, it was dissolved and replaced by the NITI Aayog to provide strategic policy advice instead of centralized planning.
• NITI Aayog was specifically established to take over policy making and advisory functions earlier carried out by the Planning Commission.
• It has taken over the role of directing strategic national level policies and development priorities.

Bank Rate:

• The interest rate charged by the central bank (RBI) on lending to commercial banks.
• Key direct monetary policy tool that allows the RBI to expand or contract money supply and liquidity.
• Hence it is a component of monetary policy.

Open Market Operations (OMO):

• RBI buys/sells government securities in the open market to inject or suck out rupee liquidity.
• Key indirect tool to manage money supply as per monetary policy.
• Thus it comes under ambit of RBI’s monetary policy.

Public Debt:

• Related to fiscal management of existing stock of government domestic and foreign borrowing.
• Managed by the Finance Ministry/Department of Economic Affairs through debt issuance.
• Does NOT qualify as instrument of monetary policy formulated by the RBI.

Public Revenue:

• Pertains to government income through taxes and non-tax receipts as part of fiscal policy.
• Channelized by Ministry of Finance, not a monetary policy tool of the central bank.

In summary, Bank Rate and Open Market Operations are key mechanisms used by the RBI to regulate money supply and liquidity as part of monetary policy formulation. Public debt and revenue are fiscal in nature.

• Encouraging the farmers to use their own farm seeds and discouraging them to buy the seeds from others: (Incorrect) The Seed Village Concept does not promote only using own seeds or discouraging purchase of seeds from others. It focuses on quality seed production at village levels.
• Involving the farmers for training in quality seed production and thereby to make available quality seeds to others at appropriate time and affordable cost: (Correct) This accurately captures the essence of the Seed Village Concept’s objectives regarding building skilled capacity in local seed production through farmers training.
• Earmarking some villages exclusively for the production of certified seeds: (Incorrect) as it does not specially designate only certain villages for certified seed production, but aims to promote localized seed production widely.
• Identifying entrepreneurs in the villages and providing them technology and finance to set up seed companies: (Incorrect) as the concept is focused more broadly on developing seed production skills among farming communities rather than setting up commercial seed companies.

• Controlling the inflation in India is the responsibility of the Government of India only: (Incorrect) Inflation control is the joint responsibility of both the central government as well as the RBI through coordinated fiscal and monetary policies.
• The Reserve Bank of India has no role in controlling the inflation. (Incorrect) The RBI plays the lead role in regulating inflation via key monetary policy rates, reserve requirements and money supply management.
• Decreased money circulation helps in controlling inflation: Tightening money supply by decreasing circulation through reduced government spending and credit creates less liquidity for consumers to demand goods. This subsequently controls price rise.
• Increased money circulation helps in controlling inflation (Incorrect) Expanding money supply and liquidity will only stoke aggregate demand much more rapidly than supply. This will further push up prices i.e., be inflationary.

• The Accelerated Irrigation Benefits Programme (AIBP) was launched in 1996-1997 by the Government of India. The objectives of AIBP are to accelerate implementation of large irrigation projects that have been delayed due to financial and other constraints. It does NOT specifically provide loan assistance to poor farmers as mentioned in the statement. Hence, statement 1 is incorrect.
• The Command Area Development Programme (CADP) was launched in 1974-1975 by the Government of India. The objectives of CADP are to improve water use efficiency through upgrading and modernizing irrigation infrastructure in command areas (the areas served by an irrigation project). Hence, statement 2 is correct.

• The Finance Commission – Not associated with Planning. It is involved in recommending tax devolution between Centre and States.
• The National Development Council – Associated with Planning. It is the apex body that approves Five Year Plans and National Development goals.
• The Union Ministry of Rural Development – Not associated with Planning. It implements and administers rural welfare schemes and programs.
• The Union Ministry of Urban Development – Not involved in Planning. It executes housing and urban infrastructure programs.
• The Parliament – Associated with Planning. It discusses and approves Five Year Plans and Plan objectives.

• Decrease the consumption expenditure: Incorrect. Lower interest rates encourage more borrowing and spending from consumers on homes, cars etc. leading to higher consumption expenditure.
• Increase tax collection: Incorrect. No direct link. Tax collection is dependent more on income growth. With lower rates leading to higher investments and GDP growth, tax collection can increase indirectly.
• Increase investment expenditure: Correct. Lower interest rates mean cheaper capital for businesses. So, businesses are encouraged to borrow more and invest in new projects/factories etc. This increases investment expenditure.
• Increase total savings: Incorrect. People tend to save less as they earn lower returns on savings when rates fall. Money is instead used for consumption or paying back debt.

In summary, lower interest rates directly stimulate higher business investments and capital expenditure as cost of money falls. This attracts investment in new capacities and projects.

The Union Budget expenditure is categorized into:

1. Plan Expenditure
2. Non-Plan Expenditure

Plan Expenditure:

• Spending on new schemes/infrastructure for socio-economic development
• Investment on assets to drive future growth
• Examples: infrastructure building, rural development schemes

Non-Plan Expenditure

• Expenditure incurred for existing establishment
• Committed liabilities rather than growth enhancement
• Includes:
  • Defence spending
  • Salaries and Pensions
  • Interest payments
  • Subsidies

• There is no National Seeds Policy in place – This is incorrect. India has a National Seeds Policy in place since 2002 which provides guidance on seed production, distribution, quality etc. to make quality seeds available across India. So this is not a constraint in enhancing seed replacement rates.
• There is no participation of private sector seed companies in the supply of quality seeds of vegetables and planting materials of horticultural crops – This statement is correct. Private sector involvement is currently limited on the vegetable seeds and horticulture planting material front leading to supply gaps and scarcity of quality seeds in these segments. This acts as a barrier in meeting crop production targets.
• There is a demand-supply gap regarding quality seeds in case of low value and high volume crops – This statement is correct. There is an imbalance in demand and supply availability of high quality seeds in the case of staple food and mass consumption crops like wheat, rice, millets etc. This affects productivity as farmers are unable to access superior seed varieties.

• Tax imposed by the Central Government: (Incorrect) Sales tax is not levied by the Central Government. It is imposed by individual State Governments.
• Tax imposed by Central Government but collected by the State Government: (Incorrect) Sales tax is not imposed by the Centre. It is exclusively imposed and collected by the State Governments.
• Tax imposed by State Government but collected by the Central Government: (Incorrect) Sales tax is both imposed and collected directly by the State Governments. The Central Government is not involved.
• Tax imposed and collected by the State Government: (Correct) Sales tax is an example of a tax directly levied on goods/services by State Governments within their jurisdiction and collected by them.

• Inclusive growth and poverty reduction: This focuses on inclusive growth and poverty reduction alone, failing to address sustainability or the need for faster economic growth which were policy priorities.
• Inclusive and sustainable growth: While inclusive and sustainable development are important objectives, this does not address fostering faster economic growth or reducing income inequalities – two aims laid out for the 12th Plan.
• Sustainable and inclusive growth to reduce unemployment: This includes sustainable, inclusive growth, and lowering unemployment – which is undeniably valuable. But it leaves out the focus on accelerating growth and poverty alleviation, missing key tenets.
• Faster, sustainable and more inclusive growth: This most comprehensively encapsulates the stated goals of the 12th Plan – growing GDP quickly, emphasizing environmental sustainability, progressing rural development & financial inclusion to spread economic gains, and implicitly driving poverty reduction.

• A short-term capital provided to industries: Incorrect because venture capital investments are made for the long-term, not short-term. They involve highly illiquid stakes in start-up companies that take years to mature.
• A long-term start-up capital provided to new entrepreneurs: Venture capital provides financing for the early stages and start-up of innovative entrepreneurial companies. It is long-term risk capital meant to fund growth over many years.
• Funds provided to industries at times of incurring losses: Incorrect as venture capital actually tends to avoid investing in industries facing losses, focusing their risky investments on high-growth start-ups instead.
• Funds provided for replacement and renovation of industries: Incorrect because venture capital has nothing to do with funding the replacement or renovation of mature industries. It is specialized start-up financing for new, innovative companies.

• Balance of trade – It refers to difference between exports and imports of physical goods. Export and import of goods constitute an important component of the Current Account.
• Foreign assets – This includes overseas assets held by a country’s residents/institutions. It is a part of the Capital Account of the Balance of Payments, not the Current Account.
• Balance of invisibles – This refers to export-import of intangible services (software, tourism, business services etc), remittances, primary & secondary income. It is an integral part of the Current Account.
• Special Drawing Rights – SDRs are international reserve assets created by the IMF. They act as supplement to existing reserve assets like gold and foreign exchange. SDR allocation/holding is part of the Reserve Assets in the Balance of Payments, not part of Current Account.

• Marginal Standing Facility (MSF) Rate refers to the rate at which banks can borrow overnight funds from the Reserve Bank of India (RBI) against approved government securities.
• Net Demand and Time Liabilities (NDTL) refers to the deposits and borrowings of a bank. It is used as a base to determine the reserve requirements and liquidity management operations.
• Both these terms are used in relation to banking operations of commercial banks and liquidity management by the central bank (RBI). They have nothing to do with communication networks, military strategies or agricultural supply and demand.

• Statement 1 is correct: Business Correspondents (BCs) enabled beneficiaries to withdraw their subsidies, pensions, MGNREGA payments, etc. directly in villages rather than having to go to a bank branch. This provided last mile financial access.
• Statement 2 is correct: BCs facilitated basic banking transactions like deposits and withdrawals for unbanked rural folks. This served financial inclusion.

Statutory Reserve Requirements (SRR) refer to the percentage of total deposits that commercial banks are required to keep with the central bank (RBI in India).

The purposes of SRR are:

1. Statement 1 is correct. To enable the RBI to control the amount of advances banks can create through fractional reserve banking. By increasing/decreasing SRR, RBI can decrease/increase the loanable funds available with banks. This helps control inflation.
2. Statement 2 is correct. To make people’s deposits with banks safe and liquid. SRR helps ensure banks have enough liquid cash to meet withdrawal demands.
3. Statement 3 is incorrect – SRR is not meant to control bank profits.
4. Statement 4 is incorrect – SRR funds are kept with RBI, not as vault cash.

• In India, deficit financing is used by the government to raise resources for economic development purposes.
• Deficit financing in India refers to the government borrowing from the RBI to fund development projects and schemes. The budget deficit is covered by asking the RBI to print new currency.
• This intentional deficit spending is aimed at public infrastructure building and jobs creation – with the objective of boosting productivity and economic growth.
• The key goals of deficit financing in India are:
  • Enabling higher public investment to boost growth
  • Increased spending on agriculture, industry, social schemes
  • Infrastructure building for long-term productivity
• The key point is deficit spending is a recommended policy tool in developing countries to enable higher public investment in growth-oriented sectors. Hence option A is the right answer.

Priority sector lending by banks in India includes lending to all of the following categories:

• Agriculture – Farmers for agriculture, allied activities
• Micro and small enterprises – Small business units, small scale industries etc
• Weaker sections – Low income groups, poorer households, vulnerable groups
• Export Credit
• Education
• Housing
• Social Infrastructure
• Renewable Energy

Banks have lending targets across each of these priority areas as part of financial inclusion policies.

All 3 factors can lead to a rise in the general price level or inflation:

1. Increase in money supply: More currency availability makes people willing to pay higher prices, driving prices up.
2. Decrease in aggregate output: Lower production and supply of goods leads to scarcity which allows producers to charge higher prices.
3. Increase in effective demand: People have more income to spend on goods; this increased spending power drives up prices if production doesn’t match pace.

More money supply -> People able to spend more -> Bids up prices

Lower output -> Scarcity -> Producers can markup prices

Higher demand -> Chases too few goods -> Pulls up prices

• India’s foreign-exchange reserves consist of:

1. Foreign Currency Assets: India’s holdings of foreign currencies
2. Gold Reserves: RBI’s gold stock
3. SDRs: Special Drawing Rights with the IMF

• Loans from foreign countries or the World Bank are not part of the foreign exchange reserves.
• India’s forex reserves consist of foreign currency assets, RBI’s gold reserves and SDRs only. Hence option B is the right answer.

• Creating new money to finance a budget deficit is likely to be the most inflationary in its effect.
• When new money is printed to cover fiscal deficits, it leads to excess money supply in the system relative to output of goods and services. This excess money supply results in too much money chasing too few goods, which causes high inflation.
• Options A, B and C referring to repayment of debt, public borrowing and bank borrowing respectively do not directly increase overall money supply. Hence, they are less inflationary than option D.
• Additionally, creating new money is under direct control of the central bank and can be done without limits, making it potentially very inflationary.
• Therefore, creating new money to fund government budget deficits tends to fuel money supply excessively, making it the most inflationary option.

• When demand for money increases while the supply remains unchanged, it leads to higher interest rates. This can be explained using the money market equilibrium:
• Higher demand for money means people want to hold more cash balances. To make them cut spending and increase their money holdings, the interest rate (cost of money) needs to rise.
• On the other hand, unchanged or inelastic money supply cannot match this increased demand. The excess demand for money pushes the interest rates upward to reach equilibrium.
• Therefore, with the supply of money remaining fixed, a rise in demand for money leads to an increase in the rate of interest, rather than a fall in price level, decrease in interest rates or an increase in income and employment.

Thus option B correctly states that there will be an increase in the rate of interest when demand for money rises while the supply is unchanged. This concept is based on the equilibrium money market conditions.

• The national income of a country for a given period is defined as the total money value of all the final goods and services produced by the country during that period.
• Total value of goods and services produced by the nationals refers to Gross Domestic Product but does not account for intermediate goods.
• Sum of total consumption and investment expenditure refers to an expenditure approach calculation.
• Sum of personals income of all individuals refers to aggregate personal income, which also includes transfer payments.