ALL INDIA PRELIMS TEST SERIES GENERAL STUDIES … · Indian Economy Basics + Recent Developments +...

1 AIPTS GS – 4 Ans Key Byju’s Classes: 9873643487

ALL INDIA PRELIMS TEST SERIES – 2018 GENERAL STUDIES PAPER- 4

Indian Economy Basics + Recent Developments + India in World Economy ANSWER KEY

Ans:1)(a) Explanation: Payment bank performs the following activity:

They can accept demand deposits.

An account balance cannot exceed Rs. 1 Lakh for an individual customer.

Payment Banks can issue ATM/debit cards but

not credit cards.

Payment Banks cannot give loans.

Payments and remittance services through various channels.

A payment bank can become Banking

Correspondent of another bank and offer all products / services which a BC can offer.

Payment Banks can distribute non-risk sharing financial products like mutual fund units and insurance products, etc. The revenue of these banks would come mainly from the transaction fees. Ans:2)(a) Explanation: If budget deficit arises due to reduction in taxes, keeping government expenditure constant, this will also lead to rise in interest rate and will therefore cause crowding-out effect on private investment. Ans:3)(b) Explanation: Merit goods are those goods and services that the government feels that people will under-consume, and which ought to be subsidized or provided free at the point of use so that consumption does not depend primarily on the ability to pay for the good or service. Both the state and private sector provide merit goods & services. We have an independent education system and people can buy private health care insurance. Negative externalities occur when production

and/or consumption impose external costs on third parties outside of the market for which no appropriate compensation is paid. This causes social costs to exceed private costs. Ans:4)(b) Explanation: National Income – Total value of final goods and services produced by the normal residents during an accounting year, after adjusting depreciation. It is Net National Product (NNP) at Factor Cost (FC). It does not include taxes, depreciation and non-factor inputs (raw materials). Ans:5)(c) Ans:6)(b) Explanation: The Ujwal DISCOM Assurance Yojana (UDAY) scheme launched in 2015, for the financial turnaround and revival of Power Distribution companies (DISCOMs). It is also to ensure a sustainable permanent solution to the problem. UDAY makes it obligatory on the states to pay for all the future losses of discoms. Saubhagya allows them the scope to lower tariffs to people covered under the scheme. Sahaj Bijli Har Ghar Yojana, or Saubhagya Scheme: This scheme is to change the metric for measuring progress in electrification from the

village to the household-level. Electrified village is defined under rural electrification scheme that if 10% of households enjoy access to electricity. Saubhagya Scheme has do away this criterion and

will target individual households. Beneficiaries for free electricity connections under the Saubhagya scheme would be identified using the Socio Economic and Caste Census (SECC) 2011 data. Ans:7)(c) Explanation: Money Supply is the total stock of all types money (currency + deposit money) held with public. Concepts/Measurement of Money Supply: M1 = C + DD + OD (Narrow Money)

C – Currency held by the public

DD – Demand Deposits with Banks

OD – Other deposits (Demand Deposits held by

RBI) M2 = M1 + Savings account deposits with Post Offices M3 = M1 + TD (Broad Money)

TD – Time Deposits with Banks Includes fixed deposits, Recurring deposits and time liability of Savings accounts M4 = M3 + Total Deposits with Post Office. Ans:8)(c) Explanation: International Liquidity relates to international reserves of particular country who participates in world monetary and trading system. International liquidity is linked with international payments which appears from international trade. Since Dollar being the commander of international currency dominating across the world in forex, the problems related with international liquidity concerns with non-availability of dollar and other related currencies. Ans:9)(a) Explanation: World Economic Outlook database

has selected macroeconomic data series from statistical appendix of World Economic Outlook report published by International Monetary Fund. It is published biannually and partly updated two times a year. It portrays the world economy in the near and medium context, with projections for up to four years into the future. WEO forecasts include key macroeconomic indicators, such as GDP, inflation, current account and fiscal balance of more than 180 countries around the globe. It also deals with major economic policy issues. Ans:10)(c) Explanation: Decrease in interest rate in an economy will increase the money supply, thus increasing the investment expenditure. With low interest rates, the banks will have more leverage to lend money for businesses and to purchase households items making an individual to spend more. With this option C is correct as if interest rate is decreased, then there will be increase in investment expenditure in the economy. Ans:11)(d) Ans:12)(a) Explanation: Ministry of New and Renewable Energy has been vested with the responsibility of


developing Small Hydro Power (SHP) projects up to 25 MW station capacities. Small hydro power projects are further classified as Micro Hydro Up to 100 Kw Mini Hydro 101 to 2000 Kw Small Hydro 2001 to 25000 Kw Renewable energy accounted for 18.37% of the total installed power capacity in India in. India set

a target of producing 40% of its total energy needs through renewable sources by 2030, as stated in its Intended Nationally Determined Contributions statement in the Paris Agreement. Present power generation capacities from these sources are:

Wind power 32,715 Mw. Solar power - Ground Mounted 14,751 Mw. Solar power - Rooftop 823 Mw. Biomass power 8,181 Mw. (Biomass & Gasification and Bagasse

Cogeneration) Small hydropower 4,399 Mw. Waste-to-Power 114 Mw.

Ans:13)(a) Explanation: Credit rating companies like CRISIL, S&P, Moody’s etc. also give credit ratings (AA, A, BBB, C, D etc.) to countries based on their eco-political conditions. India hold a credit rating in medium risk category just above the junk status. Factors affecting credit rating are

Fiscal deficit

Inflation

Infrastructure

Foreign investment

GDP growth

Ans:14)(d) Explanation: Demographic dividend is defined as the economic growth potential that can result from shifts in a population’s age structure, mainly when the share of the working-age population (15 to 64) is larger than the non-working-age share of the population (14 and younger, and 65 and older). It is followed by demographic tax where population growth stops, slows or even goes into reverse. Japan is passing through the phase of demographic tax. India is passing through the phase of demographic dividend since majority of its population is young. More than half of India’s population is below 25, and more than 65 per cent below 35. By 2020, the average age of an Indian will be 29 years. Further, 37 million people are graduate and above, including 2.6 million engineers. However, if we don’t make good use of this ‘demographic dividend’, it can turn into a demographic disaster with a huge number of unskilled and semi-skilled youngsters forming the bulk of our labour force with low productivity — and lower wages. The government is aware of this challenge and is treating skilling as an important focus area. Whereas Skill India initiative will provide skills to youth, Make in India initiative will create jobs to harness demographic dividend of country. Ans:15)(d) Explanation: A cropping system may be defined as a community of plants which is managed by a farm unit to achieve various human goals. The latter include food, fibre and other raw materials, wealth and satisfaction.

Mono-cropping is the agricultural practice of

growing a single crop year after year on the same land, in the absence of rotation through other crops or growing multiple crops on the same land (polyculture). Corn, soybeans, and wheat are three common crops often grown using monocropping techniques. Planting the same crop in the same place each year zaps nutrients from the earth and leaves soil weak and unable to support healthy plant growth. Because soil structure and quality is so poor, farmers are forced to use chemical fertilizers to encourage plant growth and fruit production.

Intercropping is growing of two or more crops simultaneously on the same piece of land (field). There is a crop intensification in both time and space dimensions. There is intercrop competition during all or part of crop growth. Alternating rows of maize and beans is an example of intercropping.

Mixed farming is one which crop production is

combined with the rearing of livestock. The livestock enterprises are complementary to crop production; so as to provide a balance and productive system of farming. In mixed farming at least 10% of its gross income must be contributed by livestock activity. Planting the same crop in the same place each year zaps nutrients from the earth and leaves soil weak and unable to support healthy plant growth. Because soil structure and quality is so poor, farmers are forced to use chemical fertilizers to encourage plant growth and fruit production. Ans:16)(a) Explanation: The Swachh Bharat Kosh would be administered by a Governing Council chaired by Secretary, Department of Expenditure. Individuals and philanthropists have expressed interest in contributing to efforts to achieve the objective of Clean India (Swachh Bharat) by the year 2019. The Swachh Bharat Kosh has been set up to facilitate channelization of philanthropic contributions and Corporate Social Responsibility (CSR) funds towards this cause. The following broad activities will be financed from the Kosh:

Construction of community/individual toilets in

rural areas, urban areas, in elementary, secondary and senior secondary government schools, aangan-waadis (Centres that provide support to children below 6 years and their mothers under the Integrated Child Development Scheme, Ministry of Women and Child Development);

Renovation and repair of dysfunctional community/individual toilets in elementary, secondary and senior secondary government schools and aangan-wadis;

Construction activity for water supply to the constructed toilets;

Training and skill development to facilitate

maintenance of constructed toilets and to ensure its inter-linkages with education on hygiene;

Other initiatives of improving sanitation and cleanliness in rural and urban areas including solid and liquid waste management; Ans:17)(d) Explanation: The Gross Domestic Product (GDP) deflator is a measure of general price inflation. It is


calculated by dividing nominal GDP by real GDP and then multiplying by 100.

Nominal GDP is the market value of goods and

services produced in an economy, unadjusted for inflation (It is the GDP measured at current prices).

Real GDP is nominal GDP, adjusted for inflation to reflect changes in real output (It is the GDP measured at constant prices). There are other measures of inflation too like Consumer Price Index (CPI) and Wholesale Price Index (or WPI); however GDP deflator is a much broader and comprehensive measure.

Since Gross Domestic Product is an aggregate

measure of production, being the sum of all final uses of goods and services, GDP deflator reflects the prices of all domestically produced goods and services in the economy whereas, other measures like CPI and WPI are based on a limited basket of goods and services, thereby not representing the entire economy.

Another important distinction is that the basket of WPI (at present) has no representation of services sector.

The GDP deflator also includes the prices of

investment goods, government services and exports, and excludes the price of imports.

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

GDP Deflator is calculated by the Ministry of Statistics and Programme Implementation. Ans:18)(b) Explanation: The Phillips curve describes a historical inverse relationship between rates of unemployment and corresponding rates of inflation that result within an economy. Ans:19)(c) Taxes are the most important revenues receipts of

the governments. However, some revenue receipts are non-tax revenues such as grants, on this basis, revenue receipts are of two types viz. Tax Revenue and Non-tax revenue. Tax revenues are either from direct taxes or indirect taxes. Non Tax Revenue Receipts are those revenue receipts which are not generated by taxing the public.

Money which the Government earns as “Dividends and profits” from its profit making public enterprises (PSUs).

Interest which the Government earns on the money lent by it to external or internal borrowers. Thus this revenue receipts may be in foreign currency as well as Indian Rupees.

The money which the government receives out of its fiscal services such as stamp printing, currency printing, medal printing etc.

Money which the Government earns from its “General Services” such as power distribution, irrigation, banking services, insurance, and community services etc. which make the part of the Government business.

Money which the government accrues as fees, fines, penalties etc.

Grants the Government of India receives from the external sources. In case of the state Governments, it may be the internal grant from the central Government.

In recent times, spectrum auctions have been one of the major sources of non-tax revenues for the government. We note here, that despite it looks that spectrum amount should be a capital receipt, it is shown as a non-tax revenue receipt in budget documents as one time spectrum charges levied on telecom players. Ans:20)(c) Explanation: In order to compare the GDP figures (and other macroeconomic variables) of different countries or to compare the GDP figures of the same country at different points of time, we cannot rely on GDPs evaluated at current market prices. For comparison we take the help of real GDP. It is because nominal GDP might increase or decrease because of prevailing tax rates of a country. However, real GDP shows real production. Ans:21)(c) Explanation: Tax Expenditures, as the word might indicate, does not relate to the expenditures incurred by the Government in the collection of taxes. Rather it refers to the opportunity cost of taxing at concessional rates, or the opportunity cost of giving exemptions, deductions, rebates, deferrals credits etc. to the tax payers. Tax expenditures indicate how much more revenue could have been collected by the Government if not for such measures. In other words, it shows the extent of indirect subsidy enjoyed by the tax payers in the country. A statement of the same is presented to the Parliament at the time of Union Budget by way of a separate budget document titled “Statement of Revenue Foregone”. It lists the revenue impact of tax incentives or tax subsidies that are part of the tax system of the Central Government. Opportunity costs are fundamental costs in economics, and are used in computing cost benefit analysis to achieve a goal. Such costs, however, are not recorded in the account books but are recognized in decision making by computing the cash outlays and their resulting profit or loss. Whenever a subsidy takes the form of a cash payment or grant to a recipient, it is typically considered a direct subsidy. Any non-cash benefit that a recipient receives that helps it operate or compete is typically considered an indirect subsidy. The benefit is considered to be indirect because its primary purpose may be unrelated to the recipient or not designed for the recipient alone, but provides a significant benefit to the recipient tangentially. For example, a government bailout of the automobile industry is a direct subsidy, while passing a law easing emission standards that has the related benefit of making it

cheaper for car companies to manufacture cars is an indirect subsidy. A popular type of indirect subsidy is tax benefit through changing of the tax code.

Ans:22)(b) It will be made available once in a cycle

of 3 years, which will indicate the status of soil

health of a farmer’s holding for that particular

period.


Ans:23)(a) Explanation: Under WTO norms, once a country gets MES status, exports from it are to be accepted at the production costs and selling price as the benchmark. Prior to this status, country is considered as a Non Market Economy (NME). Under the WTO norms, the importing countries are allowed to use alternative methodologies for the

determination of normal values for the exports from NME country. It often leads to imposition of higher anti-dumping duties by importing countries to protect its domestic market. Ans:24)(c) Explanation: For preparing the budget to be presented in Parliament, Department of Economic Affairs is responsible for preparation of Union Budget and not the Revenue Department. Since the Budget division is part of Economic Affairs, so Finance Secretary will coordinate for designing and implementation of Budget process. It is noted that past authorization is needed in order to withdraw any amount from Consolidated Fund of India. Indian Public Account can be operated by executive action where there will be no authorization needed from Parliament. Ans:25)(a) Explanation: The Rashtriya Gokul Mission aims to conserve and develop indigenous cattle breeds in a focused and scientific manner. It is a focussed project under National Programme for Bovine Breeding and Dairy Development. This mission is to undertake breed improvement program for indigenous cattle breeds so as to improve genetic makeup and increase the stock. It is to enhance milk production and productivity of indigenous bovines. To upgrade nondescript cattle using elite indigenous breeds like Gir, Sahiwal, Rathi, Tharparkar, Red Sindhi. To distribute disease free high genetic merit bulls of indigenous breeds for natural service. This mission is being implemented by State Implementing Agency (SIA)- Livestock Development Boards (LDB). State Gauseva Ayogs- Mandated to sponsor proposals to the SIAs and monitor implementation of the sponsored proposal. Participating Agencies- All Agencies having a role in indigenous cattle development for Ex- ICAR, universities, Colleges, NGOs and Gaushalas with best germplasm. Under the mission Gokul Gram (village level Integrated Indigenous Cattle Centres) and Gopalan Sangh (Breeder’s Societies) have established. Gokul Gram is Indigenous Cattle Centres and will act as Centres for development of Indigenous Breeds. They’ll be established in native breeding tracts and near metropolitan cities for housing the urban cattle These gokul grams are also functioning as state of the art in situ training centre for Farmers, Breeders. Ans:26)(a) Explanation: AIIB is a multilateral development

bank backed by China and is seen as a rival to the World Bank and Asian Development Bank (ADB). The bank started to function in January 2016. The bank was established to fund various infrastructure projects including energy,

transportation, urban construction and logistics as well as education and healthcare in Asia-Pacific region. China is the largest shareholder with 26.06% voting shares. India is the second largest shareholder with 7.5% voting shares followed by Russia 5.93% and Germany with 4.5%. The initiative gained support from 37 regional and 20 non-regional Prospective Founding Members (PFM) all of which have signed the Articles of Agreement

that form the legal basis for the bank. The bank started operation after the agreement entered into force in December 2015, after ratifications were received from 10 member states holding a total number of 50% of the initial subscriptions of the Authorized Capital Stock. Major economies that are not members include Japan and the United States. Its headquarter is in Beijing, China. Ans: 27)(c) Explanation: Foreign Currency Assets (FCA) are maintained as a multi-currency portfolio comprising major currencies, such as, US dollar, Euro, Pound sterling, Japanese yen, etc. as a part of India’s foreign exchange reserve and are valued in terms of US dollars. FCAs constitute the largest component of the Forex Reserves. Along with the major currencies it also comprises of investments in US Treasury bonds, bonds of other selected governments, deposits with foreign central and commercial banks. FCA excludes

Investment in bonds issued by IIFC (UK)

SDR holdings of Reserve Bank, which is included

under SDR

Amount lent to Sri Lanka under SAARC Swap and Special Currency Swap Arrangement. Ans:28)(d) Explanation: The main objective of ZED (Zero Effect, Zero Defect) scheme is to reduce the bad effect of products on environment. Under the scheme, MSME sector is urged to make products with “Zero Defect” and “Zero Effect” on the environment, thus improving the brand image of the country. Ans:29)(c) Explanation: Masala Bond refers to rupee-denominated borrowings by Indian entities in overseas markets. IFC named them Masala bonds to give a local flavour by calling to mind Indian culture and cuisine. The Masala bonds refer to rupee-denominated bonds through which Indian entities can raise money from foreign markets in rupee, and not in foreign currency. Basically, they are debt instruments that are typically used by corporates to raise money from investors. Through issuance of rupee denominated bonds, Indian entity is protected against the risk of currency fluctuation, typically associated with borrowing in foreign currency. Masala bonds also help in internationalization of the rupee and in expansion of the Indian bond markets. While it may seem odd to name a staid debt instrument after food stuffs,

it has been done in the past. Chinese bonds, named Dim-sum bonds after a popular dish in Hong Kong, have been around for a while. So have Japanese bonds named Samurai after the country’s warrior class. The Reserve Bank of India (RBI) has increased corporate bond investment limit for foreign investors by taking out


Masala bonds from ambit of total debt investment limit. They will be considered as part of External Commercial Borrowings (ECBs) and will be monitored accordingly. Any corporate (entity registered as a company under the Companies Act, 1956/ 2013) or body corporate (entity specially created out of a specific act of the Parliament) and Indian banks are eligible to issue Rupee denominated bonds overseas. Real Estate

Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) coming under the regulatory jurisdiction of the Securities and Exchange Board of India (SEBI) are also eligible. Other resident entities like Limited Liability Partnerships and Partnership firms, etc. are not eligible to issue these bonds. Ans:30)(c) Explanation: European Free Trade Association (EFTA) is a bloc comprising of four countries - Switzerland, Norway, Iceland and Liechtenstein. The four EFTA countries are not the part of the European Union. India and EFTA started negotiating a free trade pact in 2008, shortly after India started FTA talks with the European Union. The talks resumed last year in Geneva but hit a rough patch after the Switzerland insists on stringent IPR regime in India. This is mainly due to number of Swiss pharmaceutical MNCs, including Novartis and Roche, having been aggressively fighting for their patent rights in India over the past few years. The other areas covered by the proposed FTA include market access in goods, services, investments and public procurement. The organisation operates in parallel with the European Union (EU), and all four member states participate in the European Single Market. On 3 May 1960, the EFTA was established to serve as an alternative trade bloc for those European states that were unable or unwilling to join the then European Economic Community (EEC) (which subsequently became the European Union). The EFTA is based on the Stockholm Convention signed by the seven nations and becoming operative in May 1960. Some of the member later left and few new members joined the group, consequently the number has reduced to present four. Ans:31)(d) Explanation: The Department of Industrial Policy and Promotion (DIPP), which is the nodal body for Start-up India, has amended the definition of a start-up. As per the new definition of a start-up: As per the new definition, an entity will be considered as a Start-Up if its turn-over is less than Rs 25 crore and has not completed seven years from the date of its incorporation/registration. In the definition, the change is with respect to the time period which was five years. The new definition has increased it to 7 years taking into the consideration the long gestation period involved in establishing start-ups. More Detail: The scope of definition of start-up will also be

widened to include scalability of business model with potential of employment generation or wealth creation. For the exceptional areas like in the biotechnology sector, they will be considered as start-ups for a

period of up to 10 years from the date of incorporation/registration. The new definition and amendments will help to ease of starting new business and will promote the start-up ecosystem. Ans:32)(b) Explanation: Increase in subsidy of LPG will reduce the pocket expenditure of people on LPG, making more money available with them, thereby

increasing demand and pulling inflation. Similar will be the effect of decrease of income tax rates – more money availability. Increase in fuel prices will lead to cost-push inflation. Ans:33)(d) Explanation: A ‘Narrow Bank’ can be defined as the system of banking under which a bank places its funds in risk-free assets with maturity period matching its liability maturity profile, so that there is no problem relating to asset liability mismatch and the quality of assets remains intact without leading to emergence of sub-standard assets. Ans:34)(b) Explanation: ARCs are regulated by RBI, and not SEBI. Asset Reconstruction companies (ARCs): ARC is a company registered under Section 3 of the Securitization and reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. The main advantage of ARCs is they help the banks to concentrate on normal banking operations rather than dealing with stressed assets. Ans:35)(b) Explanation: Municipality bonds can be issued by the city corporations to fund developmental projects. These bonds help the city corporations to directly raise funds without the help of grants from the state governments or agencies such as World Bank. Institutional investors, as well as the public, can buy Municipal Bonds. The corporations can use the revenues earned from the developmental projects like Metro rail network to repay the interest and principal on these bonds. These municipal bonds have now been permitted for public offering by SEBI. Ans:36)(c) Explanation: The Human Development Index (HDI) is a summary measure of average achievement in key dimensions of human development: a long and healthy life, being knowledgeable and a decent standard of living. The health dimension is assessed by life expectancy at birth, the education dimension is measured by mean of years of schooling for adults aged 25 years and more and expected years of schooling for children of school entering age. The standard of living dimension is measured by gross national income per capita. The HDI simplifies and captures only part of what human development entails. It does not reflect on inequalities, poverty, human security, empowerment, etc. Ans:37)(a)

Explanation: It measures gender inequalities in three important aspects of human development – reproductive health, measured by maternal mortality ratio and adolescent birth rates; empowerment, measured by proportion of


parliamentary seats occupied by females and proportion of adult females and males aged 25 years and older with at least some secondary education; and economic status, expressed as labour market participation and measured by labour force participation rate of female and male populations aged 15 years and older. The GII is built on the same framework as the IHDI-to better expose differences in the

distribution of achievements between women and men. It measures the human development costs of gender inequality. Thus the higher the GII value the more disparities between females and males and the more loss to human development. Ans:38)(c)

Frictional unemployment is always present in the economy, resulting from temporary transitions made by workers and employers or from workers and employers having inconsistent or incomplete information.

Frictional unemployment is beneficial to the economy. It is an indicator that individuals are seeking better positions.

Frictional unemployment can be reduced by

quickly matching prospective job seekers with job openings of interest.

This is accomplished through the transmission of information. Through social media and job posting websites, individuals looking for jobs may now experience a quicker turnaround to get hired.

This reduces the frictional unemployment level.

Frictional unemployment is the only form of unemployment that will not be reduced through monetary expansion.

In fact, if monetary expansion occurs, more job openings will occur, thus potentially resulting in an increase of frictional unemployment.

When the economy enters into a recession,

frictional unemployment tends to decline.

This is a result of workers being afraid to leave their current positions in search of new ones. Ans:39)(c)

The Insolvency and Bankruptcy Board of India

(IBBI) has notified regulations for inspection and investigation of service providers registered with it.

IBBI is the regulator for overseeing insolvency proceedings of service providers like Insolvency Professional Agencies (IPA), Insolvency Professionals (IP) and Information Utilities (IU) in India.

It was given statutory powers through the Insolvency and Bankruptcy Code. It functions under Ministry of Commerce.

The Code provides for a market-determined and

time-bound resolution of insolvency proceedings.

It covers Individuals, Companies, Limited Liability Partnerships and Partnership firms.

It attempts to simplify the process of insolvency

and bankruptcy proceedings and speed up the resolution process for stressed assets in the country. Ans:40)(d) Explanation: Deficit financing is the budgetary situation where expenditure is higher than the revenue. It is a practice adopted for financing the excess expenditure with outside resources. The expenditure revenue gap is financed by either printing of currency or through borrowing.

Nowadays most governments both in the developed and developing world are having deficit budgets and these deficits are often financed through borrowing. Hence the fiscal deficit is the ideal indicator of deficit financing. In India, the size of fiscal deficit is the leading deficit indicator in the budget. It is estimated to be 3.9 % of the GDP (2015-16 budget estimates). Deficit financing is very useful in developing countries like India

because of revenue scarcity and development expenditure needs. Ans:41)(b) Explanation: The European Commission (EC) is responsible for proposing legislation, implementing decisions, upholding the EU treaties and managing the day-to-day business of the EU. The members are proposed by their member state governments, one from each. However, they are bound to act independently. They are completely independent in carrying out their duties during their mandate. This is in contrast to the Council, which represents governments and the Parliament. Through Article 17 of the Treaty on European Union the Commission has several responsibilities: to develop medium-term strategies; to draft legislation and arbitrate in the legislative process; to represent the EU in trade negotiations; to make rules and regulations. The European Council charged with defining the European Union's (EU) overall political direction and priorities. It comprises the heads of state or government of the member states, along with the President of the European Council and the President of the European Commission. The European Council has no direct legislative power. Ans:42)(d) Explanation: Multidimensional poverty index is made up of several factors that constitute poor people’s experience of deprivation – such as poor health, lack of education, inadequate living standard, lack of income (as one of several factors considered), disempowerment, poor quality of work and threat from violence. A multidimensional measure can incorporate a range of indicators to capture the complexity of poverty and better inform policies to relieve it. Different indicators can be chosen appropriate to the society and situation. The MPI can help the effective allocation of resources by making possible the targeting of those with the greatest intensity of poverty; it can help address some SDGs strategically and monitor impacts of policy intervention. Ans:43)(c) Explanation: GST came into effect by the 122nd constitutional amendment act.

GST is applicable on supply of goods or services as

against the earlier concept on the manufacture of goods or on sale of goods or on provision of services.

GST is based on the principle of destination-based consumption taxation as against the present principle of origin-based taxation.

There are three part of GST

Central GST (CGST) to be levied by the Centre; State GST (SGST) to be levied by the States;


Integrated GST (IGST) would be levied an inter-state supply (including stock transfers) of goods or services. This shall be levied and collected by the Government of India.

Such tax shall be apportioned between the Union

and the States in the manner as may be provided by Parliament by Law on the recommendation of the GST Council.

GST would be levied at four rates viz. 5%, 12%, 16% and 28%. The schedule or list of items that would fall under each of these slabs shall be decided by GST council. Ans:44)(d) Explanation: Rupee convertibility system allows amount of rupee which gets converted to different currency with a view of foreign exchange. It means that you can convert foreign exchange such as US dollars, Pound, Sterlings etc. into Indian rupees and vice-versa at market determined rate of exchange. Convertibility of rupees is not applicable on asset. The economic value of rupee in the market is different from convertibility. Convertibility of rupee is not related to building relations for currencies in market. Ans:45)(c)

Explanation: A popular feature of short term capitals flows (movement of international investable money) is that they are often speculative and are highly unstable flows. Their quick inflows and outflows are creating management problem for many emerging market central banks like the RBI.

Tobin tax is a tax on international flow of short term capital. The tax is known after economist James Tobin who proposed it in1972 in the form a currency transaction tax.

Basically, Tobin tax aims to discourage volatile short term capital flows or hot money which are very speculative.

Tobin has advocated the imposition of tax on cross

border flow of short term capital as these are the sources of volatility and risks in the host economies Ans:46)(b) Explanation: When money is deposited with “tenure”, it cannot be withdrawn before its maturity fixed at a particular time. Such deposits are called “Time deposits” or “Term deposits”. The most common example of Time deposits is “Fixed Deposit”. If the funds deposited can be withdrawn by the customer (depositor / account holder) at any time without any advanced notice to banks; it is called demand deposit. The money as demand deposit is liquid and can be encashed at any time. There is no fixed term to maturity for Demand Deposits. The demand deposits may or may not pay interest to the depositor. For example, while we get an interest on savings accounts; no interest is paid on current accounts. Recurring Deposit is a special kind of Term Deposit offered by banks in India which help people with regular incomes to deposit a fixed amount every month into their Recurring Deposit account and earn interest at the rate applicable to Fixed Deposits

In India, the bank deposits are covered under the insurance scheme provided by Deposit Insurance and Credit Guarantee Corporation (DICGC). When a bank covered by DICGC fails, or undergoes liquidation or is merged with another bank; the DICGC pays the amount due to depositors via the officially appointed liquidator in a time bound manner. Ans:47)(a)

Explanation: Defence Equipment and modernization falls under non plan capital expenditure while the rest falls under the category of non-plan Revenue expenditure. Non-plan revenue expenditure:

Interest payments on the loans taken by Government of India

Expenditure incurred on Defence Services (except Defence Equipment which is a capital expenditure)

Subsidies

Grants to the states and UTs, including those from calamity fund

Pensions, Social services such as healthcare, education, social security etc.

Police

Economic services by the government such as Agriculture, Industry, Power, Science & Technology

Grants to foreign Governments

Ans:48)(a) Explanation: As per Article 279A (1) of the amended Constitution, the GST Council is constituted by the President within 60 days of the commencement of Article 279A. The GST Council is a joint forum of the Centre and the States shall consist of the following members: -

Union Finance Minister - Chairperson

The Union Minister of State, in-charge of Revenue of finance - Member

The Minister In-charge of finance or taxation or any other Minister nominated by each State Government – Members.

Secretary (Revenue)will be the Ex-officio Secretary to the GST Council;

Chairperson, Central Board of Excise and Customs (CBEC), will be a permanent invitee (non-voting) to all proceedings of the GST Council; It is important to note that decisions at the GSTC shall be taken only at the meeting with adequate quorum and properly distributed majority. Accordingly,

One-half of the total number of Members of the Goods and Services Tax Council shall constitute the quorum at its meetings.

Every decision of the Goods and Services Tax Council shall be taken at a meeting, by a majority of not less than three-fourths of the weighted votes of the members present and voting, in accordance

with the following principles, namely:-

The vote of the Central Government shall have a weightage of one-third of the total votes cast, and

The votes of all the State Governments taken together shall have a weightage of two-thirds of the total votes cast, in that meeting. Ans:49)(d) Explanation: Although both US dollar and Euro are intervention currencies and the Foreign Currency Assets (FCA) are maintained in major


currencies, the foreign exchange reserves are denominated and expressed in US dollar only. Movements in the foreign exchange reserves of India occur mainly on account of purchases and sales of foreign exchange by the RBI, income arising out of the deployment of the foreign exchange reserves, external aid receipts of the Central Government and changes on account of revaluation of the assets.

Ans:50)(c) Explanation: The components of India’s Foreign Exchange Reserves include: Foreign currency assets (FCAs), Gold, Special Drawing Rights (SDRs), RBI’s Reserve position with International Monetary Fund (IMF). Investment in bonds issued by IIFC (UK) and amount lent to Sri Lanka under SAARC Swap and Special Currency Swap Arrangement are India’s International Investment Position (IIP), which is stock of country’s external financial assets. Ans:51)(c) Explanation: The statement 1 holds true for Forward charge and not reverse charge. Reverse charge means the liability to pay tax is by the recipient of goods/services instead of the supplier. Reverse charge, where the recipient is liable to pay tax, is common to many countries like Canada where it is applicable on imports of services and intangible properties. Normally, the supplier pays the tax on supply. In certain cases, the receiver becomes liable to pay the tax, i.e., the chargeability gets reversed which is why it is called reverse charge. The concept of reverse charge mechanism is already present in service tax. In GST regime, reverse charge may be applicable for both services as well as goods. In India, this is a partly new concept introduced under GST. The purpose of this charge is to increase tax compliance and tax revenues. Earlier, the government was unable to collect service tax from various unorganized sectors like goods transport. Compliances and tax collections will therefore be increased through reverse charge mechanism. Ans:52)(c) Explanation: Double Financial Repression is a phenomenon when the banks are faced with financial repression both on the asset and liability side. Repression on asset side: Financial repression on asset side is due to SLR requirement (Statutory Liquidity Ratio) i.e. the amount of liquid assets which banks are required to hold in form of cash, government bonds and gold. Provision of 40% of Priority Sector Lending has led the allocation of cash to less than fully efficient ways. Repression on Liability side: Financial repression on the liability side is the result of continued inflation since 2007. This has had a direct effect on real interest rates and hence reduction in household savings as people has to

spend more on daily food items. Ans:53)(d) Explanation: It is a pension scheme exclusively for senior citizens aged 60 years and above.

Scheme provides an assured return of 8% p.a. payable monthly (equivalent to 8.30% p.a. effective) for 10 years. Pension (minimum: Rs.1000/ month; maximum: Rs.5000) will be payable at the end of each period, during the policy term of 10 years, as per the frequency of monthly, quarterly, half-yearly, yearly as chosen by the pensioner at the time of purchase. It is exempted from goods and services

(GST) tax. It will offer senior citizens more avenues to earn steady regular income at a time of falling interest rates. On survival of the pensioner to the end of the policy term of 10 years, the purchase price of the scheme along with the final pension instalment will be payable. The scheme allows for premature exit for the treatment of any critical terminal illness of self or spouse. On such premature exit, 98% of the purchase price would be refunded. On death of the pensioner during the policy term of 10 years, the purchase price should be paid to the beneficiary. Ans:54)(b) Explanation: The term Tiger Cub Economies collectively refers to the four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that these economies are on a similar, albeit slower, growth trajectory as the original Asian tigers: Hong Kong, Singapore, South Korea and Taiwan. Ans:55)(c) Explanation: Capital gains tax is a tax that is charged on the profits that is made by selling capital asset. For making it easy for taxation, the capital assets are classified to ‘Short-Term Capital Asset; and ‘Long-Term Capital Asset’. Short-Term Capital Asset: If the shares and securities are held by the taxpayer for a period not more than 12 months preceding the date of its transfer will be treated as a short-term capital asset. Long- Term Capital Asset: If the taxpayer holds the shares and securities for a period exceeding 12 months before the transfer will be treated as a long-term capital asset. Equity shares which are listed in a recognised stock exchange, units of equity oriented mutual funds, listed debentures and Government securities, units of UTI and Zero Coupon Bonds’ period of holding will be considered for 12 months instead of 36 months. In India, the long-term capital gains on stocks and equity mutual funds are not taxed. But, the short term gains will be taxed at 15 percent. In case of debt mutual funds, both short and long term capital gains are taxed. The short-term capital gain on debt mutual fund is added to the income and taxed as per the individual’s Income Tax Slab and the long-term capital gains on debt mutual funds are taxed at 20 percent with indexation and 10 percent without indexation. Indexation is adjusting the purchase value for inflation.

Capital Gains include any property held by the assesse except the following:

Stock in trade.

Consumable stores or raw materials held for the purpose of business or profession.


Personal effects that are movable except jewellery,

archaeological collections, drawings, paintings, sculptures or any art work held for personal use.

Agricultural land. The land must not be located within 8kms from a municipality, Municipal Corporation, notified area committee, town committee or a cantonment board with a minimum population of 10,000.

5 percent Gold Bonds, National Defence Gold

Bonds and Special Bearer Bonds.

Gold Deposit bonds under Gold Deposit Scheme. Ans:56)(a) Explanation: NCLT has the same powers as assigned to the erstwhile Company Law Board (which are mostly related to dealing with operation and mismanagement), Board for Industrial and Financial Reconstruction (BIFR) (revival of sick companies) and powers related to winding up of companies (which was available only with the High Courts). The NCLT has the power under the Companies Act to adjudicate proceedings:

Initiated before the Company Law Board under the previous act (the Companies Act 1956);

Pending before the Board for Industrial and Financial Reconstruction (BIFR), including those pending under the Sick Industrial Companies (Special Provisions) Act, 1985;

Pending before the Appellate Authority for Industrial and Financial Reconstruction; and

Pertaining to claims of operation and

mismanagement of a company, winding up of companies and all other powers prescribed under the Companies Act.

Decisions of the NCLT may be appealed to the National Company Law Appellate Tribunal. The decisions of NCLT may be appealed to the Supreme Court of India. Ans:57)(b) Explanation: Union Government has launched e-Rashtriya Kisan Agri Mandi (e-RaKAM) portal to provide a platform for farmers to sell agricultural produce. It is a digital initiative that aims to bring together the farmers, PSUs, civil supplies and buyers on a single platform to ease the selling and buying process of agricultural product. e-RaKAM is a first of its kind initiative that leverages technology to connect farmers from the smallest villages to the biggest markets of the world . Ans:58)(a) Explanation: A haircut is the difference between the loan amount and the actual value of the asset used as collateral. It reflects the lender’s perception of the risk of fall in the value of assets. But in the context of loan recoveries, it is the

difference between the actual dues from a borrower and the amount he settles with the bank. Haircuts are not common in India. However, there have been instances in the past when a lender settles for some equity of a borrower to compensate for a loan loss. When collateral is being pledged, the degree of the haircut is determined by amount of associated risk to the lender. These risks include any variables that may affect the value of the collateral in the

event that the lender has to sell the security due to a default by the borrower. Price predictability and lower associated risks result in compressed haircuts, as the lender has a high degree of certainty that the full amount of the loan can be covered if the collateral must be liquidated. For example, Treasury bills are often used as collateral for overnight borrowing arrangements

between government securities dealers, which are referred to as repurchase agreements (repos). In these arrangements, haircuts are negligible due to the high degree of certainty on the value, credit quality and liquidity of the security, especially over a short time frame. Securities that are characterized by volatility and price uncertainty, on the other hand, have steep haircuts when used as collateral. For example, an investor seeking to borrow funds from a brokerage by posting equity positions to a margin account as collateral can only borrow 50% of the value of the account due to the lack of price predictability, which is a haircut of 50%. Ans:59)(a) Explanation: Economic stimulus consists of attempts by governments or government agencies to financially stimulate an economy. An economic stimulus is the use of monetary or fiscal policy changes to kick start growth during a recession. Governments can accomplish this by using tactics such as lowering interest rates, increasing government spending and quantitative easing, to name a few. Quantitative easing is an unconventional monetary policy in which a central bank purchases government securities or other securities from the market in order to lower interest rates and increase the money supply. Ans:60)(b) Explanation: B is incorrectly matched because the report is released by UNEP and not IUCN World Wildlife Crime report: The World Wildlife Crime Report by United nation office of Drug and crime takes stock of the present wildlife crime situation with a focus on illicit trafficking of specific protected species of wild fauna and flora, and provides a broad assessment of the nature and extent of the problem at the global level Global Environment Outlook: Global Environment Outlook (GEO) is a series of reports on the environment issued periodically by the United Nations Environmental Programme (UNEP). The GEO project was initiated in response to the environmental reporting requirements of UN Agenda 21 and to a UNEP Governing Council decision of May 1995 which requested the production of a new comprehensive global state of the environment report. World Economic Outlook: The World Economic Outlook (WEO) is a survey conducted and published by the International Monetary Fund. It portrays the world economy in the near and medium context, with projections for up to four years into the future.

Global Assessment Report: The Global Assessment Report on Disaster Risk Reduction (GAR) is a biennial global assessment of disaster risk reduction and comprehensive review and analysis of the natural hazards that are affecting humanity.


Ans:61)(a) Explanation: A shell company is a non-operational company that is used as a vehicle for various financial manoeuvres, or is kept dormant for future use in some other capacity. Interestingly, the term “shell company” is not defined under the Companies Act, 2013. A shell company is per se not illegal — as long as it is not used for an illegal act, such as manipulation of

share prices, evading taxes, or financial fraud. Ans:62)(d) Explanation: A capital account shows the net change in physical or financial asset ownership for a nation and, together with the current account, constitutes a nation’s balance of payments. The capital account includes foreign direct investment (FDI), portfolio and other investments, plus changes in the reserve account. A capital account may also refer to an account showing the net worth of a business at a specific point in time. Ans:63)(c) Explanation: Price subsidies are often regressive- By regressive, we mean that a rich household benefits more from the subsidy than a poor household. Price subsidies can distort markets in ways that ultimately hurt the poor. Ans:64)(c) The marginal cost of funds based lending rate (MCLR) refers to the minimum interest rate of a bank below which it cannot lend, except in some cases allowed by the RBI. It is an internal benchmark or reference rate for the bank. MCLR actually describes the method by which the minimum interest rate for loans is determined by a bank - on the basis of marginal cost or the additional or incremental cost of arranging one more rupee to the prospective borrower. The MCLR methodology for fixing interest rates for advances was introduced by the Reserve Bank of India with effect from April 1, 2016. This new methodology replaces the base rate system introduced in July 2010. In other words, all rupee loans sanctioned and credit limits renewed w.e.f. April 1, 2016 would be priced with reference to the Marginal Cost of Funds based Lending Rate (MCLR) which will be the internal benchmark (means a reference rate determined internally by the bank) for such purposes. Ans:65)(c) Explanation: Current account deficit is a measurement of a country’s trade where the value of the goods and services it imports exceeds the value of the goods and services it exports. The current account also includes net income, such as interest and dividends, as well as transfers, such as foreign aid, though these components make up only a small percentage of the current account when compared to exports and imports. The current account is essentially a calculation of a country’s foreign transactions and, along with the capital account, is a component of a country’s balance of payment.

Government can reduce substantial current account deficit by increasing exports or by decreasing imports which can be through import restrictions, quotas, or duties or by subsidizing exports. Manipulating of exchange rate for cheaper

exports tends to increase balance of payments through devaluing of domestic currency. Further current account deficit can be lowered by promoting investor friendly environment. In capital account, capital inflows results from instruments and maturity which includes foreign investment, loans and banking capital. Ans:66)(b) Explanation: The economic survey has used the

phrase “Helicopter Hoover” in the wake of demonetization. This term is, derived from the concept of Helicopter money which denotes printing large sums of money and distributing it to the public to increase money supply and stimulate the economy in deflationary periods. The survey has called demonetization as “Reverse Helicopter” Ans:67)(b) Explanation: The scheme has launched by Ministry of Rural Development. The main objectives of AGEY are to provide an alternative source of livelihoods to members of Self Help Groups (SHGs) under DAY-NRLM by facilitating them to operate public transport services in backward rural areas. This will provide safe, affordable and community monitored rural transport services like e-rickshaws, 3 and 4 wheeler motorised transport vehicles to connect remote villages with key services and amenities including access to markets, education and health for the overall economic development of the area. Ans:68)(c) Explanation: While the Lorenz curve is most often used to represent economic inequality, it can be used to represent unequal distribution in any system. The farther away the curve is from the baseline, represented by the straight diagonal line, the higher the level of inequality. In economics, the Lorenz curve denotes inequality in the distribution of either wealth or income. The Gini coefficient is used to express the extent of inequality in a single figure. It can range from 0 (or 0%) to 1 (or 100%). Ans:69)(a) Explanation: The Government has signed an agreement with Canara bank to set up non-banking financial company (NBFC) called the Higher Education Finance Agency (HEFA). It will be a joint venture between the HRD ministry and the bank. NBFC will raise funds from the market and also mobilize CSR funds from PSUs/Corporates and lend to government-run higher educational institutions for promoting research and innovation. It is formed to give a major push for creation of high quality infrastructure in premier educational institutions. Ans:70)(b) Explanation: Tertiary activities include both production and exchange. The production involves the provisioning of services that are consumed. Exchange, involves trade, transport and communication facilities that are used to overcome distance. The quaternary sector of the economy consists of

intellectual activities often associated with technological innovation. It is sometimes called the knowledge economy. Quinary activities are services that focus on the creation, re-arrangement and interpretation of new


and existing ideas; data interpretation and the use and evaluation of new technologies. It is often referred as ‘gold collar’ professions. Ans:71)(d) Explanation: Unnat Jyoti by Affordable LEDs and appliances for All (UJALA) is a flagship scheme of Ministry of Power for distribution of energy efficient appliance. Its main objective is to promote efficient lighting, enhance awareness on using

efficient equipment which reduce electricity bills and help preserve environment. Under this scheme, LED bulbs at 40% of the market price will be distributed to every grid connected consumer. It is implemented by the Electricity Distribution Company and Energy Efficiency Services Limited (EESL). Ans:72)(d) Explanation: Priority Sector includes the following categories:

Agriculture

Micro, Small and Medium Enterprises

Export Credit

Education

Housing

Social Infrastructure

Renewable Energy Ans:73)(c) Explanation: Stages of Economic Integration:

1. Preferential Trade Agreement 2. Free Trade Agreement 3. CECA/CEPA 4. Custom Union 5. Common Market 6. Economic Union

A trade agreement is an arrangement between two or more countries or trading blocs that primarily agree to reduce or eliminate customs tariff and non-tariff barriers on limited/substantial trade between them. It also includes tax benefits and investment guarantees. The most common trade agreements are of the preferential and free trade

types in order to reduce (or eliminate) tariffs, quotas and other trade restrictions on items traded between the signatories. Trade Agreements can create opportunities for and help to grow Indian economy. Ans:74)(b) Explanation: Disinflation is a slowing in the rate of price inflation. It is used to describe instances when the inflation rate has reduced marginally over the short term. Although it is used to describe periods of slowing inflation, disinflation should not be confused with deflation, which can be harmful to the economy. Deflation is a contraction in the supply of circulated money within an economy, and therefore the opposite of inflation. In times of deflation, the purchasing power of currency and wages are higher than they otherwise would have been. This is distinct from but similar to price deflation, which is a general decrease in the price level, though the two terms are often mistaken for each other and used interchangeably. Hyperinflation is extremely rapid or out of control inflation. There is no precise numerical indication of hyperinflation. Hyperinflation is a situation where the price increases are so out of control that the concept of inflation is meaningless. Although

hyperinflation is considered a rare event, it occurred as many as 55 times in the 20th century in countries such as China, Germany, Russia, Hungary and Argentina. A condition of slow economic growth and relatively high unemployment – economic stagnation – accompanied by rising prices or inflation and a decline in Gross Domestic Product (GDP). Usually, when unemployment is high, spending declines, as

do prices of goods. Stagflation occurs when the prices of goods rise while unemployment increases and spending declines. Ans:75)(a) Explanation: FSDC is super regulatory body for regulating financial sector. Without prejudice to the autonomy of regulators, this Council would monitor macro prudential supervision of the economy, including the functioning of large financial conglomerates. In this way it is regulator of regulators. It will address inter-regulatory coordination issues and thus spur financial sector development. It will also focus on financial literacy and financial inclusion. What distinguishes FSDC from other such similarly situated organizations across the globe is the additional mandate given for development of financial sector. Chairman of the FSDC is the Finance Minister of India and its members include the heads of the financial sector regulatory authorities (i.e, SEBI, IRDA, RBI, PFRDA and FMC). Ans:76)(d) Explanation: Market Intervention Scheme (MIS) is a price support mechanism implemented on the request of State Governments for procurement of perishable and horticultural commodities in the event of a fall in market prices. The Scheme is implemented when there is at least 10% increase in production or 10% decrease in the ruling rates over the previous normal year. Market Intervention Scheme works in a similar fashion to Minimum Support Price based procurement mechanism for food grains, but is an ad-hoc mechanism. Proposal of MIS is approved on the specific request of State/Union Territory (UT) Government, if the State/UT Government is ready to bear 50% loss (25% in case of North-Eastern States), if any, incurred on its implementation. Further, the extent of total amount of loss shared is restricted to 25% of the total procurement value which includes cost of the commodity procured plus permitted overhead expenses. The Department of Agriculture & Cooperation is implementing the scheme. Under MIS, funds are not allocated to the States. Instead, central share of losses as per the guidelines of MIS is released to the State Governments/UTs, for which MIS has been approved, based on specific proposals received from them. Ans:77)(b) Explanation: APEC is regional economic forum of 21 Pacific Rim member economies that promotes free trade throughout the Asia-Pacific region. These 21 member countries collectively account for

nearly 50% of the world’s trade and about 57% of GDP. It was established in 1989 in order to leverage growing interdependence of Asia-Pacific region’s economies and promote free trade in the region. Its Headquarters is in Singapore. India is


observer of APEC since 2011 and has applied for membership. The 2017 Asia-Pacific Economic Cooperation (APEC) Forum’s Leaders’ Summit will be held in Vietnam. Ans:78)(d) Ans:79)(c) Explanations: The Anti-Counterfeiting Trade Agreement (ACTA) is a multinational treaty for the purpose of establishing international standards for

intellectual property rights enforcement. The agreement aims to establish an international legal framework for targeting counterfeit goods, generic medicines and copyright infringement on the Internet, and would create a new governing body outside existing forums, such as the World Trade Organization, the World Intellectual Property Organization, and the United Ans:80)(d) Explanation: The Geographical Indication (GI) is name or sign used on certain products which correspond to specific geographical location or origin. It is used for agricultural, natural and manufactured goods having special quality and established reputation. It also ensures that none can use their name, giving them exclusivity. The registration of a GI is valid for 10 years after which it needs to be renewed. GI is covered as element of intellectual property rights (IPRs) under Paris Convention for Protection of Industrial Property. At international level, GI is governed by WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). In India, GI tag is governed by Geographical Indications of Goods (Registration and Protection Act), 1999. This Act is administered by Controller General of Patents, Designs and Trade Marks, who is also Registrar of Geographical Indications. Ans:81)(c) Explanation: National Investment Fund is managed outside Consolidated Fund of India and is handled by selected public sector mutual funds for providing sustainable return without reducing amount. Asset Management Companies such as UTI Asset Management Company Pvt. Ltd., SBI Funds Management Pvt. Ltd. and LIC Mutual Fund Asset Management Company Ltd. etc. have appointed as fund managers for National Investment Fund. Around 75% of annual income of National Investment Fund is utilized to finance social sector schemes. Ans:82)(d) Ans:83)(d) Explanation: National Payments Corporation of India (NPCI) is the umbrella organisation for all retail payments system in India. Bharat Bill Payment System (BBPS) is a Reserve Bank of India (RBI) conceptualised system driven by National Payments Corporation of India (NPCI).Bharat Bill Payment System (BBPS) is an integrated bill payment system in India offering interoperable and accessible bill payment service to customers through a network of agents, enabling multiple payment modes, and providing instant

confirmation of payment. BBPOU functions under the Payment and Settlement Systems Act, 2007. Ans:84)(b) Explanation: During periods of rising prices, debtors gain and creditors lose. When prices rise,

the value of money falls. Though debtors return the same amount of money, but they pay less in terms of goods and services. This is because the value of money is less than when they borrowed the money. Thus the burden of the debt is reduced and debtors gain. On the other hand, creditors lose. Although they get back the same amount of money which they lent, they receive less in real terms because the value of money falls. Thus

inflation brings about a redistribution of real wealth in favour of debtors at the cost of creditors. Salaried workers such as clerks, teachers, and other white collar persons lose when there is inflation. The reason is that their salaries are slow to adjust when prices are rising. Persons who hold shares or stocks of companies gain during inflation. For when prices are rising, business activities expand which increase profits of companies. As profits increase, dividends on equities also increase at a faster rate than prices. But those who invest in debentures, securities, bonds, etc. which carry a fixed interest rate lose during inflation because they receive a fixed sum while the purchasing power is falling. Ans:85)(d) Explanation: Countries opt for devaluation only to save the economy from external factors and boost export. As currency depreciate in the global parlance, exports become more favourable and imports unfavourable. This boosts the internal economy towards export and internal usage of own goods. By devaluing the currency, trade deficits are lowered which also favours the balance of payments and thus helps the economy by providing temporary relief. A government may be incentivized to encourage a weak currency policy if it has a lot of government issued sovereign debt to service on a regular basis. If debt payments are fixed, a weaker currency makes these payments effectively less expensive over time. Ans:86)(c) Ans:87)(c) A hedge is an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security, such as a futures contract. Hedging is analogous to taking out an insurance policy. Ans:88)(d) Explanation: It is an unregulated means by which funds are raised for a new crypto currency venture. An Initial Coin Offering (ICO) is used by start-ups to bypass the rigorous and regulated capital-raising process required by venture capitalists or banks. In an ICO campaign, a percentage of the crypto currency is sold to early backers of the project in exchange for legal tender or other crypto currencies, but usually for Bitcoin. Recently, The People’s Bank of China (PBC), central bank of China has banned individuals and

organisations from raising funds through initial coin offerings saying that practice constituted illegal fund-raising. Ans:89)(a)


Explanation: Systemically important bank or a bank that is ‘too big to fail’. These are one whose failure will have nationwide or worldwide repercussions. Basel Committee on Banking Supervision (BCBS) identifies the global systemically important banks (G-SIBs). The D-SIB Framework requires the Reserve Bank to disclose the names of banks designated as D-SIBs every year. Recently, RBI has added HDFC Bank, the

second largest private sector lender of country in list of D-SIBs. SIBs are required to maintain additional Common Equity Tier 1 (CET1). Ans:90)(d) Ans:91)(c) Explanation: The International North-South Transport Corridor is the ship, rail, and road route for moving freight between India, Russia, Iran, Europe and Central Asia. The route primarily involves moving freight from India, Iran, Azerbaijan and Russia via ship, rail and road. Ans:92)(c) Explanation: The term privatization is used for a stake sell in which there is a transfer of 51% or more equity to the private players. In disinvestment, the government sells only a part of the equity which is essentially less than 51% and in a manner so that ownership and management rights can be hold by the Government itself. Government had constituted the National Investment Fund (NIF) in November, 2005 into which the proceeds from disinvestment of Central Public Sector Enterprises were to be channelized. Ans:93)(d) Explanation: Since the economic reforms initiated in 1991 and since 2005, India has not only broken through the low-growth cycle but it has also become one of the fastest-growing economies after China. The high growth rate achieved since 2005 questions the trickle-down theory in India, as it has not benefited the Indian masses in terms of lowering absolute poverty levels significantly, creating employment opportunities, and reducing inter/ intra- regional imbalances (rather it has only accentuated). There are reasons to understand why trickledown theory’ has not worked for India

Indian economy has a structural problem of

excessive economic dependence on the agricultural sector. Over 65 per cent of the population is either directly/indirectly dependent on this sector. The contribution of the agricultural sector to the overall gross domestic product {GDP) is only 18 per cent. The largest contribution of over 55 per cent comes from the services sector and the remaining 27 per cent is contributed by the secondary sector of which only 14 per cent is by the manufacturing sector. The sector contributing the least to GDP has the maximum dependence (agriculture) and (he sector contributing the most, has the least dependence (services).

In India’s growth process, there has a missing link of the relative earlier maturity of the services sector before achieving manufacturing sector maturity. Ideally it should be first manufacturing sector before the services sector or at best together. This is an important feature as there is a linkage between manufacturing sector and

agriculture sector either through raw material or as a market for industrial produce and employment opportunities.

Thus the benefit of increased growth in recent

years has largely been confined to the service sector and little to the manufacturing sector and has not percolated to the agricultural sector where the majority of our population resides.

But it also has to do with the governmental efforts by providing basic, effective and efficient Infrastructure around villages including the road /rail links. The aim should be to have pan- India rail - road connectivity. This would provide for easy accessibility and faster mode of travel the making labor mobile .History has been testimony to the fact that roads are the gateways to development in countries like Germany, the United States and more recently China. India has only recently woken up to this reality.

The saving rate began to increase steadily in the

2000s with the Tenth Plan average (for 2002-07) registering 31.4 per cent while during 2007-13 it increase almost double which is the highest in all previous decades. Ans:94)(b) Explanation: The output measured at market prices can be increased by increasing taxes in an economy. This does not necessarily imply that more goods and services have been produced in the economy. Output of an economy is worked out both at market prices as well as factor cost, but for growth purposes, output at factor cost is considered. This means that increased value in production of goods and services in an economy is captured at factor cost and not at market prices. The difference between the output at market price and at factor cost is tax burden on an economy, which is useful for cross-country comparisons. Can output at market price and factor cost be the same? The answer is yes, in cases of circumstances where the taxes are equal to subsidies or in utopian circumstances where tax and subsidies both are zero. The moment we start talking about the monetary value either at market prices or factor cost, the concept of inflation becomes important. In simpler terms, inflation is increasing prices and during inflationary times it tends to inflate the value in nominal terms. Suppose inflation is at 10 percent, it implies that the price is going up by 10 percent, that is to say that the factor cost is also increasing, which would increase the output, even though there is no physical increase in the production of goods and services, it is because of this reason that the output measured at factor cost would have to be adjusted to actually reflect the increased production of goods and services in an economy. The adjustment is a statistical exercise which is done by using the GDP deflator that gives the output at factor cost in terms of

constant prices. This adjustment for inflation is also known as ' real' or otherwise it is ‘nominal’ and is generic in nature. Real growth is adjusted for inflation while nominal growth ignores adjustment for inflation. Growth by definition has to be ‘real'. Ans:95)(d)


Explanation: Mission Indradhanush aimed to revamp the functioning of public sector banks so that PSBs can compete with the Private Sector Banks. The mission is a brainchild of PJ Nayak committee. It is launched by Ministry of Finance under the Department of Financial Services. The mission includes the seven key reforms of appointments, board of bureau, capitalisation, de-stressing, and empowerment, framework of

accountability and governance reforms. It aims to clean up the balance sheets of PSBs to ensure banks remain solvent and fully comply with global capital adequacy norms, Basel-III. Ans:96)(d) Explanation: The Government policy of procurement of Food grains has broad objectives of ensuring MSP to the farmers and availability of food grains.

The procurement under Price Support is taken up mainly to ensure remunerative prices to the farmers for their produce which works as an incentive for achieving better production.

Government of India declares Minimum Support Price (MSP) for 25 notified agricultural commodities for each Kharif and Rabi crop season on the basis of the recommendation of the

Commission of Agricultural Costs and Prices (CACP) which along with other factors, takes into consideration the cost of various agricultural inputs and the reasonable margin for the farmers for their produce.

National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED) continues to be one of the Central Nodal Agencies for procurement of 16 notified agricultural commodities of Oilseeds including Copra, Pulses and Cotton under Price Support Scheme (PSS) of Government of India.

Fruits and vegetables are sold to the Agriculture Produce Marketing Cooperatives (APMC) of the respective state government, which also fix the price keeping in view their relative cost and, also ensure the farmer obtains a fair price. FCI, the nodal central agency of Government of

India, along with other State Agencies undertakes procurement of wheat and paddy under price support scheme. Coarse grains are procured by State Government Agencies for Central Pool as per the direction issued by Government of India on time to time. Ans:97)(b) Explanation: To ensure energy security, the Government of India had decided to set up 5

million metric tons (MMT) of strategic crude oil storages at three locations namely, Visakhapatnam, Mangalore and Padur (near Udupi). These strategic storages would be in addition to the existing storages of crude oil and petroleum products with the oil companies and would serve as a cushion during any external supply disruptions. The crude oil storages are constructed in

underground rock caverns and are located on the East and West coast of India. Crude oil from these caverns can be supplied to the Indian Refineries either through pipelines or through a combination of pipelines and ships. Underground rock caverns are considered the safest means of storing hydrocarbons. Ans: 98)(c)

Capital Adequacy Ratio (CAR) is the ratio of a bank’s capital in relation to its risk weighted assets and current liabilities.

It is decided by central banks and bank regulators to prevent commercial banks from taking excess leverage and becoming insolvent in the process.

It is measured as: Capital Adequacy Ratio = (Tier I

+ Tier II + Tier III (Capital funds)) /Risk weighted assets

The risk weighted assets take into account credit risk, market risk and operational risk.

The Basel III norms stipulated a capital to risk

weighted assets of 8%. However, as per RBI norms, Indian scheduled commercial banks are required to maintain a CAR of 9% while Indian public sector banks are emphasized to maintain a CAR of 12%. Ans:99)(c) Explanation: Mercosur is a custom union in South America. Its member countries are Argentina, Brazil, Paraguay, and Uruguay. Its associate countries are Chile, Bolivia, Colombia, Ecuador and Peru. Observer countries are New Zealand and Mexico. Its purpose is to promote free trade and the fluid movement of goods, people, and currency. Venezuela was suspended in 2016 from the Mercosur trade group over its failure to comply with its commitments when it joined the group in 2012. Ans:100)(c) Explanation: Countries themselves decide whether they want to be in developed or developing categories. There are no WTO definitions of “developed” or “developing” countries. Developing countries in the WTO are designated on the basis of self-selection although this is not necessarily automatically accepted in all WTO bodies.

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