UPSC Prelims 2025 Analysis

Explanation

The correct answer is (B) II only.

Statement I is incorrect.

The Securities and Exchange Board of India (SEBI), not the Reserve Bank of India (RBI), mandates the submission of BRSR.

• SEBI introduced the Business Responsibility and Sustainability Report (BRSR) framework in May 2021, replacing the earlier Business Responsibility Report (BRR).
• The mandate applies to the top 1,000 listed companies by market capitalization, not all listed companies.
• RBI is India's central bank and primarily regulates monetary policy, banking sector, and foreign exchange - it does not regulate capital markets or mandate corporate reporting for listed companies.

Statement II is correct.

• BRSR focuses on Environmental, Social, and Governance (ESG) parameters which are predominantly non-financial metrics.
• The report covers areas like:
  • Environmental impact (carbon footprint, water usage, waste management)
  • Social responsibility (employee welfare, community development, human rights)
  • Governance practices (board diversity, ethics, stakeholder engagement)
• While some quantitative data may be included, the primary focus is on sustainability practices, policies, and qualitative disclosures rather than traditional financial metrics.
• The framework emphasizes transparency in non-financial performance indicators that impact long-term value creation.

Therefore, only Statement II is correct, making option B the right answer.

Explanation

Statement I: This statement is incorrect. The United States of America is the largest producer of ethanol in the world, not Brazil. The USA produces more ethanol than Brazil, primarily from corn. Brazil is the second-largest producer, using sugarcane as the main feedstock.

Statement II: This statement is correct. In the United States, corn is the principal feedstock for ethanol production. In contrast, Brazil uses sugarcane as the main raw material for its ethanol industry. This difference in feedstock is a key distinction between the two countries' ethanol industries.

Explanation

Statement I: Correct Capital receipts are those receipts that either create a liability or cause a reduction in the assets of the government. For example, borrowings (which create a liability) and disinvestment (which reduces assets) are capital receipts.

Statement II: Correct Borrowings (like loans raised by the government) and disinvestment (sale of government assets) are classic examples of capital receipts.

Statement III: Incorrect Interest received on loans is a revenue receipt, not a capital receipt. It does not create a liability for the government; rather, it is an income earned by the government on the loans it has given to others.

Therefore, only statements I and II are correct.

Explanation

Statement I: Correct India has become the world's largest market for equity derivatives, especially options. According to data from the World Federation of Exchanges (WFE), India accounts for a very large portion of all equity option contracts traded globally, surpassing even the US in terms of volume. This reflects a significant boom in options trading in India.

Statement II: Correct India's stock market has grown rapidly in recent years. In early 2024, the total market capitalization of Indian stock markets overtook that of Hong Kong, making India the fourth largest equity market in the world for a brief period. This demonstrates the rapid growth and global significance of India's stock market.

Statement III: Incorrect There is a regulatory body in India: the Securities and Exchange Board of India (SEBI). SEBI regularly issues warnings to investors about the risks of options trading and takes action against unregistered financial advisors. SEBI has also launched investor awareness campaigns and has penalized entities for unauthorized investment advice. Therefore, the statement that there is 'no regulatory body' is incorrect.

Therefore, only statements I and II are correct.

Explanation

Statement I: This statement is correct. Bondholders are generally considered to be at lower risk compared to stockholders because bonds are debt instruments with fixed interest payments and priority in repayment over equity holders in case of liquidation. Stockholders, as owners, face higher risk but also have the potential for higher returns.

Statement II: This statement is correct. Bondholders are indeed lenders to the company—they provide loans to the company in exchange for interest payments. Stockholders, on the other hand, are owners of the company and have a claim on its residual profits.

Statement III: This statement is correct. In the event of liquidation or bankruptcy, bondholders are paid before stockholders. This prioritization in repayment is a key reason why bonds are considered less risky than stocks.

Explanation of Relationship: Statements II and III together explain why Statement I is true:

• Because bondholders are lenders (Statement II) and are prioritized for repayment (Statement III), their risk is lower compared to stockholders, who are owners and are paid last.

Conclusion: Option A is correct because both Statement II and Statement III are correct and together they explain why bondholders are at lower risk than stockholders (Statement I).

Explanation

Statement I: Correct India joined the Minerals Security Partnership (MSP) in 2023. The MSP is a US-led initiative launched in 2022 to strengthen critical mineral supply chains among partner countries. India's participation aims to secure access to critical minerals needed for clean energy transition and reduce dependence on China for these materials.

Statement II: Incorrect India is NOT resource-rich in all 30 critical minerals it has identified. While India has significant reserves of some critical minerals like lithium (recently discovered in Jammu & Kashmir), rare earth elements, graphite, and others, it lacks adequate domestic reserves of many critical minerals. India is heavily import-dependent for several critical minerals including cobalt, nickel, copper, and others. The country imports a substantial portion of its critical mineral requirements, particularly from China and other countries.

Statement III: Correct The Parliament in 2023 amended the Mines and Minerals (Development and Regulation) Act, 1957 through the Mines and Minerals (Development and Regulation) Amendment Act, 2023. This amendment empowered the Central Government to exclusively auction mining leases and composite licenses for certain critical and strategic minerals. The amendment was made to ensure better control and strategic management of critical minerals essential for national security and economic development.

Therefore, statements I and III are correct, while statement II is incorrect.

Explanation

Statement I: Correct The 15th Finance Commission recommended grants of ₹4,800 crores from 2022–23 to 2025–26 to incentivize States to enhance educational outcomes. This is a specific grant aimed at improving education quality and outcomes in States.

Statement II: Incorrect The 15th Finance Commission recommended that 41% (not 45%) of the net proceeds of Union taxes be shared with States. The previous (14th) Finance Commission had recommended 42%, but the 15th reduced it to 41% due to the creation of the Union Territory of Jammu & Kashmir.

Statement III: Incorrect The Commission has recommended that Rs. 45,000 crore be kept as a performance-based incentive for all the States for carrying out agricultural reforms

Statement IV: Correct The 15th Finance Commission reintroduced the 'tax effort' criteria to reward States for better fiscal performance, i.e., States that mobilize more revenue relative to their GSDP are rewarded.

Therefore, statements I, III and IV are correct, hence, C is the correct answer.

Explanation

Statement I: Correct Buying and selling Government bonds is a major source of income for RBI. When RBI conducts Open Market Operations (OMOs), it buys and sells government securities in the secondary market. The interest earned on these government bonds and the profit/loss from trading activities constitute a significant portion of RBI's income.

Statement II: Correct Buying and selling foreign currency is another important source of income for RBI. As the custodian of India's foreign exchange reserves, RBI actively manages forex reserves by buying and selling foreign currencies. The returns from investing these reserves in foreign government securities and the gains from forex operations contribute to RBI's income.

Statement III: Incorrect Pension fund management is NOT a source of income for RBI. Pension fund management in India is handled by specialized institutions like Pension Fund Regulatory and Development Authority (PFRDA) and fund managers appointed by them. RBI does not engage in pension fund management as a business activity.

Statement IV: Incorrect Lending to private companies is NOT a direct source of income for RBI. RBI is the central bank and does not directly lend to private companies. It provides liquidity to commercial banks through various instruments like repo, reverse repo, and refinance facilities. Private companies get loans from commercial banks, not directly from RBI.

Statement V: Correct Printing and distributing currency notes generates income for RBI. RBI has the sole authority to issue currency notes in India (except one rupee notes which are issued by Government of India). The difference between the face value of currency notes and their production cost is called 'seigniorage', which forms part of RBI's income.

Therefore, statements I, II, and V are correct. Hence, D is the correct answer.

Explanation

1. Understand the terms:

   • Fiscal Deficit: The difference between the total expenditure and total receipts of the government, excluding borrowings. It indicates the total borrowings needed by the government.
   • Non-debt creating capital receipts: Receipts that do not create any liability for the government (e.g., recovery of loans, disinvestment). These receipts reduce the fiscal deficit.
   • Interest Liabilities: Payments made by the government on its past borrowings.
   • Gross Primary Deficit: Fiscal Deficit minus Interest Payments. It shows the deficit excluding the interest payment burden from past debts.

2. Given data:

   • Fiscal Deficit = ₹50,000 crores
   • Non-debt creating capital receipts = ₹10,000 crores (This information is usually already accounted for when the fiscal deficit figure is stated. Fiscal Deficit = Total Expenditure - (Revenue Receipts + Non-debt creating capital receipts). So, the ₹50,000 crore figure already reflects these receipts.)
   • Interest Liabilities = ₹1,500 crores

3. Calculate Gross Primary Deficit: Gross Primary Deficit = Fiscal Deficit - Interest Liabilities Gross Primary Deficit = ₹50,000 crores - ₹1,500 crores Gross Primary Deficit = ₹48,500 crores

Answer: A. ₹48,500 crores

Explanation

Statement I: Correct India is indeed the largest producer and exporter of turmeric in the world. India accounts for approximately 80% of global turmeric production and about 65% of global turmeric exports. Major producing countries include India, Myanmar, Bangladesh, and some African nations, but India dominates both production and export markets significantly.

Statement II: Correct More than 30 varieties of turmeric are grown in India. Some prominent varieties include:

• Alleppey Finger (Kerala)
• Erode turmeric (Tamil Nadu)
• Sangli turmeric (Maharashtra)
• Salem turmeric (Tamil Nadu)
• Nizamabad turmeric (Telangana)
• Rajapore turmeric (Maharashtra) India has a rich diversity of turmeric varieties adapted to different agro-climatic conditions.

Statement III: Correct Maharashtra, Telangana, Karnataka and Tamil Nadu are indeed major turmeric producing states in India. According to agricultural statistics:

• Telangana - Largest producer (around 35-40% of total production)
• Maharashtra - Second largest producer
• Tamil Nadu - Significant producer, especially known for Erode variety
• Karnataka - Important producing state Other states like Andhra Pradesh, Kerala, and Odisha also contribute significantly.

Hence, Option D is correct answer.

Explanation

Statement I: This statement is NOT correct. In India, only income from agricultural activities (like cultivation of land, growing crops, etc.) is fully exempt from income tax under Section 10(1) of the Income-tax Act, 1961. However, income from allied agricultural activities such as poultry farming, dairy farming, and wool rearing is NOT considered agricultural income and is therefore taxable under the Income-tax Act.

Statement II: This statement is correct. Under Section 2(14) of the Income-tax Act, 1961, rural agricultural land in India is specifically excluded from the definition of 'capital asset'. This means that gains arising from the sale of rural agricultural land are not subject to capital gains tax.

Conclusion: Only Statement II is correct.

Explanation

Pair I: The National Automotive Board : Ministry of Commerce and Industry

• Incorrect. The National Automotive Board (NAB) functions under the Ministry of Heavy Industries, not the Ministry of Commerce and Industry. The Ministry of Heavy Industries is responsible for the automotive sector in India.

Pair II: The Coir Board : Ministry of Heavy Industries

• Incorrect. The Coir Board is under the Ministry of Micro, Small and Medium Enterprises (MSME), not the Ministry of Heavy Industries. The Coir Board promotes the coir industry in India and is a statutory body under the MSME Ministry.

Pair III: The National Centre for Trade Information : Ministry of Micro, Small and Medium Enterprises

• Incorrect. The National Centre for Trade Information (NCTI) is a joint venture between the Ministry of Commerce and Industry and the India Trade Promotion Organisation (ITPO). It is not under the Ministry of Micro, Small and Medium Enterprises.

Therefore, none of the pairs are correctly matched.

Explanation

The Petroleum and Natural Gas Regulatory Board (PNGRB) was established under the PNGRB Act, 2006. Its primary mandate is to regulate the downstream activities in the petroleum and natural gas sector. Let's analyze each activity:

1. I. Production of crude oil: This is an upstream activity (exploration and production). PNGRB does not regulate upstream activities. These are primarily overseen by the Ministry of Petroleum and Natural Gas (MoPNG) and the Directorate General of Hydrocarbons (DGH).

2. II. Refining, storage and distribution of petroleum products:

   • Refining: The PNGRB Act's preamble mentions regulating "refining". However, the Act's specific provisions for authorizing or licensing entities generally exclude the core refining operations. PNGRB may make regulations that impact refineries (e.g., quality standards for products entering pipelines, ensuring open access for evacuation), but the primary regulation of establishing and operating refineries is not its core licensing function.
   • Storage: PNGRB regulates the establishment of storage facilities for petroleum, petroleum products, and natural gas (excluding storage at crude oil producing fields and refineries themselves).
   • Distribution: PNGRB regulates the transportation pipelines for petroleum products and natural gas, as well as city or local natural gas distribution networks.

3. III. Marketing and sale of petroleum products: PNGRB regulates the marketing of notified petroleum, petroleum products, and natural gas, including authorizing entities for marketing.

4. IV. Production of natural gas: Similar to crude oil, this is an upstream activity and is not regulated by PNGRB.

Considering the listed activities:

• Item I (Production of crude oil) is not regulated by PNGRB.
• Item IV (Production of natural gas) is not regulated by PNGRB.
• Item III (Marketing and sale of petroleum products) is regulated by PNGRB.
• Item II (Refining, storage and distribution of petroleum products):
  • "Storage" (excluding at refineries) is regulated.
  • "Distribution" (pipelines, city gas networks) is regulated.
  • "Refining" itself is not directly licensed or authorized by PNGRB as a core function, though PNGRB can make regulations that touch upon aspects of it.

The question asks how many of the above activities (referring to the Roman numeral items) are regulated.

• Item III is clearly regulated.
• Item II contains significant components (storage and distribution) that are core regulatory areas for PNGRB. While "refining" is not directly licensed by PNGRB, the overall downstream activity encompassing storage and distribution is.

Given PNGRB's role in the downstream sector which prominently includes storage, transportation (distribution), and marketing:

• Activities related to storage and distribution (covered in item II) are regulated.
• Activities related to marketing and sale (covered in item III) are regulated.

Therefore, significant regulatory functions of PNGRB fall under items II and III.

Answer: B. Only two (referring to items II and III as categories containing activities regulated by PNGRB)

Explanation

Let's calculate each deficit based on the provided information:

1. Revenue Deficit (RD): RD = Revenue Expenditure - Revenue Receipts RD = ₹80,000 crores - ₹60,000 crores RD = ₹20,000 crores So, Statement I is correct.

2. Fiscal Deficit (FD): The fiscal deficit is equal to the total borrowings of the government. Given Borrowings = ₹10,000 crores FD = ₹10,000 crores So, Statement II is correct.

3. Primary Deficit (PD): PD = Fiscal Deficit - Interest Payments PD = ₹10,000 crores - ₹6,000 crores PD = ₹4,000 crores So, Statement III is correct.

Since all three statements (I, II, and III) are correct:

Answer: D. I, II and III

Explanation

I. United Arab Emirates (UAE): Correct UPI international merchant payments are accepted in the UAE. NPCI International Payments Limited (NIPL) has partnered with several payment providers in the UAE to enable UPI payments at select merchants.

II. France: Correct France has recently started accepting UPI payments at select merchants, especially in tourist hotspots like the Eiffel Tower, as per announcements in 2023-24.

III. Germany: Incorrect As of June 2024, there is no official announcement or partnership enabling UPI merchant payments in Germany.

IV. Singapore: Correct Singapore has enabled person-to-person (P2P) remittances between PayNow and UPI, international merchant payments via UPI at physical stores are operational now.

V. Bangladesh: Incorrect There is no official rollout of UPI merchant payments in Bangladesh as of June 2024.

Therefore, only three countries from the list accept international merchant payments under UPI.

List of countries where international merchant payments are accepted at select merchant outlets:

Sr. No	Country Name
1	Bhutan
2	France
3	Mauritius
4	Nepal
5	Singapore
6	Sri Lanka
7	UAE

Explanation

Statement I: Correct The International Bank for Reconstruction and Development (IBRD), which is part of the World Bank Group, primarily provides loans and guarantees to middle-income and creditworthy low-income countries. This is a core function of the IBRD.

Statement II: Incorrect While the IBRD works to reduce poverty and support development, it does not work 'single-handedly'. It is part of the World Bank Group, which includes other institutions like the International Development Association (IDA), International Finance Corporation (IFC), etc. The IBRD collaborates with these organizations and other partners to achieve its goals.

Statement III: Correct The IBRD was established in 1944, primarily to help Europe rebuild after the devastation of World War II. Its initial focus was on post-war reconstruction, especially in Europe, before expanding its mandate to development and poverty reduction globally.

Therefore, only statements I and III are correct.

Explanation

I. Bonds: Incorrect Bonds are traditional investment instruments and are not classified as Alternative Investment Funds (AIFs). They are considered conventional debt securities.

II. Hedge Funds: Correct Hedge funds are a type of Alternative Investment Fund. In India, SEBI classifies hedge funds under Category III AIFs.

III. Stocks: Incorrect Stocks (equity shares) are traditional investment instruments and are not considered AIFs. They are direct investments in companies.

IV. Venture Capital: Correct Venture capital funds are a type of Alternative Investment Fund. In India, they are classified under Category I AIFs.

Conclusion: Only two of the above (Hedge Funds and Venture Capital) are treated as Alternative Investment Funds.

Explanation

Statement I: Correct RTGS (Real Time Gross Settlement) settles transactions individually and instantly, meaning the transfer of funds happens in real time. NEFT (National Electronic Funds Transfer), on the other hand, settles transactions in batches at specific intervals, so there is a time lag before the beneficiary receives the funds.

Statement II: Incorrect For both RTGS and NEFT, inward transactions (i.e., when you receive money) are not charged to the customer. Charges, if any, are usually levied on outward transactions (when you send money). The RBI has also mandated that banks should not levy any charges for inward transactions in both RTGS and NEFT.

Statement Ill: Incorrect Both RTGS and NEFT have similar operating schedules:

• RTGS: Available 24x7x365 (round the clock throughout the year)
• NEFT: Also available 24x7x365 since December 2019