UPSC Prelims 2015 Analysis

Explanation

The correct answer is (C) dollars and other hard currencies

International Liquidity This refers to a country's ability to meet its short-term external obligations (payments for imports, debt servicing, etc.) It essentially reflects the ease with which a country can access foreign currencies needed for international transactions.

Focus on Hard Currencies While some transactions might involve other currencies, international reserves are predominantly held in major reserve currencies like the US Dollar, Euro, Japanese Yen, and British Pound. These currencies are considered "hard" because they are stable, widely traded, and liquid (easily convertible into other currencies).

Explanation

To reduce a persistent budget deficit, the government can take actions that decrease spending or increase revenue.

1. Reducing revenue expenditure (Correct) This involves cutting back on non-essential government spending. This can include areas like administrative costs, travel, or certain subsidies.
2. Introducing new welfare schemes (Incorrect) This would likely increase government spending and worsen the deficit.
3. Rationalizing subsidies (Correct) Subsidies can be a significant source of government expenditure. Reviewing and potentially reducing or reforming subsidies can help control spending.
4. Expanding industries (Depends) While industrial expansion can lead to increased tax revenue in the long run, it might not have an immediate impact on the budget deficit. In the short term, the government might need to invest in infrastructure to support expansion, potentially increasing expenditure.

Therefore, the correct answer is 1 and 3 only (Reducing revenue expenditure and Rationalizing subsidies).

Explanation

A decrease in the tax-to-GDP ratio of a country can potentially indicate 1 only (Slowing economic growth rates).

Tax to GDP Ratio This ratio represents the total tax revenue collected by a government as a percentage of the country's GDP. It's a measure of the government's ability to raise funds through taxes.

Impact of Decrease A decrease in this ratio can have several interpretations, but it doesn't necessarily point towards a less equitable income distribution (option 2).

Slowing Growth It might indicate a slowdown in economic growth. During economic downturns, businesses and individuals tend to earn less, leading to lower tax collections.

Change in Tax Policy It could also reflect a deliberate change in tax policy, such as tax cuts or exemptions, aimed at stimulating economic activity.

Inefficiency In some cases, it might suggest inefficiencies in tax collection.

Explanation

A geographical indication (GI) is a name or sign used on certain products which correspond to a specific geographical location or origin GIs have been defined under Article 22(1) of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement.

Banaras Brocades and Sarees are textiles produced in Varanasi (formerly known as Banaras), Uttar Pradesh. They have been granted Geographical Indication (GI) status, which recognizes their unique qualities and characteristics associated with the geographic region of Varanasi.

Tirupati Laddu is a sweet dish offered as prasad (religious offering) at the Tirumala Venkateswara Temple in Tirupati, Andhra Pradesh. It has been granted Geographical Indication (GI) status, recognizing its association with the temple and the unique recipe and preparation methods used.

Therefore, the correct answer is 1 and 3 only.

Explanation

The Basel III Accord is a set of international banking regulations developed by the Basel Committee on Banking Supervision (BCBS). It was formulated in response to the financial crisis of 2007-2008 and aims to improve the banking sector's resilience to financial and economic stress and improve its risk management by

Increasing capital adequacy requirements Banks need to hold more capital relative to their risk-weighted assets to absorb potential losses during financial stress. Enhancing liquidity standards Banks need to maintain a sufficient level of liquid assets to meet their short-term obligations. Strengthening risk management practices Banks are required to implement more robust risk management frameworks to identify, measure, and manage various risks they face.

Explanation

Capital-augmenting technological progress This refers to technological advancements that increase the productivity of existing capital goods. In this case, replacing wooden ploughs (a less efficient capital good) with steel ploughs (a more efficient capital good) increases the productivity of the plough itself. Steel ploughs can till more land, last longer, and require less maintenance compared to wooden ploughs.

Explanation

Both the bank rate and open market operations are components of monetary policy in the Indian economy.

Bank rate The bank rate is the rate at which the central bank (Reserve Bank of India in the case of India) lends money to commercial banks. It is one of the key tools used by the central bank to control the money supply and credit conditions in the economy.

Open market operations Open market operations refer to the buying and selling of government securities (bonds) by the central bank in the open market. Through open market operations, the central bank can inject or withdraw liquidity from the banking system, thereby influencing the level of reserves held by banks and the overall money supply in the economy.

Public debt and public revenue are not typically considered components of monetary policy. Public debt refers to the total amount of money owed by the government through borrowing, while public revenue refers to the income generated by the government through taxes and other sources. These factors are more closely related to fiscal policy, which involves government spending and taxation decisions to achieve specific economic objectives.

Explanation

Agricultural Markets in most parts of the Country are established and regulated under the APMC Acts enacted by the states.

The whole geographical area in the State is divided and declared as a market area wherein the markets are managed by the Market Committees constituted by the State Governments. Once a particular area is declared a market area and falls under the jurisdiction of a Market Committee, no person or agency is allowed freely to carry on wholesale marketing activities.

Explanation

Rupee convertibility means the system where any amount of rupee can be converted into any other currency without any question asked about the purpose for which the foreign exchange is to be used.

Non-convertibility can generally be defined with reference to the transaction for which foreign exchange cannot be legally purchased (e.g., import of consumer goods etc), or transactions which are controlled and approved on a case-by-case basis (like regulated imports etc).

Explanation

The Accelerated Irrigation Benefits Programme (AIBP) was indeed launched during 1996-97, but its objective was to provide central assistance to states to accelerate the pace of irrigation development, not specifically to provide loan assistance to poor farmers. Hence, statement 1 is incorrect.

The Command Area Development Programme (CADP) was launched in 1974-75, its primary focus was on improving the water-use efficiency and agricultural productivity in the command areas of major and medium irrigation projects. Hence, statement 2 is correct.

Explanation

The "Global Economic Prospects" report is issued periodically by the World Bank. It report that examines global economic developments and prospects, with a special focus on emerging markets and developing economies. It is issued twice a year, in January and June.

Explanation

The Labour Bureau, attached to the Ministry of Labour and Employment, is responsible for compiling and publishing the Consumer Price Index Number for Industrial Workers (CPI-IW) in India. This index tracks changes in the retail prices of a basket of goods and services consumed by industrial workers. It serves as a crucial indicator of inflation faced by this specific segment of the population.

The Labour Bureau is responsible for maintaining

• CPI (Industrial Workers)
• CPI (Rural Labourers)
• CPI (Agricultural Labourers)

Explanation

The Fair and Remunerative Price of Sugarcane (FRP) for sugarcane in India is approved by the Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister.

The proposal for FRP is determined based on the recommendation of the Commission for Agricultural Costs and Prices (CACP) in its report on the price policy for sugarcane for a particular sugar season.

Explanation

The rate of growth of real Gross Domestic Product has fluctuated over the decade. However, The Gross Domestic Product at market prices (in rupees) has steadily increased in the last decade

• The growth rate of real GDP has seen ups and downs.
• Conversely, the GDP at market prices has shown a consistent upward trend in the last decade.

Thus, statement 1 is incorrect while statement 2 is correct.

Explanation

Reducing the SLR by the RBI is likely to lead to increased liquidity in the banking system in the short term, and potentially lower lending rates by commercial banks. This can contribute to increased economic activity but wouldn't drastically alter GDP growth or directly impact FIIs.

Explanation

RBI plays a key/primary role in controlling inflation through its monetary policy. So, options (a) and (b) are incorrect.

Now, increased money supply shall only increase inflation. So option (d) is incorrect.

Decreased money circulation can help control inflation, while increased circulation can contribute to it. So, the answer should be the option (c).