UPSC Prelims 2016 Analysis

Explanation

Under Article 112 of the Constitution of India, the Annual Financial Statement has to distinguish expenditure of the Government on revenue account from other expenditures.

Government Budget, therefore, comprises Revenue Budget and Capital Budget.

Capital Budget consists of capital receipts and capital payments.

The capital receipts are loans raised by the Government from the public, called market loans, borrowings by the Government from the Reserve Bank and other parties through the sale of Treasury Bills loans received from foreign Governments and bodies, disinvestment receipts and recoveries of loans from State and Union Territory Governments and other parties.

• Capital payments consist of capital expenditure on the acquisition of assets like land, buildings, machinery, and equipment, as also investments in shares, etc., and loans and advances granted by the Central Government to State and Union Territory Governments, Government companies, Corporations and other parties.

Therefore, all the statements are correct.

Explanation

1. Incorrect The FSDC is not an organ of NITI Aayog. It's a separate apex-level body under the Ministry of Finance.

2. Correct The FSDC is headed by the Union Finance Minister.

3. Correct The FSDC plays a crucial role in monitoring macro-prudential supervision of the economy. Macro-prudential supervision focuses on preventing systemic risks within the financial system that could destabilize the entire economy.

Therefore, the correct answer is 2 and 3 only.

Explanation

It is published by the World Bank.

Ease of Doing Business Index This index was a global ranking that assessed the regulatory environment for business startups and operations in different economies. It measured regulations in areas like starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency.

Note The World Bank discontinued the Ease of Doing Business Index in 2021 due to concerns about data irregularities in some past reports.

Explanation

Andhra Pradesh is set to house India's first national investment and manufacturing zone after the state assured the Centre of availability of 2500 acres (10 sq km) of land in one place in Prakasam district.

The imminent final approval for the NIMZ, which is expected to give a fillip to the Prime Minister's Make in India campaign, comes four years after the concept was mooted to boost manufacturing in the country and two years after the Department of Industrial Policy and Promotion gave an in-principle nod to Andhra Pradesh in this regard.

Explanation

The SDR is an international reserve asset created by the International Monetary Fund (IMF) and not a single currency. Its value is based on a basket of five major world currencies

• US Dollar (USD)
• Euro (EUR)
• Japanese Yen (JPY)
• British Pound Sterling (GBP)
• Chinese Renminbi (RMB) (added in 2016)

The IMF reviews the composition of the SDR basket every five years to ensure it reflects the relative importance of currencies in the global trading and financial system. The inclusion of the RMB in 2016 signified the growing importance of the Chinese economy in the world.

Explanation

MCLR (Marginal Cost of Funds-based Lending Rate) This is a benchmark interest rate set by banks in India, below which they cannot lend. It represents the minimum cost of funds for the bank, considering factors like their own borrowing costs, operating expenses, and a profit margin. The purposes of MCLR as outlined by the RBI include

Improved Transparency (point 1) MCLR standardizes the method for calculating the minimum lending rate. This transparency allows borrowers to better understand how banks arrive at their interest rates and facilitates comparison between different banks.

Fairness for Borrowers and Banks (point 2) MCLR ensures a certain level of fairness. It prevents banks from setting arbitrarily high minimum lending rates, potentially benefiting borrowers. At the same time, it allows banks to cover their basic costs and earn a reasonable profit margin.

Therefore, both options 1 and 2 accurately reflect the purposes of the MCLR system.

Explanation

The UDAY scheme (Ujwal DISCOM Assurance Yojana), launched by the Government of India in 2015, has multiple objectives aimed at improving the financial health and operational efficiency of electricity distribution companies (DISCOMs) in India.

Explanation

Every package of food shall carry the following information on the label, namely,

• The Name of Food The name of the food shall include trade name or description of food contained in the package.

• List of Ingredients except for single-ingredient foods, a list of ingredients shall be declared on the label.

• Nutritional Information or nutritional facts per 100 gm or 100ml or per serving of the product shall be given on the label.

• Vegetarian/non-vegetarian shall be mentioned.

• There is no provision for recommendations of any medical professional regarding allergies.

Therefore, 1,2 and 4 are correct statements.

Explanation

The term "import cover" refers to the number of months a country's foreign exchange reserves can finance its imports. It's a crucial indicator of a country's external trade stability and its ability to meet its import obligations.

Explanation

Actions that can help reduce the deficit

1. Reducing revenue expenditure (Correct) This involves cutting back on non-essential government spending. Examples include reducing administrative costs, curtailing travel expenses, or postponing discretionary infrastructure projects.
2. Rationalizing subsidies (Correct) This means making subsidies more targeted and efficient. The government can identify and eliminate wasteful subsidies or ensure they reach the intended beneficiaries.

Actions that will likely increase the deficit

2. Introducing new welfare schemes (Incorrect) This would increase government spending and contribute to the deficit.
3. Reducing import duty (Incorrect) Lower import duties can lead to a decrease in government revenue collected from customs duties. This can worsen the deficit.

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

Explanation

The 'Global Financial Stability Report' is prepared by the International Monetary Fund (IMF).

The Global Financial Stability Report is a semiannual report published by the IMF that assesses the stability of the global financial system and emerging market financing. It highlights potential risks and vulnerabilities in the financial system and provides policy recommendations to promote financial stability.

Explanation

Statement 1 is Correct The International Finance Corporation (IFC) is indeed an arm of the World Bank Group, a group of five international organizations that work together to fight poverty and promote sustainable development. The IFC specifically focuses on encouraging growth in the private sector of developing countries.

Statement 2 is Correct Masala bonds are rupee-denominated bonds issued by foreign entities (public or private sector) outside of India. These bonds raise capital for the issuer in Indian rupees, providing an alternative funding source.

Therefore, the correct answer is 1 and 2 both are correct.

Explanation

A core banking solution is a centralized system that integrates various banking functions across a bank's branches.

It allows for Networked branches Customers can access their accounts and conduct transactions from any branch within the bank's network, regardless of where they originally opened their account. Improved efficiency CBS automates many manual processes, leading to faster transactions and better customer service. Centralized data management All customer information and account data are stored in a central location, facilitating easier access and record keeping.

Therefore, the correct answer is 1 only.

Explanation

The terms "amber box," "blue box," and "green box" are often associated with the agriculture sector and are commonly used in discussions related to international trade negotiations, particularly within the framework of the World Trade Organization (WTO) Agreement on Agriculture.

Amber Box This refers to domestic support measures considered to distort agricultural production and trade. These measures typically include price supports, production subsidies, and other forms of support that are considered trade-distorting.

Blue Box This category includes domestic support measures that are considered less trade-distorting compared to those in the amber box. However, they still involve certain constraints or conditions aimed at limiting their trade-distorting effects.

Green Box These are domestic support measures that are considered minimally or non-trade-distorting. They typically include subsidies that are tied to environmental or rural development objectives, as well as certain types of direct income support that do not distort trade significantly.

Explanation

Sovereign Gold Bonds (SGBs) are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash, and the bonds will be redeemed in cash on maturity. The Bond is issued by the Reserve Bank on behalf of Government of India.

Gold Monetization Scheme (GMS), which modifies the existing Gold Deposit Scheme (GDS) and Gold Metal Loan Scheme (GML), is intended to mobilise gold held by households and institutions of the country and facilitate its use for productive purposes, and in the long run, to reduce the country's reliance on the import of gold.

Explanation

The term "Base Erosion and Profit Shifting (BEPS)" refers to tax planning strategies used by multinational companies to artificially shift profits from higher-tax jurisdictions to lower-tax jurisdictions, thereby reducing their overall tax liabilities.

This practice often involves exploiting gaps and mismatches in tax rules between different countries. BEPS has been a major concern for governments worldwide as it can lead to significant revenue losses and erode the tax base of countries where economic activity occurs.

Efforts to address BEPS involve cooperation among countries to develop common standards and guidelines to prevent tax avoidance by multinational corporations.

Explanation

1. Correct Mobile telephone companies and supermarket chains owned and controlled by residents can be promoters of Payment Banks. This allows entities with a wide reach to expand financial services to unbanked populations.

2. Incorrect Payment Banks cannot issue credit cards. They can only issue debit cards linked to a pre-existing bank account.

3. Correct Payment Banks are not allowed to undertake lending activities. Their focus is on facilitating basic banking services like deposits, payments, and money transfers.