UPSC Prelims 2023 Analysis

Explanation

Out of the four listed assets, three are considered intangible investments

• Brand recognition (Intangible) This is an intangible asset as it's not a physical good but represents the value associated with a brand's reputation and customer recognition.

• Intellectual property (Intangible) This encompasses intangible assets like patents, copyrights, trademarks, and trade secrets. It represents intellectual creations that provide a competitive advantage.

• Mailing list of clients (Intangible) This is a customer relationship asset that holds value because it allows you to connect with potential and existing customers.

• Inventory (Tangible) Inventory refers to the stock of physical goods that a company holds for sale. It's a tangible asset with a physical form.

Explanation

• Statement 1 is incorrect NABARD began promoting self-help groups in 1991-1992. And it served as the actual launch pad for the SHG movement. The Reserve Bank of India additionally permitted SHGs to open savings bank accounts in 1993. 

• Statement 2 is correct The Banks provide the loan to the Self-Help Group as a whole and it is the collective responsibility of the SHG to repay that loan. Hence all members of a group take responsibility for a loan that an individual member takes. Further, the SHG may decide to not provide any share in further loans to the defaulter member. 

Statement 3 is correct. The Financial Inclusion Fund scheme to support Scheduled Commercial Banks (SCBs) and Regional Rural Banks (RRBs) for enabling Dual Authentication options in the micro ATMs for SHG transactions is being launched to provide an enabling eco-system for the SHGs to seamlessly operate at Business Correspondent points with the proposed Dual Authentication feature. Thus, it can be said that SCBs and RRBs support the SHGs in availing the credits as per their needs.

Explanation

• Statement I Incorrect : Earlier, InvITs offered some tax benefits to investors. However, the budget in 2023 changed the taxation structure. Currently, all income distributed by InvITs, including interest income, dividend income, and rental income, is taxable in the hands of the unitholders according to their income tax slab.

Statement II Correct : InvITs are indeed recognized as borrowers under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). This Act allows InvITs to access various financing options and enforce security interests in case of defaults.

Explanation

• The beta value of a stock measures how much its price moves compared to the overall market:

• Beta > 1: Stock is more volatile than the market (moves more).

• Beta < 1: Stock is less volatile than the market (moves less).

• Beta = 1: Stock moves in line with the market.

Explanation

• The concept of 'Small Farmer Large Field' is a participatory collective action model that aims to improve the livelihood of small and marginal farmers in India by achieving economies of scale and bargaining power in the supply chain. 

• It was adapted from the Large Field Model of Vietnam and was piloted to address the key challenges faced by millions of small and marginal farmers in India. The model allows small farmers to benefit from achieving economies of scale by organizing themselves into groups. 

• Option (b) Small Farmers Large Field (SFLF) is an agri model to overcome the disadvantages faced by millions of small and marginal farmers due to diseconomies of scale and lack of bargaining power in the supply chain.

Explanation

• Statement I- correct In the aftermath of the COVID-19 pandemic, many central banks around the world observed rising inflation. To combat this inflation, they resorted to raising interest rates. This is a well-established monetary policy tool to curb inflation by making borrowing more expensive and encouraging saving, thereby reducing the money supply in circulation. 

• Statement II- correct Central banks are entrusted with maintaining price stability and managing inflation. Raising interest rates is one of the primary instruments they use to achieve this objective. While other factors can influence inflation, central banks do have the ability to significantly impact it through monetary policy measures. 

• Therefore, both statements accurately reflect the role of central banks and their use of interest rates to manage inflation and statement 2 is the correct explanation for statement 1.

Explanation

• Pair 1 is correct Kamarajar Port, located on the Coromandel Coast about 24 km north of Chennai Port, Chennai, is the 12th major port of India, and the first port in India which is a public company. The Kamarajar Port is the only corporatized major port and is registered as a company. Today, the landlord port is the dominant port model in larger and medium-sized ports. 

• Pair 2 is correct Mundra Port is the largest private port in India. The port of Mundra is located on the north shores of the Gulf of Kutch near Mundra, Kutch district, in the state of Gujarat. Mundra is a major hub for containers and bulk cargo. It is run by Adani Ports and SEZ Limited (APSEZ) and began operations in 2001. Mundra Airport is undergoing major developments to convert it into an international airport for air cargo. 

• Pair 3 is incorrect Jawaharlal Nehru Port Trust Nhava Sheva (JNPT) is the largest container port in India and one of the most essential subcontinent harbours on the Western coast.

Explanation

• Transactions without US Dollar or SWIFT : Traditional digital payments often rely on the US dollar as a reserve currency and might involve the SWIFT system for international settlements.

• A central bank digital currency (CBDC) is the digital form of a country's fiat currency. CBDCs have the potential to bypass these traditional channels. Transactions between countries using their own CBDCs could happen directly, reducing reliance on the US dollar and potentially making cross-border payments faster and cheaper.

• Programmable Money with CBDCs : CBDCs can be programmed with certain features.  A central bank could issue a CBDC with a built-in spending time frame, for example, vouchers for specific purposes like public transport subsidies. These would expire after a certain period, ensuring the funds are used for the intended purpose. 

• Therefore, CBDCs offer unique functionalities compared to traditional digital currencies. They can potentially streamline international payments and introduce programmable features for targeted uses.

Explanation

Based on principles of need, equity and performance, overall devolution formula is as given in the chart:

Explanation

Capital markets are financial markets where long-term securities, such as stocks and bonds, are traded. They provide a platform for raising capital for businesses and governments. 

On the other hand, Money markets are financial markets where short-term securities such as T-Bill, C-Paper, Cash Management Bills, Ways and Means advances, etc are traded. 

• Statement 1 is correct- Government bonds are long-term debt securities issued by governments to finance their activities. The government bond market is a part of the capital market as it involves the trading of long-term debt securities. 

• Statement 2 is incorrect- The call money market is a short-term market where funds are borrowed and lent for very short durations, usually overnight. It deals with short-term funds, and its transactions are not classified as part of the capital market.

• Statement 3 is incorrect- Treasury bills are short-term debt instruments issued by governments to finance their short-term cash flow requirements. The treasury bill market, similar to the call money market, deals with short-term instruments and is not considered part of the capital market. 

• Statement 4 is correct- The stock market, also known as the equity market or share market, is where shares or stocks of publicly listed companies are bought and sold. The stock market is a part of the capital market as it involves the trading of ownership interests (equity securities) in companies.

Explanation

• Statement 1 is incorrect: As per the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, Medium Enterprises are those for which the investments in Plant and Machinery are not more than Rs. 50 crore of and turnover not more than Rs. 250 crore.

• Statement 2 is correct: All bank loans to MSMEs that meet the criteria outlined in the Master Direction on “Priority Sector Lending (PSL) – Targets and Classification” dated September 4, 2020 are eligible to be classified as priority sector lending.

Explanation

• Statement I is correct In 2021, Switzerland exported $86.7B in Gold, making it the 1st largest exporter of Gold in the world. Switzerland is consistently the world's leading gold-exporting country based on value. (Please note: The list is dynamic & keeps varying yearly)

• Statement II is not correct. The United States is way out in front as the country with the largest gold reserves in the world at 8,000 tonnes (as of 2024).

• In India, the largest resources of gold ore (primary) are located in Bihar (44%) followed by Rajasthan (25%), Karnataka (21%), West Bengal (3%), Andhra Pradesh (3% ), Jharkhand (2 %). The remaining 2% resources of ore are located in Chhattisgarh, Madhya Pradesh, Kerala, Maharashtra and Tamil Nadu. (PIB 2021)

• India is one of the largest gold importers, sourcing 800-1,000 tons annually, mainly from Switzerland, the UAE, and South Africa. Imports are driven by high domestic demand for jewelry and investment. Gold exports, primarily in jewelry, target the US, UAE, and Hong Kong, supporting India's trade through its jewelry manufacturing sector.

Explanation

• According to data from the Food and Agriculture Organization (FAO) and other agricultural databases, India does have more arable land than China. As of recent data, India's arable land is approximately 157 million hectares, whereas China's arable land is around 119 million hectares. Hence, Statement 1 is correct.

• While India has a substantial amount of irrigated land, China has implemented extensive irrigation projects and has a higher proportion of its arable land irrigated. As a percentage of arable land, China's irrigated land is higher than that of India.Therefore, statement 2 is incorrect.

• China has a higher average agricultural productivity per hectare compared to India. This is due to several factors, including technological advancements, better infrastructure, and more effective agricultural practices in China. Hence, statement 3 is also incorrect.

Explanation

• Sterilisation refers to the actions taken by a central bank to offset the impact of its foreign exchange operations on the domestic money supply. 

• When a central bank intervenes in the foreign exchange market by buying or selling foreign currencies, it affects the domestic money supply. 

• Open Market Operations (OMO) is one of the primary tools used by central banks, including the Reserve Bank of India (RBI), to conduct monetary policy. 

• In OMO, the central bank buys or sells government securities (bonds) in the open market to influence the liquidity in the economy. When the RBI conducts OMO, it impacts the money supply in the economy. If the RBI buys government securities, it injects money into the system, increasing the money supply. To prevent this injection of money from creating inflationary pressures, the RBI engages in sterilisation. 

• Sterilisation involves the simultaneous sale or purchase of other securities, typically treasury bills, to offset the impact of the initial open market operation.

Explanation

• The Government of India provides Minimum Support Price (MSP) for niger seeds to support farmers and ensure a baseline return on their crops. This is especially important for crops like niger which might have volatile market prices. 

• Niger is primarily cultivated as a Kharif crop in India. Kharif refers to the monsoon season in India, typically from June to September. Niger thrives in these rainy conditions. 

• Niger seed oil has various uses, and some tribal communities in India traditionally use it for cooking purposes. The oil has a nutty flavour and can be used as a substitute for other cooking oils.

Explanation

Statement I is incorrect India�s share in global merchandise trade is only 1.8% and 4% in global services. India plans to increase its export share in global trade from 2.1% to 3% by 2027 and 10% by 2047.

Statement II is correct The PLI scheme is open to both domestic and international manufacturers. Samsung as well as Indian firms such as Dixon Technologies, UTL, Neolyncs, Lava International, Optiemus Electronics and Micromax are also expanding their factories to take advantage of the PLI scheme.