UPSC Prelims 2024 Analysis

Explanation

Explanation:

• Collateral Borrowing and Lending Obligations (CBLO) are instruments of the: C. Money market

• CBLO is a money market instrument that facilitates borrowing and lending operations on a collateralized basis. It is used by banks, financial institutions, and other entities to manage their short-term liquidity requirements.

Explanation

Explanation:

Statement-I:  This statement is correct. If the United States of America (USA) were to default on its debt, holders of US Treasury Bonds would not be able to exercise their claims to receive payment. This statement is correct because, in the

• event of a default, the government would not be able to fulfil its debt obligations, meaning bondholders would not receive the payments they are due.

• Statement-II: This statement is correct. The US government debt is not backed by any hard assets, but only by the faith of the Government. This statement is also correct. US Government debt, such as Treasury Bonds, is backed by the full faith and credit of the US Government rather than any specific physical assets.

Statement II explains Statement I because the faith and credit of the US Government are the guarantees behind its debt. If this faith is shaken or if the government defaults, bondholders cannot claim any specific assets to recover their investment, hence they would not receive their payments.

Explanation

Explanation:

• Insurance Companies: Insurance companies have large funds that they need to invest securely for long-term returns. Corporate bonds and government securities fit this investment profile. Hence, this statement is correct.

• Pension Funds: Similar to insurance companies, pension funds manage retirement savings and need safe, long-term investment avenues like corporate bonds and government securities. Hence, this statement is correct.

• Retail Investors: Retail investors can also invest in corporate bonds and government securities, though the process might be slightly more complex than investing in stocks. Various platforms and brokers facilitate such investments. Hence, this statement is correct.

Therefore, all three statements are correct.

Explanation

Explanation:

• Statement I is incorrect: India does import apples from the USA. In fact, the USA is one of the major sources of apple imports for India.

• Statement II is correct: India has stringent regulations regarding the import of Genetically Modified (GM) food. The Genetic Engineering Appraisal Committee (GEAC) is the competent authority responsible for assessing the safety of GM crops and foods. Importing GM food without GEAC approval is illegal.

• Therefore, statement 1 is incorrect, while statement 2 is correct.

Explanation

Explanation:

• The Reserve Bank of India requires foreign banks operating as wholly owned subsidiaries to maintain a minimum capital requirement. As of current regulations, the RBI mandates that these subsidiaries must have a minimum paid-up voting equity capital of ₹5 billion (₹500 crore). Hence, statement 1 is incorrect.

• The RBI has set guidelines that require at least 50% of the board members of wholly-owned banking subsidiaries in India to be Indian nationals. This measure ensures that there is adequate local representation in the governance of these banks. Hence, statement 2 is correct.

Explanation

Explanation:

• Farmer's plough - Working capital - Incorrect: A farmer's plough is a long-term asset used repeatedly over time, making it fixed capital.

• Computer - Fixed capital - Correct: A computer is a long-term asset used over a period of time, making it fixed capital.

• Yarn used by the weaver - Fixed capital - Incorrect: Yarn is consumed in the production process and needs to be replaced regularly, making it working capital.

• Petrol - Working capital - Correct: Petrol is consumed in the production process and needs to be replenished regularly, making it working capital.

Therefore, only two pairs are correctly matched.

Explanation

• Statement 1: Correct India is indeed a member of the International Grains Council (IGC). 

• Statement 2: Incorrect Membership in the IGC is not a prerequisite for engaging in the rice and wheat trade. Countries that are not members can still export and import these grains. The IGC primarily serves as a forum for intergovernmental cooperation and policy discussion on grain trade.

Explanation

• The number of children born per 1000 people in the population in a year. This describes the crude birth rate, not the total fertility rate.

• The number of children born to a couple in their lifetime in a given population. This is close but not quite accurate. The total fertility rate is calculated for women, not couples.

• The birth rate minus death rate. This defines the rate of natural increase, which indicates population growth, not fertility.

• The average number of live births a woman would have by the end of her child-bearing age. This is the correct definition of Total Fertility Rate (TFR). It's a hypothetical measure assuming a woman lives through her childbearing years and experiences the age-specific fertility rates of a given period.

  • In simple terms, TFR tells us the average number of children a woman would have if current birth trends continued.

Explanation

• Storage of agricultural produce | Secondary (Incorrect) - Storage is a tertiary activity. It falls under the service sector, facilitating the smooth flow of goods from producers to consumers.

• Dairy farm | Primary (Correct) - Dairy farming involves the direct extraction of raw materials (milk) from natural resources (animals). Hence, it's a primary activity.

• Mineral exploration | Tertiary (Incorrect) - Mineral exploration is a primary activity. It involves extracting raw materials from the earth.

• Weaving cloth | Secondary (Correct) - Weaving cloth transforms raw materials (cotton, silk, etc.) into a finished product (cloth). This transformation signifies a secondary activity.

Therefore, only two pairs are correctly matched.

Explanation

• Statement 1 is correct. The digital rupee, also known as the e-rupee or Central Bank Digital Currency (CBDC), is indeed a sovereign currency issued by the RBI. It's a digital representation of India's fiat currency and is part of the RBI's monetary policy toolkit.

• Statement 2 is correct. Like physical currency, the digital rupee is a liability on the RBI's balance sheet. When you hold digital rupees, it's essentially a claim you have on the RBI, similar to holding physical banknotes.

• Statement 3 is incorrect. The digital rupee, by itself, doesn't come with inherent inflation protection. Its value, like physical currency, is subject to inflationary pressures. The RBI manages inflation through its monetary policy measures, not through the inherent design of the digital rupee.

• Statement 4 is correct. The digital rupee is designed to be freely convertible. This means you can easily exchange it with bank deposits (commercial bank money) and cash at a 1:1 ratio without any restrictions.

Therefore, the correct answer is (D) - 1, 2 and 4.

Explanation

Explanation:

• Exchange-Traded Funds (ETFs): ETFs are baskets of securities (like stocks) that are traded on stock exchanges, similar to individual stocks. They represent a financial instrument.

• Motor vehicles: Motor vehicles are tangible assets, not financial instruments. Financial instruments represent claims to assets or cash flows.

• Currency swap: A currency swap is a derivative contract where two parties exchange principal and interest payments in different currencies. It is a type of financial instrument.

Therefore, only ETFs and currency swaps are considered financial instruments.

Explanation

• Statement-I: This statement is correct. Syndicated lending, by definition, involves multiple lenders pooling resources to provide a loan to a single borrower. This inherently distributes the risk of default, as no single lender bears the entire burden if the borrower fails to repay.

• Statement II: This statement is incorrect. Syndicated loans can take various forms, including both fixed-amount term loans (lump sum) and revolving credit facilities (credit lines). 

Therefore, the correct option is C: Statement I is correct, but Statement II is incorrect.

Explanation

Explanation:

• Statement 1 is incorrect: Non-Banking Financial Companies (NBFCs) in India do not have direct access to the Liquidity Adjustment Facility (LAF) window of the Reserve Bank of India (RBI). The LAF is a tool used by RBI to manage short-term liquidity in the banking system. 

• Statement 2 is correct: Foreign Institutional Investors (FIIs) are permitted to invest in Government Securities (G-Secs) in India, subject to certain regulations and limits set by the Securities and Exchange Board of India (SEBI) and RBI. 

• Statement 3 is correct: Stock exchanges in India can offer separate trading platforms for debt securities. For instance, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) have dedicated platforms for trading in corporate bonds and government securities.