UPSC Prelims 2025 Analysis

Explanation

The Business Responsibility and Sustainability Report (BRSR) is a disclosure framework introduced by SEBI to promote transparency in a company’s non-financial performance, particularly in Environmental, Social, and Governance (ESG) areas.

❌ Statement I: Incorrect

• SEBI, not the RBI, mandates the submission of BRSR.
• It applies to the top 1,000 listed companies by market capitalization.

✅ Statement II: Correct

• BRSR disclosures are mostly non-financial and focus on areas like environment, social responsibility, and governance.

Explanation

Ethanol is a biofuel produced mainly by fermenting sugars found in crops like corn and sugarcane, with the USA and Brazil being the top global producers—each using a different primary feedstock.

❌ Statement I: Incorrect

• The United States is the largest ethanol producer, not Brazil.

✅ Statement II: Correct

• USA uses corn; Brazil uses sugarcane as the primary feedstock for ethanol.

Explanation

Capital receipts involve transactions that either increase liabilities or reduce assets for the government. Revenue receipts, on the other hand, are routine incomes like interest or taxes that don’t affect assets or liabilities.

✅ Statement I: Correct

• Capital receipts create liabilities (like borrowings) or reduce assets (like disinvestment).

✅ Statement II: Correct

• Borrowings and disinvestment are both capital receipts.

❌ Statement III: Incorrect

• Interest received is a revenue receipt, not a capital receipt—it’s income, not a liability.

Explanation

India has seen a massive rise in equity options trading and stock market capitalization, but investor protection is actively overseen by SEBI.

✅ Statement I: Correct India leads globally in equity options trading volume, reflecting a major boom in the derivatives market.

✅ Statement II: Correct In early 2024, India's stock market temporarily overtook Hong Kong’s, becoming the 4th largest by market cap.

❌ Statement III: Incorrect India has a regulatory body—SEBI—which issues warnings and acts against unregistered advisors.

Explanation

Bonds are debt instruments, while stocks represent ownership. Bondholders earn fixed interest and are repaid before stockholders, making them relatively less risky investors.

✅ Statement I: Correct Bondholders face lower risk as they receive fixed returns and are prioritized during repayment over stockholders.

✅ Statement II: Correct Bondholders are lenders to the company; stockholders are owners.

✅ Statement III: Correct In case of liquidation, companies repay bondholders before stockholders.

Explanation

Critical minerals are essential for modern technologies and clean energy, but many countries, including India, depend on imports for several of them. To strengthen supply chains, India has joined international partnerships and reformed mining laws.

✅ Statement I: Correct India joined the Minerals Security Partnership (MSP) in 2023 to ensure reliable access to critical minerals.

❌ Statement II: Incorrect India is not resource-rich in all 30 critical minerals it has identified and remains import-dependent for several, like cobalt and nickel.

✅ Statement III: Correct In 2023, Parliament amended the Mines and Minerals Act, giving the Central Government power to auction leases for critical minerals.

Explanation

The 15th Finance Commission made recommendations to promote better fiscal discipline, education, and agriculture reforms, while adjusting tax devolution among states.

✅ Statement I: Correct 4,800 crores were recommended (2022–23 to 2025–26) to incentivize states for improving educational outcomes.

❌ Statement II: Incorrect The Commission recommended 41% of Union taxes to be shared with states, not 45%.

✅ Statement III: Correct

• It proposed a ₹45,000 crore performance-based incentive for states to implement agricultural reforms.

✅ Statement IV: Correct It reintroduced the 'tax effort' criterion, rewarding states that better mobilize revenue in relation to their GSDP.

Explanation

The Reserve Bank of India earns income through financial operations such as managing government securities, foreign exchange, and issuing currency. It does not operate like a commercial bank or a pension fund manager.

✅ Statement I: Correct Buying and selling Government bonds through Open Market Operations earns the RBI interest and trading profits.

✅ Statement II: Correct Forex operations and investment of foreign exchange reserves generate income for the RBI.

❌ Statement III: Incorrect RBI does not manage pension funds; that is done by entities like PFRDA.

❌ Statement IV: Incorrect RBI does not lend directly to private companies; it lends to banks, which in turn lend to companies.

✅ Statement V: Correct

• Printing and distributing currency notes* yields income through seigniorage—the profit from face value minus production cost.

Explanation

Fiscal Deficit represents the government's total borrowing requirement, while the Primary Deficit shows how much the government is borrowing excluding interest payments on past debt.

✅ Formula: Primary Deficit = Fiscal Deficit − Interest Payments

Given:

• Fiscal Deficit = ₹50,000 crores
• Interest Liabilities = ₹1,500 crores
• Non-debt capital receipts are already factored into the fiscal deficit, so no need to adjust further.

Calculation: Primary Deficit = ₹50,000 − ₹1,500 = ₹48,500 crores

Explanation

✅ Statement I: Correct India produces about 80% of the world’s turmeric and exports around 65% globally.

✅ Statement II: Correct India grows over 30 turmeric varieties like Alleppey Finger, Erode, Sangli, Salem, Nizamabad, and Rajapore.

✅ Statement III: Correct Major producing states include Telangana (largest), Maharashtra, Tamil Nadu, and Karnataka.

Correct Answer: (D) All statements are correct.

Explanation

Income from agriculture is tax-exempt in India, but only core agricultural activities like cultivation qualify. Allied activities such as poultry or dairy are taxable. Also, certain types of land are excluded from capital asset classification under tax law.

❌ Statement I: Incorrect Allied agricultural activities like poultry farming and wool rearing are not tax-exempt under the Income-tax Act, 1961.

✅ Statement II: Correct Rural agricultural land is not treated as a capital asset under Section 2(14), so capital gains tax does not apply on its sale.

Explanation

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

• Incorrect. It functions under the Ministry of Heavy Industries, not Commerce and Industry.

❌ Pair II: The Coir Board – Ministry of Heavy Industries

• Incorrect. The Coir Board is under the Ministry of Micro, Small and Medium Enterprises.

❌ Pair III: National Centre for Trade Information – Ministry of MSME

• Incorrect. NCTI is linked to the Ministry of Commerce and Industry, not MSME.

Explanation

The Petroleum and Natural Gas Regulatory Board (PNGRB) regulates downstream activities like storage, distribution, and marketing—not upstream activities like production.

❌ I. Production of crude oil – Not regulated

• This is an upstream activity regulated by the Ministry of Petroleum & Natural Gas and Directorate General of Hydrocarbons (DGH), not PNGRB.

✅ II. Refining, storage and distribution – Partially regulated

• Storage and distribution are regulated by PNGRB.
• Refining is generally not directly regulated, though PNGRB may set standards affecting it.

✅ III. Marketing and sale of petroleum products – Regulated

• PNGRB authorizes entities to market notified petroleum products and natural gas.

❌ IV. Production of natural gas – Not regulated

• Like crude oil, it’s an upstream activity, not under PNGRB.

Explanation

Revenue Deficit, Fiscal Deficit, and Primary Deficit are key indicators used to assess a government's financial health.

✅ I. Revenue Deficit = ₹20,000 crores – Correct

• Definition: Revenue Deficit = Revenue Expenditure − Revenue Receipts
• Calculation: ₹80,000 crores − ₹60,000 crores = ₹20,000 crores

✅ II. Fiscal Deficit = ₹10,000 crores – Correct

• Definition: Fiscal Deficit = Total Expenditure − Total Receipts (excluding borrowings)
• Alternatively, it reflects total borrowings needed to meet the gap
• Given: Borrowings = ₹10,000 crores ⇒ Fiscal Deficit = ₹10,000 crores

✅ III. Primary Deficit = ₹4,000 crores – Correct

• Definition: Primary Deficit = Fiscal Deficit − Interest Payments
• Calculation: ₹10,000 crores − ₹6,000 crores = ₹4,000 crores

Explanation

Unified Payments Interface (UPI) is expanding internationally, but only a few countries currently support international merchant payments under UPI.

✅ I. United Arab Emirates – Correct

• UPI is accepted at select merchants in the UAE via NPCI partnerships.

✅ II. France – Correct

• France allows UPI merchant payments at select tourist locations, like the Eiffel Tower.

❌ III. Germany – Incorrect

• No official rollout of UPI for merchant payments in Germany as of now.

✅ IV. Singapore – Correct

• UPI is live for both P2P remittances and merchant payments in Singapore.

❌ V. Bangladesh – Incorrect

• UPI is not yet operational for merchant payments in Bangladesh.

International merchant payments are accepted under UPI in seven countries outside of India: Bhutan, France, Mauritius, Nepal, Singapore, Sri Lanka, and the UAE.

Explanation

The International Bank for Reconstruction and Development (IBRD) is a key arm of the World Bank Group, originally created for post-war reconstruction and now focused on development in middle-income nations.

✅ Statement I: Correct The IBRD provides loans and guarantees to middle-income and creditworthy low-income countries.

❌ Statement II: Incorrect The IBRD does not work single-handedly; it collaborates with other arms of the World Bank Group like IDA, IFC, etc.

✅ Statement III: Correct It was established in 1944 to help Europe rebuild after World War II.

Explanation

Alternative Investment Funds (AIFs) are privately pooled investment vehicles that invest in assets beyond traditional options like stocks and bonds. In India, SEBI classifies AIFs into three categories, including hedge funds and venture capital funds.

❌ Statement I: Incorrect

• Bonds are traditional debt instruments and not classified as AIFs.

✅ Statement II: Correct

• Hedge Funds fall under Category III AIFs as per SEBI regulations.

❌ Statement III: Incorrect

• Stocks are conventional equity investments, not treated as AIFs.

✅ Statement IV: Correct

• Venture Capital is a form of Category I AIF in India.

Explanation

RTGS (Real Time Gross Settlement) and NEFT (National Electronic Funds Transfer) are two major electronic payment systems in India, differing mainly in settlement speed and mechanism.

✅ Statement I: Correct RTGS processes transactions instantly in real time, while NEFT settles in hourly batches, causing a time lag.

❌ Statement II: Incorrect Inward transactions (receiving money) are not charged in either RTGS or NEFT as per RBI guidelines.

❌ Statement III: Incorrect Both RTGS and NEFT are available 24x7x365, including on holidays.