Indian Economy Mixed Quiz: Set 16

The correct answer is B, Article 265. It is the foundation of the whole tax system, because it means the executive cannot demand money from a citizen without a law passed by the competent legislature. Any levy that fails this test can be struck down by a court.

Option A, Article 246A, was inserted by the hundred and first amendment and gives Parliament and the state legislatures concurrent power to make laws on the Goods and Services Tax, which is a different matter from the general requirement of legal authority. Option C, Article 279A, provides for the constitution of the GST Council by the President. Option D, Article 280, provides for the Finance Commission, which the President appoints every fifth year to recommend how central taxes should be distributed between the Union and the states. Only Article 265 states the basic rule that taxation must rest on law.

The correct answer is B, Rural Cooperatives. Rural cooperative credit societies were the microfinance structure already in place when India became independent. They began with the Cooperative Credit Societies Act of 1904, which was passed to free village borrowers from moneylenders, and by 1947 a three tier structure of primary societies, district central cooperative banks and state cooperative banks was working across the provinces. The later forms of microfinance came much later. A is wrong because Joint Liability Groups were introduced by NABARD only in 2004 05 for small tenant farmers who lack land papers. C is wrong because the Self Help Group movement grew from the 1980s, and the SHG Bank Linkage Programme started as a pilot in 1992. D is wrong because the Grameen model belongs to Bangladesh, where Muhammad Yunus began it in the 1970s, and it reached India afterwards. Exam tip: cooperatives 1904, SHG Bank Linkage 1992, Joint Liability Groups 2004.

The correct answer is C, A and C only. Statement A is correct: Article 280 provides that the Commission shall consist of a Chairman and four other members appointed by the President. Statement C is also correct: Article 280 is the very article that lists the matters on which the Commission makes its recommendations, including tax devolution and grants-in-aid. Statement B is wrong, and this is the trap the question is built on. The recommendations of the Finance Commission are advisory in nature, and the Union government is not legally bound to accept them; Article 281 only requires the report, with a memorandum explaining the action taken, to be laid before each House of Parliament. Because B is false, options A, B and D, each of which includes B, cannot be right, leaving A and C only.

The correct answer is B, Mahatma Gandhi National Rural Employment Guarantee Act. This law makes the right to work a legal guarantee: every rural household whose adult members are willing to do unskilled manual work is entitled to at least 100 days of wage employment in a financial year. The Act was passed in 2005 as NREGA, came into force from 2 February 2006 in 200 districts, was extended to the whole country by 2008 and renamed after Mahatma Gandhi in 2009. If work is not given within fifteen days, the worker is paid an unemployment allowance, and one third of the days are reserved for women. Option A is wrong because the IIM Act of 2017 only gives those management institutes the power to grant degrees. Option C is wrong because the Payment of Wages amendment merely allowed wages by cheque or bank transfer. Option D is wrong because the Citizenship Act deals with who is a citizen. Exam tip: NREGA 2005, in force 2 February 2006, 100 days of work.

The correct answer is D, BSE. The Bombay Stock Exchange is the oldest stock exchange in India and in Asia. It began in 1875 as the Native Share and Stock Brokers' Association, growing out of the meetings of brokers under a banyan tree near Horniman Circle in Mumbai, and it was the first Indian exchange to be recognised under the Securities Contracts (Regulation) Act, 1956. Its home on Dalal Street is the Phiroze Jeejeebhoy Towers, and its benchmark index is the Sensex, made up of 30 companies. A is wrong because the Calcutta Stock Exchange, though old, was set up in 1908. B is wrong because the National Stock Exchange started in 1992 on the advice of the Pherwani Committee and was the first in India to bring in fully electronic screen-based trading, with Nifty as its index. C is wrong because the Delhi Stock Exchange came up in 1947. Exam tip: BSE 1875 with Sensex 30, NSE 1992 with Nifty 50.

The correct answer is C, SBI Life Insurance. It is a private sector joint venture, not a public sector insurer.

SBI Life was set up in 2001 as a partnership between the State Bank of India and BNP Paribas Cardif of France. Although the State Bank holds a large stake, the company is registered and classified as a private life insurer and its shares are listed on the stock exchanges. The only public sector life insurer in India is the Life Insurance Corporation, set up in 1956.

Option A, United India Insurance of Chennai, and option B, New India Assurance of Mumbai, are two of the four government owned general insurers, along with National Insurance and Oriental Insurance. Option D, the General Insurance Corporation of India, is the state owned national reinsurer. All of them came out of the nationalisation of general insurance in 1972.

Exam tip: public insurers - LIC plus the four general insurers and GIC Re; SBI Life, HDFC Life and ICICI Prudential are private.

The correct answer is B, 1 July 2017. GST was rolled out at a midnight session of Parliament and the date is now observed every year as GST Day. From that date a single tax on the supply of goods and services replaced central excise duty, service tax, state value added tax and a long list of smaller state levies.

Option A, 1 April 2016, is the beginning of a financial year but has no connection with GST; the enabling amendment was still before Parliament then. Option C, 1 April 2017, is when several of the GST Acts received assent, but the tax itself was not yet in operation. Option D, 1 January 2018, is later than the rollout and is sometimes confused with the introduction of the electronic way bill, which was phased in during 2018. The single date worth memorising for this chapter is 1 July 2017.

The correct answer is D, 1982. The National Bank for Agriculture and Rural Development was set up on 12 July 1982.

NABARD was created by an Act of Parliament of 1981 on the recommendation of the Shivaraman Committee, formally the Committee to Review Arrangements for Institutional Credit for Agriculture and Rural Development, and it began work in July 1982. It is the apex refinance institution for agriculture, small industry, handicrafts and other rural activities, and its headquarters is in Mumbai. It supervises Regional Rural Banks and cooperative banks, runs the Rural Infrastructure Development Fund, and promotes the self-help group and bank linkage programme.

A is wrong: 1979 is not connected with NABARD. B is wrong: 1981 is the year the enabling Act was passed, not the year the bank started functioning. C is wrong: 1978 is too early for this institution.

Exam tip: NABARD - Act 1981, began 12 July 1982, Shivaraman Committee, headquarters Mumbai.

The correct answer is C, The President of India. The Finance Commission is constituted by the President under Article 280, and it therefore makes its recommendations to the President. Under Article 281 the President must cause every recommendation, together with an explanatory memorandum on the action taken on it, to be laid before each House of Parliament. Option A is wrong because NITI Aayog is an executive body set up by a Cabinet resolution in 2015 and has no role in receiving the Commission's report. Option B is wrong because the Finance Minister and the Ministry of Finance act on the recommendations once accepted but are not the authority the report is addressed to. Option D is wrong because the Prime Minister chairs the Union Council of Ministers and NITI Aayog but does not receive the report either.

The correct answer is B, 1999. The Foreign Exchange Management Act was passed in 1999 and came into force on 1 June 2000, replacing the Foreign Exchange Regulation Act of 1973. The change of one word in the title tells the story: FERA regulated and restricted dealings in foreign exchange and treated a breach as a criminal offence, while FEMA manages them in an open economy and treats a breach as a civil matter with a monetary penalty. FEMA freed most current account transactions, kept capital account transactions under the control of the Reserve Bank, and is administered by the Directorate of Enforcement. Option A is wrong because 1988 has no link with this law. Option C is wrong because 2014 relates to later changes in foreign investment policy, not to FEMA's enactment. Option D is wrong because 1992 is the year of the SEBI Act and of the first big liberalisation of trade policy. Exam tip: FERA 1973 was criminal in approach, FEMA 1999 is civil, and it took effect in June 2000.

The correct answer is A, the One Hundred and First Amendment Act, 2016. It inserted Article 246A, Article 269A and Article 279A and made the sharing of taxing power between the Union and the states possible, so that both could tax the same supply.

Option B, the hundred and second amendment of 2018, gave constitutional status to the National Commission for Backward Classes and has nothing to do with taxation. Option C is the trap in this question: the hundred and twenty-second was the number of the Bill as introduced in Parliament, and on enactment it became the hundred and first Amendment Act, because amendment Acts are numbered in the order they are passed. Option D, the ninety-seventh amendment of 2011, dealt with cooperative societies and added the right to form them under Article 19. Only the first option names the Act correctly.

The correct answer is D, money. Consumer theory studies how a household decides to spend its money among the goods and services available to it.

The idea rests on three things: the wants of the consumer, the prices of goods, and the income in hand, which is the budget constraint. Since income is limited, the consumer chooses the basket that gives the greatest satisfaction, or utility, from the money spent, and is said to be in equilibrium when no rearrangement of spending can raise that satisfaction. The law of diminishing marginal utility, indifference curves and the law of demand all belong to this branch of microeconomics.

Option A is wrong because the use of time is studied separately as the labour-leisure choice. Option B is wrong because relations are social, not economic, choices. Option C is wrong because energy here has no economic meaning as a thing the consumer allocates.

Exam tip: consumer theory joins three things - wants, prices and income - and explains the demand curve.

The correct answer is B, total expenditure minus total receipts other than borrowings. Fiscal deficit measures the whole amount the government must borrow in a year, because it compares everything it spends with everything it earns from taxes, non-tax revenue, recovery of loans and disinvestment, leaving borrowing out of the receipts side. Option A is wrong because that formula gives the revenue deficit, which shows borrowing for routine running rather than the total borrowing requirement. Option C is wrong because subtracting interest payments from the fiscal deficit, not from total expenditure, gives the primary deficit. Option D is wrong because there is no standard deficit defined in that way; capital receipts themselves include borrowings, so such a figure would double count the very item that fiscal deficit is meant to isolate.

The correct answer is D, 1977. IBM and Coca-Cola wound up their Indian operations in 1977 rather than dilute their holdings to 40 per cent. The Foreign Exchange Regulation Act, passed in 1973, required foreign companies to cut their equity in Indian subsidiaries to that level and to obtain permission for most dealings in foreign exchange. This was the high point of a closed, licence based economy, and the exit of two well known American firms became its symbol. Coca-Cola returned only after the reforms of 1991, and FERA itself was replaced by the milder Foreign Exchange Management Act of 1999. Option A is wrong because 1964 falls well before FERA was enacted. Option B is wrong because 1981 is after both companies had already left. Option C is wrong because 1956 is the year of the Industrial Policy Resolution, unrelated to this exit. Exam tip: remember FERA 1973, the IBM and Coca-Cola exit in 1977, liberalisation in 1991 and FEMA in 1999 as one chain.

The correct answer is B, Article 279A. Under it the President constitutes the GST Council, which is chaired by the Union Finance Minister and includes the Union Minister of State for Finance and a minister nominated by each state. The Council recommends the rates, the exemptions, the threshold limits and the model laws, and it is the forum where the Centre and the states bargain.

Option A, Article 269A, provides for the levy and collection of GST on inter-state supply by the Government of India and its apportionment between the Union and the states. Option C, Article 246A, is the enabling provision that gives both Parliament and the state legislatures power to make laws on GST. Option D, Article 268, deals with duties levied by the Union but collected and appropriated by the states, such as stamp duties, a much older provision. The Council alone belongs to Article 279A.

The correct answer is A, Silk farming. Sericulture is the rearing of silkworms to produce raw silk. Mulberry or other host plants are grown, the worms are fed on the leaves until they spin cocoons, and the cocoons are then boiled and reeled into thread. India is the second largest producer of silk in the world after China, and the only country that makes all four commercial varieties, namely mulberry, tasar, eri and muga, the last of these grown only in Assam. Karnataka leads in mulberry silk, and the Central Silk Board at Bengaluru looks after the industry. Option B is wrong because rearing fish is called pisciculture. Option C is wrong because rearing birds, mainly poultry, is aviculture. Option D is wrong because keeping bees for honey and wax is apiculture. Exam tip: learn the family together, seri for silk, api for bees, pisci for fish, horti for fruit and vegetables, viti for grapes and flori for flowers.

The correct answer is B, at the expiration of every fifth year. Article 243-I, inserted by the seventy-third Constitutional Amendment of 1992, requires the Governor of a State to constitute a Finance Commission at the expiration of every fifth year to review the financial position of the Panchayats and to recommend how taxes, duties, tolls and fees should be divided between the State and its Panchayats. Article 243-Y makes the same body examine the finances of the Municipalities. Options A, C and D are wrong simply because the Constitution fixes the interval at five years, the same interval Article 280 sets for the central Finance Commission, which makes the two easy to remember together. Note also that the State Finance Commission, like the central one, is a constitutional body and not a statutory one.

The correct answer is B, alcoholic liquor for human consumption. The definition of goods and services tax inserted by the hundred and first amendment expressly excludes it, so states continue to levy state excise and value added tax on liquor, and it is a major source of their own revenue.

Option A, tobacco products, are within GST, and in addition the Centre may levy central excise duty on them and a compensation cess is charged, so they are taxed more heavily rather than excluded. Option C, cement, is an ordinary taxable supply under GST. Option D, air-conditioners, are likewise taxable and were placed in the highest slab at the rollout as a consumer durable. Along with liquor, the items still outside the actual levy are the five petroleum products and electricity, but those are excluded by decision rather than by the definition in the Constitution.

The correct answer is C, Constitutional body. The State Finance Commission owes its existence directly to the Constitution: Article 243-I, added by the seventy-third Amendment, requires the Governor to constitute it every fifth year for the Panchayats, and Article 243-Y extends the arrangement to the Municipalities. A body created by the Constitution itself is called a constitutional body, which is the highest of these categories. Option A is wrong because a merely legal or statutory body is one set up by an ordinary law of the legislature, such as the National Human Rights Commission. Option B is wrong because a non-statutory body rests only on an executive decision, as NITI Aayog and the former Planning Commission do. Option D is wrong because option C states the position correctly. A simple ladder helps here: a constitutional body is named in the Constitution, a statutory body is created by an ordinary Act, and a non-statutory body rests on an executive order alone; Article 243-I puts the State Finance Commission on the first rung.

The correct answer is C, IGST, the Integrated Goods and Services Tax. It is levied and collected by the Government of India on inter-state supplies under Article 269A, and the proceeds are apportioned between the Union and the state where the goods or services are consumed, which is what makes GST a destination-based tax.

Option A is wrong because Central GST is only the Union's half of the levy on a supply made within a single state. Option B is wrong for the same reason on the state side: State GST applies to an intra-state supply. Option D describes exactly the intra-state case, where CGST and SGST are charged together at half the applicable rate each, and is the distractor that catches candidates who reverse the two situations. In a union territory without a legislature the state half is charged as Union Territory GST instead.