Indian Economy Mixed Quiz: Set 18

The correct answer is B, external sector. The balance of payments is the statement that records every economic transaction between the residents of a country and the rest of the world in a given period, which is precisely what the external sector of an economy means; it covers merchandise trade, services, income, transfers and capital flows. Option A is wrong because the agriculture sector is a producing sector within the domestic economy and is measured through output and national income accounts, not through the balance of payments. Option C is wrong because the government sector is tracked through the budget and the fiscal deficit, which are internal accounts. Option D is wrong because the private sector is likewise a domestic classification, covering households and firms, and appears in savings and investment data. The other three are all parts of the internal economy, while only the external sector looks outward.

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, 1 and 3 only. Statement 1 is right because the NEER is a trade weighted index of the rupee against a basket of partner currencies, so a rise in the index means the rupee has appreciated in nominal terms. Statement 3 is right because the REER adjusts the NEER for relative prices, so when domestic inflation runs faster than inflation abroad the two indices move apart. Statement 2 is wrong, and this is why options A, B and D fail: a rise in the REER means the rupee has become expensive in real terms, which makes Indian goods dearer abroad and weakens, not improves, trade competitiveness. Option A is wrong because it accepts statement 2 and leaves out the correct statement 3, option B is wrong because it accepts statement 2 and drops the correct statement 1, and option D is wrong because it accepts all three including the faulty second one.

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 C, Securities and Exchange Board of India. SEBI is the regulator of the securities market, and protecting the interests of investors is the first duty written into its founding law. It was set up in 1988 and given statutory powers by the SEBI Act of 1992, after the securities scam of that period exposed how weak the old controls were; its headquarters is in Mumbai. SEBI registers brokers, merchant bankers and mutual funds, lays down the rules for public issues, acts against insider trading and price rigging, and runs an online grievance system called SCORES for small investors. A is wrong because the Bombay Stock Exchange is a market place where shares are traded, not the regulator that polices it. B is wrong because the Reserve Bank of India looks after banks, currency and credit. D is wrong because the National Stock Exchange, like the BSE, is itself a body regulated by SEBI. Exam tip: SEBI, formed 1988, statutory in 1992, headquarters Mumbai, regulator of the securities market.

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 A, 100. The Smart Cities Mission was launched on 25 June 2015 by the Ministry of Housing and Urban Affairs for 100 cities, chosen through a two-stage City Challenge competition in which states nominated cities and the cities then sent in their own proposals. Each selected city set up a Special Purpose Vehicle to carry out the work, and the funding was shared between the Centre and the state. The same day of June 2015 also saw the launch of AMRUT and of the Pradhan Mantri Awas Yojana (Urban), so the three urban missions are often asked together. Option B is wrong because 50 is not the mission's figure; the first list announced in January 2016 named 20 cities. Option C is wrong because 200 exceeds the sanctioned number. Option D is wrong because 150 belongs to no stage of the mission. Exam tip: Smart Cities Mission — 25 June 2015, 100 cities, first 20 named in January 2016.

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 A, World Bank. The International Bank for Reconstruction and Development (IBRD) is the oldest arm of the World Bank Group and the body people mean when they say 'World Bank'. It was agreed at the Bretton Woods Conference of 1944 along with the IMF and began work in 1946, first to rebuild Europe after the Second World War and later to lend for development. Its headquarters are in Washington, D.C., and IBRD lends to middle-income and creditworthy low-income governments. The World Bank Group also holds the IDA, which gives the poorest countries interest-free credits, plus IFC, MIGA and ICSID. Option B is wrong because the IMF is the other Bretton Woods twin and looks after exchange stability and balance-of-payments support, not project lending. Option C is wrong because the WTO replaced GATT in 1995 and frames trade rules, with its seat at Geneva. Option D is wrong because option A is correct. Exam tip: World Bank = IBRD + IDA; the wider World Bank Group adds IFC, MIGA and ICSID.

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, 57 to 79. In the SDG India Index 2023-24, the fourth edition brought out by NITI Aayog in July 2024, the states' composite scores ran from 57 at the bottom to 79 at the top, with Uttarakhand and Kerala sharing the highest score of 79 and Bihar the lowest at 57. The index scores every state and union territory out of 100 on the seventeen Sustainable Development Goals, and a score of 100 would mean the 2030 targets are fully met. India's own composite score in that edition rose to 71 from 66 two years earlier. Options B, C and D are wrong because each moves one or both ends of the band: 85 and 90 are above the best state's score, and 52 is below the lowest, so no state falls there. Exam tip: SDG India Index 2023-24 — India 71, states 57 to 79, toppers Uttarakhand and Kerala, published by NITI Aayog.

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 D, NABARD. E-Shakti was launched by NABARD in 2015 to put the accounts and records of self-help groups on a digital platform. Until then an SHG kept its savings, loans, attendance and repayments in handwritten registers, which a bank could not check quickly, so grading a group and sanctioning credit took a long time. E-Shakti holds the same records online, where the lending branch can see them, so an SHG that repays well can be identified and financed faster. The project began as a pilot in Ramgarh in Jharkhand and Dhule in Maharashtra and was then extended to many more districts. A is wrong because SIDBI is the apex bank for micro, small and medium industries. B is wrong because SEBI regulates the securities market. C is wrong because IFCI was India's first development finance institution, set up for industry. Exam tip: NABARD milestones are the SHG Bank Linkage Programme of 1992, the JLG pilot of 2004-05 and E-Shakti in 2015.

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 D, Both I and II. Statement I is right, because a government security, or G-Sec, is a tradeable debt instrument issued by the central government or by a state government and can be bought and sold in the secondary market before it matures. Statement II is right as well, because repayment is promised by the government itself, so these papers carry practically no risk of default and are therefore called risk-free gilt-edged instruments. Short-dated central paper is issued as treasury bills of 91, 182 and 364 days, which are sold at a discount and repaid at face value, while longer paper is issued as dated securities that pay a fixed coupon every six months; a state's issue is called a State Development Loan. The Reserve Bank of India manages these borrowings for the government and conducts the auctions. A is wrong because it rejects both correct statements. B is wrong because it leaves out the gilt-edged character. C is wrong because it denies that G-Secs can be traded. Exam tip: G-Secs are tradeable and gilt-edged; treasury bills run 91, 182 and 364 days.

The correct answer is B, 12 percent. India's literacy rate at independence in 1947 is put at about 12 per cent.

Colonial education reached only a thin urban layer, and the figure for women was far lower, around six per cent. The first census after independence, in 1951, recorded 18.33 per cent literacy, and the number has climbed steadily since: 28.3 per cent in 1961, 52.2 per cent in 1991 and 74.04 per cent in the census of 2011. Kerala has long stood first among the states and Bihar last. A person aged seven years or above who can read and write with understanding is counted as literate.

Options A, C and D are wrong. Twenty and twenty-two per cent are higher than any figure recorded in that decade, and 18 per cent is the 1951 census reading, not the 1947 one, which is the usual trap in this question.

Exam tip: 1947 about 12 per cent, 1951 census 18.33 per cent, 2011 census 74.04 per cent.

The correct answer is C, 100%. India allows foreign direct investment of up to 100 per cent through the automatic route in railway infrastructure. The sector was opened in 2014, and the list covers suburban corridors taken up as public private partnerships, high speed train projects, dedicated freight lines, the making of rolling stock such as coaches, locomotives and train sets, railway electrification, signalling systems, freight and passenger terminals and mass rapid transport systems. Automatic route means the investor needs no prior approval from the government and only reports the investment to the Reserve Bank. Running the railways themselves remains with Indian Railways; only the infrastructure listed above is open. Option A is wrong because 50 per cent has never been the ceiling for this sector. Option B is wrong because 75 per cent belongs to no railway rule. Option D is wrong because railway infrastructure is not a prohibited sector, unlike lottery, gambling, chit funds, atomic energy and cigarette manufacture. Exam tip: railway infrastructure 100 per cent automatic, defence 74 per cent automatic.

The correct answer is C, 2020. The Aatmanirbhar Bharat Rojgar Yojana was announced in October 2020 as part of the Aatmanirbhar Bharat package, to bring back the jobs lost during the Covid-19 lockdown. Under it the central government paid the provident fund contribution for new employees taken on by establishments registered with the EPFO: in units with up to 1,000 workers it paid both the employee's twelve per cent and the employer's twelve per cent, and in larger units only the employee's share, for two years from the date of joining. The benefit covered workers drawing less than fifteen thousand rupees a month who were newly hired or had lost a job earlier that year. A is wrong because 2010 belongs to an earlier period of schemes. B is wrong because 2015 is the year of the Atal Pension Yojana. D is wrong because by 2022 registration under this scheme had already closed. Exam tip: ABRY, 2020, an EPFO-linked wage subsidy for new jobs after Covid.

The correct answer is C, Export Security. Export security is not a recognised category of trade barrier; it is not a device that restricts the movement of goods across a border. Option A is wrong as a choice because subsidies are treated as a barrier: by lowering the cost of domestic producers they make imported goods uncompetitive, and the World Trade Organization disciplines them for that reason. Option B is wrong because an embargo is the strongest of all barriers, an outright ban on trade with a particular country or in a particular good. Option D is wrong because tariff barriers, chiefly customs duty, are the classic barrier, raising the price of the imported good in the home market. Keep the two families apart: tariff barriers act on price, while non-tariff barriers such as quotas, embargoes, licensing and standards act on quantity or on entry itself.

The correct answer is A, 1 and 2 only. Statement 1 is right because when the United States Federal Reserve tightens, returns there become attractive and portfolio money flows out of emerging markets, which is capital flight. Statement 2 is right because such an outflow weakens the rupee and raises risk premiums, so a firm servicing an external commercial borrowing pays more in rupee terms and finds refinancing dearer. Statement 3 is wrong, and this settles the other options: a fall in the value of the domestic currency raises, not lowers, the currency risk on a loan that must be repaid in dollars, because every dollar of repayment now costs more rupees. Option B is wrong because it accepts the faulty third statement and drops the correct first one, option C is wrong for accepting statement 3 while leaving out statement 2, and option D is wrong because it accepts all three.