Indian Economy Mixed Quiz: Set 23

The correct answer is A, an investor who feels that the price of a particular security is going to fall. A bear expects prices to slide and therefore sells, hoping to buy the same security back cheaper, which is why a falling market is called a bear market. The name is said to come from the bear striking downward with its paws, against the bull that tosses its horns upward. On Indian exchanges a bear typically sells short, and a spell of heavy selling that drags prices down is called a bear hug or a bear raid. B is wrong because an investor who expects prices to rise is a bull. C is wrong because a person holding a share or a bond and so having an interest in the company is a stakeholder. D is wrong because one who lends money or buys a bond is a creditor. Exam tip: bear sells expecting a fall, bull buys expecting a rise; Dalal Street carries statues of both.

The correct answer is B, differentiates it from other products in the market. A brand is the name, term, sign, symbol or design a seller gives a product so that buyers can tell it apart from everything else on the shelf. That is the defining purpose of branding, which is identification. A brand name registered as a trademark cannot legally be copied, so it fixes responsibility for quality on one producer and lets a firm build a reputation, advertise, and set a price of its own instead of competing on price alone. Packaging, labelling and branding together make up a product's identity. Option A is wrong because a brand may well help sales, but higher sales are a result of branding and not what branding itself does. Option C is wrong for the same reason, since attractiveness comes from packaging and design. Option D is wrong because a rebate on the maximum retail price is a sales promotion offer and has nothing to do with branding. Exam tip: branding identifies and differentiates, packaging protects, and labelling informs.

The correct answer is B, the proportion of the population below the poverty line. The head count ratio simply counts how many people fall below the line and divides that by the total population, which makes it easy to understand and easy to compare across states. Option A is wrong because the depth of poverty, that is the average shortfall of the poor from the line, is measured by the poverty gap index, and it is precisely what the head count ratio fails to show. Option C is wrong because inequality among the poor is captured by the squared poverty gap or by measures such as the Gini coefficient. Option D is wrong because unemployment is a separate concept measured by labour force surveys; a person may be employed and still poor, which is common among casual workers.

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, 22. The Government of India announces a Minimum Support Price for twenty-two mandated crops on the recommendation of the Commission for Agricultural Costs and Prices. These cover cereals, pulses, oilseeds and commercial crops such as copra, raw cotton and raw jute. Sugarcane is kept outside this list and is dealt with separately through a Fair and Remunerative Price.

Option A is wrong because twenty is short of the mandated list and matches no official grouping. Option C is wrong because twenty-four is often chosen by candidates who count sugarcane and one or two minor crops along with the mandated list. Option D is wrong because eighteen is far too small; the pulses and oilseeds alone account for more than ten of the twenty-two. The figure to remember is twenty-two mandated crops plus a separate FRP for sugarcane.

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 C, 1 and 3 only. Statements 1 and 3 hold while statement 2 does not, so this pairing is the right one. The Agreement on Trade-Related Investment Measures is one of the World Trade Organization agreements that came out of the Uruguay Round in 1995. It bars a member from placing conditions on a foreign investor that distort trade in goods, and the two named prohibitions are the local content requirement and the trade balancing requirement, which is why a quantitative limit on what an investor may import is not allowed. The agreement covers investment measures only insofar as they affect trade in goods, so statement 2 is wrong; services are handled separately under GATS. Statement 3 stands because the agreement does not tell a country whom to admit as an investor or on what terms, and so does not regulate foreign investment itself. A and D are wrong because each includes statement 2. B is wrong because it rests on statement 2 alone. Exam tip: TRIMS is about goods, GATS about services, TRIPS about intellectual property.

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 D, the level of mutual trust and harmony in the society. Social capital means the networks, shared norms and trust that let people in a society work together, so it is measured by relationships rather than by things or numbers of people. The idea was popularised by Robert Putnam, who argued that a community rich in trust and civic association gets better government and faster growth because agreements are kept without costly enforcement. Self-help groups, cooperatives and village committees are the everyday form it takes in India. A is wrong because literacy is part of human capital, the skill and knowledge embodied in people. B is wrong because buildings, infrastructure and machines are physical or produced capital. C is wrong because the size of the working age group is the demographic dividend, a matter of population structure. Exam tip: physical capital is what you build, human capital is what you learn, social capital is whom you trust.

The correct answer is D, Gujarat. Amul grew out of the Kaira District Co-operative Milk Producers' Union, started at Anand in Gujarat in 1946 when the farmers of Kheda district organised against the low prices paid to them by middlemen. Tribhuvandas Patel led the farmers and Verghese Kurien built the dairy into a modern enterprise, so that milk from lakhs of small producers could be collected, chilled, processed and sold under one brand. The Anand pattern was carried across the country through Operation Flood from 1970, which made India the largest milk producer in the world, and Kurien is remembered as the father of the White Revolution. A is wrong because Delhi is a market for milk, not the home of the cooperative. B is wrong because Karnataka's cooperative brand is Nandini. C is wrong because Uttar Pradesh produces a great deal of milk but Amul did not begin there. Exam tip: Amul — Anand in Gujarat, 1946; Operation Flood 1970 under Verghese Kurien.

The correct answer is A, Argentina, Mexico, South Africa and Turkey. All four of these countries sit in the G20, so this is the only group in which no name falls outside the forum. The G20 began in 1999 as a meeting of finance ministers and central bank governors, and it was raised to the level of a leaders' summit in 2008 after the global financial crisis. It brings together nineteen countries along with the European Union, and the African Union was admitted as a member at the New Delhi summit. Its Asian members include India, China, Japan, South Korea, Indonesia, Saudi Arabia and Turkey. B is wrong because Malaysia and New Zealand are not members, even though Australia and Canada are. C is wrong because Iran and Vietnam stand outside the group, while Brazil and Saudi Arabia are inside it. D is wrong because Singapore is not a member, though it is often invited as a guest. Exam tip: among the Southeast Asian states only Indonesia is a G20 member.

The correct answer is D, 1969. The Monopolies and Restrictive Trade Practices Act was passed in 1969 and came into force on 1 June 1970. It followed the report of the Dutt Committee on industrial licensing, which found that economic power had gathered in a few business houses. The Act set up the MRTP Commission, required large undertakings to get clearance before expanding, and banned restrictive and unfair trade practices. After the reforms of 1991 the licensing clauses were dropped, and the law was finally replaced by the Competition Act, 2002, under which the Competition Commission of India now works. Option A is wrong because 1977 is the year of the Janata government's Industrial Policy Statement, which favoured small and cottage industry. Option B is wrong because 1973 is the year of the Foreign Exchange Regulation Act, FERA. Option C is wrong because 1980 brought another Industrial Policy Statement, which again encouraged larger units. Exam tip: MRTP Act 1969, Competition Act 2002, Competition Commission of India in its place.

The correct answer is B, the National Statistical Office. It works under the Ministry of Statistics and Programme Implementation, gathers production returns from more than a dozen source agencies spread across ministries, and publishes the IIP every month as a Quick Estimate that is revised as fuller data come in. Option A, the Department for Promotion of Industry and Internal Trade, is the wrong answer for the IIP but the right one for a related index, because its Office of the Economic Adviser compiles the Index of Eight Core Industries and the Wholesale Price Index; examiners rely on that overlap. Option C, the Reserve Bank of India, is a heavy user of the IIP in framing monetary policy but does not compile it. Option D, NITI Aayog, is a policy think tank and has no statistical production function of this kind at all.

The correct answer is A, Licence-Permit-Quota Raj. The New Industrial Policy of 24 July 1991 abolished industrial licensing for all but a short list of industries, so a firm no longer needed a government permit to start production, to expand or to import. That system of licences, permits and quotas, named the Licence-Permit-Quota Raj by C. Rajagopalachari, had governed Indian industry since the Industries Act of 1951. The reforms came in a balance of payments crisis under Prime Minister P. V. Narasimha Rao and Finance Minister Manmohan Singh, and are remembered as liberalisation, privatisation and globalisation. Option B is wrong because the banks nationalised in 1969 and 1980 stayed in public hands. Option C is wrong because subsidies on fertiliser, food and power continue to this day. Option D is wrong because cooperative banks still work under the Reserve Bank and state registrars. Exam tip: 1991 reforms, licensing kept for only a handful of industries.

The correct answer is B, health, education and standard of living. The index counts a household as poor when it suffers deprivation in enough of the indicators grouped under these three heads, such as nutrition and child mortality under health, years of schooling and attendance under education, and cooking fuel, sanitation, drinking water, electricity, housing and assets under standard of living. Option A is wrong because the index is built precisely to look beyond income and savings, which a consumption-based poverty line already covers. Option C is wrong because food, clothing and shelter are the traditional basic needs, and although they are related to the indicators used, they are not the names of the three dimensions. Option D is wrong because agriculture, industry and services are the sectors of the economy and have nothing to do with measuring household deprivation.

The correct answer is D, Gas and water supply. The Index of Industrial Production (IIP) covers only three sectors: mining, manufacturing and electricity. It is a monthly index released by the National Statistics Office under the Ministry of Statistics and Programme Implementation, and it shows how fast the volume of industrial output is rising or falling compared with a base year. Manufacturing carries by far the largest weight in the index, so a slowdown in factories pulls the IIP down quickly. Gas and water supply are counted in the wider industry sector of national income, together with electricity, but they are not part of the IIP basket, and that is the trap in this question. Option A is wrong because mining is one of the three sectors of the IIP. Option B is wrong because electricity is also a sector of the IIP. Option C is wrong because manufacturing is the biggest part of the index. Exam tip: IIP = mining + manufacturing + electricity; the index of eight core industries is a separate, smaller index.

The correct answer is D, Targeted Public Distribution System. The public distribution system was made targeted in 1997, when households were divided into those above and those below the poverty line and the subsidy was concentrated on the poorer group. Grain from the central pool, procured largely by the Food Corporation of India, is issued to the States and sold through fair price shops under this system.

Option A is wrong because it is a made-up phrase about population spread and has no place in food policy. Option B is wrong for the same reason; it describes nothing in the administration of food subsidy. Option C is wrong because although it borrows the word target, there is no scheme by that name; the development programmes of that period were the Integrated Rural Development Programme and its successors. Only option D is the correct expansion.

The correct answer is D, Agriculture. The IIP is confined to the industrial sector and has exactly three components, mining, manufacturing and electricity, which are options A, B and C. Agriculture and the whole of the services sector, which together account for the larger part of India's output, lie outside the index, and that is why a rise in the IIP can never by itself be described as a rise in the growth of the economy. The point is tested in statement form, where a candidate is asked whether the IIP reflects overall economic activity; the answer is that it reflects industrial activity alone. Farm output is tracked instead through crop estimates and the advance estimates of agricultural production, and services through separate indicators, all of which are brought together only in the national accounts.

The correct answer is A, Cyclical unemployment. Cyclical unemployment is the unemployment that a slump or depression in the economy creates: when demand falls, firms sell less, cut production and let workers go, and those jobs come back once demand recovers. It is therefore tied to the trade cycle of boom and slump, and it is the kind of unemployment John Maynard Keynes wrote about after the Great Depression, when he argued that the government should spend to lift demand. It is common in industrial economies and rare in a largely agricultural one such as India, where disguised and seasonal unemployment matter more. B is wrong because frictional unemployment is the short gap while a worker changes jobs or a fresh graduate hunts for the first one. C is wrong because seasonal unemployment comes from work being available only in some months, as in farming or sugar mills. D is wrong because structural unemployment arises when the skills workers hold no longer match the jobs the economy offers. Exam tip: a depression brings cyclical unemployment, while a skills mismatch brings structural unemployment.

The correct answer is A, 65 per cent. When the Government announced the rabi Minimum Support Prices for the marketing season 2021-22, it also published the margin of each price over the A2 plus FL cost of production. For barley that margin worked out to about sixty-five per cent, which is comfortably above the declared floor of fifty per cent, that is one and a half times the cost.

Option B is wrong because ninety-three per cent was the margin for wheat in the same announcement, and the two are frequently interchanged. Option C is wrong because fifty per cent is the minimum the policy promises, not the figure estimated for barley. Option D is wrong because a margin above one hundred per cent applied to no rabi crop in that season. The point to carry away is that the margin is measured over the A2 plus FL cost.