Indian Economy Mixed Quiz: Set 24

The correct answer is A, disguised unemployment. Disguised unemployment is the situation in which more people work at a job than it actually needs, so taking some of them away would not reduce output at all. Indian agriculture is the standard example: a family holding of two hectares may keep five or six members busy when two could finish the same work, and the extra hands live on a share of the produce without adding to it. Their marginal productivity is close to zero, which is why the unemployment is called hidden or disguised. NCERT's Class 9 economics chapter on people as resource uses this very example. B is wrong because seasonal unemployment means being idle only in certain months, such as between sowing and harvest. C is wrong because structural unemployment comes from a mismatch between the skills workers have and the jobs the economy creates. D is wrong because marginal unemployment is not a standard category of this kind. Exam tip: disguised unemployment means surplus workers with nearly zero marginal productivity.

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 B, the Commission for Agricultural Costs and Prices. Set up in January 1965 as the Agricultural Prices Commission and renamed in 1985, it works under the Ministry of Agriculture and Farmers Welfare. It studies the cost of production, demand and supply, price trends and the terms of trade, and recommends a price for each mandated crop, which the Cabinet Committee on Economic Affairs then approves.

Option A is wrong because the Food Corporation of India buys at the announced price but plays no part in fixing it. Option C is wrong because NITI Aayog is a policy think tank without any statutory role in price fixation. Option D is wrong because the Reserve Bank of India is the monetary authority and deals with interest rates and currency, not with crop prices. The Commission recommends and the Cabinet decides.

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 B, Manufacturing, which carries 77.63 per cent of the weight of the index. Mining, option A, has 14.37 per cent, and electricity, option C, has 7.99 per cent, so the three add up to a hundred. Because manufacturing dominates so heavily, the monthly headline number usually moves with factory output, and a bad month in mining or power can be offset entirely by a good month in factories. Option D, construction, is not a component of the IIP at all, which is the trap in this question; construction activity is reflected only indirectly through the infrastructure and construction goods category of the use-based classification, which measures the production of items such as cement and steel structures rather than building work itself. The weights come from the gross value added shares of the base year, 2011-12.

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 C, C2. The C2 cost is the most comprehensive of the measures the Commission uses. It begins with all paid-out costs, adds the imputed value of unpaid family labour, and then adds two items the farmer never actually pays out: the rent the owned land could have fetched and the interest the money locked in owned fixed capital could have earned.

Option A is wrong because A2 covers only the costs actually paid in cash or kind, such as seed, fertiliser, hired labour, fuel and irrigation charges. Option B is wrong because A2 plus FL stops at adding family labour and does not touch owned land or capital; it is nevertheless the basis of the one and a half times formula. Option D is wrong because B1 is an intermediate cost in the series and is not the comprehensive measure the question describes.

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, 2011-12. In 2017 the base year of the IIP was shifted to 2011-12, the item basket was refreshed to take in goods that had become important since the previous revision, and the weights were recalculated from the gross value added shares of that year. Option B, 2004-05, was the base of the series that the 2011-12 series replaced, and it is the answer a candidate gives who has memorised the older textbook. Option A, 1993-94, was an earlier base still, used before 2004-05, and it also served as the base year for several other Indian indices of that period. Option D, 2017-18, is only the year in which the revision was announced and has never been a base year for this index. A base year is chosen as a normal year, free of unusual disturbance, so that comparisons are meaningful.

The correct answer is C, M3. The Reserve Bank of India publishes four measures of money supply, and M3 is the one called broad money, also known as aggregate monetary resources. It is made of currency with the public, demand deposits with banks, other deposits with the RBI and, above all, time deposits with banks. Adding time deposits captures almost all the money the banking system has created, which is why M3 is the figure policy makers watch. A is wrong because M1, currency plus demand deposits plus other deposits with the RBI, is narrow money, the most liquid measure of all. B is wrong because M2 is M1 plus savings deposits with post office savings banks, and it is still a narrow measure. D is wrong because M4 is M3 plus total post office deposits, the widest measure, but the name broad money belongs to M3. Exam tip: M1 and M2 are narrow, M3 and M4 are broad, and M3 is the benchmark.

The correct answer is B, A2 plus FL. The Union Budget of 2018 announced that the Minimum Support Price would be kept at a level at least one and a half times the cost of production, and the cost used for that calculation is A2 plus FL, that is all paid-out expenses together with the imputed value of unpaid family labour.

Option A is wrong because using A2 alone would ignore the labour of the farmer's own family, which is a large part of the real cost. Option C is wrong because C2 is the base the Swaminathan Commission had recommended, and the difference between the two bases is exactly what makes this question worth asking. Option D is wrong because C3 is a further mark-up over C2 used for some analytical purposes and has no role in the announced formula.

The correct answer is D, Industrial Disputes Act. The Industrial Disputes Act was passed in 1947 and governs how disputes between employers and workmen, including matters that concern trade unions as well as individual workmen, are raised and settled. It sets up works committees, conciliation officers, courts of enquiry, labour courts, industrial tribunals and a national tribunal, lays down when a strike or a lock-out is lawful, and requires larger establishments to take government permission before lay-off, retrenchment or closure. Its provisions have now been folded into the Industrial Relations Code, 2020. A is wrong because the Indian Councils Acts, of 1861, 1892 and 1909, dealt with legislative councils and not with labour. B is wrong because the Charter Acts, the last of them in 1853, renewed the East India Company's charter. C is wrong because the Rowlatt Act of 1919 allowed detention without trial and led to the protest at Jallianwala Bagh. Exam tip: Industrial Disputes Act 1947, now part of the Industrial Relations Code, 2020.

The correct answer is C, about 40 per cent; the precise figure is 40.27 per cent. The eight core industries are the energy and basic material industries on which the rest of manufacturing depends, and because they make up two-fifths of the IIP their monthly index is read as an advance signal of what the fuller index will report a little later. Options A and B, 25 and 33 per cent, understate the share and are offered because candidates often confuse this figure with the share of manufacturing in gross value added or with the forest cover target of a third. Option D, 50 per cent, overstates it; no single group inside the IIP reaches half the weight except manufacturing as a whole, which stands at 77.63 per cent. Remembering the pair 40.27 for the core sector and 77.63 for manufacturing keeps the two apart.

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 B, 1965. The Food Corporation of India was set up in 1965 under the Food Corporations Act of 1964, at a time of severe food shortage, to procure food grains, maintain buffer stocks, distribute grain through the public distribution system and keep prices stable for both the farmer and the consumer. The Agricultural Prices Commission was created in the same year.

Option A is wrong because 1955 saw the Imperial Bank of India become the State Bank of India, not the creation of the FCI. Option C is wrong because 1975 is the year the twenty point programme was launched and is unconnected with the Corporation. Option D is wrong because 1982 is the year NABARD was set up as the apex institution for rural credit, which is the most common confusion in this question.

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. The Office of the Economic Adviser, which sits in the Department for Promotion of Industry and Internal Trade under the Ministry of Commerce and Industry, compiles the Index of Eight Core Industries and also the Wholesale Price Index, and it publishes the core sector figure every month. Option A, the National Statistical Office, compiles the wider Index of Industrial Production and the Consumer Price Index, and the examiner's whole purpose in this question is to see whether a candidate can keep the two offices apart. Options C and D, the Ministry of Power and the Ministry of Coal, are source agencies that supply the production data for electricity and for coal respectively, but neither of them puts the eight series together into an index. Only one office does that, and it is not the one that produces the IIP.

The correct answer is B, the Price Support Scheme. Under it, central nodal agencies, chiefly NAFED, buy pulses, oilseeds and copra at the Minimum Support Price when prices in the mandis fall below that level, and the losses are borne by the Government. It is the procurement arm of the MSP system for crops the Food Corporation of India does not handle.

Option A is wrong because the Market Intervention Scheme is meant for perishable horticultural crops such as onion, potato, apple and grapes, which have no MSP at all. Option C is wrong because a price deficiency payment pays the farmer the gap in cash instead of buying the crop, and is used in some State schemes rather than as the central procurement route. Option D is wrong because the Open Market Sale Scheme is about selling stocks, not buying them.

The correct answer is C, Refinery products, with a weight of 28.04 per cent, more than a quarter of the whole index. Refining turns crude oil into petrol, diesel, kerosene, naphtha and feedstock for chemicals, and the value of that output is so large that a shutdown at a big refinery shows up in the national figure. Option A, electricity, comes next at 19.85 per cent, and option B, steel, follows at 17.92 per cent, so all three options are near the top and only their order distinguishes them. Option D, coal, carries 10.33 per cent and stands fourth. The full descending order worth memorising is refinery products, electricity, steel, coal, crude oil at 8.98, natural gas at 6.88, cement at 5.37 and fertilisers at 2.63 per cent, and the eight weights add up to a hundred.

The correct answer is B, sugarcane. The Fair and Remunerative Price is the minimum price a sugar mill is legally bound to pay a cane grower, fixed by the Central Government on the recommendation of the CACP under the Sugarcane Control Order. Because the obligation falls on the mill and not on a government agency, sugarcane is kept apart from the twenty-two crops covered by the ordinary MSP.

Option A is wrong because wheat is a mandated MSP crop procured by the Food Corporation of India. Option C is wrong because raw cotton has an MSP and is procured by the Cotton Corporation of India. Option D is wrong because raw jute also has an MSP, with the Jute Corporation of India as the procuring agency. Only sugarcane has an FRP, and some States additionally declare a higher State Advised Price.