Indian Economy Mixed Quiz: Set 27

The correct answer is C, 1982. The National Bank for Agriculture and Rural Development was set up on 12 July 1982 on the recommendation of the Shivaraman Committee, taking over the refinancing functions earlier performed by the Reserve Bank of India and the Agricultural Refinance and Development Corporation. It refinances cooperative banks and regional rural banks rather than lending directly to farmers.

Option A is wrong because 1969 is the year fourteen major commercial banks were nationalised and the lead bank scheme began. Option B is wrong because 1975 is the year the regional rural banks were created, which NABARD later came to supervise. Option D is wrong because 1991 is the year of economic liberalisation and of the Narasimham Committee on the financial system, not of NABARD's founding.

A related fact often paired with this one is that NABARD has its head office in Mumbai and that agriculture is a component of priority sector lending, under which banks must direct a fixed share of their credit to the sector.

The correct answer is D, Coal India Limited. Coal India, the largest coal producing company in the world, was granted Maharatna status in 2011 and remains on the list. Maharatna is the highest grade given to a central public sector enterprise, and the Department of Public Enterprises grants it only to a company that is already a Navratna, is listed on a stock exchange with the required public shareholding, and has a very large three-year average turnover, net worth and net profit. The grade matters because the board of a Maharatna can invest far larger sums in a single project on its own, without going back to the ministry for approval. Option A is wrong because Central Coalfields Limited is a subsidiary of Coal India and holds a much lower grade. Option B is wrong because Cochin Shipyard is a shipbuilder of a lower grade, not a Maharatna. Option C is wrong because the India Tourism Development Corporation is a small enterprise that has been shrinking through disinvestment. Exam tip: Maharatna status needs Navratna status plus stock market listing, and Coal India received it in 2011.

The correct answer is D, Sick Industrial Companies Act. This Act of 1985 had created the Board for Industrial and Financial Reconstruction to deal with sick industrial units in the private sector. As part of the reforms, it was amended in December 1991 so that sick public sector enterprises could also be referred to the Board, which fitted the new policy of treating public undertakings by commercial standards.

Option A is wrong because the Industries Development and Regulation Act of 1951 dealt with licensing, not with sickness or revival. Option B is wrong because the Companies Act governs the formation and working of companies in general; winding up under it is a separate route. Option C is wrong because there is no Financial Rehabilitation Act in Indian law, and the name is invented to look plausible. The machinery of the 1985 Act was itself replaced later by the Insolvency and Bankruptcy Code of 2016.

The correct answer is C, Mahila Samriddhi Yojna. It is the micro-finance scheme under which women borrow small sums at a concessional rate of interest, so the rebate in interest is built into the scheme itself. It is run by the National Backward Classes Finance and Development Corporation under the Ministry of Social Justice and Empowerment, and the money reaches women through State Channelising Agencies and self-help groups, mostly for petty trade and self-employment. A parallel scheme is run for Scheduled Caste women by the National Scheduled Castes Finance and Development Corporation. Option A is wrong because the National Maternity Benefit Scheme paid a one-time cash grant to poor pregnant women and was later merged into Janani Suraksha Yojana. Option B is wrong because it is a pilot for social security cover, not a credit scheme for women. Option D is wrong because Raj Rajeshwari Mahila Kalyan Yojana is a personal accident insurance cover for women, not a loan. Exam tip: Mahila Samriddhi Yojana means micro-credit for women at a concessional interest rate, run by NBCFDC.

The correct answer is B, 24 July 1991. The Statement on Industrial Policy of that date ended licensing for all industries except a short reserved list, cut back the industries kept for the public sector, removed the requirement of prior government approval for expansion by large firms under the monopolies law, and allowed foreign direct investment up to fifty-one per cent automatically in a list of high priority industries. Option A is wrong because 1 April is the beginning of the financial year and no such policy was issued that day. Option C is wrong because 1 January 1995 is the date on which India became a founder member of the World Trade Organisation. Option D is wrong because it moves the right day into the wrong year, a common form of trap in date questions.

The correct answer is A, Marginal product curve. The marginal product of a variable factor first rises, reaches a peak and then falls, so the curve traced out is an inverted U. This is the law of variable proportions at work. In the first stage the extra units of labour get plenty of the fixed factor to work with and each one adds more to output than the last; at the peak the fixed factor is being used best; after that each extra worker has too little of the fixed factor, so the addition to output keeps shrinking and can even turn negative. B is wrong because the short run marginal cost curve is U-shaped, falling and then rising, as cost moves opposite to product. C is wrong because the average variable cost curve is U-shaped for the same reason. D is wrong because the long run average cost curve is a flatter U-shaped envelope of the short run curves. Exam tip: product curves are inverted U, cost curves are U.

The correct answer is B, Stage 3. The law of variable proportions divides short run production into three stages. In stage one, increasing returns, both total and marginal product rise because the fixed factor is still under used. In stage two, diminishing returns, marginal product falls but stays positive, so total product keeps rising and reaches its maximum at the end of this stage, where marginal product is zero. In stage three, negative returns, extra units of the variable factor crowd the fixed factor, marginal product turns negative and total product actually falls. A sensible producer therefore works in stage two and never enters stage three. A is wrong because marginal product in stage two is falling but still positive. C is wrong because marginal product in stage one is rising. D is wrong because the law has only three stages, so there is no stage four. Exam tip: total product is highest exactly where marginal product is zero.

The correct answer is B, NHB. The National Housing Bank is one of the central nodal agencies through which the Centre passes the interest subsidy of the Credit Linked Subsidy Scheme of Pradhan Mantri Awas Yojana (Urban) down to the lenders. NHB settles the claims of housing finance companies and other primary lending institutions, HUDCO acts as the nodal agency for the rest, and the subsidy is credited upfront to the borrower's loan account so that the monthly instalment falls. NHB was set up in 1988 as the apex institution for housing finance in India; the regulation of housing finance companies moved to the Reserve Bank in 2019, but NHB still refinances them. Option A is wrong because CNA is only the abbreviation for central nodal agency, not an institution. Option C is wrong because a scheduled commercial bank lends under the scheme but does not route the subsidy. Option D is wrong because NABARD is the apex body for rural and agricultural credit. Exam tip: the PMAY Urban subsidy flows through NHB and HUDCO; NHB was set up in 1988.

The correct answer is C, Textiles. The eight core industries are coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity, so options A, B and D are all on the list. Textiles is one of the largest employers in Indian manufacturing and has a substantial weight inside the manufacturing component of the IIP, but it is not a core industry, because the core list is confined to energy and basic materials that feed the rest of industry. The same trap is set with sugar, automobiles, chemicals and paper, none of which is a core industry either. A quick way to hold the list is to count three fuels, namely coal, crude oil and natural gas, one product of refining, two construction materials in steel and cement, one farm input in fertilisers, and electricity.

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 C, milk. The White Revolution is the name given to the sharp rise in milk production in India, so the colour white here stands for milk. It began with Operation Flood, launched in 1970 by the National Dairy Development Board, which linked village milk cooperatives to city markets and cut out the middleman. Verghese Kurien, often called the Father of the White Revolution in India, built the Amul model in Anand, Gujarat that the programme spread across the country, and India grew into the largest milk producer in the world. A is wrong because a rise in foodgrain and crop output is the Green Revolution. B is wrong because the rise in fish production is called the Blue Revolution. D is wrong because leather and non-conventional energy are tied to other colour revolutions, not the white one. Exam tip: white is milk, green is foodgrains, blue is fish and yellow is oilseeds.

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, 1955. The National Small Industries Corporation was set up in 1955 to help small units with machinery on hire purchase, raw material supply, marketing and government purchase, and it works under the Ministry of Micro, Small and Medium Enterprises.

Option A is wrong because 1954 is the year of the Karve Committee's work on village and small industries, and it is placed here to catch the candidate who remembers only that the corporation belongs to the mid nineteen fifties. Option B is wrong because 1982 is the year in which NABARD was set up for rural and agricultural credit. Option D is wrong because 1975 is the year of the nationalisation of coal companies and of the founding of Coal India, nothing to do with small industry. Keep the sector's dates in one line: NSIC in 1955, KVIC in 1957, NABARD in 1982 and SIDBI in 1990.

The correct answer is B, present value of money. Money has a time value, so a rupee received years later is worth less than a rupee in hand, and every cash flow of a project is first brought to today's value before a decision is taken. A project spreads its costs and its returns over many years, and the two can be compared fairly only at a common date; the present is that date. This is why the standard appraisal tools, net present value and the internal rate of return, discount future inflows and outflows at a chosen rate, and a proposal is cleared only when the discounted inflows exceed the discounted outflows. A is wrong because future value shows what today's money grows into, which does not help in ranking projects of different lives. C is wrong because opportunity cost supplies the discount rate used in the exercise; it is an input, not the basis of the decision. D is wrong because option B is correct. Exam tip: discounting gives present value, compounding gives future value.

The correct answer is A, LPG, standing for liberalisation, privatisation and globalisation. Liberalisation removed licensing and other controls on industry and trade, privatisation reduced the ownership and the role of the public sector through disinvestment and strategic sales, and globalisation opened the economy to foreign trade, investment and technology. Option B is wrong because GST is the goods and services tax, an indirect tax reform of a much later period. Option C is wrong because MRTP refers to the Monopolies and Restrictive Trade Practices Act of 1969, a law of the pre-reform era which the reforms first amended and which was later replaced by the Competition Act of 2002. Option D is wrong because FEMA is the Foreign Exchange Management Act of 1999, one measure within the reforms rather than a name for the whole policy.

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, Primary goods, with a weight of 34.05 per cent. Primary goods in this classification are the output of mining, crude oil and natural gas extraction and electricity generation, that is goods that enter production before any manufacturing has been done to them, so the category naturally carries the largest share. Option D, intermediate goods, is second at 17.22 per cent, and covers items made to be used in further manufacture. Option C, consumer durables, carries 12.84 per cent and is watched as a measure of household confidence. Option A, capital goods, carries the smallest weight of the six at 8.22 per cent, yet it is the most discussed, because machinery and plant are ordered only when firms expect to expand, so a sustained rise there signals fresh investment. The remaining two categories are consumer non-durables at 15.33 and infrastructure and construction goods at 12.34 per cent.

The correct answer is C, High Yielding Variety. The Green Revolution rested on high yielding variety seeds, usually shortened to HYV seeds, which gave far more grain per hectare than the older local varieties when used with assured irrigation, chemical fertilizers and pesticides. The programme began in the mid 1960s with dwarf wheat and rice, and Punjab, Haryana and western Uttar Pradesh gained the most. M. S. Swaminathan is called the Father of the Green Revolution in India, and the work of Norman Borlaug on dwarf wheat lay behind it. A and B are wrong because the seeds were chosen for the size of the harvest, not for the nutrition in the grain. D is wrong because low yielding seeds are the opposite of what the programme needed. Exam tip: Green Revolution means HYV seeds plus irrigation plus fertilizers, wheat first and Punjab leading.

The correct answer is C, 2006. The MSMED Act came into force on 2 October 2006. It defined micro, small and medium enterprises in law for the first time, provided for a National Board for MSME, required a memorandum of registration and laid down the rule that a buyer must pay a micro or small enterprise within forty five days.

Option A is wrong because 2002 is the year of the Competition Act, which replaced the MRTP Act. Option B is wrong because no MSME law belongs to 2004; the year is offered only because it lies near the correct one. Option D is wrong because 2010 is a year of no statute in this field, though the National Manufacturing Policy followed in 2011. Note the date as well as the year, because 2 October, the birthday of Mahatma Gandhi, was chosen deliberately for a law about village and small enterprise.

The correct answer is B, Manmohan Singh. As Finance Minister in the government of P. V. Narasimha Rao he presented the budget of July 1991, which cut subsidies, reduced the fiscal deficit, lowered tariffs and set out the framework of the reforms, following the devaluation of the rupee earlier that month. Option A is wrong because Yashwant Sinha was Finance Minister later, in the governments of the late 1990s, and is associated with the second generation of reforms. Option C is wrong because Pranab Mukherjee had been Finance Minister in the 1980s and returned to the office only in 2009. Option D is wrong because C. Rangarajan was a central banker and economist who chaired committees on the balance of payments and on disinvestment, but he did not present a budget.