Indian Economy Mixed Quiz: Set 28

The correct answer is A, High-Yielding Varieties Programme. HYVP was launched in 1966-67 and it carried the Green Revolution into Indian fields by spreading dwarf, high-yielding seeds. It covered five crops, wheat, rice, maize, jowar and bajra, and the seed came with a package of assured irrigation, chemical fertiliser, pesticides and farm credit, which is why the change is called the seed-fertiliser-water technology. Punjab, Haryana and western Uttar Pradesh gained the most, and wheat output rose fastest, so the early Green Revolution is often called a wheat revolution. Norman Borlaug supplied the Mexican dwarf wheat varieties and M. S. Swaminathan led the work in India. Option B is wrong because the P in the name stands for Programme, not Plants. Option C is wrong because Pattern is not part of the name. Option D is wrong because the programme had nothing to do with patents on seed. Exam tip: HYVP began in 1966-67, covered five crops, and wheat gained the most.

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 B, Industrial Policy Resolution of 1956. It set the framework in which Indian industry worked for more than three decades, dividing industry into three schedules: Schedule A reserved seventeen industries for the state, Schedule B marked twelve for growing state participation and Schedule C left the rest to private enterprise. It also gave the Second Five Year Plan its emphasis on heavy and basic industry.

Option A is wrong because the Resolution of 1948 only announced the idea of a mixed economy and a four fold division of industry. Option C is wrong because the Statement of 1977 turned attention to small, village and cottage industries and created District Industries Centres. Option D is wrong because the policy of 1991 dismantled the very system the 1956 resolution had built. The phrase economic constitution in a question always points to 1956.

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, devalued in two steps by about nineteen per cent in all. The Reserve Bank lowered the value of the rupee on 1 July and again on 3 July 1991 to make exports cheaper abroad, discourage imports and restore confidence in the currency during the crisis. Option A is wrong because a revaluation upward would have widened the trade gap, the opposite of what the situation demanded. Option C is wrong because convertibility came later and only on the current account, allowed in stages after the dual exchange rate system of 1992 and completed in 1994; the rupee is still not fully convertible on the capital account. Option D is wrong because the reforms moved India away from a fixed rate towards a market determined exchange rate, not towards a permanent peg.

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 B, a volume index of industrial output. The IIP compares the physical quantity of goods produced in a month with the quantity produced in the base year, taking a weighted average of those quantity relatives, so it rises only when more is actually made and is untouched by a change in prices. Option A describes an altogether different family of numbers, the Wholesale Price Index and the Consumer Price Index, which measure prices and are used to calculate inflation. Option C is wrong because employment in industry is measured by labour force surveys and by the quarterly employment survey, not by the IIP. Option D is wrong because company profits are reported in financial results and captured in corporate data, and a firm can earn more on the same volume simply because prices rose. Keeping the IIP on the quantity side and the price indices on the value side is the distinction examiners test.

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 A, Industries Development and Regulation Act, 1951. Under this Act a licence from the government was needed to set up a new factory, to expand capacity, to change the product line or to shift the location of a plant, which is how the state controlled the pattern of industrial growth until 1991.

Option B is wrong because the MRTP Act of 1969 dealt with the concentration of economic power and restrictive trade practices, and it worked alongside licensing rather than creating it. Option C is wrong because the Foreign Exchange Regulation Act of 1973 controlled foreign exchange and foreign shareholding, and it was later replaced by FEMA of 1999. Option D is wrong because the Companies Act of 1956 governed the incorporation and management of companies. Associate 1951 with the licence, 1969 with monopoly and 1973 with foreign exchange.

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, M. Narasimham. His committee of 1991 recommended reducing the statutory pre-emption of bank funds through the Cash Reserve Ratio and the Statutory Liquidity Ratio, allowing new private banks, introducing prudential norms for the recognition of income and for capital adequacy, and giving banks freedom in branch expansion; a second committee under him reported in 1998 on supervision and consolidation. Option A is wrong because Raja Chelliah headed the tax reforms committee of the same period, and pairing him with taxes and Narasimham with banking is the distinction being tested. Option C is wrong because C. Rangarajan chaired committees on the balance of payments and on disinvestment. Option D is wrong because Bimal Jalan is associated with later work, including a committee on the economic capital framework of the Reserve Bank.

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 B, a revival of investment activity. Capital goods are machines, plant and equipment that are bought not to be consumed but to produce other goods, and a firm orders them only when it expects demand to grow enough to justify adding capacity. A run of good capital goods numbers therefore tells economists that businesses are investing again, which is why the category is quoted far more often than its small weight of 8.22 per cent would suggest. Option A belongs to consumer non-durables, which track everyday consumption. Option C is wrong because export competitiveness is judged from trade data and exchange rates, not from a domestic volume index. Option D is wrong on principle, since the IIP measures quantities and carries no price information at all, so no movement in it can by itself indicate inflation.

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 A, Competition Act, 2002. The MRTP Act had been framed for an economy of licences and was concerned with the size of firms; the Competition Act shifted the focus to conduct, prohibiting anti competitive agreements and the abuse of a dominant position and regulating combinations, and it created the Competition Commission of India to enforce these rules.

Option B is wrong because the Consumer Protection Act of 1986, later replaced by the Act of 2019, protects individual consumers through consumer commissions and is a separate line of law. Option C is wrong because the Insolvency and Bankruptcy Code of 2016 replaced the machinery for sick and insolvent companies, not the monopoly law. Option D is wrong because FEMA of 1999 replaced FERA of 1973 in the field of foreign exchange. Learn the three replacements as a set, since they are set as one another's distractors.

The correct answer is A, stagflation. Stagflation is the awkward state in which prices keep rising while output stagnates and unemployment stays high, so the usual trade-off between inflation and unemployment breaks down. The word joins stagnation and inflation and came into wide use in the 1970s, when the oil shock pushed up costs across the industrial world and growth fell at the same time. A supply shock is the common cause: costlier oil, food or imports raise prices while production and jobs shrink. It is hard to treat, because tightening money to curb prices deepens the slump, while spending to revive jobs feeds the price rise. Option B is wrong because an inflation premium is the extra interest a lender charges to make up for expected inflation. Option C is wrong because an inflationary gap is the excess of demand over the output an economy can produce at full employment. Option D is wrong because reflation is deliberate policy action to lift demand and prices after a slump. Exam tip: stagflation equals high inflation plus high unemployment, usually caused by a supply shock.

The correct answer is B, the Foreign Exchange Management Act of 1999. The older Act of 1973 treated a breach of exchange control as a criminal offence and presumed guilt; the new Act treats most breaches as civil contraventions punishable with a penalty, and its purpose is stated as facilitating external trade and payments and the orderly development of the foreign exchange market. Option A is wrong because the Competition Act of 2002 replaced the Monopolies and Restrictive Trade Practices Act, a different law of the pre-reform era. Option C is wrong because the export and import policy of 1992 liberalised trade licensing but did not replace the exchange law. Option D is wrong because the money laundering Act of 2002 deals with the proceeds of crime and was enacted for a different purpose altogether.

The correct answer is B, industrial explosives. After the New Industrial Policy of 1991 licensing was abolished for almost all industries, and only a short list was kept under licence for reasons of security, health and social policy: defence equipment and aerospace, industrial explosives, specified hazardous chemicals, tobacco products such as cigarettes, and the distillation of alcoholic drinks.

Option A is wrong because cement was freed from licensing and control and is today an open industry. Option C is wrong because cotton textiles, once the most regulated of Indian industries, no longer needs a licence. Option D is wrong because sugar was also delicensed, although it remains a controlled commodity in matters of pricing and cane supply. The short list is the whole answer to this family of questions, so learn its five heads and treat everything else as delicensed.

The correct answer is B, 1 January 1995. The World Trade Organisation came into being on that date at the end of the Uruguay Round of negotiations, taking the place of the General Agreement on Tariffs and Trade of 1947, and India, having been a party to the GATT, became a founder member. Membership required India to bind its tariffs, phase out quantitative restrictions on imports and accept agreements on agriculture, services and intellectual property. Option A is wrong because 24 July 1991 is the date of the Statement on Industrial Policy. Option C is wrong because no such landmark falls on 1 April 1997 in this context. Option D is wrong because by 2000 India was already a member and was in fact removing the last of its quantitative restrictions under WTO obligations.

The correct answer is A, Khadi and Village Industries Commission. The employment generation programme gives a bank loan with a government margin money subsidy to help a person set up a micro enterprise, and the Commission, set up in 1957 under the Ministry of MSME, is the national nodal agency, working through state boards and district industries centres.

Option B is wrong because SIDBI, founded in 1990 with its headquarters at Lucknow, is the apex refinance institution for small industry and not the agency that runs this scheme. Option C is wrong because NABARD, set up in 1982, is the apex body for agriculture and rural development finance. Option D is wrong because the National Small Industries Corporation of 1955 helps units with machinery, raw material and marketing. Keep the four bodies and their years apart, since questions mix the scheme with the wrong agency.