Indian Economy Mixed Quiz: Set 34

The correct answer is B. The fiscal deficit is the gap between what the government spends and everything it receives other than borrowings, so it measures exactly how much the government must borrow during the year and is the headline figure watched in every Budget. Option A is wrong because that is the definition of the revenue deficit, which covers only the revenue account and says nothing about capital spending. Option C is wrong because removing interest payments from a deficit gives the primary deficit, and in any case the subtraction is made from the fiscal deficit, not from total expenditure. Option D is wrong because no standard deficit is defined that way; capital receipts include borrowings, which is the very item the fiscal deficit excludes. Also remember the effective revenue deficit, which is the revenue deficit minus grants given to States for creating capital assets.

The correct answer is B, it is a price lower than the market price. Issue price is the subsidised rate at which grain from the government's buffer stock is sold through ration shops, and it is deliberately kept below the market price.

India's food security system works in three steps. The Food Corporation of India buys grain from farmers at the minimum support price, stores it as a buffer stock, and releases it to fair price shops under the public distribution system. The rate charged at those shops is the issue price, and the gap between what the government pays and what it charges is the food subsidy. Keeping the issue price low is exactly what makes grain affordable to poor households.

A is wrong: if it matched the market price there would be no subsidy and no reason for ration shops. C is wrong: the issue price is fixed by the government, not by the farmer. D is wrong: a price above the market rate would drive buyers away from ration shops altogether.

Exam tip: the farmer gets the MSP, the ration shop charges the issue price, and the difference between them is the food subsidy.

The correct answer is B, the United Nations Development Programme. The UNDP brought out the first Human Development Report in 1990, with the Human Development Index as its centrepiece, and it has published the report and the index since. Option A, the World Bank, publishes the World Development Report and indices such as the Human Capital Index, and for many years the Doing Business report, but not the HDI. Option C, the International Monetary Fund, publishes the World Economic Outlook and the Global Financial Stability Report, both concerned with macroeconomic conditions rather than human development. Option D, the World Economic Forum, publishes the Global Competitiveness Report and the Global Gender Gap Report, which is often confused with the UNDP's Gender Inequality Index although the two are built differently. Pairing each index with the body that publishes it is the single most useful piece of preparation for this chapter.

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, Shanghai. The New Development Bank was agreed at the sixth BRICS summit at Fortaleza in Brazil in 2014 and began work with its headquarters at Shanghai, with K. V. Kamath of India as its first president and an African regional centre in South Africa. Option A is wrong because New Delhi hosts no BRICS institution, although India pressed for the bank and supplied its first head. Option C is wrong because Moscow is the seat of no BRICS body of this kind, though Russia hosted the first summit. Option D is wrong because Johannesburg has the bank's regional office rather than its headquarters. The Contingent Reserve Arrangement, a swap facility for members facing a balance of payments problem, was agreed at the same summit, and the two are often offered as alternatives in one question.

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 A, 2 October 2014. The mission was launched on the 145th birth anniversary of Mahatma Gandhi, with the target of an open defecation free India by 2 October 2019, his 150th birth anniversary, and its logo is a pair of spectacles recalling him. Option B is wrong because 15 August 2014 is the date of the Independence Day speech in which the Jan Dhan Yojana was announced; the Jal Jeevan Mission was announced from the same rampart five years later. Option C is wrong because 25 June 2015 is the launch date of PMAY-Urban, AMRUT and the Smart Cities Mission together. Option D is wrong because 2 October 2019 is the date on which rural India was declared open defecation free, that is, the target date rather than the launch date, which is exactly the confusion the question is built on.

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 A, fiscal deficit minus interest payments. Interest payments are the cost of borrowing done in earlier years, so taking them out of the fiscal deficit leaves the borrowing the government needs for this year's own activities; a zero primary deficit means the government is borrowing only to pay interest on past debt. Option B is wrong because adding interest payments would double-count them, as they are already part of total expenditure within the fiscal deficit. Option C is wrong because the subtraction is made from the fiscal deficit, not from the revenue deficit; the revenue deficit covers only revenue receipts and revenue expenditure. Option D is wrong because the difference between the fiscal and revenue deficits reflects capital spending and lending, not interest. The three deficits are governed by the Fiscal Responsibility and Budget Management Act of 2003.

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, Mahbub ul Haq. The Pakistani economist led the team that produced the first Human Development Report for the UNDP in 1990 and designed the index, drawing on the capability approach of Amartya Sen, who advised the work. Option B, Simon Kuznets, is associated with the measurement of national income and with the Kuznets curve, which traces the relation between growth and inequality, not with human development. Option C, Morris David Morris, built the earlier Physical Quality of Life Index from life expectancy at age one, infant mortality and basic literacy, and that index is the usual distractor here. Option D, Gunnar Myrdal, wrote Asian Drama, an influential study of poverty in South Asia, and shared the Nobel Prize in Economics in 1974, but he devised no index. Remember Haq for the HDI, Sen for capabilities and Morris for the PQLI.

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, Paris. The OECD was established in 1961 as the successor of the Organisation for European Economic Co-operation, which had been created to administer aid under the Marshall Plan, and it works from Paris as a forum of mostly high-income countries that sets standards and publishes comparative statistics. Option A is wrong because Geneva is the seat of the World Trade Organization, the International Labour Organization and the World Health Organization. Option C is wrong because Vienna houses OPEC and the International Atomic Energy Agency. Option D is wrong because Brussels is the headquarters of the European Union institutions and of NATO. India is not a member of the OECD but takes part as a key partner, a point that appears in statement-based questions.

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 B, 2 October 2019. The declaration was timed for the 150th birth anniversary of Mahatma Gandhi, exactly five years after the mission was launched, and the second phase then began with the goal of ODF Plus villages that sustain the status and manage solid and liquid waste. Option A is wrong because 2 October 2018 was only a milestone year in the campaign and no declaration was made then. Option C is wrong because 1 October 2021 is the launch date of Swachh Bharat Mission-Urban 2.0 and AMRUT 2.0, the second-generation urban missions. Option D is wrong because 15 August 2019 is the date on which the Jal Jeevan Mission was announced from the Red Fort. Keep the three dates apart: launch 2014, ODF declaration 2019, second phase of the urban mission 2021.

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 D, Deflator method. There is no such method of measurement; the GDP deflator is a price index derived after the aggregates have been estimated, used to convert nominal values into real values. Option A is wrong because the value added or product method adds the gross value added of every producing unit and is the method on which India's industry-wise estimates rest. Option B is wrong because the income method adds the earnings of the factors of production, namely compensation of employees, rent, interest, profit and the mixed income of the self-employed. Option C is wrong because the expenditure method adds private final consumption expenditure, government final consumption expenditure, gross capital formation and net exports. All three methods should in principle yield the same total, and a mismatch between them is reported as a discrepancy in the accounts.

The correct answer is D, social inequality. The Human Development Index is built from exactly three dimensions and nothing more: a long and healthy life, knowledge, and a decent standard of living. Inequality is not among them, and that is a deliberate feature of the index, which reports a country's average achievement without saying how it is distributed. Option A, life expectancy at birth, is the indicator of the health dimension. Option B, education, is captured through the mean years of schooling of adults aged twenty-five and above together with the expected years of schooling of a child entering school. Option C, per capita income, enters as gross national income per head measured at purchasing power parity, which replaced gross domestic product per head in the 2010 report. Inequality is handled by a separate measure, the Inequality-adjusted HDI, also introduced in 2010, which discounts each dimension for the inequality in its distribution; the gap between the HDI and the IHDI is read as the loss due to inequality.

The correct answer is C, 1995. The WTO began on 1 January 1995 as the outcome of the Uruguay Round, and it replaced the General Agreement on Tariffs and Trade as a permanent organisation with a dispute settlement system. Option A is wrong because 1947 is the year the GATT was signed, the agreement the WTO succeeded, and also the year of India's independence, which makes it an attractive wrong answer. Option B is wrong because 1986 is the year the Uruguay Round of talks began at Punta del Este. Option D is wrong because 2001 is the year of the Doha Ministerial Conference, which launched the round named after that city. India is a founder member of the WTO, and its highest decision-making body is the Ministerial Conference, which normally meets every two years.

The correct answer is B, 2015. PMAY was launched on 25 June 2015, on the same day as AMRUT and the Smart Cities Mission, with the aim of a pucca house for every eligible family. Option A is wrong because 2014 is the year of the Swachh Bharat Mission and of the Jan Dhan Yojana. Option C is wrong, though it is the closest distractor: 20 November 2016 is the date on which the rural arm, PMAY-Gramin, was launched by restructuring the Indira Awaas Yojana, so a question that says PMAY-Gramin rather than PMAY has 2016 as its answer. Option D is wrong because 2019 is the year of the Jal Jeevan Mission and of the creation of the Ministry of Jal Shakti. The safe way to answer is to read whether the question names the urban scheme, the rural scheme or PMAY as a whole.