Indian Economy Mixed Quiz: Set 41

The correct answer is A. Engel's law, named after the nineteenth century statistician Ernst Engel, says that the share of a household's spending that goes on food falls as its income rises, even though the amount spent on food may well go up. It is one of the most firmly established regularities in applied economics and is used to compare the standard of living of households, regions and countries, since a high share of food in spending is a sign of poverty. Option B is wrong because it states the law in reverse. Option C is wrong because the law concerns the proportion, not the absolute amount, which usually rises and shifts towards better quality food. Option D is wrong because saving generally rises as a proportion of income, which is a separate proposition about the consumption function.

The correct answer is D, (A) is false but (R) is true. The National Infrastructure Pipeline was announced in the Budget speech of 2019-20 and the task force under the Secretary, Department of Economic Affairs, drew it up for the five years from 2019-20 to 2024-25, with projected capital expenditure of about 111 lakh crore rupees. The period in the assertion, 2020-30, is therefore wrong, which rules out A and B, both of which treat the assertion as true. The reason, however, states the pipeline aim correctly: the NIP report sets out to give every citizen equitable access to world-class infrastructure, and that purpose is genuine. C is wrong because it reverses the position, calling the false assertion true and the true reason false. Read such pairs by testing the assertion first, because a false assertion settles the answer at once.

The correct answer is B, sixty-six per cent. The Committee of Creditors is made up of the financial creditors of the company, with voting shares in proportion to the debt owed to each, and a resolution plan is approved only when creditors holding at least sixty-six per cent of the voting share vote for it; the same majority is needed for important decisions such as extending the process or going into liquidation. Option A is wrong because fifty-one per cent is the threshold for routine decisions of the committee, not for a resolution plan, and this is the commonest error. Option C is wrong because seventy-five per cent was the original requirement in the Code of 2016, lowered by the amendment of 2018 because plans were failing for want of a few votes. Option D is not a threshold the Code uses anywhere.

The correct answer is B, 2014. The Pradhan Mantri Jan Dhan Yojana was launched on 28 August 2014 as the national mission for financial inclusion, offering a zero-balance Basic Savings Bank Deposit Account, a RuPay debit card with accident insurance cover and an overdraft facility for accounts operated satisfactorily. Option A is wrong because 2012 is the year the RuPay card network was launched and the year the no-frills account was renamed the Basic Savings Bank Deposit Account. Option C is wrong because 2015 is the year of the social security package, when the Pradhan Mantri Jeevan Jyoti Bima Yojana, the Pradhan Mantri Suraksha Bima Yojana, the Atal Pension Yojana and MUDRA were announced. Option D is wrong because 2016 is the year the Unified Payments Interface was launched by NPCI.

The correct answer is B, fifty thousand rupees. MUDRA loans to non-farm micro enterprises are graded in three named categories: Shishu for loans up to fifty thousand rupees, Kishore for loans above fifty thousand and up to five lakh, and Tarun for loans above five lakh and up to ten lakh, with a higher slab added later for borrowers who have repaid an earlier loan. Option A is wrong because twenty-five thousand is not a MUDRA boundary. Option C is wrong because one lakh falls inside the Kishore range and is not the limit of any category. Option D is wrong because five lakh is the upper limit of Kishore and the lower limit of Tarun, a pairing examiners use as a distractor. All MUDRA loans are collateral-free and are given through banks and microfinance institutions.

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, 20 per cent. Viability Gap Funding is a one-time or deferred capital grant for a project that is economically necessary but commercially unviable, such as a rural road or a water supply line whose user charges can never repay the capital. The Department of Economic Affairs gives up to twenty per cent of the project cost, and the sponsoring ministry, State government or statutory authority may give a further twenty per cent, so support can reach forty per cent in total. That is why C is a tempting distractor: forty per cent is the combined ceiling, not the central share alone. A understates the scheme, and D is not available under it at all. Remember the pair of figures as twenty plus twenty.

The correct answer is B, a sub-standard asset. The classification runs in a sequence: an account that has just become non-performing is sub-standard for the first twelve months, after which it becomes doubtful, and it is called a loss asset when recovery is no longer expected. Option A is wrong because a standard asset is one where repayment is regular and which carries no more than normal risk, so it is not an NPA at all. Option C is wrong because an asset becomes doubtful only after it has stayed sub-standard for more than twelve months, and the doubtful class is itself divided by age for provisioning. Option D is wrong because a loss asset is one identified as irrecoverable by the bank, its internal auditors or the Reserve Bank inspection, though some salvage value may remain.

The correct answer is C, persons who are not eligible to submit a resolution plan. Section 29A, inserted by amendment in 2018, lists disqualifications, chiefly for promoters and connected persons whose accounts have been classified as non-performing, for undischarged insolvents and for persons disqualified as directors, so that a defaulting promoter cannot buy the company back cheaply through the very process his default caused. Option A is wrong because the moratorium is Section 14, which stays suits, recovery and transfer of assets once the application is admitted. Option B is wrong because the distribution waterfall on liquidation is Section 53, in which insolvency costs and workmen's dues rank first. Option D is wrong because the threshold of default, now one crore rupees, comes from Section 4.

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, two lakh rupees. Real Time Gross Settlement is designed for large-value transfers, each settled singly and immediately in the books of the Reserve Bank, and the minimum amount for a customer transaction is two lakh rupees with no upper ceiling. Option A is wrong because one lakh is the figure candidates most often misremember, and it belongs to no current rule of RTGS. Option C is wrong because five lakh is not a threshold in the system. Option D is wrong because it is NEFT, not RTGS, that has no minimum amount; NEFT settles in batches and is used for ordinary payments of any size. IMPS, run by NPCI, is the third system, instant and available through mobile and internet banking, and all three now work on every day of the year.

The correct answer is B, 18 to 50 years. The Pradhan Mantri Jeevan Jyoti Bima Yojana can be joined by anyone between 18 and 50 years of age who holds a savings bank account. It is a one-year term life insurance cover, renewed every year, and it pays the nominee if the member dies from any cause. The cover continues up to the age of 55 for a member who joined before turning 51 and keeps paying the premium. It was launched on 9 May 2015 along with the accident cover scheme and the pension scheme, and the premium is taken straight from the bank account under an auto-debit mandate. A, C and D are wrong because they all begin above 18 or end above 50, and so do not match the entry age fixed for the scheme. Exam tip: pair the two 2015 covers - Jeevan Jyoti for life at 18 to 50 years, Suraksha Bima for accidents at 18 to 70 years.

The correct answer is A, the Public Private Partnership Appraisal Committee, usually written as PPPAC. It is the standing inter-ministerial committee that examines the concession agreement, the risk sharing and the financial structure of a central sector PPP proposal before approval, and its chair is the Secretary of the Department of Economic Affairs, with the secretaries of Expenditure, Legal Affairs, NITI Aayog and the sponsoring ministry as members. B, the Cabinet Committee on Economic Affairs, takes the final political decision on large projects but does not perform the technical appraisal. C is the body of chief ministers that guides NITI Aayog and has no project clearance role. D is a constitutional body under Article 280 that recommends the sharing of taxes between the Union and the States.

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 A, Jan Dhan, Aadhaar and Mobile. The expression describes the three pieces that together make a cash transfer possible: a bank account opened under the Jan Dhan Yojana to receive the money, the Aadhaar number to identify the beneficiary and remove duplicate names, and the mobile phone through which the beneficiary is informed and can transact. Option B is wrong because Atal Pension Yojana and MUDRA are schemes that use the Jan Dhan account but are not part of the trinity. Option C is wrong because Jan Suraksha is the collective name of the insurance and pension schemes, not a letter of JAM. Option D is wrong because Ayushman Bharat is the health assurance scheme and MGNREGA the rural employment law, both users of direct benefit transfer rather than parts of it.

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, an operating national highway stretch that already collects toll. Under TOT the authority bundles completed highway sections that have a proven traffic record and auctions the right to collect toll on them for a long concession, usually thirty years, against a single upfront payment. The money so received is used to build new roads, so TOT is a monetisation tool rather than a construction model, and the asset returns to the authority at the end. A describes a greenfield concession such as BOT or HAM, where the road has yet to be built and the traffic is only a forecast. C is a land lease, not a toll concession. D is outside the scheme, which covers national highways held by the central authority.

The correct answer is B, two lakh rupees for ages 18 to 50. The Pradhan Mantri Jeevan Jyoti Bima Yojana is a one-year renewable life insurance cover of two lakh rupees on death from any cause, open to holders of a savings bank account between eighteen and fifty years of age, with the premium debited from the account. Option A is wrong because the cover is two lakh, not one lakh. Option C is wrong because eighteen to seventy is the age band of the Pradhan Mantri Suraksha Bima Yojana, the accident cover, which pays two lakh for accidental death or total disability and one lakh for partial disability; swapping the two age bands is the standard trap. Option D is wrong because neither the amount nor the ages match any of the Jan Suraksha schemes.

The correct answer is C, Engineering, Procurement and Construction. In an EPC contract the government owns the project, funds it from its own budget and simply buys construction services; the contractor is paid for the work done, keeps no operating responsibility and takes no revenue risk, so none of the defining features of a partnership is present. A, BOT on annuity, is a partnership in which the private partner builds with its own finance and is repaid in fixed instalments. B, the Hybrid Annuity Model, mixes a forty per cent construction grant with private finance for the rest. D, DBFOT, is the fullest form of concession, where the private partner designs, finances, builds, operates and finally transfers the asset. Examiners use this question to test the single idea that private finance and operation make a PPP.

The correct answer is A, 18 to 40 years. The Atal Pension Yojana, launched in 2015 and administered by the Pension Fund Regulatory and Development Authority, admits subscribers between eighteen and forty years of age so that every subscriber contributes for at least twenty years before the pension begins at sixty. The guaranteed pension ranges from one thousand to five thousand rupees a month, according to the contribution chosen. Option B is wrong because eighteen to fifty is the age band of the Jeevan Jyoti life insurance scheme. Option C is wrong because twenty-one is not an entry age under any of these schemes. Option D is wrong because twenty-five to sixty would leave too short a contribution period for the guarantee to work, and no such band exists in the scheme.