Indian Economy Mixed Quiz: Set 45

The correct answer is B, the General Insurance Corporation of India. It was created under the General Insurance Business Nationalisation Act of 1972 as a holding company with four subsidiaries, namely National Insurance, New India Assurance, Oriental Insurance and United India Insurance. When the sector was opened to private insurers, the four subsidiaries were detached in 2000 and the Corporation was reconstituted as the national reinsurer, so it now insures insurers rather than the public. Option A is wrong because the Life Insurance Corporation is a life insurer created in 1956 and has no reinsurance mandate. Option C is wrong because New India Assurance is one of the four detached subsidiaries and writes ordinary general insurance. Option D is wrong because the Export Credit Guarantee Corporation covers exporters against payment risk and is not the national reinsurer.

The correct answer is C, Denmark. The European Free Trade Association has exactly four members today: Iceland, Liechtenstein, Norway and Switzerland. Denmark was among the seven countries that set up EFTA in 1960, but it left to join the European Communities and is today a member of the European Union, not of EFTA. Option A is wrong because Norway is an EFTA member and has chosen to stay outside the European Union. Option B is wrong because Switzerland is an EFTA member and is India's largest trading partner among the four, which is why gold was kept out of the TEPA duty cuts. Option D is wrong because Iceland is an EFTA member; the fourth member, Liechtenstein, is the smallest of them and is often left out of the options to test recall.

The correct answer is B. A treasury bill is an instrument of the government's short-term borrowing, and the Reserve Bank of India, as banker and debt manager to the government, issues it on the government's behalf through auctions. A is wrong because SEBI regulates the securities market and protects investors in shares and debentures; it issues no government paper. C is wrong because the State Bank of India is only a participant in the auction, like other banks and primary dealers, and buys treasury bills for its own portfolio. D is wrong because the Ministry of Corporate Affairs administers company law and has nothing to do with government borrowing. Note the related fact that treasury bills carry no coupon: they are sold at a discount to face value and redeemed at face value, so the discount is the return.

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, the eldest woman of the household aged eighteen or above. The Act provides that the ration card shall be issued in the name of the eldest woman of the household who is eighteen years of age or more, so that the entitlement is held by a woman; if there is no such woman, the eldest male member holds it until a female member turns eighteen. A is wrong because the eldest male is only the fallback and not the rule. C is wrong because income decides whether the household is covered at all, not who holds the card. D is wrong because the gram panchayat has a role in identification, social audit and vigilance but no power to nominate the head of a household for this purpose.

The correct answer is C, 330 days. Section 12 of the Code gives the resolution process 180 days from the date of admission, allows the adjudicating authority to extend it once by up to 90 days on a resolution of the Committee of Creditors, and the amendment of 2019 added the outer limit of 330 days, which includes any time spent in litigation and in extensions. Option A is wrong because 180 days is only the first period, before any extension. Option B is wrong because 270 days, that is 180 plus 90, was the limit before the 2019 amendment, and papers keep it as the distractor for candidates working from older notes. Option D is wrong because the Code counts the outer limit as 330 days and not as a year. If no plan is approved within the limit, the company goes into liquidation.

The correct answer is A, Asia-Pacific Trade Agreement, earlier the Bangkok Agreement. Concluded in 1975 under the auspices of the United Nations Economic and Social Commission for Asia and the Pacific, it was renamed the Asia-Pacific Trade Agreement in 2005 and its members are India, Bangladesh, China, South Korea, Sri Lanka, Laos and Mongolia. Option B is wrong because SAFTA was signed only in 2004 and took effect in 2006. Option C is wrong because the India-Sri Lanka Free Trade Agreement was signed in 1998 and became operational in 2000, more than two decades after the Bangkok Agreement. Option D is wrong because the agreement with Singapore dates from 2005. APTA also has the distinction of being the only such arrangement that links India and China.

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, 91, 182 and 364 days. These are the three tenors of treasury bills auctioned by the Reserve Bank, with the 91-day bill auctioned most frequently. A is wrong because the 14-day treasury bill was discontinued and is no longer part of the regular auction calendar; it survives only in old study material. C is wrong because 30, 60 and 90 days are the usual maturities of trade bills and of some certificates of deposit, not of treasury bills. D is wrong because a 730-day instrument runs for two years and is therefore a dated government security of the capital market, outside the one-year limit of the money market. For periods shorter than 91 days the government uses Cash Management Bills, which were introduced in 2010.

The correct answer is C, 2013. The National Food Security Act, often called the Right to Food Act, was passed by Parliament in 2013 and converted the subsidised grain of the Targeted Public Distribution System from a scheme benefit into a legal entitlement, enforceable through a District Grievance Redressal Officer and a State Food Commission. A, 2005, is wrong, though it is the year of two other landmark laws, the Right to Information Act and the National Rural Employment Guarantee Act, which is why the option is attractive. B, 2009, is wrong because the year belongs to the Right of Children to Free and Compulsory Education Act. D, 2016, is wrong; no central food security law dates from that year, which saw the Insolvency and Bankruptcy Code instead. Note too that the Act was brought into force with effect from July 2013, which is why some sources give that month with the year.

The correct answer is C, 3, 2 and 1. The Act fixed the issue price at three rupees a kilogram for rice, two rupees for wheat and one rupee for coarse grains, and provided that these prices would hold for three years from the date of commencement, after which the Central Government could revise them up to the minimum support price. A and B are wrong because they shuffle the same three figures, which is exactly how the option is set in examinations; remember the descending order, rice the dearest and coarse grain the cheapest. D is wrong because those are not statutory figures at all. From the start of 2023 the grain due under the Act has in practice been supplied free, but the prices written into the Act remain three, two and one.

The correct answer is C, 100%. India allows 100 per cent foreign direct investment through the automatic route in the construction, operation and maintenance of rail infrastructure projects.

This opening was announced in 2014 and covers suburban corridors taken up through public private partnership, high speed train projects, dedicated freight lines, rolling stock factories, railway electrification, signalling systems, freight terminals and passenger terminals. Automatic route means the investor needs no prior approval from the government or the Reserve Bank of India and only files the required reports after the money comes in. Train operations themselves stay with Indian Railways, so the investment goes into building and maintaining the assets.

Option A is wrong because there is no 49 per cent ceiling on rail infrastructure. Option B is wrong because 74 per cent is a partial cap used in some other sectors, not here. Option D is wrong because 80 per cent is not a limit used anywhere in India's FDI policy.

Exam tip: rail infrastructure takes 100 per cent FDI on the automatic route, while running the trains stays with Indian Railways.

The correct answer is C, call money. Call money is the overnight, unsecured borrowing between banks and primary dealers that lets a bank square its cash reserve position at the end of the day; the interest on it is the call rate, the most sensitive interest rate in the system. A is wrong because term money is an interbank deposit of 15 days to one year. B is wrong because notice money runs from 2 to 14 days and is repayable after a short notice is given, which is exactly the distinction examiners test between call and notice money. D is wrong because bridge finance is a short-term loan given to a borrower, usually a company or a project, until a longer-term loan or an issue of securities is completed, and it is not an interbank money market instrument at all.

The correct answer is A, BHEL. Bharat Heavy Electricals Limited is a public sector undertaking, which means the government holds the majority of its shares and controls its management. Set up in 1964 with its headquarters at New Delhi, BHEL is the country's largest maker of power plant equipment such as boilers, turbines and generators, and it carries Maharatna status, the highest grade given to a central public sector enterprise. A public sector unit works for national priorities and balanced regional growth, not only for profit. Option B is wrong because Reliance Industries is a private company promoted by the Ambani family. Option C is wrong because the Tata group, founded by Jamsetji Tata, is a privately owned house of companies, even though many of them matter to the nation. Option D is wrong because the Adani group is likewise a private business house. Exam tip: a public sector undertaking is government owned, and BHEL, SAIL, ONGC, GAIL, NTPC and IOC are Maharatna companies, while Reliance, Tata and Adani are private.

The correct answer is C, 2000. The Antyodaya Anna Yojana was launched in December 2000 for one crore of the poorest households, which were given foodgrain at the lowest issue price; the quota was twenty-five kilograms a household a month at first and was raised to thirty-five kilograms in 2002. A, 1992, is wrong because that is the year of the Revamped Public Distribution System, which extended better terms to 1,775 blocks in drought-prone, desert, tribal and hill areas. B, 1997, is wrong because that is the year the Targeted Public Distribution System divided households into Below and Above Poverty Line. D, 2013, is wrong because that is the year of the National Food Security Act, which kept the Antyodaya category and its thirty-five kilogram entitlement intact. So fix the three years in order: 1992, 1997 and 2000, and this question becomes automatic.

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 B, 1989. Following the Vaghul Committee's recommendations on the money market, the Reserve Bank allowed scheduled commercial banks to issue negotiable certificates of deposit in 1989, and commercial paper followed a year later in 1990. A is wrong because 1985 is associated with the Sukhamoy Chakravarty Committee on the working of the monetary system, whose report led to these reforms but not to the instrument itself. C is wrong because 1991 is the year of the economic reforms and of the Narasimham Committee on the financial system, not of certificates of deposit. D is wrong because 1997 saw other money market changes, such as the phasing out of ad hoc treasury bills and the move to an auction system. The pair of years to memorise is 1989 for certificates of deposit and 1990 for commercial paper.

The correct answer is B, 1965. The Food Corporation of India was established in 1965 under the Food Corporations Act of 1964, in the years of acute shortage that preceded the Green Revolution, to procure foodgrain at the support price, store it, move it across the country and issue it to the distribution system. A, 1955, is wrong, although it is the year of the Essential Commodities Act, under which the government regulates the supply and price of essential goods. C, 1972, is wrong; no body of this kind dates from that year. D, 1985, is wrong, but it is a real date in this chapter for another reason: the Agricultural Prices Commission, which had been set up in 1965, was renamed the Commission for Agricultural Costs and Prices in 1985. So remember 1964 for the Act and 1965 for the Corporation itself.

The correct answer is C, equity share. An equity share has no maturity date at all; it represents ownership of a company for as long as the company exists, so it is the classic capital market instrument, issued in the primary market and traded on stock exchanges under SEBI's regulation. A is wrong as an answer because a certificate of deposit is a money market instrument issued by a bank for seven days to one year. B is wrong because a treasury bill is the government's short-term paper of 91, 182 or 364 days and is the safest money market instrument. D is wrong because commercial paper is the unsecured short-term promissory note of a company, with a maturity of seven days to one year. The test to apply in such questions is simple: if the maturity can exceed one year, the instrument is not a money market instrument.

The correct answer is B, the Commission for Agricultural Costs and Prices. The Commission, set up in 1965 as the Agricultural Prices Commission and renamed in 1985, recommends the minimum support price for twenty-two mandated crops after weighing the cost of production, demand and supply, price trends and the terms of trade; the Cabinet Committee on Economic Affairs takes the final decision, so the Commission only advises. A is wrong because the Food Corporation of India is the agency that buys at the announced price, stores and distributes; it does not fix the price. C is wrong because the Reserve Bank of India is the monetary authority and has no role in crop prices. D is wrong because the National Statistical Office collects and publishes statistics, including crop estimates, but recommends no price.