Indian Economy Mixed Quiz: Set 47

The correct answer is A, less than 91 days. Cash Management Bills were introduced by the Government of India and the Reserve Bank in 2010 to meet temporary mismatches in the government's cash flow, and they are issued for periods shorter than 91 days, sometimes for just a few weeks. In every other respect they resemble treasury bills: they are issued at a discount through auctions and redeemed at face value. B is wrong because a maturity of exactly 91 days is the shortest regular treasury bill, which already existed. C is wrong because 182 and 364 days are the other two treasury bill tenors, and a Cash Management Bill is deliberately shorter than all of them. D is wrong because an instrument of more than a year is not a money market instrument at all and would be a dated government security.

The correct answer is B, Kandla in Gujarat. The Kandla export processing zone, set up in 1965 beside the port of Kandla, was the first such zone in Asia, and it was later converted into a special economic zone under the Act of 2005. A is wrong because the Santacruz Electronics Export Processing Zone near Mumbai came eight years later, in 1973, and was the second zone in the country, reserved at first for electronics. C is wrong because the Noida zone in Uttar Pradesh was one of the zones set up in the 1980s, well after the first two. D is wrong because the Falta zone in West Bengal also belongs to that later group of zones and was never the first; the examiner usually offers Santacruz as the trap option here.

The correct answer is A, Shanta Kumar. The High Level Committee on restructuring the Food Corporation of India, chaired by Shanta Kumar, reported in 2015. It suggested narrowing the coverage of the National Food Security Act, offering cash transfers in place of grain where beneficiaries prefer them, handing procurement to the states under the decentralised scheme, and reforming the Corporation's storage and movement. B is wrong because Bimal Jalan is associated with committees on the Reserve Bank's economic capital framework and on expenditure management. C is wrong because M. S. Swaminathan chaired the National Commission on Farmers, whose recommendation on a support price fifty per cent above the cost of production is a separate and often confused item. D is wrong because Raghuram Rajan chaired a committee on an index for measuring the backwardness of states.

The correct answer is B, NITI Aayog. The National Monetisation Pipeline was released in August 2021 in two volumes, the second of which lists the assets ministry by ministry, with an aggregate monetisation potential of about six lakh crore rupees over four years from roads, power transmission, railways, pipelines, warehouses, stadiums and airports. Monetisation means leasing the right to operate a completed asset for a period; the ownership stays with the government and the asset comes back at the end. A, the Reserve Bank, is the monetary authority and has no role here. C regulates securities markets and would be involved only when an InvIT is listed. D is one of the ministries whose assets appear in the pipeline, not the body that prepared it.

The correct answer is B, the Foreign Exchange Management Act, 1999, which came into force in 2000 and governs all dealings in foreign exchange, including inward and outward investment. Option A is wrong because the Foreign Exchange Regulation Act of 1973 was the earlier, far stricter law that FEMA replaced; it treated foreign exchange as a scarce resource and a violation as a criminal offence, while FEMA manages it with civil penalties. Option C is wrong because the Companies Act, 2013 governs the incorporation and running of companies, not the exchange side of an investment. Option D is wrong because the SEBI Act, 1992 created the securities market regulator, which registers portfolio investors but does not govern foreign exchange itself. Remember the shift the name itself records: regulation gave way to management, and the Reserve Bank now administers the Act while the sectoral policy comes from the commerce ministry.

The correct answer is C, 2022. The India-UAE Comprehensive Economic Partnership Agreement was signed on 18 February 2022 and came into force on 1 May 2022, a gap of barely ten weeks that makes it one of the fastest agreements India has brought into operation. Option A is wrong because 2019 is the year India announced at Bangkok that it would not join the Regional Comprehensive Economic Partnership, a different event altogether. Option B is wrong because no major Indian trade agreement entered into force in 2020; negotiations with the United Arab Emirates had not even formally begun by then. Option D is wrong because 2024 is the year the Trade and Economic Partnership Agreement with the EFTA states was signed, on 10 March, and that agreement entered into force only on 1 October 2025.

The correct answer is C, 2005. The Special Economic Zones Act was passed by Parliament in 2005 and was brought into force in February 2006 together with the Special Economic Zones Rules, giving the zones a single law of their own in place of a chapter of the trade policy. A is wrong because April 2000 is the date of the policy announcement made as part of the export and import policy, not of the Act, and this is the commonest confusion in the question. B is wrong because 2003 saw amendments to the customs and other laws for the zones but no separate SEZ Act. D is wrong because 2008 is later than both the Act and the Rules, by which time zones were already being notified under the new law.

The correct answer is B. The Office of the Economic Adviser, which sits in the Department for Promotion of Industry and Internal Trade under the Ministry of Commerce and Industry, compiles the Index of Eight Core Industries and also the Wholesale Price Index, and it publishes the core sector figure every month. Option A, the National Statistical Office, compiles the wider Index of Industrial Production and the Consumer Price Index, and the examiner's whole purpose in this question is to see whether a candidate can keep the two offices apart. Options C and D, the Ministry of Power and the Ministry of Coal, are source agencies that supply the production data for electricity and for coal respectively, but neither of them puts the eight series together into an index. Only one office does that, and it is not the one that produces the IIP.

The correct answer is B, the Discount and Finance House of India. It was set up in 1988 on the recommendation of the Vaghul Working Group to deal in short-term instruments such as treasury bills and commercial bills and so give depth and liquidity to the money market; it later became a primary dealer. A is wrong because the Securities and Exchange Board of India, though established in 1988 as a non-statutory body, was created for the capital market and became statutory in 1992. C is wrong because the National Housing Bank, set up in 1988 as well, is the apex institution for housing finance, a long-term business. D is wrong because the Small Industries Development Bank of India was set up in 1990 for the financing and development of small-scale industry, not for the money market.

The correct answer is D, Pigou. A.C. Pigou belongs to the welfare group of definitions, not the wealth group. In his book The Economics of Welfare he treated economics as the study of that part of social welfare which can be brought into relation with money, carrying forward the line taken by Alfred Marshall, who called economics a study of people in the ordinary business of life. The wealth definitions came earlier. A is wrong because Adam Smith, in An Inquiry into the Nature and Causes of the Wealth of Nations, called economics the science of wealth and is the father of the wealth definition. B is wrong because J.B. Say described economics as the science which deals with wealth. C is wrong because Francis Walker held that economics is that body of knowledge which relates to wealth. Later Lionel Robbins gave the scarcity definition, treating economics as the study of human behaviour as a relationship between ends and scarce means. Exam tip: wealth – Smith, Say, Walker; welfare – Marshall, Pigou; scarcity – Robbins.

The correct answer is C, not less than six thousand rupees. Besides a free meal through the local anganwadi during pregnancy and for six months after childbirth, the Act entitles every pregnant woman and lactating mother to a maternity benefit of not less than six thousand rupees, paid in instalments; women already receiving a similar benefit as government employees are excluded. A, three thousand rupees, is wrong, though candidates often recall it because the amount is paid in instalments and the first instalments are smaller. B, five thousand rupees, is wrong and is simply a plausible round figure placed to tempt a guess. D, ten thousand rupees, is wrong because no provision of the Act fixes that sum; the floor written into the Act is six thousand rupees. Note also that the benefit does not cover women already drawing a similar payment under their service conditions.

The correct answer is C, the tertiary sector. It produces no goods at all; it provides services such as transport, storage, communication, trade, banking, insurance, education, health care and administration, which is why it is commonly called the service sector.

Option A, the primary sector, is also called the agriculture and allied sector, and option B, the secondary sector, is also called the industrial sector, so all three have a second name and papers exploit the confusion. Option D, the public sector, belongs to an entirely different classification, the one based on ownership rather than on the nature of the activity; a public sector enterprise may be in any of the three sectors, as a government owned coal mine, steel plant or bank shows. Keeping the three classifications apart is the main skill this chapter tests.

The correct answer is C, the Department for Promotion of Industry and Internal Trade, a department of the Ministry of Commerce and Industry, which was known as the Department of Industrial Policy and Promotion until it was renamed in 2019. Option A is wrong because the Reserve Bank of India administers the exchange side under FEMA and receives the reporting of inflows, but it does not frame the sectoral policy. Option B is wrong because the Securities and Exchange Board of India regulates portfolio investors and the securities market. Option D is wrong because the Ministry of Finance deals with taxation, the budget and financial sector legislation, while the sectoral caps and routes for direct investment come from the commerce ministry's department. The circular is reissued from time to time with the caps and routes for every sector, so an aspirant should read the latest one rather than an old table of percentages.

The correct answer is B, the Directorate General of Foreign Trade. The DGFT works under the Ministry of Commerce and Industry, and under the Foreign Trade (Development and Regulation) Act of 1992 it frames and administers the Foreign Trade Policy, issues the importer-exporter code without which no one may trade across the border, and runs the export promotion schemes. Option A is wrong because the Reserve Bank manages the foreign exchange side of trade under FEMA and holds the reserves, but it does not write trade policy. Option C is wrong because SEBI regulates the securities market and has nothing to do with imports and exports. Option D is wrong because NITI Aayog is a policy think tank that advises the government and has no regulatory power. Associated bodies worth remembering are the EXIM Bank of 1982 and the Export Credit Guarantee Corporation.

The correct answer is B, foreign territory. The law deems a special economic zone to be outside the customs territory of India for trade operations, duties and tariffs, which is why a supply from the rest of the country into the zone is an export and a sale from the zone into the rest of the country is an import attracting customs duty. A is wrong because the domestic tariff area is defined as the part of India outside the zones, so a zone is precisely what the domestic tariff area is not. C is wrong because a union territory is a unit of the political map administered by the Union, and a zone has no such constitutional status. D is wrong because a bonded warehouse only stores goods on which duty is deferred, and it is licensed under the customs law rather than deemed foreign territory.

The correct answer is B, 1993. The Recovery of Debts Due to Banks and Financial Institutions Act of 1993 set up the Debt Recovery Tribunals, with Debt Recovery Appellate Tribunals above them, to take bank recovery suits out of the ordinary civil courts where they had been pending for years. Option A is wrong because 1985 belongs to the Sick Industrial Companies Act, whose Board for Industrial and Financial Reconstruction the Insolvency Code later replaced. Option C is wrong because 2002 is the year of the SARFAESI Act. Option D is wrong because 2013 is the year of the Companies Act. Under the Insolvency and Bankruptcy Code the same Debt Recovery Tribunal also acts as the adjudicating authority for the insolvency of individuals and partnership firms.

The correct answer is D, 1, 2 and 3. Indian bond yields respond to the RBI's policy, to domestic inflation and short-term rates, and also to the US Federal Reserve through global capital flows.

A bond's yield is the return an investor earns on it, and it moves opposite to the bond's price. When the RBI cuts the repo rate or buys government securities through open market operations, yields tend to fall; tightening pushes them up. Higher inflation makes investors demand a higher return, and short-term rates set the base from which longer yields are priced. When the US Federal Reserve raises rates, foreign investors may pull money out of Indian bonds for safer US assets, which lowers bond prices in India and lifts yields.

A is wrong because inflation and short-term rates also matter.

B is wrong because the RBI is only one of several influences.

C is wrong because both central banks also move yields.

Exam tip: bond price and yield move in opposite directions; inflation up, yields up.

The correct answer is C, 2017. The Foreign Investment Promotion Board was wound up and its work handed to the administrative ministries concerned, which now receive applications through the Foreign Investment Facilitation Portal. Option A is wrong because 2014 is the year the Securities and Exchange Board of India created the single class of foreign portfolio investors by merging foreign institutional investors, their sub-accounts and qualified foreign investors. Option B is wrong because 2015 is remembered in this chapter for the Make in India campaign gathering pace rather than for the Board. Option D is wrong because 2019 is the year the Department of Industrial Policy and Promotion was renamed the Department for Promotion of Industry and Internal Trade, a change of name that often appears in the same set of questions.

The correct answer is B, RoDTEP, the remission of duties and taxes on exported products. The earlier merchandise exports scheme was held to be inconsistent with world trade rules because it gave an incentive directly on exports, so it was replaced by a scheme that only refunds the duties and taxes embedded in an exported product which no other scheme refunds. A is wrong because RoSCTL, the rebate of state and central taxes and levies, is confined to apparel and made-up garments and came earlier, in 2019. C is wrong because the export promotion capital goods scheme allows duty-free import of machinery against an export obligation and is a wholly different instrument. D is wrong because the service exports scheme applied to the export of services, not of merchandise, and did not replace the merchandise scheme.

The correct answer is C. Under the automatic route the foreign investor needs no prior permission from either the government or the Reserve Bank of India; the Indian company simply reports the inflow and the issue of shares to the Reserve Bank within the prescribed time. Options A and B are wrong because prior approval is the feature of the other route, the government or approval route, where the application goes to the administrative ministry concerned through the Foreign Investment Facilitation Portal. Option D is wrong because the automatic route carries no single cap: the cap depends on the sector, and in a great many sectors the whole of the equity is open under this route, while a few sectors carry a lower cap or require approval beyond it.