Indian Economy Mixed Quiz: Set 53

The correct answer is B, Modern Food Industries (India) Limited. In 1999 and 2000 the government sold seventy-four per cent of this bread-making company to Hindustan Lever along with management control, and it is counted as India's first strategic sale, that is, the first real privatisation of a central enterprise.

Option A, BALCO, the Bharat Aluminium Company, was sold to Sterlite in 2001 and is often misremembered as the first because the sale was fought in court and in Parliament. Option C, Hindustan Zinc, went to the same group in 2002. Option D, Videsh Sanchar Nigam Limited, went to the Tata group in 2002, in the best known of the early sales. The order to remember is Modern Food, then BALCO, then Hindustan Zinc and VSNL, with the public issue of Maruti Udyog in 2003.

The correct answer is C, 1 and 2 only. Necessities and luxuries are matched correctly, but an inferior good has a negative income elasticity, not a positive one.

Income elasticity of demand is the percentage change in quantity demanded divided by the percentage change in income. For a necessity such as salt or basic food grains, demand rises with income but more slowly, so the value lies between 0 and 1. For a luxury such as air travel or jewellery, demand rises faster than income, so the value is above 1. For an inferior good such as coarse grain, demand falls when income rises, so the value is below 0.

A is wrong: pair 3 is incorrect, because an inferior good has income elasticity less than zero.

B is wrong: it also includes the incorrect pair 3 and leaves out the correct pair 1.

D is wrong: all three cannot be right when pair 3 has the wrong sign.

Exam tip: inferior below 0, necessity 0 to 1, luxury above 1.

The correct answer is B, twenty workers with power and forty without power. The code doubles the thresholds of the Factories Act, 1948, the argument being that small units were burdened with compliance meant for larger ones, while the criticism is that many workers now fall outside the factory provisions. Option A is wrong because ten and twenty were the figures under the Factories Act, 1948, and that is the trap in this question. Option C is wrong because thirty and sixty appear nowhere in the code. Option D is wrong because the definition of a factory still turns on whether a manufacturing process uses power; fifty is the threshold for the contract labour provisions instead. The same code also requires an appointment letter for every worker.

The correct answer is A. The Export Credit Guarantee Corporation, founded in 1957 and first called the Export Risks Insurance Corporation, insures an Indian exporter against the commercial risk of a buyer failing to pay and the political risk of war, exchange restrictions or a ban in the buyer's country, and it also guarantees the banks that lend to exporters. B is wrong because long-term project finance is the business of the EXIM Bank and of commercial banks, not of a credit insurer. C is wrong because a direct subsidy on the price of exported goods is barred by world trade rules, which is why Indian schemes now refund embedded duties instead. D is wrong because warehousing at ports is provided by the port trusts, by customs-bonded warehouses and by free trade warehousing zones.

The correct answer is D, Mahanavratna, which does not exist. The three real grades are Maharatna, Navratna and Miniratna, and the last is itself divided into category one and category two, so there are four levels in practice. The Department of Public Enterprises administers the scheme, and the higher the grade, the larger the investment the board of the enterprise may approve without the government's permission.

Option A, Maharatna, is the highest grade and requires a listed Navratna of very large size with a significant global presence. Option B, Navratna, requires a Schedule A Miniratna of category one with a good record under its memorandum of understanding and a high score on six financial parameters. Option C, Miniratna, requires profit in each of the last three years and a positive net worth. All three are genuine categories.

The correct answer is B, 100 billion US dollars over 15 years. Article 7.1 of TEPA commits the EFTA states to increase foreign direct investment in India by 50 billion US dollars in the first ten years and a further 50 billion in the following five years, a total of 100 billion over fifteen years, with the stated aim of generating one million direct jobs in India. This is the first time any free trade agreement signed by India has carried a binding investment commitment. Option A is wrong because 50 billion is only the first instalment of the pledge, not the whole of it. Option C is wrong because the period is fifteen years and not twenty-five. Option D is wrong because no figure of 200 billion appears anywhere in the agreement.

The correct answer is B, fourteen days. The code extends to all industrial establishments the requirement, earlier limited to public utility services, that no person shall go on strike and no employer declare a lock-out without fourteen days' notice, and the strike must begin within sixty days of that notice. A strike is also barred while conciliation proceedings are pending and for a period after proceedings before a tribunal. Option A is wrong because seven days relates to the period after the conclusion of conciliation proceedings, not to the notice itself. Option C is wrong because thirty days appears in other labour provisions such as notice of retrenchment, not here. Option D is wrong because sixty days is the outer limit within which the strike must start and the bar that follows tribunal proceedings.

The correct answer is C, 2.1. The Total Fertility Rate is the average number of children a woman would have in her lifetime if she followed the current birth rates at each age from 15 to 49. Replacement level is the TFR at which each generation exactly replaces itself, so that over time, leaving migration aside, the population stops growing or shrinking. Two children are needed to replace the two parents, and the extra 0.1 covers children who die before reaching adulthood and the fact that slightly more boys than girls are born. India’s National Population Policy, 2000 set the goal of bringing TFR down to replacement level. Option A is wrong because a TFR of 1.0 would halve the population in each generation. Option B is wrong because 1.6 is below replacement, a level seen in ageing societies. Option D is wrong because 2.3 is above replacement, so the population would keep rising. Exam tip: replacement level fertility means a TFR of about 2.1 children per woman.

The correct answer is B, G. V. Ramakrishna. The Disinvestment Commission was constituted in 1996 as an advisory body to examine enterprises referred to it and to recommend the extent, method and timing of disinvestment in each case, and it was chaired by G. V. Ramakrishna, formerly the chairman of SEBI.

Option A, C. Rangarajan, headed the committee of 1993 which recommended that up to forty-nine per cent of equity be sold in industries reserved for the public sector and more in other industries, and he later became Governor of the Reserve Bank. Option C, Bimal Jalan, was a Governor of the Reserve Bank and headed committees on other subjects. Option D, Arjun Sengupta, is associated with the memorandum of understanding system for public enterprises and later with reports on the unorganised sector.

The correct answer is B, 100 days. The Mahatma Gandhi National Rural Employment Guarantee Act, passed in 2005, guarantees one hundred days of wage employment in a financial year to every rural household whose adult members volunteer to do unskilled manual work.

Options A, C and D are plausible round numbers with no basis in the Act. Two further details are asked as often as the number itself. First, the unit of the guarantee is the household, not the individual, so the hundred days are shared among the adults of one family. Second, if work is not provided within fifteen days of the demand, an unemployment allowance becomes payable by the state government. It is these enforceable claims that make the law a rights based measure rather than a welfare programme that the government may or may not run.

The correct answer is A, fifteen days' wages last drawn. The code sets up a Worker Re-skilling Fund to which the employer contributes fifteen days' wages for every retrenched worker, and the amount is to be credited to that worker's account within forty-five days of retrenchment so that it can be used while finding new work. Option B is wrong because one month's wages is the pay in lieu of notice that may become due on retrenchment, a separate payment. Option C is wrong because three months' wages matches no provision of the code. Option D is wrong because the contribution is measured against the worker's own last drawn wages rather than fixed as a flat national sum. This provision is new; the Industrial Disputes Act had no re-skilling fund at all.

The correct answer is B, 1991. By the middle of 1991 India's foreign exchange reserves had fallen to roughly a fortnight of imports, gold was pledged abroad to raise funds, the country borrowed from the International Monetary Fund and the rupee was devalued in two steps in July. The new industrial policy of 1991 followed, dismantling most industrial licensing and opening the economy. Option A is wrong because 1985 saw a limited liberalisation under Rajiv Gandhi but no crisis of this kind. Option C is wrong because 1997 is the year of the East Asian currency crisis, which India largely escaped, and of the first Tarapore Committee report. Option D is wrong because 2008 is the global financial crisis, in which India's growth slowed but its external position did not collapse. Remember 1991 together with devaluation, the IMF loan and the LPG reforms.

The correct answer is C, 2005. The National Investment Fund was set up in that year so that money raised by selling government equity would not simply fill the revenue gap. The original design kept three-fourths of the income for social sector schemes in education, health and employment and one-fourth for the capital needs of profitable public enterprises, and the arrangement was restructured later so that proceeds go into the fund in the Public Account.

Option A, 1996, is the year of the Disinvestment Commission. Option B, 1999, is the year the Department of Disinvestment was created and the year of the first strategic sale. Option D, 2016, is the year that department was renamed the Department of Investment and Public Asset Management. Keeping these four years apart is exactly what the question tests.

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 B, the 42nd Amendment, 1976. It inserted several Directive Principles, among them Article 43A on the participation of workers in the management of industrial undertakings, Article 39A on equal justice and free legal aid, and Article 48A on the protection of the environment. Option A is wrong because the 24th Amendment of 1971 affirmed Parliament's power to amend any part of the Constitution. Option C is wrong because the 44th Amendment of 1978 undid much of the Emergency-era changes and moved the right to property out of the Fundamental Rights. Option D is wrong because the 86th Amendment of 2002 inserted Article 21A on the right to education. Articles 41, 42 and 43 on the right to work, humane conditions and a living wage were in the Constitution from the beginning.

The correct answer is A, the Aadhaar number and fingerprint. The Aadhaar Enabled Payment System lets a customer withdraw or deposit cash, check a balance or transfer money at a micro ATM held by a business correspondent, identifying himself with the bank name, the Aadhaar number and a biometric such as a fingerprint, so neither a card nor a cheque is needed. It is the instrument that carries banking to villages without branches. Option B is wrong because a card and PIN belong to an ATM or point-of-sale transaction. Option C is wrong because a cheque and passbook are branch instruments and defeat the purpose of a system meant for those without easy branch access. Option D is wrong because a virtual payment address with a UPI PIN describes UPI.

The correct answer is B, banking, insurance and financial services. The policy of 2021 named four strategic sectors: atomic energy, space and defence; transport and telecommunications; power, petroleum, coal and other minerals; and banking, insurance and financial services. In these the government is to keep only a bare minimum presence, and in all other sectors enterprises are to be privatised, merged or closed.

Option A, hotels and tourism, is a standard example of a non-strategic activity from which the government has been withdrawing. Option C, trading in fertiliser and chemicals, is likewise non-strategic, though fertiliser production itself raises food security arguments. Option D, consumer goods manufacturing, has been treated as non-strategic since 1991. The point of the policy is that even in a strategic sector the presence is to be minimal, not that it is closed to private companies.

The correct answer is B, 40 per cent. The Hybrid Annuity Model was adopted to revive road construction after both the toll and the annuity models ran into trouble. The authority releases forty per cent of the bid project cost as a construction grant in instalments while the work proceeds, and the concessionaire raises the remaining sixty per cent from its own funds and from lenders. That sixty per cent is returned after completion as a series of annuities with interest linked to a bank rate, and the toll is collected by the authority itself. A, twenty per cent, is the ceiling for central viability gap funding, not the HAM grant. C, sixty per cent, is the share the concessionaire brings, so the option inverts the split. D would make it an EPC contract rather than a partnership.

The correct answer is C, three thousand rupees. The scheme, launched in 2019, is open to an unorganised worker between eighteen and forty years of age with a monthly income up to fifteen thousand rupees, and gives an assured monthly pension of three thousand rupees after sixty on a matching contribution, the worker and the government each paying half. Option A is wrong because one thousand rupees is the lowest of the slabs under the Atal Pension Yojana, a different scheme. Option B is wrong because two thousand rupees is also an Atal Pension Yojana slab. Option D is wrong because five thousand rupees is the highest Atal Pension Yojana slab, which often misleads candidates who have revised the two schemes together. Both are administered with the pension fund regulator's machinery.

The correct answer is B, Singareni Collieries Company Limited. Incorporated in 1920 and later taken over by the government, SCCL is India's oldest government-owned coal mining company.

Coal was found in the Godavari valley near Yellandu in the 1870s, and the Hyderabad (Deccan) Company began mining there in 1886. In 1920 it became The Singareni Collieries Company Limited, a public limited company, and the Hyderabad State government bought a majority of its shares in 1945. Today the Government of Telangana holds 51% and the Government of India 49%. It mines in the Godavari valley coalfields of Telangana.

A is wrong: Neyveli Lignite Corporation was set up in 1956 to mine lignite in Tamil Nadu.

C is wrong: Coal India Limited was formed in 1975, after the coal mines were nationalised in 1971–73.

D is wrong: Mahanadi Coalfields Limited is a subsidiary of Coal India created in 1992 for the Odisha coalfields.

Exam tip: SCCL 1920 (Telangana, oldest); NLC 1956; Coal India 1975; MCL 1992.