Poverty, Planning, Finance and Economic/Social Development (Part-II)

Total Questions: 50

1. Among the following who are eligible to benefit from the "Mahatma Gandhi National Rural Employment Guarantee Act"? [2011-1]

Correct Answer: (d) Adult members of any household.
Solution:
  • MGNREGA is the abbreviation for the Mahatma Gandhi National Rural Employment Guarantee Act 2005.
  • It is a law passed by the Indian government in 2005 that guarantees the "right to work" to rural citizens of India.
  • Under this, the government assures a minimum of 100 days of unskilled manual work to an adult member of an eligible rural household.
  • The main objective of the MGNREGA is to provide employment to rural citizens and improve their economic conditions.
  • Several organizations and people played key roles in championing the cause of the right to work, especially the Mazdoor Kisan Shakti Sangathan (MKSS), renowned development economist Jean Drèze, and many others.
  • MKSS's initial efforts at organizing workers working on government drought relief programmes spearheaded the way for sustained activism that led to the creation of MGNREGA.

Eligibility Criteria: For receiving the benefits of the MGNREGA Scheme, the following eligibility criteria are to be met by the applicant:

  • Citizen of India
  • 18 years of age at the time of application
  • Rural Household
  • Willing to do unskilled work.

2. With reference to the Finance Commission of India, which of the following statements is correct? [2011-1]

Correct Answer: (d) None of the statements (a), (b) and (c) given above is correct in his context
Solution:The Commission shall make recommendations as to the following matters, namely:

(i) The distribution between the Union and the States of the net proceeds of taxes which are to be, or may be, divided between them and the allocation between the States of the respective shares of such proceeds;

(ii) The principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India and the sums to be paid to the States which are in need of assistance by way of grants-in-aid of their revenues under article 275 of the Constitution for purposes other than those specified in the provisions to clause (1) of that article; and

(iii) The measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and Municipalities in the State on the basis of the recommendations made by the Finance Commission of the State.

3. What is the difference between "vote-on-account" and "interim budget" ? [2011-1]

1. The provision of a "vote-on-account" is used by a regular Government, while an "interim budget" is a provision used by a caretaker Government

2. A "vote-on-account" only deals with the expenditure in Government budget, while an "interim budget" includes both expenditure and receipts

Which of the statements given above is/are correct?

Correct Answer: (b) 2 only
Solution:Statement 1 is not correct as caretaker Government is the government which is ready to Go, it does not present the Interim Budget. The Interim Budget is presented by the Incoming Government or new Government which has different fiscal and revenue plans from the outgoing Government.
S.N. Vote on account Interim Budget
1.It deals only with the expenditure side of the government budget.It includes both expenditures and receipts of the government's budget.
2.It is for only two or three months.It is for one year.

Difference between Interim budget and Vote-on-account:

A vote-on-account contains only the expenditure of the government's budget while an Interim Budget is a complete set of accounts i.e. it includes both expenditure and receipts. Hence, statement 2 is correct.

Vote-on-account is passed every year and is used by both the regular and caretaker government.

Interim Budgets also can be presented by all governments whether incumbent or regular or caretaker. Hence, statement I is incorrect.

4. Why is the offering of "teaser loans" by commercial banks a cause of economic concern? [2011-1]

1. The teaser loans are considered to be an aspect of sub-prime lending and banks may be exposed to the risk of defaulters in future.

2. In India, the teaser loans are mostly given to inexperienced entrepreneurs to set up manufacturing or export units.

Which of the statements given above is/are correct?

Correct Answer: (a) 1 only
Solution:The statement 1 is correct because it includes the definition of teaser loans but the statement (2) is not correct, because in India teaser loan is provided to the home buyers not setting up manufacturing or export units.
Why RBI is against teaser loans?
  • The RBI feels that some borrowers may find it difficult to service the teaser loans once the normal interest rate which is higher than the rate applicable in the initial years, becomes effective.
  • In addition, a bank, while extending the loan does not take into account the borrowers repayment capacity after lending rates increase.

5. Which of the following can aid in furthering the Government's objective of inclusive growth? [2011-1]

1. Promoting Self-Help Groups.

2. Promoting Micro Small and Medium Enterprises.

3. Implementing the Right to Education Act.

Select the correct answer using the codes given below:

Correct Answer: (d) 1,2 & 3 only
Solution:The concept of the inclusive growth is based on both economic and social empowerment of ordinary and under privileged individuals. Thus all the statement are correct.

Inclusive Growth Need

  • Reduce Poverty and Inequality: Rapid growth alone has not guaranteed poverty reduction; inclusiveness ensures benefits reach marginalized groups.
  • Balanced Regional Development: Disparities across states and rural-urban divides call for growth that spreads evenly.
  • Social Justice and Equity: Ensures equal access to opportunities, resources, and markets, upholding constitutional values.
  • Human Development: Better education, healthcare, nutrition, and skill development raise overall productivity.
  • Employment Generation: Moves beyond income redistribution to create quality jobs, especially in agriculture and informal sectors.
  • Sustainable Growth: Focus on environmentally sound and socially inclusive policies avoids long-term risks.
  • Political and Social Stability: Reduces unrest by bringing disadvantaged groups into the growth process.

6. Why is the Government of India disinvesting its equity in the Central Public Sector Enterprises (CPSES)? [2011-1]

1. The Government intends to use the revenue earned from the disinvestment mainly to pay back the external debt.

2. The Government no longer intends to retain the management control of the CPSES

Which the correct statements given above is/are correct?

Correct Answer: (d) Neither 1 nor 2
Solution:When we say "Mainly" the money is to be used to pay the external debt, it is not correct to say so. Government though "may intend" to retain the management control, but there are fiscal constraints, that induce the government to go for disinvestment. Both statements are NOT correct.
Disinvestment is the process of reducing or liquidating government ownership in a company or asset, typically through the sale of shares or assets to private or public investors. It is often undertaken to raise capital, improve efficiency, or reduce government intervention in the economy.
Process of Disinvestment in India:
In India, the disinvestment process is overseen by the Department of Investment and Public Asset Management (DIPAM), operating under the Ministry of Finance. DIPAM's main goal is to manage the government's investments in public sector enterprises and supervise the disinvestment of government equity in these enterprises. Additionally, in 2005, the government established the National Investment Fund (NIF) to serve as a channel for the proceeds generated from the disinvestment of Central Public Sector Enterprises. The creation of NIF aimed to ensure transparent and efficient utilization of these funds for various developmental purposes.

7. Economic growth is usually coupled with [2011-1]

Correct Answer: (b) Inflation
Solution:Inflation and economic growth are parallel lines and can never meet. Inflation reduces the value of money and makes it difficult for the common people. Inflation and economic growth are incompatible because the former affects all sectors as indicated by CPI or Consumer Price Index.
  • Inflation refers to a general increase in the prices of goods and services over time. It's the most commonly used term to describe a rise in the cost of living.
  • Deflation is the opposite of inflation, where prices decrease. It can have negative consequences for the economy, such as discouraging spending and increasing debt burdens.
  • Stagflation is a combination of high inflation and slow economic growth, often accompanied by high unemployment. It's a particularly challenging economic situation.
  • Hyperinflation is extremely rapid and uncontrolled inflation, where prices rise very quickly and can erode the value of currency. It's a rare but serious economic crisis.

8. The lowering of Bank Rate by the Reserve Bank of India leads to : [2011-1]

Correct Answer: (a) more liquidity in the market
Solution:Bank rate refers to the official interest rate at which RBI will provide loans to the banking system which includes commercial/cooperative banks, development banks etc. when RBI lowers the bank rate, the cost of borrowing for banks decreases and the credit volume gets increased leading to increase in money and more liquidity in the market.

9. With what purpose is the Government of India promoting the concept of "Mega Food Parks"? [2011-1]

1. To provide good infrastructure facilities for the food processing industry.

2. To increase the processing of perishable items and reduce wastage.

3. To provide emerging and eco-friendly food processing technologies to entrepreneurs.

Select the correct answer using the codes given below:

Correct Answer: (b) 1 & 2 only
Solution:The Mega Food Park scheme was launched in2008 to set up modern infrastructure facilities for food processing industries.

The Schemes is under the purview of the Ministry of Food Processing Industries.
4 It establishes a mechanism to bring together farmers, processors and retailers and link agriculture production to the market to ensure maximization of value addition, minimization of wasteage and improving farmers' income.

Main objectives of the scheme:

To provide modern infrastructure for food processing. Hence, statement 1 is correct.

To increase the processing of perishable items and reduce wastage.

Hence, statement 2 is correct.

10. How do District Rural Development Agencies (DRDAs) help in the reduction of rural poverty in India? [2011-1]

1. DRDAs act as Panchayati Raj Institutions in certain specified backward regions of the country.

2. DRDAs undertake area-specific scientific study of the causes of poverty and malnutrition and prepare detailed remedial measures.

3. DRDAs secure inter-sectoral and inter-departmental coordination and cooperation for effective implementation of anti-poverty programmes.

4. DRDAs watch over and ensure effective utilization of the funds intended for anti-poverty programmes.

Which of the statements given above is/are correct?

Correct Answer: (b) 3 & 4 only
Solution:
  • Over the years the District Rural Development Agencies have emerged as the principal organs at the district level to oversing the implementation of different poverty alleviation programmes.
  • Since inception, the administrative costs of the DRDAs were met by setting apart a certain percentage of the allocation for each Programme. Of late, while the number of programmes increased, not all Programmes provided for the administrative cost of the DRDAs.
  • Keeping in view the need for an effective agency at the district level to co-ordinate the poverty alleviation efforts, a new Centrally Sponsored Scheme for strengthening the DRDAs was introduced w.e.f. 1st April, 1999.
  • The primary objective of the DRDA Administration Scheme is to professionalise the DRDAs so that they are able to effectively manage the poverty alleviation programmes of the Ministry of Rural Development and interact purposively with other agencies. The DRDAs are expected to (effectively) coordinate with the Panchayati Raj Institutions. DRDAs are to maintain their separate identity under the guidelines even though the Chairman of the Zilla Parishad is also the Chairman of the governing body of DRDA.