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

Total Questions: 61

1. Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC)? [2017-1]

1. It decides the RBI's benchmark interest rates.

2. It is a 12-member body including the Governor of RBI and is reconstituted every year.

3. It functions under the chairmanship of the Union Finance Minister.

Select the correct answer using the code given below:

Correct Answer: (a) 1 only
Solution:MPC has 6 members, not 12; and it's headed by RBI governor and not Finance Minister. So statement 2 and 3 are wrong, hence by elimination, we reach answer (A) only 1 correct.

About Monetary Policy Committee

  • Monetary policy refers to the use of monetary instruments under the control of the central bank to regulate magnitudes such as interest rates, money supply, and availability of credit with a view to achieving the ultimate objective of economic policy.
  • The RBI is vested with the responsibility of conducting monetary policy. This responsibility is explicitly mandated under the Reserve Bank of India Act, 1934.
  • The primary objective of monetary policy is to maintain price stability while keeping in mind the objective of growth. Price stability is a necessary precondition to sustainable growth.
  • In May 2016, the RBI Act, 1934, was amended to provide a statutory basis for the implementation of the flexible inflation targeting framework.
  • The amended RBI Act also provides for the inflation target to be set by the government of India, in consultation with the Reserve Bank, once in every five years.
  • The Monetary Policy Committee (MPC) constituted by the central government under Section 45ZB determines the policy interest rate required to achieve the inflation target.
  • Function: The MPC is entrusted with the task of fixing the benchmark policy rate (repo rate) required to contain inflation within the specified target level.
  • The MPC replaced the previous arrangement of the Technical Advisory Committee.

Composition:

  • MPC will have six members: the RBI Governor (Chairperson), the RBI Deputy Governor in charge of monetary policy, one official nominated by the RBI Board, and the remaining three members would represent the Government of India.
  • The external members hold office for a period of four years.

2. What is the purpose of setting up of Small Finance Banks (SFBs) in India? [2017-1]

1. To supply credit to small business units

2. To supply credit to small and marginal farmers

3. To encourage young entrepreneurs to set up business particularly in rural areas.

Select the correct answer using the code given below:

Correct Answer: (a) 1 & 2 only
Solution:While directly or indirectly all three will be encouraged because of Small Finance banks. But when RBI invited applications, the specific purpose were 1 and 2 only.

About Small Finance Bank

  • SFBs are specialized banks that are licensed by RBI to provide financial services and products to low-income individuals and underserved communities, including microfinance and micro-enterprise services, as well as other basic banking services.
  • SFBs are granted the scheduled bank status after being operational and are deemed suitable under section 42 of the RBI Act, 1934.

Objectives

  • To provide financial inclusion to these segments of the population who are often excluded from the traditional banking system.
  • SFBs help them to have access to financial products such as small loans, savings, insurance, and other basic banking services.

3. Who among the following can join the National Pension System (NPS)? [2017-1]

Correct Answer: (c) All State Government employees joining the services after the date of notification by the respective State Governments.
Solution:

About National Pension System (NPS)

  • It is a retirement benefit scheme introduced by the Government of India to facilitate regular income post-retirement for all subscribers.
  • NPS was launched on 1st January, 2004.
  • Initially, NPS was introduced for the new government recruits (except the armed forces). With effect from 1st May, 2009, NPS has been provided for all citizens of the country, including the unorganised sector workers on voluntary basis.
  • Voluntary: It is a voluntary scheme for all citizens of India. People can invest any amount in their NPS account at any time.
  • Permanent Retirement Account Number (PRAN): It is based on a unique PRAN, which is allotted to every subscriber.
  • Portability: NPS account or PRAN will remain the same irrespective of changes in employment, city, or state. It can be used from any location in India.
  • PFRDA (Pension Fund Regulatory and Development Authority) is the governing body for NPS.
  • There is no defined benefit that would be available at the time of exit from the system, and the accumulated wealth depends on the contributions made and the income generated from the investment of such wealth.

4. What is/are the most likely advantages of implementing 'Goods and Services Tax (GST)? [2017-1]

1. It will replace multiple taxes collected by multiple authorities and will thus create a single market in India.

2. It will drastically reduce the 'Current Account Deficit' of India and will enable it to increase its foreign exchange reserves.

3. It will enormously increase the growth and size of economy of India and will enable it to overtake China in the near future.

Select the correct answer using the code given below:

Correct Answer: (a) I only
Solution:Exports will become ZERO RATED under GST, so statements 2 and 3 would have been correct If examiner had used moderate words "GST will help". But he has used 'extreme' words. GST is unlikely to 'drastically reduce CAD Because of crude oil import and OPEC cartel that manipulates its prices.

Similarly, GST is unlikely to enormously increase size of oureconomy (IMF projection-1-1.5% addition in growth rate.) and we can't overtake China in near future, because unlike China we are keeping our currency undervalued against dollar.

Hence statement 2 and 3 are wrong. We are left with Answer A.

5. With reference to the 'Prohibition of Benami Property Transactions Act, 1988 (PBPT Act)', consider the following statements: [2017-1]

1. A property transaction is not treated as a benami transaction if the owner of the property is not aware of the transaction.

2. Properties held benami are liable for confiscation by the Government.

3. The Act provides for three authorities for investigations but does not provide for any appellate mechanism.

Which of the statements given above is/are correct?

Correct Answer: (b) 2 only
Solution:Act provides is an appellate tribunal, and they're required to finish case within one year. So #3 is wrong, by elimination, we are left with A and B. So, B is most appropriate because IT dept (-therefore Government) can seize the benami properties.

6. Consider the following statements: [2017-1]

1. Tax revenue as a per cent of GDP of India has steadily increased in the last decade.

2. Fiscal deficit as a per cent of GDP of India has steadily increased in the last decade.

Which of the statements given above is/are correct?

Correct Answer: (d) Neither 1 nor 2
Solution:If we look at the overall trend from 2007 to 2017 there is gradual increase but on yearly basis there have been ups and downs. So, Neither Tax revenue nor Fiscal deficit as a percentage of GDP have steadily increased. UPSC kept D is the official answer.
Tax Revenue
  • In the context of Taxation System, the term "Tax Revenue" is the income that a government collects from taxes imposed on individuals, businesses, and other entities.
  • Tax revenue can change through 2 main mechanisms:

    • Automatic Changes: These occur without any specific legislative action. For example, Tax Revenue may increase/decrease due to changes in economic activities, inflation, etc.

    • Discretionary Changes: These involve changes in Tax Revenue due to deliberate policy decisions by the government. For example, Tax Revenue may increase/decrease due to changes in tax rates, introduction of new taxes, etc.

7. What is the aim of the programme 'Unnat Bharat Abhiyan"? [2017-1]

Correct Answer: (b) Connecting institutions of higher education with local communities to address development challenges through appropriate technologies.
Solution:Answer is "b" as per the Press Information Bureau.

The Unnat Bharat Abhiyan aims to improve rural livelihood by engaging Higher Education Institutions (HEIs) with the rural population. Below mentioned are the Unnat Bharat Abhiyan Objectives that were discussed during the cabinet session:

  • HEIs are tasked with adopting the group of nearby Gram Panchayats (GPs), especially those in rural and backward areas. The institutions provide technical, managerial, and advisory support to help these GPs overcome challenges and develop sustainable solutions for local issues.
  • Institutions will contribute to community-level planning and solutions for issues like energy security, livelihood opportunities, and basic infrastructure (e.g., water supply, sanitation, and healthcare) to contribute to sustainable rural development, ensuring better livelihoods for rural populations and improving their standard of living.

8. With reference to 'National Investment and Infrastructure Fund', which of the following statements is/are correct? [2017-1]

1. It is an organ of NITI Aayog.

2. It has a corpus of ₹ 4,00,000 crore at present.

Select the correct answer using the code given below:

Correct Answer: (d) Neither 1 nor 2
Solution:NIIF is under Department of Economic Affairs. So first statement is wrong. It was setup in Budget 2015, with Rs.40k crores, but even if counting the recent allotments till Budget 2017, the 4 lakh amount is unrealistic. So, second statement is also wrong.
About National Investment and Infrastructure Fund (NIIF)
  • NIIF is a fund manager that invests in infrastructure and related sectors in India.
  • It is India’s first-ever sovereign wealth fund (SWF), which was set up in 2015.
  • An institution anchored by the Government of India, NIIF is a collaborative investment platform for international and Indian investors with a mandate to invest equity capital in domestic infrastructure.
  • NIIF invests across asset classes such as infrastructure, private equity, and other diversified sectors in India, with the objective of generating attractive risk-adjusted returns for its investors.
  • It invests in greenfield (new), brownfield (existing), and stalled projects.
  • NIIF is 49% owned by the Indian government and has more than $4.9 billion in assets under management, making it the country’s biggest infrastructure fund.
  • NIIF benefits from its association with the Government yet is independent in its investment decisions.
  • It is majority-owned by institutional investors and managed professionally by a team with experience in investments and infrastructure.
  • The funds are registered as Alternative Investment Fund (AIF)with the Securities Exchange Board of India (SEBI) and are currently raising capital from domestic and international institutional investors.

9. Which of the following are the objectives of 'National Nutrition Mission"? [2017-1]

1. To create awareness relating to malnutrition among pregnant women and lactating mothers.

2. To reduce the incidence of anemia among young children, adolescent girls and women.

3. To promote the consumption of millets, coarse cereals and unpolished rice.

4. To promote the consumption of poultry eggs.

Select the correct answer using the code given below:

Correct Answer: (a) 1 & 2 only
Solution:While this mission will certainly increase consumption of millets, coarse cereals and eggs once people become aware of their nutritional benefits, but promoting their 'consumption' is not the explicit objective of this mission. Explicitly stated objectives are only 1 and 2.

So, experts were divided between A and B and C- because in the 2016's UN-REDD+ question, UPSC official even kept 'indirect benefit of poverty removal as one of the objective.

But in official answer key of 2017, they have gone only by literal interpretation of explicitly mentioned 'direct benefits, and they chose 'A' as the official answer.

10. What is the purpose of Vidyanjali Yojana"? [2017-1]

1. To enable the famous foreign educational institutions to open their campuses in India.

2. To increase the quality of education provided in government schools by taking help from the private sector and the community.

3. To encourage voluntary monetary contributions from private individuals and organizations so as to improve the infrastructure facilities for primary and secondary schools.

Select the correct answer using the code given below:

Correct Answer: (a) 2 only
Solution:HRD Ministry has launched an initiative called 'Vidyanjali' to encourage youngsters to volunteer their services at any neighborhood government school.

So accordingly "A" is the most appropriate choice.

What about statement "3"? While the mygov.in portal guidelines mention that Vidyanjali will cover initiatives under CSR, PPP, PSU. But mobilization of voluntary monetary contribution is not the primary and explicit 'purpose' of the scheme.
And the scheme is targeted at primary (Class 1 to 5) and upper primary classes (Class 6 to 8) so 'secondary schools' infrastructure facilities' are beyond its scope of work.

HRD ministry's other schemes specifically count class 9 onwards as 'secondary education'

Hence 3 is wrong. Therefore, Answer is "A".