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

Total Questions: 50

21. Consider the following statements: [2000]

The Indian rupee is fully convertible:

1. in respect of Current Account of Balance of payment

2. in respect of Capital Account of Balance of payment

3. into gold

Which of these statements is/are correct?

Correct Answer: (a) 1 alone
Solution:In respect of capital account of balance of payment, the indian rupee is partially convertible after 1991.
• In India, Current Account is today fully convertible since August 19, 1994.
ο Prior to this date, India had partial Current Account convertibility.
• Accordingly, several provisions like remittances for service, education, basic travel, gift remittances, donation, and provisions of the Exchange Earners’ Foreign Currency Account (EEFC) were relaxed.
• It means that the full amount of foreign exchange required for current purposes will be available at the official exchange rate, allowing for unrestricted outflow of foreign exchange.
• Following the recommendations of the S.S. Tarapore Committee on Capital Account Convertibility (1997), India has been progressing towards full convertibility in this account, while taking necessary precautions.
• India still maintains partial convertibility (40:60) in the capital account.
ο However, within this policy framework, significant reforms have been implemented, and for certain levels of foreign exchange requirements, the economy allows full convertibility in capital account.

22. The growth rate of per capita income at current prices is higher than that of per capita income at constant prices, because the latter takes into account the rate of: [2000]

Correct Answer: (b) increase in price level
Solution:The growth rate of per capita income at current prices is higher than that of per capita income at constant prices, because current prices are influenced by the effect of price inflation.
• Per capita income (PCI) or total income measures the average income earned per person in a given area (city, region, country, etc.) in a specified year. It is calculated by dividing the area's total income by its total population.
• PCI compares and assesses the economic situations of countries with varying population sizes.
• The measurement of a country's per capita income is done by dividing the total national income of a particular country or state by the population in that specific geographical region.
• While taking a country's PCI, every individual is taken into account. The calculation includes men, women, children, and babies. This is mainly because the measurement considers the entire country's population or specific geographical location.

23. Consider the following: [2001]

1. Market borrowing

2. Treasury bills

3. Special securities issued to RBI

Which of these is/are components(s) of internal debt?

Correct Answer: (d) 1, 2 & 3
Solution:Internal debt is that part of the total debt that is owed to lenders within the country. Market borrowings, Treasury bills and special securities issued to RBI are all sources of internal borrowings.
About Public Debt in India
• Public debt, also known as 'national debt', is the accumulated amounts of borrowing that government, and other public sector bodies, owe to the private sector and foreign governments.
• It includes debt of Central Government and State Governments, excluding inter-Governmental liabilities.
• Public debt can be internal (borrowed within India) and external (borrowed from foreign sources).
• Internal debt is 96.59% and external debt is 3.41% of total public debt of ₹18,174,284 crore (Union Budget 2025-2026).
• Potential impact of High Public debt: Increased interest costs, limited fiscal space, potential inflationary pressures, crowding out of private investment and impact growth and intergenerational equity.

24. Global capital flows to developing countries increased significantly during the nineties. In view of the East Asian financial crisis and Latin American experience, which type of inflow is good for the host country? [2002]

Correct Answer: (b) Foreign Direct Investment
Solution:FDI is defined as investment by a foreign multinational or its subsidiary or a foreign company in terms of setting up a project in another country either by way of a 100% subsidiary or by way of a joint venture. Thus, FDI investment is long term in nature. Thus, it can not be pulled out of the country at short notice. It is also non-debt creating.

25. Five Year Plan in India is finally approved by: [2002]

Correct Answer: (d) National Development Council
Solution:In India plans are formulated by Planning Commission and are finally approved by National Development Council. All state chief ministers are members of NDC. The NDC is headed by prime minister of India.
• The idea of five-year plans is simple- The Government of India prepares a document with all its income and expenditure for five years.
• The budget of the central government and all the state governments is divided into two parts: non-plan budget and plan budget.
• The non-plan budget is spent on routine items yearly. The planned budget is spent on a five-year basis as per the priorities fixed by the plan.
• The model of the Indian Economy was premised on the concept of planning based on five-year plans from 1951-2017.
• The Five Year Plans were formulated, implemented and regulated by a body known as the Planning Commission.
• The Planning Commission was replaced by a think tank called NITI Aayog in 2015.

26. A country is said to be a debt trap if: [2002]

Correct Answer: (b) It has to abide by the conditionalities imposed by the International Monetary fund.
Solution:A debt trap is a situation where countries or businesses or individuals are forced to take fresh loans to repay their existing loans. Such a situation arises when the income of a country or individual or company is not enough to clear its debt, while the interest on the outstanding loan amount starts to pile up quickly. This forces them to avail fresh loans to clear off the piled up interest, thereby falling into a debt trap. Hence, option b is correct.

27. Which one of the following is the correct statement? Service tax is a/an: [2006]

Correct Answer: (b) indirect tax levied by the Central Government.
Solution:All taxes which are the personal liability of an assessee come under direct taxes. They include income tax, professional tax, wealth tax, securities transaction tax, commodity transaction tax and the like. On the other hand, the taxes which a person can recover from some other person but the liability of which remains of the person collecting such taxes are indirect taxes. These are custom duty, excise, service tax, vat, CST and the like.

28. During which Five Year Plan was the Emergency clamped, new elections took place and the Janata Party was elected? [2009]

Correct Answer: (c) Fifth
Solution:This all happened from 1975-78 during fifth five year plan the period of which is (1974-78).

The main objective of the Fifth Five-Year Plan was the development of basic and heavy industries, employment generation, poverty alleviation, and population control.

  • Employment Generation: One of the most important objectives of the Fifth Five Year Plan was to create employment opportunities. It was estimated that about 50 lakh new jobs would be generated during the plan period.
  • Poverty Alleviation: Another objective of the plan was to alleviate poverty and increase economic growth. The target set for poverty alleviation was to bring down the number of people below the poverty line to 22 per cent by the end of the plan period.
  • Population Control: The Fifth Five Year Plan also aimed at population control measures. The target set for population control was to reduce the population growth rate to about two per cent per annum.

29. Consider the following statements regarding Indian Planning: [2009]

1. The Second Five-Year Plan emphasized on the establishment of heavy industries.

2. The Third Five-Year Plan introduced the concept of import substitution as a strategy for industrialization.

Which of the statements given above is/are correct?

Correct Answer: (c) Both 1 & 2
Solution:The second Five Year Plan heralded in a true sense the Socialist Project of the then Prime Minister, Jawaharlal Nehru. The economic policies of Nehru were heavily influenced by the erstwhile Union of Soviet Socialist Republics (USSR) which had followed the path of speedy industrialisation to expand the expand the manufacturing base of its economy. The Second Five year plan focused mainly on heavy industry as against the First plan which was essentially an agricultural plan. This was done to boost domestic production and manufacturing of goods. Third plan aimed to achieve self-sufficiency in food grains and to increase agricultural production to meet the requirements of industry and exports.

30. Which one of the following brings out the publication called "Energy Statistics" from time to time? [2009]

Correct Answer: (d) Central Statistical Organization
Solution:It is published by Ministry of Statistics and Programme Implementation, Central Statistical Organization.

India's Energy Scenario in 2025

  • Total Energy Supply and Demand:

    • Supply: Approximately 1,800 Million Tonnes of Oil Equivalent (MToE), reflecting an annual increase of 4.5% compared to 2024.

    • Demand: It is driven primarily by industrial growth (40%), transportation (25%), and residential consumption (20%).

  • Energy Mix (Sources and Shares):

    • Coal: 48%

    • Oil: 28%

    • Natural Gas: 8%

    • Renewables (Solar, Wind, Hydro, Biomass): 12%

    • Nuclear: 4%