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

Total Questions: 50

41. In India, the tax proceeds of which one of the following as a percentage of gross tax revenue has significantly declined in the last five years? [2010]

(a) Service tax
(b) Personal income tax
(c) Excise duty
(d) Corporation tax

Correct Answer: (c) Excise duty

Solution:The excise duty's share in the total tax revenue, which was 41.3 percent in 1992-93, declined to 25.1 percent in 2006-07. The customs duty's share in the total tax revenue, which was 31.9 percent in 1992-93, fell to 17.5 percent in 2006-07, as a result of massive structuring on excise and customs.

42. Which one of the following authorities makes recommendation to the Governor of a State as to the principles for determining the taxes and duties which may be appropriated by the Panchayats in that particular State? [2010]

(a) District Planning Committees
(b) State Finance Commission
(c) Finance ministry of that State
(d) Panchayati Raj Ministry of that State

Correct Answer: (b) State Finance Commission

Solution:State Finace Commission governs the distribution between the State and the Panchayats of the net proceeds of the taxes, duties, tolls and fees leviable by the State, which may be divided between them under this Part and the allocation between the Panchayats at all levels of their respective shares of such proceeds; the determination of the taxes, duties, tolls and fees which may be assigned as, or appropriated by, the Panchayats; the grants-in-aid to the Panchayats from the Consolidated Fund of the State.

43. Consider the following statements: [2010]

In India, taxes on transactions in Stock Exchanges and Futures Markets are :

1. levied by the Union

2. collected by the States

Which of the statements given above is/are correct?

(a) 1 only
(b) 2 only
(c) Both 1 & 2
(d) Neither 1 nor 2

Correct Answer: (a) 1 only

Solution:In India taxes on transactions in Stock Exchange and Future Markets are levied and collected by the Union Govt.

44. India has experienced persistent and high food inflation in the recent past. What could be the reasons? [2011-1]

1. Due to a gradual switchover to the cultivation of commercial crops, the area under the cultivation of food grains has steadily decreased in the last five years by about 30%.

2. As a consequence of increasing incomes, the consumption patterns of the people have undergone a significant change.

3. The food supply chain has structural constraints.

Which of the statements given above are correct?

(a) 1 & 2 only
(b) 2 & 3 only
(c) 1 & 3 only
(d) 1, 2 & 3

Correct Answer: (b) 2 & 3 only

Solution:Notwithstanding some moderation, food price inflation has remained persistently elevated for over a year now, reflecting in part the structural demand-supply mismatches in several commodities. The trend of food inflation was pointing at not only structural demand-supply mismatches in commodities comprises the essential consumption basket but also at changing consumption patterns.

45. In terms of economy, the visit by foreign nationals to witness the XIX commonwealth games in India amounted to: [2011-1]

(a) Export
(b) Import
(c) Production
(d) Consumption

Correct Answer: (a) Export

Solution:Income from "tourism" is an invisible export and brings foreign exchange in the country.

In India, travel receipts - foreign exchange earnings from tourism are receipts of the country as a result of consumption expenditure, i.e. Payments made for goods and services acquired, by foreign visitors in the economy out of foreign currency brought by them.

46. Which one of the following statements appropriately describes the "fiscal stimulus"? [2011-1]

(a) It is a massive investment by the government in manufacturing sector to ensure the supply of goods to meet the demand surge caused by rapid economic growth.
(b) It is an intense affirmative action of the government to boost economic activity in the country.
(c) It is government's intensive action on financial institutions to ensure, disbursement of loans to agriculture and allied sectors to promote greater food production and contain food inflation.
(d) It is an extreme affirmative action by the government to pursue its policy of financial inclusion.

Correct Answer: (b) It is an intense affirmative action of the government to boost economic activity in the country.

Solution:Governments use fiscal policy to influence the level of aggregate demand in the economy. It is an effort to achieve economic objectives of price stability, full employment, and economic growth.

47. Consider the following actions which the government can take: [2011-1]

1. Devaluing the domestic currency.

2. Reduction in the export subsidy.

3. Adopting suitable policies which attract greater FDI and more funds from FIIs.

Which of the above action/actions can help in reducing the current account deficit ?

(a) 1 & 2
(b) 2 & 3
(c) 3 only
(d) 1 & 3

Correct Answer: (d) 1 & 3

Solution:Current Account deficit is excess of Exports over imports. After devaluation of domestic currency, domestic goods would become cheaper which will create additional demand for countries products in the world markets. Rising capital Inflow through FDI and FII may appreciate the domestic currency and can worsen a country's current account by increasing more imports and reducing exports, FDI and FII represents non-debt liabilities.

48. Both Foreign Direct Investment (FDI) and Foreign Institutional Investor (FII) are related to investment in a country. Which one of the following statements best represents an important difference between the two? [2011-1]

(a) FII helps bring better management skills and technology, while FDI only brings in capital.
(b) FII helps in increasing capital availability in general, while FDI only targets specific sectors.
(c) FDI flows only into the secondary market while FII targets primary market
(d) FII is considered to be more stable than FDI.

Correct Answer: (b) FII helps in increasing capital availability in general, while FDI only targets specific sectors.

Solution:Foreign Direct Investment only targets a specific enterprise. It aims to increase the enterprises capacity or productivity or change its management control. The FII investment flows only into the secondary market. It helps in increasing capital availability in general rather than enhancing the capital of a specific enterprise. The Foreign Direct Investment is considered to be more stable than Foreign Institutional Investor.

FDI not only brings in capital but also helps in good governance practises and better management skills and even technology transfer.

49. With reference to "Aam Admi Bima Yojana", consider the following statements? [2011-1]

1. The member insured under the scheme must be the head of the family or an earning member of the family in a rural landless house-hold.

2. The member insured must be in the age group of 30 to 65 years.

3. There is a provision for free scholarship for up to two children of the insured who are studying between classes 9 and 12.

Which of the statements given above is/are correct?

(a) 1 only
(b) 2 & 3 only
(c) 1 & 3 only
(d) 1, 2 & 3

Correct Answer: (c) 1 & 3 only

Solution:The statements 1st and 3rd are correct, but 2nd statement is wrong because, the member should be aged between 18 and 59 years not 30 and 65 years.

50. Microfinance is the provision of financial services to people of low-income groups. This includes both the consumers and the self-employed. The service/services rendered under microfinance is/are: [2011-1]

1. Credit facilities

2. Savings facilities

3. Insurance facilities

4. Fund Transfer facilities

Select the correct answer using the codes given below the lists?

(a) 1 only
(b) 1 & 4 only
(c) 2 & 3 only
(d) 1, 2, 3 & 4

Correct Answer: (d) 1, 2, 3 & 4

Solution:Microfinance is a movement whose object is "a world in which as many poor and near-poor households as possible have permanent access to an appropriate range of high quality financial services, including not just credit but also savings, insurance, and fund transfers."

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