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

Total Questions: 61

31. With reference to the casual workers employed in India, consider the following statements: [2021-1]

1. All casual workers are entitled for employees Provident Fund Coverage.

2. All casual workers are entitled for regular working hours and overtime payment.

3. The government can by a notification specify that an establishment or industry shall pay wages only through its bank account.

Which of the above statements are correct?

Correct Answer: (b) 2 & 3 only
Solution:

All casual workers are not entitled for Employees Provident Fund coverage. So, #1 is wrong #2 is right as per Code on Wages #3 right as per Payment of Wages Amendment 2017.
In the aftermath of demonetisation in 2016, the government was trying to encourage bank transfer So this amendment was made in 2017.

About Employees Provident Fund Organisation (EPFO):

• It is a statutory body under the Employees’ Provident Funds and Miscellaneous Act, 1952.
• It is under the administrative control of the Union Ministry of Labor and Employment.

Structure of EPFO:
• The Act and all its schemes are administered by a tripartite board called the Central Board of Trustees.
• The board comprises representatives of the Government (both Central and State), employers, and employees.
• The board is chaired by the Union Minister of Labour and Employment, Government of India.

32. Consider the following statements : [2021-1]

Other things remaining unchanged, market demand for a good might increase if:

1. Price of its substitute increases

2. Price of its complement increases

3. The good is an inferior good and income of the consumers increases.

4. Its price falls

Which of the above statements are correct?

Correct Answer: (a) 1 & 4 only
Solution:When a person becomes rich he will reduce the consumption of inferior goods such as kerosene and maize. So the demand for such goods will decline with the increase in income.
• The laws of demand and supply are fundamental to economic theory, providing essential insights into market behavior. They explain the relationship between prices, quantities demanded, and quantities supplied, influencing both micro and macroeconomic decision-making. Understanding these principles allows consumers, producers, and policymakers to make informed choices, anticipate market responses, and implement effective interventions.
• By analyzing demand and supply dynamics, elasticity, market equilibrium, and policy effects, we gain a comprehensive view of how markets operate in practice, both in India and globally.
• The laws of demand and supply were formalized by economists like Adam Smith, Alfred Marshall, and Léon Walras. They provide the foundation for microeconomics, illustrating how rational agents respond to price signals to allocate scarce resources efficiently.

33. With reference to Urban Cooperative Banks in India, consider the following statements: [2021-1]

1. They are supervised and regulated by local boards set up by the State Governments.

2. They can issue equity shares and preference shares.

3. They were brought under the purview of the Banking Regulation Act, 1949 through an Amendment in 1996.

Which of the statements given above is/are correct?

Correct Answer: (b) 2 & 3 only
Solution:Banking Regulation (Amendment) Ordinance/Act 2020: regulatory powers over UCBs rely solely to RBI & not State Governments. So, #1 wrong. Thus A/C/D are eliminated & we are left with correct Option "b".
About Urban Cooperative Banks

• Urban Cooperative Banks (UCBs) are a subset of cooperative banks in India that operate primarily in urban and semi-urban areas.
• History: The Cooperative Credit Societies Act of 1904 (during Lord Curzon’s tenure) and its 1912 amendment laid the legal foundation for these institutions.
• The first urban cooperative credit society was established in 1889 in Baroda (Anyonya Sahakari Mandali).
• Currently, they are registered as cooperative societies under the respective State Cooperative Societies Acts (for single-state operations) or the Multi-State Cooperative Societies Act, 2002 (for operations across multiple states).
• Control and Regulation: UCBs function under a dual regulatory framework:
• Banking Regulation Act, 1949: Since 1966, RBI has been supervising UCBs regarding licensing, capital adequacy, loan policies, and financial stability.
• The Banking Regulation (Amendment) Act, 2020 has given RBI more control over UCBs, allowing it to intervene in their management and governance.
• Registrar of Cooperative Societies (RCS): The respective state governments or the central government control administrative functions through the RCS

34. Consider the following statements: [2021-1]

The effect of devaluation of a currency is that it necessarily;

1. Improves the competitiveness of the domestic exports in the foreign markets.

2. Increase the foreign value of domestic currency.

3. Improves the trade balance.

Which of the above statements is/are

Correct Answer: (a) 1 only
Solution:Devaluation of the local currency example IF RBI notifying that henceforth "$1290 instead of $1=270". Such devaluation will improve the trade competitiveness of the domestic exports, because the foreign importers may be able to buy more quantity of Indian goods with the same quantity of dollars.

Then if previously foreigners were importing tea from Ethiopia, Sri Lanka or Kenya, now foreigners may start doing it from India. #1 is right. We are 50:50 between A or B. Now answer depends on the validity of the statement#2.

Devaluation: $1=70$1₹90. Here the foreign value of domestic currency will be ₹1 $0.014 downgraded/reduced to 1 $0.011. So, #2 is wrong. B&D eliminated.

35. Which one of the following effects of creation of black money in India has been the main cause of worry to the Government of India? [2021-1]

Correct Answer: (d) Loss of revenue to the State Exchequer due to tax evasion.
Solution:Black Money/ Tax Evasion reduces the revenue collection / fiscal resources of the government for running the welfare schemes. This problem has been highlighted multiple times by the economic surveys. So, "d" is most appropriate out of the given option.

36. Which one of the following is likely to be one of the most inflationary in its effects? [2021-1]

Correct Answer: (d) Creation of new money to finance a budget deficit.
Solution:

Printing extra money will create a high level of inflation /hyperinflation, if there are not enough goods and services in the market for purchase. Therefore, Correct Answer is "d".
• There is no universally accepted definition of black money in economics. Broadly, it refers to income that is earned through illegitimate means or income that is concealed from tax authorities.
• It represents unaccounted money on which due taxes have not been paid to the government. Black money is hidden from official records and does not figure in GDP estimates, national income, or other economic indicators.
• It is important to note that counterfeit currency or spurious notes are not classified as Black Money, since they are illegally printed currency rather than unaccounted legitimate earnings.

37. With reference to Ayushman Bharat Digital Mission, consider the following statements: [2021-1]

1. Private and public hospitals must adopt it.

2. As it aims to achieve universal health coverage, every citizen of India should be part of it ultimately.

3. It has seamless portability across the country.

Which of the statements given above is/are correct?

Correct Answer: (b) 3 only
Solution:Statement 1 is wrong: It is not 'must'/compulsory to adopt for pvt hospital. So #1 is wrong, by elimination we are left with Ans. (b).

Ayushman Bharat Digital Mission (ABDM)
• About:
• It was launched in 2021 with the aim to provide digital health IDs for all Indian citizens to help hospitals, insurance firms, and citizens access health records electronically when required.
• The National Health Authority (NHA) under the Ministry of Health and Family Welfare is the implementing Agency of ABDM.
• Key Features of ABDM:
• Unique Health Identifier for Citizens: A unique Health ABHA ID for each individual to securely store and manage health records.
• Healthcare Professionals Registry (HPR): A comprehensive repository of healthcare professionals across modern and traditional systems, enabling connection to India’s digital health ecosystem.
• Health Facility Registries (HFR): A comprehensive repository of public and private health facilities across all systems of medicine, including hospitals, clinics, labs, and pharmacies.
• Unified Health Interface (UHI): Facilitates the discovery and delivery of health services, thereby streamlining healthcare interactions and improving service accessibility.
• Data Privacy and Security: In alignment with the DPDP Act, 2023, the ABDM ensures the security, confidentiality, and secure sharing of patient related health information.
• Transparency: It offers individuals access to public and private health services, ensures guideline compliance, and promotes transparency in pricing and accountability.

38. With reference to Convertible Bonds, consider the following statements: [2022-1]

1. As there is an option to exchange the bond for equity, Convertible Bonds pay a lower rate of interest.

2. The option to convert to equity affords the bondholder a degree of indexation to rising consumer prices.

Which of the statements given above is/are correct?

Correct Answer: (c) Both 1 and 2
Solution:Both the statements are correct upon reading of global websites on financial instruments.

A convertible bond gives the holder the option to convert or exchange it for a predetermined number of shares in the issuing company. When issued, they act just like regular corporate bonds, albeit with a slightly lower interest rate. Because convertibles can be changed into stock thus, benefit from a rise in the price of the underlying stock, companies offer lower yields on convertibles. So, statement 1 is correct.
Advantages of investing in Convertible Bonds
• One of the advantages of convertible bonds is that the option to convert to equity affords the bondholder a degree of indexation to rising consumer prices. So, statement 2 is correct.
• Potential for capital appreciation: Convertible bonds offer the potential for capital appreciation if the underlying stock price rises. This is because convertible bondholders can convert their bonds into shares of stock at a predetermined price.
• Income generation: Convertible bonds typically pay regular interest payments, which can provide investors with a steady stream of income.
• Reduced risk: Convertible bonds are less risky than traditional stocks, as they offer the downside protection of a bond. This is because convertible bondholders are guaranteed to receive the principal investment back at maturity, even if the underlying stock price has fallen.
• Diversification: Convertible bonds can help investors to diversify their portfolios. This is because convertible bonds have characteristics of both bonds and stocks, and they can therefore help to reduce overall portfolio risk.

39. Consider the following statements: [2022-1]

Statement-I: Interest income from the deposits in Infrastructure Investment Trusts (InvITs) distributed to their investors is exempted from tax, but the dividend is taxable.

Statement-II: InvITs are recognized as borrowers under the 'Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

Which one of the following is correct in respect of the above statements?

Correct Answer: (d) Statement-I is incorrect but Statement-II is correct.
Solution:Income from InvITs is subjected to income tax, does not matter whether you have earned interest or dividend. Statement-1 is wrong thus and by elimination of options containing this statement, we arrive at the correct answer [d].

Statement-II is correct because InvITs are recognized as borrowers under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). This means that InvITs can raise funds by issuing debt securities, and the lenders can take possession of the assets of the InvITs in case of default.

An Infrastructure Investment Trust (InvITs) is Collective Investment Scheme similar to a mutual fund, which enables direct investment of money from individual and institutional investors in infrastructure projects to earn a small portion of the income as return.

The InvIT is designed as a tiered structure with Sponsor setting up the InvIT which in turn invests into the eligible infrastructure projects either directly or via special purpose vehicles (SPVs). The InvITs are regulated by the SEBI (Infrastructure Investment Trusts) Regulations, 2014.

40. Consider the following statements: [2023-1]

Statement-I: In the post-pandemic recent past, many Central Banks worldwide had carried out interest rate hikes.

Statement-II: Central Banks generally assume that they have the ability to counteract the rising consumer prices via monetary policy means.

Which one of the following is correct in respect of the above statements?

Correct Answer: (a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I.
Solution:The answer is (a), both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-1.

Statement-I is correct because many central banks around the world have raised interest rates in the post-pandemic period in an effort to combat rising inflation.

For example, the US Federal Reserve has raised interest rates four times since March 2022, and the Bank of England has raised interest rates five times since December 2021.

Statement-II is also correct because central banks believe that they can use monetary policy to influence the level of inflation. When interest rates are raised, it becomes more expensive to borrow money. This, in turn, can help to bring down inflation.

Therefore, Statement-II is the correct explanation for Statement-I. By raising interest rates, central banks are hoping to slow down the economy and bring inflation under control.