The Tertiary Sector in the Indian Economy

Total Questions: 66

11. Since 1980, the share of the tertiary sector in the total GDP of India has: [1999]

Correct Answer: (a) shown an increasing trend
Solution:The share of the tertiary sector in the total GDP or Gross Domestic Product of India is increasing which is a sign of economic development. This reproduces the trend shown by western countries as they were developing.
The service sector is also known as the tertiary sector. It is one of the three sectors of the economy, the other two being the primary sector (which includes agriculture, forestry, mining, and fishing) and the secondary sector (which involves manufacturing and construction).

The service sector plays a crucial role in India’s economy. Here are some key roles and contributions of the Service sector in India:

  1. Economic Growth: The service sector accounts for most of the country’s economic output. The services sector contributes over 50 percent to India’s GDP.
  2. Employment Generation: The service sector is a major source of employment in India. It provides jobs to 30.7% of the Indian population.
  3. Foreign Exchange Earnings: Services like information technology (IT), business process outsourcing (BPO), and medical tourism have generated substantial foreign exchange earnings for India.
  4. Global Outsourcing Hub: India is a global outsourcing hub, particularly for IT, BPO, and knowledge-based services.
  5. Knowledge-Based Economy: The country produces many highly skilled professionals, including software engineers, doctors, engineers, and business analysts.
  6. E-commerce and Retail Growth: The retail and e-commerce subsectors have experienced significant growth in recent years, driven by increasing consumer spending and digital transformation.
  7. Tourism and Cultural Exchange: The tourism and hospitality sector contributes to cultural exchange and the growth of the country’s reputation as a global tourist destination

12. Consider the following statements regarding Reserve Bank of India: [2001]

1. It is a banker to the Central Government

2. It formulates and administers monetary policy

3. It acts as an agent of the Government in respect of India

4. It handles the borrowing programme of Government of India

Which of these statements are correct?

Correct Answer: (c) 1, 2, 3 & 4
Solution:The union budget decides the annual borrowing needs of the Central Government. Parameters, such as, interest rate, timing and manner of raising of loans are influenced by the state of liquidity and the expectations of the market. The Reserve Bank's debt management strategy aims at minimising the cost of borrowing. reducing the roll-over and other risks, smoothening the maturity structure of debt, and improving depth and liquidity of Government securities markets by developing an active secondary market.

13. Consider the following: [2002]

1. Currency with the public

2. Demand deposits with banks

3. Time deposits with banks

Which of these are included in Broad Money (M,) in India?

Correct Answer: (d) 1, 2 & 3
Solution:Narrow money is the most liquid part of the money supply because the demand deposits can be withdrawn anytime during the banking hours. Time deposits on the other hand have a fixed maturity period and hence cannot be withdrawn before expiry of this period. When we add the time deposits into the narrow money, we get the broad money, which is denoted by M3. M3 Narrow money + Time Deposits of public with banks. We note here that the Broad money does not include the interbank deposits such as deposits of banks with RBI or other banks. At the same time, time deposits of public with all banks including the cooperative banks are included in the Broad Money.

14. Consider the following financial institutions of India: [2002 [2002]

1. Industrial Finance Corporation of India (IFCI)

2. Industrial Credit and Investment Corporation of India (ICICI)

3. Industrial Development Bank of India (IDBI)

4. National Bank for Agriculture and Rural Development (NABARD)

The correct chronological sequence of the establishment of these institution is:

Correct Answer: (a) 1, 2, 3, 4
Solution:IFC1-1948; ICICI-1955, IDBI-1964; NABARD - 1982
The Industrial Finance Corporation of India (IFCI) was the first development finance institution in the country to cater to the long-term finance needs of the industrial sector. Next, the Industrial Credit and Investment Corporation of India (ICICI) was established for the promotion of industrial development by providing finance and credit facilities. The Unit Trust of India (UTI) is India’s first mutual fund, which came into existence in 1964. Lastly, the Industrial Development Bank of India (IDBI) was established in 1964 as a development finance institution for providing credit and other financial facilities.

15. Debenture holders of a company are its: [2003]

Correct Answer: (b) creditors
Solution:Debenture is a long-term bond issued by a company in return for a loan which have a fixed rate of interest.

Debenture-holders are the subscribers to debentures. Debentures are part of loan. Debenture holder is only a creditor of the company. Debenture holders are not concerned with the management and regulation of the company.
Interest and Features of Debentures
• The investor or bondholder will be informed about the debt offerings at the time of the debenture contract, such as the maturity date, the interest rate, the timing of interest or coupon payments, the method of interest calculation, and so on.
• Debentures pay a fixed interest rate and are redeemable or repayable on a specific date.
• The debenture issuing company will fix the scheduled debt interest payments before paying stock dividends to its shareholders.
• Debentures can pay periodic interest in the form of coupon payments. The coupon rate can be either fixed or variable.
• Debentures are preferred instruments by businesses because they have lower interest rates and longer repayment terms than other types of loans or debt instruments.

16. In the last one decade, which one among the following sectors has attracted the highest Foreign Direct Investment inflows into India? [2004]

Correct Answer: (b) Services sector
Solution:During question period, the services sector has attracted the highest FDI inflows of all sectors. Hence, option b is correct. Of the Sector-wise FDI Equity Inflows from April 2000, services have the largest share (17.6% of the total inflows).

Trading had a share of 5.81%.

Telecommunication had a share of 8.13%.

Chemicals had a share of 3.82%,

Drugs and Pharmaceuticals had a share of 3.59%.

Construction had a share of 3.54%.

17. Consider the following statements: [2004]

1. The National Housing Bank the apex institution of housing finance in India, was set up as a wholly-owned subsidiary of the Reserve Bank of India

2. The Small Industries Development Bank of India was established as a whollyowned subsidiary of the Industrial Development Bank of India

Which of the statements given above is/are correct?

Correct Answer: (c) Both 1 & 2
Solution:The National Housing Bank (NHB) is a state owned bank and regulation authority in India, created on July 8, 1988 under section 6 of the National Housing Bank Act (1987). The headquarters is in New Delhi. The institution, owned by the Reserve Bank of India. was established to promote private real estate acquisition. NHB is regulating and re-financing social housing programs and other activities like research and IT-initiatives, too. f Small Industries Development Bank of India is an independent financial institution for the growth and development of micro, small and medium scale enterprises in India. Set up in 2 April, 1990 through an Act of Parliament, it was incorporated initially as a wholly owned subsidiary of Industrial Development Bank of India.

18. Consider the following statements: [2004]

1. Reserve Bank of India was nationalized on 26 January, 1950

2. The borrowing programme of the Government of India is handled by the Department of Expenditure, Ministry of Finance

Which of the statements given above is/are correct?

Correct Answer: (d) Neither 1 nor 2
Solution:RBI was established in 1935 and was nationalized on 1 January, 1949. RBI handies the borrowing programme of the central and State Governments.
Reserve Bank of India (RBI) aims to maintain monetary and financial stability, manage currency, and foster economic growth (GDP) while regulating financial institutions and promoting financial inclusion across the country.
• Monetary Stability: To maintain price stability and ensure adequate flow of credit to productive sectors through various reserve measures.
• Financial Stability: To regulate and supervise the financial system to enhance stability and protect the interests of depositors.
• Currency Management: To manage the currency and ensure its smooth distribution across the country.
• Economic Growth: To support the economic policies of the government aimed at fostering economic growth and development.
• Regulation of Financial Institutions: To regulate and supervise the financial system to ensure its stability and soundness.
• Developmental Role: To support national objectives by promoting financial inclusion and extending banking services to rural and semi-urban areas.

19. Consider the following statements: [2005]

1. Sensex is based on 50 of the most important stocks available on the Bombay stock Exchange (BSE).

2. For calculating the Sensex, all the stock are assigned proportional weightage.

3. New York Stock Exchange is the oldest stock exchange in the world.

Which of the statements given above is/are correct?

Correct Answer: (a) 2 only
Solution:The 'BSE SENSEX is a value-weighted index composed of 30 stocks and was started in 1 January, 1986. The origin of the NYSE can be traced to 17 May, 1792. Amsterdam stock exchange (1602) is considered oldest in the world and was established by the Dutch East India company.

Sensex
• Sensex is the benchmark index of the BSE.
• It was launched on January 1, 1986, as a basket of 30 stocks representing the country’s largest, financially-sound companies listed on the BSE.
• The term ‘Sensex’ is a blend of words ‘Sensitive’ and ‘Index’ and was coined by stock market expert Deepak Mohini.
• The Sensex reflects the movements in the Indian stock market. It is considered the benchmark index of the Indian stock market.
How is the Sensex calculated?
• It was calculated based on the market capitalisation, or “Full Market Capitalisation”, when it was launched but shifted to a “Free-float Market Capitalisation” methodology from September 1, 2003.
• Free-float is the proportion of total shares issued by the company that is readily available for trading to the general public. It does not take into account promoters’ holdings, government holdings, and other shares that will not be available in the market for trading in the ordinary course of events.

20. Which one of the following Indian banks is not a nationalized bank? [2006]

Correct Answer: (c) Federal Bank
Solution:Federal Bank is a major Indian commercial bank in the private sector, headquartered at Kochi, Kerala.

The process of Nationalisation of Banks was conducted in multiple phases:
• Partial Nationalisation: The first experiment began in 1955 with the State Bank of India Act, under which three Imperial Banks were merged to form the State Bank of India (SBI). This was the first public sector bank in India.
• Full-Scale Nationalisation: Success of the initial step encouraged the government to nationalise private banks on a larger scale through the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969, and later in 1980.
Phase 1 (1969): 14 banks with deposits above ₹50 crores were nationalised.
Phase 2 (1980): 6 more banks with deposits above ₹200 crores were nationalised.