The Tertiary Sector in the Indian Economy

Total Questions: 66

61. Which of the following activities constitute real sector in the economy? [2022-1]

1. Farmers harvesting their crops

2. Textile mills converting raw cotton into fabrics

3. A commercial bank lending money to a trading company

4. A corporate body issuing Rupee Denominated Bonds overseas

Select the correct answer using the code given below:

Correct Answer: (a) 1 and 2 only
Solution:
  • The real real sector of an economy is the key section as activities of this sector persuade economic output and is represented by those economic segments that are essential for the progress of GDP of the economy. So, in this sense, farmers harvesting their crops and textile mills converting raw cotton into fabrics are included under real sector of an economy. So, points 1 and 2 are correct.
  • The real sector of the economy consists of enterprises (nonfinancial corporations), households and nonprofit institutions serving households. From the point of view of monetary and financial statistics the households and nonprofit institutions serving households are in some cases combined into one subsector named "Other resident sectors".
  • A commercial bank lending money to a trading company and a corporate body issuing Rupee denominated Bonds overseas does not constitute the real sector. So, points 3 and 4 are not correct.

Real Sector vs Financial Sector of an Economy

  • The real sector of an economy is essential for economic growth. It includes all activities that directly produce goods and services, such as agriculture, manufacturing, and construction. Households and nonprofit institutions that serve households are also part of the real sector.
  • The financial sector, on the other hand, is concerned with the flow of money and other financial assets. It includes activities such as lending, investing, and trading securities. While the financial sector is important for supporting economic growth, it does not directly produce goods or services.
  • Economists and policymakers distinguish between the real sector and the financial sector to better understand the drivers of economic growth and to design policies that support the real sector. This distinction helps to ensure that resources are allocated efficiently towards sectors that directly contribute to the production of goods and services, job creation, and overall economic development.

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

1. In India, credit rating agencies are regulated by Reserve Bank of India.

2. The rating agency popularly known as ICRA is a public limited company.

3. Brickwork Ratings is an Indian credit rating agency.

Which of the statements given above are correct?

Correct Answer: (b) 2 and 3 only
Solution:Statement I is wrong: All the credit rating agencies in India are regulated by SEBI. Therefore by elimination the answer is "(b)".
• A Credit Rating Agency (CRA) is an organization that provides an independent evaluation of the creditworthiness of an issuer of debt instruments (such as bonds, loans, etc.).
• The rating reflects the agency’s opinion on the issuer’s ability and willingness to meet its debt obligations in a timely manner.
• Credit Ratings are forward-looking assessments of the likelihood that a borrower (like a government or corporation) will repay its debts.
• The rating process helps investors assess the credit risk associated with an investment and informs them about the financial health of the entity issuing the securities.
Key Functions of CRAs
• Assessing Creditworthiness: Evaluating the financial strength of borrowers and their ability to repay debt obligations.
• Rating Debt Instruments: Assigning a credit rating to bonds, loans, and other debt instruments to inform investors about their risk.
• Market Transparency: Promoting transparency in the capital markets by providing standardized ratings based on objective criteria.
• Investor Protection: Helping investors make informed decisions by clearly communicating the risk of an investment.
• Promoting Financial Stability: Assisting regulators in monitoring systemic risks within the financial system.

63. With reference to the 'Banks Board Bureau (BBB)', which of the following statements are correct? [2023-1]

1. The Governor of RBI is the Chairman of BBB.

2. BBB recommends for the selection of heads for Public Sector Banks.

3. BBB helps the Public Sector Banks in developing strategies and capital raising plans.

Select the correct answer using the code given below:

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

• The Governor of RBI is not the Chairman of the Bank Board Bureau (BBB). The Appointments Committee of the Cabinet in its discretion appoints the Chairman and members of the BBB. So, statement 1 is not correct.
• The BBB advises the Government on matters relating to appointments, confirmation or extension of tenure and termination of services of the Board of Directors in Public Sector Banks (PSBs) and financial institutions (FIs). It is responsible for the selection and appointment of Board of Directors of PSBs and FIs. So, statement 2 is correct.
• One of the functions of the BBB is to help Public Sector Banks in terms of developing business strategies and capital raising plan etc. So, statement 3 is correct.
Functions of Bank Board Bureau
• Recommends personnel for appointment as directors in government-owned insurance companies, in addition to public sector banks.
• Formulates appropriate growth and development strategies for public sector banks in collaboration with their boards of directors.
• Improves corporate governance and builds capacities at public sector banks.
• Is a public authority as defined in the Right to Information Act, 2005

64. Consider the investments in the following assets: [2023-1]

1. Brand recognition

2. Inventory

3. Intellectual property

4. Mailing list of clients

How many of the above are considered intangible investments?

Correct Answer: (c) Only three
Solution:The correct answer is (c) Only three. Intangible investments are assets that do not have a physical form. Therefore, out of the given investments, only three (Brand recognition, Intellectual property, and Mailing list of clients) are considered intangible investments.

Intangible investments are assets that are not physical in nature, such as patents, trademarks, copyrights, and human capital. They are often associated with higher productivity and growth in companies, sectors, and economies. Intangible investments can be created or acquired by businesses, but they do not appear on the balance sheet unless they have been purchased.

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

Statement-1: India, despite having uranium deposits, depends on coal for most of its electricity production.

Statement-II: Uranium, enriched to the extent of at least 60%, is required for the production of electricity.

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

Correct Answer: (c) Statement-1 is correct but Statement-II is incorrect
Solution:

• India is the world’s ninth-largest producer of uranium, with an output of 617 Tonnes in 2022, up by 0.26% in 2021. However, Coal is still the most important and abundant fossil fuel in India. It accounts for 55% of the country’s energy needs. So, statement 1 is correct.
• Uranium is an element which occurs naturally. It can have nuclear-related uses once it has been refined, or enriched. This is achieved by increasing the content of its most fissile isotopes, U-235, through the use of centrifuges - machines which spin at supersonic speeds.
• Low-enriched uranium, which typically has a 3-5% concentration of U-235, can be used to produce fuel for commercial nuclear power plants. So, statement 2 is not correct.
• Highly enriched uranium has a purity of 20% or more and is used in research reactors. Weapons-grade uranium is 90% enriched or more.

66. Consider the following airports: [2024-1]

1. Donyi Polo Airport

2. Kushinagar International Airport

3. Vijayawada International Airport

In the recent past, which of the above have been constructed as Greenfield projects?

Correct Answer: (a) 1 and 2 only
Solution:Donyi Polo Airport in Itanagar, the first Greenfield airport in Arunachal Pradesh, was developed on over 690 acres at a cost of more than Rs. 640 crores and inaugurated by Prime Minister Modi in 2022. Thus, Statement 1 is correct.

Kushinagar International Airport, a Greenfield airport, was inaugurated by Prime Minister Narendra Modi in October 2021. Thus, Statement 2 is correct.

Vijayawada International Airport is not a Greenfield project.

Thus, Statement 3 is incorrect. Hence correct answer is (a).

Government of India has accorded 'In-Principle' approval for setting up of 21 new Greenfield Airports namely. Mopa in Goa, Navi Mumbai, Shirdi and Sindhu durg in Maharashtra, Kalaburagi, Vijayapura, Hassan and Shivamogga in Karnataka, Dabra (Gwalior) in Madhya Pradesh, Kushinagar and Noida (Jewar) in Uttar Pradesh, Dholera and Hirasar in Gujarat, Karaikal in Puducherry, Dagadarthi, Bhogapuram and Orvakal (Kurnool) in Andhra Pradesh, Durgapur in West Bengal, Pakyong in Sikkim, Kannur in Kerala and Hollongi (Itanagar) in Arunachal Pradesh across the country.

Out of these, 11 Greenfield airports viz. Durgapur, Shirdi, Kannur, Pakyong, Kalaburagi, Orvakal (Kumool), Sindhudurg, Kushinagar, Itanagar, Mopa and Shivamogga have been operationalised.