Indian Economy Gs Prelims 2015.pdf

ERUDITION IAS Learning Simplified

GS ECONOMY OBJECTIVE QUESTIONS & SHORT NOTES

Specially designed for UPSC Prelims 2015 by VIVEK SINGH (IIT+MBA) ____________________________________________________________________________ Office Address: A 10-11, Mezzanine Floor, Bhandari House (Near Chawla Restaurant) Mukherjee Nagar, Delhi – 110009 Mob: 9899449709, 9953037963 This material is also available @ www.eruditionias.com

ERUDITION IAS

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Learning Simplified

GS-Economy by

VIVEK SINGH (IIT + MBA) Highlights of the Course  Covers Economic Development of GS Paper - III  Complete coverage of all the topics for pre & mains  Regular batches (morning & evening) commencing every month  30 Sessions of 2½ hours each  Weekly tests, discussions & feedback  Personal attention and interaction with the students about their performance in the class

NOTE: This material is an attempt to help the students practice questions of economy for prelims 2015. Towards the end it contains a brief note on some significant developments related to current economy. This is not an exhaustive note as my main focus is to cater to the demand of the students who really needed quality questions. The discussion of these questions will be conducted every Sunday starting from 21st June 2015 (10.00 am – 1.00 pm). Any update regarding this material will be uploaded on our website (www.eruditionias.com).

1. Recently RBI adopted a new Monetary Policy framework called “Inflation Targeting”. Under this new framework:

(c) Both (i) & (ii) (d) Neither (i) nor (ii) 3. The term „Crowd-in‟ has recently been in the news in the economy in which of the following context?

(i) Controlling prices will be a priority for RBI above the other monetary policy objectives (ii) RBI will be having only one objective of controlling the prices (iii) There will be a preset and publicly displayed target for the annual rate of inflation (iv) RBI will be accountable and will have to explain to the government the causes and steps it intends to take and within what timeframe if it misses the inflation target

(i) Targeted government spending acts as an engine of growth in the short run (ii) Government spending complements the private investment (iii) Government spending boosts demand for goods which in turn increases private demand (iv) Government spending substitutes the private investment

Select the correct answer using the code given below: (a) (b) (c) (d)

Select the correct answer using the code given below:

(i) only (ii) only (i), (iii) & (iv) only (ii), (iii) & (iv) only

(a) (b) (c) (d)

(i) & (ii) only (i) & (iii) only (i), (ii) & (iii) only All of the above

4. “Tax Buoyancy” in the economy is defined as:

2. Consider the following statements regarding purchasing power parity (PPP) exchange rates:

(i) Ratio of percentage change in tax revenue to percentage change in GDP (ii) Ratio of change in tax revenue to change in GDP (iii) Percentage increase in tax revenues as measured from previous year (iv) Incremental change in tax revenues required to increase the GDP by one percent

(i) If two countries have zero rate of inflation, their PPP exchange rates will be constant (ii) The prices of goods will be same in all the countries when converted at PPP exchange rate Select the correct answer using the code given below: (a) (i) only (b) (ii) only 1

Select the correct answer using the code given below: (a) (b) (c) (d)

(iii) It can be tackled through expansionary monetary policy (iv) It can be tackled through expansionary fiscal policy

(i) only (i) & (ii) only (iii) only (ii) & (iv) only

Select the correct answer using the code given below:

5. If a country is experiencing recession, then which of the following shall be true:

(a) (b) (c) (d)

(a) Decrease in real GDP (b) Decrease in nominal GDP (c) Decrease in rate of growth of GDP (d) All of the above

8. Reserve money of the commercial banks include which of the following: (i) Deposits of Public (ii) Government securities held by banks (iii) Cash held by banks in their vaults (iv) Money deposited with RBI

6. The Macroeconomic Vulnerability Index (MVI) of a country is constructed by adding together which of the following: (i) (ii) (iii) (iv)

Fiscal Deficit Current Account Deficit External Debt Inflation

Select the correct answer using the code given below: (a) (b) (c) (d)

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) only (ii) only (i), (iii) & (iv) only (ii), (iii) & (iv) only

(i), (iii) & (iv) only (i), (ii) & (iv) only (ii) & (iii) only All of the above

(ii) & (iii) only (ii), (iii) & (iv) only (iv) only All of the above

9. Consider the following statements: (i) Repo Rate, Reverse Repo Rate, Bank Rate & MSF rate move in the same direction (ii) Sterilization is a Market Stabilization Scheme (iii) Sterilization is a day to day phenomenon (iv) Open Market Operations take place in secondary market

7. Consider the following statements regarding an economy facing cyclical unemployment: (i) It may lead to inflation in the economy (ii) It may lead to deflation in the economy 2

Select the correct answer using the code given below: (a) (b) (c) (d)

12. In case the Union Budget is not approved by 1st April, then which of the following options is most appropriate:

(i) & (ii) only (i) & (iv) only (ii) & (iv) only (i), (ii), (iv) only

(a) The Constitution empowers Lok Sabha to grant a “Vote-onAccount” (b) The government can still withdraw money from the “Consolidated Fund of India” (c) An Interim Budget needs to be passed (d) The government can take internal and/or external debt to meet its fund requirement

10. Foreign Direct Investment (FDI) in India can happen by which of the following ways: (i) (ii) (iii) (iv)

Subsidiary Joint Venture Acquisition of shares Purchase of government securities

13. If a country‟s economy is experiencing positive real growth rate, then which of the statements may be likely true:

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) & (ii) only (ii) & (iii) only (i), (ii) & (iii) only All of the above

(i) Money needs to be pumped in the economy to keep the deflation away (ii) Money needs to be sucked from the economy to keep the inflation away

11. Consider the following statements: (i) Money can be created by Fractional Reserve Banking (ii) Money Supply and Monetary Base are two alternative terms used for the same purpose

Select the correct answer using the code given below: (a) (b) (c) (d)

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) only (ii) only Both (i) & (ii) Neither (i) nor (ii)

(i) only (ii) only Both (i) & (ii) Neither (i) nor (ii)

14. Which of the following exchange rate system is being followed in India? (a) Fixed Exchange Rate with gold standard (b) Fixed but adjustable (c) Managed/ Dirt Float 3

(d) Floating Exchange Rate (i) Issue of Passport and Visa (ii) Registration of Companies (iii) Royalty from on shore oilfields (iv) Royalty from offshore oilfields

15. Consider the following statements regarding securities: (i) (ii) (iii) (iv)

All bonds are debt securities All debt securities are bonds Shares/Stocks are securities Savings and Fixed deposits are securities

Select the correct answer using the code given below: (a) (b) (c) (d)

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) & (iii) only (ii) & (iii) only (iii) & (iv) only (i) & (iv) only

18. Consider the following statements regarding “5/25 scheme” introduced in the FY 2014-15. (i) Applicable to infrastructure and core sector (ii) Helpful for long gestation projects (iii) It is a refinancing scheme (iv) It has been introduced by RBI

16. Consider the following statements regarding Foreign Direct Investment (FDI): (i) FDI investment may happen through secondary market (ii) FDI investment is possible through both primary & secondary market (iii) FDI investment is about equity securities (iv) FDI investment is about debt securities

Select the correct answer using the code given below: (a) (b) (c) (d)

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) only (i), (ii) & (iii) only (i), (ii) & (iv) only All of the above

(i) only (i) & (ii) (i), (iii) & (iv) All of the above

19. How many times RBI reviews the Monetary Policy in a Financial Year?

(i) only (ii) & (iii) only (iii) only (ii) & (iv) only

(a) (b) (c) (d)

17. Which of the following are Non Tax Receipts of the Central Government?

Quarterly Quarterly and Mid Quarterly Bimonthly Six Monthly

20. Consider the following statements regarding Value Added Tax (VAT):

4

(i) VAT is consumption based tax (ii) VAT is destination based tax

(b) (ii) only (c) (i) & (ii) both (d) Neither (i) nor (ii)

Select the correct answer using the code given below: (a) (b) (c) (d)

23. Consider the following statements regarding “Inverted Duty Structure”:

(i) only (ii) only Both (i) & (ii) Neither (i) nor (ii)

(i) It makes domestic manufactured goods uncompetitive against finished product imports in the domestic market. (ii) Finished goods are taxed at higher rate than the raw materials (iii) Raw materials are taxed at higher rate than the finished products (iv) The duty in the “Inverted Duty Structure” is Customs Duty

21. If an economy is in “Liquidity Trap”, then which of the following statements will be true: (i) The interest rate in the market will be very low/zero (ii) People and businesses both will hold on to their cash and don‟t spend (iii) People will be willing to buy bonds (iv) Cash holdings of banks will rise

Select the correct answer using the code given below: (a) (b) (c) (d)

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) only (i) & (ii) only (i), (ii) & (iv) only (i) & (iv) only

(i) & (ii) only (i) & (iii) only (i) & (iv) only (i), (iii) & (iv) only

24. Consider the following statements regarding Foreign Institutional Investor (FII):

22. Consider the following statements:

(i) FII is mainly into primary market (ii) FII investment may happen through primary market (iii) FII investment happens only in equity shares (iv) FII investment happens only in debt securities

(i) Insurance penetration is measured as the percentage of insurance premium to GDP (ii) Insurance density is measured as the ratio of premium to total population Select the correct answer using the code given below:

Select the correct answer using the code given below:

(a) (i) only

(a) (i) only 5

(b) (ii) only (c) (ii) & (iii) only (d) None of the above

(ii) Regional Rural Banks (iii) State Cooperative Banks & Land Development Banks (iv) Non Banking Financial Companies

25. Consider the following statements regarding Goods and Services Tax (GST):

Select the correct answer using the code given below:

(i) GST is a value added tax

(a) (b) (c) (d)

(ii) GST is a multipoint destination based tax Select the correct answer using the code given below: (a) (b) (c) (d)

28. Consider the following statements regarding presentation of Budget in the Parliament:

(i) only (ii) only Both (i) & (ii) Neither (i) nor (ii)

(i) Finance Bill is introduced on the very first day when the Finance Minister presents Budget in the Parliament (ii) Appropriation Bill is introduced after the voting on demand for grants is over

26. A Country has floating (flexible) exchange rate system. Consider the following statements: (i) Rise in interest rate in the country may lead to appreciation of its currency (ii) Inflation in the country may lead to depreciation of its currency

Select the correct answer using the code given below: (a) (b) (c) (d)

Select the correct answer using the code given below: (a) (b) (c) (d)

(ii) only (ii) & (iii) only (i), (ii) & (iii) only All of the above

(i) only (ii) only Both (i) & (ii) Neither (i) nor (ii)

(i) only (ii) only Both (i) & (ii) Neither (i) nor (ii)

29. Consider the following statements regarding Central Sales Tax (CST) (i) It is an origin based tax (ii) It is levied by the Centre (iii) It is administered by the Centre (iv) It is administered by the State

27. NABARD provides refinance to which of the following types of financial institutions:

Select the correct answer using the code given below:

(i) Commercial Banks 6

(a) (b) (c) (d)

(b) (i)-4, (ii)-2, (iii)-3, (iv)-1 (c) (i)-2, (ii)-3, (iii)-1, (iv)-2 (d) (i)-4, (ii)-3, (iii)-1, (iv)-2

(i) & (ii) only (i) & (iv) only (i), (ii) & (iv) only (ii) & (iv) only

32. Which of the following factors may lead to increase in savings in the economy?

30. The goals of India‟s Central Bank‟s Monetary Policy are:

(i) Positive real interest rate (ii) Low inflation rate (iii) Rise in per capita income (iv) Growth of financial intermediaries

(i) Price stability (ii) Economic growth (iii) Financial & currency stability (iv) Employment growth Select the correct answer using the code given below:

Select the correct answer using the code given below:

(a) (b) (c) (d)

(a) (b) (c) (d)

(i) & (ii) only (ii) & (iii) only (i) & (iii) only All of the above

31. Consider the following indices and their publishers and match the columns:

(iii) only (iii) & (iv) only (ii) & (iii) only All of the above

33. Consider the following statements regarding Incremental Capital Output Ratio (ICOR):

Index (i) Ease of doing business Index (ii) Human Development Index (iii) Global Hunger Index (iv) Gini Index

(i) It shows how efficiently capital is being used to produce output (ii) It is the extra unit of capital required to produce one additional unit of output (iii) It is the extra unit of output produced from one additional unit of capital (iv) It is the ratio of change in capital to change in output

Publisher 1. International Food Policy Research Institute 2. World Bank 3. United Nations Development Programme 4. International Monetary Fund

Select the correct answer using the code given below:

Select the correct answer using the code given below:

(a) (b) (c) (d)

(a) (i)-2, (ii)-3, (iii)-1, (iv)-4 7

(i) only (i) & (ii) only (i), (ii) & (iv) only (i), (iii) & (iv) only

(b) The tax rate will be same for the Centre and State (c) The tax rate at which Central and States revenues will be same (d) All of the above

34. Consider the statements regarding the various inflation indices published in the country: (i) Wholesale Price Index (WPI) does not represent the inflation in services (ii) Consumer Price Index (CPI) represents the inflation in services also (iii) CPI and WPI represent the inflation of imported components also (iv) GDP deflator captures the inflation of the goods and services produced domestically

37. The Multidimensional Poverty Index (MPI) identifies multiple deprivations at the household and individual level in the following areas : (i) Standard of living (ii) Education (iii) Health (iv) Housing

Select the correct answer using the code given below:

Select the correct answer using the code given below: (a) (b) (c) (d)

(a) (b) (c) (d)

(i) & (ii) only (i), (ii), (iii) only (ii), (iii),(iv) only All of the above

38. Which of the following statements is correct?

35. The unemployment caused due to the workers living far from the regions and are unable to move where jobs are available is an example of: (a) (b) (c) (d)

(i) only (i), (ii), (iii) only (ii), (iii),(iv) only All of the above

(a) An overvalued currency will boost exports from the country (b) An undervalued currency will boost exports from the country (c) Overvaluation/ undervaluation of currency does not impact exports (d) None of the above

Cyclical unemployment Frictional unemployment Structural unemployment Disguised unemployment

39. The decrease in dependency ratio (ratio of dependent population to working age population) of a country may lead to which of the following situation:

36. What does “Revenue Neutral Tax Rate” means in reference to the Goods and Services Tax (GST)? (a) The rate at which tax revenues for States and Centre will remain the same as before GST

(i) Increase in savings rate (ii) Decrease in savings rate (iii) Increase in Capital Formation 8

(iv) Decrease in Capital Formation

42. Consider the following statements regarding the “Kisan Vikas Patra” reintroduced by the government in 2014

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) & (iii) only (ii) & (iv) only (i) & (iv) only (ii) & (iii) only

(i) It is a savings scheme (ii) Only farmers can purchase (iii) Revenue mobilized will be used for welfare schemes for farmers

40. Consider the following statements regarding Payment Banks:

Select the correct answer using the code given below:

(i) They accept Demand Deposits (ii) They accept Time Deposits (iii) They can lend (iv) They cannot lend

(a) (b) (c) (d)

Select the correct answer using the code given below: (a) (b) (c) (d)

43. The visit of foreigners in India to see the various places/events in the country, amounts to which of the following in terms of economy:

(i) & (ii) only (i) & (iii) only (iii) only (i) & (iv) only

(a) (b) (c) (d)

41. Consider the following statements (i)

Currencies and coins are fiat money (ii) Currencies do not have intrinsic value but coins have (iii) Currencies and coins are legal tenders (iv) Cheques are legal tenders

Production Consumption Import Export

44. Which of the following is not part of money supply in the economy? (i) Money lying with the government (ii) Deposits of commercial banks with other commercial banks (iii) Money lying with the Central bank (iv) Deposits of pubic with commercial banks

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) only (i) & (ii) only (i) & (iii) only All of the above

(i) only (i) & (iii) only (iii) & (iv) only (ii), (iii) & (iv) only

Select the correct answer using the code given below: (a) (i) only (b) (ii) only 9

(c) (i) & (ii) only (d) (i), (ii) & (iii) only

(iii) To allow state governments to impose taxes on services (iv) To allow central government to tax the sale of goods at all stages beyond the factory gate

45. How would the September 2014 floods in Jammu and Kashmir impact India‟s Gross Domestic Product (GDP) for the FY 2014-15?

Select the correct answer using the code given below:

(a) It will increase the GDP (b) It will decrease the GDP (c) It will not have any impact on GDP (d) It may increase or decrease the GDP

(a) (b) (c) (d)

48. Match the following indices with their publishers:

46. RBI is keeping the policy rate at a higher level for quite some time. Which of the following conditions have led to such behavior?

Index (i) (ii) (iii) (iv)

(i) Inflation in the economy is high (ii) Inflation expectation in the economy is high

WPI CPI combined GDP Deflator CPI-Industrial Workers

Published by 1. Labour Bureau 2. Office of Economic Advisor 3. CSO

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) & (iii) only (ii), (iii) & (iv) only (ii) & (iv) only (iii) & (iv) only

(i) only (ii) only Both (i) & (ii) Neither (i) nor (ii)

Select the correct answer using the code given below: (a) (b) (c) (d)

47. The 122nd Constitutional Amendment Bill needs to be passed for implementation of Goods and Services Tax (GST) for the following reasons:

(i)-2, (ii)- 3, (iii)–3, (iv)-1 (i)-1, (ii)- 1, (iii)-2, (iv) -1 (i)-1, (ii)-3, (iii)-3, (iv)-2 (i)-1, (ii)-2, (iii)-3, (iv)-3

49. The unemployment caused due to the workers lacking the requisite job skills is an example of:

(i) To allow central government to impose taxes on inter-state sale of goods (ii) To allow central government to impose taxes on sale of intra state goods

(a) (b) (c) (d) 10

Cyclical Structural Frictional Disguised

172 and 182 respectively. Consider the following statements:

50. With respect to the Goods and Services Tax (GST) Council, consider the following statements:

(i) Average increase in wholesale prices from May 13 to May 14 is 10% (ii) Average increase in wholesale prices from base year to May 14 is 82% (iii) Average increase in wholesale prices from May 13 to May 14 is less than 10% (iv) Average increase in wholesale prices from May 13 to May 14 is more than 10%

(i) It will have constitutional backing (ii) It will decide on all the operational aspects of the GST Select the correct answer using the code given below: (a) (b) (c) (d)

(i) only (ii) only Both (i) & (ii) Neither (i) nor (ii)

Select the correct answer using the code given below:

51. The Real Rate of Interest is equal to the Nominal Interest Rate minus inflation. Consider the following statements:

(a) (b) (c) (d)

(i) Real Interest Rate must be positive to encourage savings and reduce consumption (ii) Real Interest Rate must be positive to reduce savings and encourage consumption (iii) Nominal interest rate in the market may be negative (iv) Inflation rate in the market may be negative

53. The money accruing from the sale of “Savings Certificates” goes to which account of the Government of India? (a) (b) (c) (d)

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) & (ii) only (ii) & (iii) only (ii) & (iv) only None of the above

Consolidated Fund of India Public Debt Public Account of India Contingency Fund of India

54. Reduction in Statutory Liquidity Ratio (SLR) will help achieve the banks which of the following prudential norms:

(i) only (iii) only (i) & (iii) only (i) & (iv) only

(i) Capital Adequacy Ratio (ii) Provisioning against NPAs

52. The WPI index (base year 2004-05 = 100) for May 2013 & May 2014 are

Select the correct answer using the code given below: 11

(a) (b) (c) (d)

(i) only (ii) only Both (i) & (ii) Neither (i) nor (ii)

(a) (b) (c) (d)

(i) & (iii) only (ii) & (iii) only (ii) & (iv) only (iii) & (iv) only

55. Interest rate in the economy is decreasing, consider the following statements :

57. Consider the following statements regarding „Soil Health Card‟ Scheme launched recently:

(i) It will help in capital appreciation of banks holding Statutory Liquidity Ratio (SLR) securities (ii) It will help banks in recapitalization (iii) It will help banks achieve BASEL norms

(i) It aims to provide soil health card to every farmer in the next three years (ii) Central government will provide assistance to state governments for setting up Soil Testing Laboratories for issuing soil health cards to farmers (iii) Soil Testing will be done once in every three years

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) only (iii) only (i) & (iii) only All of the above

Select the correct answer using the code given below: (a) (b) (c) (d)

56. Consider the following statements regarding the Nutrient Based Subsidy Scheme which became effective from 1st April 2010.

(i) & (ii) only (i) & (iii) only (ii) & (iii) only All of the above

58. When the central government is not able to meet the targets as mentioned in Fiscal Responsibility and Budget Management (FRBM) Act 2003 then it introduces amendments in the Act by introducing a bill in the parliament. This bill is:

(i) It is applicable for N, P & K fertilizers (ii) Applicable for only P & K fertilizers (iii) The prices of fertilizers under nutrient based scheme are regulated by the government (iv) Subsidy is given on the actual weight of the nutrients in the fertilizer

(a) (b) (c) (d)

Select the correct answer using the code given below: 12

FRBM Amendment Bill Appropriation Bill Finance Bill No such amendment is required

59. Recently the government introduced a new series for estimation of GDP for which the base year is: (a) (b) (c) (d)

62. During the period of “Forbearance” followed by RBI:

2010-11 2011-12 2012-13 2013-14

(i) The liquidity with banks decreases (ii) Provisioning against NPAs/ restructured loans decreases (iii) Lending cost for banks increases (iv) It affects the debtors and not the creditors

60. Consider the following statements regarding Base Rate: (i) It is the minimum rate below which banks cannot lend (ii) It is decided by the RBI (iii) It is decided by the respective banks (iv) It is same for all the banks

Select the correct answer using the code given below: (a) (b) (c) (d)

Select the correct answer using the code given below: (a) (b) (c) (d)

63. As per the revised methodology of CSO, economic growth is measured by GDP at:

(i), (ii) & (iv) only (i) & (iii) only (i), (iii) & (iv) only (ii) & (iv) only

(a) (b) (c) (d)

61. Which of the following sectors have been recently/ newly added in the definition of “Priority Sector Lending” by RBI?

Constant market prices Current market prices Factor Cost at constant prices Factor Cost at market prices

64. If a factory is running at peak production with certain number of labourers then the marginal productivity of labour will be:

(i) Medium Enterprises (ii) Social Infrastructure (iii) Renewable Energy (iv) Rural Infrastructure

(a) (b) (c) (d)

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) & (ii) only (ii) only (i), (ii) & (iii) only All of the above

Positive Negative Zero One

65. RBI is using which of the following inflation indices as anchors for “Inflation Targeting”:

(i) & (ii) only (ii) & (iii) only (i), (ii) & (iii) only All of the above only

(a) WPI 13

(b) GDP Deflator (c) CPI combined (d) CPI-Industrial Workers

Select the correct answer using the code given below: (a) (b) (c) (d)

66. The decrease in Cash Reserve Ratio (CRR) requirement by RBI will impact the Base Rate of banks in which of the following manner:

69. The competitiveness of a country‟s exports can be best known by which of the following exchange rates:

(a) It may lead to increase in Base Rate (b) It may lead to decrease in Base Rate (c) It may lead to increase or decrease in Base Rate (d) It will have no impact on Base Rate

(a) Nominal Exchange Rate (b) Real Exchange Rate (c) Nominal Effective Exchange Rate (d) Real Effective Exchange Rate

67. Which of the following are part of India‟s External Debt?

70. Which of the following investors/ agencies can purchase government of India securities?

(i) External Commercial Borrowing (ECB) (ii) NRI Deposits (iii) Investments made by Portfolio Investors in debt securities (iv) Portfolio Investors purchasing government securities

(i) Reserve Bank of India (ii) Portfolio Investors (iii) Financial Institutions (iv) Individuals Select the correct answer using the code given below:

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) only (ii) only Both (i) & (ii) Neither (i) nor (ii)

(a) (b) (c) (d)

(i) only (iv) only (i), (iii) & (iv) only All of the above

(i) only (i) & (iii) only (iii) only All of the above

71. Consider the following statements: 68. Money can be created in the economy in which of the following ways:

(i) Higher Repo Rate may lead to higher Bank Rate (ii) Higher Bank Rate leads to higher Repo Rate

(i) Fractional reserve banking (ii) Full reserve banking

14

(iii) Banks are bound to pass on the Repo Rate cut benefits to customers by reducing the Base Rate

74. Consider the following statements regarding payment banks: (i) They will accept current and savings deposits (ii) They may act as Business Correspondents for other banks (iii) They will be set up as differentiated banks (iv) They will provide payments / remittance services to migrant labour workforce, low income households and small businesses

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) only (ii) only (i) & (ii) only (i) & (iii) only

72. Rural Infrastructure Development Fund (RIDF) is a fund under which of the following institutions:

Select the correct answer using the code given below:

(a) Rural Electricity Corporation Limited (b) India Infrastructure Finance Company Limited (c) NABARD (d) Regional Rural Banks (RRBs)

(a) (b) (c) (d)

75. In the 2015-16 budget, Union government has eased the fiscal deficit roadmap and will achieve the target of 3% by 31st March 2018. This additional government expenditure is meant for:

73. Fiscal Deficit is equal to: (i) Total expenditure minus total receipts (ii) Total expenditure minus total receipts except borrowing (iii) Revenue deficit plus capital expenditure minus non debt creating capital receipts (iv) Total borrowing

(a) Financing of revenue deficit (b) Giving boost to the core sectors of economy (c) Agriculture sector (d) Social sector schemes

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) only (i) & (ii) only (ii) & (iii) only All of the above

76. Consider the following statements regarding “Small Banks”:

(i) & (iv) only (ii) & (iii) only (ii), (iii) & (iv) only All of the above

(i) They will promote savings from unserved sections of the population (ii) They will supply credit to small business units, small farmers, 15

micro and small industries and unorganized sector (iii) They will be subject to prudential norms (iv) They shall comply with the priority sector lending target

(iii) It prohibits RBI from subscribing to primary issues of central government securities (iv) It ensures transparency in fiscal operations Select the correct answer using the code given below:

Select the correct answer using the code given below: (a) (b) (c) (d)

(a) (b) (c) (d)

(i) only (ii) & (iv) (i), (iii) & (iv) All of the above

(i) only (ii) & (iii) only (ii), (iii) & (iv) only All of the above

80. Who has been appointed as the first President of BRICS bank?

77. If a country is experiencing inflation then what must decrease:

(a) (b) (c) (d)

(a) Wage level (b) The output of goods and services (c) The amount of money needed to purchase a given quantity of goods and services (d) Purchasing Power

K V Kamath Arun Shourie Yashwant Sinha Bimal Jalan

81. Which of the following rates is used by RBI as the penal rate in case banks are not meeting their reserve requirements?

78. The names „Shishu‟, „Kishor‟ and „Tarun‟ are related to which of the following recently launched government scheme:

(a) (b) (c) (d)

(a) MUDRA Bank (b) Payment Bank (c) Rural Infrastructure Development Fund (d) Soil Health Cards

Bank Rate Discount Rate Marginal Standing Facility Rate Weighted Average of Retail and Wholesale inflation

82. Consider the following statements: (i)

Net Factor Income from Abroad include export receipts (ii) Old Age Pension is not included in the estimation of National Income (iii) Retirement Pension is included in the estimation of National Income

79. Consider the following statements regarding FRBM Act 2003 (i) It is applicable to Centre and State both (ii) It prohibits government borrowing from RBI

16

(iv) Indirect taxes and subsidies are not included in national income

(ii) National Housing Bank (NHB) (iii) Small Industries Development Bank of India (SIDBI) (iv) NABARD

Select the correct answer using the code given below: (a) (b) (c) (d)

Select the correct answer using the code given below:

(ii), (iii) & (iv) only (i), (ii) & (iii) only (i) only All of the above

(a) (b) (c) (d)

83. Central government declares the price at which sugarcane should be purchased from the farmers by the mill owners. This price is called:

86. High Powered Money includes of which of the following:

(a) Central Issue Price (CIP) (b) Fair and Remunerative Price (FRP) (c) Minimum Support Price (MSP) (d) Central Regulated Price (CRP)

(i) Money injected in the economy by the Monetary Authority (ii) Currency and coins held by public Select the correct answer using the code given below:

84. Regional Rural Banks (RRBs) receive funds from which of the following entities:

(a) (b) (c) (d)

(i) Central Government (ii) Respective State Governments (iii) Sponsoring Banks (iv) NABARD

(i) only (ii) only Both (i) & (ii) Neither (i) nor (ii)

87. Unemployment rate is defined as:

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) & (ii) only (i) & (iii) only (i), (ii) & (iii) only None of the above

(a) Number of people not in job as a ratio of total population (b) Number of people not in job as a ratio of labour force (c) Number of people not in job but actively looking for job as a ratio of labour force (d) Number of people not in job but actively looking for job as a ratio of total population

(ii) & (iii) only (ii) & (iv) only (iv) only All of the above

85. Which of the following institutions offers direct credit at the household or project level?

88. Consider the following statements: (i) EXIM Bank 17

(i) Base Year prices are used to calculate the real GDP (ii) Base Year prices are used to calculate the nominal GDP

Select the correct answer using the code given below:

Select the correct answer using the code given below:

(a) (b) (c) (d)

(a) (b) (c) (d)

(i) only (ii) only Both (i) & (ii) Neither (i) nor (ii)

91. The National Income of a country (India) is equal to which of the following:

89. Consider the following statements regarding bonds:

(a) Gross National Product (GNP) (b) Net National Product at Market Prices (c) Net National Product at Factor Cost (d) The income going to the household sector

(i) Bond prices depend on market interest rate (ii) Bond prices depend on rate of inflation (iii) Bond prices depend on the profits of the companies issuing the bonds (iv) Bond prices are decided by the market regulator

92. Consider the following statements regarding Open Market Operations: (i) It is conducted by Commercial Banks (ii) It is conducted by RBI (iii) It is about debt securities (iv) It is about equity securities

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) & (ii) only (iii) & (iv) only All of the above None of the above

(i) only (i) & (ii) only (i), (ii) & (iv) only All of the above

Select the correct answer using the code given below: (a) (b) (c) (d)

90. Which of the following constitute Capital Account in Balance of Payment (BoP)? (i) Global Depository Receipts (ii) Trade Credit (iii) Government securities purchased by foreign Investors (iv) Securities purchased by foreign portfolio investors

(ii) only (ii) & (iii) only (ii), (iii) & (iv) only All of the above

93. The rise in prices of goods and services in an economy may be caused due to: (i) Increase in circulation of the printed currency notes 18

(ii) Increase in Demand Deposits (iii) Increase in Time Deposits (iv) Increase in Post Office savings deposits

Select the correct answer using the code given below:

Select the correct answer using the code given below:

(a) (b) (c) (d)

(a) (b) (c) (d)

(i) only (i) & (ii) only (ii), (iii) & (iv) only All of the above

96. That part of the National Income which is received by the households is called:

94. Capital formation in a country will necessarily lead to which of the following:

(a) Personal Income (b) Personal Disposable Income (c) Net National Product at Factor Cost (d) None of these

(i) Increase in ICOR (ii) Decrease in ICOR (iii) Economic growth

97. Consider the following statements regarding the “Soil Health Card” scheme launched recently

Select the correct answer using the code given below: (a) (b) (c) (d)

(ii) only (ii) & (iii) only (i), (ii), (iii) only All of the above

(i) It will give information about the quality and fertility status of the soil (ii) It will help choose the right fertilizers in the right combination (iii) It will carry crop wise recommendations of nutrients/ fertilizers required for the farm (iv) It will promote balanced fertilization leading to improved soil health

(i) & (iii) only (ii) & (iii) only (iii) only None of the above

95. Consider the following statements regarding the “Price Stabilization Fund” launched recently under Ministry of Agriculture: (i) It will promote direct purchase of produce from farmers (ii) It will maintain a strategic buffer stock (iii) It will protect consumers by supplying commodities at reasonable prices (iv) It is a kind of market intervention scheme

Select the correct answer using the code given below: (a) (b) (c) (d)

19

(i) only (i), (ii) & (iv) only (ii), (iii) & (iv) only All of the above

98. Consider the following statements regarding Money Multiplier:

(b) (ii) & (iii) only (c) (i), (ii) & (iii) only (d) All of the above

(i) It increases with increase in reserve requirements of banks (ii) It decreases with increase in reserve requirements of banks (iii) It increases with Monetary Base (iv) It decreases with Monetary Base

101. Consider the following statements for a closed economy: (i)

Higher tax collection may lead to higher investment expenditure by government (ii) Higher tax collection may lead to higher consumption expenditure by government (iii) Higher savings will lead to higher investment

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) & (ii) only (ii) only (ii) & (iii) only (ii) & (iv) only

Select the correct answer using the code given below:

99. The Tenth Ministerial Conference of WTO scheduled for December 2015 is supposed to be held in: (a) (b) (c) (d)

(a) (b) (c) (d)

Nairobi Delhi Shanghai Buenos Aires

(i) & (iii) only (ii) & (iii) only (iii) only All of the above

102. „Stagflation‟ is a phenomenon which can occur if the economy is experiencing the following situations:

100. Consider the following statements in an economy:

(i) Demand Pull inflation (ii) Supply shock inflation

(i) Decrease in consumption expenditure may lead to increase in capital accumulation (ii) Increase in savings may lead to increase in capital accumulation (iii) Increase in savings leads to future economic growth (iv) Forgone present consumption leads to increased future consumption

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) only (ii) only Both (i) & (ii) Neither (i) nor (ii)

103. The National Census is conducted by which of the following offices/ agencies:

Select the correct answer using the code given below:

(a) Central Statistical Office (CSO)

(a) (ii) only 20

(b) National Sample Survey Office (NSSO) (c) Registrar General and Census Commissioner (d) Census Bureau of India 104. Which of characteristic Run‟?

(i) Shall be provided by the government (ii) Cannot be provided through market mechanism (iii) Not possible to exclude anyone from using these goods (iv) A person can enjoy the benefits of these goods without reducing their availability to others

the following are situation for „Bank

(i) Banks are in risk of becoming insolvent (ii) Customers withdraw their deposits fearing that banks will run out of reserves (iii) Central Bank acts as lender of last resort (iv) It arises due to fractional reserve banking

Select the correct answer using the code given below: (a) (b) (c) (d)

107. Consider the following statements regarding the Budget prepared by Government of India:

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) It shall be divided into two parts i.e. receipts budget and expenditure budget (ii) It shall be divided into two parts revenue budget and capital budget (iii) It is government‟s discretion to divide it any way (iv) There is a Constitutional specification regarding the division of the budget

(i) & (ii) only (iii) & (iv) only (ii), (iii), (iv) only All of the above

105. The Grants-in-aid given by the Central Government to the State Governments and local bodies for creation of capital assets are classified in the Union budget under? (a) Revenue expenditure (b) Capital Expenditure (c) Both Revenue and expenditure (d) None of the above

(i) only (iii) & (iv) only (ii), (iii) & (iv) only All of the above

Select the correct answer using the code given below: Capital

(a) (b) (c) (d)

106. Which of the following are characteristics of „Public Goods‟:

(i) & (iii) only (ii) & (iii) only (ii) & (iv) only (i) & (iv) only

108. Consider the following statements:

21

(i)

Repo Rate and Reverse Repo Rate are linked to each other (ii) Repo Rate and Bank Rate are independent of each other (iii) Bank Rate is called the „Policy Rate‟ (iv) Repo Rate and Reverse Repo Rate come under liquidity adjustment facility

111. Consider the following statements regarding Goods and Services Tax (GST): (i) Taxes need to be paid at each point in the value chain (ii) It will have input tax credit mechanism (iii) Taxes will be paid on the value added by any entity (iv) The total taxes will be passed on to the consumers

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) & (iv) only (ii) & (iv) only (i), (ii) & (iii) only (iv) only

Select the correct answer using the code given below: (a) (b) (c) (d)

109. To reduce the rate of inflation, the Government should: (a) Increase public expenditure (b) Encourage consumer expenditure (c) Increase Income tax (d) Reduce Interest Rate

(i) & (iii) only (i), (ii) & (iii) only (iii) & (iv) only All of the above

112. Which of the following figures are presented as part of the Budget presentation in Parliament?

(i) It may be inflationary (ii) It may not be inflationary (iii) It raises aggregate demand

(i) Budgeted receipts and expenses for the next Financial Year (FY) (ii) Budgeted receipts and expenses for the current FY (iii) Revised receipts and expenses of the current FY (iv) Actual receipts and expenses for the last FY

Select the correct answer using the code given below:

Select the correct answer using the code given below:

(a) (b) (c) (d)

(a) (b) (c) (d)

110. Consider the following statements regarding the government‟s fiscal deficit:

(i) only (ii) only (i) & (iii) only All of the above

22

(i) only (i) & (ii) only (i), (ii), & (iii) only All of the above

113. Which of the following statements will be considered as part of „Transfer Payments‟ in balance of payment?

(iv) Hyperinflation Select the correct answer using the code given below:

(i) Money sent by an NRI to his friend in India (ii) Money sent by an Indian employee who has gone abroad temporarily

(a) (b) (c) (d)

116. Which of the following are part of Monetary Base of an economy:

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) Currency notes and coins with the public (ii) Vault cash of commercial banks (iii) Deposits of commercial banks with RBI (iv) Deposits of Government of India with RBI

(i) only (ii) only Both (i) & (ii) Neither (i) nor (ii)

114. The Current Account Deficit in Balance of Payment can be financed through:

Select the correct answer using the code given below:

(i) Net capital inflow (ii) Foreign exchange reserve transaction (iii) Fiscal surplus (iv) Borrowing from external sources

(a) (b) (c) (d)

Select the correct answer using the code given below: (a) (b) (c) (d)

(ii) only (i) & (ii) only (ii) & (iii) only All of the above

(i) only (i) & (ii) only (iii) & (iv) only All of the above

117. Consider the following statements regarding Gross Domestic Product (GDP):

(i) only (ii) & (iv) only (i) & (ii) only All of the above

(i) It is the value added by all the firms in the economy (ii) It is the final value of goods and services produced in the economy (iii) It is the sum of final consumption and investment expenditure and net of exports and imports (iv) It is the income received by all the factors of production

115. Which of the following scenarios can support sustainable economic growth: (i) Deflation (ii) Low and moderate inflation (iii) Galloping inflation 23

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) Buyers and sellers act independently (ii) Buyers and sellers act in their own self interest (iii) They are at fair market price (iv) Generally the transactions between companies and their associates are at arm‟s length

(i) & (ii) only (i), (ii) & (iii) only (i), (ii) & (iv) only All of the above

118. Which agency will be acting as the Fund Manager for the recently launched “Price Stabilization Fund” for Perishable Agri-horticulture produce?

Select the correct answer using the code given below: (a) (b) (c) (d)

(a) National Agricultural Co-operative Marketing Federation of India (NAFED) (b) Small Farmers Agri-Business Consortium (SFAC) (c) Food Corporation of India (FCI) (d) National Consumer Cooperative Federation of India (NCCF) 119. Consider statements:

the

121. The term „Crowd-out‟ in economy is related to which of the following: (i) Increased public sector spending replaces private sector spending (ii) Governments deficit spending through borrowed money increases interest rates (iii) Government spending uses up financial resources that would otherwise be used by private firms (iv) Government providing a service or good that would otherwise be a business opportunity for private industry

following

(i) Foreign Portfolio investments are more volatile than FDI (ii) FDI investors can easily sell their holdings and quit the market (iii) Foreign Portfolio investment is sector specific (iv) FDI investment in general target the capital market

Select the correct answer using the code given below:

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) & (ii) only (iii) only (i), (ii) & (iii) only (i), (ii) & (iv) only

(a) (b) (c) (d)

(i) only (i) & (iii) only (iii) & (iv) only (iv) only

(i) only (i) & (ii) only (ii) & (iii) only All of the above

122. With respect to the Budget of the Central Government, Capital Receipts are those receipts which:

120. Consider the following statements regarding “arms length transactions”: 24

Select the correct answer using the code given below:

(i) Create a liability for the government (ii) Causes reduction in assets of the government

(a) (b) (c) (d)

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) only (ii) only Both (i) & (ii) Either (i) or (ii)

125. Consider the following statements: (i) Capital Account convertibility is related to the government‟s Capital Budget (ii) India has full capital account convertibility (iii) Current Account convertibility is related to governments current year domestic transactions (iv) India has partial current account convertibility

123. Consider the following statements regarding „Fiscal Consolidation‟ policy: (i) It is a conscious effort by the government to bring down fiscal deficit (ii) It is a conscious effort to reduce public debt (iii) It would raise revenues and bring down wasteful expenses (iv) It is a long term rather than short term road map for fiscal reform

Select the correct answer using the code given below: (a) (b) (c) (d)

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) only (ii) only Both (i) and (ii) Neither (i) nor (ii)

(i) & (ii) only (i) & (iii) only (i), (iii) & (iv) only All of the above

(i) & (iii) only (i), (ii) & (iii) only (i), (iii) & (iv) only None of the above

126. Consider the following statements regarding „Open Market Operations‟ (i) It results in an increase or decrease in Monetary Base (ii) It results in an increase or decrease of Money Supply (iii) It is managed by RBI but securities are bought and sold by commercial banks (iv) Securities are bought and sold by RBI

124. With respect to the “Pradhan Mantri Jan Dhan Yojana”, consider the following statements: (i) It will increase savings and investment in the economy (ii) It will increase growth in the economy

Select the correct answer using the code given below: 25

(a) (b) (c) (d)

profit, were able to reduce their taxable income

(ii) & (iii) only (ii) & (iv) only (i), (ii) & (iv) only All of the above

Select the correct answer using the code given below:

127. The amount of Money Supply in the economy affects the following macroeconomic variables: (a) (b) (c) (d)

(a) (b) (c) (d)

Rate of Interest Price level Output All of the above

130. Which of the following are components of India‟s Foreign Exchange Reserves?

128. Consider the following statements:

(i) SDR: Special Drawing Rights (ii) FCA: Foreign Currency Assets (iii) RTP: Reserve Tranche Position (iv) Gold

(i) High output leads to high unemployment (ii) High unemployment leads to high inflation

Select the correct answer using the code given below:

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) & (ii) only (i) & (iii) only (iv) only (i), (ii) & (iii) only

(a) (b) (c) (d)

(i) only (ii) only Both (i) & (ii) Neither (i) nor (ii)

(ii) only (ii) & (iv) only (i), (ii) & (iv) only All of the above

131. If a country has „Pegged‟ its exchange rate, then consider the following statements

129. Consider the following statements regarding Minimum Alternate Tax (MAT) in India:

(i) Inflation in the country may make its exports less competitive (ii) If the country devalues its currency in proportion to the inflation experienced then its exports may remain competitive

(i) Applicable to companies and individuals both (ii) MAT will be included in GST once implemented (iii) The companies are required to pay both MAT and Corporate Income Tax (iv) It was introduced as companies, in spite of having high book

Select the correct answer using the code given below: (a) (i) only (b) (ii) only 26

(c) Both (i) & (ii) (d) Neither (i) nor (ii)

(d) All of the above 134. Which of the following taxes are regressive in nature?

132. Consider the following statements regarding “Natural Monopoly”:

(i) Income Tax (ii) Sales Tax (iii) Goods & Services Tax (GST) (iv) Value Added Tax (VAT)

(i) There is only one supplier (ii) Start-up capital costs is huge and acts as deterrent for possible competitors (iii) Societies benefit as multiple firms operating in such an industry is economically inefficient (iv) Generally governments regulate such business

Select the correct answer using the code given below: (a) (b) (c) (d)

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) only (ii) only (i) & (ii) only (ii), (iii) & (iv) only

135. Consider the following statements regarding Goods and Services Tax (GST):

(i) only (i) & (ii) only (i) & (iii) only All of the above

(i)

It is levied at each point in the supply chain (ii) It provides input tax credit mechanism (iii) It is a value added tax (iv) It is a progressive tax

133. Which of the following statements are correct about CPI rural, CPI urban and CPI combined index? (i)

The price data is collected by NSSO (ii) The price data is published by CSO (iii) The base year is recently revised to 2011-12 (iv) It is released for all India and for states and UTs separately

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) & (iii) only (ii) & (iv) only (i), (ii) & (iii) only All of the above

136. Consider the following statements regarding the present taxation system in India

Select the correct answer using the code given below: (a) (ii), (iii) & (iv) only (b) (i), (ii) & (iii) only (c) (ii) & (iii) only

(i)

27

Service Tax is imposed by Centre only

(ii) VAT is imposed by states/UTs only

(b) 75% (c) 100% (d) 125%

Select the correct answer using the code given below: (a) (b) (c) (d)

140. Consider the following statements regarding Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002:

(i) only (ii) only Both (i) & (ii) Neither (i) nor (ii)

(i) It allows only RBI to classify any asset as non performing (ii) It allows RBI or any other authority or body as applicable to classify any asset as non performing (iii) It allows the banks and financial institutions to sell the security in case of secured and unsecured debt (iv) It allows the banks and financial institutions to sell the security once it becomes non performing

137. In which of the following situations in the economy people may be willing to purchase bonds? (i)

Inflation in the economy is almost zero (ii) Economy is in liquidity trap (iii) RBI is following expansionary monetary policy (iv) Inflation in the economy is high Select the correct answer using the code given below: (a) (b) (c) (d)

Select the correct answer using the code given below:

(i) & (ii) only (iii) & (iv) only (iii) only (iv) only

(a) (b) (c) (d)

138. In India, “Agriculture Year” is a period from: (a) (b) (c) (d)

st

(i) & (iv) only (ii) & (iv) only (i), (iii) & (iv) only (ii), (iii) & (iv) only

141. Which of the following is not a parameter for horizontal distribution of central tax proceeds within the states as per the Fourteenth Finance Commission report?

st

1 January – 31 December 1st April – 31st March 1st July – 30th June 1st October – 30th September

139. The Foreign Trade Policy of 201520 aims to increase the exports of goods and services from India by the following percentage:

(a) Population & Demographic change (b) Fiscal Discipline (c) Area & Forest Cover (d) Income Distance

(a) 50% 28

142. Consider the following statements regarding the mandate of NITI Aayog:

144. Consider the following statements: (i) Headline inflation measures price inflation of all types of goods and services (ii) Core inflation measures price inflation excluding food and energy items

(i) Evolve a shared vision of national development priorities and strategies with the active involvement of states (ii) Foster competitive federalism with centre competing with states and states competing with each other in pursuit of national development (iii) Decision making regarding policy and programme design on behalf of central and state governments (iv) Facilitating the implementation of the national development agenda

Select the correct answer using the code given below: (a) (b) (c) (d)

145. A person has left his current job and is looking for another job. He/ she is facing which type of unemployment:

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) only (i) & (iii) only (i), (ii) & (iv) only All of the above

(a) (b) (c) (d)

143. The Budget 2015-16 has allowed companies to issue tax free infrastructure bonds for funding to which of the following sectors: (i) (ii) (iii) (iv)

Structural Cyclical Frictional He/ she will not be considered as unemployed

146. Which of the following agencies conducts „inflation expectation survey‟ of households in India?

Road Railway Irrigation Power

(a) Central Statistical Organization (b) National Sample Survey Organization (c) Reserve Bank of India (d) Ministry of Finance

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) only (ii) only Both (i) & (ii) Neither (i) nor (ii)

147. Consider the following statements regarding the “Gold Monetization Scheme” as proposed in the budget 2015-16:

(i) & (ii) only (ii) & (iv) only (i), (ii) & (iii) only All of the above 29

(i)

It will help in mobilization of gold held by households and institutions (ii) It will give boost to the domestic gems and jewellery sector (iii) It will help in reducing import of gold and Current Account Deficit (CAD) (iv) Banks will be allowed to lend this gold to jewellers

149. Consider the following statements regarding the recently launched MUDRA Bank: (i) (ii)

Select the correct answer using the code given below:

Select the correct answer using the code given below: (a) (b) (c) (d)

(a) (b) (c) (d)

(i) & (iii) only (i), (ii) & (iii) only (ii) & (iv) only All of the above

(ii) (iii) (iv)

(i) The price of bonds falls if the lending rate in the market increases (ii) The price of bonds falls if the deposit rate in the market increases (iii) The price of bonds increases as the inflation in the market decreases (iv) The price of bonds decreases as the inflation in the market decreases

It ensures safety to the people‟s deposits in banks It ensures solvency of banks It increases the cost of funds for the banks Banks earn interest on CRR

Select the correct answer using the code given below: (a) (b) (c) (d)

(i) only (ii) only Both (i) & (ii) Neither (i) nor (ii)

150. Consider the following statements:

148. Consider the following statements regarding Cash Reserve Ratio (CRR) kept with RBI by commercial banks: (i)

It will act as a regulator for Micro Finance Institutions It will provide direct lending to small entrepreneurs

Select the correct answer using the code given below:

(i) only (i) & (ii) only (i), (ii) & (iii) only All of the above

(a) (b) (c) (d)

30

(i) & (ii) only (ii) & (iii) only (i), (ii) & (iii) only All of the above

ANSWER SHEET QNo.

ANS

QNo.

ANS

QNo.

ANS

QNo.

ANS

QNo.

ANS

1

C

31

C

61

C

91

C

121

D

2

C

32

D

62

B

92

B

122

D

3

C

33

C

63

A

93

D

123

D

4

A

34

D

64

C

94

C

124

C

5

A

35

C

65

C

95

D

125

D

6

B

36

A

66

B

96

A

126

C

7

D

37

B

67

D

97

D

127

D

8

B

38

B

68

A

98

B

128

D

9

D

39

A

69

D

99

A

129

C

10

C

40

D

70

D

100

D

130

D

11

A

41

B

71

A

101

D

131

C

12

A

42

C

72

C

102

B

132

D

13

A

43

D

73

C

103

C

133

D

14

C

44

D

74

D

104

D

134

D

15

A

45

A

75

B

105

A

135

C

16

C

46

C

76

D

106

D

136

C

17

C

47

B

77

D

107

C

137

D

18

D

48

A

78

A

108

A

138

C

19

C

49

B

79

C

109

C

139

C

20

C

50

C

80

A

110

D

140

B

21

C

51

D

81

A

111

D

141

B

22

C

52

B

82

A

112

D

142

C

23

D

53

C

83

B

113

A

143

C

24

B

54

C

84

D

114

C

144

C

25

C

55

D

85

B

115

A

145

C

26

C

56

C

86

C

116

D

146

C

27

D

57

D

87

C

117

D

147

D

28

C

58

C

88

A

118

B

148

C

29

C

59

B

89

B

119

A

149

A

30

D

60

B

90

C

120

C

150

C

31

ERUDITION IAS Learning Simplified

GS-Economy by

VIVEK SINGH (IIT + MBA) Highlights of the Course  Covers Economic Development of GS Paper - III  Complete coverage of all the topics for pre & mains  Regular batches (morning & evening) commencing every month  30 Sessions of 2½ hours each  Weekly tests, discussions & feedback  Personal attention and interaction with the students about their performance in the class

Contact and Office Address: A 10-11, Mezzanine Floor, Bhandari House (Near Chawla Restaurant) Mukherjee Nagar, Delhi – 110009 Mob: 9899449709, 9953037963 www.eruditionias.com 32

GS-ECONOMY CURRENT EVENTS RESERVE BANK OF INDIA (RBI) 1. Standard/ Restructured/ Non-Performing Assets Loans and advances given by banks are „assets‟ for them (the loan document signed by the borrower and kept with banks is an asset for bank as based on this loan document the bank receives principal and interest back). Depending on the performance of such loans (i.e. whether banks are receiving interest & principal or not) they are classified as per the norms provided by RBI. The classification is aimed to bring transparency and consistency in the accounts. Assets

Standard

Non-Performing

Substandard

Doubt

Loss

There are different criteria for different types of loans (assets) for standard and non performing classification, and no need to remember. But generally nonperforming assets (NPA) are those assets for which interest and/or principal have remained overdue for a period of more than 90 days. Difference between Refinancing and Restructuring: Refinancing may refer to the replacement of an existing debt obligation with another debt obligation with changed terms and conditions like repayment period, interest rate etc. Refinancing of a debt may be done to take advantage of a better interest rate and a reduced monthly payment. But if the replacement of debt occurs under financial distress/ difficulty, refinancing might be referred to as debt restructuring (Corporate Debt Restructuring). In restructuring the promoter must put in additional equity (owner‟s money) in the company. Once a loan becomes NPA then it can be restructured (with certain conditions by lenders) and after restructuring it becomes a „Standard Asset‟ (but is also tagged as „restructured standard’) Banks need to make a provision of 15% on NPAs (i.e. this much of funds shall be kept aside for the safety purpose in case these loans may not be recovered at all). Banks also need to provision 15% on „restructured standard‟ assets but are sometimes given relaxation by RBI which is called „forbearance‟.

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2. SARFAESI Act 2002 Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (amended in 2004) allows the banks and financial institutions to seize the security (i.e. collaterals for the loan) and sell it in case the loan/debt becomes non-performing (NPA) and if it is secured (i.e. some collateral has been placed against it). [Non Banking Financial Companies (NBFCs) were not covered under SARFAESI Act 2002 but this year budget has proposed to include it under the Act] Section 2 (1) (o) of the 2002 Act Defines NPA as an asset or account of a borrower, which has been classified by a bank or financial institution, as sub-standard, doubt or loss asset in accordance with the classification guidelines issued by RBI. Section 2 (1) (o) of the 2004 Act (after amendment) Defines NPA as an asset or account of a borrower, which has been classified by a bank or financial institution, as sub-standard, doubt or loss asset in accordance with the classification guidelines issued by RBI or if the bank/ financial institution is administered or regulated by any other authority then as per the classification guidelines issued by such authority.

Various creditors and borrowers had approached the High Courts against the amended definition of NPA (Section 2 (1) (o)) and high courts had taken the view that the amended definition suffers from excessive delegation of essential legislation and this definition creates two classes of borrowers, one governed by RBI and one governed by guidelines issued by different regulators/authorities. But the Supreme Court in January 2015 upheld the amended definition of NPAs.

3. 5/25 Scheme Generally infrastructure projects have a life of 25-30 years and are capital intensive (requiring huge money) and of long gestation (the returns come after a long time). This scheme allows banks to extend long-term loans of 20-25 years to infrastructure and core industries, while refinancing them every five or seven years after the project has commenced commercial operations. The banks can flexibly refinance (restructure) the existing and new long-term project loans and it will not be considered as restructured asset (no provisioning of 15% is required) which will help both the borrower as well as the lender.

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4. Payment Banks RBI released guidelines for licensing of payment banks in November 2014.The objectives of setting up of payments banks is to promote financial inclusion by providing small savings accounts and payments services to migrant labour workforce, low income households, small businesses, other unorganized sector entities and other users. The following will be the scope of activities for payment banks:     

Acceptance of demand deposits but no lending activity Issuance of ATM/debit cards but not credit cards Payments and remittance services through various channels Acting as Banking Correspondent (BC) of another bank Distribution of non-risk sharing simple financial products like mutual fund units and insurance products, etc.

Payment banks will be required to maintain Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). The total deposits of the public must be invested in government securities and/ or deposited in other commercial banks (i.e. no lending is allowed). This makes the public deposit in payment banks safe. Payment banks will be set up as differentiated (specialized/ specific) banks for serving niche interests.

5. Small Finance Banks: RBI released guidelines for licensing of small finance banks in November 2014.The objectives of setting up of small finance banks are to promote financial inclusion by providing provision of savings vehicles and supply of credit to small business units; small and marginal farmers; micro and small industries; and other unorganized sector entities, through high technology-low cost operations. The scope of activities for small finance banks will be basic banking activities of acceptance of deposits and lending to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries and unorganized sector entities and there will not be any restriction in the area of operations. They will be required to maintain CRR and SLR. They will also be set up as differentiated banks for serving niche interests.

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MANUFACTURING & SERVICES 1. MUDRA Bank: Micro Units Development Refinance Agency (MUDRA) Bank was launched by the Prime Minister on 8th April 2015. Corpus of the bank will be Rs. 20,000 crore. The aim of the bank is to fund the unfunded small entrepreneurs and to strengthen savings habit in the country. Big industrial houses provide jobs to only 1.25 crore people, while small entrepreneurs employ 12 crore people. There are about 5.77 crore small business units in India. Roles and Responsibilities  MUDRA Bank will act as a regulator for „Micro-Finance Institutions‟ (MFIs)  It will lay down policy guidelines for micro enterprise financing business and registration of MFI entities as well as their accreditation and rating  MUDRA Bank would partner with state/regional level coordinators to provide finance to “Last Mile Financiers” of small/micro business enterprises such as NBFCs, Cooperative Societies, Small Banks, Commercial Banks, Regional Rural Banks  It will be responsible for developing and refinancing all MFIs which are in the business of lending to micro and small business entities engaged in manufacturing, trading and service activities in rural and urban area MUDRA Bank would also benefit small manufacturing units, shopkeepers, fruits and vegetable sellers, hair salons, beauty parlours, truck operators, hawkers, artisans in rural and urban areas with financing requirements up to Rs 10 lakh. MUDRA Bank will be targeted towards mainstreaming young, educated or skilled workers and entrepreneurs including women entrepreneurs. Since the establishment of MUDRA Bank as an independent entity is likely to take some time, it has been proposed to initiate the Bank as a unit of Small Industries Development Bank of India (SIDBI) to benefit from SIDBI‟s initiatives and expertise.

2.Make in India: A national programme designed to facilitate investment, foster innovation, enhance skill development, protect intellectual property and build best-in-class manufacturing infrastructure. The programme contains a vast number of proposals including easier norms and rules designed to get both foreign and domestic investors to set up shop and make the country a manufacturing hub. The programme lays emphasis on 25 sectors with focus on job creation and skill enhancement. 36

The vision of the programme includes the following:  Increasing the manufacturing sector growth to 12-14% per annum over the medium term  Increase the share of manufacturing in the country‟s GDP from 16% to 25% by 2022  To create 100 million additional jobs by 2022 in manufacturing sector  Increasing domestic value addition and technological depth in manufacturing  Creation of appropriate skills among rural migrants and urban poor for inclusive growth  Enhancing the global competitiveness of the Indian manufacturing sector  Ensuring sustainability of growth, particularly with regard to environment 3. Digital India: The vision of Digital India aims to transform the country into a digitally empowered society and knowledge economy and is centered on three key areas: (i) (IT) infrastructure as a Utility to Every Citizen (ii) Governance and Services on Demand and (iii) Digital Empowerment of Citizens The overall scope of this programme is:  To prepare India for a knowledge future  Being transformative that is to realize IT (Indian Talent) + IT (Information Technology) = IT (India Tomorrow)  Making technology central to enabling change.  An Umbrella programme covering many ministries and departments 4. Skill India: The vision for Skill India is - “To rapidly scale up skill development efforts in India, by creating an end-to-end, outcome-focused implementation framework, which aligns, the demands of the employers for a well-trained skilled workforce with the aspirations of Indian citizens for sustainable livelihoods.” Taking advantage of India‟s demographic dividend which consists of a majority of youth, Skill India will scale up skilling with high speed and standards and will act as the main driver of skill development for the nation‟s workforce. Thus, Skill India is focused on empowering the country‟s youth by training them in skill sets of their choice which will enhance their employability and create more job possibilities for them at national and global level. The main objectives are as follows:  Build training capacity especially in the unorganized sector  Ensure long-term skill training opportunities  Establish benchmarked standards and develop a network of quality instructors  Leverage existing public infrastructure  Facilitate overseas employment  Create pathways for transitioning between vocational and general education  Support weaker/disadvantaged sections of society  Maintain a national database 37

To achieve its vision of a 'Skilled India', the Department of Skill Development and Entrepreneurship was created on 31st July, 2014 which was later made into a full fledged “Ministry of Skill Development and Entrepreneurship” on 9th Nov, 2014.

4. Foreign Trade Policy (FTP 2015-20): The new five year Foreign Trade Policy (2015-20) unveiled on 1st April 2015 provides a framework for increasing exports of goods and services as well as generation of employment and increasing value addition in the country, in keeping with the “Make in India” vision. The focus of the new policy is to support both the manufacturing and services sectors, with a special emphasis on improving the „ease of doing business‟. The policy aims to double the exports to $900 billion by 2019-20, from $466 billion in 2013-14 and raise India's share in world exports from 2% to 3.5%. The following are important features of FTP 2015-20:  The policy introduces two new schemes, namely “Merchandise Exports from India Scheme (MEIS)” for export of specified goods to specified markets and “Services Exports from India Scheme (SEIS)” for increasing exports of notified services. Duty credit scrips are issued under MEIS and SEIS to promote the export of goods and services. (When an exporter exports something, he is provided with “duty credit scrips” and these scrips (paper money) he can use for payment of customs duty or excise duty or service tax on other items)  To give a boost to exports from Special Economic Zones (SEZ), the policy will extend benefits of both the reward schemes (MEIS and SEIS) to units located in SEZs  The policy will give higher level of rewards to products with high domestic content and value addition, as compared to products with high import content and less value addition (a boost for Make in India)  The policy promotes paperless processing of reward schemes for which it has been decided to develop an online procedure to upload digitally signed documents (a boost for Trade facilitation and ease of doing business)  Considering the strategic significance of small and medium scale enterprises in the manufacturing sector and in employment generation, 108 „MSME clusters‟ have been identified for focused interventions to boost exports. Accordingly, „Niryat Bandhu Scheme‟ (for mentoring first generation entrepreneurs) has been transformed and repositioned to achieve the objectives of „Skill India‟  The policy gives higher level of support for export of defense, farm produce and ecofriendly products  The policy shall be aligned to “Make in India”, “Digital India” and “Skill India” initiatives 38

GOLD SCHEMES

(as proposed in the budget)

Government has planned (in the Budget 2015-16) to introduce various gold deposit schemes in a bid to curb imports of gold, which is a major contributor of Current Account Deficit (CAD) of India (top consumer of gold). India does not produce gold and imports around 1000 tonnes of it every year. Indians mainly prefer to hold their gold in the form of ornaments and through these gold deposit schemes government wants to put this gold into productive use.

1.Gold Monetization: A customer (person or institution) can deposit gold in the specified bank or agency in their “Gold Savings Account” in the form of jewellery or bullion and can earn interest (rate as decided by the bank). The deposited gold will be lent by banks to jewelers at an interest rate little higher than the interest rate paid to the customers. The customer will have the choice to take cash or gold on redemption. It has been proposed that minimum quantity of deposit will be 30 gram of gold and for a minimum period of one year. The scheme will help in mobilization of gold held by household and institutions and will give boost to the domestic gems and jewellery sector. It will also help in reducing import of gold and CAD Both principal and interest to be paid to the depositors of gold will be „valued‟ in gold. For example if a customer deposits 100 gms of gold and gets 1 per cent interest, then, on maturity he has a credit of 101 gms. Interest earned will be exempt from income tax and capital gains tax. 2.Gold Bonds: A customer can purchase gold bonds which will carry a fixed rate of interest and be redeemable in cash in terms of the face value of gold at the time of redemption (proposed in the budget, no further progress) (explanation: suppose a person purchased gold bonds worth Rs. 100, and suppose at that time market price of 1mg of gold is Rs. 100. Then whenever the person would like to sell his gold bonds then he will be getting the market price of 1mg of gold at that time)

3. Gold Coin: Indian gold coin will be developed carrying the image of “Ashok Chakra”. Such an Indian gold coin will help reduce the demand for coins minted outside India and help recycle the gold available in the country (proposed in the budget, no further progress)

39

AGRICULTURE 1. Rural Infrastructure Development Fund (RIDF): This fund was set up under NABARD during the Budget 1995-96 with the sole objective of giving low cost fund support to State government/ UTs and State government owned corporations for quick completion of ongoing projects relating to broadly three categories i.e., Agriculture and related sector, Social sector and Rural connectivity. A corpus of Rs. 25000 crore has been allocated for the budget 2015-16. 2. Soil Health Card: The Prime Minister launched a nationwide „Soil Health Card‟ Scheme on 19th Feb 2015 from Suratgarh in Rajasthan.  It plans to distribute 14 crore cards in the next 3 years to the farmers in the country  Central government will provide assistance to state governments for setting up soil testing labouratories for issuing soil health cards to farmers  Soil testing will be done once in every three years  It will give information about the quality and fertility status of the soil  It will carry crop wise recommendations of nutrients/ fertilizers required for the farm  It will help choose the right fertilizers in the right combination  It will promote balanced fertilization leading to improved soil health 3. National Crop Insurance Programme (NCIP)/ Rashtriya Fasal Bima Karyakram (RFBK): NCIP is applicable throughout the country since Rabi 2013-14. This Central Sector Scheme has been formulated by merging former three schemes of 11th Plan, namely Pilot Modified National Agricultural Insurance Scheme (MNAIS), Pilot Weather Based Crop Insurance Scheme (WBCIS) and Pilot Coconut Palm Insurance Scheme (CPIS). NCIP has been introduced to provide financial support to the farmers for losses in their crop yield, to help in maintaining flow of agricultural credit, to encourage farmers to adopt progressive farming practices and higher technology in agriculture and thereby, to help in maintaining production, employment & economic growth. Besides these, farmers will also benefit due to:  The coverage of indemnity (protection) for prevented sowing/planting risk (i.e. if farmers have not been able to sow the crops because of some reasons) and failure of the notified crop as a result of natural calamities, pests diseases and post harvest losses  Higher level of indemnity and advanced way for calculation of threshold yield  Faster settlement of claims due to provision for making 50% advance of likely claims for immediate relief to the farmers  The premium is required to be paid by the farmers but the government will provide subsidy up to maximum of 75% on a 50:50 basis by Centre and State The “Unit area” of insurance is the village/ village panchayat level (i.e. the assessment of damage will be at entire village level and not at a particular farm level for receiving the claims) 40

SOCIAL SECURITY/ INSURANCE SCHEMES 1. Pradhan Mantri Jeevan Jyoti Bima Yojana    

Life insurance scheme offering life insurance cover for death due to any reason This will be a one year scheme renewable every year The risk cover is Rs. 2 lakhs and premium is Rs. 330 per annum The person shall be in the age between 18 to 50 years and having a savings bank account primarily linked with Aadhaar  The cover will be for one year period stretching from 1st June to 31st May and for joining the scheme, the auto debit consent for premium from the savings bank account shall be given by 31st May  A person can exit the scheme anytime and rejoin by paying the annual premium and submitting a self declaration of good health

2. Pradhan Mantri Suraksha Bima Yojana  Accident Insurance Scheme offering accidental death and disability cover for death or disability on account of an accident  This will be a one year scheme renewable every year  The risk cover is Rs. 2 lakhs and premium is Rs. 12 per annum  The person shall be in the age between 18 to 70 years and having a savings bank account primarily linked with Aadhaar  The cover will be for one year period stretching from 1st June to 31st May and for joining the scheme, the auto debit consent for premium from the savings bank account shall be given by 31st May  A person can exit the scheme anytime and rejoin by paying the annual premium and submitting a self declaration of good health

3. Atal Pension Yojana  Fixed pension scheme, and will replace the existing Swavalamban Yojana  The subscribers would receive fixed minimum pension of Rs. 1000 per month, Rs. 2000 per month, Rs. 3000 per month, Rs. 4000 per month, Rs. 5000 per month, at the age of 60 years, depending on their monthly contributions through auto debit  The minimum age of joining the scheme is 18 years and maximum age is 40 years.  The Central Government would also co-contribute 50% of the total contribution or Rs. 1000 per annum, whichever is lower, to each eligible subscriber account, for a period of 5 years

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NATIONAL INSTITUTION FOR TRANSFORMING INDIA (NITI) AAYOG On 1st January 2015, NITI Aayog was constituted through a cabinet resolution, dissolving the Planning Commission. The major functions of NITI Aayog will include:  Evolve a shared vision of national development priorities and strategies with the active involvement of states  Provide a platform for cooperative federalism by enabling states to have active participation in the formulation of national policy as well as achieving time-bound implementation of qualitative and quantitative targets. This cooperative federalism will be enhanced by competitive federalism with the centre competing with the states and vice versa and the states competing with each other in the joint pursuit of national development  Restructure the planning process into a bottom-up model. Empowering states and guiding them to further empower local governments in developing mechanisms to formulate plans at the village level which will progressively be aggregated up to the higher levels of government  Acting as a think tank of the government, it will strategically chart out the future of the nation  Provide a platform for mutual resolution of inter-sectoral, inter-departmental, inter-state as well as centre-state issues to bring about clarity and speed in execution  Offer internal consultancy function to central and state governments on policy and programme design. While it will make recommendations to the central and state governments, the responsibility for taking and implementing the decisions will rest with the centre and respective state governments  Monitor the implementation of policies and programmes and evaluate their impact and thus facilitate the implementation of the development agenda  An accumulator as well as disseminator of research and best practices on good governance through state-of-the-art resource centre  Bringing in external ideas and expertise into government policies and programmes through a collaborative community of national and international experts & practitioners

42

GOODS & SERVICES TAX (GST) The government is planning to implement GST across the country by 1st April 2016. To implement it, Constitutional amendment is required mainly because of the following two issues: (i) (ii)

Presently taxes on services is under Union List And taxes on sale of goods within the states is under State List

After the coming of the GST, centre and states both will be required to levy taxes on goods and services across India. [That means Centre will be levying taxes on sale of goods within the states also and states will be levying taxes on services also.] And that‟s why we require Constitutional amendment. 122nd Constitutional Amendment Bill 2014 has already been introduced in the Parliament (and has been passed by Lok Sabha). It has proposed the following changes: (i) The Parliament and the Legislature of every State (including UTs) have the power to make laws with respect to goods and services tax imposed by Union or State [Article 246 A (1)] (ii) The President shall, by order, constitute a “Goods and Services Tax Council” which will decide on all the operational aspects of the GST [Article 279 A]. In the GST council:  The Centre will have one third representation and the states and UTs will have 2/3rd representation  The decisions will require 75% majority  The Union finance minister will have the veto power

Salient features of GST:  The GST will subsume a number of indirect taxes of Union and State governments  It will remove cascading effect of taxes and provide for a common national market for goods and services  It is consumption, multi-point and destination based tax  It is a value added tax (All the above characteristics of GST can be understood fully through practical examples in the class and may not be possible to explain through notes)

43

14th FINANCE COMMISSION (2015 – 2020) Transfer of funds from Centre to States: As per the Constitution, centre and states both have powers to impose taxes and both have been assigned responsibilities. But Centre has more taxation powers than states as compared to responsibilities assigned in the constitution. That is why transfer of funds is recommended from Centre to States. This transfer is recommended by two agencies: Finance Commission (a constitutional body) and Planning Commission (created by executive order but now dissolved).

1. Finance Commission (FC)

Centre

States 2. Planning Commission (PC)

Taxes

Taxes

1.The FC recommends transfers in two ways (these are called untied grants and the states can spend in the way they want): (i) As percentage share of central taxes (this is called vertical devolution and 14th FC has increased the share of states in central taxes to 42% from 32% in 13th FC) (ii) As Grants-in-Aid (also called non plan grants) in the form of (a) local body grants (b) disaster management grants and (c) Revenue deficit grants 2.The transfers recommended by PC (classified as Planned expenditure in the budget) are mainly in two ways (these are called tied grants and the states cannot spend this money in the manner they want, as conditions are imposed by centre): (i) Central Assistance to State government Annual Plans (ii) Central Government Schemes and Centrally Sponsored Schemes (CSS) The parameters for distribution of taxes as received from the centre among the states (horizontal distribution) are Population (17.5%), Demographic Change (10%), Area (15%), Forest Cover (7.5%) and Income Distance (50%). In terms of collective transfer from centre to states, there has been a compositional rather than a quantitative shift in the budget 2015-16. The increase in vertical devolution (of 42% from the previous 32%) subsumes the various modes of central plan transfers that were made by the centre to the states through planning commission in previous years. A major change is the reduction of the Centre‟s discretionary powers in transferring funds (tied grants through PC) to states under various modes. As the transfer through FC has increased to 42%, the Budget 2015-16 has announced delinking 8 CSS, changing the fund sharing pattern of 24 CSS and continuing with the full support of Centre for 31 CSS. 44

INFRASTRUCTURE

(as proposed in the Budget)

 Corporatization of 12 major ports: The ports will be established as companies under the Companies Act 2013 and this will make ports more result driven, efficient and profitable (Out of the 13 major ports only Ennore Port (Kamarajar Port Ltd.) is corporate others are trusts).  Plug and Play mode for five 4000 MW ultra mega power projects: That means all clearances will be given prior to bidding to private parties on Public Private Partnership (PPP) model which will prevent projects from getting stalled for one clearance or another. And government will consider similar plug and play mode for projects in other infrastructure projects such as roads, railway, ports and airports.  Revamping of PPP structure: Government will bear bigger share of risk, without absorbing it entirely, making it easier for private players to invest.  Tax-free bonds: Companies will be allowed to issue tax free infrastructure bonds for roads, railway and irrigation projects and raise funds from small investors. Tax free bonds means the interest income earned on the bonds by the investors will be tax free.  National Investment and Infrastructure Fund (NIIF): This fund will raise debt and in turn invest as equity in infrastructure finance companies such as Indian Railway Finance Corporation (IRFC) and National Housing Bank (NHB). Corpus of the fund is Rs. 20,000 crore.

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BUDGET FACTS: Major Statistics: Year GDP (nominal)

2014-15 126 lakh crore

Projected Nominal Growth Projected Real Growth

2015-16 141 lakh crore

(from 2014-15 to 2015-16) (from 2014-15 to 2015-16)

11.5% 8%

Budget (all figures in lakh crore) Revenue Rev Expenditure

Capital Rev Receipts

Capital Expenditure

Capital Receipts

Plan

Non Plan

Tax

Non Tax

Plan

Non Plan

Loan Rec

Borrow

3.30

12.06

9.20

2.22

1.35

1.06

0.79

5.56

Budgeted Expenditure = 17.77 lakh crore Capital Expenditure = 2.41 lakh crore (1.7% of GDP) Subsidy = 2.44 lakh crore (1.7% of GDP) Fiscal Deficit Revenue Deficit Effective Rev Deficit Primary Deficit Subsidy: Rs. Crore 2014-15 2015-16

Food 1,23,000 1,24,000

= 3.9% (2015-16), 3.5% (2016-17), = 2.8% (2015-16) = 2.0% (2015-16) = 0.7% (2015-16)

Fertilizer 71,000 73,000

Fuel 60,000 30,000

3.0% (2017-18)

Others (interest) 10,000 15,000

Total 2,67,000 2,44,000

%of GDP 2% 1.7%

Direct & Indirect Taxes:  Corporate Tax Rate to be cut from 30% to 25% by 2019  The general rate of Central Excise Duty hiked to 12.5% from 12.3%  Service Tax increased to 14% (with education cess subsumed) from 12.36%  There is an enabling (the increased rate will come into force from a date to be notified later) provision to levy a 2% Swachh Bharat Cess on all or certain taxable services to promote government‟s campaign of cleanliness and hygiene.

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