Question 1.
1. In the context of governance, consider the following:
1. Encouraging Foreign District Investment inflows
2. Privatization of higher educational Institutions
3. Down-sizing of bureaucracy
4. Selling/offloading the shares of Public Sector Undertakings
Which of the above can be used as measures to control the fiscal deficit in
India?
(a) 1, 2 and 3
(b) 2, 3 and 4
(c) 1, 2 and 4
(d) 3 and 4 only
Ans. (b)
Explanation:
Over the past few decades, it has been the private sector that has really driven
capacity-creation in Indian higher education. Serious thinking on downsizing
bureaucracy had begun in the early 1990s. A sub-group set up by the Planning
Commission had suggested in 1993 that the Union government should weed out
at least 2,000 senior-level positions in various ministries.
2. Which of the following terms indicates a mechanism used by commercial banks
for providing credit to the government?
(a) Cash Credit Ratio
(b) Debt Service Obligation
(c) Liquidity Adjustment Facility
(d) Statutory Liquidity Ratio
Ans. (d)
Explanation:
Statutory Liquidity Ratio (SLR) is the mechanism used by the RBI to regulate
the liquidity of the commercial banks. Under SLR, commercial banks invest a
certain percentage of their money in Government securities and other assets like
gold so as to comply with RBI guidelines.
3. Which one of the following statements is an appropriate description of
deflation?
(a) It is a sudden fall in the value of a currency against other currencies
(b) It is a persistent recession in both the financial and real sectors of economy
(c) It is a persistent fall in the general price level if goods and services
(d) It is a fall in the rate of inflation over a period of time
Ans. (c)
Explanation:
When there is a continuous fall in the price levels of goods and services over a
period of time, it is called deflation. Under such conditions, the rate of inflation
falls below 0%.
4. With reference to the Non-banking Financial Companies (NBFCs) in India,
consider the following statements:
1. They cannot engage in the acquisition of securities issues by the government.
2. They cannot accept demand deposits like Savings Account.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Ans. ()
Explanation:
A non-banking financial company (NBFC) is a company registered under the
Companies Act, 1956 and is engaged in the business of loans and advances,
acquisition of shares/stock/bonds/debentures/ securities issued by government or
local authority or other securities of like marketable nature, leasing,
hire-purchase, insurance business, chit business, but does not include any
institution whose principal business is that of agriculture activity, industrial
activity, sale/purchase/construction of immovable property. They cannot accept
demand deposits like commercial banks as they are not a part of clearance and
settlement system.
Also Read: GS Environment and Ecology Questions: UPSC IAS prelims 2015
5. In the parlance of financial investments, the term ‘bear’ denotes
(a) An investor who feels that the price of a particular security is going to fall
(b) An investor who expects the price of particular shares to rise
(c) A shareholder or a bondholder who has an interest in a company, financial or
otherwise
(d) Any lender whether by making a loan or buying a bond
Ans. (a)
Explanation:
The term bear denotes an investor who believes that a particular security or
market is headed downward. Bears attempt to profit from a decline in prices.
Bears are generally pessimistic about the state of a given market. Bearish
sentiment can be applied to all types of markets including commodity markets,
stock markets and the bond market.
6. A great deal of Foreign Direct Investment (FDI) to India comes from Mauritius
than from many major and mature economies like the UK and France.
(a) India has preference for certain countries as regard receiving FDI
(b) India has double taxation avoidance agreement with Mauritius
(c) Most citizens of Mauritius have ethnic identity with India and so they feel
secure to invest in India
(d) Impending dangers of global climatic change prompts Mauritius to make
huge investments in India.
Ans. (b)
Explanation:
India has comprehensive Double Taxation Avoidance Agreements (DTAA) with
More than 23 countries. This means that there are agreed rates of tax and
jurisdiction on specified types of income arising in a country to a tax resident of
another country. Under the Income Tax Act 1961 of India, there are two specific
provisions, Section 90 and Section 91, which provide specific relief to taxpayers
to save them from DTAA. Section 90 is for taxpayers who have paid the tax in a
country with which India has signed DTAA, while Section 91 provides relief to
taxpayers who have paid tax to a country with which India has not signed a
DTAA. Thus, India gives relief to both kinds of taxpayers Mauritius by itself is
a low tax counting.
7. In the context of Indian economy, consider the following pairs:
Term Most appropriate description
1. Melt Down ………………. Fall in stock prices
2. Recession ………………. Fall in growth rate
3. Slow down ………………. Fall in GDP
Which of the pairs given above is/are correctly matched?
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Ans.(b)
Explanation:
Recession is slow down in effective demand for goods and services slow down
in the economy implies a short run decline in the growth rate.
8. Which of the following is/are treated as artificial currency?
(a) ADR
(b) GDR
(c) SDR
(d) Both ADR and SDR
Ans. (c)
Explanation:
Special Drawing Right(SDR) belongs to the IMF. Member countries maintain
their reserve tranches with it in SDR and get fiscal support from it in SDR.
9. Stieglitz Commission established by the President of the United Nations General
Assembly was in the international news. The commission was supposed to deal
with
(a) The challenges posed by the impending global climate change and prepare a
road map
(b) The workings of the global financial systems and to explore ways and means
to secure a more sustainable global order
(c) Global terrorism and prepare a global action plan for the mitigation of
terrorism
(d) Expansion of the United Nations Security Council in the present global
scenario
Ans.(b)
Explanation:
Joseph Stiglitz commission was convened to review the working of the global
financial system.
10.In India, the interest rate on savings accounts in all the nationalized commercial
banks is fixed by
(a) Union Ministry of Finance
(b) Union Finance Commission
(c) Indian Banks’ Association
(d) None of the above
Ans. (d)
Explanation:
It is fixed by the Reserve Bank of India. In 2011, RBI permitted the commercial
banks to fix interest rates on saving accounts independently. Rate of interest up
to Rs.1 lakh has to be the same for every bank.
11.Consider the following actions by the Government:
1. Cutting the tax rates
2. Increasing the government spending
3. Abolishing the subsidies
In the context of economic recession, which of the above actions can be
considered a part of the “fiscal stimulus” package?
(a) 1 and 2 only
(b) 2 only
(c) 1 and 3 only
(d) 1, 2 and 3
Ans. (a)
Explanation:
Abolishing the subsidies will lead to higher prices of goods and services which
are subsidized. A reduction in the tax rate would be a stimulus. While an
increase in government expenditure would increase the level of demand in the
economy. Thus it is not good for providing stimulus in the economy.
12.When the Reserve Bank of India announces an increase of the Cash Reserve
Ratio, what does it mean?
(a) The commercial banks will have less money to lend
(b) The Reserve Bank of India have less money to lend
(c) The Union Government will have less money to lend
(d) The commercial banks will have more money to lend
Ans. (a)
Explanation:
CRR refers to the percentage of deposits banks have to keep as reserve (in cash).
This reserve sum is not available for banks for lending and thus if the CRR
increases, banks will have less money to lend.
13.With reference to India, consider the following statements:
1. The Wholesale Price Index (WPI) in India is available on a monthly basis
only.
2. As compared to Consumer Price Index – for Industrial Workers (CPI (IW)),
the WPI gives less weight to food articles.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Ans. (a)
Explanation:
The wholesale Price Index measures the changes in the prices of goods sold and
traded in bulk by wholesale businesses to other businesses. Wholesale price
indexes (WPIs) are reported monthly in order to show the average price changes
of goods. Hence, statement 1 is correct.
14.In India, which of the following is regulated by the Forward Markets
Commission?
(a) Currency Futures Trading
(b) Commodities Futures Trading
(c) Equity Futures Trading
(d) Both Commodities Futures and Financial Futures Trading
Ans. (b)
Explanation:
Forward Markets Commission (FMC) is the chief regulator of forwards and
futures markets in India. As of March 2009, it regulates Rs 52 Trillion worth of
commodity trade in India. It is headquartered in Mumbai and is overseen by the
Ministry of Consumer Affairs, Government of India. The commission allows
commodity trading in 22 exchanges India of which 6 are national. It was
established in 1953.
15.With reference to the institution of Banking Ombudsman in India, which one of
the statements is not correct?
(a) The Banking Ombudsman is appointed by the Reserve Bank of India
(b) The Banking Ombudsman can consider complaints from Non-Resident
Indians having accounts in India
(c) The orders passed by the Banking Ombudsman, are final and binding on the
parties concerned
(d) The service provided by the Banking Ombudsman is free of any fee
Ans. (c)
Explanation:
The Banking Ombudsman is a senior official appointed to redress customer
complaints against deficiency in certain banking
The Banking Ombudsman is a senior official in the rank of Chief General
Manager or General Manager appointed by the Reserve Bank of India to redress
customer complaints against deficiency in certain banking services. The tenure
of a banking ombudsman is for a period not exceeding 3 years.
16.With reference to India, consider the following:
1. Nationalization of Banks
2. Formation of Regional Rural Banks
3. Adoption of villages by Bank Branches
Which of the above can be considered as steps taken to achieve the “financial
inclusion” in India?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 3 only
(d) 1, 2 and 3
Ans. (d)
Explanation:
“Financial inclusion” is the delivery of financial services at affordable costs to
vast sections of disadvantaged and low income groups. Unrestrained access to
public goods and services is the sine qua non of an open and efficient society.
Banking services are in the nature of public good. It is essential that availability
of banking and payment services be available to the entire population without
discrimination. This is the prime objective of the government.
17.Consider the following statements:
The Functions of commercial banks in India include
1. Purchase and sale of shares and securities on behalf of customers.
2. Acting as executors and trustees of wills.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Ans. (c)
Explanation:
Miscellaneous functions of commercial banks in India include : Transfer and
collection of funds, purchase and sale of shares on behalf of customers, acting as
executors and transfers of wills, purchase and sale of foreign exchange etc.
18.In India, the tax proceeds of which one of the following as a percentage of gross
tax revenue has significantly declined in the last five years?
(a) Service Tax
(b) Personal income tax
(c) Excise duty
(d) Corporation tax
Ans. (c)
Explanation:
The excise duty’s share in the total tax revenue which was 41.3% in 1991-92,
declined to 25.1% in 2006-07. It is the most that has declined in the last 5 years.
Corporation tax has a maximum share followed by income tax. Service tax was
introduced very late so it’s share would obviously increase.
19.Consider the following statements:
In India, taxes on transactions in Stock Exchanges and Futures Markets are
1. Levied by the Union
2. Collected by the State
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Ans. (a)
Explanation:
As per Article 269 of the Constitution of India, taxes other than stamp duties on
transactions in stock-exchanges and futures markets are levied and collected by
the Union but assigned to the states.
20.With reference to Indian economy, consider the following statements:
1. The Gross Domestic Product (GDP) has increased by four times in the last 10
years.
2. The percentage share of the Public Sector in GDP has declined in the last 10
years.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Ans. (b)
Explanation:
Gross domestic product (GDP) is the total monetary or market value of all the
finished goods and services produced within a country’s borders in a specific
time period.
21.Which one of the following is responsible for the preparation and presentation
of the Union Budget to the Parliament?
(a) department of Revenue
(b) Department of Economic Affairs
(c) Department of Financial Services
(d) Department of Expenditure
Ans. (b)
Explanation:
The Finance Ministry of India is an important ministry concerned with the
economy of India. It comprises five departments one of which is the Department
of Economic Affairs. It is the nodal agency of the central government whose
principal task is to prepare and present the Union Budget before the Parliament.
Union Budget: Article 112 to the Indian Constitution defines the term ‘Financial
Statement’ also referred to as the Union Budget.
22.In the context of the affairs of which of the following is the phrase “Special
Safeguard Mechanisms” mentioned in the news frequently?
(a) United Nations Environment Programme
(b) World Trade Organization
(c) ASEAN – India Free Trade Agreement
(d) G – 20 Summits
Ans. (b)
Explanation:
In the Doha Round of negotiations on agriculture it was decided that all
developing and least developed member countries of WTO will have access to a
Special Safeguard Mechanism (SSM).
23.In order to comply with TRIPS Agreement, India enacted the Geographical
Indications off Goods (Registration and Protection) Act, 1999. The
difference/differences between a “Trade Mark” and a Geographical Indication
is/are:
1. A Trade Mark is an individual or a company’s right whereas a Geographical
Indication is a community’s right.
2. A Trade Mark can be licensed whereas a Geographical Indication cannot be
licensed.
3. A Trade Mark is assigned to the manufactured goods whereas the
Geographical
Indication is assigned to the agricultural goods/products and handicrafts only.
Which of the statements given above is/are correct?
(a) 1 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1, 2 and 3
Ans. (b)
Explanation:
Only in the 3rd statement, red flag, pause and think. Obviously GI can also be
assigned to manufactured goods, even natural products etc. Eliminate it. Now
we only have to look at option 2
You know a trade mark is a private property so a private party can license it to
the 3rd party while GI is community property hence can not be licensed to 3rd
party.
In any case GO is due to particular geography, how can a manufacturer from
other geography get GI status
24.The SEZ Act, 2005 which came into effect in February 2006 has certain
objectives. In this context, consider the following:
1. Development of infrastructure facilities.
2. Promotion of investment from foreign sources.
3. Promotion of exports of services only.
Which of the above are the objectives of this Act?
(a) 1 and 2 only
(b) 3 only
(c) 2 and 3 only
(d) 1, 2 and 3
Ans. (a)
Explanation:
SEZ Act came into force in 2006 but was questioned in prelims in 2009 and in
mains this year. Why- act keep getting amended. Always in news for all good
and bad reasons
Statement 3, only, red flag, pause and think. Obviously wrong. Promotion of
services was the only objective. Special services zone would have been the
name. Eliminate 3. You get to the answer
25.Which one of the following was not stipulated in the Fiscal Responsibility and
Budget Management Act, 2003?
(a) Elimination of revenue deficit by the end of the fiscal year 2007-08
(b) Non-borrowing by the central government from Reserve Bank of India
except under certain circumstances
(c) Elimination of primary deficit by the end of the fiscal year 2008-09
(d) Fixing government guarantees in any financial year as a percentage of GDP
Ans. (c)
Explanation:
Even if you don’t remember all the details you know zero RD, 3% FD. Nothing
about primary. You will reach the answer.
FRBM always in news as govt keeps amending the act
26.Consider the following countries:
1. Brazil
2. Mexico
3. South Africa
According to UNCTAD, which of the above is/are categorized as “Emerging
Economies”?
(a) 1 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) 1, 2 and 3
Ans. (d)
Explanation:
All are emerging. We hear about them everyday. Even if you don’t know the
answer, it’s good to make a guess here.
27.As regards the use of international food safety standards as reference points for
the dispute settlements, which one of the following does WTO collaborate with?
(a) Codex Alimentarius Commission
(b) International Federation of Standards Users
(c) International Organization for Standardization
(d) World Standards Cooperation
Ans. (a)
Explanation:
Food safety, name itself suggest codex alimentarius would be it – alimentarius –
elementary canal
28.An objective of the National Food Security Mission is to increase the production
of certain crops through area expansion and productivity enhancement in a
sustainable manner in the identified district of the country. What are those
crops?
(a) Rice and wheat only
(b) Rice, wheat and pulses only
(c) Rice, wheat, pulses and oil seeds only
(d) Rice, wheat, pulses, oil seeds and vegetables
Ans. (b)
Explanation:
National Food Security Mission (NFSM) was launched in 2007-08 to increase
the production of rice, wheat and pulses through area expansion and
productivity enhancement; restoring soil fertility and productivity; creating
employment opportunities; and enhancing farm level economy.
The National Food Security Act, 2013 (NFSA 2013) converts into legal
entitlements for existing food security programmes of the Government of India.
It includes the Midday Meal Scheme, Integrated Child Development Services
scheme and the Public Distribution System option ‘b’ is the correct answer.
29.Inclusive growth as enunciated in the Eleventh Five Year Plan does not include
one of the following:
(a) Reduction of poverty
(b) Extension of employment opportunities
(c) Strengthening of capital market
(d) Reduction of gender inequality
Ans. (c)
Explanation:
Many questions from inclusive tax
It’s clear strengthening of the capital market does not automatically include
everyone.
Other 3 options obviously do
30.In the context of India’s Five Year Plans, a shift in the pattern of
industrialization, with lower emphasis on heavy industries and more on
infrastructure begins in
(a) Fourth Plan
(b) Sixth Plan
(c) Eighth Plan
(d) Tenth Plan
Ans. (b)
Explanation:
The correct answer is Sixth Plan. Under this plan, a shift in the pattern of
industrialization, with a lower emphasis on heavy industries and more on
infrastructure began. From the sixth five-year plan onwards, there was massive
investment in the Social Services.
31.Two of the schemes launched by the Government of India for Women’s
development are Swadhar and Swayam Siddha. As regards the difference
between them, consider the following statements:
1. Swayam Siddha is meant for those in difficult circumstances such as women
survivors of natural disasters or terrorism, women prisoners released from jails,
mentally challenged women etc. whereas Swadhar is meant for holistic
empowerment of women through Self Help Groups.
2. Swayam Siddha is implemented through Local Self Government bodies or
reputed Voluntary Organizations whereas Swadhar is implemented through the
ICDS units set up in the states.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Ans. (d)
Explanation:
Swayamsiddha is an integrated programme for the empowerment of women
through the network of Self-Help Groups of women. The programme shall be
implemented through the State government in 650 blocks throughout the
country, but the State governments will be at liberty to choose the implementing
authority.
Swadhar scheme, launched in 2001, provides for holistic rehabilitation of
women in difficult circumstances. Twenty-two projects for the rehabilitation of
the widows, women affected by riots in Gujarat, and women and girls rescued
from prostitution are in operation at present. So both the statements are wrong.
32.With reference to the National Investment Fund to which the disinvestment
proceeds are routed, consider the following statements:
1. The assets in the National Investment Fund are managed by the Union
Ministry of Finance.
2. The National Investment Fund is to be maintained within the Consolidated
Fund of India.
3. Certain Asset Management Companies are appointed as the fund managers.
4. A certain proportion of annual income is used for financing select social
sectors.
Which of the statements given above is/are correct?
(a) 1 and 2
(b) 2 only
(c) 3 and 4
(d) 3 only
Ans. (c)
Explanation:
2 is definitely incorrect. It’s kept I’m public accounts. Eliminate it.
Look at 4 now. It’s correct.
withdrawal of funds from NIF was changed in the wake of financial crisis of
2008, hence the question
33.Which one of the following is not a feature of a Limited Liability Partnership
firm?
(a) Partners should be less than 20
(b) Partnership and management need not be separate
(c) Internal governance may be decided by mutual agreement among partners
(d) It is corporate body with perpetual succession
Ans. (a)
Explanation:
There is no limit to partners. Minimum is 2.
LLP is a hybrid of partnership and corporation. B, c and d are characteristics of
partnership.
34.Consider the following statements:
1. The Union Government fixes the Statutory Minimum Price of sugarcane for
each sugar season.
2. Sugar and sugarcane are Essential Commodities Act.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Ans. (c)
Explanation:
Many questions on minimum support prices and ECA.
You must know the concept of FRP and SAP.
Sugar as hell would be an essential commodity. If sugar is so would be the
sugarcane
Also Read: UPSC IAS Prelims 2016: Environment and Ecology Questions with Solutions
