UPSC Essentials | Daily subject-wise quiz : Economy MCQs on Monetary Policy Committee, Core inflation and more (Week 70)

1. The bloc has been negotiating a proposed Free Trade Agreement (FTA) since 2004 which came into effect in 2023.

2. Bangladesh was India’s largest trading partner within the bloc in 2023-24.

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

Explanation

— Commerce Minister Piyush Goyal expressed concern about the slow pace of talks for a trade agreement with the seven member countries of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) bloc, saying that the approach to boosting regional trade should be reconsidered.

— The BIMSTEC bloc includes seven countries: Bangladesh, Bhutan, Nepal, India, Sri Lanka, Myanmar, and Thailand.

— Since 2004, the union has been negotiating a potential Free Trade Agreement (FTA), with 22 rounds of discussions completed, the most recent of which took place in 2018. Six years have passed, and no further conversations have occurred. Hence, statement 1 is not correct.

— India’s overall trade with BIMSTEC countries totalled $44.32 billion in 2023-24.

— Thailand was India’s largest commercial partner in the bloc, with exports of $5.04 billion and imports of $9.91 billion, resulting in a trade deficit of $4.87 billion. Hence, statement 2 is not correct.

Therefore, option (d) is the correct answer.

QUESTION 2

With reference to the Core inflation, consider the following statements:

1. It is defined as the change in the costs of goods and services including food and energy sectors.

2. It is often calculated using the wholesale price index.

3. It estimates the effect of increased prices on consumer income.

Which of the statements given above is/are correct?

(a) 1 and 2 only

(b) 3 only

(c) 2 and 3 only

(d) 1 and 3 only

Explanation

— The Economic Survey, released before the Budget on July 22, made a case for modifying the central bank’s inflation targeting framework to exclude food inflation.

— India’s inflation targeting framework should explore targeting inflation, excluding food, because increased food prices are generally supply-induced rather than demand-induced.

— Core inflation is the change in the prices of goods and services that excludes those from the food and energy sectors. Hence, statement 1 is not correct.

— These items are excluded from our estimate of inflation because their prices are significantly more volatile.

— It is most commonly estimated using the consumer price index (CPI), which measures the cost of goods and services. Hence, statement 2 is not correct.

— It estimates the effect of increased prices on consumer income. Hence, statement 3 is correct.

Therefore, option (b) is the correct answer.

(Other Source: http://www.investopedia.com)

QUESTION 3

With reference to the Monetary Policy Committee, consider the following statements:

1. Section 45ZB of the RBI Act provides for the constitution of a six-member Monetary Policy Committee (MPC).

2. Deputy Governor of the Reserve Bank of India acts as Chairperson or ex officio of the committee.

3. The MPC is required to meet at least two times a year.

4. The first MPC was constituted in 2019.

How many of the statements given above are correct?

(a) Only one

(b) Only two

(c) Only three

(d) None

Explanation

— The RBI Act of 1934 was revised in May 2016 to give a legal basis for implementing the flexible inflation targeting framework. The first such MPC was established on September 29, 2016. Hence, statement 4 is not correct.

— Section 45ZB of the modified RBI Act of 1934 establishes an empowered six-member monetary policy committee (MPC) to be appointed by the Central Government via announcement in the Official Gazette. Hence, statement 1 is correct.

— The primary goal of monetary policy is to maintain price stability while also promoting growth.”

— The present MPC members, as notified by the Central Government in the Official Gazette of October 5, 2020, are as under:

— Governor of the Reserve Bank of India—Chairperson, ex officio; Hence, statement 2 is not correct.

— Deputy Governor of the Reserve Bank of India, in charge of Monetary Policy—Member, ex officio;

— One officer of the Reserve Bank of India to be nominated by the Central Board—Member, ex officio;

— Three other members having knowledge of economy will hold office for a period of four years or until further orders, whichever is earlier.

— The MPC calculates the policy repo rate needed to meet the inflation objective.

— The MPC is required to meet at least four times per year. The MPC meets with a quorum of four members. Hence, statement 3 is not correct.

— Each MPC member has one vote, and if there are equal votes, the Governor has a second or casting vote.

Therefore, option (a) is the correct answer.

(Other Source: rbi.org.in)

QUESTION 4

Consider the following statements:

1. This crop grows well in semi-arid conditions and can be grown up to 500 metres above mean sea level.

2. It is only grown commercially in Maharashtra, with some small-scale plantations in Gujarat and Rajasthan.

3. It can withstand frost to some extent in the dormant stage, but is injured at temperatures below -11 degrees Celsius.

4. Planting is usually done in spring (February-March) and July-August in sub-tropical and tropical regions respectively.

The above-mentioned lines refer to which crop?

(a) Turmeric

(b) Pearl Millet

(c) Pomegranate

(d) Red gram

Explanation

— Pomegranate (Punica granatum) is one of India’s most important commercial fruit crops. It is indigenous to Iran (Persia). Planting is usually done in spring (February-March) and July-August in sub-tropical and tropical regions respectively.

— Pomegranate is only grown commercially in Maharashtra. Small-scale plantations can also be found in Gujarat, Rajasthan, Karnataka, Tamil Nadu, Andhra Pradesh, Uttar Pradesh, Punjab, and Haryana.

— Pomegranate is a relatively new crop to Rajasthan, grown in an estimated 12,500 hectares, which includes 10,000 hectares over south Barmer, Sanchore, Jalore and Sirohi, and 2,500 hectares covering north Barmer, Jodhpur and Phalodi districts.

— India exports pomegranate mainly to Bahrain, Kuwait, Oman, Saudi Arabia, U.A.E., Netherlands etc.

— Pomegranate grows well under semi-arid conditions and can be grown upto an altitude of 500 m. above m.s.l.. It thrives well under hot, dry summer and cold winters provided irrigation facilities are available. The tree requires a hot and dry climate during fruit development and ripening. Pomegranate tree is deciduous in areas of low winter temperature and an evergreen or partially deciduous in tropical and sub-tropical conditions. It can tolerate frost to a considerable extent in dormant stage, but is injured at temperature below – 11 degree C.

Therefore, option (c) is the correct answer.

QUESTION 5

Consider the following statements about labour data published by Periodic Labour Force Survey (PLFS):

1. Labour data for urban areas is published every quarter.

3. Labour data for rural areas is released annually.

Which of the statements given above are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Explanation

— According to the report, the labour force participation rate (LFPR), or those working or seeking or available for work in the labour force, was the highest in four years at 39.3 per cent in 2020-21, as was the worker population ratio (WPR) at 36.3 per cent. WPR is defined as the percentage of employed persons in the population.

— The National Statistical Office (NSO) under the Ministry of Statistics of Programme and Implementation (MoSPI) conducts the PLFS for rural and urban areas.

— Labour data for rural areas is published annually, while that for urban areas is released every quarter. There is a gap of at least a year in the release of the annual PLFS report. Hence, statement 1 and statement 2 are correct.

Therefore, option (c) is the correct answer.

Previous Daily Subject-Wise-Quiz

Daily subject-wise quiz — Polity and Governance (Week 70)

Daily Subject-wise quiz — History, Culture, and Social Issues (Week 70)

Daily subject-wise quiz — Environment, Geography, Science and Technology (Week 70)

Daily subject-wise quiz — Economy (Week 69)

Daily subject-wise quiz – International Relations (Week 69)

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