UPSC Essentials | Daily subject-wise quiz : Economy (Week 11)

Each day, we will cover one new subject. Attempt today’s subject quiz on Economy to check your progress. Come back tomorrow to solve the MCQs on International Relations. Don’t miss checking the answers and explanations at the end of the quiz.

QUESTION 1

The Reserve Bank of India (RBI) has asked banks and financial institutions to adopt  widely accepted Alternative Reference Rate, such as the Secured Overnight Financing Rate (SOFR), to complete the transition from the scandal-hit London Interbank Offered Rate (LIBOR) and Mumbai Interbank Forward Outright Rate (MIFOR). With reference to the London Interbank Offered Rate (LIBOR), consider the following statements:

1. It was a key benchmark for setting the interest rates charged on adjustable-rate loans, mortgages and corporate debt.

2. Banks and private companies were using LIBOR as the benchmark rate for raising funds abroad.

Which of the statement(s) given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

QUESTION 2

With reference to the Liberalised Remittance Scheme, consider the following statements:

1. In this scheme, all resident individuals are allowed to freely remit up to USD 2,50,000 per financial year.

2. Minors are not included in this scheme.

3. Remittance for trading in foreign exchange abroad is prohibited.

How many of the above statements are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

QUESTION 3

With reference to the gold reserves, consider the following statements:

1. In value terms, the share of gold in the total foreign exchange reserves increased from March 2022 to end-March 2023.

2. The gold reserves of India decreased in March 2023 as compared to March 2022.

Which of the above statement(s) is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

QUESTION 4

With reference to the ports in India, consider the following statements:

1. The share of major ports in total transactions was less than the non-major ports in FY23.

2. Andhra Pradesh does not have a major port.

3. Many state governments have given non major ports on lease to private partners.

How many of the above statements are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

QUESTION 5

With reference to the Centre for Processing Accelerated Corporate Exit, consider the following statements:

1. It will help reduce the stress on the Registry and keep the registry clean besides the availability of more meaningful data to the stakeholders.

2. It will also benefit the stakeholders by providing a hassle-free filing, timely and process-bound striking off their company’s names from the Register.

Which of the above statement(s) is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

ANSWERS TO MCQs

1. (c)

FYI:

— The Reserve Bank of India (RBI) has asked banks and financial institutions to adopt by July 1 a widely accepted Alternative Reference Rate, such as the Secured Overnight Financing Rate (SOFR), to complete the transition from the scandal-hit London Interbank Offered Rate (LIBOR) and Mumbai Interbank Forward Outright Rate (MIFOR).

— Banks and private companies were using LIBOR as the benchmark rate for raising funds abroad. Hence, statement 2 is correct

— It was a key benchmark for setting the interest rates charged on adjustable-rate loans, mortgages and corporate debt. Hence, statement 1 is correct.

— New transactions are now predominantly undertaken using SOFR and the Modified Mumbai Interbank Forward Outright Rate (MMIFOR). SOFR is considered a more accurate and more secure pricing benchmark.

— According to the RBI, banks and financial institutions are expected to have developed the systems and processes to manage the complete transition from July 1.

Therefore, option (c) is the correct answer.

2. (b)

FYI:

— Under the Liberalised Remittance Scheme, all resident individuals, including minors, are allowed to freely remit up to USD 2,50,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both. Hence, statement 1 is correct and statement 2 is not correct.

The resident individuals can avail of foreign exchange facility for the purposes mentioned in Para 1 of Schedule III of FEM (CAT) Amendment Rules 2015, dated May 26, 2015, within the limit of USD 2,50,000 only.

The Scheme was introduced on February 4, 2004, with a limit of USD 25,000. The LRS limit has been revised in stages consistent with prevailing macro and micro economic conditions.

If the remitter is a minor, the LRS declaration form must be countersigned by the minor’s natural guardian.

The Scheme is not available to corporates, partnership firms, HUF, Trusts, etc.

The remittance facility under the Scheme is not available for the following:

(i) Remittance for any purpose specifically prohibited under Schedule-I (like the purchase of lottery tickets/sweep stakes, proscribed magazines, etc.) or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000.

(ii) Remittance from India for margins or margin calls to overseas exchanges / overseas counterparty.

(iii) Remittances for the purchase of FCCBs issued by Indian companies in the overseas secondary market.

(iv) Remittance for trading in foreign exchange abroad. Hence, statement 3 is not correct.

(v) Capital account remittances, directly or indirectly, to countries identified by the Financial Action Task Force (FATF) as “non-cooperative countries and territories”, from time to time.

(vi) Remittances directly or indirectly to those individuals and entities identified as posing a significant risk of committing acts of terrorism as advised separately by the Reserve Bank to the banks.

(vii) Gifting by a resident to another resident, in foreign currency, for the credit of the latter’s foreign currency account held abroad under LRS.

Therefore, option (b) is the correct answer.

Source: (http://www.rbi.org.in)

3. (a)

FYI:

— The Reserve Bank of India (RBI) added 34.22 metric tonne of gold in the fiscal year that ended March 31, 2023, taking the total gold reserves to 794.64 metric tonne.

— RBI held 760.42 metric tonnes as of March 31, 2022, compared to 695.31 metric tonnes as of March 31, 2021. Hence, statement 2 is not correct.

— The gold reserves as of March 31, 2023, included gold deposits of 56.32 metric tonne, according to the RBI’s half-yearly report on Management of Foreign Exchange Reserves- October 2022 – March 2023, while 437.22 metric tonne of gold is held overseas in safe custody with the Bank of England and the Bank of International Settlements (BIS), 301.10 metric tonne of gold is held domestically.

— As of March 31, 2023, the country’s total foreign exchange reserves stood at $578.449 billion, and gold reserves were at $45.2 billion.

— In value terms (USD), the share of gold in the total foreign exchange reserves increased from about 7 per cent at end-March 2022 to about 7.81 per cent as at end-March 2023. Hence, statement 1 is correct.

Therefore, option (a) is the correct answer.

4. (a)

FYI:

— India’s major ports handled the highest-ever cargo at 795 million tonnes in 2022-23 with transactions worth about Rs 5,000 crore, the shipping ministry has surpassed its FY23 asset monetisation target of about Rs 3,700 crore.

— The major ports have handled the highest-ever cargo in the history of the ports at 795 million metric tonnes. This is 10 per cent higher than the previous year’s cargo handled in 2022. Hence, statement 1 is not correct.

— India has 12 major ports — Deendayal (Kandla), Mumbai, Mormugao, New Mangalore, Cochin, Chennai, Ennore (Kamarajar), Tuticorin (V O Chidambaranar), Visakhapatnam, Paradip and Kolkata (including Haldia) and Jawaharlal Nehru Port. Hence, statement 2 is not correct

— The major ports have recorded higher annual growth than that of non-major ports. The share of major ports in the total cargo was 54 per cent and non-major ports were 46 per cent in FY22. The share of major ports rose to 55 per cent and that of non-major ports fell to 45 per cent in FY23.

— Non-major ports are administered by state governments. Many state governments have given such ports on lease to private partners. Hence, statement 3 is correct.

Therefore, option (a) is the correct answer.

5. (c)

FYI:

— The Ministry of Corporate Affairs (MCA) has centralised the process of companies with the establishment of the Centre for Processing Accelerated Corporate Exit (C-PACE).

— The C-PACE will help to reduce the stress on the Registry along with keeping the registry clean besides the availability of more meaningful data to the stakeholders. Hence, statement 1 is correct

— It will also benefit the stakeholders by providing a hassle-free filing, timely and process-bound striking off their company’s names from the Register. Hence, statement 2 is correct

— The C-PACE institution is established under sub-section (1) of section 396 and shall be in operation through the Registrar of Companies (RoC) for the purposes of exercising functional jurisdiction of the processing and disposal of applications.

Therefore, option (c) is the correct answer.

Source: (pib.gov.in)

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