UPSC Essentials | Daily subject-wise quiz : Economy MCQs on Central Bank Digital Currency, outturn ratio and more (Week 132)

3. It is released quarterly by the Reserve Bank of India (RBI).

How many of the statements given above are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

Explanation

— Consumer Price Indices (CPIs) track changes in the overall level of prices for goods and services purchased by households for consumption. Hence, statement 1 is correct.

— CPI statistics are widely used as a macroeconomic indicator of inflation, as a tool for governments and central banks to manage inflation and monitor price stability, and as deflators in national accounts.

— CPI is often used to index employees’ dearness allowances in response to price increases. The CPI is consequently regarded as one of the most important economic indicators.

— Food and fuel are major components of the CPI basket. Hence, statement 2 is not correct.

— CPI is released monthly by the NSO (MoSPI), not by the RBI. Hence, statement 3 is not correct.

Therefore, option (a) is the correct answer.

(Other Source: http://www.data.gov.in)

QUESTION 2

With reference to the Central Bank Digital Currency (CBDC), consider the following statements:

1. It is the digital form of India’s physical currency.

2. It can be used to facilitate international payments.

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

— Reserve Bank of India (RBI) Governor Sanjay Malhotra urged other central banks to use and promote Central Bank Digital Currencies (CBDCs) instead of stablecoins to facilitate international payments. Hence, statement 2 is correct.

— Digital Rupee or e₹, is India’s Central Bank Digital Currency (CBDC). It is the digital form of India’s physical currency, the Rupee (₹). e₹ is issued by the Reserve Bank of India (RBI) in digital form and offers features similar to physical cash like convenience of use, guarantee of RBI, finality of settlement, etc. Hence, statement 1 is correct.

— “Unless other countries also adopt CBDC, we are not going to see the benefits of CBDC insofar as cross-border payments are concerned. So, I would urge all those present from central banks and other jurisdictions that we need to promote the CBDC, because this has huge advantages over stablecoins,” Malhotra said in a conversation with Krishna Srinivasan, the Director of the IMF’s Asia and Pacific Department.

— The RBI is currently conducting pilot projects of two types of CBDCs – retail and wholesale. Malhotra said on Wednesday that with domestic payments not an issue in India, CBDCs were the answer for cross-border payments.

— At present, Tether and USDC are the top two stablecoins globally. Both are pegged to the US dollar and make up around 90 per cent of the $285 billion global stablecoin market.

Therefore, option (c) is the correct answer.

QUESTION 3

The outturn ratio (OTR) is defined as:

(a) yield of usable product from raw material after processing

(b) ratio of input cost to output cost

(c) amount of raw material required to produce one unit of product

(d) proportion of energy consumed during the manufacturing process

Explanation

— Making a surprise shift from their strong opposition last year, rice shellers in Punjab are now storing government-procured hybrid paddy varieties for the ongoing kharif marketing season — the same varieties they had refused to accept the previous year, citing low milling outturns — defying the state government-imposed ban on the sale of such seeds.

— Last year, rice millers had protested against hybrid paddy, claiming it resulted in a lower outturn ratio (OTR), the proportion of rice obtained from paddy after milling, than what is mandated by the Food Corporation of India (FCI).

— Outturn ratio is the yield of usable product from raw material after processing, expressed as a percentage or other measure.

— The FCI requires a minimum OTR of 67 per cent, while millers claimed only 60-63 per cent yield, causing a significant loss in the government procurement.

— In response, the Punjab government banned the sale of hybrid (non-Basmati) paddy seeds in the state ahead of the 2025 kharif season, citing low OTR and high cost of seeds. The matter reached the courts, but by the time the verdict came, the sowing had been over.

Therefore, option (a) is the correct answer.

QUESTION 4

Consider the following statements:

1. Chile is India’s second-largest trading partner in South America.

2. India majorly imports lithium from Chile.

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

— Chile is India’s fifth largest commercial partner in South America, with bilateral trade expected to reach $3.8 billion in 2024, up from $1.5 billion in 2020, according to a Ministry of External Affairs (MEA note). Hence, statement 1 is not correct.

— In 2024, India’s exports reached $1.2 billion, while Chile’s imports were $2.6 billion.

— Copper ores and concentrates, unprocessed copper, and copper scrap account for more than half of Chile’s exports to India, with molybdenum ores and concentrates following closely behind. Because lithium-ion battery manufacturing in India is still in its infancy, it does not import lithium from Chile. Hence, statement 2 is not correct.

Therefore, option (d) is the correct answer.

QUESTION 5

Which of the following components is/are part of outward foreign direct investment (OFDI)?

1. Equity

2. Loans

3. Guarantee issued

4. Portfolio investment in foreign securities

5. Import of machinery from foreign countries

Select the correct answer using the codes given below:

(a) 1, 2 and 3

(b) 1 and 2 only

(c) 2, 3 and 4

(d) 1, 2, 3, 4 and 5

Explanation

— Outward foreign direct investment (OFDI) by local firms has increased by about 17% to $37.68 billion in 2024, indicating that Indian corporations want to expand their global footprints.

— OFDI consists of three components: equity, loans, and guarantees issued. Overseas FDI by local enterprises in the form of equity totalled $12.69 billion last year, up 40% from $9.08 billion in 2023.

— Portfolio investments entail purchasing stocks or bonds for short-term gains without management oversight. These are designated as Foreign Portfolio Investments (FPI), not OFDI.

— Importing machinery is a trade transaction, not an investment abroad, and hence falls outside of OFDI.

— Hotels, construction, manufacturing, agriculture, mining, and services are among the areas in which Indian corporations venture overseas. Singapore, the United States, the United Kingdom, the United Arab Emirates, Saudi Arabia, Oman, and Malaysia are among the countries that have received entire financial commitments through ODI.

Therefore, option (a) is the correct answer.

Previous Daily Subject-Wise-Quiz

Daily Subject-wise quiz — History, Culture, and Social Issues (Week 127)

Daily subject-wise quiz — Polity and Governance (Week 132)

Daily subject-wise quiz —  Science and Technology (Week 132)

Daily subject-wise quiz — Economy (Week 131)

Daily subject-wise quiz — Environment and Geography (Week 131)

Daily subject-wise quiz – International Relations (Week 131)

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