UPSC Essentials | Daily subject-wise quiz : Economy MCQs on wage rates for unskilled manual workers under VB-G RAM G, Financial Stability Report and more (Week 169)

2. The state government can fix their wage rate for different parts of the state.

3. The wage rate notified under the VB G RAM G Act can be lower than the prevailing wage rate notified under Section 6 of the MGNREGA, 2005.

How many of the statements given above are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

Relevance: Questions on wage employment programmes and their implementation mechanisms are a recurring theme in UPSC Prelims. UPSC often tests knowledge of the powers of the Union and States in administering welfare schemes and fixing statutory entitlements

Explanation

— The Centre notified wage rates for unskilled manual workers under the Viksit Bharat-Guarantee for Rozgar and Ajeevika Mission (Gramin) (VB-G RAM G) Act, 2025, which comes into effect, replacing the two-decade-old Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), 2005.

— Daily wages have been fixed between Rs 300 and Rs 409 across states, with a special rate of Rs 450 in certain gram panchayats in Sikkim, as per a notification issued by the Union Ministry of Rural Development late Tuesday night. Hence, statement 1 is not correct.

— Northern and northeastern states such as Arunachal Pradesh, Nagaland, Himachal Pradesh, Uttar Pradesh, Uttarakhand, Bihar, Jharkhand, Assam, Tripura, Sikkim and West Bengal have seen wage hikes of over 15%. Haryana, which has the highest wage rate of Rs 409, stands out with the lowest hike of just 2.25%. Southern states like Karnataka, Tamil Nadu, Andhra Pradesh and Telangana saw a hike of 3% or below.

— The wage rate has been fixed at Rs 300 for 21 states: Gujarat, Manipur, Mizoram, Rajasthan, Odisha, Jammu and Kashmir, Ladakh, Meghalaya, Chhattisgarh, Madhya Pradesh, West Bengal, Sikkim, Assam, Tripura, Bihar, Jharkhand, Uttar Pradesh, Uttarakhand, Himachal Pradesh (non-scheduled areas), Arunachal Pradesh, Nagaland.

— The wage rates for the other states have been fixed as follows: Rs 308 for Telangana, Rs 312 for Andhra Pradesh, Rs 317 for Maharashtra, Rs 340 for Dadra and Nagar Haveli and Daman and Diu, Rs 345 for Tamil Nadu, Rs 347 for Puducherry, Rs 348 each for Andaman and Nicobar (Andaman District) and Lakshadweep, Rs 360 for Punjab, Rs 367 for Andaman and Nicobar (Nicobar District), Rs 375 for Himachal Pradesh (scheduled areas), Rs 382 for Karnataka, Rs 401 for Kerala, and Rs 406 for Goa. Three gram panchayats in Sikkim – Gnathang, Lachung, and Lachen – will pay a fixed wage rate of Rs 450.

— Section 10 of the VB-G RAM G Act empowers the Centre to specify wage rates for unskilled manual work provided under the Scheme. As per the Act, the Central government can notify different wage rates for different areas. The Act also mandates that the wage rate notified under the VB G RAM G law shall not be less than the prevailing wage rate as notified under Section 6 of the Mahatma Gandhi National Rural Employment Guarantee Act, 2005. Hence, statements 2 and 3 are not correct.

Therefore, option (d) is the correct answer.

QUESTION 2

Consider the following statements regarding risks to financial stability highlighted by the Reserve Bank of India (RBI) in its recent Financial Stability Report:

1. The Reserve Bank of India has cautioned that elevated valuations of AI-related stocks could pose risks to global financial stability.

2. The RBI has identified domestic household debt as the single largest immediate threat to India’s financial stability.

3. The Indian banking sector currently lacks adequate resilience to withstand severe macroeconomic stress scenarios.

Which one of the following conclusions based on the above statements is correct ?

(a) All three statements are correct.

(b) There are two correct statements, that include statement 1.

(c) There is only one correct statement.

(d) There is no correct statement.

Relevance: UPSC can ask questions on the role of the RBI, financial sector resilience, systemic risks, and banking reforms. RBI reports, monetary policy documents, and financial stability assessments are increasingly used by UPSC to frame conceptual and application-based Prelims questions.

Explanation

— The Reserve Bank of India (RBI) has warned that a sharp correction in global equity markets, particularly if driven by a reassessment of corporate earnings growth and elevated valuations in AI-related stocks, could spill over to domestic markets. Hence, statement 1 is correct.

— AI-related investments are now permeating other segments of capital markets, including bond markets, the RBI said in its Financial Stability Report (FSR). Many markets, including South Korea, Taiwan and Japan, had recently witnessed a boom and high volatility in AI-related stocks.

— Concentration remains elevated with a small group of firms involved in AI-related technologies increasingly driving stock market performance in economies that are leading AI adoption or participating in its supply chain, the report said.

— The RBI did not identify domestic family debt as the single most significant immediate danger to India’s financial stability. While rising family debt was identified as a concern requiring close monitoring, the report also noted geopolitical fragmentation, higher asset prices, and AI vulnerabilities. Hence, statement 2 is not correct.

— The RBI declared unequivocally that the Indian banking system is resilient and capable of withstanding severe macroeconomic stress scenarios thanks to high capital buffers and improved asset quality. Hence, statement 3 is not correct.

Therefore, option (c) is the correct answer.

QUESTION 3

Consider the following statements:

1. The appointment of the chairman of private banks does not require RBI approval.

2. In the case of public sector banks, the Government of India makes the appointment directly based on the Financial Services Institutions Bureau’s (FSIB) recommendations.

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

Relevance: UPSC can ask questions on the regulatory architecture of the banking sector, including the roles of the RBI and the Government of India. Institutions such as the Financial Services Institutions Bureau (FSIB) and their functions are important topics under the Economy syllabus.

Explanation

— The board of HDFC Bank has approved the appointment of former Chief Election Commissioner of India Rajiv Kumar as part-time Chairman for a period of three years, effective from the date as approved by the Reserve Bank of India (RBI).

— He headed most key bodies shaping the country’s financial architecture, ranging from the Central Board of Reserve Bank, the Financial Stability and Development Council, the Financial Sector Regulatory Appointments Search Committee, Secretary of the Appointment Committee of the Cabinet, the Public Enterprises Selection Board, the Bank Board Bureau, to the boards of SBI and NABARD. He was also part of an expert committee on the central bank’s economic capital framework, and a committee on NITI Aayog’s restructuring.

— For the private banks, the Chairman may be appointed on a full-time or part-time basis (non-executive). Whole-time Chairmen (typically serving concurrently as MD and CEO) require RBI approval and are limited to a 5-year term (re-eligible afterward). Hence, statement 1 is not correct.

— For Public Sector Banks, appointments are made directly by the Government of India, usually based on recommendations from the Financial Services Institutions Bureau (FSIB). Hence, statement 2 is correct.

Therefore, option (b) is the correct answer.

QUESTION 4

With reference to the Carbon Border Adjustment Mechanism (CBAM), consider the following statements:

1. CBAM is a European Union’s (EU) policy designed to put a price on the carbon emitted during the production of carbon-intensive goods that are entering the EU.

2. For India, the impact of the CBAM is likely to be felt the most by the pharmaceuticals sector.

3. For an Indian exporter, it is optional to submit CBAM certificates that correspond to the total embedded emissions.

How many of the statements given above are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

Relevance: UPSC can frame questions at the intersection of trade policy and climate change, such as carbon taxes, carbon markets, and environmental regulations. CBAM reflects emerging global climate governance mechanisms and the principle of carbon pricing, which are recurring themes in UPSC Prelims and Mains.

Explanation

— The Centre is working on a scheme to absorb 90% of the compliance cost borne by micro, small, and medium enterprises (MSMEs) to help soften the disproportionate impact of the Carbon Border Adjustment Mechanism (CBAM) compliance burden imposed by the European Union.

— India’s efforts to secure a concession for its small industries in negotiations with developed countries have not worked, and the industry has been seeking assistance to meet the steep annual compliance costs due to the imposition of the EU’s carbon tax since January 1, 2026. The UK too has plans to impose its version of CBAM from 2027. CBAM is an EU policy designed to put a price on the carbon emitted during the production of carbon-intensive goods that are entering the EU. Hence, statement 1 is correct.

— Complying with the regulation is seen as a major global challenge, as declarants must track the embedded emissions of their goods, including direct emissions and, for certain sectors such as cement and fertilisers, indirect emissions. Industry sources said that the compliance cost for each MSME unit to meet the requirement under carbon tax alone is Rs 15 lakh to 20 lakh and that they do not have the wherewithal to report the number of data points sought under the regulation by the EU.

— For MSMEs, the principal challenge under CBAM is not necessarily the carbon levy itself, but the cost of compliance. Unlike large corporations, MSMEs often lack the technical expertise, systems and financial resources to measure, verify and report embedded emissions in accordance with CBAM requirements. They may have to incur significant upfront expenditure on carbon accounting, third-party verification, digital reporting systems and capacity building.

— Imports from India would decline for all CBAM commodities, and the impact of the CBAM is likely to be felt the most by the iron and steel (I&S) sector, where the extent of the decline in imports by the EU could be about 24%, and the Indian Council for Research on International Economic Relations (ICRIER) working paper released this month. The fertilisers and aluminium products, followed by metal products, are next in line. India’s global export of I&S will decline by 5.7%; for China, the corresponding estimate is 1.2%. Hence, statement 2 is not correct.

— An Indian exporter is required to submit CBAM certificates that correspond to the total embedded emissions. The regulation becomes a major challenge for MSMEs as the EU says that if exporters are unable to provide actual data, importers must use “default values” provided by the European Commission. The default values for CBAM goods have to be increased by a proportionately designed percentage ‘mark-up’ in their value. Hence, statement 3 is not correct.

— “These mark-ups are 10% in 2026, 20% in 2027, and 30% from 2028 onwards. Default values, including mark-up, have been determined to ensure that embedded emissions are not underestimated when applying default values,” the regulation said.

Therefore, option (a) is the correct answer.

QUESTION 5

Consider the following statements:

Statement 1: The production-linked incentive (PLI) scheme aims to enhance India’s manufacturing competitiveness and strengthen its integration with global supply chains.

Statement 2: The PLI scheme particularly focuses on areas which have export potential and also on sectors where there is high import intensity.

Which one of the following is correct in respect of the above statements?

(a) Both Statement 1 and Statement 2 are correct and Statement 2 is the correct explanation for Statement 1.

(b) Both Statement 1 and Statement 2 are correct and Statement 2 is not the correct explanation for Statement 1.

(c) Statement 1 is correct but Statement 2 is incorrect.

(d) Statement 1 is incorrect but Statement 2 is correct.

Relevance: PLI is one of India’s flagship industrial policies and is frequently discussed in relation to manufacturing and exports. Features, objectives, and rationale of major economic schemes remain a recurring theme in Economy questions.

Explanation

— Resource mobilisation had been a serious concern for the industry during the West Asia crisis, and with the easing of the crisis, efforts must shift to a faster pace of exploration which would also address India’s steep import dependence in several areas, said Confederation of Indian Industry (CII) President R. Mukundan in an interview with The Indian Express.

— Mukundan said the government should keep pushing the production-linked incentive scheme (PLIs), particularly focusing on areas which have export potential and also in sectors where there is high import intensity. He said there should be a PLI scheme for chemicals which go into active pharma ingredients, as the pharma industry has already been a success for the country. Hence, statement 2 is correct.

— The Production-Linked Incentive (PLI) Scheme was launched to boost domestic manufacturing, improve competitiveness, attract investments, and integrate India more deeply into global value chains. Hence, statement 1 is correct.

— Statement 2 is the right explanation of Statement 1, as the strategy increases India’s participation in global supply chains by boosting industries with high export potential, and it promotes local manufacturing competitiveness by lowering import dependence in crucial areas.

Therefore, option (a) is the correct answer.

Previous Daily Subject-Wise-Quiz

Daily Subject-wise quiz — History, Culture, and Social Issues (Week 159)

Daily subject-wise quiz — Polity and Governance (Week 169)

Daily subject-wise quiz —  Science and Technology (Week 169)

Daily subject-wise quiz — Economy (Week 168)

Daily subject-wise quiz — Environment and Geography (Week 168)

Daily subject-wise quiz – International Relations (Week 168)

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