UPSC Essentials | Daily subject-wise quiz : Economy MCQs on merchant discount rate, Mission Vatsalya and more (Week 175)

3. In India, MDR was implemented in 2017, but later it was revoked.

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: The topic connects with financial inclusion, fintech and the government’s push towards a less-cash economy, making it relevant for Economy-based conceptual questions.

Explanation

— The Parliament has begun to dismantle the free-UPI regime through the Taxation and Other Laws (Amendment) Bill, 2026, which, for the most part, is a measure about direct taxation. However, a single clause within it repeals a rule that has stood since January 2020 — the prohibition on levying a merchant discount rate (MDR) on UPI payments. The MDR is the fee a merchant pays its bank to accept a digital payment, ordinarily one to two per cent on a card transaction. On UPI, it has been zero, mandated by statute. Hence, statement 1 is correct.

— MDR fees typically range from 1% to 3%, covering payment processor services and interchange fees to banks. Hence, statement 2 is correct.

— The Bill itself imposes no fee. It withdraws the automatic prohibition and empowers the government to decide, by notification, which payment modes remain free of charge. It specifies no rate, no threshold, and no exemption for small merchants or ordinary users. The government has given assurances that only large merchants will be charged, and never consumers. Those assurances may well be sincere, but they are not guaranteed by the law. The statute now permits the executive to decide the matter later, without returning to Parliament.

— UPI was never costless. The infrastructure has always been paid for either by banks, the payment applications, or the government, which reimbursed them for the fee they were required to forgo. That subsidy has been unevenly disbursed over time. The figure oscillates from year to year, and even at its height it met only a fraction of industry’s estimated operating costs. The budget has proved to be an unreliable means of keeping UPI free. The amendment is the other half of that predicament: To relieve the exchequer, and to permit a fee in its place.

— MDR was not implemented in 2017 and was subsequently withdrawn. MDR has been a long-standing element of India’s card-payment infrastructure. The government has, however, taken explicit steps to limit or eliminate MDR for some digital payment transactions, including prescribed UPI transfers. Hence, statement 3 is not correct.

Therefore, option (b) is the correct answer.

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

QUESTION 2

The ‘Mission Vatsalya’ is related to:

(a) Strengthening nutritional outcomes and reducing malnutrition among children and mothers.

(b) Expanding institutional healthcare and nutritional support for vulnerable children.

(c) Promoting skill development, employment and entrepreneurship opportunities for adolescents.

(d) Child rights, advocacy, and awareness as well as strengthening of the juvenile justice care and protection system.

Relevance: The topic is important for UPSC Prelims because child protection and welfare schemes are recurring areas in government-scheme based questions.

Explanation

— The central government is planning to conduct a National Child Survey, with the Ministry of Statistics and Programme Implementation (MoSPI) having begun discussions with the Ministry of Women and Child Development (MoWCD).

— According to the 42nd report of the Standing Committee on Finance, the survey hopes to “map the needs of children under Mission Vatsalya, specifically focusing on children in need of care and protection and juveniles requiring legal and social rehabilitation”.

— Formerly known as Integrated Child Protection Scheme, Mission Vatsalya focusses on child rights, advocacy, and awareness as well as strengthening of the juvenile justice care and protection system.

— In its report, the Standing Committee on Finance noted that while a robust legal framework exists, “the abolition of child labour remains a complex challenge”, with coordination gaps and absence of updated data being key obstacles. As such, the committee has called on MoSPI and MoWCD to “move beyond the discussion stage” regarding the survey.

Therefore, option (d) is the correct answer.

QUESTION 3

What is the correct order of the cities from high to low in terms of female Labour Force Participation Rate as per the Ministry of Statistics and Programme Implementation’s (MoSPI) recent report on the labour market in India’s cities with a population of more than 10 lakh as per Census 2011?

1. Coimbatore

2. Surat

3. Madurai

Select the correct answer using the codes given below:

(a) 1—2—3

(b) 2—3—1

(c) 3—1—2

(d) 3—2—1

Relevance: The topic is important for understanding women’s participation in India’s labour market and regional variations in employment, an emerging area in official statistical data and economic indicators.

Explanation

— New data underlines how Tamil Nadu remains closest in India to replicating China’s women-led electronics manufacturing model, with other states far behind.

— The Ministry of Statistics and Programme Implementation’s (MoSPI) recent report on the labour market in India’s 46 most populous cities (with a population of more than 10 lakh as per Census 2011) shows that two Tamil Nadu cities – Coimbatore at 41.3% and Madurai at 37% – rank in the top three when it comes to the female Labour Force Participation Rate. This is well above the urban India average of 27.7%.

— The Labour Force Participation Rate refers to the percentage of people either already employed or looking for work.

— Sandwiched between the two, at 40.6%, is Surat. However, the Annual Survey of Industries data shows that Gujarat’s share among women employed in the manufacture of computers, electronics and optical products remained stagnant at 10% from 2013-14 to 2023-24, even as it grew from 20% to 43% for Tamil Nadu in the same period.

— At the same time, Maharashtra and Karnataka saw notable declines in the share of women they employ in the manufacture of computers, electronics and optical products – 24% to 6%, and 11% to 8%, between 2013-14 and 2023-24.

Therefore, option (a) is the correct answer.

To read more: With a page out of China book, Tamil Nadu maintains lead in share of women workers

QUESTION 4

With reference to the Primary Agricultural Credit Societies (PACS), consider the following statements:

1. These societies operate at the village or gram panchayat level.

2. They are established and regulated directly by the Reserve Bank of India.

3. Their primary function is to provide long-term agricultural loans to farmers for capital-intensive investments.

How many of the statements given above are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

Relevance: PACS are important for understanding India’s cooperative credit structure, rural finance and agricultural credit delivery, making them relevant for Economy questions on financial institutions and government initiatives.

Explanation

— The Rajya Sabha passed the National Cooperative Development Corporation (Amendment) Bill, 2026, which expands the role of the NCDC to giving loans and grants directly to cooperative societies.

— It amends the National Cooperative Development Corporation Act, 1962, which was enacted to set up the NCDC in order to carry out programmes through cooperative societies for “production, processing, marketing, storage, export and import of agriculture produce, foodstuffs, industrial goods, livestock and certain other commodities and services”, as per the Bill’s statement of objects and reasons.

What are PACS?

— PACS operate at the village or gram panchayat level, acting as the grassroots institutions of the short-term cooperative credit structure. Hence, statement 1 is correct.

— PACS are registered under the State Cooperative Societies Act and supervised by the state’s Registrar of Cooperative Societies (RCS). They are not founded or governed directly by the RBI. Hence, statement 2 is not correct.

— PACS generally provide short- and medium-term finance to farmers and other members. Long-term agricultural loans for capital-intensive initiatives are often provided by cooperative agricultural and rural development banks rather than PACS. Hence, statement 3 is not correct.

Therefore, option (a) is the correct answer.

QUESTION 5

If tax certainty and a lower tax burden make India more attractive to offshore investment funds, which of the following is the most direct economic outcome?

(a) Greater capital inflows into India

(b) Automatic appreciation of the rupee

(c) Immediate increase in government tax revenue

(d) Automatic elimination of the current account deficit

Relevance: The topic is important for understanding the relationship between tax policy, investment decisions and capital flows. It also connects with foreign investment, exchange rates and India’s external sector, making it relevant for conceptual Economy questions.

Explanation

— In a bid to “promote fund management activity and provide tax certainty”, the government has proposed substantial relaxations to the conditions for Eligible Investment Funds, or offshore funds managed from India, to avail tax exemption under the Income-tax Act. The government also proposes to extend the five-year tax exemption for contract manufacturing given till 2030-31 in Budget this year by 10 years.

— A foreign company providing capital goods, equipment or tooling to a contract manufacturer for making electronics in India can now avail tax exemption till 2040-41.

— Further, a new tax holiday of 15 years up to March 31, 2041 has been proposed for specified foreign companies operating as mining companies, sightholders, brokers, aggregators, and tender/auction entities, exempting their income from the sale of rough diamonds in a notified special zone in India.

— The proposed amendments are part of the Taxation and Other Laws (Amendment) Bill, 2026, which is yet to be tabled in Parliament, but has been circulated with the members.

— For offshore funds, the government has proposed to remove the majority of the conditions — 8 out of 13 — for their activities to not constitute business income in India. Offshore funds will not be required to meet conditions such as minimum investor threshold of 25 members, maximum 10% participation interest for a single investor, restriction on investing more than 25% of the corpus in a single entity, restriction on investments in associate entities, and minimum monthly average corpus requirement of Rs 100 crore to avail tax exemption on global income.

— Greater tax certainty and a lower tax burden can improve India’s attractiveness as an investment destination, encouraging offshore investment funds to invest in India, thereby increasing capital inflows.

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 175)

Daily subject-wise quiz —  Science and Technology (Week 175)

Daily subject-wise quiz — Economy (Week 174)

Daily subject-wise quiz — Environment and Geography (Week 174)

Daily subject-wise quiz – International Relations (Week 174)

Subscribe to our UPSC newsletter and stay updated with the news cues from the past week.

Stay updated with the latest UPSC articles by joining our Telegram channel – IndianExpress UPSC Hub, and follow us on Instagram and X