UPSC Essentials: Daily subject-wise quiz — Economy (Week 7)

QUESTION 1

The “Green Credit Programme” was in the news recently. It has been launched for:

(a) Inter-state transmission systems for evacuation and grid integration.

(b) Encouraging behavioural change that will be notified under the Environment (Protection) Act. 

(c) Restoration, Awareness, Nourishment and Amelioration of Mother Earth.

(d) Generating waste to wealth plants under Galvanizing Organic Bio-Agro Resources Dhan scheme.

QUESTION 2

Consider the following statements about Financial Inclusion Index:

1. The Reserve Bank of India launches the Index.

2. The base year for the Index is 2021.

3. The index is published annually.

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

(a) 1 and 2 only

(b) 2 and 3 only

(c) 3 only

(d) 1 and 3 only

QUESTION 3

With reference to the Current Account Deficit (CAD), which of the following statement(s) is/are correct?

1. It is the difference between exports and imports of goods only.

2. Higher CAD implies imports are more than exports.

Select the correct answer using the code given below:

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

QUESTION 4

Which of the following statements is not correct about GST Council?

(a) The recommendations of the GST Council are binding.

(b) The Union Finance Minister is the chairperson of the council.

(c) It is a joint forum of the Centre and the states which the President set up as per Article 279A (1) of the amended Constitution of India.

(d) Each state can nominate a minister in charge of finance or taxation or any other minister as a member.

QUESTION 5

With reference to the Windfall Tax, consider the following statements:

1. It is levied in the form of Cess under the central excise department.

2. It is revised every month based on global crude oil prices.

3. The windfall tax on petrol and aviation turbine fuel (ATF) is zero.

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

(a) 1 and 2 only

(b) 2 only

(c) 1 and 3 only

(d) 1, 2 and 3

QUESTION 6

Consider the following statements about  Standing Deposit Facility (SDF):

1. It reduces the excess liquidity in the system and controls inflation.

2. It was introduced in 2018 by an amendment to the RBI Act.

3. It strengthens the operating framework of monetary policy.

Which of the statements given above are correct?

(a) 1 and 2 only

(b) 1 and 3 only

(c) 2 and 3 only

(d) 1, 2 and 3

QUESTION 7

With reference to the Fincluvation, which of the following statement(s) is/are correct?

1. It is a  joint initiative to collaborate with the Fintech Startup community to co-create and innovate solutions for financial inclusion.

2. It is a permanent platform of RBI to co-create inclusive financial solutions with participating start-ups.

Select the correct answer using the codes given below:

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

QUESTION 8

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

1. It is the legal tender issued by a central bank in digital form.

2. The digital fiat currency or CBDC can be transacted using wallets backed by blockchain.

3. Transactions can be both person-to-person (P2P) and person-to-merchant (P2M).

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

(a) 1 and 2 only

(b) 2 only

(c) 1 and 3 only

(d) 1, 2 and 3

ANSWERS TO MCQs

1. (b)

FYI:

— The Finance Minister of India listed ‘Green Growth’ as one of the seven priorities of her Budget. She said these seven principles complement each other and act as the ‘Saptarishi’ guiding India through the Amrit Kaal. Green Growth is the fifth of these seven priorities.

— India is moving towards the ‘panchamrit’ and net-zero carbon emission by 2070 to usher in a green industrial and economic transition.

Green Credit Programme

— The programme has been launched to encourage behavioural change, a Green Credit Programme will be notified under the Environment (Protection) Act.

— This will incentivize environmentally sustainable and responsive actions by companies, individuals and local bodies, and help mobilize additional resources for such activities.

Therefore, option (b) is the correct answer.

2. (d)

FYI:

— The Reserve Bank of India has launched a composite Financial Inclusion Index (FI-Index) to capture the extent of financial inclusion across the country. Hence, statement 1 is correct.

— The FI-Index has been conceptualised as a comprehensive index incorporating details of banking, investments, insurance, postal as well as the pension sector in consultation with the Government and respective sectoral regulators.

— The index captures information on various aspects of financial inclusion in a single value ranging between 0 and 100, where 0 represents complete financial exclusion and 100 indicates full financial inclusion.

— The FI-Index comprises of three broad parameters viz., Access (35%), Usage (45%), and Quality (20%) with each of these consisting of various dimensions, which are computed based on a number of indicators.

— The Index is responsive to ease of access, availability and usage of services, and quality of services, comprising in all 97 indicators.

— A unique feature of the Index is the Quality parameter which captures the quality aspect of financial inclusion as reflected by financial literacy, consumer protection, and inequalities and deficiencies in services.

— The FI-Index has been constructed without any ‘base year’ and as such it reflects the cumulative efforts of all stakeholders over the years towards financial inclusion. Hence, statement 2 is not correct.

— The FI-Index will be published annually in July every year. The annual FI-Index for the period ending March 2021 is 53.9 as against 43.4 for the period ending March 2017. Hence, statement 3 is correct.

Therefore, option (d) is the correct answer.

Source: (rbi.org.in)

3. (b)

FYI:

— The current account deficit (CAD) is defined as the difference between exports and imports of goods and services. Hence, statement 1 is not correct.

— The Current Account, then, has two specific sub-parts:

(1) Import and Export of goods — this is the trade account.

(2) Import and export of services — this is called the invisible account.

— The net effect of this surplus (or deficit) on the invisible account and the deficit (or surplus) on the trade account is called the current account balance.

— In India, there is a huge trade deficit and a smaller surplus on the Invisibles, then what we have is an overall deficit on the current account — or Current Account Deficit.

— In essence, having a CAD or a deficit on the current account implies that, in monetary terms, India imports more goods and services than it exports. This, in turn, implies that the demand for foreign currency (say the US dollar) is more than the demand for the Indian rupee. Hence, statement 2 is correct.

Therefore, option (b) is the correct answer.

4. (a)

FYI:

— The GST Council is a joint forum of the Centre and the states which the President set up as per Article 279A (1) of the amended Constitution.

— The Council, according to Article 279, is meant to “make recommendations to the Union and the states on important issues related to GST, like the goods and services that may be subjected or exempted from GST, model GST Laws”.

— It also decides on various rate slabs of GST.

— The recommendations of the GST Council are not binding.

— The court said Article 246A of the Constitution gives both Parliament and state legislatures “simultaneous” power to legislate on GST and recommendations of the Council “are the product of a collaborative dialogue involving the Union and States”. 

Therefore, option (a) is the correct answer.

5. (c)

FYI:

— The Centre reimposed the windfall tax on domestically produced crude oil revising it to Rs 6,400 per tonne while also scrapping the export duty on diesel.

— This is the 19th revision of the windfall tax, which was first imposed on July 1, 2022, due to a surge in global crude prices caused by the ongoing Russia-Ukraine war.

— The windfall tax on petrol and aviation turbine fuel (ATF) continues to be zero. Hence, statement 3 is correct.

— The windfall tax is levied in the form of cess under the central excise department. Hence, statement 1 is correct.

— It is revised every fortnight based on global crude oil prices. Hence, statement 2 is not correct.

— The government started levying windfall gains to tax super-normal profits of oil producers and fuel exporters. It had mandated that companies sell the equivalent of 50 per cent of their gasoline exports and 30 per cent of their diesel exports domestically in the current fiscal year.

Therefore, option (c) is the correct answer.

6. (d)

FYI:

— In 2018, the amended Section 17 of the RBI Act empowered the Reserve Bank to introduce the SDF – an additional tool for absorbing liquidity without any collateral. Hence, statement 2 is correct.

— The SDF strengthens the operating framework of monetary policy by removing the binding collateral constraint on the RBI. Hence, statement 3 is correct.

— The SDF is also a financial stability tool in addition to its role in liquidity management.

— The main purpose of SDF is to reduce the excess liquidity in the system and control inflation. Hence, statement 1 is correct.

— The SDF will replace the fixed rate reverse repo (FRRR) as the floor of the liquidity adjustment facility corridor. Both the standing facilities — the MSF (marginal standing facility) and the SDF will be available on all days of the week, throughout the year.

Therefore, option (d) is the correct answer.

7. (a)

FYI:

— On the occasion of the 75th anniversary of Indian Independence & ongoing Azadi ka Amrit Mahotasav, India Post Payments Bank (IPPB), a 100 per cent government-owned entity under the Department of Posts (DoP) announced the launch of Fincluvation– a joint initiative to collaborate with Fintech Startup community to co-create and innovate solutions for financial inclusion. Hence, statement 1 is correct.

— It is the first initiative to create a powerful platform to mobilize the start-up community towards building meaningful financial products aimed at financial inclusion.

— Fincluvation will be a permanent platform of IPPB to co-create inclusive financial solutions with participating start-ups. Hence, statement 2 is not correct.

— Fincluvation invites startups to Participate, Ideate, Develop and Market intuitive and tailored products and services that can be taken to the customers. 

Therefore, option (a) is the correct answer.

Source: (pib.gov.in)

8. (d)

FYI:

— According to the RBI, “CBDC is the legal tender issued by a central bank in a digital form. It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency. Hence, statement 1 is correct.

— The digital fiat currency or CBDC can be transacted using wallets backed by blockchain. Hence, statement 2 is correct.

— Though the concept of CBDCs was directly inspired by Bitcoin, it is different from decentralised virtual currencies and crypto assets, which are not issued by the state and lack legal tender status.

— CBDCs enable the user to conduct both domestic and cross-border transactions which do not require a third party or a bank.

Working — Digital Rupee

— The e₹-R would be in the form of a digital token that represents legal tender. It will be issued in the same denominations as paper currency and coins and will be distributed through intermediaries, i.e., banks.

— The users will be able to transact with e₹-R through a digital wallet offered by the participating banks and stored on mobile phones and devices, according to the RBI.

— Transactions can be both person-to-person (P2P) and person-to-merchant (P2M). Payments to merchants can be made using QR codes displayed at merchant locations. Hence, statement 3 is correct.

— The e₹-R would offer features of physical cash like trust, safety and settlement finality. As in the case of cash, it will not earn any interest and can be converted to other forms of money, like deposits with banks.

Therefore, option (d) is the correct answer.

Previous Quizzes:

Polity and Governance: (Week 4) , (Week 5),  (Week 6)

History, Culture, and Social Issues (Week 4),  (Week 5),  (Week 6)