Indian Economy: UPSC Previous Year Questions (Prelims)

Explanation

India’s Imports of Top-10 Agricultural Commodities [Value in Rs. Crores. Quantity in ‘000’ Tonnes)

Option (d) is correct: As per the data from Department of Commerce, Government of India, Vegetable oils account for the highest import in terms of value in the last five years(i.e. Between 2014-15 and 2018-19). India relies on imports for 70% of its edible oil consumption. Options (a), (b) and (c) are incorrect: Pulses account for second-most highest while fresh fruits account for third highest and spices account for least imports in terms of value in the last five years among the above-mentioned agricultural commodities imported in India.

Explanation

Land reforms in independent India were primarily aimed at redistributing land to achieve social equity and increase agricultural productivity.

Option (a) is incorrect: Ceiling laws often target individual holdings to prevent landowners from circumventing the laws by splitting land among family members. While some states applied ceilings to family holdings, this was not consistent across India. Example: In Uttar Pradesh, ceiling laws were implemented based on individual holdings, allowing families to distribute land titles among relatives to bypass ceilings. In contrast, states like Kerala applied ceilings based on family holdings.

Option (b) is correct: The primary goal of land reforms in independent India was to redistribute land to landless farmers and promote social justice. This aimed to reduce inequalities in land ownership and improve agricultural productivity.

Option (c) is incorrect: Land reforms primarily focused on redistribution and tenancy reforms, with the aim of promoting food security and subsistence farming rather than the cultivation of cash crops. Example: In West Bengal and Kerala, land reforms led to increased production of rice and staple crops, not cash crops like cotton or sugarcane.

Option (d) is incorrect: Many states provided exemptions to ceiling limits for specific purposes, such as plantations, religious institutions, and educational establishments. Example: Religious and charitable institutions were also exempt in states like Tamil Nadu and Karnataka.

Explanation

Option (a) is incorrect: China is the world’s largest producer of rice, yet it exports only a small portion of its total production. The majority of its rice is directed towards domestic consumption, reflecting the country’s significant internal demand rather than a focus on international exports.

Option (b) is correct: Over the last five years, India has firmly held its position as the largest exporter of rice in the world. The country exports a wide range of rice varieties, including basmati rice, known for its aromatic quality, and non-basmati rice, which caters to diverse global markets. According to data from the Food and Agriculture Organization (FAO), India has maintained its leading position in rice exports from 2018 to 2023.

Option (c) is incorrect: Myanmar is an important regional rice exporter, particularly to China and ASEAN countries. However, its export volumes are much smaller, and political instability in recent years has affected its agricultural output.

Option (d) is incorrect: Vietnam consistently ranks amongst the top three rice exporters after India. While it exports significant quantities to Africa and Southeast Asia, its total exports are considerably lower than India’s.

Explanation

Statement 1 is correct: The coal sector in India was nationalized in two phases under Prime Minister Indira Gandhi. The first phase took place in 1971 with the nationalization of coking coal mines, and the second phase occurred in 1973 with the nationalization of non-coking coal mines. This was done to ensure proper development of the coal sector and to prevent exploitation by private players.

Statement 2 is incorrect: Coal blocks are not allocated on a lottery basis. The allocation of coal blocks in India is done through a transparent and competitive bidding process as per the Coal Mines (Special Provisions) Act, 2015. This process ensures fairness and efficiency in the allocation of coal re-sources.

Statement 3 is incorrect: India still imports coal to meet its domestic demand, particularly high-grade coal that is not sufficiently available domestically. Despite having large coal reserves, India faces challenges in coal production, transportation, and quality, which necessitate imports. India is not self-sufficient in coal products.

Explanation

The Service Area Approach (SAA) was implemented under the purview of the Lead Bank Scheme. It was introduced by the Reserve Bank of India (RBI) in April 1989. The SAA aimed to facilitate the planned and orderly development of rural and semi-urban areas. Under this approach, each commercial bank branch in these areas was designated to serve a specific cluster of 15 to 25 villages. The designated branch was responsible for meeting the banking needs of its assigned service area, thereby strengthening the link between bank credit and rural development.

Explanation

Statement 1 is correct: The Reserve Bank of India (RBI) directed payment system providers to ensure that all payment system data is stored only in India. This is part of the data localization policy.

Statement 2 is incorrect: The RBI’s directive does not require payment systems to be owned or operated by public sector enterprises only. The policy applies to all payment system providers regardless of whether they are public or private entities. It focuses on the localization of data storage rather than ownership structures.

Statement 3 is incorrect: The directive does not require payment system providers to submit audit reports to the Comptroller and Auditor General of India. Instead, they are required to submit a System Audit Report (SAR) conducted by CERT-IN empaneled auditors to the RBI not later than December 31.

Explanation

The Inter-Creditor Agreement (ICA) was signed by Indian banks and financial institutions to expedite the resolution of stressed assets involving amounts of 50 crore or more under consortium lending arrangements. The ICA was part of the "Sashakt" committee recommendations which proposed a five-pronged strategy to tackle NPAs. The ICA provides a structured framework for multiple lenders to collaborate and resolve stressed assets efficiently. Key features include:

Majority Decision Binding: If 66% of the lenders by value agree on a resolution plan, it becomes binding on all participating lenders. This was done to prevent individual holdouts from delaying resolutions. Timely ReAns: The agreement emphasizes prompt action, setting specific timelines to finalize and implement resolution plans. Asset Management Approach: It encourages the formation of independent asset management companies to manage and turn around distressed assets.

Explanation

Banks Board Bureau recommends for selection of heads - Public Sector Banks and Financial Institutions and helps banks in developing strategies and capital raising plans. Bank Board Bureau was established as an independent organisation in February 2016 based on the suggestions of the RBI appointed Nayak Committee. It was part of the Indradhanush Plan. It suggested the selection of full-time directors and non-ex-ecutive chairs for Public Sector Banks (PSBs) and state-owned financial institutions. Note: Now, Financial Services Institutions Bureau (FSIB) was put in place by the Government in place of BBB for recommending candidates for PSBs heads

Explanation

A bank’s assets are what it owns and what generates income for the bank. They represent how the bank uses the funds it has mobilized. A bank’s liabilities are what it owes to others. They represent the sources of funds that the bank uses to acquire assets and conduct its business. A commercial bank’s balance sheet, assets and liabilities are categorized as follows:

Assets:

Advances: These are loans and credits extended to customers, generating interest income for the bank. Investments: Holdings in government securities, bonds, and other approved securities that earn returns. Money at Call and Short Notice: Short-term funds lent to other banks or financial institutions, typically repayable on demand or within a short period. Liabilities:

Deposits: Funds accepted from the public, including savings, current, and fixed deposits, which the bank is obligated to repay. Hence, option (b) is correct.

Explanation

Option (d) is correct: P-Notes, short for Participatory Notes, are financial instruments that let foreign investors indirectly invest in the Indian stock market without registering with the market regulator Securities and Exchange Board of India (SEBI). P-Notes act like a substitute for underlying Indian company shares. Essentially, P-Notes act as a proxy for direct investment. The overseas investor buys a P-Note from the FPI, and the FPI invests the underlying funds in Indian securities on behalf of the P-Note holder. Benefits for foreign investors include avoiding the hassle of registering with SEBI and offering anonymity. Options (a), (b) and (c) are incorrect:

Certificate of Deposits (CDs) are short-term debt instruments issued by banks to raise funds. They are not related to foreign investment in the stock market. Commercial Paper is also a short-term debt instrument issued by companies to raise working capital. It is also not directly used for foreign investment in the stock market. Promissory Note is a written promise to pay a specific sum of money at a certain date. While it can be used in various financial transactions, it’s not the instrument used for indirect foreign investment in the stock market through FPIs