Indian Economy: UPSC Previous Year Questions (Prelims)

Explanation

The Kelkar Committee Report (2002) did not recommend raising the personal income tax exemption limit specifically for widows to Rs. 1.20 lakh. Instead, the report focused on simplifying the tax system and broadening the tax base. Key recommendations included:

Abolition of Wealth Tax to streamline the tax structure. Elimination of standard deduction for salaried employees to simplify personal income tax calculations. Exemption from tax on dividends and capital gains from listed equities to encourage market participation. The report emphasized promoting economic grow-th by reducing distortions in the tax system and encouraging compliance.

Explanation

The services sector has attracted the highest Foreign Direct Investment (FDI) inflows into India in the decade leading up to 2004. This includes banking, insurance, IT, and business process outsourcing (BPO). The liberalization of FDI norms, IT boom, and rapid urbanization contributed to significant investments in financial services, telecommunications, and IT-enabled services. As per Reserve Bank of India (RBI) and Department for Pro-motion of Industry and Internal Trade (DPIIT) reports, the services sector remained the largest recipient of FDI inflows, consistently contributing over 15-20% of total FDI inflows.

Explanation

Option (a) is correct: The Abid Hussain Committee (1997) recommended the abolition of the reservation of items for the small-scale sector in industry. This recommendation was made to enhance the competitiveness of small-scale industries (SSIs) by opening up reserved items to medium and large-scale industries and promoting efficiency and modernization. Options (b) is incorrect: Narasimham Committee (1991 & 1998) focused on banking sector reforms to enhance financial stability and improve banking efficiency. Some of its recommendations include:

Reducing Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). Recommended the establishment of Asset Reconstruction Companies (ARCs) to address Non-Performing Assets (NPAs). Proposed the autonomy of public sector banks and the establishment of a stronger regulatory framework under RBI. Options (c) is incorrect: Nayak Committee (1992) focused on improving credit availability for small-scale industries (SSIs). Key Recommendations:

Banks should provide working capital equivalent to 20% of the annual turnover of SSIs. Simplify loan procedures and reduce collateral requirements for SSIs. Establish specialized branches for SSI lending. Recommended the formation of a dedicated financial institution to cater to small-scale industries. Options (d) is incorrect: Rakesh Mohan Committee (2004) analyzed small savings schemes and suggested reforms to align them with market rates. It recommended rationalization of interest rates on schemes like National Savings Certificates (NSCs) and Post Office Deposits. It proposed that small savings schemes should no longer distort the financial market and advocated better financial literacy for savers.

Explanation

Option (a) is incorrect: Reliance Industries Limited (RIL) was India’s largest petrochemical company and not Indian Petrochemicals Corporation Limited (IPCL). RIL had established itself as a dominant player in the petrochemical sector, with significant market shares in various products. Specifically, RIL was the largest manufacturer of monoethylene glycol, puri-fied terephthalic acid, and paraxylene, holding an 80% market share in these products. Additionally, the company had a 50% market share in polymers such as polyvinyl chloride, polypropylene, and polyethylene.

Option (b) is correct: Reliance Industries Limited (RIL) is the largest private sector company in India by market capitalization and revenue. It has diversified interests in petrochemicals, refining, oil, telecommunications, and retail.

Option (c) is correct: MTNL (Mahanagar Telephone Nigam Limited) was listed on the New York Stock Exchange (NYSE).

Option (d) is correct: BSNL (Bharat Sanchar Nigam Limited) was the first telecom service organization in India to launch nationwide mobile services. It was formed by separating the telecom services division from the Department of Telecommunications (DoT). Note: Currently India is second largest producer of steel and coal both.

Explanation

Option (a) is incorrect: India has a significant fertilizer industry, particularly in nitrogenous fertilizers. According to the "Chemical and Petrochemical Statistics at a Glance" report by the Department of Chemicals and Petrochemicals, India ranks 4th globally in the production of inorganic chemicals, which includes nitrogenous fertilizers.

Option (b) is correct: Regarding steel production, India was the ninth-largest producer in 2002, with a production of 31.8 million metric tons as per worldsteel.org.

Option (c) is correct: India is the second-largest producer of silk globally, after China.

Option (d) is correct: In 2003, India was the third-largest producer of coal globally, following China and the United States.

Explanation

Option (d) is correct: In the fiscal year 2000-01, In-dia’s industrial sector experienced varied growth rates across different industries. According to the Economic Survey 2000-01, during the period from April to December 2000, the growth rates for key industries were as follows:

Cement: The cement industry recorded a growth rate of 2.3%, a significant decline from the 16.0% growth observed during the same period in the previous year. Electricity: The electricity sector experienced a growth rate of 4.7%, down from 7.5% in the corresponding period of the previous year. Coal: The coal industry saw an improvement, with a growth rate of 5.2% compared to 3.0% in the same period of the prior year. Steel: The steel industry achieved a growth rate of 9.0%, which was a decrease from the 11.0% growth rate recorded in the same period of the previous year.

Explanation

Option (a) is correct: Alliance Air is a wholly-owned subsidiary of Indian Airlines which was established in 1996. Alliance Air operates regional flights under the UDAN (Ude Desh ka Aam Nagrik) scheme to enhance connectivity to remote areas. Alliance Air was rebranded as Alliance Air (India) Limited in 2022 after the privatization of Air India. Options (b), (c), (d) are incorrect:

As of 2003, the Airports Authority of India (AAI) managed 12 international airports across the country, including major hubs like Chennai, Kolkata, and Trivandrum. The number of international airports under AAI’s management has evolved over time due to the development of new airports and changes in management structures. As of 2024, AAI manages 34 international airports and over 110 domestic airports. The Directorate General of Civil Aviation (DGCA) not AAI is the regulatory body responsible for enforcing civil aviation regulations, air safety, and airworthiness standards in India. The AAI primarily focuses on creating, upgrading, maintaining, and managing civil aviation infrastructure, including airports and air traffic management. DGCA ensures compliance with international aviation standards set by the International Civil Aviation Organization (ICAO). The planning and construction of runways and terminal buildings fall under the purview of the Airports Authority of India. The AAI handles the design, development, operation, and maintenance of airports, ensuring the infrastructure meets international standards.

Explanation

Stamp duty is a tax levied by the state government on the transfer of property/property ownership. It is governed by Section 3 of the Indian Stamp Act, 1899. The amount of stamp duty at the time of registration depends on the value of the property. It also varies based on the location of the property, as well as whether the property is newly constructed or pre-owned.

Statement 1 is correct: Stamp duties on financial transactions are levied and collected by State Governments under the Seventh Schedule of the Indian Constitution (State List).

Statement 2 is incorrect: The revenue from stamp duties is not appropriated by the Union Government but remains a vital source of income for state governments. Stamp duties play a significant role in generating non-tax revenue for states. They are imposed on documents such as property deeds, share certificates, and other financial instruments.

Explanation

Debenture holders are creditors of a company as they lend money to the company in exchange for a fixed interest rate over a specified period. Unlike shareholders, they do not hold ownership rights but receive priority during liquidation over equity holders. Debentures are issued to raise long-term capital and are generally backed by the company’s assets or revenue-gener-ating ability. Unlike equity shareholders, debenture holders do not have voting rights in company decisions.

Explanation

The female literacy rate is the percentage of women aged 7 years and above who can read and write with under-standing in any language. It is a key indicator of the educational and social development of a region or country. As per Census 2001, the overall female literacy rate in India was 54.16%, while the male literacy rate was 75.85%. As per Census 2011, the female literacy rate in India rose to 65.46%, and Chhattisgarh’s female literacy rate increased to 60.59%.

Option (a) is correct:

As per the Census 2001, conducted by the Office of the Registrar General and Census Commissioner, India, Chhattisgarh had the highest female literacy rate among the given options. Here are the female literacy rates for the states mentioned:

Chhattisgarh: 52.40% Madhya Pradesh: 50.28% Orissa (Odisha): 50.97% Rajasthan: 44.34%