UPSC 2015 Indian Economy Questions with Answers

Explanation

The Fair and Remunerative Price (FRP) is the price set by the government that mills are legally required to pay farmers for the sugarcane they purchase. It is mandated under the Sugarcane Control Order, 1966 published under the Essential Commodities Act (ECA), 1955. The FRP is announced by the Cabinet Committee on Economic Affairs (CCEA), and it serves as a benchmark price for sugar mills to pay farmers. The Cabinet Committee on Economic Affairs (CCEA) announces the decision following the Commission on Agricultural Costs and Prices’ (CACP) recommendation.

Explanation

Agricultural markets in India are primarily regulated under the APMC Acts, which are state-level legislations. These acts establish regulated markets (mandis) where farmers are required to sell their produce through licensed traders to ensure fair prices and reduce exploitation. The central government provides guidelines, but states have the authority over agricultural marketing as agriculture is a state subject under the Constitution. Options (a), (c) and (d) are incorrect:

Essential Commodities Act, 1955: This act is aimed at controlling the production, supply, and distribution of essential commodities to prevent hoarding and black marketing. It does not regulate agricultural markets directly but empowers the government to regulate the prices and stock limits of certain agricultural products in times of scarcity. Agricultural Produce (Grading and Marking) Act, 1937: This act deals with the grading and quality control of agricultural products through standards like AGMARK. It focuses on quality assurance rather than the regulation of markets or the sale process. Food Products Order, 1956 and Meat and Food Products Order, 1973: These orders are related to the quality control and standardization of food products and meat, ensuring they meet safety and hygiene standards. They do not regulate the agricultural markets directly.

Explanation

Statement 1 is incorrect: The Accelerated Irrigation Benefits Programme was launched in 1996-97. Its goal was to provide Central Loan Assistance (CLA) to the states, rather than directly to poor farmers. The programme aimed to help states complete their major irrigation projects that were in the advanced stages of development. Its primary objective was to speed up the completion of ongoing irrigation projects.

Statement 2 is correct: The Command Area Development (CAD) programme was launched in 1974-75. Its aim was to close the gap between the irrigation potential and the actual use of major and medium irrigation schemes. The ultimate goal of the programme is to deliver irrigation water to the fields. The plan involves creating field channels, land contouring, and a rotational water supply. These measures are designed to improve water use efficiency in agriculture. In 2004, the programme was restructured into the Command Area Development and Water Management Program.

Explanation

This is because the replacement of wooden ploughs (a less durable, less efficient tool) with steel ploughs (which are more durable, efficient, and require less labor for maintenance and use) leads to increased productivity per unit of capital, i.e., the plough itself. This represents a shift towards more capital-in-tensive technology. This is capital-augmenting rather than labor-augmenting progress because the improvement is in the capital itself (the plough), making it more productive, rather than increasing the labor force or improving labor productivity directly.

Explanation

The main aim of the Seed Village Concept is to involve farmers in the production of quality seeds through training, ensuring that these seeds are accessible to others at the right time and at affordable prices. This approach empowers farmers to contribute to seed production, meeting local demand and ensuring that both they and neighboring farmers have access to high-quality seeds.

Option (b) is correct: A village is referred to as a ‘seed village’ if a trained group of farmers produces seeds for a variety of crops and provides for the requirements of themselves, their fellow villagers, and villagers in nearby villages at an affordable price. Thus this option best captures the main objective of the Seed Village Concept, which focuses on training farmers to produce high-quality seeds for local use, ensuring accessibility and affordability.

Explanation

Statement 1 is correct: IREDA was incorporated in 1987 as a public limited government company under the Companies Act, 1956. It operates as a Government of India Enterprise and is under the administrative control of the Ministry of New and Renewable Energy (MNRE). In April 2024 IREDA achieved the "Navratna" status which granted it greater financial and operational autonomy.

Statement 2 is correct: IREDA is registered as a Non-Banking Financial Company (NBFC) with the Reserve Bank of In-dia (RBI). In 2023 it was granted the status of an Infrastructure Finance Company (IFC) by the RBI enhancing its capacity to finance large-scale renewable energy projects.

Explanation

The Consumer Price Index for Industrial Workers (CPI-IW) is compiled and released by the Labour Bureau which operates under the Ministry of Labour and Employment, Government of India. CPI-IW measures inflation and changes in the cost of living for industrial workers across various sectors. It serves as a benchmark for revising wages, dearness allowance (DA), and social security benefits for workers and government employees. The Labour Bureau publishes CPI-IW monthly based on data collected from major industrial centers across India. The Labour Bureau has been compiling the CPI-IW since 1944, with revisions to the base year occurring periodically (e.g., 2001=100, 2016=100) to reflect changing consumption patterns.

Explanation

Inflation is the general rise in prices of goods and services within a particular economy wherein, the purchasing power of consumers decreases, and the value of the cash holdings erode. Reserve Bank of India is the authority to control inflation through monetary policies which it does by increasing bank rates, repo rates, cash reserve ratio, buying dollars, regulating money supply and availability of credit. Statement (a) is incorrect: While the government plays a key role in controlling inflation through fiscal policies (such as taxation, subsidies, and public expenditure), the Reserve Bank of India (RBI) also plays a key role in controlling inflation through its monetary policies (such as adjusting inter-est rates and controlling money supply). Statement (b) is incorrect: The RBI is central to controlling inflation in India. Since 2016, the RBI has adopted an inflation targeting framework, aiming to keep inflation at 4%, with a tolerance band of 2% on either side. The RBI uses tools like repo rates and reverse repo rates to influence inflation. Statement (c) is correct: When the central bank decreases the money supply in the economy (by increasing interest rates or selling government securities) it leads to less money circulating in the market. This reduces demand and, consequently, controls inflation. This process is known as tight monetary policy. Statement (d) is incorrect: Increasing money circulation typically leads to demand-pull inflation, where more money in the system drives up prices. To control inflation, reducing the money supply (through higher interest rates and other measures) is more effective.

Explanation

PMJDY (Pradhan Mantri Jan Dhan Yojana) is a na-tional initiative for financial inclusion, aiming to ensure that every household in the country has access to comprehensive financial services. The objective of "Pradhan Mantri Jan-Dhan Yojana (PMJDY)" is ensuring access to various financial services like availability of basic savings bank account, access to need based credit, remittances facility, insurance and pension to the excluded sections i.e. weaker sections & low income groups. This deep penetration at affordable cost is possible only with effective use of technology. The plan includes providing universal banking access, with at least one basic bank account per household, as well as promoting financial literacy, credit access, insurance, and pension services. Beneficiaries will receive a RuPay Debit card, which includes accident insurance coverage of 1 lakh. The program also plans to direct all government benefits (from central, state, and local bodies) into beneficiaries’ accounts and promote the Direct Benefits Transfer (DBT) scheme.

Explanation

Option (a) is incorrect: While reducing the SLR can stimulate economic activity by increasing liquidity but it does not directly lead to a drastic increase in GDP growth. GDP growth is influenced by a multitude of factors, including investment levels, consumption, and government spending.

Option (b) is incorrect: The SLR reduction primarily affects domestic liquidity and does not directly influence foreign investment decisions. Foreign Institutional Investors (FIIs) are more influenced by factors such as market potential, regulatory environment, and economic stability.

Option (c) is correct: The Statutory Liquidity Ratio (SLR) cut by the RBI is likely to give more room for banks to cut rates. When the RBI reduces the SLR banks are required to keep a smaller portion of their net demand and time liabilities (NDTL) in liquid asset freeing up additional funds. This boost in liquidity allows banks to lend more to borrowers. To encourage borrowing and make use of the increased liquidity, banks may lower their lending rates, thereby making credit more accessible to consumers and businesses.

Option (d) is incorrect: It does not drastically reduce the liquidity to the banking system. Reducing the SLR increases liquidity in the banking system by freeing up funds that banks can use for lending or investment.