UPSC 2016 Indian Economy Questions with Answers

Explanation

Statement 1 is incorrect: The Financial Stability and Development Council (FSDC) was set up by the government in December 2010. It serves as the top forum for financial matters. The FSDC was established well before the NITI Aayog came into existence.

Statement 2 is correct: The Chairman of the Financial Stability and Development Council (FSDC) is the Union Finance Minister.

Statement 3 is correct: The Council monitors macro-prudential supervision of the economy, which includes functioning of large financial conglomerates.

Explanation

Statement 1 is incorrect: The New Development Bank (NDB) was not set up by APEC (Asia-Pacific Economic Cooperation). It was established by the BRICS nations (Brazil, Russia, India, China, and South Africa) in 2014 during the 6th BRICS Summit in Fortaleza, Brazil. APEC is a regional economic forum comprising 21 Pacific Rim member economies.

Statement 2 is correct: The headquarters of the New Devel-opment Bank is in Shanghai, China. The bank became operational in 2015 and focuses on infrastructure and sustainable development projects in BRICS and other emerging economies. The headquarters was designed with a focus on innovation, efficiency, and sustainability which reflects the bank’s commitment to sustainable development.

Explanation

‘Import cover’ refers to the duration (typically measured in months) that a country’s foreign exchange reserves can sustain its current level of imports. This metric is crucial for assessing a nation’s external vulnerability and economic stability. To calculate import cover, the total foreign exchange re-serves are divided by the average monthly import expenditure. For instance, if a country has foreign exchange reserves of $60 billion and its average monthly imports amount to $10 billion, the import cover would be 6 months. A higher import cover indicates a stronger buffer against external economic shocks, as the country can continue to fund its import needs even during periods of reduced foreign exchange inflows. Conversely, a lower import cover suggests greater vulnerability to external pressures, such as fluctuations in global commodity prices or capital outflows.

Explanation

The terms Amber Box, Blue Box, and Green Box are classifications used within the framework of the World Trade Organization (WTO) to categorize different types of agricultural subsidies based on their trade-distorting effects. Amber Box: This category includes subsidies that are considered to distort production and trade. Examples encompass measures such as price support schemes and subsidies directly related to production quantities. These are subject to reduction commitments under the WTO agreements. Blue Box: Subsidies in this box are also trade-distorting but are conditioned upon programs that limit production. For instance, direct payments under production-limiting programs fall into this category. Blue Box subsidies are exempt from reduction commitments. Green Box: This box contains subsidies that cause minimal or no trade distortion. They are typically government-funded and do not involve price support. Examples include research funding, environmental programs, and disaster relief payments. Green Box subsidies are permitted without limits under WTO rules.

Explanation

Statement 1 is correct: The International Monetary and Financial Committee (IMFC) is a key body within the IMF structure. It discusses pressing issues related to the global economy and provides guidance to the IMF on its policies and work. It plays a crucial role in shaping the IMF’s agenda and priorities.

Statement 2 is correct: The World Bank participates as an observer in IMFC meetings. This allows for coordination and collaboration between the IMF and the World Bank on issues related to international finance and development. Given the interconnectedness of their work, it’s essential for both institutions to be aligned.

Explanation

Pradhan Mantri MUDRA Yojana (PMMY) launched in 2015 by the Government of India, provides collateral-free institutional loans up to Rs. 10 lakhs for small business enterprises. The scheme aims to bring enterprises into the formal financial system. Mantri MUDRA Yojana (PMMY) offers three loan products:

Shishu: Loans up to Rs. 50,000 Kishore: Loans between Rs. 50,000 and Rs. 5 lakh Tarun: Loans between Rs. 5 lakh and Rs. 10 lakh An increase in the loan limit to 20 lakh was announced during the Union Budget 2024-25 To strengthen support for aspiring entrepreneurs.

Explanation

Ease of Doing Business Index is published by the World Bank. It is an aggregate figure that includes different parameters which define the ease of doing business in a country. It is calculated by adding up the distance to frontier ratings of various economies. The "regulatory best practices" for conducting business serve as the basis for the distance to frontier score, which compares economies based on that parameter. The index for ease of doing business is calculated based on the following indicators: Construction permits, registration, obtaining financing, tax payment mechanisms, etc.