UPSC 2016 Prelims Questions with Answers

Explanation

MCLR is the lowest interest rate a bank can charge for loans. It helps banks calculate the minimum interest rate for different types of loans. The Reserve Bank of India (RBI) introduced the MCLR system on April 1, 2016, to make monetary policy transmission more effective and increase transparency in setting interest rates. It replaced the base rate system, which had been used since July 2010.

Statement 1 is correct: Bringing transparency in the methods followed by various banks for the determination of interest rate is one of the key objectives of MCLR regime. Before banks used various methods to set lending rates which lead to opacity and confusion for borrowers. MCLR introduced a standardized, transparent calculation method, requiring banks to disclose its components, helping borrowers better understand their loan rates.

Statement 2 is correct: By standardizing the methodology for calculating lending rates, the MCLR guidelines aim to ensure that interest rates are "fair" to Borrowers and Banks:

The transparent methodology prevents banks from arbitrarily charging high interest rates. The MCLR framework allows banks to factor in their actual cost of funds when determining lending rates, ensuring that they can maintain profitability.

Explanation

Montague-Chelmsford Proposals had the scheme of constitutional reforms, known as the Montagu-Chelmsford (or Mont-Ford) Reforms, which led to the enactment of the Government of India Act of 1919. It introduced diarchy (rule of two individuals/parties) at the provincial government level. The diarchy was implemented in eight provinces: Assam, Bengal, Bihar and Orissa, Central Provinces, United Provinces, Bombay, Madras and Punjab.

Explanation

Drip irrigation is a highly efficient water-saving irrigation technique where water is directly supplied to the plant roots through a network of pipes, valves, and emitters.

Statement 1 is correct: Drip irrigation delivers water only to plant roots, preventing water wastage in surrounding soil areas. Since weeds grow in moist conditions, less water in non-target areas leads to reduced weed growth.

Statement 2 is incorrect: Drip irrigation does not reduce soil salinity. Instead it may lead to salt accumulation near the root zone over time due to limited leaching of salts from the soil. Flood irrigation is more effective in reducing soil salinity as it washes away excess salts.

Statement 3 is correct: Since drip irrigation supplies water at a slow and controlled rate there is minimal surface runoff, preventing soil erosion. Unlike traditional irrigation methods like flood or sprinkler irrigation, which cause water runoff and soil displacement, drip irrigation keeps soil structure intact.

Explanation

Statement 1 is correct: Kharai camels have the remarkable ability to swim in seawater and feed on saline plants and mangroves. This adaptation gives them their name, "Kharai." They are considered the only domesticated camel breed that thrives in both marine and desert ecosystems. They were identified as a separate breed by the National Bureau of Animal Genetic Resources (NBAGR) in recent years.

Statement 2 is correct: Kharai camels are known to feed on mangroves and other salty marine plants found on offshore islands. To access this unique food source, they can swim for several hours in seawater.

Statement 3 is incorrect: Kharai camels are domesticated and play an essential role for local communities, often being used for transportation and various other purposes in the coastal and desert regions of Gujarat.

Explanation

‘Red Sanders’ are known for their rich hue and therapeutic properties. They are in high demand across Asia, particularly in China and Japan for use in cosmetics and medicinal products as well as for making furniture, woodcraft and musical instruments. The main threats that Red Sanders face are illicit felling for smuggling, forest fires, cattle grazing and other anthropogenic threats.

Statement 1 is correct: Red Sanders is an endemic tree species native to the Eastern Ghats, specifically found in the forests of Andhra Pradesh. It thrives in rocky, degraded, and fallow lands with red soil and a hot, dry climate.

Statement 2 is incorrect: It occurs in the forest formation which is classified as "Southern Tropical Dry Deciduous Forests". The tree is listed as Endangered on the IUCN Red List, due to over-exploitation of its timber and habitat loss. Efforts are being made to protect the tree’s habitats and to promote sustainable harvesting practices.

Explanation

India is home to nine hornbill species, about one-fifth of the 50+ species worldwide. While mainly frugivores, some also consume small mammals, reptiles, and birds. The Great Indian Hornbill primarily inhabits tropical evergreen forests and is found mostly in the Western Ghats and Nilgiris. It relies on large trees with cavities for nesting and roosting.

Explanation

A budget deficit occurs when government expenses exceed revenue. It can be used as an indicator of the financial health of a country. It is a term more commonly used to refer to government spending and receipts rather than businesses or individuals. When a budget deficit occurs, it means that the current expenses surpass the income generated from regular operations. To correct its nation’s budget deficit, often referred to as a fiscal deficit, a government may cut back on certain expenditures or increase revenue-generating activities.

Statement 1 is correct: Reducing the revenue expenditure will certainly help in bridging the gap. Reducing revenue expenditure (such as government spending on salaries, interest payments, and subsidies) directly reduces the fiscal deficit. By controlling unproductive expenditure, the government can balance its budget more effectively.

Statement 2 is incorrect: Introducing new welfare schemes will most likely result in increasing expenditure and so will expanding industries which would require capital infusion. These steps will increase the budget deficit.

Statement 3 is correct: Rationalizing subsidies (for instance, by cutting unnecessary subsidies or targeting them better) can help reduce the fiscal deficit. Subsidies consume a significant portion of government revenue, and streamlining them would lead to savings.

Statement 4 is incorrect: Reducing import duties can reduce government revenue (as import duties are a source of income). This could increase the fiscal deficit if the loss in revenue isn’t compensated by other measures or increased economic activity.

Explanation

Capital Budget consists of capital receipts (like disinvestment, borrowing, loans from public or foreign governments, Reserve Bank of India, etc) and capital expenditure (like expenditure on development of machinery, health facilities, etc). Capital budgeting implies setting targets for projects/schemes to ensure maximum profitability.

Statement 1 is correct: Capital Expenditure includes the expenditure on the acquisition of land, building, machinery, equipment, creating assets such as roads and hospitals, repayment of government borrowings.

Statement 2 is correct: Capital receipts components are Loan borrowings, disinvestments, funds received from the issue of shares or debentures, etc.

Statement 3 is correct: Loans, and advances by the central government to state and union territory governments, etc. are also included in the capital budget of the Government of India.

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 Chief Secretary is ‘chosen’ by the Chief Minister. As the appointment of Chief Secretary is an executive action of the Chief Minister, it is taken in the name of the Governor of the State.

Statement 2 is incorrect: Though the Administrative Reforms Commission, in its report on State Administration in 1969, had recommended that a Chief Secretary should have a minimum tenure of three to four years, there is no fixed tenure for the post of Chief Secretary of a State.