DAY – 5 (InstaTest-5): Insta 75 Days Revision Plan-2022: Topic – ECONOMY, Subject-wise Test 12, Textbook-wise Test 5 and June 2021 CA – INSIGHTSIAS

Solution : a 

Justification: A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities. 

A company is registered as a NBFC by RBI if its principal business is conducting financial activity. 

Financial activity as principal business is when a company’s financial assets constitute more than 50 per cent of the total assets and income from financial assets constitute more than 50 per cent of the gross income. 

However, this excludes institutions whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property. 

• A company which fulfils both these criteria will be registered as NBFC by RBI. The term ‘principal business’ is not defined by the Reserve Bank of India Act. 
• The Reserve Bank has defined it to ensure that only companies predominantly engaged in financial activity get registered with it and are regulated and supervised by it. 
• Hence if there are companies engaged in agricultural operations, industrial activity, purchase and sale of goods, providing services or purchase, sale or construction of immovable property as their principal business and are doing some financial business in a small way, they will not be regulated by the Reserve Bank. 

Interestingly, this test is popularly known as 50-50 test and is applied to determine whether a company is into financial business.

Q Source: Chapter on Banking: Indian Economy: Ramesh Singh

Solution : c

Justification: Carbon tax is a form of pollution tax. It levies a fee on the production, distribution or use of fossil fuels based on how much carbon their combustion emits. The government sets a price per ton on carbon, then translates it into a tax on electricity, natural gas or oil.

From an economic perspective, carbon taxes are a type of Pigovian tax. A Pigovian tax is a tax on any market activity that generates negative externalities (which are costs not included in the market price). Pollution from manufacturing is an externality, for example, which imposes a cost on the community that the consumer price fails to reflect (since the consumer is paying a much higher effective price due to the degradation of the environment imposing a long-term cost).

Carbon taxes help to address the problem of emitters of greenhouse gases not facing the full social cost of their actions, since these taxes can be used to mitigate adverse ecological changes.  

Carbon taxes can be a regressive tax, in that they may directly or indirectly affect low-income groups disproportionately. 

The regressive impact of carbon taxes could be addressed by using tax revenues to favour low-income groups.

Q Source: Basics: Environmental economics

Solution : c

Justification: Overheating of an economy occurs when its productive capacity is unable to keep pace with growing aggregate demand leading to inflation. 

When there is excess demand and low supply, high consumption and low savings can lead to a situation where there is a shortage of investible capital. The economy is unable to supply demanded goods and prices start increases. 

This can be caused due to additional liquidity pumped in the system by the central bank or government. When people have more money in the short-term, they can demand more goods and services causing the economy to heat up in the short-term, until the demand is satisfied. 

Q Source: Basics: Economy

Solution : c 

Justification:  The expenditure of the governments from which they can not deny (as they have already committed them to pay) are known as committed expenditure. The liabilities such as ‘interest’ (of the internal as well as external loans) and ‘pension’ (of the retired personnel of the governments) are examples of such expenditure. 

By the year 2015-16, this expenditure for the Government of India was 41.5 per cent of the non-plan expenditure. Non-plan expenditure for the year was 73.8 per cent of the total expenditure (plan pluc non-plan). The GoI has decided to shift to the ‘revenue’ and ‘capital’ classification for its expenditure from 2017-18 (in place of the existing classification ‘plan’ and ‘non-plan’).

Q Source: Indian Economy: Ramesh Singh: Terminologies 

Solution : a

Justification:  Marginal standing facility (MSF) is a window for banks to borrow from the Reserve Bank of India in an emergency situation when inter-bank liquidity dries up completely.

Banks borrow from the central bank by pledging government securities at a rate higher than the repo rate under liquidity adjustment facility or LAF in short. The MSF rate is pegged 100 basis points or a percentage point above the repo rate. Under MSF, banks can borrow funds up to one percentage of their net demand and time liabilities (NDTL).

It was operationalised on the lines of the existing Liquidity Adjustment Facility (LAF – Repo) in May 2011 under which all Scheduled Commercial Banks can avail overnight funds.  

Q Source: Basics: Banking

Solution : a

The Bretton Woods System: The Bretton Woods Conference held in 1944 set up the International Monetary Fund (IMF) and the World Bank and reestablished a system of fixed exchange rates. 

Solution : c

Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices. The minimum support prices are announced by the Government of India at the beginning of the sowing season for certain crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).

Solution : d

A Shade house is a structure enclosed by agro nets or any other woven material to allow required sunlight, moisture and air to pass through the gaps. It creates an appropriate micro climate conducive to the plant growth. It is also referred as shade net house or net house.

Uses of shade house

• Helps in cultivation of flower plants, foliage plants, medicinal plants, vegetables and spices. 
• Used for fruit and vegetable nurseries as well as for raising of forest species etc.
• Helps in quality drying of various agro products. 
• Used to protect against pest attack. 
• Protects from natural weather disturbances such as wind, rain, hail and frost. 
• Used in production of graft saplings and reducing its mortality during hot summer days.
• Used for hardening tissue culture plantlets

Solution : c

The National Statistical Office (NSO), Ministry of Statistics and Programme Implementation is releasing Consumer Price Index (CPI) on Base 2012=100 for Rural, Urban and Combined for the month of June 2020 (Provisional) in this press note. The corresponding Consumer Food Price Index (CFPI) for all India Rural, Urban and Combined are also being released.

The CSO launched Consumer Food Price Index (CFPI) constructing the index for early months of 2014 onwards. Consumer Food Price Index (CFPI) is a measure of change in retail prices of food items consumed by the population. Under the CSO’s CFPI, the index gives food price level changes for rural, urban and all India basis. The base year used in CFPI is 2012 as in the case of CPI.

Composition of CFPI

The Methodology for the calculation of CFPI is similar to that of CPI. Base year and data are the same. In CPI, food and beverage group constitutes 45.86% of weight. Out of this, beverages and some of the eatable items are excluded to derive the CFPI basket of commodities. Weight of the CFPI commodities is 39.05% of the entire CPI basket (MOSPI Annual Report 2014-15, P.27).

Solution : c

An employee stock ownership plan (ESOP) is a type of employee benefit plan which is intended to encourage employees to acquire stocks or ownership in the company.

Description: Under these plans, the employer gives certain stocks of the company to the employee for negligible or less costs which remain in the ESOP trust fund, until the options vests and the employee exercises them or the employee leaves/retires from the company or institution.

These plans are aimed at improving the performance of the company and increasing the value of the shares by involving stock holders, who are also the employees, in the working of the company. The ESOPs help in minimizing problems related to incentives.

Solution : b

What are the different categories under priority sector?

Priority Sector includes the following categories:

(i) Agriculture
(ii) Micro, Small and Medium Enterprises
(iii) Export Credit
(iv) Education
(v) Housing
(vi) Social Infrastructure
(vii) Renewable Energy
(viii) Others

What is included under Weaker Sections under priority sector?

Priority sector loans to the following borrowers are eligible to be considered under Weaker Sections category:-

Solution : a

World Happiness Report:

It is released by the Sustainable Development Solutions Network for the United Nations by the UN General Assembly. Hence, option (a) is correct.

It is a landmark survey of the state of global happiness that ranks 156 countries by how happy their citizens perceive themselves to be.

Solution : c

What is Money Market?

While the G-Secs market generally caters to the investors with a long-term investment horizon, the money market provides investment avenues of short term tenor. Money market transactions are generally used for funding the transactions in other markets including G-Secs market and meeting short term liquidity mismatches. By definition, money market is for a maximum tenor of one year. Within the one year, depending upon the tenors, money market is classified into:

1. Overnight market – The tenor of transactions is one working day.
2. Notice money market – The tenor of the transactions is from 2 days to 14 days.

iii. Term money market – The tenor of the transactions is from 15 days to one year.

What are the different money market instruments?

Money market instruments include call money, repos, T- Bills (for details refer para 1.3), Cash Management Bills (for details refer para 1.4), Commercial Paper, Certificate of Deposit and Collateralized Borrowing and Lending Obligations (CBLO).

Call money market

Call money market is a market for uncollateralized lending and borrowing of funds. This market is predominantly overnight and is open for participation only to scheduled commercial banks and the primary dealers.

Solution : c

Revenue Expenditure

Revenue Expenditure is expenditure incurred for purposes other than the creation of physical or financial assets of the central government. It relates to those expenses incurred for the normal functioning of the government departments and various services, interest payments on debt incurred by the government, and grants given to state governments and other parties (even though some of the grants may be meant for creation of assets).

Interest payments on market loans, external loans and from various reserve funds constitute the single largest component of non-plan revenue expenditure. Defence expenditure, is committed expenditure in the sense that given the national security concerns, there exists little scope for drastic reduction. Subsidies are an important policy instrument which aim at increasing welfare. Apart from providing implicit subsidies through underpricing of public goods and services like education and health, the government also extends subsidies explicitly on items such as exports, interest on loans, food and fertilisers.

Revenue Expenditure 

(a) Interest payments 

(b) Major subsidies 

(c) Defence expenditure

Solution : d

The Wholesale Price Index is the price of a representative basket of wholesale goods. Some countries use WPI changes as a central measure of inflation.

From April 2014, the RBI had adopted the CPI as its key measure of inflation.

Solution : d

Solution: The Heart of Asia – Istanbul Process (HoA-IP) is an initiative of the Republic of Afghanistan and the Republic of Turkey, which was officially launched at a conference hosted by Turkey in Istanbul on 2 November 2011. Since then, Afghanistan supported by fourteen Participating Countries of the Heart of Asia Region and 16 Supporting Countries beyond the region as well as 12 Regional and International Organizations is leading and coordinating this Process. It is a platform for promoting regional security, economic and political cooperation centered on Afghanistan through dialogue and a set of Confidence Building Measures (CBMs).

Solution :c

Solution:The NASA-ISRO Synthetic Aperture Radar (NISAR) mission is a joint project between NASA and ISRO to co-develop and launch a dual-frequency synthetic aperture radar on an Earth observation satellite. The satellite will be the first radar imaging satellite to use dual frequencies. It will be used for remote sensing, to observe and understand natural processes on Earth. For example, its left-facing instruments will study the Antarctic cryosphere.With a total cost estimated at US$1.5 billion, NISAR is likely to be the world’s most expensive Earth-imaging satellite.

Solution :b

Solution: The Suez Canal is a human-made waterway and is one of the world’s most heavily used shipping lanes. It connects the Mediterranean and the Red Sea through Egypt and extends 193 km between Port Said in the north and Port Suez in the south. Built in 1869, it provides a major shortcut for ships moving between Europe and Asia, who before its construction had to sail around Africa to complete the same journey.

Solution : a

Solution:Foundation stone for 19-km-long four-lane Dhubri Phulbari bridge will be laid down over the Brahmaputra It will be India’s longest bridge over a river that connects Dhubri in Assam and Phulbari in Meghalaya, to be constructed at the cost of Rs 5,000 crore.

Solution : d

Solution:

1. THAAD: USA
2. Iron Dome: Israel
3. Iron Beam: Israel
4. S400: Russia
5. Advanced Air Defence: India

Solution : a

The Organization comprises 57 participating States that span the globe, encompassing three continents – North America, Europe and Asia – and more than a billion people

India is not a member of it.

The OSCE traces its origins to the détente phase of the early 1970s, when the Conference on Security and Co-operation in Europe (CSCE) was created to serve as a multilateral forum for dialogue and negotiation between East and West

Solution : b

• It is an intergovernmental military alliance. Established by Washington treaty.
• Treaty that was signed on 4 April 1949.
• Headquarters — Brussels, Belgium
• NATO’s essential and enduring purpose is to safeguard the freedom and security of all its members by political and military means.
• NATO invoked Article 5 for the first time in its history after the 9/11 terrorist attacks against the United States.
• NATO has taken collective defence measures on several occasions, including in response to the situation in Syria and the Russian invasion of Ukraine.
• NATO has standing forces on active duty that contribute to the Alliance’s collective defence efforts on a permanent basis.

Solution : a

It is a scientific research and exploration program under the National Centre for Antarctic and Ocean Research (NCPOR).

It started in 1981 when the first Indian expedition to Antarctica was made.

Dakshin Gangotri: First Indian scientific research base station established in Antarctica

Maitri: India’s second permanent research station in Antarctica. It is situated on the rocky mountainous region called Schirmacher Oasis. India also built a freshwater lake around Maitri known as Lake Priyadarshini.

Bharti: India’s latest research station operation since 2012. It is India’s first committed research Facility

Himadri is in Arctic

Solution : d
Statements are reversed

The Bosporus connects the Black Sea with the Sea of Marmara

The Kerch Strait is a strait in Eastern Europe. It connects the Black Sea and the Sea of Azov, separating the Kerch Peninsula of Crimea in the west from the Taman Peninsula of Russia’s Krasnodar Krai in the east.

Solution : d

Prime Minister Narendra Modi Tuesday announced the ‘Young, Upcoming and Versatile Authors’ (YUVA) scheme, a mentorship programme to train young authors.

The scheme is aimed at training 75 aspiring writers below 30 years, who are ready to express themselves and project India and its culture and literature globally. A consolidated scholarship of Rs 50,000 per month for a period of six months per author will be paid under the mentorship scheme.

About SATAT initiative:

The initiative is aimed at providing a Sustainable Alternative Towards Affordable Transportation (SATAT) as a developmental effort that would benefit both vehicle-users as well as farmers and entrepreneurs.

Compressed Bio-Gas plants are proposed to be set up mainly through independent entrepreneurs.

Solution : b

Cleary, number of students in the class = (8+1+37)=46

Solution : b

Clearly, number of boys in the class

= (18+ 1+18) = 37

Solution : d

Number of boys who passed = (15 +1+ 28)=44

∴Total number of boys in the class = 44 +6 +5) = 55.

Solution : b

Clearly, number of boys in the line

= (11 +1+3) = 15.

∴Number of boys to be added = (28-15) = 13.

Solution : b

Passage is talking about both the prespectives of Virus ; good and bad. Hence option B seems