[Mission 2022] QUIZ – 2022: INSIGHTS STATIC QUIZ, 05 April 2022 – Economy – INSIGHTSIAS

Solution: a)

Government provides certain goods and services which cannot be provided by the market mechanism i.e. by exchange between individual consumers and producers. Examples of such goods are national defence, roads, government administration etc. which are referred to as public goods. To understand why public goods need to be provided by the government, we must understand the difference between private goods such as clothes, cars, food items etc. and public goods. The benefits of public goods are available to all and are not only restricted to one particular consumer.

In case of private goods anyone who does not pay for the goods can be excluded from enjoying its benefits. If you do not buy a ticket, you will not be allowed to watch a movie at a local cinema hall. However, in case of public goods, there is no feasible way of excluding anyone from enjoying the benefits of the good. That is why public goods are called non-excludable.

Public goods, as distinct from private goods, are collectively consumed. Two important features of public goods are – they are non-rivalrous in that one person can increase her satisfaction from the good without reducing that obtained by others and they are non-excludable, and there is no feasible way of excluding anyone from enjoying the benefits of the good.

Solution: d)

The Micro; Small and Medium Enterprises Development (MSMED) Act was notified in 2006 to address policy issues affecting MSMEs as well as the coverage and investment ceiling of the sector. The Act seeks to facilitate the development of these enterprises as also enhance their competitiveness. It provides the first-ever legal framework for recognition of the concept of “enterprise” which comprises both manufacturing and service entities. It defines medium enterprises for the first time and seeks to integrate the three tiers of these enterprises, namely, micro, small and medium.

The primary responsibility of promotion and development of MSMEs is of the State Governments. However, the Government of India, supplements the efforts of the State Governments through various initiatives.

Solution: b)

The Insolvency and Bankruptcy Code (Amendment) Bill, 2021, passed by Lok Sabha has proposed ‘pre-packs’ as an insolvency resolution mechanism for Micro, Small and Medium Enterprises (MSMEs). The Bill will replace The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021.

A pre-pack envisages the resolution of the debt of a distressed company through a direct agreement between secured creditors and the existing owners or outside investors, instead of a public bidding process.

One of the key criticisms of the Corporate Insolvency Resolution Process (CIRP) has been the time it takes for resolution. The pre-pack in contrast, is limited to a maximum of 120 days with only 90 days available to stakeholders to bring a resolution plan for approval before the NCLT.

Another key difference between pre-packs and CIRP is that the existing management retains control in the case of pre-packs; in the case of CIRP, a resolution professional takes control of the debtor as a representative of financial creditors. Experts note that this ensures minimal disruption of operations relative to a CIRP.

The pre-pack mechanism does however, allow for a ‘Swiss challenge’ to any resolution plan that provides less than full recovery of dues for operational creditors.

Under the Swiss challenge mechanism, any third party would be permitted to submit a resolution plan for the distressed company, and the original applicant would have to either match the improved resolution plan or forego the investment.

Solution: b)

Eligibility Criteria for Startup Recognition:

The Startup should be incorporated as a private limited company or registered as a partnership firm or a limited liability partnership

• Turnover should be less than INR 100 Crores in any of the previous financial years

• An entity shall be considered as a startup up to 10 years from the date of its incorporation

• The Startup should be working towards innovation/ improvement of existing products, services and processes and should have the potential to generate employment/ create wealth.

An entity formed by splitting up or reconsutrctuon of an existing business shall not be considered a “Startup”

Solution: c)

The labour participation rate (LPR) for April 2021, at 40%, remained lower than the levels seen before last year’s lockdown. Labour participation helps measure the section of the population that is willing to take on jobs. Unemployment is a subset, which helps in giving a measure of those who are willing to take on jobs but are not employed.