EDITORIALS & ARTICLES

Hit List Questions 16 - PPP 100 PRELIMS 2024 - 34

Questions & Explanations:

1.

Which of the following could be the impact of EU''s Carbon Border Tax on India''s Exports?.

(a) It will reduce the competitiveness of Indian exports.

(b) It will act as a non-tariff barrier that undermines zero duty FTAs.

(c) Both (a) and (b) are the impacts

(d) Neither (a) nor (b) is the impact

Note:

https://www.thehindu.com/news/international/explained-what-is-the-eus-carbon-border-adjustment-mechanism/article66886488.ece

https://www.thehindubusinessline.com/opinion/editorial/india-must-strategise-against-eu-carbon-tax/article67449523.ece

C

2.

The benefits of Currency Internationalization by any country are

1. It limits exchange rate risk.

2. It facilitates access to international financial markets.

3. It creates new opportunities for the country.

4. It boost capital formation

(a) 1, 2 and 4 only

(b) 1 and 4 only

(c) 2, 3 and 4 only

(d) 1, 2, 3, and 4

Note:

https://www.thehindu.com/opinion/op-ed/internationalising-the-rupee-without-the-coin-tossing/article67050360.ece

D

3.

1. It is a location in space where the combined gravitational forces of two large bodies equal the centrifugal force felt by a much smaller third body.

2. Objects placed at these positions are relatively stable and require minimal external energy.

Which of the statements given above is/are correct w.r.t. Lagrange Point?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Note:

https://www.sci.news/space/esas-euclid-mission-launch-12055.html

https://www.theweek.in/news/sci-tech/2023/07/21/what-makes-aditya-l1-mission-to-sun-by-isro-special.html

C

4.

The CPI (combined) inflation for June 2023 is 4.81% said National Statistical Office (NSO). Consider the following statements regarding CPI (combined):

1. It captures/reflects the impact of monthly change in prices of various commodities.

2. It does not capture/reflect the impact of monthly change in consumption pattern of various commodities.

3. It captures/reflects the impact of yearly change in consumption pattern of various commodities.

4. It captures the impact of consumption pattern of people through their expenditure on various items.

Which of these is/are true?.

(a) 1, 2 and 4 only

(b) 2, 3 and 4 only

(c) 1, 2 and 3 only

(d) None of these

Note:

https://indianexpress.com/article/business/economy/india-june-retail-inflation-cpi-8830233/#:~:text=The%20Consumer%20Price%20Index%20(CPI,CPI%20jumped%205.66%20per%20cent.

A  

5.

Which of the following factors may lead to increase in ''Tax Buoyancy''?

1. Increase in GDP

2. Improvement in tax administration

3. Formalization of Economy

4. Bringing agriculture income under tax

Select the correct answer using the code given below:

(a) 1, 2 & 3 only

(b) 3 & 4 only

(c) 2, 3 & 4 only

(d) 1, 2, 3 & 4

Note:

https://timesofindia.indiatimes.com/blogs/toi-editorials/a-taxing-question-corporate-tax-buoyancy-is-low-this-puts-pressure-on-the-fisc-goi-should-investigate-why-this-is-happening/

Since we have progressive tax system, so when GDP increases and people income increases, then their tax increases more as compared to GDP/income. Hence, increase in GDP may lead to increase in tax buoyancy.

All the other factors will increase tax even without an increase in GDP, hence it will also

increase tax buoyancy.

ü D

6.

The term ''Effective Capital Expenditure'' is equal to Centre''s capital expenditure plus

(a) Central PSUs Capital Expenditure

(b) Grants given to States for creation of capital assets

(c) Finance Commission transfers to States for creation of capital assets

(d) Loans given to States for creation of capital assets

Note:

https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1935378#:~:text=Under%20the%20scheme%2C%20special%20assistance,1%20lakh%20crore.

B

7.

The largest contributor to the rise in Indian residents’ foreign assets during April-June 2023 is

(a) direct investment

(b) reserve assets

(c) loans

(d) trade credit

Note:

https://www.thehindu.com/business/net-claims-of-non-indians-on-india-rise-121-billion-to-3798-billion-as-at-june/article67357886.ece

B  

8.

1. It has 14 partner countries.

2. Bangladesh and Pakistan are its members..

Which of the statements given above is/are correct w.r.t. Indo – Pacific Economic Framework for Prosperity (IPEF)?.

(a) 1 Only

(b) 2 Only

(c) Both 1 and 2

(d) Neither 1 nor 2

Note:

Indo-Pacific Economic Framework (IPEF)

  • US President Biden first spoke about the IPEF at the October 2021 East Asia Summit.
  • At this summit, he said that the United States will explore with partners the development of an Indo-Pacific economic framework.
  • This framework will define our shared objectives around: 
    • trade facilitation, standards for the digital economy and technology, supply chain resiliency, decarbonization and clean energy, infrastructure, worker standards, and other areas of shared interest.
  • The IPEF will not include market access commitments such as lowering tariff barriers, as the agreement is more of an administrative arrangement.

 IPEF

  • Launched in Tokyo, in May 2023, IPEF aims to strengthen economic engagement among the member countries to advance growth, peace and prosperity in the region.
  • According to an insight paper on IPEF put out by the US Congressional Research Service, the IPEF is not a traditional trade agreement.
  • Rather, it would include different modules (four pillars) covering various aspects.  

Four Pillars of IPEF

  • Pillar I - fair and resilient trade, 
  • Pillar II - supply chain resilience, 
  • Pillar III - infrastructure and decarbonization, and 
  • Pillar IV - tax and anticorruption.
    • Countries would have to sign up to all of the components within a module (pillar), but do not have to participate in all modules.

 

 

Members of Indo-Pacific Economic Framework:

  • The IPEF has 14 partner countries including Australia, Brunei, Fiji, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, Vietnam and the US. 

Significance of Indo-Pacific Economic Framework:

  • The 14-nation IPEF bloc is seen as crucial as it accounts for about 40 per cent of the world’s GDP and 28 per cent of the world’s trade in goods and services.
  • It is seen as an economic and trade strategy backed by the US to counter China’s economic influence in the region.  

India and IPEF:

  • In September 2022, India joined three pillars of the IPEF. These are:
    • the supply chain, decarbonisation and infrastructure, and anti-tax and corruption pillars of the IPEF.
  • However, it had decided to remain out of the trade pillar. 

India weighs better market access to join IPEF trade pillar

  • India is learnt to have asked for better market access in order to be a part of the trade pillar of the IPEF.
  • As of now, market access has not been agreed upon for India, which is being seen as a crucial factor to join the trade pillar (Pillar-I).
  • India has an observer status on the trade pillar negotiations. 

India’s Dilemma with respect to trade pillar of IPEF

  • The Union Commerce Ministry is currently discussing whether New Delhi should: 
    • make a commitment to join, even without knowing the specific benefits, or 
    • join now because 13 countries are already negotiating the details.
  • If India joins later, it may be at a disadvantage because it would have missed out on the negotiations.
    • Since the beginning, India felt that it is not getting much out of trade pillar of IPEF. Also, the environmental and labour laws conditions have been stringent.
    • Some of the other countries are also finding these conditions as stringent and they are also negotiating it.
  • India had also been reluctant earlier to join Pillar-I in view of concerns to protect its domestic agricultural, labour and digital sectors without being completely sure about the impact of joining the IPEF. 

Current status of IPEF

  • The fourth negotiating round of IPEF for all pillars is currently underway from July 9-15 hosted by Korea in Busan.
    • The first negotiating round was held in Australia in December 2022, followed by a special negotiating round on Pillars II-IV in India in February 2023. 
    • The second negotiating round was held in Indonesia in March 2023, followed by the third negotiating round in Singapore in May 2023.
  • Text-based negotiations under the supply chain pillar (Pillar-II) were substantially concluded in the second ministerial meeting in May 2023 in the US.
    • On May 27, the IPEF partners met in Detroit, Michigan for a ministerial meeting.

A

9.

Which of the following document is NOT presented along with the (Union) Budget Documents?

(a) Medium Term Fiscal Policy Statement

(b) Fiscal Policy Strategy Statement

(c) Macroeconomic Framework Statement

(d) Medium-Term expenditure Framework Statement

Note:

''Medium-Term expenditure Framework Statement’ should be laid in the session immediately following the session of the Parliament in which the budget has been presented.

https://www.thehindu.com/business/Industry/fiscal-firepower-necessary-to-handle-exogenous-shocks/article67173087.ece

Medium-Term Expenditure Framework (MTEF)

o The MTEF statement sets a three-year rolling target for expenditure indicators, along with specifications of underpinning assumptions and risks.

o This statement is presented in Parliament under Section 3 of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003.

o The statement provides an estimate of expenditure for various sectors, including education, health, rural development, energy, subsidies and pension, and so on.

o This statement is presented in the session after the one in which the Budget is presented — usually, that is the monsoon session.

o Data such as expenditure commitments spread across the various central ministries on salaries and pensions, major programmes, grants-in-aid for creation of capital assets, defence expenditure, interest payment and major subsidies, etc, besides other commitments of the government are considered while formulating this statement.

o The objective of MTEF is to facilitate a closer integration between FRBM statements and the Union Budget.

Fiscal Reduction and Management Act (FRBM)

o The FRBM Act is an act of the Parliament which was enacted in 2003 with the aim of ensuring fiscal discipline, transparency and accountability in government spending.

o The act requires the government to ensure that the Fiscal Deficit is reduced over a period of time and to eliminate revenue deficit, which is the excess of government''s total expenditure over its total revenue.

o It limited the fiscal deficit to 3% of the GDP.

Provisions

o Fiscal Deficit Targets: The act requires the government to reduce its fiscal deficit to a specified target over a period of time. The fiscal deficit would be brought down to below 4.5 per cent by 2025-26.

o Elimination of Revenue Deficit: The act requires the government to eliminate its revenue deficit, which is the excess of government''s total expenditure over its total revenue.

o Medium-term Fiscal Strategy: The act requires the government to formulate and implement a medium-term fiscal strategy, which outlines the government''s plans for reducing its fiscal deficit over a period of three years.

o Annual Fiscal Reports: The act requires the government to present an annual fiscal responsibility statement to Parliament, which outlines the government''s progress in achieving its fiscal consolidation targets.

Statements

o Macro-Economic Framework Statement: The Macro-Economic Framework Statement provides a detailed outline of the macroeconomic assumptions that form the basis of the budget estimates.

o It includes key economic indicators and projections that influence revenue and expenditure decisions. These assumptions help in understanding the economic context within which the budget is framed.

o Medium-Term Fiscal Policy Statement: This section outlines the government''s medium-term fiscal policy objectives and the strategies to achieve them over a specific period (usually the next three years).

o It highlights the intended direction of fiscal policy, the rationale behind fiscal targets, and how these targets align with broader economic goals.

D

10.

RBI buys gold to

1. Counter Strategy against Negative Interest Rate

2. Diversify Forex Reserves

3. Good Hedge in Geopolitical Uncertainty

(a) 1 only

(b) 2 only

(c) 2 and 3 only

(d) 1, 2 and 3

Note:

https://indianexpress.com/article/explained/explained-economics/rbis-hoard-of-gold-now-almost-800-tonnes-whats-behind-the-gold-rush-by-central-banks-8599547/

D

11.

Consider the following statements w.r.t. Gaza:

1. Gaza is ruled by Hamas.

2. In the Six-Day War of 1967, Israel captured Gaza from Egypt.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Note:

https://indianexpress.com/article/explained/explained-global/why-gaza-is-known-as-the-worlds-biggest-open-air-prison-8978189/

 

C

12.

Exercise Nomadic Elephant is conducted between India and

(a) South Africa

(b) Iran

(c) Mongolia

(d) South Korea

Note:

https://www.thehindu.com/news/national/india-mongolia-joint-military-exercise-to-be-held-in-ulaanbaatar-from-july-17-july-31/article67086858.ece

C

13.

As per the WTO’s ''Agreement on Fisheries Subsidy'', Consider the following statements:

1. The Agreement will enter into force upon acceptance of its legal instrument by half of the members.

2. For a period of 2 years, from the date of this Agreement comes into force, subsidies granted by Developing and Least Developed countries within the Exclusive Economic Zones will be exempt from actions.

3. A funding mechanism will be established to provide technical assistance to Developing and Least Developed countries.

Which of the above are correct?

(a) 2 and 3 only

(b) 1 and 2 only

(c) 1 and 3 only

(d) 1, 2 and 3

Note:

In the 12th MC of WTO, members have forged an ‘Agreement on Fisheries Subsidies’ which sets new global rules to curb harmful subsidies and protect global fish stocks. The following are some important aspects of the Agreement

1. The Agreement will enter into force upon acceptance of its legal instrument by two-thirds of the members

2. The agreement prohibits support for illegal, unreported and unregulated (IUU) fishing.

3. It bans support for fishing in overfished stocks.

4. And it takes a first but significant step forward to curb subsidies for overcapacity and overfishing by ending subsidies for fishing on the unregulated high seas

5. For a period of 2 years from the date of entry into force of this Agreement, subsidies granted or maintained by developing country Members, including LDC Members, up to and within the Exclusive Economic Zones (EEZ) shall be exempt from actions

6. A Member shall exercise due restraint in raising matters involving an LDC Member

7. Developing country members including LDC members shall be provided targeted technical assistance for the purpose of implementation of the various measures in the agreement. For this a voluntary WTO funding mechanism shall be established in cooperation with relevant international organizations such as the Food and Agriculture Organization of the United Nations (FAO) and International Fund for Agricultural Development

Fisheries Subsidies Agreement at WTO

The fisheries subsidies agreement agreed upon by the WTO prohibits subsidies for Illegal, Unreported and Unregulated (IUU) fishing and overfished stocks. It also restricts subsidies for fishing on the high seas, outside the jurisdiction of coastal countries and Regional Fisheries Management Organizations.

Transition Period: Developing countries and Least Developed Countries (LDCs) are granted a two-year transition period under Special and Differential Treatment (S&DT) and are not obligated to implement disciplines during this period. 

Exemptions:

The agreement allows subsidies for vessels or operators not engaged in IUU fishing and permits subsidies to rebuild overfished stocks to a sustainable level.

Advantages for India:

For India, the agreement is seen as crucial to combat large-scale IUU fishing that impacts coastal communities’ livelihoods and depletes fisheries resources. 

Concerns:

Concerns for India

Description

1. Impact on Livelihoods

Reduction in subsidies may negatively affect small-scale and traditional fishers’ livelihoods and income.

   

2. Competitiveness

Indian fishing industries may face challenges competing with heavily subsidized fishing operations from other nations.

   

3. Resource Access

Restrictions on subsidies for fishing in certain areas may limit Indian fishing vessels’ access to high-seas fishing grounds, affecting their ability to catch valuable fish stocks.

4. Impact on the Fishing Industry

The agreement may lead to increased operational costs for the fishing industry, impacting its overall competitiveness.

   

5. Market Disruptions

Reduced subsidies for certain fishing practices may lead to market disruptions and changing dynamics in the industry.

   

6. Negotiation Leverage

India’s bargaining power in international fishing negotiations may be affected by the new agreement’s provisions.

7. Unequal for India

Concerns have been raised that the agreement is unequal and does not address the overfishing and overcapacity issues adequately

India’s stand

India, being a low fisheries subsidizer with a sustainable approach, emphasizes that advanced fishing nations that have historically provided substantial subsidies and contributed to fish stock depletion should bear more responsibility based on the ‘polluter pay principle’ and ‘common but differentiated responsibilities.’ 

Suggestions:

Experts have suggested India initiate talks for a comprehensive agreement that addresses industrial fishing nations’ disciplines related to overcapacity and overfishing. 

India has not yet ratified the agreement.

https://economictimes.indiatimes.com/news/economy/foreign-trade/civil-society-trade-experts-urge-india-not-to-ratify-wtos-agreement-on-fisheries-subsidies/articleshow/102084177.cms

A

14.

Consider the following statements w.r.t. “Eastern Economic Forum”: 

1. It is an initiative by India to exhibit its commitment to an “Act Far-East” policy. 

2. Its meeting is held annually in New Delhi.

3. It is an offshoot of Indo-ASEAN committee.

Which of the statements given above is/are correct? 

Which of the statements given above is/are incorrect? 

(a) 1 only

(b) 2 and 3 only 

(c) 3 only

(d) 1, 2 and 3

Note:

https://www.thehindu.com/news/international/india-russia-exploring-use-of-northern-sea-route-eastern-maritime-corridor/article67304566.ece

Eastern Economic Forum

  • EEF is an international forum organised each year in Vladivostok, Russia. 
  • It was first held in September 2015, at Far Eastern Federal University in Vladivostok, to support the economic development of Russia’s Far East and to expand international cooperation in the Asia-Pacific region. 
  • This forum is sponsored by the organizing committee appointed by Roscongress.
  • This forum serves as a platform for the discussion of key issues in the world economy, regional integration, and the development of new industrial and technological sectors, as well as of the global challenges facing Russia and other nations.

Far East

  • It is the easternmost part of Russia. 
  • It borders two oceans, the Pacific and the Arctic, and five countries (China, Japan, Mongolia, the United States and the DPRK).
  • The Far Eastern Federal District covers more than a third of the country’s territory.
  • It is rich in natural resources like diamonds, stannary, borax materials, 50 gold, tungsten, and fish and seafood. 
  • About 1/3 of all coal reserves and hydro-engineering resources of the country are here. 

Forests of the region comprise about 30% of the total forest area of Russia.

D  

15.

The Kerch Bridge, seen in the news, is between

(a) Russia and Crimea

(b) Russia and Ukraine

(c) Ethiopia and Egypt

(d) Sudan and Egypt

Note:

https://www.thehindu.com/specials/text-and-context/explained-why-is-kerch-bridge-attack-significant/article67101627.ece

 

16.

Fluorspar contains mainly

(a) Aluminium

(b) Magnesium

(c) Calcium

(d) Potassium

Note:

https://www.thehindu.com/sci-tech/science/fluorspar-hydrogen-fluoride-fluorochemicals-mechanochemistry-fluoromix/article67115217.ece

C

17.

If Nominal Exchange Rate between US and India is “$1 = Rs. 80"   and PPP exchange rate is "$1 = Rs. 16" then, one dollar in India can buy

(a) 4.5 times (more) goods and services than in the US.

(b) 4 times (more) goods and services than in the US.

(c) 5 times (more) goods and services than in the US.

(d) 8 times (more) goods and services than in the US.

Note:

Purchasing power parities (PPPs) are the rates of currency conversion that try to equalise the purchasing power of different currencies, by eliminating the differences in price levels between countries.

https://www.thehindu.com/data/data-the-problems-with-the-prime-ministers-economic-claims/article67249426.ece

C

18.

The statement “Countries with surplus labor could industrialize by paying wages just high enough to attract workers away from family farms” signifies

(a) Fabian Economy

(b) Capability Economy

(c) Lewis Model

(d) Sen Model

Note:

https://indianexpress.com/article/explained/explained-economics/why-the-lewis-model-has-worked-in-china-not-in-india-9005004/

C

19.

Ol Chiki script in news refer to

(a) script of Santhali language.

(b) script of Harappan language.

(c) script of Todan language.

(d) script of Irula language.

Note:

https://www.downtoearth.org.in/blog/governance/seven-decades-after-independence-many-tribal-languages-in-india-face-extinction-threat-73071

https://timesofindia.indiatimes.com/city/ranchi/frame-law-to-make-ol-chiki-first-official-language-of-jharkhand-says-tribal-outfit/articleshow/101842012.cms

a

20.

''Bisalpur Dam'' is built on the river

(a) Narmada

(b) Mahanadi

(c) Tapti

(d) Banas

Note:

https://timesofindia.indiatimes.com/city/jaipur/biparjoy-helps-to-fill-dams-in-western-raj/articleshow/101177261.cms

D

21.

The liquidity with the banking system has slipped into deficit. The probable reasons could be

1. Currency Leakage

2. Advance Tax Payment

3. RBI''s intervention in the forex market

4. Government expenditure not picking up

(a) 1, 2 and 4 only

(b) 2, 3 and 4 only

(c) 1, 2 and 3 only

(d) 1, 2, 3 and 4

Note:

1. Currency Leakage means currency is flowing out of the banking system to the public, so this is reducing the money/liquidity with the banks.

2. In case of Advance tax payment, our money (deposits) from the banks moves to Govt. account with RBI.

3. When investors are moving abroad, rupee is depreciating this is because foreign investors are selling rupees in the forex market and purchasing dollars and returning to their home destination. Now in this case RBI intervenes and starts selling/pumping dollars in the forex market and purchases rupees (from the banks).

4. When Govt. will spend then this money (from the Govt.''s account with RBI) reaches to the public who keeps their money with bank deposits and liquidity with bank increases. But in this case Govt. expenditure is not picking.

https://www.thehindubusinessline.com/money-and-banking/indias-banking-system-liquidity-slips-into-deficit-first-time-in-fy24/article67221973.ece

https://www.moneycontrol.com/news/business/rbi-likely-to-keep-banking-system-liquidity-tight-say-experts-11481691.html  

D

22.

Which of the following can be the impact/s of Tightening of Monetary Policy?

1. Rise in price level of goods.

2. Higher unemployment.

3. Decline in economic growth.

4. Encourage savings & investment.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2, 3 only

(c) 2, 3 and 4 only

(d) 1, 2, 3 and 4

Note:

Tight Monetary Policy

·   Controls Inflation: The tightening of the economy’s money supply primarily aims to reduce inflation and ensure the price stability of goods and services.

·   Increases Unemployment: As a result of low consumption, the sales of goods and services also decline. Thus, the companies lay off employees to cut expenses.

·   Decelerates Economic Growth: Since all the measures focus on curtailing the money circulating in the economy, there is a decrease in consumption and sales of goods and services. It results in lower profitability of the business entities. Also, the banks don’t have sufficient funds to extend loans to their clients.

·   Increases Exchange Rates: It leads to a decrease in exports and an increase in imports. As a result, exchange rates rise, and the balance of payments decreases.

·   Encourage savings and investment: Consumers spend less on purchasing goods and services.

C

23.

Consider the following statements w.r.t. National Multidimensional Poverty Index (NMPI):

1. It is released by Niti Aayog.

2. It has three equally weighted dimensions of Health, Education and Standard of Living.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Note:

https://www.thehindubusinessline.com/blexplainer/bl-explainer-all-you-want-to-know-about-multidimensional-poverty-in-india/article67097006.ece

C

24.

BIS standard IS: 16240 is related to

(a) Plastic Bottles

(b) Aviation Fuels

(c) RO-based water treatment system

(d) Fourth Generation Bio-Fuels

Note:

https://www.thehindu.com/news/cities/chennai/bis-certification-to-be-made-mandatory-for-all-ro-based-water-purifiers/article67361978.ece

C

25.

1. It has evolved from the Harrod-Domar Growth Theory.

2. A higher ICOR signifies greater efficiency and productive use of capital.

Which of the statements given above is/are correct w.r.t. Incremental Capital Output Ratio (ICOR)?.

(a) 1 Only

(b) 2 Only

(c) Both 1 and 2

(d) Neither 1 nor 2

Note:

https://www.livemint.com/Money/TmtxSMWJzA9gIC6WQyvDFN/Dejargoned-Incremental-Capital-Output-Ratio-ICOR.html

https://indianexpress.com/article/opinion/columns/an-economy-more-future-ready-8847102/#:~:text=Excluding%20two%20outlier%20years%20namely,need%20to%20work%20towards%20it.

A    







POSTED ON 13-05-2024 BY ADMIN
Next previous