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INDIAN ECONOMY QUIZ 5


  • a.) 
    I and II correct
  • b.) 
    Only I is correct
  • c.) 
    Only II is correct
  • d.) 
     Neither I nor II is correct
Answer is (a)
The core function of MUDRA is refinancing. It will provide refinancing all Last Mile Financiers such as Non-Banking Finance Companies, Societies, Trusts, Co-operative Societies, Small Banks, Scheduled Commercial Banks, Regional Rural Banks and Section 8 Companies [formerly Section 25], which gives loans to micro/small business entities engaged in manufacturing, trading and services activities. MUDRA would also partner with State/Regional level financial intermediaries to provide finance to Last Mile Financier of small/micro business enterprises. 
The PMMY sets financial limit for three categories of borrowers: 
1. Shishu : covering loans upto  50,000/-
2. Kishor : covering loans above  50,000/- and upto  5 lakh
3. Tarun : covering loans above  5 lakh to  10 lakh


  • a.) 
    It will be established as a company
  • b.) 
    It is established as an NBFC
  • c.) 
    It is established as an Alternate Investment Fund with sovereign support 
  • d.) 
    It is established as a foreign entity 
Answer is (c)
The NIIF registered as a Category II AIF with SEBI
As per the initial plan about the structure of the NIIF, the circular from the government says that it will be established as one or more Alternative Investment Funds under the SEBI regulations. In December 2015, the NIIF was registered as a Category II AIF (Alternative Investment Fund) with SEBI. Initial authorized capital of the Fund is set at Rs 20000 crore, which will be revised from time to time in accordance with the Ministry of Finance's decision. An initial allocation of Rs 4000 crore was made under the budget 2016-17.
Alternate investment funds (AIFs) are regulated by the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012, and classified under three categories - Categories I, II and III, from the angle of tax treatment under provisions of Income Tax Act. If set up as Category I and II AIFs, then NIIF will be eligible for a pass through status under the Income Tax Act. A 'pass-through' status means that the income generated by the fund would be taxed in the hands of the ultimate investor, and the fund will be exempted. Both greenfield and brown field projects can be financed out of NIIF. 
 


  • a.) 
     I, II and III are correct
  • b.) 
    I and II are correct
  • c.) 
     II and III are correct
  • d.) 
    I and III are correct 
Answer is (a)
The Monetary Policy Committee (MPC) is formed under the RBI with six members. Three of the members are m from the RBI while the other three members are appointed by the government. Members from the RBI are the Governor who is the chairman of the MPC, a Deputy Governor and one officer of the RBI. The government members will be appointed by the Centre on the recommendations of a search-cum-selection committee which is to be headed by the Cabinet Secretary.
Under MPC, the governor has a casting vote and doesn't enjoy veto power. Decisions will be taken on the basis of majority vote.
Responsibility of the MPC is to administer the inflation targeting monetary policy regime through determining the policy rate or repo rate to contain inflation.
The Committee is to meet at least four times a year and make public its decisions following each meeting. There will be no reappointment of the committee.


  • a.) 
    I and II correct
  • b.) 
    Only I is correct
  • c.) 
    Only II is correct    
  • d.) 
     Neither I nor II is correct
Answer is (a) 
Selection of PSU for strategic sale is the responsivity of NITI Ayog whereas the design of the sale process is the responsibility of DIPAM. 
 
Strategic sale
"Strategic disinvestment would imply the sale of substantial portion of the Government shareholding of a central public sector enterprise (CPSE) of upto 50%, or such higher percentage as the competent authority may determine, along with transfer of management control."
The idea for strategic sale comes from the government's policy for a comprehensive approach for efficient management of Government investment in CPSEs. Various programmes like addressing issues such as capital restructuring, dividend, bonus shares, etc. will be made as part of this policy.  
As a matter of change, the Department of Disinvestment is being re-named as the 'Department of Investment and Public Asset Management (DIPAM)'.
What is NITI Ayogs's role in strategic sale?
After budget 2016, the Finance Ministry has empowered the NITI Ayog to advise the Government on strategic disinvestment of CPSEs. It will do the following functions with regard to strategic sale.
  • It will identify the CPSEs for strategic disinvestment.
  • It will advise the government on mode of sale and percentage of shares to be sold; and
  • It will suggest methods for valuation of the CPSE.
The above responsibility of the NITI Ayog means it has to initiate the process of strategic disinvestment of CPSEs.
The budget has given power to the NITI to identify public sector companies for strategic sale. In June 16. 2016, the NITI has prepared a report on CPSEs and suggested 32 PSUs for strategic sale including CPSEs. It has also suggested the winding up of 26 CPSEs out of the total 74.
What is the role of DIPAM in strategic sale?
After the NITI Ayog's suggestions, Department of Investment and Public Asset Management (DIPAM) is finalizing a model for strategic sale of shares of PSEs.
Earlier the government has approved the proposal of DIPAM for laying down the procedure and mechanism for strategic disinvestment of Central Public Sector Enterprises (CPSEs). Hence, the procedure for strategic sale will be prepared by DIPAM.


  • a.) 
    Low income economy
  • b.) 
    Middle income economy
  • c.) 
      Both low and some of the middle income economies
  • d.) 
    Poor economy
Answer is (c)



  • a.) 
    Treaty of Lisbon
  • b.) 
    The Maastricht Treaty 
  • c.) 
    Treaty of Rome
  • d.) 
    Treaty of Nice
Answer is (c) The Treaty of Rome was signed in 1957 where the European Economic Community was created. 



  • a.) 
    Middle Income Country    
  • b.) 
    Poor country
  • c.) 
     Low income Country
  • d.) 
    Blend country
Answer is (d) 
This classification is with respect to lending. Previously India has obtained loans from the IDA because of economic backwardness. But now the country is not considered as a low income country because of increased per capita income. According to the WB, upto 2017, India will be treated as a blend country. This is a transition period identity. As per the World Bank, the concessional treatment given to low income countries will be provided to India till 2017. After that India will be treated as an IBRD country. IDA loans means concessional loans at low interest rate. IBRD loans means relatively higher interest rate and other conditions. 


  • a.) 
    Board of Governors
  • b.) 
    Executive board
  • c.) 
    General Council
  • d.) 
    General Assembly
Answer is (a) 
The Board of Governors is the highest decision making body of the IMF which has delegated its power to the Board of Executives. The same system is followed by the World Bank.


  • a.) 
     I and II correct
  • b.) 
    I, II and III correct 
  • c.) 
    II and III correct
  • d.) 
    Only II is correct 
Answer is (b) 
 
All statements are correct as per SEBI regulations. Credit rating agencies are regulated by SEBI. The SEBI (Credit Rating Agencies) Regulations, 1999 govern the credit rating agencies and provide for eligibility criteria for registration of credit rating agencies, monitoring and review of ratings, requirements for a proper rating process, avoidance of conflict of interest and inspection of rating agencies by SEBI, amongst other things.
An investment grade rating signifies the rating agency's belief that the rated instrument is likely to meet its payment obligations. In the Indian context, debt instruments rated 'BBB' and above are classified as investment grade ratings. Instruments that are rated 'BB' and below are classified as speculative grade category ratings in which case the ability to meet the payment obligations is considered to be "speculative". Instruments rated in the speculative grade are considered to carry materially higher risk and a higher probability of default compared to instruments rated in the investment grade.


  • a.) 
    There is risk of default for that security 
  • b.) 
    The return from the security is going to be very low
  • c.) 
    The issuer is declared a defaulting entity
  • d.) 
     Secondary market transaction for the security is exhausted 
Answer is (a)



  • a.) 
     I and II correct
  • b.) 
    neither I nor II is correct  
  • c.) 
    Only I is correct
  • d.) 
    Only II is correct 
Answer is (c)                                   
World Bank follows a weighted voting system like that of the IMF. Each new member country of the Bank is allotted 250 votes plus one additional vote for each share it holds in the Bank's capital stock. The quota assigned by the Fund is used to determine the number of shares allotted to each new member country of the Bank.
Member countries are allocated votes at the time of membership and subsequently for additional subscriptions to capital. Votes are allocated differently in each organization, and result in different voting powers.


  • a.) 
    Marrakesh Agreement – WIPO
  • b.) 
    Treaty of Rome - EC
  • c.) 
    Maastricht treaty-    EMU
  • d.) 
    Brettonwoods Agreement – IMF, IBRD
Answer is (a). All these marches refer to the place of origin of organisations. 
Marrakesh (Morocco) treaty is related with the signing of the eighth GATT around and the formation of WTO. 


  • a.) 
    Use of tariff barriers
  • b.) 
    Use of non tariff barriers
  • c.) 
    Use of capital controls
  • d.) 
    Discrimination against foreign investment
Answer is (b).
 Neo protectionism or new protectionism refers to the practice of imposing several non-tariff barriers to curb imports.


  • a.) 
    II and II correct
  • b.) 
     I, II and III correct 
  • c.) 
    I, II, III and IV are correct
  • d.) 
    Only II is correct 
Answer is (c). 
All statements are correct


  • a.) 
    Million plus cities, census towns and statutory towns
  • b.) 
    Statutory towns, census towns and outgrowths
  • c.) 
    Statutory towns and census towns
  • d.) 
    Urban agglomerations and census towns
Answer is (c). 
 
Statutory towns and census towns constitute to the entire urban areas according to the census. For this the census defines census towns and statutory towns. 
For the Census of India 2011, the definition of urban area is as follows;
 1. All places with a municipality, corporation, cantonment board or notified town area committee, etc. 2. All other places which satisfied the following criteria: 
i) A minimum population of 5,000; 
ii) At least 75 per cent of the male main working population engaged in non-agricultural pursuits; and
 iii) A density of population of at least 400 persons per sq. km. The first category of urban units is known as Statutory Towns. 
The first category of urban units is known as Statutory Towns. These towns are notified under law by the concerned State/UT Government and have local bodies like municipal corporations, municipalities, municipal committees, etc., irrespective of their demographic characteristics as reckoned on 31st December 2009. Examples: Vadodara (M Corp.), Shimla (M Corp.) etc. The second category of Towns (as in item 2 above) is known as Census Town. These were identified on the basis of Census 2001 data.



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