Insights Static Quiz -386, 2019–Economy

Solution: d)

The transactions in BOP are categorised in

a) Current account showing export and import of visibles (also called merchandise) and invisibles (also called non-merchandise). Invisibles take into account services, transfers and income.

b) Capital account showing a capital expenditure and income for a country. It gives a summary of the net flow of both private and public investment into an economy. External commercial borrowing (ECB), foreign direct investment, foreign portfolio investment, etc form a part of capital account.

Solution: b)

Headline inflation is a measure of the total inflation within an economy, including commodities such as food and energy prices (e.g., oil and gas), which tend to be much more volatile and prone to inflationary spikes. On the other hand, “core inflation” (also non-food-manufacturing or underlying inflation) is calculated from a consumer price index minus the volatile food and energy components. Headline inflation may not present an accurate picture of an economy’s inflationary trend since sector-specific inflationary spikes are unlikely to persist.

The RBI Act was amended in 2016 for an inflation targeting framework, that had set a target for the RBI of 4% consumer price (CPI) index-based inflation, with a deviation of 2% on both sides, for five years.

Source

Solution: b)

Corporate bonds are debt securities issued by private and public corporations. Companies issue corporate bonds to raise money for a variety of purposes, such as building a new plant, purchasing equipment, or growing the business. When one buys a corporate bond, one lends money to the “issuer,” the company that issued the bond. In exchange, the company promises to return the money, also known as “principal,” on a specified maturity date. Until that date, the company usually pays you a stated rate of interest, generally semiannually. Corporate bond does not have an ownership interest in the issuing company, unlike when one purchases the company’s equity stock.

In India, given the absence of a well functioning corporate bond market, the burden of financing infrastructure projects such as roads, ports, and airports is more on banks and the general government. This, in turn, puts lenders such as the banks under pressure as reflected in the ballooning of bad loans.

Source

Solution: a)

White Label ATMs – ATMs set up, owned and operated by non-bank entities are called “White Label ATMs” (WLAs).

Brown Label ATMs – ATMs where hardware and the lease of the ATM machine is owned by a service provider, but cash management and connectivity to banking networks is provided by a sponsor bank whose brand is used on the ATM.

Solution: a)

According to Article 114 of the Indian constitution, no money can be withdrawn from the Consolidated Fund of India to meet specified expenditure except under an appropriation made by Law. Similarly, State (sub-national) Governments can also draw from their Consolidated Funds only after an appropriation act is passed.

Every year, after budgetary estimates are approved, an Appropriation Bill is passed by the Parliament/state legislature and then it is presented to the President/Governor. After the assent by the President/governor to the bill, it becomes an Act. However, if during the course of the financial year, the funds so appropriated are found to be insufficient, the Constitution provides for seeking approval from the Parliament or State Legislature for supplementary grants.

Borrowing from World Bank is not a part of revenue receipts.

Under Article 112 of the Constitution of India, the Annual Financial Statement has to distinguish expenditure of the Government on revenue account from other expenditures. Government Budget, therefore, comprises of Revenue Budget and Capital Budget.

Revenue Budget consists of the revenue receipts of Government (tax revenues and other revenues like interest and dividend on investments made by Government, fees, and other receipts for services rendered by Government) and the expenditure met from these revenues.