Insights Static Quiz -411, 2019–Economy

Solution: c)

Automatic Route

Under the Automatic Route, the non-resident investor or the Indian company does not require any approval from Government of India for the investment.

Government Route

Under the Government Route, prior to investment, approval from the Government of India is required. Proposals for foreign investment under Government route, are considered by respective Administrative Ministry/Department.

PROHIBITED SECTORS

• Lottery Business including Government/private lottery, online lotteries, etc.
• Chit Funds
• Trading in Transferable Development Rights (TDR)
• Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes
• Nidhi Company
• Real Estate Business or Construction of farm houses (Real estate business shall not include development of town shops, construction of residential/ commercial premises, roads or bridges and Real Estate Investment Trusts (REITs) registered and regulated under the SEBI (REITs) Regulations, 2014)
• Sectors not open to private sector investment- atomic energy, railway operations (other than permitted activities mentioned under the Consolidated FDI policy).

Source

Solution: c)

FDI and FPI routes are used by foreign funds for entirely different purposes. Investments through the FDI route are strategic in nature, and meant for the long term. Several FDI investors also get a say in the management of the investee company, including board seats.

By contrast, portfolio investments are short-term in nature, with investors having the liberty to buy or sell stock on the bourses. Also, FPIs are allowed to invest only in listed securities, while FDI investments can be made even in unlisted assets.

Source

Solution: c)

A decrease in the repo rate means the commercial banks can borrow more money from RBI at a cheaper rate, meaning lending rates for consumers may decrease.

Solution: c)

In pursuance of the announcement made in the Union Budget 2010–11 and with a view to strengthen and institutionalize the mechanism for maintaining financial stability and enhancing inter-regulatory coordination, Indian Government has setup an apex-level Financial Stability and Development Council (FSDC).

The Chairman of the FSDC is the Finance Minister of India and its members include the heads of the financial sector regulatory authorities (i.e, SEBI, IRDA, RBI, PFRDA and FMC), Finance Secretary and/or Secretary, Department of Economic Affairs (Ministry of Finance), Secretary, (Department of Financial Services, Ministry of Finance) and the Chief Economic Adviser.

This Council would monitor macro prudential supervision of the economy, including the functioning of large financial conglomerates. It will address inter-regulatory coordination issues and thus spur financial sector development. It will also focus on financial literacy and financial inclusion. What distinguishes FSDC from other such similarly situated organizations across the globe is the additional mandate given for development of financial sector.

A sub-committee of FSDC has also been set up under the chairmanship of Governor RBI. The Sub-Committee discusses and decides on a range of issues relating to financial sector development and stability including substantive issues relating to inter-regulatory coordination.

Solution: a)

RBI releases Financial Stability Report. The FSR reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on risks to financial stability, as also the resilience of the financial system. The Report also discusses issues relating to development and regulation of the financial sector.