DAY – 33 ( INSTA REVISION TEST)INSTA REVISION PLAN 3.0, 2020

Solution: C

Dividend Distribution Tax

What is it?

It is a tax levied on dividends that a company pays to its shareholders out of its profits.

How is it applied?

The Dividend Distribution Tax, or DDT, is taxable at source, and is deducted at the time of the company distributing dividends.

The dividend is the part of profits that the company shares with its shareholders.

The law provides for the Dividend Distribution Tax to be levied at the hands of the company, and not at the hands of the receiving shareholder.

However, an additional tax is imposed on the shareholder, who receives over Rs. 10 lakh in dividend income in a financial year.

Is Dividend Distribution Tax applicable to private companies?

Under Section 115-O, the Income Tax Act, any domestic firm which is declaring or distributing dividend has to pay DDT at the rate of 15 per cent on the gross amount of dividend.

Is Dividend Distribution Tax fair?

Market participants, especially brokers, have been calling for long to scrap the DDT. The tax makes markets unattractive as it leads to significant taxation of corporate earnings, they argue.

Other than Dividend Distribution Tax (DDT), the Securities Transaction Tax (STT) and Long-Term Capital Gains (LTCG) tax are other major taxes levied on market instruments.

Solution: B

The Reserve Bank of India (RBI) has exempted banks from maintaining cash reserve ratio (CRR) for loans to retail and micro, small and medium enterprises for five years, if these loans are extended between January 31 and July 31, 2020.

Background:

At present, CRR is 4% of net demand and time liabilities. Banks do not earn any interest for maintaining CRR with the RBI.

What is CRR?

• It is a certain minimum amount of deposit that the commercial banks have to hold as reserves with the central bank.
• The percentage of cash required to be kept in reserves, vis-a-vis a bank’s total deposits, is called the Cash Reserve Ratio.
• The cash reserve is either stored in the bank’s vault or is sent to the RBI. Banks do not get any interest on the money that is with the RBI under the CRR requirements.

There are two primary purposes of the Cash Reserve Ratio:

1. Since a part of the bank’s deposits is with the Reserve Bank of India, it ensures the security of the amount. It makes it readily available when customers want their deposits back.
2. Also, CRR helps in keeping inflation under control. At the time of high inflation in the economy, RBI increases the CRR, so that banks need to keep more money in reserves so that they have less money to lend further.

How does Cash Reserve Ratio help in times of high inflation?

At the time of high inflation, the government needs to ensure that excess money is not available in the economy.

• To that extent, RBI increases the Cash Reserve Ratio, and the amount of money that is available with the banks reduces. This curbs excess flow of money in the economy.

When the government needs to pump funds into the system, it lowers the CRR rate, which in turn, helps the banks provide loans to a large number of businesses and industries for investment purposes. Lower CRR also boosts the growth rate of the economy.

Solution: D

United Nations Conference on Trade and Development (UNCTAD):

• UNCTAD is a permanent intergovernmental body established by the United NationsGeneral Assembly in 1964.
• It is part of the UN Secretariat. It reports to the UN General Assembly and the Economic and Social Council, but has its own membership, leadership, and budget. It is also a part of the United Nations Development Group.

Objectives and roles:

• It supports developing countries to access the benefits of a globalized economy more fairly and effectively. Along with other UN departments and agencies, it also measures the progress made in the Sustainable Development Goals, as set out in Agenda 2030.

Reports published by UNCTAD are:

• Trade and Development Report
• World Investment Report
• Technology and Innovation Report
• Digital Economy Report

Solution: B

The Reserve Bank of India (RBI) has said it has received Rs 1.13 lakh crore worth of bids in the targeted long term repo operation (TLTRO) conducted for an amount of Rs 25,000 crore with a three-year tenor.
The RBI received 18 bids in the auction. The total bids that were received amounted to Rs 1.13 lakh crore, implying a bid to cover ratio — the number of bids received relative to the notified amount — of 4.5.

What is LTRO?

The LTRO is a tool under which the central bank provides one-year to three-year money to banks at the prevailing repo rate, accepting government securities with matching or higher tenure as the collateral.

How is it different from LAF and MSF?

While the RBI’s current windows of liquidity adjustment facility (LAF) and marginal standing facility (MSF) offer banks money for their immediate needs ranging from 1-28 days, the LTRO supplies them with liquidity for their 1- to 3-year needs. LTRO operations are intended to prevent short-term interest rates in the market from drifting a long way away from the policy rate, which is the repo rate.

Why is it important?

• As banks get long-term funds at lower rates, their cost of funds falls.
• In turn, they reduce interest rates for borrowers.
• LTRO helped RBI ensure that banks reduce their marginal cost of funds-based lending rate, without reducing policy rates.
• LTRO also showed the market that RBI will not only rely on revising repo rates and conducting open market operations for its monetary policy, but also use new tools to achieve its intended objectives.

Solution: A

Hangul:

Context: A massive decline in the population of Kashmir’s iconic wildlife species, the Hangul (Cervus hanglu hanglu), also known as the Kashmir stag, continues to be a big concern.

Key facts:

• It is the state animal of Jammu & Kashmir.
• It is restricted to the Dachigam National Park some 15 km north-west of Jammu & Kashmir’s summer capital Srinagar.
• It is placed under Schedule I of the Indian Wildlife (Protection) Act, 1972 and the J&K Wildlife Protection Act, 1978.
• The Hangul was once widely distributed in the mountains of Kashmir and parts of Chamba district in neighbouring Himachal Pradesh.
• The IUCN’s Red List has classified it as Critically Endangered and is similarly listed under the Species Recovery Programme of the Wildlife Institute of India (WII) and the Environmental Information System (ENVIS) of the MoEFCC.

Solution: C

Amid rising concerns over economic crisis that has been triggered by the COVID-19 lockdown; Helicopter Money is one concept that is being considered by authorities’ world over.

In fact, Telangana Chief Minister K. Chandrashekar Rao has suggested RBI to adopt the concept of Helicopter Money to help state governments tide over the current crisis and kickstart economic activity in India.

What is helicopter money?
This is an unconventional monetary policy tool aimed at bringing a flagging economy back on track. It involves printing large sums of money and distributing it to the public. American economist Milton Friedman coined this term.

Why it is called so?

It basically denotes a helicopter dropping money from the sky. Friedman used the term to signify “unexpectedly dumping money onto a struggling economy with the intention to shock it out of a deep slump.” Under such a policy, a central bank “directly increase the money supply and, via the government, distribute the new cash to the population with the aim of boosting demand and inflation.”

Why is helicopter money in news now?
With the coronavirus-hit economy falling deeper and deeper into a chasm with each passing day, Telangana chief minister KC Rao has said helicopter money can help states comes out of this morass. He asked for the release of 5% funds from GDP by way of quantitative easing (QE).

Is helicopter money the same as quantitative easing?
Quantitative easing also involves the use of printed money by central banks to buy government bonds. But not everyone views the money used in QE as helicopter money. It sure means printing money to monetise government deficits, but the govt has to pay back for the assets that the central bank buys. It’s not the same as bond-buying by central banks “in which bank-owned assets are swapped for new central bank reserves.”

How will Helicopter Money help Indian Economy?

• Simply put, Helicopter Money means extension of non-repayable money transfer from the central bank to the state and central governments, to infuse liquidity in the system.
• The policy aims at putting more money into the pockets of people to nudge them to spend more money and in turn pick-up economic activity in the country.
• The direct impact of Helicopter Money is rise in disposable incomes of the people, increase in money supply with an intention to boost demand and inflation in the economy.

Solution: D

Business Correspondent (BC) – An Introduction

Business correspondents are bank representatives. They help villagers to open bank accounts. Business Correspondents get commission from bank for every new account opening, every transaction made via them, every loan-application processed etc. The Business Correspondent carries a mobile device and helps villagers in banking transactions. (Deposit money, take money out of savings account, loans etc.). The villager gives his thumb impression or electronic signature, and gets the money.

Eligibility to become a Business Correspondent

As per the RBI guidelines, the following entities are eligible for appointment of Business Correspondents (BCS) for banks:

• NGOs/MFls set up under Societies/Trust Acts
• Societies registered under Mutually Aided Cooperative Societies Acts or the Cooperative Societies Acts of States
• Section 25 companies that are standalone entities or in which NBFCs, banks, telecom companies and other corporate entities or their holding companies did not have equity holdings in excess of 10 per cent
• Post offices
• Retired bank employees,
• Ex-servicemen
• Retired government employees.
• Individual kirana / medical / fair price shop owners Individual Public Call Office (PCO) operators
• Agents of Small Savings Schemes of Government of India/Insurance Companies Individuals who own petrol pumps
• Retired teachers
• Authorised functionaries of well run Self Help Groups (SHGs) linked to banks Non deposit taking NBFCs (non-banking finance companies) in the nature of loan companies whose micro finance portfolio is not less than 80 per cent of their loan outstanding in the financially excluded districts as identified by the Committee on Financial Inclusion.
• RBI has now permitted banks to engage any individual, including those operating Common Service Centres (CSCs) as BC, subject to banks’ comfort level and their carrying out suitable due diligence as also instituting additional safeguards as may be considered appropriate to minimise the agency risks.

Solution: D

North East Rural Livelihood Project (NERLP):

• A study finds that North East Rural Livelihood Project (NERLP) improves livelihoods of 300,000 households in 11 districts of Mizoram, Nagaland, Tripura and Sikkim.

• It is a World Bank aided, multi-state livelihood project under the Ministry of Development of North Eastern Region (DoNER), launched in 2012.
• Implemented in 11 districts of Mizoram, Nagaland, Tripura and Sikkim.
• Aim: to improve rural livelihoods especially that of women, unemployed youth and the most disadvantaged, in four North Eastern States.
• The project has focussed on five development strategies, namely, social empowerment, economic empowerment, partnership development, project management and livelihood & value chain developments.

Solution: B

What are RRBs?

Regional Rural Banks were set up on the basis of the recommendations of the Narasimham Working Group (1975), and after the legislation of the Regional Rural Banks Act, 1976.

The first Regional Rural Bank “Prathama Grameen Bank” was set up on 2nd October, 1975.

The equity of a regional rural bank is held by the Central Government, concerned State Government and the Sponsor Bank in the proportion of 50:15:35.

The Regional Rural Banks (RRBs) were established in 1975 under the provisions of the Ordinance promulgated on 26th September, 1975 and Regional Rural Banks Act, 1976 with a view to developing the rural economy by providing, for the purpose of development of agriculture, trade, commerce, industry and other productive activities in the rural areas, credit and other facilities, particularly to small and marginal farmers, agricultural labourers, artisans and small entrepreneurs, and for matters connected therewith and incidental thereto.

Solution: A

Speaker of the Lok Sabha:

• The chairman or the Presiding Officer of Lok Sabha is called Speaker.
• The speaker of the Lok Sabha is elected from all other members by simple majority.
• Any member of Parliament is eligible to be nominated as a speaker but most commonly the candidate of ruling party or the party with majority wins this post.
• However, there are certain cases when the elected Speaker does not belonged to the majority ruling party of Lok Sabha (G. M. C. Balyogi, Manohar Joshi, Somnath Chatterjee).

Functions and Powers of Lok Sabha Speakers:

• Speaker of Lok Sabha is basically the head of the house and presides over the sittings of Parliament and controls its working.
• The constitution has tried to ensure the independence of Speaker by charging his salary on the consolidated Fund of India and the same is not subject to vote of Parliament.
• While debating or during general discussion on a bill, the members of the parliament have to address only to the Speaker.
• Whenever there is a joint sitting of both houses of Parliament (Lok Sabha & Rajya Sabha) the Speaker of the Lok Sabha presides over this meeting.
• The Speaker of Lok Sabha comes at sixth position in the Order of Precedence of Government of India.
• In the normal circumstances the Speaker does not casts his vote over any matter in Lok Sabha. But when ever there is a tie on votes between the ruling party and opposition, the Speaker at that time can exercise his vote.
• It is the Speaker who decides the agenda of various discussions.
• The speaker has the power to adjourn or suspend the house/meetings if the quorum is not met.
• The Speaker ensures the discipline and decorum of the house. If the speaker finds the behaviour and a member of Parliament is not good, he/she can punish the unruly members by suspending.
• The Speaker decides weather a bill brought to the house is a money bill or not. In the case Speaker decides some bill as a money bill, this decision can not be challenged.
• Speaker is the final and sole authority to allow different types of motions and resolutions such as No Confidence Motion, Motion of Adjournment, Censure Motion etc.
• The Speaker of Lok Sabha does not leave the office just after dissolution of the assembly. He continues to be in the office till the newly formed assembly takes its first meeting and elects the new Speaker.

The Speaker of Lok Sabha automatically disqualifies from his post if:

• he is no longer the Member of Parliament.
• if he tenders his resignation to the Deputy Speaker.
• if he holds the office of profit under central government or any state government.
• if he is of unsound mind and that too declared by the court of law.
• if he is declared undischarged insolvent.
• if he is no longer the citizen of India or voluntarily accepts the citizenship of any other country.
• if he is removed from the post of Speaker by passing a resolution by majority of the members of Lok Sabha. This is to note that during resolution for removal of Speaker, the Speaker is not in position to cast his vote even if there is tie.

Solution: C

In an effort to give a push to digital payments across the country, the Reserve Bank of India (RBI) is setting up a Payment Infrastructure Development Fund (PIDF) of Rs 500 crore.

All you need to know about the fund:

Objective: This fund has been created to encourage acquirers to deploy point of sale (PoS) infrastructure, both physical and digital, in tier-3 to tier-6 centres and north eastern states.

Contributions to the fund: The RBI has made an initial contribution of Rs 250 crore covering half the fund. The remaining will come from the card issuing banks and card networks operating in the country.

Management: The fund will be governed through an advisory council but it will be managed and administered by the RBI.

Solution: D

Wholesale Price Index, or WPI, measures the changes in the prices of goods sold and traded in bulk by wholesale businesses to other businesses. WPI is unlike the Consumer Price Index (CPI), which tracks the prices of goods and services purchased by consumers.

The numbers are released by the Economic Advisor in the Ministry of Commerce and Industry. An upward surge in the WPI print indicates inflationary pressure in the economy and vice versa. The quantum of rise in the WPI month-after-month is used to measure the level of wholesale inflation in the economy.

Even as the WPI is used as a key measure of inflation in some economies, the RBI no longer uses it for policy purposes, including setting repo rates. The central bank currently uses CPI or retail inflation as a key measure of inflation to set the monetary and credit policy.

The new series of Wholesale Price Index (WPI) with base 2011-12 is effective from April 2017.

Solution: D

West Asia peace plan The West Asia peace plan was recently unveiled by U.S. President Trump. It plans to revive the stalled two-state talks between the Israelis and the Palestinians. It seeks to give the Israelis an expansive state with Jerusalem as its “undivided capital” and tight security control over a future Palestinian state.

Solution: D

What are the different categories under priority sector?

Priority Sector includes the following categories:

(i) Agriculture
(ii) Micro, Small and Medium Enterprises
(iii) Export Credit
(iv) Education
(v) Housing
(vi) Social Infrastructure
(vii) Renewable Energy
(viii) Others

What is included under Weaker Sections under priority sector?

Priority sector loans to the following borrowers are eligible to be considered under Weaker Sections category:-

Solution: B

Judicial review is the power of the judiciary to examine the constitutionality of legislative enactments and executive orders of both the Central and State governments.

The Supreme Court has declared the power of judicial review as a basic feature of the Constitution or an element of the basic structure of the Constitution. Hence, the power of judicial review cannot be curtailed or excluded even by a constitutional amendment.

The doctrine of judicial review originated and developed in the USA. In India, the Constitution confers the power of judicial review on the judiciary (both the Supreme Court as well as High Courts). 

Solution: C

The Office of Economic Adviser, Department for Promotion of Industry and Internal Trade is releasing Index of Eight Core Industries.

Solution: A

India’s forex reserves comprise Foreign Currency Assets (FCAs), gold reserves, Special Drawing Rights (SDRs) and India’s reserve position with the International Monetary Fund (IMF).

Foreign currency assets (FCAs) are the largest component of the forex reserves.

Solution: C

Lok Adalat is a forum where the cases (or disputes) which are pending in a court or which are at pre-litigation stage (not yet brought before a court) are compromised or settled in an amicable manner.

Lok Adalats have been given statutory status under the Legal Services Authorities Act, 1987. Under the said Act, the award (decision) made by the Lok Adalats is deemed to be a decree of a civil court and is final and binding on all parties and no appeal against such an award lies before any court of law.

A permanent Lok Adalat can pass an award on merits, even without the consent of parties. Such an award is final and binding. From that no appeal is possible.

Solution: D

Stagflation is a condition of slow economic growth and relatively high unemployment, or economic stagnation, accompanied by rising prices, or inflation.

Solution: D

World Economic Situation Prospects (WESP) is a joint product of the United Nations Department of Economic and Social Affairs (UN DESA), the United Nations Conferenceon Trade and Development (UNCTAD) and the five United Nations regional commissions;

The Indian economy is expected to register a GDP growth of 5.7 per cent this fiscal, according to the newly launched UN World Economic Situation and Prospects (UNWESP) report 2020.

Solution: B

Transfer payments are the receipts which the residents of a country get for ‘free’, without having to provide any goods or services in return.

They consist of gifts, remittances and grants.

They could be given by the government or by private citizens living abroad.

Solution: B

Minimum Alternate Tax (MAT) is a tax effectively introduced in India by the Finance Act of 1987, vide Section 115J of the Income Tax Act, 1961 (IT Act), to facilitate the taxation of ‘zero tax companies’ i.e., those companies which show zero or negligible income to avoid tax. Under MAT, such companies are made liable to pay to the government, by deeming a certain percentage of their book profit as taxable income. Thus, it is a direct tax.

MAT is applicable to all corporate entities, whether public or private. However, it does not apply to any income accruing or arising to a company from life insurance business. Nor does it apply to shipping income liable to tonnage taxation as provided in section 115V to 115VZC of the IT Act

Solution: D

Desert National Park, near Jaisalmer and coastal grasslands of the Abdasa and Mandvi talukas of Kutch District of Gujarat support some populations.

Great Indian bustard, (Ardeotis nigriceps), large bird of the bustard family (Otididae), one of the heaviest flying birds in the world. The great Indian bustard inhabits dry grasslands and scrublands on the Indian subcontinent; its largest populations are found in the Indian state of Rajasthan.

Solution: C

Index of Industrial Production (IIP) measures the quantum of changes in the industrial production in an economy and captures the general level of industrial activity in the country.

The current base year for the IIP series in India is 2011-12. Index of Industrial Production is compiled and published every month by Central Statistics Office (CSO) of the Ministry of Statistics and Programme Implementation.

Industrial production for the purpose of IIP is divided into three sectors, i.e, Mining, Manufacturing and Electricity. In ‘Sectoral’ classification, relative weights of Manufacturing, Mining and Electricity are 75.5%, 14.2% and 10.3% respectively.

Solution: D

The Living Planet Report, WWF’s flagship publication released every two years, is a comprehensive study of trends in global biodiversity and the health of the planet. The Living Planet Report 2018 is the twelfth edition of the report and provides the scientific evidence to what nature has been telling us repeatedly: unsustainable human activity is pushing the planet’s natural systems that support life on Earth to the edge.

https://wwf.panda.org/knowledge_hub/all_publications/living_planet_report_2018/