DAY – 35 ( INSTA REVISION TEST)INSTA REVISION PLAN 3.0, 2020

Solution: A

What is a domestic systemically important bank and why is it important?

D-SIB means that the bank is too big to fail. According to the RBI, some banks become systemically important due to their size, cross-jurisdictional activities, complexity and lack of substitute and interconnection. Banks whose assets exceed 2% of GDP are considered part of this group.

Significance:

1. Should such a bank fail, there would be significant disruption to the essential services they provide to the banking system and the overall economy.
2. The too-big-to-fail tag also indicates that in case of distress, the government is expected to support these banks. Due to this perception, these banks enjoy certain advantages in funding. It also means that these banks have a different set of policy measures regarding systemic risks and moral hazard issues.

Classification:

1. RBI has to disclose names of banks designated as D-SIB. It classifies the banks under five buckets depending on order of importance.
2. Based on the bucket in which a D-SIB is, an additional common equity requirement applies. Banks in bucket one need to maintain a 0.15% incremental tier-I capital from April 2018. Banks in bucket three have to maintain an additional 0.45%.
3. All the banks under D-SIB are required to maintain higher share of risk-weighted assets as tier-I equity.

Need:

1. It was observed during the global financial crisis that problems faced by certain large and highly interconnected financial institutions hampered the orderly functioning of the financial system, which in turn, negatively impacted the real economy.
2. Government intervention was considered necessary to ensure financial stability in many jurisdictions. Cost of public sector intervention and consequential increase in moral hazard required that future regulatory policies should aim at reducing the probability of failure of SIBs and the impact of the failure of these banks.

Solution: C

The base effect refers to the impact of the rise in price level (i.e. last year’s inflation) in the previous year over the corresponding rise in price levels in the current year (i.e., current inflation): if the price index had risen at a high rate in the corresponding period of the previous year leading to a high inflation rate, some of the potential rise is already factored in, therefore a similar absolute increase in the Price index in the current year will lead to a relatively lower inflation rates. On the other hand, if the inflation rate was too low in the corresponding period of the previous year, even a relatively smaller rise in the Price Index will arithmetically give a high rate of current inflation.

Solution: C

Private property:

• The Supreme Court has recently held that a citizen’s right to own private property is a human right and the state cannot take possession of it without following due procedure and authority of law.
• ‘Right to private property was previously a fundamental right’ under Article 31 of the Constitution.
• Property ceased to be a fundamental right with the 44th Constitution Amendment in 1978.
• Nevertheless, Article 300A required the state to follow due procedure and authority of law to deprive a person of his or her private property.
• The right to property is now considered to be not only a constitutional or statutory right, but also a human right.

Solution: C

Financial Market Infrastructure (FMI) refers to critically important institutions responsible for providing clearing, settlement and recording of monetary and other financial transactions.

An authorized payment system would be categorized as an FMI as and when it reaches systemic importance which could be based on various parameters such as (i) volume and value of transactions; (ii) share in the overall payment systems; (iii) markets in which it is operating; (iv) degree of interconnectedness and interdependencies; (v) criticality in terms of concentration of payment activities etc. The Reserve Bank maintains a separate list of authorized payment systems which are declared as FMIs and are made public. As in June 2017, its list includes, Real Time Gross Settlement System (RTGS), Securities Settlement Systems (SSS), Clearing Corporation of India Ltd (CCIL) and Negotiated Dealing System- Order Matching (NDS-OM).

Solution: D

Bibi Ka Maqbara:

• Bibi Ka Maqbara It is a tomb located in Aurangabad, Maharashtra.
• It was commissioned in 1660 by the Mughal emperor Aurangzeb in the memory of his first and chief wife Dilras Banu Begum.
• It is considered to be a symbol of Aurangzeb’s ‘conjugal fidelity’.
• The structure, known as the ‘Taj of the Deccan’ because of its striking resemblance to the Taj Mahal.

Solution: D

National Small Savings Fund (NSSF) was established in 1999 within the Public Account of India for pooling the money from different small saving schemes (SSSs). Collections from all small savings schemes are credited to the NSSF. Similarly, withdrawals under small savings schemes by the depositors are made out of this Fund. The money in the account is used by the centre and states to finance their fiscal deficit. The balance in the Fund is invested in Central and State Government Securities. Pattern of utilization of the fund among the centre and states is decided from time to time by the Government of India.

The Fund is administered by the Government of India, Ministry of Finance (Department of Economic Affairs) under National Small Savings Fund (Custody and Investment) Rules, 2001, framed by the President under Article 283(1) of the Constitution.

Solution: C

Hot money signifies currency that quickly and regularly moves between financial markets, that ensures investors lock in the highest available short-term interest rates. Hot money continuously shifts from countries with low-interest rates to those with higher rates. These financial transfers affect the exchange rate and potentially impact a country’s balance of payments. Hot money can also refer to stolen money that has been especially marked, so that it may be traced and identified.

Solution: D

WHO ‘Triple Billion’ targets:

• It is a strategic plan for the next five years.

It aims for:

• One billion more people to be benefitted from Universal Health Coverage (UHC)
• One billion more people to be protected from health emergencies
• One billion more people to be covered for better health and well-being.

Solution: B

The Centre for Trade and Investment Law (CTIL) was established in the year 2016 by the Ministry of Commerce and Industry, Government of India, at the Indian Institute of Foreign Trade (IIFT). The Centre’s primary objective is to provide sound and rigorous analysis of legal issues pertaining to international trade and investment law to the Government of India and other governmental agencies. The Centre is aiming to create a dedicated pool of legal experts who could provide technical inputs for enhancing India’s participation in international trade and investment negotiations and dispute settlement. The Centre also aims to be a thought leader in the various domains of international economic law such as WTO law, international investment law and legal issues relating to economic integration.

Solution: D

Pt. Madan Mohan Malaviya

The Prime Minister of India paid tribute to Pt. Madan Mohan Malaviya on his 158th birth anniversary (25th December, 2019).

• Madan Mohan Malaviya was a freedom fighter and social reformer.
• He had served as the President of the INC on four occasions.
• He was awarded the Bharat Ratna posthumously in 2014.
• He was the editor of a Hindi magazine, ‘Hindosthan’.
• He became the editor of the ‘Indian Opinion’ in 1889. He also started a Hindi weekly ‘Abhyudaya’, an English daily ‘Leader’, a Hindi newspaper ‘Maryada’.
• Pandit Malaviya was instrumental in founding the Benares Hindu University in 1916. He also became its Vice-Chancellor till 1939.
• He was opposed to separate electorates to Muslims and the Lucknow Pact.
• He was also against the INC’s participation in the Khilafat Movement.
• He was a participant in the Second Round Table Conference in 1931.
• He started the Ganga Mahasabha to oppose construction of dams in the Ganga.
• He was also a social reformer who opposed untouchability. He worked for the temple entry of Dalits at the Kalaram Temple at Nashik, Maharashtra.
• He also founded the organisation Shri Mathura Vrindavan Hasanand Gochar Bhoomi in Vrindavan.

Solution: C

Most-favoured-nation (MFN)

Under the World Trade Organisation (WTO) agreements, countries cannot normally discriminate between their trading partners. If any country grants one country a special favour such as a lower customs duty rate for one of their products the same would need to be extended to all other WTO members. This principle is known as most-favoured-nation (MFN) treatment.

MFN is so important a principle that it is the first article of the General Agreement on Tariffs and Trade (GATT), which governs trade in goods. MFN is also a priority in the General Agreement on Trade in Services (GATS) (Article 2) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) (Article 4). Together, those three agreements cover all three main areas of trade handled by the WTO.

Some exceptions, however, are allowed under WTO regime. For example, countries can set up a free trade agreement that applies only to goods traded within the group — discriminating against goods from outside. Or they can give developing countries special access to their markets. Or a country can raise barriers against products that are considered to be traded unfairly from specific countries. And in services, countries are allowed, in limited circumstances, to discriminate. But the agreements only permit these exceptions under strict conditions. In general, MFN means that every time a country lowers a trade barrier or opens up a market, it has to do so for the same goods or services for all its trading partners whether developed or developing.

MFN at the same time allows some exemptions as well:

Right to engage in Free Trade Agreements: This means members can participate in regional trade agreements or free trade agreements where there is discrimination between member countries and non-member countries.

Members can give developing countries special and differential treatment like greater market access. This special concession are in different forms like reduced tariff rates from developing country imports, concessions that allows developing countries to give subsidies to their production sectors etc.

Solution: C

Producer Price Index (PPI) measures the average change in the price of goods and services either as they leave the place of production, called output PPI or as they enter the production process, called input PPI.

PPI estimates the change in average prices that a producer receives.

PPI Vs Wholesale Price Index (WPI)

PPI is different from WPI on following grounds:

• WPI captures the price changes at the point of bulk transactions and may include some taxes levied and distribution costs up to the stage of wholesale transactions. PPI measures the average change in prices received by the producer and excludes indirect taxes.
• Weight of an item in WPI is based on net traded value whereas in PPI weights are derived from Supply Use Table.
• PPI removes the multiple counting bias inherent in WPI.
• WPI does not cover services and whereas PPI includes services.

Solution: C

Quad Countries:

• The quadrilateral formation includes Japan, India, United States and Australia.
• All four nations find a common ground of being the democratic nations and common interests of unhindered maritime trade and security.
• The idea was first mooted by Japanese Prime Minister Shinzo Abe in 2007. However, the idea couldn’t move ahead with Australia pulling out of it.
• It was revived in 2017 and is being viewed as response to increased Chinese economic and military power.

Quad is an opportunity for like-minded countries to share notes and collaborate on projects of mutual interest. Members share a vision of an open and free Indo-Pacific.

Solution: B

Special Drawing Rights (SDRs) are designed to augment international liquidity by supplementing the standard reserve currencies. SDRs are assigned to the accounts of International Monetary Fund members in proportion to their contribution to the fund. This international monetary reserve currency was established by the International Monetary Fund. It operates as a supplement to the existing reserve of member countries. Responding to the concerns about the limitation of gold and dollars as the sole means of settling international accounts, SDRs are meant to augment international liquidity by supplementing the standard reserve currencies. The International Monetary Fund uses SDRs for internal accounting purposes. SDRs are allocated by the IMF to its member countries.

Special Drawing Rights were created by the IMF in 1969 and were intended to be an asset held in foreign exchange reserves.

Solution: C

The National Policy on Biofuels-2018 approved by the Government envisages an indicative target of 20% blending of ethanol in petrol and 5% blending of bio-diesel in diesel by 2030.

National Policy on biofuels- salient features:

1. Categorization: The Policy categorises biofuels as “Basic Biofuels” viz. First Generation (1G) bioethanol & biodiesel and “Advanced Biofuels” – Second Generation (2G) ethanol, Municipal Solid Waste (MSW) to dropin fuels, Third Generation (3G) biofuels, bio-CNG etc. to enable extension of appropriate financial and fiscal incentives under each category.
2. Scope of raw materials: The Policy expands the scope of raw material for ethanol production by allowing use of Sugarcane Juice, Sugar containing materials like Sugar Beet, Sweet Sorghum, Starch containing materials like Corn, Cassava, Damaged food grains like wheat, broken rice, Rotten Potatoes, unfit for human consumption for ethanol production.
3. Protection to farmers: Farmers are at a risk of not getting appropriate price for their produce during the surplus production phase. Taking this into account, the Policy allows use of surplus food grains for production of ethanol for blending with petrol with the approval of National Biofuel Coordination Committee.
4. Viability gap funding: With a thrust on Advanced Biofuels, the Policy indicates a viability gap funding scheme for 2G ethanol Bio refineries of Rs.5000 crore in 6 years in addition to additional tax incentives, higher purchase price as compared to 1G biofuels.
5. Boost to biodiesel production: The Policy encourages setting up of supply chain mechanisms for biodiesel production from non-edible oilseeds, Used Cooking Oil, short gestation crops.

Solution: C

In economics, a Kuznets curve graphs the hypothesis that as an economy develops, market forces first increase and then decrease economic inequality. The hypothesis was first advanced by economist Simon Kuznets in the 1950s and 1960s.

In economics, the Laffer curve, popularized by supply-side economist Arthur Laffer, illustrates a theoretical relationship between rates of taxation and the resulting levels of the government’s tax revenue. The Laffer curve assumes that no tax revenue is raised at the extreme tax rates of 0% and 100%, and that there is a tax rate between 0% and 100% that maximizes government tax revenue.

Solution: C

National Pharmaceutical Pricing Authority (NPPA) was constituted vide Government of India Resolution dated 29th August, 1997 as an attached office of the Department of Pharmaceuticals (DoP), Ministry of Chemicals & Fertilizers as an independent Regulator for pricing of drugs and to ensure availability and accessibility of medicines at affordable prices.

Solution: D

With an aim to resolve the problem of stressed assets with public-sector banks, the government has come out with a new plan – Sashakt – that includes the creation of one or more widely held asset management companies for loans above Rs 500 crore.

Solution: C

The Commodities included under Essential Commodities Act (ECA), 1955 are

(i) Petroleum and its products

(ii) Food stuff, including edible oil and seeds, vanaspati, pulses, sugarcane and its products like, khandsari and sugar, rice paddy

(iii) Raw Jute and jute textiles

(iv)  Drugs- prices of essential drugs are still controlled by the DPCO

(v) Fertilisers- the Fertiliser Control Order prescribes restrictions on transfer and stock of

fertilizers apart from prices

(vi) Onion and Potato

(vii) Seeds of food crops, fruits and vegetables, cattle fodder, Jute seeds and Cotton seeds

https://www.thehindu.com/business/Economy/essential-commodities-act-is-outdated-must-go-says-economic-survey/article30705358.ece

Solution: B

With a vision to ‘Cultivate one Million children in India as Neoteric Innovators’, Atal Innovation Mission is establishing Atal Tinkering Laboratories (ATLs) in schools across India.

• Objective: The objective of this scheme is to foster curiosity, creativity and imagination in young minds; and inculcate skills such as design mindset, computational thinking, adaptive learning, physical computing etc.
• Financial Support: AIM will provide grant-in-aid that includes a one-time establishment cost of Rs. 10 lakh and operational expenses of Rs. 10 lakh for a maximum period of 5 years to each ATL.
• Eligibility: Schools (minimum Grade VI – X) managed by Government, local body or private trusts/society can set up ATL.

Solution: B

The World Bank — in collaboration with the United Nations Conference on Trade and Development (UNCTAD) and in consultation with organizations such as International Trade Center, United Nations Statistical Division (UNSD) and the World Trade Organization (WTO) — developed the World Integrated Trade Solution (WITS). This software allows users to access and retrieve information on trade and tariffs.

Solution: C

In economics, the Dutch disease is the apparent causal relationship between the increase in the economic development of a specific sector and a decline in other sectors.

Solution: C

An FDC is a cocktail of two or more active drug ingredients in a fixed ratio of doses.  FDCs’ popularity in India is due to advantages such as increased efficacy, better compliance, reduced cost and simpler logistics of distribution.

Fixed dose combinations (FDCs) were declared “irrational” by a Health Ministry expert committee set up in 2014.

Solution: C

The Herfindahl index is a measure of the size of firms in relation to the industry and an indicator of the amount of competition among them. Named after economists Orris C. Herfindahl and Albert O. Hirschman, it is an economic concept widely applied in competition law, antitrust and also technology management.

Solution: B

IRENA is an intergovernmental organisation mandated to facilitate cooperation, advance knowledge, and promote the adoption and sustainable use of renewable energy.

• It is the first international organisation to focus exclusively on renewable energy, addressing needs in both industrialized and developing countries.
• It was founded in 2009 & its statute entered into force on 8 July 2010 and is headquartered in Masdar City, Abu Dhabi.
• IRENA is an official United Nations observer.