[Mission 2022] Insta– QUED ( Questions from Editorials. ) 2 September 2021

Solution: c)

Asset Monetization involves creation of new sources of revenue by unlocking of value of hitherto unutilized or underutilized public assets. Internationally, it is recognized that public assets are a significant resource for all economies.

The objective of the asset monetization programme of the Government of India (GOI), for which this note lays down procedures and mechanism, is to unlock the value of investment made in public assets which have not yielded appropriate or potential returns so far, create hitherto unexplored sources of income for the company and its shareholders, and contribute to a more accurate estimation of public assets which would help in better financial management of government/public resources over time.

The Cabinet Committee on Economic Affairs, had approved monetisation of assets of POWERGRID, a Public Sector Undertaking (PSU) under Ministry of Power, through Infrastructure Investment Trust (InvIT) model. The proceeds from the asset monetization would be deployed by POWERGRID in their new and under-construction projects. The Budget 2019-20 emphasized investment led growth and indicated that new and innovative financial instruments including Infrastructure Investment Trusts (lnvITs), have been launched as part of the brown field asset monetization strategy for augmenting infrastructure investment. The InvIT would provide an opportunity to the general public and institutional investors such as Pension Funds, Mutual Funds, to benefit from this investment opportunity and participate in the growth of Indian Infrastructure Sector.

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Solution: c)

How does a relaxation of the FRBM work?

The law does contain what is commonly referred to as an ‘escape clause’. Under Section 4(2) of the Act, the Centre can exceed the annual fiscal deficit target citing grounds that include national security, war, national calamity, collapse of agriculture, structural reforms and decline in real output growth of a quarter by at least three percentage points below the average of the previous four quarters.

Solution: c)

Annual Financial Statement (AFS) is a statement of the estimated receipts and expenditure of the Government in a financial year (which begins on 01 April of the current year and ends on 31 March of the following year). In addition to it, the Budget contains:

• Estimates of revenue and capital receipts,
• Ways and means to raise the revenue,
• Estimates of expenditure,

The economic and financial policy of the coming year, i.e., taxation proposals, prospects of revenue, spending programme and introduction of new schemes/projects.

Solution: d)

Fiscal Deficit is “reflective of the total borrowing requirements of the Government”.

If the fiscal deficit ratio is too high, it implies that there is a lesser amount of money left in the market for private entrepreneurs and businesses to borrow.

Lesser amount of this money, in turn, leads to higher rates of interest charged on such lending.

So, simply put, a higher fiscal deficit means higher borrowing by the government, which, in turn, mean higher interest rates in the economy.

A high fiscal deficit and higher interest rates would also mean that the efforts of the Reserve Bank of India to reduce interest rates are undone.

Solution: a)

Participatory Notes, also called P-Notes or just PNs are instruments that are issued by registered FIIs to overseas investors who want to invest in the stock markets in India, without registering themselves with the market regulatory authority SEBI. PNs are not used within India but by investors abroad. Hence, they are also known as offshore derivative instruments. They are used by clients of FIIs who do not wish to directly participate in the stock market in India, but do it through the FIIs using PNs.

The P-Note holder also does not enjoy any voting rights in relation to security/shares referenced by the P-Note.