[Mission 2022] QUIZ – 2020: INSIGHTS STATIC QUIZ , 8 October 2021 – Economy

Solution: c)

In 1934, Sir M. Visvesvaraya had published a book titled “Planned Economy in India”, in which he presented a constructive draft of the development of India in next ten years. His core idea was to lay out a plan to shift labour from agriculture to industries and double up National income in ten years.

In the light of the basic principles of Gandhian economics, S. N. Agarwal authored ‘The Gandhian Plan’ in 1944 in which he put emphasis on the expansion of small unit pro­duction and agriculture. Its fundamental fea­ture was decentralisation of economic struc­ture with self-contained villages and cottage industries.

The Bombay Plan emphasizes the importance of basic industries, but also calls for the development of consumption goods industries in the early years of the plan.

Solution: a)

Participatory notes also referred to as P-Notes, or PNs, are financial instruments required by investors or hedge funds to invest in Indian securities without having to register with the Securities and Exchange Board of India (SEBI). P-Notes are among the group of investments considered to be Offshore Derivative Investments (ODIs).

The investor in PN does not own the underlying Indian security, which is held by the FII who issues the PN. Thus, the investors in PNs derive the economic benefits of investing in the security without actually holding it. They benefit from fluctuations in the price of the underlying security since the value of the PN is linked with the value of the underlying Indian security. The PN holder also does not enjoy any voting rights in relation to security/shares referenced by the PN.

Solution: b)

The balance of payments (BoP) record the transactions in goods, services and assets between residents of a country with the rest of the world for a specified time period typically a year. There are two main accounts in the BoP — the current account and the capital account

Capital Account records all international transactions of assets. An asset is any one of the forms in which wealth can be held, for example: money, stocks, bonds, Government debt, etc. Purchase of assets is a debit item on the capital account. If an Indian buys a UK Car Company, it enters capital account transactions as a debit item (as foreign exchange is flowing out of India). On the other hand, sale of assets like sale of share of an Indian company to a US customer is a credit item on the capital account. Capital Account is used to finance deficit in current account or absorb surplus of current account.

Components of Capital Account:

Components of Current Account:

Solution: d)

About Economic Censuses: Launched in 1976 as a plan scheme.

o Coverage: All entrepreneurial units in the country which are involved in any economic activities of either agricultural or non-agricultural sector which are engaged in production and/or distribution of goods and/or services not for the sole purpose of own consumption.

o Objective: It provides detailed information on operational and other characteristics such as number of establishments, number of persons employed, source of finance, type of ownership etc.

o Significance: This information used for micro level/ decentralized planning and to assess contribution of various sectors of the economy in the gross domestic product (GDP).

The latest 7th Economic Census -2019 was conducted by MoSPI to provide disaggregated information on various operational and structural aspects of all establishments in the country.

Solution: c)

The FRBM Act aims to introduce transparency in India’s fiscal management systems. The Act’s long-term objective is for India to achieve fiscal stability and to give the Reserve Bank of India (RBI) flexibility to deal with inflation in India. The FRBM Act was enacted to introduce more equitable distribution of India’s debt over the years.

Key features of the FRBM Act

The FRBM Act made it mandatory for the government to place the following along with the Union Budget documents in Parliament annually:

1. Medium Term Fiscal Policy Statement
2. Macroeconomic Framework Statement
3. Fiscal Policy Strategy Statement

The FRBM Act proposed that revenue deficit, fiscal deficit, tax revenue and the total outstanding liabilities be projected as a percentage of gross domestic product (GDP) in the medium-term fiscal policy statement.

FRBM Act exemptions:

On grounds of national security, calamity, etc, the set targets of fiscal deficits and revenue could be exceeded.