[Mission 2022] Insta– QUED ( Questions from Editorials ) 25 March 2022

Solution: d)

Cost-Push Inflation:

Cost push inflation is inflation caused by an increase in prices of inputs like labour, raw material, etc. The increased price of the factors of production leads to a decreased supply of these goods. While the demand remains constant, the prices of commodities increase causing a rise in the overall price level. This is in essence cost push inflation.

This type of inflation is caused due to various reasons such as:

• Increase in price of inputs
• Hoarding and Speculation of commodities
• Defective Supply chain
• Increase in indirect taxes
• Depreciation of Currency
• Crude oil price fluctuation
• Defective food supply chain
• Low growth of Agricultural sector
• Food Inflation
• Interest rates increased by RBI

Solution: a)

The Supreme Court had observed that the right to cast a vote in elections is neither a fundamental right nor a right under common law.

Who can vote and who cannot?

Under Section 62(5) of the Representation of the People Act, 1951, individuals in lawful custody of the police and those serving a sentence of imprisonment after conviction cannot vote. Undertrial prisoners are also excluded from participating in elections even if their names are on electoral rolls.

Only those under preventive detention can cast their vote through postal ballots.

Solution: d)

The Lead Bank Scheme, introduced towards the end of 1969, envisages assignment of lead roles to individual banks (both in public sector and private sector) for the districts allotted to them. A bank having a relatively large network of branches in the rural areas of a given district and endowed with adequate financial and manpower resources has generally been entrusted with the lead responsibility for that district.

Accordingly, all the districts in the country have been allotted to various banks. The lead bank acts as a leader for coordinating the efforts of all credit institutions in the allotted districts to increase the flow of credit to agriculture, small-scale industries and other economic activities.

Objectives of The Lead Bank Scheme:

• To identify unbanked and underbanked centres in districts and to evaluate their physiographic, agro climatic end Socio-economic conditions through economic survey.
• To help in removing regional imbalances through appropriate credit deployment;
• To extend banking facilities to unbanked areas;
• To estimate credit gaps in various sectors of an economy of a district and prepare a credit plan accordingly.
• To identify economically viable and technically feasible schemes.
• To effect structural and procedural changes in banking sector.
• To develop co-operation amongst financial and non-financial institutions, in overall development of the districts.
• To serve as a clearing house for discussions of problems arising out of financing priority sectors.

Solution: a)

The “developing country” status allows a member of the WTO to seek temporary exception from the commitments under various multilateral trade agreements ratified by the organisation.

They can continue to impose tariffs and quotas on goods and services in order to limit imports and promote domestic producers who may otherwise be affected adversely by imports that are lower in price or better in quality. However, Exports by developing countries are not exempted from import duties in developed countries

Solution: b)

To fight high levels of inflation, RBI increases reverse Repo rate. It makes it attractive for the bank to park funds with the RBI (More certainty of return + more interest rate) rather than to lend to the private sector. It thus reduces the liquidity in the market and increases the interest rate on borrowing.  Private players will find it costly to borrow and thus investment decreases. It helps to contain inflation. 

When inflation is high, the government reduces public expenditure. Decline in public expenditure affects private investment and results in decline of aggregate demand.

In case of high inflation, government may resort to increasing personal or corporate taxes to reduce household expenditure/ private investment. Rise in taxation leaves lesser money with the people for consumption (and private players for investment). This would lead to decline in aggregate demand and help in containing rising inflation.