DAY – 44 : Insta 75 Days Revision Plan-2026 : ECONOMY

Answer:   (c)

Explanation:

• Fourth Five-Year Plan (1969–1974): Correct. Following the Plan Holiday (1966–69), this plan was based on the Gadgil Strategy. Its two main objectives were Growth with Stability and Progressive Achievement of Self-Reliance. It was during this plan that 14 major Indian banks were nationalized (1969) and the Indo-Pak war of 1971 occurred.
• Fifth Five-Year Plan (1974–1978): Correct. The slogan Garibi Hatao (Remove Poverty) was the centerpiece of this plan. It focused on the Removal of Poverty and Attainment of Self-Reliance. This plan was terminated a year ahead of its schedule by the newly elected Janata Government in 1978.

Sixth Five-Year Plan (1980–1985): Correct. While the 5th Plan introduced the concept, the 6th Plan launched a direct attack on poverty by institutionalizing nationwide rural development programs. It saw the implementation of the Integrated Rural Development Programme (IRDP) and the National Rural Employment Programme (NREP) to address the structural roots of poverty.

Answer:   (b)

Explanation:

• 1. Old-age pensions (Excluded): These are Transfer Payments. The government provides this money without the recipient providing any current productive service or labor in return. Therefore, it is not included in the National Income.
• 2. Rental value of self-occupied houses (Included): This is known as Imputed Rent. Even if the owner does not pay rent to anyone, the house provides a housing service that has an economic value. National income accounting treats the owner as if they are paying rent to themselves to ensure the value of all housing services is captured.
• 3. Corporate profit tax (Included): This is a part of the Profit earned by a firm (a factor of production). Profits are typically divided into three parts: Corporate Tax, Dividends, and Retained Earnings (Undistributed Profits). Since total profit is a factor income, the tax component is included.
• 4. Windfall gains from ancestral property (Excluded): The sale of an old asset is a Capital Gain. The value of the house was already counted in the National Income of the year it was originally built. Selling it now is just a transfer of ownership of an existing asset, not the production of a new one.

Answer:   (a)

Explanation:

The relationship between these three variables can be expressed through the formula:

When analyzing growth rates (for small percentages), a commonly used macroeconomic approximation is:

Why option (a) is correct:

• Nominal GDP growth (12%) represents the increase in the total value of goods and services produced at current year prices.
• Real GDP growth (7%) represents the increase in the actual physical output of goods and services produced at constant base-year prices, excluding the effect of inflation.
• The difference between the two:

12%−7%=5%

shows the part of GDP growth that occurred due to an increase in the general price level, and not because of higher production.

Thus, the GDP Deflator (inflation in the economy) has increased by approximately 5%.

Answer:   (d)

Explanation:

The Crowding Out Effect is a phenomenon that occurs when increased government involvement in a sector of a market economy substantially affects the remainder of the market, either on the supply or demand side of the market.

How it Works?

1. Increased Deficit: When the government spends more than it earns, it runs a fiscal deficit. To fund this, the government must borrow money by issuing bonds.
2. Competition for Savings: The government enters the market for loanable funds, competing with private borrowers (corporations and individuals) for the limited pool of domestic savings.
3. Interest Rate Spike: Because the government is considered a risk-free borrower, its high demand for funds pushes up the interest rates in the economy.
4. Impact on Private Investment: As interest rates rise, the cost of borrowing for private companies increases. Many investment projects that were previously profitable at lower interest rates are now canceled or postponed.

Answer:   (b)

Explanation:

• Proceeds from Disinvestment (Capital Receipt): When the government sells its shares in PSUs, it is liquidating a financial asset. Since it results in a reduction of assets, it is categorized as a Capital Receipt (specifically, a Non-Debt Capital Receipt).
• Interest receipts on loans (Revenue Receipt): While the loan itself was an asset, the interest earned on it is recurring income. It does not reduce the government’s claim on the principal loan amount, nor does it create a liability. Therefore, it is Non-Tax Revenue Receipt.
• Borrowings through National Savings Certificates (Capital Receipt): Any form of borrowing (market loans, small savings, or external debt) creates a financial liability for the government to repay the amount in the future. Hence, it is a Debt Capital Receipt.
• Dividends and profits from the RBI (Revenue Receipt): These are periodic payments made by the RBI to the government from its surplus. Since these payments do not create a liability or reduce government assets, they are categorized as Non-Tax Revenue Receipt.

Answer:   (c)

Explanation:

• Statement 1 is Correct: While standard Scheduled Commercial Banks (SCBs) have a Priority Sector Lending (PSL) target of 40% of their Adjusted Net Bank Credit (ANBC), SFBs have a much higher target of 75%. This is to ensure that their primary focus remains on sectors like agriculture, MSMEs, and micro-credit.
• Statement 2 is Incorrect: Small Finance Banks are not prohibited from dealing in foreign exchange. After they have established their operations and met certain regulatory requirements, they can apply for an Authorized Dealer (AD) Category-II license from the RBI to handle foreign exchange business for their customers (mostly for remittances and current account transactions).
• Statement 3 is Correct: To ensure that SFBs do not shift their focus to large corporate loans, the RBI mandates that at least 50% of their loan portfolio must consist of loans and advances of up to 25 lakh.

Answer:   (c)

Explanation:

The Provisioning Coverage Ratio (PCR) is the ratio of the total amount of money a bank has set aside (provisioned) to cover potential losses from its bad loans, relative to its total Gross NPAs.

How it Works:

• The Provisioning Requirement: When a loan becomes an NPA, the RBI mandates that banks must set aside a portion of their profits to cover the risk that the loan might never be repaid. This buffer is called a provision.
• The Formula:

A higher PCR (e.g., above 70%) indicates that the bank has a healthy cushion to absorb potential losses. It means the bank’s bottom line (profits) will be less affected if those bad loans are eventually written off.

Answer:   (b)

Explanation:

• Statement 1 is Incorrect: While the MPC is indeed a statutory body, it was not constituted under the Banking Regulation Act, 1949. It was established by amending the Reserve Bank of India (RBI) Act, 1934 (specifically Section 45ZB). This is a common UPSC trap where the correct fact (statutory status) is linked to the wrong legislation.
• Statement 2 is Correct: The Governor of the RBI serves as the ex-officio Chairperson of the committee. The committee consists of six members: three from the RBI (including the Governor) and three appointed by the Central Government.
• Statement 3 is Correct: The primary mandate of the MPC is to fix the benchmark policy rate (Repo Rate) to maintain the inflation target. The target (currently 4% with a margin of +/- 2%) is set by the Central Government in consultation with the RBI once every five years.

Answer:   (c)

Explanation:

• Statement 1 is Correct: The Standing Deposit Facility (SDF) is a liquidity-absorbing window. Unlike the Reverse Repo, where the RBI has to provide government securities (collateral) to banks to borrow money, the SDF allows the RBI to absorb excess liquidity without providing any collateral. This was introduced to strengthen the RBI’s ability to manage massive liquidity surpluses without being constrained by the availability of government securities.
• Statement 2 is Correct: In April 2022, the RBI introduced the SDF as the new floor of the LAF corridor. Previously, the Fixed Reverse Repo Rate served as the floor. The SDF has effectively institutionalized a more transparent and non-collateralized way to suck out excess money from the banking system.
• Statement 3 is Incorrect: The SDF rate is positioned 25 basis points (bps) below the Repo Rate, not higher. In the LAF corridor:
• The Marginal Standing Facility (MSF) is the ceiling (Repo + 25 bps).
• The Repo Rate is the center/policy rate.
• The SDF is the floor (Repo – 25 bps).

Answer:   (a)

Explanation:

• Statement 1 is Incorrect: RPREX (Regional Level Pollution Response Exercise) is conducted by the Indian Coast Guard (ICG), not the Indian Navy. While the Navy focuses on maritime defense and combat readiness, the ICG is the nodal agency for soft maritime security, which includes environmental protection and oil spill response. Furthermore, while the exercise occurs periodically, its primary goal is to validate the National Oil Spill Disaster Contingency Plan (NOS-DCP) rather than combat readiness.
• Statement 2 is Correct: The Indian Coast Guard is indeed the designated Central Coordinating Authority (CCA) for maritime oil spill response in Indian waters. This mandate was established by the Government of India in 1986. The ICG is responsible for coordinating with various stakeholders, including major ports, oil handling agencies, and state governments, to mitigate the impact of marine pollution.

Answer: (b)

Solution:

Observe the pattern:

• STOVE → EVOTS
  → The letters are written in reverse order
• CANDLE → ELDNAC
  → Again, completely reversed

So, the rule is:
Reverse the word

Apply to REPORT:

• REPORT → T R O P E R

Final Answer: TROPER

Answer: (a)

Solution:

Observe the change letter by letter:

PEOPLE → QGRSNH

• P → Q (+1)
• E → G (+2)
• O → R (+3)
• P → S (+3)
• L → N (+2)
• E → H (+1)

So pattern is:
+1, +2, +3, +3, +2, +1 (symmetric pattern)

Apply to SILVER:

• S +1 → T
• I +2 → K
• L +3 → O
• V +3 → Y
• E +2 → G
• R +1 → S

Final Answer: TKOYGS

Answer: (a)

Solution:

Observe the pattern in MANGO → NZOFP:

Write positions:

• M → N (+1)
• A → Z (−1, cyclic shift backward)
• N → O (+1)
• G → F (−1)
• O → P (+1)

So the pattern is:
+1, −1, +1, −1, +1 (alternating shift)

Apply to APPLE:

• A → B (+1)
• P → O (−1)
• P → Q (+1)
• L → K (−1)
• E → F (+1)

Result:
B O Q K F

Final Answer: (a) BOQKF

Answer: (b)

Solution:

Use alphabet positions:

A = 1, B = 2, … Z = 26

Rule:
Replace each letter with reverse position
Reverse position = 27 − original position

Check GOLD:

• G (7) → 27 − 7 = 20
• O (15) → 27 − 15 = 12
• L (12) → 27 − 12 = 15
• D (4) → 27 − 4 = 23

→ 20121523

Now apply to WIND:

• W (23) → 27 − 23 = 4
• I (9) → 27 − 9 = 18
• N (14) → 27 − 14 = 13
• D (4) → 27 − 4 = 23

Combine:
→ 4 18 13 23
→ 4181323

Final Answer: 4181323

Answer: (a)

Explanation:

Option (a) is correct: The passage laments that “our tools have expanded our reach, yet shortened our attention,” and warns that “when everything is knowable at once, nothing is truly learned in depth.” This clearly conveys the message that excess information undermines reflection and depth, eroding true understanding. Hence, (a) captures the core argument.
Option (b) is incorrect: The author is not concerned with access inequality but with quality and depth of understanding. The problem is intellectual superficiality, not information scarcity.
Option (c) is incorrect: The passage does not call wisdom outdated; it instead calls for its revival, noting that “wisdom demands contemplation, humility, and an awareness of consequences.”
Option (d) is incorrect: The author does not treat information overload as inevitable or acceptable; he presents it as a moral and intellectual danger. Therefore, (a) alone represents the passage’s precise, reflective message.