DAY – 46 : Insta 75 Days Revision Plan-2026 : ECONOMY

Answer: (a)

Explanation

The Balance of Payments (BoP) is a systematic record of all economic transactions between the residents of a country and the rest of the world. It is divided into two main accounts: the Current Account and the Capital Account.

• I. Remittances: These are classified under “Unilateral Transfers” or “Invisibles.” Since they represent a flow of income without any future obligation of repayment, they are part of the Current Account.
• II. Balance of Trade: This refers to the difference between the value of exports and imports of physical goods (merchandise). This is the primary component of the Current Account.
• III. Foreign Direct Investment (FDI): FDI involves a change in the ownership of assets and creates a future liability or claim. Therefore, it is a capital flow and falls under the Capital Account.
• IV. Government Debt: External borrowings by the government (sovereign debt) represent a liability that must be repaid in the future. Hence, it is categorized under the Capital Account.

Hence, Only Remittances (1) and Balance of Trade (2) form part of the Current Account.

Answer: (c)

Explanation

The Real Effective Exchange Rate (REER) is a sophisticated metric used by central banks and economists to assess the true value of a currency beyond its simple market exchange rate.

• Statement 1 is correct: Unlike the Nominal Effective Exchange Rate (NEER), which is a weighted average of a currency against a basket of foreign currencies, the REER adjusts this average for inflation differentials between the home country and its trading partners. This makes it the most reliable indicator of a country’s international competitiveness. If your local prices are rising faster than your neighbors’, your goods become more expensive even if the exchange rate stays the same.
• Statement 2 is correct: An increase in the REER (appreciation) means that the domestic currency is becoming “stronger” in real terms. While this might sound positive, it implies that domestic goods are becoming more expensive for foreigners, while foreign goods are becoming cheaper for domestic consumers. Consequently, a rising REER generally signifies a loss of export competitiveness and a likely increase in imports.

Hence, both statements are correct.

Answer: (d)

Explanation

The Current Account records the flow of goods, services, and income between a country and the rest of the world. It essentially tracks “net income” rather than “net assets.”

• I. Imports and exports of goods and services: These are the primary components of the Current Account. Trade in goods is often called the “Merchandise Account” (Visible Trade), while trade in services (like software, tourism, or banking) is part of the “Invisibles” category.
• II. Income payments made to foreign holders of domestic assets: This includes payments such as interest on loans, dividends on stocks, or profits from businesses located in India but owned by foreigners. Because this is a payment for the service of providing capital, it is recorded as an outflow in the Current Account.
• III. Income receipts from investments made abroad: This is the reverse of the previous point. When an Indian resident receives interest from a foreign bond or dividends from a foreign company, it is an inflow of income and is recorded in the Current Account.
• IV. Transfers such as foreign aid and remittances: These are “unilateral transfers” (one-way payments). Remittances from the Indian diaspora and grants/aid received from foreign governments are classic examples of Current Account inflows.

Answer: (d)

Explanation

The internationalisation of the rupee refers to the process of increasing the use of the Indian Rupee (INR) in cross-border transactions. This involves promoting the INR for import and export trade, and subsequently other current account transactions, followed by its use in capital account transactions.

• Statement 1 is correct: When trade is settled in INR, Indian exporters and importers are not exposed to the volatility of foreign currencies like the USD. This eliminates the exchange rate risk and the associated hedging costs for domestic businesses.
• Statement 2 is correct: A wider global circulation of the rupee increases the demand for rupee-denominated financial assets. This leads to deeper and more liquid markets, which can lower the cost of capital for Indian entities by improving their access to a broader pool of international investors.
• Statement 3 is correct: Seigniorage is the difference between the face value of money and the cost of producing it. If the rupee becomes an international reserve currency, foreign central banks and private entities will hold INR balances. This effectively acts as an interest-free loan to India, providing seigniorage benefits.
• Statement 4 is correct: If India can pay for its imports (especially critical ones like oil) in its own currency, the necessity to maintain a massive “war chest” of foreign exchange reserves (like USD) to cover import bills and manage shocks is significantly reduced.

Answer: (d)

Explanation

The terms “Vostro” and “Nostro” are essential to understanding international banking and trade settlement. They describe the same bank account but from two different perspectives.

• Statement 1 is correct: A Vostro account (from the Latin vostro, meaning “yours”) is an account that a domestic bank holds on behalf of a foreign bank in the domestic currency (Indian Rupees in this context). For example, if a Russian bank opens an account with the State Bank of India (SBI) in Mumbai in INR, that account is a Vostro account for SBI.
• Statement 2 is correct: Vostro accounts are the primary mechanism for the Internationalisation of the Rupee. Under the RBI’s specialized mechanism, Indian importers make payments in INR into the Special Rupee Vostro Account (SRVA) of the partner country’s bank. Conversely, Indian exporters are paid their dues in INR from the balances available in these same Vostro accounts.

Answer: (b)

Explanation

The Soil Health Card (SHC) Scheme was launched by the Government of India in February 2015 with the motto “Swastha Dhara, Khet Hara” (Healthy Earth, Green Farm). It aims to help farmers improve productivity through the judicious use of inputs.

• Statement 1 is correct: The SHC is a printed report provided to farmers for each of their holdings. It contains the status of their soil and provides dosage recommendations for fertilizers and soil amendments (like lime or gypsum) needed to achieve optimal yields.
• Statement 2 is incorrect: According to the revised guidelines, the Soil Health Card is issued to farmers once every three years (not two years). Initially, the cycle was two years (2015–2017), but it was subsequently updated to a three-year cycle to better track long-term changes in soil fertility.
• Statement 3 is correct: The soil is tested based on 12 specific parameters:
  • Macro-nutrients: Nitrogen (N), Phosphorus (P), Potassium (K).
  • Secondary-nutrient: Sulphur (S).
  • Micro-nutrients: Zinc (Zn), Iron (Fe), Copper (Cu), Manganese (Mn), Boron (B).
  • Physical parameters: pH (Acidity/Alkalinity), EC (Electrical Conductivity), and OC (Organic Carbon).

Answer: (c)

Explanation

An Inverted Duty Structure (IDS) is a tax or tariff anomaly that creates an uneven playing field for domestic manufacturers compared to foreign exporters.

• Statement 1 is correct: In a standard economic model, tariffs are usually higher on finished products to protect local industries and lower on raw materials to reduce production costs. An Inverted Duty Structure occurs when this is reversed: the import duty on intermediate inputs or raw materials (e.g., $10\%$) is higher than the duty on the finished product (e.g., $5\%$).
• Statement 2 is correct: This structure acts as a “negative protection” for domestic industry. It makes it cheaper for a business to import the final product from abroad rather than importing raw materials and manufacturing it locally. Consequently, it discourages domestic value addition, leads to the “hollowing out” of the manufacturing sector, and hinders initiatives like ‘Make in India.’

Answer: (a)

Explanation

The Herfindahl–Hirschman Index (HHI) is a standard measure used by economists and regulators (like the Competition Commission of India or the US Department of Justice) to determine the market concentration and the competitiveness of a particular industry.

• The HHI is calculated by squaring the market share of each firm competing in a market and then summing the resulting numbers.
• Scale: The index ranges from close to 0 to 10,000.
  • Highly Competitive Market: A low HHI (e.g., below 1,500) indicates a fragmented market with many small players.
• By squaring the market shares, the index gives much heavier weight to firms with large market shares. This makes it more sensitive to the power of dominant players than a simple “four-firm concentration ratio.”

Answer: (a)

Explanation

The Nutrient Based Subsidy (NBS) Scheme represents a significant shift in India’s fertilizer policy, moving away from a product-linked subsidy to a nutrient-linked one.

• Statement 1 is correct: The NBS scheme was launched in April 2010 and is administered by the Department of Fertilizers under the Ministry of Chemicals and Fertilizers.
• Statement 2 is correct: Under this policy, a fixed amount of subsidy (decided annually or bi-annually) is provided on each grade of subsidized Phosphatic and Potassic (P&K) fertilizers based on its nutrient content. The primary nutrients covered are Nitrogen (N), Phosphate (P), Potash (K), and Sulphur (S).
• Statement 3 is incorrect: This is the most critical distinction in Indian fertilizer policy. The NBS scheme excludes Urea. The subsidy on Urea remains “statutorily controlled” and “product-based,” where the government fixes the Maximum Retail Price (MRP). The NBS scheme is specifically for Non-Urea (P&K) fertilizers.

Thus, only Statements 1 and 2 are correct.

Answer: (c)

Explanation

Compulsory Licensing (CL) is a flexibility built into the TRIPS Agreement (Trade-Related Aspects of Intellectual Property Rights) of the WTO. It allows a government to balance the rights of patent holders with the public interest.

• Statement 1 is correct: Compulsory licensing allows a government to authorize a third party (a generic manufacturer or the government itself) to produce a patented product or use a patented process without the consent of the patent owner. While it is often associated with public health emergencies, the TRIPS agreement does not limit it to emergencies; however, in cases of national emergency, the requirement to first negotiate for a voluntary license can be bypassed.
• Statement 2 is incorrect: There is a common misconception that CL is restricted to life-saving medicines or specific diseases like HIV/AIDS. Under the WTO framework, countries have the freedom to determine the grounds upon which such licenses are granted. It can be applied to any patented invention (including clean energy or electronics), though in practice, it is most frequently used for pharmaceuticals to ensure affordable access.
• Statement 3 is correct: Although the patent holder’s consent is not required, the TRIPS Agreement (Article 31) stipulates that the patent holder must be paid “adequate remuneration” in the circumstances of each case, taking into account the economic value of the authorization.

Hence, only Statements 1 and 3 are correct.

Answer: (d)

Solution:
The passage builds a clear argument:

• It introduces neuroplasticity, showing intelligence is adaptable.
• It then highlights a constraint: unequal socio-economic conditions limit access to opportunities.
• The concluding line stresses that solving this requires systemic social reform, not just individual-level improvement.

Options (a), (b), and (c) are extreme or contradicted.
Option (d) captures the core concluding idea, hence correct.

Answer: (a) 2-15-10-14-2-13

Solution

Using alphabetical positions (A=1, B=2, … Z=26):

DANGER → 5-2-15-8-6-19

Using A=1, B=2, …:

D(4) + 1 = 5

A(1) + 1 = 2

N(14) + 1 = 15

G(7) + 1 = 8

E(5) + 1 = 6

R(18) + 1 = 19

From TIGER → 21-10-8-6-19
T (20) + 1 = 21
I (9) + 1 = 10
G (7) + 1 = 8
E (5) + 1 = 6
R (18) + 1 = 19

Thus, the pattern is: each letter is increased by 1

Applying the same to ANIMAL:

A (1) + 1 = 2
N (14) + 1 = 15
I (9) + 1 = 10
M (13) + 1 = 14
A (1) + 1 = 2
L (12) + 1 = 13

Final code: 2-15-10-14-2-13

Answer: (a)

Solution:

From PANDEMIC → QZOCFLJB:
Pattern = alternating +1 and –1 shifts

P(+1)=Q
A(–1)=Z
N(+1)=O
D(–1)=C
E(+1)=F
M(–1)=L
I(+1)=J
C(–1)=B

Apply to COLLEGES:

C(+1)=D
O(–1)=N
L(+1)=M
L(–1)=K
E(+1)=F
G(–1)=F
E(+1)=F
S(–1)=R

Final code: DNMKFFFR

Answer: (b)

Solution:

Pattern: Sum of alphabetical positions
(A=1, B=2, … Z=26)

Check:
SPACE = 19 + 16 + 1 + 3 + 5 = 44
MOON = 13 + 15 + 15 + 14 = 57

Apply to EARTH:
E = 5
A = 1
R = 18
T = 20
H = 8

Total = 5 + 1 + 18 + 20 + 8 = 52

Answer: (a)

Solution:

From STATION → URCRKMP:
Pattern = alternating +2 and –2 shifts

S(+2)=U
T(–2)=R
A(+2)=C
T(–2)=R
I(+2)=K
O(–2)=M
N(+2)=P

Apply to AIRPORT:

A(+2)=C
I(–2)=G
R(+2)=T
P(–2)=N
O(+2)=Q
R(–2)=P
T(+2)=V

Final code: CGTNQPV