Monday, September 30, 2013

Rajan Committee’s new methodology to replace ‘special category’ status for devolution of funds to States

The panel set up by the government under the chairmanship of the then Chief Economic Advisor Raghuram Rajan (now RBI governor) has suggested ending the ‘special category’ criteria for providing additional assistance to poorer states.
 Rajan Committee:
The Union Government set up Raghuram Rajan Committee amid demands for “special category” status by Bihar and some other status to get additional financial assistance from the Centre. The Committee was tasked to suggest methods for identifying backwardness of states using a variety of criteria and also to recommend how the criteria may be reflected in future planning and devolution of funds from the central government to the states.
Key recommendations of the Rajan Committee:
The Rajan Committee has made two key recommendations for devolution of funds to states. They are:
a) A new methodology based on a ‘Multi Dimensional Index (MDI)’.
Depending on the scores of the 28 states on the MDI, they will be split into 3 categories:
  1. Least developed
  2. Less developed
  3. Relatively developed
b) Each state should get a basic fixed allocation and an additional allocation depending on its development needs and development performance. 
As per the Committee, these two recommendations, along with the allocation methodology, will effectively subsume what is now “Special Category” status.
According to the MDI scores: 
  • Least Developed states: Odisha, Bihar, Madhya Pradesh, Chhattisgarh, Jharkhand, Arunachal Pradesh, Assam, Meghalaya, Uttar Pradesh and Rajasthan.
  • Less Developed statesManipur, West Bengal, Nagaland, Andhra Pradesh, Jammu and Kashmir, Mizoram, Gujarat, Tripura, Karnataka, Sikkim and Himachal Pradesh.
  • Relatively Developed states: Goa, Kerala, Tamil Nadu, Punjab, Maharashtra, Uttrakhand and Haryana.

Monday, September 9, 2013

Indian Economy Practice Questions

1. Which of the following has become the first Regional Rural Bank to issue a debit card in the country? 
(A) Punjab Gramin Bank (B) Punjab National Bank 
(C) Kashi Gomti Samyut Gramin Bank (D) Ahmedabad RRB 
Answer: Kashi Gomti Samyut Gramin Bank 

2. Which of the following statements is/are correct? 
1. Maharashtra ranks first in the length of roadways among various States of the country. 
2. National Highways comprise only about 2 percent of the total length of roads and carry about 40 percent of the total traffic. 
(A) 1 only (B) 2 only 
(C) Both 1 and 2 (D) Neither 1 nor 2 
Answer: Both 1 and 2 

3. With reference to Finance Commission which of the following statements is/are correct? 
1. The recommendations of 13th Finance Commission are applicable between the period 2010-15. 
2. Formation of 13th. Finance Commission was delayed due to presidential election. 
(A) 1 only (B) 2 only 
(C) Both 1 and 2 (D) Neither 1 nor 2 
Answer: 1 only 

4. National Social Security Fund has been created in order to– 
(A) fund workers of unorganised sector including weavers, rickshaw pullers, bidi makers, etc. 
(B) finance workers of organised sector. 
(C) help create self employment opportunities for unemployed youth. 
(D) to finance self help groups. 
Answer: fund workers of unorganised sector including weavers, rickshaw pullers, bidi makers, etc. 

5. Consider the following statements– 
1. Raising the repo rate will control inflation and rein in inflationary expectation. 
2. Monetary policy operates largely through demand compression in the short run. 
3. Manufacturing sector has emerged as the key driver of growth in the Indian economy. 
Which of the above statements is/are correct? 
(A) 1 and 3 (B) 1 and 2 
(C) 2 and 3 (D) All of these 
Answer: 1 and 2 

6. Which of the following is/are the major contributory factor(s) to high inflation related to current Indian economic scenario? 
(A) Higher primary articles prices such as vegetables, eggs, meat and fish. 
(B) High global commodity prices such as metal and chemical prices. 
(C) High international crude and petroleum prices. 
(D) All of these 
Answer: All of these 

7. Which of following statements stand/s correct on the account of sharp depreciation of ‘Rupee’?
1. Decrease in foreign institutional investor inflows. 
2. Withdrawal of investment by foreign investors because of the economic meltdown in Europe and inflation in emerging market economy. 
(A) 1 only (B) 2 only 
(C) Both 1 and 2 (D) Neither 1 nor 2 
Answer: Both 1 and 2 

8. With reference to India’s external debt profile which of the following statements is/are correct? 
(A) There is an overwhelming dominance of long-term borrowings over short-term debt 
(B) External debt to GDP ratio shows that India’s external debt is within the manageable limits, 
(C) Raising sovereign loans on concessional terms with long-term maturities has been given priority, 
(D) All of these 
Answer: All of these 

9. Which of the following does not include monetary policy instruments? 
(A) Repo rate (B) Cash reserve ratio 
(C) Open market operations (D) Foreign direct investment 
Answer: Foreign direct investment 

10. Which of the following is concerned with inequality in distribution of family income? 
(A) Gini Multiplier (B) Gini Index 
(C) Lorenz Curve (D) Laffer Curve 
Answer: Gini Index 

11. The thrust of National Rural Health Mission (NRHM) is on– 
(A) establishing a fully functional, community-owned decentralised health delivery system. 
(B) providing accessible, affordable and accountable quality health services to all. 
(C) functional health system at the district level.
(D) institutional integration with the fragmented health sector. 
Answer: establishing a fully functional, community-owned decentralised health delivery system. 

12. Consider the following statements with reference to National Rural Livelihood Mission (NRLM)– 
1. National Rural Livelihood Mission has been launched with the aim to eliminate poverty in rural areas. 
2. Under NRLM, self-help groups will be constituted in the form of federation to provide self-employment opportunities to the rural people. 
Which of the above statements is/are correct? 
(A) 1 only (B) 2 only 
(C) Both 1 and 2 (D) Neither 1 nor 2 
Answer: Both 1 and 2 

13. Which of the following does not lead to increase in foreign exchange reserves? 
1. Devaluation of Rupee. 
2. Increased foreign investment. 
3. Supply of dollar by Central Bank. 
4. Availability of loans from international institutions. 
(A) 1 and 2 only (B) 2, 3 and 4 
(C) 1, 2 and 4 (D) All of these 
Answer: 1, 2 and 4 

14. Consider the following statements– 
1. A flexible external commercial borrowing (ECB) policy was an important reason why India emerged largely unscathed from the global economic crisis. 
2. The liberalisation of ECB policy has to keep in view the need to maintain sustainable level of external debt ratios. 
Which of the above statements is/are incorrect? 
(A) 1 only (B) 2 only 
(C) Both 1 and 2 (D) Neither 1 nor 2 
Answer: 1 only 

15. Which of the following countries signed a Comprehensive Economic Partnership Agreement (CEPA) with India in 2011? 
(A) Japan (B) Malaysia 
(C) Canada (D) Australia 
Answer: Japan 

16. Which of the following consists of major water-polluting industries? 
1. Fertilisers 2. Refineries 3. Pulp & paper 
4. Plastic 5. Thermal 
(A) 1, 2 and 3 only (B) 2, 3 and 4 
(C) 4 and 5 only (D) All of these 
Answer: 1, 2 and 3 only 

17. Which of the following emissions are considered as Green House gas emissions under Kyoto Protocol mechanism? 
1. Carbon dioxide (CO2) 2. Methane (CH4
3. Nitrous oxide (N2O) 4. Hydrofluorocarbons (HFCs) 
5. Perfluorocarbons (PFCs) 
(A) 1, 2 and 3 only (B) 2, 3 and 4 only 
(C) 1, 2, 3 and 4 (D) All of these 
Answer: All of these 

18. Consider the following statements– 
1. Census 2011 is the 15th census of India since 1872. 
2. Census 2011 was conducted in two phases. 
Which of these statements is/are correct? 
(A) 1 only (B) 2 only 
(C) Both 1 and 2 (D) Neither 1 nor 2 
Answer: Both 1 and 2 

19. Which of the following statements is/are correct? 
1. ‘Customs Duty’ revenue earned by the Union Government is not distributed to the States. 
2. ‘Commodity Exchanges’ market is independently regulated by Forward Market Commissions. 
(A) 1 only (B) 2 only 
(C) Both 1 and 2 (D) Neither 1 nor 2 
Answer: Both 1 and 2 

20. Select the correct statement(s): 
1. National Rural Development Institute is situated at Hyderabad. 
2. The headquarter of SIDBI is located in Lucknow. 
(A) 1 only (B) 2 only 
(C) Both 1 and 2 (D) Neither 1 nor 2 
Answer: Both 1 and 2

Indian Economy Practice MCQs

1. Child sex ratio in the age group 0-6 years as per provisional Census 2011 report is– 
(A) 921 (B) 925 
(C) 914 (D) 920 
Answer: 914 

2. Consider the following statements– 
1. Indian Railways is the second largest rail network in the world under a single management. 
2. In Indian Railways, about 50% of the total track km has been electrified. 
Which of the above statements is/are correct? 
(A) 1 only (B) 2 only 
(C) Both 1 and 2 (D) Neither 1 nor 2
Answer: 1 only 

3. An ‘Innovation fund’ of Rs. 5,000 crore has been planned by the government with an aim to– 
(A) promote research and development in defence sector. 
(B) promote new talents and their innovation tendencies. 
(C) finance the promotional activities to attract foreign direct investment. 
(D) promote the development of new generation satellites. 
Answer: promote new talents and their innovation tendencies.

4. With reference to Manufacturing consider the following statements– 
1. Manufacturing occupies an unusually large weight (65 percent), relative to its share in national output. 
2. It has an exaggerated bearing on inflation measurement in India. 
Which of the above statements is/are correct? 
(A) 1 only (B) 2 only
(C) Both 1 and 2 (D) Neither 1 nor 2 
Answer: Both 1 and 2 

5. With reference to growth in Indian economy which of the following statements is/are correct? 
1. The long-term growth rate of the agriculture sector over the last 60 years has been 2.7 percent.
2. Industrial sector registered a higher growth rate than the services sector ever since Independence. 
3. Services sector accounts for highest share of sectoral composition of GDP followed by Industry and Agriculture. 
(A) 1 and 3 (B) 2 and 3 
(C) 1 and 2 (D) All of these 
Answer: 1 and 3 

6. Scheduled Commercial Banks are allowed to borrow at their own discretion using– 
(A) Net demand and time liabilities (B) Marginal standing facility 
(C) Open market operation (D) None of these 
Answer: Marginal standing facility 

7. Which of the following does not mainly consist of Portfolio Investment? 
(A) FII investment (B) American depository receipts (ADRs) 
(C) Global depository receipts (GDRs) (D) None of these 
Answer: None of these 

8. Which of the following does not contribute to sustainable development? 
(A) Improvement of economic well being with social justice. 
(B) Restrained use of, natural resources. 
(C) Protection of interests of future generations. 
(D) None of these 
Answer: None of these 

9. Which Committee set up by RBI has the mandate to study issues and concerns in the micro-finance sector? 
(A) Y. H. Malegam Committee (B) J. J. Irani Committee 
(C) Mashelkar Committee (D) None of these 
Answer: Y. H. Malegam Committee 

10. A state of economy where aggregate demand is greater than the total supply of goods and services is called– 
(A) Repressed-inflation (B) Reflation 
(C) Deflation (D) Demand pull-inflation 
Answer: Repressed-inflation 

11. Which of the following-forms a major innovation of National Rural Health Mission? 
(A) Creation of a cadre of Accredited Social Health Activists (ASHA). 
(B) Improvised hospital care. 
(C) Decentralisation at district level arid effective utilisation of resources through NGOs and community. 
(D) All of these 
Answer: All of these 

12. Which of the following forms an important component of the foreign exchange reserves of the country? 
(A) Foreign exchange assets of RBI (B) Gold reserves of RBI 
(C) SDR holdings of the Government (D) All of these 
Answer: All of these 

13. According to World Bank’s “Global Development Finance, 2012” report, India is the fifth most indebted country, after China, the Russian Federation, Brazil and– 
(A) Turkey (B) Indonesia 
(C) United States of America (D) Greece 
Answer: Turkey 

14. Portfolio Investment consists of the following–
1. Foreign direct investment 2. Foreign institutional investment 
3. American depository receipts 4. Global depository receipts 
Select the correct code–
(A) 1 and 2 only (B) 2, 3 and 4 
(C) 1 and 4 (D) 1, 2 and 3 
Answer: 2, 3 and 4 

15. In which group of crops, growth rate in yield levels appears to have plateaued over the last few years? 
(A) Rice and Wheat (B) Pulses and Mustard 
(C) Sugarcane and Oilseeds (D) Coarse cereals and plantation crop 
Answer: Rice and Wheat 

16. Which of the following forms part of National Manufacturing Policy? 
1. Provision for National Investment and Manufacturing Zones (NIMZs). 
2. Create appropriate skill sets among the rural migrant and urban poor for their easy absorption in manufacturing. 
3. Enable manufacturing to contribute at least 25% of GDP by 2022. 
(A) 1 only (B) 2 only 
(C) 1 and 2 (D) All of these 
Answer: All of these 

17. Consider the following statements with regard to Environmental Performance Index– 
1. India’s Environmental Performance Index rank is 122 out of 132 countries. 
2. India’s performance is better on protection of its forests and fisheries. 
(A) 1 only (B) 2 only 
(C) Both 1 and 2 (D) Neither 1 nor 2 
Answer: Both 1 and 2 

18. Which of the following States has formed ‘Innovation Council’ based on the lines of National Innovation Council? 
(A) Bihar (B) Haryana 
(C) Karnataka (D) West Bengal 
Answer: Haryana 

19. ‘Stagflation’ indicates– 
(A) Inflation with growth (B) Deflation with growth 
(C) Inflation with depression (D) Inflation with stagnation 
Answer: Inflation with depression 

20. Which group of labour comes under the provision of Aam Admi Yojana? 
(A) All labour in rural areas 
(B) Only labour of urban region 
(C) All landless labour living below poverty line in rural areas 
(D) None of these
Answer: All landless labour living below poverty line in rural areas