Static Quiz 22 June 2023
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Static Quiz 22 June 2023 for UPSC Prelims
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- Question 1 of 5
1. Question
Which of these were significant elements of the New Industrial Policy, 1991?
(a) De-reservation and de-licensing of certain industries
(b) The revival of the MRTP Limit (Monopolistic and Restrictive Trade Practices)
(c) Promotion to Foreign Investment
(d) Commitment to a Foreign Exchange Management Act allowing improved current account convertibilitySelect the correct answer using the codes below.
CorrectSolution: b)
Statement 1: This policy abolished the Industrial licensing for all industries except for a short list of 18 industries. This list of 18 industries was further pruned in 1999 whereby the number reduced to six industries viz. drugs and pharmaceuticals, hazardous chemicals, explosives such as gun powder and detonating fuses, tobacco products, alcoholic drinks, and electronic, aerospace and defence equipment.Statement 2: The limit was abolished and companies were allowed to expand freely with only certain limitations.
Statement 3: This was the first Industrial policy in which foreign companies were allowed to have majority stake in India. In 47 high priority industries, up to 51% FDI was allowed. For export trading houses, FDI up to 74% was allowed. Today, there are numerous sectors in the economy where government allows 100% FDI.
Statement 4: Restrictions on exchange of currency for the purposes of current account (such as trade or remittances) were revoked.
IncorrectSolution: b)
Statement 1: This policy abolished the Industrial licensing for all industries except for a short list of 18 industries. This list of 18 industries was further pruned in 1999 whereby the number reduced to six industries viz. drugs and pharmaceuticals, hazardous chemicals, explosives such as gun powder and detonating fuses, tobacco products, alcoholic drinks, and electronic, aerospace and defence equipment.Statement 2: The limit was abolished and companies were allowed to expand freely with only certain limitations.
Statement 3: This was the first Industrial policy in which foreign companies were allowed to have majority stake in India. In 47 high priority industries, up to 51% FDI was allowed. For export trading houses, FDI up to 74% was allowed. Today, there are numerous sectors in the economy where government allows 100% FDI.
Statement 4: Restrictions on exchange of currency for the purposes of current account (such as trade or remittances) were revoked.
- Question 2 of 5
2. Question
Agriculture was chosen as the Prime Moving force of the economy since 2002 on the advice of the Planning Commission. As a major policy shift, it was aimed at solving which of the following issues affecting the Indian Economy?
(a) Boosting aggregate demand in the economy
(b) Ending the production monopoly of the PSUs in the agricultural sector
(c) Increasing rural employmentSelect the correct answer using the codes below.
CorrectSolution: b)
Statement 1: Agriculture is a key feed to other industries, for e.g. food processing sector. An increase in agricultural growth directly translates to growth in other sectors of the economy.Statement 2: The movement was intended not to cut down competition in any particular sector of the economy rather to facilitate growth in all the sectors.
Statement 3: Investment in agriculture also involves creation of capital goods such as warehousing, irrigation infrastructure which both directly and indirectly generates employment.
The other major challenges to be solved were:Food Security, which in a sense means ensuring adequate infrastructure in rural areas in agriculture. It is because food security is not just about productivity; it is also about the accessibility of food.
Market Failure: It also had to solve the case of India being a market failure. It means that goods and services are available in the economy, but there is little demand.
This is because the majority of population lives on agriculture which does not provide them with good purchasing power. With this policy shift, their incomes were supposed to be improved and market demand be boosted. This would also involve generating more rural employment.
IncorrectSolution: b)
Statement 1: Agriculture is a key feed to other industries, for e.g. food processing sector. An increase in agricultural growth directly translates to growth in other sectors of the economy.Statement 2: The movement was intended not to cut down competition in any particular sector of the economy rather to facilitate growth in all the sectors.
Statement 3: Investment in agriculture also involves creation of capital goods such as warehousing, irrigation infrastructure which both directly and indirectly generates employment.
The other major challenges to be solved were:Food Security, which in a sense means ensuring adequate infrastructure in rural areas in agriculture. It is because food security is not just about productivity; it is also about the accessibility of food.
Market Failure: It also had to solve the case of India being a market failure. It means that goods and services are available in the economy, but there is little demand.
This is because the majority of population lives on agriculture which does not provide them with good purchasing power. With this policy shift, their incomes were supposed to be improved and market demand be boosted. This would also involve generating more rural employment.
- Question 3 of 5
3. Question
India agreed to the conditionalities of the World Bank and IMF and announced the New Economic Policy (NEP) 1991 to avert
CorrectSolution: a)
Justification: Foreign exchange reserves in the late 1980s declined to a level that was not adequate to finance imports for more than two weeks. There was also not sufficient foreign exchange to pay the interest that needs to be paid to international lenders. Therefore, a BoP crisis was looming to avert which India resorted to the help of WB and IMF.Other objectives of the policy were to tackle high inflation, mismanagement of the economy, revive growth prospects etc. However, the most appropriate reason is to avert a BoP crisis.
The NEP aimed towards creating a more competitive environment in the economy and removing the barriers to entry and growth of firms. It can broadly be classified into two groups: the stabilization measures and the structural reform measures.
IncorrectSolution: a)
Justification: Foreign exchange reserves in the late 1980s declined to a level that was not adequate to finance imports for more than two weeks. There was also not sufficient foreign exchange to pay the interest that needs to be paid to international lenders. Therefore, a BoP crisis was looming to avert which India resorted to the help of WB and IMF.Other objectives of the policy were to tackle high inflation, mismanagement of the economy, revive growth prospects etc. However, the most appropriate reason is to avert a BoP crisis.
The NEP aimed towards creating a more competitive environment in the economy and removing the barriers to entry and growth of firms. It can broadly be classified into two groups: the stabilization measures and the structural reform measures.
- Question 4 of 5
4. Question
Consider the following statements with regard to depreciation:
1. It refers to that portion of the capital goods which goes in maintenance and replacement of existing goods due to wear and tear.
2. To obtain net investment in an economy, depreciation is subtracted from the gross investment.
3. It takes into account unexpected fall in the market value of the assets due to recession.
Which of the statements given above is/are correct?CorrectAnswer: D
It does not take in account unexpected and sudden destruction caused due to fall in the market value of the assets due to economic recession, natural calamities like earthquake, floods or fire. Loss value of fixed assets owing to unexpected obsolescence is called capital loss not depreciation
IncorrectAnswer: D
It does not take in account unexpected and sudden destruction caused due to fall in the market value of the assets due to economic recession, natural calamities like earthquake, floods or fire. Loss value of fixed assets owing to unexpected obsolescence is called capital loss not depreciation
- Question 5 of 5
5. Question
What are ‘Wage Goods’?
CorrectSolution: a
Wage goods, in contrast to capital goods, are consumed by the workers of the country. In the initial phase of Indian economic development, it was alleged that wage goods were given a lesser priority as compared to the capital goods that require a specialized workforce and heavy investment to pick up. This industrialization-led strategy of development neglected the constraint of wage goods availability on two things: Employment generation as demand for workers and thus wage goods increases post-economic growth, and its potential influence on inflation that is caused by the shortage of wage goods as a nation’s GDP starts growing. However, with the renewed focus on catching up with National GDP, wage goods are no longer neglectedIncorrectSolution: a
Wage goods, in contrast to capital goods, are consumed by the workers of the country. In the initial phase of Indian economic development, it was alleged that wage goods were given a lesser priority as compared to the capital goods that require a specialized workforce and heavy investment to pick up. This industrialization-led strategy of development neglected the constraint of wage goods availability on two things: Employment generation as demand for workers and thus wage goods increases post-economic growth, and its potential influence on inflation that is caused by the shortage of wage goods as a nation’s GDP starts growing. However, with the renewed focus on catching up with National GDP, wage goods are no longer neglected