Indian Economy MCQs

Notes:
The Special Drawing Rights (SDR) basket is made up of five major international currencies: the U.S. dollar, euro, Chinese renminbi, Japanese yen and British pound sterling. The Indian Rupee is not part of this basket. The SDR basket is reviewed periodically by the IMF, and its composition reflects the relative importance of currencies in global trade and finance.

Notes:
Article 243X of the Indian Constitution allows State Legislatures to empower local bodies to levy taxes such as entertainment tax. Income tax, corporation tax, and customs duty are Union taxes exclusively collected by the central government. Entertainment tax is assigned to municipalities or local authorities under state law for collection and appropriation.

Notes:
The Airports Economic Regulatory Authority (AERA) is the statutory body that regulates tariff and other charges for aeronautical services at major airports, including matters related to development fee. Its role is to determine or revise such fees for airports covered under its jurisdiction. The Airports Authority of India manages airports, but the fee-setting function for major airports is entrusted to AERA under the relevant regulatory framework.

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Commercial Paper is issued as an unsecured promissory note. It was first introduced in India in 1990. CPs have maturities ranging from 7 days to 1 year. Only companies with a high credit rating can issue CPs. The Reserve Bank of India regulates CP issuance. CPs are used for short-term funding needs by corporate bodies, primary dealers, and financial institutions.

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The National Small Savings Fund (NSSF) is part of the Public Account of India. The Public Account includes funds that the government holds on behalf of others, such as small savings schemes, provident funds, and other deposits. The NSSF primarily manages the savings from various small savings schemes like the Public Provident Fund (PPF) and the National Savings Certificate (NSC). These funds are used for financing government projects and development activities.

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An inflationary gap exists when actual GDP exceeds potential GDP. This describes an economic condition where production surpasses the sustainable full employment level, creating excess demand over supply. The concept was introduced by John Maynard Keynes. The inflationary gap is calculated as Actual GDP minus Potential GDP. This situation generally leads to increased prices and inflationary pressures in the economy.

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All three statements are correct. India was among the founding members of the AIIB and signed the MoU in October 2014. The bank’s headquarters are indeed located in Beijing’s Asia Financial Center in the Olympic Forest Park area. As of now, AIIB has 111 members (including prospective members) from different continents, confirming it has over 100 member states.

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Natural gas, essentially methane, is upgraded by combination with nitrogen from the air to form nitrogen fertilizer. 80% of the gas is used as feedstock for fertilizer while 20% is used for heating the process and producing electricity.

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CRR is the portion of deposits banks must keep with the Reserve Bank of India. When CRR increases, banks have less money to lend, which lowers the money supply. With reduced funds available, lending interest rates rise. Reduced money supply and higher lending rates lead to lower inflation. As of 2024, RBI uses CRR as a monetary policy tool for credit and inflation control.

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Capital-intensive industries use automated machinery for production, as seen in sectors like automobile manufacturing. Automation reduces the need for human labor. This leads to displacement of workers, causing structural unemployment. In 2022, India’s manufacturing sector showed a trend toward greater automation. Labor-intensive industries offer more jobs, while capital-intensive ones contribute to unemployment.