Indian Economy MCQs

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Gresham’s law, enunciated by Sir Thomas Gresham, states that inferior currency (bad money) in circulation displaces valuable or superior currency (good money) if both are accepted at same face value, as people hoard the good currency and spend the bad.

Notes:
Monetary policy is conducted by central banks to control money supply and interest rates. In India, the Reserve Bank of India manages monetary policy under the Reserve Bank of India Act, 1934. Changing interest rates is a primary method to influence inflation and economic growth. The Monetary Policy Committee determines policy repo rates. Interest rate changes affect borrowing, spending, and inflation in the economy.

Notes:
Income tax was introduced in India in 1860 by Sir James Wilson. Income tax rates in India increase with higher income slabs as per the Finance Act. The income tax structure is defined in the Income Tax Act, 1961. Income tax collection is administered by the Central Board of Direct Taxes. A progressive tax system is implemented where tax liability rises as an individual’s income increases, with no fixed single rate for all.

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The main motive of the Reserve Bank of India (RBI) behind the mechanism known as devolvement is to counter the volatility in the price of Government Securities. Devolvement occurs when underwriters fail to fully subscribe to a government bond auction, leading the RBI to purchase the unsold portion. This helps stabilize the market by ensuring liquidity and maintaining orderly pricing of government securities, which are crucial for fiscal policy and economic stability. The RBI’s role in this process is vital for managing interest rates and ensuring confidence in government debt instruments.

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The Reserve Bank of India regulates foreign currency accounts and remittances for Indian residents. RBI acts under the Foreign Exchange Management Act, 1999 and the Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2015. Amendments until 2025 empower RBI to set conditions for outward and inward remittance and opening of overseas bank accounts. RBI issues notifications for compliance with FEMA rules.

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The Global Enabling Trade Report is published by the World Economic Forum. The first edition appeared in 2008. The report assesses the policies, institutions, and services facilitating trade globally. The World Economic Forum is headquartered in Geneva, Switzerland, and was established in 1971. The report includes the Enabling Trade Index, which ranks countries based on their trade enabling factors.

Notes:
The primary difference between a free trade area and a customs union is that members of a customs union adopt a common set of external trade barriers. In a free trade area, member countries eliminate tariffs among themselves but maintain their own external tariffs. Examples include NAFTA (now USMCA) as a free trade area and the European Union as a customs union, which has a unified external tariff policy.

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Small Industries Development Bank of India is an independent financial institution aimed to aid the growth and development of micro, small and medium-scale enterprises. Small Industries Development Bank of India (SIDBI) was set up on April 2, 1990 under small industries development bank of India act.

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The Global Innovation Index is published by WIPO with partners, the Global Competitiveness Index by the World Economic Forum, and only the Ease of Doing Business Index is published by the World Bank Group. Thus, among the options, only the third report is published by the World Bank. The other two are not associated with the World Bank.

Notes:
Fourth option is the correct answer. Airtel Payments Bank is India’s first payments bank.