Indian Economy MCQs

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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 “Government Route” in the language of foreign investments refers to the scenario where a foreign investor needs to acquire prior approval from the government to make an investment. This route is usually applicable for sectors which are of strategic importance or have implications for national security, where it would be imperative for the host country to have an additional level of scrutiny and control.

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Maruti Udyog Limited (now Maruti Suzuki India Limited) was actually the first public sector enterprise in India to be privatized. Maruti Udyog Limited was established in 1981 as a government owned company under the provisions of Indian Companies Act. In 1992, the Government allowed Suzuki Motor Corporation, Japan to purchase 40% of Maruti’s stakes leading to partial privatization. Finally on 17th July 2002, the Government sold its remaining stake and Maruti Suzuki became a private company. So Maruti Udyog Ltd, which is currently known as Maruti Suzuki India Ltd, was the first instance of privatization of a state owned company in India. The process started in 1992 with partial privatization and was completed in 2002. However, first fully privatized PSE was Modern Foods India Ltd in 2000. Modern Food Industries was set up in 1965 as a public sector enterprise under the Ministry of Agriculture. It was engaged in producing bread, biscuits and other bakery products. In January 2000, the Government of India decided to privatize Modern Food Industries by selling its equity to the public. This marked the beginning of the disinvestment and privatisation drive in India.

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The correct answer is “Penny Stock.” Penny stocks are typically low-priced shares, often trading for less than $5, and are known for their high volatility and risk due to limited liquidity and less regulatory oversight. They are often associated with smaller companies and can be subject to important price manipulation. The term “penny stock” originated from the fact that these stocks were once traded for just a few cents.

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Fiscal Responsibility and Budget Management (FRBM) Act, 2003 requires the Ministry of Finance to review every quarter the trends in Receipts and Expenditure in relation to the Budget and place it before both Houses of Parliament. As part of this exercise, the Economic Division of Department of Economic Affairs prepares the Mid-Year Review in the second quarter of each year for placing it before Parliament. In addition, at the end of first quarter and third quarter a Macro-Economic backdrop statement is prepared and provided to the Budget Division for incorporating in the review of quarterly receipts and expenditure

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The correct answer is “London Inter Bank Offered Rate.” LIBOR is a benchmark interest rate that reflects the average rate at which major global banks lend to one another in the London interbank market. It is used as a reference rate for various financial products, including loans and derivatives. LIBOR was historically published for multiple currencies and maturities but has been phased out in favor of more robust benchmarks like SOFR (Secured Overnight Financing Rate) due to manipulation scandals.

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In India, the exchange rate system is managed floating from 1994 onwards and hence the relevant currency movements are appreciation and depreciation. Managed float regime is the environment in which exchange rates fluctuate from day to day.

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In 1995, Banking Ombudsman scheme was launched with an objective to provide quicker solutions to customers’ complaints.

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Priority Sector Lending means that the banks have to make sure that they lend to few specific sectors like agriculture and allied activities, micro and small enterprises, poor people for housing, students for education and other low income groups and weaker sections.

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BNP Paribas, a foreign bank of India, is a France based bank having 8 operational branches in India. It is a major foreign bank in India.