Economics UPSC PYQ 2016

39.

With reference to prepackaged items in India, it is mandatory to the

manufacturer to put which

of the following information

on the main label, as per the

Food Safety and Standards

(Packaging and Labelling) Regulations, 2011?

1.List of ingredients including additives

2.Nutrition information

3.Recommendation, if any,

made by the medical

profession about the

possibility of any allergic

reactions Vegetarian/nonvegetarian

Select the correct answer

using the code given below.

(a) 1, 2 and 3

(b) 2, 3 and 4

(d) 1 and 4 only

Correct Answer:

Explanation:

Statement 1 – Correct

As per the Food Safety and Standards (Packaging and Labelling) Regulations, 2011, pre-packaged food must display the list of ingredients, including food additives, in descending order of their composition.

Statement 2 – Correct

Nutrition information is mandatory. It includes energy value, protein, carbohydrate, sugars, fat, and other nutritional components per 100 g/ml or per serving.

Statement 3 – Incorrect

Medical recommendations regarding possible allergic reactions are not required. However, declaration of allergens (such as milk, peanuts, gluten, etc.) is mandatory. The regulation requires disclosure of allergen content, not a medical recommendation.

Statement 4 – Correct

It is mandatory to display whether the food is vegetarian or non-vegetarian using the prescribed green or brown symbol.

Memory Trick:

“Ingredients + Nutrition + Veg mark = Must.

Medical advice = Not required.”

38.

Pradhan Mantri MUDRA

Yojana is aimed at

(a) bringing the small

entrepreneurs into formal

financial system

(b) providing loans to poor

farmers for cultivating

particular crops

and destitute persons

(d) funding the voluntary

organizations involved in the

promotion of skill

development and

employment generation

Correct Answer:

(a) bringing the small entrepreneurs into formal financial system

Explanation:

Option (a) – Correct

Pradhan Mantri MUDRA Yojana (PMMY) was launched in 2015 to provide collateral-free loans to micro and small non-corporate, non-farm enterprises.

Its objective is to bring small entrepreneurs, informal businesses, and micro units into the formal financial system through institutional credit.

Loans are provided under three categories:

• Shishu (up to ₹50,000)

• Kishor (₹50,000 to ₹5 lakh)

• Tarun (₹5 lakh to ₹10 lakh)

Option (b) – Incorrect

Loans to poor farmers for cultivation are provided under agricultural credit schemes such as Kisan Credit Card (KCC), not MUDRA.

Option (c) – Incorrect

Pensions to old and destitute persons are covered under schemes like National Social Assistance Programme (NSAP), not MUDRA.

Option (d) – Incorrect

MUDRA does not fund voluntary organisations; it provides loans directly to micro-entrepreneurs through banks and financial institutions.

Memory Trick:

“MUDRA = Micro Units Development for small entrepreneurs.”

37.

Belt and Road Initiative’ is

sometimes mentioned in the

news in the context of the

affairs of

(a) African Union

(b) Brazil

(d) China

Correct Answer:

(d) China

Explanation:

Option (a) – Incorrect

The Belt and Road Initiative (BRI) is not an initiative of the African Union, although several African countries participate in it.

Option (b) – Incorrect

Brazil is not the originator of the Belt and Road Initiative.

Option (c) – Incorrect

The European Union is not the creator of the Belt and Road Initiative, though some European countries have engaged with it.

Option (d) – Correct

The Belt and Road Initiative (BRI) was launched by China in 2013 under President Xi Jinping.

It aims to enhance global connectivity through infrastructure development, trade corridors, ports, railways, highways, and maritime routes linking Asia, Europe, Africa and beyond.

Memory Trick:

“BRI = Beijing’s Road Initiative.”

Belt and Road Initiative (BRI) faces major controversies centered on "debt-trap diplomacy," where high-interest loans for infrastructure projects burden developing nations, sometimes leading to the forfeiture of strategic assets to China.

Other critical issues include poor project quality, environmental damage, corruption, and increased geopolitical influence for Beijing.

36.

Which of the following is not

a member of ‘Gulf

Cooperation Council’?

(a) Iran

(b) Saudi Arabia

(d) Kuwait

Correct Answer:

(a) Iran

Explanation:

Option (a) – Correct

Iran is not a member of the Gulf Cooperation Council (GCC).

Option (b) – Incorrect

Saudi Arabia is a founding member of the Gulf Cooperation Council.

Option (c) – Incorrect

Oman is a member of the Gulf Cooperation Council.

Option (d) – Incorrect

Kuwait is a member of the Gulf Cooperation Council.

GCC Members:

Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates.

Memory Trick:

“GCC = 6 Arab Gulf Monarchies, No Iran.”

Expected Questions

Gulf Cooperation Council

35.

Consider the following

statements:

1.New Development Bank

has been set up by APEC.

2.The headquarters of New

Development Bank is in

Shanghai.

Which of the statements

given above is/are correct?

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

Correct Answer:

(b) 2 only

Explanation:

Statement 1 – Incorrect

The New Development Bank (NDB) was established by the BRICS countries (Brazil, Russia, India, China, and South Africa) in 2014.

It was not set up by APEC (Asia-Pacific Economic Cooperation).

Statement 2 – Correct

The headquarters of the New Development Bank is located in Shanghai, China.

Memory Trick:

“NDB = BRICS Bank, based in Beijing’s neighbour Shanghai.”

34.

‘SWAYAM’, an initiative of

the Government of India,

aims at

(a) promoting the Self Help

Groups in rural areas

(b) providing financial and

technical assistance to young

start-up entrepreneurs

and health of adolescent girls

(d) providing affordable and

quality education to the

citizens for free

Correct Answer:

(d) providing affordable and quality education to the citizens for free

Explanation:

Option (a) – Incorrect

Promotion of Self Help Groups (SHGs) is related to schemes like National Rural Livelihoods Mission (NRLM), not SWAYAM.

Option (b) – Incorrect

Financial and technical assistance to start-ups relates to schemes such as Start-up India, not SWAYAM.

Option (c) – Incorrect

Education and health of adolescent girls is related to schemes like SABLA or Poshan-related initiatives, not SWAYAM.

Option (d) – Correct

SWAYAM (Study Webs of Active Learning for Young Aspiring Minds) is an online learning platform launched by the Government of India to provide free access to high-quality educational courses from school level to postgraduate level.

It aims to bridge the digital divide and provide affordable, accessible, and quality education.

Memory Trick:

“SWAYAM = Study Web for All Minds.”

33.

Recently, India’s first

‘National Investment and

Manufacturing Zone’ was

proposed to be set up in

(a) Andhra Pradesh

(b) Gujarat

(d) Uttar Pradesh

Correct Answer:

(a) Andhra Pradesh

Explanation:

Option (a) – Correct

India’s first National Investment and Manufacturing Zone (NIMZ) was proposed to be set up in Andhra Pradesh under the National Manufacturing Policy (2011).

The NIMZ was planned in Prakasam district (near Ongole) in Andhra Pradesh.

Option (b) – Incorrect

Although Gujarat has strong industrial zones, the first proposed NIMZ was not in Gujarat.

Option (c) – Incorrect

Maharashtra has industrial corridors, but it was not the first proposed NIMZ location.

Option (d) – Incorrect

Uttar Pradesh was not the first state where NIMZ was proposed.

Memory Trick:

“NIMZ started in AP.”

Expected Questions

National Investment and Manufacturing Zones (NIMZ) – UPSC Ready Notes

1️⃣ What is NIMZ?

National Investment and Manufacturing Zones (NIMZs) are large, integrated industrial townships established under the National Manufacturing Policy (NMP), 2011.

Objective:

• Increase manufacturing share in GDP to 25%

• Create 100 million jobs

• Promote export growth

• Develop world-class infrastructure

They function as autonomous industrial townships with strong Centre–State partnership.

2️⃣ Key Features

• Minimum area: Around 5,000 hectares

• At least 30% of land reserved for manufacturing

• Focus on integrated infrastructure (roads, power, logistics, housing, skill development)

• Public–Private Partnership (PPP) model

• Special Purpose Vehicle (SPV) for governance

The Department for Promotion of Industry and Internal Trade (DPIIT) under Ministry of Commerce and Industry oversees NIMZ implementation.

3️⃣ Difference Between NIMZ and SEZ

NIMZ:

• Focus on entire industrial ecosystem

• Includes domestic manufacturing + exports

• Larger integrated township model

Special Economic Zones (SEZ):

• Primarily export-oriented

• Tax incentives focused

• Smaller, export-focused enclaves

Simple line:

SEZ = Export hub

NIMZ = Manufacturing city

4️⃣ Examples

Final approvals have been given to NIMZs in:

• Prakasam (Andhra Pradesh)

• Sangareddy (Telangana)

• Kalinganagar (Odisha)

Some NIMZs are linked with industrial corridors such as the Delhi-Mumbai Industrial Corridor (DMIC).

🧠 Quick Memory Line

“NIMZ = National Manufacturing Mega Zone.”

32.

The term ‘Base Erosion and

Profit Shifting’ is sometimes

seen in the news in the

context of

(a) mining operation by

multinational companies in

resource-rich but backward

areas

(b) curbing of the tax evasion

by multinational companies

resources of a country by

multinational companies

(d) lack of consideration of

environmental costs in the

planning and

implementation of

developmental projects.

Correct Answer:

(b) curbing of the tax evasion by multinational companies

Explanation:

Option (a) – Incorrect

Base Erosion and Profit Shifting (BEPS) is not related to mining operations in backward areas. It deals with international taxation.

Option (b) – Correct

BEPS refers to tax avoidance strategies used by multinational companies to shift profits to low-tax jurisdictions, thereby eroding the tax base of higher-tax countries.

The Organisation for Economic Co-operation and Development (OECD) and G20 launched the BEPS Project to curb such tax avoidance practices.

Option (c) – Incorrect

Exploitation of genetic resources relates to issues like biopiracy and biodiversity governance, not BEPS.

Option (d) – Incorrect

Environmental cost neglect is related to environmental impact assessment and sustainable development, not international taxation.

Memory Trick:

“BEPS = Big companies Escape Paying tax Strategically.”

31.

With reference to ‘Initiative for Nutritional Security

through Intestive Millets

Promotion’, which of the

following statements is/are

correct?

1.This initiative aims to

demonstrate the improved

production and post-harvest

technologies, and to

demonstrate value addition

techniques, in an integrated

manner, with cluster

approach.

2.Poor, small, marginal and

tribal farmers have larger

stake in this scheme.

3.An important objective of

the scheme isto encourage

farmers of commercial crops

to shift to millet cultivation

by offering them free kits of

critical inputs of nutrients

and microirrigation

equipment.

Select the the correct answer

using the code given below.

(a) 1 only

(b) 2 and 3 only

(d) 1, 2 and 3

Correct Answer:

Explanation:

Statement 1 – Correct

The Initiative for Nutritional Security through Intensive Millets Promotion (INSIMP) was launched under the Rashtriya Krishi Vikas Yojana (RKVY).

It aimed to promote millets through cluster-based demonstrations, improved production technologies, post-harvest management and value addition in an integrated manner.

Statement 2 – Correct

Millets are primarily grown in rainfed, dryland and tribal regions.

Therefore, poor, small, marginal and tribal farmers are the primary stakeholders and beneficiaries of the scheme.

Statement 3 – Incorrect

The objective was not to shift farmers from commercial crops to millets by providing free kits of nutrients and micro-irrigation equipment.

The focus was on increasing productivity and promoting millets in suitable regions, not on replacing commercial crops through such incentives.

Memory Trick:

“Millets = Marginal farmers + Modern methods, not crop shifting.”

30.

With reference to the ‘TransPacific Partnership’, consider the following statements:

1.It is an agreement among

all the Pacific Rim countries

except China and Russia.

2.It is a strategic alliance for

the purpose of maritime

security only.

Which of the statements

given above is/are correct?

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

Correct Answer:

(d) Neither 1 nor 2

Explanation:

Statement 1 – Incorrect

The Trans-Pacific Partnership (TPP) was a trade agreement among selected Pacific Rim countries.

It did not include all Pacific Rim countries.

Countries such as the United States (initially), Japan, Australia, Canada, Mexico, Vietnam, etc., were part of it.

China and Russia were not members, but it is incorrect to say that it included all other Pacific Rim countries except them. Many Pacific Rim countries were not part of TPP.

Statement 2 – Incorrect

The Trans-Pacific Partnership was not a maritime security alliance.

It was a comprehensive trade agreement aimed at reducing tariffs, setting trade rules, protecting intellectual property, and regulating investment and services.

It was economic in nature, not a defence or maritime security arrangement.

Memory Trick:

“TPP = Trade Pact, not Navy Pact.”

29.

‘Net metering’ is sometimes

seen in the news in the

context of promoting the

(a) production and use of

solar energy by the

households/consumers

(b) use of piped natural gas

in the kitchens of households

motor-cars

(d) installation of water

meters in urban households

Correct Answer:

(a) production and use of solar energy by the households/consumers

Explanation:

Option (a) – Correct

Net metering is a billing mechanism that allows households or consumers who generate electricity (usually through rooftop solar panels) to feed surplus power into the grid and receive credit for it.

The electricity meter runs forward when electricity is consumed and runs backward when surplus electricity is supplied to the grid.

This promotes rooftop solar energy adoption.

Memory Trick:

“Net Meter = Solar + Grid Adjustment.”

28.

‘Mission Indradhanush’

launched by the Government

of India pertains to

(a) immunization of children

and pregnant women

(b) construction of smart

cities across the country

Earth-like planets in outer

space

(d) New Educational Policy

Correct Answer:

(a) immunization of children and pregnant women

Explanation:

Option (a) – Correct

Mission Indradhanush was launched by the Ministry of Health and Family Welfare to improve immunization coverage among children and pregnant women.

It aims to provide vaccines against vaccine-preventable diseases under the Universal Immunization Programme (UIP).

Memory Trick:

“Indradhanush = 7 colours = 7 vaccines”

Expected Questions

Mission Indradhanush

Launched in December 2014 by the Ministry of Health and Family Welfare, Mission Indradhanush is a targeted and intensified vaccination programme.

It aims to achieve 90% full immunisation coverage among:

• Children under two years of age

• Pregnant women

The mission focuses on protection against vaccine-preventable diseases such as:

• Diphtheria

• Pertussis (Whooping cough)

• Tetanus

• Polio

• Tuberculosis

• Measles

• Hepatitis B

Additional vaccines have been included depending on the phase of implementation.

1️⃣ Scope and Coverage (Expanded Disease Basket)

Initially focused on seven diseases, the mission has expanded to include:

• Japanese Encephalitis

• Haemophilus influenzae type B (Hib)

• Rotavirus

• Pneumococcal Conjugate Vaccine (PCV)

Mission Indradhanush is a key component of the Universal Immunisation Programme (UIP).

2️⃣ Intensified Mission Indradhanush (IMI 5.0)

The programme targets:

• Low-coverage districts

• Urban slums

• Tribal and hard-to-reach areas

IMI 5.0, launched in 2023:

• Covers children up to 5 years of age (earlier limit was 2 years)

• Operates across all districts

• Promotes the U-WIN digital platform for real-time vaccination tracking

3️⃣ Collaborative Strategy (Convergence Approach)

Mission Indradhanush follows a 360-degree strategy that includes:

• Intensive planning

• Community mobilisation

• Partnerships with WHO, UNICEF, and Rotary International

It relies on convergence of grassroots workers such as:

• ASHAs

• ANMs

• Anganwadi workers

This ensures outreach to left-out and unvaccinated children.

Important Context for UPSC

Mission Indradhanush (Health Ministry initiative) should not be confused with the banking-sector “Indradhanush” related to Public Sector Banks.

The vaccination programme has progressed through multiple phases, and as of recent updates, more than 11 phases have been completed, with further rounds continuing to strengthen immunisation coverage.

27.

With reference to ‘Stand Up

India Scheme’, which of the

following statements is/are

correct?

1.Its purpose is to promote

entrepreneurship among

SC/ST and women

entrepreneurs.

2.It provides for refinance

through SIDBI.

Select the correct answer

using the code given below.

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

Correct Answer:

Explanation:

Statement 1 – Correct

The Stand Up India Scheme was launched to promote entrepreneurship among Scheduled Castes (SC), Scheduled Tribes (ST), and women entrepreneurs.

It facilitates bank loans between ₹10 lakh and ₹1 crore for setting up greenfield enterprises in manufacturing, services, or trading sectors.

Statement 2 – Correct

The scheme provides refinance support through Small Industries Development Bank of India (SIDBI).

SIDBI acts as the refinance agency and supports banks in extending credit under the scheme.

Memory Trick:

“Stand Up = SC/ST + She (Women) + SIDBI Support”

26.

Why does the Government

of India promote the use of

‘Neem-coated Urea’ in

agriculture?

(a) Release of Neem oil in the

soil increases nitrogen

fixation by the soil

microorganisms

(b) Neem coating slows

down the rate of dissolution

of urea in the soil

greenhouse gas, is not at all

released into atmosphere by

crop fields

(d) It is a combination of a

weedicide and a fertilizer for

particular crops.

Correct Answer:

(b) Neem coating slows down the rate of dissolution of urea in the soil

Explanation:

Option (a) – Incorrect

Neem-coated urea does not increase nitrogen fixation. Nitrogen fixation is performed by specific bacteria (e.g., Rhizobium in legumes). Neem coating does not enhance this biological process.

Option (b) – Correct

Neem coating acts as a nitrification inhibitor. It slows down the conversion of urea into usable nitrogen forms.

This reduces rapid dissolution and nitrogen loss through leaching and volatilisation.

Result:

• Better nitrogen use efficiency

• Reduced fertilizer requirement

• Lower diversion for industrial use

Option (c) – Incorrect

Nitrous oxide (N₂O) emission is reduced, but it is not eliminated “at all.” The phrase “not at all released” makes the statement absolutely incorrect.

Option (d) – Incorrect

Neem-coated urea is only a fertilizer with a coating. It is not a weedicide-fertilizer combination.

Memory Trick:

“Neem = Slow Release”

If nitrogen releases slowly → Less waste → More efficiency.

25.

Which of the following are

the key features of ‘National

Ganga River Basin Authority

(NGRBA)’?

1.River basin is the unit of

planning and management.

2.It spearheads the river

conservation efforts at the

national level.

3.One of the Chief Ministers

of the States through which

the Ganga flows becomes the

Chairman of NGRBA on

rotation basis.

Select the correct answer

using the code given below.

(a) 1 and 2 only

(b) 2 and 3 only

(d) 1, 2 and 3

Correct Answer:

(a) 1 and 2 only

Explanation:

Statement 1 – Correct

The National Ganga River Basin Authority (NGRBA) adopted the river basin as the unit of planning and management.

This marked a shift from stretch-based pollution control to integrated basin-level management.

1. What is a River Basin? (Simple Meaning)

A river basin is the entire area of land from where rainwater drains into one main river and its tributaries.

It includes:

• The main river

• All its tributary rivers

• Streams

• Groundwater

• Surrounding land area

In simple words:

River Basin = Full drainage area of a river system.

Real-life example:

The Ganga River Basin includes: • Ganga main river

• Yamuna

• Ghaghara

• Gandak

• Kosi

• All land areas from where water flows into these rivers

If rain falls in Uttarakhand, Bihar or Uttar Pradesh and that water ultimately reaches the Ganga, that area is part of the Ganga basin.

Memory Trick:

“Basin = Big Bowl”

Imagine the entire river system as a bowl collecting water from all sides.

2. What is Stretch-Based Pollution Control?

Earlier approach:

Government cleaned only specific polluted stretches (parts) of the river.

Example:

If Kanpur stretch of Ganga was polluted, focus was only on Kanpur city sewage.

Problem:

Pollution from upstream areas or tributaries was ignored.

Result:

Even if one stretch is cleaned, polluted water from other areas flows in again.

3. What is Integrated Basin-Level Management?

New approach:

Instead of cleaning one part, manage the entire river system as one unit.

This includes:

• Pollution control

• Sewage treatment

• Industrial discharge

• Groundwater management

• Flow regulation

• State coordination

Example:

If Yamuna (tributary) is polluted in Delhi, that pollution ultimately affects Ganga downstream.

So cleaning only Ganga main channel is not enough.

Integrated approach means:

Clean Yamuna + Clean Ganga + Control industries + Manage sewage across all states.

Simple Comparison

Stretch-based approach = Treating fever only on one arm.

Basin-level approach = Treating the whole body.

Final Memory Trick

“Stretch cleans a spot.

Basin cleans the system.”

Statement 2 – Correct

NGRBA was constituted under the Environment (Protection) Act, 1986 to coordinate and oversee conservation efforts of the River Ganga at the national level. It functioned as the apex body for Ganga conservation.

Statement 3 – Incorrect

The Chairperson of NGRBA was the Prime Minister of India, not a Chief Minister on rotational basis. Chief Ministers of Ganga basin States were members, but not Chairpersons.

Memory Trick:

“PM heads Ganga, not CM rotation.”

24.

With referene to ‘Pradhan

Mantri Fasal Bima Yojana’,

consider the following

statements:

1.Under this scheme,

farmers will have to pay a

uniform premium of two

percent for any crop they

cultivate in any Season of the

year.

2.This scheme covers post-

harvest losses arising out of

cyclones and unseasonal

rains.

Which of the statements

given above is/are correct?

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

Correct Answer:

(b) 2 only

Explanation:

Statement 1 – Incorrect

Under Pradhan Mantri Fasal Bima Yojana (PMFBY), premium is not uniform at 2% for all crops in all seasons.

The farmer’s premium share is:

• 2% of sum insured for Kharif crops

• 1.5% of sum insured for Rabi crops

• 5% for commercial and horticultural crops

Therefore, it is not “uniform” and not “two percent for any crop in any season.”

Statement 2 – Correct

PMFBY covers post-harvest losses for up to 14 days after harvesting.

It includes losses due to cyclones, unseasonal rains, and similar natural calamities affecting crops kept in the field for drying.

Memory Trick:

“2–1.5–5, not all 2”

If premium were uniform, all seasons would have same rate — but PMFBY has different rates.

23.

Recently, which one of the

following currencies has

been proposed to be added

to the basket of IMF’s SDR?

(a) Rouble

(b) Rand

(d) Renminbi

Correct Answer:

(d) Renminbi

Explanation:

The International Monetary Fund (IMF) reviews the composition of the Special Drawing Rights (SDR) basket periodically.

The Chinese Renminbi (RMB) was proposed and subsequently included in the SDR basket in 2016.

SDR Basket Criteria:

The currency must be issued by a major exporting country.

It must be “freely usable” in international transactions.

The Renminbi met these criteria and was added alongside:

• US Dollar

• Euro

• Japanese Yen

• Pound Sterling

Memory Trick:

“SDR became SUPER in 2016 — China entered.”

Think: SDR = Dollar + Euro + Yen + Pound + Renminbi.

Expected Questions

What is IMF SDR? (Simple Explanation)

IMF = International Monetary Fund.

SDR = Special Drawing Rights.

In simple words:

SDR is not a currency like rupee or dollar.

It is an international reserve asset created by the IMF.

Think of SDR as:

A special “international backup money” given by IMF to countries.

When a country faces shortage of foreign currency (like dollars), it can exchange its SDR with other countries for usable currencies.

So:

SDR = Emergency reserve asset for countries.

It is based on a basket of major world currencies.

Currently, SDR basket includes: • US Dollar

• Euro

• Chinese Renminbi

• Japanese Yen

• British Pound Sterling

Currency and Their Countries

Rouble (or Ruble)

Belongs to: Russia

Official currency of the Russian Federation.

Rand

Belongs to: South Africa

Official currency of South Africa.

Renminbi (RMB)

Belongs to: China

Renminbi is the official currency name.

Yuan is the main unit of Renminbi.

Quick Memory Trick

“Russia Rolls with Rouble

South Africa Runs on Rand

China Rules with Renminbi”

R – Russia – Rouble

R – Republic of South Africa – Rand

R – Republic of China – Renminbi

22.

With reference to ‘IFC

Masala Bonds’, sometimes

seen in the news, which of

the statements given below

is/are correct?

1.The International Finance

Corporation, which offers

these bonds, is an arm of the

World Bank.

2.They are the rupee-

denominated bonds and are

a source of debt financing for

the public and private sector,

Select the correct answer

using the code given below.

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

Correct Answer:

Explanation:

Statement 1 – Correct

The International Finance Corporation (IFC) is a member of the World Bank Group.

It is the private sector arm of the World Bank Group and provides investment and advisory services to private sector entities in developing countries.

Statement 2 – Correct

Masala Bonds are rupee-denominated bonds issued in overseas markets.

Although issued abroad, they are denominated in Indian Rupees.

They serve as a source of debt financing for Indian public and private sector entities.

The term “IFC Masala Bonds” refers to rupee-denominated bonds issued by the International Finance Corporation to mobilise funds for investment in India.

Key Concept:

Rupee-denominated bond → Currency risk is borne by the investor, not the issuer.

Currency risk - change in exchange rate

Memory Trick:

“Masala = India flavour = Rupee”

If bond is Masala → It is rupee-denominated and linked to India.

21.

Which of the following is/are

the indicator/ indicators

used by IFPRI to compute the

Global Hunger Index Report?

1.Undernourishment

2.Child stunting

3.Child mortality

Select the correct answer

using the code given below.

(a) 1 only

(b) 2 and 3 only

(d) 1 and 3 only

Correct Answer:

Explanation:

Statement 1 – Correct

Undernourishment is one of the core indicators used in the Global Hunger Index (GHI). It measures the proportion of the population with insufficient caloric intake.

Statement 2 – Correct

Child stunting (low height for age) is used to reflect chronic undernutrition among children under five years of age.

It is a key indicator of long-term nutritional deprivation.

Statement 3 – Correct

Child mortality (under-five mortality rate) is included as it reflects the fatal synergy of inadequate nutrition and unhealthy environments. It indicates the extent to which hunger contributes to child deaths.

Note: The Global Hunger Index currently uses four indicators:

• Undernourishment

• Child stunting

• Child wasting

• Child mortality

The question includes three of them — all are correct.

Memory Trick:

“GHI = Hungry Population + Hungry Children + Child Deaths”

If it measures hunger severity, it must include nutrition deficiency and child mortality.

Expected Questions

Undernourishment

Meaning (Simple Words):

Undernourishment means a person does not get enough calories (energy) from food to live a normal, healthy and active life.

As per Government of India (based on Food and Agriculture Organization (FAO) method), it refers to the proportion of population whose habitual food consumption is insufficient to provide the dietary energy levels required for a normal life.

Key Point:

It is about insufficient calorie intake in the overall population.

Memory Trick:

Under-nourishment = Under-energy

If energy (calories) is less than required → Undernourished.

Child Stunting

Meaning (Simple Words):

Child stunting means a child is too short for his or her age because of long-term poor nutrition.

Key Point:

It reflects chronic (long-term) malnutrition.

Memory Trick:

Stunting = Standing short

If a child stands shorter than normal for age → Long-term nutrition problem.

Child Mortality

Meaning (Simple Words):

Child mortality means the number of children who die before reaching the age of five years.

As per Government of India (Sample Registration System definition), Under-Five Mortality Rate (U5MR) is the probability of a child dying before age five, expressed per 1,000 live births.

Key Point:

It reflects the combined effect of malnutrition, disease and poor healthcare.

Memory Trick:

Mortality = Death rate

Under-5 deaths per 1,000 births → Child mortality.

20.

Consider the following statements:

1.The International Solar Alliance was launched at the United Nations Climate Change Conference in 2015.

2.The Alliance includes all the member countries of the United Nations.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

Correct Answer:

(a) 1 only

Explanation:

Statement 1 – Correct

The International Solar Alliance (ISA) was launched in 2015 at the United Nations Climate Change Conference (COP21) held in Paris.

It was jointly initiated by India and France.

Thus, Statement 1 is correct.

Statement 2 – Incorrect

The Alliance does not automatically include all United Nations member countries.

Membership is open to countries, but they must sign and ratify the ISA Framework Agreement.

Therefore, it does not include all UN member countries by default.

Thus, Statement 2 is incorrect.

Memory Trick:

ISA = Launched at Paris COP21, not All UN nations automatically.

19.

On which of the following can you find the Bureau of Energy Efficiency Star Label?

1.Ceiling fans

2.Electric geysers

3.Tubular fluorescent lamps

Select the correct answer using the code given below.

(a) 1 and 2 only

(b) 3 only

(d) 1, 2 and 3

Correct Answer:

(d) 1, 2 and 3

Explanation:

The Bureau of Energy Efficiency (BEE), established under the Energy Conservation Act, 2001, issues the Star Labelling Programme to promote energy-efficient appliances.

The star label indicates the energy efficiency of appliances — more stars mean higher efficiency and lower electricity consumption.

Statement 1 – Correct

Ceiling fans are covered under BEE’s star labelling programme.

Energy-efficient fans (including BLDC fans) carry BEE star labels.

Statement 2 – Correct

Electric geysers (storage water heaters) are included in the BEE labelling scheme.

Consumers can see star ratings indicating energy performance.

Statement 3 – Correct

Tubular fluorescent lamps are also included under BEE star labelling.

Lighting products such as CFLs and fluorescent lamps are covered under the scheme.

Therefore, all three appliances can carry BEE star labels.

Memory Trick:

BEE Stars = Fans + Geysers + Lights (Think: Home appliances).

18.

The term 'Regional Comprehensive Economic Partnership' often appears in the news in the context of the affairs of a group of countries known as

(a) G20

(b) ASEAN

(d) SAARC

Correct Answer:

(b) ASEAN

Explanation:

The Regional Comprehensive Economic Partnership (RCEP) is a mega Free Trade Agreement (FTA) involving 15 Asia-Pacific countries.

It was negotiated under the leadership of ASEAN (Association of Southeast Asian Nations).

RCEP includes:

10 ASEAN countries

Plus their FTA partners: China, Japan, South Korea, Australia and New Zealand

Thus, it is centered around ASEAN.

Memory Trick:

RCEP = ASEAN + Partners Trade Pact

17.

Regarding 'Atal Pension Yojana', which of the following statements is/are correct?

1.It is a minimum guaranteed pension scheme mainly targeted at unorganized sector workers.

2.Only one member of a family can join the scheme.

3.Same amount of pension is guaranteed for the spouse for life after subscriber's death.

Select the correct answer using the code given below.

(a) 1 only

(b) 2 and 3 only

(d) 1, 2 and 3

Correct Answer:

Explanation:

Statement 1 – Correct

Atal Pension Yojana (APY) is a government-backed minimum guaranteed pension scheme launched in 2015.

It is primarily targeted at workers in the unorganised sector.

Subscribers receive a fixed minimum pension (₹1,000 to ₹5,000 per month) after the age of 60, depending on contribution.

Thus, Statement 1 is correct.

Statement 2 – Incorrect

There is no restriction that only one member per family can join APY.

Any eligible individual (age 18–40) with a bank account can enroll.

Therefore, multiple members of the same family can join separately.

Thus, Statement 2 is incorrect.

Statement 3 – Correct

Under APY, after the subscriber’s death:

The spouse receives the same guaranteed pension for life.

After the death of both subscriber and spouse, the accumulated corpus is returned to the nominee.

Thus, Statement 3 is correct.

Memory Trick:

APY = Assured Pension for You and Your spouse.

16.

What is/are the purpose/purposes of Government’s ‘Sovereign Gold Bond Scheme’ and ‘Gold Monetization Scheme’?

1.To bring the idle gold lying with Indian households into the economy.

2.To promote FDI in the gold and jewellery sector

3.To reduce India’s dependence on gold imports.

Select the correct answer using the code given below.

(a) 1 only

(b) 2 and 3 only

(d) 1, 2 and 3

Correct Answer:

Explanation:

Statement 1 – Correct

The Gold Monetization Scheme (GMS) aims to mobilise idle gold held by households and institutions.

People deposit gold with banks and earn interest.

This brings unproductive gold into the formal financial system.

The Sovereign Gold Bond (SGB) Scheme provides an alternative to physical gold investment, thereby reducing hoarding.

Thus, Statement 1 is correct.

Statement 2 – Incorrect

These schemes are not designed to promote Foreign Direct Investment (FDI) in the gold and jewellery sector.

Their focus is domestic resource mobilisation and macroeconomic stability, not foreign investment promotion.

Thus, Statement 2 is incorrect.

Statement 3 – Correct

India is one of the largest importers of gold.

High gold imports worsen the Current Account Deficit (CAD).

By promoting paper gold (SGB) and monetising existing gold stocks (GMS), the government aims to reduce gold imports.

Thus, Statement 3 is correct.

Memory Trick:

Gold Schemes = Use Domestic Gold, Reduce Imports.

15.

With reference to ‘Bitcoins’, sometimes seen in the news, which of the following statements is/are correct?

1.Bitcoins are tracked by the Central Banks of the countries.

2.Anyone with a Bitcoin address can send and receive Bitcoins from anyone else with a Bitcoin address.

3.Online payments can be sent without either side knowing the identity of the other.

Select the correct answer using the code given below.

(a) 1 and 2 only

(b) 2 and 3 only

(d) 1, 2 and 3

Correct Answer:

(b) 2 and 3 only

Explanation:

Statement 1 – Incorrect

Bitcoin is a decentralized cryptocurrency.

It is not issued, tracked, or controlled by any central bank.

Transactions are recorded on a public blockchain ledger maintained by a distributed network of participants (miners/nodes), not central banks.

Statement 2 – Correct

Anyone who has a Bitcoin address (public key) can send or receive Bitcoins from any other Bitcoin address globally.

There is no need for a banking intermediary.

Thus, Statement 2 is correct.

Statement 3 – Correct

Bitcoin transactions are pseudonymous.

While all transactions are publicly visible on the blockchain, the identities of users are not directly revealed unless linked externally.

Thus, payments can occur without either party knowing the real-world identity of the other.

Hence, Statement 3 is correct.

Memory Trick:

Bitcoin = Bankless + Borderless + Pseudonymous.

14.

What is/are the purpose/purposes of ‘District Mineral Foundations’ in India?

1.Promoting mineral exploration activities in mineral-rich districts

2.Protecting the interests of the persons affected by mining operations

3.Authorizing State Governments to issue licenses for mineral exploration

Select the correct answer using the code given below.

(a) 1 and 2 only

(b) 2 only

(d) 1, 2 and 3

Correct Answer:

(b) 2 only

Explanation:

District Mineral Foundations (DMFs) were established under the

Mines and Minerals (Development and Regulation) Amendment Act, 2015.

They are statutory bodies set up in mining-affected districts.

Statement 1 – Incorrect

The purpose of DMFs is not to promote mineral exploration.

Mineral exploration is governed by licensing and regulatory mechanisms under the

Mines and Minerals (Development and Regulation) Act, 1957.

DMFs focus on welfare, not exploration.

Statement 2 – Correct

The primary objective of DMFs is:

To work for the interest and benefit of persons and areas affected by mining-related operations.

Funds are used for:

Health

Education

Drinking water

Environmental protection

Skill development

Thus, Statement 2 is correct.

Statement 3 – Incorrect

DMFs do not authorize State Governments to issue exploration licenses.

Licensing powers already rest with State Governments under mining laws.

DMFs are welfare institutions, not regulatory authorities.

Memory Trick:

DMF = Mining Welfare Fund, not Mining Permission Body.

13.

With reference to ‘Financial Stability and Development Council’, consider the following statements:

1.It is an organ of NITI Aayog.

2.It is headed by the Union Finance Minister.

3.It monitors macroprudential supervision of the economy.

Which of the statements given above is/are correct?

(a) 1 and 2 only

(b) 3 only

(d) 1, 2 and 3

Correct Answer:

Explanation:

Statement 1 – Incorrect

The Financial Stability and Development Council (FSDC) is not an organ of NITI Aayog.

It was established by the Government of India in 2010 following the recommendations of the Raghuram Rajan Committee on Financial Sector Reforms.

It functions under the Ministry of Finance and coordinates financial regulators.

Statement 2 – Correct

The FSDC is chaired by the Union Finance Minister.

Its members include:

Governor of the Reserve Bank of India (RBI)

Heads of major financial regulators (SEBI, IRDAI, PFRDA, etc.)

Finance Secretary and other officials

Statement 3 – Correct

One of the primary mandates of FSDC is:

Maintaining financial stability

Strengthening macroprudential supervision

Coordinating among regulators

Macroprudential supervision refers to oversight of systemic risks in the financial system as a whole.

Thus, Statements 2 and 3 are correct.

Memory Trick:

FSDC = Finance Minister + Financial Stability + Systemic Risk Control.

12.

What is/are the purpose/purposes of the ‘Marginal Cost of Funds based Lending Rate (MCLR)’ announced by RBI?

1.These guidelines help improve the transparency in the methodology followed by banks for determining the interest rates on advances.

2.These guidelines help ensure availability of bank credit at interest rates which are fair to the borrowers as well as the banks.

Select the correct answer using the code given below.

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

Correct Answer:

Explanation:

MCLR (Marginal Cost of Funds based Lending Rate) was introduced by the Reserve Bank of India (RBI) in 2016 to replace the Base Rate system.

Its objectives were:

• Improve transmission of monetary policy

• Make lending rate determination more transparent

• Ensure rates reflect marginal cost of funds

Statement 1 – Correct

Under MCLR, banks are required to determine lending rates based on 4 component:

Let us understand each in very simple words with real-life logic.

🔵 1️⃣ Marginal Cost of Funds

Meaning:

Marginal cost of funds = The cost at which the bank raises new money.

It mainly includes:

Interest paid on new deposits

Cost of borrowings

Simple Example:

If a bank is now taking deposits at 7% interest,

then lending below 7% would cause loss.

So the bank must price loans based on the latest cost of funds, not old deposits.

That latest cost = Marginal Cost.

One-Line:

Marginal cost = Cost of fresh money for the bank.

🔴 2️⃣ Negative Carry on Cash Reserve Ratio (CRR)

First understand CRR:

Cash Reserve Ratio (CRR) = Percentage of deposits banks must keep with RBI.

This money:

Earns no interest

Cannot be lent

Why “Negative Carry”?

Suppose:

Bank collects ₹100 deposit at 7% interest.

RBI requires 4% CRR → ₹4 kept idle.

Bank still pays 7% interest on full ₹100.

But can lend only ₹96.

That ₹4 earns nothing → This is a cost.

That cost is called Negative Carry on CRR.

One-Line:

Negative carry = Loss because CRR money earns zero return.

🟢 3️⃣ Operating Costs

These are day-to-day expenses of running the bank.

Examples:

Staff salaries

Rent

IT systems

Electricity

Branch maintenance

Bank adds this cost into lending rate.

One-Line:

Operating cost = Cost of running the bank.

🟣 4️⃣ Tenor Premium

Tenor = Time period of loan.

Longer loan = More risk + More uncertainty.

So:

1-year loan → Lower rate

10-year loan → Higher rate

Extra charge for longer duration = Tenor Premium.

Real-Life Example:

If you lend money to a friend:

For 1 month → Low risk

For 5 years → High risk

You would demand higher interest.

Same logic applies.

🔷 Final MCLR Formula (Conceptually)

MCLR =

Marginal Cost of Funds

Negative Carry on CRR

Operating Costs

Tenor Premium

🔷 Very Simple Memory Trick

Banks recover:

Cost of Money

Cost of CRR

Cost of Running

Cost of Time

This improves transparency and standardises methodology for calculating lending rates.

Hence, Statement 1 is correct.

Statement 2 – Correct

MCLR links lending rates more closely to actual funding costs of banks.

This ensures:

• Borrowers get benefit of RBI rate cuts faster

• Banks maintain reasonable margins

Thus, it promotes fairness in credit pricing for both borrowers and banks.

Hence, Statement 2 is correct.

Memory Trick:

MCLR = Market-linked + Cost-based + Transparent Lending Rate.

Expected Question

💡 What Lending Rate Benchmark Do Indian Banks Currently Follow?

In India today, banks use more than one lending rate benchmark, but the primary framework as per RBI guidelines is linking loans to an external benchmark, not just MCLR.

✔ 1️⃣ External Benchmark Lending Rate (EBLR)

This is the current preferred regime promoted by the RBI for most new floating-rate loans.

EBLR ties lending rates to an external reference such as:

• RBI’s Repo Rate

• 3-month or 6-month Treasury Bill yields published by Financial Benchmarks India Pvt. Ltd. (FBIL)

• Other approved external benchmark

Banks add a spread (margin) over the external benchmark to decide the loan interest rate.

This ensures faster transmission of RBI’s monetary policy to borrowers, improving transparency.

So, for most new floating loans, banks are expected to follow EBLR linked to the repo rate.

✔ 2️⃣ MCLR (Marginal Cost of Funds Based Lending Rate) Still in Use

Even though RBI has pushed the external benchmark system since 2019, many existing loans are still linked to MCLR — the internal benchmark for interest rates.

Existing borrowers with MCLR-linked loans still pay interest based on MCLR.

Thus:

✔ New floating-rate loans → increasingly linked to EBLR

✔ Older loans and some products → still influenced by MCLR

🧠 Quick Summary (Exam-Ready)

Current practice: RBI prefers linking lending rates to External Benchmark Lending Rate (EBLR) for greater transparency and quicker transmission of policy rates.

MCLR is still used for many existing loans and remains an internal benchmark in the banking system.

🔄 Evolution of Lending Rate Regimes in India

BPLR (Before 2010) – opaque, bank-determined benchmark.

Base Rate (2010-2016) – more transparent than BPLR.

MCLR (2016-2019) – linked to marginal cost of funds.

External Benchmark (2019 onwards) – recommended by RBI for most floating-rate loans.

🧠 One-Line Takeaway

New floating loans in India are mainly priced using an external benchmark (EBLR), while MCLR still persists for legacy loans and certain products.

If you want, I can also explain why RBI shifted from MCLR to external benchmarks and how this affects borrowers in detail!

🔵 What is a Floating Rate Loan?

A floating rate loan is a loan whose interest rate changes over time.

It is linked to a benchmark such as:

Repo Rate

External Benchmark Lending Rate (EBLR)

MCLR

When the benchmark changes → Your loan interest rate also changes.

🔷 Simple Meaning

Floating = Moving

So,

Floating rate loan = Interest rate that moves up and down.

🏠 Real-Life Example

Suppose:

You take a home loan at:

Repo Rate (6%) + 2% = 8%

Now if RBI increases Repo Rate to 6.5%,

Your loan becomes:

6.5% + 2% = 8.5%

Your EMI increases.

If Repo Rate falls → EMI decreases.

🔴 What is Fixed Rate Loan?

In a fixed rate loan:

Interest rate stays same for entire period.

Even if RBI changes rates, your EMI does not change.

🔷 Difference in Simple Words

Floating rate → EMI changes

Fixed rate → EMI constant

🔷 Why Floating Loans Are Common in India?

RBI wants:

✔ Better transmission of monetary policy

✔ Faster impact of Repo Rate changes

So most retail loans (home loans, MSME loans) are linked to external benchmark.

🔷 UPSC-Level Concept

Floating loans improve monetary policy transmission.

If RBI cuts repo rate:

Floating loans → Immediate benefit to borrowers

Fixed loans → No immediate impact

🔷 One-Line Definition

Floating rate loan = Loan whose interest rate varies according to benchmark rate.

🔷 Memory Trick

Floating = Follows RBI

🔵 1️⃣ Why RBI Shifted from MCLR to External Benchmark

Core Reason: Poor Monetary Policy Transmission

When RBI reduced Repo Rate, banks did not pass the benefit fully or quickly to borrowers under MCLR.

There was:

Delay in rate cuts

Partial transmission

Opaque methodology

So RBI wanted:

✔ Faster transmission

✔ Transparent pricing

✔ Direct linkage with Repo Rate

Thus, from October 2019, RBI mandated that new floating-rate retail loans must be linked to an external benchmark (mainly Repo Rate).

🔴 2️⃣ What Was the Problem with MCLR?

MCLR = Internal benchmark.

It depended on:

Bank’s marginal cost of funds

Operating cost

Tenor premium

CRR cost

Since banks calculated it internally:

❌ Lack of full transparency

❌ Slower response to repo rate cuts

❌ Banks protected margins during rate cuts

Example:

RBI cuts repo rate by 0.50%

Bank reduces MCLR by only 0.20%

Transmission was incomplete.

🟢 3️⃣ What is External Benchmark Lending Rate (EBLR)?

Under this system, loan rate =

External Benchmark (e.g., Repo Rate) + Spread

Example:

Repo Rate = 6.5%

Bank Spread = 2%

Loan Rate = 8.5%

If repo increases to 7% → Loan becomes 9% immediately (as per reset period).

It is:

✔ Transparent

✔ Market-linked

✔ Directly connected to RBI policy

🔷 4️⃣ How It Affects Borrowers

🟢 When RBI Cuts Repo Rate

Borrowers benefit faster.

Earlier (MCLR):

Rate cut passed slowly.

Now (EBLR):

Rate cut passed quickly.

Good for borrowers.

🔴 When RBI Raises Repo Rate

Borrowers feel pain immediately.

Interest increases quickly.

EMI increases or tenure increases.

More volatility compared to MCLR.

🔷 Practical Impact

Under MCLR:

Rates were sticky downward.

Under EBLR:

Rates move both up and down quickly.

So borrowers now face:

✔ Faster benefit in rate cuts

✔ Faster burden in rate hikes

🔷 Why RBI Prefers EBLR (Policy Angle)

Because it improves:

✔ Monetary transmission

✔ Policy credibility

✔ Financial transparency

✔ Inflation control effectiveness

It strengthens Monetary Policy framework.

🔷 UPSC Mains Angle

You can write:

Shift to external benchmark improves monetary policy transmission, enhances transparency, and reduces discretionary pricing by banks.

🔷 One-Line Summary

MCLR = Bank-controlled

EBLR = Repo-controlled

🔷 Simple Analogy

MCLR = Bank decides how much to pass

EBLR = RBI decision directly reflected

11.

India’s ranking in the ‘Ease of Doing Business Index’ is sometimes seen in the news. Which of the following has declared that ranking?

(a) Organization for Economic Cooperation and Development (OECD)

(b) World Economic Forum

(d) World Trade Organization (WTO)

Correct Answer:

Explanation:

Note

The World Bank officially discontinued its annual Doing Business report in September 2021 following an investigation that revealed data manipulation and ethical irregularities in the 2018 and 2020 reports.

so, we don't need to study it in detail now.

The Ease of Doing Business (EoDB) Index was published by the World Bank under its “Doing Business” reports.

The index measured regulatory environment and ease of starting and operating a business in different countries.

It evaluated parameters such as:

• Starting a business

• Getting construction permits

• Getting electricity

• Registering property

• Paying taxes

• Enforcing contracts

10.

The term ‘Core Banking Solution’ is sometimes seen in the news. Which of the following statements best describes/describe this term?

1.It is a networking of a bank’s branches which enables customers to operate their accounts from any branch of the bank on its network regardless of where they open their accounts.

2.It is an effort to increase RBI’s control over commercial banks through computerization.

3.It is a detailed procedure by which a bank with huge non-performing assets is taken over by another bank.

Select the correct answer using the code given below.

(a) 1 only

(b) 2 and 3 only

(d) 1, 2 and 3

Correct Answer:

(a) 1 only

Explanation:

Statement 1 – Correct

Core Banking Solution (CBS) refers to centralized online real-time banking.

Under CBS:

• All branches are connected to a central server.

• Customer data is stored centrally.

• Customers can access their accounts from any branch.

This enables “Anywhere Banking.”

Thus, Statement 1 correctly describes CBS.

Statement 2 – Incorrect

CBS is not introduced to increase Reserve Bank of India (RBI) control over commercial banks.

It is a technological banking reform aimed at improving efficiency, service delivery and real-time data management.

Therefore, Statement 2 is incorrect.

Statement 3 – Incorrect

CBS has no relation to merger or takeover of banks with high Non-Performing Assets (NPAs).

Bank resolution and mergers are separate regulatory processes.

Thus, Statement 3 is incorrect.

Memory Trick:

CBS = Centralized Banking System → Anywhere Banking.

Which of the following best describes the term ‘import cover’, sometimes seen in the news?

(a) It is the ratio of value of imports to the Gross Domestic Product of a country

(b) It is the total value of imports of a country in a year

(d) It is the number of months of imports that could be paid for by a country’s international reserves

Correct Answer:

(d) It is the number of months of imports that could be paid for by a country’s international reserves

Explanation:

Import cover refers to the adequacy of a country’s foreign exchange reserves in relation to its import payments.

It is calculated as:

Import Cover = Foreign Exchange Reserves ÷ Monthly Import Bill

It tells us how many months a country can continue importing goods and services if no new foreign exchange inflows occur.

Memory Trick:

Import Cover = “How many months can a country survive without earning foreign currency?”

Higher import cover = Strong external sector stability.

Lower import cover = External vulnerability.

With reference to the International Monetary and Financial Committee (IMFC), consider the following statements:

1. IMFC discusses matters of concern affecting the global economy, and advises the International Monetary Fund (IMF) on the direction of its work.

2.The World Bank participates as observer in IMFC’s meetings.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

Correct Answer:

Explanation:

Statement 1 – Correct

The International Monetary and Financial Committee (IMFC) is the ministerial-level advisory body of the International Monetary Fund (IMF).

It:

• Discusses global economic and financial developments

• Reviews risks to the international monetary system

• Provides strategic direction to the IMF

However, it does not exercise decision-making power; it advises the IMF Board of Governors.

Thus, Statement 1 is correct.

Statement 2 – Correct

The World Bank participates as an observer in IMFC meetings.

Since the IMF and World Bank are sister institutions under the Bretton Woods system, the World Bank President traditionally attends IMFC meetings in observer capacity.

Thus, Statement 2 is also correct.

Memory Trick:

IMFC = IMF’s Ministerial Advisory Forum

IMF + World Bank sit together → Bretton Woods connection

Which of the following is/are included in the capital budget of the Government of India?

1.Expenditure on acquisition of assets like roads, buildings, machinery, etc.

2.Loans received from foreign governments.

3.Loans and advances granted to the States and Union Territories

Select the correct answer using the code given below.

(a) 1 only

(b) 2 and 3 only

(d) 1, 2 and 3

Correct Answer:

(d) 1, 2 and 3

Explanation:

Capital Budget = Asset creation / Reduction or creation of liabilities

Basics of Budget

Now evaluate each statement:

Statement 1 – Correct

Expenditure on the acquisition of assets such as roads, buildings, machinery, etc., creates physical or financial assets.

This is classified as Capital Expenditure.

Hence, included in the Capital Budget.

Statement 2 – Correct

Loans received from foreign governments increase the liabilities of the Government.

Such borrowings are classified under Capital Receipts (Debt creating).

Hence, included in the Capital Budget.

Statement 3 – Correct

Loans and advances granted to States and Union Territories create financial assets for the Central Government.

Such lending is treated as Capital Expenditure.

Hence included in Capital Budget.

Conceptual Clarification:

Revenue Budget → Revenue Receipts + Revenue Expenditure (no asset creation, no liability change).

Capital Budget → Asset creation or liability change.

Memory Trick:

Capital = Create Asset or Create Liability.

If asset is created or loan involved → Capital side.

In the context of which of the following do you sometimes find the terms ‘amber box, blue box and green box’ in the news?

(a) WTO affairs

(b) SAARC affairs

(d) India-EU negotiations on FTA

Correct Answer:

(a) WTO affairs

Explanation:

The terms ‘Amber Box’, ‘Blue Box’ and ‘Green Box’ are used in the context of agricultural subsidies under the World Trade Organization (WTO), specifically under the Agreement on Agriculture (AoA).

Option (a) – Correct

Under the WTO framework:

Amber Box – Trade-Distorting Support

• Includes subsidies that distort production and trade.

• Subject to reduction commitments.

• Measured under Aggregate Measurement of Support (AMS).

Example:

• Minimum Support Price (MSP)-type price support

• Input subsidies linked to production

Blue Box – Production-Limiting Support

• Subsidies linked to production but with conditions that limit output.

• Considered less trade-distorting than Amber Box.

• Not subject to reduction commitments.

Example:

• Direct payments to farmers based on fixed area or fixed yields

• Payments made on condition that farmers limit production (e.g., keeping part of land fallow)

The European Union’s Common Agricultural Policy historically used Blue Box-type payments.

Green Box – Non-Trade-Distorting Support

• Fully permitted under WTO.

• Must not distort trade or production significantly.

Example:

• Agricultural research

• Environmental protection payments

• Disaster relief

• Decoupled income support (not linked to current production)

WTO Agriculture = Traffic Light Model

Green = Allowed

Amber = Caution/Reduce

Blue = Special case

Which one of the following is a purpose of ‘UDAY’, a scheme of the Government?

(a) Providing technical and financial assistance to start-up entrepreneurs in the field of renewable sources of energy

(b) Providing electricity to every household in the country by 2018

(c) Replacing the coal-based power plants with natural gas, nuclear, solar, wind and tidal power plants over a period of time

(d) Providing for financial turnaround and revival of power distribution companies

✔ Correct Answer:

(d) Providing for financial turnaround and revival of power distribution companies

📌 What is the UDAY Scheme?

UDAY stands for Ujwal DISCOM Assurance Yojana.

It is a centrally sponsored scheme launched in November 2015 by the Ministry of Power, Government of India.

The scheme’s primary focus is to revive and restructure debt-laden State Power Distribution Companies (DISCOMs) so that they become financially stable and operationally efficient.

Key Details of UDAY:

Debt Takeover: States take over 75% of DISCOM debt over two years (50% in 2015-16, 25% in 2016-17).

Bond Issuance: The debt is converted into state-guaranteed bonds, often leading to a significant reduction in interest rates for the liabilities.

🧠 UPSC Memory Trick

UDAY = Ujwal DISCOM Turnaround → D = Debt + Operational Discipline.

The establishment of ‘Payment Banks’ is being allowed in India to promote financial inclusion. Which of the following statements is/are correct in this context?

1.Mobile telephone companies and supermarket chains that are owned and controlled by residents are eligible to be promoters of Payment Banks.

2.Payment Banks can issue both credit cards and debit cards.

3.Payment Banks cannot undertake lending activities.

Select the correct answer using the code given below.

(a) 1 and 2 only

(b) 1 and 3 only

(d) 1, 2 and 3

Correct Answer:

(b) 1 and 3 only

Explanation:

Statement 1 – Correct

As per Reserve Bank of India (RBI) guidelines, entities such as mobile telephone companies, supermarket chains, corporate business correspondents, and other resident-owned entities are eligible to promote Payment Banks, subject to “fit and proper” criteria.

Thus, Statement 1 is correct.

Statement 2 – Incorrect

Payment Banks can issue ATM cards/debit cards.

However, they are not permitted to issue credit cards.

Therefore, Statement 2 is incorrect.

Statement 3 – Correct

Payment Banks are not allowed to undertake lending activities.

They cannot provide loans or advances.

They mainly:

• Accept demand deposits (up to prescribed limit)

• Facilitate payments and remittances

Hence, Statement 3 is correct.

Memory Trick:

Payment Bank = Pay but No Loan.

Debit ✔

Credit ✘

There has been a persistent deficit budget year after year. Which action/actions of the following can be taken by the Government to reduce the deficit?

1.Reducing revenue expenditure

2.Introducing new welfare schemes

3.Rationalizing subsidies

4.Reducing import duty

Select the correct answer using the code given below.

(a) 1 only

(b) 2 and 3 only

(d) 1, 2, 3 and 4

Correct Answer:

Explanation:

Deficit arises when:

Fiscal Deficit = Total Expenditure − (Revenue Receipts + Non-debt Capital Receipts)

To reduce deficit, the Government must either:

• Reduce expenditure

• Increase revenue

Now evaluate each statement:

Statement 1 – Correct

Reducing revenue expenditure (e.g., salaries, interest payments, subsidies, administrative expenses) directly lowers total expenditure.

Lower expenditure → Lower fiscal deficit.

Thus, correct.

Statement 2 – Incorrect

Introducing new welfare schemes increases revenue expenditure.

Higher expenditure → Higher fiscal deficit.

Thus, incorrect.

Statement 3 – Correct

Rationalizing subsidies reduces unnecessary or excessive subsidy burden.

Lower subsidy outgo → Lower revenue expenditure → Reduced deficit.

Thus, correct.

Statement 4 – Incorrect

Reducing import duty decreases government revenue from customs duties.

Lower revenue → Higher fiscal deficit (unless compensated elsewhere).

Thus, incorrect.

Memory Trick:

Fiscal Deficit falls when:Cut spending or raise revenue.

Regarding 'DigiLocker', sometimes seen in the news, which of the following statements is/are correct?

1.It is a digital locker system offered by the Government under Digital India Programme.

2.It allows you to access your e-documents irrespective of your physical location.

Select the correct answer using the code given below.

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

Correct Answer:

Explanation:

Statement 1 – Correct

DigiLocker is a digital document wallet launched by the Government of India under the Digital India Programme.

It is administered by the Ministry of Electronics and Information Technology (MeitY).

Statement 2 – Correct

DigiLocker enables citizens to store, access and share digital documents online.

Since it is cloud-based, users can access their e-documents from anywhere, irrespective of physical location, using internet authentication.

Thus, both statements are correct.

Memory Trick:

DigiLocker = Government Cloud Access document Anywhere.

Which of the following is/are the advantage/advantages of practicing drip irrigation?

1.Reduction in weed

2.Reduction in soil salinity

3.Reduction in soil erosion

Select the correct answer using the code given below.

(a) 1 and 2 only

(b) 3 only

(d) None of the above is an advantage of practising drip irrigation

Correct Answer:

Explanation:

Statement 1 – Correct

Drip irrigation delivers water directly to the root zone of crops.

Since only the targeted area is wetted, surrounding soil remains dry.

This reduces germination and growth of weeds.

Therefore, reduction in weed growth is an advantage.

Statement 2 – Incorrect

Drip irrigation does not inherently reduce soil salinity.

In fact, improper drip irrigation may lead to salt accumulation at the edges of the wetted zone due to evaporation.

Salinity management depends on leaching practices and drainage, not merely on drip method.

Leaching practice = Application of extra irrigation water to wash excess salts below the crop root zone.

Thus, reduction in soil salinity is not a guaranteed advantage.

Statement 3 – Correct

Drip irrigation applies water slowly and directly to the soil.

There is no surface runoff.

This significantly reduces soil erosion compared to flood irrigation.

Hence, Statements 1 and 3 are correct.

Memory Trick:

Drip = Drop by drop → No runoff, less weed spread.

Think: Targeted water = Less weeds + Less erosion.

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IAS PCS PYQ

Economics UPSC PYQ 2016

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