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ANSWERS & EXPLANATION

GENERAL STUIDES (P) TEST 2112 (2017)

Q 1.D
o Index of Industrial Production (IIP) measures the quantum of changes in the industrial production in an
economy and captures the general level of industrial activity in the country. It is a composite indicator
expressed in terms of an index number which measures the short term changes in the volume of
production of a basket of industrial products during a given period with respect to the base period. Index
of Industrial Production is compiled and published every month by Central Statistics Office (CSO). IIP
covers 682 items comprising Mining (61 items), Manufacturing (620 items) & Electricity (1 item). The
weights of the three sectors are 14.16%, 75.53% and 10.32% respectively and are on the basis of their
share of GDP at factor cost during 2004-05.

Q 2.A
o Statement 1 is correct. Participatory notes, also referred to as "P-notes," are financial instruments used
by investors or hedge funds that are not registered with the Securities and Exchange Board of India
(SEBI) to invest in Indian securities.
o Statement 2 is incorrect. The investor in PN does not own the underlying Indian security, which is held
by the FII who issues the PN. Thus the investors in PNs derive the economic benefits of investing in the
security without actually holding it. They benefit from fluctuations in the price of the underlying security
since the value of the PN is linked with the value of the underlying Indian security. The PN holder also
does not enjoy any voting rights in relation to security/shares referenced by the PN.

Q 3.A
Secondary Market refers to a market where securities are traded after being initially offered to the
public in the primary market and/or listed on the Stock Exchange. Majority of the trading is done in the
secondary market.
Secondary market comprises of equity markets and the debt markets. Following are the main financial
products/instruments dealt in the secondary market:
Equity: The ownership interest in a company of holders of its common and preferred stock. The various
kinds of equity shares are as follows:
o Equity Share
o Rights Issue / Rights Shares
o Bonus Shares
o Preferred Stock / Preference shares
o Security Receipts
o Government securities (G-Secs)
o Debentures
o Bond
Initial Public Offering (IPO) is an offering of the primary market where a private company decides to sell
stocks to the public for the first time.

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Q 4.B
o Statement 1 is correct as the transfer payments which include the remittances, gifts and grants are the
part of the capital account of the Balance of Payments. Any increase in them would likely lead to a
surplus in the current account.
o Statement 2 is not correct. All the international purchases and sales of assets such as money, stocks,
bonds etc. are recorded under the capital account.
o Statement 3 is correct as fall in global oil prices will reduce imports which will increase the current
account surplus.

Q 5.C
o Statement 1 is correct as rural India's fuel mix is more geared towards domestically produced firewood,
chips and biogas inputs, which are dependent much on crude price. On the other hand, fuel products
more widely used in urban India, i.e. LPG and diesel have benefited from lower global prices.
o Statement 2 is correct. Although fall in crude prices has impacted WPI fuel and power inflation
significantly, the impact on CPI fuel & light is minimal. This is mainly due to difference in the
commodities and their weights included in the CPI and WPI fuel baskets. Diesel and petrol whose prices
are directly linked to global crude prices constitute around 40 per cent of the WPI fuel & power basket.
Petroleum products have negligible weight in CPI fuel & light group.

Q 6.A
o Statement 1 is correct as Global slowdown would result into weakening of global demand of Indian
goods and thus result into lower value of exports.
o Statement 2 is correct as Low global commodity prices means the prices that traders would get in
international market would be low and hence it will discourage exports .
o Statement 3 is not correct as deprecation in currency would make exports more competitive and
encourage rise in value of exports.

Q 7.B
o Statement 1 is not correct. Domestic commercial banks both Public and Private contribute to the RIDF
to the extent of their shortfall in stipulated priority sector lending to agriculture. The main objective of
the Fund is to provide loans to State Governments and State-owned corporations to enable them to
complete ongoing rural infrastructure projects. The foreign banks having shortfall in lending to
stipulated priority sector target/sub-targets are required to contribute to Small Enterprises Development
Fund (SEDF) to be set up by Small Industries Development Bank of India (SIDBI).
o Statement 2 is correct. The RIDF was set up by the Government in 1995-96 for financing ongoing rural
Infrastructure projects. The fund is maintained by the National Bank for Agriculture and Rural
Development (NABARD).

Q 8.D
o Statement 1 is not correct. Where an investor has a stake of 10 percent or less in a company, is treated
as FII and, where an investor has a stake of more than 10 percent, is treated as FDI.
o Statement 2 is not correct. As per Section 15 (1) (a) of the SEBI FII Regulations, 1995, a Foreign
Institutional Investor (FII) may invest in the securities in the primary and secondary markets including
shares, debentures and warrants of companies unlisted, listed or to be listed on a recognized stock
exchange in India.

Q 9.B
Currently the cost of production of domestic steel companies is more than the import parity price at 10
per cent import duty and hence is not globally competitive. To make the domestic production of steel
sustainable following steps can help:
o increasing basic customs duties on certain primary iron and steel products
o imposing anti-dumping duties on steel imported from other nations

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 o imposing provisional safeguard duty
o imposing minimum import price
All the above steps have been taken by the government in recent times as explained in the Economic
Survey 2015-16.
Statement 1 is incorrect as decreasing basic customs duties would make the imported product cheaper
further eroding the competitiveness of Indian steel manufacturers.
Statement 2 is correct as it would provide Indian steel manufacturers some parity.

Q 10.D
Challenges to Ease of Doing Business:
o Time required to obtain clearances.
o Challenges in transfer pricing audit
o Indian tax regime not proactive in promoting investments etc.
Steps that can be taken:
o Need for simplification & transparency in process
o Promote industrial clusters
o Introduce market price-based pricing mechanism
o Implement Goods & Services Tax
o Reduce discretionary nature of taxes
o Time-bound taxation-related dispute resolution

Q 11.D
o Statement 1 is not correct. Micro, Small & Medium Enterprises Development Act, 2006 (MSMED Act)
provides for classification of enterprises based on their investment size and the nature of the activity
undertaken by that enterprise. As per MSMED Act, enterprises are classified into two categories -
manufacturing enterprises and service enterprises.
o Statement 2 is not correct. There is no item reserved for exclusive manufacture in the micro small and
medium scale sector unlike such a provision that existed during during pre-liberalisation phase. In 2015
Government has dereserved the remaining 20 items from the erstwhile list of items reserved for
exclusive manufacture in MSMEs.

Q 12.C
o The Nutrient Based Subsidy (NBS) Policy is being implemented by the Department of Fertilizers and
under the said policy, a fixed amount of subsidy decided on annual basis, is provided on each grade of
subsidized Phosphatic and Potassic (P&K) fertilizers depending on its Nutrient Content. At present 22
grades of P&K fertilizers are covered under the NBS policy.
o Under the NBS Policy, a fixed rate of subsidy is announced on nutrients namely Nitrogen (N), Phosphate
(P), Potash (K) and Sulphur (S) by the Government on annual basis.

Q 13.B
o The key difference between a share and a debenture is that while share represents part of ownership of
a company, debenture acknowledges loan or debt to the company. Thus, a shareholder is a participant in
the profits as well as losses of the company.
o Dividend is paid on share, which is an appropriation of profits, but a debenture holder is paid interest
over the lifetime of the debenture and principal amount at the end of life.

Q 14.B
o At the time of independence, there were less private entrepreneurs and India needed a large capital in
order to bring industrialisation.
o The demand for industrial goods in market was less during that time owing to low income levels. The low
demand had resulted in lack of incentives for the profit driven private investment.

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 o Maximisation of profit would require private players rather than state intervention. The state
intervention aimed for generation of employment and achievement of socialistic goals rather than
maximising the profits.

Q 15.A
o The money market primarily facilitates lending and borrowing of funds between banks and entities like
Primary Dealers (PDs). Banks and PDs borrow and lend overnight or for the short period to meet their
short term mismatches in fund positions. This borrowing and lending is on unsecured basis. "Call Money"
is the borrowing or lending of funds for 1 day, whereas money borrowed or lend for period between 2
days and 14 days is known as "Notice Money". And "Term Money" refers to borrowing/lending of funds
for period exceeding 14 days.

Q 16.C
o Statement 1 is correct. Of all the fertilisers, it is the most produced (86 per cent), the most consumed (74
per cent share), and the most imported (52 per cent). It also faces the most government intervention.
Urea is the most physically controlled fertiliser, with 50 per cent under the Fertiliser Ministry's
movement control order.
o Statement 2 is correct. Urea is only subsidised for agricultural uses. Subsidies like this violate what we
call the One Product-One Price principle-the intuition that products which are essentially the same
should be charged essentially the same price, else there will be incentives to divert the subsidised
commodity from eligible to ineligible consumers. The 75 per cent subsidy on agricultural urea creates a
large price wedge which feeds a thriving black market diverting urea to industry and possibly across the
border to Bangladesh and Nepal.

Q 17.C
o Statement 1 is correct. Demographic dividend occurs when the proportion of working people in the total
population is high because this indicates that more people have the potential to be productive and
contribute to growth of the economy. Working population refers to population between 15-64 years of
age.
o Statement 2 is correct. To reap the benefits of "demographic dividend", 12th Plan recommends various
strategies - improved access to quality education, better preventive and curative health care, enhancing
skills and faster generation of employment are being finalized to ensure greater productivity of Indian
workers.

Q 18.C
o Statement 1 is correct. Under the 'Direct Benefits Transfer' or 'DBT', the entitled benefit from several
schemes of the central government in the form of subsidy, stipend, scholarship or other monetary
benefits is directly transferred to the beneficiary's bank account which will eventually be linked to an
'Aadhaar' number. The scheme has been rolled out presently for even the beneficiaries who do not have
an Aadhaar number.
o Statement 2 is correct. DBT aims to target the beneficiaries accurately and reduce corruption. It will
eliminate waste in subsidy transfer.

Q 19.D
All the given agreements are under the WTO framework: Trade Facilitation Agreement, Trade Related
Intellectual Property Rights, Agreement on Subsidies and Countervailing Measures.

Q 20.B
o PFRDA is a pension regulatory body established by the government of India IN 2003 and granted
statutory status through Pension Fund Regulatory & Development Authority Act in 2013. It is a statutory
body and is autonomous as it does not under ambit of any ministry. Hence statement 1 is incorrect.

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 o It regulates and oversees pension funds of both government and private sector employees including
employees of unorganized sector. It regulates the National Pension Scheme. Hence statements 2 and 3
are correct.

Q 21.D
o Statement 1 is not correct. In the new regulations released by RBI, it has eased the norms on priority
sector lending. The distinction between direct and indirect lending to agriculture has been removed
enabling more funds to flow to farm infrastructure such as warehouses, irrigation projects, and even
cold storage. Now even bank loans to food and agro processing units will form part of agriculture.
o Statement 2 is not correct. The priority sector rulings also apply to foreign banks. However for the banks
with less than 20 branches, total priority sector is 34% of Adjusted Net Bank Credit (ANBC).

Q 22.A
o Statement 1 is incorrect. The Tenth Ministerial Conference of the WTO was held in Nairobi, Kenya during
15-19 December 2015. This was the first such meeting to be hosted by an African nation. The outcomes
of the Conference, referred to as the "Nairobi Package" include Ministerial Decisions on agriculture,
cotton and issues related to least developed countries (LDCs).
o Statement 2 is incorrect. The divergence in viewpoints as regards the fate of the Doha Round continued
during the Conference. The Nairobi Ministerial Declaration reflects divergence amongst the WTO
membership on the relevance of reaffirming the Doha Development Agenda (DDA) as the basis of future
negotiations. This was despite the fact that India, along with many other developing countries, from
groups such as the G-33, LDCs, and the Africa Group, wanted a reaffirmation of the mandate of the Doha
Round.
o Statement 3 is correct. Afghanistan and Liberia acceded to the WTO at this conference, bringing the
total membership of the organization to 162.

Q 23.A
o Statement 1 is correct. Infrastructure Investment Trusts (InvITs) are mutual fund like institutions that
enable investments into the infrastructure sector by pooling small sums of money from multitude of
individual investors for directly investing in infrastructure so as to return a portion of the income (after
deducting expenditures) to unit holders of InvITs, who pooled in the money.
o Statement 2 is not correct. InvITs can invest in any infrastructure projects, either directly or through a
special purpose vehicle (SPV). In case of Public Private Partnership (PPP) projects, such investments can
only be through SPV.
o Statement 3 is correct. InvITs are regulated by the securities market regulator in India- Securities and
Exchange Board of India (SEBI).

Q 24.B
o Under current account of the BoP, transactions are classified into merchandise (exports and imports)
and invisibles.
o Invisible transactions are further classified into three categories, namely (a) Services-travel,
transportation, insurance, Government not included elsewhere (GNIE) and miscellaneous (such as,
communication, construction, financial, software, news agency, royalties, management and business
services); (b) Income; and (c) Transfers (grants, gifts, remittances, ets.) which do not have any quid pro
quo.
o Loans from world bank and the investment by Indian nationals abroad are part of the capital account of
the Balance of Payments.

Q 25.D
o AMRUT i.e. Atal Mission for Rejuvenation and Urban Transformation was launched on June 25, 2015
with the objective of improving basic urban infrastructure in 500 cities. Hence it involves urban
infrastructure.

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 o National Heritage City Development and Augmentation Yojana (HRIDAY): The HRIDAY scheme aims at
preserving and revitalizing the soul and unique character of heritage cities in India. The urban
component exists in HRIDAY too.
o Swachh Bharat Mission (SBM): The SBM aims at making India free from open defecation and at achieving
100 percent scientific management of municipal solid waste in 4041 statutory towns/ cities in the
country. Municipal Management is a major urban issue.

Q 26.C
o Many factors are responsible for the privatization and commercialization in infrastructure. These are
massive investment needs, managerial constraints in the public sector, changes in technology, transport
needs, globalization and new dynamism in world markets.

Q 27.C
o Statement 1 is correct. The National Agriculture Market (NAM) is envisaged as a pan-India electronic
trading portal which seeks to network the existing Agricultural Produce Market Committees (APMCs)
and other market yards to create a unified national market for agricultural commodities. NAM is a
"virtual" market but it has a physical market (mandi) at the back end.
o NAM was announced during the Union Budget 2014-15 and is proposed to be achieved through the
setting up of a common e-platform to which initially 585 APMCs selected by the states are linked. NAM
was launched on 14 April 2016 with 21 mandis from 8 States joining it.
o Statement 2 is correct. NAM will be implemented as a Central Sector Scheme through Agri-Tech
Infrastructure Fund (ATIF). The Department of Agriculture & Cooperation (DAC), Ministry of Agriculture
will set it up through the Small Farmers Agribusiness Consortium (SFAC). The Central Government will
provide the software free of cost to the states and in addition, a grant of up to Rs. 30 lakhs per mandi
/market will be given as a onetime measure for related equipment and infrastructure requirements. In
order to promote genuine price discovery, it is proposed to provide the private mandis also with access
to the software but they would not have any monetary support from Government.

Q 28.B
o The Mahalanobis Growth Model had to components; (i) more emphasis on industrialization and (ii)
emphasis on heavy goods industries which was believed to help us attain self sustained/ self reliant
growth and also leading to a consequent trickle down effect.
o Indicative Planning (8th Five Year Plan) was not a part of Mahalanobis Growth Model.

Q 29.C
o Statement 1 is correct. WTO's Special Safeguard Mechanism (SSM) is a protection measure allowed for
developing countries to take contingency restrictions against agricultural imports that are causing
injuries to domestic farmers. It is a tool that will allow developing countries to raise tariffs temporarily
to deal with import surges or price falls.
o Statement 2 is correct. The "Nairobi Package" was adopted at the WTO's Tenth Ministerial Conference,
held in Nairobi, Kenya in 2015. It contains a series of six Ministerial Decisions on agriculture, cotton and
issues related to least-developed countries (LDCs). These cover public stockholding for food security
purposes, a Special Safeguard Mechanism for developing countries and a commitment to abolish export
subsidies for farm exports.

Q 30.B
o Statement 1 is not correct. Quantitative easing is an unconventional monetary policy in which a central
bank purchases government securities or other securities from the market in order to lower interest
rates and increase the money supply. Quantitative easing increases the money supply by flooding
financial institutions with capital in an effort to promote increased lending and liquidity.

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 o Statement 2 is correct. If central banks increase the money supply too quickly, it can cause inflation. This
happens when there is increased money but only a fixed amount of goods available for sale when the
money supply increases.

Q 31.A
Railway Transport and Atomic Energy are reserved for Public Sector. Issue of Licencing, therefore, does
not arise.
The list of items covered under compulsory licensing under the Industries (Development & Regulation)
Act, 1951 is reviewed on an ongoing basis. At present, only five industries are under compulsory
licensing mainly on account of environmental, safety and strategic considerations. They are:
o Distillation and brewing of alcoholic drinks.(Licensing ceased by DIPP in compliance with Supreme
Court Order of 29.1.1997 in Bihar Distillery case which ruled that industries engaged in manufacture
of potable alcohol would be under the jurisdiction of the States).
o Cigars and cigarettes of tobacco and manufactured tobacco substitutes.
o Electronic Aerospace and defense equipment: all types.
o Industrial explosives including detonating fuses, safety fuses, gun powder, nitrocellulose and
matches.
o Specified Hazardous chemicals i.e. (i) Hydrocyanic acid and its derivatives, (ii) Phosgene and its
derivatives and (iii) Isocyanates & diisocyanates of hydrocarbon, not elsewhere specified (example
Methyl isocyanate).

Q 32.D
o Transfer payments are receipts which the residents of a country receive " for free", without having to
make any present or future payments in return. They consist of remittances, gifts and grants. They could
be official or private. The payment for the service provided abroad is not part of transfer payments.

Q 33.C
Liberalisation includes:
o De-licensing
o De-reservation of sectors which were reserved for small scale industry.
o Allowing establishment of private sector banks, both Indian as well as foreign
o Market determined exchange rate
o Easing quantitative restrictions on imports.
o Abolishing import licensing.
Whereas disinvestment comes under Privatisation.

Q 34.D
Under the Essential Commodities Act 1955, the State Governments/UT Administrations have been
provided with various control powers to regulate various aspects of trading in essential commodities
such as food grain, edible oils, pulses, kerosene and sugar etc.
This is being done for
o Maintaining or increasing their supplies
o Equitable distribution and availability at fair prices of the commodities concern Securing any
essential commodity for the
o defence of India or the efficient conduct of military operations
Following items falls under its purview
o Petroleum and petroleum products
o Food items: edible oil, seeds ,vanaspati,pulses,sugar cane ,rice
o Prices of essential drugs
o Fertilizers
Recently, potatoes and onions were included in the list

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Q 35.D
o Statement 1 is correct. The Green Revolution saw development of improved high yielding varieties
various crops such as rice and wheat etc. The modern varieties produced more than traditional varieties
because they were more responsive to controlled irrigation and to petrochemical fertilizers.
o Statement 2 is correct. Use of chemical fertilizers and pesticides have played a positive role in increasing
agricultural productivity and in making India self-sufficient in food grain production. Yield of food-grain
in India increased from 644 k.g. per hectare in 1966-67 to 1636 k.g. per hectare in 2000-2001 i.e. this
registered an impressive increase by around two and half times. This was mainly brought about by a
more than 12 fold increase in the consumption of chemical fertilizers (from 1.1 million ton to 13.56
million tons) during the same period.
o Statement 3 is correct. Irrigation infrastructure in India has seen substantial expansion over the years.
The total irrigation potential created (IPC) from major, medium and minor irrigation schemes has
increased from 22.6 million hectares during pre-plan period to 113 million hectares at the end of the
11th Plan. This has led to increase in the agricultural productivity. Moreover, adoption of water saving
technologies such as sprinkler and drip irrigation system have proven extremely effective in not just
water conservation but also leading to higher yields by delivering water in a controlled manner in parts
of the plant where it is most efficiently absorbed.

Q 36.A
o Statement 1 is correct. The Increment Capital Output Ratio (ICOR) is a metric that assesses the marginal
amount of investment capital necessary for an entity to generate the next unit of production. Overall, a
higher ICOR value is not preferred because it indicates that the entity's production is inefficient.
o Statement 2 is not correct. Higher ICOR signifies that more input investment is required to get same
amount of output. It indicates that the efficiency of the firm/economy to produce has come down.

Q 37.C
o Statement 1 is incorrect: Private industries were allowed in limited field and license was mandatory. All
basic industries were reserved for public sector
o Statement 2 is correct: Under the MRTP Act, 1969, which aimed at preventing economic power
concentration, large business houses required permission from the government to expand their business
operations.
o Statement 3 is incorrect: Rate of taxation was kept high as government was doing most of the work. All
banks were also kept under control of government.Stock exchange was also kept under strict control.

Q 38.D
A Current Account Deficit can be financed by different sources:
o A country may use a part of its gold stocks and make payments to foreigners by means of gold.
o A country may draw upon its reserves of foreign currencies and foreign securities.
o A country may borrow foreign exchange from different officials and private sources.
o It may mobilise foreign exchange by attracting deposits by foreigners and investment of capital by
foreigners. Generally, no country likes to draw upon its gold and foreign exchange stocks. It
mobilises foreign exchange by way of loans, deposits and investments.

Q 39.C
o Both the statements are correct.
o Tariffs are a tax on imported goods. They make imported goods more expensive and discourage their
use. Quotas specify the quantity of goods which can be imported. The effect of tariffs and quotas is that
they restrict imports and therefore protect the domestic firms from foreign competition.

Q 40.B
o Statement 1 is not correct. A Depository Receipt (DR) is a financial instrument representing certain
securities (eg. shares, bonds etc.) issued by a company/entity in a foreign jurisdiction.

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 o Statement 2 is correct. DRs constitute an important mechanism through which issuers can raise funds
outside their home jurisdiction. DRs are issued for tapping foreign investors who otherwise may not be
able to participate directly in the domestic market. It is perceived as the beginning point of connecting
with the foreign investors (i.e. a stage before the actual listing the shares /securities in a foreign stock
exchange) or a way of introducing the company to a foreign investor. For investors, depository receipt is
a way of diversifying the risk, by getting exposure to a foreign market, but without the exchange rate risk
as they are foreign currency denominated. Further, they feel more safe to invest from their home
location.
o Statement 3 is correct. Depository Receipts are a foreign currency denominated instrument.

Q 41.B
The features of a capitalist economy are:
o Two-class system: Historically a capitalist society was characterized by the split between two classes
of individuals--the capitalist class, which owns the means for producing and distributing goods (the
owners) and the working class, who sell their labor to the capitalist class in exchange for wages. The
economy is run by the individuals (or corporations) who own and operate companies and make
decisions as to the use of resources. But there exists a "division of labor" which allows for
specialization, typically occurring through education and training, further breaking down the two
class system into sub-classes (eg the middle class). A capitalist economy accepts that income polarity
is a reality in order to motivate high performers to develop new ideas and products for personal
gain. Hence, statement 1 is not correct.
o Profit motive: Companies exist to make a profit. The motive for all companies is to make and sell
goods and services only for profits. Companies do not exist solely to satisfy people's needs. Even
though some goods or services may satisfy needs, they will only be available if the people have the
resources to pay for them. Hence, statement 2 is correct.
o Minimal government intervention: Capitalist societies believe markets should be left alone to
operate without government intervention. However, a completely government-free capitalist
society exists in theory, only. A purely capitalist society would allow the markets to set prices based
on demand and supply for the purpose of making profits. Hence, statement 3 is correct.
o Competition: True capitalism needs a competitive market. Without competition, monopolies exist
and instead of the market setting the prices, the seller is the price setter, which is against the
conditions of capitalism.
o Willingness to change: The last characteristic of capitalism is the ability to adapt and change.
Technology has been a game changer in every society and the willingness to allow change and
adaptability of societies to improve inefficiencies within economic structures is a true characteristic.

Q 42.C
o The Trans-Pacific Partnership is a proposed free trade agreement linking the United States and 11 other
Pacific Rim economies.
o The members are: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru,
Singapore, the U.S. and Vietnam.

Q 43.D
Following are the goals under SDGs:
Goal 1: End poverty in all its forms everywhere
Goal 2: End hunger, achieve food security and improved nutrition and promote sustainable agriculture
Goal 3: Ensure healthy lives and promote well-being for all at all ages
Goal 4: Ensure inclusive and quality education for all and promote lifelong learning
Goal 5: Achieve gender equality and empower all women and girls
Goal 6: Ensure access to water and sanitation for all
Goal 7: Ensure access to affordable, reliable, sustainable and modern energy for all
Goal 8: Promote inclusive and sustainable economic growth, employment and decent work for all
Goal 9: Build resilient infrastructure, promote sustainable industrialization and foster innovation
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 Goal 10: Reduce inequality within and among countries
Goal 11: Make cities inclusive, safe, resilient and sustainable
Goal 12: Ensure sustainable consumption and production patterns
Goal 13: Take urgent action to combat climate change and its impacts
Goal 14: Conserve and sustainably use the oceans, seas and marine resources
Goal 15: Sustainably manage forests, combat desertification, halt and reverse land degradation, halt
biodiversity loss
Goal 16: Promote just, peaceful and inclusive societies
Goal 17: Revitalize the global partnership for sustainable development

Q 44.B
o Statement 1 is correct: In India the growth rate of demand for power is generally higher than the GDP
growth rate. Studies point that in order to have 8 per cent GDP growth per annum, power supply needs
to grow around 12 per cent annually.
o Statement 2 is correct:In India, in 2016, power generated from coal accounted for around 61 % of the
power generation capacity. Hydel power accounted for 14 per cent while nuclear power accounted only
for 2 per cent.
o Statement 3 is incorrect: In India, commercial energy consumption makes up about 74 per cent of the
total energy consumed while Non-commercial energy sources consisting of firewood, cow dung and
agricultural wastes account for over 26 per cent of the total energy consumption.

Q 45.A
o NIIF was set up following the proposal made in the General Budget of 2015-16. It aims to attract
investment from both domestic and international sources for maximizing economic impact mainly
through infrastructure development in commercially viable projects, both greenfield and brownfield,
including stalled projects.

Q 46.A
o Within Asia, India has signed bilateral FTAs with Sri Lanka, Afghanistan, Thailand, Singapore, Bhutan,
Nepal, Korea, Malaysia and Japan. There have also been two regional trade agreements, the South Asian
Free Trade Agreement (SAFTA) and the India-Association of Southeast Asian Nations Agreement
(ASEAN). Outside Asia, FTAs have been agreed with Chile and MERCOSUR.
o India has not signed a FTA with European Union. The FTA talks have been deadlocked since 2013 after 16
rounds of negotiations.

Q 47.C
o Statement 1 is correct. A fixed exchange rate is a country's exchange rate regime under which the
government or central bank ties the official exchange rate to another country's currency or to the price
of gold. The purpose of a fixed exchange rate system is to maintain a country's currency value within a
very narrow band.
o Statement 2 is correct. A floating exchange rate is a regime where the currency price is set by the forex
market based on supply and demand compared with other currencies. This is in contrast to a fixed
exchange rate, in which the government entirely or predominantly determines the rate.

Q 48.C
o Statement 1 is not correct. It was during the first decade after independence (1951-52) that money
lenders and others had more than 90 % share in rural credit. Currently their relative share have come
down to almost 40 %. To a large extent, they have been replaced by institutional agencies.
o Statement 2 is not correct. NABARD does not extend any direct loan to farmers. It extend loans to
cooperatives and commercial banks who offer loans to farmers and others in rural areas.
o Statement 3 is correct. The ratio of agricultural credit to agricultural GDP has increased from 10 per cent
in 1999-2000 to around 38 per cent by 2012-13. This fact can also be derived from the fact that

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 increasing efforts are being made at financial inclusion and also government has been continuously
increasing the target of agricultural credit in every budget.

Q 49.B
o Statement 1 is correct. Though the dependence of workforce on agriculture has come down, but still
agriculture is the largest employer. In 1951, more than 70 % of labour force was involved in agriculture.
By 2015, the number has come down to 48%.
o Statement 2 is not correct. There is gradual shift from subsistence agriculture to commercial agriculture.
It is mainly due to improved farming techniques, efficient machinery, better irrigation facilities.
However, due to increase in population, the average land holdings have come down.
o Statement 3 is correct. Share of Kharif crop in total crop production gives indication of dependence of
Indian agriculture on monsoon. In 1961, share of rainfall dependent kharif crop in total foodgrain
production was 68%. It has come down to 50% now.

Q 50.C
o Asian Development Bank (ADB) is a regional development bank headquartered in Manila (Philippines).
The bank admits members of the United Nations Economic and Social Commission for Asia and Pacific
o Creativity Productivity Index is an annual report released by it.

Q 51.D
o Statement 1 is correct. Salt is used to prepare food during cooking as well as preservative and is thus
considered as an intermediate good.
o Statement 2 is correct. Long lasting consumer goods are called durable ones. Domestic vehicles such as
car and scooter are such goods. However trucks and buses are considered as capital goods.
o Statement 3 is correct. Capital goods are those which are used to produce other goods and services.
Boat used to transport goods across water is one such item.
o Statement 4 is correct. Shoes and other clothing are non-durable consumer goods as they last a limited
period of time.

Q 52.C
o Statement 1 is correct. Agricultural Produce Market Committee (APMC) is a statutory market committee
constituted by a State Government in respect of trade in certain notified agricultural or horticultural or
livestock products, under the Agricultural Produce Market Committee Act issued by that state
government.
o Statement 2 is correct. The APMC system was introduced to prevent distress sale by farmers to their
creditors, to protect farmers from the exploitation of intermediaries and traders and to ensure better
prices and timely payment for their produce through the auctions in the APMC area. However, APMC
Acts restrict the farmer from entering into direct contract with any processor/ manufacturer/ bulk
processor as the produce is required to be routed through these regulated markets. Over a period of
time, these markets have acquired the status of restrictive and monopolistic markets, harming the
farmers rather than helping them to realise remunerative prices.

Q 53.A
o Statement 1 is correct. It is the duty of the Commission to eliminate practices having adverse effect on
competition, promote and sustain competition, protect the interests of consumers and ensure freedom
of trade in the markets of India. The Commission is also required to give opinion on competition issues
on a reference received from a statutory authority established under any law and to undertake
competition advocacy, create public awareness and impart training on competition issues.
o Statement 2 is correct. The Competition Commission of India (CCI) was established under the
Competition Act, 2002 for the administration, implementation and enforcement of the Act.
o Statement 3 is not correct. It is an autonomous independent body working as an affiliated office under
the Ministry of Corporate Affairs.

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Q 54.D
Following are the functions performed by the Securities and Exchange Board of India:
o regulating the business in stock exchanges and any other securities markets;
o registering and regulating the working of stock brokers, sub-brokers, share transfer agents, bankers
to an issue, trustees of trust deeds, registrars to an issue, merchant bankers, underwriters, portfolio
managers, investment advisers and such other intermediaries who may be associated with securities
markets in any manner;
o registering and regulating the working of [venture capital funds and collective investment
schemes],including mutual funds;
o promoting and regulating self-regulatory organisations;
o prohibiting fraudulent and unfair trade practices relating to securities markets;
o promoting investors' education and training of intermediaries of securities markets;
o prohibiting insider trading in securities;
o regulating substantial acquisition of shares and take-over of companies;

Q 55.A
The Rashtriya Gokul Mission is a focused project under National Programme for Bovine Breeding and
Dairy Development, with an outlay of Rs 500 crore during the 12th Five Year Plan. During 2014-15 Rs
150.00 crores will be allocated for development, preservation and conservation of indigenous breeds.
The Mission will be implemented with the objectives to:
o development and conservation of indigenous breeds
o undertake breed improvement programme for indigenous cattle breeds so as to improve the genetic
makeup and increase the stock;
o enhance milk production and productivity;
o upgrade nondescript cattle using elite indigenous breeds like Gir, Sahiwal, Rathi, Deoni, Tharparkar,
Red Sindhi and
o distribute disease free high genetic merit bulls for natural service.
As it aims at conserving indigenous breeds, there is no provision for cross breeding with foreign breeds.

Q 56.B
o The Mines and Minerals (Development and Regulation) Act 2015 has provision for the establishment of
District Mineral Foundation (DMF), a non-profit organization, in any district affected by mining-related
operations, with the objective of working for the interest and benefit of persons as well as affected areas
where mining activity is taking place. Hence statement 1 is incorrect and statement 2 is correct.

Q 57.D
o Free Trade Agreement (FTA): A free trade agreement is a preferential arrangement in which members
reduce tariffs on trade among themselves, while maintaining their own tariff rates for trade with
nonmembers.
o Customs Union (CU): A customs union (CU) is a free-trade agreement in which members apply a
common external tariff(CET) schedule to imports from nonmembers.
o Common Market (CM): A common market is a customs union where movement of factors of production
is relatively free amongst member countries.
Free Trade Agreement (FTA): A free trade agreement is a preferential arrangement in which members
reduce tariffs on trade among themselves, while maintaining their own tariff rates for trade with
nonmembers. Customs Union (CU): A customs union (CU) is a free-trade agreement in which members
apply a common external tariff(CET) schedule to imports from nonmembers. Common Market (CM): A
common market is a customs union where movement of factors of production is relatively free amongst
member countries.

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Q 58.D
o Statement 1 is not correct. This is a virtual currency. There is no underlying or backing of any asset for
virtual currency. Its value seems to be depends on speculation.
o Statement 2 is not correct. Bitcoin is a digital currency that is not tied to a bank or government and
allows users to spend money anonymously.

Q 59.D
o The Qualified Foreign Investor (QFI) is sub-category of Foreign Portfolio Investor and refers to any
foreign individuals, groups or associations, or resident, however, restricted to those from a country that
is a member of Financial Action Task Force (FATF) or a country that is a member of a group which is a
member of FATF and a country that is a signatory to International Organization of Securities
Commission's (IOSCO) Multilateral Memorandum of Understanding (MMOU). The objective of enabling
QFIs is to deepen and infuse more foreign funds in the Indian capital market and to reduce market
volatility as individuals are considered to be long term investors, as compared to institutional investors.
They are allowed to invest in - mutual funds, equities and corporate debt.

Q 60.C
o Statement 1 is correct: It has been observed that the yields from organic farming are less than modern
agricultural farming in the initial years. Therefore, small and marginal farmers may find it difficult to
adapt to large scale production.
o Statement 2 is correct: Organic produce may also have more blemishes and a shorter shelf life than
sprayed produce.
o Statement 3 is incorrect: In general, organic farming requires more manual and physical control of
weeds and other cultivation techniques. Hence it is labour-intensive (required more labour
force). Moreover choice in production of off-season crops is also quite limited in organic farming.

Q 61.B
o Statement 1 is correct. Post 1991 reforms, there is an increase in foreign direct investment due to
liberalization process and hence an increase in forex reserves.
o Statement 2 is incorrect. It is complained that economic reforms have bypassed agriculture sector. Public
investment in agricultural infrastructure has reduced during reforms period.
o Statement 3 is incorrect. There is an increasing regional disparities after the reforms. Growth has
concentrated in few areas and regions which are experiencing unprecedented prosperity.

Q 62.D
o Unemployment in India is caused by a range of factors: (1) Slow growth in agricultural and industrial
productivity. (2) Slow expansion of manufacturing sector (3) Concentration of investment in capital
goods industry.
o One of the most important objectives of economic planning in India was to create employment
opportunities for the rising labour force. To meet this goal several initiatives were undertaken -
expansion of heavy industries, cottage and small industries, agriculture and related activities etc.

Q 63.D
o Statement 1 is correct. The CPSEs fulfilling the following criteria are eligible to be considered for grant of
Maharatna status. (i) Having Navratna status. (ii) Listed on Indian stock exchange with minimum
prescribed public shareholding under SEBI regulations. (iii) Average annual turnover of more than Rs.
25,000 crore, during the last 3 years. (iv) Average annual net worth of more than Rs. 15,000 crore, during
the last 3 years. (v) Average annual net profit after tax of more than Rs. 5,000 crore, during the last 3
years. (vi) Should have significant global presence/international operations.
o Statement 2 is correct. The CPSEs which have made profits in the last three years continuously and have
positive net worth are eligible to be considered for grant of Miniratna status.

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 o Statement 3 is correct. Maharatna CPSEs are: Bharat Heavy Electricals Limited. Coal India Limited. GAIL
(India) Limited. Indian Oil Corporation Limited. NTPC Limited. Oil & Natural Gas Corporation Limited.
Steel Authority of India Limited.

Q 64.A
o A unicorn club refers to a start-up with a estimated valuation of more than $1 billion. As of December
2015, eight Indian startups belonged to the "Unicorn" club.

Q 65.C
Currency of a strong geo-political nation is considered as hard currency.
Such currencies have the following characteristics:
High liquidity: As these currencies are traded throughout the world and have high stability.
(statement 1 incorrect)
Free convertibility: No fee being charged in converting these currencies into other(statement 2
correct)
Full convertibility: Generally, these currencies are fully convertible for easy trading without any
condition attached (statement 3 correct)
Currency like US dollar, Euro falls under the category of hard currency.

Q 66.D
The country's long run potential growth rate is still around 8-10 per cent. Realizing this potential requires
a push on at least three fronts:
o First, key to creating a more competitive environment will be to address the exit (the Chakravyuha)
problem which bedevils the Indian economy and endures as an impediment to investment,
efficiency, job creation and growth.
o Second, major investments in people- their health and education-will be necessary to exploit India's
demographic dividend.Tomorrow's worker is today's child or foetus-born to and raised by today's
mothers. It would consequently seem important to focus on "mother and child", involving maternal
health and early life interventions.
o Third, while dynamic sectors such as services and manufacturing tend to grab public attention, India
cannot afford to neglect its agriculture. After all, nearly 42 per cent of Indian households derive the
bulk of their income from farming. Smaller farmers and landless laborers especially are highly
vulnerable to productivity, weather, and market shocks changes that affect their incomes. The newly
introduced crop insurance schemes should begin to address these problems to a great extent.

Q 67.B
Agreement on Subsidies and Countervailing Measures under WTO classifies subsidies as follows:
(a) Green: Subsidies which are no or least market distorting includes measures decoupled from output
such as income-support payments, etc.
(b) Amber: Those subsidies which are trade distorting and need to be curbed and actionable by trading
partners.
(c) Blue Box: Only "Production limiting Subsidies" under this are allowed. They cover payments based on
acreage, yield, or number of livestock in a base year.

Q 68.C
Some of the salient features of India's Foreign Trade Policy 2015-20 are as follows:
o Increase exports to $900 billion by 2019-20, from $466 billion in 2013-14
o Raise India's share in world exports from 2% to 3.5%.
o Merchandise Export from India Scheme (MEIS) and Service Exports from India Scheme (SEIS)
launched. Merchandise Export from India Scheme (MEIS) and Service Exports from India Scheme (SEIS)
are schemes to incentivise export of selected items of goods and services respectively by giving duty
concessions

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 o Higher level of rewards under MEIS for export items with High domestic content and value addition.
o Export obligation under EPCG scheme reduced to 75% to promote domestic capital goods
manufacturing.
o FTP to be aligned to Make in India, Digital India and Skills India initiatives.

Q 69.C
As per the CSR provision, if a company has:
Assets of 500 crore rupees or more or
Turnover of 1000 crore rupees or more or
Net profit of 5 crores or more then the concerned company is liable to pay CSR.
It mandates all the companies and PSUs operating in India (not their foreign branches) are liable to
spend 2% of their net average profit of three years on social development works.
A foreign company operating in India is liable to pay CSR (statement 1 correct).
An Indian company with branches overseas would have to pay CSR for branch operating in India only
(statement 2 incorrect).
CPSUs are liable to spend on CSR. (statement 3 is correct).

Q 70.A
o In India, total Central Government Liabilities constitutes the following three categories; [i] Internal Debt.
[ii] External Debt. [iii] Public Account Liabilities.
o Public Debt in India includes only Internal and External Debt incurred by the Central Government. It does
not include Public Account Liabilities.
o Internal Debt includes liabilities incurred by resident units in the Indian economy to other resident units,
while External Debt includes liabilities incurred by residents to non-residents.

Q 71.D
o Green bond is a debt instrument (and not equity instrument) which publicly states that capital is being
raised to fund 'green' projects, that typically include those relating to renewable energy, emission
reductions and so on.
o Green bonds are issued by multilateral agencies such as the World Bank, corporations, government
agencies and municipalities.
India has embarked on an ambitious target of building 175 gigawatt of renewable energy capacity by
2022, from just over 30 gigawatt now. This requires a massive $200 billion in funding. This is likely to
increase India's share in green bond market

Q 72.D
o PMKSY has been conceived amalgamating ongoing schemes viz. Accelerated Irrigation Benefit
Programme (AIBP) of the Ministry of Water Resources, River Development & Ganga Rejuvenation
(MoWR, RD&GR), Integrated Watershed Management Programme (IWMP) of Department of Land
Resources (DoLR) and the On Farm Water Management (OFWM) of Department of Agriculture and
Cooperation (DAC). The scheme will be implemented by Ministries of Agriculture, Water Resources and
Rural Development.
o The major objective of PMKSY is to achieve convergence of investments in irrigation at the field level,
expand cultivable area under assured irrigation, improve on-farm water use efficiency to reduce wastage
of water, enhance the adoption of precision-irrigation and other water saving technologies (more crop
per drop), enhance recharge of aquifers and introduce sustainable water conservation practices by
exploring the feasibility of reusing treated municipal waste water for peri-urban agriculture and attract
greater private investment in precision irrigation system.

Q 73.C
o Viability Gap Funding (VGF) is a grant one-time or deferred, provided to support infrastructure projects
that are economically justified but fall short of financial viability. The lack of financial viability usually

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 arises from long gestation periods and the inability to increase user charges to commercial levels.
Infrastructure projects also involve externalities that are not adequately captured in direct financial
returns to the project sponsor.

Q 74.D
o IDFs are investment vehicles which can be sponsored by commercial banks and NBFCs in India in which
domestic/offshore institutional investors, specially insurance and pension funds can invest through units
and bonds issued by the IDFs. State-owned India Infrastructure Finance Co. Ltd (IIFCL) in the process of
raising Rs.1,000 crore from second tranche of infrastructure debt fund (IDF) to finance renewal energy
projects.
o The Reserve Bank of India (RBI) has revamped priority sector lending (PSL) norms. Now, loans to sectors
such as social infrastructure, renewable energy and medium enterprises will also be treated as PSL.
o The National Clean Energy Fund (NCEF) is a fund created in 2010-11 using the carbon tax - clean energy
cess - for funding research and innovative projects in clean energy technologies of public sector or
private sector entities, upto the extent of 40% of the total project cost. The Fund is designed as a non
lapsable fund under Public Accounts.

Q 75.A
o Pradhan Mantri MUDRA (Micro Units Development and Refinance Agency) Yojana or PMMY has been
set up with the intention to 'fund the unfunded'. The new institution aims to provide financial assistance
to "unfunded" small entrepreneurs who provide employment to a large number of people.
o The purpose of MUDRA is to provide funding to the non-corporate small business sector through various
Last Mile Financial Institutions like Banks, NBFCs and MFIs. Hence, statement 1 is correct.
o The main focus will be on businesses promoted by SC and ST entrepreneurs. However, there is no
specific amount that is mentioned for these sections. Hence, statement 2 is incorrect.
o MUDRA loan is available through Banks/NBFCs/MFIs for activities such as manufacturing, trading and
services. Loans are categorised into Shishu, Kishor and Tarun. These products have been designed to
cater to customers operating at the lower end of the enterprise spectrum.
o Recently, clarifying its stand on regulation of microfinance companies, the government has said that the
Reserve Bank of India would continue to regulate MFIs registered as non-banking finance companies
(NBFCs) with the central bank. MFIs will not be regulated by the Micro Units Development and Refinance
Agency (MUDRA) Bank, as proposed by the finance ministry earlier. Hence, 3rd statement is not correct.

Q 76.D
At a time when the newest normal for the world economy is one of turbulence and volatility, India is a
refuge of stability and an outpost of opportunity. Its macro-economy is robust, and it is likely to be the
fastest growing major economy in the world in 2016. This performance reflects the implementation of a
number of meaningful reforms, each incremental, but collectively meaningful:
1. Liberalizing foreign direct investment (FDI) across-the-board, including by passing the long-awaited
insurance bill. FDI reforms reflect a decisive change in philosophy, from viewing FDI as a tolerable
necessity to something to welcome.
2. Vigorously pursuing efforts to ease the cost of doing business, which has allowed India to advance in
cross-country competitiveness rankings and become the crucible for "million mutinies" reflected in
the unprecedented dynamism of the startup and e-commerce sectors, and in the interest of large
employment-generating companies.
3. Elevating to mission mode the financial inclusion agenda via the Jan Dhan Yojana by creating bank
accounts for over 200 million people within months. Financial inclusion will also be furthered by the
licensing of 11 payments banks and 10 small banks;
4. Restoring stability and predictability in tax decisions, reflected in the settlement of the Minimum
Alternate Tax (MAT) imposed on foreign companies, and increasing substantially the limits beyond
which the tax department will file appeals;

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 5. Creating the palpable and pervasive sense that corruption at the centre has been meaningfully
addressed, reflected in transparent auctions of public assets and non-interference in regulatory
decisions;
6. Implementing a major public investment program to strengthen the country's infrastructure and
make up for the deficiency of private investment;

Q 77.D
o Statement 1 is correct. India, exports water-intensive foodgrains like rice, cotton, sugar and soybean.
Water "embedded" in crops is the water content of each crop and once the crop is exported, it cannot
be recovered. In 2010, India exported about 25 cu km of water embedded in its agricultural exports. This
is equivalent to the demand of nearly 13 million people. India was a "net importer" of water until around
1980s. With increases in food grain exports, India has now become a net exporter of water - about 1 per
cent of total available water every year. The ratio of export to import of such virtual water is about 4 for
India and 0.1 for China. Thus China remains a net importer of water. This is also evident in China and
India's trade patterns. China imports water intensive soybeans, cotton, meat and cereal grains, while
exporting vegetables, fruits and processed food.
o Statement 2 is correct. It has long been recognized that a key factor undermining the efficient use of
water is subsidies on power for agriculture that, apart from its benefits towards farmers, incentivises
wasteful use of water and hasten the decline of water tables. According to an analysis by National
Aeronautics and Space Administration (NASA), India's water tables are declining at a rate of 0.3 meters
per year. Between 2002 and 2008, the country consumed more than 109 cubic kilometers of
groundwater, double the capacity of India's largest surface water reservoir, the Upper Wainganga.
o Statement 3 is correct. Since independence, India has invested numerous resources on irrigation, both
public (canal irrigation) and private (tube wells). In both cases the water has been deployed via "flood"
irrigation, which is an extremely inefficient use of water. Irrigation investments must shift to adopting
technologies like sprinkler and drip irrigation and rainwater harvesting.

Q 78.D
o Under the Capital Account, capital inflows can be classified by instrument (debt or equity) and maturity
(short or longterm).
o The main components of the capital account include foreign investment, loans and banking capital.
o Foreign investment, comprising Foreign Direct Investment (FDI) and Portfolio Investment consisting of
Foreign Institutional Investors (FIIs) investment, American Depository Receipts/Global Depository
Receipts (ADRs/GDRs) represents non-debt liabilities, while loans (external assistance,
external commercial borrowings and trade credit) and banking capital, including non-resident Indian
(NRI) deposits are debt liabilities.

Q 79.D
o New Economic Policy can broadly be classified into two groups : Stabilization measures and Structural
Reforms measures. Stabilization measures are the short term measures that involves maintaining
sufficient forex reserves ( balance of payment) and keeping the prices under control ( inflation).
o Structural Reforms measures are the long term measures that involves improving efficiency of the
economy and increasing its international competitiveness by removing rigidities in various segments of
the economy.

Q 80.C
Balance of payments summarizes an economy's transactions with the rest of the world for a specified
time period. To correct deficit in BoP, a country will have to take steps which would:
(a) attract more foreign investment
(b) increase exports and decrease unnecessary imports
1. is not correct as Reducing import duty would lead to increase in imports and hence would lead to
more deficit in BoP.

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 2. is correct as restrictive monetary policy(lower money supply) would lead to fall in prices of goods in
country which would make exports competitive in international market.
3. is not correct as Appreciation of increase in value of domestic currency would make exports less
competitive.

Q 81.C
Following 5 institutions are part of the World Bank Group:
International Bank for Reconstruction and Development
International Development Association
International Finance Corporation
Multilateral Investment Guarantee Agency
International Center for the Settlement of Investment Disputes
India is a member of four of the five constituents of the World Bank Group viz., International Bank for
Reconstruction and Development (IBRD), International Development Association (IDA), International
Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA). India is not a member
of ICSID (International Centre for Settlement of Investment Disputes).

Q 82.D
o Statement 1 is correct. Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade
agreement (FTA) between the ten member states of the Association of Southeast Asian Nations (ASEAN)
(Brunei, Burma (Myanmar), Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand,
Vietnam) and the six states with which ASEAN has existing FTAs (Australia, China, India, Japan, South
Korea and New Zealand).
o Statement 2 is incorrect. India has been main negotiator ever since RCEP was envisaged.
o Statement 3 is correct. RCEP will cover trade in goods, trade in services, investment, economic and
technical co-operation, intellectual property, competition, dispute settlement and other issues.

Q 83.C
o Statement 1 is correct. During first plan, about one third of the expenditure was marked for agriculture.
Given the dependence of people on the agriculture related activities, policy makers gave maximum focus
on agriculture.
o Statement 2 is correct. 12th five year plan aims at both inclusive and sustainable growth. The theme of
the plan is "Faster, More Inclusive and Sustainable Growth".

Q 84.D
o Rainbow revolution encompasses an all-round growth in the production of foodgrains, edible oils, fruits,
vegetables and animal and fish products and evergreen revolution in agriculture through diversified
agriculture, precision farming, resource conservation and value addition to provide in real sense, the
required food, nutrition and environmental security are the hopes of the future.

Q 85.A
o Statement 1 is correct. Minimum Support Price (MSP) is a form of market intervention by the
Government of India to insure agricultural producers against any sharp fall in farm prices. MSP is price
fixed by Government of India to protect the producer - farmers - against excessive fall in price during
bumper production years. The minimum support prices are a guarantee price for their produce from the
Government. The major objectives are to support the farmers from distress sales and to procure food
grains for public distribution. In case the market price for the commodity falls below the announced
minimum price due to bumper production and glut in the market, government agencies purchase the
entire quantity offered by the farmers at the announced minimum price.
o Statement 2 is not correct. The minimum support prices are announced by the Government of India at
the beginning of the sowing season for certain crops on the basis of the recommendations of the
Commission for Agricultural Costs and Prices (CACP).

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Q 86.C
o Statement 1 is correct. SEZ refers to a specially demarcated territory usually known as 'deemed foreign
territory' with tax holidays, exemption from duties for export and import, world level economic and
social infrastructure for production and augmentation of export activities within the territory along with
facilities like abundant and relatively cheap labour, strategic location and market access etc.
o Statement 2 is correct. The major objectives of setting up a SEZ are to attract Foreign Direct Investment
(FDI), earn foreign exchange and contribute to exchange rate stability, boost the export sector especially
non traditional exports, to create employment opportunities, introduce new technology, develop
backward regions etc. by stimulating sectors as electronics, information technology, R & D, tourism,
infrastructure and human resource development that are regarded as strategically important to the
economy.

Q 87.C
o A micro nation or a model country is an entity physical or real- that purports to have the appearance of
becoming a sovereign state but it not so. Not officially recognized but this doesn't stop them from
making up rules for their business. Examples are Republic of Molossia, Kingdom of Slabovia, etc.

Q 88.B
o The Special Drawing Rights (SDR) is an international reserve asset, created by the IMF in 1969 to
supplement its member countries official reserves. SDRs are entitlements granted to member countries
enabling them to draw from the IMF apart from their quota.
o Statement 1 is incorrect as SDR is not a hard currency; it is an independent reserved asset.
o Statement 2 is correct as every member is allocated SDR in proportion to their respective quotas. Quota
subscriptions are a central component of the IMF's financial resources. Each member country of the IMF
is assigned a quota, based broadly on its relative position in the world economy.
o Statement 3 is incorrect as SDR also includes Pound Sterling. SDR basket of currencies include US dollar,
Japanes Yen, Euro, Pound Sterling and Chinese Reminbi (most recent addition).

Q 89.B
o Udyog Aadhar Memorandum (UAM): The UAM scheme, which was notified in September 2015 under
section 8 of the MSME Development Act 2006, is a path-breaking step to promote ease of doing
business for MSMEs. Under the scheme, MSME entrepreneurs just need to file an online entrepreneurs
memorandum to instantly get a unique Udyog Aadhaar Number (UAN). The information sought is on
self-certification basis and no supporting documents are required. This marks a significant improvement
over the earlier complex and cumbersome procedure.

Q 90.B
o Convertibility of rupee means that those who have foreign exchange (e.g. US dollars, Pound Sterlings
etc.) can get them converted into rupees and vice-versa at the market determined rate of exchange.
o In India full convertibility is permitted for current account and partial convertibility for capital account.
o Convertibility has been partial in capital account to protect the domestic market from flight of foreign
investment , as what marred the east Asian countries in 90's .

Q 91.B
o Statement 1 is incorrect. As per the World Bank, the share of services in global employment has
increased by 15 pp from 35.9 per cent in 2001 to 50.9 per cent in 2010. Among the top 15 services
producer countries, the share of services in employment is high, contributing more than two-thirds of
total employment in 2014.
o Statement 2 is Correct. As per the economic survey 2015-16, the percentage contribution of India's
service sector to its GDP is 53%. The percentage contribution of China's service sector to its GDP is
47.7%.

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Q 92.C
o Statement 1 is incorrect. Restriction on imports and restrictions on entry of foreign companies to India
leads to lesser competition for domestic players and lesser choice for the consumers. The Indian
consumers will have to purchase whatever the Indian producers produce.
o Statement 2 is correct. Because of lesser competition, domestic players have greater incentive to sell
their goods at higher price.
o Statement 3 is correct. This policy by ways of tariffs and quotas helps domestic industries compete
against foreign players.
o Statement 4 is incorrect. As a result of protectionism, import of goods are restricted. This results in
lesser imports and thus helps in saving of precious forex reserve.

Q 93.D
o Trade deficit is the difference between value of imports and exports of the country.
o Fall of any good which we import more than export would result into narrowing of our trade deficit.
Gold, crude oil and pulses are major item of Import in India's external trade. Hence all the three
statements are correct.
o In 2015-16, India's 9% of import is on Gold, 23.1 % of import is on Petroleum. Also, India imported
around 6 million tonnes of pulses.

Q 94.D
o Public distribution system (PDS) is an Indian food security system. Established by the Government of
India under Ministry of Consumer Affairs, Food, and Public Distribution and managed jointly with state
governments in India.
o Major commodities distributed include staple food grains, such as wheat, rice,sugar, and kerosene,
through a network of fair price shops (also known as ration shops) established in several states across
the country. Food Corporation of India, a Government-owned corporation, procures and maintains the
PDS.
o The responsibility of distributing food grains is shared between the centre and states. The centre,
specifically FCI, is responsible for the inter-state transport of food grains from procuring to consuming
states, as well as delivering grains to the state godowns. Once FCI transports grains to the state depots,
distribution of food grains to end consumers is the responsibility of state governments.
o On receipt of food grains, states allocate the grains to each district and further to each Fair Price Shop
(FPS; ration shop) within the first week of the month. State governments are responsible for
transporting food grains from the state godowns to the doorstep of each FPS in the state.
o Statement 1 is wrong as the central government is responsible for procurement, storage, transportation,
and bulk allocation of food grains.
o Statement 2 is wrong as the state governments hold the responsibility for distributing the same to the
consumers through the established network of Fair Price Shops (FPSs). It will not have the responsibility
of storage of food grains.
o Statement 3 is wrong as it distributes both subsidized food and non-food items to India's poor.

Q 95.C
o Services export means an activity which earns foreign exchange for the home country, and which is
included within the services sector. In this case, the first option is included within the services sector but
it would result in outflow of foreign exchange.
o In rest of the three cases the activities are included in services sector and are earners of foreign
exchange for India.

Q 96.D
Following are the major recommendations of the 14th finance commission:
o Increasing share of states in the central divisible tax pool to 42% from 32%.
o Reduce fiscal deficit to 3% of GDP by 2016-17 and revenue deficit to zero by 2019
o Establishing an independent fiscal council to undertake assessment of the fiscal policy implications
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 o Replacement of FRBM act with Debt ceiling and Fiscal Responsibility legislation
o Remove the distinction between special and general category states for tax devolution purposes but
provide grants to 11 revenue deficit states.

Q 97.A
o Statement (a) is correct because when interest rates are higher in India investors from other countries
will buy bonds from India. For this they will need more rupees. Thus demand for rupee will rise in
comparison to the other currency. Hence there will be appreciation in the rupee.

Q 98.D
o Statement 1 is incorrect. In a socialist society the government decides what goods are to be produced in
accordance with the needs of society. It is assumed that the government knows what is good for the
people of the country and so the desires of individual consumers are not given much importance. The
government decides how goods are to be produced and how they should be distributed. In principle,
distribution under socialism is supposed to be based on what people need and not on what they can
afford to purchase.
o Statement 2 is incorrect. Factors of production are owned only by the government. Strictly, a socialist
society has no private property since everything is owned by the state.
o Statement 3 is incorrect. Since public sector is the sole owner as well as producer with no private
players, there will be lesser competition which results in lower efficiency.

Q 99.B
o The dependency ratio relates the number of children (0-14 years old) and older persons (65 years or
over) to the working-age population (15-64 years old). The Head count ratio (HCR) is the proportion of a
population that exists, or lives, below the 'poverty line'.

Q 100.A
o Statement 1 is correct as the real exchange rate is calculated by adjusting the nominal exchange rate
with purchasing power parity between the two countries.
o Statement 2 is not correct. A real rate higher than 1 means that the goods abroad have become
expensive. The real exchange rate measures prices abroad relative to those at home. If the real
exchange rate is equal to one, currencies are at purchasing power parity. This means that goods cost the
same in two countries when measured in the same currency. If the real exchange rises above one, this
means that goods abroad have become more expensive than goods at home.

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