UPSC IAS Archives

41. With reference to Corporate Social Responsibility (CSR) rules in India

With reference to Corporate Social Responsibility (CSR) rules in India, consider the following statements :

CSR rules specify that expenditures that benefit the company directly or its employees will not be considered as CSR activities.
CSR rules do not specify minimum spending on CSR activities.

Which of the statements given above is/are correct ?

1 only

2 only

Both 1 and 2

Neither 1 nor 2

This question was previously asked in

UPSC IAS – 2024

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The question is about Corporate Social Responsibility (CSR) rules in India under the Companies Act, 2013. Let’s examine the statements:
Statement 1: “CSR rules specify that expenditures that benefit the company directly or its employees will not be considered as CSR activities.” This statement is correct. The CSR rules (specifically Schedule VII of the Companies Act, 2013 and associated rules/clarifications) explicitly exclude activities undertaken in the normal course of business, activities that benefit only employees of the company, or activities conducted solely for the benefit of the company itself from being considered as CSR expenditure.
Statement 2: “CSR rules do not specify minimum spending on CSR activities.” This statement is incorrect. Section 135 of the Companies Act, 2013 mandates that companies meeting certain turnover, net worth, or net profit criteria in any financial year must constitute a CSR Committee and “shall ensure that the company spends, in every financial year, at least two per cent. of the average net profit of the company made during the three immediately preceding financial years”. This clearly specifies a minimum spending requirement for eligible companies.
Therefore, only statement 1 is correct.

The Companies Act, 2013 made India the first country to legally mandate CSR spending for eligible companies. The objective is to encourage businesses to contribute to societal goals through corporate resources. The law specifies eligible activities and mandates a minimum expenditure based on profitability.

Eligible CSR activities are listed in Schedule VII of the Act and include areas like eradicating hunger and poverty, promoting education, healthcare, environmental sustainability, protection of national heritage, etc. If a company fails to spend the mandated amount, it is required to explain the reasons in its annual report or transfer the unspent amount to a designated fund within a specified timeframe, depending on whether the project is ongoing or not.

42. With reference to the rule/rules imposed by the Reserve Bank of India

With reference to the rule/rules imposed by the Reserve Bank of India while treating foreign banks, consider the following statements:

There is no minimum capital requirement for wholly owned banking subsidiaries in India.
For wholly owned banking subsidiaries in India, at least 50% of the board members should be Indian nationals.

Which of the statements given above is/are correct ?

1 only

2 only

Both 1 and 2

Neither 1 nor 2

This question was previously asked in

UPSC IAS – 2024

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The question concerns the rules imposed by the Reserve Bank of India (RBI) on foreign banks setting up operations in India, specifically regarding Wholly Owned Subsidiaries (WOS). Let’s evaluate the statements:
Statement 1: “There is no minimum capital requirement for wholly owned banking subsidiaries in India.” This statement is incorrect. RBI guidelines require foreign banks operating as WOS in India to maintain a minimum initial assigned capital (net worth) of ₹500 crore.
Statement 2: “For wholly owned banking subsidiaries in India, at least 50% of the board members should be Indian nationals.” This statement is correct. RBI guidelines for WOS stipulate that a majority of the board members (i.e., at least 50%) should be Indian nationals, and the Chairperson of the board should be an Indian national resident in India.
Therefore, only statement 2 is correct.

RBI permits foreign banks to operate in India through branches or by setting up Wholly Owned Subsidiaries (WOS). The WOS model is generally preferred by RBI as it provides greater regulatory oversight and ring-fences the Indian operations from potential problems faced by the parent entity abroad. Specific guidelines are in place for WOS regarding capital requirements, governance, priority sector lending, and branching.

The policy for WOS of foreign banks was introduced by the RBI to allow foreign banks greater flexibility in expanding their branch network in India compared to the restrictions faced by foreign bank branches. WOS are treated on par with domestic banks in terms of branching rules, although they have specific requirements regarding capital, governance, and prudential norms. The requirement for a majority of Indian directors is aimed at ensuring local understanding and responsiveness to the Indian market and regulatory environment.

43. Which one of the following words/phrases is most appropriately used to

Which one of the following words/phrases is most appropriately used to denote “an interoperable network of 3D virtual worlds that can be accessed simultaneously by millions of users, who can exert property rights over virtual items” ?

Big data analytics

Cryptography

Metaverse

Virtual matrix

This question was previously asked in

UPSC IAS – 2024

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The description “an interoperable network of 3D virtual worlds that can be accessed simultaneously by millions of users, who can exert property rights over virtual items” precisely defines the concept of the Metaverse. The Metaverse is envisioned as a persistent, shared virtual space that combines elements of virtual reality, augmented reality, and the internet, allowing users to interact with each other, digital objects, and AI avatars. The inclusion of property rights over virtual items is a key aspect often discussed in relation to NFTs and digital economies within the Metaverse.
Option A, Big data analytics, is the process of examining large data sets to uncover hidden patterns, correlations, and other insights. This is unrelated to virtual worlds.
Option B, Cryptography, is the practice and study of techniques for secure communication in the presence of third parties. It is related to securing transactions and data within virtual worlds but does not define the virtual world itself.
Option D, Virtual matrix, is not a standard or widely recognized term for the described concept. While “matrix” might evoke ideas of a digital reality (like in the movie “The Matrix”), “Metaverse” is the term specifically coined and used to denote the kind of interconnected, persistent 3D virtual environment described.

The Metaverse is a convergent environment merging physical and digital reality, often characterized by persistent virtual worlds, digital identity (avatars), social interaction, economic activity (digital assets, property rights), and interoperability across different platforms.

The concept of the Metaverse has gained significant attention with advancements in VR/AR technology, blockchain (for digital ownership), and increased connectivity. While a fully realized, interoperable Metaverse is still under development, various platforms and technologies are contributing to its emergence. Property rights within the Metaverse often relate to ownership of digital assets like virtual land, clothing, art, or collectibles, frequently managed using blockchain technology and NFTs (Non-Fungible Tokens).

44. With reference to physical capital in Indian economy, consider the fol

With reference to physical capital in Indian economy, consider the following pairs :

	Items	Category
1.	Farmer’s plough	Working capital
2.	Computer	Fixed capital
3.	Yarn used by the weaver	Fixed capital
4.	Petrol	Working capital

How many of the above pairs are correctly matched ?

Only one

Only two

Only three

All four

This question was previously asked in

UPSC IAS – 2024

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The question asks how many pairs are correctly matched. Let’s examine each pair:
1. Farmer’s plough is used repeatedly over many production cycles. This is a tool/machine and is considered Fixed Capital, not Working Capital (which is consumed or transformed in the production process). So, Pair 1 is incorrectly matched.
2. A Computer is a durable asset used in production or work over a long period. This is correctly categorized as Fixed Capital. So, Pair 2 is correctly matched.
3. Yarn is a raw material that is used up or transformed during the weaving process to create fabric. This is correctly categorized as Working Capital, not Fixed Capital. So, Pair 3 is incorrectly matched.
4. Petrol is a fuel that is consumed during production (e.g., running machinery, vehicles). This is correctly categorized as Working Capital, not Fixed Capital. So, Pair 4 is correctly matched.
Only pairs 2 and 4 are correctly matched. Therefore, the number of correctly matched pairs is two. Option B is the correct answer.

Physical capital refers to the tangible assets created by humans for use in the production of goods and services. It is broadly classified into:
– Fixed Capital: Assets that are used repeatedly over a long period in the production process (e.g., machinery, tools, buildings, computers).
– Working Capital: Assets that are consumed or transformed during the production process (e.g., raw materials, fuel, intermediate goods, cash on hand).

The distinction between fixed and working capital is crucial in economics as they play different roles in the production cycle and require different management strategies. Fixed capital represents long-term investments in productive capacity, while working capital ensures the smooth day-to-day operations by providing necessary inputs and liquidity. Human capital, another form of capital, refers to the skills, knowledge, and health of people, which contributes to productivity.

45. Consider the following materials : 1. Agricultural residues 2. Co

Consider the following materials :

1. Agricultural residues
2. Corn grain
3. Wastewater treatment sludge
4. Wood mill waste

Which of the above can be used as feedstock for producing Sustainable Aviation Fuel ?

1 and 2 only

3 and 4 only

1, 2, 3 and 4

1, 3 and 4 only

This question was previously asked in

UPSC IAS – 2024

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The correct option is C.

Sustainable Aviation Fuel (SAF) can be produced from a variety of sources (feedstocks) besides traditional petroleum-based jet fuel. These feedstocks are often biomass-based or derived from waste materials.
1. Agricultural residues: Residues like corn stover, wheat straw, sugarcane bagasse, etc., are lignocellulosic materials that can be converted into SAF through various biochemical or thermochemical processes like gasification followed by Fischer-Tropsch synthesis, or cellulosic ethanol converted to jet fuel.
2. Corn grain: While controversial from a food security perspective, corn grain can be fermented into ethanol, which can then be converted into SAF via the alcohol-to-jet (ATJ) pathway. This is a recognized method for producing SAF, although its sustainability is debated depending on the criteria used (e.g., land use change).
3. Wastewater treatment sludge: The organic content in sewage sludge can be utilized as a feedstock for SAF production through processes such as hydrothermal liquefaction or gasification.
4. Wood mill waste: Forestry residues, sawdust, wood chips, and other wood waste from sawmills and logging operations are lignocellulosic feedstocks similar to agricultural residues and can be converted into SAF.

All listed materials are potential feedstocks for producing Sustainable Aviation Fuel.

The sustainability of SAF depends not just on the feedstock but also the production pathway, land use impacts, and overall lifecycle greenhouse gas emissions compared to conventional jet fuel. Various pathways and feedstocks are being explored and certified globally to meet sustainability criteria set by international bodies.

46. With reference to the sectors of the Indian economy, consider the foll

With reference to the sectors of the Indian economy, consider the following pairs :

	Economic activity	Sector
1.	Storage of agricultural produce	Secondary
2.	Dairy farm	Primary
3.	Mineral exploration	Tertiary
4.	Weaving cloth	Secondary

How many of the pairs given above are correctly matched ?

Only one

Only two

Only three

All four

This question was previously asked in

UPSC IAS – 2024

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The correct option is B.

Economic activities are typically divided into three main sectors:
– Primary Sector: Extraction and collection of natural resources (Agriculture, forestry, fishing, mining, quarrying).
– Secondary Sector: Processing of raw materials and manufacturing of goods (Industry, construction).
– Tertiary Sector: Provision of services (Trade, transport, storage, communication, banking, insurance, education, healthcare, etc.).

Let’s evaluate the pairs:
1. Storage of agricultural produce: Storage is a service that facilitates the distribution and trade of goods. It falls under the Tertiary sector (warehousing, logistics). The pair (Storage of agricultural produce – Secondary) is incorrectly matched.
2. Dairy farm: Dairy farming involves the production of milk by raising livestock, which is an agricultural activity. Agriculture belongs to the Primary sector. The pair (Dairy farm – Primary) is correctly matched.
3. Mineral exploration: Mineral exploration is the process of searching for mineral deposits. This is part of the broader mining activity, which is classified under the Primary sector as it involves the extraction of natural resources. The pair (Mineral exploration – Tertiary) is incorrectly matched.
4. Weaving cloth: Weaving is a manufacturing process where yarn is converted into fabric. Manufacturing is part of the Secondary sector. The pair (Weaving cloth – Secondary) is correctly matched.

Therefore, two pairs (2 and 4) are correctly matched.

Beyond the three main sectors, sometimes Quaternary (knowledge-based services like IT, R&D, education, finance) and Quinary (highest-level decision-making) sectors are also identified, but the primary-secondary-tertiary classification is standard.

47. Consider the following : Exchange-Traded Funds (ETF) Motor vehicles

Consider the following :

Exchange-Traded Funds (ETF)
Motor vehicles
Currency swap

Which of the above is/are considered financial instruments ?

1 only

2 and 3 only

1, 2 and 3 only

1 and 3 only

This question was previously asked in

UPSC IAS – 2024

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The correct option is D.

A financial instrument is a monetary contract between parties. They are broadly classified as cash instruments (like currency, deposits, loans, bonds, stocks) or derivative instruments (like futures, options, swaps).
1. Exchange-Traded Funds (ETF): An ETF is a type of investment fund that trades on stock exchanges. It represents ownership in a portfolio of underlying assets. ETFs are securities and are considered financial instruments.
2. Motor vehicles: A motor vehicle is a physical asset (a tangible good). It is not a financial instrument. While financing related to buying a vehicle (like a car loan) or insuring it involves financial instruments, the vehicle itself is not one.
3. Currency swap: A currency swap is a derivative contract where two parties exchange principal and interest payments in different currencies. It is a type of financial derivative and thus a financial instrument.

Financial instruments facilitate the flow of capital and allocation of risk in the economy. They allow entities to raise funds, manage risk, and invest. Physical assets like vehicles, real estate, or commodities themselves are not financial instruments, although contracts related to their ownership or transfer (like property deeds, futures contracts on commodities) can be financial instruments.

48. In India, which of the following can trade in Corporate Bonds and Gove

In India, which of the following can trade in Corporate Bonds and Government Securities ?

Insurance Companies
Pension Funds
Retail Investors

Select the correct answer using the code given below :

1 and 2 only

2 and 3 only

1 and 3 only

1, 2 and 3

This question was previously asked in

UPSC IAS – 2024

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The correct option is D.

All three categories of investors can trade in Corporate Bonds and Government Securities in India.
1. Insurance Companies: Insurance companies are major investors in the debt market, including G-Secs and corporate bonds, primarily due to regulatory requirements to invest a certain percentage of their funds in approved securities and to match their long-term liabilities with long-term assets.
2. Pension Funds: Pension funds, such as EPFO and funds under the National Pension System (NPS), are also significant players in the debt market. They invest substantial amounts in G-Secs and corporate bonds as part of their long-term investment strategy to meet future pension obligations.
3. Retail Investors: Retail investors can invest in both government securities and corporate bonds. The RBI has introduced the RBI Retail Direct scheme to provide easier access for retail investors to G-Secs. Corporate bonds can be accessed by retail investors through stock exchange platforms, mutual funds, or direct placements, although participation might be lower compared to institutional investors or equity markets.

The debt market in India comprises government securities and corporate bonds. It caters to various types of investors ranging from large institutions to individual retail investors, each participating based on their investment objectives, risk appetite, and regulatory framework.

49. Consider the following statements: 1. In India, Non-Banking Financia

Consider the following statements:

1. In India, Non-Banking Financial Companies can access the Liquidity Adjustment Facility window of the Reserve Bank of India.
2. In India, Foreign Institutional Investors can hold the Government Securities (G-Secs).
3. In India, Stock Exchanges can offer separate trading platforms for debts.

Which of the statements given above is/are correct ?

1 and 2 only

3 only

1, 2 and 3

2 and 3 only

This question was previously asked in

UPSC IAS – 2024

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The correct option is D.

Statement 1 is incorrect. The Liquidity Adjustment Facility (LAF) is a tool used by the Reserve Bank of India (RBI) to inject or absorb liquidity into the banking system. It is primarily accessible to Scheduled Commercial Banks (SCBs). Non-Banking Financial Companies (NBFCs) do not have direct access to the LAF window.
Statement 2 is correct. Foreign Institutional Investors (FIIs), now largely categorized under Foreign Portfolio Investors (FPIs), are permitted by the RBI to invest in Government Securities (G-Secs) within prescribed limits and frameworks.
Statement 3 is correct. Stock exchanges in India, such as the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), have established separate trading platforms specifically for debt instruments, including corporate bonds, government securities, State Development Loans, etc., to facilitate their trading.

RBI operates LAF through repurchase agreements (repos) and reverse repos. While NBFCs cannot access LAF, some large NBFCs may access funds from the banking system or the market, indirectly influenced by LAF rates. RBI also has other windows like Marginal Standing Facility (MSF) for banks and Standing Deposit Facility (SDF).

50. The total fertility rate in an economy is defined as :

The total fertility rate in an economy is defined as :

the number of children born per 1000 people in the population in a year.

the number of children born to a couple in their lifetime in a given population.

the birth rate minus death rate.

the average number of live births a woman would have by the end of her child-bearing age.

This question was previously asked in

UPSC IAS – 2024

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The correct option is D.

Total Fertility Rate (TFR) is a demographic measure defined as the average number of children that would be born to a woman over her lifetime if she were to experience the exact current age-specific fertility rates through her reproductive years, and survive through all those years. It represents the potential number of children born per woman.
Option A describes the Crude Birth Rate (CBR).
Option B is a simplified concept, but TFR is a theoretical construct based on population-wide age-specific rates, not an average of actual children born to specific couples or women who have completed their childbearing.
Option C describes the natural growth rate (or rate of natural increase), if expressed per 1000 people.
Option D accurately defines the Total Fertility Rate.

A TFR of approximately 2.1 is generally considered replacement level fertility, meaning that each generation is having just enough children to replace itself, accounting for mortality before the end of the reproductive years.