2020 Archives

211. With reference to the Indian economy, consider the following statement

With reference to the Indian economy, consider the following statements:

‘Commercial Paper’ is a short-term unsecured promissory note.
‘Certificate of Deposit’ is a long-term instrument issued by the Reserve Bank of India to a corporation.
‘Call Money’ is a short-term finance used for interbank transactions.
‘Zero-Coupon Bonds’ are the interest bearing short-term bonds issued by the Scheduled Commercial Banks to corporations.

Which of the statements given above is/are correct ?

[amp_mcq option1=”1 and 2 only” option2=”4 only” option3=”1 and 3 only” option4=”2, 3 and 4 only” correct=”option3″]

This question was previously asked in

UPSC IAS – 2020

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The question asks to identify the correct statements regarding different financial instruments in the Indian economy.

– Statement 1: ‘Commercial Paper’ is indeed a short-term (typically 7 days to one year) unsecured promissory note issued by highly-rated corporations to raise funds from the money market. This statement is correct.
– Statement 2: ‘Certificate of Deposit’ (CD) is a marketable receipt for funds deposited in a bank for a specified period (minimum 7 days). It is issued by commercial banks and financial institutions, not the Reserve Bank of India, and can be short to medium-term, not exclusively long-term. This statement is incorrect.
– Statement 3: ‘Call Money’ is a short-term finance (usually overnight) used in the interbank market for lending and borrowing funds to manage liquidity. This statement is correct.
– Statement 4: ‘Zero-Coupon Bonds’ do not pay periodic interest (coupon). They are sold at a discount to their face value, and the difference between the face value and the purchase price represents the investor’s return. They are not characterized as “interest bearing” in the traditional sense and can be issued by various entities (government, corporations, banks), not just Scheduled Commercial Banks to corporations. This statement is incorrect.

These instruments are key components of the money market (short-term) and capital market (long-term), facilitating funding and investment activities in the economy.

212. Consider the following statements: In the case of all cereals, pulse

Consider the following statements:

In the case of all cereals, pulses and oil-seeds, the procurement at Minimum Support Price (MSP) is unlimited in any State/UT of India.
In the case of cereals and pulses, the MSP is fixed in any State/UT at a level to which the market price will never rise.

Which of the statements given above is/are correct ?

[amp_mcq option1=”1 only” option2=”2 only” option3=”Both 1 and 2″ option4=”Neither 1 nor 2″ correct=”option4″]

This question was previously asked in

UPSC IAS – 2020

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The question asks about the correctness of two statements regarding the Minimum Support Price (MSP) regime in India.

– Statement 1: Procurement at MSP is not unlimited for all cereals, pulses, and oilseeds, or in all States/UTs. While MSP is declared for many crops, effective procurement at MSP is strong primarily for wheat and rice in certain states, mainly to meet the requirements of the Public Distribution System (PDS) and buffer stocks. Procurement for other crops is often limited or handled through different schemes like Price Support Scheme (PSS) or Price Deficiency Payment Scheme (PDPS), and is not guaranteed unlimited procurement from all farmers nationwide.
– Statement 2: MSP is fixed as a *minimum* price to protect farmers from excessive price falls. Market prices are determined by demand and supply forces and can rise significantly above the MSP, especially during periods of high demand or supply shortages. Fixing MSP at a level that the market price will *never* exceed is contrary to the purpose of MSP as a floor price.

The government’s procurement operations primarily focus on food grains like wheat and rice through agencies like the Food Corporation of India (FCI). For other crops, procurement operations are often limited in scale and geographical reach, and market prices frequently fluctuate above and below the MSP.

213. Consider the following pairs: River Flows into 1. M

Consider the following pairs:

River	Flows into
1. Mekong	— Andaman Sea
2. Thames	— Irish Sea
3. Volga	— Caspian Sea
4. Zambezi	— Indian Ocean

Which of the pairs given above is/are correctly matched ?

[amp_mcq option1=”1 and 2 only” option2=”3 only” option3=”3 and 4 only” option4=”1, 2 and 4 only” correct=”option3″]

This question was previously asked in

UPSC IAS – 2020

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The question asks to identify the correctly matched pairs of rivers and the water bodies they flow into.

– Pair 1: Mekong River flows through Southeast Asia and empties into the South China Sea, not the Andaman Sea. Incorrect match.
– Pair 2: River Thames flows through England and empties into the North Sea, not the Irish Sea. Incorrect match.
– Pair 3: Volga River is the longest river in Europe and flows through Russia, draining into the Caspian Sea. Correct match.
– Pair 4: Zambezi River flows through Southern Africa and empties into the Indian Ocean (specifically, the Mozambique Channel). Correct match.

Geographical knowledge of major rivers and their drainage basins is important for mapping and environmental studies. Knowing the final outflow point helps understand regional hydrology and connectivity.

214. Consider the following statements: The weightage of food in Consumer

Consider the following statements:

The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index (WPI).
The WPI does not capture changes in the prices of services, which CPI does.
Reserve Bank of India has now adopted WPI as its key measure of inflation and to decide on changing the key policy rates.

Which of the statements given above is/are correct ?

[amp_mcq option1=”1 and 2 only” option2=”2 only” option3=”3 only” option4=”1, 2 and 3″ correct=”option1″]

This question was previously asked in

UPSC IAS – 2020

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The question asks which of the given statements regarding CPI, WPI, and RBI’s inflation measure are correct.

– Statement 1: The weightage of food in Consumer Price Index (CPI) is indeed significantly higher than its weight in the Wholesale Price Index (WPI) in India. CPI basket reflects typical household consumption patterns where food items constitute a large share of expenditure, while WPI tracks prices at the wholesale level which includes manufactured products, fuel, power, and primary articles (including food).
– Statement 2: WPI primarily measures price changes of goods traded in wholesale markets. CPI measures price changes of a basket of goods and services consumed by households. Therefore, WPI does not capture changes in the prices of services, while CPI does.
– Statement 3: The Reserve Bank of India (RBI) officially adopted the Consumer Price Index (Combined) (CPI-C) as its key measure for inflation targeting and monetary policy decisions following the recommendations of the Urjit Patel Committee in 2014. Prior to this, WPI was more commonly used, but now CPI is the primary target variable for inflation.

CPI reflects the impact of price changes on the final consumer, making it a more relevant measure for monitoring the welfare impact of inflation and for informing monetary policy aimed at price stability for consumers. WPI captures price movements at an earlier stage of the economic transaction.

215. Under the Kisan Credit Card scheme, short-term credit support is given

Under the Kisan Credit Card scheme, short-term credit support is given to farmers for which of the following purposes ?

Working capital for maintenance of farm assets
Purchase of combine harvesters, tractors and mini trucks
Consumption requirements of farm households
Post-harvest expenses
Construction of family house and setting up of village cold storage facility

Select the correct answer using the code given below :

[amp_mcq option1=”1, 2 and 5 only” option2=”1, 3 and 4 only” option3=”2, 3, 4 and 5″ option4=”1, 2, 3, 4 and 5″ correct=”option2″]

This question was previously asked in

UPSC IAS – 2020

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The Kisan Credit Card (KCC) scheme is designed to provide short-term credit support to farmers for various agricultural and related activities. The specified purposes for which credit is extended under the scheme typically include working capital for cultivation (covering inputs like seeds, fertilisers, pesticides), post-harvest expenses (like storage, marketing), produce marketing loans, consumption requirements of the farm household, and working capital for maintenance of farm assets and allied activities (like dairy, poultry, fisheries).

– Statement 1: Working capital for maintenance of farm assets is a valid purpose for short-term credit under KCC.
– Statement 2: Purchase of large farm machinery like combine harvesters, tractors, and mini trucks typically falls under long-term investment credit, not short-term KCC.
– Statement 3: Consumption requirements of farm households are included as a component of KCC credit.
– Statement 4: Post-harvest expenses are covered under the scheme.
– Statement 5: Construction of family house and setting up of village cold storage facilities are long-term investments, not covered by the short-term KCC scheme.

The KCC scheme aims to provide flexible and simplified credit access to farmers, covering both cultivation needs and certain non-farm activities and personal consumption, all within the short-term framework. Long-term capital investments are typically financed through separate term loans.

216. In which one of the following groups are all the four countries member

In which one of the following groups are all the four countries members of G20 ?

[amp_mcq option1=”Argentina, Mexico, South Africa and Turkey” option2=”Australia, Canada, Malaysia and New Zealand” option3=”Brazil, Iran, Saudi Arabia and Vietnam” option4=”Indonesia, Japan, Singapore and South Korea” correct=”option1″]

This question was previously asked in

UPSC IAS – 2020

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The G20 (Group of Twenty) is an international forum for the governments and central bank governors from 19 countries and the European Union. The member countries are: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom, United States.
Let’s examine the options:
A) Argentina, Mexico, South Africa, and Turkey: All four countries (Argentina, Mexico, South Africa, Turkey) are members of the G20.
B) Australia, Canada, Malaysia, and New Zealand: Australia and Canada are G20 members, but Malaysia and New Zealand are not.
C) Brazil, Iran, Saudi Arabia, and Vietnam: Brazil and Saudi Arabia are G20 members, but Iran and Vietnam are not.
D) Indonesia, Japan, Singapore, and South Korea: Indonesia, Japan, and South Korea are G20 members, but Singapore is not.
Therefore, only option A lists four countries that are all members of the G20.

Recognizing the member countries of major international groupings like the G20 is essential for international relations and economy topics.

The G20 represents about two-thirds of the world’s population, 85% of global gross domestic product, and 75% of international trade. It works on major issues related to the global economy, such as international financial stability, climate change mitigation, and sustainable development.

217. Consider the following statements : The value of Indo-Sri Lanka trad

Consider the following statements :

The value of Indo-Sri Lanka trade has consistently increased in the last decade.
“Textile and textile articles” constitute an important item of trade between India and Bangladesh.
In the last five years, Nepal has been the largest trading partner of India in South Asia.

Which of the statements given above is/are correct ?

[amp_mcq option1=”1 and 2 only” option2=”2 only” option3=”3 only” option4=”1, 2 and 3″ correct=”option2″]

This question was previously asked in

UPSC IAS – 2020

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Statement 1 is incorrect: While Indo-Sri Lanka trade has grown over the longer term, it has not consistently increased every single year over the last decade. Trade figures can fluctuate due to various economic factors, policy changes, and external shocks (like the COVID-19 pandemic or Sri Lanka’s economic crisis).
Statement 2 is correct: “Textile and textile articles” are indeed an important and growing component of trade between India and Bangladesh. India exports cotton and yarns to Bangladesh, while Bangladesh exports garments and other textile products to India.
Statement 3 is incorrect: In the last five years, Bangladesh has been India’s largest trading partner in South Asia. Nepal is a significant partner, but its total trade value with India is typically lower than that of Bangladesh.

Evaluating trade relationships requires looking at specific country data and trends. Bangladesh is a major trading partner for India in South Asia, with textiles being a key sector in their bilateral trade.

India’s major trading partners in South Asia include Bangladesh, Sri Lanka, Nepal, and Bhutan. The volume and composition of trade vary with each country based on geographical proximity, bilateral agreements (like SAFTA), and economic structures.

218. Which of the following factors/policies were affecting the price of ri

Which of the following factors/policies were affecting the price of rice in India in the recent past?

Minimum Support Price
Government’s trading
Government’s stockpiling
Consumer subsidies

Select the correct answer using the code given below :

[amp_mcq option1=”1, 2 and 4 only” option2=”1, 3 and 4 only” option3=”2 and 3 only” option4=”1, 2, 3 and 4″ correct=”option4″]

This question was previously asked in

UPSC IAS – 2020

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All four factors listed significantly affect the price of rice in India:
1. Minimum Support Price (MSP): The MSP sets a floor price. Government procurement at MSP influences market supply and provides a benchmark, impacting open market prices, especially during harvest season.
2. Government’s trading: The government procures, stores, and distributes rice through schemes like the Public Distribution System (PDS). These trading activities (buying and selling/distributing) directly influence the supply available in the open market and hence impact prices.
3. Government’s stockpiling: The level of buffer stocks held by the government affects market expectations about future supply. Large stocks can stabilize prices, while depletion or surplus can lead to price fluctuations.
4. Consumer subsidies: Subsidies on rice distributed through PDS reduce the effective cost for consumers and ensure access for a large population. This influences overall demand dynamics in the market, indirectly affecting open market prices by diverting a portion of demand.

Government policies like MSP, procurement, stockpiling, and consumer subsidies are major interventions in the agricultural market in India that significantly influence the supply, demand, and ultimately the market price of essential commodities like rice.

Other factors affecting rice prices include production levels (influenced by monsoon, seeds, etc.), international prices, export/import policies, and logistics/storage infrastructure.

219. What is the importance of the term “Interest Coverage Ratio” of a firm

What is the importance of the term “Interest Coverage Ratio” of a firm in India?

1. It helps in understanding the present risk of a firm that a bank is going to give loan to.
2. It helps in evaluating the emerging risk of a firm that a bank is going to give loan to.
3. The higher a borrowing firm’s level of Interest Coverage Ratio, the worse is its ability to service its debt.

Select the correct answer using the code given below:

[amp_mcq option1=”1 and 2 only” option2=”2 only” option3=”1 and 3 only” option4=”1, 2 and 3″ correct=”option1″]

This question was previously asked in

UPSC IAS – 2020

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The Interest Coverage Ratio is calculated as Earnings Before Interest and Taxes (EBIT) divided by Interest Expense. It measures a company’s ability to handle its outstanding debt interest payments.
Statement 1 is correct: A company’s current Interest Coverage Ratio indicates how many times its current earnings can cover its current interest obligations. A low ratio signals potential difficulty in meeting interest payments (present risk), while a high ratio indicates a strong ability to do so.
Statement 2 is correct: By analyzing historical trends of the ratio, future projections of EBIT, and changes in interest expenses, a lender can evaluate the likelihood of the firm being able to service debt in the future, thus helping assess emerging risk.
Statement 3 is incorrect: A *higher* Interest Coverage Ratio means the company has more earnings available relative to its interest expense. This indicates a *better* ability to service its debt obligations, not worse. A *lower* ratio suggests a worse ability.

The Interest Coverage Ratio is a key financial metric used by lenders to assess a borrower’s capacity to repay interest on debt. A higher ratio signifies greater financial health and lower risk from the lender’s perspective.

Different industries and debt structures may have varying acceptable levels for the Interest Coverage Ratio. A ratio below 1.5 is often considered risky, indicating that the company may struggle to meet interest payments.

220. In India, which of the following can be considered as public investmen

In India, which of the following can be considered as public investment in agriculture?

1. Fixing Minimum Support Price for agricultural produce of all crops
2. Computerization of Primary Agricultural Credit Societies
3. Social Capital development
4. Free electricity supply to farmers
5. Waiver of agricultural loans by the banking system
6. Setting up of cold storage facilities by the governments

Select the correct answer using the code given below:

[amp_mcq option1=”1, 2 and 5 only” option2=”1, 3, 4 and 5 only” option3=”2, 3 and 6 only” option4=”1, 2, 3, 4, 5 and 6″ correct=”option3″]

This question was previously asked in

UPSC IAS – 2020

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Statement 1 is incorrect: Fixing Minimum Support Price (MSP) is a price policy intervention aimed at providing a safety net for farmers and influencing market prices. It is not considered a direct public investment in creating productive assets or infrastructure in agriculture.
Statement 2 is correct: Computerization of Primary Agricultural Credit Societies (PACS) is an investment in rural financial infrastructure and digital technology, aimed at improving the efficiency of credit delivery to farmers. This constitutes a public investment in the agricultural sector’s support system.
Statement 3 is correct: Social Capital development, such as forming and strengthening farmer groups, cooperatives, and Farmer Producer Organizations (FPOs), is an investment in human and organizational resources that can improve agricultural practices, market access, and collective action. Government expenditure on facilitating this is considered a public investment in agricultural development.
Statement 4 is incorrect: Free electricity supply to farmers is a subsidy provided to reduce input costs. While it supports irrigation and production, it is a current expenditure/transfer, not an investment in creating a public asset or long-term productive capacity, although reliable power supply is part of infrastructure. However, ‘free supply’ is classified as subsidy/revenue expenditure, not capital investment.
Statement 5 is incorrect: Waiver of agricultural loans is a financial relief measure to address farmer debt distress. It is a transfer payment or fiscal measure, not a public investment aimed at enhancing the sector’s productive capacity.
Statement 6 is correct: Setting up of cold storage facilities by the government is a direct public investment in post-harvest infrastructure. This infrastructure improves storage, reduces spoilage, and helps farmers access better markets, thereby enhancing the sector’s capacity.
Therefore, 2, 3, and 6 represent public investments in agriculture.

Public investment in agriculture focuses on creating durable assets, improving infrastructure, technology, research, extension, and human/social capital, as opposed to subsidies or financial relief measures which are typically considered revenue expenditure or transfers.

Examples of other public investments in agriculture include investment in irrigation projects, agricultural research and development, extension services, market infrastructure (mandis), soil health testing facilities, etc.