Economic Development Archives

141. The money multiplier in an economy increases with which one of the

The money multiplier in an economy increases with which one of the following?

[amp_mcq option1=”Increase in the cash reserve ratio” option2=”Increase in the banking habit of the population” option3=”Increase in the statutory liquidity ratio” option4=”Increase in the population of the country” correct=”option2″]

This question was previously asked in

UPSC IAS – 2019

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The correct answer is B) Increase in the banking habit of the population.

The money multiplier is the ratio of the money supply to the monetary base (high-powered money). It is inversely related to the reserve ratio (CRR + SLR) and the public’s cash-to-deposit ratio. When the banking habit of the population increases, people hold less cash and deposit more money in banks. This reduces the cash-to-deposit ratio. With a lower cash-to-deposit ratio, a larger proportion of the monetary base is held as reserves by banks, enabling banks to create more credit and expand the money supply through the process of deposit multiplication, thereby increasing the money multiplier.

Options A and C are incorrect because an increase in the Cash Reserve Ratio (CRR) or the Statutory Liquidity Ratio (SLR) forces banks to hold more reserves, reducing the funds available for lending and decreasing the money multiplier. Option D, an increase in the population, does not directly or necessarily increase the money multiplier; its effect would depend on how it influences other factors like banking habits or savings rates.

142. Consider the following statements: The Reserve Bank of India’s recent

Consider the following statements:
The Reserve Bank of India’s recent directives relating to ‘Storage of Payment System Data’, popularly known as data diktat, command the payment system providers that

1. they shall ensure that entire data relating to payment systems operated by them are stored in a system only in India
2. they shall ensure that the systems are owned and operated by public sector enterprises
3. they shall submit the consolidated system audit report to the Comptroller and Auditor General of India by the end of the calendar year

Which of the statements given above is/are correct?

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

This question was previously asked in

UPSC IAS – 2019

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The correct answer is A) 1 only.

The Reserve Bank of India’s (RBI) directive on ‘Storage of Payment System Data’ requires all system providers to ensure that the entire data relating to payment systems operated by them are stored in a system only in India. This is the core of the ‘data localization’ mandate.

Statement 2 is incorrect; the RBI directive applies to all payment system providers (including private companies, foreign entities operating in India, etc.) and does not mandate that the systems must be owned and operated by public sector enterprises.
Statement 3 is incorrect; the payment system providers are required to submit the System Audit Report to the RBI, not the Comptroller and Auditor General (CAG) of India. The CAG audits government accounts and public sector undertakings, not typically the compliance reports of private payment system providers submitted to the regulator (RBI).

143. Which one of the following is not the most likely measure the Governme

Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of Indian rupee?

[amp_mcq option1=”Curbing imports of non-essential goods and promoting exports” option2=”Encouraging Indian borrowers to issue rupee denominated Masala Bonds” option3=”Easing conditions relating to external commercial borrowing” option4=”Following an expansionary monetary policy” correct=”option4″]

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UPSC IAS – 2019

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The correct answer is D) Following an expansionary monetary policy.

An expansionary monetary policy typically involves lowering interest rates and increasing liquidity in the economy. This can lead to increased domestic demand and inflation, potentially making the country’s exports less competitive and increasing import demand. Furthermore, lower interest rates might make domestic assets less attractive to foreign investors, potentially leading to capital outflows. All these factors tend to weaken a currency (cause it to slide), not stop its slide.

Options A, B, and C are measures that can help strengthen the Indian Rupee:
A) Curbing imports (reduces demand for foreign currency) and promoting exports (increases supply of foreign currency) improves the trade balance and supports the rupee.
B) Encouraging Indian borrowers to issue rupee-denominated Masala Bonds abroad brings foreign currency into India as foreign investors buy these bonds, increasing demand for the rupee.
C) Easing conditions for External Commercial Borrowing (ECB) encourages Indian entities to borrow in foreign currency from abroad, bringing foreign currency into India and increasing its supply relative to the rupee.
Therefore, an expansionary monetary policy is the least likely measure to be taken to stop a currency slide.

144. Among the agricultural commodities imported by India, which one of the

Among the agricultural commodities imported by India, which one of the following accounts for the highest imports in terms of value in the last five years?

[amp_mcq option1=”Spices” option2=”Fresh fruits” option3=”Pulses” option4=”Vegetable oils” correct=”option4″]

This question was previously asked in

UPSC IAS – 2019

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The correct answer is D. Among the agricultural commodities imported by India, vegetable oils account for the highest imports in terms of value in the last five years.

India is a major consumer of edible oils but domestic production does not meet the demand, leading to significant imports, particularly of palm oil, soybean oil, and sunflower oil. These imports consistently account for the largest share by value among agricultural commodities. While India also imports pulses, fresh fruits, and spices, the value of vegetable oil imports is typically much higher.

The large import bill for vegetable oils has implications for India’s trade balance and food security. The government has been promoting schemes to increase domestic oilseed production to reduce reliance on imports.

145. With reference to the cultivation of Kharif crops in India in the last

With reference to the cultivation of Kharif crops in India in the last five years, consider the following statements:

1. Area under rice cultivation is the highest.
2. Area under the cultivation of jowar is more than that of oilseeds.
3. Area of cotton cultivation is more than that of sugarcane.
4. Area under sugarcane cultivation has steadily decreased.

Which of the statements given above are correct?

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

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UPSC IAS – 2019

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The correct answer is A, as statements 1 and 3 are correct.

Statement 1 is correct. Rice is the principal Kharif crop in India and is grown in the largest area among all crops during the Kharif season.
Statement 2 is incorrect. The area under the cultivation of oilseeds (such as soybean, groundnut, etc., which are significant Kharif crops) in India is substantially larger than the area under Jowar cultivation, especially considering only the Kharif season for Jowar.
Statement 3 is correct. The area under cotton cultivation in India is significantly more than the area under sugarcane cultivation. While sugarcane is also grown, its total area is less than that of cotton.
Statement 4 is incorrect. The area under sugarcane cultivation in India has not steadily decreased over the last five years; it has generally remained stable or shown some increase.

Understanding the relative cultivation areas of major crops in India is important for agricultural economics and geography. Kharif crops are sown with the onset of the monsoon (June-July) and harvested in September-October. Major Kharif crops include Rice, Jowar, Bajra, Maize, Cotton, Jute, Sugarcane, Groundnut, Soybean, and Pulses (like Arhar). Sugarcane is a tropical plant and is often grown as a multi-seasonal crop.

146. Consider the following statements: 1. Purchasing Power Parity (PPP)

Consider the following statements:

1. Purchasing Power Parity (PPP) exchange rates are calculated by comparing the prices of the same basket of goods and services in different countries.
2. In terms of PPP dollars, India is the sixth largest economy in the world.

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=”option1″]

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UPSC IAS – 2019

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The correct answer is A, as statement 1 is correct while statement 2 is incorrect.

Statement 1 is correct. Purchasing Power Parity (PPP) exchange rates are calculated by comparing the prices of a common basket of goods and services in different countries. The idea is to determine how much currency ‘A’ is needed in country ‘A’ to buy the same basket of goods that currency ‘B’ buys in country ‘B’. The PPP exchange rate is the rate at which the currency of one country would have to be converted into that of another country to buy the same amount of goods and services in each country.
Statement 2 is incorrect. In terms of PPP dollars, India is the third largest economy in the world, after China and the United States. This ranking has been consistent in data provided by international bodies like the International Monetary Fund (IMF) and the World Bank in recent years.

PPP is considered a more accurate measure of comparing living standards and the size of economies across countries than using nominal GDP converted at market exchange rates, because it accounts for differences in the cost of living. Market exchange rates can be volatile and influenced by financial flows, whereas PPP rates reflect the actual purchasing power of a currency within its domestic economy.

147. The economic cost of food grains to the Food Corporation of India is M

The economic cost of food grains to the Food Corporation of India is Minimum Support Price and bonus (if any) paid to the farmers plus

[amp_mcq option1=”transportation cost only” option2=”interest cost only” option3=”procurement incidentals and distribution cost” option4=”procurement incidentals and charges for godowns” correct=”option3″]

This question was previously asked in

UPSC IAS – 2019

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The correct answer is C. The economic cost of food grains to the Food Corporation of India includes Minimum Support Price and bonus (if any) paid to the farmers plus procurement incidentals and distribution cost.

The economic cost for FCI is the total cost incurred in the process of procurement, storage, and distribution of food grains under the public distribution system (PDS) and other welfare schemes. It comprises two main components:
1. Acquisition Cost: This is the price paid to the farmers (MSP + bonus, if any).
2. Incidentals and Distribution Costs: These are expenses incurred beyond the acquisition cost.
– Procurement Incidentals include expenses incurred during procurement up to the point of storage, such as mandi charges, handling charges, transportation from mandi to depot, interest on borrowed capital for procurement, and storage losses.
– Distribution Costs include expenses incurred from the point of storage onwards, such as freight charges for inter-state movement, handling charges at distribution centres, storage losses during distribution, administrative costs, and retailers’ margins (in some cases).
Option C correctly encapsulates these additional costs as “procurement incidentals and distribution cost”.

The economic cost is higher than the MSP and is a key factor in determining the issue price of food grains sold through the PDS, although the issue prices (Central Issue Price) are often kept significantly lower than the economic cost, leading to food subsidies borne by the government.

148. Which one of the following is not a sub-index of the World Bank’s Ease

Which one of the following is not a sub-index of the World Bank’s Ease of Doing Business Index?

[amp_mcq option1=”Maintenance of law and order” option2=”Paying taxes” option3=”Registering property” option4=”Dealing with construction permits” correct=”option1″]

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UPSC IAS – 2019

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The correct answer is A, as ‘Maintenance of law and order’ is not a sub-index of the World Bank’s Ease of Doing Business Index.

The World Bank’s Ease of Doing Business index measures aspects of business regulation that are relevant to a domestic firm throughout its life cycle. It assesses factors such as starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency.
Statements B, C, and D refer to ‘Paying taxes’, ‘Registering property’, and ‘Dealing with construction permits’, respectively, all of which are explicit sub-indices used in the calculation of the Ease of Doing Business ranking.
‘Maintenance of law and order’, while crucial for a business environment, is a broader governance aspect and is not a specific, measured indicator within the defined scope of the Ease of Doing Business report.

The Ease of Doing Business report was published annually by the World Bank Group from 2003 to 2020. In 2021, the World Bank Group discontinued the report due to concerns about data integrity. While the report is no longer published, the components tested in this question were standard features of the index during its publication period.

149. Consider the following statements : 1. Petroleum and Natural Gas Reg

Consider the following statements :

1. Petroleum and Natural Gas Regulatory Board (PNGRB) is the first regulatory body set up by the Government of India.
2. One of the tasks of PNGRB is to ensure competitive markets for gas.
3. Appeals against the decisions of PNGRB go before the Appellate Tribunals for Electricity.

Which of the statements given above are correct?

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

This question was previously asked in

UPSC IAS – 2019

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Statement 1: The Petroleum and Natural Gas Regulatory Board (PNGRB) was established under the PNGRB Act, 2006. It was not the first regulatory body in India. Several regulatory bodies were established much earlier, such as SEBI (1988/1992), TRAI (1997), and CERC (1998). Thus, Statement 1 is incorrect.
Statement 2: The PNGRB Act, 2006, lists the functions of the Board, which include protecting the interests of consumers and entities, ensuring the adequate availability of petroleum products, fostering fair trade, and promoting competitive markets. Section 11(h) explicitly states one of the functions is “promoting competitive markets in petroleum, petroleum products and natural gas.” Thus, Statement 2 is correct.
Statement 3: The PNGRB Act, 2006, provides for appeals against the orders of the PNGRB to be filed before the Appellate Tribunal for Electricity (APTEL). APTEL was established under the Electricity Act, 2003, to hear appeals against the orders of regulatory commissions, and its jurisdiction was extended to cover appeals against PNGRB decisions as per the PNGRB Act. Thus, Statement 3 is correct.
Based on the analysis, Statements 2 and 3 are correct.

The PNGRB is a regulatory body established in 2006 to promote competitive markets in the petroleum and natural gas sector, and appeals against its decisions go to the Appellate Tribunal for Electricity (APTEL). It is not the first regulatory body in India.

The establishment of PNGRB aimed to regulate the midstream and downstream activities in the petroleum and natural gas sector, which were previously largely unregulated or governed by administrative orders. Its functions include regulating the refining, processing, storage, transportation, distribution, marketing and sale of petroleum, petroleum products, and natural gas.

150. The Chairmen of public sector banks are selected by the

The Chairmen of public sector banks are selected by the

[amp_mcq option1=”Banks Board Bureau” option2=”Reserve Bank of India” option3=”Union Ministry of Finance” option4=”Management of concerned bank” correct=”option1″]

This question was previously asked in

UPSC IAS – 2019

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As part of banking reforms aimed at improving governance in Public Sector Banks (PSBs), the Government of India established the Banks Board Bureau (BBB) in 2016. One of the primary functions of BBB was to recommend persons for appointment as whole-time directors and non-executive chairmen in PSBs and public sector financial institutions. While the final appointment order is issued by the Ministry of Finance (on the recommendation of the Appointments Committee of the Cabinet), the selection process and recommendation for these top posts in PSBs are made by the dedicated body, BBB (which was later replaced by FSIB). Therefore, the selection is done by the Banks Board Bureau (or its successor body).

The selection of Chairmen (and other whole-time directors) of Public Sector Banks is done by the Banks Board Bureau (or its successor, FSIB).

The Reserve Bank of India regulates banks but does not appoint their chairmen. The management of the concerned bank does not select its own top leadership. While the Union Ministry of Finance is the administrative ministry and issues the final appointment order, the actual selection process for recommending candidates is undertaken by the specialized body (BBB/FSIB) to professionalize the appointments.