Economic Development

171. Which one of the following best describes the term “Merchant Discount

Which one of the following best describes the term “Merchant Discount Rate” sometimes seen in news ?

[amp_mcq option1=”The incentive given by a bank to a merchant for accepting payments through debit cards pertaining to that bank.” option2=”The amount paid back by banks to their customers when they use debit cards for financial transactions for purchasing goods or services.” option3=”The charge to a merchant by a bank for accepting payments from his customers through the bank’s debit cards.” option4=”The incentive given by the Government to merchants for promoting digital payments by their customers through Point of Sale (PoS) machines and debit cards.” correct=”option3″]

This question was previously asked in
UPSC IAS – 2018
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Merchant Discount Rate (MDR) is the fee charged by a bank or a payment service provider to a merchant for processing debit or credit card transactions. It is typically calculated as a percentage of the transaction value. This fee is paid by the merchant to the bank for the service of facilitating card payments from customers.
– MDR is a charge paid by the merchant.
– It is paid to the bank or payment processor.
– It is for accepting payments through debit/credit cards.
– It is usually a percentage of the transaction value.
MDR includes fees paid to various parties involved in the transaction, such as the issuing bank, the acquiring bank, the payment networks (like Visa, Mastercard), and the payment gateway provider. The government has taken steps to lower MDR, especially for small value transactions and digital payments, to promote a cashless economy.

172. Consider the following statements: 1. Tax revenue as a percent of GD

Consider the following statements:

  • 1. Tax revenue as a percent of GDP of India has steadily increased in the last decade.
  • 2. Fiscal deficit as a percent of GDP of India has steadily increased in the last decade.

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 – 2017
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The correct option is D, as neither statement 1 nor statement 2 is correct.
Both statements claim a “steadily increased” trend over the last decade (referring to the decade prior to the question’s likely year, e.g., 2003-2013).
1. Tax revenue as a percent of GDP: India’s tax-to-GDP ratio has historically fluctuated based on economic cycles, policy changes (like tax reforms), and collection efficiency. While there have been efforts to increase it, it did not show a *steady* increase over a full decade; there were ups and downs, including a dip after the 2008 global financial crisis.
2. Fiscal deficit as a percent of GDP: Governments aim to manage and often reduce the fiscal deficit as a percentage of GDP for macroeconomic stability. While stimulus measures or economic slowdowns can lead to temporary increases, a *steady* increase over a decade is not a typical pattern or policy goal and generally has not happened in the Indian context; it fluctuates based on budgetary policies and economic conditions.
Economic indicators like tax-to-GDP ratio and fiscal deficit are influenced by numerous factors and rarely exhibit a strictly ‘steady’ trend over a long period like a decade. Analyzing specific government budgets and economic reports from the relevant period would confirm the non-steady nature of these trends.

173. What is/are the most likely advantages of implementing ‘Goods and Serv

What is/are the most likely advantages of implementing ‘Goods and Services Tax (GST)’?

  • 1. It will replace multiple taxes collected by multiple authorities and will thus create a single market in India.
  • 2. It will drastically reduce the ‘Current Account Deficit’ of India and will enable it to increase its foreign exchange reserves.
  • 3. It will enormously increase the growth and size of economy of India and will enable it to overtake China in the near future.

Select the correct answer using the code given below:

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

This question was previously asked in
UPSC IAS – 2017
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Statement 1 correctly identifies a primary advantage of GST, which is the creation of a unified national market by subsuming multiple taxes.
The Goods and Services Tax (GST) aims to simplify the indirect tax structure in India, replacing various central and state taxes with a single comprehensive tax, thereby reducing tax cascading and promoting ease of doing business across states.
Statements 2 and 3 make exaggerated and less certain claims. While GST is expected to positively impact the economy in the long run by increasing tax buoyancy and improving supply chains, drastic reduction in the Current Account Deficit or enormously increasing the growth to overtake China in the near future are not guaranteed outcomes solely due to GST implementation; these factors depend on a multitude of economic variables.

174. Consider the following statements: 1. National Payments Corporation

Consider the following statements:

  • 1. National Payments Corporation of India (NPCI) helps in promoting the financial inclusion in the country.
  • 2. NPCI has launched RuPay, a card payment scheme.

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=”option3″]

This question was previously asked in
UPSC IAS – 2017
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The correct answer is C) Both 1 and 2. Both statements accurately describe aspects related to the National Payments Corporation of India (NPCI).
– Statement 1 is correct. NPCI is an initiative to create robust payment and settlement systems in India, which are foundational for financial inclusion. By developing affordable and accessible payment platforms like UPI, AePS, and RuPay, NPCI facilitates easier access to financial services for a wider population, especially in rural and semi-urban areas.
– Statement 2 is correct. RuPay is a domestic card payment network launched by NPCI. It is an alternative to international card networks like Visa and Mastercard and plays a significant role in promoting cashless transactions and financial inclusion in India.
NPCI was founded in 2008 as a not-for-profit organization under the guidance of the Reserve Bank of India (RBI) and the Indian Banks’ Association (IBA). Its mandate is to provide retail payment infrastructure to the country. Besides RuPay, NPCI operates other major payment systems like Unified Payments Interface (UPI), Immediate Payment Service (IMPS), Aadhaar Enabled Payment System (AePS), Bharat Bill Payment System (BBPS), etc., all of which contribute significantly to the digital transformation of India’s payment landscape and financial inclusion efforts.

175. Which of the following has/have occurred in India after its liberaliza

Which of the following has/have occurred in India after its liberalization of economic policies in 1991?

  • Share of agriculture in GDP increased enormously.
  • Share of India’s exports in world trade increased.
  • FDI flows increased.
  • India’s foreign exchange reserves increased enormously.

Select the correct answer using the codes given below:

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

This question was previously asked in
UPSC IAS – 2017
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The correct answer is B) 2, 3 and 4 only. After the liberalization of economic policies in 1991, India experienced significant increases in its share of world trade, FDI flows, and foreign exchange reserves, while the share of agriculture in GDP declined.
– Statement 1 is incorrect. The share of agriculture in India’s GDP has consistently declined after 1991, although a large proportion of the population still depends on it for livelihood. This is a common structural transformation in developing economies.
– Statement 2 is correct. Liberalization led to increased trade integration with the global economy, resulting in a rise in India’s share of global exports.
– Statement 3 is correct. Policy changes opened up the Indian economy to foreign investment, leading to a substantial increase in Foreign Direct Investment (FDI) inflows.
– Statement 4 is correct. Increased trade surplus (in some periods), capital inflows (FDI, FII, external commercial borrowings), and remittances led to a massive increase in India’s foreign exchange reserves.
The 1991 reforms were aimed at dismantling the ‘License Raj’, opening the economy to greater domestic and international competition, and integrating it with the global economy. These reforms led to higher economic growth rates, increased trade, and greater foreign investment, fundamentally transforming the Indian economy.

176. Which of the following statements best describes the term ‘Scheme for

Which of the following statements best describes the term ‘Scheme for Sustainable Structuring of Stressed Assets (S4A), recently seen in the news?

[amp_mcq option1=”It is a procedure for considering ecological costs of developmental schemes formulated by the Government.” option2=”It is a scheme of RBI for reworking the financial structure of big corporate entities facing genuine difficulties.” option3=”It is a disinvestment plan of the Government regarding Central Public Sector Undertakings.” option4=”It is an important provision in ‘The Insolvency and Bankruptcy Code’ recently implemented by the Government.” correct=”option2″]

This question was previously asked in
UPSC IAS – 2017
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The term ‘Scheme for Sustainable Structuring of Stressed Assets (S4A)’ refers to a scheme by RBI for reworking the financial structure of big corporate entities facing difficulties.
– The Scheme for Sustainable Structuring of Stressed Assets (S4A) was introduced by the Reserve Bank of India (RBI) in June 2016.
– It provided a framework for the resolution of large stressed accounts (non-performing assets) of ₹500 crore or more.
– The scheme allowed for the bifurcation of a stressed asset into sustainable debt (debt which can be serviced by the current operations of the borrower) and unsustainable debt. The unsustainable debt could be converted into equity or other hybrid instruments, allowing banks to resolve large NPAs without having to classify the entire account as NPA immediately after restructuring, provided certain conditions were met.
S4A was one of the measures taken by the RBI to address the issue of rising non-performing assets (NPAs) in the Indian banking system, particularly those involving large corporate borrowers. It aimed to provide a path for resolution and revival of viable businesses while taking a hit on the unsustainable portion of the debt. This scheme was later superseded by other resolution frameworks introduced by the RBI and ultimately the Insolvency and Bankruptcy Code (IBC).

177. The Global Infrastructure Facility is a/an

The Global Infrastructure Facility is a/an

[amp_mcq option1=”ASEAN initiative to upgrade infrastructure in Asia and financed by credit from the Asian Development Bank.” option2=”World Bank collaboration that facilitates the preparation and structuring of complex infrastructure Public-Private Partnerships (PPPs) to enable mobilization of private sector and institutional investor capital.” option3=”Collaboration among the major banks of the world working with the OECD and focused on expanding the set of infrastructure projects that have the potential to mobilize private investment.” option4=”UNCTAD funded initiative that seeks to finance and facilitate infrastructure development in the world.” correct=”option2″]

This question was previously asked in
UPSC IAS – 2017
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The correct answer is B) World Bank collaboration that facilitates the preparation and structuring of complex infrastructure Public-Private Partnerships (PPPs) to enable mobilization of private sector and institutional investor capital.
The Global Infrastructure Facility (GIF) is a collaborative platform led by the World Bank Group. Its primary role is to support developing countries in preparing and structuring viable, bankable infrastructure projects, particularly Public-Private Partnerships (PPPs), to attract and mobilize private sector investment.
The GIF was launched in 2014 by the World Bank Group in partnership with G20 nations and other multilateral development banks, private sector investors, and governments. It acts as a global platform that pools expertise and resources from its partners to address the constraints in the early stages of complex infrastructure PPP project development in developing countries. It focuses on project preparation support rather than directly providing financing for construction.

178. With reference to ‘National Investment and Infrastructure Fund’, which

With reference to ‘National Investment and Infrastructure Fund’, which of the following statements is/are correct ?

  • 1. It is an organ of NITI Aayog.
  • 2. It has a corpus of ₹ 4,00,000 crore at present.

Select the correct answer using the code given below :

[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
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The correct answer is D) Neither 1 nor 2.
The National Investment and Infrastructure Fund (NIIF) is not an organ of NITI Aayog. It is a fund set up by the Government of India to attract investment into the country’s infrastructure sector. The initial planned corpus for NIIF was significantly less than ₹4,00,000 crore.
Statement 1 is incorrect. NIIF was established in 2015 by the Government of India as a Category II Alternative Investment Fund (AIF) under the Securities and Exchange Board of India (SEBI) Regulations, 2012. While both NIIF and NITI Aayog are government initiatives related to economic development, NIIF is a separate fund management entity, not a subsidiary or organ of NITI Aayog. Statement 2 is incorrect. The initial target corpus announced for NIIF was ₹40,000 crore (approximately USD 6 billion at the time), with the government contributing 49%. The actual funds raised and managed across its various funds (Master Fund, Fund of Funds, Strategic Opportunities Fund) are substantial but have evolved and grown over time, and ₹4,00,000 crore is not its current stated corpus or target corpus size.

179. Which of the following is a most likely consequence of implementing th

Which of the following is a most likely consequence of implementing the ‘Unified Payments Interface (UPI)’ ?

[amp_mcq option1=”Mobile wallets will not be necessary for online payments.” option2=”Digital currency will totally replace the physical currency in about two decades.” option3=”FDI inflows will drastically increase.” option4=”Direct transfer of subsidies to poor people will become very effective.” correct=”option1″]

This question was previously asked in
UPSC IAS – 2017
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The correct answer is A) Mobile wallets will not be necessary for online payments.
The Unified Payments Interface (UPI) enables instant transfer of money directly between any two bank accounts using a mobile platform. It simplifies digital payments by allowing direct debits and credits from bank accounts linked via a UPI ID or mobile number. This significantly reduces the dependency on pre-loading money into separate mobile wallets for many online transactions, making mobile wallets less necessary for *all* online payments compared to the pre-UPI era.
Option B is a radical and unlikely outcome within a couple of decades. Physical currency still serves essential functions. Option C is speculative; while improved digital infrastructure can support economic activity, a drastic increase in FDI is not a direct or guaranteed consequence of UPI implementation. Option D is plausible as UPI facilitates direct bank transfers useful for subsidies (DBT), but existing systems also enable this. UPI’s most direct and noticeable impact is on the payment methods available to individuals and businesses, particularly reducing reliance on wallets.

180. What is the purpose of setting up of Small Finance Banks (SFBs) in Ind

What is the purpose of setting up of Small Finance Banks (SFBs) in India ?

  • To supply credit to small business units
  • To supply credit to small and marginal farmers
  • To encourage young entrepreneurs to set up business particularly in rural areas.

Select the correct answer using the code given below:

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

This question was previously asked in
UPSC IAS – 2017
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The correct answer is A) 1 and 2 only.
Small Finance Banks (SFBs) are a category of banks introduced by the Reserve Bank of India (RBI) with the primary objective of furthering financial inclusion by providing access to financial services to unserved and underserved sections of the society. The target segments for SFBs specifically include small business units, small and marginal farmers, micro and small industries, and entities in the unorganized sector. Statement 1 and Statement 2 directly align with these objectives. Statement 3, while potentially a positive outcome, is not listed as a core or explicit purpose of setting up SFBs compared to the focus on specific segments like small businesses and farmers.
SFBs are regulated by the RBI and are subject to prudential norms and regulations similar to scheduled commercial banks, with some specific adjustments to reflect their focus on small-scale lending. They are required to extend 75% of their Adjusted Net Bank Credit (ANBC) to the sectors categorized as priority sector lending by the RBI.
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