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Economic Survey 2016-17 for IAS Prelims: Two Analytical Narratives on States’ Development III

Mar 2, 2017 18:04 IST

    Economic Survey on demonetisation part 4The UPSC IAS aspirants must do study and practice of IAS questions based on the Economic Survey provided in this article. Such Indian Economy IAS questions based on the Economic Survey are very important in terms of IAS Prelims Exam and it will also help IAS aspirants to gain momentum during the preparation of IAS Prelims Exam.

    Economic Survey 2016-17 for IAS Prelims- Two Analytical Narratives on States’ Development II

    1. Consider the following statements regarding the Supreme Court’s judgment Goa Mining:
    I. The apex court ordered a cap on mining as well as the creation of a Goan Iron Ore Permanent Fund to meet the ends of inter-generational equity and sustainable development.
    II. The proposal for exploring the creation of a Goan Iron Ore Permanent Fund is notable for being the first that has potential to be established by judicial action.

    Which of the following statement(s) is/are correct?
    a. Only I
    b. Only II
    c. Both I and II
    d. Neither I nor II

    Answer: c

    Explanation:

    The judgment of the Supreme Court of India in WP 435/2012 (Goa Foundation vs UoI & Ors, the Goa mining case), was the culmination of a series of landmark judgements on the subject of managing natural resources in public domain. In this case, the apex court ordered a cap on mining as well as the creation of a Goan Iron Ore Permanent Fund to meet the ends of inter-generational equity and sustainable development. When considered along with earlier SC judgments on the public trust doctrine, notably CA 4154/2000 (Fomento Resorts & Anr vs Minguel Martins & Ors), and on the disposal of natural resources, notably WP 423/2010 (CPIL & Ors vs UoI & Ors, the 2G spectrum case), a new picture emerges for minerals.

    What implications does the SC judgment carry for natural resource management? Natural resources, including minerals, are a shared inheritance that needs to be preserved for future generations. As sub-soil minerals are largely owned by the States, and offshore minerals by the Centre, the states are the trustees on behalf of the people. The cap on mining in Goa is to ensure the availability of minerals over several generations as well as to limit the environmental damage from permitted extraction. The proposal for exploring the creation of a Goan Iron Ore Permanent Fund is notable for being the first that has potential to be established by judicial action. Norway and over 50 other countries / sub-nations have created Permanent Funds based on extracting economic rent from oil or other natural resources. The oldest of these funds, in Texas, dates back to 1876.

    Current Affairs Quizzes for IAS Prelims 2017- February 2017

    2. With the intention of ensuring that the revenue from minerals is utilized for the development and welfare of the citizens of the concerned state, the government has amended the existing mines and Minerals Development Regulation Act. Consider the following statements regarding the Mines and Minerals (Development and Regulation) Amendment Act, 2015:
    I. The amended Act includes stablishment of a trust, to be called the District Mineral Foundation (DMF) for districts affected by mining related operations.
    II. The composition and functions of DMF are to be prescribed by the respective State governments.

    Which of the following statement(s) is/are correct?
    a. Only I
    b. Only II
    c. Both I and II
    d. Neither I nor II

    Answer: c

    Explanation:

    With the intention of ensuring that the revenue from minerals are utilized for the development and welfare of the citizens of the concerned states, the Mines and Minerals (Development and Regulation) Amendment Act, 2015 included the following in the Act:
    • Establishment of a trust, to be called the District Mineral Foundation (DMF) for districts affected by mining related operations.
    • The composition and functions of DMF are to be prescribed by the respective State governments. The foundation shall work for the benefit and interest of persons affected by mining related operations.

    Complete study material of ECONOMIC SURVEY 2016-17

    3. As a part of cooperative federalism, a number of factors that can be taken in the account while determining the quantum and architecture of redistributive resource flow to the states. Which of the following statements is/are true regarding the redistributive resource flow to the states?
    a. One possibility would be to redirect a certain portion of RRT and channel the resources directly to households as part of a Universal Basic Income (UBI) scheme.
    b. Another possibility would to find ways to offset the fiscal bias uncovered by the above analysis, in which higher resource flow leads states to relax their own tax effort.
    c. To encourage better governance and sound institutional practices, the fund transfer mechanism could explicitly include a few monitorable institutional indicators as criteria for receiving transfers.
    d. All of the above

    Answer: d

    Explanation:

    There are, in fact, a number of factors that can be taken in the account while determining the quantum and architecture of redistributive resource flows to the states. In the spirit of cooperative federalism these proposals can be suitably modified to address the priorities and concerns of various states. For example:

    Redirecting flows to households- One possibility would be to redirect a certain portion of RRT and channel the resources directly to households as part of a Universal Basic Income (UBI) scheme.

    Conditioning transfers on fiscal performance- Another possibility would to find ways to offset the fiscal bias uncovered by the above analysis, in which higher resource flow leads states to relax their own tax effort. Perhaps future Finance Commissions could revert to the practice of the 13th FC of conditioning transfers on the tax effort of states; in fact the weightage could be even greater than suggested by the 13th FC.

    Making governance contingent transfers- Given that some high RRT recipient states have performed better than others, it is possible that the capacity of states to utilize funds optimally plays an important role. To encourage better governance and sound institutional practices, the fund transfer mechanism could explicitly include a few monitorable institutional indicators as criteria for receiving transfers.

    Union Budget 2017 Questions for IAS Exam

    4. According to the economic survey 2017, the successful peninsular India has offered three interesting and different models of development. Consider the following statements in this regard:
    I. The traditional East Asian mode of escape from development based on manufacturing is followed by the states of Karnataka and Andhra Pradesh.
    II. The remittance-reliant mode of development exemplified by Kerala.
    III. The distinctive Precocious India model based on specializing in skilled services is followed by Gujarat and Tamil Nadu.

    Which of the above statements is true?
    a. I and II
    b. Only II
    c. I and III
    d. All of the above

    Answer: b

    Explanation:

    The analysis conducted on the broader development experience shows that successful peninsular India has offered three interesting and different models of development. One is the traditional East Asian mode of escape from development based on manufacturing (Gujarat and Tamil Nadu); the remittance-reliant mode of development exemplified by Kerala; and the distinctive, “Precocious India” model based on specializing in skilled services (Karnataka, Andhra Pradesh and Tamil Nadu).

    Other states have been relatively less successful, and perhaps because of that have received less attention. But they are interesting in their own right because they have conformed to other models of development.

    Current Affairs Quizzes for IAS Prelims 2017- January 2017

    5. Which of the following statements best describe the meaning of the term,” ‘Redistributive Resource Transfer’s (RRT)”?
    a. RRT to a state is defined as gross devolution to the state adjusted for the respective state’s share in aggregate gross domestic product.
    b. RRT to a state is defined as the state’s share in aggregate gross domestic product.
    c. Both (angel) and (beer)
    d. None of the above.

    Answer: a

    Explanation:

    RRT to a state is defined as gross devolution to the state adjusted for the respective state’s share in aggregate gross domestic product. Thus RRT is not identical to gross devolution. This adjustment is made to ensure that only the portion of resources devolved to the states over and above their contribution to Gross Domestic Product is included as RRT.

    An alternative definition (gross devolution net of the amount the state would have received as per its contribution in the country-wide fiscal effort measured by the state’s share in aggregate own tax revenue) is also considered to check whether results obtained using the first definition are robust or not.

    The definition of RRT excludes the impact such transfers have on expenditures undertaken by state governments. It is also essential to note that any redistribution that might occur directly by the Centre’s spending is also excluded. Thus, RRT is one specific measure of transfers, and is not a definitive metric of redistribution.

    IAS Prelims 2017- GS Economy complete Study Material

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