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IAS Prelims Exam: Economic Survey 2015-16 Questions: Economic Outlook

Mar 4, 2016 16:18 IST

    In the Civil Services IAS Exam, the questions of GS Indian Economy play a crucial role for the aspirants to crack the IAS Exam. In the past few years the relevance of questions based on Indian Economy has been increased in IAS Prelims Exam while there is always a greater possibility of asking many more questions. So, an aspirant should have to be prepared for such questions based on Indian Economy.

    Here, we have provided Multiple Choice Questions based on the very first chapter of Economic Survey 2015-16: Economic Outlook, Prospects, and Policy Challenges.

    1. Recently Government has launched ‘UDAY’ Scheme. Its aim is to:

    (a) Financial turnaround of Power Distribution Companies (DISCOMs).
    (b) Empower the women in rural areas in establishing help groups.
    (c) Promote higher education in the North East Region.
    (d) Empower and instill confidence among minority women.

    Answer(a)

    Explanation: Ujwal DISCOM Assurance Yojna or UDAYprovides for the financial turnaround and revival of Power Distribution companies (DISCOMs), and importantly also ensures a sustainable permanent solution to the problem. UDAY is optional for all States. However, States are encouraged to take the benefit at the earliest, as benefits are dependent on the performance. Hence option (a) is the correct answer.

    2. Which of the following countries are included in Fragile Five.

    1. Turkey
    2. Brazil
    3. India
    4. South Africa
    5. China
    6. Indonesia
    7. Russia

    Select the correct answer using the code given below:

    (a) 1, 2, 4, 6 and 7 only
    (b) 1, 2, 3, 4 and 6 only
    (c) 2, 3, 4, 5 and 6 only
    (d) 1, 2, 3, 4 and 7 only

    Answer (b)

    Explanation: A research analyst at Morgan Stanley in 2013 coined the term Fragile Five and identifies Turkey, Brazil, India, South Africa and Indonesia as economies that have become too dependent on skittish foreign investment to finance their growth ambitions. Hence option (b) is the correct answer.

    3.  Consider the following statements about Rational Investor Ratings Index (RIRI)

    1. It is computed by averaging a country’s GDP growth rate and macro-economic indicators.
    2. Average of Fiscal deficit, current account deficit and inflation are taken as macro economic indicators.
    3. Higher levels of RIRI indicate better performance of economy.

    Which of the statements given above is/are correct?

    (a) 1 only
    (b) 1and 2 only  
    (c) 2 and 3 only
    (d) 1, 2 and 3

    Answer (d)

    Explanation: In 2015-16 EconomySurvey Rational Investor Ratings Index (RIRI) was introduced. It iscomputed by averaging a country’s GDP growth rate and its macro-economic indicators (average of the fiscal deficit, current account deficit, and inflation with negative signs). Higher levels of RIRI indicate better performance of economy. Hence all the statements are correct and option (d) is the right answer.

    4. Consider the following statements about ‘Debt-to-GDP’ ratio.

    1. It compares a country's sovereign debt to its total economic output for the year.
    2. In Feb 2016 India’s debt-to-GDP ratio is around 67%.
    3. Declining ratio indicates towards improving fiscal strength.

    Select the correct answer using the code given below.

    (a) 1 only
    (b) 1and 2 only  
    (c) 2 and 3 only
    (d) 1, 2 and 3

    Answer (d)

    Explanation: The debt to GDP ratio compares a country's sovereign debt to its total economic output for the year. It allows gauging a country's ability to pay off its debt.
    A high ratio means a country isn't healthy enough to pay off its debt. Whereas if the ratio is declining,then the government’s fundamental fiscalstrength is improving. In Feb, 2016 India’s debt-to-GDP ratio is around 67%, including both central and state government debt. That is the highest among major emerging market economies, except Brazil. Hence all the statements are correct and option (d) is the correct answer.

    5. Consider the following statements regarding TBS Challenge:

    I. TBS problem is one of the most critical short-term challenges confronting the Indian economy—the impaired financial positions of the Public Sector Banks (PSBs) and some large corporate houses— which has been characterized as the ‘Balance Sheet Syndrome with Indian characteristics’.
    II. Resolving the TBS challenge comprehensively would require 4 Rs: Recognition, Recapitalization, Resolution, and Reform.
    III. TBS is like Basel I, a set of international banking regulations put forth by the Basel Committee on Bank Supervision, which set out the minimum capital requirements of financial institutions with the goal of minimizing credit risk.

    Which of the following statement(s) is/are correct?

    A. Only I
    B. I and II
    C. I and III
    D. All of the above

    Answer (b)

    Explanation: One of the most critical short-term challenges confronting the Indian economy is the twin balance sheet (TBS) problem—the impaired financial positions of the Public Sector Banks (PSBs) and some large corporate houses— what we have hitherto characterized as the ‘Balance Sheet Syndrome with Indian characteristics’. By now, it is clear that the TBS problem is the major impediment to private investment, and thereby to a full-fledged economic recovery.

    6. Which of the following indicators is/are considered in making index of macroeconomic vulnerability.

    1. Fiscal deficit
    2. Primary Deficit
    3. Current account deficit
    4. Inflation

    Select the correct answer using the code given below.

    (a) 1 and 2 only
    (b) 1, 3 and 4 only
    (c) 2, 3 and 4 only
    (d) 1,2, 3 and 4

    Answer (b)

    Explanation: In 2015-16 economic survey, an overall index of macroeconomic vulnerability, which adds acountry’s fiscal deficit, current account deficit and inflation, was introduced. It is one of the keyelements of assessing a country’s attractiveness to investors. Hence answer is (b).

    7. Which of the following can be categorized under Capital expenditure.

    1. Loans and advances
    2. Repayment of loan
    3. Interest payment on past debt
    4. Subsidies and Pension

    Select the correct answer using the code given below.

    (a) 1 and 2 only
    (b) 1 and 3 only
    (c) 3 and 4 only
    (d) 1,2 and 4 only

    Answer (a)

    Explanation: An expenditure that neither creates assets nor reduces a liability is categorized as revenue expenditure, whereas if it creates an asset or reduce a liability, categorized as capital expenditure.
    Loans and advances creates an asset whereas Repayment of loan reduces liability, hence both are categorized under Capital expenditure. Interest payment on past debt, Subsidies and Pension are categorized under revenue expenditure. So answer is (a).

    8. Consider the following statements about Trans-Pacific Partnership (TPP).

    1. It is a free-trade agreement of the Pacific rim countries.
    2. India and China both are not part of TPP.

    Which of the statements given above is/are correct?

    (a) 1 only
    (b) 2 only
    (c) Neither 1 nor 2
    (d) Both 1 and 2

    Answer (d)

    Explanation: Trans-Pacific Partnership (TPP) is a free-trade agreement being negotiated between 12 countries of thePacific rim. Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States of America, Vietnam and Japan are its member countries. India and China both are not part of TPP. Hence only statement 1 is correct and (a) is correct answer.

    9. Recently Government has launched ‘Indradhanush’ Scheme. Its aim is to:

    (a) Revamp functioning of public sector banks.
    (b) Protect, restore and enhance diminishing forest cover.
    (c) Improve connectivity in the North East Region.
    (d) Improve farm production by evergreen revolution in Agriculture sector.

    Answer (a)  

    Explanation: Indradhanush is launched to revamp functioning of public sector banks. It has adopted pronged approach, which include appointments, board of bureau, capitalisation, destressing, empowerment, framework of accountability and governance reforms. Hence option (a) is right answer.

    10.Recently 5:25 and SDR schemes are in news. They are initiated by:

    (a) WTO
    (b) IMF
    (c) RBI
    (d) World Bank 

    Answer (c)   

    Explanation: 5:25 and SDR schemes, which create incentives forthe banks to come together with their borrowers to rehabilitate stressed assets.Both are initiated by RBI.

    Click here for GS Economy Study Material

     


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