16 November 2023

1) Take into account the following statements about operating ratio:

1. The Indian Railways use the phrase “operating ratio,” and it is good if it is greater than 100.
2. In 2019–2020, Indian Railways had an operational ratio of greater than 90%.

Which of the aforementioned statements is true?

• 1 only
• 2 only
• Both 1 and 2
• Neither 1 nor 2

Solution: b

• Simply explained, the operating ratio is the amount of money the railways must spend in order to make one hundred. Better financial health is implied by a lower operating ratio.
• The Indian Railways’ operating ratio of 98.36% in 2019–2020 does not accurately reflect its true financial performance; instead, the ratio will be 114.35% if the actual cost of pension payments is taken into account, according to THE COMPTROLLER and Auditor General of India’s report on the railways’ finances.

2) Take into account the following statements regarding the recently approved framework for small-value digital payments in offline mode by the RBI:

1. Cards, wallets, and mobile devices can be used to make the payments in person.
2. A single offline payment transaction has a 200 rupee maximum.
3. Two Factor Authentication is necessary for these transactions.

Which of the aforementioned statements is true?

• 1 and 2 only
• 2 and 3 only
• 1 and 3 only
• 1,2 and 3

Solution: a

• In order to encourage digital payments in semi-urban and rural areas, the Reserve Bank of India (RBI) has released the framework for small-value digital payments in offline mode.
• A digital payment made offline does not require Internet or phone access.
• This new framework allows for the use of any channel or instrument, including cards, wallets, and mobile devices, to conduct such payments in person (proximity mode).
• The use of an Additional Factor of Authentication (AFA) wouldn’t be necessary for such transactions. Due to the offline nature of the transactions, the consumer will eventually receive alerts (by SMS and/or email).
• Until the account’s balance is replenished, there is a limit of 200 for each transaction and 2,000 for all transactions combined. Only in an online manner can balances be refilled.

3) The Domestic Systemically Important Insurers (D-SIIs) in India are which of the following?

1. The India Life Insurance Corporation.
2. The Indian General Insurance Corporation
3. New India Insurance

Choose the right answer code:

• 1 and 2 only
• 2 and 3 only
• 1 and 3 only
• 1,2 and 3

Solution: d

• As domestic systemically important insurers (D-SIIs), Life Insurance Corporation of India, General Insurance Corporation of India, and New India Assurance continue to be more closely regulated.
• This was stated by insurance regulator IRDAI when it was announced that LIC, GIC Re, and New India had been designated as D-SIIs for 2021–22, just like in 2020–21.

4) Take into account the following assertions:

1. The First Advance Estimates (FAE) of GDP are the first recognised projections of GDP growth for the current fiscal year.
2. The Ministry of Finance releases them.
3. They are used to determine the budget allocations for the upcoming fiscal year.

Which of the aforementioned statements is true?

• 1 and 2 only
• 2 and 3 only
• 1 and 3 only
• 1,2 and 3

Solution c)

• For the current fiscal year (2021–22 or FY22), the Ministry of Statistics and Programme Implementation (MoSPI) has produced the First Advance Estimates (FAE).
• The FAE, which were introduced for the first time in 2016–17, are normally released at the conclusion of the first week of January.
• They are the “first” official projections of GDP growth for that fiscal year. But because they are released well in advance of the fiscal year, which runs from April to March, they are also considered the “advance” estimates.
• Although the FAE are released in the months immediately following the third quarter’s end (October, November, and December), it is crucial to remember that they do not contain the official Q3 GDP data, which is released at the end of February as part of the Second Advance Estimates (SAE).
• FAE’s primary relevance comes from the fact that the Union Finance Ministry uses them to determine the budget allocations for the upcoming fiscal year. They are estimates of GDP.

5) Take into account the following assertions:

1. The GDP that has been adjusted for inflation is known as real GDP.
2. The discrepancy between real and nominal GDP reveals the annual levels of inflation.

Which of the aforementioned statements is true?

• 1 only
• 2 only
• Both 1 and 2
• Neither 1 nor 2

Solution: b

• A derived indicator is real GDP, which is the GDP less the impact of inflation. The nominal GDP serves as the foundation for all budget calculations.
• Nominal GDP minus inflation rate equals real GDP.
• However, real GDP is what counts from the standpoint of the average person. The difference between real and nominal GDP demonstrates the annual levels of inflation.

6) Take into account the comments made about the Gross Domestic Product (GDP) and the Gross Value Added (GVA):

1. By adding up all of the expenditures, GDP maps the economy from the demand or expenditure side.
2. GVA offers an overview of the economy’s supply side.
3. GVA plots the value contributed by several economic sectors, including agriculture, industry, and services.

Which of the aforementioned statements is true?

• 1 and 2 only
• 2 and 3 only
• 1 and 3 only
• 1,2 and 3

Solution: d

• The GVA paints a picture of the economy from the supply side, whereas the GDP maps the economy from the expenditure (or demand) side, that is, by adding up all the expenditures. GVA plots the “value-added” by various economic sectors, including agriculture, industry, and services.

7) Take into account the following statements about inverted duty structure:

1. An inverted duty structure occurs when the import duty paid on finished items is lower than the import duty paid on the raw materials used to make those finished goods.
2. When a product’s duty structure is inverted relative to its raw material, it tends to deter the import of finished items.

Which of the aforementioned statements is true?

• 1 only
• 2 only
• Both 1 and 2
• Neither 1 nor 2

Solution: a

• A scenario known as a “inverted duty structure” occurs when the import duty on finished items is lower than the import charge on the raw materials used to produce those finished goods.
• A case of an inverted duty structure would be one in which the tariff (import tax) on the import of tyres is 10% and the tariff on the import of the natural rubber used in the manufacture of tyres is 20%.
• It will be more difficult to produce the aforementioned good domestically at a competitive price when the import duty on raw materials is high. Imported raw materials and components are essential to many industries. They are forced to boost prices due to the high tax on the raw materials.
• As the utilisation of imported raw materials rises, the drawback of the inverted tariff structure gets worse. An inverted tariff structure prevents the creation of domestic value.
• On the other side, due to minimal tax advantages, imported finished goods will be less expensive. As a result, domestically produced goods are no longer competitive with imported completed goods.
• Even international investors would be uninterested in establishing a company for production in the nation in such a scenario.

8) What advantages come with the World Trade Organisation (WTO) designation of “developing country”?

1. The timelines for implementing WTO agreements are extended.
2. It makes it possible for other nations to grant preferential treatment.
3. All exports to industrialised nations are allowed with no taxes and no quotas.

Choose the right answer code:

• 1 and 2 only
• 2 and 3 only
• 1 and 3 only
• 1,2 and 3

Solution: a

• What advantages come with the label “developing country”?
• Through “special and differential treatment” (S&DT) clauses, which can allow developing nations lengthier implementation timelines and even obligations to increase trading possibilities for such countries, several WTO accords grant developing countries exceptional privileges.
• WTO agreements frequently aim to gradually reduce government support for certain industries, set more lenient standards for developing countries, and give them more time to reach those targets than do industrialised nations.
• Additionally, the designation enables other nations to provide preferential treatment.
• LDCs frequently receive exemptions from certain WTO treaty provisions. For practically all exports to the EU, Bangladesh, which is now categorised as an LDC, is granted zero duty and zero quota access.

9) Take into account the following assertions:

1. The World Trade Organisation (WTO) classifies nations as “developed” or “developing” based on their GDP per capita ratio.
2. Through technical cooperation and training, the WTO helps developing, least-developed, and low-income countries in transition to WTO rules.

Which of the aforementioned statements is true?

1 only

2 only

Both 1 and 2

Neither 1 nor 2

Solution: b

• The terms “developed” and “developing” countries have not been defined by the WTO, thus any member country is free to declare which category it falls within.
• It is the responsibility of the WTO to monitor the formulation of global economic policy, analyse and disseminate national trade policies, and assure their consistency and transparency. Assistance for developing, least-developed, and low-income countries in transition to adapt to WTO rules and disciplines through technical cooperation and training is another objective of the WTO.

10) Which of the subsequent is not a non-tariff measure?

• Procedures for obtaining import licences
• Technical trade barriers
• Phytosanitary limitations
• All are examples of non-tariff measures.

Solution: d

• Non-tariff measures (NTMs) are described as administrative actions that are not subject to regular customs tariffs and that may have an impact on international commerce in goods by altering pricing, volumes exchanged, or both.
• NTMs therefore cover a wide range of regulations, including conventional trade policy tools like quotas or price controls.
• They also include technical regulatory measures, such as Sanitary and Phytosanitary (SPS) measures and Technical Barriers to Trade (TBT), that pursue significant non-trade goals related to health and environmental protection.