Day-540 | Daily MCQs | UPSC Prelims | ECONOMY

Answer: A
Explanation:
● Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices. The minimum support prices are announced by the Government of India at the beginning of the sowing season for certain crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP). MSP is price fixed by the Government of India to protect the producer (farmers) against excessive fall in price during bumper production years.
● Minimum Support Prices for all Rabi and Kharif crops are given below:
● List of Kharif crops:
o Paddy
o Jowar
o Bajra
o Maize
o Ragi
o Arhar (Tur)
o Moong
o Cotton
o Groundnut in shell
o Sunflower seed
o Soybean
o Sesamum
o Niger Seed
● List of Rabi crops:
o Wheat
o Barley
o Gram
o Masur (Lentil)
o Rapeseed & Mustard
o Safflower
o Toria

Answer: A
Explanation:
Marginal Standing Facility (MSF):
● It is a facility introduced in 2011, under which scheduled commercial banks can borrow additional amounts of overnight money (over and above what is available to them through repo rate) from the Reserve Bank by dipping into their SLR portfolio up to a limit (2%) at a penal rate of interest. This provides a safety valve against unanticipated liquidity shocks to the banking system.
● When banks take loans from RBI at Repo rate, banks need to keep Government Securities with RBI, but this security is in addition to the requirement under SLR. Banks cannot keep SLR securities to avail loan from RBI at Repo Rate.
● But under MSF, banks can borrow from the RBI by dipping into the SLR reserve. This means that the banks can keep 2% of the SLR securities with RBI (i.e., the SLR can go down up to 2% below the normal SLR requirement) and can borrow cash from RBI. This is called Marginal Standing Facility (MSF). But for deepening the SLR below their limit’s banks have to give some penalty. As a result, MSF is greater than the repo rate.
● MSF Rate = Repo Rate + 0.25%

Answer: A
Explanation:
Statement 1 is correct: Currency convertibility refers to the freedom to convert the domestic currency into other internationally accepted currencies and vice versa at the market-determined exchange rate.
Current Account Convertibility:
● RBI allows full conversion of Rupee into foreign currencies and foreign currencies into Rupee (at market price i.e., Nominal Exchange Rate) for any transactions under the current account of balance of payments (BoP). This is called “rupee is fully convertible at current account”. So, suppose someone wants to import commodities worth $10 billion in India then RBI will convert that many Rupees into $10 billion without any restriction for import purposes.
● As a part of the economic reforms initiated in 1991 rupee was made fully convertible at current account in 1993.
Capital Account Convertibility:
● RBI does not allow full conversion of Rupee into foreign currencies and foreign currencies into Rupee for transactions falling under the capital account of BoP. There are restrictions/limits imposed by the RBI and government on the value of transactions that anybody can do under a capital account. This is called “rupee is partially convertible at capital account”.
● There are restrictions on how much ECB can be raised in a particular year, there are restrictions on how much foreign investors can invest in Government securities, there are restrictions on how much individuals/companies can do capital account kind of transactions etc.
● Capital account convertibility leads to free exchange of currency at market rates and an unrestricted mobility of capital. It is beneficial for a country because it increases inflow of foreign investment. But the flip side is that it could destabilize an economy due to massive capital flows in and out of the country.
● Rupee will move to full capital account convertibility once the macroeconomic parameters like current account deficit, fiscal deficit, external debt, inflation become stable at low range and there is resilience to absorb shocks related to capital outflows.
● Since capital convertibility is risky and makes foreign exchange rate more volatile, it is introduced only sometime after the introduction of convertibility on current account when the exchange rate of currency of a country is relatively stable, deficit in balance of payments is well under control and enough foreign exchange reserves are available with the Central Bank.
Statement 2 is incorrect: In India, there is full current account convertibility since August 20, 1993. But there is partial capital account convertibility in India.
Balance of payments: The balance of payments (BOP), also known as the balance of international payments, is a statement of all transactions made between entities in one country and the rest of the world over a defined period, such as a quarter or a year. It summarizes all transactions that a country’s individuals, companies, and government bodies complete with individuals, companies, and government bodies outside the country.

Answer: A
Explanation:
Context: PM inaugurates Vishwakarma Scheme for the upliftment of the marginalised.
Statement 1 is incorrect: It is a central sector scheme for the upliftment of the traditional artisans and craftsmen.
Statement 2 is incorrect: The Ministry of Micro, Small and Medium Enterprises (MoMSME) is the Nodal Ministry for the Scheme. The Scheme will be jointly implemented by the MoMSME, the Ministry of Skill Development and Entrepreneurship and the Department of Financial Services, Ministry of Finance, Government of India.
Statement 3 is correct: It will initially be implemented over a five-year period, up to the fiscal year 2027-28.
Additional information:
Objectives of the Scheme:
● Enable recognition of artisans and craftspeople as Vishwakarma.
● Provide skill upgradation and training opportunities.
● Support access to modern tools.
● Facilitate easy access to collateral-free credit.
● Encourage digital transactions and empowerment.
● Create a platform for brand promotion and market linkages.
Scheme Eligibility:
● Artisans or craftspersons engaged in one of the specified traditional trades.
● Minimum age of 18 years.
● Not availed loans under similar credit-based schemes in the past 5 years, except for MUDRA and SVANidhi beneficiaries who have fully repaid their loans.
● Registration and benefits restricted to one member per family.
● Government employees and their family members are not eligible.

Answer: C
Explanation:
Context: Despite successive hikes in the interest rates on several small savings instruments (SSIs), the returns are still significantly lower than expected.
Small savings instruments help individuals achieve their financial goals over a particular period. They are the major source of household savings in India.
Collections from all small savings instruments are credited to the National Small Savings Fund (NSSF).
The small savings instrument basket comprises 12 instruments which can be classified into three categories:
▪ Postal Deposits: (comprising savings account, recurring deposits, time deposits of varying maturities and monthly income scheme).
▪ Savings Certificates: National Small Savings Certificate (NSC) and Kisan Vikas Patra (KVP).
▪ Social Security Schemes: Sukanya Samriddhi Scheme, Public Provident Fund (PPF) and Senior Citizens ‘Savings Scheme (SCSS).
Rates of Small Saving Instruments:
▪ The rates for small saving instruments are announced quarterly.
▪ Theoretically, it is based on yields of G-Secs of corresponding maturity but political factors also influence the rate change.
▪ The Shyamala Gopinath panel (2010) constituted on the Small Saving (SS) Scheme had suggested a market-linked interest rate system for SS Schemes.
Formula for Small Savings Rates:
▪ It is used to calculate the interest rates for various SSIs in India and is based on the average quarterly yields on G-Secs in the first 3 of the preceding 4 months.
▪ The formula is used to decide how much interest to pay to savers who invest in SS schemes.