Day-548 | Daily MCQs | UPSC Prelims | ECONOMY

Answer: C
Explanation:
● Direct listing is a process by which a company can list its shares on a foreign stock exchange without issuing new shares or raising capital from investors.
● Direct listing is different from the traditional Initial Public Offering (IPO), where a company sells a portion of its shares to the public and raises funds from investors.
● Direct listing is also different from the Depository Receipt (DR) route, where a company issues its shares to a custodian bank, which then issues DRs to foreign investors.
Not a possible benefit of direct foreign listing:
● Exposure to the currency fluctuations and market volatility of the foreign exchange is one of the effects of direct foreign list. However, it can affect their share price and returns. So, it is a challenge not a benefit.
Benefits of Direct Foreign Listing:
● Access to a larger and more liquid market, which can increase the demand and valuation of their shares.
● Savings on the costs and time involved in the IPO or DR process, such as underwriting fees, listing fees, legal fees, etc.
● Avoidance of the dilution of ownership and control that comes with issuing new shares or DRs.
● Ability to reach out to a wider and more sophisticated investor base, which can enhance their reputation and credibility.
● Startups and unicorns may benefit from this avenue of raising funds and increasing their global profile.
● Exposure to the best practices and regulations of the foreign jurisdiction can improve their governance and transparency.
Additional information:
How do Indian Companies Currently List on Foreign Exchanges?
● Currently, Indian companies list on foreign bourses using depository receipts, including American Depository Receipts (ADRs) and Global Depository Receipts (GDRs).
● To list on foreign stock exchanges, Indian companies entrust their shares to an Indian custodian, who then issues depository receipts (DRs) to foreign investors.
● Between 2008 and 2018, 109 companies raised over Rs 51,000 crore through ADRs/GDRs.
● However, after 2018, no Indian companies pursued overseas listings through this route.
● ADR refers to a negotiable certificate issued by a U.S. depositary bank representing a specified number of shares, usually one share of a foreign company’s stock.
● GDRs is a certificate issued by a depository bank that represents shares in a foreign company and deposits them in an account. GDRs are mostly traded on the European markets.
Challenges Involved in Direct Foreign Listing:
● Compliance with the laws and rules of the foreign jurisdiction, which may be different from or more stringent than those in India.
● Challenges in direct foreign listings include valuation issues, as global investors may not offer the same valuations as in India, potentially impacting the company’s market perception and pricing.
● Potential conflicts or disputes with the existing shareholders, regulators, or tax authorities in India or abroad.
● Clarity is needed on which classes of public companies can use this route, the classes of securities that can be listed, the foreign jurisdictions and permitted stock exchanges for listing, and the exemptions offered to such companies in terms of procedural compliances.

Answer: B
Explanation:
Statement 1 is correct: The IIP measures the short-term changes in the volume of production of a basket of industrial products.
Statement 2 is incorrect: The Central Statistical Organization (CSO) computes and publishes the IIP index on a monthly basis.
Statement 3 is correct: The current base year for the IIP series in India is 2011-12.
Additional information:
● IIP is an important composite indicator in India that measures the changes in the volume of production of a basket of industrial products. IIP measures the growth of manufacturing, mining, and electricity sectors.
● The aim of IIP is to capture the direction and the trend of industrial production in the country, not the absolute value of industrial production.
● This index gives the growth rates of different industry groups of the economy over a specified time period.
● The eight core industries of India represent about 40% of the weight of items that are included in the IIP. The Eight Core Sectors/Industries are: Electricity; Steel; Refinery products; Crude oil; Coal; Cement; Natural gas; Fertilizers.
● The industry groups that it measures are classified under the following:
1. Broad sectors like manufacturing, mining, and electricity.
2. Use-based sectors like capital goods, basic goods, intermediate goods, infrastructure goods, consumer durables, and consumer non-durables.

Answer: A
Explanation:
● Statement 1 is correct: Angel Tax is a term basically used to refer to the income tax payable on the capital raised by unlisted companies via the issue of shares through off-market transactions.
● Statement 2 is incorrect: Before budget 2023-24, angel tax was imposed only on investments made by a resident investor. i.e., it was not applicable in case the investments are made by any non-resident or venture capital funds. With Budget 2023-24, the government has decided to include foreign investors in the ambit. That means when a start-up raises funding from a foreign investor, that too will now be counted as income and be taxable. However, these foreign investors will not need to pay any angel tax while investing in a government-recognised startup in India similar to the provision for domestic investors.
● Statement 3 is incorrect: All government recognised startups are not exempt from the Angel Tax. It is only those start-ups which meet certain criteria are exempted from this tax. Moreover, the Central Board of Direct Taxes (CBDT) has clarified that government recognised startups will not be scrutinized for the changes brought about by the Budget 2023-24.
Additional information:
● Angel tax is levied on the capital raised via the issue of shares by unlisted companies from an Indian investor/ foreign investor from certain countries if the share price of issued shares is seen in excess of the fair market value of the company.
● Rule related to Angel Tax is described in Section 56(2)(viib) of the Income Tax Act, 1961.
● This clause was inserted into the act in 2012 to prevent laundering of black money, round-tripping via investments with a large premium into unlisted companies.
● Allaying the concerns of the startup community, the govt had also exempted investments made by the domestic investors in companies approved by an inter-ministerial panel from Angel Tax.
● Government recognised startups, upon meeting certain criteria are exempted from this tax.
● Currently, angel tax is levied at the rate of 30.6 per cent.

Answer: A
Explanation:
Statement 1 is incorrect: Parents or legal guardians can open deposits on behalf of a girl child (including adopted girl child) for up to 2 daughters aged below 10.
Statement 2 is correct: Only one account can be opened in the name of a girl child.
Statement 3 is correct: Maximum period up to which deposits can be made 15 years from the date of opening of the account.
Statement 4 is correct: Interest that accrues against this account which gets compounded annually is also exempt from tax under Section 10 of the Income Tax Act.
Additional information:
● Sukanya Samriddhi Yojana (SSY) Scheme was Introduced in 2016, the Sukanya Samriddhi Yojana Account (SSA) is a central government scheme aimed to cater to a girl child.
● The Sukanya Samriddhi Yojana is a government savings scheme created with the intention to benefit girl child under the initiative called “Beti Bachao – Beti Padhao”.
● This scheme carries a higher interest rate along with several tax benefits.
● The principal amount deposited, interest earned during the entire tenure and maturity benefits are tax-exempt. The principal amount is deductible under section 80C up to Rs 1.5 lakh.
● The proceeds received upon maturity/withdrawal are also exempt from income tax.
● The account matures after 21 years of opening the account or in the event of the marriage of the girl child after she gains the age of 18 years.
● A premature withdrawal of up to 50% of the investment is allowed after the child gains the age of 18 years even if she is not getting married.
● Three girl children, in case of twin girls as second birth or the first birth itself results in three girl children.
● Minimum of Rs 250 of initial deposit with multiple of Rs 150 thereafter with annual ceiling of Rs.150000 in a financial year.
● The account shall mature on completion of 21 years from the date of opening of account or on the marriage of Account holder whichever is earlier.

Answer: D
Explanation:
Statement 1 is incorrect: Open Market Operations (OMOs) have a significant impact on interest rates. When the RBI buys government securities, it injects liquidity in the market. Banks have excess funds to lend to borrowers. This reduces the cost of borrowing in the market.
Statement 2 is incorrect: OMOs can also influence the exchange rate of the Indian rupee. When the RBI sells government securities, it receives rupees from buyers, reducing the supply of rupees in the market and putting upward pressure on the exchange rate, making the rupee stronger.
Additional information:
● Open market operations (OMOs) are one of the tools that the Reserve Bank of India (RBI) uses to regulate the money supply and liquidity conditions in the economy.
● OMOs are the sale and purchase of government securities (G-Secs) and treasury bills (T-Bills) by the RBI in the open market. When RBI wants to inject liquidity into the system, it buys G-Secs and T-Bills from the market, thereby increasing the money supply.
● Conversely, when RBI wants to absorb excess liquidity from the system, it sells G-Secs and T-Bills to the market, thereby reducing the money supply.
● OMO plays a crucial role in ensuring consistent liquidity availability throughout the year, thus maintaining desired interest rate levels.
● Regular OMO activities are conducted to strike a balance between controlling inflation and ensuring that banks maintain sufficient funds for lending.
● Factors contributing to this tightening include reduced government expenditure, heightened currency demand during the festive season, and fluctuations in foreign institutional investments and tax payments.