Day-568 | Daily MCQs | UPSC Prelims | ECONOMICS

Answer: B
Explanation:
Statement 1 is correct: PM Programme for Restoration, Awareness, Nourishment and Amelioration of Mother Earth” (PM-PRANAM) scheme was announced in the Budget 2023-24 with the objective to incentivise the states and union territories to promote usage of alternative fertilizers and balanced use of chemical fertilizers.
Statement 2 is incorrect: The government hasn’t discontinued urea subsidy under the programme. The government decided to continue urea subsidy for three years ending March 2025, with an outlay of Rs 3.68 lakh crore.
• An outlay of Rs 1451 crore subsidy has been approved to promote organic manure.
Statement 3 is correct: The scheme is fully funded by the central government, ie, a central scheme.
How the scheme will work:
• 50% of the fertilizer subsidy saved by a State/UT in a particular financial year by way of reduction in consumption of chemical fertilizers (Urea, DAP, NPK, MOP) compared to previous 3 years’ average consumption, will be passed on to that State/UT as Grant.
• To support marketing of organic fertilizers i.e. Fermented Organic Manure (FOM) / Liquid FOM / Phosphate Rich Organic Manure (PROM) produced as a by-product from Biogas Plants / Compressed Bio Gas (CBG) Plants set up under Gobardhan initiative 1500 per metric ton as MDA scheme is included.
• These organic fertilizers will be available to the farmers at affordable prices.
• Sulfur Coated Urea (Urea Gold) has been introduced to overcome the sulfur deficiency in the soil and reduce the input cost of the farmers.

Answer: C
Explanation:
Statement I is correct and statement II is incorrect.
Statement I is correct: The concept of capital-output ratio expresses the relationship between the value of capital invested and the value of output.
• For example, suppose that investment in an economy is 32% (of GDP), and the economic growth corresponding to this level of investment is 8%.
• Here, a Rs 32 investment produces an output of Rs 8. Capital output ratio is 32/8 or 4. In other words, to produce one unit of output, 4 unit of capital is needed.
Relevance of capital-output ratio in economic planning
Suppose the government targets an economic growth of 9% for next year. planners know that the capital output ratio in India is 4. Here, to realize 9% growth, investment should be increased to 36% (9 x4).
Statement II is incorrect: A lower capital-output ratio shows that only low level of investment is needed to produce a given growth rate in the economy. This is considered as a desirable situation. Lower capital output ratio shows that capital is very productive or efficient.

Answer: A
Explanation:
Statement 1 is correct. India is one of the world’s largest importers of gold. High gold imports affect the trade deficit of the country. India’s merchandise trade deficit rose to a record high in October, propelled by a 95% increase in gold imports. In July this year, the government had curbed import of plain gold jewellery. It was meant to check the move of importers over the last few months, who have been using a policy flaw to source plain gold jewellery from Indonesia without paying any import taxes. The government suspected re-routing of gold from Indonesia to India via FTA.
Statement 2 is incorrect: The Reserve Bank of India is the custodian of foreign exchange reserves.
The components of foreign exchange reserves include:
1) Foreign Currency Assets
2) Gold reserves
3) Special Drawing Rights (an international reserve asset created by the International Monetary Fund (IMF) to supplement the official reserves of the member countries)
4) Reserve Tranche Position in the IMF
Currently, Foreign Currency Assets are the largest component of foreign exchange reserves of the country, followed by gold.

Answer: B
Explanation
Statement 1 is incorrect: Employment elasticity is a measure of the percentage change in employment associated with a one percentage change in economic growth and not labour force.
Statement 2 is correct: Less than 1% increase in employment relative to 1% increase in output implies jobless growth, ie, low employment elasticity implies jobless growth.
• India is said to have been going through the phenomenon of jobless growth. Employment elasticity has consistently fallen between 1983 and 2017 in India. This is because the workers who have been released from agriculture sector have not been absorbed by other sectors of the economy.
• Construction sector, the second largest employer after agriculture sector, has been a shock absorber as it employs many unskilled and low-skilled workers.
• India has not produced enough good quality jobs commensurate with its GDP growth.

Answer: D
Explanation:
Statement 1 is incorrect: Both Treasury Bills and Cash Management Bills (CMBs) are money market instruments.
Statement 2 is incorrect.
Cash Management Bills:
• These are short-term security sold by the Reserve Bank of India on behalf of the Union government to meet the temporary cash flow mismatches of the government.
• These are similar to T-Bills, but the tenure is less than 91 days.
• These are issued at discount to the face value through auctions.
• State governments cannot issue CMBs.
Treasury Bills
• These are short-term debt instruments issued by the government of India to meet the short-term requirements.
• They are issued in three tenors: 91-day, 182-day and 364-day.
• These are zero-coupon securities and pay no interest.
• Instead, they are issued at a discount and redeemed at the face value at maturity.
• Treasury bills are not issued by the state governments.