Day-722 | Daily MCQs | UPSC Prelims | ECONOMY

Answer: C
Explanation:
Investment increases the productive capacity of an economy. Several factors can discourage investment in an economy.
• Shortage of skilled labour: If there’s a lack of skilled labour in the economy, it can make it difficult for businesses to grow and innovate. This can deter investment in the economy.
• High interest rate: In case of high interest, return on investment gets affected, lowering the profits of businesses. This prevents them from investing.
• Lack of infrastructure: Poor infrastructure, such as transportation and communication networks, can make it difficult and expensive for businesses to operate. This can deter investment. This is the reason why the government has been investing heavily in creating infrastructure and has launched programs like PM Gati Shakti.
• High budget deficit: Large government budget deficits can raise concerns about future taxation and government debt. This can discourage investors.
• Predictable inflation: Maintaining a predictable inflation rate assures investors that the return on their investments can be projected over a longer period. Thus, they can remain invested to generate larger return over risk free return. This encourages investment and does not deter it. In short, the predictability of inflation rate ensures lower risk premium over time.

Answer: B
Explanation
Structured on the lines of Prompt Corrective Action (PCA) plan for scheduled commercial banks, Supervisory Action Framework (SAF) monitors and regulates the health of urban cooperative banks.
A UCB may be placed under SAF when its:
• Net non-performing assets (NPA) ratio exceeds 6 percent
• Capital adequacy ratio falls below 9 percent and
• If it incurs losses for two consecutive financial years or has accumulated losses on its balance sheet.
Under SAF, the bank’s board will have to submit a board-approved action plan for improving these parameters. There will be a restriction on declaration and payment of dividend or donation without RBI’s prior approval.
Other restrictions include lending restrictions to sectors with high defaults and incurring capital expenditures beyond specified limits. The UCB will also have to take measures to cut operating and administrative costs.

Answer: C
Explanation:
The surplus represents the RBI’s income exceeding its operational expenses and allocations to reserves. This transfer is a significant source of non-tax revenue for the government.
Non-tax revenue refers to the income earned by the government from sources other than taxes. These sources can be quite varied and can be a significant contributor to a government’s overall budget. This can be from various sources:
• Dividend from PSUs
• User fees and fines and penalties
• Interest on loans
• Income from sale of public assets

Answer: B
Explanation:
Statement 1 is incorrect: Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory note. It was introduced in India in 1990 with a view to enabling highly rated corporate borrowers to diversify their sources of short-term borrowings and to provide an additional instrument to investors. Subsequently, primary dealers and satellite dealers were also permitted to issue CP to enable them to meet their short-term funding requirements for their operations.
Statement 2 is correct: As per the Reserve Bank of India rules, only corporates who get an investment grade rating can issue CP. It is issued at a discount to face value.
• It can be issued for a maturity for a minimum of 15 days and a maximum upto one year from the date of issue.
Other issuers: Primary Dealers and the all-India financial institutions (FIs) that have been permitted to raise short-term resources under the umbrella limit fixed by the Reserve Bank of India are eligible to issue CP

Answer: D
Explanation:
Statement 1 and 2 are correct: India is the world’s largest producer, consumer and importer of pulses. India’s pulses imports in fiscal 2024 surged 84% year-on-year to their highest level in six years after lower production prompted India to allow duty-free imports of red lentils and yellow peas.
Statement 3 is correct: During the last five years (2018-19 to 2022-23), total pulses production has increased by 18%. Based on the production estimates for the year 2022-23, Madhya Pradesh, Maharashtra and Rajasthan are the top three pulses producing states in the country.
The Government of India also provides flexibility to the states for state specific needs/priorities under Rashtirya Krishi Vikas Yojana (RKVY). The states can promote pulses under RKVY with approval of the State Level Sanctioning Committee (SLSC) headed by the Chief Secretary of the State.