Day-744 | Daily MCQs | UPSC Prelims | ECONOMY

Answer: C
Explanation:
● Statement 1 is correct: As per the provisions of the RBI Act, the Monetary Policy Committee (MPC) consists of six members: three Members from RBI and three are appointed by the Central Government.
● Statement 2 is correct: The committee determines the policy interest rate required to achieve the inflation target. The MPC is required to meet at least four times in a year. The quorum for the meeting of the MPC is 4 members.
● Statement 3 is correct: According to section 45ZB of the RBI Act, 1934, the decision of the Monetary Policy Committee shall be binding on the RBI.
● Statement 4 is incorrect: The RBI Governor does not have veto power; decisions are made by a majority vote, and in the case of a tie, the Governor casts the deciding vote.
The Central government has recently reconstituted the MPC.

Answer: C
Explanation:
The demographic dividend is calculated by comparing the proportion of a country’s working-age population to its non-working-age population. A demographic dividend occurs when the working-age population is larger than the non-working-age population. This indicates that more people are able to contribute to the economy, which can lead to economic growth.
India entered the demographic dividend opportunity window in 2005-06 and will remain there till 2055-56.

Answer: B
Explanation:
● Skimpflation occurs when businesses reduce the quality of products and services instead of raising prices, making consumers get less for their money.
● Skimpflation can lead to consumers getting less value for their money. They may also buy less of the product or look for cheaper alternatives.

Answer: A
Explanation:
● The Green Swan effect refers to unpredictable climate risks causing financial instability. The term was coined by the Bank for International Settlements (BIS). The Green Swan effect is based on the concept of a “black swan”, which refers to rare, unpredictable events with extreme impact. Green Swan events could include increased droughts, water stress, flooding, and heat waves.
● It emphasizes the need for a rapid transition to a zero-carbon economy to mitigate these risks and ensure financial stability. By understanding the green swan effect, policymakers, businesses, and investors can better prepare for potential financial disruptions and take proactive steps to build a more resilient and sustainable future.

Answer: A
Explanation:
Statement 1 is correct: Participatory notes also referred to as P-notes, or PNs, are financial instruments required by investors or hedge funds to invest in Indian securities without having to register with the Securities and Exchange Board of India (SEBI). P-notes are among the group of investments considered to be Offshore Derivative Investments (ODIs).
Statement 2 is incorrect: While P-notes can be used by foreign institutional investors (FIIs) for both short-term and long-term investments in Indian securities, they are not specifically designed for short-term investing.
Why P-notes can be used for both short-term and long-term investing:
● Flexibility: P-notes offer flexibility in terms of investment horizon. FIIs can use them for short-term trading or long-term portfolio building.
● Market access: P-notes provide a convenient way for FIIs to access the Indian securities market without having to establish a local entity.
● Regulatory compliance: Indian intermediaries handle the regulatory compliance associated with investing in Indian securities, making it easier for FIIs.