The total liability of the monetary authority of the country, RBI, is called the monetary base or high
powered money.
It consists of currency (notes and coins in circulation with the public and currency with the bank )
and deposits held by the Government of India and commercial banks with.
High powered money is the liability of the monetary authority of the country. This is also called the
monetary base and is created by the RBI. High powered money includes currency (notes and coins),
deposits with the government and reserves of commercial banks with RBI. So, to sum up, high
powered money is H = C + R
Where
H - High powered money
C - Currency
R - Cash Reserves of commercial banks

A financial market is a market that brings buyers and sellers together to trade in financial
securities or assets such as stocks, bonds, derivatives, currencies etc. Financial markets are broadly
of two types.
1.Capital Market: Financial markets for buying and selling debt and equity securities. In this market
securities of medium and long term of more than one year are bought and sold. Capital markets are
of two types:
(i) Primary Market: It refers to the capital market where securities are created. It is in this market
that companies sell new shares and bonds for the first time (Initial Public Offering, IPO). In this
market transaction is between the issuer (company) of security and the investor. In the securities
example above, the market in which the company issued bonds for the first time to one lakh
investors is the primary market.
(i) Secondary Market: Once the securities have been issued by the issuer in the primary market, it
gets traded in the secondary market among the investors. In this market, investors trade the
previously issued securities among themselves without the involvement of the issuer of security
(company). Example, Bombay Stock Exchange. In the securities example, the market in which the
investors started buying and selling the bonds among themselves is a secondary market.
2.Money Market: A segment of the financial market in which financial instruments with high
liquidity and very short maturities (less than one year) are traded. Money market instruments are
basically debt instruments and include Call money, Repos, Treasury Bills, Cash Management Bills,
Commercial Paper, Certificate of Deposit and Collateralized Borrowing and Lending Obligations
(CBLO). The players who can trade in the money market are financial institutions, commercial banks,

central banks and highly rated corporate/companies. These markets are less risky. Money Market
can also be classified as primary and secondary.

The incremental capital output ratio (ICOR) explains the relationship between the level of
investment made in the economy and the consequent increase in GDP. ICOR is a metric that assesses
the marginal amount of investment capital necessary for a country or other entity to generate the
next unit of production.
A lower capital-output ratio shows the productivity of capital and technological progress. A lower
capital-output ratio indicates that a lower level of investment is required to produce a given
growth rate in the economy. This is considered to be a desirable situation.

When a foreign investor puts money into an Indian company, then the Indian company gets the
"cash" and it issues "shares" to the FDI investor OR "shares/bonds" in case of FPI investor. For the
company, this "cash" is asset but the "shares or bonds" which the company issued to the foreign
investor (FDI/FPI investor), is a liability for the Company and asset for the FDI/FPI investor.
When we say "FDI investments in India is a liability on India", this basically is referring to the shares
issued by the Indian company (in return of the cash which it got).
And when we say "All FPI investments in India is a liability on India", this basically referred to the
shares or bonds issued by the Indian company (in return of the cash it got). Basically "All" meant
both shares and bonds, because FPI can be in both shares or bonds.
So, the shares/bonds issued by the Indian company to the foreign investor is liability for the Indian
Company. And since its a liability for the Indian Company, we can say that its a liability on India.
India does not mean just "Govt. of India", rather it includes Govts, people, companies all.

A depositary receipt (DR) is a negotiable certificate issued by a bank representing shares in a foreign
company traded on a local stock exchange. The depositary receipt gives investors the opportunity to
hold shares in the equity of foreign countries and gives them an alternative to trading on an
international market.
An IDR is an instrument denominated in Indian Rupees in the form of a depository receipt created
by a Domestic Depository (custodian of securities registered with the Securities and Exchange
Board of India) against the underlying equity shares of issuing company to enable foreign
companies to raise funds from the Indian securities Markets.

The technical definition of "Recession" is two consecutive quarters of negative real GDP
growth. And as per today's news India has entered into recession technically as Q1 (April-June) and
Q2 (July-Sept) faced negative real GDP growth of -23.9% and -7.5% respectively.
The nominal growth in the GDP in Q2 is -4%. The contraction in Nominal GDP is less as compared to
Real GDP because of the positive inflation factor.

A liquidity trap is a contradictory economic situation in which interest rates are very low and
savings rates are high, rendering monetary policy ineffective.
Suppose the economy is in recession and the inflation/prices are falling down . To pull the economy
out of recession i.e. to stimulate the economy, the Central Bank may reduce the repo rate to
increase the supply of money and to push demand. When the repo rate is reduced, the banks will
reduce the deposit rates and lending rate. But if the demand and the inflation in the economy is
falling, the Central Bank may further reduce the repo rate to increase the money supply and
demand. But if still the economy is not pulled out of recession and the prices are falling, the Central
Bank may keep on reducing the repo rate and the banks will keep on reducing their deposit and
lending rates. The Central Bank will keep on reducing the repo rate till the repo rate #(almost)
touches zero. At this point, the banks deposit rate and lending rate will also reach almost zero. The
Central Bank cannot reduce the repo # rate beyond zero and similarly banks also cannot reduce their
deposit and lending rate beyond zero (practically the lower limit on repo rate, lending rate or
deposit rates are zero). The Central Bank cannot stimulate the economy beyond this point and it is
trapped in a quagmire called the Liquidity Trap. At this point the government. should use its fiscal
policy to pull the economy out of recession/ slowdown.
In case of liquidity trap, people keep their funds in normal savings account (demand deposits) and do
not want to lock their investment in fixed deposits at a very low interest rate. They hope that in
future the interest in the market will rise and then they will invest in bonds or other instruments.

An inflationary gap is a macroeconomic concept that measures the difference between the current
level of real gross domestic product (GDP) and the GDP that would exist if an economy was
operating at full employment.
For the gap to be considered inflationary, the current real GDP must be higher than the potential
GDP. Policies that can reduce an inflationary gap include reductions in government spending, tax
increases, bond and securities issues, interest rate increases, and transfer payment reductions.
An inflationary gap exists when the demand for goods and services exceeds production due to
factors. such as higher levels of overall employment, increased trade activities, or elevated
government expenditure. According to Keynes, an inflationary gap exists when, at full employment
income level, aggregate demand exceeds aggregate supply. This means that due to an increase in
investment and government expenditure, the money income increases, but the production does not
increase because of the limitations of productive capacity. Against this backdrop, the real GDP can
exceed the potential GDP, resulting in an inflationary gap. The inflationary gap is named as such
because the relative rise in real GDP causes an economy to increase its consumption, leading prices
to climb in the long run # When the potential GDP is higher than the real GDP, the gap is instead
referred to as a deflationary gap.
The other type of output gap is the recessionary gap, which describes an economy operating below
its full-employment equilibrium.
An inflationary gap arises when a government chooses to finance even its normal expenditure.
through monetary expansion in a time of full employment.

All rural cooperative banks are supervised by NABARD
DCCB and state cooperative are supervised by dual regulations of state and RBI
NABARD: NABARD was established in 1982 under the provisions of National Bank for Agriculture and
Rural Development Act 1981.
NABARD provides credit for the promotion of agriculture, small scale industries, cottage and village
industries, handicrafts and other rural crafts and other allied economic activities in rural areas.

NABARD acts as coordinator/ supervisor in the operations of rural credit institutions like RBs and
Rural Cooperative Banks(RBI has delegated its supervisory powers in case of rural sector to NABARD
while retaining its regulatory powers) NABARD extends assistance to the government, RBI and other
matters relating to rural development
It does not extend direct credit at individual level but extends indirect financial assistance by way of
refinance (NABARD finances those institutions which provide financial assistance to rural sector).
NABARD provides direct finance to institutions as may be approved by the Central government.
Section 35(6) of the Banking Regulation Act, 1949, empowers NABARD to conduct inspection of
State Cooperative Banks (StCBs), District Central Cooperative Banks (DCCBs) and Regional Rural
Banks (RRBs).

Broad money (M3):
Broad money (M3) includes currency, deposits with an agreed maturity of up to two years,
deposits redeemable at notice of up to three months and repurchase agreements, money market
fund shares/units and debt securities up to two years.

Treasury bills or T-bills: These are short term debt instruments issued by the. Government of India
for a maturity of less than one year. Treasury bills are zero coupon securities and pay no interest.
Instead, they are issued at a discount and redeemed at the face value at maturity. For example, a 91
day Treasury bill of 2100/- (face value) may be issued at say ? 98.20, that is, at a discount of say,
21.80 and would be redeemed at the face value of 2100/-. (Treasury bills are traded in money
market)

A Government Security (G-Sec) is a tradable instrument issued by the Central Government or the
State Governments. G-Secs carry practically no risk of default and, hence, are called risk-free gilt
edged instruments. (Govt. issues only debt securities). There are various types of government
securities like Treasury Bills, Cash Management Bills (CMBs), Dated Government Securities, State
Development Loans, Treasury Inflation-Protected Securities (TIPS) etc.)
G-Secs are issued through auctions conducted by RBI. Auctions are conducted on the electronic
platform called the E-Kuber, the Core Banking Solution (CBS) platform of RBI. Commercial banks,
scheduled Urban Cooperative Banks (UCBs), Primary Dealers (PD), insurance companies and
provident funds are members of this platform. Foreign Portfolio Investors (FPIs) also participate in
this market. Individuals /retail investors) can also participate directly in the Govt. securities market.
Treasury bills or T-bills: These are short term debt instruments issued by the. Government of India
for a maturity of less than one year. Treasury bills are zero coupon securities and pay no interest.
Instead, they are issued at a discount and redeemed at the face value at maturity. For example, a 91
day Treasury bill of 2100/- (face value) may be issued at say ? 98.20, that is, at a discount of say,
21.80 and would be redeemed at the face value of 2100/-. (Treasury bills are traded in money
market)
Cash Management Bills (CMB): In 2010, Government of India, in consultation with RBI introduced a
new short-term instrument, known as Cash Management Bills (CMBs), to meet the temporary

mismatches in the cash flow of the Government of India. The CMBs have the generic character of T
bills but are issued for maturities less than 91 days.
Dated Securities: Dated central government securities have a tenor of more
Dated Securities: Dated central government securities have a tenor of more than one year up to 40
years. They can be of different categories:
Fixed rate bonds: Interest rate is fixed till maturity
Floating rate bonds: The interest/coupon rate is not fixed and can be linked to the yield of Treasury
bills Inflation indexed bonds: Interest and principal both are protected against inflation and can be
linked with CPI or WPI
Special Securities: Under the market borrowing program, the Government of India also issues, from
time to time, special securities to entities like Oil Marketing Companies, Fertilizer Companies, the
Food Corporation of India, etc. (popularly called oil bonds, fertiliser bonds and food bonds
respectively) as compensation to these companies in lieu of cash subsidies.
Bank recapitalization bonds: Government of India has also. issued Bank Recapitalisation Bonds to
specific Public Sector Banks in 2018.
Sovereign gold bonds (SGB): SGBs are unique instruments, prices of which are linked to commodity
price viz Gold. SGBs are also budgeted in lieu of market borrowing.
State Development Loans (SDL): State Governments also raise loans from the market which are
called SDLs with maturity more than one year. SDLs issued by the State. Governments also qualify
for SLR.

GNP and GDP are the most commonly used measures of a country's economy, both of which
represent the total market value of all goods and services produced over a defined period. There are
differences between how each one defines the scope of the economy. While GDP limits its
interpretation of the economy to the geographical borders of the country, GNP extends it to include
the net overseas economic activities performed by its nationals. Gross domestic product (GDP) and
gross national product (GNP) are both widely used measures of a country's aggregate economic
output. GDP measures the value of goods and services produced within a country's borders, by
citizens and non-citizens alike. GNP measures the value of goods and services produced by only a
country's citizens but both domestically and abroad. GDP is the most commonly used by global
economies.

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 current account of 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 purpose. As a part of the
economic reforms initiated in 1001 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 under capital account of BoP There are
restrictions/limits imposed by the RBI and government on the value of transactions that anybody
can do under capital account. This is called "rupee is partially convertible at capital account". So,
suppose someone wants to borrow $5 billion as External Commercial Borrowing (EB) then RBI has
put restrictions and may not convert the whole $5 billion into rupee.

Tiger is placed on the seal of Reserve Bank of India.

In India, GDP is estimated by Central Statistical Office (CSO). There are three different ways
of estimating the national income of a country, these three methods are:
1. Value Added Method (or the Product Method)
2. Income Method
3. Expenditure Method
Income Method:
This approach focuses on aggregating the payments made by firms to households, called factor
payments. This gives the National Income, defined as total income earned by citizens and businesses
of a country.
There are four types of factors of production and four types of factor incomes accordingly i.e. Land,
Labour, Capital and Organization as Factors of Production and Rent, Wages, Interest and Profit as
Factor Incomes correspondingly.
We need to add indirect taxes, less subsidies and add depreciation to get GDP.
GDP = Wages+ Interest + Rent +Profit + Dividend + Indirect Taxes-Subsidies+ Depreciation

Real Exchange Rate is the relative price of the goods of two countries. That is, the real
exchange rate tells us the rate at which we can trade the goods of one country for the goods of
another. The real exchange rate is sometimes called the terms of trade.
The Nominal Effective Exchange Rate (NEER) is the weighted average value of nominal
exchange rate of the rupee against the currencies of major trading partners of India. On the other
hand, the Real Effective Exchange Rate (REER) is the weighted average of Real Exchange Rates of
Rupee against the currencies of major trading partners of India.

The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member
countries’ official reserves. It is an interest bearing - international reserve asset, which can be
exchanged for freely usable currencies. The value of the SDR is based on a basket of five major
currencies—the US dollar, the euro, the Chinese renminbi (RMB), the Japanese yen, and the British
pound sterling.
The Chinese RMB was included in the SDR basket from Effective October 1, 2016. The
Board also decided at that time that the weights of each currency would be 41.73 percent for the
U.S. dollar, 30.93 percent for the Euro, 10.92 percent for the Chinese yuan, 8.33 percent for the
Japanese yen, and 8.09 percent for the Pound sterling.
The SDRs are allocated to the member countries in proportion to their quota subscriptions. Only the
IMF members can participate in SDR facility. SDRs being costless as it is just a book entry in the
Special Drawing Account of the IMF, is often called paper gold.

The World Bank has updated the methods it uses to measure incomes and poverty around the
world.

The World Bank updated the global poverty lines in September 2022. The decision,
announced in May, follows the release in 2020 of new purchasing power parities (PPPs)—the main
data used to convert different currencies into a common, comparable unit and account for price
differences across countries. The new extreme poverty line of $2.15 per person per day, which
replaces the $1.90 poverty line, is based on 2017 PPPs. Here you find more information about this
change and what it means for measuring global poverty.

The food processing industry has become an essential part of the food supply chain in
the global economy. It plays an important role in linking farmers to consumers in domestic and
international markets. This industry in India is regarded as a sunrise sector, accounting for 32% of
the country's total food market.
100% FDI is permitted under the automatic route in food processing industries in
India. 100% FDI is allowed through the approval route for the trading of the government, which
includes allowing FDI through e-commerce with respect to manufactured food products that are
produced in India.

➢ Blue chip stocks are shares of very large and well-recognised companies with a long
history of sound financial performance and such companies are called ‘Blue Chip’
companies.
➢ These stocks are known to have capabilities to endure tough market conditions and give
high returns in good market conditions.

➢ Blue chip stocks generally cost high, as they have good reputation and are often market
leaders in their respective industries.
Several parameters can be considered to identify blue chip companies.
They include-
➢ consistent annual revenue over a long period
➢ stable debt-to-equity ratio
➢ average return on equity (RoE) and interest coverage ratio besides market capitalization and
price-to-earnings ratio (PE).

The balance of payments (BOP) is a statement of all transactions made between entities in one
country and the rest of the world over a defined period of time.
The BoP can be broadly divided into two accounts namely-
a. current account,
b. capital and financial account.
The current account measures the transfer of real resources (goods, services, income and transfers)
between an economy and the rest of the world.
The current account is further subdivided into -
a. Merchandise account
b. Invisibles account.
The merchandise account consists of transactions relating to exports and imports of goods.

In the invisible account, there are three broad categories namely,
(a) non-factor services such as travel, transportation, insurance and miscellaneous services;
(Hence option 1 is correct.)
(b) transfers which do not involve any value in exchange like remittances income of workers and
(Hence option 2 is correct.)
(c) income which includes compensation of employees and investment income.
NRI deposits are calculated under Capital Accounts while Private Remittances are calculated under
Current Account.
The capital account can be broadly broken up into two categories namely,
(a) non-debt flows such as direct and portfolio investments, and (Hence option 3 is incorrect.)
(b) debt flows such as external assistance, commercial borrowings, non-resident deposits, etc.
(Hence option 4 is incorrect.)

A current account deficit occurs when the value of imports is greater than the value of exports.

Statement 1 is correct: Supply side policies can improve the competitiveness of the economy and
help make exports more attractive. If the government pursued a policy of privatization and
deregulation it may help to increase the efficiency of the economy because of the profit motive in
the private sector. This increased efficiency would translate into lower costs of production and more
exports.
Statement 2 is correct: Increasing the import duty on gold will makes its import costlier, thus
reducing its imports. This will help in reducing the Current Account Deficit.
Statement 3 is correct: If there is a devaluation of the currency, the price of imported goods
increases and therefore the quantity demanded of imports falls. Exports will become cheaper, and
there will be an increase in the quantity of exports. We would expect a devaluation to lead to an
improvement in net exports and therefore the current account on the balance of payments.
Statement 4 is incorrect: Investment is inversely related to interest rates, which are the cost of
borrowing and the reward to lending. So, the monetary policy should aim to reduce the interest
rates to attract greater foreign investment.

The Balance of Payments (BOP) crisis began by the end of 1989 when fiscal expansion led to a
widening current account deficit. The situation turned into a crisis when Saddam Hussein invaded
Kuwait in 1990, sending crude oil prices through the roof.
Imports were more strictly controlled than in almost any other developing country because it was
felt necessary to conserve scarce foreign exchange. Consumer goods simply could not be imported
so domestic producers faced no import competition. Producers could import capital goods and
intermediates needed for production, but this generally required an import license.
The economic system had restricted entrepreneurship. For instance, the private sector was not
allowed to invest in a number of sectors thought to be critical for development. This approach was
continued despite the public sector’s lacklustre performance. In sectors where the private sector
was allowed, it could invest only after getting an industrial license, and that was especially hard to
get for “large” industrial houses. Over 860 items were reserved exclusively for small-scale producers,
including many that had very high export potential.
NRI inflows turned negative when non-resident Indians began withdrawing their deposits, making
the foreign exchange reserves situation even more precarious. The import of technology was
controlled and Foreign Direct Investment (FDI) was discouraged.

Option c is correct and a is incorrect: Kuznets curve hypothesizes that industrializing nations
experience a rise and subsequent decline in income inequality. The rise in inequality occurs after
rural labor migrates to urban areas and becomes socially mobile. After a certain income level is
reached, inequality declines as a welfare state takes hold.
Option b is incorrect: The Phillips curve states that inflation and unemployment have an inverse
relationship. Higher inflation is associated with lower unemployment and vice versa.
Option d is incorrect: The Laffer Curve is a theory to show the relationship between tax rates and
the amount of tax revenue collected by governments. The curve is used to illustrate the argument
that sometimes cutting tax rates can result in increased total tax revenue.
Environmental Kuznets Curve – It is a modification of Kuznets curve. It charts the rise and
subsequent decline in pollution levels of developing economies.

Pair 1 is incorrectly matched. Frictional Unemployment is a situation when people are unemployed
for a short span of time while searching for a new job or switching between jobs. Frictional
Unemployment also called Search Unemployment, is the time lag between the jobs. Frictional
unemployment is considered as voluntary unemployment because the reason for unemployment is
not a shortage of jobs, but in fact, the workers themselves quit their jobs in search of better
opportunities.
Pair 2 is correctly matched. Disguised Unemployment is a type of unemployment where people
employed are more than actually needed. Disguised unemployment is generally traced in
unorganised sectors or the agricultural sectors.
Pair 3 is incorrectly matched. Structural Unemployment arises when there is a mismatch between
the worker’s skills and availability of jobs in the market. Many people in India do not get job
matching to their skills or due to lack of required skills they do not get jobs and because of poor
education level, it becomes important to provide them related training. Seasonal Unemployment is
the situation of unemployment when people do not have work during certain seasons of the year
such as labourers in India rarely have occupation throughout the year.
Pair 4 is incorrectly matched. Cyclical Unemployment caused due to the business cycle, where the
number of unemployed heads rises during recessions and declines with the growth of the economy.
Cyclical unemployment figures in India are negligible.

The term "pause" is used to describe the temporary nature of the decision to stop raising interest
rates.

A hawkish pause is a situation in which a central bank decides to temporarily stop raising interest
rates, but makes it clear that they are still committed to fighting inflation and may resume raising
rates in the future.
A dovish pause is a situation in which a central bank decides to stop raising rates because they are
about slowing economic growth.
The Federal Reserve and the RBI have both implemented hawkish pauses in recent months. Both
central banks of USA and India have signalled that they are willing to continue raising rates in the
future, but they have also taken a pause to assess the impact of their previous rate hikes.

➢ Countervailing Duties (CVDs) are tariffs levied on imported goods to offset subsidies made
to producers of these goods in the exporting country. Countervailing measures are put in
place to offset imports being sold at unfair prices due to government subsidies in their
country of origin.
➢ Recently UK government removed the countervailing duty for Stainless steel bars and rods
imported from India. According to official statistics, India accounted for the UK's third
biggest source of stainless steel bars and rods in tonnage in 2021.
➢ Countervailing Duties is one of three types of trade remedies that are allowed under World
Trade Organisation (WTO) rules.
Three types of trade remedies that are allowed under World Trade Organisation (WTO) rules
includes -
➢ Anti-dumping
➢ Countervailing Duties
➢ Safeguard Actions

Recently Tamil Nadu minister was arrested by Enforcement Directorate on the direction of the
Supreme Court in a money-laundering case.
The Enforcement Directorate (ED) is a premier financial investigation agency of the Government of
India. It is a multi-disciplinary organization mandated with investigation of offence of money
laundering and violations of foreign exchange laws.
The statutory functions of the ED include enforcement of following Acts:
1. The Prevention of Money Laundering Act, 2002 (PMLA),
2. The Foreign Exchange Management Act, 1999 (FEMA),
3. The Fugitive Economic Offenders Act, 2018 (FEOA),
4. The Foreign Exchange Regulation Act, 1973 (FERA),
5. Sponsoring agency under Conservation of Foreign Exchange and Prevention of Smuggling
Activities Act, 1974 (COFEPOSA).

Payment System Operator (PSO)
➢ A payment system operator means a legal entity responsible for operating a payment
system.
➢ The PSO provides services by operating on certain models.
➢ They largely outsource their payment and settlement-related activities to various other
entities.
➢ Examples of PSOs include Google Pay, Amazon Pay, Paytm etc.
➢ PSOs in India also includes
➢ According to the Payment and Settlement Systems Act 2007, Payments Regulatory Board,
constituted by the RBI, regulates and supervises the payment systems

Recent Context- Recently Reserve Bank of India released the draft Master Directions on Cyber
Resilience and Digital Payment Security Controls for Payment System Operators.

TP Rajendran Committee

➢ Rajendran said that all chemicals and pesticides including the toothpaste we use is harmful
for human health.

➢ What matters is the dosage, the formulation composition and the way humans have been
asked to use the product.
➢ One cannot simply say that all pesticides are harmful and all pesticides are to be banned
based on hearsay.
➢ What is important here is what Indian medical records say on the harm that a particular
pesticide has done to human beings or to those who are exposed to it over a reasonable
period of time.
➢ He said monocrotophos, has been in use in India for the past 30 or 40 years and there is
absolutely no data provided by agencies to claim that there has been any adverse health
impact due to their use.
➢ All pesticides have a label in them specifying good agriculture practices, with right
dosage,time of application, precautions to be taken and so on.
➢ If somebody violates that, it is that individual’s problem and not a national or a government
issue.
➢ Govt notifies draft ban on 27 pesticides and gives 45 days for public feedback.

Statement 1 is incorrect: The aim of Inflation Targeting/ Stabilisation is to keep inflation rates in an
economy at optimum levels - called a healthy range of inflation. That means that these rates can
neither be too high nor can they be too low.
If the Inflation is too low, this will indicate low demand to businesses, and there will be no new
investment and no expansion of production capacity or output, leading to stagnant job market and
economy with little to no growth.
Similarly, if the inflation is too high, it will erode the value and purchasing power of the domestic
currency and make the cost of living too high in that economy, jeopardising macroeconomic stability.
Statement 2 is incorrect: The amended RBI Act provides for the inflation target to be set by the
Government of India, in consultation with the Reserve Bank, once in every five years.
Since signing of the Monetary Policy Framework of 2015, the central bank (RBI) has been given the
single task of maintaining inflation at a target of 4% with a flexibility tolerance of +/- 2% (Flexible
Inflation Targeting).
This has been done to ensure that the economy has just the sufficient amount of Inflation required
to keep the Indian economy growing, while also preventing the negative side effects.

Stagflation is a situation in an economy when inflation and unemployment both are at
higher levels, contrary to conventional belief. Stagflation is an economic cycle characterized by slow
growth and a high unemployment rate accompanied by inflation. Stagflation is difficult for policy
makers. For example, the Central Bank can increase interest rates to reduce inflation or cut interest
rates to reduce unemployment. But, they can’t tackle both inflation and unemployment at the same
time.
Core inflation: It is the change in the costs of goods and services, but it does not include those from
the food and energy sectors. This measure of inflation excludes these items because their prices are
much more volatile.
Headline inflation: It is the total inflation in an economy. The headline inflation figure includes
inflation in a basket of goods that includes commodities like food and energy. It is different from
core inflation, which excludes food and energy prices while calculating inflation.
'Refined core inflation' is a new term constructed by the Economic Survey 2021-22. It is a type of
inflation which excludes main fuel items like ‘petrol for vehicle’, ‘diesel for vehicle’ and ‘lubricants
and other fuels for vehicles, in addition to ‘food and beverages’ and ‘fuel and light’ from the
headline retail inflation.

Statement a is incorrect: Budget is the annual financial statement of a government which lays out
fiscal roadmap for the country for the next one year. It is prepared by the finance ministry in
consultation with the Niti Aayog and other ministries. Budget division of the department of
economic affairs (DEA) (and not revenue affairs) is the nodal body responsible for producing the
Budget.
Statement b is incorrect: In 2017, the Railway Budget was merged with the Union Budget, ending a
practice that began in 1924 (and not in 1935) under the British. As per the Niti Aayog
recommendations, over the years the Railway Budget had shrunk significantly, and therefore a
separate Budget was not required.
Statement c is correct: The estimates of receipts and disbursements in the Annual Financial
Statement and of expenditure in the Demands for Grants are shown according to the accounting
classification prescribed under Article 150 of the Constitution, which enables Parliament and the
public to make a meaningful analysis of allocation of resources and purposes of Government
expenditures.
Statement d is incorrect: Finance minister presents the budget in Lok Sabha. Until 2016, it was
presented on the last day of February. However, from 2017 the budget has been presented on
February 1 of every year.

During the 1960s, Phillips curve was among the most important theories of the modern economists.
This concept was developed by Alban William Housego Phillips.
Option a is correct: Phillips curve is a graphic curve which advocates a relationship between
inflation and unemployment in an economy.
Option b is incorrect: As per the curve there is a ‘trade off’ between inflation and unemployment,
i.e., an inverse relationship between them. The curve suggests that lower the inflation, higher the
unemployment and higher the inflation, lower the unemployment.
Option c is correct: An increase in the minimum wage would shift the Phillips curve to the right. The
increased wage would lead to less profit to companies, thus increasing layoffs and resulting in more
unemployment. Simultaneously, the increased minimum wage would lead to increase in inflation.
Option d is correct: A
decrease in energy prices
represents
a positive
supply shock. This would
cause
the
aggregate
supply curve to shift out
to the right, yielding more
real GDP at a lower price
level. This would shift the
Phillips
curve
toward
the
down
origin,
meaning the economy
would experience lower
unemployment and a
lower rate of inflation.

The evergreening of loans is a term in which banks try to revive a loan that is on the verge of
default by granting further loans to the same borrower.
Basically, banks provide more loans to borrowers to stop them from turning into huge
nonperforming assets (NPAs). When customers do not repay the principal amount and interest for a
certain period of time, then such loans are considered as nonperforming assets or NPA. This practice
might put lenders at risk of huge amounts of defaults. Besides, the RBI does not approve of
evergreen loans and has set strict norms and potential penalties for banks committing this practice.

The RBI has focused on its stance of ‘withdrawal of accommodation’ until all risks to
inflation dissipate. An accommodative stance means the central bank is prepared to expand the
money supply to boost economic growth. Withdrawal of accommodation will mean reducing the
money supply in the system which will rein in inflation further.

An old pension scheme (OPS), commonly known as the PAYG scheme, is defined as an
unfunded pension scheme where current revenues fund pension benefits. Under this scheme, the
contribution of the current generation of workers was explicitly used to pay the pensions of existing
pensioners. OPS involved a direct transfer of resources from the current generation of taxpayers to
fund the pensioners.
NPS is a defined contribution pension scheme. NPS enables an individual to undertake retirement
planning while in employment. With systematic savings and investments,
NPS facilitates the accumulation of a pension corpus during their working life. NPS is designed to
deliver a sustainable solution of having adequate retirement income in old age or upon
superannuation.
NPS is mandatory for central government employees joining services on or after January 1, 2004,
and almost all state governments have adopted it for their employees. NPS, regulated by the
Pension Fund Regulatory and Development Authority (PFRDA), is a contributory pension scheme
under which employees contribute 10 per cent of their salary (Basic + Dearness Allowance).

Monetary policy transmission is the process through which policy action of the central
bank is transmitted to meet the ultimate objectives of inflation and growth. Repo rate is the interest
rate that the RBI charges the banks when it lends them money. The banks’ lending rate is the
interest rates that banks charge from customers when they take a loan. By cutting the repo rate, the
RBI has been sending a signal to the rest of the banking system that the lending rates in the system
should come down.
Option a is the reason. Repo rates have little impact on a bank’s overall cost of funds. Banks borrow
a minuscule fraction from the RBI under the repo, so even sharply reducing the repo rate does not
change the overall cost of funds for the banks.

Option b is the reason. To attract deposits, banks pay a high deposit rate. Such deposits make up
almost 80% of all banks’ funds from which they then lend to borrowers. For banks to be viable, there
must be a clear difference between the lending rate (charged on loans) and the deposit rate (given
on deposits). In effect, unless banks reduce their deposit rates, they will not be able to reduce their
lending rates.
Option c is the reason. Competitive pressure for maintaining small savings schemes is one of the
reasons for ineffective monetary transmission. Depositors Park more of their savings in small saving
instruments (public provident fund, Sukanya Samriddhi Yojana, etc.) that pay much higher interest
rates. Also, 65% of total deposits are “term” deposits (fixed for a certain duration) and take, on an
average, up to 2 years to get repriced at fresh rates. So, banks cannot always reduce deposit rates
immediately as deposits take longer to get repriced.
Option d is not the reason. Transmission is difficult because public sector banks do not borrow from
RBI but depend on public deposit for their business, Again, impounding of bank money by RBI is too
high with 4% cash reserve ratio carrying no return whatsoever.

Pair 1 is incorrect. Green Box Subsidies are the subsidies that don’t distort free trade or distort the
free trade at a very minimal or negligible level. Green box subsidies are non–price supportive thus
are exempted from the calculation of Aggregate Market Support (AMS). The example for Green Box
subsidies is publicly funded government programmes including expenditure on agriculture research
and development, agricultural training, subsidies under environmental programmes etc.
Pair 2 is incorrect. Amber Box Subsides are the subsidies that are trade-distorting in nature and need
to be curbed at any cost. These are domestic support for agriculture that is considered to distort
trade and therefore subject to reduction commitments. It is counted in the calculation of AMS. The
Amber Box contains the category of domestic subsidy that is scheduled to reduce based on the
formula called “Aggregate Measure of Support” (AMS).
Pair 3 is correct. Blue box subsidies are direct payments under production limiting programmes. Blue
Box is the “amber box subsidy with conditions” attached. Blue Box subsidies are also exempted from
calculation of AMS. The Blue box subsidies aim towards limiting production, by imposing production
quotas or requiring farmers to set aside part of their land.

Option a is incorrect. Strategic disinvestment would imply the sale of a substantial portion of
the Government shareholding of a central public sector enterprises (CPSE) of up to 50% or such
higher percentage as the competent authority may determine, along with transfer of management
control. It occurs when the government decides to transfer the ownership and control of a public
sector entity to some other entity, either private or public.
Option b is correct. All Public Sector Enterprises (PSEs) in non-strategic sectors will either be fully
privatized or closed down. A revised mechanism will be introduced that will ensure timely closure of
sick or loss making CPSEs. There will be a bare minimum presence of PSE only in the following four
strategic sectors:
1) Atomic energy, Space and Defence
2) Transport and Telecommunications
3) Power, Petroleum, Coal and other minerals
4) Banking, Insurance and financial services
Option c is correct. The new strategic disinvestment policy clears decks for disinvestment and
privatisation of Public Sector Enterprises (PSEs). Existing CPSEs, Public Sector Banks and Public Sector
Insurance Companies to be covered under it. The policy envisages two-fold classification of sectors
to be disinvested: strategic and non-strategic sectors.
Option d is correct. The strategic disinvestment policy of the government is aimed at making use of
disinvestment proceeds to finance various social sector and developmental programmes and to
infuse private capital, technology and best management practices in Central Government Public
Sector Enterprises.

Option a is incorrect: Surcharge is an additional charge or tax. In simple words, a surcharge is a tax
on tax. It is levied as a percentage on the income tax payable as per normal rates. In case no tax is
due for a financial year, then no surcharge is levied. Unlike a cess, which is meant to raise revenue
for a temporary need, surcharge is usually permanent in nature.
Option b is correct: Parliament can impose a surcharge for ‘the purposes of the Union’. The exact
import of this phrase is not clear, but it is logical that the Union can impose a surcharge only on its
tax base. Unlike a cess, in the case of a surcharge, there is no need to stipulate the purpose at the
time of levy and it is the discretion of the Union to utilise the proceeds of the surcharges for
whichever purpose it deems fit.
Option c is incorrect: Pursuant to Constitution (One Hundred and First Amendment) Act, 2016, a
surcharge cannot ordinarily be imposed over and above the Goods and Service Tax.
Option d is incorrect: The proceeds from surcharges need not be shared with State Governments.
The concept of surcharge and the language for ‘purposes of the Union’ in Article 271 was interpreted
to mean that surcharge proceeds are separate from income tax proceeds for the purposes of

distribution and therefore it is not the obligation of Union to share proceeds from surcharge with
the states.

Statement a is incorrect. Hard currency is the international currency in which the highest faith is
shown and is needed by every economy. The strongest currency of the world is one which has a high
level of liquidity. Basically, the economy with the highest as well as highly diversified exports that are
compulsive imports for other countries (as of high-level technology, defence products, life saving
medicines and economy on the petroleum products) will also create high demand for its currency in
the world and become the hard currency. It is always scarce.
Statement b is correct. Soft currency- A term used in the foreign exchange market which denotes
the currency that is easily available in any economy in its forex market. For example, rupee is a soft
currency in the Indian forex market. It is basically the opposite term for the hard currency.
Statement c is incorrect. Heated currency is a term used to denote the investments in domestic
currency which is under enough pressure development an (heat) of depreciation due to a hard
currencies. We also need to high tendency of exiting the economy (since it has goods and service
become hot). It is also known as currency under heat or under hammering.
Statement d is incorrect. Dear Currency-This term was popularised by economists in early 1930s to
show the opposite of the cheap currency. when a government issues bonds, the money which flows
from the public to the government or the money in the economy in general is called dear currency,
also called as dear money. In the banking industry, it means a period of comparatively
higher/costlier interest rates regime.

The consumer price index number measures changes only in one of the factors; prices.
This index is an important economic indicator and is widely considered as a barometer of inflation, a
tool for monitoring price stability and as a deflator in national accounts.
Consumer price index is used as a measure of inflation in around 157 countries. Dearness
Allowance, or simply DA, is one of the components of the monthly salary paid to public sector
employees in order to compensate them for the increase in the cost of living due to inflation. This
percentage is increased twice a year - in January and July. Since the core function of the DA is to
reduce the impact of inflation, its increase is determined by the CPI.
It must be noted that the rise in DA is not the same for all government employees. It varies
greatly on the job location, the job department and the level of seniority among other things.
Dearness Allowance is completely taxable for individuals who are salaried employees.
The government used the new consumer price index with the base year 2016 to calculate the DA
from September 2020.
The CPI provides the basis for the annual cost of living increases for recipients of Social Security
benefits.
The CPI is not a direct cost-of-living indicator; it is merely a price survey of a broad basket of
consumer staples, but it is still utilized to estimate any cost of living changes. Due to this utility wage
contracts between labour and employer is based on this index. Hence option (b) is the correct
answer.

GVA at factor cost + (Production taxes less Production subsidies) = GVA at basic prices
GDP at market prices = GVA at basic prices + Product taxes- Product subsidies; Hence option (a) is
the correct answer.
Gross Domestic Product (GDP) of any nation represents the sum total of gross value added (GVA)in
all the sectors of that economy during the said year after adjusting for taxes and subsidies. Gross
value added (GVA) is defined as the value of output less the value of intermediate consumption.
Value added represents the contribution of labour and capital to the production process.
In the revision of National Accounts statistics done by Central Statistical Organization (CSO) in
January 2015, it was decided that sector-wise wise estimates of Gross Value Added (GVA) will now
be given at basic prices instead of factor cost. In simple terms, for any commodity, the basic price is
the amount receivable by the producer from the purchaser for a unit of a product minus any tax on
the product plus any subsidy on the product.
Production taxes or production subsidies are paid or received with relation to production and are
independent of the volume of actual production. Some examples of production taxes are land
revenues, stamps and registration fees and tax on profession. Some production subsidies include
subsidies to Railways, input subsidies to farmers, subsidies to village and small industries,

administrative subsidies to corporations or cooperatives, etc. Product taxes or subsidies are paid or
received on per unit of product. Some examples of product taxes are excise tax, sales tax, service tax
and import and export duties. Product subsidies include food, petroleum and fertilizer subsidies,
interest subsidies given to farmers, households, etc. through banks.

Liquidity adjustment facility (LAF) is a monetary policy tool which allows banks to borrow money
through repurchase agreements(repo). LAF is used to aid banks in adjusting the day-to-day
mismatches in liquidity. LAF consists of repo and reverse repo operations.
Repo or repurchase option is a collateralized lending i.e.; banks borrow money from Reserve bank of
India to meet short term needs by selling securities to RBI with an agreement to repurchase the
same at predetermined rate and date.
Marginal standing facility (MSF) is a window for banks to borrow from the RBI in an
emergency when inter-bank liquidity dries up completely. It is a penal rate at which banks can
borrow money from RBI when they are completely exhausted of all borrowing assistance.
The Marginal Standing facility allows banks to borrow money with an interest rate above
the repo rate and can be termed as the Marginal standing facility rate.
Statement 1 is correct. Under LAF, All Scheduled Commercial Banks (excluding Regional Rural Banks)
and Primary Dealers (PDs) having Current Account and SGL Account with RBI are eligible to
participate in the Repo and Reverse Repo auctions.

All Scheduled Commercial Banks (excluding Regional Rural Banks) having SGL and Current Accounts
with RBI, Mumbai is eligible to participate in the MSF facility. Unlike LAF, only scheduled
commercial banks can take loans under the MSF facility from RBI.
Statement 2 is correct. In Marginal Standing Facility (MSF), wherein the banks were allowed to avail
of funds under the MSF by dipping into the Statutory Liquidity Ratio (SLR) up to an additional one
per cent of their net demand and time liabilities (NDTL), i.e., cumulatively up to three per cent of
NDTL.
Under MSF, banks can borrow from RBI up to an additional three per cent of their net
demand and time liabilities (NDTL).

Statement 1 is CORRECT: An Initial Public Offering (IPO) refers to the process of offering shares
of ab private corporation to the public in a new stock issuance. The sale of securities to the public
happens in the primary market. The primary market deals with new securities being issued for the
first time. It is also known as the new issues market.
Statement 2 is NOT CORRECT: Companies can raise equity capital (not debt capital) with the help of
an IPO by issuing new shares to the public or the existing shareholders can sell their shares to the
public without raising any fresh capital. Equity capital is for perpetuity and not returned, debt capital
has to be returned after a specified time. Equity investors do not enjoy any fixed return, debt
investors earn a pre-decided rate of interest.
Once the IPO is done, the shares of the firm are listed and can be traded freely in the open
market. While coming up with an IPO, the company has to file its offer document with the market
regulator Securities and Exchange Board of India (SEBI).

PRAGATI is an Information and Communication Technology (ICT) platform existing in
the Prime Minister’s Office (PMO), that reviews and monitors various Government Projects across
the country. In this article, you can read all about the Government program on Pro-Active
Governance and Timely Implementation (PRAGATI).

The UCBs were under dual regulation by the state registrar of societies and the RBI But in 2020,
all UCBs and multi-state cooperatives were brought under the supervision of RBI. In June 2020, the
Central government approved an Ordinance to bring all urban and multi-state cooperative banks
under the direct supervision of RBI.

In 2021 RBI appointed a committee that suggested 4 tier structure for the UCBs.
1. Tier 1 with all unit UCBs and salary earner’s UCBs (irrespective of deposit size) and all
other UCBs having deposits up to Rs 100 crore.
2. Tier 2 with UCBs of deposits between Rs 100 crore and Rs 1,000 crore,
3. Tier 3 with UCBs of deposits between Rs 1,000 crore and Rs 10,000 crore and
4. Tier 4 with UCBs of deposits more than Rs 10,000 crore.
The Reserve Bank of India (RBI) has recently announced an extension of time for the
achievement of Priority Sector Lending (PSL) targets by Primary (Urban) Co-operative Banks (UCBs).
According to the 2020 circular, large cooperative banks were required to increase their PSL portfolio,
encompassing loans for agriculture, micro, small, and medium enterprises, export credit, education,
housing, social infrastructure, among other sectors, to constitute 75 percent of their total advances
by March 2024.
In a bid to address implementation challenges faced by UCBs, the RBI has decided to extend the
phase-in time by an additional two years, until March 31, 2026.

The core sector with the highest weight in the Index of Industrial Production (IIP) is Refinery
Products.
Explanation:
• The IIP is an index that measures the growth of various sectors in an economy, such as
mineral mining, electricity, and manufacturing.
• The Index of Eight Core Industries (ICI) is a subset of the IIP and includes eight key sectors.
• Among the eight core industries, Refinery Products currently holds the highest weightage.
• Previously, Electricity had the highest weightage, but this has since been overtaken by
Refinery Products.

The Index of Eight Core Industries (ICI) is published by the Office of Economic Advisor
(OEA) within the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of
Commerce & Industry, Government of India. It is a production volume index that measures the
performance of eight core industries in India. The index is released on a monthly basis.

In 2024, the top 5 countries contributing to FDI inflows in India were: Mauritius (25%), Singapore
(24%), the United States (10%), the Netherlands (7%), and Japan (6%). These countries accounted for
a significant portion of the total FDI received by India.
The state that received the highest FDI equity inflow during October 2019-December 2024, was
Maharashtra with Rs. 7,33,677 crore (US$ 85.73 billion) at 31%, followed by Karnataka with at 20%
with Rs. 4,75,140 crore (US$ 55.52 billion), Gujarat at 16% with Rs. 3,83,056 crore (US$ 44.76
billion), Delhi at 13% with Rs.

Disguised unemployment exists when part of the labor force is either left without work or
is working in a redundant manner such that worker productivity is essentially zero. It is
unemployment that does not affect aggregate output. An economy demonstrates disguised
unemployment when productivity is low and too many workers are filling too few jobs.

John Robinson was perhaps the first
economist who used the term ‘disguised
unemployment. But she used this term
for the people taking to occupation with
comparatively low productivity and
income instead of occupations of high
productivity and large income during
periods of depression in the developed
and advanced countries. But the term
‘disguised unemployment’ is used in a
different sense in the under developed
countries
In the under-developed countries,
disguised unemployment refers to a
situation where too many people are
engaged in agriculture. A common
characteristic of the over-populated
under-developed countries is that a large majority of population draw their livelihood from
agriculture.

The Commission of Railway Safety for the south-eastern circle is conducting an investigation
into the recent tragic train accident in Odisha.
Commission of Railway Safety
• It is a Government body serving as Railway Safety Authority.
• Responsibilities: Safety of rail travel and operations, inspectorial, investigatory, and advisory
functions.
• Headquartered: Lucknow, Uttar Pradesh.
• Ministry: Under the administrative control of the Ministry of Civil Aviation (MoCA).
• Reason to Keep away from Railway Ministry: To maintain independence from railway
establishment and prevent conflicts of interest.

The full form of NSDL is National Securities Depository Limited. NSDL is a depository of
Indian securities that stores digitally securities such as investor bonds, shares and debentures. It is
India’s first and largest depository of national securities dealing with issues related to paper-based
securities settlement, such as bad delivery and delayed transfer of title, etc.
In India, there are two central depositories, namely.
1. NSDL (National Security Depository Limited)

2. CSDL (Central Depository Services Limited)
NSDL is India’s primary & biggest depository founded on 8 August 1996, which is developed mainly
to manage securities held in the Indian economy in a Demat form.
Industrial Development Bank of India (IDBI), Unit Trust of India (UTI), and National Stock Exchange (
NSE) are promoting NSDL.
NSDL headquartered is located in Mumbai, India.

The General Theory of Employment, Interest and Money is a book by English
economist John Maynard Keynes published in February 1936. It caused a profound shift in economic
thought, giving macroeconomics a central place in economic theory and contributing much of its
terminology – the "Keynesian Revolution".
It had equally powerful consequences in economic policy, being interpreted as providing theoretical
support for government spending in general, and for budgetary deficits, monetary intervention and
counter-cyclical policies in particular. It is pervaded with an air of mistrust for the rationality of free
market decision making.
The central belief of Keynesian economics is that government intervention can stabilize the
economy. Keynes’ theory was the first to sharply separate the study of economic behavior and
individual incentives from the study of broad aggregate variables and constructs.
Based on his theory, Keynes advocated for increased government expenditures and lower taxes to
stimulate demand and pull the global economy out of the Depression. Subsequently, Keynesian
economics was used to refer to the concept that optimal economic performance could be
achieved—and economic slumps could be prevented—by influencing aggregate demand through
economic intervention by the government. Keynesian economists believe that such intervention can
achieve full employment and price stability.

India’s foreign exchange reserves, which peaked at $642 billion in October 2021, declined
for most part of last year. The trend reversed this year with forex reserves touching a 15-month high
of $609 billion as of 14 July.
India's foreign exchange reserves are mainly composed of US dollar in the forms of US government
bonds and institutional bonds. with nearly 7.34% of forex reserves in gold.
Forex reserves jumped this year primarily due to revaluation gains as the dollar weakened and
capital flows rose. Also, oil imports from Russia are not settled in dollar, which has also added
reserves.
India has USD $634.287 billion in foreign exchange reserves as of January 2022. In terms of foreign
exchange reserves, India is ranked fifth in the world. The top four countries are China, Japan,
Switzerland, and Russia.
The Indian Forex reserve is made up of the following:
• Gold
• Foreign currency - Given the currency's prominence in the worldwide financial and trade
system, the majority of the reserves are normally stored in US dollars. In addition to US
dollars, several central banks retain reserves in Euros, British pounds, Japanese yen, or
Chinese yuan.
• IMF's Special Drawing Rights
• Reverse Tranche Position of IMF reserves

The Reserve Bank of India (RBI) at the instance of the Government of India, constituted a
committee to review the Arrangements for Institutional Credit for Agriculture and Rural
Development (CRAFICARD) to look into these very critical aspects.

The Committee was formed on 30 March 1979, under the Chairmanship of Shri B. Sivaraman,
former Member of the Planning Commission, Government of India.
The Committee’s interim report outlined the need for a new organizational device for providing
undivided attention, and forceful direction, and pointed focus to credit-related issues linked with
rural development.
Its recommendation was the formation of a unique development financial institution that would
address these aspirations and the creation of the National Bank for Agriculture and Rural
Development (NABARD) was approved by the Parliament through Act 61 of 1981.
NABARD came into existence on 12 July 1982 by transferring the agricultural credit functions of RBI
and refinance functions of the then Agricultural Refinance and Development Corporation (ARDC).
Consequent to the revision in the composition of share capital between the Government of India
and RBI, NABARD today is fully owned by the Government of India.
Shri Shaji K V assumed charge as Chairman of NABARD on 7th December 2022.

As FY23 ended, an RBI release said that “in consultation with the (Central) Government, the limit for
Ways and Means Advances (WMA) for the first half of the financial year 2023-24 (April 2023 to
September 2023) will be ₹1,50,000 crore.”
WMA is short-term credit (up to three months) provided by the RBI to both Central and State
governments to bridge a temporary mismatch in their cash flows, as laid down in terms of Section
17(5) of the RBI Act, 1934. As such, WMA is not a resource to finance government expenditure.
WMA to the Centre was re-introduced on April 1, 1997 after a period of four decades when the
system of ad hoc treasury bills. was abolished.
Currently, WMA limits are fixed at ₹1,50,000 crore for the first half of FY24. The interest rate on
WMA is repo rate i.e., 6.5 per cent. When the WMA limit is crossed, the Central government enters
into an overdraft (OD) which has to be cleared within 10 consecutive working days. The interest rate
on OD is currently the repo rate plus two per cent.
For State governments, WMA (since 1999) has been formula-based with a committee approach. In
other words, periodically an expert committee fixes the WMA limits and overdraft regulations.
Contrary to this, the WMA to the Central government is arbitrarily fixed in a non-transparent
manner by the Centre and the RBI.
There are two types of Ways and Means Advances — normal and special.
• After the state has exhausted the limit of SDF, it gets normal WMA.
• A Special WMA or Special Drawing Facility is provided against the collateral of the
government securities held by the state.
• The interest rate for SDF is one percentage point less than the repo rate.
• The number of loans under normal WMA is based on a three-year average of actual revenue
and capital expenditure of the state.

HARD CURRENCY: It is the international currency in which the highest faith is shown and is needed
by every economy. The strongest currency of the world is one which has a high level of liquidity.
Basically, the economy with the highest as well as highly diversified exports that are compulsive
imports for other countries(as of high-level technology, defence products,life saving medicines and
petroleum products) will also create high demand for its currency in the world and become the hard
currency. It is always scarce.
Up to the second world war, the best hard currency was the Pound Sterling(£) of the UK, but soon it
was replaced by the US Dollar. Some of the best hard currencies of the world today are the US
Dollar, the Euro(€), Japanese, Yen (¥) and the UK Sterling Pound (£). Meanwhile, by late 2015, the
IMF allowed the SDR to be denominated in the Chinese ‘Yuan’–paving the way for a new hard
currency to be implemented in 2016.
SOFT CURRENCY: A term used in the foreign exchange market which denotes the currency that is
easily available in any economy in its forex market. For example, rupee is a soft currency in the
Indian forex market. It is basically the opposite term for the hard currency.
HOT CURRENCY: Hot currency is a term of the forex market and is a temporary name for any hard
currency. Due to certain reasons, if a hard currency is exiting an economy at a fast pace for the time,
the hard currency is known to be hot. The currency which has a tendency of quick migration is
called Hot currency. As in the case of the SE Asian crisis, the US dollar had become hot.
HEATED CURRENCY: A term used in the forex market to denote the domestic currency which is
under enough pressure (heat) of depreciation due to a hard currency’s high tendency of exiting the
economy (since it has become hot). It is also known as currency under heat or under hammering.

The statement "Supply creates its own demand" is given by J.B. Say. Jean-Baptiste Say was a French
economist who had liberal views and argued in favour of competition and free trade. He is best
known for Say's law, which is also known as the law of markets.

J. B. Say's Law of Markets comes from chapter XV, "Of the Demand or Market for
Products" of French economist Jean-Baptiste Say's 1803 book, Treatise on Political Economy, Or, The
Production, Distribution, and Consumption of Wealth.
It is a classical economic theory that says that the income generated by past production and sale of
goods is the source of spending that creates demand to purchase current production. Modern
economists have developed varying views and alternative versions of Say's Law.

He meant: build it, take it to market, and you’ll see, someone will pay money for it, whatever it is. He
also meant; the wise business person does this process as rapidly as possible. The sooner they make
it, the sooner it is sold, and the sooner their investment of time and money is recouped, to do it all
again.
John M. Keynes, while writing his seminal work, The General Theory of Employment, Interest and
Money, comprehensively refuted, in the context of the Great Depression, what he termed “Say’s
Law", usually nutshelled as “supply creates its own demand". According to Keynes, this was the only
major tenet of classical economics.

When the goods are exported by a country to a foreign country at a price lower than the
price it charges in its own home market is called dumping.
Dumping is a situation of international price discrimination this unfair trade practice has a
negative impact on international trade.
Under World Trade Organization (WTO) rules, dumping is illegal only if the foreign country can
reliably show the negative effects the exporting firm has caused its domestic producers.
Anti-dumping is a protectionist tariff, imposed by a domestic government on foreign imports that
are at a price lower than the price it normally charges in its own home market.
Anti-dumping duty is imposed as a remedy to the distortive trade which arises due to the dumping
of goods. This tool of fair competition is permitted by the WTO.
Countervailing duty: It is a customs duty on those goods that have received some kind of
government subsidies whether in the originating or exporting country.
Whereas, anti-dumping duty is a form of customs duty on imports. It actually provides protection
against the dumping of goods at prices substantially lower than the normal value.
Directorate General of Trade Remedies, the apex national authority under the Ministry of Commerce
and Industry administers all trade remedial measures.
Trade remedial measures include anti-dumping, countervailing duties and safeguard measures.
Safeguard measures include tariff increases to check increased imports of particular products that
have caused ‘serious injury’ to domestic producers.
Safeguard Duty is a tariff barrier imposed by the government on commodities to ensure that imports
in excessive quantities do not harm the domestic industry.

The term describes an ideal state for an economic system. In this perfect state, there is full
employment, economic stability, and stable growth. The economy is not expanding or contracting by
a large margin.
A Goldilocks economy is thus warm enough with steady economic growth to prevent a recession;
however, growth is not so hot as to push it into an inflationary status.
The ideal conditions are typically characterized by:
Low unemployment: A low unemployment rate defines the number of people willing and able to
work but unable to find gainful employment.
Asset price inflation: An increase in the prices of stocks, derivatives, bonds, real estate, and other
assets will earmark a Goldilocks economy. This increase is difficult to see when using broader
measures that gauge real economic growth.
Low market interest rates: These rates are the percentage of a dollar/rupee amount that a lender
will charge a borrower when they lend money. Market interest rates have a basis on the overnight
rate set by the Fed/RBI, which dictates the rate banks charge to lend to one another.
Low inflation as measured by the quantitative-based—based on a number—consumer price index
(CPI) and the producer price index (PPI) also identifies this golden economic state. Inflation describes
the purchasing power of a nation's money.
Steady gross domestic product (GDP) or economic growth: This is the most cited indicator of the
Goldilocks economy.

A transfer payment is a one-way payment to a person or organization which has given or
exchanged no goods or services for it. This contrasts with a simple "payment," which in economics
refers to a transfer of money in exchange for a product or service.
Generally, the phrase "transfer payment" is used to describe government payments to individuals
through social programs such as welfare, student grants, and even Social Security. However,
government payments to corporations—including unconditional bailouts and subsidies—are not
commonly described as transfer payments.
There arises the problem of including transfer payments in national income. Government makes
payments in the form of pensions, unemployment allowance, subsidies, interest on national debt,
etc. These are government expenditures but they are not included in national income because they
are paid without adding anything to the production process during the current year.
For instance, pensions and unemployment allowances are paid to individuals by the government
without doing any productive work during the year. Subsidies tend to lower the market price of the
commodities. Interest on national or public debt is also considered a transfer payment because it is
paid by the government to individuals and firms on their past savings without any productive work.
India has four types of social transfer payments –
• old age and disability benefits
• sickness and maternity benefits
• work injury transfers
• unemployment benefits

Most sources of payments are employers (via provident funds), and the government.

Statement 1 and Statement 2 are Correct:
Procedure and powers of the Commission: The Commission shall determine their procedure and in
the performance of their functions shall have all the powers of a civil court under the Code of Civil
Procedure, 1908 (5 of 1908), while trying a suit in respect of the following matters, namely:--
• summoning and enforcing the attendance of witnesses;
• requiring the production of any document;
• requisitioning any public record from any court or office

Agricultural economics is a branch of economics that uses economic theory to optimise the
production and distribution of food and fibre products.
Agricultural economics began as a subfield of economics concerned with land use.
Father of Agricultural Economics: Henry Charles Taylor
Norman Ernest Borlaug - Father of Agriculture.
He was an American agronomist who led global projects that contributed to the Green Revolution's
massive increase in agricultural production.
Mason Vaugh - Father of Agricultural Engineering in India.
He was an American agronomist who established the first agricultural engineering department
outside of North America at Allahabad Agricultural Institute in 1921.
Petrus de Crescentiis - Father of Agronomy.
He was a Bolognese jurist, now remembered for his writings on horticulture and agriculture, the
Ruralia commoda.
M. H. Marigowda - Father of Horticulture in India.

Dr. MS Swaminathan is at present chairman of National Commission on Farmers. He gives a
new call for “Evergreen Revolution” for doubling the present production levels of the food grains. He
stresses on adopting some best techniques and promotion of organic farming.

Cash Management Bills (CMBs) are money market instruments to meet the temporary
mismatch in cash flow. It is similar to Treasury Bills. CMBs are issued by the Central Government
only. The bills are issued by the RBI on behalf of the Central Government. It is issued at a discounted
price but redeemed at face value. Cash Management Bills are traded in the Government Securities
Market and Money Market.
• On May 12, 2010, the first Cash Management Bills were issued. They were created to
supplement short-term cash-raising instruments such as treasury bills and ways and means
advances.
• In consultation with the Reserve Bank of India (RBI), the Government of India issued a new
short-term money market instrument, Cash Management Bills, to address the government's
temporary cash flow mismatch.
• These bills are discounted monetary market instruments with a maturity period of fewer
than 91 days.
• The Cash Management bills are said to have the generic character of treasury bills and will
be subject to pre-specified terms and conditions when sold.

The Harrod-Domar model is a classical economic growth model that explains the relationship
between economic growth, capital accumulation, and savings. The model was developed by
economists Roy Harrod and Evsey Domar in the 1930s and 1940s.
The basic idea of the Harrod-Domar model is that economic growth depends on the amount of
capital that is available for investment, and that the rate of capital accumulation is proportional to

the rate of savings. The model assumes that the economy is closed, meaning that there is no
international trade or foreign investment.
Basic Harrod-Domar model says:
Rate of growth of GDP = Savings ratio / capital output ratio
Basically, the model suggests that the economy's rate of growth depends on:
• The level of national saving (S)
• The productivity of capital investment (this is known as the capital-output ratio)
First Five year plan was based on this model.

Prior to the First World War the whole world was having gold standard under which the
currency in circulation was allowed to get converted either in gold or other currencies based on the
gold standard. But after the failure of Bretton woods system in 1971 this system changed. Presently
convertibility of money implies a system where a country’s currency becomes convertible in foreign
exchange and vice versa. Since 1994, Indian rupee has been made fully convertible in current
account transactions and partial convertibility in capital account.
Current account convertibility has been defined as the freedom to buy or sell foreign exchange for
the following international transactions:
(a) All payments due in connection with foreign trade, other current business, including services
and normal short term banking and credit facilities;
(b) Payments due as interest on loans and as net income from other investments;
(c) Payments of moderate amount of amortization of loans or for depreciation of direct
investment; and
(d) Moderate remittances for family living expenses
Capital Account Convertibility:
• This refers to a liberalization of a country’s capital transactions such as loans and
investment, both short term and long term as well as speculative capital flows.
• In a way, capital account convertibility removes all the restrains on international flows on
India’s capital account.

The Life Insurance Corporation of India (LIC), General Insurance Corporation of India and
The New India Assurance Co have been identified as Domestic Systemically Important Insurers (D
SIIs) for 2020-21 by insurance regulator, the Insurance Regulatory and Development Authority of
India (IRDAI). It has remain the same for 2022-23.
• D-SIIs are insurers of such size, market importance, and domestically & globally inter
connected, whose failure or distress will result into significant dislocation in domestic
financial system.
• D-SIIs are perceived as insurers which are ‘too big or too important to fail’ (TBTF).
• This perception and perceived expectation of government support may reduce market
discipline, amplify risk-taking, create competitive distortions, as well as increase the
possibility of distress in future.
• Thus, continued functioning of D-SIIs is necessary for uninterrupted availability of insurance
services for national economy.
• IRDAI identifies D-SIIs on an annual basis and disclose such insurers names for public
information.
What are the Requirements for D-SIIs ?
• Public sector insurers are required to raise the level of corporate governance.
• They are mandated to identify all relevant risks as well as promote a sound risk management
culture.
• They are subjected to enhanced regulatory supervision of the IRDAI.

APJ Abdul Kalam proposed the concept of PURA (Provision of Urban Amenities to Rural Areas) in
the VISION 2020 project. Its goal and objectives are to provide India with new heights and
achievements, developed status, and an economy. The Ministry of Rural Development is
implementing the PURA scheme on a pilot basis. The objective of PURA is the Provision of livelihood
opportunities and urban amenities in rural areas to bridge the rural-urban divide. It covers
Sewerage, Construction, and maintenance of Village Streets, Drainage, Solid Waste Management,
etc.

Mahatma Gandhi was a keen supporter of agriculture. His belief was always to make
decentralisation and a self-contained nation.
The Third Five-Year Plan can be referred to as the Gandhian Model. It commenced from
1961-1966 under the leadership of Pandit Jawaharlal Nehru. The major objectives of the Third five
year plan were the establishment of an independent economy. Such an economy was based on the
idea of establishing a self-reliant and self-generating economy, enhancement of agriculture and
improvement in the production of wheat. This plan was also known as the Gadgil Yojana. D.R. Gadgil
was the Deputy Chairman of the Planning commission during the tenure of this five-year plan.

Fourth Five-Year Plan: (1969-74)
• It was introduced under the Prime Ministership of Indira Gandhi and attempted to correct
the previous failures.
• Based on Gadgil Formula, a great deal of emphasis was laid on growth with stability and
progress towards self-reliance.
• The government nationalised 14 major Indian Banks and the Green Revolution boosted
agriculture.
• The Drought Prone Area Programme was also launched.
• The target growth rate was 5.6%, but the actual growth rate was 3.3%.

The Service Area Approach (SAA) introduced in April 1989 (7th five-year plan) for planned and
orderly development of rural and semi-urban areas was applicable to all scheduled commercial
banks including Regional Rural Banks.
Under SAA, each bank branch in rural and semi-urban area was designated to serve an area of 15 to
25 villages and the branch was responsible for meeting the needs of bank credit of its service area.
The primary objective of SAA was to increase productive lending and forge effective linkages
between bank credit, production, productivity and increase in income levels.
The SAA scheme was reviewed from time to time and appropriate changes were made in the
scheme to make it more effective.

Statement 1 is incorrect. SVAMITVA Scheme is a Central Sector scheme.
The Ministry of Panchayati Raj (MoPR) is the Nodal Ministry for implementation of the scheme. In
the States, the Revenue Department / Land Records Department will be the Nodal Department and
shall carry out the scheme with support of State Panchayati Raj Department. Carried out by R&DM
department Odisha in rural areas.
Survey of India shall work as the technology partner for implementation.
Statement 2 is correct. The scheme aims to provide an integrated property validation solution for
rural India. The demarcation of rural abadi areas would be done using Drone Surveying technology.
The scheme seeks to achieve the following objectives:
• To bring financial stability to the citizens in rural India by enabling them to use their property
as a financial asset for taking loans and other financial benefits.
• Creation of accurate land records for rural planning.
• Determination of property tax, which would accrue to the GPs directly in States where it is
devolved or else, add to the State exchequer.
• Creation of survey infrastructure and GIS maps that can be leveraged by any department for
their use.
• To support in preparation of better-quality Gram Panchayat Development Plan (GPDP) by
making use of GIS maps.
• To reduce property related disputes and legal cases

The 1991 policy made ‘Licence, Permit and Quota Raj’ a thing of the past. It attempted to liberalise
the economy by removing bureaucratic hurdles in industrial growth. Limited role of Public sector
reduced the burden of the Government.
Statement 1 is incorrect: The industrial policy of 1991 has almost abandoned the industrial licensing
system. It has reduced industrial licensing to fifteen sectors. There are only 4 industries at present
related to security, strategic and environmental concerns, where an industrial license is currently
required.
These four industries are -
• Electronic aerospace and defence equipment,
• Specified hazardous chemicals,
• Industrial explosives
• Cigars and cigarettes of tobacco and manufactured tobacco substitutes
Statement 2 is incorrect: Under industrial deregulation, most of the industrial sectors was opened to
the private sector as well. Previously, most of the industrial sectors were reserved to the public
sector. Under the new industrial policy, sectors like atomic energy and railways will continue as
reserved for public sector.
Statement 3 is correct: The 1991 industrial policy did away with the 40 per cent cap on foreign
equity investment. It also empowered the Reserve Bank of India to grant ‘automatic approval’ to
foreign equity investment of up to 51 per cent in more than 30 industries. This list was gradually
expanded over the years.

The 14th and 15th Finance Commissions are Indian government bodies responsible for
recommending how the central government's collected revenue should be shared with the
states. The 14th Finance Commission, with Y.V. Reddy as chairman, recommended a 42% share of
central taxes for states, which was a significant increase from the previous 32%. The 15th Finance
Commission, chaired by N.K. Singh, recommended a slightly lower 41% share for the period 2021
2026, adjusting for the newly formed Union Territories of Jammu & Kashmir and Ladakh.

Recently the scheme was announced by Odisha to address the gaps in the Forest Rights Act,
2006 and to strengthen forest rights among tribals and forest dwellers. With this initiative, Odisha is
set to become the first state in India to recognize both individual and community forest rights. The
Mo Jungle Jami Yojana scheme operates in conjunction with the 2006 Recognition of Forest Rights
Act (FRA), which focuses on acknowledging the rights of scheduled tribes and other traditional forest
dwellers.
Odisha boasts an impressive number of 32,562 villages with potential for FRA recognition. The state
is home to a diverse range of 62 tribes, out of which 13 tribes are officially recognized as Particularly
Vulnerable Tribal Groups (PVTGs). With an estimated tribal population of 9,590,756, constituting
22.85% of the state’s overall population, the significance of empowering these communities cannot
be overstated.
The scheme will provide land ownership and access to forest resources, improving livelihoods and
food security for the Scheduled Tribe and forest-dwelling population. It includes the digitization of
records, conversion of unsurveyed and zero area villages into revenue villages, and the
establishment of Forest Rights Cells for monitoring and review.
Mo Jungle Jami Yojana aims to ensure livelihood and food security for Scheduled Tribes and forest
dwelling populations. Eligible claimants, especially single women and PVTGs, will receive land titles,
enabling them to gain ownership of land and access forest resources as per their entitlement. The
scheme also aims to integrate these communities into mainstream development programs initiated
by the government.

Recently Delhi Lieutenant Governor distributed Honey Bee-Boxes and Toolkits to
beneficiaries under 'Gramodyog Vikas Yojna'
Gramodyog Vikas Yojana (GVY) scheme is for promotion and development of village industries
through common facilities, technological modernization, training and other support and services for
promotion of village Industries.
It is under Ministry of Micro, Small and Medium Enterprises.
GVY has the following components from the activities under Village Industries:
1. Wellness & Cosmetics Industry (WCI)
2. Handmade Paper, Leather & Plastic Industry (HPLPI)
3. Agro Based & Food Processing Industry (ABFPI)
4. Mineral Based Industry (MBI)

Government of India has recently released the draft rules for Green Credit Programme (GCP)
which was announced during 2023-24 budget.
• GCP aims at incentivising voluntary environmental actions of various stakeholders. It allows
green projects to achieve optimal returns beyond carbon reductions alone.
• The Green Credit Programme serves as a powerful tool for incentivizing sustainable actions
and promoting sustainable living among individuals, companies, and local bodies.
Individuals, industries, Farmers producer’s organisations (FPOs), urban local bodies (ULB),
gram panchayats and private sectors will be able to earn green credit for environment
friendly actions.
• The environment-friendly actions include planting trees, conserving water, waste
management and reducing air pollution.
• Green credits will be tradable, creating a potential market platform where participants can
sell their earned credits.
• Indian Council of Forestry Research and Education (ICFRE) will act as the program
administrator.
The sectors which qualify for Green Credits include:
1. Tree plantation-based green credit
2. Water-based green credit
3. Sustainable agriculture-based green credit

4. Waste management-based green credit
5. Air pollution reduction-based green credit
6. Mangrove conservation and restoration-based green credit
7. Eco mark based green credit

Ministry of Education releases report on Performance Grading Index 2.0 for States/UTs for the
year 2021-22. The report grades performance of States/ UTs on a uniform scale. Department of
School Education & Literacy, Ministry of Education, devised Performance Grading Index (PGI) for
States and UTs which assesses the performance of school education system at the State/UT level
by creating an index for comprehensive analysis. The PGI - States/UTs was first released for the
year 2017-18 and so far, has been released up to the year 2020-21.
The PGI 2.0 structure comprises of 1000 points across 73 indicators grouped into 2 categories which
are Outcomes, Governance Management (GM). These categories of PGI 2.0 are further divided into

6 domains namely: 1. Learning Outcomes, 2. Access, 3. Infrastructure & Facilities, 4. Equity, 5.
Governance Process and 6. Teachers Education and Training.
Chandigarh has topped the index. Chandigarh is followed by Punjab, Kerala, Puducherry and Tamil
Nadu.
Meghalaya has least score grade in the index. In the least category Meghalaya is followed by
Arunachal Pradesh and Mizoram.
Odisha, which ranked 10th spot of the PGI 2.0 report in the year 2017-18, has now slipped to 24th
position.

Explanation:

Recently Delhi High Court rejected PepsiCo India’s patent appeal for its unique Lays’ potato (FC5
potato variety) in purview of Protection of Plant Varieties and Farmers Rights Act, 2001
Protection of Plant Varieties and Farmers Rights Act, 2001 (PPV&FR) provides an effective
framework to conserve and encourage the development of various plant varieties.
PPV&FR Act established an effective system to safeguard and recognise the rights of breeders,
researchers and farmers to promote agricultural development in the country. It also facilitates the
Indian seed industry to ensure the availability of high-quality seeds and planting materials to
farmers.
It aims to provide for the establishment of an effective system for protection of plant varieties, the
rights of farmers and plant breeders and to encourage the development of new varieties of plants.

The Protection of Plant Varieties and Farmers Rights Act was enacted in 2001 after engaging
debates were held in the country on how intellectual property rights should be introduced in
Indian agriculture after the country joined the World Trade Organisation in 1995 and agreed to
implement the Agreement on Trade-Related Aspects of Intellectual Property Rights.

Recently Supreme Court invalidated the third extension of service to Sanjay Kumar Mishra, the
Director of the Enforcement Directorate (ED).
Chief of CBI and the Director of the Enforcement Directorate (ED) have fixed tenures of 2 years
with a maximum of 3 annual extensions.
Five-member panel composed of the Central Vigilance Commissioner and Vigilance Commissioners
has to recommend for service extensions for Director of the Enforcement Directorate (ED).
According to High Court, extension of tenure to officers should be done only in rare and exceptional
cases and that such extensions should be for a short period.

Market Infrastructure Institutions (MII) is a financial entity that provides essential
infrastructure for running the daily operations of stock or capital markets.
• MMI includes Stock exchanges, depositories and clearing houses.
• Bimal Jalan committee is related MMI reforms, whereas R.N. Malhotra committee is
related to insurance reforms.
• Any failure of such an MII could lead to even bigger collapses that may result in an overall
economic downfall.
• India International Exchange is not a systematically important MMI.
The SEBI lists the following 7 institutions as systematically important MMIs:
1. Bombay Stock Exchange
2. The National Stock Exchange
3. The Multi Commodity Exchange of India
4. The Metropolitan Stock Exchange of India
5. Central Depository Services Ltd
6. National Securities Depository Ltd
7. Multi Commodity Exchange Clearing Corporation.

To compensate the Mahatma Gandhi NREGA workers against inflation, the
Ministry of Rural Development revises the wage rate every financial year based on change in
Consumer Price Index for Agricultural Labourers (CPI-AL).

Demographic momentum is the tendency for growing populations to continue growing after a
fertility decline because of their young age distribution. This is important because once this happens
a country moves to a different stage in the demographic transition model. Hence, statement 1 is
correct.
In this situation, a relatively youthful age structure promotes a more rapid growth, because the
births being produced by the relatively large number of women of reproductive age outnumber the
deaths occurring in the total population, even if the fertility of the average woman stands at the
replacement level. It’s only when both the fertility rate and the number of women level off that
population momentum stops. And this is when global population growth will come to an end. Hence,
statement 2 is correct.
For example, when China first introduced the one-child policy, population growth continued
regardless. Even though the number of children born reduced dramatically, the sheer number of
maturing youth was significant. In 1979 when the one-child policy entered into force, the number of
people becoming adults was based on the number of births around the 1950s, not 1979. As a result,
the Chinese population maintained the same momentum of increase as for the past 20 years.
In demography, demographic transition is a phenomenon and theory which refers to the
historical shift from high birth rates and high death rates in societies with minimal technology,
education (especially of women) and economic development, to low birth rates and low death rates
in societies with advanced technology, education and economic development, as well as the stages
between these two scenarios.

Digital payments across the country registered a growth of 13.24 per cent in a year through
March 2023, as per RBI’s index that measures the adoption of online transactions.

RBI’s Digital Payments Index (RBI-DPI) stood at 395.57 at end-March 2023 compared to 377.46 in
September 2022 and 349.30 in March 2022. The index is a base to capture the extent of digitisation
of payments across the country.

When a government is giving subsidies to its exporters then the importing country can put
extra tariff/duty (other than its normal customs/import duty) on those products entering into their
market. This extra duty is called "Countervailing Duty". It is country specific and is also called anti
subsidy duty.

The human development concept was developed by economist Mahbub ul Haq. At the
World Bank in the 1970s, and later as minister of finance in his own country, Pakistan, Dr. Haq
argued that existing measures of human progress failed to account for the true purpose of
development—to improve people's lives.

Sustainable Development Goal 2 aims at ZERO HUNGER within and among countries.
The 17 sustainable development goals are as follows:
1. No Poverty
2. Zero Hunger
3. Good Health and Well-being
4. Quality Education
5. Gender Equality
6. Clean Water and Sanitation
7. Affordable and Clean Energy
8. Decent Work and Economic Growth
9. Industry, Innovation and Infrastructure
10. Reduced Inequality
11. Sustainable Cities and Communities
12. Responsible Consumption and Production
13. Climate Action
14. Life Below Water

15. Life on Land
16. Peace and Justice Strong Institutions
17. Partnerships to achieve the Goal

Participatory notes are often referred to as PNs or P-Notes. These are financial
instruments used by investors and hedge funds to invest in the Indian securities, and no registration
is required with the SEBI, the market regulator in India. Investments flowing in through PNs are
considered as offshore derivative investments (ODIs). Hence, option (d) is the correct answer.
Foreign institutional investors (FIIs) offer financial instruments in other countries for the local
investors to invest in the Indian securities market. FIIs are those investors or funds that are based
out of a foreign country and invest in the Indian securities market. This has enabled the foreign
investors that are unregistered to trade in the Indian securities market without having to register
with any of the Indian securities market regulators.
The investor in PN does not own the underlying Indian security, which is held by the FII who issues
the PN. Thus the investors in PNs derive the economic benefits of investing in the security without
actually holding it. They benefit from fluctuations in the price of the underlying security since the
value of the PN is linked with the value of the underlying Indian security. The PN holder also does
not enjoy any voting rights in relation to security/shares referenced by the PN.

The T+1 settlement cycle means that trade-related settlements must be done within a
day, or 24 hours, of the completion of a transaction. For example, under T+1, if a customer bought
shares on Wednesday, they would be credited to the customer’s demat account on Thursday. As
many as 256 large-cap and top mid-cap stocks, including Nifty and Sensex stocks, will come under
the T+1 settlement from Friday. After China, India will become the second country in the world to
start the ‘trade-plus-one’ (T+1) settlement cycle in top-listed securities.
Benefits of T+1 settlement cycle:
• The most important benefit of this shortening of the settlement cycle is that it reduces the
risk of non-payment or non-delivery of shares by the broker by one day. A shortened
settlement cycle also reduces the number of outstanding unsettled trades at any point in
time, and thus decreases the unsettled exposure to Clearing Corporation by 50 percent. The
narrower the settlement cycle, the narrower the time window for a counterparty
insolvency/ bankruptcy to impact the settlement of a trade.
• This will provide liquidity to the investors as they get their funds for the shares sold/
credited to their account a day earlier. The investors will have the benefit of profitably
deploying their cash for a day more, either to buy shares or otherwise. The real advantage of
such an early settlement can be experienced in a volatile market, as it can help in the
efficient use of capital and resultant benefits to the investors. Hence option 1 is correct.
• With the additional liquidity provided by the improved system, there is every possibility of
investors undertaking more transactions in the stock market, which will benefit the brokers
as well, as they too will earn more through higher turnover.
• With increased turnover possible through quicker settlements, all the participants in the
market— stock exchanges, depositories, depository participants, and even the
government—will stand to benefit from increased fees and taxes, etc.
• Foreign investors were against SEBI’s T+1 proposal and had written to the regulator and the
Finance Ministry about the operational issues faced by them, as they operate from different
geographies. Among the issues raised by them were time zone differences, information flow
processes, and foreign exchange problems. Foreign investors said they would also find it
difficult to hedge their net India exposure in dollar terms at the end of the day under the
T+1 system. Hence option 2 is not correct.

There are several direct and indirect instruments that are used for implementing monetary policy.
Repo Rate: The interest rate at which the Reserve Bank provides liquidity under the liquidity
adjustment facility (LAF) to all LAF participants against the collateral of government and other
approved securities.
Standing Deposit Facility (SDF) Rate: The rate at which the Reserve Bank accepts uncollateralised
deposits, on an overnight basis, from all LAF participants. The SDF is also a financial stability tool in
addition to its role in liquidity management. The SDF rate is placed at 25 basis points below the
policy repo rate. With introduction of SDF in April 2022, the SDF rate replaced the fixed reverse repo
rate as the floor of the LAF corridor.
Marginal Standing Facility (MSF) Rate: The penal rate at which banks can borrow, on an overnight
basis, from the Reserve Bank by dipping into their Statutory Liquidity Ratio (SLR) portfolio up to a

predefined limit (2 per cent). This provides a safety valve against unanticipated liquidity shocks to
the banking system. The MSF rate is placed at 25 basis points above the policy repo rate.
Liquidity Adjustment Facility (LAF): The LAF refers to the Reserve Bank’s operations through which it
injects/absorbs liquidity into/from the banking system. It consists of overnight as well as term
repo/reverse repos (fixed as well as variable rates), SDF and MSF. Apart from LAF, instruments of
liquidity management include outright open market operations (OMOs), forex swaps and market
stabilisation scheme (MSS).
LAF Corridor: The LAF corridor has the marginal standing facility (MSF) rate as its upper bound
(ceiling) and the standing deposit facility (SDF) rate as the lower bound (floor), with the policy repo
rate in the middle of the corridor.
Main Liquidity Management Tool: A 14-day term repo/reverse repo auction operation at a variable
rate conducted to coincide with the cash reserve ratio (CRR) maintenance cycle is the main liquidity
management tool for managing frictional liquidity requirements.
Fine Tuning Operations: The main liquidity operation is supported by fine-tuning operations,
overnight and/or longer tenor, to tide over any unanticipated liquidity changes during the reserve
maintenance period. In addition, the Reserve Bank conducts, if needed, longer-term variable rate
repo/reverse repo auctions of more than 14 days.
Reverse Repo Rate: The interest rate at which the Reserve Bank absorbs liquidity from banks against
the collateral of eligible government securities under the LAF. Following the introduction of SDF, the
fixed rate reverse repo operations will be at the discretion of the RBI for purposes specified from
time to time.
Bank Rate: The rate at which the Reserve Bank is ready to buy or rediscount bills of exchange or
other commercial papers. The Bank Rate acts as the penal rate charged on banks for shortfalls in
meeting their reserve requirements (cash reserve ratio and statutory liquidity ratio). The Bank Rate
is published under Section 49 of the RBI Act, 1934. This rate has been aligned with the MSF rate and,
changes automatically as and when the MSF rate changes alongside policy repo rate changes.
Cash Reserve Ratio (CRR): The average daily balance that a bank is required to maintain with the
Reserve Bank as a per cent of its net demand and time liabilities (NDTL) as on the last Friday of the
second preceding fortnight that the Reserve Bank may notify from time to time in the Official
Gazette.
Statutory Liquidity Ratio (SLR): Every bank shall maintain in India assets, the value of which shall not
be less than such percentage of the total of its demand and time liabilities in India as on the last
Friday of the second preceding fortnight, as the Reserve Bank may, by notification in the Official
Gazette, specify from time to time and such assets shall be maintained as may be specified in such
notification (typically in unencumbered government securities, cash and gold).
Open Market Operations (OMOs): These include outright purchase/sale of government securities
by the Reserve Bank for injection/absorption of durable liquidity in the banking system.

In May 2016, the RBI Act, 1934 was amended to provide a statutory basis for the
implementation of the flexible inflation targeting framework.
Inflation Target: Under Section 45ZA, the Central Government, in consultation with the RBI,
determines the inflation target in terms of the Consumer Price Index (CPI), once in five years and
notifies it in the Official Gazette. Accordingly, on August 5, 2016, the Central Government notified in
the Official Gazette 4 per cent Consumer Price Index (CPI) inflation as the target for the period from
August 5, 2016 to March 31, 2021 with the upper tolerance limit of 6 per cent and the lower
tolerance limit of 2 per cent. On March 31, 2021, the Central Government retained the inflation
target and the tolerance band for the next 5-year period – April 1, 2021 to March 31, 2026.
Section 45ZB of the RBI Act provides for the constitution of a six-member Monetary Policy
Committee (MPC) to determine the policy rate required to achieve the inflation target.
Section 45ZB of the amended RBI Act, 1934 provides for an empowered six-member monetary policy
committee (MPC) to be constituted by the Central Government by notification in the Official
Gazette. The first such MPC was constituted on September 29, 2016.

NHB is a statutory body that has been set up by the Parliament. National Housing Bank (NHB)
was set up by an Act of Parliament in 1987. NHB is an apex financial institution for housing.
The broad functions of NHB as a part of its objective of building a strong, healthy, cost-effective, and
viable Housing Finance System include:
(i) Supervision and grievance redressal regarding Housing Finance Companies (HFCs).
(ii) Financing
(iii) Promotion and Development.
It is to be noted that NHB supervises HFCs while regulation of HFCs is with RBI.
Before April 2019, National Housing Bank (NHB) was a wholly-owned subsidiary of RBI. RBI sold its
100% equity to government in 2019 and now its owner is Government of India. This was done to
end the cross-holding in the regulatory institutions as per the Narasimham-II committee report’s
recommendations.

The savings rate is the percentage of disposable personal income that a person or group of
people save rather than spend on consumption. The savings rate reflects the rate of time preference
for an individual or the average time preference for a group. Economic conditions, social institutions,
and individual or population characteristics can all influence the savings rate
Factors influencing saving levels:
• Changes in the interest the market generates can have an effect on the savings rate. Higher
interest rates can lead to lower consumption and higher savings. Higher interest rates make
saving more attractive than consumption.
• Inflation can have an effect on saving. If there is high inflation households may look to
either spend money before it falls in value or buy assets which hold their value during
inflation. People dip into savings as inflation erodes purchasing power.
• Periods of economic growth can also create optimism and confidence amongst consumers
and encourage a relatively higher percentage of consumption. Periods of high economic
uncertainty, such as recessions and economic shocks, tend to induce an increase in the
savings rate as people defer current spending to prepare for an uncertain economic future.
• Typically households on low income will have very low saving levels. They need to buy
necessities and do not have the ‘luxury’ of being able to save. As incomes rise, households
tend to have a higher marginal propensity to save. This is because with higher incomes

there is a diminishing marginal utility to consumption – households with extra income are
more likely to save it. If there is a rise in incomes of the low paid, this will have a bigger
impact on increasing savings than if there is a rise in incomes of the wealthy. A reduction in
inequality can increase saving levels.

All indirect taxes are regressive in nature. Let us consider an example: Suppose a rich person (income
10 lacs) is purchasing bread worth Rs. 25 (including Rs. 5 tax). Then he is paying tax of Rs 5. But if the
same bread is purchased by a poor person whose income is Rs. 1 lac then he is also paying the same
tax of Rs. 5.
This means the poor person is paying a higher tax percentage with respect to his income (.005% =
Rs. 5/ Rs. 1,00,000) and the rich person is paying less tax percentage with respect to his income
(.0005%= Rs. 5/ Rs. 10,00,000). Hence, statement 1 is correct.
• A progressive tax is a taxing mechanism in which the taxing authority charges more taxes as the
income of the taxpayer increases. A higher tax is collected from the taxpayers who earn more and
lower taxes from taxpayers earning less. The government uses a progressive tax mechanism.

• Under progressive taxes, it is believed that people who earn more should pay more. The income
tax is divided into slabs. As the income of the taxpayer crosses a benchmark income, a new rate of
tax (higher than before) is charged to him.
• Direct taxes are generally progressive in nature, meaning that they take a larger percentage of
income from high-income earners than from low-income earners. This is because direct taxes are
typically based on the ability to pay, with the assumption being that people with higher incomes
have a greater ability to pay taxes than those with lower incomes. Some examples of direct taxes
include income taxes and property taxes. However, it is worth noting that the progressivity of a
direct tax can vary depending on the specific tax rate structure and the exemptions, deductions, and
credits that are available. For example, a flat tax, which applies the same tax rate to all taxpayers
regardless of income level, would not be progressive. Hence, statement 2 is not correct.

NITI Aayog to identify CPSEs for strategic disinvestment and advise on the mode of sale,
percentage of shares to be sold and method for valuation of the CPSE.
The disinvestment process of individual CPSEs has evolved over time and is based on decision
making through inter-ministerial consultations and the involvement of professionals and experts, in
view of the technical and complex nature of transactions and the need for transparency and fair
play.
• In-principle consent by the Administrative Ministry of the CPSE concerned.
• Approval of the proposal to disinvest by CCEA.
• Constitution of an Inter-Ministerial Group (IMG) with the approval of the Finance Minister to
guide and oversee the disinvestment process.
• IMG appoints Advisers for the transaction including Merchant Bankers/ Book Running Lead
Managers (BRLMs)/ Legal Advisers.
• Presentation by BRLMs before High-Level Committee (HLC) on valuation.
• HLC recommends price band/ floor price to 'Alternative Mechanism' taking into
consideration the recommendation of the BRLMs.

• Approval by 'Alternative Mechanism' of recommended price band/ floor price, method of
disinvestment, price discount for retail investors and employees, etc.
• Strategic Disinvestment Policy of 2015-20 rests on key pillars - Minority stake stale by SEBI
approved modes and Strategic Disinvestment along with transfer of management control.
Strategic disinvestment of CPSEs lies at the heart of the disinvestment policy. Strategic
disinvestment would imply the sale of a substantial portion of the Government shareholding
of a central public sector enterprise (CPSE) of up to 50%, or such higher percentage as the
competent authority may determine, along with transfer of management control.
The Department of Disinvestment was set up as a separate Department on 10th December
1999 and was later renamed as Ministry of Disinvestment on 6th September 2001. From 27th May
2004, the Department of Disinvestment is one of the Departments under the Ministry of Finance.
The Department of Disinvestment has been renamed the Department of Investment and Public
Asset Management (DIPAM) from 14th April 2016. As per the present Allocation of Business Rules,
the mandate of the Department is as follows:
• All matters relating to the management of Central Government investments in equity
including disinvestment of equity in Central Public Sector Undertakings.
• All matters relating to the sale of Central Government equity through offer for sale or
private placement or any other mode in the erstwhile Central Public Sector Undertakings.
• It takes decisions on the recommendations of Administrative Ministries, NITI Aayog, etc.
for disinvestment including strategic disinvestment.