IAS Prelims 2014: Gs Paper I: Economic And Social Development: Previous Year Questions

A "closed economy" refers to an economic system where there are no international trade activities, meaning that neither exports nor imports take place. In this type of economy, all economic activities, including production, consumption, and investment, are limited to the domestic market. As a result, there is no interaction with foreign economies, and the economy is self-sufficient, relying solely on its internal resources and capabilities.

FII helps in increasing capital availability in general, while FDI only targets specific sectors. FII refers to investments made by institutional investors, such as mutual funds and pension funds, in the financial markets of a foreign country. This helps to increase the overall capital availability in the country and contributes to its economic growth. On the other hand, FDI involves direct investments made by foreign companies in specific sectors of a country's economy. These investments focus on long-term projects and contribute to the development of specific industries or sectors. Therefore, the statement accurately highlights the difference between FII and FDI in terms of their impact on capital availability and sector targeting.

Open Market Operations in the context of the Indian economy refers to the purchase and sale of government securities by the Reserve Bank of India (RBI). The RBI conducts these operations to regulate the money supply in the economy. When the RBI buys government securities from commercial banks, it injects money into the economy, increasing liquidity. Conversely, when the RBI sells government securities, it absorbs money from the economy, reducing liquidity. These operations help the RBI control inflation, manage interest rates, and stabilize the financial system.

Microfinance is the provision of financial services to people of low-income groups, including both consumers and self-employed individuals. These services include credit facilities, savings facilities, insurance facilities, and fund transfer facilities. Therefore, the correct answer is 1, 2, 3, and 4, as all of these services are rendered under microfinance.

An increase in the money supply can lead to a rise in the general level of prices because when there is more money in circulation, people have more purchasing power, which can drive up demand and prices. A decrease in the aggregate level of output can also contribute to inflation because when there is less production, there is less supply available to meet demand, which can lead to price increases. Finally, an increase in effective demand, which refers to the desire and ability of consumers to purchase goods and services, can also drive up prices as it increases competition for limited resources. Therefore, all three factors can contribute to a rise in the general level of prices.

Both statement 1 and 2 are correct. The explanation for this is that the question is asking about the growth rate of GDP and per capita income in the Indian economy over the last five years. The word "steadily" indicates that there has been a consistent increase in both the growth rate of GDP and per capita income. Therefore, both statements are correct as they state that there has been a steady increase in both indicators over the specified time period.

Promoting Self-Help Groups can aid in furthering the Government's objective of inclusive growth by empowering marginalized and vulnerable sections of society to become self-reliant and financially independent. Self-Help Groups provide access to credit, training, and support for income-generating activities, which can help alleviate poverty and promote economic development at the grassroots level. Promoting Micro, Small, and Medium Enterprises (MSMEs) also contributes to inclusive growth by creating employment opportunities, fostering entrepreneurship, and promoting equitable distribution of wealth. Implementing the Right to Education Act ensures that every child has access to free and compulsory education, which is a crucial step towards reducing educational disparities and promoting social inclusion.

India's foreign-exchange reserves include foreign-currency assets, gold holdings of the RBI, and Special Drawing Rights (SDRs). This means that India holds foreign currencies, such as the US dollar and euro, as well as gold reserves and SDRs, which are international reserve assets created by the International Monetary Fund (IMF). These reserves are important for maintaining stability in the country's economy, facilitating international trade, and meeting any external payment obligations.

The correct answer is "total value of goods and services produced by the nationals." National income refers to the total value of all goods and services produced within a country's borders by its nationals during a specific time period. It includes the value of all final goods and services produced, regardless of whether they are consumed domestically or exported. This measure provides an indication of the overall economic activity and productivity of a country.

The by-products of the sugar industry have multiple uses. Bagasse, the fibrous residue left after extracting juice from sugarcane, can be used as biomass fuel to generate energy. Molasses, a by-product of sugar production, can be used as feedstock for the production of synthetic chemical fertilizers and also for the production of ethanol. Therefore, all three statements are correct, making the correct answer option 1, 2, and 3.

The National Rural Livelihood Mission seeks to improve livelihood options of rural poor by strengthening 'self-help groups' and providing skill development. This means that the mission focuses on empowering rural communities by promoting self-sufficiency and building their capacity to generate income through various means. It does not involve setting up new industries or providing free agricultural inputs as mentioned in options 1 and 3. Therefore, the correct answer is option 2 only.

The Multi-dimensional Poverty Index developed by Oxford Poverty and Human Development Initiative with UNDP support covers deprivation of education, health, assets, and services at the household level. This means that it measures poverty based on a range of factors that go beyond just income or purchasing power parity at the national level. The index takes into account the lack of access to basic necessities and services that are essential for a decent standard of living. Therefore, the correct answer is 1 only.

The correct order of the stages of demographic transition associated with economic development is 2, 3, 1. This means that initially there is a high birthrate with a high death rate, indicating a less developed economy. As the economy develops, there is a transition to a high birthrate with a low death rate, indicating improved healthcare and living conditions. Finally, the birthrate decreases and approaches the death rate, resulting in a low birthrate with a low death rate, indicating a more developed economy.

If the National Mission on water is properly and completely implemented, it will have the following impacts on the country:
1. Part of the water needs of urban areas will be met through recycling of waste-water.
2. The water requirements of coastal cities with inadequate alternative source of water will be met by adopting appropriate technologies that allow for the use of ocean water.
Therefore, the correct answer is 1 and 2 only.

Disguised unemployment refers to a situation where there are more workers employed in a job than actually required for its efficient functioning. In such cases, the marginal productivity of labor becomes zero, meaning that the additional output produced by each additional worker is negligible or non-existent. This implies that even if some workers were to be removed from the job, there would be no significant impact on the overall productivity.

The correct answer is "It is an intense affirmative action of the Government to boost economic activity in the country." This statement accurately describes fiscal stimulus as a measure taken by the government to stimulate economic activity. It implies that the government takes affirmative action, such as increasing spending or cutting taxes, to boost economic growth and stimulate demand in the country. This can be done to counteract a slowdown in the economy or to promote overall economic development.

The base effect refers to the impact of the price levels of the previous year on the calculation of the inflation rate. It means that when the current year's inflation rate is compared to the previous year's low price levels, it may appear to be higher due to the low base. This can happen even if there is no actual increase in prices, leading to a rapid increase in the rate of inflation.

Priority Sector Lending by banks in India includes lending to agriculture, micro and small enterprises, and weaker sections. This means that banks in India are required to allocate a certain percentage of their lending towards these sectors to promote their development and financial inclusion. By doing so, banks contribute to the growth of the agricultural sector, support small businesses, and provide financial assistance to marginalized and economically weaker sections of society.

The correct answer is 1 and 2 only. The Janani Suraksha Yojana program aims to promote institutional deliveries and provides monetary assistance to the mother to cover the expenses of delivery. It does not provide for wage loss due to pregnancy and confinement, which is stated in statement 3.

District Rural Development Agencies (DRDAs) help in the reduction of rural poverty in India by securing inter-sectoral and inter-departmental coordination and cooperation for effective implementation of anti-poverty programs. They also watch over and ensure the effective utilization of funds intended for these programs. However, they do not act as Panchayati Raj Institutions or undertake area-specific scientific studies of the causes of poverty and malnutrition. Therefore, the correct answer is 3 and 4 only.

Promoting skill development is the correct answer because to fully benefit from the demographic dividend, India needs to focus on developing the skills of its young population. By investing in education and training programs, India can ensure that its workforce is equipped with the necessary skills to contribute to the economy. This will lead to increased productivity, higher incomes, and overall economic growth. Additionally, promoting skill development can also help address the issue of unemployment by creating more job opportunities for the youth.

When there is an increase in demand for money, but the supply of money remains the same, there will be an increase in the rate of interest. This is because when the demand for money increases, individuals and businesses are willing to pay a higher price (interest rate) to borrow money. This increase in the rate of interest helps to balance the increased demand for money with the limited supply, as lenders are incentivized to lend out their money at higher interest rates.

The correct answer is "there is capital formation in X". Economic growth in country X will necessarily occur if there is capital formation because capital formation refers to the increase in the stock of capital goods in an economy. When there is an increase in capital goods, it leads to an increase in productivity and efficiency, which in turn drives economic growth. Therefore, capital formation is a crucial factor in promoting economic growth in a country.

Capital gains may arise when there is a natural increase in the value of the property owned, as well as when you purchase a painting and its value grows due to an increase in its popularity. This means that option 2 and 3 only are correct, as option 1 does not involve the concept of capital gains.

Thermal power is the maximum consumer of water in India because it requires large amounts of water for cooling purposes. In thermal power plants, water is used to cool the steam that is used to generate electricity. This water is then released back into the environment, but at a higher temperature, which can have negative impacts on aquatic ecosystems. The engineering, paper and pulp, and textiles industries also consume water, but not to the same extent as thermal power.

The question asks for the parts of 'inclusive governance'. Inclusive governance refers to a governance system that includes and represents all sections of society, particularly marginalized and vulnerable groups. The given answer options suggest that all of the listed actions contribute to inclusive governance. Permitting non-banking financial companies to do banking can help increase financial inclusion and access to banking services for all. Establishing effective district planning committees ensures that local communities have a say in decision-making processes. Increasing government spending on public health and strengthening the mid-day meal scheme both aim to improve the well-being and access to basic services for all. Therefore, options 1, 2, 3, and 4 can be considered as essentially the parts of inclusive governance.

ASHA, a trained community health worker, is responsible for accompanying women to the health facility for antenatal care checkup, using pregnancy test kits for early detection of pregnancy, providing information on nutrition and immunization, and conducting the delivery of a baby.

The recent policy initiatives of the Government of India to promote the growth of the manufacturing sector include setting up National Investment and Manufacturing Zones, providing the benefit of 'single window clearance', and establishing the Technology Acquisition and Development Fund. These initiatives aim to attract investment, simplify regulatory processes, and promote technological development in the manufacturing sector.

When the central bank increases the Bank Rate, it indicates that they are following a tight money policy. This means that the central bank is trying to reduce the money supply in the economy by increasing the cost of borrowing for commercial banks. By doing so, they aim to control inflation and curb excessive borrowing and spending. This increase in the Bank Rate makes loans more expensive for commercial banks, which in turn leads to higher interest rates in the market. Therefore, the correct answer is that an increase in the Bank Rate indicates that the central bank is following a tight money policy.

Value Added Tax (VAT) is a multi-point destination-based system of taxation, which means that tax is levied at each stage of the production-distribution chain. It is a tax on the value addition made at each stage of the transaction. It is also a tax on the final consumption of goods or services, meaning that ultimately the consumer bears the burden of the tax. However, the statement that it is basically a subject of the Central Government and the State Governments are only a facilitator for its successful implementation is incorrect. VAT is implemented and administered by both the Central Government and the State Governments, with each having their own jurisdiction and control over the tax.

The correct answer is 1, 2 and 3. Persons with disabilities in India are entitled to several benefits under the law. Firstly, they have the right to free schooling till the age of 18 years in government-run schools. This ensures that they have access to education without any financial burden. Secondly, they are given preferential allotment of land for setting up a business. This helps in promoting entrepreneurship and economic empowerment among persons with disabilities. Lastly, ramps in public buildings are provided to ensure accessibility and ease of movement for individuals with disabilities. These benefits aim to promote inclusivity and equal opportunities for persons with disabilities in India.

The Government of India is promoting the concept of "Mega Food Parks" with the purpose of providing good infrastructure facilities for the food processing industry, increasing the processing of perishable items, reducing wastage, and providing emerging and eco-friendly food processing technologies to entrepreneurs. This initiative aims to support the growth of the food processing sector in India by creating a conducive environment for food processing activities and ensuring the efficient utilization of resources.

The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) is a social security scheme that guarantees 100 days of wage employment in a financial year to adult members of any household. This means that all adult members, regardless of their caste, tribe, poverty status, or community, are eligible to benefit from this act. The aim of MGNREGA is to provide livelihood security and improve the living standards of rural households by providing them with employment opportunities.

The correct answer is "It grants loans to only member countries." The International Monetary Fund (IMF) is an international organization that provides financial assistance and loans to member countries facing economic difficulties. Non-member countries are not eligible to receive loans from the IMF. The IMF's primary objective is to promote global economic stability and growth by providing financial support and policy advice to member countries.

Inflation is the correct answer because economic growth is typically accompanied by an increase in the overall prices of goods and services in an economy. This increase in prices is known as inflation. As the economy grows, demand for goods and services increases, leading to higher production and higher prices. Inflation is seen as a positive sign of a growing economy, as long as it is within manageable levels. Deflation, stagflation, and hyperinflation are not typically associated with economic growth.

Employees of hotels and restaurants, motor transport undertakings, and newspaper establishments can have social security coverage under the Employees' State Insurance Scheme. Private medical institutions are not included in the coverage.

Creating new money to finance a budget deficit is likely to be the most inflationary in its effect. When a government creates new money to finance a budget deficit, it increases the money supply in the economy. This excess money supply leads to an increase in aggregate demand, which can result in higher prices for goods and services. This is known as inflation. In contrast, repayment of public debt, borrowing from the public, or borrowing from banks to finance a budget deficit do not directly increase the money supply and therefore have less inflationary effects.

Regional Rural Banks and Land Development Banks grant direct credit assistance to rural households. National Bank for Agriculture and Rural Development (NABARD) does not directly grant credit assistance to rural households, but it provides refinance facilities and other forms of support to these banks. Therefore, the correct answer is 1 and 3 only.

Purchasing government securities from the public by the Central Bank increases the money supply because it injects money into the economy. When the Central Bank buys these securities, it pays the public with money, thereby increasing the amount of money circulating in the economy.

Borrowing by the government from the Central Bank also leads to an increase in the money supply. When the government borrows from the Central Bank, the Central Bank creates new money to lend to the government. This increases the money supply in the economy.

Therefore, the correct answer is 1 and 3.

The correct answer is 2 and 3 only. The statement in option 1 is incorrect. It states that the area under the cultivation of food grains has steadily decreased in the last five years by about 30% due to a switchover to the cultivation of commercial crops. However, there is no information given in the question about the decrease in the area under cultivation. Option 2 is correct as increasing incomes can lead to changes in consumption patterns, which can contribute to food inflation. Option 3 is also correct as structural constraints in the food supply chain can lead to persistent and high food inflation.

The correct answer is 2 and 3 only. The price of any currency in the international market is determined by the demand for goods/services provided by the country concerned and the stability of the government of the concerned country. Factors such as economic potential and the role of organizations like the World Bank may have some influence, but they do not directly decide the price of a currency in the international market.

The correct answer is individual banks should adopt particular districts for intensive development. The Lead Bank Scheme was introduced by the Reserve Bank of India to ensure the spread of banking facilities in rural and semi-urban areas. Under this scheme, individual banks are assigned specific districts where they take responsibility for promoting banking services and development activities. The aim is to focus on the development of these districts by providing access to financial services and promoting economic growth.

Bacteria, fungi, and flowering plants can all be employed as bio-pesticides. Bacteria such as Bacillus thuringiensis produce toxins that can kill certain pests. Fungi like Beauveria bassiana and Metarhizium anisopliae can infect and kill insects. Flowering plants, specifically certain species of plants like Chrysanthemum and Neem, produce natural compounds that have insecticidal properties. Therefore, all three kinds of organisms can be utilized as bio-pesticides.

The term "Brent crude oil" implies that it is a major classification of crude oil and it is sourced from the North Sea. It does not imply that it does not contain Sulphur.

Commercial banks have the highest share in the disbursement of credit to agriculture and allied activities in India. This is because commercial banks have a wider reach and larger network compared to other financial institutions. They have the capacity to provide larger loans and have the necessary infrastructure to assess and manage agricultural loans effectively. Additionally, commercial banks have access to various sources of funds, including deposits and borrowings, which enables them to provide credit to the agricultural sector at competitive interest rates.

When the Reserve Bank of India lowers the Bank Rate, it means that the central bank is reducing the interest rate at which it lends to commercial banks. This reduction in the Bank Rate encourages commercial banks to borrow more from the central bank, resulting in an increase in liquidity in the market. With more liquidity available, commercial banks have more funds to lend to businesses and individuals, stimulating economic activity and promoting borrowing and investment. Therefore, the correct answer is "More liquidity in the market."

The correct sequence of decreasing liquidity is 4-1-3-2. Currency (4) is the most liquid asset as it can be used immediately for transactions. Demand deposits with the banks (1) can also be easily accessed and used for transactions. Savings deposits with the banks (3) are less liquid as there may be some restrictions or penalties for withdrawal. Time deposits with the banks (2) have the least liquidity as they have a fixed term and penalties for early withdrawal.

The correct answer is 1, 2, 3 and 4 only. This means that among the eight core industries with a combined weight of 37.90% in the Index of Industrial Production in India, the industries included are Cement, Fertilizers, Natural gas, and Refinery products. Textiles is not included in the list of these eight core industries.

The correct answer is 1 and 2 only. This means that the RBI acts as a bankers' bank by performing two functions: other banks retain their deposits with the RBI, and the RBI lends funds to commercial banks in times of need. The statement does not mention anything about the RBI advising commercial banks on monetary matters, so option 3 is not included in the correct answer.

Deficit financing is a method used by the government to raise resources for economic development. It involves borrowing money from the central bank or other sources to cover the deficit between government expenditure and revenue. This borrowed money is then used to finance various developmental projects, such as infrastructure development, education, healthcare, and poverty alleviation. By investing in these sectors, the government aims to stimulate economic growth, create employment opportunities, and improve the overall standard of living in the country.