Indian Economy Questions and Answers

Answer: A

The Lead Bank Scheme was proposed by the Gadgil Study Group. The group, set up by the National Credit Council and headed by D. R. Gadgil, recommended in 1969 that one bank be made the lead bank in each district to co-ordinate the credit plans of all banks there, and the Reserve Bank launched the scheme the same year. The NK Singh Committee and the ML Dantwala Committee dealt with other subjects. The Development Study Group is not the body credited with the scheme.

Answer: D

The official key is five. What was confirmed: the question refers to the usual classification of the players of the microfinance industry into broad categories. What was not confirmed: the count of five could not be checked against a source in this review, since different textbooks group the players differently. The key is kept as printed. The options two, three and four are the counts that the key rejects, and nothing found in this review shows the key to be wrong.

Answer: B

Coal is the commercial source of energy. Commercial sources are those that are bought and sold in the market, such as coal, petroleum, natural gas and electricity. Firewood, agricultural waste and dried dung are non-commercial (traditional) sources because they are collected and used locally and are normally not traded in the market. So of the four, only coal belongs to the commercial group.

Answer: A

Expenditure on law and order and expenditure on old age pensions are revenue expenditure, since they are spent on running the government and do not create assets or reduce liabilities. So statements a and b are correct.

Expenditure on the construction of roads and highways creates assets that last, so it is capital expenditure. The options that include c are therefore wrong, and only a and b together are revenue expenditure.

Answer: A

A feature of microcredit is that it does not require any collateral for the loan. Microcredit means very small loans given to poor borrowers, often women in self-help groups, who have no assets to pledge, and the loan is usually backed by group guarantees and a good repayment record.

Option B contradicts the meaning, because micro loans are exactly what is offered. Repayment is frequent (weekly or monthly) and not rare, and the tenure is short, not long, so options C and D are also wrong.

Answer: A

The LIC was formed in 1956 and absorbed 245 Indian and foreign insurers. The Life Insurance Corporation Act was passed in 1956 and the life insurance business was nationalised on 1 September 1956, taking over 154 Indian insurers, 16 non-Indian insurers and 75 provident societies, which together make 245.

1951 and 1991 are not the year of nationalisation (1991 was the start of economic liberalisation), and 145 is not the total, so options B, C and D are wrong.

Answer: D

The National Infrastructure Pipeline was launched in 2019. The task force report was released on 31 December 2019, listing infrastructure projects of about Rs 100 lakh crore to be implemented over 2020-25.

The years 2016, 2017 and 2018 are earlier and do not match the launch.

The National Infrastructure Pipeline was announced by the Prime Minister in his Independence Day speech of 2019 and its task force report, headed by the Economic Affairs Secretary, was released on 31 December 2019. It listed infrastructure projects worth over Rs 100 lakh crore for 2020-25, so the launch year of the pipeline is 2019 and not any of the earlier years.

Answer: B

A Joint Liability Group (JLG) is an informal group of 4 to 10 individuals who take loans against mutual guarantee, a model promoted by NABARD for tenant farmers and small cultivators who have no collateral.

1 to 3 members is too small to share liability, and groups of 15 to 18 or 20 to 30 members describe larger self-help style groups, not the JLG.

A JLG is built on peer guarantee, so the small size of four to ten members lets each member know and rely on the others, and a group of three or fewer would not spread the risk.

Answer: C

The Targeted Public Distribution System (TPDS) was launched in 1997. It replaced the universal PDS with a system aimed at the poor, separating beneficiaries into below poverty line and above poverty line households. Revamped PDS had come in 1992, and 1995 to 1996 and 1998 are not the launch year.

Answer: A

The incorrect statement is the first one. The law of diminishing marginal productivity arises when more of a variable input is added to a fixed input; marginal productivity falls after a point. It does not arise because of advantageous changes made to the fixed input. The second statement is a loose description of the same law, the third states how managers use it, and the fourth is correct because the law is also called the law of diminishing marginal returns.