Economic Survey 2021 (Volume I)- 1 with solutions Attempt Free MCQ Test

Cyclicality of the fiscal policy

• The cyclicality of the fiscal policy refers to a change in direction of government expenditure and taxes based on economic conditions.
• These pertain to decisions by policymakers based on the fluctuations in economic growth. There are two types of cyclical fiscal policies - counter-cyclical and procyclical.

Counter-cyclical Fiscal Policy

• Counter-cyclical fiscal policy refers to the steps taken by the government that go against the direction of the economic or business cycle.
• Thus, in a recession or slowdown, the government increases expenditure and reduces taxes to create a demand that can drive an economic boom.
• In Recession
  • The government takes the route of expansionary fiscal policy i.e. the government expenditure is increased and taxes are reduced. This increases the consumption potential of the economy and helps soften the recession. Hence, statements 1 and 2 are correct.
• In Economic Boom
  • The government takes the route of contractionary fiscal policy i.e. the government expenditure is decreased and taxes are increased. This decreases the consumption potential of the economy and helps moderate the boom.

Gini Coefficient

• The Gini index, or Gini coefficient, is a measure of the distribution of income across a population developed by the Italian statistician Corrado Gini in 1912.
• It is often used as a gauge of economic inequality, measuring income distribution and wealth distribution among a population. Hence, statement 1 is correct.
• The coefficient ranges from 0 (or 0%) to 1 (or 100%), with 0 representing perfect equality and 1 representing perfect inequality. Values over 1 are theoretically possible due to negative income or wealth. Hence, statement 2 is NOT correct.

The ‘World Rule of Law Index’ published by the World Justice Project provides a cross country comparison on various aspects of regulatory enforcement. Hence, the option (c) is correct.

The World Governance Index is released by the World Bank. The data published by the World Justice Project is used by the World Bank in its World Governance Indicators. Hence, option (a) is correct.

Global Innovation Index

• The GII is co-published by Cornell University, INSEAD, and the World Intellectual Property Organization (WIPO), a specialized agency of the United Nations. It seeks to assist economies in evaluating their innovation performance. Hence, option (b) is correct.
• GII has two sub-indices: the Innovation Input Sub-Index and the Innovation Output Sub-Index, and seven pillars, each consisting of three sub-pillars, further divided into a total of 80 indicators.

Pradhan Mantri Ujjwala Yojana (PMUY)

• PMUY launched in May 2016 in order to provide clean cooking fuel to poor households with a target to provide an 8 crore deposit free LPG connection.
• It is being implemented by the Ministry of Petroleum and Natural Gas through its Oil Marketing Companies.
• This connection is provided in the name of an adult woman member of a poor family. Hence, statement 1 is correct.
• The beneficiary has an option to avail connection with 14.2 kg or 5 kg cylinder.
• The existing beneficiary with a 14.2 kg LPG cylinder has an option to swap with a 5 kg cylinder also. Hence, statement 2 is correct.
• Under PMUY, a target to provide 8 crores new LPG connections has been achieved in September 2019, 7 months in advance of the target date of 31^st March 2020.

Structure Of India’s Debt

• India’s public debt-to- GDP has been significantly low compared to high global debt levels. A cross-country comparison of debt levels points out that for India, the government debt level as a proportion of GDP is equal to the median in the group of G-20 OECD countries and in the group of BRICS nations.
• India’s overall debt levels as a percent of GDP are the lowest amongst the group of G-20 OECD countries and also among the group of BRICS nations. Hence, statement 1 is not correct.
• Moreover, public debt and overall debt level for India has declined since 2003 and has been stable since 2011.
• The Government’s debt portfolio is characterized by very low foreign exchange risk as the external debt is only 2.7 percent of GDP (5.9 per cent of total Central Government liabilities). Hence, statement 2 is correct.
• Of the total public debt, 70 per cent is held by the Centre and 30 percent by the states. Hence, statement 3 is correct.

Poverty Reduction and Development

• The World Bank (2000) has found that India could have achieved a sustained decline in poverty during the 1970s-1990s only when the GDP growth picked up from 3.5 per cent in the initial years.
• Evidence from 80 countries demonstrated that in medium to long run, growth in average incomes contributed to 66-90 percent of the variations in changes in poverty.
• Many researchers have found that growth reduced poverty, and the association has acquired more strength after the 1991 reforms. The pattern of growth has changed significantly after 1991. Poverty is concentrating more and more in urban areas, as now one-in-three poor people are living in urban areas, which was about one-in-eight in the early 1950s. Hence, statement 1 is correct.
• In the post-liberalisation period urban growth and non-agricultural growth has emerged as a major driver of national poverty reduction including rural poverty. Hence, statement 2 is correct.

• The Ministry of Corporate Affairs (MCA) launched the Simplified Proforma for Incorporating Company Electronically Plus (SPICe+) web form. Hence, statement 1 is NOT correct.
  (i) The SPICe+ form replaced the existing SPICe form.
  (ii) SPICe was launched in 2016 and is a single form for multiple services for incorporation of a company.
• SPICe+ has two parts:
  (i) Part A for name reservation for new companies and
  (ii) Part B offers a bunch of services including incorporation, Director Identification Number (DIN) allotment, mandatory issue of Permanent Account Number (PAN), besides allotment of Goods and Service Tax Identification Number - GSTIN (if applied for). Hence, statement 2 is correct.

• Regulatory forbearance for banks involves relaxing the norms for restructuring assets, where restructured assets were no longer required to be classified as Non-Performing Assets (NPAs) and therefore did not require the levels of provisioning that NPAs attract. Hence, statement 2 is NOT correct.
• The Forbearance prevents spillover of the failures in the financial sector to the real sector, thereby avoiding a deepening of the crisis. Hence, statement 1 is correct.

• The Commerce and Industry Ministry has launched the national GIS-enabled land bank system, which will help investors to get real-time information about the availability of industrial land and resources. Hence, option (c) is correct.
• The system is being developed by integrating the Industrial Information System (IIS) with state GIS (Geographic Information System).
• The IIS portal is a GIS-enabled database of industrial areas/clusters across the states.
• The Land Bank System could eliminate the need for investors to visit multiple platforms/offices to gather information and obtain clearances from different stakeholders.

• The primary sector in India (agriculture and mining sectors) contributes around 16% of Gross Value Added (GVA) while it employs around 43% of the workforce. Hence, statement 1 is correct and statement 2 is NOT correct.
• India’s GDP is estimated to contract by 7.7% in the Financial Year (FY) 2020-21, composed of a sharp 15.7% decline in the first half and a modest 0.1% fall in the second half.
• Sector-wise, agriculture has remained the silver lining while contact-based services, manufacturing, construction were hit hardest, and have been recovering steadily.
• The external sector provided an effective cushion to growth with India recording a Current Account Surplus of 3.1% of GDP in the first half of FY 2020-21.

• A program for multi-mode access to digital/online education will be launched under the PM eVIDYA program. Hence, statement 1 is correct.
• The programme consists of:
  (i) DIKSHA for school education in states/UTs: e-content and QR coded Energized Textbooks for all grades (one nation, one digital platform)
  (ii) One earmarked TV channel per class from 1 to 12 (one class, one channel)
  (iii) Extensive use of Radio, Community radio and Podcasts.
  (iv) Special e-content for visually and hearing impaired. Hence, statement 2 is correct.
  (v) Top 100 universities will be permitted to automatically start online courses by 30th May, 2020.

• National Health Authority (NHA) is the apex body responsible for implementing India's flagship public health insurance/assurance scheme called “Ayushman Bharat Pradhan Mantri Jan Arogya Yojana”. Hence, option (a) is correct.
• NHA has been set-up to implement the PM-JAY at the national level. In the States, SHAs or State Health Agencies in the form of a society/trust have been set up with full operational autonomy over the implementation of this scheme including extending the coverage to non SECC beneficiaries.

• The government’s fiscal deficit has increased to Rs. 11.58 lakh crore or 145.5% of the Budget Estimate (BE) at the end of December 2020 (accounting for the first nine months of the year 2020-21) mainly on account of lower revenue realisation.
• A high fiscal deficit can also be good for the economy if the money spent goes into the creation of productive assets like highways, roads, ports and airports that boost economic growth and result in job creation.
• The Fiscal Responsibility and Budget Management Act, 2003 provides that the Centre should take appropriate measures to limit the fiscal deficit upto 3% of the GDP by 31st March, 2021. Hence, statement 1 is correct.
• The NK Singh committee (set up in 2016) recommended that the government should target a fiscal deficit of 3% of the GDP in years up to 31st March, 2020, cut it to 2.8% in 2020-21 and to 2.5% by 2023.
  (i) The Finance Commission has constituted a committee under the chairmanship of NK Singh in order to create a roadmap for fiscal consolidation for the Center and the States. The Finance Commission submitted its first report to the Government of India in February 2020. Hence, statement 2 is correct.