Test: Current Affairs October 2020


12 Questions MCQ Test UPSC Mains: International Relations, Social Issues & others | Test: Current Affairs October 2020


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QUESTION: 1

Consider the following statements regarding Monetisation of the deficit.

1. Deficit monetisation means printing large sums of money and distributing it to the public.

2. The Monetisation of the deficit is not practised in India after 1991 Economic Reforms.

Which of the above statements is/are incorrect?

Solution: In layman's language, Monetisation of deficit means printing more money. In other words, Monetisation of deficit happens when RBI buys government securities directly from the primary market to fund the Government's expenses.

The Monetisation of the deficit was in practice in India until 1997, whereby the central Bank automatically monetised government deficit through ad-hoc treasury bills.

What is helicopter money? : This is an unconventional monetary policy tool aimed at bringing a flagging economy back on track. It involves printing large sums of money and distributing it to the public. Under such a policy, a central bank "directly increase the money supply and, via the government, distribute the new cash to the population to boost demand and inflation."

QUESTION: 2

Which of the following are recognised as "Three Sisters" under the Sanitary and Phytosanitary Measures (SPS) Agreement of the World Trade Organization (WTO)?

1. International Plant Protection Convention (IPPC)

2. Codex Alimentarius Commission

3. Pacific Plant Protection Organization

4. World Organization for Animal Health (OIE)

Select the correct answer code:

Answer: b

Solution:

The International Plant Protection Convention (IPPC) is one of the "Three Sisters" recognised by the World Trade Organization's (WTO) Sanitary and Phytosanitary Measures (SPS) Agreement, along with the Codex Alimentarius Commission for food safety standards and the World Organization for Animal Health (OIE) for animal health standards.

 

 

 

QUESTION: 3

Consider the following statements regarding the Bank for International Settlements (BIS).

1. The Bank for International Settlements (BIS), jointly owned by the World Bank and the International Monetary Fund, is an international financial institution.

2. It offers banking services, but only to central banks and other foreign organisations.

Which of the above statements is/are incorrect?

Solution: The Bank for International Settlements (BIS) is an international financial institution owned by central banks that "fosters international monetary and financial cooperation and serves as a bank for central banks". The BIS carries out its work through its meetings, programmes and through the Basel Process - hosting international groups pursuing global financial stability and facilitating their interaction.

It also provides banking services, but only to central banks and other international organisations. It is based in Basel, Switzerland.

QUESTION: 4

Consider the following statements regarding Open Credit Enablement Network (OCEN).

1. The Open Credit Enabling Network is a new credit protocol infrastructure that will link lenders and marketplaces.

2. It will help small businesses and entrepreneurs get loans.

3. National Payments Corporation of India builds it.

Which of the above statements is/are correct?

Solution: Open Credit Enablement Network (OCEN), a credit protocol infrastructure built by the Indian Software Product Industry Roundtable (iSpirt), a think-tank of the software industry, will democratise the lending ecosystem.

OECN as a credit rail will have a common language and connecting lenders and marketplaces, allowing them to create innovative credit products and services on top of it.

It will democratise credit in the country, helping small businesses and entrepreneurs get loans.

QUESTION: 5

Consider the following statements regarding AT-1 bonds.

1. AT-1 bonds are unsecured, high-risk bonds that banks issue to shore up their core capital base to meet the Basel III norms.

2. As per the latest norms, banks can issue these bonds only on electronic platforms, and only institutional investors could subscribe to them.

3. As per RBI guidelines, Banks cannot skip paying interest on these bonds even if their capital ratios fall below a certain threshold level.

Which of the above statements is/are correct?

Solution: AT-1 bonds are unsecured, perpetual, high-risk bonds that banks issue to shore up their core capital base to meet the Basel III norms. Banks can skip paying interest on these bonds if their capital ratios fall below a certain threshold level.

Market regulator Securities and Exchange Board of India (Sebi) tightened its regulations of additional tier-1 bonds or AT-1 bonds and ensured that these risky instruments are less accessible to retail investors.

As per the latest norms, banks can issue these bonds only on an electronic platform, and only institutional investors could subscribe to them. Minimum allotment for these bonds is set at 1 cr

"These instruments have certain unique features which, inter-alia, grant the issuer (i.e. banks, in consultation with RBI) a discretion in terms of writing down the principal/interest, to skip interest payments, to make an early recall etc. without the commensurate right for investors to legal recourse, even if such actions of the issuer might result in a potential loss to investors,"

"The absolute right, given to the RBI, to direct a bank to write down the entire value of its outstanding AT1 instruments/bonds, if it thinks the Bank has passed the Point of Non-Viability (PONV) or requires a public sector capital infusion to remain a going concern.

QUESTION: 6

Consider the following statements regarding Geographical indication (GI).

1. The right to a geographical indication allows those who have the right to use the indication to prohibit the indication by a third party whose product is not consistent with the relevant requirements.

2. A protected geographical indication does not allow the holder to stop anyone from using the same techniques as those set out in the criteria for that indication to produce a product.

3. Since industrial products are machine made, Geographical indications cannot be used for industrial products.

Which of the above statements is/are correct?

Solution: A geographical indication right enables those who have the right to use the indication to prevent its use by a third party whose product does not conform to the applicable standards. 

For example, in the jurisdictions in which the Darjeeling geographical indication is protected, Darjeeling tea producers can exclude the term "Darjeeling" for tea not grown in their tea gardens or not produced to the standards set out in the code of practice for the geographical indication.

However, a protected geographical indication does not enable the holder to prevent someone from making a product using the same techniques as those set out in the standards for that indication. 

Protection for a geographical indication is usually obtained by acquiring a right over the sign that constitutes the indication. Geographical indications are typically used for agricultural products, foodstuffs, wine and spirit drinks, handicrafts, and industrial products.

How long is the registration of Geographical Indication valid?

The registration of a geographical indication is valid for a period of 10 years.

It can be renewed from time to time for a further period of 10 years each.

QUESTION: 7

Consider the following statements regarding the New Development Bank (NDB).

1. New Development Bank is a multilateral development bank established by the BRICS states during Second BRICS Summit.

2. The Bank shall support public or private projects through loans, guarantees and equity participation and also provide technical assistance for projects to be supported by the Bank.

3. The initial subscribed capital of the Bank was equally distributed among the founding members.

Which of the above statements is/are correct?

Solution: The New Development Bank (NDB), formerly referred to as the BRICS Development Bank, is a multilateral development bank established by the BRICS states. According to the Agreement on the NDB, "the Bank shall support public or private projects through loans, guarantees, equity participation and other financial instruments." Moreover, the NDB "shall cooperate with international organisations and other financial entities, and provide technical assistance for projects to be supported by the Bank."

It was established in 2014, at the 6th BRICS Summit at Fortaleza, Brazil.

The Bank's initial authorised capital is $100 billion divided into 1 million shares having a par value of $100,000 each. The initial subscribed capital of the NDB is $50 billion divided into paid-in shares ($10 billion) and callable shares ($40 billion). The initial subscribed capital of the Bank was equally distributed among the founding members. The Agreement on the NDB specifies that every member will have one vote no one would have any veto powers.

QUESTION: 8

Consider the following statements regarding the Asian Development Bank (ADB).

1. Asian Development Bank (ADB) is a regional development bank dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth.

2. The Bank admits the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) and non-regional developed countries.

3. The ADB was modelled closely on the New Development Bank, where the Bank's initial subscribed capital was equally distributed among the founding members.

Which of the above statements is/are correct?

(b)1 and 2 only

Solution: About ADB

(i) It is a regional development bank.

(ii) Established on 19 December 1966.

(iii) headquartered — Manila, Philippines.

(iv) Official United Nations Observer.

The Bank admits the members of the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP, formerly the Economic Commission for Asia and the Far East or ECAFE) and non-regional developed countries.

ADB now has 68 members, 49 from within Asia.

It is modelled closely on the World Bank and has a similar weighted voting system where votes are distributed in proportion with members' capital subscriptions.

As of 31 December 2019, ADB's five largest shareholders are Japan and the United States (each with 15.6% of total shares), the People's Republic of China (6.4%), India (6.3%), and Australia (5.8%).

Roles and functions:

Dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration.

This is carried out through investments - in the form of loans, grants and information sharing - in infrastructure, health care services, financial and public administration systems, helping nations prepare for the impact of climate change or better manage their natural resources, as well as other areas.

QUESTION: 9

Consider the following statements regarding the Coal Sector in India.

1. Coal Mines (Special Provisions) Act, 2015 permits the Government to auction coal mines to the private sector for both captive and Commercial purposes.

2. Coal Mines (Special Provisions) Act, 2015 extends to the whole of India.

3. India allows 100% FDI in the coal sector.

Which of the above statements is/are incorrect?

Solution: The objective of Coal Mines (Special Provisions) Act, 2015 is to empower the Government to allocate the coal mines based on competitive bidding to ensure continuity in coal mining operations and promote optimum utilisation of coal resources.

The Coal Mines (Special Provisions) Act, 2015, permits the Government to auction coal mines to the private sector for captive and commercial purposes. The Government has auctioned 24 coal blocks to private companies till March 2019 and will be further auctioning coal blocks for commercial mining by both Indian and foreign companies.

This act extends to the whole of India.

QUESTION: 10

Consider the following statements regarding International Financial Services Centres Authority.

1. International Financial Services Centres Authority is a statutory regulatory body under the Department of Economic Affairs to regulate all financial services in International Financial Services Centres (IFSCs) in the country.

2. The authority exercises the powers of RBI in respect of financial services performed in the international financial services centres in the country.

3. IFSCA has members each nominated from RBI, IRDAI, SEBI and PFRDA.

Which of the above statements is/are correct?

Solution: About the International Financial Services Centres Authority

(i) It is a statutory body established in 2020.

(ii) It works under the Department of Economic Affairs, Ministry of Finance.

(iii)Headquartered in Gandhinagar, Gujarat.

The Authority will function as a unified regulator and is empowered to exercise the powers of RBI, SEBI, IRDAI and PFRDA in respect of financial services, financial products and financial institutions performed/located in the international financial services centres in the country.

Besides the Chairman, IFSCA has a member each nominated from RBI, IRDAI, SEBI and PFRDA. There are also two members from the Central Government and full-time or part-time members in the Authority.

QUESTION: 11

In India, the sectors where FDI is not allowed are:

1. Investment in Chit Funds

2. Tobacco industry

3. All Agricultural or Plantation Activities

4. Satellite and its associated activities 

Select the correct answer code:

Solution: Sectors in the Indian economy where FDI is not allowed are

(i) Atomic Energy Generation

(ii) Cigars, Cigarettes, or any related tobacco industry

(iii) Lotteries (online, private, government, etc.)

(iv) Investment in Chit Funds

(v) Agricultural or Plantation Activities (although there are many exceptions like horticulture, fisheries, tea plantations, Pisciculture, animal husbandry, etc.)

(vi) Housing and Real Estate (except townships, commercial projects, etc.)

(vii) Trading in TDR's (Transferable development rights)

(viii) Any Gambling or Betting businesses

QUESTION: 12

Consider the following statements regarding Government Security (G-Sec) and Treasury Bills (T-bills).

1. In India, the Central Government issues both, treasury bills and bonds or dated securities while the State Governments issue only bonds or dated securities, which are called the State Development Loans (SDLs).

2. They are not available for small and retail investors.

Which of the above statements is/are incorrect?

Solution: What is Government Security (G-Sec)?

A Government Security (G-Sec) is a tradeable instrument issued by the Central Government or the State Governments. It acknowledges the Government's debt obligation. Such securities are short term (usually called treasury bills, with original maturities of less than one year) or long term (usually called Government bonds or dated securities with an original maturity of one year or more). In India, the Central Government issues both, treasury bills and bonds or dated securities while the State Governments issue only bonds or dated securities.

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