Test: Verbal Ability- 2


28 Questions MCQ Test Mock Test Series for CLAT 2021 | Test: Verbal Ability- 2


Description
This mock test of Test: Verbal Ability- 2 for CLAT helps you for every CLAT entrance exam. This contains 28 Multiple Choice Questions for CLAT Test: Verbal Ability- 2 (mcq) to study with solutions a complete question bank. The solved questions answers in this Test: Verbal Ability- 2 quiz give you a good mix of easy questions and tough questions. CLAT students definitely take this Test: Verbal Ability- 2 exercise for a better result in the exam. You can find other Test: Verbal Ability- 2 extra questions, long questions & short questions for CLAT on EduRev as well by searching above.
QUESTION: 1

Images are the core of society today; they have become the means of massive communication and, therefore, the essence of daily life. Humans have become homus photographicus. Almost every person has a camera, whether it is in a cellphone, iPad, tablet, point and shoot or any other device. People have learned to express emotions, ideas and concepts through images regardless of its complexity. Photos may be digital images but not every image is a photograph. In general, the image is defined as a figure, the representation of something. That is, the copy of an object, a mental representation is subject to cognition and interpretation.
The material images, under their production scheme, are prone to depict the world on a canvas, the medium determines how people look, read, sing and tell stories. Additionally, the narratives are considered to be truthful because, in order to photograph an object, it has to exist; it has a referent, contrary to painting, where the artist may create chimeras based on imagination. Nonetheless, the veracity of a picture may be questioned since it could be staged or transformed into something else, even something that is not as it appears in reality. For example, a portrait may be an idealistic version of a person, an alter ego or simply not the subject as known in daily life. To illustrate further, the case of Hippolyte Bayard becomes interesting to mention. In 1840, Bayard photographed himself as a drowned man, and people who saw the picture believed it was real. At the time, these images were believed to be real because a mechanic device, a camera, had taken them. In this way, Bayard created an alternative reality, where he was found dead.

What is the most important message conveyed by the passage?

Solution:

The author begins the passage by citing the importance of photographs in today’s life. In the second paragraph, the author mentions that a photograph may not always represent reality. Hence, photographs are a fallacy of reality. So, option (c) is correct.

QUESTION: 2

Images are the core of society today; they have become the means of massive communication and, therefore, the essence of daily life. Humans have become homus photographicus. Almost every person has a camera, whether it is in a cellphone, iPad, tablet, point and shoot or any other device. People have learned to express emotions, ideas and concepts through images regardless of its complexity. Photos may be digital images but not every image is a photograph. In general, the image is defined as a figure, the representation of something. That is, the copy of an object, a mental representation is subject to cognition and interpretation.
The material images, under their production scheme, are prone to depict the world on a canvas, the medium determines how people look, read, sing and tell stories. Additionally, the narratives are considered to be truthful because, in order to photograph an object, it has to exist; it has a referent, contrary to painting, where the artist may create chimeras based on imagination. Nonetheless, the veracity of a picture may be questioned since it could be staged or transformed into something else, even something that is not as it appears in reality. For example, a portrait may be an idealistic version of a person, an alter ego or simply not the subject as known in daily life. To illustrate further, the case of Hippolyte Bayard becomes interesting to mention. In 1840, Bayard photographed himself as a drowned man, and people who saw the picture believed it was real. At the time, these images were believed to be real because a mechanic device, a camera, had taken them. In this way, Bayard created an alternative reality, where he was found dead.

According to the passage, images have taken center stage in today’s society because

Solution:

Refer to the first sentence of the passage where the author uses the word ‘therefore’ to signify why images play such a pivotal role in our lives today. So, option (b) is the correct answer.

QUESTION: 3

Images are the core of society today; they have become the means of massive communication and, therefore, the essence of daily life. Humans have become homus photographicus. Almost every person has a camera, whether it is in a cellphone, iPad, tablet, point and shoot or any other device. People have learned to express emotions, ideas and concepts through images regardless of its complexity. Photos may be digital images but not every image is a photograph. In general, the image is defined as a figure, the representation of something. That is, the copy of an object, a mental representation is subject to cognition and interpretation.
The material images, under their production scheme, are prone to depict the world on a canvas, the medium determines how people look, read, sing and tell stories. Additionally, the narratives are considered to be truthful because, in order to photograph an object, it has to exist; it has a referent, contrary to painting, where the artist may create chimeras based on imagination. Nonetheless, the veracity of a picture may be questioned since it could be staged or transformed into something else, even something that is not as it appears in reality. For example, a portrait may be an idealistic version of a person, an alter ego or simply not the subject as known in daily life. To illustrate further, the case of Hippolyte Bayard becomes interesting to mention. In 1840, Bayard photographed himself as a drowned man, and people who saw the picture believed it was real. At the time, these images were believed to be real because a mechanic device, a camera, had taken them. In this way, Bayard created an alternative reality, where he was found dead.

As per the passage, which of the following can possibly be a limitation of a photographic image?

Solution:

In the second paragraph, the author says that a photographic image can be staged and gives the example of Bayard to support his statement. So, option (d) can be said to be a limitation of a photographic image. Option (a) is incorrect since it is a limitation of photography and not a photographic image. Options (b) and (c) are not limitations.

QUESTION: 4

Images are the core of society today; they have become the means of massive communication and, therefore, the essence of daily life. Humans have become homus photographicus. Almost every person has a camera, whether it is in a cellphone, iPad, tablet, point and shoot or any other device. People have learned to express emotions, ideas and concepts through images regardless of its complexity. Photos may be digital images but not every image is a photograph. In general, the image is defined as a figure, the representation of something. That is, the copy of an object, a mental representation is subject to cognition and interpretation.
The material images, under their production scheme, are prone to depict the world on a canvas, the medium determines how people look, read, sing and tell stories. Additionally, the narratives are considered to be truthful because, in order to photograph an object, it has to exist; it has a referent, contrary to painting, where the artist may create chimeras based on imagination. Nonetheless, the veracity of a picture may be questioned since it could be staged or transformed into something else, even something that is not as it appears in reality. For example, a portrait may be an idealistic version of a person, an alter ego or simply not the subject as known in daily life. To illustrate further, the case of Hippolyte Bayard becomes interesting to mention. In 1840, Bayard photographed himself as a drowned man, and people who saw the picture believed it was real. At the time, these images were believed to be real because a mechanic device, a camera, had taken them. In this way, Bayard created an alternative reality, where he was found dead.

Which of the following is true in the context of the passage?

Solution:

Refer to the last sentence where the author mentions that Bayard created an alternative reality or alter ego through his photograph. So, option (b) is correct. Option (a) is wrong because the author mentions in the second paragraph that in a painting, an artist may give shapes to his fancies or draw a subject that is present. Thus, it cannot be inferred that a painting is always a reflection of the artist’s imagination. Option (c) can be negated from the first sentence of the second paragraph. Option (d) is incorrect. The option means that people intentionally express emotions when being photographed. However, this is not true. Refer to the line “People have learnt to express emotions... ” What the sentence means is that the person taking the photograph expresses his emotions, etc. through the pictures he takes. In other words, the pictures reflect the emotions, ideas and concepts of the person taking the picture.

QUESTION: 5

Images are the core of society today; they have become the means of massive communication and, therefore, the essence of daily life. Humans have become homus photographicus. Almost every person has a camera, whether it is in a cellphone, iPad, tablet, point and shoot or any other device. People have learned to express emotions, ideas and concepts through images regardless of its complexity. Photos may be digital images but not every image is a photograph. In general, the image is defined as a figure, the representation of something. That is, the copy of an object, a mental representation is subject to cognition and interpretation.
The material images, under their production scheme, are prone to depict the world on a canvas, the medium determines how people look, read, sing and tell stories. Additionally, the narratives are considered to be truthful because, in order to photograph an object, it has to exist; it has a referent, contrary to painting, where the artist may create chimeras based on imagination. Nonetheless, the veracity of a picture may be questioned since it could be staged or transformed into something else, even something that is not as it appears in reality. For example, a portrait may be an idealistic version of a person, an alter ego or simply not the subject as known in daily life. To illustrate further, the case of Hippolyte Bayard becomes interesting to mention. In 1840, Bayard photographed himself as a drowned man, and people who saw the picture believed it was real. At the time, these images were believed to be real because a mechanic device, a camera, had taken them. In this way, Bayard created an alternative reality, where he was found dead.

What is meant by the word ‘chimera’?

Solution:

‘Chimera’ refers to something that exists only in the imagination and is not possible in reality. So, option (d) is the answer.

QUESTION: 6

The Writ Jurisdiction of Supreme Court can be invoked under Article 32 of the Constitution for the violation of fundamental rights guaranteed under Part - III of the Constitution. Any provision in any Constitution for Fundamental Rights is meaningless unless there are adequate safeguards to ensure enforcement of such provisions. Since the reality of such rights is tested only through the judiciary, the safeguards assume even more importance. In addition, enforcement also depends upon the degree of independence of the Judiciary and the availability of relevant instruments with the executive authority. Indian Constitution, like most of Western Constitutions, lays down certain provisions to ensure the enforcement of Fundamental Rights. However, Article 32 is referred to as the “Constitutional Remedy” for enforcement of Fundamental Rights. This provision itself has been included in the Fundamental Rights and hence it cannot be denied to any person. Dr. B. R. Ambedkar described Article 32 as the most important one, without which the Constitution would be reduced to nullity. It is also referred to as the heart and soul of the Constitution. By including Article 32 in the Fundamental Rights, the Supreme Court has been made the protector and guarantor of these Rights. An application made under Article 32 of the Constitution before the Supreme Court, cannot be refused on technical grounds. In addition to the prescribed five types of writs, the Supreme Court may pass any other appropriate order. Moreover, only the questions pertaining to the Fundamental Rights can be determined in proceedings against Article 32. Under Article 32, the Supreme Court may issue a Writ against any person or government within the territory of India. Where the infringement of a Fundamental Right has been established, the Supreme Court cannot refuse relief on the ground that the aggrieved person may have remedy before some other court or under the ordinary law.
The relief can also not be denied on the ground that the disputed facts have to be investigated or some evidence has to be collected. Even if an aggrieved person has not asked for a particular Writ, the Supreme Court, after considering the facts and circumstances, may grant the appropriate Writ and may even modify it to suit the exigencies of the case. Normally, only the aggrieved person is allowed to move the Court. But it has been held by the Supreme Court that in social or public interest matters, any one may move the Court. A Public Interest Litigation can be filed before the Supreme Court under Article 32 of the Constitution or before the High Court of a State under Article 226 of the Constitution under their respective Writ Jurisdictions.

The main purpose of the passage is to

Solution:

The passage is primarily concerned with telling us about article 32. It does talk about the Supreme Court and Fundamental Rights, but the primary emphasis is on article 32. Hence, option (a) is the correct choice.

QUESTION: 7

The Writ Jurisdiction of Supreme Court can be invoked under Article 32 of the Constitution for the violation of fundamental rights guaranteed under Part - III of the Constitution. Any provision in any Constitution for Fundamental Rights is meaningless unless there are adequate safeguards to ensure enforcement of such provisions. Since the reality of such rights is tested only through the judiciary, the safeguards assume even more importance. In addition, enforcement also depends upon the degree of independence of the Judiciary and the availability of relevant instruments with the executive authority. Indian Constitution, like most of Western Constitutions, lays down certain provisions to ensure the enforcement of Fundamental Rights. However, Article 32 is referred to as the “Constitutional Remedy” for enforcement of Fundamental Rights. This provision itself has been included in the Fundamental Rights and hence it cannot be denied to any person. Dr. B. R. Ambedkar described Article 32 as the most important one, without which the Constitution would be reduced to nullity. It is also referred to as the heart and soul of the Constitution. By including Article 32 in the Fundamental Rights, the Supreme Court has been made the protector and guarantor of these Rights. An application made under Article 32 of the Constitution before the Supreme Court, cannot be refused on technical grounds. In addition to the prescribed five types of writs, the Supreme Court may pass any other appropriate order. Moreover, only the questions pertaining to the Fundamental Rights can be determined in proceedings against Article 32. Under Article 32, the Supreme Court may issue a Writ against any person or government within the territory of India. Where the infringement of a Fundamental Right has been established, the Supreme Court cannot refuse relief on the ground that the aggrieved person may have remedy before some other court or under the ordinary law.
The relief can also not be denied on the ground that the disputed facts have to be investigated or some evidence has to be collected. Even if an aggrieved person has not asked for a particular Writ, the Supreme Court, after considering the facts and circumstances, may grant the appropriate Writ and may even modify it to suit the exigencies of the case. Normally, only the aggrieved person is allowed to move the Court. But it has been held by the Supreme Court that in social or public interest matters, any one may move the Court. A Public Interest Litigation can be filed before the Supreme Court under Article 32 of the Constitution or before the High Court of a State under Article 226 of the Constitution under their respective Writ Jurisdictions.

All of the following can be inferred from the passage except :-

Solution:

Refer to the line, “An application made under Article 32...technical grounds.” This line does not suggest that an application made under Article 32 of the Constitution before the Supreme Court, cannot be refused under any circumstances as the given line only mentions technical grounds. All the other options can be deduced from the passage.

QUESTION: 8

The Writ Jurisdiction of Supreme Court can be invoked under Article 32 of the Constitution for the violation of fundamental rights guaranteed under Part - III of the Constitution. Any provision in any Constitution for Fundamental Rights is meaningless unless there are adequate safeguards to ensure enforcement of such provisions. Since the reality of such rights is tested only through the judiciary, the safeguards assume even more importance. In addition, enforcement also depends upon the degree of independence of the Judiciary and the availability of relevant instruments with the executive authority. Indian Constitution, like most of Western Constitutions, lays down certain provisions to ensure the enforcement of Fundamental Rights. However, Article 32 is referred to as the “Constitutional Remedy” for enforcement of Fundamental Rights. This provision itself has been included in the Fundamental Rights and hence it cannot be denied to any person. Dr. B. R. Ambedkar described Article 32 as the most important one, without which the Constitution would be reduced to nullity. It is also referred to as the heart and soul of the Constitution. By including Article 32 in the Fundamental Rights, the Supreme Court has been made the protector and guarantor of these Rights. An application made under Article 32 of the Constitution before the Supreme Court, cannot be refused on technical grounds. In addition to the prescribed five types of writs, the Supreme Court may pass any other appropriate order. Moreover, only the questions pertaining to the Fundamental Rights can be determined in proceedings against Article 32. Under Article 32, the Supreme Court may issue a Writ against any person or government within the territory of India. Where the infringement of a Fundamental Right has been established, the Supreme Court cannot refuse relief on the ground that the aggrieved person may have remedy before some other court or under the ordinary law.
The relief can also not be denied on the ground that the disputed facts have to be investigated or some evidence has to be collected. Even if an aggrieved person has not asked for a particular Writ, the Supreme Court, after considering the facts and circumstances, may grant the appropriate Writ and may even modify it to suit the exigencies of the case. Normally, only the aggrieved person is allowed to move the Court. But it has been held by the Supreme Court that in social or public interest matters, any one may move the Court. A Public Interest Litigation can be filed before the Supreme Court under Article 32 of the Constitution or before the High Court of a State under Article 226 of the Constitution under their respective Writ Jurisdictions.

According to the passage, article 32 has which of the following characteristics?
A. it is used for enforcement of fundamental rights.
B. The Supreme Court may issue a writ against any person or government of India.
C. Article 32 defines a fundamental right.

Solution:

A and B are mentioned in the passage. It is mentioned that article 32 refers to the “Constitutional Remedy” for the enforcement of the Fundamental Rights and is in itself a Fundamental Right. Hence, option (d) is correct.

QUESTION: 9

The Writ Jurisdiction of Supreme Court can be invoked under Article 32 of the Constitution for the violation of fundamental rights guaranteed under Part - III of the Constitution. Any provision in any Constitution for Fundamental Rights is meaningless unless there are adequate safeguards to ensure enforcement of such provisions. Since the reality of such rights is tested only through the judiciary, the safeguards assume even more importance. In addition, enforcement also depends upon the degree of independence of the Judiciary and the availability of relevant instruments with the executive authority. Indian Constitution, like most of Western Constitutions, lays down certain provisions to ensure the enforcement of Fundamental Rights. However, Article 32 is referred to as the “Constitutional Remedy” for enforcement of Fundamental Rights. This provision itself has been included in the Fundamental Rights and hence it cannot be denied to any person. Dr. B. R. Ambedkar described Article 32 as the most important one, without which the Constitution would be reduced to nullity. It is also referred to as the heart and soul of the Constitution. By including Article 32 in the Fundamental Rights, the Supreme Court has been made the protector and guarantor of these Rights. An application made under Article 32 of the Constitution before the Supreme Court, cannot be refused on technical grounds. In addition to the prescribed five types of writs, the Supreme Court may pass any other appropriate order. Moreover, only the questions pertaining to the Fundamental Rights can be determined in proceedings against Article 32. Under Article 32, the Supreme Court may issue a Writ against any person or government within the territory of India. Where the infringement of a Fundamental Right has been established, the Supreme Court cannot refuse relief on the ground that the aggrieved person may have remedy before some other court or under the ordinary law.
The relief can also not be denied on the ground that the disputed facts have to be investigated or some evidence has to be collected. Even if an aggrieved person has not asked for a particular Writ, the Supreme Court, after considering the facts and circumstances, may grant the appropriate Writ and may even modify it to suit the exigencies of the case. Normally, only the aggrieved person is allowed to move the Court. But it has been held by the Supreme Court that in social or public interest matters, any one may move the Court. A Public Interest Litigation can be filed before the Supreme Court under Article 32 of the Constitution or before the High Court of a State under Article 226 of the Constitution under their respective Writ Jurisdictions.

What is the tone of the author?

Solution:

The author has stated various facts and figures in a factual/objective tone. He neither expresses his opinions nor analyzes the issue. Thus, option (d) is the correct choice.

QUESTION: 10

The Writ Jurisdiction of Supreme Court can be invoked under Article 32 of the Constitution for the violation of fundamental rights guaranteed under Part - III of the Constitution. Any provision in any Constitution for Fundamental Rights is meaningless unless there are adequate safeguards to ensure enforcement of such provisions. Since the reality of such rights is tested only through the judiciary, the safeguards assume even more importance. In addition, enforcement also depends upon the degree of independence of the Judiciary and the availability of relevant instruments with the executive authority. Indian Constitution, like most of Western Constitutions, lays down certain provisions to ensure the enforcement of Fundamental Rights. However, Article 32 is referred to as the “Constitutional Remedy” for enforcement of Fundamental Rights. This provision itself has been included in the Fundamental Rights and hence it cannot be denied to any person. Dr. B. R. Ambedkar described Article 32 as the most important one, without which the Constitution would be reduced to nullity. It is also referred to as the heart and soul of the Constitution. By including Article 32 in the Fundamental Rights, the Supreme Court has been made the protector and guarantor of these Rights. An application made under Article 32 of the Constitution before the Supreme Court, cannot be refused on technical grounds. In addition to the prescribed five types of writs, the Supreme Court may pass any other appropriate order. Moreover, only the questions pertaining to the Fundamental Rights can be determined in proceedings against Article 32. Under Article 32, the Supreme Court may issue a Writ against any person or government within the territory of India. Where the infringement of a Fundamental Right has been established, the Supreme Court cannot refuse relief on the ground that the aggrieved person may have remedy before some other court or under the ordinary law.
The relief can also not be denied on the ground that the disputed facts have to be investigated or some evidence has to be collected. Even if an aggrieved person has not asked for a particular Writ, the Supreme Court, after considering the facts and circumstances, may grant the appropriate Writ and may even modify it to suit the exigencies of the case. Normally, only the aggrieved person is allowed to move the Court. But it has been held by the Supreme Court that in social or public interest matters, any one may move the Court. A Public Interest Litigation can be filed before the Supreme Court under Article 32 of the Constitution or before the High Court of a State under Article 226 of the Constitution under their respective Writ Jurisdictions.

What is the correct meaning of the word ‘infringement’?

Solution:

Violation means a failure to uphold the requirements of law, duty, or obligation. Thus, violation is the correct word.

QUESTION: 11

India’s delicately balanced current account wouldn’t be the only major casualty of costlier crude oil: Local travelers now have to pay more to fly within the country as expensive jet fuel propels airlines to raise domestic fares that had tracked global energy prices to plunge to record lows last year.
Higher consumer fares in January reflect the persistent rise in aviation-fuel prices, which increased 8% on-month in November at the New Delhi airport, the country’s busiest. After a brief lull in December, prices firmed in January and February, breaching the levels of 2015 when the cycle of declines began.
The trend has led carriers to pass additional fuel costs on to consumers, many of whom switched to airlines after the gap between air and upper-class train fares narrowed in 2016. A senior executive at Jet Airways, India’s second-biggest airline by market share, said that the airline has recently revived the practice of levying a fuel surcharge - a fare component linked to movements in jet fuel prices - on domestic flights.
“We used to charge between Rs 100 and Rs 300 depending on short- and long haul sectors. Now we charge as much as Rs 700,” he added. Jet-fuel is the biggest cost item for Indian carriers.
Prices of petroleum products began rising since the spring after the 2015-16 winter witnessed record lows for crude oil, with global prices breaching $30 a barrel on their way down to levels not seen since the 1980s. However, after a period of consolidation that analysts believed would have put many shale oil producers out of business, global crude oil prices began firming and have now stabilized around $55 a barrel, a level that some believe would be maintained over the medium term. Airlines had clubbed fuel surcharge with the base fare component in 2015 after an advisory from the Directorate General of Civil Aviation, the country’s aviation regulator. No-frills carrier SpiceJet has separated the two components over the last six months, although the fuel surcharge hasn’t been increased yet, said a spokesperson.
Travel company executives said overall fares have increased in January. According to data on Makemytrip, the country’s biggest online travel portal, average fares dropped in November and December but rose in January. Ticket prices for the Delhi-Mumbai sector rose to Rs 4,266 in January, compared with Rs 3,908 the same month last year, Rs 4,914 on the Mumbai- Bangalore sector compared with Rs 4,573 a year earlier, and Rs 4,473 on the Mumbai-Chennai route, compared with Rs 3,784 last January. Rival Cleartrip noticed divergent trends that showed those booking early stood to benefit. Last year, spot-booking fares too had fallen drastically.
“An analysis of the last three months of airfare data for the top 20 air travel sectors reveals that the increased cost to airlines, contributed by the fuel prices surge and the rupee’s depreciation, has resulted in a 15% increase in airfares for a booking window of 0-14 days,” said Samyukth Sridharan, president and chief operating officer of Cleartrip. “At the same time, we see that the airlines have been quite aggressive in offering deals to passengers who plan in advance, reflected in a 21% year on-year drop in fares on an average for travel bookings made over 14 days in advance.”
Last year, airlines had offered substantial discounts across sectors and made attractive offers for ticket-buyers who planned their travel in advance, resulting in lower yields. To be sure, the industry’s ability to charge more will depend on the direction in aviation fuel prices and seasonal changes in air-travel demand.
“February and March are lean months, and the airlines may not have room to increase so much. But there will be increases subsequently if jet fuel prices continue their climb,” said a senior executive of a budget carrier.

According to the passage, why have many passengers switched to air travel post 2016?

Solution:

Refer to the first sentence of the third paragraph where the answer is given. The other options are out of scope.

QUESTION: 12

India’s delicately balanced current account wouldn’t be the only major casualty of costlier crude oil: Local travelers now have to pay more to fly within the country as expensive jet fuel propels airlines to raise domestic fares that had tracked global energy prices to plunge to record lows last year.
Higher consumer fares in January reflect the persistent rise in aviation-fuel prices, which increased 8% on-month in November at the New Delhi airport, the country’s busiest. After a brief lull in December, prices firmed in January and February, breaching the levels of 2015 when the cycle of declines began.
The trend has led carriers to pass additional fuel costs on to consumers, many of whom switched to airlines after the gap between air and upper-class train fares narrowed in 2016. A senior executive at Jet Airways, India’s second-biggest airline by market share, said that the airline has recently revived the practice of levying a fuel surcharge - a fare component linked to movements in jet fuel prices - on domestic flights.
“We used to charge between Rs 100 and Rs 300 depending on short- and long haul sectors. Now we charge as much as Rs 700,” he added. Jet-fuel is the biggest cost item for Indian carriers.
Prices of petroleum products began rising since the spring after the 2015-16 winter witnessed record lows for crude oil, with global prices breaching $30 a barrel on their way down to levels not seen since the 1980s. However, after a period of consolidation that analysts believed would have put many shale oil producers out of business, global crude oil prices began firming and have now stabilized around $55 a barrel, a level that some believe would be maintained over the medium term. Airlines had clubbed fuel surcharge with the base fare component in 2015 after an advisory from the Directorate General of Civil Aviation, the country’s aviation regulator. No-frills carrier SpiceJet has separated the two components over the last six months, although the fuel surcharge hasn’t been increased yet, said a spokesperson.
Travel company executives said overall fares have increased in January. According to data on Makemytrip, the country’s biggest online travel portal, average fares dropped in November and December but rose in January. Ticket prices for the Delhi-Mumbai sector rose to Rs 4,266 in January, compared with Rs 3,908 the same month last year, Rs 4,914 on the Mumbai- Bangalore sector compared with Rs 4,573 a year earlier, and Rs 4,473 on the Mumbai-Chennai route, compared with Rs 3,784 last January. Rival Cleartrip noticed divergent trends that showed those booking early stood to benefit. Last year, spot-booking fares too had fallen drastically.
“An analysis of the last three months of airfare data for the top 20 air travel sectors reveals that the increased cost to airlines, contributed by the fuel prices surge and the rupee’s depreciation, has resulted in a 15% increase in airfares for a booking window of 0-14 days,” said Samyukth Sridharan, president and chief operating officer of Cleartrip. “At the same time, we see that the airlines have been quite aggressive in offering deals to passengers who plan in advance, reflected in a 21% year on-year drop in fares on an average for travel bookings made over 14 days in advance.”
Last year, airlines had offered substantial discounts across sectors and made attractive offers for ticket-buyers who planned their travel in advance, resulting in lower yields. To be sure, the industry’s ability to charge more will depend on the direction in aviation fuel prices and seasonal changes in air-travel demand.
“February and March are lean months, and the airlines may not have room to increase so much. But there will be increases subsequently if jet fuel prices continue their climb,” said a senior executive of a budget carrier.

As per the passage, what is meant by fuel surcharge?

Solution:

Refer to the last sentence of the third paragraph for the answer.

QUESTION: 13

India’s delicately balanced current account wouldn’t be the only major casualty of costlier crude oil: Local travelers now have to pay more to fly within the country as expensive jet fuel propels airlines to raise domestic fares that had tracked global energy prices to plunge to record lows last year.
Higher consumer fares in January reflect the persistent rise in aviation-fuel prices, which increased 8% on-month in November at the New Delhi airport, the country’s busiest. After a brief lull in December, prices firmed in January and February, breaching the levels of 2015 when the cycle of declines began.
The trend has led carriers to pass additional fuel costs on to consumers, many of whom switched to airlines after the gap between air and upper-class train fares narrowed in 2016. A senior executive at Jet Airways, India’s second-biggest airline by market share, said that the airline has recently revived the practice of levying a fuel surcharge - a fare component linked to movements in jet fuel prices - on domestic flights.
“We used to charge between Rs 100 and Rs 300 depending on short- and long haul sectors. Now we charge as much as Rs 700,” he added. Jet-fuel is the biggest cost item for Indian carriers.
Prices of petroleum products began rising since the spring after the 2015-16 winter witnessed record lows for crude oil, with global prices breaching $30 a barrel on their way down to levels not seen since the 1980s. However, after a period of consolidation that analysts believed would have put many shale oil producers out of business, global crude oil prices began firming and have now stabilized around $55 a barrel, a level that some believe would be maintained over the medium term. Airlines had clubbed fuel surcharge with the base fare component in 2015 after an advisory from the Directorate General of Civil Aviation, the country’s aviation regulator. No-frills carrier SpiceJet has separated the two components over the last six months, although the fuel surcharge hasn’t been increased yet, said a spokesperson.
Travel company executives said overall fares have increased in January. According to data on Makemytrip, the country’s biggest online travel portal, average fares dropped in November and December but rose in January. Ticket prices for the Delhi-Mumbai sector rose to Rs 4,266 in January, compared with Rs 3,908 the same month last year, Rs 4,914 on the Mumbai- Bangalore sector compared with Rs 4,573 a year earlier, and Rs 4,473 on the Mumbai-Chennai route, compared with Rs 3,784 last January. Rival Cleartrip noticed divergent trends that showed those booking early stood to benefit. Last year, spot-booking fares too had fallen drastically.
“An analysis of the last three months of airfare data for the top 20 air travel sectors reveals that the increased cost to airlines, contributed by the fuel prices surge and the rupee’s depreciation, has resulted in a 15% increase in airfares for a booking window of 0-14 days,” said Samyukth Sridharan, president and chief operating officer of Cleartrip. “At the same time, we see that the airlines have been quite aggressive in offering deals to passengers who plan in advance, reflected in a 21% year on-year drop in fares on an average for travel bookings made over 14 days in advance.”
Last year, airlines had offered substantial discounts across sectors and made attractive offers for ticket-buyers who planned their travel in advance, resulting in lower yields. To be sure, the industry’s ability to charge more will depend on the direction in aviation fuel prices and seasonal changes in air-travel demand.
“February and March are lean months, and the airlines may not have room to increase so much. But there will be increases subsequently if jet fuel prices continue their climb,” said a senior executive of a budget carrier.

Since when have airlines started clubbing the fuel surcharge with the base fare component?

Solution:
QUESTION: 14

India’s delicately balanced current account wouldn’t be the only major casualty of costlier crude oil: Local travelers now have to pay more to fly within the country as expensive jet fuel propels airlines to raise domestic fares that had tracked global energy prices to plunge to record lows last year.
Higher consumer fares in January reflect the persistent rise in aviation-fuel prices, which increased 8% on-month in November at the New Delhi airport, the country’s busiest. After a brief lull in December, prices firmed in January and February, breaching the levels of 2015 when the cycle of declines began.
The trend has led carriers to pass additional fuel costs on to consumers, many of whom switched to airlines after the gap between air and upper-class train fares narrowed in 2016. A senior executive at Jet Airways, India’s second-biggest airline by market share, said that the airline has recently revived the practice of levying a fuel surcharge - a fare component linked to movements in jet fuel prices - on domestic flights.
“We used to charge between Rs 100 and Rs 300 depending on short- and long haul sectors. Now we charge as much as Rs 700,” he added. Jet-fuel is the biggest cost item for Indian carriers.
Prices of petroleum products began rising since the spring after the 2015-16 winter witnessed record lows for crude oil, with global prices breaching $30 a barrel on their way down to levels not seen since the 1980s. However, after a period of consolidation that analysts believed would have put many shale oil producers out of business, global crude oil prices began firming and have now stabilized around $55 a barrel, a level that some believe would be maintained over the medium term. Airlines had clubbed fuel surcharge with the base fare component in 2015 after an advisory from the Directorate General of Civil Aviation, the country’s aviation regulator. No-frills carrier SpiceJet has separated the two components over the last six months, although the fuel surcharge hasn’t been increased yet, said a spokesperson.
Travel company executives said overall fares have increased in January. According to data on Makemytrip, the country’s biggest online travel portal, average fares dropped in November and December but rose in January. Ticket prices for the Delhi-Mumbai sector rose to Rs 4,266 in January, compared with Rs 3,908 the same month last year, Rs 4,914 on the Mumbai- Bangalore sector compared with Rs 4,573 a year earlier, and Rs 4,473 on the Mumbai-Chennai route, compared with Rs 3,784 last January. Rival Cleartrip noticed divergent trends that showed those booking early stood to benefit. Last year, spot-booking fares too had fallen drastically.
“An analysis of the last three months of airfare data for the top 20 air travel sectors reveals that the increased cost to airlines, contributed by the fuel prices surge and the rupee’s depreciation, has resulted in a 15% increase in airfares for a booking window of 0-14 days,” said Samyukth Sridharan, president and chief operating officer of Cleartrip. “At the same time, we see that the airlines have been quite aggressive in offering deals to passengers who plan in advance, reflected in a 21% year on-year drop in fares on an average for travel bookings made over 14 days in advance.”
Last year, airlines had offered substantial discounts across sectors and made attractive offers for ticket-buyers who planned their travel in advance, resulting in lower yields. To be sure, the industry’s ability to charge more will depend on the direction in aviation fuel prices and seasonal changes in air-travel demand.
“February and March are lean months, and the airlines may not have room to increase so much. But there will be increases subsequently if jet fuel prices continue their climb,” said a senior executive of a budget carrier.

What was the observation of Cleartrip on airline ticket prices?

Solution:
QUESTION: 15

India’s delicately balanced current account wouldn’t be the only major casualty of costlier crude oil: Local travelers now have to pay more to fly within the country as expensive jet fuel propels airlines to raise domestic fares that had tracked global energy prices to plunge to record lows last year.
Higher consumer fares in January reflect the persistent rise in aviation-fuel prices, which increased 8% on-month in November at the New Delhi airport, the country’s busiest. After a brief lull in December, prices firmed in January and February, breaching the levels of 2015 when the cycle of declines began.
The trend has led carriers to pass additional fuel costs on to consumers, many of whom switched to airlines after the gap between air and upper-class train fares narrowed in 2016. A senior executive at Jet Airways, India’s second-biggest airline by market share, said that the airline has recently revived the practice of levying a fuel surcharge - a fare component linked to movements in jet fuel prices - on domestic flights.
“We used to charge between Rs 100 and Rs 300 depending on short- and long haul sectors. Now we charge as much as Rs 700,” he added. Jet-fuel is the biggest cost item for Indian carriers.
Prices of petroleum products began rising since the spring after the 2015-16 winter witnessed record lows for crude oil, with global prices breaching $30 a barrel on their way down to levels not seen since the 1980s. However, after a period of consolidation that analysts believed would have put many shale oil producers out of business, global crude oil prices began firming and have now stabilized around $55 a barrel, a level that some believe would be maintained over the medium term. Airlines had clubbed fuel surcharge with the base fare component in 2015 after an advisory from the Directorate General of Civil Aviation, the country’s aviation regulator. No-frills carrier SpiceJet has separated the two components over the last six months, although the fuel surcharge hasn’t been increased yet, said a spokesperson.
Travel company executives said overall fares have increased in January. According to data on Makemytrip, the country’s biggest online travel portal, average fares dropped in November and December but rose in January. Ticket prices for the Delhi-Mumbai sector rose to Rs 4,266 in January, compared with Rs 3,908 the same month last year, Rs 4,914 on the Mumbai- Bangalore sector compared with Rs 4,573 a year earlier, and Rs 4,473 on the Mumbai-Chennai route, compared with Rs 3,784 last January. Rival Cleartrip noticed divergent trends that showed those booking early stood to benefit. Last year, spot-booking fares too had fallen drastically.
“An analysis of the last three months of airfare data for the top 20 air travel sectors reveals that the increased cost to airlines, contributed by the fuel prices surge and the rupee’s depreciation, has resulted in a 15% increase in airfares for a booking window of 0-14 days,” said Samyukth Sridharan, president and chief operating officer of Cleartrip. “At the same time, we see that the airlines have been quite aggressive in offering deals to passengers who plan in advance, reflected in a 21% year on-year drop in fares on an average for travel bookings made over 14 days in advance.”
Last year, airlines had offered substantial discounts across sectors and made attractive offers for ticket-buyers who planned their travel in advance, resulting in lower yields. To be sure, the industry’s ability to charge more will depend on the direction in aviation fuel prices and seasonal changes in air-travel demand.
“February and March are lean months, and the airlines may not have room to increase so much. But there will be increases subsequently if jet fuel prices continue their climb,” said a senior executive of a budget carrier.

Out of the following options, which of the following comes closest in meaning to the word “breach”?

Solution:

Infringe means to actively break the terms of something.

QUESTION: 16

There is a controversy raging over the entry of giants such as Tesco and Wal-Mart into India after the government last week permitted foreign direct investment (FDI) in multi-brand retail. Most economic analysts look at it in terms of capital coming into India to oust local shopkeepers or in terms of capital coming in to offer better prices to farmers or set up distribution chains and storage facilities to help consumers. These arguments seem a little old. There is a technological dimension to this that may reveal that it is India that is behind the competitive edge of big retail chains.
In 2009, Wal-Mart picked Bangalore-based Infosys Technologies and India-centric Cognizant among three information technology service vendors for a $600 million multi-year contract. Finance is now easily available for retail companies from banks and equity markets. What sets the real smart retail giants apart is their ability to leverage software and IT to keep their competitive edge. Supply chain software can help lower costs by managing inventories. Data analytics and customer relations software can help them identify the more lucrative customers or choose discount strategies. Partners, employees and vendors of retail giants are now connected by software. Indian talent figures in all this. Infosys was an early adapter of Wal-Mart’s move to go in for radio-frequency identification (RFID) tags that helps the retail chain track inventories at low cost. Last year, Wal-Mart also acquired Kosmix, a cutting-edge search engine, founded by Indian-born Venky Harinarayan and Anand Rajaraman (who earlier co-founded Junglee.com that Amazon acquired). Now Kosmix is a part of Wal- Mart Labs. Its technology filters and aggregates information by topic from Twitter messages and the larger Web in real time. This is a new way to interact with shoppers. Tesco now owes its edge to its Bangalore IT facility called the “Hindustan Service Centre”. The British retail chain says 6,000-employee-strong HSC’s strategic initiatives cover the “IT, business, financial, commercial and property aspects.” In Bangalore, Indian techies develop tools like mobile applications for Tesco.

From the passage, it can be assumed that the author’s views on FDI in multi-brand retail are

Solution:

In the sentence “There is a technological...of big retail chains.” the author highlights that India has played an important role in giving the retail giants a competitive edge. Option (c) is the answer. Options (a) and (b) are incorrect because they place importance on the interests of the local shopkeepers whereas the author does not highlight this in the passage. Option (d) is incorrect because it goes against the information in the passage and the stand that the author takes in the first paragraph.

QUESTION: 17

There is a controversy raging over the entry of giants such as Tesco and Wal-Mart into India after the government last week permitted foreign direct investment (FDI) in multi-brand retail. Most economic analysts look at it in terms of capital coming into India to oust local shopkeepers or in terms of capital coming in to offer better prices to farmers or set up distribution chains and storage facilities to help consumers. These arguments seem a little old. There is a technological dimension to this that may reveal that it is India that is behind the competitive edge of big retail chains.
In 2009, Wal-Mart picked Bangalore-based Infosys Technologies and India-centric Cognizant among three information technology service vendors for a $600 million multi-year contract. Finance is now easily available for retail companies from banks and equity markets. What sets the real smart retail giants apart is their ability to leverage software and IT to keep their competitive edge. Supply chain software can help lower costs by managing inventories. Data analytics and customer relations software can help them identify the more lucrative customers or choose discount strategies. Partners, employees and vendors of retail giants are now connected by software. Indian talent figures in all this. Infosys was an early adapter of Wal-Mart’s move to go in for radio-frequency identification (RFID) tags that helps the retail chain track inventories at low cost. Last year, Wal-Mart also acquired Kosmix, a cutting-edge search engine, founded by Indian-born Venky Harinarayan and Anand Rajaraman (who earlier co-founded Junglee.com that Amazon acquired). Now Kosmix is a part of Wal- Mart Labs. Its technology filters and aggregates information by topic from Twitter messages and the larger Web in real time. This is a new way to interact with shoppers. Tesco now owes its edge to its Bangalore IT facility called the “Hindustan Service Centre”. The British retail chain says 6,000-employee-strong HSC’s strategic initiatives cover the “IT, business, financial, commercial and property aspects.” In Bangalore, Indian techies develop tools like mobile applications for Tesco.

According to the passage, which of the following are the essential elements in the success of retail giants?
1. The use of technology to maintain an advantage over others.
2. Sales and marketing strategies based on an analysis of customer data.
3. Maintenance of large inventories to bring the benefits of low cost to the customer.
Select the correct answer using the code given below.

Solution:

Statement 1 can be inferred from the last line of the second paragraph - “What sets the real. keep their competitive edge.” Statement 2 can be inferred from the sentence given in the third paragraph of the passage - “Data analytics and customer relations. choose discount strategies.” Statement 3 cannot be inferred as there is no reference to the maintenance of large inventories leading to the reduction in cost for consumers. Hence, option (a) is the answer.

QUESTION: 18

There is a controversy raging over the entry of giants such as Tesco and Wal-Mart into India after the government last week permitted foreign direct investment (FDI) in multi-brand retail. Most economic analysts look at it in terms of capital coming into India to oust local shopkeepers or in terms of capital coming in to offer better prices to farmers or set up distribution chains and storage facilities to help consumers. These arguments seem a little old. There is a technological dimension to this that may reveal that it is India that is behind the competitive edge of big retail chains.
In 2009, Wal-Mart picked Bangalore-based Infosys Technologies and India-centric Cognizant among three information technology service vendors for a $600 million multi-year contract. Finance is now easily available for retail companies from banks and equity markets. What sets the real smart retail giants apart is their ability to leverage software and IT to keep their competitive edge. Supply chain software can help lower costs by managing inventories. Data analytics and customer relations software can help them identify the more lucrative customers or choose discount strategies. Partners, employees and vendors of retail giants are now connected by software. Indian talent figures in all this. Infosys was an early adapter of Wal-Mart’s move to go in for radio-frequency identification (RFID) tags that helps the retail chain track inventories at low cost. Last year, Wal-Mart also acquired Kosmix, a cutting-edge search engine, founded by Indian-born Venky Harinarayan and Anand Rajaraman (who earlier co-founded Junglee.com that Amazon acquired). Now Kosmix is a part of Wal- Mart Labs. Its technology filters and aggregates information by topic from Twitter messages and the larger Web in real time. This is a new way to interact with shoppers. Tesco now owes its edge to its Bangalore IT facility called the “Hindustan Service Centre”. The British retail chain says 6,000-employee-strong HSC’s strategic initiatives cover the “IT, business, financial, commercial and property aspects.” In Bangalore, Indian techies develop tools like mobile applications for Tesco.

Which of the following options best explains the purpose of the last four paragraphs?

Solution:

In the last four paragraphs, the author presents examples of how Indian firms and professionals have, through technology, helped in the growth of the foreign retail giants. Refer to the last line of the first paragraph - “There is a technological dimension.edge of big retail chains.” It helps infer that option (b) is the answer. Option (a) is incorrect because it does not point out the role of Indian technology firms and professionals. Option (c) is incorrect because it is a general statement while the author only presents information on Indian IT firms and does not link this with the growth of retail giants. Option (d) is incorrect because it leaves out the role of the Indian IT firms.

QUESTION: 19

There is a controversy raging over the entry of giants such as Tesco and Wal-Mart into India after the government last week permitted foreign direct investment (FDI) in multi-brand retail. Most economic analysts look at it in terms of capital coming into India to oust local shopkeepers or in terms of capital coming in to offer better prices to farmers or set up distribution chains and storage facilities to help consumers. These arguments seem a little old. There is a technological dimension to this that may reveal that it is India that is behind the competitive edge of big retail chains.
In 2009, Wal-Mart picked Bangalore-based Infosys Technologies and India-centric Cognizant among three information technology service vendors for a $600 million multi-year contract. Finance is now easily available for retail companies from banks and equity markets. What sets the real smart retail giants apart is their ability to leverage software and IT to keep their competitive edge. Supply chain software can help lower costs by managing inventories. Data analytics and customer relations software can help them identify the more lucrative customers or choose discount strategies. Partners, employees and vendors of retail giants are now connected by software. Indian talent figures in all this. Infosys was an early adapter of Wal-Mart’s move to go in for radio-frequency identification (RFID) tags that helps the retail chain track inventories at low cost. Last year, Wal-Mart also acquired Kosmix, a cutting-edge search engine, founded by Indian-born Venky Harinarayan and Anand Rajaraman (who earlier co-founded Junglee.com that Amazon acquired). Now Kosmix is a part of Wal- Mart Labs. Its technology filters and aggregates information by topic from Twitter messages and the larger Web in real time. This is a new way to interact with shoppers. Tesco now owes its edge to its Bangalore IT facility called the “Hindustan Service Centre”. The British retail chain says 6,000-employee-strong HSC’s strategic initiatives cover the “IT, business, financial, commercial and property aspects.” In Bangalore, Indian techies develop tools like mobile applications for Tesco.

Consider the following statements:
1. Anand Rajaraman was a manager of Junglee.com
2. Last year, Wal-Mart was bought by Kosmix. According to the above passage, which of the statements is/are valid?

Solution:

Both the statements are incorrect.

QUESTION: 20

There is a controversy raging over the entry of giants such as Tesco and Wal-Mart into India after the government last week permitted foreign direct investment (FDI) in multi-brand retail. Most economic analysts look at it in terms of capital coming into India to oust local shopkeepers or in terms of capital coming in to offer better prices to farmers or set up distribution chains and storage facilities to help consumers. These arguments seem a little old. There is a technological dimension to this that may reveal that it is India that is behind the competitive edge of big retail chains.
In 2009, Wal-Mart picked Bangalore-based Infosys Technologies and India-centric Cognizant among three information technology service vendors for a $600 million multi-year contract. Finance is now easily available for retail companies from banks and equity markets. What sets the real smart retail giants apart is their ability to leverage software and IT to keep their competitive edge. Supply chain software can help lower costs by managing inventories. Data analytics and customer relations software can help them identify the more lucrative customers or choose discount strategies. Partners, employees and vendors of retail giants are now connected by software. Indian talent figures in all this. Infosys was an early adapter of Wal-Mart’s move to go in for radio-frequency identification (RFID) tags that helps the retail chain track inventories at low cost. Last year, Wal-Mart also acquired Kosmix, a cutting-edge search engine, founded by Indian-born Venky Harinarayan and Anand Rajaraman (who earlier co-founded Junglee.com that Amazon acquired). Now Kosmix is a part of Wal- Mart Labs. Its technology filters and aggregates information by topic from Twitter messages and the larger Web in real time. This is a new way to interact with shoppers. Tesco now owes its edge to its Bangalore IT facility called the “Hindustan Service Centre”. The British retail chain says 6,000-employee-strong HSC’s strategic initiatives cover the “IT, business, financial, commercial and property aspects.” In Bangalore, Indian techies develop tools like mobile applications for Tesco.

Consider the following statements:
1. Wal-Mart picked Infosys Technologies in 2008.
2. Retail companies procure finance from banks and equity markets.
According to the above passage, which of the statements is/are valid?

Solution:
QUESTION: 21

The problem with backdating taxes is that the taxpayer will have to continuously guess how much of his current income will be taken away at a later date. This is the crux of the Parthasarathi Shome committee report on retrospective taxation of cross-border acquisition of Indian assets, like Vodafone’s $11.2 billion purchase of Hutchison’s stake in the country’s third largest telecom service provider in 2007.
The Supreme Court in January ruled against the taxman, who was claiming Rs. 11,200 crore in tax, penalty and interest. The court conceded that Indian law was incapable of plugging a widely used tax dodge by inbound foreign investment. The message for the government in the verdict was that the law needed to be changed to curb treaty shopping, the practice of routing investments through letter-box companies in havens like Mauritius to avoid paying taxes in India.
Presenting his last budget in March, the then finance minister Pranab Mukherjee, altered the Income Tax Act to tax such deals with retrospective effect. His argument was since the court felt the intent of the law was not clear, it had to be explicitly clarified for the entire past life of the Income Tax Act, which was enacted in 1962. This last bit - that deals done earlier could be taxed - raised a chorus of protest from the investing community, and the finance ministry under P Chidambaram sought an independent review of its stand. Mr Shome, a tax expert of international standing, has now told the government what it knew all this while: taxes in retrospect are best avoided.
Specifically, they must never be used to merely raise tax revenue. In the Vodafone case, the Shome committee is unequivocal: the company to claim tax from is Hutchison, which made the profit from the sale of its stake in the telecom company. Vodafone was not required by the extant law to withhold capital gains tax. Since Vodafone made no profit in the deal, the question of interest and penalties on back taxes does not arise.
Mr Chidambaram has indicated his desire to reverse the decision as soon as possible, even before the next budget when, normally, amendments to the Income Tax Act are undertaken. He reckons investors will return to the table once the fog over retrospective taxes is lifted.

Which one of these options best explains the reference the author makes to the practice of treaty shopping?

Solution:

Refer to the third paragraph. The passage discusses the issue of tax evasion and states that investments are routed into India through countries like Mauritius so that investors can avoid paying taxes. This is done by setting up a letter-box company in Mauritius so that investors can avoid paying tax in India. It also indicates that Mauritius is a tax friendly country (havens) but not necessarily tax free. Thus, option (b) can be ruled out and option (d) is the answer. Option (c) can be ruled out because nothing has been mentioned about “obsolete tax laws” in the passage. Option (a) can be ruled out because treaty shopping is a loop hole that investors have discovered, however, this doesn’t mean that the practice is illegal.

QUESTION: 22

The problem with backdating taxes is that the taxpayer will have to continuously guess how much of his current income will be taken away at a later date. This is the crux of the Parthasarathi Shome committee report on retrospective taxation of cross-border acquisition of Indian assets, like Vodafone’s $11.2 billion purchase of Hutchison’s stake in the country’s third largest telecom service provider in 2007.
The Supreme Court in January ruled against the taxman, who was claiming Rs. 11,200 crore in tax, penalty and interest. The court conceded that Indian law was incapable of plugging a widely used tax dodge by inbound foreign investment. The message for the government in the verdict was that the law needed to be changed to curb treaty shopping, the practice of routing investments through letter-box companies in havens like Mauritius to avoid paying taxes in India.
Presenting his last budget in March, the then finance minister Pranab Mukherjee, altered the Income Tax Act to tax such deals with retrospective effect. His argument was since the court felt the intent of the law was not clear, it had to be explicitly clarified for the entire past life of the Income Tax Act, which was enacted in 1962. This last bit - that deals done earlier could be taxed - raised a chorus of protest from the investing community, and the finance ministry under P Chidambaram sought an independent review of its stand. Mr Shome, a tax expert of international standing, has now told the government what it knew all this while: taxes in retrospect are best avoided.
Specifically, they must never be used to merely raise tax revenue. In the Vodafone case, the Shome committee is unequivocal: the company to claim tax from is Hutchison, which made the profit from the sale of its stake in the telecom company. Vodafone was not required by the extant law to withhold capital gains tax. Since Vodafone made no profit in the deal, the question of interest and penalties on back taxes does not arise.
Mr Chidambaram has indicated his desire to reverse the decision as soon as possible, even before the next budget when, normally, amendments to the Income Tax Act are undertaken. He reckons investors will return to the table once the fog over retrospective taxes is lifted.

Consider the following assumptions.
1. The Supreme Court has ruled in favour of Vodafone mainly because the law does not allow for a case against the latter.
2. The tax claims that are being made should be rightfully made against Hutchison and not Vodafone.
With reference to the above passage which of the following assumptions is/are valid?

Solution:

Refer to the second paragraph that states that the Supreme Court ruled against the taxman (and in favour of Vodafone) and accepted that Indian law does not have provisions to stop the widely used tax evasion methods used by incoming foreign investors. Statement 1 is correct. Statement 2 is also correct and can be inferred from the sixth paragraph. Refer to the line, “...the company to claim tax from is Hutchison, which made profit from the sale of its stake in the telecom company.” Option (c) is the answer.

QUESTION: 23

The problem with backdating taxes is that the taxpayer will have to continuously guess how much of his current income will be taken away at a later date. This is the crux of the Parthasarathi Shome committee report on retrospective taxation of cross-border acquisition of Indian assets, like Vodafone’s $11.2 billion purchase of Hutchison’s stake in the country’s third largest telecom service provider in 2007.
The Supreme Court in January ruled against the taxman, who was claiming Rs. 11,200 crore in tax, penalty and interest. The court conceded that Indian law was incapable of plugging a widely used tax dodge by inbound foreign investment. The message for the government in the verdict was that the law needed to be changed to curb treaty shopping, the practice of routing investments through letter-box companies in havens like Mauritius to avoid paying taxes in India.
Presenting his last budget in March, the then finance minister Pranab Mukherjee, altered the Income Tax Act to tax such deals with retrospective effect. His argument was since the court felt the intent of the law was not clear, it had to be explicitly clarified for the entire past life of the Income Tax Act, which was enacted in 1962. This last bit - that deals done earlier could be taxed - raised a chorus of protest from the investing community, and the finance ministry under P Chidambaram sought an independent review of its stand. Mr Shome, a tax expert of international standing, has now told the government what it knew all this while: taxes in retrospect are best avoided.
Specifically, they must never be used to merely raise tax revenue. In the Vodafone case, the Shome committee is unequivocal: the company to claim tax from is Hutchison, which made the profit from the sale of its stake in the telecom company. Vodafone was not required by the extant law to withhold capital gains tax. Since Vodafone made no profit in the deal, the question of interest and penalties on back taxes does not arise.
Mr Chidambaram has indicated his desire to reverse the decision as soon as possible, even before the next budget when, normally, amendments to the Income Tax Act are undertaken. He reckons investors will return to the table once the fog over retrospective taxes is lifted.

As per the information in the passage, the author is most likely to agree with which of the following?

Solution:

Option (a) can be ruled out by a reference to the second paragraph in which it is stated that Indian law was incapable of plugging a widely used tax dodge by inbound foreign investment. However, this does not point to the general archaic nature of Indian law. Option (b) is the answer and can be inferred from the last line of the fourth paragraph - “.taxes in retrospect are best avoided.” The passage also talks about “the fog over retrospective taxes” which tells us that there is a lack of clarity about the issue. Option (c) is incorrect as the line, “Specifically, they must.tax revenue” implies that taxes in retrospect should not be used to just raise tax revenue. This does not imply that taxes in retrospect is not the only way to raise tax revenue. Option (d) can be ruled out because it goes beyond the scope of the passage and the focus of the author’s argument.

QUESTION: 24

The problem with backdating taxes is that the taxpayer will have to continuously guess how much of his current income will be taken away at a later date. This is the crux of the Parthasarathi Shome committee report on retrospective taxation of cross-border acquisition of Indian assets, like Vodafone’s $11.2 billion purchase of Hutchison’s stake in the country’s third largest telecom service provider in 2007.
The Supreme Court in January ruled against the taxman, who was claiming Rs. 11,200 crore in tax, penalty and interest. The court conceded that Indian law was incapable of plugging a widely used tax dodge by inbound foreign investment. The message for the government in the verdict was that the law needed to be changed to curb treaty shopping, the practice of routing investments through letter-box companies in havens like Mauritius to avoid paying taxes in India.
Presenting his last budget in March, the then finance minister Pranab Mukherjee, altered the Income Tax Act to tax such deals with retrospective effect. His argument was since the court felt the intent of the law was not clear, it had to be explicitly clarified for the entire past life of the Income Tax Act, which was enacted in 1962. This last bit - that deals done earlier could be taxed - raised a chorus of protest from the investing community, and the finance ministry under P Chidambaram sought an independent review of its stand. Mr Shome, a tax expert of international standing, has now told the government what it knew all this while: taxes in retrospect are best avoided.
Specifically, they must never be used to merely raise tax revenue. In the Vodafone case, the Shome committee is unequivocal: the company to claim tax from is Hutchison, which made the profit from the sale of its stake in the telecom company. Vodafone was not required by the extant law to withhold capital gains tax. Since Vodafone made no profit in the deal, the question of interest and penalties on back taxes does not arise.
Mr Chidambaram has indicated his desire to reverse the decision as soon as possible, even before the next budget when, normally, amendments to the Income Tax Act are undertaken. He reckons investors will return to the table once the fog over retrospective taxes is lifted.

Consider the following statements:
1. Vodafone bought Hutchison’s stake in the year 2008.
2. The then Finance Minister Pranab Mukherjee did not alter the Income Tax Act.
According to the above passage, which of the statements is/are valid?

Solution:

Both the statements are incorrect. Refer to the first and third paragraphs.

QUESTION: 25

The problem with backdating taxes is that the taxpayer will have to continuously guess how much of his current income will be taken away at a later date. This is the crux of the Parthasarathi Shome committee report on retrospective taxation of cross-border acquisition of Indian assets, like Vodafone’s $11.2 billion purchase of Hutchison’s stake in the country’s third largest telecom service provider in 2007.
The Supreme Court in January ruled against the taxman, who was claiming Rs. 11,200 crore in tax, penalty and interest. The court conceded that Indian law was incapable of plugging a widely used tax dodge by inbound foreign investment. The message for the government in the verdict was that the law needed to be changed to curb treaty shopping, the practice of routing investments through letter-box companies in havens like Mauritius to avoid paying taxes in India.
Presenting his last budget in March, the then finance minister Pranab Mukherjee, altered the Income Tax Act to tax such deals with retrospective effect. His argument was since the court felt the intent of the law was not clear, it had to be explicitly clarified for the entire past life of the Income Tax Act, which was enacted in 1962. This last bit - that deals done earlier could be taxed - raised a chorus of protest from the investing community, and the finance ministry under P Chidambaram sought an independent review of its stand. Mr Shome, a tax expert of international standing, has now told the government what it knew all this while: taxes in retrospect are best avoided.
Specifically, they must never be used to merely raise tax revenue. In the Vodafone case, the Shome committee is unequivocal: the company to claim tax from is Hutchison, which made the profit from the sale of its stake in the telecom company. Vodafone was not required by the extant law to withhold capital gains tax. Since Vodafone made no profit in the deal, the question of interest and penalties on back taxes does not arise.
Mr Chidambaram has indicated his desire to reverse the decision as soon as possible, even before the next budget when, normally, amendments to the Income Tax Act are undertaken. He reckons investors will return to the table once the fog over retrospective taxes is lifted.

Consider the following statements:
1. The Income Tax Act was enacted in 1963.
2. Mr. Parthasarathi Shome was an economist. According to the above passage, which of the statements is/are valid?

Solution:
QUESTION: 26

India’s balance of payments is back in surplus. Important as this development has been in the management of the external economy, it is unwise to exaggerate its significance. The level of deficit is still way above what is considered prudent and manageable. Besides, the fall in the Current Account Deficit (CAD) is due to all the wrong reasons — falling imports that corroborate the slowdown, and decelerating exports. The outlook for software export earnings is not bright amidst the global slowdown. Expressed as a percentage of GDP, the CAD has fallen from 4.5 per cent to 3.9 per cent. Most experts have projected the CAD for 2012-13 at 3.5 per cent or lower, on the basis of certain key assumptions: that the economy will grow at a reasonably fast clip of around 6.5 per cent; oil prices will not go very much higher than current levels of around $100 a barrel; and most important of all, the actions of the European Central Bank and the Federal Reserve will help in bringing economic growth in Europe and the U.S. back on track. The last point will have an all-round bearing on India’s external economy. It could help India’s faltering exports regain traction. Second, there would be far less uncertainty on the movement of capital flows to India.
There is of course a flip side to all of this. India’s growth has already slipped by most accounts to below five per cent. The cheap money policy of the Federal Reserve will boost inflation worldwide. Although it is customary to view the CAD on a par with the fiscal deficit — the menace of twin deficits as they are usually referred to — it is the latter that has received greater attention. Besides, the government seems determined to adopt questionable means to finance the deficit rather than be proactive in reining it in. For instance, recent announcements to ease external commercial borrowings and encourage capital market flows from abroad might have had the intended effect of boosting stock prices. But these are not sound policies from the point of view of the macroeconomy. Encouraging foreign currency borrowing to take advantage of the surfeit of funds circulating abroad is hardly the right strategy for an economy whose level of short-term debt has been rising and exchange reserves falling.

Why does the author feel that it is too early to place a positive significance on the surplus balance of payments?

Solution:

Refer to the first paragraph. Option (a) cannot be inferred as there is no reference in the passage to the cabinet reshuffle. Option (b) can be inferred from the third line of the first paragraph - the level of deficit is still way above what is considered prudent and manageable. Option (c) is incorrect because there is no correct or incorrect level of current account deficit reduction discussed in the passage. Option (d) moves the discussion to a different track - it suggests that the balance of payments situation will not reach a critical stage if there is a reduction in imports and exports. However, this option does not address the question itself. Option (b) is the answer.

QUESTION: 27

India’s balance of payments is back in surplus. Important as this development has been in the management of the external economy, it is unwise to exaggerate its significance. The level of deficit is still way above what is considered prudent and manageable. Besides, the fall in the Current Account Deficit (CAD) is due to all the wrong reasons — falling imports that corroborate the slowdown, and decelerating exports. The outlook for software export earnings is not bright amidst the global slowdown. Expressed as a percentage of GDP, the CAD has fallen from 4.5 per cent to 3.9 per cent. Most experts have projected the CAD for 2012-13 at 3.5 per cent or lower, on the basis of certain key assumptions: that the economy will grow at a reasonably fast clip of around 6.5 per cent; oil prices will not go very much higher than current levels of around $100 a barrel; and most important of all, the actions of the European Central Bank and the Federal Reserve will help in bringing economic growth in Europe and the U.S. back on track. The last point will have an all-round bearing on India’s external economy. It could help India’s faltering exports regain traction. Second, there would be far less uncertainty on the movement of capital flows to India.
There is of course a flip side to all of this. India’s growth has already slipped by most accounts to below five per cent. The cheap money policy of the Federal Reserve will boost inflation worldwide. Although it is customary to view the CAD on a par with the fiscal deficit — the menace of twin deficits as they are usually referred to — it is the latter that has received greater attention. Besides, the government seems determined to adopt questionable means to finance the deficit rather than be proactive in reining it in. For instance, recent announcements to ease external commercial borrowings and encourage capital market flows from abroad might have had the intended effect of boosting stock prices. But these are not sound policies from the point of view of the macroeconomy. Encouraging foreign currency borrowing to take advantage of the surfeit of funds circulating abroad is hardly the right strategy for an economy whose level of short-term debt has been rising and exchange reserves falling.

Which of the following has not been mentioned as an incorrect strategy in the current economy?

Solution:

Refer to the last paragraph which discusses the flip side - in this case the negative as the first paragraph introduces a positive view point. Option (a) can be inferred from the seventh line of the paragraph, “Besides, the government...reining it in.” Option (b) can be inferred from the lines, “For instance, recent...boosting stock prices.” Option (c) can be inferred from the lines, “The cheap money...received greater attention.” Option (d) is incorrect as the author subtly criticises following a cheap money policy. However, there is no mention of money obtained through cheap means or through low means.

QUESTION: 28

India’s balance of payments is back in surplus. Important as this development has been in the management of the external economy, it is unwise to exaggerate its significance. The level of deficit is still way above what is considered prudent and manageable. Besides, the fall in the Current Account Deficit (CAD) is due to all the wrong reasons — falling imports that corroborate the slowdown, and decelerating exports. The outlook for software export earnings is not bright amidst the global slowdown. Expressed as a percentage of GDP, the CAD has fallen from 4.5 per cent to 3.9 per cent. Most experts have projected the CAD for 2012-13 at 3.5 per cent or lower, on the basis of certain key assumptions: that the economy will grow at a reasonably fast clip of around 6.5 per cent; oil prices will not go very much higher than current levels of around $100 a barrel; and most important of all, the actions of the European Central Bank and the Federal Reserve will help in bringing economic growth in Europe and the U.S. back on track. The last point will have an all-round bearing on India’s external economy. It could help India’s faltering exports regain traction. Second, there would be far less uncertainty on the movement of capital flows to India.
There is of course a flip side to all of this. India’s growth has already slipped by most accounts to below five per cent. The cheap money policy of the Federal Reserve will boost inflation worldwide. Although it is customary to view the CAD on a par with the fiscal deficit — the menace of twin deficits as they are usually referred to — it is the latter that has received greater attention. Besides, the government seems determined to adopt questionable means to finance the deficit rather than be proactive in reining it in. For instance, recent announcements to ease external commercial borrowings and encourage capital market flows from abroad might have had the intended effect of boosting stock prices. But these are not sound policies from the point of view of the macroeconomy. Encouraging foreign currency borrowing to take advantage of the surfeit of funds circulating abroad is hardly the right strategy for an economy whose level of short-term debt has been rising and exchange reserves falling.

Which of the following options has/have not been taken into account while projecting the current account deficit for 2012-2013?
1. The rate of growth of the economy will occur at much more than 6.5 per cent.
2. The European Central Bank’s measures will bring in positive economic change in Europe.
3. Oil prices will finally settle at a higher rate than the current $100 per barrel.
With reference to the above passage which of the given statements is/are valid?

Solution:

Refer to the first paragraph. Statement 1 is incorrect because the line, “...that the economy will grow at a reasonably fast clip of around 6.5 per cent...” implies that the rate of growth of the economy will occur at around 6.5 per cent and not much more than 6.5 per cent. Statement 2 is correct and can be inferred from the line “...the actions of the European Central Bank and the Federal Reserve will help in bringing economic growth in Europe and the U.S. back on track.” Statement 3 is incorrect as the ninth line states that oil prices will not go much higher than the current price of $100 per barrel. However, there isn’t enough information in the passage to infer that the prices will finally settle at a rate higher than the current $100 per barrel. Option (d) is the answer.

Related tests