Factual Theme: Infrastructure

Statement 1 is incorrect: The project has been implemented
by the National Highway Authority of India.

Statement 2 is incorrect: Over the course of the project,
institutions like the World Bank, Asian Development Bank (ADB) and Japanese
Bank for International Cooperation (JBIC) are expected to finance as well.

Notes: National Highway Development ProjectNHDP deal with the development of high-quality highways. NHDP is the largest highway project undertaken in the country. It has been implemented by the National Highway Authority of India (NHAI).

Initially, The National Highway Development Project (NHDP)
consists of two major components: The “Golden Quadrilateral”: The Golden Quadrilateral” project will connect the four major metropolitan cities (Delhi. Mumbai, Chennai & Kolkata) with 4-6 lane highways, with a total length of about 5,850 km. The “North South – East West” projects: The “North-South –
East-West” project will connect the Northernmost point of the country to the
Southernmost, and similarly from East to West, with a total length of about
7,300 kmThe NHDP was expected to cost Rs 540 billion when started
in 1998. The financing pattern of this project indicates that private sector
participation in the form of investment amounts to only Rs 40 billion (7.4 per
cent of the total).Over the course of the project, institutions like the World
Bank, Asian Development Bank (ADB) and Japanese Bank for International
Cooperation (JBIC) are expected to finance about Rs 200 billion; another Rs 200
billion of investment would be financed from the cess.NHDP consists of following Phases:

Phase 1 and Phase 2: The phase envisages construction of 4
& 6 lane highways of about 14000 KMs. The two phases comprise the construction of “Golden Quadrilateral” and North-South (Srinagar to Kanyakumari) – East-West (Silchar to Porbandar) Projects.

Phase 3: The phase consists of the construction of 4-6 lane National highways of 12100 KMs connecting state capitals, tourist places, industrial centres.

Phase 4: The phase involved up-gradation and strengthening of
20000 KMs of single/two-lane national highways.

Phase 5: The phase involved the construction of 6 lane national
highways of 6500 KMs.Phase 6 & 7: The phase 6 & 7, involved the construction of 1000 KMs of expressways and construction of 700 KMs of ring roads of major towns and bypasses and other elevated roads, tunnels, underpasses on national highways respectively.

Theme : Industrial Sector

Similar question on Industries was asked in UPSC Prelims
2015 to 2018.

Statement 3 is incorrect: There is no such provision under
the Policy.

Notes: Summary of the National Manufacturing Policy Manufacturing’s share in India’s GDP has been stuck at 16% since the 1980s. The policy aims to increase the share of manufacturing in the country’s GDP from the current 16% to 25% by 2022. The National Manufacturing Policy aims to create 100 million additional jobs in the next decade. The draft policy envisages establishment of National Investment and Manufacturing Zones (NIMZ) equipped with world-class infrastructure that would be autonomous and self-regulated developed in partnership with the private sector. Each National Investment and Manufacturing Zones To have 5,000 hectares. The land will be selected by State Governments. Preference would
be given to uncultivable land. Both state and central Government would fund trunk infrastructure. The policy embodies an easy exit policy and single window clearance in zonesThe NIMZ would be managed by special entityThe policy has envisaged fiscal sops to boost manufacturing. Small & medium enterprises to be reimbursed for
a technology purchase. Industrial training and skills development programmes Flexible labour laws and simplified & expeditious exit mechanism for sick units Relaxation in environmental regulations financial and tax incentives to small and medium enterprisesIncentives to states for infrastructure development incentives for Green ManufacturingRationalization of business regulations to reduce the burden of procedural and regulatory compliance on businesses Increased focus on employment-intensive industries, capital
goods industry, industries with strategic significance and those in which India
enjoys a competitive edge and the SME sector. Make industrial land (land acquisition) available through the creation of land banks by states.

InteractiveTheme : Inflation

Similar question on inflation was asked in UPSC Prelims
2013,2014,2015.

Statement 1 is incorrect: Headline inflation includes food and fuel items.

Statement 2 is incorrect: Core inflation is used by the government as a tool for framing long-term policy targeting inflation.

Notes :Inflation is a rise in the general level of prices of goods
and services in an economy over a period of time. When the general price level
rises, Each unit of currency buys fewer goods and services. Headline Inflation versus Core InflationHeadline inflation reflects prices of all the tradeables
within an economy including those commodities or items that experience sudden inflationary spikes such as food or energy. On the other hand, Core Inflation is a measure which excludes transitory or temporary price volatility as in the case of some commodities such as food items, energy products etc. Since headline inflation includes everything, it may not present an accurate picture of the current state of the economy. On the other
hand, the core inflation shows long term trends and is focused by Central Banks because it reflects the demand-side pressure in the economy. It is also used as a tool for framing long-term policy. In recent years, due to these reasons, RBI has inclined from headline to core inflation which shows a more correct trend in inflation.

Theme: Industries

Statement 1 is incorrect: They are now classified based on annual turnover criteria. Earlier they were classified based on investment in plant and machinery.

Statement 3 is incorrect: Agriculture is the largest employment generating sectorNotes: MSME is the second-largest employment generating sector after agriculture sector. It provides 80% of jobs in the industry with just 20% of the investment. It contributes around 31% to the nation’s GDP and 45% and 34% share of the overall exports and manufacturing output (2017 report).

New Classification Criteria (based on turnover)

1.Microenterprise: It will be unit with annual turnover does not exceed Rs. 5 crore.

2. Small enterprise: It will be unit with annual turnover is more than Rs. 5 crores but does not exceed Rs. 75 crore.

3.Medium enterprise: It will be unit with annual turnover is more than Rs. 75 crore but does not exceed Rs. 250 crore.

FactualTheme: Infrastructure

Statement 1 is incorrect: The National Expressway-1 connects Ahmedabad to Vadodara.

Notes: National Expressways

India has two National Expressways viz. National
Expressway-1 (NE-1) and National Expressway-2 (NE-2).

National Expressway-1:

Ahmedabad Vadodara Expressway has been designated as National Expressway-1, also known as Mahatma Gandhi Expressway. It is a 93 kilometres 4 lane expressway built by Atal Bihari Vajpayee government in the early 2000s.

National Expressway-2: The Sonipat (Kundli)-Ghaziabad-Palwal
expressway is the National Expressway-2.

State Expressways

There are 13 state expressways in India including Mumbai-Pune, Ambala-Chandigarh, Delhi-Gurgaon, Delhi-Faridabad, Kundli–Manesar–Palwal, Faridabad-NOIDA-Ghaziabad, Kalyani Expressway, DND Flyway, Bengaluru-Mysore, Chennai HSCTC, Hyderabad Elevated Expressways, Belghoria Expressway and Yamuna State ExpresswaysThere are 13 state expressways in India including Mumbai-Pune, Ambala-Chandigarh, Delhi-Gurgaon, Delhi-Faridabad, Kundli–Manesar–Palwal, Faridabad-NOIDA-Ghaziabad, Kalyani Expressway, DND Flyway, Bengaluru-Mysore, Chennai HSCTC, Hyderabad Elevated Expressways, Belghoria Expressway and Yamuna Expressway

Theme: Poverty

Notes: Poverty Estimation Committees in India

1. Lakdawala Committee

The committee was constituted in the year 1993. The criteria suggested by the committee was Calorie intake
based on consumption expenditure. The committee recommended for state-specific poverty lines. As per Ladkawala committee the percentage of the population living below the poverty line in the year 2004-05 was:

Rural: 28.3%Urban: 25.7%All India: 27.5%

2. Tendulkar Committee

The Committee was constituted in the year 2004-05The committee estimated poverty by using the basic requirement of the poor such as housing, clothing, shelter, education, sanitation, travel expense and health etc., to make poverty estimation realistic. The committee suggested to do away with the calorie-based criteria. The committee also suggested to have a uniform poverty line across rural and urban India.The Tendulkar committee stipulated a benchmark daily per capita expenditure of Rs. 27 and Rs. 33 in rural and urban areas, respectively, and arrived at a cut-off of about 22% of the population below poverty line.As per Tendulkar report, the percentage of people living
below poverty line in the year 2004-05 were as follows:Rural:41.8Urban: 25.7Total 37.2In the year 2011-12,Rural:25.7Urban: 13.7Total: 21.9

3.Rangarajan Committee

The Committee was constituted in the year 2012The Rangarajan Committee goes back to the idea of Lakdawala committee method of calculating Rural and Urban Poverty Separately. The Rangarajan group took the view that the consumption basket should contain a food component that satisfied certain minimum nutrition requirements, as well as consumption expenditure on essential non-food item groups (education, clothing, conveyance and house rent) besides a residual set of behaviourally determined non-food expenditure.C Rangarajan expert group report, recommended a monthly per
capita consumption expenditure of RS 972 in rural areas and RS 1,407 in urban areas as the poverty line at the all-India level. Assuming five members for a family, this will imply a monthly per household expenditure of RS 4,860 in rural areas and RS 7,035 in urban areas. The Rangarajan committee estimated a daily per capita expenditure of RS 32 and RS 47, in rural and urban areas respectively as the poverty line, and worked out the poverty line at close to 29.5%. The Rangarajan expert group estimates that 30.9 per cent of
the rural population and 26.4 per cent of the urban population were below the
poverty line in 2011-12. The all-India ratio was 29.5 per cent.

Factual/Tikdam

Theme: Government budgeting

Budgeting is always a hot topic and similar question on inflation was asked in UPSC Prelims 2013,2014,2015 and 2016

Statement 1 is incorrect: There is no such provision of any proportion of outlay to be mandatorily spent on scheme focusing on women development.

Statement 2 is incorrect: There is no such provision

Notes :

Gender Budgeting

Gender Budgeting is a powerful tool for achieving gender mainstreaming so as to ensure that the benefits of development reach women as much as men.

It is not an accounting exercise but an ongoing process of keeping a gender perspective in policy/ programme formulation, its implementation and review.

Gender Budgeting entails dissection of the Government budgets to establish its gender differential impacts and to ensure that gender commitments are translated into budgetary commitments.

Experts define Gender Budgeting as “Gender budget initiatives. To analyse how governments raise and spend public money, with the aim of securing gender equality in decision-making about public resource allocation; and gender equality in the distribution of the impact of government budgets, both in their benefits and in their burdens.

The impact of government budgets on the most disadvantaged groups of women is a focus of special attention.

The rationale for gender budgeting arises from recognition of the fact that national budgets impact men and women differently through the pattern of resource allocation.

Women, constitute 48% of India’s population, but they lag behind men on many social indicators like health, education, economic opportunities, etc. Hence, they warrant special attention due to their vulnerability and lack of access to resources.

The way Government budgets allocate resources, has the potential to transform these gender inequalities. In view of this, Gender Budgeting, as a tool for achieving gender mainstreaming, has been propagated.

Theme : National Income Accounting

Similar question on National Income Accounting was asked in
UPSC Prelims 2013.

Notes: GDP doesn’t cover the following

Underground Economy Non-Marketed Activities (Mom cooking food for home)Barter Exchanges (Rice given for oranges) Negative Externality (Acid rain)Opportunity cost lost (kids not going to school which could
have made a difference in future – Human Dev)- (HDI)Income Inequality (Gini Coefficient)

FactualTheme : AgricultureStatement

1 is incorrect: Up to 75% of the rural population and 50% of the Urban population is included.

Statement 3 is incorrect: State and Centre are not responsible to supply food grains during the time of natural calamities like flood and drought.

Notes:

Legal Status: Passed by the Parliament with the statutory
backing for “Right to Food”.

Coverage: Up to 75% of the rural population and 50% of the Urban population are included. Total coverage is 67.5% of all Population.

Categorisation: AAY Households, Priority Households and
Excluded Households.

Entitlements Priority HHs: 5 KG/Person/MonthAAY HHs: 35 KG/Family/MonthPrices All Categories: RS 3/KG of RiceRS 2/KG of Wheat RS 1/KG of Coarse GrainsIdentificationCooperative Structure with Centre realising the state-wise estimates of the household to be covered under the NFSA.States are responsible for creating criteria and identifying
eligible households. Role of Centre and State.Centre & State: Some provisions are the same as with TPDS.
Except that centre will provide food security allowances to states to pass on
to the beneficiaries. State and Centre are not responsible to supply food grains during the time of natural calamities like flood and drought. GrievancesDistrict grievances redressal officers will be appointed;
Establishment of the State Food Commissioners; Vigilance committees at district and block levels.

Theme: Financial Market

Statement 1 is incorrect: When the liquidity position is tight, returns are higher on Treasury Bills.

Statement 2 is incorrect: Individuals, Firms, Trusts, Institutions and banks can purchase Treasury Bills.

Notes: Treasury Bills.

The bill market is a sub-market of the money market in India. There are two types of bills viz. Treasury Bills and commercial bills.
While Treasury Bills or T-Bills are issued by the Central Government;
Commercial Bills are issued by financial institutions.

Types of Treasury Bills:

Treasury Bills are basically instruments for short term
(maturities less than one year) borrowing by the Central Government.

Treasury Bills were first issued in India in 1917. At present, the active T-Bills are
91-days T-Bills, 182-day T-Bills and 364-days T-Bills. The 91 day T-Bills are
issued on weekly auction basis while 182 day T-Bill auction is held on
Wednesday preceding Non-reporting Friday and 364 day T-Bill auction on
Wednesday preceding the Reporting Friday.

In 1997, the Government had also introduced the 14-day intermediate treasury bills. Auctions of T-Bills are
conducted by RBI.T-Bills are issued on discount to face value, while the
holder gets the face value on maturity. The return on T-Bills is the difference
between the issue price and face value. Thus, return on T-Bills depends upon
auctions. When the liquidity position in the economy is tight, returns are
higher and vice versa.

Who can purchase T-Bills?

Individuals, Firms, Trusts, Institutions and banks can purchase
T-Bills.

The commercial and cooperative banks use T-Bills for fulfilling their
SLR requirements.

Advantages of Treasury Bills

Objective of issuing T-Bills is to fulfill the short term
money borrowing needs of the government.

T-bills have an advantage over the other bills such as:Zero Risk weighting associated with them. They are issued by the government and sovereign papers have zero risk assigned to them High liquidity because 91 days and 364 days are short term maturity.

Tradability

The secondary market of T-Bills is very active so they have a higher degree of tradability.

Theme: Financial Market

Similar question on Financial Market was asked in UPSC Prelims 2016.

Statement 2 is incorrect: They are used by Foreign Institutional Investors (FIIs) who are NOT registered with SEBI.

Notes:

Participatory Notes:

Participatory Notes or P-notes are offshore derivative instruments, used by Foreign Institutional Investors (FIIs) who are NOT registered with SEBI. The major characteristics of P-notes are:

They are offshore derivative instruments.

They are used by Foreign Institutional Investors (FIIs) who
are NOT registered with SEBI.

They are used on Indian shares, but at a location outside of
India.

The above implies that FIIs who are not registered with SEBI but wish to take exposure in the Indian securities markets can use P-notes. Brokers buy or sell securities on behalf of their clients on their proprietary account and issue such notes in favour of such foreign investors. The P-note holder is entitled to all the dividends, capital gains and other payouts on the underlying securities. The brokerages or FIIs have to compulsorily report the P-note issuance status every quarter to SEBI. In doing so, the identity of the client or the final investor can be hidden.

Theme : Monetary Policy

Similar question on Monetary Policy was asked in UPSC Prelims consecutively from 2013 to 2015.

Statement 3 is incorrect: Developed economies generally go through liquidity trap.

Notes: What is the ‘Liquidity Trap

‘The liquidity trap is the situation in which the current interest rates are low and savings rates are high, rendering monetary policy ineffective. In a liquidity trap, consumers choose to avoid bonds and keep their funds in savings because of the prevailing belief that interest rates
will soon rise. Because bonds have an inverse relationship to interest rates,
many consumers do not want to hold an asset with a price that is expected to
decline. As part of the liquidity trap, consumers continue to hold
funds in standard deposit accounts, such as savings and checking accounts,
instead of in other investment options, even when the central banking system
attempts to stimulate the economy through the injection of additional funds.
These consumer actions, often spurred by the belief of a negative economic
event on the horizon, renders monetary policy to be generally ineffective.

Tikdam/Factual Theme: Unemployment

Similar question on Unemployment was asked in UPSC Prelims 2013.

Statement 1 is incorrect: Reference period is taken as 1
year.

Notes:

A measure of Unemployment in India Usual Status ApproachUsual Status approach records only those persons as unemployed who had no gainful work for a major time during the 365 days preceding the date of the survey and are seeking or are available for work. The status of activity on which a person has spent the relatively long time of the preceding 365 days prior to the date of the survey is considered to be the usual principal activity status of the person. The Usual Status captures long-term unemployment in the economy. The Usual Principal Activity status (UPS), written as Usual Status (PS), is determined using the majority time criterion and refers to the activity status on which h/she spent longer part of the year. Principal usual activity status is further used to classify him in/out the labour force. For instance, if an individual was ‘working’ and/or was ‘seeking or available for work’ for a major part of the year preceding the date of the survey then h/she is considered as being part of the ‘Labour Force’.Weekly Status ApproachThe weekly status approach records only those persons as unemployed who had no gainful work for a major time during the seven days preceding the date of the survey. The weekly status approach captures both the long-term open chronic unemployment and seasonal unemployment. A person is considered to be employed if he or she pursues any one or more of the gainful activities for at least one hour on any day of the reference week. On the other hand, if a person does not pursue any gainful activity, but has been seeking or available for work, the person is considered as unemployed. Daily Status ApproachIn the Daily status approach, the current activity status of the
person with regard to whether employed or unemployed or outside labour force is recorded for each day in the reference week. The measure adopts half day as a unit of measurement for estimating employment or unemployment.

The approach is most inclusive than the other two. Since it also captures the days of unemployment of those who are recorded as employed on the weekly status approach. A person who works for 4 hours or more but up to 8 hours on
a day is recorded as employed for the full day. A person who works for 1 hour or more but less than 4 hours is recorded as employed for the half day. Accordingly, a person having no gainful work even for 1 hour in a day is described as unemployed for a full day.

Tikdam: Statement 1 is a factual statement.Factual
statements are generally wrong. Using this as logic, the options can be narrowed down.

Theme : International Economic Institutions

Similar question on International Economic Institutions was
asked in UPSC Prelims in 2016,2017 and 2018.

Correct Matching:

1. International Development Assistance – Helps the world’s
poorest countries

2. International Finance Corporation – Focuses on the private
sector.

3.Multilateral Investment Guarantee Agency – Aim is to
promote FDI into developing countries.

Notes:

International Development AssistanceThe International Development Association (IDA) is the part of the World Bank group that helps the world’s poorest countries. Overseen by 173 shareholder nations, IDA aims to reduce poverty by providing loans (called “credits”) and grants for programs that boost economic growth, reduce inequalities, and improve people’s living conditions.IDA complements the World Bank’s original lending arm—the
International Bank for Reconstruction and Development (IBRD). IBRD was
established to function as a self-sustaining business and provides loans and
advice to middle-income and credit-worthy poor countries. IBRD and IDA share the same staff and headquarters and evaluate projects with the same rigorous standards.IDA is one of the largest sources of assistance for the
world’s 75 poorest countries, 39 of which are in Africa, and is the single
the largest source of donor funds for basic social services in these countries.IDA lends money on concessional terms. This means that IDA credits have a zero or very low-interest charge and repayments are stretched over 25 to 40 years, including a 5- to 10-year grace period. IDA also provides grants to countries at risk of debt distress. In addition to concessional loans and grants, IDA provides
significant levels of debt relief through the Heavily Indebted Poor Countries
Initiative and the Multilateral Debt Relief Initiative. International Finance CorporationThe IFC was established in 1956 to support the growth of the
private sector in the developing world. IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the
the private sector in developing countries. The IFC’s stated mission is “to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people’s lives.”While the World Bank (IBRD and IDA) provides credit and non-lending assistance to governments, the IFC provides loans and equity financing, advice, and technical services to the private sector. The IFC also plays a catalytic role, by mobilizing additional capital through loan syndication and by lessening the political risk for investors, enabling their participation in a given project. The IFC has worked with more than 3319 companies in 140 countries since its inception in 1956. It is a public entity, although its clientele consists of transnational, national, and local private sector companies, operating in a competitive and fast-moving business environment. Multilateral Investment Guarantee AgencyMIGA is a member of the World Bank Group. Its mission is to
promote FDI into developing countries to help support economic growth, reduce poverty and improves people’s lives.

At the centre of MIGA’s new FY18-20 strategy are three elements:

A re-affirmed focus on the poorest through support for projects in IDA countries A continuing emphasis on Fragile and Conflict-affected States, where MIGA has the opportunity to have an impact where private PRI insurers are unwilling to go, and an expanded commitment to climate change mitigation and adaptation, targeting 28% of new issuance related to climate change mitigation or adaptation in 2020.

Factual

Theme: National Income Accounting

Similar question on National Income Accounting was asked in 2013.

Statement 2 is incorrect:

GDP at (Constant) Market price is the official GDP of India.

Notes :

When we combine the monetary value of all the final goods and services produced in the economic territory of a country for a specified time such as a year, this will be called “Gross Domestic Product”. GDP is concerned with the final/finished goods and not the unfinished or intermediate goods.

GDP at Current Prices and Constant Prices

GDP can be estimated at current prices and constant prices. GDP at Current prices is the total market value of goods and services at current market prices. For example, if the average unit price of 100 goods + services is Rs. 100 in 2010 and Rs. 150 in 2015; then the GDP will be Rs. 10000 in 2010 but Rs. 15000 in 2015 at current prices. Thus, this figure does not take into account the inflation and despite being an increased figure in value; the increase in production is zero. Due to this, GDP at Current Prices is also known as Nominal GDP. In this figure inflation is not adjusted, so can be misleading. When it is estimated on the basis of some fixed prices prevalent at a particular point of time, this is called GDP at constant prices. If the average unit price of 100 goods + services is Rs. 100 in 2010 and Rs. 150 in 2015; then the GDP at current prices will be Rs. 10000 in 2010 but Rs. 15000 in 2015. However, GDP at constant prices will still be Rs. 10000, so GDP growth is zero in this case.

Factual/Tikdam Theme:

Banking in India Banking is always a hot topic and similar question on Monetary Policy was asked in UPSC Prelims consecutively from 2013 to 2018. Statement 1 is incorrect: Banks with a reserve capital of less than 5 lakh rupees qualify as non-scheduled banks.

Statement 2 is incorrect : Unlike scheduled banks, they are not entitled to borrow from the RBI for normal banking purposes, except, in emergency or “abnormal circumstances.” Notes: Scheduled Commercial Banks All the commercial banks in India- Scheduled and Non-Scheduled is regulated under Banking Regulation Act 1949. By definition, any bank which is listed in the 2nd schedule of the Reserve Bank of India Act, 1934 is considered a scheduled bank. The list includes the State Bank of India and its subsidiaries (like State Bank of Travancore), all nationalised banks (Bank of Baroda, Bank of India etc), Private sector banks, Foreign banks, regional rural banks (RRBs), foreign banks (HSBC Holdings Plc, Citibank NA) and some co-operative banks. Till 2017, Scheduled commercial banks in India comprised 26 Public sector banks including SBI and its associates, and 19 Nationalised Bank and IDBI. The creation of Bhartiya Mahila Bank has increased the total no of Public sector SCB’s to 27, but the recent merger of the Mahaila Bank with SBI had reduced the list back to 26. The scheduled private sector bank includes old private sector banks and new private sector banks. There are 13 old private sector banks and 9 new private sector banks including the newly formed IDFC and Bandhan Bank. There are also 43 Foreign National Banks operating in India. The Regional Rural Banks were started in India back in the 1970s due to the inability of the commercial banks to lend to farmers/rural sectors/agriculture. The governance structure/shareholding of RRBs is as follows: Central Government: 50%, State Government: 15% and Sponsor Bank: 35%. RBI has kept CRR (Cash Reserve Requirements) of RRBs at 3% and SLR (Statutory Liquidity Requirement) at 25% of their total net liabilities. Non-scheduled Banks Non-scheduled banks by definition are those which are not listed in the 2nd schedule of the RBI Act, 1934. Banks with a reserve capital of less than 5 lakh rupees qualify as non-scheduled banks. Unlike scheduled banks, they are not entitled to borrow from the RBI for normal banking purposes, except, in emergency or “abnormal circumstances.” Jammu & Kashmir Bank is an example of a non-scheduled commercial bank. Cooperative Banks Co-operative banks operate in both urban and non-urban areas. All banks registered under the Cooperative Societies Act, 1912 are considered co-operative banks. In the urban centres, they mainly finance entrepreneurs, small businesses, industries, self-employment and cater to home buying and educational loans. Likewise, co-operative banks in the rural areas primarily cater to agricultural-based activities, which include farming, livestock’s, diaries and hatcheries etc. They also extend loans to small scale units, cottage industries, and self-employment activities like artisanship. Unlike commercial banks, who are driven by profit, cooperative banks work on a “no profit, no loss” basis. Co-operative Banks are regulated by the Reserve Bank of India under the Banking Regulation Act, 1949 and Banking Laws (Application to Co-operative Societies) Act, 1965.

Theme: Banking in India

Banking is always a hot topic and similar question on Monetary Policy was asked in UPSC Prelims consecutively from 2013 to 2018.

Statement 3 is incorrect: The assets size of a bank is used as a criteria for classifying bank as D-SIBNotes: Domestic Systemically Important Bank(D-SIB)D-SIB means that the bank is too big to fail. According to the RBI, some banks become systemically important due to their size, cross-jurisdictional activities, complexity and lack of substitute and interconnection. Banks whose assets exceed 2% of GDP are considered part of this group. The RBI stated that should such a bank fail, there would be significant disruption to the essential services they provide to the banking system and the overall economy.The too-big-to-fail tag also indicates that in case of distress, the government is expected to support these banks. Due to this perception, these banks enjoy certain advantages in funding. It also means that these banks have a different set of policy measures regarding systemic risks and moral hazard issues.HDFC Bank Ltd,State Bank of India (SBI) and ICICI Bank Ltd are currently classified as D-SIB.

Theme : Banking in IndiaBanking is always a hot topic and similar question on Monetary Policy was asked in UPSC Prelims consecutively from 2013 to 2018.

Statement 1 is incorrect: It provides funds to MFIs which in turn provide loan facility to MSMEs.

Notes:For further notes please refer : https://www.civilsdaily.com/pradhan-mantri-mudra-yojana-funding-the-unfunded/

FactualTheme : Growth and developmentSimilar question on Growth and Development was asked in UPSC 2016,2017 and 2018

Statement 1 is incorrect : SDGs are legally non-binding.

Statement 2 is incorrect : There were no specific goals on economic indicators under MDGs.They are added for the first time under SDGs.Notes :Sustainable Development GoalsOn 25 September 2015, the United Nations has adopted the resolution on “Transforming our world: the 2030 Agenda for Sustainable Development“, which has 169 targets in 17 goals called Sustainable Development Goals. These goals are legally non-binding and have succeeded the eight MDGs, which were adopted in 2000 for fifteen years in Rio 20+ summit.Sustainable Development Goals (SDGs) outline broader sustainability agenda dealing with ‘five Ps’ people, planet, prosperity, peace, and partnership. they seek to address the universal need for development that works for all people and root causes of poverty. They call for eradicating hunger and poverty, improving living standards, ensuring quality education, affordable and reliable energy, achieving gender equality and taking urgent action to combat climate change etc. They also include specific goals on economic indicators for first time.The Goals :Goal 1: No PovertyGoal 2: Zero HungerGoal 3: Good Health and Well BeingGoal 4: Quality EducationGoal 5: Gender EqualityGoal 6: Clean Water and SanitationGoal 7: Affordable and Clean EnergyGoal 8: Decent Work and Economic GrowthGoal 9: Industry, Innovation and InfrastructureGoal 10: Reduce InequalitiesGoal 11: Sustainable Cities and CommunitiesGoal 12: Responsible Production and ConsumptionGoal 13: Climate ActionsGoal 14: Life Below WaterGoal 15: Life on landGoal 16: Peace, Justice and Strong InstitutionsGoal 17: Partnership for the Goals

FactualTheme : FInancial MarketSimilar question on Financial Market was asked in UPSC Prelims 2016.

Statement 1 is incorrect: It is a capital market instrument.

Statement 2 is incorrect: Debenture acknowledges loan or debt to the company and not a part in the ownership of the company.

Notes:

A debenture is one of the capital market instruments which is used to raise medium or long term funds from public. A debenture is essentially a debt instrument that acknowledges a loan to the company and is executed under the common seal of the company. The debenture document, called Debenture deed contains provisions as to payment, of interest and the repayment of principal amount and giving a charge on the assets of a such a company, which may give security for the payment over the some or all the assets of the company. Issue of Debentures is one of the most common methods of raising the funds available to the company. It is an important source of finance.Salient Features of DebenturesThe most salient features of Debentures are as follows:A debenture acknowledges a debtIt is in the form of certificate issued under the seal of the company (called Debenture Deed). It usually shows the amount & date of repayment of the loan.It has a rate of interest & date of interest payment.Debentures can be secured against the assets of the company or may be unsecured.Debentures are generally freely transferable by the debenture holder. Debenture holders have no rights to vote in the company’s general meetings of shareholders, but they may have separate meetings or votes e.g. on changes to the rights attached to the debentures.The interest paid to them is a charge against profit in the company’s financial statements.Convertibility in Debentures:Convertibility in debentures denotes conversion of a debenture to equity shares. On this basis they are of four types as follows:Partly Convertible Debentures (PCD):A part of these instruments are converted into Equity shares in the future at notice of the issuer. The issuer decides the ratio for conversion. This is normally decided at the time of subscription.Fully convertible Debentures (FCD):These are fully convertible into Equity shares at the issuer’s notice. The ratio of conversion is decided by the issuer. Upon conversion the investors enjoy the same status as ordinary shareholders of the company.Optionally Convertible Debentures (OCD): The investor has the option to either convert these debentures into shares at price decided by the issuer/agreed upon at the time of issue.Non Convertible Debentures (NCD): Non-convertible debentures , which are simply regular debentures, cannot be converted into equity shares of the liable company. They are debentures without the convertibility feature attached to them. As a result, they usually carry higher interest rates than their convertible counterparts. Thus, these instruments retain the debt character and can not be converted in to equity shares