DAY – 44 : Insta 75 Days Revision Plan-2025 : Economy

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• Question 1 of 30 1. Question 1 points Consider the following statements regarding Non-Banking Financial Companies (NBFCs) in India: All NBFCs are regulated by the Reserve Bank of India (RBI). NBFCs can accept demand deposits similar to commercial banks. NBFCs form part of the payment and settlement system. Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation (DICGC) is not available for NBFC depositors. How many of the statements given above are correct? (a) Only one (b) Only two (c) Only three (d) All four Correct Solution: A Statement 1 is incorrect: While the RBI regulates a vast majority of NBFCs, not all entities falling under the broad definition are regulated by it. For example, certain NBFCs like Housing Finance Companies are regulated by the National Housing Bank (NHB), Merchant Banking companies by SEBI, Nidhi companies by the Ministry of Corporate Affairs, etc., although RBI often has overarching systemic oversight. Statement 2 is incorrect: A key distinction between banks and NBFCs is that NBFCs cannot accept demand deposits (deposits repayable on demand, like those in savings or current accounts). Some NBFCs are permitted to accept time deposits, subject to regulations. Statement 3 is incorrect: NBFCs are generally not part of the payment and settlement system. They cannot issue cheques drawn on themselves. Access to payment systems like NEFT/RTGS is typically through sponsor banks. Statement 4 is correct: The deposit insurance cover provided by DICGC (a subsidiary of RBI) is available only to depositors of commercial banks, cooperative banks, RRBs, etc. It does not extend to deposits held with NBFCs. Incorrect Solution: A Statement 1 is incorrect: While the RBI regulates a vast majority of NBFCs, not all entities falling under the broad definition are regulated by it. For example, certain NBFCs like Housing Finance Companies are regulated by the National Housing Bank (NHB), Merchant Banking companies by SEBI, Nidhi companies by the Ministry of Corporate Affairs, etc., although RBI often has overarching systemic oversight. Statement 2 is incorrect: A key distinction between banks and NBFCs is that NBFCs cannot accept demand deposits (deposits repayable on demand, like those in savings or current accounts). Some NBFCs are permitted to accept time deposits, subject to regulations. Statement 3 is incorrect: NBFCs are generally not part of the payment and settlement system. They cannot issue cheques drawn on themselves. Access to payment systems like NEFT/RTGS is typically through sponsor banks. Statement 4 is correct: The deposit insurance cover provided by DICGC (a subsidiary of RBI) is available only to depositors of commercial banks, cooperative banks, RRBs, etc. It does not extend to deposits held with NBFCs.

#### 1. Question

Consider the following statements regarding Non-Banking Financial Companies (NBFCs) in India:

• All NBFCs are regulated by the Reserve Bank of India (RBI).

• NBFCs can accept demand deposits similar to commercial banks.

• NBFCs form part of the payment and settlement system.

• Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation (DICGC) is not available for NBFC depositors.

How many of the statements given above are correct?

• (a) Only one

• (b) Only two

• (c) Only three

• (d) All four

Solution: A

• Statement 1 is incorrect: While the RBI regulates a vast majority of NBFCs, not all entities falling under the broad definition are regulated by it. For example, certain NBFCs like Housing Finance Companies are regulated by the National Housing Bank (NHB), Merchant Banking companies by SEBI, Nidhi companies by the Ministry of Corporate Affairs, etc., although RBI often has overarching systemic oversight.

• Statement 2 is incorrect: A key distinction between banks and NBFCs is that NBFCs cannot accept demand deposits (deposits repayable on demand, like those in savings or current accounts). Some NBFCs are permitted to accept time deposits, subject to regulations.

• Statement 3 is incorrect: NBFCs are generally not part of the payment and settlement system. They cannot issue cheques drawn on themselves. Access to payment systems like NEFT/RTGS is typically through sponsor banks.

• Statement 4 is correct: The deposit insurance cover provided by DICGC (a subsidiary of RBI) is available only to depositors of commercial banks, cooperative banks, RRBs, etc. It does not extend to deposits held with NBFCs.

Solution: A

• Question 2 of 30 2. Question 1 points Consider the following statements regarding the potential implementation and impact of a Central Bank Digital Currency (CBDC) or ‘e-Rupee’ in India: A retail CBDC aims to provide a direct digital alternative to physical cash, potentially reducing currency management costs for the RBI. Widespread adoption of CBDC could significantly diminish the role of commercial banks in the payment system. Unlike cryptocurrencies, a CBDC would be a sovereign liability backed by the central bank, ensuring legal tender status. How many of the statements given above are correct? (a) Only one (b) Only two (c) All three (d) None Correct Solution: B Statement 1 is correct: A key motivation cited for exploring retail CBDCs globally is to offer a safe, digital form of central bank money directly accessible to the public, similar to physical cash. This could potentially lead to efficiencies and cost savings in printing, distributing, and managing physical currency over the long term. Statement 2 is incorrect: While the exact impact depends on the design (e.g., direct vs. indirect model), most proposed CBDC models (including those piloted by RBI) involve commercial banks playing a significant role, particularly in distribution, KYC/AML compliance, and potentially providing wallet services. The aim is generally not to disintermediate banks entirely but to offer an additional payment rail. Widespread adoption might change their role, but likely not diminish it significantly in the near to medium term, especially given their existing infrastructure and customer base. Complete disintermediation raises financial stability concerns. Statement 3 is correct: This is a fundamental characteristic distinguishing CBDCs from private cryptocurrencies (like Bitcoin). A CBDC is issued by the central bank, represents a direct liability of the sovereign authority, and carries the status of legal tender, just like physical currency. Cryptocurrencies lack this sovereign backing and legal tender status. Incorrect Solution: B Statement 1 is correct: A key motivation cited for exploring retail CBDCs globally is to offer a safe, digital form of central bank money directly accessible to the public, similar to physical cash. This could potentially lead to efficiencies and cost savings in printing, distributing, and managing physical currency over the long term. Statement 2 is incorrect: While the exact impact depends on the design (e.g., direct vs. indirect model), most proposed CBDC models (including those piloted by RBI) involve commercial banks playing a significant role, particularly in distribution, KYC/AML compliance, and potentially providing wallet services. The aim is generally not to disintermediate banks entirely but to offer an additional payment rail. Widespread adoption might change their role, but likely not diminish it significantly in the near to medium term, especially given their existing infrastructure and customer base. Complete disintermediation raises financial stability concerns. Statement 3 is correct: This is a fundamental characteristic distinguishing CBDCs from private cryptocurrencies (like Bitcoin). A CBDC is issued by the central bank, represents a direct liability of the sovereign authority, and carries the status of legal tender, just like physical currency. Cryptocurrencies lack this sovereign backing and legal tender status.

#### 2. Question

Consider the following statements regarding the potential implementation and impact of a Central Bank Digital Currency (CBDC) or ‘e-Rupee’ in India:

• A retail CBDC aims to provide a direct digital alternative to physical cash, potentially reducing currency management costs for the RBI.

• Widespread adoption of CBDC could significantly diminish the role of commercial banks in the payment system.

• Unlike cryptocurrencies, a CBDC would be a sovereign liability backed by the central bank, ensuring legal tender status.

How many of the statements given above are correct?

• (a) Only one

• (b) Only two

• (c) All three

Solution: B

• Statement 1 is correct: A key motivation cited for exploring retail CBDCs globally is to offer a safe, digital form of central bank money directly accessible to the public, similar to physical cash. This could potentially lead to efficiencies and cost savings in printing, distributing, and managing physical currency over the long term.

• Statement 2 is incorrect: While the exact impact depends on the design (e.g., direct vs. indirect model), most proposed CBDC models (including those piloted by RBI) involve commercial banks playing a significant role, particularly in distribution, KYC/AML compliance, and potentially providing wallet services. The aim is generally not to disintermediate banks entirely but to offer an additional payment rail. Widespread adoption might change their role, but likely not diminish it significantly in the near to medium term, especially given their existing infrastructure and customer base. Complete disintermediation raises financial stability concerns.

• Statement 3 is correct: This is a fundamental characteristic distinguishing CBDCs from private cryptocurrencies (like Bitcoin). A CBDC is issued by the central bank, represents a direct liability of the sovereign authority, and carries the status of legal tender, just like physical currency. Cryptocurrencies lack this sovereign backing and legal tender status.

Solution: B

• Question 3 of 30 3. Question 1 points Which of the following activities would most likely lead to an increase in India’s Gross Domestic Product (GDP) calculated using the expenditure method? A foreign tourist spending money on hotels and restaurants in India. An Indian company purchasing new machinery manufactured domestically. The Government of India increasing its expenditure on building new highways. An Indian household purchasing shares of an existing Indian company. Select the correct answer using the code given below: (a) 1, 2 and 3 only (b) 2 and 3 only (c) 1 and 4 only (d) Partition of British India Correct Solution: A The expenditure method of calculating GDP (GDP=C+I+G+(X−M)), which sums up final spending on goods and services produced within a country’s borders. C = Private Consumption Expenditure I = Gross Private Investment Expenditure G = Government Consumption and Investment Expenditure (X-M) = Net Exports (Exports – Imports) 1. Foreign tourist spending: Spending by foreign tourists in India represents exports (X) of services (hospitality, food). Exports add to GDP. This increases GDP. 2. Indian company purchasing new machinery (domestic): Purchase of new capital goods (machinery) by a firm is considered Investment (I). Since it’s domestically manufactured, it contributes to GDP. This increases GDP. (If the machinery was imported, it would increase I but also increase M, netting out in the (X-M) term for GDP calculation). 3. Government expenditure on highways: Government spending on goods and services, including infrastructure like highways, is part of Government Expenditure (G). This directly adds to GDP. This increases GDP. 4. Household purchasing existing shares: Purchase of existing shares or financial assets represents a transfer of ownership of existing assets. It does not correspond to the production of new goods or services. Therefore, such financial transactions are not included in GDP calculation via the expenditure method. (Brokerage fees paid for the transaction would be included as payment for a service). Incorrect Solution: A The expenditure method of calculating GDP (GDP=C+I+G+(X−M)), which sums up final spending on goods and services produced within a country’s borders. C = Private Consumption Expenditure I = Gross Private Investment Expenditure G = Government Consumption and Investment Expenditure (X-M) = Net Exports (Exports – Imports) 1. Foreign tourist spending: Spending by foreign tourists in India represents exports (X) of services (hospitality, food). Exports add to GDP. This increases GDP. 2. Indian company purchasing new machinery (domestic): Purchase of new capital goods (machinery) by a firm is considered Investment (I). Since it’s domestically manufactured, it contributes to GDP. This increases GDP. (If the machinery was imported, it would increase I but also increase M, netting out in the (X-M) term for GDP calculation). 3. Government expenditure on highways: Government spending on goods and services, including infrastructure like highways, is part of Government Expenditure (G). This directly adds to GDP. This increases GDP. 4. Household purchasing existing shares: Purchase of existing shares or financial assets represents a transfer of ownership of existing assets. It does not correspond to the production of new goods or services. Therefore, such financial transactions are not included in GDP calculation via the expenditure method. (Brokerage fees paid for the transaction would be included as payment for a service).

#### 3. Question

Which of the following activities would most likely lead to an increase in India’s Gross Domestic Product (GDP) calculated using the expenditure method?

• A foreign tourist spending money on hotels and restaurants in India.

• An Indian company purchasing new machinery manufactured domestically.

• The Government of India increasing its expenditure on building new highways.

• An Indian household purchasing shares of an existing Indian company.

Select the correct answer using the code given below:

• (a) 1, 2 and 3 only

• (b) 2 and 3 only

• (c) 1 and 4 only

• (d) Partition of British India

Solution: A

The expenditure method of calculating GDP (GDP=C+I+G+(X−M)), which sums up final spending on goods and services produced within a country’s borders.

• C = Private Consumption Expenditure

• I = Gross Private Investment Expenditure

• G = Government Consumption and Investment Expenditure

• (X-M) = Net Exports (Exports – Imports)

• 1. Foreign tourist spending: Spending by foreign tourists in India represents exports (X) of services (hospitality, food). Exports add to GDP. This increases GDP.

• 2. Indian company purchasing new machinery (domestic): Purchase of new capital goods (machinery) by a firm is considered Investment (I). Since it’s domestically manufactured, it contributes to GDP. This increases GDP. (If the machinery was imported, it would increase I but also increase M, netting out in the (X-M) term for GDP calculation).

• 3. Government expenditure on highways: Government spending on goods and services, including infrastructure like highways, is part of Government Expenditure (G). This directly adds to GDP. This increases GDP.

• 4. Household purchasing existing shares: Purchase of existing shares or financial assets represents a transfer of ownership of existing assets. It does not correspond to the production of new goods or services. Therefore, such financial transactions are not included in GDP calculation via the expenditure method. (Brokerage fees paid for the transaction would be included as payment for a service).

Solution: A

The expenditure method of calculating GDP (GDP=C+I+G+(X−M)), which sums up final spending on goods and services produced within a country’s borders.

• C = Private Consumption Expenditure

• I = Gross Private Investment Expenditure

• G = Government Consumption and Investment Expenditure

• (X-M) = Net Exports (Exports – Imports)

• 1. Foreign tourist spending: Spending by foreign tourists in India represents exports (X) of services (hospitality, food). Exports add to GDP. This increases GDP.

• Question 4 of 30 4. Question 1 points Consider the following statements related to monetary policy transmission: Monetary policy transmission refers to the process through which changes in the policy repo rate by the central bank affect interest rates in the broader economy and ultimately influence aggregate demand and inflation. A high level of Non-Performing Assets (NPAs) in the banking system can weaken monetary policy transmission by making banks more risk-averse and less willing to pass on rate cuts. The external benchmark lending rate (EBLR) system was introduced by RBI to improve the transparency and speed of monetary policy transmission compared to the earlier MCLR regime. In India, monetary policy transmission is generally considered to be instantaneous and complete across all segments of the financial market. Which of the statements given above is/are incorrect? (a) 4 only (b) 1 and 3 only (c) 2 and 4 only (d) 1, 2 and 3 only Correct Solution: A Statement 1 is correct. This is the standard definition of monetary policy transmission – the process by which the central bank’s policy actions (like changing the repo rate) are transmitted through the financial system to influence other economic variables, primarily interest rates, credit availability, aggregate demand, and inflation. Statement 2 is correct. High levels of NPAs erode banks’ profitability and capital base. This can make them more cautious about lending, even if the policy rate is cut. They might be hesitant to reduce their lending rates fully or quickly, or they might focus on repairing their balance sheets rather than expanding credit, thereby impeding the transmission of monetary policy easing. Statement 3 is correct. The RBI mandated banks to link their new floating rate loans for retail and MSME sectors to an external benchmark from October 2019. This EBLR system was introduced precisely because the transmission under the previous internal benchmark systems (Base Rate and Marginal Cost of Funds based Lending Rate – MCLR) was found to be slow and incomplete. EBLR aims to ensure a more direct, transparent, and faster pass-through of policy rate changes to borrowers. Statement 4 is incorrect. Monetary policy transmission in India (and most economies) is widely acknowledged to be characterized by significant lags and incompleteness. The pass-through of policy rate changes to deposit and lending rates, and further to aggregate demand and inflation, takes time and is often not one-for-one. Various factors like banking system rigidities (NPAs, operational costs), market structure, sticky inflation expectations, and informal credit markets contribute to these lags and imperfections. Transmission is neither instantaneous nor complete. Incorrect Solution: A Statement 1 is correct. This is the standard definition of monetary policy transmission – the process by which the central bank’s policy actions (like changing the repo rate) are transmitted through the financial system to influence other economic variables, primarily interest rates, credit availability, aggregate demand, and inflation. Statement 2 is correct. High levels of NPAs erode banks’ profitability and capital base. This can make them more cautious about lending, even if the policy rate is cut. They might be hesitant to reduce their lending rates fully or quickly, or they might focus on repairing their balance sheets rather than expanding credit, thereby impeding the transmission of monetary policy easing. Statement 3 is correct. The RBI mandated banks to link their new floating rate loans for retail and MSME sectors to an external benchmark from October 2019. This EBLR system was introduced precisely because the transmission under the previous internal benchmark systems (Base Rate and Marginal Cost of Funds based Lending Rate – MCLR) was found to be slow and incomplete. EBLR aims to ensure a more direct, transparent, and faster pass-through of policy rate changes to borrowers. Statement 4 is incorrect. Monetary policy transmission in India (and most economies) is widely acknowledged to be characterized by significant lags and incompleteness. The pass-through of policy rate changes to deposit and lending rates, and further to aggregate demand and inflation, takes time and is often not one-for-one. Various factors like banking system rigidities (NPAs, operational costs), market structure, sticky inflation expectations, and informal credit markets contribute to these lags and imperfections. Transmission is neither instantaneous nor complete.

#### 4. Question

Consider the following statements related to monetary policy transmission:

• Monetary policy transmission refers to the process through which changes in the policy repo rate by the central bank affect interest rates in the broader economy and ultimately influence aggregate demand and inflation.

• A high level of Non-Performing Assets (NPAs) in the banking system can weaken monetary policy transmission by making banks more risk-averse and less willing to pass on rate cuts.

• The external benchmark lending rate (EBLR) system was introduced by RBI to improve the transparency and speed of monetary policy transmission compared to the earlier MCLR regime.

• In India, monetary policy transmission is generally considered to be instantaneous and complete across all segments of the financial market.

Which of the statements given above is/are incorrect?

• (a) 4 only

• (b) 1 and 3 only

• (c) 2 and 4 only

• (d) 1, 2 and 3 only

Solution: A

• Statement 1 is correct. This is the standard definition of monetary policy transmission – the process by which the central bank’s policy actions (like changing the repo rate) are transmitted through the financial system to influence other economic variables, primarily interest rates, credit availability, aggregate demand, and inflation.

• Statement 2 is correct. High levels of NPAs erode banks’ profitability and capital base. This can make them more cautious about lending, even if the policy rate is cut. They might be hesitant to reduce their lending rates fully or quickly, or they might focus on repairing their balance sheets rather than expanding credit, thereby impeding the transmission of monetary policy easing.

• Statement 3 is correct. The RBI mandated banks to link their new floating rate loans for retail and MSME sectors to an external benchmark from October 2019. This EBLR system was introduced precisely because the transmission under the previous internal benchmark systems (Base Rate and Marginal Cost of Funds based Lending Rate – MCLR) was found to be slow and incomplete. EBLR aims to ensure a more direct, transparent, and faster pass-through of policy rate changes to borrowers.

• Statement 4 is incorrect. Monetary policy transmission in India (and most economies) is widely acknowledged to be characterized by significant lags and incompleteness. The pass-through of policy rate changes to deposit and lending rates, and further to aggregate demand and inflation, takes time and is often not one-for-one. Various factors like banking system rigidities (NPAs, operational costs), market structure, sticky inflation expectations, and informal credit markets contribute to these lags and imperfections. Transmission is neither instantaneous nor complete.

Solution: A

• Question 5 of 30 5. Question 1 points Consider the following statements regarding Financial Inclusion in India: The Pradhan Mantri Jan Dhan Yojana (PMJDY) primarily aimed at providing universal access to banking facilities with a basic savings account, overdraft facility, and RuPay debit card. Small Finance Banks (SFBs) are required to extend 75% of their Adjusted Net Bank Credit (ANBC) towards Priority Sector Lending (PSL). Payments Banks are permitted to issue credit cards and offer term loans to their customers. How many of the statements given above are correct? (a) Only one (b) Only two (c) All three (d) None Correct Solution: B Statement 1 is correct. PMJDY, launched in 2014, is a national mission for financial inclusion aiming to ensure access to financial services, namely banking/savings & deposit accounts, remittance, credit, insurance, pension in an affordable manner. Key features include a basic savings bank deposit (BSBD) account, an overdraft facility (initially ₹5,000, later enhanced), and a RuPay debit card with inbuilt accident insurance cover. Statement 2 is correct. Small Finance Banks (SFBs) are a differentiated category of banks created by the RBI to further financial inclusion by primarily serving small business units, small and marginal farmers, micro and small industries, and unorganized sector entities. They are subject to all prudential norms applicable to commercial banks, including the requirement to lend 75% of their ANBC to the priority sector, similar to Regional Rural Banks (RRBs). Universal banks have a 40% PSL target. Statement 3 is incorrect. Payments Banks are another type of differentiated bank focused on providing basic banking services like accepting deposits (up to a limit, currently ₹2 lakh per customer) and offering payments/remittance services. However, they are not permitted to undertake lending activities, which includes issuing credit cards or offering loans (like term loans). They can issue debit cards and facilitate payments. Incorrect Solution: B Statement 1 is correct. PMJDY, launched in 2014, is a national mission for financial inclusion aiming to ensure access to financial services, namely banking/savings & deposit accounts, remittance, credit, insurance, pension in an affordable manner. Key features include a basic savings bank deposit (BSBD) account, an overdraft facility (initially ₹5,000, later enhanced), and a RuPay debit card with inbuilt accident insurance cover. Statement 2 is correct. Small Finance Banks (SFBs) are a differentiated category of banks created by the RBI to further financial inclusion by primarily serving small business units, small and marginal farmers, micro and small industries, and unorganized sector entities. They are subject to all prudential norms applicable to commercial banks, including the requirement to lend 75% of their ANBC to the priority sector, similar to Regional Rural Banks (RRBs). Universal banks have a 40% PSL target. Statement 3 is incorrect. Payments Banks are another type of differentiated bank focused on providing basic banking services like accepting deposits (up to a limit, currently ₹2 lakh per customer) and offering payments/remittance services. However, they are not permitted to undertake lending activities, which includes issuing credit cards or offering loans (like term loans). They can issue debit cards and facilitate payments.

#### 5. Question

Consider the following statements regarding Financial Inclusion in India:

• The Pradhan Mantri Jan Dhan Yojana (PMJDY) primarily aimed at providing universal access to banking facilities with a basic savings account, overdraft facility, and RuPay debit card.

• Small Finance Banks (SFBs) are required to extend 75% of their Adjusted Net Bank Credit (ANBC) towards Priority Sector Lending (PSL).

• Payments Banks are permitted to issue credit cards and offer term loans to their customers.

How many of the statements given above are correct?

• (a) Only one

• (b) Only two

• (c) All three

Solution: B

Statement 1 is correct. PMJDY, launched in 2014, is a national mission for financial inclusion aiming to ensure access to financial services, namely banking/savings & deposit accounts, remittance, credit, insurance, pension in an affordable manner. Key features include a basic savings bank deposit (BSBD) account, an overdraft facility (initially ₹5,000, later enhanced), and a RuPay debit card with inbuilt accident insurance cover.

• Statement 2 is correct. Small Finance Banks (SFBs) are a differentiated category of banks created by the RBI to further financial inclusion by primarily serving small business units, small and marginal farmers, micro and small industries, and unorganized sector entities. They are subject to all prudential norms applicable to commercial banks, including the requirement to lend 75% of their ANBC to the priority sector, similar to Regional Rural Banks (RRBs). Universal banks have a 40% PSL target.

• Statement 3 is incorrect. Payments Banks are another type of differentiated bank focused on providing basic banking services like accepting deposits (up to a limit, currently ₹2 lakh per customer) and offering payments/remittance services. However, they are not permitted to undertake lending activities, which includes issuing credit cards or offering loans (like term loans). They can issue debit cards and facilitate payments.

Solution: B

• Question 6 of 30 6. Question 1 points Consider the following statements: Assertion (A): The later Five-Year Plans in India, particularly after the 1991 economic reforms, saw a gradual shift towards indicative planning rather than directive planning. Reason (R): The increasing role of the private sector and market forces in the economy post-liberalization reduced the scope and effectiveness of centralized resource allocation by the state. Select the correct answer using the codes given below: (a) Both A and R are true, and R is the correct explanation of A. (b) Both A and R are true, but R is not the correct explanation of A. (c) A is true, but R is false. (d) A is false, but R is true. Correct Solution: A Assertion (A): Following the economic liberalization reforms initiated in 1991, the nature of planning in India began to change. The emphasis shifted away from the earlier model of comprehensive, directive planning with detailed targets and resource allocation controlled heavily by the state (Planning Commission). Instead, planning became more indicative, focusing on setting broad strategic directions, identifying priority areas, and creating an enabling environment for economic actors (including the increasingly important private sector), rather than directly controlling investment decisions across the economy. This trend continued through the subsequent plan periods until the dissolution of the Planning Commission. Assertion (A) is true. Reason (R): The 1991 reforms significantly reduced the dominance of the public sector and opened up many areas to private and foreign investment. With market forces playing a larger role in determining investment, production, and pricing decisions, the ability and necessity for the state to centrally allocate resources and issue detailed directives diminished. The economy became more complex and market-oriented, making the earlier style of planning less feasible and effective. Reason (R) accurately describes the changing economic landscape post-1991. Reason (R) is true. The rise of the private sector and market mechanisms (Reason R) is the primary driver behind the shift from directive to indicative planning (Assertion A). As the state’s direct control over economic resources and decisions lessened due to liberalization, the planning approach had to adapt to a more guiding, facilitating role rather than a controlling one. Therefore, R provides the correct explanation for A. Incorrect Solution: A Assertion (A): Following the economic liberalization reforms initiated in 1991, the nature of planning in India began to change. The emphasis shifted away from the earlier model of comprehensive, directive planning with detailed targets and resource allocation controlled heavily by the state (Planning Commission). Instead, planning became more indicative, focusing on setting broad strategic directions, identifying priority areas, and creating an enabling environment for economic actors (including the increasingly important private sector), rather than directly controlling investment decisions across the economy. This trend continued through the subsequent plan periods until the dissolution of the Planning Commission. Assertion (A) is true. Reason (R): The 1991 reforms significantly reduced the dominance of the public sector and opened up many areas to private and foreign investment. With market forces playing a larger role in determining investment, production, and pricing decisions, the ability and necessity for the state to centrally allocate resources and issue detailed directives diminished. The economy became more complex and market-oriented, making the earlier style of planning less feasible and effective. Reason (R) accurately describes the changing economic landscape post-1991. Reason (R) is true. The rise of the private sector and market mechanisms (Reason R) is the primary driver behind the shift from directive to indicative planning (Assertion A). As the state’s direct control over economic resources and decisions lessened due to liberalization, the planning approach had to adapt to a more guiding, facilitating role rather than a controlling one. Therefore, R provides the correct explanation for A.

#### 6. Question

Consider the following statements:

Assertion (A): The later Five-Year Plans in India, particularly after the 1991 economic reforms, saw a gradual shift towards indicative planning rather than directive planning.

Reason (R): The increasing role of the private sector and market forces in the economy post-liberalization reduced the scope and effectiveness of centralized resource allocation by the state.

Select the correct answer using the codes given below:

• (a) Both A and R are true, and R is the correct explanation of A.

• (b) Both A and R are true, but R is not the correct explanation of A.

• (c) A is true, but R is false.

• (d) A is false, but R is true.

Solution: A

• Assertion (A): Following the economic liberalization reforms initiated in 1991, the nature of planning in India began to change. The emphasis shifted away from the earlier model of comprehensive, directive planning with detailed targets and resource allocation controlled heavily by the state (Planning Commission). Instead, planning became more indicative, focusing on setting broad strategic directions, identifying priority areas, and creating an enabling environment for economic actors (including the increasingly important private sector), rather than directly controlling investment decisions across the economy. This trend continued through the subsequent plan periods until the dissolution of the Planning Commission. Assertion (A) is true.

• Reason (R): The 1991 reforms significantly reduced the dominance of the public sector and opened up many areas to private and foreign investment. With market forces playing a larger role in determining investment, production, and pricing decisions, the ability and necessity for the state to centrally allocate resources and issue detailed directives diminished. The economy became more complex and market-oriented, making the earlier style of planning less feasible and effective. Reason (R) accurately describes the changing economic landscape post-1991. Reason (R) is true.

• The rise of the private sector and market mechanisms (Reason R) is the primary driver behind the shift from directive to indicative planning (Assertion A). As the state’s direct control over economic resources and decisions lessened due to liberalization, the planning approach had to adapt to a more guiding, facilitating role rather than a controlling one. Therefore, R provides the correct explanation for A.

Solution: A

• Question 7 of 30 7. Question 1 points Consider the following statements: Statement I: An increase in the Tax-to-GDP ratio generally indicates improved fiscal health and greater capacity for the government to fund public services. Statement II: A higher Tax-to-GDP ratio necessarily implies a more equitable and progressive tax system. Select the correct answer using the codes given below: (a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I. (b) Both Statement-I and Statement-II are correct but Statement-II is not the correct explanation for Statement-I. (c) Statement-I is correct but Statement-II is incorrect. (d) Statement-I is incorrect but Statement-II is correct. Correct Solution: C Statement I: The Tax-to-GDP ratio measures the total tax revenue collected by the government as a percentage of the country’s GDP. A higher ratio generally signifies that the government is able to mobilize a larger share of the national income through taxes. This typically enhances the government’s fiscal capacity, allowing it to finance public expenditures (like infrastructure, health, education) and manage its debt more effectively, which is usually seen as an indicator of improved fiscal health. Statement I is correct. Statement II: While a higher Tax-to-GDP ratio indicates greater revenue mobilization, it does not necessarily imply that the tax system is equitable or progressive. A country could achieve a high ratio through regressive taxes (which disproportionately burden the poor, like high indirect taxes on essentials) or a system with many loopholes favouring the rich. Equity and progressivity depend on the structure of the tax system (e.g., the balance between direct and indirect taxes, the progressivity of income tax rates, the presence of wealth taxes) rather than just the overall collection level relative to GDP. Statement II is incorrect. Conclusion: Statement I is correct, but Statement II is incorrect. Incorrect Solution: C Statement I: The Tax-to-GDP ratio measures the total tax revenue collected by the government as a percentage of the country’s GDP. A higher ratio generally signifies that the government is able to mobilize a larger share of the national income through taxes. This typically enhances the government’s fiscal capacity, allowing it to finance public expenditures (like infrastructure, health, education) and manage its debt more effectively, which is usually seen as an indicator of improved fiscal health. Statement I is correct. Statement II: While a higher Tax-to-GDP ratio indicates greater revenue mobilization, it does not necessarily imply that the tax system is equitable or progressive. A country could achieve a high ratio through regressive taxes (which disproportionately burden the poor, like high indirect taxes on essentials) or a system with many loopholes favouring the rich. Equity and progressivity depend on the structure of the tax system (e.g., the balance between direct and indirect taxes, the progressivity of income tax rates, the presence of wealth taxes) rather than just the overall collection level relative to GDP. Statement II is incorrect. Conclusion: Statement I is correct, but Statement II is incorrect.

#### 7. Question

Consider the following statements:

Statement I: An increase in the Tax-to-GDP ratio generally indicates improved fiscal health and greater capacity for the government to fund public services.

Statement II: A higher Tax-to-GDP ratio necessarily implies a more equitable and progressive tax system.

Select the correct answer using the codes given below:

• (a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I.

• (b) Both Statement-I and Statement-II are correct but Statement-II is not the correct explanation for Statement-I.

• (c) Statement-I is correct but Statement-II is incorrect.

• (d) Statement-I is incorrect but Statement-II is correct.

Solution: C

• Statement I: The Tax-to-GDP ratio measures the total tax revenue collected by the government as a percentage of the country’s GDP. A higher ratio generally signifies that the government is able to mobilize a larger share of the national income through taxes. This typically enhances the government’s fiscal capacity, allowing it to finance public expenditures (like infrastructure, health, education) and manage its debt more effectively, which is usually seen as an indicator of improved fiscal health. Statement I is correct.

• Statement II: While a higher Tax-to-GDP ratio indicates greater revenue mobilization, it does not necessarily imply that the tax system is equitable or progressive. A country could achieve a high ratio through regressive taxes (which disproportionately burden the poor, like high indirect taxes on essentials) or a system with many loopholes favouring the rich. Equity and progressivity depend on the structure of the tax system (e.g., the balance between direct and indirect taxes, the progressivity of income tax rates, the presence of wealth taxes) rather than just the overall collection level relative to GDP. Statement II is incorrect.

• Conclusion: Statement I is correct, but Statement II is incorrect.

Solution: C

• Conclusion: Statement I is correct, but Statement II is incorrect.

• Question 8 of 30 8. Question 1 points Consider the following statements regarding the Monetary Policy Committee (MPC) in India: The MPC is mandated under the RBI Act, 1934 to determine the Policy Repo Rate required to achieve the inflation target. The Governor of the RBI has the casting vote in case of a tie in the MPC meeting. The inflation target is set by the RBI in consultation with the Government of India once every three years. How many of the statements given above are correct? (a) Only one (b) Only two (c) All three (d) None Correct Solution: B Statement 1 is correct. The amended RBI Act, 1934 establishes the Monetary Policy Committee (MPC) and explicitly mandates it with the responsibility of determining the Policy Repo Rate required to achieve the inflation target set by the government. Statement 2 is correct. The MPC consists of six members (3 from RBI, 3 appointed by the government). Each member has one vote. In the event of a tie, the Governor of the RBI, who is the ex-officio Chairperson of the MPC, has a second or casting vote to break the deadlock. Statement 3 is incorrect. The inflation target (currently 4% Consumer Price Index (CPI) inflation with a tolerance band of +/- 2%, i.e., 2% to 6%) is set by the Government of India in consultation with the RBI. This target is mandated to be reviewed once every five years, not three years. The current target was set in 2016 and retained in 2021 for the next five years. Incorrect Solution: B Statement 1 is correct. The amended RBI Act, 1934 establishes the Monetary Policy Committee (MPC) and explicitly mandates it with the responsibility of determining the Policy Repo Rate required to achieve the inflation target set by the government. Statement 2 is correct. The MPC consists of six members (3 from RBI, 3 appointed by the government). Each member has one vote. In the event of a tie, the Governor of the RBI, who is the ex-officio Chairperson of the MPC, has a second or casting vote to break the deadlock. Statement 3 is incorrect. The inflation target (currently 4% Consumer Price Index (CPI) inflation with a tolerance band of +/- 2%, i.e., 2% to 6%) is set by the Government of India in consultation with the RBI. This target is mandated to be reviewed once every five years, not three years. The current target was set in 2016 and retained in 2021 for the next five years.

#### 8. Question

Consider the following statements regarding the Monetary Policy Committee (MPC) in India:

• The MPC is mandated under the RBI Act, 1934 to determine the Policy Repo Rate required to achieve the inflation target.

• The Governor of the RBI has the casting vote in case of a tie in the MPC meeting.

• The inflation target is set by the RBI in consultation with the Government of India once every three years.

How many of the statements given above are correct?

• (a) Only one

• (b) Only two

• (c) All three

Solution: B

• Statement 1 is correct. The amended RBI Act, 1934 establishes the Monetary Policy Committee (MPC) and explicitly mandates it with the responsibility of determining the Policy Repo Rate required to achieve the inflation target set by the government.

• Statement 2 is correct. The MPC consists of six members (3 from RBI, 3 appointed by the government). Each member has one vote. In the event of a tie, the Governor of the RBI, who is the ex-officio Chairperson of the MPC, has a second or casting vote to break the deadlock.

• Statement 3 is incorrect. The inflation target (currently 4% Consumer Price Index (CPI) inflation with a tolerance band of +/- 2%, i.e., 2% to 6%) is set by the Government of India in consultation with the RBI. This target is mandated to be reviewed once every five years, not three years. The current target was set in 2016 and retained in 2021 for the next five years.

Solution: B

• Question 9 of 30 9. Question 1 points Consider the following pairs related to fiscal concepts: Fiscal Consolidation : Reducing the ratio of public debt to GDP over time. Revenue Deficit : Excess of total revenue expenditure over total revenue receipts. Tax Elasticity : Percentage change in tax revenue divided by the percentage change in the tax rate. How many of the pairs given above are correctly matched? (a) Only one pair (b) Only two pairs (c) All three pairs (d) None of the pairs Correct Solution: B Pair 1 is correctly matched. Fiscal consolidation refers to the policies undertaken by governments to reduce their deficits and debt accumulation. The primary goal is usually to bring down the public debt-to-GDP ratio to sustainable levels over the medium to long term. This involves measures to increase revenue and/or reduce expenditure. Pair 2 is correctly matched. The revenue deficit is defined as the excess of the government’s total revenue expenditure (spending that does not create assets, like salaries, subsidies, interest payments) over its total revenue receipts (income from taxes and non-tax sources). It indicates that the government’s own current income is insufficient to cover its current operational expenses. Pair 3 is incorrectly matched. Tax elasticity measures the responsiveness of tax revenue to changes in the tax base (e.g., GDP or income), assuming that tax laws and rates remain unchanged. Tax buoyancy, on the other hand, measures the responsiveness of tax revenue to changes in GDP, incorporating the effects of both economic growth and discretionary changes in tax policy (like changes in tax rates). The definition given (responsiveness to tax rate changes) is related but doesn’t accurately define tax elasticity or buoyancy as commonly understood in public finance. Incorrect Solution: B Pair 1 is correctly matched. Fiscal consolidation refers to the policies undertaken by governments to reduce their deficits and debt accumulation. The primary goal is usually to bring down the public debt-to-GDP ratio to sustainable levels over the medium to long term. This involves measures to increase revenue and/or reduce expenditure. Pair 2 is correctly matched. The revenue deficit is defined as the excess of the government’s total revenue expenditure (spending that does not create assets, like salaries, subsidies, interest payments) over its total revenue receipts (income from taxes and non-tax sources). It indicates that the government’s own current income is insufficient to cover its current operational expenses. Pair 3 is incorrectly matched. Tax elasticity measures the responsiveness of tax revenue to changes in the tax base (e.g., GDP or income), assuming that tax laws and rates remain unchanged. Tax buoyancy, on the other hand, measures the responsiveness of tax revenue to changes in GDP, incorporating the effects of both economic growth and discretionary changes in tax policy (like changes in tax rates). The definition given (responsiveness to tax rate changes) is related but doesn’t accurately define tax elasticity or buoyancy as commonly understood in public finance.

#### 9. Question

Consider the following pairs related to fiscal concepts:

• Fiscal Consolidation : Reducing the ratio of public debt to GDP over time.

• Revenue Deficit : Excess of total revenue expenditure over total revenue receipts.

• Tax Elasticity : Percentage change in tax revenue divided by the percentage change in the tax rate.

How many of the pairs given above are correctly matched?

• (a) Only one pair

• (b) Only two pairs

• (c) All three pairs

• (d) None of the pairs

Solution: B

• Pair 1 is correctly matched. Fiscal consolidation refers to the policies undertaken by governments to reduce their deficits and debt accumulation. The primary goal is usually to bring down the public debt-to-GDP ratio to sustainable levels over the medium to long term. This involves measures to increase revenue and/or reduce expenditure.

• Pair 2 is correctly matched. The revenue deficit is defined as the excess of the government’s total revenue expenditure (spending that does not create assets, like salaries, subsidies, interest payments) over its total revenue receipts (income from taxes and non-tax sources). It indicates that the government’s own current income is insufficient to cover its current operational expenses.

• Pair 3 is incorrectly matched. Tax elasticity measures the responsiveness of tax revenue to changes in the tax base (e.g., GDP or income), assuming that tax laws and rates remain unchanged. Tax buoyancy, on the other hand, measures the responsiveness of tax revenue to changes in GDP, incorporating the effects of both economic growth and discretionary changes in tax policy (like changes in tax rates). The definition given (responsiveness to tax rate changes) is related but doesn’t accurately define tax elasticity or buoyancy as commonly understood in public finance.

Solution: B

• Question 10 of 30 10. Question 1 points Consider the following statements regarding India’s fiscal framework: Off-budget borrowings, undertaken by public sector entities on behalf of the government, are typically included in the calculation of the Union Government’s fiscal deficit as per the FRBM Act. The ‘Escape Clause’ under the FRBM Act allows the central government to deviate from fiscal deficit targets only on grounds of national security or act of war. Tax buoyancy measures the responsiveness of tax revenue growth to changes in the GDP growth rate. Which of the statements given above is/are incorrect? (a) 1 and 2 only (b) 2 only (c) 1 and 3 only (d) 1, 2 and 3 Correct Solution: A Statement 1 is incorrect. Off-budget borrowings are loans taken by Public Sector Undertakings (PSUs) or other government agencies, often under government direction, to fund expenditures that would otherwise be part of the Union Budget. A key characteristic and criticism of such borrowings is that they are not typically included in the official calculation of the Union Government’s fiscal deficit. This practice can understate the true extent of government borrowing and liabilities, raising transparency concerns. Statement 2 is incorrect. The FRBM Act’s ‘Escape Clause’ (Section 4(2)) allows deviation from the fiscal targets under specific circumstances, but the grounds are broader than just national security or war. The grounds typically include national security, act of war, national calamity, collapse of agriculture severely affecting output and incomes, structural reforms in the economy with unanticipated fiscal implications, or a sharp decline in real output growth. The exact grounds and deviation limits might be specified in the Act and its rules, and have been subject to amendment/review. Limiting it only to national security or war is incorrect. Statement 3 is correct. Tax buoyancy is an indicator of the efficiency and responsiveness of revenue mobilization in response to GDP growth. It is calculated as the ratio of the percentage change in tax revenues to the percentage change in nominal GDP. A buoyancy greater than 1 indicates that tax revenues are growing faster than GDP, suggesting a responsive tax system. Tax elasticity is a related but distinct concept that measures responsiveness to changes in the tax base, holding tax policy constant. Incorrect Solution: A Statement 1 is incorrect. Off-budget borrowings are loans taken by Public Sector Undertakings (PSUs) or other government agencies, often under government direction, to fund expenditures that would otherwise be part of the Union Budget. A key characteristic and criticism of such borrowings is that they are not typically included in the official calculation of the Union Government’s fiscal deficit. This practice can understate the true extent of government borrowing and liabilities, raising transparency concerns. Statement 2 is incorrect. The FRBM Act’s ‘Escape Clause’ (Section 4(2)) allows deviation from the fiscal targets under specific circumstances, but the grounds are broader than just national security or war. The grounds typically include national security, act of war, national calamity, collapse of agriculture severely affecting output and incomes, structural reforms in the economy with unanticipated fiscal implications, or a sharp decline in real output growth. The exact grounds and deviation limits might be specified in the Act and its rules, and have been subject to amendment/review. Limiting it only to national security or war is incorrect. Statement 3 is correct. Tax buoyancy is an indicator of the efficiency and responsiveness of revenue mobilization in response to GDP growth. It is calculated as the ratio of the percentage change in tax revenues to the percentage change in nominal GDP. A buoyancy greater than 1 indicates that tax revenues are growing faster than GDP, suggesting a responsive tax system. Tax elasticity is a related but distinct concept that measures responsiveness to changes in the tax base, holding tax policy constant.

#### 10. Question

Consider the following statements regarding India’s fiscal framework:

• Off-budget borrowings, undertaken by public sector entities on behalf of the government, are typically included in the calculation of the Union Government’s fiscal deficit as per the FRBM Act.

• The ‘Escape Clause’ under the FRBM Act allows the central government to deviate from fiscal deficit targets only on grounds of national security or act of war.

• Tax buoyancy measures the responsiveness of tax revenue growth to changes in the GDP growth rate.

Which of the statements given above is/are incorrect?

• (a) 1 and 2 only

• (b) 2 only

• (c) 1 and 3 only

• (d) 1, 2 and 3

Solution: A

• Statement 1 is incorrect. Off-budget borrowings are loans taken by Public Sector Undertakings (PSUs) or other government agencies, often under government direction, to fund expenditures that would otherwise be part of the Union Budget. A key characteristic and criticism of such borrowings is that they are not typically included in the official calculation of the Union Government’s fiscal deficit. This practice can understate the true extent of government borrowing and liabilities, raising transparency concerns.

• Statement 2 is incorrect. The FRBM Act’s ‘Escape Clause’ (Section 4(2)) allows deviation from the fiscal targets under specific circumstances, but the grounds are broader than just national security or war. The grounds typically include national security, act of war, national calamity, collapse of agriculture severely affecting output and incomes, structural reforms in the economy with unanticipated fiscal implications, or a sharp decline in real output growth. The exact grounds and deviation limits might be specified in the Act and its rules, and have been subject to amendment/review. Limiting it only to national security or war is incorrect.

• Statement 3 is correct. Tax buoyancy is an indicator of the efficiency and responsiveness of revenue mobilization in response to GDP growth. It is calculated as the ratio of the percentage change in tax revenues to the percentage change in nominal GDP. A buoyancy greater than 1 indicates that tax revenues are growing faster than GDP, suggesting a responsive tax system. Tax elasticity is a related but distinct concept that measures responsiveness to changes in the tax base, holding tax policy constant.

Solution: A

• Question 11 of 30 11. Question 1 points Consider the following statements regarding MPLAD Scheme: Under it, an annual outlay of Rs.4000 crore is used for implementation of recommended works sanctioned by district authorities in States. The e-SAKSHI portal is responsible for transparent implementation of the scheme under the Ministry of Statistics and Programme Implementation. Construction of residential buildings for government is not included within the scheme How many of the statements given above is/are correct? (a) Only one (b) Only two (c) All three (d) None Correct Solution: C Under the MPLADs scheme annamount of Rs. 5 crore is allocated to each Member of Parliament and they can recommend development works for creating durable community asset based on locally felt needs. The scheme has an annual outlay of around Rs. 4000 crore which is used for implementation of recommended works sanctioned by district authorities. Hence statement 1 is correct The e-SAKSHI portal is an end to end solution for efficient and transparent implementation of the MPLAD Scheme. The scheme is over seen by Ministry of Statistics and Programme Implementation. Hence statement 2 is correct Under the revised 2023 guidelines, construction of residential buildings for governments, Commercial/private assets or individual/family benefits is not included within the scheme. Hence statement 3 is correct Incorrect Solution: C Under the MPLADs scheme annamount of Rs. 5 crore is allocated to each Member of Parliament and they can recommend development works for creating durable community asset based on locally felt needs. The scheme has an annual outlay of around Rs. 4000 crore which is used for implementation of recommended works sanctioned by district authorities. Hence statement 1 is correct The e-SAKSHI portal is an end to end solution for efficient and transparent implementation of the MPLAD Scheme. The scheme is over seen by Ministry of Statistics and Programme Implementation. Hence statement 2 is correct Under the revised 2023 guidelines, construction of residential buildings for governments, Commercial/private assets or individual/family benefits is not included within the scheme. Hence statement 3 is correct

#### 11. Question

Consider the following statements regarding MPLAD Scheme:

• Under it, an annual outlay of Rs.4000 crore is used for implementation of recommended works sanctioned by district authorities in States.

• The e-SAKSHI portal is responsible for transparent implementation of the scheme under the Ministry of Statistics and Programme Implementation.

• Construction of residential buildings for government is not included within the scheme

How many of the statements given above is/are correct?

• (a) Only one

• (b) Only two

• (c) All three

Solution: C

• Under the MPLADs scheme annamount of Rs. 5 crore is allocated to each Member of Parliament and they can recommend development works for creating durable community asset based on locally felt needs.

• The scheme has an annual outlay of around Rs. 4000 crore which is used for implementation of recommended works sanctioned by district authorities.

Hence statement 1 is correct

• The e-SAKSHI portal is an end to end solution for efficient and transparent implementation of the MPLAD Scheme.

• The scheme is over seen by Ministry of Statistics and Programme Implementation.

Hence statement 2 is correct

• Under the revised 2023 guidelines, construction of residential buildings for governments, Commercial/private assets or individual/family benefits is not included within the scheme.

Hence statement 3 is correct

Solution: C

• The scheme has an annual outlay of around Rs. 4000 crore which is used for implementation of recommended works sanctioned by district authorities.

Hence statement 1 is correct

• The e-SAKSHI portal is an end to end solution for efficient and transparent implementation of the MPLAD Scheme.

• The scheme is over seen by Ministry of Statistics and Programme Implementation.

Hence statement 2 is correct

• Under the revised 2023 guidelines, construction of residential buildings for governments, Commercial/private assets or individual/family benefits is not included within the scheme.

Hence statement 3 is correct

• Question 12 of 30 12. Question 1 points Consider the following statements: Statement – I: Variable Repo Rate (VRR) can also be used by the RBI for injecting liquidity into the banking system. Statement – II: Under VRR, Banks bid for funds, whose interest rates are determined by interaction of demand and supply in the market. Which of the following is correct in respect of the above statements? (a) Both Statement -I and Statement -II are correct and Statement -II explains Statement -I (b) Both Statement -I and Statement -II are correct but Statement -II does not explain Statement -I (c) Statement- I is correct but Statement -II is incorrect (d) Statement- I is incorrect but Statement -II is correct Correct Solution: A Variable Repo Rate is tool used by the Reserve Bank of India for management of liquidity in the system While VRR auctions can be used to inject liquidity, they are also a tool for absorbing The RBI uses Variable Rate Reverse Repo (VRRR) auctions for the latter purpose. Under it, banks can borrow funds for short duration at market determined interest rate through an auction mechanism The borrowing rate is not pre- determined by the central bank but is influenced by market forces. It allows banks to borrow funds for periods ranging from few days to 14 days or longer. Banks participate in auctions where they bid for funds and the interest rate is determined by interaction of demand and supply in the market. Hence statements 1 and 2 are correct and statement 2 correctly explains statement 1 Incorrect Solution: A Variable Repo Rate is tool used by the Reserve Bank of India for management of liquidity in the system While VRR auctions can be used to inject liquidity, they are also a tool for absorbing The RBI uses Variable Rate Reverse Repo (VRRR) auctions for the latter purpose. Under it, banks can borrow funds for short duration at market determined interest rate through an auction mechanism The borrowing rate is not pre- determined by the central bank but is influenced by market forces. It allows banks to borrow funds for periods ranging from few days to 14 days or longer. Banks participate in auctions where they bid for funds and the interest rate is determined by interaction of demand and supply in the market. Hence statements 1 and 2 are correct and statement 2 correctly explains statement 1

#### 12. Question

Consider the following statements:

Statement – I: Variable Repo Rate (VRR) can also be used by the RBI for injecting liquidity into the banking system.

Statement – II: Under VRR, Banks bid for funds, whose interest rates are determined by interaction of demand and supply in the market.

Which of the following is correct in respect of the above statements?

• (a) Both Statement -I and Statement -II are correct and Statement -II explains Statement -I

• (b) Both Statement -I and Statement -II are correct but Statement -II does not explain Statement -I

• (c) Statement- I is correct but Statement -II is incorrect

• (d) Statement- I is incorrect but Statement -II is correct

Solution: A

• Variable Repo Rate is tool used by the Reserve Bank of India for management of liquidity in the system

• While VRR auctions can be used to inject liquidity, they are also a tool for absorbing The RBI uses Variable Rate Reverse Repo (VRRR) auctions for the latter purpose.

• Under it, banks can borrow funds for short duration at market determined interest rate through an auction mechanism

• The borrowing rate is not pre- determined by the central bank but is influenced by market forces.

• It allows banks to borrow funds for periods ranging from few days to 14 days or longer.

• Banks participate in auctions where they bid for funds and the interest rate is determined by interaction of demand and supply in the market.

Hence statements 1 and 2 are correct and statement 2 correctly explains statement 1

Solution: A

• Variable Repo Rate is tool used by the Reserve Bank of India for management of liquidity in the system

• While VRR auctions can be used to inject liquidity, they are also a tool for absorbing The RBI uses Variable Rate Reverse Repo (VRRR) auctions for the latter purpose.

• Under it, banks can borrow funds for short duration at market determined interest rate through an auction mechanism

• The borrowing rate is not pre- determined by the central bank but is influenced by market forces.

• It allows banks to borrow funds for periods ranging from few days to 14 days or longer.

• Banks participate in auctions where they bid for funds and the interest rate is determined by interaction of demand and supply in the market.

Hence statements 1 and 2 are correct and statement 2 correctly explains statement 1

• Question 13 of 30 13. Question 1 points Swiss Challenge Model, sometimes seen in news, is related to: (a) Creation of resource efficient and environmentally responsible structures in a cost-effective way (b) Development of transport and communication through Public -Private partnership (c) Development of Brown field projects (d) A public procurement method involving bidding process Correct Solution: D The Swiss Challenge Model is a public procurement method in which a public party submits an unsolicited proposal to a government for a project The government then invites other parties to submit counter proposals to improve upon the initial offer If the counter proposal is better, the initial proposal gets a chance to upgrade itself If they can’t or choose not to, the counter proposal gets the project. Hence option B is correct Incorrect Solution: D The Swiss Challenge Model is a public procurement method in which a public party submits an unsolicited proposal to a government for a project The government then invites other parties to submit counter proposals to improve upon the initial offer If the counter proposal is better, the initial proposal gets a chance to upgrade itself If they can’t or choose not to, the counter proposal gets the project. Hence option B is correct

#### 13. Question

Swiss Challenge Model, sometimes seen in news, is related to:

• (a) Creation of resource efficient and environmentally responsible structures in a cost-effective way

• (b) Development of transport and communication through Public -Private partnership

• (c) Development of Brown field projects

• (d) A public procurement method involving bidding process

Solution: D

• The Swiss Challenge Model is a public procurement method in which a public party submits an unsolicited proposal to a government for a project

• The government then invites other parties to submit counter proposals to improve upon the initial offer

• If the counter proposal is better, the initial proposal gets a chance to upgrade itself

• If they can’t or choose not to, the counter proposal gets the project.

Hence option B is correct

Solution: D

• The Swiss Challenge Model is a public procurement method in which a public party submits an unsolicited proposal to a government for a project

• The government then invites other parties to submit counter proposals to improve upon the initial offer

• If the counter proposal is better, the initial proposal gets a chance to upgrade itself

• If they can’t or choose not to, the counter proposal gets the project.

Hence option B is correct

• Question 14 of 30 14. Question 1 points Consider the following statements: Priority Sector Lending certificates are issued by banks that exceed their priority sector lending targets. The PSL target for Urban Cooperative Banks is 50% of Adjusted Net Bank Credit or Credit Equivalent of Off-Balance Sheet Exposure, which ever is lower. Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Correct Solution: A Priority Sector Lending certificates are tradable instruments used by banks to meet their mandated priority sector lending targets and sub target Banks that exceed their PSL targets issue these certificates and banks with shortfalls can purchase them to meet their requirements This system incentivises banks to lend to priority sector and help those with credit deficit to full feel their obligations. Hence statement 1 is correct The Revised PSL target for Urban Cooperative Banks mandates 60% of Adjusted Net Bank Credit or Credit Equivalent of Off-Balance Sheet Exposure which ever is higher. Hence statement 2 is incorrect Incorrect Solution: A Priority Sector Lending certificates are tradable instruments used by banks to meet their mandated priority sector lending targets and sub target Banks that exceed their PSL targets issue these certificates and banks with shortfalls can purchase them to meet their requirements This system incentivises banks to lend to priority sector and help those with credit deficit to full feel their obligations. Hence statement 1 is correct The Revised PSL target for Urban Cooperative Banks mandates 60% of Adjusted Net Bank Credit or Credit Equivalent of Off-Balance Sheet Exposure which ever is higher. Hence statement 2 is incorrect

#### 14. Question

Consider the following statements:

• Priority Sector Lending certificates are issued by banks that exceed their priority sector lending targets.

• The PSL target for Urban Cooperative Banks is 50% of Adjusted Net Bank Credit or Credit Equivalent of Off-Balance Sheet Exposure, which ever is lower.

Which of the statements given above is/are correct?

• (a) 1 only

• (b) 2 only

• (c) Both 1 and 2

• (d) Neither 1 nor 2

Solution: A

• Priority Sector Lending certificates are tradable instruments used by banks to meet their mandated priority sector lending targets and sub target

• Banks that exceed their PSL targets issue these certificates and banks with shortfalls can purchase them to meet their requirements

• This system incentivises banks to lend to priority sector and help those with credit deficit to full feel their obligations.

Hence statement 1 is correct

• The Revised PSL target for Urban Cooperative Banks mandates 60% of Adjusted Net Bank Credit or Credit Equivalent of Off-Balance Sheet Exposure which ever is higher.

Hence statement 2 is incorrect

Solution: A

• Priority Sector Lending certificates are tradable instruments used by banks to meet their mandated priority sector lending targets and sub target

• Banks that exceed their PSL targets issue these certificates and banks with shortfalls can purchase them to meet their requirements

• This system incentivises banks to lend to priority sector and help those with credit deficit to full feel their obligations.

Hence statement 1 is correct

• The Revised PSL target for Urban Cooperative Banks mandates 60% of Adjusted Net Bank Credit or Credit Equivalent of Off-Balance Sheet Exposure which ever is higher.

Hence statement 2 is incorrect

• Question 15 of 30 15. Question 1 points Consider the following statements regarding mBridge Project: It has been launched by the Reserve Bank of India in collaboration with the Bank for International Settlements. It aims to promote digital cross border payment system using Central Bank Digital currencies. It leverages blockchain Technology to address issues in cross border payments. How many of the statements given above is/are correct? (a) Only one (b) Only two (c) All three (d) None Correct Solution: B The mBridge Project was launched in 2021 by the BIS Innovation Hub in collaboration with four Central banks of China, Thailand, UAE and Hong Kong. Saudi Arabia joined it in 2024 There are several observing members including RBI. Hence statement 1 is incorrect The mBridge Project is a digital cross border payment system using Central Bank digital currencies that intends to improve the efficiency and cost effectiveness of international transactions. A platform based on a new blockchain, ‘the mBridge ledger’, has been built to support real time, cross border payments and foreign exchange transactions. It aims to address inefficiencies in cross-border payment including high cost, slow speed and operational complications by enabling immediate, cheap and accessible payments Hence statements 2 and 3 are correct- Incorrect Solution: B The mBridge Project was launched in 2021 by the BIS Innovation Hub in collaboration with four Central banks of China, Thailand, UAE and Hong Kong. Saudi Arabia joined it in 2024 There are several observing members including RBI. Hence statement 1 is incorrect The mBridge Project is a digital cross border payment system using Central Bank digital currencies that intends to improve the efficiency and cost effectiveness of international transactions. A platform based on a new blockchain, ‘the mBridge ledger’, has been built to support real time, cross border payments and foreign exchange transactions. It aims to address inefficiencies in cross-border payment including high cost, slow speed and operational complications by enabling immediate, cheap and accessible payments Hence statements 2 and 3 are correct

#### 15. Question

Consider the following statements regarding mBridge Project:

• It has been launched by the Reserve Bank of India in collaboration with the Bank for International Settlements.

• It aims to promote digital cross border payment system using Central Bank Digital currencies.

• It leverages blockchain Technology to address issues in cross border payments.

How many of the statements given above is/are correct?

• (a) Only one

• (b) Only two

• (c) All three

Solution: B

• The mBridge Project was launched in 2021 by the BIS Innovation Hub in collaboration with four Central banks of China, Thailand, UAE and Hong Kong.

• Saudi Arabia joined it in 2024

• There are several observing members including RBI.

Hence statement 1 is incorrect

• The mBridge Project is a digital cross border payment system using Central Bank digital currencies that intends to improve the efficiency and cost effectiveness of international transactions.

• A platform based on a new blockchain, ‘the mBridge ledger’, has been built to support real time, cross border payments and foreign exchange transactions.

• It aims to address inefficiencies in cross-border payment including high cost, slow speed and operational complications by enabling immediate, cheap and accessible payments

Hence statements 2 and 3 are correct-

Solution: B

• The mBridge Project was launched in 2021 by the BIS Innovation Hub in collaboration with four Central banks of China, Thailand, UAE and Hong Kong.

• Saudi Arabia joined it in 2024

• There are several observing members including RBI.

Hence statement 1 is incorrect

• The mBridge Project is a digital cross border payment system using Central Bank digital currencies that intends to improve the efficiency and cost effectiveness of international transactions.

• A platform based on a new blockchain, ‘the mBridge ledger’, has been built to support real time, cross border payments and foreign exchange transactions.

• It aims to address inefficiencies in cross-border payment including high cost, slow speed and operational complications by enabling immediate, cheap and accessible payments

Hence statements 2 and 3 are correct

• Question 16 of 30 16. Question 1 points Consider the following statements: Statement – I: A Low credit deposit ratio suggests higher demand for credit. Statement – II: Credit Deposit ratio is calculated by dividing total loans issued by a bank by its total deposits. Which of the following is correct in respect of the above statements? (a) Both Statement -I and Statement -II are correct and Statement -II explains Statement -I (b) Both Statement -I and Statement -II are correct but Statement -II does not explain Statement -I (c) Statement- I is correct but Statement -II is incorrect (d) Statement- I is incorrect but Statement -II is correct Correct Solution: D A higher CD ratio suggests a bank is lending out a larger portion of its deposits, indicating strong credit demand or difficulties in attracting deposit. On the other hand, lower CD ratio suggests conservative lending practices and lower demand for credit. Hence statement 1 is incorrect The credit deposit ratio is a measure that reflects a bank’s liquidity and credit risk by comparing the loans it has disbursed to the deposit it has collected. It Indicates the percentage of deposits utilised for receiving loan. It is calculated by the total loans issued by the bank divided by its total deposits. Hence statements 2 is correct Incorrect Solution: D A higher CD ratio suggests a bank is lending out a larger portion of its deposits, indicating strong credit demand or difficulties in attracting deposit. On the other hand, lower CD ratio suggests conservative lending practices and lower demand for credit. Hence statement 1 is incorrect The credit deposit ratio is a measure that reflects a bank’s liquidity and credit risk by comparing the loans it has disbursed to the deposit it has collected. It Indicates the percentage of deposits utilised for receiving loan. It is calculated by the total loans issued by the bank divided by its total deposits. Hence statements 2 is correct

#### 16. Question

Consider the following statements:

Statement – I: A Low credit deposit ratio suggests higher demand for credit.

Statement – II: Credit Deposit ratio is calculated by dividing total loans issued by a bank by its total deposits.

Which of the following is correct in respect of the above statements?

• (a) Both Statement -I and Statement -II are correct and Statement -II explains Statement -I

• (b) Both Statement -I and Statement -II are correct but Statement -II does not explain Statement -I

• (c) Statement- I is correct but Statement -II is incorrect

• (d) Statement- I is incorrect but Statement -II is correct

Solution: D

• A higher CD ratio suggests a bank is lending out a larger portion of its deposits, indicating strong credit demand or difficulties in attracting deposit.

• On the other hand, lower CD ratio suggests conservative lending practices and lower demand for credit.

Hence statement 1 is incorrect

• The credit deposit ratio is a measure that reflects a bank’s liquidity and credit risk by comparing the loans it has disbursed to the deposit it has collected.

• It Indicates the percentage of deposits utilised for receiving loan.

• It is calculated by the total loans issued by the bank divided by its total deposits.

Hence statements 2 is correct

Solution: D

• A higher CD ratio suggests a bank is lending out a larger portion of its deposits, indicating strong credit demand or difficulties in attracting deposit.

• On the other hand, lower CD ratio suggests conservative lending practices and lower demand for credit.

Hence statement 1 is incorrect

• The credit deposit ratio is a measure that reflects a bank’s liquidity and credit risk by comparing the loans it has disbursed to the deposit it has collected.

• It Indicates the percentage of deposits utilised for receiving loan.

• It is calculated by the total loans issued by the bank divided by its total deposits.

Hence statements 2 is correct

• Question 17 of 30 17. Question 1 points Consider the following criteria: A scheduled bank status Minimum net worth of Rs.1000 crore Shares must be listed on a recognised stock Exchange How many of the above should be met by a Small Finance Bank to become a Universal Bank? (a) Only one (b) Only two (c) All three (d) None Correct Solution: C Recently the RBI stated that Small Finance Banks should have the following criteria to become Universal banks under one tap licensing norms: A minimum net worth of Rs. 1000 crore Must have scheduled status and a 5-year satisfactory performance track record Shares must be listed on a recognised Stock exchange They should have Gross Non-Performing Assets ≤3% and Net Non-Performing Assets ≤1% respectively in the last two financial years Should have posted a net profit in the last two financial years. Hence option C is correct Incorrect Solution: C Recently the RBI stated that Small Finance Banks should have the following criteria to become Universal banks under one tap licensing norms: A minimum net worth of Rs. 1000 crore Must have scheduled status and a 5-year satisfactory performance track record Shares must be listed on a recognised Stock exchange They should have Gross Non-Performing Assets ≤3% and Net Non-Performing Assets ≤1% respectively in the last two financial years Should have posted a net profit in the last two financial years. Hence option C is correct

#### 17. Question

Consider the following criteria:

• A scheduled bank status

• Minimum net worth of Rs.1000 crore

• Shares must be listed on a recognised stock Exchange

How many of the above should be met by a Small Finance Bank to become a Universal Bank?

• (a) Only one

• (b) Only two

• (c) All three

Solution: C

Recently the RBI stated that Small Finance Banks should have the following criteria to become Universal banks under one tap licensing norms:

• A minimum net worth of Rs. 1000 crore

• Must have scheduled status and a 5-year satisfactory performance track record

• Shares must be listed on a recognised Stock exchange

• They should have Gross Non-Performing Assets ≤3% and Net Non-Performing Assets ≤1% respectively in the last two financial years

• Should have posted a net profit in the last two financial years.

Hence option C is correct

Solution: C

Recently the RBI stated that Small Finance Banks should have the following criteria to become Universal banks under one tap licensing norms:

• A minimum net worth of Rs. 1000 crore

• Must have scheduled status and a 5-year satisfactory performance track record

• Shares must be listed on a recognised Stock exchange

• They should have Gross Non-Performing Assets ≤3% and Net Non-Performing Assets ≤1% respectively in the last two financial years

• Should have posted a net profit in the last two financial years.

Hence option C is correct

• Question 18 of 30 18. Question 1 points Consider the following statements: The Urjit Patel Committee has been constituted with an aim to revise base year of GDP to 2022-23. The Department of Economic Affairs is responsible for calculating the GDP of India. Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Correct Solution: D Recently the government has decided to update the base year for compilation of Gross domestic product from 2011-12 to 2022-23. An advisory committee on National Accounts Statistics comprising of representatives from Central and state governments, RBI, Academia and researchers has been constituted for identification of new data sources and advice on the methodology for compilation of national account statistics in the revised series. The Urjit Patel Committee was constituted in 2014 to give recommendations on revising and strengthening Monetary policy framework. It was set up by former RBI Governor Raghuram Rajan. Hence statement 1 is incorrect The Central Statistics Office under the Ministry of Statistics and Programme Implementation is responsible for calculating the GDP of India. The Department of Economic Affairs functions under the Ministry of Finance. Hence statement 2 is incorrect Incorrect Solution: D Recently the government has decided to update the base year for compilation of Gross domestic product from 2011-12 to 2022-23. An advisory committee on National Accounts Statistics comprising of representatives from Central and state governments, RBI, Academia and researchers has been constituted for identification of new data sources and advice on the methodology for compilation of national account statistics in the revised series. The Urjit Patel Committee was constituted in 2014 to give recommendations on revising and strengthening Monetary policy framework. It was set up by former RBI Governor Raghuram Rajan. Hence statement 1 is incorrect The Central Statistics Office under the Ministry of Statistics and Programme Implementation is responsible for calculating the GDP of India. The Department of Economic Affairs functions under the Ministry of Finance. Hence statement 2 is incorrect

#### 18. Question

Consider the following statements:

• The Urjit Patel Committee has been constituted with an aim to revise base year of GDP to 2022-23.

• The Department of Economic Affairs is responsible for calculating the GDP of India.

Which of the statements given above is/are correct?

• (a) 1 only

• (b) 2 only

• (c) Both 1 and 2

• (d) Neither 1 nor 2

Solution: D

• Recently the government has decided to update the base year for compilation of Gross domestic product from 2011-12 to 2022-23.

• An advisory committee on National Accounts Statistics comprising of representatives from Central and state governments, RBI, Academia and researchers has been constituted for identification of new data sources and advice on the methodology for compilation of national account statistics in the revised series.

• The Urjit Patel Committee was constituted in 2014 to give recommendations on revising and strengthening Monetary policy framework.

• It was set up by former RBI Governor Raghuram Rajan.

Hence statement 1 is incorrect

• The Central Statistics Office under the Ministry of Statistics and Programme Implementation is responsible for calculating the GDP of India.

• The Department of Economic Affairs functions under the Ministry of Finance.

Hence statement 2 is incorrect

Solution: D

• Recently the government has decided to update the base year for compilation of Gross domestic product from 2011-12 to 2022-23.

• The Urjit Patel Committee was constituted in 2014 to give recommendations on revising and strengthening Monetary policy framework.

• It was set up by former RBI Governor Raghuram Rajan.

Hence statement 1 is incorrect

• The Central Statistics Office under the Ministry of Statistics and Programme Implementation is responsible for calculating the GDP of India.

• The Department of Economic Affairs functions under the Ministry of Finance.

Hence statement 2 is incorrect

• Question 19 of 30 19. Question 1 points Consider the following statements: As per RBI guidelines, interest free loans to households with annual income below Rs. 5 lakhs are termed as microfinance. Microfinance NGOs are classified only as Non-Banking Financial Companies registered as Societies or Trusts. Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Correct Solution: D A microfinance loan is defined as a collateral free loan to a household with an annual income up to Rs. 3 lakhs. These loans should be collateral free and not linked to a deposit account. The RBI regulates microfinance institutions under NBFC-MFI Framework 2014. Such loans carry high interest rates. Hence statement 1 is incorrect Microfinance NGOs that provide small loans and other financial services to low-income individuals often choose to register as societies or trusts. Microfinance NGOs in India can take various legal forms. While some might register as Societies or Trusts, they are not classified as Non-Banking Financial Companies (NBFCs) unless they specifically register with the RBI as an NBFC-MFI (Microfinance Institution). NGOs typically operate under different regulatory frameworks than NBFCs. The Societies Registration Act 1860 is the primary legal Framework for registering voluntary societies or Association Trusts registered under the Indian Trust Act 1882 are another common structure for NGOs particularly those focused on social welfare. Hence statement 2 is correct Incorrect Solution: D A microfinance loan is defined as a collateral free loan to a household with an annual income up to Rs. 3 lakhs. These loans should be collateral free and not linked to a deposit account. The RBI regulates microfinance institutions under NBFC-MFI Framework 2014. Such loans carry high interest rates. Hence statement 1 is incorrect Microfinance NGOs that provide small loans and other financial services to low-income individuals often choose to register as societies or trusts. Microfinance NGOs in India can take various legal forms. While some might register as Societies or Trusts, they are not classified as Non-Banking Financial Companies (NBFCs) unless they specifically register with the RBI as an NBFC-MFI (Microfinance Institution). NGOs typically operate under different regulatory frameworks than NBFCs. The Societies Registration Act 1860 is the primary legal Framework for registering voluntary societies or Association Trusts registered under the Indian Trust Act 1882 are another common structure for NGOs particularly those focused on social welfare. Hence statement 2 is correct

#### 19. Question

Consider the following statements:

• As per RBI guidelines, interest free loans to households with annual income below Rs. 5 lakhs are termed as microfinance.

• Microfinance NGOs are classified only as Non-Banking Financial Companies registered as Societies or Trusts.

Which of the statements given above is/are correct?

• (a) 1 only

• (b) 2 only

• (c) Both 1 and 2

• (d) Neither 1 nor 2

Solution: D

• A microfinance loan is defined as a collateral free loan to a household with an annual income up to Rs. 3 lakhs.

• These loans should be collateral free and not linked to a deposit account.

• The RBI regulates microfinance institutions under NBFC-MFI Framework 2014.

• Such loans carry high interest rates.

Hence statement 1 is incorrect

• Microfinance NGOs that provide small loans and other financial services to low-income individuals often choose to register as societies or trusts.

• Microfinance NGOs in India can take various legal forms. While some might register as Societies or Trusts, they are not classified as Non-Banking Financial Companies (NBFCs) unless they specifically register with the RBI as an NBFC-MFI (Microfinance Institution).

• NGOs typically operate under different regulatory frameworks than NBFCs.

• The Societies Registration Act 1860 is the primary legal Framework for registering voluntary societies or Association

• Trusts registered under the Indian Trust Act 1882 are another common structure for NGOs particularly those focused on social welfare.

Hence statement 2 is correct

Solution: D

• A microfinance loan is defined as a collateral free loan to a household with an annual income up to Rs. 3 lakhs.

• These loans should be collateral free and not linked to a deposit account.

• The RBI regulates microfinance institutions under NBFC-MFI Framework 2014.

• Such loans carry high interest rates.

Hence statement 1 is incorrect

• Microfinance NGOs that provide small loans and other financial services to low-income individuals often choose to register as societies or trusts.

• NGOs typically operate under different regulatory frameworks than NBFCs.

• The Societies Registration Act 1860 is the primary legal Framework for registering voluntary societies or Association

• Trusts registered under the Indian Trust Act 1882 are another common structure for NGOs particularly those focused on social welfare.

Hence statement 2 is correct

• Question 20 of 30 20. Question 1 points Consider the following statements: Both Governing Council (GC) of the NITI Aayog and the National Development Council focus on decentralized planning. Unlike NDC which was established as a separate body, GC is an integral part of the NITI Aayog. Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Correct Solution: C The National Development Council as well as Governing Council of the NITI Aayog are aimed at decentralised planning by including states and the union territories However, the NDC was a separate body from the Planning Commission while the governing Council is an integral part of NITI Aayog. While the planning commission was able to function without NTC but without the GC then API will not be able to function without discussion of developmental policies Hence statements 1 and 2 are correct Incorrect Solution: C The National Development Council as well as Governing Council of the NITI Aayog are aimed at decentralised planning by including states and the union territories However, the NDC was a separate body from the Planning Commission while the governing Council is an integral part of NITI Aayog. While the planning commission was able to function without NTC but without the GC then API will not be able to function without discussion of developmental policies Hence statements 1 and 2 are correct

#### 20. Question

Consider the following statements:

• Both Governing Council (GC) of the NITI Aayog and the National Development Council focus on decentralized planning.

• Unlike NDC which was established as a separate body, GC is an integral part of the NITI Aayog.

Which of the statements given above is/are correct?

• (a) 1 only

• (b) 2 only

• (c) Both 1 and 2

• (d) Neither 1 nor 2

Solution: C

• The National Development Council as well as Governing Council of the NITI Aayog are aimed at decentralised planning by including states and the union territories

• However, the NDC was a separate body from the Planning Commission while the governing Council is an integral part of NITI Aayog.

• While the planning commission was able to function without NTC but without the GC then API will not be able to function without discussion of developmental policies

Hence statements 1 and 2 are correct

Solution: C

• The National Development Council as well as Governing Council of the NITI Aayog are aimed at decentralised planning by including states and the union territories

• However, the NDC was a separate body from the Planning Commission while the governing Council is an integral part of NITI Aayog.

• While the planning commission was able to function without NTC but without the GC then API will not be able to function without discussion of developmental policies

Hence statements 1 and 2 are correct

• Question 21 of 30 21. Question 1 points With reference to the conservation efforts and biology of the Ganges River Dolphin, consider the following statements: Project Dolphin is a government initiative under the Ministry of Jal Shakti focused on pollution control in dolphin habitats. Female dolphins are typically larger than males and reproduce once every 2–3 years. The dolphin is listed under Schedule I of the Wildlife (Protection) Act, 1972 and Appendix I of CITES. Which of the statements given above is/are correct? (a) 1 and 2 only (b) 2 and 3 only (c) 1 and 3 only (d) 1, 2 and 3 Correct Solution: B Explanation: Statement 1 is incorrect: Project Dolphin is a Ministry of Environment, Forest and Climate Change (MoEFCC) initiative, not Jal Shakti. It focuses on conservation, monitoring, and habitat protection of dolphins, not just pollution control. Statement 2 is correct: In the species, females are larger than males, and they reproduce every 2–3 years, typically birthing one calf at a time, which underscores their low reproductive rate, making conservation crucial. Statement 3 is correct: The Ganges River Dolphin is protected under Schedule I of the Wildlife (Protection) Act, 1972, Appendix I of CITES, and is classified as Endangered on the IUCN Red List. Incorrect Solution: B Explanation: Statement 1 is incorrect: Project Dolphin is a Ministry of Environment, Forest and Climate Change (MoEFCC) initiative, not Jal Shakti. It focuses on conservation, monitoring, and habitat protection of dolphins, not just pollution control. Statement 2 is correct: In the species, females are larger than males, and they reproduce every 2–3 years, typically birthing one calf at a time, which underscores their low reproductive rate, making conservation crucial. Statement 3 is correct: The Ganges River Dolphin is protected under Schedule I of the Wildlife (Protection) Act, 1972, Appendix I of CITES, and is classified as Endangered on the IUCN Red List.

#### 21. Question

With reference to the conservation efforts and biology of the Ganges River Dolphin, consider the following statements:

• Project Dolphin is a government initiative under the Ministry of Jal Shakti focused on pollution control in dolphin habitats.

• Female dolphins are typically larger than males and reproduce once every 2–3 years.

• The dolphin is listed under Schedule I of the Wildlife (Protection) Act, 1972 and Appendix I of CITES.

Which of the statements given above is/are correct?

• (a) 1 and 2 only

• (b) 2 and 3 only

• (c) 1 and 3 only

• (d) 1, 2 and 3

Solution: B

Explanation: Statement 1 is incorrect: Project Dolphin is a Ministry of Environment, Forest and Climate Change (MoEFCC) initiative, not Jal Shakti. It focuses on conservation, monitoring, and habitat protection of dolphins, not just pollution control. Statement 2 is correct: In the species, females are larger than males, and they reproduce every 2–3 years, typically birthing one calf at a time, which underscores their low reproductive rate, making conservation crucial. Statement 3 is correct: The Ganges River Dolphin is protected under Schedule I of the Wildlife (Protection) Act, 1972, Appendix I of CITES, and is classified as Endangered on the IUCN Red List.

Solution: B

• Question 22 of 30 22. Question 1 points Consider the following statements: Statement-I: The RPwD Act, 2016 allows full guardianship for persons with mental disabilities, authorizing the guardian to take all legal decisions. Statement-II: The Act provides for “limited guardianship” which is a joint decision-making arrangement based on mutual understanding and guided by the will of the person with disability. Which one of the following is correct in respect of the above statements? a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I b) Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I c) Statement-I is correct but Statement-II is incorrect d) Statement-I is incorrect but Statement-II is correct Correct Solution: D Explanation: Statement-I is incorrect: The RPwD Act, 2016 does not endorse full guardianship unless in exceptional cases. It emphasizes “limited guardianship”, aligning with the UN Convention on Rights of Persons with Disabilities (UNCRPD). Statement-II is correct: Limited guardianship under the Act is a shared decision-making process, involving both the guardian and the PwD, and is applicable only in specific contexts (e.g., legal or financial decisions). It is designed to respect the autonomy and will of the individual, and it is time-bound and subject-specific. Incorrect Solution: D Explanation: Statement-I is incorrect: The RPwD Act, 2016 does not endorse full guardianship unless in exceptional cases. It emphasizes “limited guardianship”, aligning with the UN Convention on Rights of Persons with Disabilities (UNCRPD). Statement-II is correct: Limited guardianship under the Act is a shared decision-making process, involving both the guardian and the PwD, and is applicable only in specific contexts (e.g., legal or financial decisions). It is designed to respect the autonomy and will of the individual, and it is time-bound and subject-specific.

#### 22. Question

Consider the following statements:

Statement-I: The RPwD Act, 2016 allows full guardianship for persons with mental disabilities, authorizing the guardian to take all legal decisions.

Statement-II: The Act provides for “limited guardianship” which is a joint decision-making arrangement based on mutual understanding and guided by the will of the person with disability.

Which one of the following is correct in respect of the above statements?

• a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I

• b) Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I

• c) Statement-I is correct but Statement-II is incorrect

• d) Statement-I is incorrect but Statement-II is correct

Solution: D

Explanation: Statement-I is incorrect: The RPwD Act, 2016 does not endorse full guardianship unless in exceptional cases. It emphasizes “limited guardianship”, aligning with the UN Convention on Rights of Persons with Disabilities (UNCRPD). Statement-II is correct: Limited guardianship under the Act is a shared decision-making process, involving both the guardian and the PwD, and is applicable only in specific contexts (e.g., legal or financial decisions). It is designed to respect the autonomy and will of the individual, and it is time-bound and subject-specific.

Solution: D

• Question 23 of 30 23. Question 1 points With reference to UNICEF, consider the following statements: It was established in response to the global child refugee crisis after World War II. UNICEF’s global operations are funded through mandatory contributions by member states. The Convention on the Rights of the Child (1989) provides the guiding framework for UNICEF’s work. Which of the statements given above is/are correct? (a) 1 and 2 only (b) 1 and 3 only (c) 2 and 3 only (d) 1, 2 and 3 Correct Solution: B Explanation: Statement 1 is correct: UNICEF was established in 1946 to provide emergency food and healthcare to children affected by WWII. Statement 2 is incorrect: UNICEF is funded through voluntary contributions, not mandatory ones. Its funding comes from governments, private sector, foundations, and individuals. Statement 3 is correct: The Convention on the Rights of the Child (1989)—ratified by India in 1992—is the guiding framework for UNICEF’s mission, setting global standards for promoting and protecting children’s rights. Incorrect Solution: B Explanation: Statement 1 is correct: UNICEF was established in 1946 to provide emergency food and healthcare to children affected by WWII. Statement 2 is incorrect: UNICEF is funded through voluntary contributions, not mandatory ones. Its funding comes from governments, private sector, foundations, and individuals. Statement 3 is correct: The Convention on the Rights of the Child (1989)—ratified by India in 1992—is the guiding framework for UNICEF’s mission, setting global standards for promoting and protecting children’s rights.

#### 23. Question

With reference to UNICEF, consider the following statements:

• It was established in response to the global child refugee crisis after World War II.

• UNICEF’s global operations are funded through mandatory contributions by member states.

• The Convention on the Rights of the Child (1989) provides the guiding framework for UNICEF’s work.

Which of the statements given above is/are correct?

• (a) 1 and 2 only

• (b) 1 and 3 only

• (c) 2 and 3 only

• (d) 1, 2 and 3

Solution: B

Explanation: Statement 1 is correct: UNICEF was established in 1946 to provide emergency food and healthcare to children affected by WWII. Statement 2 is incorrect: UNICEF is funded through voluntary contributions, not mandatory ones. Its funding comes from governments, private sector, foundations, and individuals. Statement 3 is correct: The Convention on the Rights of the Child (1989)—ratified by India in 1992—is the guiding framework for UNICEF’s mission, setting global standards for promoting and protecting children’s rights.

Solution: B

• Question 24 of 30 24. Question 1 points Which of the following best explains the purpose of the Hong Kong Convention? (a) To enforce decarbonization targets in the global steel industry. (b) To regulate international carbon pricing mechanisms under the Paris Agreement. (c) To ensure safe and environmentally sound recycling of ships and protect worker safety. (d) To restrict the use of beaching methods in ship dismantling across all signatory countries. Correct Solution: C Explanation: The Hong Kong International Convention (2009) seeks to regulate global ship recycling, ensuring environmental safety and health standards are met during dismantling. It takes effect in 2025. While beaching is still allowed, the Convention mandates safety protocols, worker training, and pollution control. It is not directly related to steel decarbonization or carbon markets. Incorrect Solution: C Explanation: The Hong Kong International Convention (2009) seeks to regulate global ship recycling, ensuring environmental safety and health standards are met during dismantling. It takes effect in 2025. While beaching is still allowed, the Convention mandates safety protocols, worker training, and pollution control. It is not directly related to steel decarbonization or carbon markets.

#### 24. Question

Which of the following best explains the purpose of the Hong Kong Convention?

• (a) To enforce decarbonization targets in the global steel industry.

• (b) To regulate international carbon pricing mechanisms under the Paris Agreement.

• (c) To ensure safe and environmentally sound recycling of ships and protect worker safety.

• (d) To restrict the use of beaching methods in ship dismantling across all signatory countries.

Solution: C

Explanation: The Hong Kong International Convention (2009) seeks to regulate global ship recycling, ensuring environmental safety and health standards are met during dismantling. It takes effect in 2025. While beaching is still allowed, the Convention mandates safety protocols, worker training, and pollution control. It is not directly related to steel decarbonization or carbon markets.

Solution: C

• Question 25 of 30 25. Question 1 points With reference to Extrachromosomal DNA (ecDNA), consider the following statements: ecDNA consists of linear fragments of DNA that freely circulate in the cytoplasm of normal cells. ecDNA is known to carry multiple copies of oncogenes, contributing to cancer progression and drug resistance. Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Correct Solution: B Explanation: Statement 1 is incorrect: Extrachromosomal DNA (ecDNA) is not linear but rather consists of circular fragments of DNA that exist outside the chromosomes. These circular structures freely circulate in the cytoplasm and are distinct from normal chromosomal DNA. Statement 2 is correct: ecDNA is known to carry multiple copies of oncogenes (cancer-causing genes), which can lead to their amplification. This contributes to aggressive tumor growth, cancer progression, and drug resistance because the high copy number of oncogenes can overwhelm normal cellular regulation. Thus, only Statement 2 is correct. Incorrect Solution: B Explanation: Statement 1 is incorrect: Extrachromosomal DNA (ecDNA) is not linear but rather consists of circular fragments of DNA that exist outside the chromosomes. These circular structures freely circulate in the cytoplasm and are distinct from normal chromosomal DNA. Statement 2 is correct: ecDNA is known to carry multiple copies of oncogenes (cancer-causing genes), which can lead to their amplification. This contributes to aggressive tumor growth, cancer progression, and drug resistance because the high copy number of oncogenes can overwhelm normal cellular regulation. Thus, only Statement 2 is correct.

#### 25. Question

With reference to Extrachromosomal DNA (ecDNA), consider the following statements:

• ecDNA consists of linear fragments of DNA that freely circulate in the cytoplasm of normal cells.

• ecDNA is known to carry multiple copies of oncogenes, contributing to cancer progression and drug resistance.

Which of the statements given above is/are correct?

• (a) 1 only

• (b) 2 only

• (c) Both 1 and 2

• (d) Neither 1 nor 2

Solution: B

Explanation: Statement 1 is incorrect: Extrachromosomal DNA (ecDNA) is not linear but rather consists of circular fragments of DNA that exist outside the chromosomes. These circular structures freely circulate in the cytoplasm and are distinct from normal chromosomal DNA. Statement 2 is correct: ecDNA is known to carry multiple copies of oncogenes (cancer-causing genes), which can lead to their amplification. This contributes to aggressive tumor growth, cancer progression, and drug resistance because the high copy number of oncogenes can overwhelm normal cellular regulation.

Thus, only Statement 2 is correct.

Solution: B

Thus, only Statement 2 is correct.

• Question 26 of 30 26. Question 1 points Although water is a renewable resource, rapid population growth, industrialization, and climate change are causing serious water scarcity. Groundwater, the largest usable source of water, is replenished through percolation of rainwater. However, activities like deforestation, construction of tar roads, and modern irrigation methods using borewells are preventing rainwater from seeping into the ground, depleting the water table. Over-extraction for agriculture, multi-storey construction, and lack of proper water management worsen the crisis. Non-judicious use of water is another key reason for depletion. Conducting local water audits can help identify areas of excessive consumption. Conservation efforts must be both individual and collective. Rainwater harvesting is vital since rain is the primary source of freshwater. Traditional systems like stepwells, once used for storing rainwater, declined due to urbanization and pollution. Encouragingly, some regions in India are reviving or rebuilding stepwells to enhance water storage. Sensitizing communities and promoting responsible use are essential to prevent a water crisis. The UN recognized this need and declared 2004–2014 as the International Decade of Water to promote global awareness and action. Which of the given assumptions based on the passage are most logical and rational? a) Rainwater harvesting should be practised on a large scale. b) Afforestation techniques must be used to increase levels of ground water. c) Individual efforts to conserve water must be encouraged. d) All of the above Correct Correct Option: D Justification: The passage shows how scarcity of groundwater is leading to unavailability of water and how human actions are exacerbating the problem. Rainwater harvesting and afforestation can combat some of the problems that have been created due to human impact and growing population. Also, not just governments but communities and individuals have to be mindful of their water consumption. Hence, D. Incorrect Correct Option: D Justification: The passage shows how scarcity of groundwater is leading to unavailability of water and how human actions are exacerbating the problem. Rainwater harvesting and afforestation can combat some of the problems that have been created due to human impact and growing population. Also, not just governments but communities and individuals have to be mindful of their water consumption. Hence, D.

#### 26. Question

Although water is a renewable resource, rapid population growth, industrialization, and climate change are causing serious water scarcity. Groundwater, the largest usable source of water, is replenished through percolation of rainwater. However, activities like deforestation, construction of tar roads, and modern irrigation methods using borewells are preventing rainwater from seeping into the ground, depleting the water table. Over-extraction for agriculture, multi-storey construction, and lack of proper water management worsen the crisis. Non-judicious use of water is another key reason for depletion. Conducting local water audits can help identify areas of excessive consumption. Conservation efforts must be both individual and collective. Rainwater harvesting is vital since rain is the primary source of freshwater. Traditional systems like stepwells, once used for storing rainwater, declined due to urbanization and pollution. Encouragingly, some regions in India are reviving or rebuilding stepwells to enhance water storage. Sensitizing communities and promoting responsible use are essential to prevent a water crisis. The UN recognized this need and declared 2004–2014 as the International Decade of Water to promote global awareness and action.

Which of the given assumptions based on the passage are most logical and rational?

• a) Rainwater harvesting should be practised on a large scale.

• b) Afforestation techniques must be used to increase levels of ground water.

• c) Individual efforts to conserve water must be encouraged.

• d) All of the above

Correct Option: D

Justification:

The passage shows how scarcity of groundwater is leading to unavailability of water and how human actions are exacerbating the problem. Rainwater harvesting and afforestation can combat some of the problems that have been created due to human impact and growing population. Also, not just governments but communities and individuals have to be mindful of their water consumption. Hence, D.

Correct Option: D

Justification:

• Question 27 of 30 27. Question 1 points Select the related number from the given alternatives. 343 : 678 : : 512 : ? a)1024 b) 1536 c) 1000 d) 1016 Correct Correct Option: D Justification: 343 × 2 = 686 – (2)3 = 686 – 8 = 678 Similarly, 512 × 2 = 1024 – (2)3 = 1024 – 8 = 1016 Hence, option (D) is correct. Incorrect Correct Option: D Justification: 343 × 2 = 686 – (2)3 = 686 – 8 = 678 Similarly, 512 × 2 = 1024 – (2)3 = 1024 – 8 = 1016 Hence, option (D) is correct.

#### 27. Question

Select the related number from the given alternatives.

343 : 678 : : 512 : ?

Correct Option: D

Justification:

343 × 2 = 686 – (2)3 = 686 – 8 = 678

Similarly, 512 × 2 = 1024 – (2)3 = 1024 – 8 = 1016

Hence, option (D) is correct.

Correct Option: D

Justification:

343 × 2 = 686 – (2)3 = 686 – 8 = 678

Similarly, 512 × 2 = 1024 – (2)3 = 1024 – 8 = 1016

Hence, option (D) is correct.

• Question 28 of 30 28. Question 1 points Complete the series: AFI, JOR, MRU,? a) GJU b) HMP c) PMO d) RJL Correct Correct Option: B Justification: A + 5 = F; F + 3 = I: J + 5 = O; O + 3 = R: M + 5 = R; R + 3 = U: Similarly, HMP will have the same logic among the given questions. Incorrect Correct Option: B Justification: A + 5 = F; F + 3 = I: J + 5 = O; O + 3 = R: M + 5 = R; R + 3 = U: Similarly, HMP will have the same logic among the given questions.

#### 28. Question

Complete the series: AFI, JOR, MRU,?

Correct Option: B

Justification:

A + 5 = F; F + 3 = I:

J + 5 = O; O + 3 = R:

M + 5 = R; R + 3 = U:

Similarly, HMP will have the same logic among the given questions.

Correct Option: B

Justification:

A + 5 = F; F + 3 = I:

J + 5 = O; O + 3 = R:

M + 5 = R; R + 3 = U:

Similarly, HMP will have the same logic among the given questions.

• Question 29 of 30 29. Question 1 points What is the next letter of the following sequence. N, O, M, P, L, Q, K, R, ? a) S b) I c) J d) T Correct Correct Option: C Justification: Here the series has mixed two series. n m l k…! reverse alphabet o p q r …! forward alphabet So the letter before k is j and after that letter after r is s and so on… Incorrect Correct Option: C Justification: Here the series has mixed two series. n m l k…! reverse alphabet o p q r …! forward alphabet So the letter before k is j and after that letter after r is s and so on…

#### 29. Question

What is the next letter of the following sequence.

N, O, M, P, L, Q, K, R, ?

Correct Option: C

Justification:

Here the series has mixed two series.

n m l k…! reverse alphabet

o p q r …! forward alphabet

So the letter before k is j and after that letter after r is s and so on…

Correct Option: C

Justification:

Here the series has mixed two series.

n m l k…! reverse alphabet

o p q r …! forward alphabet

So the letter before k is j and after that letter after r is s and so on…

• Question 30 of 30 30. Question 1 points What should come in place of the question mark (?) in the following number series? 2, 10, 30, ‘?’, 130 a) 68 b) 78 c) 108 d) 58 Correct Correct Option: A Justification: (1)^ 3 + 1= 2, (2)^3 + 2 = 10 (3) ^ 3 + 3 = 30 (4) ^ 3 + 4= 68 (5)^ 3 + 5 = 130 Hence, option (a) is correct. Incorrect Correct Option: A Justification: (1)^ 3 + 1= 2, (2)^3 + 2 = 10 (3) ^ 3 + 3 = 30 (4) ^ 3 + 4= 68 (5)^ 3 + 5 = 130 Hence, option (a) is correct.

#### 30. Question

What should come in place of the question mark (?) in the following number series?

2, 10, 30, ‘?’, 130

Correct Option: A

Justification:

• (1)^ 3 + 1= 2,

• (2)^3 + 2 = 10

• (3) ^ 3 + 3 = 30

• (4) ^ 3 + 4= 68

• (5)^ 3 + 5 = 130

Hence, option (a) is correct.

Correct Option: A

Justification:

• (1)^ 3 + 1= 2,

• (2)^3 + 2 = 10

• (3) ^ 3 + 3 = 30

• (4) ^ 3 + 4= 68

• (5)^ 3 + 5 = 130

Hence, option (a) is correct.

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