UPSC Static Quiz – Economy : 19 June 2025

UPSC Static Quiz – Economy : 19 June 2025 We will post 5 questions daily on static topics mentioned in the UPSC civil services preliminary examination syllabus. Each week will focus on a specific topic from the syllabus, such as History of India and Indian National Movement, Indian and World Geography, and more.We are excited to bring you our daily UPSC Static Quiz, designed to help you prepare for the UPSC Civil Services Preliminary Examination. Each day, we will post 5 questions on static topics mentioned in the UPSC syllabus. This week, we are focusing on Indian and World Geography.

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• Question 1 of 5 1. Question Consider the following statements regarding the Insolvency and Bankruptcy Code (IBC), 2016: The primary objective of the IBC is liquidation of stressed assets to recover dues for creditors. The IBC provides for a time-bound process for insolvency resolution of corporate persons, partnership firms, and individuals. Which of the above statements is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Correct Solution: b) Statement 1 is incorrect: The primary objective of the Insolvency and Bankruptcy Code (IBC), 2016, is insolvency resolution in a time-bound manner for maximization of value of assets of interested persons. Liquidation is considered only if resolution is not feasible. The focus is on reviving the company as a going concern if possible. Statement 2 is correct: The IBC provides for a consolidated framework that governs the insolvency and bankruptcy proceedings for corporate persons, partnership firms, and individuals in a time-bound manner. This ensures quicker resolution compared to previous fragmented laws. Incorrect Solution: b) Statement 1 is incorrect: The primary objective of the Insolvency and Bankruptcy Code (IBC), 2016, is insolvency resolution in a time-bound manner for maximization of value of assets of interested persons. Liquidation is considered only if resolution is not feasible. The focus is on reviving the company as a going concern if possible. Statement 2 is correct: The IBC provides for a consolidated framework that governs the insolvency and bankruptcy proceedings for corporate persons, partnership firms, and individuals in a time-bound manner. This ensures quicker resolution compared to previous fragmented laws.

#### 1. Question

Consider the following statements regarding the Insolvency and Bankruptcy Code (IBC), 2016:

• The primary objective of the IBC is liquidation of stressed assets to recover dues for creditors.

• The IBC provides for a time-bound process for insolvency resolution of corporate persons, partnership firms, and individuals.

Which of the above statements is/are correct?

• (a) 1 only

• (b) 2 only

• (c) Both 1 and 2

• (d) Neither 1 nor 2

Solution: b)

• Statement 1 is incorrect: The primary objective of the Insolvency and Bankruptcy Code (IBC), 2016, is insolvency resolution in a time-bound manner for maximization of value of assets of interested persons. Liquidation is considered only if resolution is not feasible. The focus is on reviving the company as a going concern if possible.

• Statement 2 is correct: The IBC provides for a consolidated framework that governs the insolvency and bankruptcy proceedings for corporate persons, partnership firms, and individuals in a time-bound manner. This ensures quicker resolution compared to previous fragmented laws.

Solution: b)

• Question 2 of 5 2. Question Consider the following statements regarding Fiscal Responsibility and Budget Management (FRBM) Act, 2003: The Act mandates the elimination of the revenue deficit by the central government. The Act requires the central government to lay before Parliament three policy statements: Macro-Economic Framework Statement, Medium-Term Fiscal Policy Statement, and Fiscal Policy Strategy Statement. The Act sets a specific, unalterable target for the fiscal deficit to GDP ratio that the government must adhere to annually. How many of the above statements is/are correct? (a) Only one (b) Only two (c) All three (d) None Correct Solution: a) Statement 1 is incorrect: While the original FRBM Act aimed at eliminating the revenue deficit, subsequent amendments and reviews have shifted the focus. For instance, the FRBM Review Committee (N.K. Singh Committee) recommended a more flexible approach, focusing on debt-to-GDP ratio and fiscal deficit targets, rather than mandating complete elimination of revenue deficit under all circumstances. The current framework allows for deviations under specific conditions. Statement 2 is correct: The FRBM Act, 2003, requires the Central Government to lay before both Houses of Parliament three key documents along with the Union Budget. These are the Macro-Economic Framework Statement, the Medium-Term Fiscal Policy Statement, and the Fiscal Policy Strategy Statement. These documents provide transparency and a medium-term perspective on the government’s fiscal stance. Statement 3 is incorrect: The FRBM Act sets targets for fiscal consolidation, but these targets are not unalterable and have been subject to amendments and escape clauses. The Act allows for deviations from fiscal targets under exceptional circumstances, such as national security, calamity, or a sharp decline in economic growth. Incorrect Solution: a) Statement 1 is incorrect: While the original FRBM Act aimed at eliminating the revenue deficit, subsequent amendments and reviews have shifted the focus. For instance, the FRBM Review Committee (N.K. Singh Committee) recommended a more flexible approach, focusing on debt-to-GDP ratio and fiscal deficit targets, rather than mandating complete elimination of revenue deficit under all circumstances. The current framework allows for deviations under specific conditions. Statement 2 is correct: The FRBM Act, 2003, requires the Central Government to lay before both Houses of Parliament three key documents along with the Union Budget. These are the Macro-Economic Framework Statement, the Medium-Term Fiscal Policy Statement, and the Fiscal Policy Strategy Statement. These documents provide transparency and a medium-term perspective on the government’s fiscal stance. Statement 3 is incorrect: The FRBM Act sets targets for fiscal consolidation, but these targets are not unalterable and have been subject to amendments and escape clauses. The Act allows for deviations from fiscal targets under exceptional circumstances, such as national security, calamity, or a sharp decline in economic growth.

#### 2. Question

Consider the following statements regarding Fiscal Responsibility and Budget Management (FRBM) Act, 2003:

• The Act mandates the elimination of the revenue deficit by the central government.

• The Act requires the central government to lay before Parliament three policy statements: Macro-Economic Framework Statement, Medium-Term Fiscal Policy Statement, and Fiscal Policy Strategy Statement.

• The Act sets a specific, unalterable target for the fiscal deficit to GDP ratio that the government must adhere to annually.

How many of the above statements is/are correct?

• (a) Only one

• (b) Only two

• (c) All three

Solution: a)

• Statement 1 is incorrect: While the original FRBM Act aimed at eliminating the revenue deficit, subsequent amendments and reviews have shifted the focus. For instance, the FRBM Review Committee (N.K. Singh Committee) recommended a more flexible approach, focusing on debt-to-GDP ratio and fiscal deficit targets, rather than mandating complete elimination of revenue deficit under all circumstances. The current framework allows for deviations under specific conditions.

• Statement 2 is correct: The FRBM Act, 2003, requires the Central Government to lay before both Houses of Parliament three key documents along with the Union Budget. These are the Macro-Economic Framework Statement, the Medium-Term Fiscal Policy Statement, and the Fiscal Policy Strategy Statement. These documents provide transparency and a medium-term perspective on the government’s fiscal stance.

• Statement 3 is incorrect: The FRBM Act sets targets for fiscal consolidation, but these targets are not unalterable and have been subject to amendments and escape clauses. The Act allows for deviations from fiscal targets under exceptional circumstances, such as national security, calamity, or a sharp decline in economic growth.

Solution: a)

• Question 3 of 5 3. Question With reference to the concept of ‘Effective Revenue Deficit’ in India, consider the following statements: It represents the difference between revenue deficit and grants for creation of capital assets. A zero Effective Revenue Deficit implies that all revenue expenditure is met from revenue receipts. Which of the above statements is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Correct Solution: a) Statement 1 is correct: Effective Revenue Deficit (ERD) is defined as the difference between revenue deficit and grants-in-aid for the creation of capital assets. This concept was introduced in the Union Budget 2011-12. Statement 2 is incorrect: A zero Effective Revenue Deficit implies that the revenue deficit is entirely used for grants that create capital assets. It does not necessarily mean that all revenue expenditure is met from revenue receipts; there could still be a revenue deficit if revenue expenditure exceeds revenue receipts, but this deficit is offset by capital-creating grants for the ERD to be zero. A zero revenue deficit would imply all revenue expenditure is met from revenue receipts. Incorrect Solution: a) Statement 1 is correct: Effective Revenue Deficit (ERD) is defined as the difference between revenue deficit and grants-in-aid for the creation of capital assets. This concept was introduced in the Union Budget 2011-12. Statement 2 is incorrect: A zero Effective Revenue Deficit implies that the revenue deficit is entirely used for grants that create capital assets. It does not necessarily mean that all revenue expenditure is met from revenue receipts; there could still be a revenue deficit if revenue expenditure exceeds revenue receipts, but this deficit is offset by capital-creating grants for the ERD to be zero. A zero revenue deficit would imply all revenue expenditure is met from revenue receipts.

#### 3. Question

With reference to the concept of ‘Effective Revenue Deficit’ in India, consider the following statements:

• It represents the difference between revenue deficit and grants for creation of capital assets.

• A zero Effective Revenue Deficit implies that all revenue expenditure is met from revenue receipts.

Which of the above statements is/are correct?

• (a) 1 only

• (b) 2 only

• (c) Both 1 and 2

• (d) Neither 1 nor 2

Solution: a)

• Statement 1 is correct: Effective Revenue Deficit (ERD) is defined as the difference between revenue deficit and grants-in-aid for the creation of capital assets. This concept was introduced in the Union Budget 2011-12.

• Statement 2 is incorrect: A zero Effective Revenue Deficit implies that the revenue deficit is entirely used for grants that create capital assets. It does not necessarily mean that all revenue expenditure is met from revenue receipts; there could still be a revenue deficit if revenue expenditure exceeds revenue receipts, but this deficit is offset by capital-creating grants for the ERD to be zero. A zero revenue deficit would imply all revenue expenditure is met from revenue receipts.

Solution: a)

• Question 4 of 5 4. Question Consider the following statements regarding ‘Green Bonds’: Green bonds are debt instruments exclusively issued by governments to fund renewable energy projects. The proceeds from green bonds are earmarked for projects with positive environmental or climate benefits. The coupon payments on green bonds are typically lower than conventional bonds due to their environmental benefits, a phenomenon known as ‘greenium’. How many of the above statements is/are incorrect? a) Only one (b) Only two (c) All three (d) None Correct Solution: b) Statement 1 is incorrect: Green bonds are debt instruments, but they are not exclusively issued by governments. They can be issued by governments, multilateral institutions, corporations, and other entities to finance or refinance projects that have positive environmental and/or climate benefits. While renewable energy is a common use, proceeds can also fund energy efficiency, clean transportation, sustainable water management, etc. Statement 2 is correct: The defining characteristic of a green bond is that the proceeds raised from its issuance are specifically earmarked for financing or refinancing new or existing eligible green projects that deliver environmental benefits. Statement 3 is incorrect: While there is some evidence suggesting that green bonds might sometimes trade at a slight premium (meaning investors accept a slightly lower yield, leading to the ‘greenium’), it is not a universal or guaranteed feature that coupon payments are *typically* lower. The existence and magnitude of a greenium can vary based on market conditions, issuer credibility, and specific bond characteristics. It’s an observed market phenomenon in some cases, not a defining rule. Incorrect Solution: b) Statement 1 is incorrect: Green bonds are debt instruments, but they are not exclusively issued by governments. They can be issued by governments, multilateral institutions, corporations, and other entities to finance or refinance projects that have positive environmental and/or climate benefits. While renewable energy is a common use, proceeds can also fund energy efficiency, clean transportation, sustainable water management, etc. Statement 2 is correct: The defining characteristic of a green bond is that the proceeds raised from its issuance are specifically earmarked for financing or refinancing new or existing eligible green projects that deliver environmental benefits. Statement 3 is incorrect: While there is some evidence suggesting that green bonds might sometimes trade at a slight premium (meaning investors accept a slightly lower yield, leading to the ‘greenium’), it is not a universal or guaranteed feature that coupon payments are *typically* lower. The existence and magnitude of a greenium can vary based on market conditions, issuer credibility, and specific bond characteristics. It’s an observed market phenomenon in some cases, not a defining rule.

#### 4. Question

Consider the following statements regarding ‘Green Bonds’:

• Green bonds are debt instruments exclusively issued by governments to fund renewable energy projects.

• The proceeds from green bonds are earmarked for projects with positive environmental or climate benefits.

• The coupon payments on green bonds are typically lower than conventional bonds due to their environmental benefits, a phenomenon known as ‘greenium’.

How many of the above statements is/are incorrect?

• a) Only one

• (b) Only two

• (c) All three

Solution: b)

• Statement 1 is incorrect: Green bonds are debt instruments, but they are not exclusively issued by governments. They can be issued by governments, multilateral institutions, corporations, and other entities to finance or refinance projects that have positive environmental and/or climate benefits. While renewable energy is a common use, proceeds can also fund energy efficiency, clean transportation, sustainable water management, etc.

• Statement 2 is correct: The defining characteristic of a green bond is that the proceeds raised from its issuance are specifically earmarked for financing or refinancing new or existing eligible green projects that deliver environmental benefits.

• Statement 3 is incorrect: While there is some evidence suggesting that green bonds might sometimes trade at a slight premium (meaning investors accept a slightly lower yield, leading to the ‘greenium’), it is not a universal or guaranteed feature that coupon payments are *typically* lower. The existence and magnitude of a greenium can vary based on market conditions, issuer credibility, and specific bond characteristics. It’s an observed market phenomenon in some cases, not a defining rule.

Solution: b)

• Question 5 of 5 5. Question Consider the following statements regarding the ‘Gig Economy’ in the context of current Indian labour law discussions: Gig workers are primarily engaged through digital platforms for project-based tasks. The new Labour Codes in India explicitly grant all gig workers the exact same comprehensive social security benefits as permanent employees of traditional establishments. The gig economy exclusively comprises low-skilled, temporary jobs. How many of the above statements is/are correct? (a) Only one (b) Only two (c) All three (d) None Correct Solution: a) Statement 1 is correct: A key feature of the modern gig economy is that workers are often engaged for specific tasks or projects, frequently facilitated through digital platforms. This is a defining operational aspect. Statement 2 is incorrect: While the new Labour Codes in India (e.g., the Code on Social Security, 2020) aim to extend social security to gig and platform workers, they do not mandate the *exact same comprehensive* benefits as those available to permanent employees in traditional sectors. The framework allows for specific schemes to be formulated for gig workers, which may differ in scope and contribution. Statement 3 is incorrect: The gig economy is diverse and includes not only low-skilled jobs but also highly skilled freelance work in areas like IT, design, consulting, and content creation. Incorrect Solution: a) Statement 1 is correct: A key feature of the modern gig economy is that workers are often engaged for specific tasks or projects, frequently facilitated through digital platforms. This is a defining operational aspect. Statement 2 is incorrect: While the new Labour Codes in India (e.g., the Code on Social Security, 2020) aim to extend social security to gig and platform workers, they do not mandate the *exact same comprehensive* benefits as those available to permanent employees in traditional sectors. The framework allows for specific schemes to be formulated for gig workers, which may differ in scope and contribution. Statement 3 is incorrect: The gig economy is diverse and includes not only low-skilled jobs but also highly skilled freelance work in areas like IT, design, consulting, and content creation.

#### 5. Question

Consider the following statements regarding the ‘Gig Economy’ in the context of current Indian labour law discussions:

• Gig workers are primarily engaged through digital platforms for project-based tasks.

• The new Labour Codes in India explicitly grant all gig workers the exact same comprehensive social security benefits as permanent employees of traditional establishments.

• The gig economy exclusively comprises low-skilled, temporary jobs.

How many of the above statements is/are correct?

• (a) Only one

• (b) Only two

• (c) All three

Solution: a)

• Statement 1 is correct: A key feature of the modern gig economy is that workers are often engaged for specific tasks or projects, frequently facilitated through digital platforms. This is a defining operational aspect.

• Statement 2 is incorrect: While the new Labour Codes in India (e.g., the Code on Social Security, 2020) aim to extend social security to gig and platform workers, they do not mandate the *exact same comprehensive* benefits as those available to permanent employees in traditional sectors. The framework allows for specific schemes to be formulated for gig workers, which may differ in scope and contribution.

• Statement 3 is incorrect: The gig economy is diverse and includes not only low-skilled jobs but also highly skilled freelance work in areas like IT, design, consulting, and content creation.

Solution: a)

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