UPSC Static Quiz – Economy : 25 January 2025

UPSC Static Quiz – Economy : 25 January 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 Which of the following ministries is not represented in the composition of the Insolvency and Bankruptcy Board of India (IBBI)? a) Ministry of Commerce and Industry b) Ministry of Finance c) Ministry of Law d) Ministry of Corporate Affairs Correct Solution: a) The Ministry of Commerce and Industry is not represented in the composition of the IBBI. The IBBI includes ex-officio members from the Ministry of Finance, Ministry of Corporate Affairs, Ministry of Law, and a member nominated by the Reserve Bank of India (RBI). Incorrect Solution: a) The Ministry of Commerce and Industry is not represented in the composition of the IBBI. The IBBI includes ex-officio members from the Ministry of Finance, Ministry of Corporate Affairs, Ministry of Law, and a member nominated by the Reserve Bank of India (RBI).

#### 1. Question

Which of the following ministries is not represented in the composition of the Insolvency and Bankruptcy Board of India (IBBI)?

• a) Ministry of Commerce and Industry

• b) Ministry of Finance

• c) Ministry of Law

• d) Ministry of Corporate Affairs

Solution: a)

The Ministry of Commerce and Industry is not represented in the composition of the IBBI. The IBBI includes ex-officio members from the Ministry of Finance, Ministry of Corporate Affairs, Ministry of Law, and a member nominated by the Reserve Bank of India (RBI).

Solution: a)

• Question 2 of 5 2. Question The primary objective of the Mutual Funds Lite (MF Lite) framework introduced by SEBI is: a) To increase the regulatory burden on Asset Management Companies (AMCs) b) To promote actively managed mutual fund schemes c) To attract new players to the mutual fund industry and offer less risky investment opportunities for retail investors d) To introduce complex and high-risk investment strategies Correct Solution: c) The Mutual Funds Lite (MF Lite) framework aims to promote passively managed mutual fund schemes, which typically involve lower risk and cost than actively managed funds. This initiative seeks to attract new players into the mutual fund industry by easing entry barriers, offering diversified and less risky investment options, and enhancing market liquidity. SEBI’s intent is to make the mutual fund sector more inclusive and efficient, with a particular focus on retail investors. Incorrect Solution: c) The Mutual Funds Lite (MF Lite) framework aims to promote passively managed mutual fund schemes, which typically involve lower risk and cost than actively managed funds. This initiative seeks to attract new players into the mutual fund industry by easing entry barriers, offering diversified and less risky investment options, and enhancing market liquidity. SEBI’s intent is to make the mutual fund sector more inclusive and efficient, with a particular focus on retail investors.

#### 2. Question

The primary objective of the Mutual Funds Lite (MF Lite) framework introduced by SEBI is:

• a) To increase the regulatory burden on Asset Management Companies (AMCs)

• b) To promote actively managed mutual fund schemes

• c) To attract new players to the mutual fund industry and offer less risky investment opportunities for retail investors

• d) To introduce complex and high-risk investment strategies

Solution: c)

The Mutual Funds Lite (MF Lite) framework aims to promote passively managed mutual fund schemes, which typically involve lower risk and cost than actively managed funds. This initiative seeks to attract new players into the mutual fund industry by easing entry barriers, offering diversified and less risky investment options, and enhancing market liquidity. SEBI’s intent is to make the mutual fund sector more inclusive and efficient, with a particular focus on retail investors.

Solution: c)

• Question 3 of 5 3. Question Consider the following statements regarding the Windfall Gains Tax: It was introduced in India to manage domestic fuel shortages. The tax applies only to domestic oil companies and excludes private refiners. It helps in generating additional government revenue during periods of high crude prices. How many of the above statements are incorrect? a) Only one b) Only two c) All three d) None Correct Solution: a) Statement 1: Correct. The tax was introduced in July 2022, partly to address domestic fuel shortages by curbing exports. Statement 2: Incorrect. The tax applies to both domestic and private oil firms, including multinational corporations. Statement 3: Correct. It generates additional revenue for the government, cushioning the impact of domestic fuel duty cuts. About Windfall Gains Tax: Introduced in: July 2022 amid soaring global oil prices post-Russia’s invasion of Ukraine. What it is: A tax imposed to capture super-normal profits earned by oil producers and fuel exporters during times of high global crude prices. Aim: To curb export-induced domestic shortages and capture excess profits for government revenue. Products covered: Domestic crude oil, diesel, petrol, and ATF. GST Status: Not under GST; levied as Special Additional Excise Duty (SAED) and Additional Excise Duty (AED). Applicable to both domestic and private oil firms, including multinational corporations operating in India. Impacts on Indian Economy: Positive: Helped generate ₹25,000 crore in FY23, cushioning revenue loss from domestic fuel duty cuts. Ensured steady domestic fuel supply during global energy turmoil. Negative: Discouraged private refiners from boosting production. Created an unpredictable tax regime, affecting investor sentiment. Incorrect Solution: a) Statement 1: Correct. The tax was introduced in July 2022, partly to address domestic fuel shortages by curbing exports. Statement 2: Incorrect. The tax applies to both domestic and private oil firms, including multinational corporations. Statement 3: Correct. It generates additional revenue for the government, cushioning the impact of domestic fuel duty cuts. About Windfall Gains Tax: Introduced in: July 2022 amid soaring global oil prices post-Russia’s invasion of Ukraine. What it is: A tax imposed to capture super-normal profits earned by oil producers and fuel exporters during times of high global crude prices. Aim: To curb export-induced domestic shortages and capture excess profits for government revenue. Products covered: Domestic crude oil, diesel, petrol, and ATF. GST Status: Not under GST; levied as Special Additional Excise Duty (SAED) and Additional Excise Duty (AED). Applicable to both domestic and private oil firms, including multinational corporations operating in India. Impacts on Indian Economy: Positive: Helped generate ₹25,000 crore in FY23, cushioning revenue loss from domestic fuel duty cuts. Ensured steady domestic fuel supply during global energy turmoil. Negative: Discouraged private refiners from boosting production. Created an unpredictable tax regime, affecting investor sentiment.

#### 3. Question

Consider the following statements regarding the Windfall Gains Tax:

• It was introduced in India to manage domestic fuel shortages.

• The tax applies only to domestic oil companies and excludes private refiners.

• It helps in generating additional government revenue during periods of high crude prices.

How many of the above statements are incorrect?

• a) Only one

• b) Only two

• c) All three

Solution: a)

Statement 1: Correct. The tax was introduced in July 2022, partly to address domestic fuel shortages by curbing exports.

Statement 2: Incorrect. The tax applies to both domestic and private oil firms, including multinational corporations.

Statement 3: Correct. It generates additional revenue for the government, cushioning the impact of domestic fuel duty cuts.

About Windfall Gains Tax:

• Introduced in: July 2022 amid soaring global oil prices post-Russia’s invasion of Ukraine.

• What it is: A tax imposed to capture super-normal profits earned by oil producers and fuel exporters during times of high global crude prices.

• Aim: To curb export-induced domestic shortages and capture excess profits for government revenue.

• Products covered: Domestic crude oil, diesel, petrol, and ATF.

• GST Status: Not under GST; levied as Special Additional Excise Duty (SAED) and Additional Excise Duty (AED).

• Applicable to both domestic and private oil firms, including multinational corporations operating in India.

Impacts on Indian Economy:

• Positive: Helped generate ₹25,000 crore in FY23, cushioning revenue loss from domestic fuel duty cuts. Ensured steady domestic fuel supply during global energy turmoil.

• Helped generate ₹25,000 crore in FY23, cushioning revenue loss from domestic fuel duty cuts.

• Ensured steady domestic fuel supply during global energy turmoil.

• Negative: Discouraged private refiners from boosting production. Created an unpredictable tax regime, affecting investor sentiment.

• Discouraged private refiners from boosting production.

• Created an unpredictable tax regime, affecting investor sentiment.

Solution: a)

Statement 1: Correct. The tax was introduced in July 2022, partly to address domestic fuel shortages by curbing exports.

Statement 2: Incorrect. The tax applies to both domestic and private oil firms, including multinational corporations.

Statement 3: Correct. It generates additional revenue for the government, cushioning the impact of domestic fuel duty cuts.

About Windfall Gains Tax:

• Introduced in: July 2022 amid soaring global oil prices post-Russia’s invasion of Ukraine.

• What it is: A tax imposed to capture super-normal profits earned by oil producers and fuel exporters during times of high global crude prices.

• Aim: To curb export-induced domestic shortages and capture excess profits for government revenue.

• Products covered: Domestic crude oil, diesel, petrol, and ATF.

• GST Status: Not under GST; levied as Special Additional Excise Duty (SAED) and Additional Excise Duty (AED).

• Applicable to both domestic and private oil firms, including multinational corporations operating in India.

Impacts on Indian Economy:

• Positive: Helped generate ₹25,000 crore in FY23, cushioning revenue loss from domestic fuel duty cuts. Ensured steady domestic fuel supply during global energy turmoil.

• Helped generate ₹25,000 crore in FY23, cushioning revenue loss from domestic fuel duty cuts.

• Ensured steady domestic fuel supply during global energy turmoil.

• Negative: Discouraged private refiners from boosting production. Created an unpredictable tax regime, affecting investor sentiment.

• Discouraged private refiners from boosting production.

• Created an unpredictable tax regime, affecting investor sentiment.

• Question 4 of 5 4. Question Consider the following statements about the global context of de-dollarisation: De-dollarisation involves completely abandoning the use of the U.S. dollar in global trade. China and Russia have increased the use of their local currencies in bilateral trade as part of de-dollarisation. De-dollarisation aims to strengthen the dominance of gold as the sole global reserve asset. Which of the above statements is/are correct? a) 2 only b) 1 and 3 only c) 2 and 3 only d) 1, 2 and 3 Correct Solution: a) Statement 1 is incorrect: De-dollarisation reduces dependence on the U.S. dollar but does not aim to completely abandon its use. Statement 2 is correct: Countries like China and Russia are using local currencies for bilateral trade, reducing reliance on the dollar. Statement 3 is incorrect: While gold plays a role in diversification, de-dollarisation promotes alternatives, including regional currencies, not just gold. What is De-dollarisation? Definition: The process of reducing reliance on the U.S. dollar in international trade and reserves to mitigate risks associated with currency volatility. Global Context: Countries like China and Russia have initiated measures such as bilateral trade in local currencies and increasing gold reserves. India’s Initiatives: Local Currency Trade Agreements: India has signed agreements with select nations for bilateral trade in local currencies, reducing transaction costs and exchange rate volatility. Diversification of ForexReserves: Increased focus on gold and other currencies in reserves. Promoting INR Trade: Steps to internationalize the Indian rupee for global trade settlements. Impact of De-dollarisation: On the Global Economy: Reduced Dollar Dominance: Weakens the U.S. dollar’s role as a global reserve currency. Geopolitical Tensions: May lead to trade blocs and financial realignments. Alternative Currencies: Promotes regional currencies or gold as trade and reserve assets. On India’s Economy: Trade Diversification: Enhances resilience against dollar volatility. Risk Mitigation: Shields the economy from sudden dollar-driven shocks. Incorrect Solution: a) Statement 1 is incorrect: De-dollarisation reduces dependence on the U.S. dollar but does not aim to completely abandon its use. Statement 2 is correct: Countries like China and Russia are using local currencies for bilateral trade, reducing reliance on the dollar. Statement 3 is incorrect: While gold plays a role in diversification, de-dollarisation promotes alternatives, including regional currencies, not just gold. What is De-dollarisation? Definition: The process of reducing reliance on the U.S. dollar in international trade and reserves to mitigate risks associated with currency volatility. Global Context: Countries like China and Russia have initiated measures such as bilateral trade in local currencies and increasing gold reserves. India’s Initiatives: Local Currency Trade Agreements: India has signed agreements with select nations for bilateral trade in local currencies, reducing transaction costs and exchange rate volatility. Diversification of ForexReserves: Increased focus on gold and other currencies in reserves. Promoting INR Trade: Steps to internationalize the Indian rupee for global trade settlements. Impact of De-dollarisation: On the Global Economy: Reduced Dollar Dominance: Weakens the U.S. dollar’s role as a global reserve currency. Geopolitical Tensions: May lead to trade blocs and financial realignments. Alternative Currencies: Promotes regional currencies or gold as trade and reserve assets. On India’s Economy: Trade Diversification: Enhances resilience against dollar volatility. Risk Mitigation: Shields the economy from sudden dollar-driven shocks.

#### 4. Question

Consider the following statements about the global context of de-dollarisation:

• De-dollarisation involves completely abandoning the use of the U.S. dollar in global trade.

• China and Russia have increased the use of their local currencies in bilateral trade as part of de-dollarisation.

• De-dollarisation aims to strengthen the dominance of gold as the sole global reserve asset.

Which of the above statements is/are correct?

• b) 1 and 3 only

• c) 2 and 3 only

• d) 1, 2 and 3

Solution: a)

Statement 1 is incorrect: De-dollarisation reduces dependence on the U.S. dollar but does not aim to completely abandon its use.

Statement 2 is correct: Countries like China and Russia are using local currencies for bilateral trade, reducing reliance on the dollar.

Statement 3 is incorrect: While gold plays a role in diversification, de-dollarisation promotes alternatives, including regional currencies, not just gold.

What is De-dollarisation?

• Definition: The process of reducing reliance on the U.S. dollar in international trade and reserves to mitigate risks associated with currency volatility.

• Global Context: Countries like China and Russia have initiated measures such as bilateral trade in local currencies and increasing gold reserves.

India’s Initiatives:

• Local Currency Trade Agreements: India has signed agreements with select nations for bilateral trade in local currencies, reducing transaction costs and exchange rate volatility.

• Diversification of ForexReserves: Increased focus on gold and other currencies in reserves.

• Promoting INR Trade: Steps to internationalize the Indian rupee for global trade settlements.

Impact of De-dollarisation:

On the Global Economy:

• Reduced Dollar Dominance: Weakens the U.S. dollar’s role as a global reserve currency.

• Geopolitical Tensions: May lead to trade blocs and financial realignments.

• Alternative Currencies: Promotes regional currencies or gold as trade and reserve assets.

On India’s Economy:

• Trade Diversification: Enhances resilience against dollar volatility.

• Risk Mitigation: Shields the economy from sudden dollar-driven shocks.

Solution: a)

Statement 1 is incorrect: De-dollarisation reduces dependence on the U.S. dollar but does not aim to completely abandon its use.

Statement 2 is correct: Countries like China and Russia are using local currencies for bilateral trade, reducing reliance on the dollar.

Statement 3 is incorrect: While gold plays a role in diversification, de-dollarisation promotes alternatives, including regional currencies, not just gold.

What is De-dollarisation?

• Definition: The process of reducing reliance on the U.S. dollar in international trade and reserves to mitigate risks associated with currency volatility.

• Global Context: Countries like China and Russia have initiated measures such as bilateral trade in local currencies and increasing gold reserves.

India’s Initiatives:

• Local Currency Trade Agreements: India has signed agreements with select nations for bilateral trade in local currencies, reducing transaction costs and exchange rate volatility.

• Diversification of ForexReserves: Increased focus on gold and other currencies in reserves.

• Promoting INR Trade: Steps to internationalize the Indian rupee for global trade settlements.

Impact of De-dollarisation:

On the Global Economy:

• Reduced Dollar Dominance: Weakens the U.S. dollar’s role as a global reserve currency.

• Geopolitical Tensions: May lead to trade blocs and financial realignments.

• Alternative Currencies: Promotes regional currencies or gold as trade and reserve assets.

On India’s Economy:

• Trade Diversification: Enhances resilience against dollar volatility.

• Risk Mitigation: Shields the economy from sudden dollar-driven shocks.

• Question 5 of 5 5. Question Consider the following statements regarding Confederation of Indian Industry (CII): CII focuses exclusively on domestic industrial policy and avoids international linkages. It provides financial grants to industries for capacity building. It advocates for industrial growth while promoting affirmative action and skill development. 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 because CII has global linkages with 300 counterpart organizations in nearly 100 countries. Statement 2 is incorrect; CII does not provide financial grants but focuses on advocacy and capacity-building initiatives. Statement 3 is correct as CII actively promotes affirmative action and skill development while fostering industrial growth. About the Confederation of Indian Industry: Origin:Established in 1895, as a non-government, not-for-profit organization. Ministry affiliation:Collaborates with the Ministry of Commerce and Industry, but operates independently. Headquarters:Located in New Delhi, India. Aim:Foster a conducive environment for industrial growth, sustainable development, and global competitiveness. Functions: Policy Advocacy:Partners with the government on policy-making to boost industrial growth. Capacity Building:Promotes innovation, sustainability, and competitiveness through dedicated Centres of Excellence. Global Linkages:Strengthens international business relations with 300 counterpart organizations in nearly 100 countries. Corporate Citizenship:Focuses on affirmative action, skill development, and sustainable development programs. Incorrect Solution: b) Statement 1 is incorrect because CII has global linkages with 300 counterpart organizations in nearly 100 countries. Statement 2 is incorrect; CII does not provide financial grants but focuses on advocacy and capacity-building initiatives. Statement 3 is correct as CII actively promotes affirmative action and skill development while fostering industrial growth. About the Confederation of Indian Industry: Origin:Established in 1895, as a non-government, not-for-profit organization. Ministry affiliation:Collaborates with the Ministry of Commerce and Industry, but operates independently. Headquarters:Located in New Delhi, India. Aim:Foster a conducive environment for industrial growth, sustainable development, and global competitiveness. Functions: Policy Advocacy:Partners with the government on policy-making to boost industrial growth. Capacity Building:Promotes innovation, sustainability, and competitiveness through dedicated Centres of Excellence. Global Linkages:Strengthens international business relations with 300 counterpart organizations in nearly 100 countries. Corporate Citizenship:Focuses on affirmative action, skill development, and sustainable development programs.

#### 5. Question

Consider the following statements regarding Confederation of Indian Industry (CII):

• CII focuses exclusively on domestic industrial policy and avoids international linkages.

• It provides financial grants to industries for capacity building.

• It advocates for industrial growth while promoting affirmative action and skill development.

How many of the above statements is/are incorrect?

• a) Only one

• b) Only two

• c) All three

Solution: b)

Statement 1 is incorrect because CII has global linkages with 300 counterpart organizations in nearly 100 countries.

Statement 2 is incorrect; CII does not provide financial grants but focuses on advocacy and capacity-building initiatives.

Statement 3 is correct as CII actively promotes affirmative action and skill development while fostering industrial growth.

About the Confederation of Indian Industry:

• Origin:Established in 1895, as a non-government, not-for-profit organization.

• Ministry affiliation:Collaborates with the Ministry of Commerce and Industry, but operates independently.

• Headquarters:Located in New Delhi, India.

• Aim:Foster a conducive environment for industrial growth, sustainable development, and global competitiveness.

Functions:

• Policy Advocacy:Partners with the government on policy-making to boost industrial growth.

• Capacity Building:Promotes innovation, sustainability, and competitiveness through dedicated Centres of Excellence.

• Global Linkages:Strengthens international business relations with 300 counterpart organizations in nearly 100 countries.

• Corporate Citizenship:Focuses on affirmative action, skill development, and sustainable development programs.

Solution: b)

Statement 1 is incorrect because CII has global linkages with 300 counterpart organizations in nearly 100 countries.

Statement 2 is incorrect; CII does not provide financial grants but focuses on advocacy and capacity-building initiatives.

Statement 3 is correct as CII actively promotes affirmative action and skill development while fostering industrial growth.

About the Confederation of Indian Industry:

• Origin:Established in 1895, as a non-government, not-for-profit organization.

• Ministry affiliation:Collaborates with the Ministry of Commerce and Industry, but operates independently.

• Headquarters:Located in New Delhi, India.

• Aim:Foster a conducive environment for industrial growth, sustainable development, and global competitiveness.

Functions:

• Policy Advocacy:Partners with the government on policy-making to boost industrial growth.

• Capacity Building:Promotes innovation, sustainability, and competitiveness through dedicated Centres of Excellence.

• Global Linkages:Strengthens international business relations with 300 counterpart organizations in nearly 100 countries.

• Corporate Citizenship:Focuses on affirmative action, skill development, and sustainable development programs.

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