Indian Economic Policies and Concepts

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Questions and Answers

Which of the following is not true about the Securities and Exchange Board of India?

Securities and Exchange Board of India (SEBI) has its headquarters in New Delhi. (correct)

It was established on the recommendation of the Narasimham Committee.

It was founded in 1992.

It regulates stock market activities in India.

Which one of the following statements is not correct about the Cash Reserve Ratio (CRR)?

Banks cannot lend the CRR money to corporations.

CRR is a part of bank's deposit with the RBI.

CRR is a cash amount that earns interest for banks. (correct)

CRR is used to regulate money supply in the economy.

Which of the following is a trade barrier in India?

Market Expansion Grants.

Import Licensing. (correct)

Anti-Dumping measures. (correct)

Quality Control Regulations.

Which of the following is NOT a tool of Fiscal Policy?

Repo Rate. Signup and view all the answers

Consider the following statements with regard to Money supply: Which is/are correct?

M3 is the most commonly used measure of money supply. Signup and view all the answers

What are the characteristics of an economy when Stagflation occurs?

Inflation and Unemployment both are high. Signup and view all the answers

Which of the following statements is/are correct about calculation of National Income in India?

It includes total value of final goods and services produced by residents and non-residents. Signup and view all the answers

Which of the following contributes to determining the official poverty line?

Basic caloric needs. Signup and view all the answers

Who drafted the Sarvodaya Plan?

Jayprakash Narayan Signup and view all the answers

Which statement about Marginal Propensity to Consume (MPC) is correct?

MPC represents a proportion of income spent on consumption. Signup and view all the answers

Which sector involves activities related to specialized knowledge and technical skills?

Quinary sector Signup and view all the answers

What factor contributes to the appreciation of the Indian rupee?

Rise in interest rates in India Signup and view all the answers

Which aspect was NOT a part of the New Industrial Policy of 1991?

Establishment of new public sector enterprises Signup and view all the answers

Which year was the Foreign Exchange Management Act enacted?

1999 Signup and view all the answers

In which economic situation does the Reserve Bank of India use expansionary monetary policy?

When demand in the economy is low Signup and view all the answers

Which of the following is included in the balance of payments?

Current account transactions Signup and view all the answers

Which statement regarding the Monetary Policy Committee (MPC) is accurate?

It consists of six members. Signup and view all the answers

Which transaction is NOT part of India's Current Account of Balance of Payments?

Sales of assets Signup and view all the answers

Study Notes

Securities and Exchange Board of India (SEBI)

SEBI was established in 1992, based on the Narasimham Committee's recommendations.
SEBI's headquarters are in New Delhi.

Cash Reserve Ratio (CRR)

CRR is a portion of bank deposits held with the Reserve Bank of India (RBI).
Banks cannot lend CRR money.
CRR is used to control the money supply.
Banks do not earn interest on CRR.

Trade Barriers in India

Trade barriers in India include:
- Import Licensing
- Testing, Labelling, and Certification
- Anti-Dumping measures
- Export subsidies

Fiscal Policy Tools

Fiscal policy tools do not include the Repo Rate.
Fiscal policies include Taxation and Public Expenditure.

Money Supply

M4 is more liquid than M1.
Interbank deposits are part of the money supply.
M3 is the most common measure of money supply.

Stagflation

Stagflation is characterized by high inflation and high unemployment.

National Income Calculation in India

National Income includes the value of goods and services produced by residents and non-residents in a year.
National income is calculated as NNP at Factor Cost.
National income calculation excludes taxes, depreciation, and non-factor inputs.

Sarvodaya Plan

The Sarvodaya Plan was drafted by Jayaprakash Narayan.
It was drafted in 1950 and focused on agriculture and cottage industries.

Marginal Propensity to Consume (MPC)

MPC is the proportion of increased income spent on consumption.
MPC varies based on income level.
MPC is typically lower at lower incomes.

Quaternary and Quinary Sectors

Quaternary sector: policy formulation and high-level decision making.
Quinary sector: advanced services like knowledge and technical skills.

Indian Rupee Appreciation

Factors contributing to rupee appreciation include:
- Rise in Indian interest rates
- Increased Indian travel abroad.

New Industrial Policy of 1991

The policy brought changes in:
- Industrial de-licensing
- Deregulation of the industrial sector
- Reforms related to public sector enterprises
- Abolition of Monopoly and Restrictive Trade Practices Act
- Foreign investment and technology policies

Taxation Laws

Income Tax Act of 1961
Wealth Tax Act of 1998
Foreign Exchange Management Act of 1999

Expansionary Monetary Policy

Used when economic demand is low.

Balance of Payments

Components include the current account and the capital account.
Savings account is not part of Balance of Payments.

Monetary Policy Committee (MPC)

The MPC is a six-member committee.
It decides policy interest rates to maintain inflation.

Current Account Transactions

India's current account includes export and import of goods and services, and transfer payments.
Sales of assets are not included in the current account.

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Description

This quiz covers essential topics related to the Indian economy, including the role of SEBI, cash reserve ratio, trade barriers, fiscal policy tools, and money supply measures. Test your knowledge on important economic concepts like stagflation and national income calculation in India.