Prelims Objective Practices Questions
( I.) Consider the following statements regarding the financial stability report (FSR):
1. It is released biannually by Reserve Bank of India.
2. It is approved by sub-committee of Financial Stability and Development Council (FSDC) before it is
published.
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
(II.) Which of the following is/are the approache (s) to study of human development?
1. Income approach
2. Welfare approach
3. Sustainability approach
Select the correct answer using the codes given below:-
A.) 1 only
B.) 1 and 2 only
C.) 2 and 3 only
D.) 1, 2 and 3
(III.) Arrange the following “core industries” in the ascending order of their weight in Index of Industrial Production (IIP):-
1. Coal 2. Cement
3. Steel 4. Electricity
Select the correct answer using the code given below:-
A.) 2-1-4-3
B.) 2-1-3-4
C.) 1-2-4-3
D.) 1-2-3-4
Note:- The Index of Eight Core Industries measures the performance of eight core industries i.e., Coal, Crude Oil, Natural Gas, Refinery Products, Fertilizers, Steel, Cement and Electricity. The industries included in the Index of Eight Core Industries comprise 40.27 per cent weight in the Index of Industrial Production (IIP).
UPSC Mains Question :- Should a brand endorser be held responsible for the Product they are promoting?. Discuss in the context of Consumer protection act of India.
Prelims Specific Facts
1.) Govt. keeps small savings interest rates unchanged.
- Small Savings Schemes are a set of savings instruments managed by the central government with an aim to encourage citizens to save regularly irrespective of their age. They are popular as they not only provide returns that are generally higher than bank fixed deposits but also come with a sovereign guarantee and tax benefits.
- The schemes can be grouped under three heads –
1. Post office deposits, savings certificates and social security schemes.
2. Under Post Office Deposits we have the savings deposit, recurring deposit and time deposits with
1, 2, 3 and 5 year maturities and the monthly income account.
3. Under Savings Certificates, we have the National Savings Certificate and the Kisan Vikas Patra. - The National Savings Certificate pays interest at a rate of 6.8% per annum upon maturity after 5 years. The interest that is earned is reinvested into the scheme every year automatically. The NSC also qualifies for tax saving under Section 80C of the income tax act.
- In the third head of social security schemes, there is Public Provident Fund, Sukanya Samriddhi Account and Senior Citizens Savings Scheme.
- The Sukanya Samriddhi Account was launched in 2015 under the Beti Bachao Beti Padhao campaign exclusively for a girl child. The account can be opened in the name of a girl child below the age of 10 years. The scheme guarantees a return of 7.6% per annum and is eligible for tax benefit under Section 80 C of the Income Tax Act. The tenure of the deposit is 21 years from the date of opening of the account and a maximum of Rs 1.5 lakh can be invested in a year.
2.) ‘Alternatives to single-use plastic costlier’
- A day ahead of the ban on 19 single-use plastic (SUP) items, many parts of the city saw wide use of such products. Several eateries using these items said the ban will increase their expenditure as the alternatives are costlier and not economically viable for them.
- The 19 banned items include plastic cups, spoons, froks, knives, straws and plates, among other things.
3.) Modified PSLV places three foreign satellites into orbit
- On a hot summer evening accentuated by clear blue skies, the Indian Space Research Organisation’s (ISRO) workhorse launch vehicle on its 55th mission, the PSLV-C53.
- Injected three Singaporean satellites into their intended orbits in the second dedicated mission for the commercial arm of ISRO, New Space India Limited (NSIL).
- The mission also served an additional purpose for ISRO, which decided to use the fourth stage, the PS4, as a stationary platform in orbit to conduct scientific experiments.
- The PSLV Orbital Experimental module (POEM) is going to be functional after this [placing of satellites into orbit] taking over the control of the primary mission computer to another computer.
- The fourth stage can be used in missions where the load is light, like on the PSLV-C53.
4.) It is vital to protect Indian Ocean Region
- “In the national security discourse, maritime security has its own specific emphasis,” Mr. Doval said.
- “We are destined for greater things. India’s time will come. We, as a nation have to be strong. Coastal and maritime security will play an important role in this,” he said.
- He said, “Maritime borders cannot be fenced. We cannot have the concept of zero per cent tolerance for intrusion. So we need technology and other ways of countering it.”
5.) Jackson takes oath as first Black woman SC justice
- The U.S. made history on Thursday as Ketanji Brown Jackson was sworn in as the first Black woman to serve in the Supreme Court.
6.) Banks have capital to buffer any shock
- The Reserve Bank of India said in its biannual Financial Stability Report (FSR) released on Thursday.
- Given the global volatility and spillover risks to the Indian economy, Indis’s financial system was well capitalised.
- The Capital to risks weighted assets ratio (CRAR) rising to a new high of 16.7%, while their gross non-performing assets (GNPA) ratio slipped to a six year low of 5.9% and net non-performing asses (NNPA) ratio fell to 1.7% in March, 2022.
CRAR also known as Capital Adequacy Ratio (CAR) is the ratio of a bank’s capital to its risk. CRAR is decided by central banks and bank regulators to prevent commercial banks from taking excess leverage and becoming insolvent in the process.
The Basel III norms stipulated a capital to risk-weighted assets of 8%. In India, scheduled commercial banks are required to maintain a CAR of 9% while Indian public sector banks are emphasized to maintain a CAR of 12% as per RBI norms. It is arrived at by dividing the capital of the bank with aggregated risk-weighted assets for credit risk, market risk, and operational risk.
RBI tracks CRAR of a bank to ensure that the bank can absorb a reasonable amount of loss and complies with statutory Capital requirements.
The higher the CRAR of a bank the better capitalized it is. A Provisioning Coverage Ratio or PCR is the percentage of funds that a bank sets aside for losses due to bad debts. A high PCR can be beneficial to banks to buffer themselves against losses if the NPAs start increasing faster.
Explainer of the day
1.) Should endorsers be held responsible for claims in advertising?
- The Central Consumer Protection Authority (CCPA) notified guidelines for ‘Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022’. The guidelines, brought in with immediate effect, are applicable to all forms of advertisements. While the Consumer Protection Act of 2019 does have a provision on misleading advertisements, the CCPA can impose a penalty of up to Rs.10 lakh on manufacturers, advertisers and endorsers for misleading advertisements and a penalty of up to Rs.50 lakh for subsequent contraventions. It can also prohibit the endorser of a misleading advertisement from making any endorsement for up to one year; for subsequent contravention, prohibition can extend up to three years.
- When a celebrity comes in, he/she brings in the trust or credibility that is needed. But often the endorsement is also for the wrong reasons, as there is nothing new to say. In mature categories, which have high penetration, established brands that have little to differentiate [among them] and have almost reached a party stage, celebrities are used as identifiers. Sometimes it’s lazy marketing. When you don’t have an idea, you just take a face, sit back and believe that this is going to do the job.
- Endorsers are service providers . They do have responsibilities given the kind of impact they have no the audience. But at the end of the day, it’s not solely on them. They wouldn’t have the technical knowledge to verify the products.
- This will increase instances where brand endorsers may need to take some technical advice, they may need to avail of services like those of the ASCI, which provide a team of dedicated technical experts to verify whether the endorsements are substantiated or not with these guidelines there will be an increase in transparency and more responsible advertising.
- These guidelines are good, but in the real world it is going to make only so much of a difference because the penalty on the brand ambassadors is so, it doesn’t really matter to them.
- The Celebrities get away easily in case of a misleading ad with a public apology. So, a Rs.10 lakh penalty is nothing if they had a deal of Rs.4 crore.
- Section 21 (power of Centre Authority to issue directions and penalties against false or misleading advertisements) of the Act states no endorser will be liable to a penalty if they have exercised due diligence to verify the veracity of the claims made in the advertisement regarding the product or service being endorsed by them. with the guidelines, they obliged to do their due diligence, and to make the disclosure of their new material connection with the brand. Now, it’s come as a statutory obligation. Whether these guidelines were required to be there or not is questionable. In my view, the ASCI guidelines were already in place, may be additional onus has been put now. It will have to be seen whether there is any reduction in misleading advertisements or not, following this new set of guidelines.
2.) The free fall of the rupee
- The Indian rupee hit an all-time low against the U.S. dollar, weakening past the 79 rupees to a dollar mark and selling as low as 79.05 against the dollar on Wednesday.
- India’s forex reserves have also dropped below $600 billion, plunging by more than $50 billion since September 3, 2021, when forex reserves stood at an all-time high of $642 billion. The drop in India’s forex reserves is believed to be largely due to steps taken by the Reserve Bank of India to support the rupee. RBI officials, however, have noted that the drop in forex reserves is due to a fall in the dollar value of assets held as reserves by the RBI. For instance, if a portion of the reserves are in euros and the euro depreciates against the dollar, this would cause a drop in the value of forex reserves.
- The aim of the RBI’s policy is to allow the rupee to find its natural value in the market but without undue volatility or causing unnecessary panic among investors.
- By thus selling dollars in the open market in exchange for rupees, the RBI can improve demand for the rupee and cushion its fall.
- What determines the rupee’s value?
The value of any currency is determined by demand for the currency as well as its supply. When the supply of a currency increases, its value drops. On the other hand, when the demand for a currency increases, its value rises. In the wider economy, central banks determine the supply of currencies, while the demand for currencies depends on the amount of goods and services produced in the economy.
In the forex market, the supply of rupees is determined by the demand for imports and various foreign assets. So, if there is high 6 demand to import oil, it can lead to an increase in the supply of rupees in the forex market and cause the rupee’s value to drop.
So, for instance, when there is great enthusiasm among foreign investors to invest in India, it can lead to an increase in the supply of dollars in the forex market which in turn causes the rupee’s value to rise against the dollar. What is causing the rupee to lose value against the dollar?
Since March this year, the U.S. Federal Reserve has been raising its benchmark interest rate causing investors seeking higher returns to pull capital away from emerging markets such as India and back into the U.S. This, in turn, has put pressure on emerging market currencies which have depreciated significantly against the U.S. dollar so far this year.- Moreover, India’s current account deficit, which measures the gap between the value of imports and exports of goods and services, is expected to hit a 10-year high of 3.3% of gross domestic product in the current financial year. This means that India’s import demand amid rising global oil prices is likely to negatively affect the rupee unless foreign investors pour sufficient capital into the country to fund the deficit.
- The rupee, it should also be noted, has consistently lost value against the U.S. dollar for several decades now. A major reason for this has been consistently higher domestic price inflation in India. Higher inflation in India suggests that the RBI has been creating rupees at a faster rate than the U.S. Federal Reserve has been creating dollars.
