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Economy & Current Affairs Most Important Objective Questions for UPSC 2020 #29

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Questions & Answers

1. Consider the following statements concerning Sufism in India

1)The Sufi Movement outwardly rejected the religion and emphasized love and devotion to God and compassion towards all fellow human beings
2)Nizamuddin Auliya is a sufi saint belonging to the Chisti order.
Select the correct statements

a) 1 Only
b) 2 Only
c) Both
d) None

Solution: (c)

  • The core concept of Sufi Movement is Darikh-i-Duniya / Wahad-ul-wahjud, meaning “Universal Brotherhood”.
  • It outwardly rejected the religion and emphasized love and devotion to God and compassion towards all fellow human beings.
  • The Sufis were organized in 12 orders or Silsilahs.
    • A Silsilah was generally led by a prominent mystic who lived in a Khanqah or hospice along with his disciples.
    • The Sufi orders are broadly divided into two: Ba-shara – Those who followed the Islamic Law and Be-shara – Those who were not bound by the Islamic Law.
    • The Sufi saints made themselves popular by adopting musical recitations called “Sama”, to create a mood of nearness to God.
    • Qawwali is the form of sufi devotional music popular in South Asia and ghazal is a form of Qawwali.
  • Nizamuddin Auliya is a sufi saint belonging to the Chisti order.
  • Nizamuddin Auliya’s predecessors were Qutbuddin Bakhthiyar Kaki, Khwaja Moinuddin Chisti. His notable disciple was Amir Khusrow.
  • The Chisti order is the first of the four main Sufi orders – Chisti, Qadiriyya, Suhrawardiyya and Naqshbandi order.

2. Consider the following statements with respect to ‘National Pension Scheme (NPS)’

1)Any Indian citizen, resident or non-resident and OCIs are eligible to join NPS till the age of 65 years.
2)Contributions made towards the NPS are eligible for an additional tax deduction up to ₹50,000, which is over and above the ₹1,50,000 limit of deduction available under sec 80CCD (1).
Select the correct statements

a) 1 Only
b) 2 Only
c) Both
d) None

Solution (c)

  • Pension Fund Regulatory and Development Authority (PFRDA) has allowed overseas citizens to invest in National Pension Scheme (NPS), a move that will enable such citizens take advantage of the social security scheme and associated income tax benefits.
  • With this, Overseas Citizens of India (OCI)—people of Indian origin holding citizenship of other countries—will be at par with non-resident Indians (NRIs) as far as eligibility for applying for NPS is concerned.
  • The NPS is a government run pension and investment scheme aimed at providing old age security through safe and regulated market-based return.
  • The scheme is regulated by PFRDA. With the latest addition, any Indian citizen, resident or non-resident and OCIs are eligible to join NPS till the age of 65 years.

3. ‘Chavang Kut’ festival is associated with which of the following states?

a) Manipur
b) Nagaland
c) West Bengal
d) Goa

Solution (a)

Kut festival or Chavang Kut is one of the most celebrated festivals of Manipur. Celebrated by the tribes of Kuki-Chin-Mizo groups of Manipur, Chavang Kut is a festival which is observed with so much zeal and joyousness.

4. ‘Sukinda Valley’ is known for reserves of

a) Chromite
b) Bauxite
c) Diamond
d) Tungsten

Solution (a)

Sukinda Valley has 90% of India’s chromite reserves.

5. Consider the following statements regarding Sovereign Bonds.

1)A sovereign bond is a specific debt instrument issued by the government in both foreign and domestic currency.
2)The Yield of the sovereign bond is the interest rate that the government pays on issuing bonds.
3)The central banks also control the supply of money within the economy by the use of these bonds.
Which of the above statements is/are correct?

a) 1, 2
b) 1, 3
c) 2, 3
d) 1, 2, 3

Solution: d)

  • A sovereign bond is a specific debt instrument issued by the government.
  • They can be denominated in both foreign and domestic currency.
  • Just like other bonds, these also promise to pay the buyer a certain amount of interest for a stipulated number of years and repay the face value on maturity.
  • They also have a rating associated with them which essentially speaks of their credit worthiness.
  • The Yield of the sovereign bond is the interest rate that the government pays on issuing bonds.
  • Countries with volatile economies and high inflation rates have to issue higher interest returns on their bonds compared to more stable ones.
  • The Yield of the bonds are dependent on primarily 3 factors:
    • Creditworthiness – The issuing countries’ perceived ability to repay their debts. This can be obtained from rating agencies.
    •  Country Risk – External/Internal factors like unrest and wars tend to jeopardize a country’s ability to pay off their debts.
    •  Exchange Rates– In cases where bonds are issued in foreign currency, fluctuations in exchange rate may lead to increased pay out pressure on the issuing government.
  • The central banks also control the supply of money within the economy by the use of these bonds.
    • When the government is in expansionist mode, the central bank will back debt in exchange for cash to raise capital for the expenditure.
    • In case it is in the contracting mode, the banks hope to slow growth by selling more securities to take out liquidity from the system.

6. Consider the following statements about International Finance Corporation (IFC).

1)It is a sister organization of the IMF.
2)It is the largest global development institution focused exclusively on the private sector in developing countries.
3)Its goals are to increase sustainable agriculture opportunities, improve healthcare and education.
Which of the above statements is/are correct?

a) 1, 2
b) 1, 3
c) 2, 3
d) 1, 2, 3

Solution: c)

  • IFC—a sister organization of the World Bank and member of the World Bank Group—is the largest global development institution focused exclusively on the private sector in developing countries.
  • The Bank Group has set two goals for the world to achieve by 2030: end extreme poverty and promote shared prosperity in every country.
  • Functions:
    • It offers an array of debt and equity financing services and helps companies face their risk exposures, while refraining from participating in a management capacity.
    • The corporation also offers advice to companies on making decisions, evaluating their impact on the environment and society, and being responsible.
    • It advises governments on building infrastructure and partnerships to further support private sector development.
  • Since 2009, the IFC has focused on a set of development goals that its projects are expected to target.
    • Its goals are to increase sustainable agriculture opportunities, improve healthcare and education, increase access to financing for microfinance and business clients, advance infrastructure, help small businesses grow revenues, and invest in climate health.

7. Which of the following are the possible implications when a country adopts negative rate policy?

1)Increases borrowing costs.
2)Help weaken a country’s currency rate by making it a less attractive investment than that of other currencies.
3)Boosts Inflation
Select the correct answer code:

a) 1, 2
b) 2 only
c) 2, 3
d) 1, 3

Solution: c)

  • Under a negative rate policy, financial institutions are required to pay interest for parking excess reserves with the central bank.
  • That way, central banks penalise financial institutions for holding on to cash in hope of prompting them to boost lending.

8. Consider the following statements about National Payments Corporation of India (NPCI).

1)It is a “Not for Profit” Company under the provisions of Companies Act 2013.
2)It is set up to provide infrastructure to the entire Banking system in India for physical as well as electronic payment and settlement systems.
3)National Financial Switch (NFS) and Cheque Truncation System (CTS) are the flagship products of NPCI.
Which of the above statements is/are correct?

a) 1, 2
b) 2, 3
c) 1, 3
d) 1, 2, 3

Solution: d)

  • National Payments Corporation of India (NPCI), an umbrella organisation for operating retail payments and settlement systems in India, is an initiative of Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007.
  • It has been incorporated as a “Not for Profit” Company under the provisions of Section 25 of Companies Act 1956 (now Section 8 of Companies Act 2013), with an intention to provide infrastructure to the entire Banking system in India for physical as well as electronic payment and settlement systems.
  • National Financial Switch (NFS) and Cheque Truncation System (CTS) continues to be the flagship products of NPCI.
  •  The other products include Unified Payments Interface (UPI),Bharat Bill Payment System (BBPS), RuPay Credit Card, National Common Mobility Card (NCMC) and National Electronic Toll Collection (NETC).
  • With these products the aim is to transform India into a ‘less-cash’ society by touching every Indian with one or other payment services.
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