31 AUGUST CURRENT AFFAIRS (MCQ)

Q1. With reference to Negative Yield Bonds recently seen in the news, consider the following
statements:

1. These bonds are debt instruments that offer to pay the investor a maturity amounts higher than
   the purchase price of the bond.
2. These bonds are issued by the central bank of a country.
   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
   Solution: b)
   Explanation:
   Statement 2 is correct.
   Negative-yield bonds are debt instruments that offer to pay the investor a maturity amount lower
   than the purchase price of the bond. These are generally issued by central banks or governments,
   and investors pay interest to the borrower to keep their money with them.
   Negative-yield bonds attract investments during times of stress and uncertainty as investors look to
   protect their capital from significant erosion. At a time when the world is battling the Covid-19
   pandemic and interest rates in developed markets across Europe are much lower, investors are
   looking for relatively better-yielding debt instruments to safeguard their interests.
   Q2. Consider the following statements with regard to national income estimation.:
3. The Gross Domestic Product (GDP) data looks at the demand side of the national income,
   the Gross Value Added (GVA) data looks at the supply side
4. If the government earned more taxes than what it spent on subsidies, GDP will be lesser than
   GVA.
   Which of the above statements is/are incorrect?
   a) 1 only
   b) 2 only
   c) Both 1 and 2
   d) Neither 1 nor 2
   Solution: b)
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   Explanation:
   Gross value added, is defined as the value of output minus the value of intermediate consumption
   and is a measure of the contribution to GDP made by an individual producer, industry or sector.
    At its simplest it gives the rupee value of goods and services produced in the economy
   after deducting the cost of inputs and raw materials used.
   GDP = GVA + Taxes earned by the government — Subsidies provided by the government
    The better variable to track is GVA or the Gross Value Added by economic agents employed
   in different sectors of the economy.
    The GVA data shows which specific sectors of the economy are doing well and which are
   struggling to add value.
    The GDP data looks at the demand side of the national income, the GVA data looks at the
   supply side and provides a sense of whether producers in a particular sector are earning
   more money (by “adding value”) than before. 1 is correct.
    If the government earned more taxes than what it spent on subsidies, GDP will be higher
   than GVA. 2 is incorrect.
   o If, on the other hand, the government provided subsidies in excess of its tax
   revenues then the absolute level of GVA would be higher than the absolute level
   of GDP.
   Q3. Consider the following statements with regard to GDP data:
5. In India’s context, demand from private individuals contributes maximum to the total GDP.
6. Goods and services generated by the government account for about 11% of India’s GDP.
   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: c)
   Explanation:
   GDP
    GDP stands for “Gross Domestic Product” and represents the total monetary value of all
   final goods and services produced (and sold on the market) within a country during a
   period of time (typically 1 year).
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    India’s Central Statistic Office under the Ministry of Statistics and Programme
   Implementation (MoSPI), calculates the nation’s gross domestic product (GDP).
    India’s GDP is calculated with two different methods, one based on economic activity (at
   factor cost), and the second on expenditure (at market prices).
   Drivers of GDP
    In any economy, the total demand for goods and services — that is, the GDP — is generated
   from one of the four engines of growth.
    In India’s context, the biggest engine is consumption (C) demand from private individuals.
   This demand typically accounts for 55% to 56% of all GDP. 1 is correct.
    The second-biggest engine is the investment (I) demand generated by private sector
   businesses. This accounts for 32% of all GDP in India.
    The third engine is the demand for goods and services generated by the government
   (G). This demand accounts for 11% of India’s GDP. 2 is correct.
    The fourth engine is the demand created by “Net Exports” (NX). This is arrived at by
   subtracting the demand Indians have for foreign goods (that is, India’s imports) from the
   demand that foreigners have for Indian goods and services (that is, India’s exports).
    Since India typically imports more than it exports, it is the smallest engine of GDP growth;
   often it is negative
   GDP = C + I + G + NX
   Q4. With reference to Oil Palm cultivation, consider the following statements1. India produces Oil Palm far less than it what consumes.
7. India is the largest consumer of Palm Oil in the world.
8. National Edible Oil Mission-Palm Oil aims to increase production of oil by three times to 11 Lakh
   tonnes by 2025.
   Select the correct answer using the code given belowa) 1 only
   b) 2 and 3 only
   c) 1 and 3 only
   d) 1, 2 and 3
   Solution: d)
   Explanation:
   All statements are correct.
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   Recently, the Prime Minister has announced a new national initiative on palm oil production to help
   increase farm incomes.
    The scheme, called National Edible Oil Mission-Oil Palm (NMEO-OP), for self-reliance in
   edible oil involves investment of over Rs. 11,000 crore (over a five year period).
   Key Points
    Aims:
   o To harness domestic edible oil prices that are dictated by expensive palm oil
   imports.
   o To raise the domestic production of palm oil by three times to 11 lakh MT by 2025-
   26
    This will involve raising the area under oil palm cultivation to 10 lakh
   hectares by 2025-26 and 16.7 lakh hectares by 2029-30.
    Features:
   o The special emphasis of the scheme will be in India’s north-eastern states and the
   Andaman and Nicobar Islands due to the conducive weather conditions in the
   regions.
   o Under the scheme, oil palm farmers will be provided financial assistance and will get
   remuneration under a price and viability formula.
    India consumes 10 per cent of the total global production of palm oil, with the
   consumption significantly exceeding domestic production. India produces less than 0.7
   million tonnes of palm oil annually, while it imports around 7.4 million tonnes.
    The demand for palm oil is primarily driven by high consumption as a vegetable oil in food
   and fast-moving consumer goods industry led by its versatility.
    As many as 194.4 million people are still undernourished in India, highlighting the need to
   prioritise food security in the country, according to United Nations Food and Agriculture
   Organization in the State of Food Security and Nutrition in the World report.
   Q5. Consider the following statements:
9. The Pradhan Mantri JI-VAN Yojana aims to boost research and development in the 2G
   Ethanol.
10. In India, the current permissible level of blending is 20% of ethanol with gasoline.
    Which of the statements given above is/are correct?
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    a) 1 only
    b) 2 only
    c) Both 1 and 2
    d) Neither 1 nor 2
    Solution: a)
    Explanation:
    Statement 2 is not correct.
    Ethanol Blending Programme (EBP) aims at blending ethanol with petrol, thereby bringing it under
    the category of biofuels and saving millions of dollars by cutting fuel imports and decreasing carbon
    emissions.
    E20 Fuel: Earlier, the Indian government had invited public comments for introducing adoption of
    E20 fuel (a blend of 20% ethanol with gasoline).
    The target is to achieve 20% blending of ethanol by 2023. The current permissible level of blending
    is 10% of ethanol, though India reached only 5.6% of blending in 2019. H
    Pradhan Mantri JI-VAN Yojana, 2019: The objective of the scheme is to create an ecosystem for
    setting up commercial projects and to boost research and development in the 2G Ethanol sector.
    Hence, statement 1 is correct.
    National Biofuel Policy 2018: The Policy categorises biofuels as “Basic Biofuels” viz. First Generation
    (1G) bioethanol & biodiesel and “Advanced Biofuels” – Second Generation (2G) ethanol, Municipal
    Solid Waste (MSW) to drop-in fuels, Third Generation (3G) biofuels, bio-CNG etc. to enable
    extension of appropriate financial and fiscal incentives under each category.
    Q6. With respect to International Fund for Agricultural Development, consider the following
    statements1. It is a specialized arm of World Bank which focusses on rural poverty reduction.
11. This organization is an outcome of World Food Conference 1974.
    Which of the above-given statements are correct?
    a) 1 only
    b) 2 only
    c) Both 1 and 2
    d) Neither 1 nor 2
    Solution: b)
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    Explanation:
    Statement 1 is not correct.
    International Fund for Agricultural Development (IFAD)
     The IFAD is an international financial institution working in the field of poverty eradication
    in the rural areas of developing countries. It is a specialized United Nations agency created
    in 1977 engaged in providing grants and loans with low interest for allied projects.
     The IFAD works with rural people allowing them to enhance their food security, improve
    nutrition and raise their incomes.
     It also helps people to expand their businesses.
     The organization is an outcome of the World Food Conference of 1974.
     It is headquartered in Rome and headed by a President.
     It has 177 member countries.
     It works with marginalized and vulnerable groups such as farmers with small holdings,
    foresters, pastoralists, fishermen and small scale entrepreneurs by giving them disaster
    preparedness, access to weather information, technology transfer and social learning.
     IFAD brings out the Rural Development Report every year.
    Q7. Consider the following statements about Infrastructure Investment Trusts (InvIT)-
12. It is an instrument which works like Mutual Fund.
13. They cannot be listed on stock exchange.
14. They are modified version of REITs (real-estate investment infrastructure).
    Which of the above statements given above is/are correct?
    a) 1 only
    b) 2 and 3 only
    c) 1 and 3 only
    d) 1, 2 and 3
    Solution: c)
    Explanation:
    Statement 2 is not correct.
    What are Infrastructure Investment Trusts (InvIT)?
    It is like a mutual fund, which enables direct investment of small amounts of money from possible
    individual/institutional investors in infrastructure to earn a small portion of the income as return.
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15. InvITs can be treated as the modified version of REITs designed to suit the specific
    circumstances of the infrastructure sector.
16. They are similar to REIT but invest in infrastructure projects such as roads or highways
    which take some time to generate steady cash flows.
17. It can listed on stock exchange. Like IPO.
    What are Real Estate Investment Trusts (REIT)?
    A REIT is roughly like a mutual fund that invests in real estate although the similarity doesn’t go
    much further.
18. The basic deal on REITs is that you own a share of property, and so an appropriate share
    of the income from it will come to you, after deducting an appropriate share of expenses.
19. Essentially, it’s like a group of people pooling their money together and buying real estate
    except that it’s on a large scale and is regulated.
    Why need InvITs and REITs?
20. Infrastructure and real estate are the two most critical sectors in any developing economy.
21. A well-developed infrastructural set-up propels the overall development of a country.
22. It also facilitates a steady inflow of private and foreign investments, and thereby augments
    the capital base available for the growth of key sectors in an economy, as well as its own
    growth, in a sustained manner.
23. Given the importance of these two sectors in the country, and the paucity of public funds
    available to stimulate their growth, it is imperative that additional channels of financing
    are put in place.
    Q8. With reference to the 15th Finance Commission, consider the following statements:
24. It has recommended 80% of the allocation to RLBs/ Panchayats.
25. Commission identified ‘water supply and sanitation’ as national priority areas, which determines
    the quality of life of people living in rural areas.
26. NITI Aayog India will act as the nodal Department for determining the eligibility of the rural local
    bodies for the ‘15th FC tied grant for water & sanitation’.
    Which of the statements given above is/are correct?
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    a) 1 only
    b) 2 and 3 only
    c) 2 only
    d) 3 only
    Solution: c)
    Explanation:
    Statement 1 and 3 are not correct.
     In all, the 15th Finance Commission recommended Rs. 2,36,805 Crore to RLBs/ PRIs for the
    period 2021-22 to 2025-26.
     Commission also identified ‘water supply and sanitation’ as national priority areas, which
    determines the quality of life of people living in rural areas.
     It has recommended 60% of the allocation to RLBs/ Panchayats i.e. Rs. 1,42, 084 Crore as
    a tied grant to be utilized for a.) supply of drinking water, rainwater harvesting and water
    recycling; and b.) sanitation & maintenance of open-defecation free (ODF) status.
     The Dept. of Drinking Water & Sanitation (DDWS), Ministry of Jal Shakti, Govt of India will
    act as the nodal Department for determining the eligibility of the rural local bodies for the
    ‘15th FC tied grant for water & sanitation’ and recommend release of tied grant for water
    & sanitation, to the Dept. of Expenditure, Ministry of Finance for all States.
    Q9. Which of the following statements are correct about Permafrost?
27. It is a ground which remains frozen for at least two years straight.
28. They are common in higher latitudes.
29. They are not always covered with snow, though ground remains frozen.
    Select the correct answer using the code given belowa) 1 only
    b) 2 and 3 only
    c) 1,2 and 3
    d) None of the above
    Solution: c)
    Explanation:
    All statements are correct.
    Permafrost
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     Permafrost is any ground that remains completely frozen—32°F (0°C) or colder—for at
    least two years straight.
     These permanently frozen grounds are most common in regions with high mountains and
    in Earth’s higher latitudes—near the North and South Poles.
     Permafrost covers large regions of the Earth. Almost a quarter of the land area in the
    Northern Hemisphere has permafrost underneath. Although the ground is frozen,
    permafrost regions are not always covered in snow.
    Q10. Consider the following statements1. RBI transfer surplus money (Receipts minus expenditure) in accordance with RBI Act,1934.
30. Y.H Malegam Committee was constituted to investigate this matter.
    Select the correct answer using the code belowa) 1 only
    b) 2 only
    c) Both 1 and 2
    d) Neither 1 nor 2
    Solution: c)
    Explanation:
    Both statements are correct.
    Surplus Transfer:
    RBI transfers the surplus – that is, the excess of income over expenditure – to the government, in
    accordance with Section 47 (Allocation of Surplus Profits) of the Reserve Bank of India Act, 1934.
    A technical Committee of the RBI Board headed by Y H Malegam (2013), which reviewed the
    adequacy of reserves and surplus distribution policy, recommended a higher transfer to the
    government.
    By and large, with a few exceptions, the quantum of surplus transfer averages around 0.5% of the
    GDP.
    RBI’s Earning:
    Returns earned on its foreign currency assets, which could be in the form of bonds and treasury bills
    of other central banks or top-rated securities, and deposits with other central banks.
    Interest on its holdings of local rupee-denominated government bonds or securities, and while
    lending to banks for very short tenures, such as overnight.
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    Management commission on handling the borrowings of state governments and the central
    government.
    RBI’s Expenditure:
    Printing of currency notes and on staff, besides the commission it gives to banks for undertaking
    transactions on behalf of the government across the country, and to primary dealers, including
    banks, for underwriting some of these borrowings.