Economics – Medium Level – GK Questions

The Planning Commission was a powerful body that could allocate plan funds to various ministries and states, often using this financial leverage to enforce policy compliance. NITI Aayog was deliberately stripped of these financial allocation powers (which now rest with the Finance Ministry) to allow it to focus purely on policy design, strategic thinking, and monitoring without bureaucratic entanglements.

Historically, Finance Commissions used the 1971 census data for population, which penalized states that had successfully controlled their population since then. To address this, the 15th FC used the 2011 census but introduced the 'Demographic Performance' criterion, assigning higher weightage to states with lower fertility rates to ensure they are not financially disadvantaged for their progressive social policies.

When states surrendered their taxation rights to the Centre to form the unified GST market, they feared a loss of fiscal autonomy and revenue. To secure their agreement, the Centre guaranteed a 14% annual growth in their tax revenues for five years (2017-2022), funding this guarantee through a special Compensation Cess levied on luxury, sin, and coal products.

GST is a destination-based consumption tax. When goods move from State A to State B, the Centre collects IGST. However, since the goods are consumed in State B, the Centre retains its share and transfers the remainder to State B (the destination state), ensuring that manufacturing states do not unfairly hoard the tax revenues generated by consuming states.

Article 266(1) forms the bedrock of parliamentary financial control. It explicitly states that no money can be withdrawn from the Consolidated Fund of India except under appropriation made by law. Therefore, the executive cannot spend a single rupee without the prior approval and legislative sanction of the Parliament via an Appropriation Act.

A Vote on Account is a constitutional provision (Article 116) that allows the government to withdraw funds from the Consolidated Fund of India for a limited period (usually two months) to keep essential administrative and developmental machinery running. It only covers the estimated expenditure side, not the new taxation proposals, which are debated in the full budget later.

While Keynes published his revolutionary 'General Theory' in 1936, it was highly conceptual and literary. Hicks and Hansen formalized Keynes's ideas into the IS (Investment-Savings) and LM (Liquidity preference-Money supply) framework, creating the foundational macroeconomic model used to analyze the effects of fiscal and monetary policy on national income and interest rates.

Tier 1 capital represents the highest quality of capital because it is fully available to absorb losses without the bank being required to cease operations. It includes common equity, retained earnings, and certain disclosed reserves. In contrast, Tier 2 capital (supplementary capital like subordinated debt) is less secure and only absorbs losses on a 'gone-concern' (liquidation) basis.

The CCB is an additional layer of high-quality capital (usually 2.5% of risk-weighted assets) that banks must hold during normal economic times. The objective is to create a financial cushion that allows banks to absorb losses during periods of economic or financial stress without breaching their minimum capital requirements or requiring taxpayer bailouts.

The Bretton Woods Conference established the IMF to oversee the fixed exchange rate system and provide short-term balance of payments support, while the IBRD (now part of the World Bank Group) was created to provide long-term capital for the reconstruction of war-torn Europe and subsequent development of poorer nations. The WTO was not created until 1995, replacing the GATT.

Coined by economist John Williamson in 1989, the Washington Consensus represented the dominant neoliberal paradigm of the late 20th century. It advocated for free markets, deregulation, and minimal state intervention. In recent years, it has faced severe criticism for ignoring institutional realities and social safety nets, leading to a shift toward more nuanced, context-specific development strategies.

Launched in July 2020, Udyam Registration replaced the older Udyog Aadhaar system. It is completely free, requires no document uploads (relying instead on PAN and GSTIN integration for automatic data fetching), and provides MSMEs with a permanent, verifiable identity that allows them to easily access priority sector credit, government subsidies, and delayed payment protections.

Gig workers, such as ride-hailing drivers or food delivery partners, operate outside the traditional employer-employee relationship. While this model offers flexibility, it raises significant economic and policy challenges regarding the lack of social security, health insurance, and job stability, prompting recent government initiatives to draft welfare codes specifically for unorganized and gig workers.

Founded in 1919 as part of the League of Nations and later becoming the first specialized agency of the UN, the ILO brings together governments, employers, and workers to set labor standards and formulate policies. It is unique for its tripartite structure and is the global authority on issues like minimum wages, occupational safety, and the eradication of exploitative labor practices.

When the government injects a certain amount of money into the economy (e.g., building a highway), that money becomes income for workers, who then spend a portion of it, creating income for others. The fiscal multiplier quantifies this ripple effect, showing how an initial $1 of government spending can ultimately generate more than $1 in total GDP growth.

Bracket creep occurs in progressive tax systems where tax brackets are not indexed to inflation. As nominal wages rise merely to keep pace with inflation, individuals are pushed into higher marginal tax rates. This stealthily increases government revenue at the expense of the taxpayer's real disposable income, acting as a hidden tax.

The National MPI, modeled after the Global MPI, deliberately moves away from purely income-based metrics. Instead, it assesses deprivations across three equally weighted dimensions: Health (nutrition, child mortality), Education (years of schooling, attendance), and Standard of Living (cooking fuel, sanitation, drinking water, electricity, housing, and assets).

The World Bank scrapped the flagship Ease of Doing Business report following an ethics audit that revealed data manipulation in previous editions. To restore credibility, the Bank launched the 'Business Ready' (B-READY) project, which aims to evaluate the business environment with a more robust, transparent, and balanced methodology that includes labor rights and environmental sustainability.

CBAM is a landmark climate policy that forces importers to buy certificates corresponding to the carbon price they would have paid if the goods were produced under EU carbon pricing rules. It aims to prevent 'carbon leakage'—where EU companies move production to countries with lax climate laws—and forces global trading partners like India to decarbonize their export sectors.

NaBFID was set up as a specialized Development Financial Institution (DFI) with a target to support the National Infrastructure Pipeline. Unlike commercial banks that rely on short-term deposits, NaBFID raises long-term funds from domestic and international capital markets, providing the crucial long-gestation 'patient capital' required for massive, multi-year infrastructure projects.