Economics – GK Questions

Answer: 2011-12

The Office of the Economic Adviser (OEA) compiles the WPI, which tracks price changes in the wholesale market for a basket of 697 items. The base year was updated from 2004-05 to 2011-12 to align it with the base year of the Consumer Price Index (CPI) and GDP series.

Answer: Simultaneous inflation in some sectors and deflation in others

Skewflation describes a scenario where prices rise persistently in specific sectors (like food or energy) while remaining stable or even falling in others. This makes monetary policy challenging, as raising interest rates to curb sector-specific inflation might hurt the broader, non-inflating economy.

Answer: base

The base effect is a statistical artifact that occurs when comparing year-on-year inflation data. If prices spiked abnormally in the previous year, the current year's inflation will mathematically look lower even if absolute prices are still rising steadily.

Answer: True

Headline inflation represents the raw, overall inflation rate in the economy, which can be skewed by temporary supply shocks in food or energy. Central banks often focus on core inflation (CPI excluding food and fuel) to make long-term monetary policy decisions, as it reflects sustained demand pressures.

Answer: Transforming India

NITI Aayog stands for National Institution for Transforming India. It was established in 2015 to replace the Planning Commission, acting as the premier policy think tank of the Government of India and fostering cooperative federalism through a bottom-up approach.

Answer: 41

The 15th Finance Commission, chaired by N.K. Singh, recommended a 41% share for the states. This is 1% lower than the 42% recommended by the 14th FC, with the adjustment made to account for the creation of the new Union Territories of Jammu & Kashmir and Ladakh.

Answer: False

The Finance Commission is an advisory constitutional body under Article 280. While its recommendations carry immense weight and are generally accepted by the government, they are technically advisory in nature and not legally binding on the Parliament or the Executive.

Answer: 2011-12

Introduced in 2011-12, the Effective Revenue Deficit excludes the revenue expenditure that goes towards the creation of durable assets (like rural roads or housing). It provides a more accurate picture of the government's unproductive borrowing, which is used merely to finance current consumption.

Answer: 279A

Article 279A empowers the President to constitute the GST Council, a federal forum comprising the Union Finance Minister (as Chairperson) and state finance ministers. It ensures cooperative federalism by requiring a 3/4th majority for decisions, balancing central and state interests.

Answer: Both B and C

A cess is earmarked for a specific developmental purpose (like education or health) and ceases when the purpose is fulfilled. A surcharge is an additional tax on the existing tax of high-income earners. Crucially, the proceeds of both cess and surcharge are retained exclusively by the Centre and are not shared with states via the Finance Commission.

Answer: 112

Article 112 forms the constitutional basis of the Union Budget, requiring the government to present a detailed statement of its estimated receipts and expenditures for the upcoming financial year. It distinguishes between revenue and capital accounts to ensure fiscal transparency.

Answer: Salary and allowances of the President of India

Charged expenditures, which include the salaries of the President, Supreme Court/High Court judges, and the CAG, as well as debt servicing, are automatically met from the Consolidated Fund. They can be discussed by Parliament but cannot be voted upon to ensure the independence of constitutional authorities.

Answer: capital

The capital market facilitates the flow of long-term savings into productive investments, comprising both the primary market (new issues) and the secondary market (stock exchanges). It is essential for funding corporate expansion and infrastructure development.

Answer: False

NBFCs primarily engage in lending and investment activities but cannot accept demand deposits from the public. Furthermore, they are not part of the payment and settlement system and cannot issue cheques drawn on themselves, distinguishing them fundamentally from commercial banks.

Answer: PFRDA

The Pension Fund Regulatory and Development Authority (PFRDA) was established by the Government of India in 2003 and later given statutory status in 2013. Its mandate is to regulate pension funds, protect the interests of subscribers, and promote old-age income security.

Answer: 1992

Although SEBI was initially set up as a non-statutory body in 1988, it lacked enforcement teeth. It was granted statutory status and comprehensive regulatory powers over the securities market via the SEBI Act, which was passed by Parliament in 1992.

Answer: RBI on behalf of the Central Government

T-bills are zero-coupon, short-term debt instruments issued by the Reserve Bank of India on behalf of the Government of India to manage short-term liquidity mismatches. They are currently issued in tenures of 91 days, 182 days, and 364 days.

Answer: banks

Unlike Commercial Papers issued by corporates, Certificates of Deposit are negotiable term deposits issued specifically by commercial banks and select financial institutions. They are issued at a discount to face value and are subject to the RBI's monetary policy directives.

Answer: False

Commercial Papers are issued by large, highly-rated corporate entities, primary dealers, and financial institutions to meet their short-term working capital needs. The government issues Treasury Bills (T-bills), not CPs, for its short-term borrowing requirements.

Answer: 1 day

The call money market deals in extremely short-term, uncollateralized loans between banks to meet their immediate reserve requirements. Funds borrowed for exactly one day are called 'call money', whereas funds borrowed for 2 to 14 days are termed 'notice money'.