IASbaba Daily Prelims Quiz
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The Current Affairs questions are based on sources like ‘The Hindu’, ‘Indian Express’ and ‘PIB’, which are very important sources for UPSC Prelims Exam. The questions are focused on both the concepts and facts. The topics covered here are generally different from what is being covered under ‘Daily Current Affairs/Daily News Analysis (DNA) and Daily Static Quiz’ to avoid duplication. The questions would be published from Monday to Saturday before 2 PM. One should not spend more than 10 minutes on this initiative.
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Question 1 of 5
1. Question
While being cautious of inflation, the RBI has recently decided to continue the accommodative stance in its latest monetary policy to support growth. Accommodative stance means –
Correct
Solution (a)
RBI’s various policy stances with regard to policy rates
Accommodative Stance
- Accommodative stance means RBI may reduce the policy rates to increase the money supply in the economy.
- Under this stance, policy rates normally decrease.
- Usually, this policy is adopted when there is slowdown in the economy.
Neutral stance
- Neutral stance means the RBI would have the flexibility to either increase or decrease the policy rates by taking into account the macroeconomic conditions.
- Under this stance, key policy rates would move in either direction.
- Usually, this policy is adopted when the inflation rate is stable.
Calibrated Tightening stance
- Calibrated Tightening stance means the RBI would either keep the rates constant or increase the rates.
- Under this stance, key policy rates either remain unchanged or increase. Decrease in policy rates is ruled out.
- Usually, this policy is adopted when there are concerns of higher rate of inflation.
Article reference: Keep the wheels of economic recovery turning
Incorrect
Solution (a)
RBI’s various policy stances with regard to policy rates
Accommodative Stance
- Accommodative stance means RBI may reduce the policy rates to increase the money supply in the economy.
- Under this stance, policy rates normally decrease.
- Usually, this policy is adopted when there is slowdown in the economy.
Neutral stance
- Neutral stance means the RBI would have the flexibility to either increase or decrease the policy rates by taking into account the macroeconomic conditions.
- Under this stance, key policy rates would move in either direction.
- Usually, this policy is adopted when the inflation rate is stable.
Calibrated Tightening stance
- Calibrated Tightening stance means the RBI would either keep the rates constant or increase the rates.
- Under this stance, key policy rates either remain unchanged or increase. Decrease in policy rates is ruled out.
- Usually, this policy is adopted when there are concerns of higher rate of inflation.
Article reference: Keep the wheels of economic recovery turning
-
Question 2 of 5
2. Question
During previous monetary policy, RBI introduced a tool called long-term repo operation (LTRO). Which of the following is not true about LTRO?
Correct
Solution (d)
Basic information:
The LTRO is a tool under which the RBI provides longer term (one- to three-year) loans to banks at the prevailing repo rate. As banks get long-term funds at lower rates, their cost of funds falls. In turn, they reduce interest rates for borrowers. LTRO helped RBI ensure that banks reduce their marginal cost of funds-based lending rate, without reducing policy rates.
LTRO also showed the market that RBI will not only rely on revising repo rates and conducting open market operations for its monetary policy, but also use new tools to achieve its intended objectives.
LTRO operations are also intended to prevent short-term interest rates in the market from drifting a long way away from the policy rate (i.e. repo rate)
The LTRO will also help bring down the yields for shorter-term securities (in the 1-3-year tenor) in the bond market.
Article reference: Keep the wheels of economic recovery turning
Incorrect
Solution (d)
Basic information:
The LTRO is a tool under which the RBI provides longer term (one- to three-year) loans to banks at the prevailing repo rate. As banks get long-term funds at lower rates, their cost of funds falls. In turn, they reduce interest rates for borrowers. LTRO helped RBI ensure that banks reduce their marginal cost of funds-based lending rate, without reducing policy rates.
LTRO also showed the market that RBI will not only rely on revising repo rates and conducting open market operations for its monetary policy, but also use new tools to achieve its intended objectives.
LTRO operations are also intended to prevent short-term interest rates in the market from drifting a long way away from the policy rate (i.e. repo rate)
The LTRO will also help bring down the yields for shorter-term securities (in the 1-3-year tenor) in the bond market.
Article reference: Keep the wheels of economic recovery turning
-
Question 3 of 5
3. Question
Under the Targeted Long-Term Repo Operations (TLTRO), banks can invest in specific sectors through which of the following debt instruments to push the credit flow in the economy?
- Corporate bonds
- Commercial papers
- Non-convertible debentures
Choose correct answer:
Correct
Solution (d)
Basic information:
LTRO lets banks borrow one to three-year funds from the central bank at the repo rate, by providing government securities with similar or higher tenure as collateral.
Targeted Long-Term Repo Operations (TLTRO), banks can invest in specific sectors through debt instruments (corporate bonds, commercial papers, and non-convertible debentures (NCDs)) to push the credit flow in the economy.
It is called ‘Targeted’ LTRO as in this case, the central bank wants banks opting for funds under this option to be specifically invested in investment-grade corporate debt.
This helps banks get funds for a longer duration as compared to the short-term (up to 28 days) liquidity provided by the RBI through other tools such as liquidity adjustment facility (LAF) and marginal standing facility (MSF).
Article reference: Keep the wheels of economic recovery turning
Incorrect
Solution (d)
Basic information:
LTRO lets banks borrow one to three-year funds from the central bank at the repo rate, by providing government securities with similar or higher tenure as collateral.
Targeted Long-Term Repo Operations (TLTRO), banks can invest in specific sectors through debt instruments (corporate bonds, commercial papers, and non-convertible debentures (NCDs)) to push the credit flow in the economy.
It is called ‘Targeted’ LTRO as in this case, the central bank wants banks opting for funds under this option to be specifically invested in investment-grade corporate debt.
This helps banks get funds for a longer duration as compared to the short-term (up to 28 days) liquidity provided by the RBI through other tools such as liquidity adjustment facility (LAF) and marginal standing facility (MSF).
Article reference: Keep the wheels of economic recovery turning
-
Question 4 of 5
4. Question
Consider the following statements:
- India’s R&D investment in science and technology is less than BRIC nations.
- India’s gross expenditure on R&D (GERD) as a percentage of GDP stood below 0.5% in 2020.
Which of the statements given above is/are correct?
Correct
Solution (a)
India’s R&D investment in science and technology continue to hover between 0.5% and 0.6% of the GDP. Raising it to 2% of the GDP has been a national goal for a while. Despite strong recommendations in the past by several scientific bodies and leading scientists and policymakers, we are still well short of that goal.
However, India’s gross expenditure on R&D (GERD) has been consistently increasing over the years. India’s GERD as a percentage of GDP stood at 0.86% in 2020.
Gross expenditure on R&D as percentage share of the Indian GDP is far lower compared to Israel, South Korea, Japan, Germany, USA, France, UK, and Canada.
India’s spending is lower than that of BRIC nations. China spends 2.1 per cent, Brazil 1.3 per cent while Russia spends a bit over 1 per cent.
Article reference: Emphasising self-reliance in science
Incorrect
Solution (a)
India’s R&D investment in science and technology continue to hover between 0.5% and 0.6% of the GDP. Raising it to 2% of the GDP has been a national goal for a while. Despite strong recommendations in the past by several scientific bodies and leading scientists and policymakers, we are still well short of that goal.
However, India’s gross expenditure on R&D (GERD) has been consistently increasing over the years. India’s GERD as a percentage of GDP stood at 0.86% in 2020.
Gross expenditure on R&D as percentage share of the Indian GDP is far lower compared to Israel, South Korea, Japan, Germany, USA, France, UK, and Canada.
India’s spending is lower than that of BRIC nations. China spends 2.1 per cent, Brazil 1.3 per cent while Russia spends a bit over 1 per cent.
Article reference: Emphasising self-reliance in science
-
Question 5 of 5
5. Question
Consider the following statements with reference to International Energy Agency:
- It is a Paris-based autonomous intergovernmental organisation established in the framework of the Organisation for Economic Co-operation and Development (OECD).
- India has signed Strategic Partnership Agreement with the IEA.
Which of the statements given above is/are correct?
Correct
Solution (c)
The International Energy Agency is a Paris-based autonomous intergovernmental organisation established in the framework of the Organisation for Economic Co-operation and Development (OECD) in 1974 in the wake of the 1973 oil crisis. The IEA was initially dedicated to responding to physical disruptions in the supply of oil, as well as serving as an information source on statistics about the international oil market and other energy sectors.
The Framework for Strategic Partnership between the International Energy Agency (IEA) members and the Government of India was signed on 27th January, 2021 to strengthen mutual trust and cooperation & enhance global energy security, stability and sustainability.This partnership will lead to an extensive exchange of knowledge and would be a stepping stone towards India becoming a full member of the IEA.
Incorrect
Solution (c)
The International Energy Agency is a Paris-based autonomous intergovernmental organisation established in the framework of the Organisation for Economic Co-operation and Development (OECD) in 1974 in the wake of the 1973 oil crisis. The IEA was initially dedicated to responding to physical disruptions in the supply of oil, as well as serving as an information source on statistics about the international oil market and other energy sectors.
The Framework for Strategic Partnership between the International Energy Agency (IEA) members and the Government of India was signed on 27th January, 2021 to strengthen mutual trust and cooperation & enhance global energy security, stability and sustainability.This partnership will lead to an extensive exchange of knowledge and would be a stepping stone towards India becoming a full member of the IEA.
