Daily Quiz #22 UPSC Prelims Marathon – August 27, 2019

Explanation: Foreign portfolio investment (FPI) refers to investing in the financial assets of a foreign country, such as stocks or bonds available on an exchange. This type of investment is at times viewed less favorably than direct investment because portfolio investments can be sold off quickly and are at times seen as short-term attempts to make money, rather than a long-term investment in the economy. Portfolio investment typically has a shorter time frame for investment return than direct investment. As with any equity investment, foreign portfolio investors usually expect to quickly realize a profit on their investments. Unlike direct investment, portfolio investment does not offer control over the business entity in which the investment is made.

Explanation: Animal spirit is a term used by the famous British economist, John Maynard Keynes, to describe how people arrive at financial decisions, including buying and selling securities, in times of economic stress or uncertainty. In Keynes’s 1936 publication, The General Theory of Employment, Interest, and Money, he speaks of animal spirits as the human emotions that affect consumer confidence. Today, animal spirits describe the psychological and emotional factors that drive investors to take action when faced with high levels of volatility in the capital markets. The term comes from the Latin spiritus animalis,which means “the breath that awakens the human mind.”

Explanation: Wholesale Price Index (WPI) measures the average change in the prices of commodities for bulk sale at the level of early stage of transactions. The index basket of the WPI covers commodities falling under the three major groups namely Primary Articles, Fuel and Power and Manufactured products. (The index basket of the present 2011-12 series has a total of 697items including 117 items for Primary Articles, 16 items for Fuel & Power and 564 items for Manufactured Products.) The prices tracked are ex- factory price for manufactured products, mandi price for agricultural commodities and ex-mines prices for minerals. Weights given to each commodity covered in the WPI basket is based on the value of production adjusted for net imports. WPI basket does not cover services.

Explanation: Privatization is the process of transferring an enterprise or industry from the public sector to the private sector.
The public sector is the part of the economic system that is run by government agencies. Privatization may involve either sale of government-held assets or removal of restrictions preventing private individuals and businesses from participating in a given industry.
Privatization is an ongoing trend in many parts of the developed and developing world. Proponents of privatization maintain that the competition in the private sector fosters more efficient practices, which eventually yield better service and products, lower prices and less corruption.

Explanation: The Prime Minister’s Economic Advisory Council has recommended phased dilution of government stake in public-sector banks, from 58 per cent to 51 per cent, and introduction of on-tap licensing of new banks. The council, headed by C Rangarajan, said the stake reduction would help raise the additional capital required to implement the Basel III norms, meant to strengthen the banking system. Assuming no discount to market price, the government will be able to rise more than Rs 55,000crore, the council has estimated, adding the pricing of shares should be attractive enough to bring in non-government shareholders.