Daily Quiz: UPSC Prelims Marathon (Economy) – August 25, 2020

The United States Trade Representative has, in its “2019 Special 301 Report”, placed India on the “priority watch list”, again.

• A move that has been labelled ‘anti public health’ by international humanitarian organisation Médecins Sans Frontières or the Doctors Without Borders.
• The “Special 301 report” assesses US trading partners on their track record when it comes to protecting and enforcing intellectual property.
• And, India has always received a critical review for reasons, including its balancing act between granting pharmaceutical patents and taking policy decisions to keep medicines affordable.

ECGC Ltd. (Formerly Export Credit Guarantee Corporation of India Ltd.), wholly owned by Government of India, was set up in 1957 with the objective of promoting exports from the country by providing Credit Risk Insurance and related services for exports.

• It functions under the administrative control of Ministry of Commerce & Industry, and is managed by a Board of Directors comprising representatives of the Government, Reserve Bank of India, banking, and insurance and exporting community.
• Over the years it has designed different export credit risk insurance products to suit the requirements of Indian exporters and commercial banks extending export credit.
• ECGC is essentially an export promotion organization, seeking to improve the competitiveness of the Indian exporters by providing them with credit insurance covers. ECGC keeps its premium rates at the optimal level.

National Calamity Contingent Duty (NCCD) is levied as a duty of excise on certain manufactured goods specified under the Seventh Schedule of Finance Act, 2001. The Union Budget proposed an increase in the NCCD on tobacco products (except bidi).

Currently, the price build-up of petrol comprises the base price of ₹32.81 and freight cost of ₹0.35 per litre. The price charged to dealers (excluding excise duty and VAT) is ₹33.16.

• With excise duty at ₹19.98 per litre, average dealer commission of ₹3.55 per litre and VAT (including VAT on dealer commission) of ₹15.30 per litre, the retail selling price at Delhi is rounded off to ₹71.99 per litre.
• Similarly, price build-up of diesel includes the base price of ₹37.15 per litre. With freight cost of ₹0.32 per litre, the price charged to dealers (excluding excise duty and VAT) is ₹37.47 per litre.
• With an excise duty of ₹15.83 per litre, average dealer commission of ₹2.49 per litre and VAT (including VAT on dealer commission) of ₹9.64 per litre, the retail selling price at Delhi is rounded off to ₹65.43 per litre.

The government on August 28, 2019 relaxed FDI rule for foreign single brand retailers and also permitted foreign investment in contract manufacturing and coal mining.

List of the important decisions on FDI by the Cabinet:

• Allows 100% FDI under automatic route in coal mining and associated infrastructure
• Allows 100% FDI in contract manufacturing under automatic route
• Relaxes FDI rules for single brand retail; expands definition of 30% domestic sourcing
• Allows online retailing under single-brand retail; relaxes rule of mandatory brick-and-mortar store
• Approves 26% FDI in digital media

The Securities Transaction Tax (STT) is a type of ‘financial transaction tax’ levied in India on transactions done on the domestic stock exchanges.

• The rates of STT are prescribed by the central government through its budget from time to time. In tax parlance, this is categorised as a direct tax. The tax came into effect from 1 October, 2004.
• In India, STT is collected for the Government of India by the stock exchanges.
• With charging of STT, long-term capital gains tax was made zero and short-term capital gains tax was reduced to 10 per cent (subsequently, changed to 15 per cent since 2008).

All Indian banks have to follow the compulsory target of priority sector lending (PSL).

The priority sector in India are at present the sectors-agriculture, small and medium enterprises (SMEs), road and water transport, retail trade, small business, small housing loans (not more than Rs. 10lakhs), software industries, self help groups (SHGs), agro-processing, small and marginal farmers, artisans, distressed urban poor and indebted non-institutional debtors besides the SCs, STs and other weaker sections of society.

The PSL target must be met by the banks operating in India in the following way:

• Indian Banks need to lend 40 per cent to the priority sector every year (public sector as well as private sector banks, both) of their total lending.
• Foreign Banks (having less than 20 branches) have to fulfill only 32 per cent PSL target which has sub-targets for the exports (12 per cent) and small and medium enterprises (10 per cent).

The Service Area Approach (SAA) introduced in April 1989 for planned and orderly development of rural and semi-urban areas was applicable to all scheduled commercial banks including Regional Rural Banks.

• Under SAA, each bank branch in rural and semi-urban area was designated to serve an area of 15 to 25 villages and the branch was responsible for meeting the needs of bank credit of its service area.
• The primary objective of SAA was to increase productive lending and forge effective linkages between bank credit, production, productivity and increase in income levels.
• The SAA scheme was reviewed from time to time and appropriate changes were made in the scheme to make it more effective.

Mixed economy is a golden mixture of capitalism and socialism.

• Under this system there is freedom of economic activities and government interferences for the social welfare. Hence it is a blend of both the economies.
• The concept of mixed economy is of recent origin. The developing countries like India have adopted mixed economy to accelerate the pace of economic development.
• Even the developed countries like UK, USA, etc. have also adopted ‘Mixed Capitalist System’.

Mixed economy has following main features:

• Co-existence of Private and Public Sector
• Personal Freedom
• Private Property is allowed
• Economic Planning
• Price Mechanism and Controlled Price
• Profit Motive and Social Welfare

There are two main set of inflation indices for measuring price level changes in India – the Wholesale Price Index (WPI) and the Consumer Price Index (CPI).

• The WPI, where prices are quoted from wholesalers, is constructed by Office of Economic Affairs, Ministry of Commerce and Industries.
• In the case of CPI (prices quoted from retailers), there are several indices to measure it: CPI for industrial labourers (CPI-IL), agricultural labourers (CPI-AL) and rural labourers (CPI-RL) besides an all India CPI.
• In addition, Gross Domestic Product (GDP) deflator and Private Final Consumption Expenditure (PFCE) deflator from the National Accounts Statistics (NAS) provide an implicit economy-wide inflation estimate.