Daily Quiz: UPSC Prelims Marathon (Economy)–October 20th,2020

: All expenditures incurred by the government are either of revenue kind or current kind or compulsive kind. The basic identity of such expenditures is that they are of consumptive kind and do not involve creation of productive assets. They are either used in running of a productive process or running a government. A broad category of things that fall under such expenditures in India are:
•Interest payment by the government on the internal and external loans;
•Salaries, Pension and Provident Fund paid by the government to government employees;
•Subsidies forwarded to all sectors by the government;
•Defense expenditures by the government;
•Postal Deficits of the government;
•Law and order expenditures (i.e., police & paramilitary);
•Expenditures on social services (includes all social sector expenditures as education, health care, social security, poverty alleviation, etc.) and general services (tax collection, etc.);
•Grants given by the government to Indian states and foreign countries.
Source: Ramesh Singh

More recent trilemmas in economics, the prima donna of all of them is Mundell’s ‘impossible trinity’. This old trilemma asserts that a country cannot maintain, simultaneously, all three policy goals of —
•free capital flows,
•a fixed exchange rate, and
•an independent monetary policy.
The impossible trinity has seen enough waters flowing down the time since it were articulated almost five decades ago which a strong theoretical foundation in the Mundell-Fleming Model has developed in the 1960s.
Source: Ramesh Singh

By early September 2014, the Government of India constituted an Expenditure Management Commission (EMC) through a Resolution.
•The EMC will look into various aspects of expenditure reforms to be undertaken by the government and other issues concerning Public Expenditure Management.
•The Commission has one full time, one part time and one ex-officio members other than Chairman of (Cabinet rank).
•Dr. Bimal Jalan is its first Chairman.
Source: Ramesh Singh

: When an increase in one form of net exports drives up a country’s exchange rate, it is called the Dutch Disease.
•Such instances make other exports noncompetitive in the world market and impair the ability of domestic products to compete with imports.
•The term originated from the supposed effect of natural gas discoveries on the Netherlands economy.
Source: Ramesh Singh

The World Food Programme is the food-assistance branch of the United Nations and the world’s largest humanitarian organization addressing hunger and promoting food security.
•Funded entirely by voluntary donations, in 2018 WFP raised a record US$7.2 billion.
•WFP has more than 17,000 staff worldwide of who over 90 percent are based in the countries where the agency provides assistance.
•WFP is governed by a 36-member Executive Board.
•It works closely with its two Rome-based sister organizations, the Food and Agriculture Organization of the United Nations and the International Fund for Agricultural Development.
•WFP partners with more than 1,000 national and international NGOs to provide food assistance and tackle the underlying causes of hunger.
Source: The Hindu

The Directorate General of Trade Remedies (DGTR), Ministry of Commerce and Industry has launched ARTIS (Applications for Remedies in Trade for Indian Industry and other Stakeholders).
It is an online system developed for filing applications by the domestic industry with respect to various trade remedial measures such as anti-dumping duty, safeguards duty and countervailing duty.
Source: The Hindu

The (“SPI”), compiled by the Social Progress Imperative, a US-based non-profit, ranks 149 countries’ social performance over six years (2014-2019).
•It uses 51 indicators including: nutrition, shelter, safety, education, health, personal rights and inclusiveness.
•The Social Progress Index is the first holistic measure of a country’s social performance that is independent of economic factors.
•The index is based on a range of social and environmental indicators that capture three dimensions of social progress: Basic Human Needs, Foundations of Wellbeing, and Opportunity.
•The 2019 Social Progress Index includes data from 149 countries on 51 indicators.
•The index captures outcomes related to all 17 Sustainable Development Goals and is a comprehensive snapshot of a country’s overall progress towards the achievement of the goals.
Source: The Hindu

Effective Revenue Deficit is the difference between revenue deficit and grants for creation of capital assets.
•The concept of effective revenue deficit has been suggested by the Rangarajan Committee on Public Expenditure.
•It is aimed to deduct the money used out of borrowing to finance capital expenditure.
•The concept has been introduced to ascertain the actual deficit in the revenue account after adjusting for expenditure of capital nature.
•Focusing on this will help in reducing the consumptive component of revenue deficit and create space for increased capital spending.
•Though the Budget documents have given targets for revenue deficit, the amendments to the Fiscal Responsibility and Budget Management Act 2003 has proposed to substitute the definitions of “effective revenue deficit” and “revenue deficit” with those of “Central government debt” and “general government debt” respectively.
Source: Ramesh Singh

When the government decides to transfer the ownership and control of a public sector entity to some other entity, either private or public, the process is called strategic disinvestment.
•The Department of Investment and Public Asset Management (DIPAM) which comes under the Finance Ministry defines Strategic disinvestment as follows:
•“Strategic disinvestment would imply the sale of a substantial portion of the Government shareholding of central public sector enterprises (CPSE) of up to 50%, or such higher percentage as the competent authority may determine, along with transfer of management control.”
•The Cabinet Committee on Economic Affairs (CCEA) approves the strategic divestment of government holdings.
Source: The Hindu

The Reserve Bank of India (RBI) on June 7, 2019 issued a new framework for resolution of bad loans, replacing the previous norms quashed by the Supreme Court in April, offering a 30-day gap for stress recognition instead of the one-day default earlier.
•The new norms replaces all the earlier resolution plans such as the framework for revitalising distressed assets, corporate debt restructuring scheme, flexible structuring of existing long-term project loans, strategic debt restructuring scheme (SDR), change in ownership outside SDR, and scheme for sustainable structuring of stressed assets (S4A), and the joint lenders’ forum with immediate effect.
•The central bank said lenders shall recognise incipient stress in loan accounts, immediately on default, by classifying such assets as special mention accounts (SMA).
•Since default with any lender is a lagging indicator of financial stress faced by the borrower, it is expected that the lenders initiate the process of implementing a resolution plan (RP) even before a default.
•The central bank said once a borrower is reported to be in default by any lenders, financial institutions, small finance banks or NBFCs, the lenders shall undertake a prima facie review of the borrower account within 30 days from the day of default.
Source: The Hindu