Daily Quiz: UPSC Prelims Marathon (Economy) – September 1, 2020

the Union Cabinet approved a new hydroelectricity policy that, among other things, included large hydro projects within the ambit of renewable energy.

• Prior to the policy, only small hydro projects of a capacity of less than 25 MW were treated as renewable energy. Large hydro projects were treated as a separate source of energy.
• India’s renewable energy sector had an installed capacity of 75,055.92 MW as of February 2019, according to data with the Central Electricity Authority.
• This made up about 21.4% of the overall energy mix, with the rest coming from thermal, nuclear and large hydro sources.
• With the inclusion of large hydro in renewable energy, the energy mix changes drastically.
• Renewable energy capacity would now be 1,20,455.14 MW or 34.4% of the overall energy mix.

It must be noted that this is a purely cosmetic change. No additional resources have been created through this policy. It is a reclassification of existing capacity.

Indian Accounting Standard (abbreviated as Ind-AS) is the Accounting standard adopted by companies in India and issued under the supervision of Accounting Standards Board (ASB) which was constituted as a body in the year 1977.

Presently, the Institute of Chartered Accountants of India (ICAI) has issued 39 Indian Accounting Standards (Ind AS) which have been notified under the Companies (Indian Accounting Standards) Rules, 2015 (‘Ind AS Rules’), of the Companies Act, 2013.

A Real Estate Investment Trust or REIT is an investment vehicle that provides an opportunity to invest in various projects by only investing in the units of a sponsor entity that will manage the paperwork and may be, even the hindrances of investing in the real estate market.

• The biggest benefit is the ease of investment as investing in REIT is just like investing in direct equity that can be done through a demat account.
• The other big advantage is getting an opportunity to invest in commercial properties that will earn rental income.
• This is a significant advantage as commercial properties typically earn more rent than residential properties with built-in clauses of rent hikes at fixed intervals.
• Moreover, REIT regulations mandate the distribution of 90% of the rental income to unit holders. The remaining 10% can be used for business purposes.
• Also, since REIT is a publicly listed and traded instrument, liquidity should ideally not be a concern.

David Malpass, a top U.S. Treasury official in Trump administration, was on April 5 unanimously selected as the new President of the World Bank.

• The World Bank’s 25-member executive board unanimously approved 63-year-old Malpass, who is currently Under Secretary of Treasury for International Affairs, as the development lender’s 13th President for a five-year term beginning April 9.
• Since the bank’s creation following World War II, all of its Presidents have been American men.
• The World Bank President is Chair of Boards of Directors of the International Bank for Reconstruction and Development (IBRD) and International Development Association (IDA).
• The President is also ex officio Chair of Boards of Directors of the International Finance Corporation (IFC), Multilateral Investment Guarantee Agency (MIGA), and the Administrative Council of the International Centre for Settlement of Investment Disputes (ICSID).

The World Bank Group takes a comprehensive approach to enhancing debt transparency—through its own engagement with more than 100 low- and middle-income countries and in close collaboration with the International Monetary Fund (IMF).

• In 2018, the World Bank has launched—together with the IMF—a comprehensive approach to address debt vulnerabilities in low-income developing countries.
• Debt transparency is a key pillar of this approach.
• It also seeks to promote debt transparency in the context of the proposed Sustainable Development Finance Policy under IDA19 and through its engagement in international fora and outreach to other creditors.
• In addition, the Bank made several important contributions to global knowledge and best practices on debt transparency.
• Two joint notes, prepared in collaboration with the IMF, were delivered to the G-20 in 2018.
• The first identified ways the international financial community can help low- and lower-middle-income countries improve the recording, monitoring, and reporting of debt.
• The second evaluated how the World Bank Group and the IMF can strengthen public debt transparency by disseminating debt data, publishing public debt analysis, enhancing creditor outreach, and promoting sustainable borrowing and lending practices.

The output gap is an economic measure of the difference between the actual output of an economy and its potential output.

• Potential output is the maximum amount of goods and services an economy can turn out when it is most efficient—that is, at full capacity.
• Often, potential output is referred to as the production capacity of the economy.­
• Policymakers often use potential output to gauge inflation and typically define it as the level of output consistent with no pressure for prices to rise or fall.
• In this context, the output gap is a summary indicator of the relative demand and supply components of economic activity.
• As such, the output gap measures the degree of inflation pressure in the economy and is an important link between the real sides of the economy—which produces goods and services—and inflation.
• All else equal, if the output gap is positive over time, so that actual output is greater than potential output, prices will begin to rise in response to demand pressure in key markets.
• Similarly, if actual output falls below potential output over time, prices will begin to fall to reflect weak demand.­

A recent report by the National Sample Survey Organisation titled ‘Technical Report on Service Sector Enterprises in India’ found that nearly 38% of the companies it surveyed using the MCA-21 database were unusable for data collection purposes.

• About 21% were designated “out of coverage”, 12% as untraceable, and 4.5% as closed.
• The government has started using the MCA-21 database to calculate the Gross Domestic Product and the Gross Value Added.

Central government will aim to combine 44 central laws into four codes wages, industrial relations, social security and welfare, and the fourth – occupational safety, health and working conditions.

Tax buoyancy is one of the key indicators to assess the efficiency of a government’s tax system.

Tax buoyancy explains this relationship between the changes in government’s tax revenue growth and the changes in GDP.

Tax buoyancy depends largely on –

• the size of the tax base
• the friendliness of the tax administration

the reasonableness and simplicity of the tax rates

The Uruguay Round was the 8th round of Multilateral Trade Negotiations (MTN) conducted within the framework of the General Agreement on Tariffs and Trade (GATT), spanning from 1986 to 1994 and embracing 123 countries as “contracting parties”.

• The negotiations and process ended with the signing of the Final Act of the Marrakesh Agreement in April 1994 at Marrakesh, Morocco.
• The round led to the creation of the World Trade Organization (WTO), with GATT remaining as an integral part of the WTO agreements.