Daily Quiz: UPSC Prelims Marathon (Economy)|November 3,2020

The term ‘Washington Consensus’ was coined by the US economist John Williamson (in 1989) under which he had suggested a set of policy reforms which most of the official in Washington (i.e., International Monetary Fund countries of the time. The policy reforms included ten propositions:
•Fiscal discipline
•A redirection of public expenditure priorities toward fields offering both high economic returns and the potential to improve income distribution, such as primary health care, primary education, and infrastructure.
•Tax reform (to lower marginal rates and broaden the tax base)
•Interest rate liberalisation
•A competitive exchange rate
•Trade liberalisation
•Liberalisation of FDI inflows
•Privatisation
•Deregulation (in the sense of abolishing barriers to entry and exit)
•Secure property rights
Source: Ramesh Singh

In the aftermath of the Great Recession (after the ‘US sub-prime’ crisis) in the Western economies, it is believed that dependence on market to correct the growth and development may not sustain any longer—and the world might agree in favour of a development state, as in the case of the East Asian nations which never went for the Consensus for their robust growth.
The Keynesian idea of ‘interventionist state’ seems the ultimate alternative in the present times, as is suggested by the US Nobel economist Paul Krugman and being followed by the Japanese Prime Minister, Shinzo Abe (the Three Arrows of Abenomics).
Source: Ramesh Singh

Indian economy did show some traits which were unique:
•The contribution of primary sector in the GDP has fallen down regularly and today it stands at 14.1 %.
•The dependency of the population on the primary sector for employment is still high is a symptom of agrarian economy.
•The expansion of industries was not sufficient to attract labour from the primary sector activities.
Source: Ramesh Singh

The World Development Report is an annual report published since 1978 by the International Bank for Reconstruction and Development or World Bank. Each WDR provides in-depth analysis of a specific aspect of economic development.
Source: World Bank

The Odisha government launched its new State Agricultural Policy (SAP) 2020-SAMRUDHI that focuses on profitability for farmers.
•Samrudhi is focused on the social and economic well-being of farmers, sharecroppers and landless agriculture households.
•It aims to actualise the untapped potential of agriculture, while ensuring growth process is environmentally, economically and technologically inclusive.
•It is based on an 8-pillar strategy focused on simultaneous reforms.
Source: The Hindu

Prompt Corrective Action or PCA is a framework under which banks with weak financial metrics are put under watch by the RBI.
•The PCA framework deems banks as risky if they slip below certain norms on three parameters — capital ratios, asset quality and profitability.
•It has three risk threshold levels (1 being the lowest and 3 the highest) based on where a bank stands on these ratios.
•Banks with a capital to risk-weighted assets ratio (CRAR) of less than 10.25 per cent but more than 7.75 per cent fall under threshold 1.
•Those with CRAR of more than 6.25 per cent but less than 7.75 per cent fall in the second threshold.
•In case a bank’s common equity Tier 1 (the bare minimum capital under CRAR) falls below 3.625 per cent, it gets categorized under the third threshold level.
•Banks that have a net NPA of 6 per cent or more but less than 9 per cent fall under threshold 1, and those with 12 per cent or more fall under the third threshold level.
•On profitability, banks with negative return on assets for two, three and four consecutive years fall under threshold 1, threshold 2 and threshold 3, respectively.
Source: Hindu – Business line

As the name suggests these taxes are directly paid by the assesse to the government. These are not paid on behalf of the taxpayers but are imposed directly by the regulator.
Furthermore, this liability is non-transferable to another taxpayer. Different types of direct taxes in India are:
•Corporate tax: Such tax is levied on domestic companies that are different from the shareholders. This tax is also payable by foreign corporations whose income arises or is deemed to arise in India. Income earned as interest, royalties, dividends, technical services fees, or gains through the sale of assets based in India is taxable. Corporate tax also includes the following:
•Minimum Alternate Tax (MAT): Levied on zero tax companies whose accounts are prepared as per the guidelines of the Companies Act.
•Fringe Benefits Tax: Such direct tax is paid by companies on fringe benefits (drivers, maids, etc.) provided to employees.
•Dividend Distribution Tax (DDT): This tax is levied on any amounts that are declared, distributed, or paid by domestic entities as dividends to the shareholders; foreign companies are exempt from DDT.
•Securities Transaction Tax (STT): This liability arises from income earned through taxable securities transactions.
Source: Financial Express

An idea which (generated too much controversies) originally suggested by David Ricardo (1772–1823) and more recently by Barro, that government deficits do not affect the overall level of demand in an economy.
•This is because tax-payers know that any deficit has to be paid later, and so they increase their savings in anticipation of a higher tax bill in future;
•Thus government attempts to stimulate an economy by increasing public spending or cutting taxes, will be rendered impotent by private sector reaction.
•The equivalence can be seen as part of a thread of economic thinking which holds that only decisions about real variables (e.g., consumption and production) matter, and that decision about financing will, in a perfectly functioning market, never have an effect.
Source: Ramesh Singh

In recent times, India has become more conscious towards protecting its agricultural trade interests at the international platforms. At the 10th Ministerial Conference of the WTO (Nairobi, December 2015), the Government of India adopted the following approach towards agri-trade policy:
•A Special Safeguard Mechanism (SSM) for developing countries.
•Public stockholding food for security purposes,
•A commitment to abolish export subsidies for farm exports, and
•Measures related to cotton.

Source: Ramesh Singh

Government e Marketplace is an online marketplace setup in 2016 for procurement of commonly used goods and services by government ministries, departments and CPSEs.
•It aims to enhance transparency, efficiency and speed in public procurement.
•It is a National Procurement Portal of India. It functions under Directorate General of Supplies and Disposals (DGS&D), Ministry of Commerce and Industry.
Source: The Hindu