Daily Quiz: UPSC Prelims Marathon – October 10

• Prime Minister  constituted an Economic Advisory Council to the Prime Minister (EAC-PM).
• The five-member council consists of economists of high repute and eminence. Dr. Bibek Debroy, a member of the Niti Aayog has been appointed as the Chairman of the council.
• Terms of reference of the EAC would be to “analyse any issue, economic or otherwise, referred to it by the prime minister and advising him thereon,
• It will also “address issues of macroeconomic importance” and present its views to the prime minister, “This could be either suo-motu or on reference from the prime minister or anyone else.

GSTN is a not for profit, non-Government, private limited company incorporated in 2013.The Union Government holds 24.5% equity in GSTN. It has been set up primarily to provide IT infrastructure and services to the Central and State Governments, tax payers and other stakeholders for implementation of Goods and Services Tax (GST). All States including two UTs (Delhi and Puducherry) and the Empowered Committee of State Finance Ministers (EC) together hold another 24.5%. Balance 51% equity is with non-Government financial institutions-HDFC Bank Ltd (10%), HDFC Ltd (10%), ICICI Bank Ltd (10%), NSE NSE Strategic Investment Corporation Ltd (10%) and LIC Housing Finance Limited (11%).

The Trade and Development Report (TDR), launched in 1981, is issued every year for the annual session of the Trade and Development Board.

The Report analyses current economic trends and major policy issues of international concern, and makes suggestions for addressing these issues at various levels.

First, bank rate is the rate at which central bank (in case of India, it is RBI) of a country provides re-financing facilities or provides loans to the commercial banks.

When bank rate is lowered, it is called ‘cheap money policy’. Money supply in the economy is increased. Commercial banks now can borrow from the RBI at cheaper rates and can pass on this change to their customers through by providing loans at cheaper rate. Now, say if you want to get a home loan, your cost of getting that loan gets decreased. Generally, RBI lowers the bank rate during a period of recession/slowdown or sluggish economic activity. Reduced costs of loans, encourage companies/manufacturing units etc to borrow more for increasing production and consumers to spend more. Thus, economic activity in the country picks up.

When RBI increases bank rate, it is called ‘dear money policy’. Money becomes costlier. RBI, does so, generally, during a period of inflation. Commercial banks are compelled to pay higher interest to the RBI which in turn prompts them to raise the interest rates on loans they offer to customers. The customers then are dissuaded in taking credit from banks, leading to a shortage of money in the economy and less liquidity. So, while on the one hand, inflation is under controlled as there is less money to spend, growth suffers as companies avoid taking loans at high rates, leading to a shortfall in production and expansion.

ADB is multilateral lending agency based in Manila, Philippines.  It is dedicated to reduce poverty in Asia and the Pacific region through inclusive economic growth, environmentally sustainable growth, and regional integration.

Statement 2 is wrong:

ADB has 67 members – 48 from the Asia-Pacific region including India and is collectively owned by these 67 members. The non Asia pacific region members are only developed countries.

Most of the ADB’s lending (~80%) is concentrated public sector lending in five operational areas viz. Education; Environment, Climate Change & Disaster Management; Finance Sector Development; Regional Cooperation & Integration and Private sector lending.

It provides finance to both sovereign countries as well as private parties. It provides hard loans to middle income countries while soft loans to poorer countries.

Net national product (NNP) refers to gross national product (GNP), i.e. the total market value of all final goods and services produced by the factors of production of a country or other polity during a given time period, minus depreciation

Statement 1 is wrong :

The Council is chaired by the Union Finance Minister

Members of FSDC :

Governor, Reserve Bank of India; Finance Secretary and/or Secretary, Department of Economic Affairs; Secretary, Department of Financial Services; Chief Economic Adviser, Ministry of Finance; Chairman, Securities and Exchange Board of India; Chairman, Insurance Regulatory and Development Authority and Chairman, Pension Fund Regulatory and Development Authority.