Daily Quiz: UPSC Prelims Marathon – September 4, 2018

Soft currency is a currency which is hyper sensitive and fluctuates frequently. Such currencies react very sharply to the political or the economic situation of a country.

It is also known as weak currency due to its unstable nature. Such currencies mostly exist in developing countries with relatively unstable governments. Soft currencies cause high volatility in exchange rates as well, making them undesirable by foreign exchange dealers. These currencies are the least preferred for international trade or holding reserves.

The Zimbabwe dollar and the Venezuelan bolivar are two examples of soft currencies. Both these countries have experienced both political instability as well as hyperinflation which has led to sharp devaluation in its currency and the printing of high denominating notes.

‘The National Innovations in Climate Resilient Agriculture’ is a project initiated by Indian Council of Agricultural Research (ICAR). NICRA was launched in February, 2011.

This project aims to enhance resilience of Indian agriculture to climate change and climate vulnerability through strategic research and technology demonstration.

The research on adaptation and mitigation covers crops, livestock, fisheries and natural resource management.

The project consists of four components viz. Strategic Research, Technology Demonstration, Capacity Building and Sponsored/Competitive Grants.

Statement 1 is correct.

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) empowers Banks / Financial Institutions to recover their non-performing assets without the intervention of the Court.

Statement 2 is correct.

Lok Adalat is for the recovery of small loans. According to RBI guidelines issued in 2001, they cover NPA up to Rs. 5 lakhs, both suit filed and non-suit filed are covered.

Statement 3 is correct.

A Credit Information Bureau help banks by maintaining a data of an individual defaulter and provides this information to all banks so that they may avoid lending to him/her.

Statement 4 is incorrect.

Decrease in profitability and Increase loan loss reserves, Reduce capital assets and lending limits are the consequences of NPA’s in an organization.

Statement 1 is correct.

Higher spending on infrastructures like roads and railways can help remove supply bottlenecks and enable greater efficiency. This can also boost long-term economic growth.

Statement 2 is incorrect.

Government reducing subsidy in electricity bills will not result in demand-pull inflation. Rather,

consumers will start using electricity more judiciously. It will also save government expenditure which can be used for other development activities. Demand-pull inflation is asserted to arise when aggregate demand in an economy outpaces aggregate supply.

Statements 2 and 3 are correct.

Inflation is a condition in which huge money is chasing few goods. If the export is promoted, then the commodity shortage is increased and situation further worsen. In this context, at the time of inflation, essential commodities are imported to tackle the shortage.

In fiscal policy, the government controls inflation either by reducing private spending or by decreasing government expenditure, or by using both.

During the time of inflation, RBI uses tight monetary policies to reduce the supply of money in the economy. Some methods used in such situations are, RBI selling securities, Increasing SLR and CRR etc.

Statement 1 is incorrect.

Export promotion will not help the government to curb the rising inflation.

Municipality bonds can be issued by the city corporations to fund developmental projects. Institutional investors, as well as the public, can buy these bonds. Hence, statement 1 is correct.

The Pune Municipal Corporation (PMC) became the first municipal corporation in the country to tap money through municipal bonds using BSE BOND platform. Hence, statement 2 is incorrect.

Statement 1 is incorrect.

The term ‘Monetary transmission’ refers to the process by which a central bank’s monetary policy signals (like repo rate) are passed on, through financial system to influence the businesses and Households. It is Helicopter money (a hypothetical), an unconventional tool of monetary policy that involves printing large sums of money and distributing it to the public in order to stimulate the economy.

Statement 2 is correct.

The Central Bank’s monetary policies like repo rate, reverse repo rate and cash reserve requirement etc. can influence Monetary Transmission in an economy. For an example; when the RBI wants to stimulate growth, it cuts the repo rate to reduce the cost of borrowings. Banks get money at a cheaper rate. If this is passed on to borrowers, then monetary transmission is said to have happened smoothly.