Indian Economy MCQs

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Entertainment tax is levied by state government only. Now it has been subsumed under Goods and Service Tax by 101st Amendment to the Indian Constitution.

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In the context of industry, a lockout is a temporary measure used by employers to prevent workers from entering the workplace. This is typically done in response to a labor dispute or strike, and is intended to protect the employer’s property and ensure the safety of workers and others on the premises. A lockout may be imposed by an employer unilaterally, or it may be agreed upon as part of a collective bargaining agreement with a labor union. During a lockout, workers are not allowed to enter the workplace or perform their duties, and the employer may not provide any work or pay to the affected workers. A lockout can have significant economic and social consequences for both the employer and the affected workers, and is generally considered a last resort in the resolution of labor disputes.

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Circular trading is a fraudulent practice where sell orders are entered by a broker who knows that offsetting buy orders, the same number of shares at the same time and at the same price, have either been or will be entered. Essentially, it is a deceptive practice that creates the illusion of extensive trading activity in a security to attract further investment which often leads to artificially inflated stock prices.

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Credit Default Swaps (CDS) are not allowed in India as of now. CDS are financial derivatives that allow an investor to “swap” or transfer the credit risk of a borrower. While they are widely used in developed markets, their introduction in India has been cautious due to concerns over systemic risk and market stability. The Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI) have focused on regulating derivatives to prevent excessive risk-taking.

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The correct answer is “Security Holdings.” Security holdings refer to investments in stocks, bonds, or other financial instruments, which are assets for a bank. In contrast, time deposits, borrowing from savings banks, and demand deposits are liabilities, as they represent money the bank owes to depositors. Commercial banks typically hold a diverse portfolio of securities to manage risk and generate income.

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India has established itself as a major player in the global steel industry, holding the position of the world’s second-largest steel producer after China and the top producer of sponge iron. The country is also the third-largest consumer of finished steel globally, trailing only China and the United States. India’s steel sector has shown remarkable growth, with production increasing by 8.5% year-on-year from January to April 2024, outperforming other top steel producers who experienced declines during the same period. Looking ahead, the National Steel Policy 2017 sets an ambitious target to nearly double India’s steel production capacity from around 161 million tonnes to 300 million tonnes. The country’s steel industry is supported by several equipment manufacturers, including Heavy Engineering Corporation, Larsen & Toubro, and CG Industrial Solutions, further strengthening its position in the global market.

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Round Tripping refers to the practice of moving capital out of a country and then bringing it back in, often to take advantage of favorable tax regulations or to inflate financial statements. It is commonly associated with Foreign Direct Investments (FDI), where companies may invest in foreign subsidiaries and then reinvest the profits back into the home country. This practice can create the illusion of increased investment and economic activity. Notably, countries like India have faced scrutiny for round-tripping, as it can distort true investment figures and lead to regulatory challenges.

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Government spending refers to the money spent by the government or public sector on the acquisition of goods and services such as education, healthcare, social protection, defence etc. It does not come under monetary policy.

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Collateralized Borrowing and Lending Obligation (CBLO) is a money market instrument introduced by the Reserve Bank of India (RBI) to facilitate borrowing and lending among banks and financial institutions. It allows participants to borrow funds against collateral, typically government securities, for short-term needs. CBLO helps enhance liquidity in the money market and is governed by the Clearing Corporation of India Ltd. (CCIL). It is particularly useful for managing liquidity mismatches and is a key tool in the Indian financial system.

Notes:
Some of the major tools to suck the excess liquidity out of the system standing deposit facility (SDF), narrowing the liquidity adjustment facility (LAF), increase repo rate, cash reserve ratio etc.