QUESTIONS

1. Government is conducting Asset (a) Indian School of Business

Monetisation Programmes in order (b) INSEAD
to increase its resources. Which of the (c) World Economic Forum
following statements are correct in (d) World Bank
this context?
1. Asset Monetisation programmes of the 4. With reference to Long-term Capital
government are carried out through Union Gains (LTCG) Tax, consider the
Ministry of Commerce and Industry.
following statements:
2. Setting up infrastructure investment trusts 1. Long-term capital gains are often given
(InvITs) is part of Asset Monetisation. more favorable tax treatment than short-
3. Capital restructuring of Central Public term gains.

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Sector Enterprise (CPSEs) is an example of 2. LTCG Tax is applicable to inherited properties
Asset Monetisation. which are held for more than a year.
Select the correct answer using the code given Which of the above statements is/are correct?
below: (a) 1 only
(a) 1 and 2 only (b) 2 only
(b) 1 and 3 only Both 1 and 2
(c)
(d)
2 and 3 only
1, 2 and 3
O (c)
(d) Neither 1 nor 2

5. Baba Kalyani Committee was set up

SC
to:
2. Banking Regulation Act, 1949 was
recently amended to empower RBI to (a) Draft a new model Police Act
have greater control over cooperative (b) Recommend amendments to the Criminal
Law
banks. In this context, which of the
following statement(s) is/are correct? (c) Study the existing SEZ policy of India

1. The amendments will apply to urban co- (d) Review domestic production profile of oil
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operative banks and not rural cooperative and gas

banks.
2. Section 35A of the Banking Regulation Act 6. Recently released India Human
deals with cooperative banks. Development Survey (IHDS) suggests
that consumption spending has grown
3. Rural cooperatives are more in number as
compared to urban cooperative banks.
between 2011-12 and 2017. Which of
the following statements are correct
Select the correct answer using the code given about IHDS findings?
below:
1. IHDS findings are contrary to NSS findings.
(a) 1 and 2 only
2. National Council of Applied Economic
(b) 1 and 3 only Research (NCAER) prepares IHDS report.
(c) 3 only 3. IHDS provides an assessment of changes in
living standards.
(d) 1, 2 and 3
Select the correct answer using the code given
below:
3. The Global Talent Competitiveness
Index (GTCI), an annual benchmarking (a) 1 only
report, is published by: (b) 1 and 2 only

3 P2020_CRCA_500/D33
 (c) 2 and 3 only 9. Recently, RBI introduced long-term
(d) 1, 2 and 3 repo operations (LTRO). Which of
the following statements is correct
7. Krishnapuram Onions were in news
regarding LTRO?
recently. Which of the following
statements is/are correct about 1. LTRO will be at the policy repo rate.
Krishnapuram Onions? 2. LTROs will be conducted on CBS (E-KUBER)
1. They are not used domestically due to their platform.
size and pungency.
3. LTRO can boost credit growth.
2. They are export quality onions.
3. They are produced in the state of Select the correct answer using the code given
Karnataka. below:
Select the correct answer using the code given (a) 1 and 2 only
below:

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(b) 1 and 3 only
(a) 1 and 2 only
(b) 2 and 3 only (c) 3 only

(c) 3 only (d) 1, 2 and 3

(d) 1, 2 and 3
10. Which of the following statements is/
O
8. Recently, government launched a new are correct regarding ‘cess’?
scheme called Remission of Duties and
1. It is a tax on tax, levied by the central
Taxes on Export Product (RoDTEP).
SC
Which of the following statements are government for a specific purpose.

correct regarding this new scheme? 2. The tax revenue from Cess is credited to the
1. RoDTEP will replace Merchandise Exports Public Account Fund.
From India Scheme (MEIS).
3. Cess comes under the divisible pool and
2. RoDTEP is inconsistent with WTO
hence they shall be shared with the states
requirements.
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according to the recommendations of the

3. RoDTEP will have a fully automated route
for Input Tax Credit (ITC). Finance Commission.

Select the correct answer using the code given Which of the above statements is/are incorrect?
below:
(a) 2 and 3 only
(a) 1 and 2 only
(b) 2 only
(b) 1 and 3 only
(c) 2 and 3 only (c) 3 only

(d) 1, 2 and 3 (d) 1, 2 and 3

**********

P2020_CRCA_500/D33 4
 ANSWER HINTS

Answer Key

Q. 1 (c) Q. 3 (b) Q. 5 (c) Q. 7 (a) Q. 9 (d)

Q. 2 (b) Q. 4 (a) Q. 6 (d) Q. 8 (b) Q. 10 (a)

1. Correct Option: (c) buyback of shares by CPSEs.

Explanation:  Asset Monetization is a way of getting more

RE
cash on the balance sheet and reducing the
 Statement 1 is incorrect: Asset Monetisation debt-to-capital ratios that are crucial to rating
Programmes of the government are carried agencies.
out through Department of Investment and
Public Asset Management (DIPAM) under  Sale proceeds (for example, disinvestment
Ministry of Finance. proceeds) can be used to acquire additional
operations, stabilize costs, or revitalize existing
Supplementary notes: properties etc.
Asset Monetisation Programmes
O  Means of raising capital from the public
market
 It Budget 2020, government proposed to use
tax sops to nudge overseas investors towards  Privatizing operating infrastructure assets.
its upcoming asset monetization schemes.
SC
 Toll-operate-transfer agreements with
 It Budget 2020, government proposed to private investors
use tax sops to nudge overseas investors
 Setting up infrastructure investment trusts
towards its upcoming asset monetization
(InvITs)
schemes.
 The Department of Investment and Public
Asset Management (DIPAM) is working 2. Correct Option: (b)
on restructuring and asset monetisation
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of public sector enterprises for better
management and competitiveness in the
present world.
 Cabinet has approved procedure and
mechanism for Asset Monetization of
Central Public Sector Enterprises (CPSEs)/
Public Sector Undertakings (PSUs)/other
Government Organizations and Immovable
Enemy Properties.
 Objective: The objective of the asset
monetization programme of the Government
of India is to unlock the value of investment
made in public assets which have not
yielded appropriate or potential returns so
far.
 Procedure and Guidelines: Guidelines for
asset monetisation programme include
principles and mechanism for capital
restructuring of CPSEs regarding payment
of dividend, issue of bonus shares, and
Explanation:
 Statement 2 is incorrect: Section 56 of the
Banking Regulation Act deals with cooperative
banks.
Supplementary notes:
Banking Revolution Act, 1949
 Union cabinet cleared changes in Banking
Regulation Act to give RBI wider powers.
 Ambit: The amendments will apply to all
urban co-operative banks and multi-state
cooperative banks.
 They will not be applicable to rural
cooperatives.
 Current regulations: Cooperative banks are
currently under dual control of Registrar of
Cooperative Societies and RBI.
 The role of registrar of cooperative
societies includes incorporation,

P2020_CRCA_500/D33 6
 registration, management, audit,
supersession of board and liquidation.
 RBI is responsible for regulatory
functions such maintaining cash reserve
and capital adequacy, among others.
 New changes: The administrative role will
continue to be done by the Registrar of
Cooperative Societies.
 Rural cooperatives are under state-policies:
RBI has considerable control over urban
cooperative bank but has a limited control
over the rural cooperative banks which are
guided by state-level policies.
 Assets of rural cooperatives are higher:
As per RBI’s Trends and Progress in Banking
Report, as of March-end 2018, rural co-
operative banks accounted for 64.7 per cent
of the total assets of cooperatives.
RE
 Rural cooperatives are also more in
number as compared to urban cooperative
banks.
 Section 56:In 1965, the Act was amended to
include cooperative banks under its purview
by adding the Section 56. Cooperative banks,
which operate only in one state, are formed

and run by the state government.
Section 35A:Section 35A of the Banking
O
Regulation Act, 1949 vests power in the RBI to
4. Correct Option: (a)
give directions to banks and can take action,
SC
“to prevent the affairs of any banking company
being conducted in a manner detrimental to
the interests of the depositors or in a manner
prejudicial to the interests of the banking
company”.
3. Correct Option: (b)
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Explanation:
 Option (a) is correct: The Global Talent
Competitiveness Index (GTCI) is an annual
benchmarking report that measures the ability
of countries to compete for talent. The report
is published by INSEAD, the Business School
for the World, in partnership with the Adecco
Group and Tata Communications.
Supplementary notes:
Global Talent Competitiveness Index
 Launched for the first time in 2013, the Global
Talent Competitiveness Index (GTCI) is an
annual benchmarking report that measures
the ability of countries to compete for talent.
 It provides a wealth of data and analysis
that helps decision-makers develop talent
strategies, overcome talent mismatches
and become more competitive in the global
marketplace.
7 P2020_CRCA_500/D33
 2020 GTCI report focuses on Global Talent in
the Age of Artificial Intelligence.
 The index includes 70 variables and covers
132 countries.
 The six metrics used to decide a country’s rank
are - enable, attract, grow, retain, vocational
skills and global knowledge skills.
 This year, Switzerland topped the list of 132
countries, followed by the US and Singapore.
 Top 10 league table: Other countries in the
top 10 include Sweden at the 4th position,
Denmark (5th), the Netherlands (6th), Finland
(7th), Luxembourg (8th), Norway (9th) and
Australia (10th).
 In the BRICS grouping, China was ranked 42nd,
Russia (48th), South Africa (70th) and Brazil at
80th position.
 India has secured 72nd place in the index
while last year the country was ranked at 80th
position.
 The report said the gap between high income,
talent-rich nations and the rest of the world is
widening. More than half of the population in
the developing world lack basic digital skills.
Explanation:
 Statement 2 is incorrect: Capital gains are not
applicable to an inherited property as there is
no sale but only a transfer of ownership.
Supplementary notes:
Long Term Capital Gains Tax (LTCG Tax)
Any profit or gain that arises from the sale of

a ‘capital asset’ is a capital gain. This gain or
profit comes under the category of ‘income’.
 Hence, the capital gain tax will be required to
be paid for that amount in the year in which
the transfer of the capital asset takes place.
This is called the capital gains tax, which can
be either short-term or long-term.
 Long-term Capital Gains Tax is a levy on the
profits from the sale of assets held for more
than a year whereas Short-term Capital Gains
Tax applies to assets held for a year or less and
is taxed as ordinary income.
 Capital gains are not applicable to an
inherited property as there is no sale but
only a transfer of ownership.
 In India, such a tax existed until October
2004 when it was replaced by the Securities
Transaction Tax (STT) which was levied on all
trades made on the stock exchanges.
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P2020_CRCA_500/D33
  Long-term capital gains are often given
more favorable tax treatment than short-
term gains.
 Government has re-introduced long-term
capital gains tax of 10 percent if the gains
exceed Rs 100,000 without allowing the
benefit of indexation. However, all gains till
31st January 2018 will be grandfathered and
short term capital gains remains unchanged
at 15 percent.
 Budget 2020-2021 chose to retain long-term
capital gains tax on equity mutual funds.
5. Correct Option: (c)
Explanation:
 Option (c) is correct
Supplementary notes:
Baba Kalyani Committee
 The Baba Kalyani committee was constituted
by the Ministry of Commerce & Industry to
study the existing SEZ policy of India.
The objectives of the committee were to evaluate

O
the SEZ policy and make it WTO compatible,
suggest measures for maximizing utilization of
vacant land in SEZs, suggest changes in the SEZ
policy based on international experience and
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merge the SEZ policy with other Government
schemes like coastal economic zones, Delhi-
Mumbai industrial corridor, national industrial
manufacturing zones and food and textiles
parks.
 Key recommendations are:
 Framework shift from export growth to
broad-based Employment and Economic
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Growth (Employment and Economic
Enclaves-3Es)
 Formulation of separate rules and
procedures for manufacturing and service
SEZs
 Shift from supply driven to demand
driven approach for 3Es development to
improve efficiency of investment-based on
certain industries, current level of existing
inventory in the region
 Promote integrated industrial and urban
development- walk to work zones, States
and center to coordinate on the frame work
development to bring linkages between all
initiatives
 Enhance competitiveness by enabling
ecosystem development by funding high
speed multi modal connectivity, business
services and utility infrastructure.
9 P2020_CRCA_500/D33
 Certain sectors such as electronics are
showing high domestic demand and need
to have a plan for import substitution.
6. Correct Option (d)
Explanation:
 All statements are correct
Supplementary notes:
India Human Development Survey (IHDS)
 NSS report: Leaked portions National Sample
Survey (NSS) on consumption expenditure
suggested that consumption declined in real
terms between 2011-12 and 2017-18.
 The results were held back by the National
Statistical Office (NSO).
RE
 NSO claims that there were serious data
quality issues with the 2017-18 survey.
 IHDS report: A study by researchers from the
National Council of Applied Economic Research
(NCAER) and the University of Maryland show
findings contrary to NSS.


Consumption spending has grown between
2011-12 and 2017.
Yet, the pace of growth is significantly lower (in
real per capita terms) compared to the growth
between 2004-05 and 2011-12.
 Assessment of living standards: IHDS
provides an independent assessment of
changes in living standards for a panel of
4828 households across Rajasthan, Bihar and
Uttarakhand.
 Per capita incomes grew: Per capita incomes
grew by 3.5% per annum between 2011-12
and 2017.
 The same households experienced per capita
income growth of 7.2% per annum between
2004-5 and 2011-12.
 Per capita consumption expenditure grew:
Per capita consumption expenditure grew by
2.7% per annum over the same period.
 The same households experienced and per
capita consumption growth of 4% per annum
between 2004-5 and 2011-12.
 Increase in ownership of vehicles: There is
a consistent increase in ownership of vehicles
over the two time-periods.
 While ownership of cars and motorcycles rose
11 percentage points to 22 percent between
2004-05 and 2011-12, the same figure went
up 10 percentage points between 2011-12
and 2017
7. Correct Option: (a)
Explanation:
 Statement 3 is incorrect: Krishnapuram
onions are a variety of export quality onions
from Andhra Pradesh.
Supplementary notes:
Krishnapuram Onions
 Krishnapuram onions are a variety of export
quality onions from Andhra Pradesh.
 The variety, not too popular in the domestic
market and is mainly grown for exports.
 Krishnapuram onions are not used in kitchen
due to their size and pungency.
 These onions are imported by Thailand,
Hong Kong, Malaysia, Sri Lanka and
Singapore.
 Last year government had banned export
of onions, when prices of onions in the
domestic shot up.
 The blanket banon export of onions affected
Krishnapuramtoo, hitting a number of farmers
in Andhra Pradesh who did not find too many
takers for it in the local market.
O 
 They are also called Krishnapuram Rose
Onions.
SC
8. Correct Option (b)
Explanation:
 Statement 2 is incorrect: RoDTEP is consistent
with WTO requirements.
Supplementary notes:
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Remission of Duties and Taxes on Export
Product (RoDTEP)
 Remission of Duties and Taxes on Export
Product (RoDTEP): RoDTEP is a Rs 50,000-
crore exports programme which is supposed
to replace Merchandise Exports From India
Scheme (MEIS).
 Operation delayed: The operation of RoDTEP
was recently delayed. MEIS would remain in
force till March 31, 2020.
 MEIS was introduced in the Foreign Trade
Policy (FTP) 2015-20 w.e.f. 1st April 2015.
 Objective: Its objective was to offset
infrastructural inefficiencies and associated
costs involved in exporting goods which are
manufactured in India, including products
manufactured by the MSME Sector.
 MEIS was WTO-incompatible: World Trade
Organization (WTO) panel had determined
P2020_CRCA_500/D33
that India’s export subsidies are inconsistent
with WTO requirements.
 Reimburse input taxes and duties: RoDTEP
is expected to adequately incentivize
exporters by reducing duties paid on exports
and will initiate the refund of various taxes to
exporters.
 WTO compliant: The new scheme is supposed
to reimburse all taxes and duties paid on
inputs consumed in exports in sync with the
WTO norms.
 The MEIS, exporters have persistently
complained, doesn’t offset all the taxes, so
the new scheme will be beneficial to them
when it’s implemented.
 Automatic refund-route: The new scheme
will have a fully automated route for Input Tax
Credit (ITC) in the GST to help increase exports
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in India.
 Avoid double taxation: ITC is provided to set
off tax paid on the purchase of raw materials,
consumables, goods or services that were used
in the manufacturing of goods or services.
This helps in avoiding double taxation and the
cascading effect of taxes
Attempt to reverse export fall: It is expected
to adequately incentivize exporters by reducing
duties paid on exports and will initiate the
refund of various taxes to exporters. Measures
in the new scheme include:
 Easier priority-sector lending norms for
exports
 Greater insurance cover under ECGC
 Lower premium for MSMEs to avail of such
cover
9. Correct Option: (d)
Explanation:
 All statements are correct
Supplementary notes:
LTROs
 The central bank will conduct long-term repos
operations (LTROs) of one- and three-year
tenors for up to a total amount of Rs. 1 lakh
crore at the policy repo rate.
 LTROs conducted under this scheme will be in
addition to the existing Liquidity Adjustment
Facility (LAF) and Marginal Standing Facility
(MSF) operations.
 Objective: This is a direct incentive by
RBIto boost credit growth, even as the
monetary policy committee (MPC) earlier
kept benchmark rates unchanged because of
10
 uncertainty in the inflation outlook.
 Credit lending in the economy is at low
levels. India’s credit growth slowed to 7.1% in
2019.
 External Benchmark System: Earlier, the
central bank mandated all banks to link their
floating rate loans to an external benchmark
instead of the marginal cost-based lending
rate (MCLR).
 LTROs will be conducted on CBS (E-KUBER)
platform.
 RBI’s action is reminiscent of the European
Central Bank’s (ECB’s) unequivocal promise
of funds to the banking system in 2011.
Measures used by RBI:
 Cash reserve ratio (CRR) norms were also
eased for new retail loans to improve credit
flow.
 Revised the liquidity management
framework, and finalized weighted average
call rate (WACR) as the single operating
target.
 RBI also abolished the daily variable rate
O
reverse repo and replaced it with a daily
fixed-rate reverse repo.
 An Accommodative Monetary policy during
2019-20: As on end January 2020, Monetary
SC
Policy Committee (MPC) cut the repo rate by
110 basis points in four consecutive meetings.
In its 5th meeting, MPC kept the repo rate
unchanged.
 A repo rate cut means that RBI will lend money
to commercial banks at a lower rate.
 A lower repo rate will reduce cost of borrowing
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for commercial banks.
 This incentivises commercial banks to lend
money to businesses at a lower interest rate.
 At a lower rate of interest, businesses will
borrow more, and more liquidity is injected
into the economy.
10. Correct Option: (a)
Explanation:
 Statement 2 is incorrect: The tax revenue
from Cess are first credited to the Consolidated
Fund of India and the Central Government may,
**********
P2020_CRCA_500/D33
after due appropriation made by Parliament,
utilise the money for the specified purposes.
 Statement 3 is incorrect: Major feature of
cess is that the Centre need not share it with
states.
Supplementary notes:
Cess
 A cess imposed by the central government
is a tax on tax, levied for a specific purpose.
Generally, cess is expected to be levied till the
time the government gets enough money for
that purpose.
 A cess is different from the usual taxes like
excise duty and personal income tax as it is
imposed as an additional tax besides the
existing tax (tax on tax).
RE
 Another difference between cess and the usual
tax is the way in which tax revenue from cess
is kept. Revenue from main taxes like Personal
Income taxes is kept at Consolidated Fund of
India (CFI). The government can use it for any
purposes. But the tax revenue from Cess
are first credited to the CFI and the Central
Government may, after due appropriation
made by Parliament, utilise the money for
the specified purposes.
 Another major feature of cess like surcharges
is that the Centre need not share it with
states. But regarding all other major taxes
they come under the divisible pool and
hence they shall be shared with the states
with the recommendations of the Finance
Commission.
 In News: The union government has asked
all states to dip into the Rs. 52,000 crore
Construction Cess fund to give financial and
allied benefits to the construction workers
through direct benefit transfer (DBT).The central
advise comes as Corona outbreak spreads
and the country is facing an unprecedented
lockdown hampering livelihood of millions
of informal workers. The advisory comes
under Section 60 of the Building and Other
Construction Workers (BOCW) Act, 1996. The
amount to be granted to construction workers
may be decided by the respective state
governments and Union territories.
12