UPSC Essentials | Daily subject-wise quiz : Economy MCQs on startup ecosystem in India, Female Labour Force Participation Rate and more (Week 88)

1. A free fall in the rupee’s value is primarily prevented by interventions from the Reserve Bank of India (RBI).

2. A strong balance of payments position supports the stability of the rupee.

3. External factors, such as the performance of the US dollar, do not affect the value of the Indian rupee.

Which of the statements given above is/are correct?

(a) 1 only

(b) 1 and 2 only

(c) 2 and 3 only

(d) 1, 2, and 3

Explanation

— India’s foreign exchange reserves increased by $1.51 billion every week, reaching $658.09 billion on November 29. This reversed an eight-week drop from the all-time high of $704.89 billion set on September 27.

— In the almost two months since September 27, not only have forex reserves fallen by $46.79 billion, but the rupee has also weakened from 83.67 to 84.66 against the US dollar.

— However, the depletion or accretion of forex reserves is not solely due to FPIs withdrawing or putting money into Indian markets.

— Reserve movements are driven by the country’s external balance of payments (BoP) transactions, including current and capital. Current account transactions primarily include the export and import of commodities and services. A good balance of payments situation helps the currency remain stable. Hence, statement 2 is correct.

— In terms of merchandise trade, India has always been a net importer. In 2023-24, its merchandise exports were $441.48 billion, far less than imports of $683.55 billion, resulting in a $242.07 billion trade imbalance.

— A free fall in the rupee’s value is primarily prevented by interventions from the Reserve Bank of India (RBI). Hence, statement 1 is correct.

— External factors, such as the performance of the US dollar, also affect the value of the Indian rupee. Hence, statement 3 is not correct.

Therefore, option (b) is the correct answer.

QUESTION 2

With reference to the Reserve Bank of India’s measures to reduce reliance on the US dollar, consider the following statements:

1. The RBI has promoted the use of the Indian rupee in international trade settlements.

2. The RBI has increased its gold reserves as a hedge against currency volatility.

3. De-dollarization involves completely replacing the US dollar in global trade.

Which of the statements given above is/are correct?

(a) 1 and 2 only

(b) 2 only

(c) 3 only

(d) 1, 2, and 3

Explanation

— Shaktikanta Das, Governor of the Reserve Bank of India (RBI), stated that India is not pursuing “de-dollarisation” and that recent steps supporting domestic currency transactions are aimed to de-risk Indian commerce. The RBI has pushed the use of the Indian rupee in international trade settlements. Hence, statement 1 is correct.

— The clarification comes only days after US President-elect Donald Trump threatened BRICS members with “100 percent tariffs” if they sought to diminish their reliance on the US dollar in international commerce.

— Das stated that the BRICS (Brazil, Russia, India, China, and South Africa) nations have discussed the prospect of a single currency but have not reached a resolution. RBI measures, such as permitting Vostro accounts and entering local currency trade agreements, are intended to diversify risk rather than reduce reliance on the dollar.

— The RBI has raised its gold holdings to protect against currency volatility. Hence, statement 2 is correct.

— “This is not about de-dollarisation; it is about de-risking our trade,” says Das. “The geographical distribution of the BRICS nations is an important consideration. Unlike the Eurozone, where geographical proximity allows for a common currency, BRICS countries are distributed across varied geographies, creating significant obstacles,” he said.

— De-dollarization involves reducing dependence on the dollar instead of replacing the US dollar in global trade. Hence, statement 3 is not correct.

Therefore, option (a) is the correct answer.

QUESTION 3

With reference to the startup ecosystem in India, consider the following statements:

1. The Government of India has prioritized promoting startups in Tier-2 and Tier-3 cities to decentralize innovation hubs.

2. The Department for Promotion of Industry and Internal Trade (DPIIT) is responsible for recognizing startups under the Startup India initiative.

3. All startups in Tier-2 and Tier-3 cities are eligible for tax exemptions under the Startup India initiative.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) 1 and 2 only

(d) 1, 2, and 3

Explanation

— There have been consistent efforts to integrate India into the global supply chain and lower tariffs to the global average, but pressure to raise tariffs persists, necessitating an investigation into why India’s industry is not competitive enough, Department for Promotion of Industry and Internal Trade (DPIIT) Secretary Amardeep Singh Bhatia said Wednesday.

— Bhatia’s statement comes as huge steel producers are pressuring the government to drastically boost steel tariffs. The Steel Ministry has asked the Commerce and Industry Ministry to hike steel import tariffs by up to 25%, citing a rapid increase in steel imports from countries with which India has signed free trade agreements (FTAs).

— Micro, Small, and Medium Enterprises (MSMEs) have warned that such a move will affect the downstream industry, potentially forcing them out of business due to rising steel prices. Notably, imported steel is far cheaper than domestic steel, prompting concerns about competitiveness. The Department for Promotion of Industry and Internal Trade (DPIIT) is in charge of recognising businesses under the Startup India initiative. Hence, statement 2 is correct.

— Indian steel producers are facing many hurdles in foreign markets, resulting in a dramatic drop in exports and a huge increase in steel imports into India. Steel imports into India increased by almost 41% in the first half of the current fiscal year, while exports fell by 36%, according to government figures.

— The Government of India has prioritized promoting startups in Tier-2 and Tier-3 cities to decentralize innovation hubs. Hence, statement 1 is correct.

— All startups in Tier-2 and Tier-3 cities are not eligible for tax exemptions under the Startup India initiative. Hence, statement 3 is not correct.

Therefore, option (c) is the correct answer.

QUESTION 4

With reference to India’s stance on global trade agreements, consider the following statements:

1. India has opposed the inclusion of non-trade issues within the framework of the World Trade Organization (WTO).

2. India’s position on trade agreements is often supported by developing nations with shared economic interests.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Explanation

— The China-led Investment Facilitation for Development (IFD) agreement has received support from 128 countries at the World Trade Organisation (WTO), but India, South Africa, Namibia, and Turkey will continue to oppose the initiative due to its potential to undermine weaker countries’ policy space, a central government official said on Tuesday ahead of the WTO General Council meeting in Geneva on December 16-17.

— This comes at a time when investment flows are gradually shifting away from China, owing to a potential US-China trade war and deteriorating consumer demand in China. As Chinese enterprises’ overseas assets reach historic highs, these investments are increasingly flowing to ASEAN countries.

— “There is enormous push and momentum from China. They enjoy the support of 128 out of 166 WTO countries, including Pakistan. Four countries—India, South Africa, Namibia, and Turkey—are against it. The United States is not opposed to it, but has chosen not to participate in the deal,” the official stated. Notably, Pakistan was not previously included in the IFD.

— India has opposed the inclusion of non-trade problems in the framework of the World Trade Organisation (WTO). Hence, statement 1 is correct.

— India’s perspective on trade agreements is frequently supported by developing countries with similar economic goals. Hence, statement 2 is correct.

Therefore, option (c) is the correct answer.

QUESTION 5

With reference to the Female Labour Force Participation Rate (FLFPR) in India, consider the following statements:

1. The FLFPR in India has shown a consistent decrease since 2017-18, as per the Periodic Labour Force Survey (PLFS).

2. The FLFPR in India is above the global average as per recent surveys.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Explanation

— Female labour force participation rate (LFPR) increased in almost all Indian states from 2017-18 to 2022-23, with rural areas outperforming urban areas, according to a recent working paper produced by the Economic Advisory Council to the Prime Minister (EAC-PM). Hence, statement 1 is not correct.

— According to the paper, states such as Bihar, Punjab, and Haryana have consistently reported very low levels of female LFPR. This inter-state variation in female LFPR is significant given that Haryana and Punjab are among India’s richest states, while Bihar is the poorest.

— According to a new working paper titled Female Labour Force Participation Rate: An Observational Analysis of the Periodic Labour Force Survey (PLFS) 2017-18 to 2022-23, co-authored by EAC-PM Member Shamika Ravi and Mudit Mapoor of EPU, ISI-Delhi, rural female LFPR increased to 41.5% (~69%) from 24.6% from 2017-18 to 2022-23, while urban LFPR increased to 25.4% from 20.4%.

— According to the report, married males have consistently greater LFPR across states and age groups, whereas marriage dramatically lowers female LFPR, particularly in metropolitan areas. In terms of age, female LFPR follows a bell-shaped curve, peaking at 30-40 years old and then rapidly falling. The male LFPR, on the other hand, remains high (almost 100 percent) from ages 30 to 50, then gradually declines, according to the report.

— The FLFPR in India is below the global average as per recent surveys. Hence, statement 2 is not correct.

Therefore, option (d) is the correct answer.

Previous Daily Subject-Wise-Quiz

Daily Subject-wise quiz — History, Culture, and Social Issues (Week 88)

Daily subject-wise quiz — Polity and Governance (Week 88)

Daily subject-wise quiz —  Science and Technology (Week 88)

Daily subject-wise quiz — Environment and Geography (Week 88)

Daily subject-wise quiz — Economy (Week 87)

Daily subject-wise quiz – International Relations (Week 87)

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