Explanation:

Liquidity refers to how quickly an asset can be converted into cash without loss of value. The correct decreasing order of liquidity is:

1. Currency (Cash) – The most liquid asset, as it is immediately available for transactions.
2. Demand deposits with banks – These can be withdrawn at any time without prior notice, making them highly liquid.
3. Savings deposits with banks – Less liquid than demand deposits as they have withdrawal limits and restrictions.
4. Certificate of Deposits (CDs) – Fixed-term deposits that can be liquidated before maturity, but often with penalties.
5. Time deposits with banks – These have the least liquidity as they are locked for a fixed term and cannot be withdrawn without penalties.

• Thus, the correct order is Currency > Demand Deposits > Savings Deposits > Certificate of Deposits > Time Deposits, which matches option (a).

Explanation:

• Basel I (1988): Focused on Capital Adequacy, introducing risk-weighted assets (RWA) to determine the capital requirement for banks.
• Basel II (2004): Introduced the Three Pillars framework—Minimum Capital Requirements, Supervisory Review, and Market Discipline to ensure better risk management.
• Basel III (2010): Focused on improving bank resilience, introducing stricter capital requirements, leverage ratio, and liquidity coverage ratio in response to the 2008 financial crisis.

Explanation:

• Pigovian Tax: Designed to correct negative externalities like pollution, ensuring costs are internalized.
• Angel Tax: Imposed on startups receiving investments above fair market valuation, preventing tax evasion.
• Windfall Tax: Applied on unexpected, high profits earned due to favorable market conditions beyond a company’s control.
• Cess: Dedicated tax for specific purposes like education, health, or infrastructure development.
• Surcharge: Additional tax over existing tax rates, often used to raise extra government revenue from high-income individuals or corporations.

Explanation:

• Statement 1 is correct. The Finance Commission is tasked with determining the formula for the distribution of taxes between the Centre and the States and the allocation of grants-in-aid to the states from the Consolidated Fund of India. This involves detailed calculations and considerations to ensure equitable distribution based on factors like population, area, and state income.
• Statement 2 is incorrect. Although the Finance Commission plays a critical role in shaping fiscal federalism in India, it does not function as a mediator for financial disputes between the Centre and the states. The role of mediating financial or constitutional disputes generally falls to the judiciary, not the Finance Commission. The Commission’s recommendations are advisory and are meant to guide the allocation of financial

Explanation:

• Statement 1 is correct because FDI requires investors to actively manage or have a significant influence on the management of the enterprise.
• Statement 2 is correct as FDI involves investment in physical assets such as properties or manufacturing facilities.
• Statement 3 is correct, highlighting FDI’s focus on long-term investment rather than quick financial gains.
• Statement 4 is incorrect; entry and exit for FDI are complex due to the significant investments and regulatory requirements involved.Top of Form

Foreign Direct Investment

• FDI refers to the investment made by foreign investors to obtain a substantial interest in an enterprise located in a different country.
• Active investor in FDI.
• Direct investment type for FDI.
• High degree of control in FDI.
• Long-term investment in FDI.
• Investment in physical assets of the foreign country for FDI.
• Difficult entry and exit for FDI.
• Stable risks involved in FDI.

Foreign Portfolio Investment

• FPI involves investing in financial assets of a foreign country, such as stocks or bonds available on an exchange.
• Passive investor in FPI.
• Indirect investment type for FPI.
• Very low degree of control in FPI.
• Short-term investment in FPI.
• Investment in financial assets of the foreign country for FPI.
• Relatively easy entry and exit for FPI.
• Volatile risks involved in FPI.

Explanation:

• Statement 1 is correct as trade deficits can initially improve living standards by providing access to a broader array of products.
• Statement 2 is correct, as ongoing trade deficits often require sourcing more foreign currency, which can devalue the local currency.
• Statement 3 is correct as trade deficits enable a country to consume more than it produces, expanding access to essential goods.

Explanation:

1. (Fiscal Deficit) corresponds to A: Excess of total expenditures over total receipts excluding borrowing.
2. (Budget Deficit) corresponds to B: Excess of total expenditures, including loans net of repayments, over revenue receipts and non-debt capital receipts.
3. (Revenue Deficit) corresponds to C: Difference between the revenue expenditure and revenue receipts.
4. (Primary Deficit) corresponds to D: Fiscal deficit minus interest payments.

• Fiscal Deficit: It indicates the total borrowing requirement of the government, including money borrowed to cover both capital and revenue expenditures.
• Budget Deficit: This is a broader concept than fiscal deficit and includes all government borrowings used to meet expenses.
• Revenue Deficit: Reflects the shortfall in government’s current revenue compared with its current expenditure, indicating how much of the government’s spending is going unmet by current revenues.
• Primary Deficit: Focuses on the current year’s deficit situation without considering interest payments on past loans, highlighting the government’s immediate fiscal health excluding loan-servicing costs.

Explanation:

• Statement 1 is correct as the E-Way Bill is mandatory for transporting goods valued over Rs. 50,000, for both inter-state and intra-state movement.
• Statement 2 is incorrect because the E-Way Bill system reduces but does not eliminate physical checkpoints; verification can still occur anywhere during transit.
• Statement 3 is incorrect as both registered and unregistered persons can generate an E-Way Bill, the latter through the registered supplier, recipient, or as an enrolled transporter.

Explanation:

• Statement-I is correct as it correctly describes the current tax regime for petroleum products. These products are excluded from the GST, meaning that the taxes paid on them are subject to separate state and central taxes without the benefit of input tax credit.
• Statement-II is also correct as potential implications of including petroleum products under GST. While standardizing tax rates could lead to more uniform prices across states, it could also result in revenue losses for states due to the possibility of lower tax rates under GST compared to the higher rates charged as state VAT.
• These statements, while both accurate, address different facets of the tax regime for petroleum products. Statement-II does not directly explain why petroleum products are excluded from GST as mentioned in Statement-I but discusses the potential effects if they were included

Explanation:

• A ‘debt trap’ refers to a situation where an entity, such as a person, business, or government, is forced to take out new loans continually in order to pay off existing debts. This often happens when the entity’s debt obligations exceed its repayment capacity, resulting in a vicious cycle where the debt burden keeps increasing over time. This scenario can severely hamper financial stability and growth, as more and more resources are diverted towards servicing debt rather than other productive uses.

Explanation:

• Treasury Bills – Treasury bills are short-term government securities issued to meet temporary cash shortages. They are a part of the internal debt since they are borrowed within the country.
• Special Securities Issued to the RBI – These are securities issued specifically to the Reserve Bank of India, usually as part of government debt management strategies. They are also considered internal debt because they are issued within the country to the central bank.
• Funds Collected through Small-Savings Schemes – Funds collected from the public through various small-savings schemes are used by the government for its expenditures. These funds form part of the internal debt as well, as they are sourced domestically.
• Masala Bonds – Masala bonds are rupee-denominated bonds issued by Indian entities in overseas markets. Despite being issued in rupees, these are not considered internal debt because they are raised from foreign investors.
• Treasury bills, special securities issued to the RBI, and funds from small-savings schemes are all components of internal debt.
• Masala bonds are not considered internal debt.
• Therefore, the correct answer is:
• C. Only Three (Treasury bills, special securities issued to the RBI, and funds collected through small-savings schemes) are components of internal debt.

Explanation:

• In the context of a government budget, the ‘Capital Account’ records all transactions related to the government’s long-term investments and loans.
• This includes expenditures on infrastructure projects, purchase of fixed assets, investments in securities, and loans provided by the government to states, foreign governments, or public sector enterprises.
• This account is crucial for tracking how government funds are allocated towards building capital assets that are expected to benefit the economy over a longer period. It is distinct from the Revenue Account, which deals with the day-to-day operating expenses and revenue transactions of the government.

Explanation:

• Statement 1 is correct: The Phillips curve is an economic concept developed by A. W. Phillips stating that inflation and unemployment have a stable and inverse relationship.
• The theory claims that with economic growth comes inflation, which in turn should lead to more jobs and less unemployment. This theory was found to be empirically correct in many countries.

• Statement 2 is correct: However, the concept was called into question due to the occurrence of stagflation in the 1970s, when there were high levels of both inflation and unemployment.

Explanation:

• Statement 1 is correct: The First Industrial Revolution began in Britain in the late 18th century and was driven by the mechanization of the textile industry.
• Statement 2 is incorrect: Electricity and gas became prominent in the Second Industrial Revolution, while the First Industrial Revolution primarily relied on water and steam.
• Statement 3 is correct: The steam engine and coal extraction were crucial in driving industrial growth.

First Industrial Revolution (1765):

• Initiated in Britain with the mechanization of the textile industry.
• Transition from agricultural to industrial society with mass extraction of coal and steam engine innovations.
• Introduction of factories which centralized production processes.

Explanation:

• Statement 1 is correct: The Second Industrial Revolution was powered by electricity, gas, and oil as new energy sources.
• Statement 2 is correct: The invention of the combustion engine and improvements in transportation (e.g., automobiles, planes) were defining features of this era.
• Statement 3 is incorrect: Automation with robots and programmable logic controllers was a feature of the Third Industrial Revolution, not the second.

Second Industrial Revolution (1870):

• Emergence of new energy sources: electricity, gas, and oil.
• Significant advancements in communication (telegraph, telephone) and transportation (automobiles, airplanes).
• Introduction of mass production techniques, notably Ford’s assembly line.

Third Industrial Revolution (1969):

• Characterized by the rise of electronics and information technology.
• Introduction of high-level automation in production with programmable logic controllers and robots.

Fourth Industrial Revolution (Industry 4.0):

• Ongoing revolution based on the digitization of manufacturing.
• Focus on the end-to-end digitization of all physical assets and integration into digital ecosystems.
• Utilization of big data, artificial intelligence, and analytics to drive complete digitization of the manufacturing sector.
• Creation of “smart factories” where machines are interconnected digitally, capable of autonomous decision-making based on data analytics.

Explanation:

• The PLI scheme for pharmaceuticals provides financial incentives for the manufacturing of Active Pharmaceutical Ingredients (APIs), Key Starting Materials (KSMs), and Drug Intermediates to boost domestic production and reduce import dependence.

Production Linked Incentive Scheme (PLIS):

• Launch and Scope: Initiated for the manufacturing sectors of mobiles, medical devices, and pharmaceuticals, with plans to expand to eight more sectors with export potential.
• Incentive Mechanism: Companies receive a 4% to 6% incentive on incremental sales compared to a base year. For instance, if sales increase from Rs. 1 lakh to Rs. 1.2 lakh, the incentive would be 4% of the Rs. 20,000 increase, equaling Rs. 800.
• Investment Requirement: There is a requirement for additional investment in plant and machinery to qualify for the incentive.
• Pharmaceutical Sector Implementation: Targets about 53 active pharmaceutical ingredients (APIs) covering 41 products. Financial incentives are given for additional sales generated by companies that establish indigenous Greenfield or brownfield investments.
• Objective: Aimed at boosting domestic manufacturing of Key Starting Materials (KSMs), Drug Intermediates, and APIs to attract large investments and reduce import dependence, particularly from critical API imports from China.
• Significance to India: The Indian pharmaceutical industry is significant globally, being the third largest by volume and contributing 3.5% to global drug exports. Despite its stature, India relies heavily on imports for basic raw materials like bulk drugs and APIs.

Explanation:

• Statement-I is correct because inclusive growth focuses on creating opportunities for all, ensuring equity in economic benefits.
• Statement-II is correct as inclusive growth is built on four attributes: opportunity (creating economic chances), capability (enhancing skills), access (connecting opportunities to people), and security (protecting livelihoods).
• Statement-II explains Statement-I as it elaborates on the key elements that ensure equitable growth.

Explanation:

• Statement 1 is correct: According to the World Bank, inclusive growth focuses on economic growth as a necessary condition for poverty reduction.
• Statement 2 is incorrect: Inclusive growth is not strictly defined in terms of employment generation or income distribution; these are potential outcomes rather than specific goals.
• Statement 3 is incorrect: Inclusive growth is typically market-driven, with the government playing a facilitating role.

Concept of inclusive growth according to the World Bank:

1. Objective of Inclusive Growth: It focuses on economic growth as a crucial condition for poverty reduction, emphasizing long-term sustainability.
2. Broad-Based Growth: Growth should be broad-based across sectors and inclusive of the majority of a country’s labor force.
3. Equality of Opportunity: Inclusive growth implies equality of opportunity in terms of access to markets, resources, and an unbiased regulatory environment.
4. Focus on Productive Employment: The emphasis is on productive employment rather than income redistribution, highlighting both employment and productivity growth.
5. Pro-Poor Growth: Follows an absolute definition of pro-poor growth, where poor people benefit in absolute terms, rather than the relative definition that requires outpacing average income growth.
6. Market-Driven Growth: Predominantly fueled by market-driven sources, with the government playing a facilitating role.

Need for Inclusive Growth in India:

• Economic Liberalization Impact: Post-1990s, India saw accelerated growth, transforming from an agricultural to a services economy. High growth rates were achieved, but a large section of the population remained unaffected.
• Sectoral and Social Inequality: High growth has not uniformly reached all segments of society, particularly rural areas, women, and minorities, leading to sectoral, social, and spatial inequalities.
• Government’s Role: The government recognizes the need for ‘inclusive growth’ to address employment, poverty reduction, regional development, and human development more holistically.

Challenges for Inclusive Growth:

• • Poverty and Employment: High population percentages remain under the poverty line with low-quality employment opportunities.
  • Agriculture: Despite a large workforce in agriculture, the sector contributes minimally to GDP and faces issues like low productivity and dependence on monsoon.
  • Social Development: Critical issues in health, education, gender disparity, and child nutrition hinder progress.
  • Regional Disparities: Varying development levels across regions create pronounced disparities in income and development.

Strategies for Achieving Inclusive Growth:

• • Infrastructure and Skill Development: Developing infrastructure and enhancing skills are crucial for bringing rural India into the mainstream.
  • Entrepreneurial Development: Encouraging entrepreneurship through an enabling environment and easy access to finance.
  • Government and Civil Society: A collaborative approach involving government, industry, and civil society is essential to address the multifaceted challenges of inclusive growth.

Explanation:

• Statement 1 is correct: As per the latest National Family Health Survey (NFHS), India’s TFR has declined to 2.0, which is below the replacement level fertility of 2.1.
• Statement 2 is correct: India’s working-age population (20-59 years) will peak around 2041, reaching 59% of the total population.
• Statement 3 is correct: India’s annual population growth rate has declined from 2.5% (1971-81) to around 1% in the 2020s.
• Statement 4 is correct: The elderly population (60 years and above) is projected to reach 16% by 2041.

Explanation:

• Statement 1 is correct: The Code on Wages, 2019 introduces the statutory concept of ‘Floor Wage’ to ensure a minimum wage standard for all workers across India.
• Statement 2 is incorrect: MGNREGA wages have been kept outside the purview of the Code on Wages, meaning rural employment schemes are not regulated under this code.
• Statement 3 is correct: The code mandates that wages be paid within two working days if an employee is removed, dismissed, retrenched, or resigns.

Code on Wages, 2019:

• Replaces Payment of Wages Act, Minimum Wages Act, Payment of Bonus Act, and Equal Remuneration Act.
• Introduces ‘Floor Wage’ applicable to all workers (organized/unorganized).
• Minimum wages reviewed every five years and overtime wages must be twice the regular rate.
• MGNREGA wages are outside its scope.
• Wages must be paid within two working days if an employee is dismissed, retrenched, or resigns.

Explanation:

• Statement 1 is correct: The code mandates that all employees must be provided an employment letter, which promotes formalization of employment.
• Statement 2 is correct: Overtime wages must be paid at twice the rate of regular wages, and workers must give consent for overtime work.
• Statement 3 is incorrect: The code defines a factory as a manufacturing unit employing 20 workers (with electricity) or 40 workers (without electricity), not 30 or 50 workers.

Occupational Safety, Health, and Working Conditions Code, 2020:

• Replaces 13 previous acts, including the Factories Act, 1948.
• Mandatory employment letters for all employees.
• Defines a factory as employing 20 workers (electric) or 40 workers (non-electric).
• Allows women in all establishments, including night shifts, with safeguards.
• Overtime wages must be double the normal wages.

Explanation:

• Statement 1 is correct: The Code universalizes social security benefits for all workers, including those in the unorganized sector.
• Statement 2 is correct: The definitions of ‘gig workers’ and ‘platform workers’ have been introduced, and aggregators must contribute 1-2% of their turnover to their social security fund.
• Statement 3 is incorrect: EPFO coverage is now applicable to all establishments with 20 or more workers, not 10 or more workers.

Code on Social Security, 2020:

• Replaces 9 previous Acts.
• Extends social security benefits to all workers, including gig and platform workers.
• Aggregators must contribute 1-2% of turnover to social security funds.
• EPFO coverage extended to all establishments with 20+ workers.

Explanation:

• Statement 1 is correct: The Industrial Relations Code, 2020 increases the worker threshold for layoffs and retrenchments requiring government approval from 100 to 300 workers.
• Statement 2 is incorrect: Companies with more than 300 workers still need approval to lay off employees, but if authorities do not respond in time, the approval is deemed granted.
• Statement 3 is correct: The mandatory 14-day notice period for strikes and lockouts has been extended to all industrial units, not just public utility firms.

Industrial Relations Code, 2020:

• Replaces Trade Unions Act, Industrial Employment Act, and Industrial Disputes Act.
• Increases layoff approval threshold from 100 to 300 workers.
• 14-day notice mandatory for all strikes and lockouts.
• Mass casual leave (by 50%+ workers) is considered a strike.
• Fixed-term employment allowed for all industries.

Explanation:

• Under the Employees’ Pension Scheme (EPS), 1995, the Government of India contributes 1.16% of the employee’s basic salary and dearness allowance towards the pension scheme, in addition to the employer’s 8.33% contribution.

Explanation:

• As per EPFO regulations, it is mandatory for an establishment (factory or service industry) with more than 20 workers to register with EPFO. However, employees earning more than ₹15,000 per month are not required to contribute but may opt-in voluntarily.