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Daily Prelims Test – 27_January_2022

1. Consider the following statements regarding Money Bill:

1)  The Lower House of the Parliament has limited power over it.

2)  It contains the government’s expenditure, revenues, and borrowings.

3)  It contains the imposition, abolition, remission, alteration or regulation of any tax.

Which of the above statements is/are correct?

a)   1 and 2 only

b)  2 only

c)   2 and 3 only

d)  1, 2 and 3

Answer: (c) 2 and 3 only

Explanation:

In NEWS: What is a Money Bill?

●     Apart from the money and finance bills, the other two bills can be presented in either of the houses.

●     But the money and finance bills have to be introduced in Lok Sabha. The Upper House of the Parliament has limited power over itHence statement (1) is incorrect.

Money bill:

●     Defined in Article 110 of the Constitution, money bill contains tax proposals of the government, telling about the new taxes and changes in rates of existing taxes.

●     It also contains the government’s expenditure, revenues, and borrowings. Hence statement (2) is correct.

●     According to the Constitution, a money bill contains the imposition, abolition, remission, alteration or regulation of any taxHence statement (3) is correct.

●     But the imposition of local taxes doesn’t come under the purview of the money bill.

●     The regulation of the borrowing of money by the Union government also comes under its ambit.

●     The payment of moneys into or the withdrawal of moneys from Consolidated Fund or the Contingency Fund of India also come under this bill.

●     The appropriation of money out of the Consolidated Fund of India and the declaring of any expenditure charged on the Consolidated Fund of India or the increasing of the amount of any such expenditure comes under money bill.

●     The receipt of money on account of the Consolidated Fund of India or the public account of India or the custody or issue of such money or the audit of the accounts of the Union or of a state comes under the money bill.

●     The Speaker of the Lok Sabha takes the final call if a bill is a money bill or not. And his decision cannot be challenged in any court of the country.

Source: https://www.business-standard.com/podcast/finance/what-is-money-bill-122012600093_1.html

2. Consider the following statements:

1)  The Union Budget gives the statement of receipts and expenditure for three consecutive years.

2)  The Union Budget includes the Appropriation Bill and Finance Bill.

3)  The Appropriation Bill gives the government the power to withdraw funds from the Consolidated Fund of India.

Which of the above statements is/are correct?

a)   1 and 2 only

b)  2 only

c)   2 and 3 only

d)  1,2 and 3

Answer: (c) 2 and 3 only

Explanation:

In NEWS: What is the annual Union Budget?

●     Under Article 112 of the Indian Constitution, the central government is bound to lay down the country’s ‘annual financial report’.

●     Also called the Union Budget of India, this is the most extensive account of the Central government’s finances.

●     Till its 2017 iteration, the Union Budget was presented on 28th February. However, since 2017, the finance minister has been presenting it on the 1st of February.

●     The Budget gives the statement of receipts and expenditure for three consecutive years. These are the actuals for the preceding year, estimates for the present year, and estimates for the coming year.  Hence statement (1) is correct.

●     The Budget also includes the Appropriation Bill and Finance Bill. Both the Houses of Parliament have to pass them before implementation on 1st April of the new financial year. Hence statement (2) is correct.

●     The Appropriation Bill is a money Bill that gives the government the power to withdraw funds from the Consolidated Fund of India in order to meet its expenses during the course of the financial year. Hence statement (3) is correct.

●     Meanwhile, the Finance Bill contains key changes pertaining to direct and indirect taxes.

●     The nodal agency responsible for producing the Union Budget is the Department of Economic Affairs, which comes under the Ministry of Finance. 

Source: https://www.business-standard.com/budget/podcast/what-is-the-annual-union-budget-122012100083_1.html

3. Consider the following statements:

1)  The power to create new districts or alter or abolish existing districts rests with the home ministry.

2)  The power to change the name of a district or a railway station rests with the Rajya Sabha.

Which of the above statements is/are correct?

a)   1 only

b)  2 only

c)   Both 1 and 2

d)  Neither 1 nor 2

Answer: (d) Neither 1 nor 2

Explanation:

In NEWS: With creation of 13 new districts, AP now has 26 districts

●     The Andhra Pradesh (AP) government issued a preliminary notification for creation of 13 new revenue districts in exercise of its powers underSection.3 (5) of AP Districts (Formation) Act of1974

●     According to the 2011 Census, there were 593 districts in the country.

●     The Census results showed that between 2001-2011, as many as 46 districts were created by States.

How are new districts carved?

●     The power to create new districts or alter or abolish existing districts rests with the State governmentsHence statement (1) is incorrect.

●     This can either be done through an executive order or by passing a law in the State Assembly.

●     Many States prefer the executive route by simply issuing a notification in the official gazette.

How does it help?

●     States argue that smaller districts lead to better administration and governance.

●     For example, in 2016, the Assam government issued a notification to upgrade the Majuli sub-division to Majuli district for “administrative expediency”.

Does the Central government have a role to play here?

●     The Centre has no role to play in the alteration of districts or creation of new ones. States are free to decide.

●     The Home Ministry comes into the picture when a State wants to change the name of a district or a railway stationHence statement (2) is incorrect.

●     The State government’s request is sent to other departments and agencies such as the Ministry of Earth Sciences, Intelligence Bureau, Department of Posts, Geographical Survey of India Sciences and the Railway Ministry seeking clearance.

●     A no-objection certificate may be issued after examining their replies.

Source: https://www.thehindu.com/news/national/other-states/explained-the-why-and-how-of-creating-a-new-district/article34576952.ece

4. Consider the following sectors:

1)  Arms & Ammunition of defence equipment

2)  Defence aircraft & warships

3)  Atomic energy

4)  Railways

Which of the above sectors comes under the Strategic sector PSUs as per recently released government notification in India?

a)   1, 2 and 4 only

b)  3 and 4 only

c)   2, 3 and 4 only

d)  1, 2, 3 and 4

Answer: (d) 1, 2, 3 and 4

Explanation:

In NEWS: Non-strategic PSU privatisation may see a push next year

●     A new committee has also been formed under the chairmanship of NITI Aayog CEO Amitabh Kant to help identify non-strategic PSUs for privatisation

●     As the new Public Sector Enterprises (PSE) policy clearly states the government’s intent of exiting non-strategic sectors that include steel, hospitality, tourism, urban development, health care, among others — either by privatisation or closure — some PSUs in these sectors are expected to attract private participants’ interest

Strategic sector PSUs

●        An industry is considered strategic if it has large innovative spillovers and if it provides a substantial infrastructure for other firms in the same or related industries.

●        Earlier, the strategic sectors were defined on the basis of industrial policy.

●        The government classified Central Public Sector Enterprises (CPSEs) as ‘strategic’ and ‘non-strategic’ on the basis of industrial policy that keeps on changing from time-to-time.

According to this, the Strategic sector PSUs are:

●        Arms & Ammunition of defence equipment

●        Defence aircraft & warships

●        Atomic energy

●        Applications of radiation to agriculture, medicine and non-strategic industry

●        Railways. Hence option (d) is correct.

Banking, insurance, defence, and energy are likely to be part of the strategic sector list. All other PSUs apart from the strategic sectors fall under Non-strategic Sector including Power Discoms.

Source: https://www.business-standard.com/article/markets/budget-2022-23-non-strategic-psu-privatisation-may-see-a-push-next-year-122012700049_1.html

5. Consider the following statements regarding Shell Company:

1)  In India, Shell companies are not defined under any specific law.

2)  It is corporate entities that do not have any significant assets in their possession or any active business operations.

Which of the above statements is/are correct?

a)   1 only

b)  2 only

c)   Both 1 and 2

d)  Neither 1 nor 2

Answer: (c) Both 1 and 2

Explanation:

In NEWS: Companies want FM to enable foreign listing

●     In order to facilitate SPAC transactions, the budget may consider introducing a tax deferral regime, similar to that which exists for business trusts (i.e. real estate investment trust and infrastructure investment trusts).

●     SPACs, also referred to as blank cheque entities, are shell companies (initially) that are listed on foreign stock exchanges by certain sponsors/investments funds, with the aim of acquiring operating companies within a prescribed time.

●     Consequently, such acquisition of operating companies, commonly referred to as the ‘De-SPAC’ process, results in listing of such target operating companies on the foreign stock exchange.

Shell company:

●     The term shell company is used for illegal companies whose basis of purpose of creation is derived from a ‘shell’ which has an outer covering but nothing inside that is a Shell company does no substantial tangible business. Such companies are generally only in papers and are mostly established in tax havens.

●     Shell companies are typically corporate entities which do not have any active business operations or significant assets in their possessionHence statement (2) is correct.

●     The government views them with suspicion as some of them could be used for money laundering, tax evasion and other illegal activities.

●     These companies are generally involved in money laundering and tax avoidance activities.

●     The main purpose is to divert money for tax evasion and route money generated from illegal activities to formal financial institutions.

●     Shell companies are not defined under any specific law. The Companies Act, 2013 does not define shell companies and what activities constitute shell companies. Hence statement (1) is correct.

●     Curbing illegal activities such as money laundering and can indirectly be used to target shell companies — Benami Transaction (Prohibition) Amendment Act 2016; The Prevention of Money Laundering Act 2002 and The Companies Act, 2013.

Source: https://www.businesstoday.in/union-budget-2022/opinion/story/budget-2022-companies-want-fm-to-enable-foreign-listing-320010-2022-01-23

6. Consider the following statements:

1)  Fiscal deficit is the excess of total disbursements from the consolidated fund of India excluding repayment of debt.

2)  Fiscal consolidation refers to the ways and means of narrowing the fiscal deficit.

3)  The FRBM Act mandates the central government to bring down its fiscal deficit to 3% of GDP.

Which of the above statements is/are correct?

a)   1 and 2 only

b)  2 only

c)   2 and 3 only

d)  1, 2 and 3

Answer: (d) 1, 2 and 3

Explanation:

In NEWS: What is the FRBM Act, 2003?

To ensure discipline in government finances and keep a check on fiscal profligacy, a legislation was enacted almost two decades ago – the FRBM Act, 2003.

What is the fiscal deficit?

●     Fiscal deficit is the excess of total disbursements from the consolidated fund of India, excluding repayment of debt, over total receipts into the fund (excluding debt receipts) during a financial year. Hence statement (1) is correct.

●     Simply put, it is the amount the government spent beyond its income and is measured as a percentage of the GDP.

Why is fiscal consolidation important for an emerging economy?

●     Fiscal consolidation refers to the ways and means of narrowing the fiscal deficit. A government typically borrows to bridge the deficit. It will then have to allocate a part of its earnings to service the debt. Hence statement (2) is correct.

●     The interest burden will increase as the debt increases. In the Budget for FY22, of the total government expenditure of over ₹34.83 lakh crore, more than 8.09 lakh crore (around 20 per cent) went towards interest payment.

●     Debt is one liability that is difficult to defer and, at the end of day, the government struggles to find more resources not just for capital expenditure but also revenue expenditure.

●     In the long run, an uncontrolled fiscal deficit will hurt economic growth.

Is fiscal consolidation legally mandated in India?

●     The seeds for fiscal consolidation were sown in 1994 by the then Finance Minister Manmohan Singh.

●     In his budget speech for FY95, he highlighted the need for fiscal discipline and pronounced a policy to end monetising the deficit. 

●     The initial deadline to reach the 3% target was 2007-08 but it has been extended several times over the years. In 2018, the deadline was again extended to 2020-21. Hence statement (3) is correct.

●     However, in the FY21 Budget, the target was relaxed to 3.5% as permitted under the FRBM Act.

●     The Centre made use of escape clauses to deviate from the fiscal consolidation road map.

●     The option allows the government to widen the deficit by 0.5 percentage points in times of exigencies such as a war or calamities of national proportion.

Source: https://www.business-standard.com/podcast/finance/what-is-the-frbm-act-2003-122011400043_1.html

7. The Corruption Perception Index is prepared by the

a)   Transparency International

b)  World Justice Project

c)   Greenpeace

d)  World Bank

Answer: (a) Transparency International

Explanation:

In NEWS: India ranks 85 in Transparency International’s corruption index

●     Underlining that some of the mechanisms that could help reign in corruption are weakening, Transparency International ranked India at 85 among 180 countries in its Corruption Perception Index report. Hence option (a) is correct.

●     The index, which ranks 180 countries and territories by their perceived levels of public sector corruption according to experts and business people, uses a scale of 0 to 100 to rank Corruption Perception Index (CPI), where 0 is highly corrupt and 100 is very clean. Transparency International gave India a CPI score of 40.

●     In 2021, India ranked 86th with the same CPI score of 40. The report highlighted concerns over the risk to journalists and activists who have been “victims of attacks by the police, political militants, criminal gangs and corrupt local officials.”

Source: https://indianexpress.com/article/india/india-ranks-85-in-transparency-internationals-corruption-index-7741760/

8. Consider the following statements:

1)  An election manifesto cannot be construed as a corrupt practice under section 123 of the Representation of the People Act, 1951.

2)  Currently, there is no Indian law to govern the freebies.

Which of the above statements is/are correct?

a)   1 only

b)  2 only

c)   Both 1 and 2

d)  Neither 1 nor 2

Answer: (c) Both 1 and 2

Explanation:

In NEWS: Supreme Court issues notice to Centre, Election Commission on plea against freebies

●     Incidentally, the apex court had already issued notice to the Centre, EC and some states on another plea against direct cash transfer schemes and freebies more than two years ago. The poll watchdog cited limitations of its powers in its response.

●     The Bench also referred to the Supreme Court’s earlier judgement in the case of Subramaniam Balaji vs State of Tamil Nadu where the Court while stating that the promises made in an election manifesto cannot be construed as a ‘corrupt practice’ under section 123 of the Representation of the People Act, 1951. Hence statement (1) is correct.

●     It had directed the Election Commission to frame guidelines on the contents of election manifesto with the consultation of political parties and include it in the Model Code of Conduct (MCC) for the guidance of political parties and candidates.

●     Also, the commission has issued instructions about implementing the ongoing government schemes while the code of conduct is in operation.

●     Currently, there is no Indian law to govern the freebies being announced by the state governments. Hence statement (2) is correct.

Source: https://indianexpress.com/elections/supreme-court-notice-centre-ec-pil-poll-promises-freebies-7740459/

9. Recently, the term CHIRU-2Q22 is seen in news, it is

a)   A naval drill

b)  A nematode-resistant species

c)   A new variety of potato

d)  A Portable arm

Answer: (a) A naval drill

Explanation:

In NEWS: Iran, Russia and China begin naval drill

●     Iran, Russia and China began a joint naval drill in the Indian Ocean aimed at boosting marine security. Hence option (a) is correct.

●     The manoeuvres would cover some 17,000 square km, or 10,600 miles, in the Indian Ocean’s north, and include night fighting, rescue operations and firefighting drills.

●     This is the third joint naval drill between the countries since 2019.

●     The countries conducted military artillery fire against the sea targets. Also, they took part in tactical maneuvering. The countries also conducted anti – piracy drills during the exercise.

●     CHIRU is a naval drill recently conducted by China, Russia and Iran in the Gulf of Oman. China sent Urumqi, a missile destroyer to take part in the exercise.

Source: https://www.thehindu.com/news/international/iran-russia-and-china-begin-naval-drill/article38304811.ece

10. With reference to Indian history, which of the following statements is/are correct?

1)  The Nizamat of Arcot emerged out of Hyderabad State.

2)  The Mysore Kingdom emerged out of Vijayanagara Empire.

3)  Rohilkhand Kingdom was formed out of the territories occupied by Ahmad Shah Durrani.

Select the correct answer using the code given below.

a)   1 and 2

b)  2 only

c)   2 and 3

d)  3 only

Answer: (b) 2 only

Explanation:

Nizamat of Arcot was established by Mughal Emperor Aurangzeb and was the legal dependency of the Nizam of Hyderabad, it did not emerge from the Hyderabad state. Hence statement (1) is not correct.

Mysore was a small feudatory kingdom under the Vijayanagar Empire. After Vijayanagar fell in 1565, the ruling dynasty of Wodeyars asserted their independence and Raja Wodeyar ascended the throne in 1578. The capital moved from Mysore to Srirangapatnam in 1610. Hence statement (2) is correct.

Ali Muhammad Khan took advantage of the collapse of authority in north India following Nadir Shah’s invasion, to set up a petty kingdom, Rohilakhand. Hence statement (3) is not correct.