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5 MCQ’s ECONOMY(Road to prelims 2022)

By April 7, 2022April 11th, 2022Economy, GS 3

 Q.1. Recently an electronic marketplace, e-SANTA, was launched. Consider the following statements with respect to the same.

  1. It is a platform to connect aqua farmers and the buyers.
  2. It is being implemented by Rajiv Gandhi Centre for Aquaculture (RGCA).

Which of the above statements is/are correct?

  1. 1 only
  2. 2 only
  3. Both 1 and 2 
  4. None of the above

__________________________________________________________________________________

Q.2. Which one of the following statements is incorrect with respect to Equalization Levy?

  1. It is a direct tax, which is withheld at the time of payment made to a non-resident service provider. 
  2. It is imposed under the Finance Act 2016 and not as a part of the Indian Income Tax Act, 1961.
  3. Fees for technical services are included in the scope of the Equalization Levy.
  4. None of the above

___________________________________________________________________________________

Q.3. In which of the following sectors FDI of upto 100 percent is allowed under Automatic Route.

  1. Insurance Intermediaries
  2. Companies seeking new industrial licenses in Defence Sector
  3. Telecom services sector.
  4. Food Processing

Select the correct code.

  1. 1 and 2 only
  2. 1, 3 and 4 only
  3. 1, 2 and 3 only
  4. 3 and 4 only

 

 

Q.4. With reference to Capital Gains Tax, which of the following comes under the category of Capital Asset?

  1. Agricultural land in rural India
  2. Any assets or shares received by a partner of a company when s/he retires.
  3. Securities listed on a recognized stock exchange in India.
  4. Zero coupon bonds

Select the correct code.

  1. 1, 2 and 3 only
  2. 2 and 3 only
  3. 2, 3 and 4 only
  4. 1, 2, 3 and 4

___________________________________________________________________________________

Q.5.Which one of the following statements is incorrect with respect to the amended rules for initial public offerings?

  1. Anchor investors can sell half their shares after the 30-day lock-in, but can sell the remaining shares only after 90 days from the date of allotment.
  2. One third of the portion available to Non-institutional investors (NIIs) shall be reserved for applicants with application size of more than Rs 2 lakh and up to Rs 10 lakh rupees.
  3. Existing shareholders owning more than 20 percent of pre-issue cannot offer more than 50 percent of their shares in an IPO.
  4. None of the above

___________________________________________________________________________________


 

Q.1. Recently an electronic marketplace, e-SANTA, was launched. Consider the following statements with respect to the same.

  1. It is a platform to connect aqua farmers and the buyers.
  2. It is being implemented by Rajiv Gandhi Centre for Aquaculture (RGCA).

Which of the above statements is/are correct?

  1. 1 only
  2. 2 only
  3. Both 1 and 2 
  4. None of the above

Answer-A

Explanation

Context

e-SANTA is an electronic marketplace providing a platform to connect aqua farmers and the buyers.

  • It will enable the farmers to get a better price and the exporters to directly purchase quality products from the farmers enhancing traceability, a key factor in international trade. 
  • The term e-SANTA was coined for the web portal, meaning Electronic Solution for Augmenting NaCSA farmers’ Trade in Aquaculture. 
  • National Centre for Sustainable Aquaculture (NaCSA) is an extension arm of Marine Products Export Development Authority (MPEDA), Govt. of India, Ministry of Commerce & Industry.

e-SANTA will RAISE the lives & income of farmers by:

  • Reducing Risk
  • Awareness of Products & Markets
  • Increase in Income
  • Shielding Against Wrong Practice
  • Ease of Processes
  • e-SANTA is a Digital Bridge to end the market divide and will act as an alternative marketing tool between farmers & buyers by eliminating middlemen. 
  • The Platform is available in many languages, which will help the local population.


 

Q.2. Which one of the following statements is incorrect with respect to Equalization Levy?

  1. It is a direct tax, which is withheld at the time of payment made to a non-resident service provider. 
  2. It is imposed under the Finance Act 2016 and not as a part of the Indian Income Tax Act, 1961.
  3. Fees for technical services are included in the scope of the Equalization Levy.
  4. None of the above

Answer-C

Explanation

  • Equalization Levy was introduced in India in 2016, with the intention of taxing the digital transactions i.e. the income accruing to foreign e-commerce companies from India. It is aimed at taxing business to business transactions.
  • In India, 6% EL was introduced in 2016.
  • Equalization Levy is a direct tax, which is withheld at the time of payment by the service recipient. 
  • The two conditions to be met to be liable to equalization levy:
  • The payment should be made to a non-resident service provider;
  • The annual payment made to one service provider exceeds Rs. 1,00,000 in one financial year.
  • In 2020, the Indian Income-tax Act expanded the scope of Equalization Levy (commonly referred to as ‘Equalization Levy 2.0 or EL 2.0’) as part of the Finance Act 2020. 
  • EL 2.0 was made effective on April 1, 2020. 
  • The new levy now includes a 2 per cent tax on gross revenues received by a non-resident “e-commerce operator” from the provision of ‘e-commerce supply or service’ to Indian residents or non-resident companies having a permanent establishment in India.
  • Further, amendments were made in the Finance Act 2021 to clarify and expand the scope of EL 2.0. 
  • Goods owned by Indians not to attract Equalization Levy.
  • Royalty and fees for technical services will be excluded from EL.
  • It will apply even to companies that do not own the goods or provide services on their platforms but receive payment online.


 

Q.3. In which of the following sectors FDI of up to 100 percent is allowed under Automatic Route.

  1. Insurance Intermediaries
  2. Companies seeking new industrial licenses in Defense Sector
  3. Telecom services sector.
  4. Food Processing

Select the correct code.

  1. 1 and 2 only
  2. 1, 3 and 4 only
  3. 1, 2 and 3 only
  4. 3 and 4 only

Answer-B

Explanation

  • The changes in the FDI policy can be broadly categorized into measures taken to improve foreign participation while protecting Indian industry from opportunistic takeovers, to enhance transparency and rationalization of processes and steps to monitor and expedite implementation.

Automatic Route

  • Under the Automatic Route, the non-resident investor or the Indian company does not require any approval from Government of India for the investment.

Government Route

  • Under the Government Route, prior to investment, approval from the Government of India is required. Proposals for foreign direct investment under Government route, are considered by respective Administrative Ministry/ Department.

Defense Sector

  • The FDI policy amendments, notified vide Press Note 4 (2020 series) dated 17.09.2020, have been carried out to realize the vision of an AtmaNirbhar Bharat. 
  • Now, FDI in defense sector is allowed up to 74 per cent through automatic route (from earlier 49 percent) for companies seeking new industrial licenses. 
  • FDI beyond 74 percent and up to 100 per cent will be permitted under Government route. 
  • For existing FDI approved holders/defence licensees, infusion of fresh foreign investment up to 49percent resulting in change in equity/ shareholding pattern can be done by making declaration within 30 days


 

Insurance Sector

  • Government issued Press Note 2(2021) dated 14.06.2021 to raise the permissible FDI limit from 49 percent to 74 percent in Insurance Companies under the automatic route and allow foreign ownership and control with safeguards.
  • Intermediaries and Insurance Intermediaries (upto 100%) : including insurance brokers, re-insurance brokers, insurance consultants, corporate agents, third party administrator, Surveyors and loss assessors and such other entities, as may be notified by the Insurance Regulatory and Development Authority of India from Time to Time.

Telecom sector

  • Press Note 4 (2021) dated 06.10.2021 has been issued to permit foreign investment up to 100percent under automatic route in Telecom services sector.
  • FDI in Telecom sector is subject to observance of licensing and security conditions by licensee as well as investors as notified by the Department of Telecommunications (DoT) from time to time, except “Other Service Providers”, which are allowed 100% FDI on the automatic route

Food Processing

  • 100% FDI is permitted under the automatic route in food processing industries in India. 
  • 100% FDI is allowed through the government approval route for trading, including through e-commerce in respect of food products manufactured or produced in India


 

Q.4. With reference to Capital Gains Tax, which of the following comes under the category of Capital Asset?

  1. Agricultural land in rural India
  2. Any assets or shares received by a partner of a company when s/he retires.
  3. Securities listed on a recognized stock exchange in India.
  4. Zero coupon bonds

Select the correct code.

  1. 1, 2 and 3 only
  2. 2 and 3 only
  3. 2, 3 and 4 only
  4. 1, 2, 3 and 4

Answer-C

Explanation

  • Land, building, house property, vehicles, patents, trademarks, leasehold rights, machinery, and jewelry are a few examples of capital assets. 
  • This includes having rights in or in relation to an Indian company. It also includes the rights of management or control or any other legal right

The following do not come under the category of capital asset:

  • Any stock, consumables, or raw material, held for the purpose of business or profession.
  • Personal goods such as clothes and furniture held for personal use
  • Agricultural land in rural India
  • 6½% gold bonds (1977) or 7% gold bonds (1980) or national defense gold bonds (1980) issued by the central government
  • Special bearer bonds (1991)
  • Gold deposit bond issued under the gold deposit scheme (1999) or deposit certificates issued under the Gold Monetisation Scheme, 2015.
  • The 2021 amendment imposes Capital Gains Tax on any assets or shares received by a partner of a company when s/he retires.


 

Q.5.Which one of the following statements is incorrect with respect to the amended rules for initial public offerings?

  1. Anchor investors can sell half their shares after the 30-day lock-in, but can sell the remaining shares only after 90 days from the date of allotment.
  2. One third of the portion available to Non-institutional investors (NIIs) shall be reserved for applicants with application size of more than Rs 2 lakh and up to Rs 10 lakh rupees.
  3. Existing shareholders owning more than 20 percent of pre-issue cannot offer more than 50 percent of their shares in an IPO.
  4. None of the above

Answer-D

Explanation

  • Capital and commodities market regulator SEBI amended the rules for initial public offerings, both for investors as well as the issuing companies. 
  • The regulator also made changes to the rules relating to preferential allotment of shares.

Fund raising by companies through IPOs:

  • Previous rule: Companies did not have to specify how much of the funds raised would be earmarked for acquisitions, and/or for routine investments.
  • New rule: If the company has not identified any acquisition or investment target, the amount for this and the amount for general corporate purpose (GCP) cannot exceed 35 percent of the total amount being raised. 
  • Also, if the acquisition target is not identified, the amount cannot exceed 25 percent of the total amount raised

Anchor investors

  • Previous rule: All anchor investors in an IPO had a lock-in period of 30 days from the date of allotment.
  • Revised rule: Anchor investors can sell half their shares after the 30-day lock-in, but can sell the remaining shares only after 90 days from the date of allotment.

Non-institutional investors or HNIs

  • Previous rule: 35 percent of the IPO would be earmarked for NIIs.
  • Revised rule: One third of the portion available to NIIs shall be reserved for applicants with application size of more than Rs 2 lakh and up to Rs 10 lakh rupees.

Price band for book built IPOs

  • Previous rule: Companies going public could set a price band as they chose.
  • New rule: The upper price band has to be at least 105 percent of the lower price band. For example, if the lower price band is Rs 100, then then the upper price band has to be Rs 105 at least.


 

Offer for sale

  • Previous rule: No limits on sale of shares by existing shareholders
  • New rule: Existing shareholders owning more than 20 percent of pre-issue cannot offer more than 50 percent of their shares in an IPO. Those holding less than 20 percent of pre-issue, cannot sell more than 10 percent of their shares.

Utilization of IPO proceeds

  • Previous rule: Funds raised through IPOs were not monitored by rating agencies.
  • Revised rules: Rating agencies to monitor use of IPO proceeds till 100 percent of it is spent.

Preferential allotment pricing formula

  • Previous rule: Floor price to be higher of the volume weighted average price (VWAP) of the last two weeks or the last 26 weeks.
  • New rule: Floor price to be higher than VWAP of last 90 days or 10 days.

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