Economics : Quiz - 23 | De Facto IAS

1. Consider the following statements regarding a public limited company

(1) Minimum capital requirement for a public limited company is Rs. 5 lakhs.

(2) Such company may be owned by either the Government or private sector.

(3) There is no limit on maximum shareholders of such company.

Which of the statements given above is/are correct?

(a) 1 only

(b) 1 and 3 only

(d) None of the above

Answer: (c) Explanation: All the given statements are correct. Public limited companies are incorporated or registered in India under the Indian Companies Act 2013. As per the present law, Public limited company are defined as a type of organization which is not a private ltd company i.e. It’s not managed privately by group of individuals. Shares are freely traded by the public and the organization registered as a public limited company uses letters “ltd” or “limited” after its name. These organizations are also known as publicly held companies. A public limited company can be listed on the stock exchange If a private ltd company want to get listed in stock exchange then it has to get converted to public ltd first before starting the listing process. Minimum Requirements to form a Public Limited Company ➢ Minimum capital requirement for a public limited company is Rs. 5, 00,000 ➢ Minimum number of members or shareholders required is 7 (seven) ➢ Must have minimum number of at least 3 directors – The Director needs to be over 18 years of age and must be a natural person. There are no limitations in terms of citizenship or residency.

2. The Government has replaced New Exploration and Licensing Policy (NELP) with Hydrocarbon Exploration and Licensing Policy (HELP). Which of the following is/are the difference/s between HELP and NELP?

(1) HELP covers only conventional gases whereas NELP covered all conventional and unconventional oils and gases.

(2) HELP has a revenue-sharing model whereas NELP had a profit sharing model.

(3) Under HELP a single licence for both exploration and extraction of all types of oils and gases is granted; on the other hand under NELP separate licenses for different products used to be granted.

Select the correct answer using the code given below:

(a) 1 and 2 only

(b) 2 only

(d) 1, 2 and 3

Answer: (c) Explanation: Statement 1 is incorrect. HELP covers all conventional and unconventional oil and gas where as NELP covers only conventional gas. Statement 2 is correct. HELP is revenue sharing model, under which revenue will be shared with government in the ratio submitted by bidders. NELP is a profit-sharing model/production sharing model, under which government receives a share in the profit. Statement 3 is correct. Under HELP a single licence for both exploration and extraction of all types of oils and gas is granted on the other hand under NELP separate license for different products like conventional oil and gas, coal bed methane, shale oil and gas and gas hydrates were granted.

3. ‘The Global Findex Report’ is released by which of the following institutions?

(a) IMF

(b) World Bank

(d) WTO

Answer: (b) Explanation: Recently, World Bank has released Global Findex Report. It is world’s most comprehensive data set on how adults save, borrow, make payments, and manage risk. It has been prepared in partnership with Gallup Inc. with funding of Bill &Melinda Gates Foundation. At least 19 crore Indian adults do not have bank accounts making the country the second largest in terms of unbanked population according the Global Findex Report. The 2017 report shows that financial inclusion has increased worldwide from 62% to 69% in 2014. However, in developed countries 94% of adults have an account. The report lists that the number of account holders in India has risen from 35% in 2011 to 80% in 2017. During 2014-17, 51.4 crore bank accounts were opened worldwide out of which 55% were in India. Hence option (b) is correct.

4. The term ‘Hybrid Security Instruments’ is seen in the news some times. Consider the following statements in this context:

(1) Hybrid security instruments help in raising capital without losing control over the entity by the startups.

(2) Hybrid security instruments have the characteristics of both debt and equity and come with differential voting rights.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

Answer: (c) Explanation: A hybrid security is a single financial security that combines two or more different financial instruments. Hybrid securities, often referred to as "hybrids," generally combine both debt and equity characteristics. Statement 1 is correct. Hybrid instruments help companies particularly start-ups to raise funds without the fear of losing control. Statement 2 is correct. Hybrid instruments have the characteristics of both - debt and equity and come with differential voting rights. In a number of IT companies, overseas promoters hold less than 15% equity but exercise full control. The most common type of hybrid security is a convertible bond that has features of an ordinary bond but is heavily influenced by the price movements of the stock into which it is convertible.

5. Which of the following is/are the outcome/s of ‘Weakening of Rupee'?

(1) It will be beneficial for both te exporters as well as the importers.

(2) Margin of oil companies will come under pressure.

(3) Inflation in the economy will increase.

Which of the statements given above is/are correct?

(a) 1 only

(b) 1 and 2 only

(d) 1, 2 and 3

Answer: (c) Explanation: Statement 1 is incorrect. When Rupee value weakens it leads to high CAD (Current Account Deficit) that is the country’s dollar outflows towards import of goods and services usually exceed its dollar earnings from exports. Importers will be hit as the cost of getting goods or equipment into India will increase. When the rupee weakens, importers especially oil companies and other import-intensive companies have to shell out more rupees to buy an equivalent amount of dollars. Exporters especially software exporters stand to benefit as they get more rupees while converting dollar export earnings into Indian currency. This will boost the exports in general. Statement 2 is correct. For the oil sector it is a double burden, due to the rise in crude oil purchase bill in the international market due to weakening of rupee also adds to retail fuel prices. Therefore, the margins of oil companies will come under pressure. Statement 3 is correct. When the rupee weakens, the foreign goods would cost more in rupee terms (for example imports of Oil and Natural Gas) — resulting in an increase in prices in domestic economy.