1. Unsolicited proposals, or ‘Swiss Challenge’ for infrastructure development was in news recently. Which of the following statements is not correct in this regard?
(a) Any bidder can offer to improve upon a project proposal submitted by another player.
(b) Private players can approach the government suo-moto with the project proposal.
(c) The Indian model has yet to incorporate Intellectual Property Rights (IPR) regime.
(d) It has high applicability in acquisition of stressed companies under Insolvency and Bankruptcy Code (IBC).
Answer: (c) Explanation: A Swiss Challenge is a method of bidding, often used in public projects, in which an interested party initiates a proposal for a contract or the bid for a project. The government then puts the details of the project out in the public and invites proposals from others interested in executing it. On the receipt of these bids, the original contractor gets an opportunity to match the best bid. The method also has other uses. In its original form, a Swiss Challenge allows an infrastructure developer to come up with a suo motu proposal for a new project without waiting for the government to call for bids with exclusive intellectual property rights. Then government has two options with it: Government can buy the intellectual property rights from the original proponent and call for a competitive bidding to award the project. Government allows other players with similar capabilities to submit their proposals. If any proposal is better than the proposal of the original proponent, the original proponent is asked to match with the other proposal. This can foster innovation, as contractors or developers may initiate projects that the government didn’t even think of. The method was upheld by the Supreme Court of India for awarding public projects and the Government of India has tried out this method in road and railway projects.
If Swiss Challenge is applied to bankruptcy cases, banks may get to squeeze out more from the auction of stressed assets under IBC, as they can realize a better price by putting the details of bid in public domain. Hence, option (c) is the correct answer.
2. A NITI Aayog Committee has mooted the idea of ‘Make in India in Gold’. What could be the possible outcomes of the same?
(1) Increased import dependence on raw gold.
(2) Increased gold mining in India, as there are considerable gold reserves.
(3) Micro, Small and Medium Enterprises (MSMEs) dominating the gold sector could become organized.
Select the correct answer using the code given below:
(a) 1 only
(b) 1 and 2 only
(c) 3 only
(d) 2 and 3 only
Answer: (d) Explanation: Statement 1 is incorrect. Make in India in Gold scheme will increase domestic production of gold which in turn would reduce the dependence on import of gold. Statement 2 is correct. Under the ‘Make in India in Gold’ initiative, the mining of gold would be actively pursued. Statement 3 is correct. Under the initiative jewellery parks, common facility centres and clusters would be developed which would improve the organization of the MSMEs, which dominate this sector. Hence, Option (d) is the correct answer.
3. Both Foreign Direct Investment (FDI) and Foreign Institutional Investment (FII) are related to investment in the country. Which of the following statements best represent an important difference between FDI and FII?
(a) FII helps bring better management skills and technology, while FDI only brings capital.
(b) FII helps in increasing capital availability in general, while FDI only targets specific sectors.
(c) FDI flows only into the secondary market while FII targets primary market.
(d) FII is considered to be more stable than FDI.
Foreign investment is of two types: Foreign Direct Investment and Foreign Portfolio Investment. FDI is an investment that a parent company makes in a foreign country. On the contrary, FII is an investment made by an investor in the markets of a foreign nation. FDI only targets a specific enterprise. It aims to increase the enterprises’ capacity or productivity or change its management control. In a FDI, the capital inflow is translated into additional production. The FII investment flows only into the secondary market. It helps in increasing capital availability in general rather than enhancing the capital of a specific enterprise. FDI is considered to be more stable than FII. FDI not only brings in capital but also helps in good governance practices and better management skills and even technology transfer. Though FII helps in promoting good governance and improving accounting, it does not come out with any other benefits of the FDI. While the FDI flows into the primary market, the FII flows into secondary market. While FII’s a short-term investment, FDI is long term investment. FDI is more preferred to the FII as they are it is considered to be the most beneficial kind of foreign investment for the whole economy. FDI is considered more stable than FII. Hence, option (b) is correct.
4. Consider the following statements related to the World Economic Forum:
(1) It is a non-profit organisation under the United Nations for improving the state of the world by improving business agendas.
(2) It is headquartered at Geneva, Switzerland.
(3) It releases Inclusive Development Index
Which of the statements given above are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Answer: (b) Explanation: Statement 1 is incorrect. The World Economic Forum is an independent international organization committed to improving the state of the world by engaging business, political, academic and other leaders of society to shape global, regional and industry agendas. It is not the aegis of United Nations. Statement 2 is correct. It was established in 1971 as a not-for-profit foundation and is headquartered in Geneva, Switzerland. Statement 3 is correct. It releases Inclusive Development Index. Inclusive Development Index (IDI) measures progress of 103 economies on three individual pillars – growth and development; inclusion; and inter-generational equity. It has been divided into two parts. The first part covers 29 advanced economies and second 74 emerging economies. India ranks 62nd among the emerging economies in year 2018.
5. The banks are required to maintain a certain ratio of liquid assets between their cash in hand and the total assets. This ratio is called?
(a) Bank Rate
(b) Cash Reserve Ratio
(c) Statutory Liquidity Ratio
(d) Reverse Repo Rate
Answer: (c) Explanation: BANK RATE: It is that rate of interest at which the RBI provides refinancing facilities to commercial banks by rediscounting their bills of exchange or other commercial papers. It is the rate at which the RBI extends long term credit to commercial banks. Hence, option (a) is incorrect. CASH RESERVE RATIO: The RBI Act, 1934 stipulates that a commercial bank is required to keep a certain percentage of its total deposits with the RBI in cash. The RBI can vary this percentage. As such, this is also called Variable Reserve Ratio. Generally, the RBI permits banks to maintain minimum daily average holding of 70% of the mandates CRR. However, it can tighten this requirement depending upon changed economic conditions. This ratio helps in increasing or squeezing liquidity in the system. Hence, option (b) is incorrect. STATUTORY LIQUIDITY RATIO: It is that ratio/percentage of its total deposits which a commercial bank has to maintain with itself at any given point of time in the form of liquid assets like cash in hand, current balances with other banks, gold or first-class securities (generally government securities). Hence, option (c) is correct. REVERSE REPO: It means that the RBI borrows from banks by selling them government securities for a short period with an in-built clause that the RBI will repurchase these securities from banks after that period. The rate at which banks lend to the RBI is called reverse Repo rate. Hence, option (d) is incorrect.