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Q1. The “largest producer of milk” in the world is-
A. India
B. USA
C. China
D. Australia
Answer: A

Exp.:
India is the world’s largest milk producer, followed by the United States of America, China, Pakistan and Brazil.
India has the biggest milk industry of any country in the world, producing more than 180 million tons of milk in 2018. This is 22 percent of the world’s annual production, according to the UN Food and Agriculture Organization, and more than all EU member countries produce in a year combined.
• Milk Surplus Countries: The countries with the highest milk surpluses are New Zealand, the United States of America, Germany, France, Australia and Ireland.
• Highest Mil Deficit Countries: The countries with the highest milk deficits are China, Italy, the Russian Federation, Mexico, Algeria and Indonesia.

Q2. When Indian Rupee gets depreciated vis-a-vis U.S dollar, it usually makes our-
A. Exports cheaper and imports costlier
B. Imports Cheaper and exports costlier
C. Both exports & imports costlier
D. No effect on exports and imports
Answer: A
The value of the Indian rupee against dollar has significantly declined to the level of Rs 72.

Rupee Devaluation vs Rupee Depreciation

The term devaluation is used when the government reduces the value of a currency under Fixed-Rate System. When the value of the currency falls under the Floating Rate System, it is called depreciation.
1947: 1 US$ = 1.00 INR (Sounds interesting, huh? :-))
1948: 1 US$ = 4.79 INR.
1965: 1 US$ = 4.79 INR.
1966: 1 US$ = 7.57 INR.
1971: 1 US$ = 8.39 INR.
1985: 1 US$ = 12.0 INR.
1991: 1 US$ = 17.9 INR.
1993: 1 US$ = 31.7 INR.
2000: 1 US$ = 45.0 INR.
2013: 1 US$ = 60.0 INR.
2017: 1 US$ = 65.0 INR.
2018: 1 US$ = 74.0 INR.

Causes for the Decline
Corporate Tax Cut in U.S: US economy has become a more attractive option for the investors of the global capital.
• Trade war between the US and China: The trade war between the US and China and the spat between Turkey and America is another cause of concern.
• Rise in Crude Oil Prices: The rise in international crude oil prices is one of the reasons behind the rupee’s decline as importers have had to shell out more dollars to fund their purchases.
• India imports about 80% of its petroleum needs. The rise in the price of oil has traditionally exerted tremendous stress on the current account deficit and the currency, as is happening now.

Possible Impact:
• A depreciating rupee could put inflationary pressure on the domestic economy.
• The devaluation will also increase the prices of imported inputs.
• It can slow down the economic growth, corporate earnings, and can lead to market volatility.
Who fixes the value of Indian Rupee against US dollar?
The value of Indian Rupee (or any other currency) is determined by the market. Here market means the currency market. The demand and supply forces in the currency market determine the price of each currency.
If the demand for Indian currency is high, Indian rupee will appreciate (for example 1$ = Rs.40), and if demand is low, it will depreciate (for example, 1$ = Rs.70).

Floating Rate System: If market forces determine the value of a currency, that type of system is called Floating Rate System.

India has adopted the partial floating rate system since 1975, and from 1993 is fully dependent on Floating Rate System.
Fixed Rate system: If the government or RBI fix the exchange rate of a currency (and does not allow any variations according to demand and supply forces in the market), such a system is called the Fixed Rate system.

Q3. “Economic Reforms” measures in India was formally introduced in-
A. July, 1991
B. August, 1947
C. January, 1980
D. March, 1990
Exp.: Economic reforms refer to the fundamental changes in the economy in order to quicken its rate of economic growth.

The Narasimha Rao Government, in 1991, started the economic reforms in order to rebuild internal and external faith in the Indian economy.
Policy Measures: The policy proposed are as follows:
• Technology up-gradation
• Ind

ustrial licensing
• Removal of restrictions on the private sector
• Foreign investments and foreign trade.
Why the need of Economic Reforms?
• Poor Performance of the Industrial Sector
• Adverse Balance of Payments
• Rise in Fiscal Deficit
• Inflation
• The Gulf War

Q4. Demonetisation of Rs. 500 and Rs. 1000 currency notes was announced on-
A. 08th November 2016
B. 01st January 2017
C. 15th August 2016
D. 31st March 2017

Answer: A.
Exp.: On 8th November 2016 demonetization was announced with the aim of the action was fourfold: to curb corruption; counterfeiting; the use of high denomination notes for terrorist activities; and especially the accumulation of “black money”, generated by income that has not been declared to the tax authorities.

Q5. The slogan "Garibi Hatao" is coined by-
A. Indira Gandhi
B. Rajiv Gandhi
C. Sonia Gandhi
D. Rahul Gandhi
Answer: A.
Exp.: The slogan 'Garibi Hatao' (Remove Poverty) was given by Indira Gandhi in 1971 as her election campaign. The slogan was officially used by the Congress party in 1980 for the five year plan.
• Poverty was serious issue after 1965 war and famine. 4th, 5th and 6th all three five year plans mentions about poverty removal as their core objective.

WBCS 2020
Subject: Economy

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