DEBT SERVICE RATIO
1. Context
According to the RBI, household debt surged to 5.8 per cent of the GDP in FY23, marking the second-highest annual increase since Independence (the highest growth was at 6.7 per cent of GDP in FY07). Despite intense debate over the drivers of this surge, there is no discussion about the sustainability of such a rise in household debt.
2. About household debt
- Household debt is the total amount of debt owed by individuals and families. It can include mortgages, credit card debt, student loans, car loans, and other types of debt.
- Household debt can be secured or unsecured. Secured debt is backed by collateral, such as a home or car.
- Unsecured debt is not backed by collateral, such as credit card debt.
- For Example, Mortgages, Credit card debt, Student loans, Car loans, Personal loans, Payday loans, Medical debt, Retail debt, Utility bills, Phone bills and Other bills and expenses.
3. Household debt in India
- The household debt-to-GDP ratio in India was 35.56% in 2023. This means that Indian households owe 35.56% of the country's GDP in debt.
- The household debt-to-GDP ratio in India has been increasing in recent years, due to factors such as rising housing prices and increased access to consumer credit.
- The Reserve Bank of India (RBI) and other financial institutions monitor household debt levels in the country.
- Household debt itself is not considered part of a country's Gross Domestic Product (GDP).
- GDP measures the total economic output of a nation, including the value of goods and services produced.
- Household debt reflects the financial obligations of individuals and families, which is a liability.
- However, the financial transactions and spending associated with household debt, such as buying homes or consumer goods, can contribute to GDP indirectly through consumption and investments.
4. About Debt service ratio (DSR)
- The debt service ratio (DSR) is a measure of how much of a household's income is used to pay debt payments.
- It is calculated by dividing total monthly debt payments by monthly income. A DSR of 36% or less is generally considered to be healthy.
Calculation of DSR:
Total Monthly Debt Payments: ₹1, 000
Monthly income: ₹5,000
DSR: ₹1, 000 / ₹5,000 = 20 %
- A DSR of 20% means that the household is using 20% of its income to pay debt payments.
- This is a healthy level of DSR, as it leaves the household with plenty of income to cover other expenses and save for the future.
- However, a DSR above 36% could indicate that the household is at risk of financial distress.
- If a household has a high DSR, it may have difficulty making debt payments if its income decreases or its expenses increase.
5. Debt-service Coverage Ratio (DSCR)
- The debt-service coverage ratio (DSCR) is a measure of a company's ability to meet its debt obligations. It is calculated by dividing net operating income by total debt service, which includes principal and interest payments. A higher DSCR indicates that a company has more cash flow available to pay its debt, while a lower DSCR indicates that the company may be at risk of defaulting on its debt obligations.
- DSCR is an important metric for both lenders and investors. Lenders use DSCR to assess a company's creditworthiness and to determine the interest rate and terms of a loan. Investors use DSCR to assess a company's financial health and to make investment decisions.
- A good DSCR depends on the company's industry, competitors, and growth. However, a DSCR above 1.25 is generally considered to be strong, while a DSCR below 1.00 could indicate that the company is facing financial difficulties.
5.1. The advantages and disadvantages of using DSCR
Advantages
- Can be calculated over a period of time to better understand a company's financial trend.
- May be used to compare operational efficiency across companies.
- Includes more financial categories (i.e., principal repayments) than other financial ratios.
- Maybe a more comprehensive analysis of a company's financial health as it is often calculated on a rolling annual basis.
Disadvantages
- May not fully incorporate a company's finances as some expenses (i.e., taxes) may be excluded.
- Has heavy reliance on accounting guidance which may widely vary from the actual timing of cash needs.
- Maybe consider a more complex formula compared to other financial ratios.
- Does not have consistent treatment or requirement from one lender to another.
6. Conclusion
The surge in household debt in India highlights the need for responsible lending practices and ongoing monitoring to ensure financial stability. Both households and businesses should carefully manage their debt obligations to maintain a healthy financial position and avoid potential financial distress.
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For Prelims: household debt, debt-service coverage ratio, debt-service ratio, Gross Domestic Product, RBI,
For Mains:
1. Examine the concept of the Debt Service Ratio (DSR) and its significance in evaluating the financial health of households. How does a high DSR affect a household's financial stability, and what measures can be taken to manage it effectively? (250 words)
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Previous Year Questions
1. In the context of the Indian economy, non-financial debt includes which of the following? (UPSC 2020)
1. Housing loans owed by households
2. Amounts outstanding on credit cards
3. Treasury bills
Select the correct answer using the code given below:
A. 1 only B. 1 and 2 only C. 3 only D. 1, 2 and 3
Answer: D
2. Consider the following statements: (UPSC 2019)
1. Most of India's external debt is owed by governmental entities.
2. All of India's external debt is denominated in US dollars.
Which of the statements given above is/are correct?
A. 1 only B. 2 only C. Both 1 and 2 D. Neither 1 nor 2
Answer: D
3. What is Debt Service Ratio? (UGC NET Geography 2022)
1. It is the proportion of a country's export earnings that it needs to use to meet its debt repayment
2. It is the proportion of a country's total national income that it needs to use to meet its debt repayment
3. It is the proportion of a country's income from services sector that it needs to use to meet its debt repayment
4. It is the proportion of a country's total income from manufacturing sector that it needs to use to meet its debt repayment
Answer: A
4. Debt Service Coverage Ratio indicates which one of the following? (UGC NET Management 2018)
A. Effective utilisation of assets.
B. Number of times fixed assets cover borrowed funds.
C. Excess of Current Assets over Current Liabilities.
D. Number of times surplus covers interest and instalments of Term Loans.
Answer: D
5. With reference to Indian economy, consider the following statements: (UPSC 2015)
1. The rate of growth of Real Gross Domestic Product has steadily increased in the last decade. 2. The Gross Domestic Product at market prices (in rupees) has steadily increased in the last decade. Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Answer: B
6. A decrease in tax to GDP ratio of a country indicates which of the following? (UPSC 2015) 1. Slowing economic growth rate 2. Less equitable distribution of national income Select the correct answer using the code given below: (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Answer: A
7. With reference to the Indian economy, consider the following statements: (UPSC 2022)
1. An increase in the Nominal Effective Exchange Rate (NEER) indicates the appreciation of the rupee.
2. An increase in the Real Effective Exchange Rate (REER) indicates an improvement in trade competitiveness.
3. An increasing trend in domestic inflation relative to inflation in other countries is likely to cause an increasing divergence between NEER and REER.
Which of the above statements are correct?
A. 1 and 2 only B. 2 and 3 only C. 1 and 3 only D. 1, 2 and 3
Answer: C
8. Consider the following statements: (UPSC 2021)
1. The Governor of the Reserve Bank of India (RBI) is appointed by the Central Government. 2. Certain provisions in the Constitution of India give the Central Government the right to issue directions to the RBI in the public interest.
3. The Governor of the RBI draws his natural power from the RBI Act.
Which of the above statements is/are correct?
A. 1 and 2 only B. 2 and 3 only C. 1 and 3 only D. 1, 2 and 3
Answer: C
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Source: Investopedia
PARLIAMENTARY COMMITTEES
1. Context
A revamp of the Standing Committees of Parliament could potentially worsen the relations between the government and opposition parties. Of the 22 committees announced , the Congress has the post of chairperson in only one, and the second largest opposition party, Trinamool Congress, none
2. What are the Committees of Parliament?
- The legislative process commences with the introduction of a Bill in either house of Parliament. However, this process can be intricate, and due to the limited time available for in-depth discussions, it often becomes challenging.
- Furthermore, the growing political polarization and the narrowing of the political center have led to increasingly heated and inconclusive debates within Parliament.
- Consequently, a substantial portion of legislative matters is effectively addressed within the framework of Parliamentary Committees.
- A Parliamentary Committee is a group of Members of Parliament (MPs) appointed or elected by the House, or nominated by the Speaker.
- These committees operate under the Speaker's guidance and subsequently present their findings and recommendations either to the House or directly to the Speaker.
- The roots of the Parliamentary Committee system can be traced back to the British Parliament. Their legitimacy is derived from Article 105, which outlines the privileges of MPs, and Article 118, which empowers Parliament to establish regulations governing its processes and business conduct.
3. What are the various Committees of Parliament?
- Parliamentary Committees can be categorized into distinct groups, including Financial Committees, Departmentally Related Standing Committees, Other Parliamentary Standing Committees, and Ad hoc Committees. These classifications serve specific purposes within the legislative process.
- The Financial Committees, namely the Estimates Committee, Public Accounts Committee, and the Committee on Public Undertakings, were originally established in 1950. They were designed to enhance financial oversight and accountability within Parliament.
- In 1993, the formation of seventeen Departmentally Related Standing Committees was undertaken to bolster the scrutiny of parliamentary activities.
- The primary objectives were to provide members with more extensive involvement in the examination of significant legislation and to expand the scope of parliamentary review. Subsequently, the number of these committees was raised to 24, each consisting of 31 members, with 21 being from the Lok Sabha and 10 from the Rajya Sabha.
- Ad hoc Committees, on the other hand, are constituted for specific, time-bound purposes. Once these committees have fulfilled their designated tasks and presented their findings to the House, they are dissolved.
- Notable examples include Select and Joint Committees on Bills, as well as committees like the Railway Convention Committee and the Committee on Food Management and Security in Parliament House Complex, which fall within the Ad hoc Committee category.
- Additionally, Parliament has the authority to establish a Joint Parliamentary Committee (JPC) with a particular focus, featuring members from both Houses.
- These committees are responsible for in-depth examinations of specific subjects or Bills. Alternatively, any of the two Houses can establish a Select Committee comprising members from that respective House.
- Typically, these JPCs and Select Committees are chaired by Members of Parliament from the ruling party and are disbanded upon the submission of their reports.
4. How are the Committees constituted?
- There are a total of 16 Departmentally Related Standing Committees for the Lok Sabha and eight for the Rajya Sabha, with each Committee comprising members from both Houses. The leadership of these committees is typically drawn from the respective House they belong to.
- Notable Lok Sabha committees include those covering areas like Agriculture, Coal, Defence, External Affairs, Finance, Communications and Information Technology, Labour, Petroleum & Natural Gas, and Railways.
- Similarly, prominent Rajya Sabha committees encompass Commerce, Education, Health & Family Welfare, Home Affairs, and Environment.
- Each House also has other Standing Committees, including the Business Advisory Committee and the Privileges Committee, whose members are nominated by the Presiding Officer of the respective House. Ministers are generally not eligible for election or appointment to Financial Committees and specific Departmentally Related Committees.
- The decision to refer a matter to a Parliamentary Committee lies with the Presiding Officers, although this choice is commonly made in consultation with party leaders within the House.
- The appointment of committee heads follows a similar process, with the convention typically being that the main Opposition party's nominee assumes the role of the PAC (Public Accounts Committee) chairman. However, recent restructuring has seen a shift from this pattern.
- The committee heads are responsible for scheduling meetings, setting the agenda, and preparing the annual report.
- They can make decisions aimed at efficiently managing the committee. During meetings, the chairperson presides and can determine which individuals should be summoned before the panel.
- An invitation to appear before a Parliamentary Committee carries the same weight as a court summons. If someone is unable to attend, they must provide reasons, which the committee may or may not accept.
- However, the chairman usually requires the support of the majority of members to summon a witness.
- Members of Parliament typically serve on Parliamentary Committees for a one-year term, and the composition of these committees generally remains consistent in terms of party representation.
5. How important are the recommendations of the Committees?
- The reports produced by Departmentally Related Standing Committees are advisory in character.
- While they are not legally binding on the government, they do hold substantial influence. Historically, governments have often embraced the recommendations provided by these committees and integrated them into the legislation after it returns to the House for deliberation and approval.
- Additionally, these committees analyze policy matters within their respective Ministries and offer suggestions to the government.
- The government is obligated to provide feedback regarding its acceptance of these recommendations.
- As a result, the Committees present Action Taken Reports, which outline the government's progress in implementing each recommendation.
6.Way forward
Parliamentary committees in India provide a crucial mechanism for the legislative branch to scrutinize the executive branch (the government), hold it accountable, and conduct in-depth examinations of various aspects of governance and policy. They play a vital role in ensuring transparency, accountability, and effective governance in a democratic system
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For Prelims: Standing Committees, Ethics Committees, Adhoc Committees
For Mains: Parliamentary Committees of Indian Parliament
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Previous Year Questions
1. Consider the following statements: The Parliamentary Committee on Public Accounts (UPSC CSE 2013)
1. consists of not more than 25 members of the Lok Sabha.
2. scrutinizes appropriation and finance accounts of the Government.
3. examines the report of the Comptroller and Auditor General of India.
Which of the statements given above is/are correct?
A. 1 Only
B. 2 and 3 Only
C. 3 only
D. 1, 2 and 3
Answer (B)
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Source: Indianexpress
EXCLUSIVE ECONOMIC ZONE
1. Context
Stressing the need for establishing multi-national collaborative frameworks to effectively tackle common maritime challenges in the Indian Ocean Region, Defence Minister Rajnath Singh recently, said ‘might is right’ has no place in a ‘free, open and rule-based’ maritime order.
2. About exclusive economic zones (EEZ)
- An exclusive economic zone (EEZ) is a maritime zone extending 200 nautical miles from a coastal nation's baseline. Within its EEZ, a coastal nation has exclusive rights to explore and exploit marine resources, including living and non-living resources. The EEZ also gives coastal nations jurisdiction over marine scientific research and the protection of the marine environment.
- The concept of the EEZ was introduced in the 1982 United Nations Convention on the Law of the Sea (UNCLOS), which has been ratified by over 160 countries. The EEZ has become a key element of international maritime law, and it plays an important role in managing and protecting the world's oceans.
- EEZs are important for several reasons. They provide coastal nations with exclusive access to valuable marine resources, such as fish, oil, and gas. EEZs also give coastal nations a role in managing and protecting the marine environment. For example, coastal nations can use their EEZs to establish marine protected areas and to regulate fishing activities.
- EEZs can also be a source of conflict between coastal nations. For example, there have been disputes over EEZ boundaries in several areas, such as the South China Sea and the East China Sea. However, the EEZ regime has generally been successful in promoting peaceful cooperation among coastal nations in the management of the world's oceans.
3. UNCLOS
- UNCLOS 1982 is a landmark treaty that provides a comprehensive framework for the management and protection of the world's oceans.
- It is the only global treaty that addresses all aspects of ocean law, from the delimitation of maritime boundaries to the protection of marine ecosystems.
- UNCLOS 1982 has been ratified by over 160 countries, and it is widely considered to be the most important international treaty on ocean law.
- It has played a vital role in promoting peace and cooperation among coastal nations and in protecting the marine environment.
3.1. The objectives of UNCLOS
The objectives of the United Nations Convention on the Law of the Sea (UNCLOS) 1982 are to promote peace, cooperation, and sustainable development in the world's oceans.
- Establish a comprehensive regime of law and order in the world's oceans and seas;
- Facilitate international communication and promote the peaceful uses of the seas and oceans;
- Promote the equitable and efficient utilization of ocean resources;
- Conserve and protect the living resources of the sea;
- Study, protect, and preserve the marine environment.
Examples of how UNCLOS 1982 has achieved its objectives:
- UNCLOS 1982 has helped to resolve maritime boundary disputes between coastal nations. For example, UNCLOS 1982 was used to resolve a maritime boundary dispute between Colombia and Venezuela in the Caribbean Sea.
- UNCLOS 1982 has helped to promote the sustainable use of ocean resources. For example, UNCLOS 1982 establishes several mechanisms for regulating fishing and other marine activities.
- UNCLOS 1982 has helped to protect the marine environment. For example, UNCLOS 1982 requires countries to take measures to prevent pollution of the marine environment.
4. Conclusion
UNCLOS is often referred to as the "constitution for the oceans" and plays a crucial role in promoting international cooperation, managing ocean resources, protecting the marine environment, and resolving disputes related to the use of the seas and their resources. It is a key treaty in the field of international maritime law, contributing to peace, security, and sustainable development in the maritime domain.
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For Prelims: Indian Ocean Region, exclusive economic zone, United Nations Convention on the Law of the Sea, South China Sea, the East China Sea, marine ecosystems, international maritime law,
For Mains:
1. How can India work with other countries in the region to promote cooperation and sustainable development in the Indian Ocean Region? (250 Words)
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Previous Year Questions
1. With reference to 'Indian Ocean Rim Association for Regional Cooperation (IOR-ARC)', consider the following statements: (UPSC 2015)
1. It was established very recently in response to incidents of piracy and accidents of oil spills. 2. It is an alliance meant for maritime security only.
Which of the statements given above is/are correct?
A. 1 only B. 2 only C. Both 1 and 2 D. Neither 1 nor 2
Answer: D
2. With reference to 'Indian Ocean Dipole (IOD)' sometimes mentioned in the news while forecasting Indian monsoon which of the following statements is/are correct? (UPSC 2017)
1. IOD phenomenon is characterised by a difference in sea surface temperature between tropical Western Indian Ocean and tropical Eastern Pacific Ocean.
2. An IOD phenomenon can influence an EI Nino's impact on the monsoon.
Select the correct answer using the code given below:
A. 1 only B. 2 only C. Both 1 and 2 D. Neither 1 nor 2
Answer: B
3. With reference to the United Nations Convention on the Law of Sea, consider the following statements: (UPSC 2022)
1. A coastal state has the right to establish the breadth of its territorial sea up to a limit not exceeding 12 nautical miles, measured from baseline determined in accordance with the convention.
2. Ships of all states, whether coastal or land-locked, enjoy the right of innocent passage through the territorial sea.
3. The Exclusive Economic zone shall not extend beyond 200 nautical miles from the baseline from which the breadth of the territorial sea is measured.
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: D
4. The South China Sea Dispute involves which of the following countries? (CDS GK 2019)
1. China
2. Vietnam
3. Malaysia
4. Indonesia
Select the correct answer using the code given below.
A. 1 and 4 B. 1 and 2 only C. 1, 2 and 3 D. 2, 3 and 4
Answer: C
5. Which country has renamed part of South China Sea as the North Natuna Sea? (OPSC OAS 2018)
A. Indonesia B. Malaysia C. Brunei D. Philippines
Answer: A
6. Which one of the following statements best reflects the issue with Senkaku Islands, sometimes mentioned in the news? (UPSC 2022)
A. It is generally believed that they are artificial islands made by a country around South China Sea.
B. China and Japan engage in maritime disputes over these islands in East China Sea.
C. A permanent American military base has been set up there to help Taiwan to increase its defence capabilities.
D. Though International Court of Justice declared them as no man's land, some South-East Asian countries claim them.
Answer: B
7. In the context of ecosystem productivity, marine upwelling zones are important as they increase marine productivity by bringing the (UPSC 2011)
1. decomposer microorganisms to the surface.
2. nutrients to the surface.
3. bottom-dwelling organisms to the surface.
Which of the statements given above is/are correct?
A.1 and 2 B. 2 only C. 2 and3 D. 3 only
Answer: B
8. Consider the following kinds of organisms: (UPSC 2021)
1. Copepods
2. Cyanobacteria
3. Diatoms
4. Foraminifera
Which of the above are primary producers in the food chains of oceans?
A. 1 and 2 B. 2 and 3 C. 3 and 4 D. 1 and 4
Answer: B
Mains
1. Evaluate the economic and strategic dimensions of India’s Look East Policy in the context of the post-Cold War international scenario. (2016)
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Source: Indianexpress
OPEN MARKET OPERATIONS (OMO)
1. Context
In its October meeting, the monetary policy committee voted unanimously to keep interest rates unchanged. This was widely expected. But what was not was the RBI Governor stating that the central bank would consider open market operations to manage liquidity.
2. Open market operations by RBI
- Open market operations (OMOs) are a monetary policy tool used by central banks to influence the money supply and interest rates.
- It involves buying and selling government securities in the open market. When the central bank buys government securities, it injects money into the economy. When it sells government securities, it withdraws money from the economy.
- Open market operations (OMOs) are the buying and selling of government securities in the open market by the Reserve Bank of India (RBI) to influence the money supply and interest rates.
- When the RBI buys government securities, it injects money into the economy. This is because the RBI pays for the securities using cash.
- This increase in the money supply can lead to lower interest rates and higher economic growth.
- When the RBI sells government securities, it withdraws money from the economy. This is because the RBI receives cash in exchange for the securities.
- This decrease in the money supply can lead to higher interest rates and lower economic growth.
2.1. Examples of OMOs by RBI
The RBI uses OMOs to achieve its monetary policy objectives, which are to maintain price stability and promote sustainable economic growth. For example, the RBI may conduct OMOs to:
- inject liquidity into the economy to support economic growth during a recession.
- Withdraw liquidity from the economy to control inflation.
- Manage the exchange rate of the rupee.
The RBI has used OMOs to inject liquidity into the economy to support economic growth. For example, in March 2020, the RBI conducted a series of OMOs to inject ₹30,000 crores into the economy in response to the COVID-19 pandemic.
The RBI has also used OMOs to withdraw liquidity from the economy to control inflation. For example, in October 2022, the RBI announced that it would conduct OMO sales of government bonds to withdraw ₹50,000 crores from the economy.
2.2. Advantages and Disadvantages of OMOs by RBI
- OMOs are a flexible tool that the RBI can use to quickly and precisely adjust the money supply and interest rates.
- They are also a relatively transparent tool, as the RBI typically announces its OMO plans in advance.
- OMOs can be complex and difficult to understand. They can also be less effective in influencing the economy during times of financial market stress.
- OMOs are a powerful tool that the RBI can use to manage the money supply and interest rates. They are an important part of the RBI's monetary policy toolkit.
3. Monetary Policy Committee
The Monetary Policy Committee (MPC) is a committee or group responsible for setting the monetary policy of a country, including key interest rates. It is an important institution in many central banks worldwide, including the Reserve Bank of India (RBI).
Key features and functions of a Monetary Policy Committee:
- The MPC typically consists of a group of experts, including both members from the central bank and external members. In the case of the RBI, the MPC is composed of six members: three from the RBI, including the RBI Governor, and three external members appointed by the Government of India.
- The primary function of the MPC is to make decisions regarding the central bank's monetary policy, including setting key policy interest rates. This group assesses various economic indicators, financial market conditions, and other factors to make informed decisions.
- Many MPCs, including the RBI's MPC, operate under a framework of inflation targeting. This means that their primary objective is to achieve and maintain a specific inflation rate within a target range. The committee uses interest rate adjustments to control inflation.
- MPCs aim to operate transparently and communicate their decisions to the public. They often release statements explaining the rationale behind their decisions and their economic outlook.
- The independence of the MPC from political interference is crucial. It allows the committee to make decisions solely based on economic and financial considerations, free from political pressures.
- MPCs typically meet at regular intervals, such as every quarter or month, to review the economy, assess the impact of previous policy decisions, and make adjustments if necessary.
- MPCs engage in economic forecasting to anticipate future economic conditions, including inflation trends. These forecasts guide their monetary policy decisions.
- One of the primary tools at the disposal of an MPC is setting key policy interest rates. For example, the RBI's MPC sets the repo rate (the rate at which banks can borrow money from the central bank) and the reverse repo rate (the rate at which banks can lend money to the central bank).
- Decisions made by the MPC can have a significant impact on financial markets. Changes in policy rates can affect interest rates, exchange rates, and asset prices.
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For Prelims: RBI, Monetary Policy Committee, COVID-19 pandemic, Open market operations, interest rates, inflation,
For Mains:
1. Explain the concept of Open Market Operations (OMO) as a monetary policy tool. How do OMOs impact the money supply and interest rates in an economy? Provide examples of OMOs conducted by the Reserve Bank of India (RBI) to achieve its monetary policy objectives. (250 Words)
2. Explore the concept of inflation targeting and how it influences the primary objective of the Monetary Policy Committee. Discuss the significance of interest rate adjustments in controlling inflation. (250 Words)
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Previous Year Questions
1. Consider the following statements: (UPSC 2021)
1. The Governor of the Reserve Bank of India (RBI) is appointed by the Central Government.
2. Certain provisions in the Constitution of India give the Central Government the right to issue directions to the RBI in the public interest.
3. The Governor of the RBI draws his natural power from the RBI Act.
Which of the above statements is/are correct?
A. 1 and 2 only B. 2 and 3 only C. 1 and 3 only D. 1, 2 and 3
Answer: C
2. Concerning the Indian economy, consider the following: (UPSC 2015)
Which of the above is/are component(s) of Monetary Policy? (a) 1 only (b) 2, 3 and 4 (c) 1 and 2 (d) 1, 3 and 4 Answer: C 3. An increase in Bank Rate generally indicates: (UPSC 2013) (a) Market rate of interest is likely to fall. (b) Central bank is no longer making loans to commercial banks. (c) Central bank is following an easy money policy. (d) Central bank is following a tight money policy. Answer: D 4. Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC)? (UPSC 2017) 1. It decides the RBI's benchmark interest rates. 2. It is a 12-member body including the Governor of RBI and is reconstituted every year. 3. It functions under the chairmanship of the Union Finance Minister. 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: A 5. With reference to the Indian economy, consider the following statements: (UPSC 2022)
1. An increase in the Nominal Effective Exchange Rate (NEER) indicates the appreciation of the rupee.
2. An increase in the Real Effective Exchange Rate (REER) indicates an improvement in trade competitiveness.
3. An increasing trend in domestic inflation relative to inflation in other countries is likely to cause an increasing divergence between NEER and REER.
Which of the above statements are correct?
A. 1 and 2 only
B. 2 and 3 only
C. 1 and 3 only
D. 1, 2 and 3
Answer: C
6. In the context of vaccines manufactured to prevent COVID-19 pandemic, consider the following statements: (UPSC 2022)
1. The Serum Institute of India produced COVID-19 vaccine named Covishield using mRNA platform.
2. Sputnik V vaccine is manufactured using vector based platform.
3. COVAXIN is an inactivated pathogen based vaccine.
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
7. In the context of Indian economy, 'Open Market Operations' refers to (UPSC 2013)
A. borrowing by scheduled banks from the RBI
B. lending by commercial banks to industry and trade
C. purchase and sale of government securities by the RBI
D. None of the above
Answer: C
8. If the interest rate is decreased in an economy, it will (UPSC 2014)
A. decrease the consumption expenditure in the economy
B. increase the tax collection of the Government
C. increase the investment expenditure in the economy
D. increase the total savings in the economy
Answer: C
9. With reference to the Indian economy, consider the following statements: (UPSC 2022)
1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy government securities.
2. If the rupee is rapidly depreciating, RBI is likely to sell dollars in the market.
3. If interest rates in the USA or European Union were to fall, that is likely to induce RBI to buy dollars.
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
10. Read the following passage and answer the question that follows. Your answers to these items should be based on the passage only.
Policymakers and media have placed the blame for skyrocketing food prices on a variety of factors, including high fuel prices, bad weather in key food producing countries, and the diversion of land to non-food production. Increased emphasis, however, has been placed on a surge in demand for food from the most populous emerging economics. It seems highly probable that mass consumption in these countries could be well poised to create a food crisis.
With reference to the above passage, the following assumptions have been made: (UPSC 2021)
1. Oil producing countries are one of the reasons for high food prices.
2. If there is a food crisis in the world in the near future, it will be in the emerging economies. Which of the above assumptions is/are valid?
A. 1 only B. 2 only C. Both 1 and 2 D. Neither 1 nor 2
Answer: D
11. India has experienced persistent and high food inflation in the recent past. What could be the reasons? (UPSC 2011)
1. Due to a gradual switchover to the cultivation of commercial crops, the area under the cultivation of food grains has steadily decreased in the last five years by about 30.
2. As a consequence of increasing incomes, the consumption patterns of the people have undergone a significant change.
3. The food supply chain has structural constraints.
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
12. With reference to inflation in India, which of the following statements is correct? (UPSC 2015)
A. Controlling the inflation in India is the responsibility of the Government of India only
B. The Reserve Bank of India has no role in controlling the inflation
C. Decreased money circulation helps in controlling the inflation
D. Increased money circulation helps in controlling the inflation
Answer: C
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Source: Indianexpress
SUSPENSION OF MPs
1. Context
The Lok Sabha Ethics Committee’s proceedings against the All India Trinamool Congress Member of Parliament (MP) from West Bengal, Mahua Moitra, have resulted in much public debate
2. Suspension of MPs
- It is the role and duty of the Presiding officer- Speaker of Lok Sabha and Chairman of Rajya Sabha to maintain order so that the House can function smoothly.
- In order to ensure that proceedings are conducted in the proper manner, the Speaker/Chairman is empowered to force a member to withdraw from the House.
3. Why do MPs disrupt Parliament?
- Over the years, the presiding officers of the legislature and political leaders have discussed and identified four broad reasons leading to disorder in the legislature.
- One reason is the lack of time available to MPs for raising important matters; a second is the "unresponsive attitude of the government and retaliatory posture by Treasury benches".
- The other two reasons are deliberate disruption by parties for political or publicity purposes, and the absence of prompt action against MPs disrupting parliamentary proceedings.
4. Rules under which the Presiding Officer/Chairman acts
4.1 For Loksabha
Rule number 373 of the Rules of Procedure and Conduct of Business.
- It empowers presiding officers to direct an MP to withdraw from the house for any disorderly conduct.
- This rule says that any Member so ordered to withdraw shall remain absent during the remainder of the day's sitting.
Rule Number 374 and 374A
- To deal with more recalcitrant (uncooperative)
- Rule 374 empowers the Presiding officers to name the legislators of the MP who continue disrupting the House even after repeated warnings.
- After that, the House can move a motion to suspend the MP for a period not exceeding the remainder of the session.
- Rule 374A was incorporated into the Rule book in December 2001. The intention was to circumvent the necessity of adopting a motion for suspension.
- Under this rule, the speaker can name an MP, who shall then automatically stand suspended for five days or the remaining part of the session, whichever is less.
- Provided that the House may, at any time, on a motion being made, resolve that such suspension be terminated.
4.2 For Rajya Sabha
Rule 255 of the Rule Book of Rajya Sabha
It empowers the Chairman of Rajya Sabha to direct any Member to withdraw immediately from the House for any disorderly conduct.
Rule 256
- This rule empowers the Chairman to name the members who persistently disregard the authority of the Chair or abuse the rules of the Council.
- After that, the House may adopt a motion suspending the Member for a period not exceeding the remainder of the session.
- It should be noted that, unlike Lok Sabha (under rule 374A), Rajya Sabha can not suspend its members without passing a motion for the same.
5. Can courts intervene in a matter of suspension of MPs?
- Article 122 of the Indian Constitution says parliamentary proceedings cannot be questioned before a court.
- In some cases, however, courts have intervened in the procedural functioning of legislatures.
- For example, the Maharashtra Legislative Assembly passed a resolution in its 2021 Monsoon Session suspending 12 BJP MLAs for a year.
- The matter came before the supreme court, which held that the resolution was ineffective in law beyond the remainder of the Monsoon Session.
6. What has Parliament done to address these issues?
- The government and not Parliament decides the parliamentary calendar.
- Therefore, the decision about the time available with Parliament for discussions rests with the government.
- The parliamentary procedure also prioritizes government business over other debates that take place in the legislature.
- In this regard, Parliament has not updated its rules over the last 70 years to give Opposition parties a say in deciding the agenda for discussion.
- The stance of political parties on uninterrupted parliamentary functioning depends on whether they belong to the ruling party/coalition or are in the opposition.
- In 2001, Lok sabha amended its rules to give the speaker more powers to discipline MPs who disrupt House proceedings.
7. Other Key information
The BJP has asked Speaker Om Birla to set up a special committee of Lok Sabha to explore whether Congress leader Rahul Gandhi should be suspended for allegedly insulting the country, its democracy, and Parliament during his recent visit to the United Kingdom. Rahul has rejected the allegations and refused to apologize for his statements.
8. What is the legal basis for setting up the special committee?
- The House can set up a committee and decide its terms of reference. It is entirely within its power.
- A special committee could be formed by moving a motion for the establishment of such a committee and its terms of reference.
- The offense will have to be defined before anyone can be punished for it.
A committee that was similar to the one that was set up to investigate the cash-for-votes scandal in 2008 could be formed to investigate and punish an MP. - A mechanism to look into the “moral and ethical conduct of the members” already exists in the Ethics Committee of Lok Sabha.
- However, the BJP does not want Rahul’s case to be “one of the many issues before the committee”.
- Instead, it wants a special committee along the lines of the one constituted to look into the cash-for-query scandal in 2005.
Previous year Question
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1. Regarding the office of the Lok Sabha speaker, consider the following statements: (UPSC 2012)
1. He/She holds the office during the pleasure of the President.
2. He/She need not be a member of the House at the time of his/her election but has to become a member of the House within six months from the date of his/her election.
3. If he/she intends to resign, the letter of his/her resignation has to be addressed to the Deputy Speaker.
Which of the statements given above is/are correct?
A. 1 and 2 only B. 3 only C. 1, 2 and 3 D. None
Answer: B
The Speaker is elected by the members of Lok Sabha from amongst its members (as soon as may be, after its first sitting).
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For Prelims & Mains
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For Prelims: Lok Sabha, Rajya Sabha, Speaker of Lok Sabha, Chairman of Rajya Sabha, Rule Number 373, 374, and 374A of Lok Sabha, Rule 255 and Rule 256 of the Rule Book of Rajya Sabha, Special Committee.
For Mains: 1. The Indian Constitution has provisions for holding joint session of the two houses of the Parliament. Enumerate the occasions when this would normally happen and also the occasions when it cannot, with reasons thereof. (UPSC 2017).
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Source: The Indian Express
