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Direction (1-10): Read the following passage carefully and answer the questions given below it.
This no mean achievement that the daunting fiscal deficit target of 3.5% of GDP for the past year was met. Continuing this trend in the future will enable the realisation of the preferred 60% debt-GDP ratio by 2023. The Fiscal Responsibility and Budget Management Review Committee report, now in the public domain, has preferred a debt to GDP ratio of 60% for the general government by 2023, comprising 40% for the Central government and 20% for the State governments. For international investors and rating agencies, what matters is the fiscal position of the country as a whole. The challenge of States achieving a debt ceiling of 20% by 2023 is undoubtedly herculean for more reasons than one. First, the best of times, so to say, on fiscal issues may be somewhat behind us. For highly indebted countries, an increase in this differential of a couple of percentage points, if sustained, could lead to a change from a declining to an explosive path for the debt-to-GDP ratio. However, the advantages on account of a favourable depend primarily on the level of debt stock. In this context, the Union government, which has larger domestic liabilities of 49.23% of GDP as compared to that of the States (21% of GDP), benefits more due to a negative interest rate-growth differential. The combined debt dynamics necessitate States to run successively lower primary and fiscal deficits just to maintain their combined debt to GDP ratio at the current level. Second, the role of exogenous factors in fiscal corrections of the States. Till FY13, fiscal conduct of the States was exemplary, strictly adhering to and even outperforming the targets of the Fiscal Responsibility Legislation. No doubt positive externalities facilitated this outcome. Consolidation of Central loans and debt waiver to States based on their fiscal performance effectively reduced their interest payments to about 0.9% of Gross State Domestic Product. Third, the recent marked deterioration in fiscal health of the States. The Fourteenth FC enhanced the borrowing limits up to 0.5% of GSDP for the States. This was conditional on debt to GSDP ratio being less than or equal to 25% and interest payments being less than or equal to 10% of the revenue receipts in the preceding year.
Hence there is need for greater convergence. The most obvious one is the prudent use of powers defined in the Constitution of India under Clause (3) of Article 293. This makes it mandatory for a State to take the Central government’s consent for raising any loan if the former owes any outstanding liabilities to the latter. One or two States may indeed reach that position, endangering this constitutional instrumentality of the Central government. It would be interesting to see what happens when States cease to have any outstanding liabilities to the Central government. Looking beyond, there must be symmetry between the cost of borrowing and the quality of financial governance. Combined market borrowings have been rising consistently from 18% in FY11 to 28% in FY16. The gross market borrowing of States through State Development Loans increased by a sharp 27% in FY17 from ₹2.9 trillion in FY16. Markets expect this to rise even further by 22% in FY18 consequent upon pay revisions, implementation of Ujwal DISCOM Assurance Yojana and exclusion of State governments from the National Small Savings Fund. Risk variations across States are not reflected adequately in the cost of borrowings. This is a major concern. Fiscally healthy States should be enabled to attract higher investments at lower costs. Two, ushering in transparent accounting practices. It is being increasingly acknowledged that the current stock of State debt at 21% of GDP could be underestimated owing to fallacious budgetary practices and operational intricacies. Off-budget expenditures through State Public Sector Undertakings borrowings and explicit guarantees offered by the States do not form a part of State government liabilities. Private researchers and public auditors alike have been pointing out the growing trend of off-budget public spending and mis-categorisation of budget data.
The Comptroller and Auditor General of India while appraising States’ finances, has repeatedly censured such practices. The Fourteenth Finance Commission’s recommendation of adopting a template for collating, analysing and annually reporting the total extended public debt in their respective budgets as a supplement to the budget document must be implemented. Three, emphasising quality of expenditure. A recent HSBC report notes that quality of state spending has been gradually worsening over the past few years. The share of States’ revenue expenditure in total expenditure has remained around 80% and States’ non-developmental expenditure has risen by over 50% from FY2013 to FY2016. The RBI’s latest assessment of State Budgets with the theme, Quality of Sub-national Public Expenditure, raises the concerns about dominance of revenue expenditure in the States. While the quantum of untied funds from the Centre to the States has increased owing to the recommendations of the FFC, expenditure on physical and social infrastructure by the States has remained stagnant. Four, encapsulating Fiscal Discipline in determining inter se tax shares of different States. Fiscal discipline as a criterion for tax devolution was used by Eleventh, Twelfth and Thirteenth Finance Commissions for incentivising the States in prudent management of its finances. However, the FFC dropped this indicator and accommodated Population 2011 and Forest Cover in its devolution formula. Given the deteriorating condition of State finances, the Fifteenth Finance Commission could consider restoring fiscal discipline as a determinant for horizontal devolution of funds.
1) According to the passage which of the following are dragging factors making it a challenge for states in achieving a debt ceiling of 20%?
a) ii and iii
b) i and ii
c) i and iii
d) All except i
e) None of these
2) According to the passage what was the theme of latest assessment of State Budgets of RBI?
a) Public Sector Undertakings borrowings
b) Quality of Sub-national Public Expenditure
c) Deteriorating condition of State finances
d) Loopholes of Off-budget expenditures
e) None of these
3) According to the passage what are the instrumentalities available with the Central government to ensure greater convergence?
a) i and ii
b) ii and iii
c) i and iii
d) Only ii
e) All of these
4) Which of the following is not true in the context of the passage?
a) i and iii
b) ii and iii
c) Only i
d) i and ii
e) None of these
5) Which of the following given statements have been mentioned correct about the Fourteenth Finance Commission?
a) ii and iii
b) i and iii
c) i and ii
d) Only i
e) All are correct
6) Which of the following is not true in the context of the passage?
a) i and ii
b) Only iii
c) i and iii
d) All except i
e) None of these
7) Choose the word which is most nearly the same in meaning as the word “facilitated” printed in bold as used in the passage.
a) Desist
b) Expedite
c) Culminate
d) Refrain
e) Intermit
8) Choose the word which is most nearly the same in meaning as the word “daunting” printed in bold as used in the passage.
a) Embolden
b) Abetment
c) Ecstasy
d) Felicity
e) Ominous
9) Choose the word which is most opposite in meaning of the word “ushering” printed in bold as used in the passage
a) Accosting
b) Heralding
c) Bewilderment
d) Ovation
e) Portend
10) Choose the word which is most opposite in meaning of the word “encapsulating” printed in bold as used in the passage
a) Encase
b) Condense
c) Circumscribe
d) Clemency
e) Immure
Direction (11-15): In each of the following questions on phrase has been given and it has been followed by four sentences. You have to find out on which sentences phrase has been used properly according to its meaning and mark your answer from the options denoted a), b), c), d) Mark e) as your answer of you find that the phrase has been applied properly in all sentences
11) Drop from
a) i and iii
b) i and ii
c) iii and iv
d) ii and iv
e) All are correct
12) Hold with
a) ii and iii
b) i and iv
c) iii and iv
d) i and ii
e) All are correct
13) Break through
a) i and iv
b) iii and iv
c) i and iii
d) All except ii
e) All are correct
14) Plug away
a) i and ii
b) ii and iii
c) iii and iv
d) All except i
e) All are correct
15) Lay up
a) ii and iii
b) i and iv
c) ii and iv
d) i and iii
e) All are correct
Direction (16-20): In each of the questions given below a sentence is given which is then divided into five parts out of which one bold part is correct. There are no errors in three out of four remaining parts and therefore only one of the parts other than the bold one is incorrect. You must choose the grammatically incorrect part as your answer. Choose e if you find out there is no error. (Ignore punctuation error if any)
16) The recapitalisation of public sector banks too can a)/help increase the capital cushion of banks and induce them to lend more and b)/boost economic activity but bad debt resolution and c)/recapitalisation are only part of the solution d)/ as it can do very little to rein in reckless lending e)/
a) b
b) d
c) e
d) c
e) No error
17) The resolution of bankruptcy cases, particularly a)/against large borrowers that contribute b)/ a major share of bank NPAs, in the c)/new Insolvency and Bankruptcy Code should d)/ help bring the NPA situation under some control e)/
a) c
b) d
c) b
d) e
e) No error
18) A federal shutdown occurs when lawmakers fail to agree on a)/a spending bill, and cannot even sign off on a stopgap funding measure b)/that might keep the government machinery humming for a few more c)/ months, in this case the bill in question would d)/ have helped tide on a looming fiscal gap e)/
a) e
b) a
c) b
d) c
e) No error
19) The IMF, however, was not oblivious to the threats a)/that could severely derail the broad-based economic recovery, in b)/particular it warn about the troubling rise in c)/ debt levels across countries, including the U.S. which d)/could pose a huge risk to financial stability and drag down economic growth e)/
a) d
b) e
c) b
d) c
e) No error
20) It is no secret that since the 2008 financial crisis the a)/ global economy has been propped up mainly on the unprecedented b)/ easy money policies adopted by global central banks c)/, in fact, the absence of substantial structural reforms d)/has been another feature of the present global economic recovery e)/
a) c
b) a
c) b
d) e
e) No error
Answers:
Direction (1-10):
1) Answer: c)
It is clearly mentioned in para 1-The challenge of States achieving a debt ceiling of 20% by 2023 is undoubtedly herculean for more reasons than one. Second, the role of exogenous factors in fiscal corrections of the States. Third, the recent marked deterioration in fiscal health of the States.
2) Answer: b)
It is clearly mentioned in para 3-The RBI’s latest assessment of State Budgets with the theme, Quality of Sub-national Public Expenditure, raises the concerns about dominance of revenue expenditure in the States.
3) Answer: e)
It is clearly mentioned in para 2&3-Hence there is need for greater convergence. The most obvious one is the prudent use of powers defined in the Constitution of India under Clause (3) of Article 293Two, ushering in transparent accounting practices. Three, emphasising quality of expenditure. Four, encapsulating Fiscal Discipline in determining inter se tax shares of different States
4) Answer: c)
It is clearly mentioned in para 1&2-Off-budget expenditures through State Public Sector Undertakings borrowings and explicit guarantees offered by the States do not form a part of State government liabilities. Combined market borrowings have been rising consistently from 18% in FY11 to 28% in FY16. In this context, the Union government, which has larger domestic liabilities of 49.23% of GDP as compared to that of the States (21% of GDP), benefits more due to a negative interest rate-growth differential
5) Answer: c)
It is clearly mentioned in para 3-The Fourteenth Finance Commission’s recommendation of adopting a template for collating, analysing and annually reporting the total extended public debt in their respective budgets as a supplement to the budget document must be implemented. However, the FFC dropped this indicator and accommodated Population 2011 and Forest Cover in its devolution formula.
6) Answer: d)
It is mentioned in para 1&3-The Fiscal Responsibility and Budget Management Review Committee report, now in the public domain, has preferred a debt to GDP ratio of 60% for the general government by 2023, comprising 40% for the Central government and 20% for the State governments. Consolidation of Central loans and debt waiver to States based on their fiscal performance effectively reduced their interest payments to about 0.9% of Gross State Domestic Product. The share of States’ revenue expenditure in total expenditure has remained around 80% and States’ non-developmental expenditure has risen by over 50% from FY2013 to FY2016.
7) Answer: b)
The meaning of word facilitated is make an action or process easy or easier.
8) Answer: e)
The meaning of word daunting is seems difficult to deal with in prospect
9) Answer: c)
The meaning of word ushering is to cause or mark the start of something new
10) Answer: d)
The meaning of word encapsulating is to express the essential features of something
Direction (11-15):
11) Answer: a)
The meaning of “drop from” is to exclude someone or something and the phrase has been applied properly in i and iii sentences
12) Answer: c)
The meaning of “hold with” is to agree or go along with something and the phrase has been applied properly in iii and iv sentences
13) Answer: d)
The meaning of “break through” is to penetrate or to make a sudden as through an obstruction and the phrase has been applied properly in i, iii and iv sentences
14) Answer: e)
The meaning of “plug away” is to keep trying something or to keep working at something and the phrase has been applied properly in all the sentences
15) Answer: d)
The meaning of “lay up” is to force someone to stay in bed and the phrase has been applied properly in i and iii sentences
Direction (16-20):
16) Answer: c)
In part e in place of it, it should be they
17) Answer: a)
In part c in place of in it should be under
18) Answer: a)
In part e in place of on it should be over (tide over means to sustain or support someone or something through a period of deficiency)
19) Answer: d)
In part c in place of warn it should be warned
20) Answer: c)
In part b in place of on it should be by
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This post was last modified on November 20, 2021 8:46 am