CA-FC-Day-42-2020-iastoppers
Flash Cards

Day#42 Current Affairs Flash Cards [PRELIMS 2020]

Appointment of Governor and Deputy Governor of the Reserve Bank of India; Fiscal stimulus; Difference between Co-operative federalism and Competitive federalism; Internal debt or domestic debt; Punnamada Kayal;
By IASToppers
September 11, 2019

 

 

Punnamada Kayal or Lake is famous for what?

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Answer:

  • Punnamada Lake in Kerala is famous for its Nehru Trophy boat race.

Enrich Your Learning:

Punnamada Lake

  • Punnamada Lake, popularly known as Punnamada Kayal is an extension of the Vembanad Lake, which is the biggest lake in Kerala.
  • In the Kuttanad, the lake is called Punnamada Kayal.
  • The lake is renowned for the famous boat race called Nehru Trophy boat race.
  • This lake is spread over the Kuttanad region in the Alappuzha district attracts a large number of tourists during the festive month of Onam celebration.
  • Punnamada wetland system has a wide spanning area of over 2033.02 sqkm hence making it the largest wetland system in India. Punnamada Lake is the largest surface water ecosystem of India.
  • Punnamada Lake surrounds three main islands of Kerala, which are Pathiramanal, Perumbalam and Pallippuram.

 

 

What would be the three major problems that can arise from the internal debt?

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Answer:

  • Internal debt creates three major problems:
    • Distorting effects on incentives due to extra-tax burden.
    • Diversion of society’s limited capital from the productive private sector to unproductive public sector.
    • Slowing the rate of growth of the economy.

Enrich Your Learning:

Internal debt or domestic debt

  • When a government borrows money from its own citizens by selling bonds or long-term credit instruments an internal debt is created.
  • It is owed by a nation to its own citizens. So, it may apparently seem that an internal debt does not impose any burden on society because we owe it all to ourselves.
  • Repayment of internal debt will constitute only a re-distribution of resources without causing any change in the total resources of the community.
  • There can, thus, be no direct money burden caused by internal debts since all payments cancel each other out in the aggregate community as a whole.
  • Whatever is taxed from one section of the community servicing the debts is distributed among the bond-holders by way of repayment of loans and interest.
  • In this, the incomes of tax-payers are reduced, so will the incomes of creditors/ bond-holders increase, but the aggregate position of the community will, nevertheless, remain the same.
  • Internal debt is basically immune to changes in international or other foreign rates. Therefore, if local rates are low, then internal debt will increase.

 

 

As per the RBI Act, the Governor or Deputy Governor of Reserve Bank of India has to be graduate in economics or financial subject. True or False?

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Answer:

False.

Correct Statement– There is no specific mention for the qualification of Governor or Deputy Governor of Reserve Bank of India in RBI Act.

But they had either Economics/Financial management experience with the government or were Economists.

Enrich Your Learning:

Appointment of Governor and Deputy Governor of the Reserve Bank of India

  • Governor and Deputy Governor are appointed/nominated by the Central Government under the RBI Act.
  • The RBI Governor is appointed after the proposal made by the Financial Sector Regulatory Appointments Search Committee (FSRASC), headed by the Cabinet Secretary.
  • The term of the governor may be fixed by the government at the time of his appointment. But it should be noted that the Governor and Deputy Governors hold office for periods not exceeding five years.
  • The governor can be removed by the government.
  • Both, the Governor and Deputy Governor are eligible for reappointment or extension.
  • The RBI Act doesn’t mention any specific qualification for the governor. Persons with different educational backgrounds were selected as Governor.
  • But they had either Economics/Financial management experience with the government (Economic Affairs Secretary/Financial Secretary etc.,) or were Economists.
  • Salaries and allowances of the Governor and Deputy Governors may be determined by the Central Board, with the approval of the Central Government.
  • In absence of the Governor, a Deputy Governor nominated by him functions as the Chairman of the Central Board.

 

 

What is the major difference between Co-operative federalism and Competitive federalism?

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Answer:

Cooperative Federalism is part of the basic structure of Indian constitution and cannot be amended by the parliament. It deals with the matters of legislation, administration and finance.

On the other hand, competitive federalism deals with the relationship among two or more states (and not between union and state) in the matters of trade, investment and commerce.

Enrich Your Learning:

Cooperative Federalism:

  • Co-operative federalism, in general terms, is a concept wherein the federal government, state government, and local government interact co-operatively and share their responsibilities in the governance.
  • This concept puts in a view that the national government and the state governments are partners in their governance. It involves participative policy making.
  • Sharing of powers and responsibilities between three levels of government is the key element of this concept.
  • A key element in fostering cooperative federalism is the respect for the mandate of elected governments.
  • The Indian Constitution provides for a scheme of tax sharing between the Centre and the State. This means that the Centre should share some taxes collected with the States.
  • Apart from the scheme of tax sharing, there is another way of transfer of revenue from the Centre to the State and that is the system of grants-in-aid.

Competitive Federalism:

  • Competitive federalism can refer to the relationship between the Central and state governments (vertical) or between State governments (horizontal).
  • In a free-market economy, the spirit of competition is developed through the provision of endowments to states, their available resource base and their comparative advantages.
  • States not only need to compete with the Centre but also among themselves for gaining these benefits.
  • Increasing globalisation, however, has made the already existing inequalities and imbalances between states much wider. Hence, there is concern about the states’ freedom to formulate their own growth policies.
  • With the onset of globalisation, there have been new economic roles for the government. There has been complex power sharing and multi-level relationship.
  • There is raise of Identity-related issues (e.g. Telangana) and resource-based issues (like Cauvery and Narmada), hence in a multiparty system it is important to forge effective federal coalitions.
  • Fiscal constraints of the states have led to the proliferation of central schemes and national missions.
  • Because of responsive and participative democracy, India get asymmetric federalism (the acceptance of inequality of states) leading to decline in inequality, tensions and dissatisfactions.

 

 

What is Fiscal stimulus? Does fiscal stimulus entail the Government expanding money supply?

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Answer:

  • A fiscal stimulus is the use of monetary or fiscal policy changes to kickstart growth during a recession.
  • A monetary stimulus will see the central bank expanding money supply or reducing the cost of money (interest rates), to spur consumer spending. A fiscal stimulus entails the Government spending more from its own coffers or slashing tax rates to put more money in the hands of consumers.

Enrich Your Learning:

Fiscal stimulus

  • An increase in public spending or a reduction in the level of taxation that might be performed by a government in order to encourage and support economic growth.
  • Most government bailout packages offered to various business types can be considered a form of fiscal stimulus.
  • India is seeing its financial growth momentum slowing down. It is not clear that it’s a structural or cyclical slowdown.
  • The usual thumb rule is that the policy response to a structural slowdown is through economic reforms that ease supply constraints.
  • And a cyclical slowdown has to be tackled with measures to stimulate demand.
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Daily Current Flash Cards 2020 Prelims 2020
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