Question 1:
Directions: Read the following passage carefully and answer the questions given below it. Certain parts are given in bold to answer some of the questions based on the passage.
It was not without reason that Finance Minister Nirmala Sitharaman met the Chief Ministers/Finance Ministers of all the States and Union Territories on November 15 in what she described as a “rare, one-off” meeting. Though she discussed ways to sustain the economic recovery post the second wave of Covid, her primary objective was to push the States to focus on capital expenditure. She even agreed to front-load a month’s devolution if that will help them enhance their capital spend. The emphasis on capital expenditure is understandable. (A) It has the maximum multiplier effect, something the Indian economy desperately needs to accelerate its pace of growth. According to a study by the National Institute of Public Finance and Policy, every rupee spent as a revenue expenditure has a multiplier effect of ₹0.98. At the same time a rupee of capex delivers a multiplier effect of ₹2.25 in the year it is incurred and it is ₹4.80 during the course of the entire expenditure. Apart from the higher multiplier effect, government capex catalyses private investment, increases production capacity thereby speeding up economic growth which in turn creates a lot more jobs.
Typically, the States cumulatively spend more on capex than the Centre. In FY21, they spent ₹4.46 lakh crore while the Centre’s spend was ₹4.12 lakh crore. States spending more on capex helps as it has better multiplier effect than the expenditure incurred by the Centre. It is because the Centre’s capex includes defence capital spending (roughly about ₹1 lakh crore) which predominantly consists of imports which provide little impetus to the Indian economy. Though States spend more on Capital expenditure, they traditionally do so in a manner that is not entirely efficient. The money is not uniformly spent through the year but is bunched up and spent in the last quarter of the fiscal. The reasons are not far to seek. Capex is a discretionary expenditure unlike salaries, pension and subsidies which have to be necessarily spent. Unsure of the revenue flow States prioritise revenue expenditure and asset creation happens towards the end of the fiscal. The Centre too did this till recently.
That many European countries are imposing total lockdown again is a reminder that India too could face possible economic disruptions in the future. Under the circumstances, States may want to wait and watch before ramping up capex. The Centre is better placed to spend more on capex as it gets revenue from various types of cess that are not shareable with the States. That apart, for many States the additional borrowing is not an incentive. They are already heavily leveraged and would not want to add to the debt. They have no incentive to front-load capex given the uncertainties. Also, Tamil Nadu, Andhra Pradesh, Sikkim and Manipur, have negative cash balance as of end-October. Front-loading of devolution will certainly help ease their cash flow but it is unclear if they will use it on capex or prefer to clear their pending revenue expenses. An attempt to bring about a behavioural change on how capex is spent is a welcome move. The policy may meet with limited success now due to the pandemic and the uncertainties it has created in terms of revenue visibility. But the (B) Centre should not lose heart. Better results will come as the economy recovers. Going forward, both the Centre and the States should also focus on the quality of capex. Spending on roads, power plants, ports and airports generate better multiplier effect than investing in buildings. These changes are necessary if India has to escape its current moderate pace of economic expansion and post strong double digit GDP growth in a sustained manner in the future.
Statement B “Centre should not lose heart” what do you understand from this statement?
Directions: Read the following passage carefully and answer the questions given below it. Certain parts are given in bold to answer some of the questions based on the passage.
It was not without reason that Finance Minister Nirmala Sitharaman met the Chief Ministers/Finance Ministers of all the States and Union Territories on November 15 in what she described as a “rare, one-off” meeting. Though she discussed ways to sustain the economic recovery post the second wave of Covid, her primary objective was to push the States to focus on capital expenditure. She even agreed to front-load a month’s devolution if that will help them enhance their capital spend. The emphasis on capital expenditure is understandable. (A) It has the maximum multiplier effect, something the Indian economy desperately needs to accelerate its pace of growth. According to a study by the National Institute of Public Finance and Policy, every rupee spent as a revenue expenditure has a multiplier effect of ₹0.98. At the same time a rupee of capex delivers a multiplier effect of ₹2.25 in the year it is incurred and it is ₹4.80 during the course of the entire expenditure. Apart from the higher multiplier effect, government capex catalyses private investment, increases production capacity thereby speeding up economic growth which in turn creates a lot more jobs.
Typically, the States cumulatively spend more on capex than the Centre. In FY21, they spent ₹4.46 lakh crore while the Centre’s spend was ₹4.12 lakh crore. States spending more on capex helps as it has better multiplier effect than the expenditure incurred by the Centre. It is because the Centre’s capex includes defence capital spending (roughly about ₹1 lakh crore) which predominantly consists of imports which provide little impetus to the Indian economy. Though States spend more on Capital expenditure, they traditionally do so in a manner that is not entirely efficient. The money is not uniformly spent through the year but is bunched up and spent in the last quarter of the fiscal. The reasons are not far to seek. Capex is a discretionary expenditure unlike salaries, pension and subsidies which have to be necessarily spent. Unsure of the revenue flow States prioritise revenue expenditure and asset creation happens towards the end of the fiscal. The Centre too did this till recently.
That many European countries are imposing total lockdown again is a reminder that India too could face possible economic disruptions in the future. Under the circumstances, States may want to wait and watch before ramping up capex. The Centre is better placed to spend more on capex as it gets revenue from various types of cess that are not shareable with the States. That apart, for many States the additional borrowing is not an incentive. They are already heavily leveraged and would not want to add to the debt. They have no incentive to front-load capex given the uncertainties. Also, Tamil Nadu, Andhra Pradesh, Sikkim and Manipur, have negative cash balance as of end-October. Front-loading of devolution will certainly help ease their cash flow but it is unclear if they will use it on capex or prefer to clear their pending revenue expenses. An attempt to bring about a behavioural change on how capex is spent is a welcome move. The policy may meet with limited success now due to the pandemic and the uncertainties it has created in terms of revenue visibility. But the (B) Centre should not lose heart. Better results will come as the economy recovers. Going forward, both the Centre and the States should also focus on the quality of capex. Spending on roads, power plants, ports and airports generate better multiplier effect than investing in buildings. These changes are necessary if India has to escape its current moderate pace of economic expansion and post strong double digit GDP growth in a sustained manner in the future.
Statement B “Centre should not lose heart” what do you understand from this statement?
Question 6:
The following question has two blanks, each blank indicating that something has been omitted. Choose the set of words for each blank that best fits in the context of sentence.
At least 18 persons _______killed in Nadia district of West Bengal when the vehicle they were travelling in collided________a truck parked on the roadside.
The following question has two blanks, each blank indicating that something has been omitted. Choose the set of words for each blank that best fits in the context of sentence.
At least 18 persons _______killed in Nadia district of West Bengal when the vehicle they were travelling in collided________a truck parked on the roadside.
Question 10:
In the following questions, a sentence with four highlighted words indicated by a, b, c and d are given. More than one of these four words are either wrongly spelled or inappropriately used. Find out the words which are wrongly spelled or inappropriate (if any). If all the words given in bold are correctly spelled and appropriate in the context of the sentence, (All are correct) as your answer.
India’s anxities(a) over ungovarned (b) spaces and lawless Afghanistan turning into a significantly (c) source of internal security threat (d)are gradually turning into reality.
In the following questions, a sentence with four highlighted words indicated by a, b, c and d are given. More than one of these four words are either wrongly spelled or inappropriately used. Find out the words which are wrongly spelled or inappropriate (if any). If all the words given in bold are correctly spelled and appropriate in the context of the sentence, (All are correct) as your answer.
India’s anxities(a) over ungovarned (b) spaces and lawless Afghanistan turning into a significantly (c) source of internal security threat (d)are gradually turning into reality.
