Directions (Q.1-10): Read the following passage carefully and answer the questions given below. Certain words/phrases have been printed in bold to help you locate them.
The gloom over economic growth appears to have dissipated a bit after the new numbers on National Income were released at the end of January 2015. However, there is continued scepticism about the numbers as several analysts feel that they are not inaccord with the ground realities. According to the advanced estimates for 2014-15, the growth rate is projected at 7.4 per cent. What are the prospects for 2015-16? We do not have the data for past years reworked on the new base and the new methodology, and without such a time series it becomes hard to forecast. Perhaps, 2015-16 will be a shade better than 2014-15, if all the positive factors mentioned later come together. However, it will fall short of the Budget expectations of eight per cent.
What are the favourable factors that can contribute to a better performance of the economy in 2015-16? First and foremost, there is the advantage of low crude oil prices. This will not only reduce the oil import bill and impact favourably on the current account balance, but will also moderate the price increase in general because petroleum products are used in the production of almost every commodity and service. Second, the credit rating agency, Moody’s decision to upgrade the outlook to “positive” may facilitate the inflow of capital. Though the recovery of the advanced economies is still tepid, the external environment as far as India is concerned may be benign. On the domestic front, there are signs of a gradual improvement in the investment “sentiment”. Still, there are several unfavourable or uncertain factors, chief among them being the uncertainty about the monsoon. We have not yet seen the full impact of the unseasonal rains of the last few months. The damage to crops has been extensive in several States and the natural consequence will be some pick up in food prices. Initial reports indicate that rainfall this time will be below normal. The impact on production will depend not only on the quantum of rainfall but also on its distribution over time and across States. Even though agriculture contributes only about 15 per cent to the GDP, any shortfall in agricultural production has serious implications. It fuels inflation and human distress is high as more than 50 per cent of the population depends on agriculture. Second, the several initiatives promised in the Budget will have the desired impact only if they are implemented speedily and effectively. For example, take the increased allocation of funds for railways and roads. Are these ministries adequately prepared to utilise these funds? Some of the initiatives such as the National Investment and Infrastructure Fund and Mudra Bank will take time to be set up and for their impact to be felt.
The Economic Survey has persuasively argued for larger public investment at a time when private investment is yet to pick up. The same point was made by the Report of the Economic Advisory Council to the Prime Minister in September 2013, that said: “The focused attention that is being given to achieving the production and capacity creation targets in coal, power, road and railways should generate higher growth. In effect, the public sector would act as the driver of growth and crowd in private sector activities”. It is to be noted that capital expenditures of the Central government in the Budget are not significant. Capital expenditures are also not synonymous with investment. While capital expenditures in 2015-16 show an increase over the revised estimates of 2014-15, as a proportion of GDP, they remain the same as in the Budget estimate of 2014-15, i.e. at 1.7 per cent of GDP. In fact, the bulk of the investment has to come from public sector institutions such as Coal India and the Indian Railways. What is needed is for the government to come out with a statement regarding the quantum of investment that will be made by the various public sector institutions. This should be monitored every quarter and the actual investments made should be made public. Apart from making the government accountable, this will inspire confidence in investors.
For raising the growth rate, the government relies on many of the initiatives announced in the Budget. Several of them need clarification and refinement. For example, how will the National Investment in Infrastructure Fund operate? Will it take the form of a trust or a non-banking financial company (NBFC)? The word “trust” was used in the Budget speech. The sooner the details are spelled out, the better it will be. Take another idea, of the Mudra Bank. To call the institution a “bank” will be incorrect if it is only to be a refinancing institution. Which are the last mile finance institutions which will be refinanced by this institution? Apparently, this institution will have to rely totally on Budget allocation. The idea of a refinancing institution is good but, once again, the details need to be spelled out. In fact, in this context, perhaps the best way to promote investment in the large-, medium- and small-scale sector is to go back to the days when we had development banks which provided long-term finance to large, medium and small industries. At the national level, the IDBI (Industrial Development Bank of India of that time) played a major role. At the State level, State finance corporations operated to provide long-term finance to medium and small enterprises. The development banks became universal banks and in that process we have lost out on long-term finance. Even the new initiative of allowing commercial banks to raise infrastructure bonds may not be adequate. Very soon, they will reach the limits of exposure with respect to industries and groups. And, it is also difficult to have firewalls separating short term from long-term credit. While the new ideas promoted in the Budget are welcome, it is time to think in terms of creating long-term finance institutions to provide equity and long-term loans to large and medium industries.
Q.1.Choose an appropriate title for the passage.
1) The Economic Leap
2) Budget and All
3) High on Ranking
4) The Development Plan
5) Growth: the next steps to be taken
Q.2.What is the synonym of the word “Persuasively”?
Q.3.What does the author mean by the phrase “any shortfall in agricultural production has serious implications.”?
1) Due to lesser rainfall, there will be serious consequences.
2) As monsoon is expected to be inadequate, the agricultural production will be less
3) The consequences will be very dangerous when there will be shortfall in the manufacturing sector.
4) All of the above.
5) None of the above
Q.4.Which of the following is not true according to the passage.
1) Several analysts doubts that the new estimated growth is not in accordance with real pictures.
2) Due to lesser oil prices, the import will be less and will help lowering the prices of other commodities.
3) Not only Private sector, but Public sector also has to invest equally for proper growth.
4) Mudra bank will not have to rely on budget allocation for its proper functioning and can be proved to be a milestone in refinancing sector.
5) None of the above
Q.5.What is the intention of the author behind this passage?
1) To pin point the govt. for not having proper plans to tackle upcoming issue.
2) To suggest that whatever govt. is doing, it will lead to the slowdown of the economy.
3) To give us clear understanding of growth and what the path would be.
4) To destroy Govt.’s image of being economic friendly.
5) To insinuate the Govt among public.
Q.6. Which of the following can be inferred from the passage.
A) The author wants Public Sector to come forward and invest more in the economy.
B) The functioning of Mudra bank will have to be clarified.
C) There is no need for any financial institution to look after the functioning of refinancing.
1) Only C
2) Only A and B
3) Only B and C
4) Only A and C
5) All A, B and C
Q.7.What is the synonym of the word “tepid”?
Q.8. What is the meaning of the word “benign”?
Q.9. Which of the following is not the synonym of “moderate”?
Q.10.What is the synonym of the word “accord”?
Answers 1. (5)