As you going to appear in UPSC civil services exam in this December and for its preparation looking for GK paper with solution , so on your demand I have provided same :

Q 1. With a consideration towards the strategy of inclusive growth, the new Companies Bill, 2013 has indirectly made CSR a mandatory obligation. Discuss the challenges expected in its implementation in right earnest. Also discuss other provisions in the Bill and their implications. (200 words) (10 marks)

Ans.

The Companies Bill, 2013 replaces the over half a century old Companies Act.
- Its CSR provision makes it mandatory for companies above a threshold to spend 2% of their average annual profits of last 3 years on CSR activities or else provide explanation. The company has to create a CSR policy and its implementation has to be seen by an independent director.

Challenges in implementation of CSR provision

The allowed CSR activities will be prescribed in the rules. Many companies like Tata, Wipro have their own CSR programmes. What happens if their activities are not covered under the rules?
It may lead to armtwisting of companies by the local politicians.
Companies may simply donate to government funds like prime minister relief fund to avoid compliance costs.
There is no penalty for non-compliance.

Other Provisions

Minority shareholders
Electronic voting provision.
Class action suits provision.
Related party transactions approval provision.
Impact: will protect minority shareholders.
Minimum 1/3rd independent directors. They can have maximum 2 terms of 5 years each.
Impact: will improve corporate governance and prevent compromising of directors.
Audit and accounting related provisions
Auditors have to be changed periodically.
Auditors have to act as whistleblowers.
NFRA established to prescribe accounting standards and oversee conduct of auditors.
Impact: will improve disclosures and corporate governance.
Small companies
1 person companies allowed.
Small companies have smaller compliance requirements.
Impact: will encourage small companies.

Briefly wrote one sentence on each provision.

Q 2. What were the reasons for the introduction of Fiscal Responsibility and Budget Management (FRBM) Act, 2003? Discuss critically its salient features and their effectiveness. (200 words) (10 marks)

Ans.

Reasons for introduction of FRBMA

High fiscal deficit of centre and states: central deficit was over 6% and state + central combined over 8%.
This high fiscal deficit was unsustainable and could have led to Eurozone like sovereign crisis in India.
Public savings were running negative (-1.7% of GDP).
Revenue deficit was high. So to keep our public finances sustainable, FRBMA was enacted.

Salient features and effectiveness

Fiscal deficit to be kept below 3% before 2007-08.
Effectiveness: It was achieved in 2007-08. But due to global financial crisis, it shot up over 6% in subsequent years and remained above 3%. The deadline has since been repeatedly extended and now it is 2015.
Revenue deficit to be eliminated. In 2012, the target was changed to effective revenue deficit to be eliminated by 2015.
Effectiveness: It was achieved but since then has been breached.
Off balance sheet guarantees of the government for PPP projects to be limited to 0.5% of GDP.
RBI to not to participate in primary government securities auction. Government borrowing from RBI only to happen via Ways and Means Advance and not adhoc t-bills.
Effectiveness: Totally effective.
Even state governments were given incentives by Finance Commissions to enact their FRBMAs and they have complied. Their fiscal deficit is < 3% now.
But the law requires only a simple majority to be amended and any government in power would have that. Its numerous amendments and deadline postponements have shown that it lacks efficacy.
There are also no penalties for violation of law.
Government has merely shifted fiscal deficit off the balance sheet by issuing oil bonds. Similarly power discom liabilities too don't come under fiscal deficit.

Q 3. What is the meaning of the term 'tax expenditure'? Taking housing sector as an example, discuss how it influences the budgetary policies of the government. (200 words) (10 marks)

Ans.

No idea. Didn't attempt.

Q 4. Food Security Bill is expected to eliminate hunger and malnutrition in India. Critically discuss various apprehensions in is effective implementation along with the concerns it has generated in WTO. (200 words) (10 marks)

Ans.

FSB makes it a statutory right of 67% of population (75% in villages, 50% in urban areas) to get 5 kg of cereals at highly subsidised prices. However, it has given rise to many concerns.

Concerns in WTO: talked about Amber box subsidies, how they have to be limited to 10% by developing countries. AMS is calculated based on prices in the base year (1986) and on entire eligible output. India risks breaching that due to FSB commitments. So India should press for (a) food security and small and marginal farmers exemption. (b) updation of reference prices to present prices to account for food inflation. (c) peace clause (art 13 of AoA) for a long tenure or until a permanent solution is found. On the other hand, developed countries are only willing to give a peace clause for 4 years.
Food subsidy costs: Mentioned many estimates put astronomical numbers to the costs. But they include many other large costs such as money to be spent on development of agriculture (eg. Gulati) which would have been spent irrespective of FSB. The government says costs of FSB will be Rs. 125,000 crores as against present subsidies of Rs. 109,000 crores.
Will increase PDS leakages: Some argue that to push more money through already leaking PDS is a wastage. But empirical data doesn't support it. Experiences in states such as Chattisgarh, Odisha, TN and even Bihar since 2009-10 suggests more coverage of PDS results in better delivery and less leakages (Khera). The FSB also contains provisions for many PDS reforms.
Will cause inflation: People will spend money saved on food on other things which may lead to inflation. There is substance to this, but this increased demand can give a positive stimulus to the sluggish economy.
Increased procurement needs will lead to grain imports / Nationalization of grain trade: Critics argue that more food procurement requirements will lead to imports. But FSB's procurement needs are around 65-70 million tonnes and government has been procuring more than this for the past few years already. Total foodgrain production in India is over 250 million tonnes. As seen above, government procurement will still be limited to only a fraction of foodgrain production.
Will hurt farmers: Critics also argue that with everybody buying grains at so cheap costs, farmers will not get remunerative prices. But this is wrong. To meed FSB requirements, government will have to increase MSP which will benefit farmers.

Q 5. What are the different types of agriculture subsidies given to farmers at the national and at state levels? Critically analyse the agriculture subsidy regime with reference to the distortions created by it. (200 words) (10 marks)

Ans.

Subsidies in agriculture came after the Green Revolution, both at centre and state levels.

Subsidies at central level

Fertilizers
The urea is covered under retention price scheme while other nutrients (P & K) are under nutrient based subsidy regime.
Distortions created: soil fertility imbalance, ecological imbalances like eutrophication. Recent spikes in P & K prices have worsened it.
But needed to sustain HYV seeds and support marginal and small farmers who are heavy users of fertilizers.
Minimum Support Prices
But it is effective only for wheat and rice and that too in Punjab, Haryana and West UP.
This creates distortions that crops not suited to the climate of a place are cultivated. eg. water guzzling rice in arid areas in Punjab and Haryana.
MSP can be used to promote ecological friendly farming and cropping patterns. So it must be made effective for all regions and all crops.
They are also highly needed given poor state of our small and marginal farmers.
Credit / Interest Subvention Schemes / Debt waivers:
Diesel
Distortion created is ground water depletion.
Insurance:

Subsidies at state level

Electricity: Distortion created is ground water depletion and poor supply of electricity in villages.
Irrigation water: Distortion created is (a) Irrigation systems don't even recover O&M costs. This leads to poor water supply and management. (b) farmers at canal heads use more water and cultivate water guzzling crops. (c) Ground water depletion. So water must be brought under public trust doctrine and O&M costs recovered, WUAs should be encouraged.

Wrote one sentence each describing each subsidy.

Attached Files

UPSC civil services exam GK paper with solution .pdf (143.6 KB, 80 views)