APPSC Group-1 2017 Economy Previous Year Questions

Ans: (3) Acute shortage of foreign exchange (as per APPSC official final key)

The Second Five Year Plan (1956–61) followed the Mahalanobis model, which focused on heavy and basic industries. These needed large imports of machinery. By 1957–58 India faced an acute foreign exchange crisis: reserves were falling fast and food imports were also rising.

So the Plan was cut back to a “core” of essential projects, mainly steel, coal, transport and power, and other targets were pruned.

Note:

• Steel plants of the Second Plan: Bhilai (USSR), Rourkela (West Germany), Durgapur (UK).
• The Third Plan (1961–66) was hit by the 1962 and 1965 wars and the 1965–66 drought, leading to Plan Holidays (1966–69).

Ans: (1) Employment (as per APPSC official final key)

After the Janata Party came to power in 1977, it ended the Fifth Plan a year early and launched a Rolling Plan (1978–83), suggested by Gunnar Myrdal and others. Its draft Sixth Plan gave the main emphasis to employment, along with removal of poverty, agriculture, cottage and small industries, and rural development.

When the Congress returned in 1980, the Rolling Plan was dropped and a new Sixth Plan (1980–85) was started, focused on poverty removal.

Note:

• In a Rolling Plan, the plan is reviewed and revised every year.
• The Janata government’s Planning Commission deputy chairman was D.T. Lakdawala.

Ans: (3) Tenth Plan (as per APPSC official final key)

The Tenth Five Year Plan (2002–07) first set monitorable targets for key development indicators, not only for GDP growth. Examples were reducing poverty by 5 percentage points by 2007, all children in school by 2003, reducing IMR to 45 per 1,000, and increasing literacy to 75%. It also aimed at 8% GDP growth.

Note:

• The Eleventh Plan (2007–12) theme was ‘faster and more inclusive growth’, with 27 monitorable targets.
• The Twelfth Plan (2012–17) theme was ‘faster, more inclusive and sustainable growth’.

Ans: (2) Economic Growth first versus Investment in Social Infrastructure first (as per APPSC official final key)

The Bhagwati–Sen debate is about which policy India should give priority to.

• Jagdish Bhagwati (with Arvind Panagariya) argues for economic growth first. Growth produces the revenue needed for welfare (the “Gujarat model”).
• Amartya Sen (with Jean Drèze) argues for investment in social infrastructure first: health, education and nutrition, which make growth inclusive (the “Kerala model”).

Note:

• Bhagwati–Panagariya book: ‘Why Growth Matters’ (2013).
• Drèze–Sen book: ‘An Uncertain Glory: India and its Contradictions’ (2013).
• Sen won the Nobel Prize in Economics in 1998.

Ans: (4) categorization of erstwhile rural areas as urban areas (as per APPSC official final key)

According to Census 2011, for the first time since 1921 the absolute increase in urban population (about 91 million) was more than the increase in rural population. One major reason was the reclassification of rural areas as urban. The number of census towns rose from 1,362 in 2001 to 3,894 in 2011.

A census town is a settlement that meets three conditions: a population of at least 5,000, a density of at least 400 per sq km, and at least 75% of the male workforce in non-agricultural work.

Note:

• Urban population in 2011: 31.1% (377 million).
• Statutory towns are those notified by law (municipality, corporation etc.).

Ans: (3) farmers decreased and farm labourers decreased and (4) farmers decreased and farm labourers increased (as per APPSC official final key; both options are treated as correct)

According to Census 2011:

• Cultivators fell from about 12.7 crore (2001) to 11.9 crore (2011), the first absolute fall.
• Agricultural labourers rose from about 10.7 crore to 14.4 crore.

So farmers decreased and farm labourers increased, which is option (4). APPSC also accepted option (3) in the final key.

Note:

• For the first time, agricultural labourers outnumbered cultivators.
• About 54.6% of workers were in agriculture and allied activities (Census 2011).

Ans: (2) bankruptcy or indebtedness (as per APPSC official final key)

According to the NCRB report Accidental Deaths and Suicides in India (ADSI) 2015, the biggest reason for suicides by farmers and cultivators was bankruptcy or indebtedness (about 38.7%), followed by farming-related issues (about 19.5%). Family problems and illness came next.

Maharashtra had the highest number of farmer suicides, followed by Telangana and Karnataka.

Note:

• ADSI 2015 was the first to separate farmers/cultivators from agricultural labourers.
• NCRB is under the Ministry of Home Affairs.

Ans: (4) National Water Grid (as per APPSC official final key)

The Pradhan Mantri Krishi Sinchayee Yojana (PMKSY, 2015) aims at “Har Khet ko Pani” (water to every field) and “More Crop per Drop“. Its components are:

• AIBP (Accelerated Irrigation Benefits Programme) – completing major and medium irrigation projects;
• Har Khet ko Pani – new minor irrigation and repair of water bodies;
• Per Drop More Crop – micro-irrigation such as drip and sprinkler;
• Watershed Development.

A National Water Grid (river linking) is not a part of PMKSY.

Note:

• AIBP began in 1996–97.
• The National Perspective Plan for river linking was prepared in 1980.

Ans: (3) Usage of energy efficient LED bulbs (as per APPSC official final key)

The UDAY scheme (Ujwal DISCOM Assurance Yojana, November 2015) was launched to revive loss-making power distribution companies (DISCOMs). States took over 75% of DISCOM debt.

• Supply-side and cost measures: coal swapping, cheaper funds, reducing transmission losses and better coal supply.
• Demand-side interventions: energy-efficient LED bulbs, agricultural pumps, fans and ACs. These cut the demand for power.

Note:

• UJALA scheme distributes LED bulbs at low prices.
• AT&C (aggregate technical and commercial) losses were to be cut to 15%.

Ans: (1) 100% of the cost of the irrigation component for the period starting from 01/04/2014 to the extent of the cost as on that date (as per APPSC official final key)

The Polavaram project on the Godavari was declared a national project under Section 90 of the AP Reorganisation Act, 2014. In the special assistance measure of September 2016, the Centre agreed to fund 100% of the cost of the irrigation component, for the period from 1 April 2014, to the extent of the cost as on that date. AP was to execute the project.

Note:

• Polavaram is named Indira Sagar; it will link to the Krishna through the right canal.
• Pattiseema lift scheme (2015) linked the Godavari and the Krishna.

Ans: (3) Income distance (as per APPSC official final key)

The 14th Finance Commission (chairman Y.V. Reddy, award period 2015–20) used these weights for sharing taxes among the States:

• Income distance – 50%
• Population (1971) – 17.5%
• Area – 15%
• Demographic change (2011 population) – 10%
• Forest cover – 7.5%

Note:

• The 14th FC raised the States’ share of divisible taxes from 32% to 42%.
• The 15th FC (N.K. Singh) set it at 41% and used 2011 population.

Ans: (2) 2014 – 15 (as per APPSC official final key)

To assess the resources of the Centre and the States for its award period (2015–20), the 14th Finance Commission took 2014–15 as the base year for its projections of revenue and expenditure, as per the key.

Note:

• The FC is set up under Article 280 every five years.
• The 14th FC also recommended grants for local bodies: about ₹2.87 lakh crore.

Ans: (3) Differential levels in aspirations and expectations of the population of various States (as per APPSC official final key)

In deciding the vertical devolution (the States’ share of central taxes), the 14th Finance Commission considered:

• the spirit of the constitutional provisions;
• the concerns of the States and Centre on fiscal space;
• the need for clarity on the functional and expenditure responsibilities of the States and Centre.

Differences in the aspirations and expectations of people of different States were not a factor.

Note:

• Vertical devolution = Centre-to-States share (42%); horizontal = among States.
• Article 270 deals with the sharing of central taxes.

Ans: (2) increase in share of unconditional transfers to States (as per APPSC official final key)

The 14th Finance Commission raised tax devolution to 42% and left less room for specific-purpose grants. A shift from grants (often tied to conditions and schemes) to tax devolution (formula-based and untied) increases the share of unconditional transfers to the States. This gives them more freedom to spend according to their own priorities.

Note:

• Article 275 grants are statutory grants; Article 282 grants are discretionary.
• The Centre reduced its CSS share after the 14th FC.

Ans: (4) negative (as per APPSC official final key)

The Economic Survey 2016–17 studied how central transfers affect the States. It found that redistributive resource transfers from the Centre to the States had a negative relationship with outcomes like per capita consumption, GDP growth and the States’ own tax effort. It called this a “dependence syndrome“, similar to the “aid curse”: States that receive more transfers make less effort to raise their own revenue.

Note:

• Economic Survey 2016–17 was prepared under CEA Arvind Subramanian.
• It also introduced the idea of Universal Basic Income.

Ans: (1) Social protection and Social inclusion schemes (as per APPSC official final key)

The Sub-Group of Chief Ministers on Rationalisation of Centrally Sponsored Schemes (2015) put CSS into three groups:

• Core of the core – schemes for social protection and social inclusion, such as MGNREGA, the National Social Assistance Programme, and umbrella schemes for SCs, STs, minorities and other vulnerable groups. These get the most central funding.
• Core schemes – those in the national agenda, like health, education, housing and Swachh Bharat; usually 60:40 Centre–State.
• Optional schemes.

Note:

• The number of CSS was cut to about 28 umbrella schemes.
• Sharing pattern for NE and Himalayan states: 90:10.

Ans: (2) Rurban Mission (as per APPSC official final key)

The Shyama Prasad Mukherji Rurban Mission (February 2016) develops clusters of rural villages with urban facilities. It is a rural development scheme, not an urban one.

Urban rejuvenation schemes include:

• AMRUT (Atal Mission for Rejuvenation and Urban Transformation, 2015) – water supply, sewerage and green spaces in 500 cities;
• HRIDAY (Heritage City Development and Augmentation Yojana, 2015) – heritage cities;
• Swachh Bharat Mission (Urban).

Note:

• 300 Rurban clusters were planned.
• Smart Cities Mission covered 100 cities.

Ans: (1) Universal Basic Income (as per APPSC official final key)

The Economic Survey 2016–17 discussed Universal Basic Income (UBI) as a radical idea. It means a fixed amount paid to every citizen without conditions, to replace many poorly targeted welfare schemes that suffer from misallocation and leakage. The Survey estimated that a UBI of about ₹7,620 a year to 75% of the population would cost about 4.9% of GDP.

Note:

• ‘Wipe every tear from every eye’ was the title of the UBI chapter.
• Direct Benefit Transfer (DBT) started in 2013.

Ans: (3) 56% (as per APPSC official final key)

Under MGNREGA (2005), at least one-third of the beneficiaries must be women. In practice women’s participation is much higher: in 2016–17 it was about 56% of the person-days generated.

Note:

• Kerala and Tamil Nadu have the highest women’s participation.
• MGNREGA guarantees 100 days of wage employment a year to each rural household.

Ans: (2) Rules are set by users and not by outsiders (as per APPSC official final key)

The Andhra Pradesh Farmer Managed Groundwater Systems (APFAMGS) project ran in the drought-prone districts of AP. Farmers measured rainfall and groundwater levels themselves, and planned crops according to the water available.

It followed the principle of community self-regulation: rules are set by the users, not by outsiders. There were no sanctions, formal dispute mechanisms or fixed rules, and participation was voluntary.

Note:

• APFAMGS was supported by FAO and was cited as a model in World Bank and Economic Survey reports.
• Elinor Ostrom’s work on managing common resources supports user-made rules.

Ans: (3) Sharp rise in value of imports of oil & petroleum products (as per APPSC official final key)

The 1991 balance of payments crisis came from a long build-up of fiscal deficits and external debt. The immediate trigger was the Gulf War (1990–91), which sharply raised oil prices and the import bill. Remittances from Gulf workers also fell. Foreign exchange reserves dropped to about two weeks of imports (about $1 billion).

Note:

• Political instability (two governments in 1990–91) and credit rating downgrades worsened the crisis.
• New Economic Policy: LPG (Liberalisation, Privatisation, Globalisation), July 1991.

Ans: (2) Emergency loan from IMF by pledging gold reserves (as per APPSC official final key)

To get through the 1991 balance of payments crisis, the government pledged gold reserves: about 47 tonnes with the Bank of England and the Bank of Japan, and 20 tonnes sold through the SBI. With this it raised emergency funds and obtained a loan from the IMF under its structural adjustment programme. In return India agreed to economic reforms.

Note:

• P.V. Narasimha Rao was PM and Manmohan Singh was Finance Minister.
• By 1993–94 reserves had recovered and the gold was redeemed.

Ans: (4) Railways (as per APPSC official final key)

After 1991, many sectors were opened to private and foreign players:

• Civil aviation – private airlines (open skies, 1994).
• Banking – new private banks (Narasimham Committee).
• Telecommunications – private mobile operators; the regulator TRAI (1997).

Railways stayed mostly a government monopoly and saw little reform.

Note:

• Only two sectors remain reserved for the public sector: atomic energy and railway operations.
• The Bibek Debroy Committee (2015) suggested railway restructuring.

Ans: (1) Reforms were mainly confined to the formal sector (as per APPSC official final key)

Jobless growth means GDP grows, but employment does not grow at the same pace. After 1991, the reforms mainly benefited the formal (organised) sector, which was capital- and skill-intensive. Most Indian workers were in the informal sector, which saw little benefit. So growth did not create enough jobs.

Note:

• More than 90% of India’s workforce is informal.
• Labour law reforms (four labour codes) came in 2019–20.

Ans: (3) Anti-profiteering measure (as per APPSC official final key)

Under Section 171 of the CGST Act, 2017, any reduction in tax rate or benefit of input tax credit must be passed on to consumers through a commensurate reduction in prices. This is called the anti-profiteering measure. The National Anti-Profiteering Authority was set up in November 2017 to enforce it. Its work was later transferred to the CCI (2022).

Note:

• GST came into force on 1 July 2017 after the 101st Constitutional Amendment (2016).
• The GST Council is under Article 279A.

Ans: (1) Government through notification (as per APPSC official final key)

Under the GST law, the GST rates are fixed by government notification on the recommendation of the GST Council, within the ceiling in the Act (for CGST, 20%). So no amendment to the Act or the Constitution is needed to change rates. GST has slabs of 5%, 12%, 18% and 28%, plus cess.

Note:

• The GST Council is chaired by the Union Finance Minister.
• Decisions need three-fourths majority; the Centre has one-third and the States two-thirds of the votes.

Ans: (2) Shared equally between the Centre and States with apportionment amongst the States on the basis of SGST collection in the last year of transition (as per APPSC official final key)

The GST (Compensation to States) Act, 2017 promised compensation for 5 years for a revenue shortfall below 14% annual growth (base year 2015–16), paid from a cess. At the end of the transition period, the unutilised money in the Compensation Fund would be split:

• 50% to the Centre (Consolidated Fund of India);
• 50% to the States, in the ratio of their SGST collections in the last year of transition.

Note:

• The compensation period ended on 30 June 2022; the cess was extended to repay borrowings.
• Compensation cess is levied on luxury and sin goods.

Ans: (3) Misclassification of goods and services (as per APPSC official final key)

With multiple tax rates, every item has to be placed in a rate slab. This leads to disputes and misclassification: traders may show a product under a lower-rate category to pay less tax. It also creates litigation and higher compliance costs. A single or few rates reduce these problems.

Note:

• The Arvind Subramanian committee (2015) suggested a revenue-neutral GST rate of 15–15.5%.
• Disputes like ‘Parotta vs roti’ arose over classification.

Ans: (3) Travelling long distance for toilet facility (as per APPSC official final key)

The Economic Survey 2016–17 discussed sanitation and women. It noted that in households without toilets, women often have to travel a long distance to go out in the open, usually early morning or after dark. This exposes them to safety risks, health problems and loss of dignity. Swachh Bharat Mission (2014) aimed to make India open-defecation free by 2 October 2019.

Note:

• ‘Izzat ghar’ is the name for toilets under SBM in some states.
• SBM (Gramin) phase II runs from 2020–25 (ODF Plus).

Ans: (1) The lower the coverage, the higher the leakage (as per APPSC official final key)

The Economic Survey 2016–17 (UBI chapter) found an inverse relation between coverage and leakage in the Public Distribution System: States with lower coverage had higher leakage. Where PDS covers most people (e.g. Tamil Nadu, Chhattisgarh), leakages are lower, because there is less incentive to divert and more public pressure for the system to work.

Note:

• The National Food Security Act, 2013 covers up to 75% of rural and 50% of urban population.
• Leakage means grain lost or diverted before reaching beneficiaries.

Ans: (4) Jan Dhan Yojana (as per APPSC official final key)

Pradhan Mantri Jan Dhan Yojana (August 2014) is the national mission for financial inclusion. It opened zero-balance bank accounts for the unbanked, with a RuPay debit card, accident insurance (₹1–2 lakh) and an overdraft facility. Jan Dhan, Aadhaar and mobile phones together form the JAM trinity, used for DBT.

Note:

• PMJDY entered the Guinness Book for most accounts opened in a week (1.8 crore).
• Other inclusion schemes: PMJJBY, PMSBY, Atal Pension Yojana (2015).

Ans: (2) Satellite imagery (as per APPSC official final key)

The Economic Survey 2016–17 estimated the gap in property tax collection in Bengaluru and Jaipur using satellite imagery. By counting buildings from satellite images and comparing them with tax records, it found that Bengaluru collected only about 5–20% of its potential property tax.

Note:

• Property tax is a main own-revenue source of urban local bodies.
• The 74th Amendment (1992) placed municipalities in the 12th Schedule.

Ans: (1) To minimize dropout rate of girl students from high school (as per APPSC official final key)

Under the Badikosta scheme (2015), the Andhra Pradesh government gave bicycles to girl students of Class IX in government schools. Many girls dropped out after Class VIII because the high school was far away. So the main aim was to reduce the dropout rate of girls in high school.

Note:

• ‘Badikosta’ in Telugu means ‘come to school’.
• Similar schemes elsewhere: Mukhyamantri Balika Cycle Yojana (Bihar).

Ans: (2) Desiltation of minor irrigation tanks and channels (as per APPSC official final key)

Neeru–Chettu (“Water–Tree”) was an Andhra Pradesh programme launched in 2015 to make the state drought-proof. Its main works were desilting minor irrigation tanks and channels, building check dams and farm ponds, and recharging groundwater, along with tree plantation.

Note:

• Pattiseema and Purushottapatnam lift schemes were part of AP’s water security plan.
• Jala Siri is a related bore-well programme.

Ans: (1) AP Economic Development Board (as per APPSC official final key)

The Andhra Pradesh Economic Development Board (APEDB) was set up in 2014–15, after the state’s reorganisation, by an Act of the state legislature. It acts as a catalyst to attract investment and promote economic growth. It handles investment promotion, partnerships and overseas outreach.

Note:

• AP Industrial Infrastructure Corporation (APIIC) develops industrial parks.
• AP’s Single Desk Portal gives industrial clearances.

Ans: (4) There should be no poverty in any form (as per APPSC official final key)

The Sustainable Development Goals (SDGs, 2015–30) have 17 goals. SDG 1 is “End poverty in all its forms everywhere” by 2030. It includes eradicating extreme poverty (people living on less than $1.25 a day) and halving poverty by national definitions.

Note:

• SDGs succeeded the Millennium Development Goals (2000–15).
• NITI Aayog publishes the SDG India Index (since 2018).

Ans: Question deleted by APPSC (official final key; no option is treated as correct)

APPSC deleted this question in the final key. It concerned the dispute between Andhra Pradesh and Telangana over the assets of the AP State Council of Higher Education (APSCHE). The Supreme Court held in March 2016 that the assets should be divided on the basis of location (Section 47 of the Reorganisation Act), and the Union Home Ministry issued orders on this basis in 2017. The given options did not clearly match the official position, which is probably why it was deleted.

Note:

• Schedule IX and Schedule X institutions of the AP Reorganisation Act are divided under Sections 53 and 75.
• Population ratio AP:TS = 58.32:41.68.

Ans: (3) Population ratio was the sole factor for distribution of debt (as per APPSC official final key)

Under the AP Reorganisation Act, 2014, the debt of the old State was divided between AP and Telangana. Project-specific loans were divided according to where the project was located. The rest of the public debt was divided in the ratio of population (58.32 : 41.68). Because AP got the larger share of the population, it took on a larger share of the debt.

Note:

• Section 50 and the 12th Schedule of the Act deal with debt apportionment.
• The appointed day was 2 June 2014.

Ans: (2) ₹ 1,976·50 Cr (as per APPSC official final key)

In place of Special Category Status, the Centre announced a special assistance measure for Andhra Pradesh in September 2016. It was meant to be equal to the extra central share AP would have got as a special category state for 2015–20, given through externally aided projects. As per the key, the amount of special assistance for 2016–17 was ₹1,976.50 crore.

Note:

• The 14th FC said there was no basis for special category status beyond the existing ones.
• AP also received resource gap (revenue deficit) grants for 2014–15.

Ans: (4) 20000 (as per APPSC official final key)

The Andhra Pradesh Retail Trade Policy 2015–20 aimed to make AP a retail hub. It offered incentives such as allowing shops to stay open 24×7 and simpler licensing. As per the key, it aimed to create 20,000 additional jobs in the retail sector by 2020.

Note:

• AP’s Single Desk Policy and Industrial Development Policy 2015–20 were announced the same year.
• Retail is the largest employer in the services sector.

Ans: (3) 29·36 (as per APPSC official final key)

After reorganisation, Andhra Pradesh’s outstanding debt as a share of GSDP was about 29.36% in 2014–15, as per the key (based on State budget and RBI data). The FRBM framework aims to keep this ratio under control. The 14th FC suggested a debt–GSDP limit of about 25% for most States.

Note:

• AP FRBM Act was passed in 2005.
• The N.K. Singh FRBM Committee (2017) suggested a combined debt of 60% of GDP (Centre 40%, States 20%).