introduction to indian economy section 5 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (c)

Answer: (b)

The Finance Commission of India came into existence in 1951. It was established under Article 280 of the Indian Constitution by the President of India.

It was formed to define the financial relations between the centre and the state. The Constitution of India has made several provisions to bridge the gap of finances between the Centre and the States.

These include various articles in the constitution like Article 268, which facilitates a levy of duties by the Centre but equips the states to collect and retain the same.

Similarly, there are Articles 269, 270, 275, 282 and 293 all of which specify ways and means of sharing resources between Union and States. Apart from the above-mentioned provisions, The Indian Constitution provides an institutional framework to facilitate Centre-State TransfeRs.This body is the Finance Commission

Answer: (c)

Taxes levied, collected and retained by the Centre are:

1. Corporation Tax (Corporate tax)
2. Customs Duties.
3. Surcharge on Income Tax.
4. Taxes on the capital value of assets of individuals and companies.
5. Fees on matters of the Union list.

These taxes belong to the centre exclusively. In other words, no part of the proceeds of these taxes can be assigned to the states.

Answer: (a)

At present, the index is being developed only for the residential housing sector.

However, at a later stage, the index could be expanded to develop separate indices for commercial property and land. Primary data on housing prices is being collected from real estate agents by commissioning the services of private consultancy/research organisations of national repute.

In addition, data on housing prices is also being collected from the housing finance companies and banks, which is based on housing loans contracted by these institutions.

Answer: (a)

Open Market Operations (OMOs) are the market operations conducted by the Reserve Bank of India by way of sale/ purchase of Government securities to/ from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis.

When the RBI feels there is excess liquidity in the market, it resorts to the sale of securities thereby sucking out the rupee liquidity.

Similarly, when the liquidity conditions are tight, the RBI will buy securities from the market, thereby releasing liquidity into the market.

The two traditional types of OMO’s used by RBI are:

1. Outright purchase (PEMO): Is outright buying or selling of government securities; and
2. Repurchase agreement (REPO): This is the short term, and are subject to repurchase.