JAIIB Paper 1 Module A Quiz 1

Organised-sector employment is generally associated with formal registration, regulation and more structured employment arrangements. Informality can also exist within registered enterprises, so the distinction should not be reduced to enterprise size alone; formal records and employment arrangements are relevant indicators.

Under the RBI’s Priority Sector Lending Directions, 2025, all bank loans to MSMEs qualify for PSL classification, subject to the applicable directions and correct borrower classification. Banks should still verify the current MSME definition and documentation.

From 1 April 2025, a micro enterprise is defined by investment in plant and machinery or equipment not exceeding ₹2.5 crore and annual turnover not exceeding ₹10 crore. Both criteria are relevant to classification.

Positive externalities occur when an activity creates benefits for third parties that are not fully captured by the investor. Because social benefits can exceed the project’s private returns, public investment or support may be justified after proper appraisal.

Health and education improve human capabilities, productivity and participation in economic activity. Their benefits extend beyond a single individual, which is why they are treated as core elements of social infrastructure rather than only current consumption.

Trade openness can increase competition, access to imported inputs, export opportunities and technology transfer. The gains can be uneven, and some domestic firms or workers may face adjustment pressures, so openness does not guarantee that every sector benefits equally.

A tariff is a tax on imports. It can raise the domestic price of imported goods and provide protection to domestic producers, while potentially increasing costs for consumers and firms that use imported inputs.

The 1991 reforms initiated a move towards liberalisation, a greater role for market mechanisms and increased integration with the world economy. Reforms included industrial delicensing in many areas, trade and investment changes, and macroeconomic stabilisation measures; they did not mean that the state ceased to have an economic role.

Depreciation means more rupees are needed to buy one US dollar. If the dollar price of an import and other charges remain unchanged, the rupee cost rises. The effect on the overall trade balance depends on volumes, elasticities and other factors.

Foreign direct investment generally involves a lasting interest and significant influence in an enterprise resident in another economy. It differs from portfolio investment, which typically involves financial securities without the same degree of management influence.

The International Monetary Fund (IMF) supports international monetary cooperation, conducts surveillance of members’ economic policies and provides financial assistance to countries facing balance-of-payments difficulties, subject to programme terms.

The World Bank Group focuses on long-term development and poverty reduction through financing, expertise and related support. The IMF focuses on international monetary stability, macroeconomic surveillance and balance-of-payments assistance. Their activities can complement one another.

Adaptation means adjusting systems and communities to actual or expected climate impacts, such as floods and heatwaves. Mitigation instead targets the causes of climate change, for example by reducing greenhouse-gas emissions or increasing carbon sinks.

The Green Revolution combined high-yielding varieties with complementary inputs such as assured irrigation, fertilisers, pesticides and improved farming practices. Its early gains were especially strong in regions with suitable infrastructure; benefits were not uniform across all crops and regions.

Productivity growth raises the amount of output produced per unit of input, while inclusive development seeks to broaden access to opportunities and the benefits of growth. Sustainable economic progress generally requires attention to both efficiency and distribution.

Structural transformation is a change in the composition of economic activity and employment across sectors, often accompanied by productivity changes. It does not simply mean that every sector grows at the same rate; the relative importance of agriculture, industry and services changes over time.

Planning can coordinate long-term investment and address market failures, especially where infrastructure has large spillover benefits, long gestation periods or returns that are difficult for a single private investor to capture.

An objective describes the result sought, such as faster inclusive growth or poverty reduction. An instrument is a means used to pursue it, such as public investment, taxation, subsidies, regulation or credit support.

Higher farm productivity can improve food availability and farm incomes while supporting agro-processing through more reliable inputs. Increased rural income can also raise demand for manufactured goods and services, creating inter-sector linkages.

The quaternary sector is commonly associated with knowledge-based activities such as information, research, technology and specialised analysis. The factory’s physical manufacturing remains secondary-sector activity, but the research and data-intensive function described fits the quaternary sector.