One who reads leads! 🙂

Reading makes a man a gentleman! 100% of the world leaders are found with a newspaper or a magazine or a book in their pictures. As they say, reading has answers to all the questions in the world. Our jobs have understood the importance of the same and hence we have been witnessing an increasing popularity of RC based questions in almost all the government sector exams including the UPSC. Let’s try and catch up with the trend. Bringing to you an economic passage straight from the mighty Economic Times!

Read, Learn, Succeed! 🙂

Directions (1-10): Read the passage given below and answer the questions that follow:

What explains the incredible run up in the country’s equity market – which has gained nearly 13% in value in one year – as the economy struggle? Optimism about bright long-term prospects, sustained by reforms such as the goods and services tax, is one explanation. It could be a part of a global bubble, as well. The MSCI Asia Pacific Index is up nearly 14%, led by Japan with a near-18% year-on-year gain; America’s Dow Jones has climbed more than 18% and western Europe as a whole has shot up more than 16%, in one year. There is a lot of liquidity looking form returns and lifting stock values worldwide.

But India’s corporate and macroeconomic fundamentals hardly merit this kind of market exuberance. For the US, Europe and the Asia Pacific, the grinding pain of 2008’s global crisis seems to be getting over. The International Monetary Fund reckons the world economy will grow a healthy 3.5% this year. In India, the Sensex price-to-earnings ratio, at nearly 24, shows that stock prices have run up faster than corporate earnings. For the first quarter this year, which ended in June, corporate revenues have inched up, but profit margins have fallen sharply. Only a part of this is attributable to the liquidity crunch affecting all sectors after demonetization.

India’s banks, loaded with unprecedented amounts of bad debt, are now so risk-averse, they would rather not lend for new projects. This has caused private investment to dry up: in the first half of 2016 – 17, the net fixed assets of all listed companies tracked by CMIE saw assets contract by 9%, the first time this has happened. The government has boosted investment within its fiscal deficit constraints, but this has not prevented contraction of the investment rate, at its lowest level since 2004 – 05. Projects like the Delhi – Mumbai Industrial Corridor (DMIC), which would build cities, highways, rail corridors and ports, are needed to step up investment and growth. DMIC has not progressed much. The government must clear up the banking mess, and invest aggressively to give private players the cue to follow suit. Vigorous investment must underpin a market boom.

1Question 1

1. Which of the following best explains “India’s banks, loaded with………… projects”?

1) The huge amount of debt has affected the banking industry in the world
2) Indian banks need to impose SARFAESI more strictly
3) Sensex is picking up at the rate of 13% in the present economic conditions
4) Indian banks badly affected by a huge amount of debt have even lost their risk appetite
5) Indian banking industry is going through recession and not funding new projects because of that

2Question 2

2. Which of the following serves as a synonym of the word underpin as used in the passage?

1) form
2) support
3) grounded
4) based
5) None of the above

3Question 3

3. What possible reason has been mentioned behind the falling profit margins of the corporates?

1) The economic crunch being faced by the equity markets
2) Increasing revenues of the banks
3) Lack of vigorous investment which could boost the economy
4) The equity markets of Japan and Europe growing faster than that of India
5) It is the result of demonetization as it resulted in a cash crunch in the market

4Question 4

4. Find a suitable antonym for unprecedented as used in the passage.

1) Normal
2) Uncommon
3) Extraordinary
4) Equal
5) Revolutionary

5Question 5

5. What can replace the phrase step up in the given context?

1) Produce
2) Find out
3) Augment
4) Sustain
5) Keep up with

6Question 6

6. Why have the private sector investments taken a toll as per the author?

1) Because their profit margins have witnessed a sharp decline
2) The banks have been bearing an attitude of aversion towards new projects
3) There is no optimism about the long term projects in the economy
4) Not mentioned in the passage
5) None of the above

7Question 7

7. Which of the following is not mentioned in the passage?

1) The government must make stringent laws to curb the rising NPAs in the banking sector
2) America and Europe’s equity markets have climbed up
3) The world economy is slated to grow at a decent 5.3 % this fiscal
4) Both (1) and (3)
5) All of the above

8Question 8

8. What would be the best synonym to the word grinding as used in the passage?

1) Perennial
2) Effervescent
3) Temporary
4) Harsh
5) Difficult

9Question 9

9. What does the author mean by the phrase ‘global bubble’?

1) Boost in the banking sector
2) The optimism being observed in the global markets
3) Both (1) and (2)
4) The hype being created about the equity markets
5) None of the above

10Question 10

10. What is the antonym of the word prospects as used in the passage?

1) Opportunities
2) Possibilities
3) Hope
4) Happenings
5) None of the above

11Answer Key:

1. 4
2. 2
3. 5
4. 1
5. 3
6. 2
7. 1
8. 1
9. 2
10. 5

5 (100%) 1 vote
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