Table of Contents
COMPREHENSION COMPETITIVE EXAM QUESTIONS
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Directions (Q. 1-10): Read the passage carefully and answer the questions given below it. Certain words/ phrases have been given in bold to help you locate them while answering some of the questions.
Hindsight is always 20/20 and it is difficult to escape the impression that the soft-spoken, incredibly low-profile, Kenyan-born Urjit Patel is a perfect fit as RBI governor for prime minister Narendra Modi as he embarks on the last three crucial years of his first term. Dr Patel has all the qualities that Mr Modi cherishes and admires in ministers and government officials — intellectual gravitas, a publicity-shy nature, workaholism and a laser-like focus on fighting and curbing inflation, one of the significant policy achievements of the 28-month-old Modi government.
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Outgoing governor Raghuram Rajan has been credited with curbing inflation, for preparing a monetary policy framework that squarely put inflation in cross hairs and laid the foundation for institutionalisation of monetary policy. For years, RBI’s inflation-fighting efforts have suffered from confused thinking, misplaced priorities and a general reluctance to appear too hawkish on the rates front for fear of incurring the wrath of the political and business establishment. One of the biggest achievements of Rajan was that he buried such pigeon-hearted thinking and took the battle to interest rate-cut-wallahs and crony capitalists with gusto.
Rajan deserves credit no doubt on inflation but it was Dr Patel’s monetary policy report that served as intellectual basis for one of the most dramatic transformations in Indian monetary-policy thinking.
Much of media and expert commentary has focused on this aspect of Dr Patel but with an added twist. Dr Patel has been hailed as an intellectual giant but also as one who would shy away from cutting interest rates too fast as he is supposed to be an inflation hawk who will toe the line adopted by Raghuram Rajan on interest rates. In other words, consumers and home buyers will have to wait longer for lower interest rates.
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This argument is so flawed that it is difficult to know where to begin. Firstly, the fact that Indian economy, industry and consumer behaviour is suffering from high interest rates is only partially true. Consumer behaviour is certainly not suffering and the high rate of home-loan and personal-loan growth is testament to this. As far as industry is concerned, there are so many issues relating to land acquisition, clearances, the high level of leverage among India Inc that it is difficult to lay the blame on poor pace of investments squarely on high rates. Industry would like to argue like that but sensible policy makers should be able to see through this.
Secondly, Dr Patel’s hawkish anti-inflation stance should matter very little in the new scheme of things. Indian monetary policy decision-making has moved from its reliance on an individual to a committee. Dr Rajan was the last governor to independently take decisions on his own. Dr Patel will be the first governor to oversee a proper monetary policy committee which will decide where interest rates should be. Under rules of the committee, the governor of Reserve Bank will have the casting vote in case of a tie, but he does not have any powers to override a majority decision. If five of six members of the committee decide to cut rates by 50 basis Points in the next policy, there is very little Dr Patel can do to reverse that. The focus, should be on the committee, instead of being on the governor, and that point has been missed by many experts.
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What does the decision to appoint Dr Patel say about Narendra Modi’s talent-hunting abilities? This is important as all are judged on their ability to get the best and brightest to work for them. For many months now, a canard has been spread that the Modi sarkar is struggling to get talent for its high-profile jobs. This falsehood has gained ground despite the transformative work done by many Modi ministers like Nitin Gadkari and Piyush Goyal. Modi selected Arvind Subramanian despite the economist’s criticism of some of Modi government’s policies. Despite the tension with Rajan, the Modi government has followed through and implemented Rajan’s signature policy accomplishment: inflation targeting and monetary policy committee.
Some say Dr Patel has been rewarded because he will be able to toe the government line. May be. But there is no evidence to back that speculation. If anything, Dr Patel should not have been Modi government’s first choice because he had strong links with UPA and Congress governments of the past. He was first appointed by the Narasimha Rao government which persuaded him to give up his IMF post and work for India. In 2013, as Sheela Bhatt writes in her piece on the new governor, none other than Dr Manmohan Singh recommended his passport application. Yes, rabid Sanghis and Subramanian Swamy fanboys may not like this, but Modi sarkar has not only appointed a Kenyan-born as RBI governor but also One Who became an Indian citizen only in 2013.
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1). Which of the following statements is/are true in the context of the passage?
(A) Now, instead of governor, monetary policy committee will decide what the interest rates should be.
(B) According to the author, that the consumers and home buyers will not get the benefit of lower interest rates, is a flawed statement.
(C) Indian economy, industry and consumer behaviour are not suffering from high interest rates.
a) Only (A)
b) Only (B)
c) Only (C)
d) Only (A) and (B)
e) All (A), (B) and (C)
2). According to PM Modi, which of the following qualities is not desirable in ministers and government officials?
a) A laser-like focus on a particular problem
b) Intellectual gravitas
c) A publicity-shy nature
d) Workaholism
e) Procrastination
3). According to the media, which of the following is going to happen during the tenure of the new governor Urjit Patel?
(A) Consumers and home buyers will have to wait longer for lower interest rates.
(B) There is little probability of cutting interest rates too fast.
(C) The relationship between the government and the RBI will remain synergistic.
a) Only (A) and (B)
b) Only (B) and (C)
c) Only (A) and (C)
d) All (A), (B) and (C)
e) Only (B)
4). Several credits go to former RBI governor Raghuram Rajan. Which is not one of them?
(A) He laid the foundation for institutionalisation of monetary policy.
(B) He brought the most dramatic transformation in Indian monetary policy thinking. (C) He is well known for cutting interest rates and fighting against crony capitalism.
a) Only (A) and (B)
b) Only (B) and (C)
c) Only (A) and (C)
d) All (A), (B) and (C)
e) Only (C)
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5). Well before Rajan taking over as Governor of the RBI, the RBI’s inflation fighting efforts have suffered from
a) Red tapism and political interference
b) Confused thinking and misplaced priorities
c) A general reluctance to appear too hawkish on the rates front
d) Only a) and b)
e) Only b) and c)
6). Who among the following is the brain behind bringing the policy of inflation targeting and monetary – committee?
a) Narendra Modi
b) Arun Jaithley
c) Urjit Patel
d) Raghuram Rajan
e) Dr Manmohan Singh
Directions (Q. 7-8): Choose the word which is MOST SIMILAR in meaning to the word printed in bold as used in the passage.
7). Squarely
a) eventually
b) directly
c) later
d) formerly
e) deadly
8). Reluctance
a) curiosity
b) interest
c) concern
d) unwillingness
e) regard
Directions (Q. 9-10): Choose the word which is MOST OPPOSITE in meaning of the word printed in hold as used in the passage.
9). Canard
a) hoax
b) spoof
c) truth
d) rumour
e) fib
10). Persuaded
a) discouraged
b) prompted
c) influenced
d) impressed
e) incited
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ANSWERS:
1).a
2).e
3).a
4).b
5).e
6).d
7).b
8).d
9).c
10).a
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