Comprehension

Read the following passage carefully and answer the questions that follow.
The Reserve Bank of India’s annual report for 2017-18 reveals that 99.3% of currency notes that were demonetised at midnight on November 8, 2016 have returned to the banking system. This is only marginally higher than its provisional estimate last year that over 99% — or Rs.15.28 lakh crore worth of the old Rs.500 and Rs.1,000 notes — out of the Rs.15.44 lakh crore that were in circulation at the time had been deposited by June 30, 2017. This makes a couple of things crystal clear. First, the hope that a large chunk of unaccounted money would not return to the system — arguably, the principal reason for the exercise — was almost wholly belied. As a result, the plan to transfer the arising surplus from the RBI to the Centre, which was not formally declared but strongly rumoured, was a non-starter. Second, given the sheer logistical difficulty in penalising all those who converted unaccounted money into legal tender, demonetisation worked as an unintended amnesty scheme. Despite the significant cost to the economy, demonetisation, to the disappointment of the Prime Minister’s critics, had no political fallout. Narendra Modi succeeded in portraying the move as one that would knock out the corrupt rich — a harsh but necessary shock therapy. This was perhaps why the massive disruption caused by the overnight removal of 86% of the currency in value terms did not cause agitations. 
Nevertheless, the RBI report, which points to a spurt in counterfeiting of the new Rs.500 and Rs.2,000 notes, raises the old question all over again. Was it worth the slowdown in growth, the damage to informal sector supply chains, and job losses in sectors such as construction that were the bulwark of employment creation for the unskilled? True, there have been some benefits. For instance, the number of income tax returns filed has surged a little over the trend growth rate. But surely this could have been achieved by other policy measures. Cashless modes of payment have become more common, but financial savings in the form of currency have also risen, suggesting that people still value cash. Not all policy choices work out and accepting mistakes or planning flaws helps strengthen governance processes. For example, learning from the UPA’s mistakes, a cleaner auction process for natural resources has been worked out. The government must not disown its biggest reform attempt or try to sidestep parliamentary scrutiny of the outcomes of demonetisation. Instead, it could focus on fixing the problems that people still face — transactions with Rs.2,000 notes in the absence of Rs.1,000 notes are difficult as it is a departure from the currency denomination principle every note should be twice or two and a half times its preceding denomination). Even as these issues are sorted out, the larger lesson must be heeded: sudden shocks to the economy don’t always yield intended policy objectives.

Question: 1

Which among the following is the opinion of the author regarding the demonetization drive announced by the government?

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When answering questions based on a passage, always carefully read and understand the author’s viewpoint. Pay attention to the tone and implications, as well as the direct statements made.
Updated On: Mar 10, 2025
  • if the author is very much hopeful that the demonetization drive will be able to divide the wealth among all the sections equally.
  • if the author has no opinion to give regarding demonetization.
  • if the author feels that the government should do proper homework before implementing any scheme such as demonetization.
  • if the author feels that the move to demonetize currencies did not yield the desired results though some positive sides can be appreciated.
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The Correct Option is D

Solution and Explanation

Step 1: Analyze Option (a)
"The author is very much hopeful that the demonetization drive will be able to divide the wealth among all the sections equally."

The author does not express hope regarding dividing wealth equally. Therefore, option (a) is incorrect.

Step 2: Analyze Option (b)
"The author has no opinion to give regarding demonetization."

The author has an opinion and discusses the effects of demonetization. Thus, option (b) is incorrect.

Step 3: Analyze Option (c)
"The author feels that the government should do proper homework before implementing any scheme such as demonetization."

While the author critiques the implementation, there is no specific mention of proper homework being necessary. Therefore, option (c) is incorrect.

Step 4: Analyze Option (d)
"The author feels that the move to demonetize currencies did not yield the desired results though some positive sides can be appreciated."

This is supported by the passage, as the author acknowledges the shortcomings of demonetization but also recognizes some benefits. Thus, option (d) is correct. Final Answer: The correct answer is (d) The author feels that the move to demonetize currencies did not yield the desired results though some positive sides can be appreciated.
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Question: 2

Which among the following should be the course of action of the government now that the demonetization has failed?

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When evaluating options based on a passage, always check for the exact wording or ideas presented. Eliminate options that stray from the passage’s main points.
Updated On: Mar 10, 2025
  • if the government should understand that there can be error in judgment on its part and it can be corrected by first accepting it.
  • if the government should cancel the whole demonetization drive and give back the currency notes to the general public.
  • if the central government should approach the Supreme Court to ensure that there is no legal issue in the future.
  • if the Government of India is of the opinion that it has done the right thing but the public could not understand the importance of it.
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The Correct Option is A

Solution and Explanation

Step 1: Analyze Option (a)
"The government should understand that there can be error in judgment on its part and it can be corrected by first accepting it."

This option reflects the author’s opinion in the passage where it states, "The government must not disown its biggest reform attempt or try to sidestep parliamentary scrutiny of the outcomes of demonetisation." The author suggests focusing on fixing the problems, and option (a) aligns with this perspective.

Step 2: Analyze Option (b)
"The government should cancel the whole demonetization drive and give back the currency notes to the general public."

The passage does not suggest cancelling the whole demonetization drive. Therefore, option (b) is incorrect.

Step 3: Analyze Option (c)
"The central government should approach the Supreme Court to ensure that there is no legal issue in the future."

The passage does not mention any need for a legal approach or involving the Supreme Court. Therefore, option (c) is incorrect.

Step 4: Analyze Option (d)
"The Government of India is of the opinion that it has done the right thing but the public could not understand the importance of it."

This option does not align with the passage, which does not suggest the government should attribute the failure to a lack of public understanding. Therefore, option (d) is incorrect. Final Answer: The correct answer is (a) The government should understand that there can be error in judgment on its part and it can be corrected by first accepting it.
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Question: 3

Which among the following can be considered as an important takeaway from the incident described in the given passage?

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When analyzing passages, always consider the final takeaway or lesson presented. The main point is often reflected in one of the last sentences or paragraphs.
Updated On: Mar 10, 2025
  • if the economy of the country is not suffering at all and no policy can impact the economy.
  • if the economy of India is ready to accept any change since it is now mature enough to withstand any kind of problem.
  • if the Indian government is not receptive of any international shocks since there is no mechanism in India to accept the foreign risks.
  • if the economy has its own rhythm and it should not be taken for granted that any kind of sudden policy decision will be positive for the economy.
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The Correct Option is D

Solution and Explanation

Step 1: Analyze Option (a)
"The economy of the country is not suffering at all and no policy can impact the economy."

This option does not align with the passage, as the author discusses the potential impacts of policy decisions on the economy. Therefore, option (a) is incorrect.

Step 2: Analyze Option (b)
"The economy of India is ready to accept any change since it is now mature enough to withstand any kind of problem."

This is not supported by the passage, which does not suggest that the economy is invulnerable to problems. Thus, option (b) is incorrect.

Step 3: Analyze Option (c)
"The Indian government is not receptive of any international shocks since there is no mechanism in India to accept the foreign risks."

While the passage does mention international shocks, it does not state that the government is unresponsive to them. Therefore, option (c) is incorrect.

Step 4: Analyze Option (d)
"The economy has its own rhythm and it should not be taken for granted that any kind of sudden policy decision will be positive for the economy."

This option directly reflects the passage`s final message: "sudden shocks to the economy don`t always yield intended policy objectives." Thus, option (d) is correct. Final Answer: The correct answer is (d) The economy has its own rhythm and it should not be taken for granted that any kind of sudden policy decision will be positive for the economy.
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Question: 4

Which among the following is correct regarding the positive effects of demonetization as discussed in the passage?
I. The number of income tax returns filed post demonetization has increased since now a lot of people are filing income tax returns.
II. The cashless mode of transactions has become more popular post demonetization.
III. The RBI has become more proactive in its money laundering strategies.

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When answering questions based on a passage, always look for explicit mentions in the text. Statements that aren`t directly supported by the passage can usually be eliminated.
Updated On: Mar 10, 2025
  • Both II and III
  • Both I and II
  • Both I and III
  • Only II
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The Correct Option is B

Solution and Explanation

Step 1: Analyze Statement I
"The number of income tax returns filed post demonetization has increased since now a lot of people are filing income tax returns."

This is supported by the passage where it mentions that the number of income tax returns filed has surged. Therefore, statement I is true.

Step 2: Analyze Statement II
"The cashless mode of transactions has become more popular post demonetization."

This is also supported by the passage, which mentions that cashless modes of payment have become more common. Therefore, statement II is true.

Step 3: Analyze Statement III
"The RBI has become more proactive in its money laundering strategies."

The passage does not mention the RBI`s role in money laundering strategies, so statement III is not supported by the text.

Step 4: Final Answer
Since statements I and II are correct, the correct answer is option (b) Both I and II. Final Answer: The correct answer is (b) Both I and II.
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