TOPIC- Reading Comprehension
Directions (1-5): Read the following passage and answer the following questions based on the given passage.
The Centre has announced the constitution of a committee to revisit several provisions of the Companies Act, 2013 that impose stiff penalties and, in some cases, prison terms as well, for directors and key management personnel. The 2013 law entailed the first massive overhaul of India’s legal regime to govern businesses that had been in place since 1956 and was borne of a long-drawn consultative process. Now, this 10-member committee appointed by the Corporate Affairs Ministry has been tasked with checking if certain offences can be ‘de-criminalised’. The panel, which includes top banker Uday Kotak, has been given 30 days to work out whether some of the violations that can attract imprisonment (such as a clerical failure by directors to make adequate disclosures about their interests) may instead be punished with monetary fines. It will also examine if offences punishable with a fine or imprisonment may be re-categorised as ‘acts’ that attract civil liabilities. Importantly, the committee has also been asked to suggest the broad contours for an adjudicatory mechanism that allows penalties to be levied for minor violations, perhaps in an automated manner, with minimal discretion available to officials. In fact, some of the provisions in the law are so tough that even a spelling mistake or typographical error could be construed as a fraud and lead to harsh strictures.
The government hopes such changes in the regulatory regime would allow trial courts to devote greater attention to serious offences rather than ______(A)_______. The decision to build in harsh penalties and prison terms for corporate misdemeanours in the 2013 law was, no doubt, influenced by the high-pitched anti-corruption discourse that prevailed in the country at that moment in time. Apart from several cases of crony capitalism that had come to light during the second UPA government, massive corporate frauds reported at once-revered firms such as the erstwhile Satyam Computer Services had spooked investors and other stakeholders about the credibility of corporate India’s books and governance standards. When the NDA came to power in May 2014, a comprehensive review of the Companies Act was at the top of industry’s wish list as a means to revive the economy. Industry captains had red-flagged the impact of such provisions on the ease of doing business, and investor sentiment in general. Owing to the incidents corporate wrong doings, there has been a lack of trust that has developed between the industry and government but this should not hamper the normal business operations, they had argued. Four years down the line, the government is finally moving purposefully on this, a rethink perhaps triggered by the fact that private sector investment is yet to pick up steam and capital still seeks foreign shores to avoid regulatory risks. One hopes this is followed up on swiftly, before the ruling party slips into election mode.
Q1. What can be the possible inference drawn from the passage given above?
(a) In India, company legislation has until recently been the main instrument for improving corporate governance.
(b) Over the last few years, regulatory bodies have taken numerous steps towards inculcating good corporate governance practices among Indian companies.
(c) Corporate governance has become a subject of immense importance in recent years for the state governments.
(d) A relook at the overly harsh provisions of the Companies Act must yield action.
(e) Corporate governance is a dynamic field of study and practice.
Q2. Which of the following phrases can appropriately fill in the blank (A) to make it contextually and grammatically correct?
(a) consider management as completely obsolete and discard it to give way to what is called governance
(b) taking into consideration all the factors it was necessary to ascertain the awareness of general public
(c) get overloaded with cases as zealous officials blindly pursue prosecutions for even minor violations
(d) a, b and c
(e) governance has no justification to override management because management is not worth its name
Q3. What was the topmost expectation of the corporate sector when the UPA government lost the power in Centre?
(a) New standards for corporate governance
(b) Companies Act, 2013, which is a milestone on corporate governance, should not be altered.
(c) Review of Companies Act for reviving the Indian economy
(d) Reduce the administrative and regulatory burdens introduced by UPA government for corporate governance.
(e) None of these
Q4. What were the basic reasons for creation of the ten members committee for revisiting the provisions of Companies Act, 2013?
(i) To check whether any offence which is punishable through imprisonment can instead be punished on the basis of monetary fines.
(ii) To evaluate whether offences can be recategorised as acts which attract civil liabilities.
(iii) To suggest a mechanism where penalties for minor violations can be automated with minimum involvement by the officials.
(a) Only (i)
(b) Only (ii)
(c) Both (i) & (ii)
(d) Both (i) & (iii)
(e) All (i), (ii), (iii)
Q5. What have been the point of view put up by industry leaders against the consequences of several corporate frauds?
(a) The positive effect of corporate governance on different stakeholders ultimately is a strengthened economy, and hence good corporate governance is a tool for socio-economic development.
(b) Strong governance standards focusing on fairness, transparency, accountability & responsibility are vital not only for the healthy & vibrant corporate sector growth, as well as inclusive growth of the economy.
(c) Good corporate governance is essential for the integrity of Corporations, Financial Institutions & Markets. It ensures the health of our economies & their stability.
(d) A trust deficit between industry and government owing to stray incidents of corporate malfeasance should not inhibit normal business operations.
(e) None of these
Directions (6-10): Read the following passage and answer the following questions based on the given passage.
U.S. Federal Reserve Chairman Jerome Powell’s speech last week at the conference for central bankers in Jackson Hole, Wyoming was a strong defence of the current gradual approach to raising interest rates. With the American economy growing at a strong pace, inflation being close to the Fed’s 2% target and unemployment at a 20-year low, President Donald Trump has been so sharply critical of this approach of raising interest rates that it has led to suggestions that he is encroaching on the Fed’s independence. Mr. Trump is worried that rising interest rates could derail the country’s economic growth, check the stock market boom, and thereby affect his own popularity and electoral chances. Mr. Trump, however, has not been the only one critical of the Fed’s policy. Coming from another perspective, some are concerned that the Fed may in fact be raising interest rates too slowly, despite strong signals of an overheating economy. At Jackson Hole, in his first speech as Fed chief, Mr. Powell sought to defend his gradualism from his critics on both sides of the divide. He emphasised the imprecise nature of economic variables such as unemployment and inflation in the modern economy in drawing attention to the risks of raising rates either too fast or too slow. In stressing why macroeconomic forecasting is so difficult, Mr. Powell seemed to suggest that much of monetary policy-making is simply about groping in the dark.
The speech also contained some important hints about the Fed’s likely policy direction in the coming years. Apart from the assurance that interest rate hikes will be gradual as before, the Fed Chairman had a message that has implications for the monetary policy stance of central banks in emerging market countries. He hinted that “risk factors abroad” could lead to a change in the Fed’s policy stance in the future. It is probably this portion of the speech that the markets may perceive as a dovish statement, even though Mr. Powell framed his speech primarily as a defence of the moderately hawkish policy of gradually raising interest rates. The Fed’s tightening policy stance has rattled several emerging markets, most notably Turkey and Brazil, which have seen a sharp fall in the values of their currencies. The Reserve Bank of India, too, has had to raise rates twice in the last few months, in part to defend the rupee. The stock market rallied in response to Mr. Powell’s statement, and the U.S. dollar, which has strengthened this year, witnessed a fall. It is well-known that the U.S. central bank has historically been non-committal when it comes to framing policy with the concerns of emerging markets in mind. A shift in policy under Mr. Powell would mark a significant change in the Fed’s outlook towards the rest of the world.
Q6. What was the message conveyed through the speech given by the Chairman of Federal Reserve?
(a) The Chairman of Federal Reserve conveyed that the economy is losing momentum and that the toll of trade tariffs on the economy will likely mount.
(b) Mr. Powell had highlighted that although the rate hikes will be gradual yet the any risks abroad might provoke Federal Reserve to change its policies in future.
(c) The central bank is watching current economic developments and will do what it must to keep the near-record expansion going.
(d) Jerome Powell established the fact that Fed was closely monitoring the implications of these developments for the U.S. economic outlook and, as always, will act as appropriate to sustain the economic growth of the country.
(e) None of these
Q7. How did Mr. Powell defend his policy of raising the interest rates slowly?
(a) The Fed’s preferred target is based on the personal consumption expenditure price index, which generally runs a half a percent below the CPI data.
(b) U.S. Treasury yields extended their fall after the core consumer price gauge fell short of expectations which has been the reason for slow hike in interest rates.
(c) Mr. Powell had highlighted the vague nature of various economic variables in modern economy if the rates are increased too slow or too fast.
(d) The current ceiling of interest rates is on the feasible level of interest rates which means that when the next recession hits, central banks will have little scope for reducing them.
(e) None of the above
Q8. What does the phrase, “groping in the dark” as highlighted in the passage given above, implies?
(a) Describing something that has gone wrong.
(b) To keep someone uninformed (about something); to exclude someone from full knowledge or disclosure (of something)
(c) To seek (something) in a blind, aimless, or uncertain manner, especially to find a solution, meaning, or sense of purpose.
(d) An omen that something bad or problematic will happen in the near future.
(e) None of these
Q9. What has been the impact of Fed’s tightening policy stance on the emerging economies?
(a) Stringent policy stance by Fed will derail much of the socioeconomic progress that has been made in recent years in emerging market economies.
(b) In the short run, higher import tariffs cause an increase in the price of imported goods for both firms and households thriving within the emerging economies.
(c) As the Fed has slashed rates, the inflation rates have fallen which has help in continuing trade wars against the emerging economies.
(d) It has disconcerted the markets of emerging economies as these policies have resulted the currencies of these countries to tank under Fed’s policies.
(e) None of the above
Q10. Why has been the rising interest rates cause of concern for American President?
(a) Trump’s tariff threats will make it more difficult to reach a trade deal, as they damage the credibility of the US as a negotiating partner.
(b) It will negatively impact the economic growth in America which will affect Powell’s popularity among the masses.
(c) Mexico is considered one of the most lucrative markets for American agriculture products given its easy access and close proximity to the U.S and rising interest rates will affect its relations with neighbouring countries.
(d) It will affect the economic growth of America negatively which will in turn affect Trump’s popularity ultimately affecting the electoral chances
(e) None of these
Solutions
S1. Ans. (d)
Sol. Here, the paragraph discussed the Company Act and shortcomings of some of its provisions. It also states the formation of the ten member committee to look into the provisions of the act and the need to address those shortcomings. Hence, option (d) is the most suitable answer choice.
S2. Ans. (c)
Sol. Here, only the phrase given in option (c) fits in perfectly in the given blank with which we can clearly infer that the statement mentions that it has been done with the objective to allow the authorities to devote attention towards serious offences rather than focusing minor violations. Hence, option (c) is the most suitable answer choice.
S3. Ans. (c)
Sol. To validate the answer, refer to the second paragraph, which mentions, “When the NDA came to power in May 2014, a comprehensive review of the Companies Act was at the top of industry’s wish list as a means to revive the economy.” Here, the answer has been clearly stated in the statement given in option (c). Hence, option (c) is the most suitable answer choice.
S4. Ans. (e)
Sol. To validate the answer, refer to the first paragraph of the passage given above, “The panel, which includes top banker Uday Kotak, has been given 30 days to work out whether some of the violations that can attract imprisonment (such as a clerical failure by directors to make adequate disclosures about their interests) may instead be punished with monetary fines. It will also examine if offences punishable with a fine or imprisonment may be re-categorised as ‘acts’ that attract civil liabilities. Importantly, the committee has also been asked to suggest the broad contours for an adjudicatory mechanism that allows penalties to be levied for minor violations, perhaps in an automated manner, with minimal discretion available to officials.” Here, we can infer the quoted text from all the three statements (i), (ii), (iii). Hence, option (e) is the most suitable answer choice.
S5. Ans. (d)
Sol. To validate the answer, refer to the second paragraph of the passage given above, which mentions, “Owing to the incidents corporate wrong doings, there has been a lack of trust that has developed between the industry and government but this should not hamper the normal business operations, they had argued.” Here, the quoted text has been clearly justified in the statement given in option (d). Hence, option (d) is the most suitable answer choice.
S6. Ans. (b)
Sol. To validate the answer, refer to the second paragraph of the passage given above, which mentions, “Apart from the assurance that interest rate hikes will be gradual as before, the Fed Chairman had a message that has implications for the monetary policy stance of central banks in emerging market countries He hinted that “risk factors abroad” could lead to a change in the Fed’s policy stance in the future.” Here, we can infer the quoted text from the statement given in option (b). Hence, option (b) is the most suitable answer choice.
S7. Ans. (c)
Sol. To validate the answer, refer to the first paragraph of the passage given above, which mentions, “At Jackson Hole, in his first speech as Fed chief, Mr. Powell sought to defend his gradualism from his critics on both sides of the divide. He emphasised the imprecise nature of economic variables such as unemployment and inflation in the modern economy in drawing attention to the risks of raising rates either too fast or too slow.” Here, the quoted text can be inferred from the statement given in option (c). Hence, option (c) is the most suitable answer choice.
S8. Ans. (c)
Sol. Here, the correct meaning of the highlighted phrase can be inferred from option (c). Hence, option (c) is the most suitable answer choice.
S9. Ans. (d)
Sol. Referring to the second paragraph of the passage given above, which mentions, “The Fed’s tightening policy stance has rattled several emerging markets, most notably Turkey and Brazil, which have seen a sharp fall in the values of their currencies. The Reserve Bank of India, too, has had to raise rates twice in the last few months, in part to defend the rupee”, we can infer that the statement given in option (d) is the most suitable answer choice as it clearly justifies the quoted text.
S10. Ans. (d)
Sol. To validate the answer, refer to the first paragraph of the passage given above, which mentions, “Mr. Trump is worried that rising interest rates could derail the country’s economic growth, check the stock market boom, and thereby affect his own popularity and electoral chances.” Here, we can infer the quoted text from the statement given in option (d). Hence, option (d) is the most suitable answer choice.
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