SYMBIOSIS INTERNATIONAL (DEEMED UNIVERSITY)

(Establlshed under Scctlon 3 of the UGC Act, 1956 )

Ro-accroditod by NAAC with 'A++' Grade (3.56I4)) Awarded Category -lby UGC

Instituto:
Seat No4 =26
(0212)SYMBIOSIS INSTITUTE OF BUSINESS MANAGEMENT, NAGPUR
Programmo: (021241) MASTER OF BUSINESS ADMINISTRATION

Batch: 2022-24
Somoster:
Courso: Macroeconomics
Courso Codo: 0212410202
Date: 05/04/2023
Maximum Marks: 60
Day: Wodnesday Time: 10:00 -12:30
NOTE : DO NOT WRITE ANYTHING ON THE QUESTION PAPER
Instructions:
1) Students are advised to read the instructions qiven in Section A &Section B.
2) Students should write the Question Number at the middle- top of the attempted answer and in the
left column so that the examiner cannot miss out the evaluation of that attempted question.
3) Students should use Blue/Black pen to attempt the answers. Usage of other colour pens is strictly
avoided.
4) Students are allowed to use a pencl,wherever required, only to present diagrams while answering
the questions.

Section -A(30 Marks)

(Attempt any 5questions from first 6questions of Section A). Q7 is compulsory
(6Questions *5 Marks= 30 marks)
Q.1 As per the First Advance Estimates of National Income for 2022-23, India's real
GDP and nominal GDP are projected to grow by 7 per cent y-o-y) and 15.4 per
cent (y-o-y), respectively. For 2023-24, the Union Budget has projected nominal
GDP growth at 10.5 per cent. Despite the global slowdown caused by Covid-19
and Russia-Ukraine war, Indian economy is expected to grow at 7 per cent in fiscal
2022-23 - the highest rate of growth among all major economies.
5 Marks (C01)
Questions:
a) Considering the above scenario, differentiate nominal GDP and real GDP?
2 Mark (C01)
b) Elaborate the factors that affect the aggregate demand and aggregate
supply in the given context?
3 Mark (Co1)

Q.2 A surge was expected due to an unfavourable base effect from last year. But
January's 6.52% rise on an annual basis as against 5.72 per cent in December last
year -- much higher than expected -- has been partly fuelled by rising food prices,
which account for nearly 40 per cent of the Consumer Price Index (CPI) basket.

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 Question:
Based on the inflation indices statistics, suggest and elaborate quantitative
monetarypolicy tools tocurb inflation.
5Marks (C01)

3 "Global investors can nolonger ignorethe investment opportunities in Indiaand

taking this cue,we see an increasing number of NRIs in that race for participating
in Indian prosperity, as the main Western, American and Asian markets have
matured," Chief Executive Oficer of Taurus Wealth Advisors Pte Ltd and Taurus
Capital Management Pte Ltd, Mandeep Nalwa.
Question:
Considering the above opinion, appraise the contributing factors for induced
investment in India.
5 Marks (C02)

Q.4 The government's focus is to ensure that public expenditure continues togrow as
it will have a desired multiplier effect on all sectors. inclusion is an
important
pillar of the Budget. It also provided that the free-food programme and self-help
groups (SHGS) can ensure that the money is directed to the right places,
generating multiplier effects.
Question:
Based on the given context, elaborate and differentiate the different types of
multiplier's effect on the Indian economy.
5Marks (C02)
Q.5 The government's budget gap, which hit a high of 9.5% of GDP in 2020/21 as
the
spread of COVID-19 infections brought the economy to a halt, has since
but remains well'above the medium-term goal of 4.5% of GDP by narrowed
2025/26. India's
federal government will target a budget deficit of 5.9% of GDP for 2023/24.
Question:
Considering the above facts, state whether the Indian union budget is facing a
deficit or surplus.
a) If fiscal deficit, suggest how the deficit financing is beneficial to
fiscal deficit.
address the
b) Explain the adverse effects that arise due to deficit financing.
(3Marks)
(2 Marks)

5 Marks (C03)
Q.6 The Monetary Policy Committee (MPC) recently increased the repo
key rate at which the RBI lends short-term funds to
rate, or the
commercial banks, to 6.50 per
cent from 6.25 per cent. The key rate has now been raised by 250
(225+25)bps
since May by the panel.

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 Question:
Increase in repo rate as part of monetary policy review committee has been
widely argued by economists. Suggest important factors to assess the
effectiveness of monetary policy.
5 Marks (C03)

Q.7 If India wants to achieve a growth rate of 7%-plus in the years ahead, it should
also aim for a strong export performance. World trade is likely to grow more
slowlyin the future than it did in the past. But, even so, India should aim at
expanding its exports at rates faster than the world's economies.
Question:
In an endeavour to achieve the above objective, suggest whether the fixed
exchange rate system or flexible exchange rate system applies to the Indian
context.
5 Marks (C04)

Section -B (30 Marks)

(Case-Study -Compulsory)

Q.8 India recorded a current account deficit (CAD) of 1.2% of GDP in 2021-22 against
a surplus of 0.9% in 2020-21 as the trade deficit widened to $189.5 billion from
$102.2 billion a year earlier, according to data released by the Reserve Bank of
India (RBI).

Net invisible receipts were higher in 2021-22 because of an increase in net

exports of services and net private transfer receipts though net income outgo
was higher than a year ago.

Net Foreign Direct Investment (FDI) inflows at $38.6 billion in 2021-22 were
lower than $44 billion in 2020-21. Net Foreign Portfolio Investment (FP)
recorded an outflow of $16.8 billion in 2021-22 as against an inflow of $36.1
billion a year earlier.

For the January-March 2022 quarter, the CAD narrowed on a sequential basis to
$13.4 billion, or 1.5% of GDP, against $22.2 billion, or 2.6% of GDP, in the
December 2021 quarter.
The merchandise trade deficit narrowed to $54.5 billion in the
March quarter
compared with a deficit of $60.4 billion in the previous quarter. The deficit in the
same quarter a year earlier, however, had stood at $41.7 billion.

As per the data, net External Commercial Borrowings to

India recorded an inflow
of $7.4 billion in 2021-22 compared with $0.2
billion 2020-21. In 2021-22,
in

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there was an accretionof $47.5 billion to foreign exchange reserves on a Balance
of Payment (BoP) basis, the RBIdata showed.

As per preliminary data on India's BoP for the fourth quarter (January to March),
the current account deficit (CAD) decreased to $13.4 billion (1.5% of GDP) in Q4
2021-22 from $22.2 billion (2.6 % of GDP) in Q3:2021-22. "The sequential
decline in CAD in Q4 2021-22 was mainly on account of a moderation in the trade
deficit and lower net outgo of primary income," the RBI said.

Net foreign portfolio investment recorded an outflow of $15.2 billion - mainly

from the equity market. Net ECBs to India were lower at $3.3 billion in 04 2021
22 compared to $6.1 billion a year earlier.

There was a drawdown of $16 bllion in the foreign exchange reserves (on a BoP
basis)as against an accretion of $3.4 billion in Q4 2020-21, according to the data.

Questions:

a) The CAD was registered at 1.2% of GDP in the FY 2021-2022. Considering

the facts and figures stated in the above case, suggest the measures to
correct the Balance of Payment disequilibrium.
08 Mark (Co4)

b) Suppose that India adopts a fixed exchange rate regime; how does the
automaticadjustment in the fixed exchange rate mechanism manage BoP
disequilibrium?
10 Marks (C04)

c) Explain how does automatic adjustment in a flexible exchange rate regime

differ from an automaticadjustment in a fixed exchange rate regime?

12 Marks (C04)

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