EPFO EO/AO 2023 General Ability Test · Question 115 of 120

Correct — A, (a) Asian Development Bank. The commitment described in the stem was the Asian Development Bank's. Its President, Masatsugu Asakawa, who held the office when this paper was set, indicated that the Bank intended to provide up to 25 billion dollars of resources to India over the following five years, to support the infrastructure push under the PM Gati Shakti National Master Plan along with social development, climate action and the country's aspirations for green growth. The announcement came as the Bank was finalising a new five-year country partnership strategy for India covering 2023 to 2027, and the areas named alongside Gati Shakti in the Bank's own account of the discussion included building future cities, mobilising domestic resources and strengthening basic services in disadvantaged districts. Three features of the stem point to a regional development bank rather than any of the other three institutions. First, the sum is a five-year sovereign lending programme, which is the shape of a multilateral development bank's country partnership rather than of a one-off project loan. Second, the money is tied to a Government of India programme, PM Gati Shakti, which is the national master plan for multimodal connectivity launched in October 2021 and built around seven engines of growth: roads, railways, airports, ports, mass transport, waterways and logistics infrastructure. Lending against a Government master plan of that kind requires an institution that lends to sovereigns. Third, the combination of infrastructure, social development and climate action in a single commitment is characteristic of the Asian Development Bank's country programming, which pairs its infrastructure lending with an explicit climate finance ambition. The Asian Development Bank was established in 1966 and has its headquarters in Manila. India is a founding member and among its largest borrowers, and the Bank lends to Indian States as well as to the Union Government for transport, urban services, energy and water projects. One caution belongs on a card about a figure of this kind: a commitment announced for a five-year window is an intention to lend, not a disbursed amount, and the figures move as country partnership strategies are renewed. The question tests the announcement as it stood when the paper was set.

• (b)International Finance Corporation — The International Finance Corporation is the private-sector arm of the World Bank Group. It invests in and lends to private enterprises in developing countries without a sovereign guarantee, taking equity stakes, providing long-term loans and mobilising other investors alongside it. That mandate is the reason it does not fit the stem: the commitment described is directed at a Government of India infrastructure master plan, and the Corporation does not lend to governments. It is a genuine and large investor in India, in areas such as renewable energy, financial inclusion and affordable housing, which makes it a plausible-looking option, but the counterpart in every one of those transactions is a company rather than the State.
• (c)New Development Bank — The New Development Bank is the multilateral development bank established by the BRICS countries, headquartered in Shanghai, and it does lend to sovereign borrowers including India for infrastructure and sustainable development projects. It is therefore the right kind of institution but the wrong one on the facts, and it is much the smaller lender: its capital base and its India portfolio are a fraction of those of the older multilateral banks, and it has not made a country commitment of this size or shape. A candidate who has read that India is a founding member of the Bank and that an Indian, K. V. Kamath, was its first President may over-weight its role in Indian infrastructure finance.
• (d)World Bank — This is the strongest of the three wrong options, because the World Bank does exactly the kind of thing the stem describes: it lends to the Government of India through the International Bank for Reconstruction and Development and the International Development Association, and it agrees multi-year country partnership frameworks setting out its intended support. So the shape of the commitment fits. The attribution does not. The up-to-25-billion-dollar figure over five years, linked to PM Gati Shakti and to India's green growth aspirations, was announced by the Asian Development Bank. When two institutions do similar work, a current-affairs question is testing which one made the particular announcement, and the discipline is to attach the number to the institution when the news is first read rather than to remember the number alone.

India's external development finance comes from a small set of multilateral institutions with distinguishable mandates, and questions about them are usually questions about which mandate fits. The World Bank Group lends to governments through the International Bank for Reconstruction and Development and, on concessional terms, through the International Development Association, while its private-sector arm, the International Finance Corporation, invests in companies without sovereign guarantee. The Asian Development Bank, established in 1966 and headquartered in Manila, is the regional development bank for Asia and the Pacific; India is a founding member and among its largest borrowers, and the Bank lends both to the Union Government and to State Governments for transport, urban services, energy and water. The Asian Infrastructure Investment Bank, headquartered in Beijing, and the New Development Bank, set up by the BRICS countries and headquartered in Shanghai, are the newer entrants, both lending for infrastructure and both counting India among their founding members. Set against these is the domestic programme the commitment supports. PM Gati Shakti, the National Master Plan for multimodal connectivity, was announced in August 2021 and launched on 13 October 2021. It is a digital platform bringing the infrastructure ministries onto a common geographic information system so that projects are planned together rather than in sequence, and it is organised around seven engines of growth: roads, railways, airports, ports, mass transport, waterways and logistics infrastructure.

The last block of the EO/AO General Ability Test is current affairs and economy, and multilateral finance announcements are a staple of it because they combine an institution, a number and a Government programme, all three of which can be swapped to make a question. What such an item really tests is whether the candidate read the news with the institution attached to the figure. The habit rewarded is to record each announcement as a triple of who, how much and for what, and to keep a short mandate note against each institution so that an unfamiliar announcement can be assigned by elimination even when the figure has been forgotten.

• The Asian Development Bank indicated support of up to 25 billion dollars to India over the following five years for infrastructure under PM Gati Shakti, social development and climate action.
• The announcement was made by the Bank's President Masatsugu Asakawa, who held that office when this paper was set.
• It accompanied the Bank's new five-year country partnership strategy for India for 2023 to 2027.
• The Asian Development Bank was established in 1966 and is headquartered in Manila; India is a founding member and among its largest borrowers.
• PM Gati Shakti, the National Master Plan for multimodal connectivity, was announced in August 2021 and launched on 13 October 2021.
• Its seven engines of growth are roads, railways, airports, ports, mass transport, waterways and logistics infrastructure.
• The International Finance Corporation is the World Bank Group's private-sector arm and lends without sovereign guarantee.
• The New Development Bank is the BRICS bank, headquartered in Shanghai, with India among its founding members.
• A multi-year commitment of this kind is an intended lending envelope rather than a disbursed amount.

• Attributing a multilateral commitment to the World Bank by default, since it is the best known of the lenders.
• Forgetting that the International Finance Corporation lends to companies and not to governments.
• Remembering a headline figure without the institution attached to it.
• Treating a five-year commitment as money already disbursed.
• Dating PM Gati Shakti to 2022; it was announced in August 2021 and launched in October 2021.

Current-affairs questions of this shape appear in EO/AO papers as a single-line 'which one among the following' item naming an institution, an amount and a programme, or as a two-statement code item combining an announcement with a claim about the institution's mandate. The examiner varies whichever element the candidate is least likely to have fixed, which is usually the institution. Read economic news for the triple of who, how much and for what, and keep a one-line mandate note against each multilateral lender so that elimination remains possible when the figure has gone.

No directly related past PYQ was found.

• practice — not a real PYQ

  Which one of the following institutions lends to private enterprises in developing countries without a sovereign guarantee ?

  • (a)International Development Association
  • (b)International Finance Corporation
  • (c)International Bank for Reconstruction and Development
  • (d)Asian Development Bank

  Answer(b) International Finance Corporation

• practice — not a real PYQ

  PM Gati Shakti, the National Master Plan, is best described as :

  • (a)A credit guarantee scheme for small and medium enterprises
  • (b)A digital platform for integrated planning of multimodal infrastructure connectivity
  • (c)A direct benefit transfer scheme for transport workers
  • (d)A programme for the construction of rural roads only

  Answer(b) A digital platform for integrated planning of multimodal infrastructure connectivity