Pariksha SaathiGeneral Studies
Indian Economy: Practice Questions with Answers
234 practice questions on Indian Economy, with answers; most also have an explanation or a worked solution. Try each one before you open its answer.
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Q.51
In the simple model of credit creation, if banks must keep 20 per cent of their deposits as reserves, the money (credit) multiplier is:
- A 20
- B 2
- C 5
- D 0.2
Show answer
Correct answer: (C) 5
Money multiplier = 1 / reserve ratio = 1 / 0.20 = 5. A higher reserve ratio, such as a higher CRR, lowers the multiplier and the banks' capacity to create credit.
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Q.52
According to Engel's law, as a household's income rises:
- A The absolute amount spent on food falls
- B The proportion of income spent on food falls
- C The proportion of income spent on food rises
- D Savings fall to zero
Show answer
Correct answer: (B) The proportion of income spent on food falls
Engel's law states that the share of income spent on food declines as income increases, even though the absolute spending on food may rise.
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Q.53
The Reserve Bank of India was established on the recommendation of the:
- A Hilton Young Commission
- B Simon Commission
- C Hunter Commission
- D Lee Commission
Show answer
Correct answer: (A) Hilton Young Commission
The Royal Commission on Indian Currency and Finance (1926), known as the Hilton Young Commission, recommended a central bank for India; the RBI Act followed in 1934. The Simon Commission (1927) dealt with constitutional reforms.
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Q.54
The Kisan Credit Card (KCC) scheme was introduced in:
- A 1991
- B 1995
- C 2004
- D 1998
Show answer
Correct answer: (D) 1998
KCC was launched in 1998 on the recommendation of the R.V. Gupta Committee to give farmers timely and adequate short-term credit through a single card.
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Q.55
Under PM-KISAN (2019), eligible farmer families receive income support of:
- A Rs 6,000 per year in three equal instalments
- B Rs 12,000 per year in two instalments
- C Rs 5,000 per year in one instalment
- D Rs 3,000 per month as pension
Show answer
Correct answer: (A) Rs 6,000 per year in three equal instalments
PM-KISAN transfers Rs 6,000 a year directly to farmers' bank accounts in three instalments of Rs 2,000 each. A monthly pension of Rs 3,000 is the PM Kisan Maandhan scheme.
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Q.56
Which of the following is a qualitative (selective) instrument of credit control used by the RBI?
- A Moral suasion
- B Cash Reserve Ratio
- C Open market operations
- D Bank rate
Show answer
Correct answer: (A) Moral suasion
Quantitative tools such as CRR, SLR, bank rate, repo and OMO change the overall volume of credit. Qualitative tools such as moral suasion, margin requirements and selective credit controls steer credit towards or away from particular uses.
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Q.57
The Minimum Support Price (MSP) for crops is recommended to the government by:
- A Commission for Agricultural Costs and Prices (CACP)
- B Food Corporation of India
- C NABARD
- D NITI Aayog
Show answer
Correct answer: (A) Commission for Agricultural Costs and Prices (CACP)
CACP recommends MSPs for notified crops; the Cabinet Committee on Economic Affairs approves them. The FCI procures grain at MSP but does not fix it.
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Q.58
Major devaluations of the Indian rupee after Independence took place in which pair of years?
- A 1950 and 1975
- B 1971 and 1980
- C 1985 and 2008
- D 1966 and 1991
Show answer
Correct answer: (D) 1966 and 1991
The rupee was devalued in 1949, 1966 and in two steps in July 1991. The 1966 devaluation followed war and drought; the 1991 devaluation was part of the crisis response before the LPG reforms.
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Q.59
Operation Barga, launched in 1978 to record the names of sharecroppers and protect them from eviction, is associated with which state?
- A Kerala
- B West Bengal
- C Bihar
- D Odisha
Show answer
Correct answer: (B) West Bengal
Operation Barga in West Bengal registered bargadars (sharecroppers) so that they gained legal protection against eviction. Kerala is known for its own land reforms, but Operation Barga was a West Bengal programme.
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Q.60
The 1979 Task Force that defined the poverty line by a daily calorie requirement of 2,400 kcal per person in rural areas and 2,100 kcal in urban areas was chaired by:
- A D.T. Lakdawala
- B Y.K. Alagh
- C Suresh Tendulkar
- D C. Rangarajan
Show answer
Correct answer: (B) Y.K. Alagh
The Y.K. Alagh Task Force (1979) converted these calorie norms into a minimum monthly consumption expenditure, which served as the poverty line for rural and urban India.
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Q.61
Gross Domestic Product (GDP) of a country is best defined as:
- A The market value of all goods produced by its citizens anywhere in the world
- B The market value of all final goods and services produced within its domestic territory in a year
- C The total income earned by its citizens working abroad
- D The value of all intermediate goods used in production during a year
Show answer
Correct answer: (B) The market value of all final goods and services produced within its domestic territory in a year
GDP counts final goods and services produced within the domestic territory, regardless of who owns the producing units. Production by citizens abroad is captured in GNP, not GDP.
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Q.62
Under the Industrial Policy Resolution of 1956, the industries listed in Schedule A were those:
- A Whose future development would be the exclusive responsibility of the State
- B That were left entirely to private enterprise
- C That were reserved for cottage and village industries
- D That would be progressively State-owned, with private enterprise supplementing the State
Show answer
Correct answer: (A) Whose future development would be the exclusive responsibility of the State
Schedule A listed 17 industries, such as arms and ammunition, atomic energy and railway transport, whose new units would be set up only by the State. Progressive State ownership with private participation describes Schedule B.
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Q.63
Ayushman Bharat PM-JAY (2018) provides health cover per family per year of up to:
- A Rs 1 lakh
- B Rs 5 lakh
- C Rs 2 lakh
- D Rs 10 lakh
Show answer
Correct answer: (B) Rs 5 lakh
PM-JAY, launched on 23 September 2018 from Ranchi, gives cashless hospital cover of Rs 5 lakh per family per year to poor and vulnerable families.
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Q.64
Who was the Prime Minister of India when 14 major commercial banks were nationalised in July 1969?
- A Lal Bahadur Shastri
- B Morarji Desai
- C Indira Gandhi
- D Gulzarilal Nanda
Show answer
Correct answer: (C) Indira Gandhi
The Indira Gandhi government nationalised 14 banks through an ordinance on 19 July 1969. Morarji Desai had been relieved of the Finance portfolio a few days earlier.
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Q.65
Consider the following statements about MGNREGA (2005): 1. Work was to be provided, as far as possible, within a radius of 5 km of the applicant's village. 2. The Gram Sabha was to conduct social audits of the works taken up. Which of the statements given above is/are correct?
- A Only 1
- B Only 2
- C Both 1 and 2
- D Neither 1 nor 2
Show answer
Correct answer: (C) Both 1 and 2
Both are correct. If work was given beyond 5 km, the worker was entitled to 10% extra wages for travel and living costs. Social audit by the Gram Sabha was written into the Act to keep the works transparent. MGNREGA was repealed from 1 July 2026 and replaced by the VB-G RAM G Act.
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Q.66
Who chairs the GST Council constituted under Article 279A?
- A Union Finance Minister
- B Prime Minister
- C Governor of the RBI
- D Vice-Chairman of NITI Aayog
Show answer
Correct answer: (A) Union Finance Minister
The GST Council is chaired by the Union Finance Minister, with the Union Minister of State for Finance and the finance ministers of all states as members.
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Q.67
Under the Statutory Liquidity Ratio (SLR), banks must keep a portion of their deposits in which form?
- A Cash balances with the RBI only
- B Equity shares of listed companies
- C Foreign currency deposits abroad
- D Cash, gold and approved government securities held by the bank itself
Show answer
Correct answer: (D) Cash, gold and approved government securities held by the bank itself
SLR assets are liquid assets held by the bank itself: cash, gold and approved (mainly government) securities. Cash kept with the RBI is CRR, which is the main distractor.
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Q.68
The Economic Survey, presented in Parliament just before the Union Budget, is prepared by:
- A NITI Aayog
- B The Reserve Bank of India
- C The National Statistical Office
- D The Economic Division of the Department of Economic Affairs, under the Chief Economic Adviser
Show answer
Correct answer: (D) The Economic Division of the Department of Economic Affairs, under the Chief Economic Adviser
The Economic Survey reviews the economy over the past year. It is prepared by the Economic Division of the Department of Economic Affairs, Ministry of Finance, under the guidance of the Chief Economic Adviser.
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Q.69
'Stagflation' describes a situation of:
- A Falling prices along with high growth
- B Very rapid rise in prices of over 50% a month
- C High inflation combined with stagnant output and high unemployment
- D Zero inflation with full employment
Show answer
Correct answer: (C) High inflation combined with stagnant output and high unemployment
Stagflation = stagnation + inflation: prices rise while growth stalls and unemployment stays high. A monthly price rise of over 50% is hyperinflation.
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Q.70
The 'Anand pattern' of cooperatives, associated with Verghese Kurien, refers to:
- A A three-tier dairy cooperative structure of village societies, district unions and a state federation
- B A network of State-owned dairy farms run by government officials
- C A contract-farming model in which private firms buy oilseeds from farmers
- D A crop insurance system run by primary agricultural credit societies
Show answer
Correct answer: (A) A three-tier dairy cooperative structure of village societies, district unions and a state federation
Under the Anand pattern, milk producers own village cooperative societies, which form a district milk union, and the unions form a state federation, as with Amul in Gujarat. Producers, not the State or private firms, control the structure.
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Q.71
The Wholesale Price Index (WPI) in India is published by:
- A National Statistical Office (NSO)
- B Reserve Bank of India
- C Labour Bureau
- D Office of the Economic Adviser, DPIIT, Ministry of Commerce and Industry
Show answer
Correct answer: (D) Office of the Economic Adviser, DPIIT, Ministry of Commerce and Industry
WPI is compiled by the Office of the Economic Adviser under the Department for Promotion of Industry and Internal Trade. CPI (Rural/Urban/Combined) comes from the NSO.
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Q.72
NITI Aayog replaced the Planning Commission with effect from:
- A 15 August 2014
- B 1 January 2015
- C 1 April 2015
- D 26 January 2016
Show answer
Correct answer: (B) 1 January 2015
NITI Aayog (National Institution for Transforming India) was established on 1 January 2015 as a policy think tank, with the Prime Minister as chairperson.
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Q.73
Which of the following scheme–ministry pairs is correctly matched?
- A PM Awas Yojana (Gramin) – Ministry of Labour and Employment
- B Ayushman Bharat PM-JAY – Ministry of Finance
- C Digital India – Ministry of Electronics and Information Technology
- D PM MUDRA Yojana – Ministry of Rural Development
Show answer
Correct answer: (C) Digital India – Ministry of Electronics and Information Technology
Digital India, launched in 2015, is coordinated by the Ministry of Electronics and Information Technology. PM Awas Yojana (Gramin) is run by the Ministry of Rural Development, PM-JAY comes under the Ministry of Health and Family Welfare, and the PM MUDRA Yojana under the Ministry of Finance.
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Q.74
Consider the following statements: 1. Devaluation of the rupee makes Indian exports costlier for foreign buyers. 2. Devaluation is a deliberate official reduction in a currency's value under a fixed or pegged exchange rate system. Which of the statements given above is/are correct?
- A Only 1
- B Only 2
- C Both 1 and 2
- D Neither 1 nor 2
Show answer
Correct answer: (B) Only 2
Only statement 2 is correct. Devaluation makes exports cheaper and imports dearer, which is why it is used to correct a trade deficit. A fall in value caused by market forces under a floating rate is called depreciation.
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Q.75
Which GST is levied on an inter-State supply of goods or services?
- A CGST only
- B SGST only
- C CGST and SGST together
- D IGST
Show answer
Correct answer: (D) IGST
On inter-State supplies the Centre levies and collects Integrated GST (IGST) under Article 269A, and it is apportioned between the Union and the States. Supplies within a State attract CGST plus SGST (or UTGST).
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Q.76
Which money market instrument is an unsecured, short-term promissory note issued by companies to raise funds?
- A Certificate of Deposit
- B Commercial Paper
- C Treasury Bill
- D Dated government security
Show answer
Correct answer: (B) Commercial Paper
Commercial Paper is issued at a discount for short periods by companies (and some financial institutions). Certificates of Deposit are issued by banks, and Treasury Bills by the RBI for the government.
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Q.77
Minimum Support Price (MSP) is best described as:
- A The highest retail price that shops may charge consumers for foodgrains
- B The price at which ration shops sell foodgrains to card holders
- C The price at which the government stands ready to buy a crop from farmers, announced before sowing
- D The lowest price at which a crop may be exported
Show answer
Correct answer: (C) The price at which the government stands ready to buy a crop from farmers, announced before sowing
MSP is a floor price that protects farmers against a sharp fall in market prices; it is announced before the sowing season so that farmers can plan. The price at which grain is issued for the public distribution system is a different one, the Central Issue Price; foodgrains for National Food Security Act beneficiaries have been free since January 2023.
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Q.78
A loan is classified as a Non-Performing Asset (NPA) when interest or principal remains overdue for more than:
- A 30 days
- B 60 days
- C 90 days
- D 180 days
Show answer
Correct answer: (C) 90 days
As per RBI norms, a term loan becomes an NPA if interest and/or instalment of principal remains overdue for a period of more than 90 days.
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Q.79
Consider the following statements about the Reserve Bank of India: 1. It was set up under the Reserve Bank of India Act, 1934. 2. It was nationalised with effect from 1 January 1949. Which of the statements given above is/are correct?
- A Only 1
- B Only 2
- C Both 1 and 2
- D Neither 1 nor 2
Show answer
Correct answer: (C) Both 1 and 2
The RBI was established under the RBI Act, 1934 as a shareholders' bank and began work in 1935. It was nationalised on 1 January 1949 under the Reserve Bank (Transfer to Public Ownership) Act, 1948.
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Q.80
Per capita income of a country is obtained by dividing:
- A GDP by the geographical area of the country
- B National income by the total population
- C Total tax collection by the population
- D Total exports by total imports
Show answer
Correct answer: (B) National income by the total population
Per capita income = National income / Population. It is an average and does not show how income is distributed among people.
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Q.81
The Commission for Agricultural Costs and Prices (CACP) was set up in 1965 under which original name?
- A National Commission on Agriculture
- B Agricultural Costs Board
- C Agricultural Prices Commission
- D Farm Produce Pricing Authority
Show answer
Correct answer: (C) Agricultural Prices Commission
The Agricultural Prices Commission was created in 1965 and renamed the Commission for Agricultural Costs and Prices in 1985. The National Commission on Agriculture (1970-76) was a separate body that reviewed agriculture as a whole.
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Q.82
Which of the following organisation–headquarters pairs is correctly matched?
- A World Trade Organization – Washington, D.C.
- B International Monetary Fund – New York
- C World Bank – Geneva
- D Asian Development Bank – Manila
Show answer
Correct answer: (D) Asian Development Bank – Manila
The Asian Development Bank is headquartered in Manila, the Philippines. The WTO is based in Geneva, while the IMF and the World Bank are both in Washington, D.C.
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Q.83
A 'land ceiling' law fixes:
- A The minimum area a person must hold to be called a farmer
- B The maximum rent a landlord may charge a tenant
- C The rate of land revenue payable to the State
- D The maximum area of land that an individual or family may own
Show answer
Correct answer: (D) The maximum area of land that an individual or family may own
Land ceiling laws cap the size of holdings; land above the ceiling is declared surplus and is meant to be redistributed to the landless. Limits on rent belong to tenancy reform, a separate measure.
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Q.84
The Asian Development Bank (ADB), of which India is a founding member, was established in:
- A 1944
- B 1957
- C 1966
- D 1991
Show answer
Correct answer: (C) 1966
ADB was set up in 1966 to promote economic growth and cooperation in Asia and the Pacific. The year 1944 belongs to the Bretton Woods conference, which created the IMF and the World Bank.
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Q.85
When the Small Industries Development Bank of India (SIDBI) was set up in 1990, it was a wholly owned subsidiary of:
- A The Reserve Bank of India
- B The Industrial Development Bank of India (IDBI)
- C The State Bank of India
- D NABARD
Show answer
Correct answer: (B) The Industrial Development Bank of India (IDBI)
SIDBI was established on 2 April 1990 under the SIDBI Act, 1989 as a wholly owned subsidiary of IDBI and was later delinked from it. It is the principal financial institution for MSMEs.
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Q.86
The GST (Compensation to States) Act, 2017 promised to compensate States for loss of revenue arising from GST for a period of:
- A Three years
- B Ten years
- C Five years
- D Seven years
Show answer
Correct answer: (C) Five years
The 101st Amendment and the Compensation Act provided compensation for five years from the introduction of GST (July 2017 to June 2022), funded through a GST compensation cess. After compensation ended in June 2022, the cess was continued to repay the loans taken to cover the compensation shortfall; it was removed from most goods in September 2025 and ended altogether on 1 February 2026, when a new excise duty on tobacco and a new cess on pan masala replaced it.
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Q.87
Payments banks in India, set up on the recommendation of the Nachiket Mor Committee, are NOT permitted to:
- A Accept savings and current account deposits
- B Give loans or issue credit cards
- C Issue debit cards
- D Provide remittance services
Show answer
Correct answer: (B) Give loans or issue credit cards
Payments banks can accept demand deposits up to a prescribed limit, issue ATM/debit cards and offer remittance and payment services, but they cannot lend or issue credit cards.
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Q.88
From 2017 onwards, the date of presentation of the Union Budget was advanced from the last working day of February to:
- A 15 January
- B 1 March
- C 1 February
- D 1 April
Show answer
Correct answer: (C) 1 February
Since 2017 the Budget has been presented on 1 February so that Parliament can pass it before the financial year begins on 1 April.
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Q.89
The Phillips curve shows the relationship between:
- A Tax rates and tax revenue
- B Income and expenditure on food
- C Interest rates and investment
- D Inflation and unemployment
Show answer
Correct answer: (D) Inflation and unemployment
The Phillips curve depicts an inverse relationship between inflation and unemployment in the short run: lower unemployment tends to go with higher inflation.
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Q.90
Which American agronomist, awarded the Nobel Peace Prize in 1970, developed the high-yielding semi-dwarf wheat varieties in Mexico that were used in India's Green Revolution?
- A Norman Borlaug
- B Albert Howard
- C Luther Burbank
- D George Washington Carver
Show answer
Correct answer: (A) Norman Borlaug
Norman Borlaug bred disease-resistant semi-dwarf wheat in Mexico, and these seeds were brought to India in the mid-1960s with M.S. Swaminathan's support. Albert Howard was a British botanist known for organic farming methods.
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Q.91
The Fiscal Responsibility and Budget Management (FRBM) Act was enacted in:
- A 1991
- B 2003
- C 1999
- D 2005
Show answer
Correct answer: (B) 2003
The FRBM Act, 2003 aims at fiscal discipline by setting targets for reducing fiscal and revenue deficits. It came into force in July 2004.
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Q.92
Revenue deficit in the Union Budget refers to the excess of:
- A Total expenditure over total receipts excluding borrowings
- B Revenue expenditure over revenue receipts
- C Capital expenditure over capital receipts
- D Imports over exports
Show answer
Correct answer: (B) Revenue expenditure over revenue receipts
Revenue deficit = revenue expenditure − revenue receipts; it shows the government borrowing to meet day-to-day expenses. Total expenditure minus non-debt receipts is the fiscal deficit.
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Q.93
In which year were 14 major commercial banks nationalised in India?
- A 1955
- B 1980
- C 1991
- D 1969
Show answer
Correct answer: (D) 1969
On 19 July 1969, 14 major banks with deposits above Rs 50 crore were nationalised. A second round in 1980 nationalised six more banks.
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Q.94
To convert national income at market price into national income at factor cost, one should:
- A Add indirect taxes and subtract subsidies
- B Add both indirect taxes and subsidies
- C Subtract indirect taxes and add subsidies
- D Subtract both indirect taxes and subsidies
Show answer
Correct answer: (C) Subtract indirect taxes and add subsidies
Factor cost = Market price minus indirect taxes plus subsidies. Indirect taxes raise the market price above what factors receive, while subsidies lower it.
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Q.95
The New Development Bank (NDB), set up by the BRICS countries, is headquartered in:
- A Beijing
- B Mumbai
- C Shanghai
- D Moscow
Show answer
Correct answer: (C) Shanghai
NDB is located in Shanghai, China, and its first president was an Indian, K.V. Kamath. The Asian Infrastructure Investment Bank (AIIB) is in Beijing.
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Q.96
In the New Economic Policy of 1991, 'stabilisation measures' refer to:
- A Long-term measures to improve efficiency and international competitiveness
- B Measures to nationalise key industries
- C Measures to raise import tariffs and protect domestic industry
- D Short-term measures to correct the balance of payments and control inflation
Show answer
Correct answer: (D) Short-term measures to correct the balance of payments and control inflation
Stabilisation measures are short-term steps to fix the balance of payments and inflation. Structural reform measures are long-term steps to raise efficiency and competitiveness by removing rigidities.
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Q.97
Who was the chairman of the First Finance Commission of India?
- A K. Santhanam
- B K.C. Neogy
- C A.K. Chanda
- D P.V. Rajamannar
Show answer
Correct answer: (B) K.C. Neogy
The First Finance Commission (1951) was headed by K.C. Neogy. K. Santhanam, A.K. Chanda and P.V. Rajamannar chaired the Second, Third and Fourth Commissions respectively.
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Q.98
The Consumer Price Index (Rural, Urban and Combined) used by the RBI for inflation targeting is compiled by:
- A National Statistical Office under the Ministry of Statistics
- B Reserve Bank of India
- C Department of Economic Affairs, Ministry of Finance
- D Securities and Exchange Board of India
Show answer
Correct answer: (A) National Statistical Office under the Ministry of Statistics
CPI (Rural, Urban and Combined) is released monthly by the NSO, MoSPI. The RBI targets CPI (Combined) inflation; CPI for Industrial Workers is published separately by the Labour Bureau.
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Q.99
Gross National Product (GNP) is obtained from GDP by:
- A Subtracting depreciation
- B Adding indirect taxes
- C Subtracting net factor income from abroad
- D Adding net factor income from abroad
Show answer
Correct answer: (D) Adding net factor income from abroad
GNP = GDP + Net Factor Income from Abroad (NFIA). Subtracting depreciation gives the 'net' concepts (NNP or NDP), not GNP.
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Q.100
Under the Pradhan Mantri MUDRA Yojana (2015), loans up to Rs 50,000 fall in which category?
- A Shishu
- B Kishore
- C Tarun
- D Yuva
Show answer
Correct answer: (A) Shishu
MUDRA loans for micro enterprises are graded Shishu (up to Rs 50,000), Kishore (Rs 50,000 to Rs 5 lakh) and Tarun (above Rs 5 lakh). There is no 'Yuva' category.
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How these questions were made
Authored by an AI assistant (Claude) from its own general knowledge of stable, well-established facts (no live lookup) - not reviewed by a subject-matter expert; verify against an official source before relying on any fact.