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.101
Primary deficit is equal to:
- A Fiscal deficit plus interest payments
- B Revenue deficit minus grants for capital assets
- C Fiscal deficit minus interest payments
- D Fiscal deficit minus revenue deficit
Show answer
Correct answer: (C) Fiscal deficit minus interest payments
Primary deficit = Fiscal deficit minus interest payments on past borrowings. It indicates how much of the current borrowing is for purposes other than servicing old debt.
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Q.102
A tax is called progressive when:
- A The rate of tax rises as the taxable income rises
- B Everyone pays tax at the same rate
- C The rate of tax falls as income rises
- D It is levied only on goods and services, not on income
Show answer
Correct answer: (A) The rate of tax rises as the taxable income rises
Under a progressive tax, higher incomes face higher rates, as with slab-wise income tax, so the rich pay a larger share of their income as tax.
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Q.103
The Congress Agrarian Reforms Committee of 1949, which recommended the abolition of all intermediaries between the State and the tiller, was headed by:
- A D.R. Gadgil
- B V.T. Krishnamachari
- C J.C. Kumarappa
- D Gulzarilal Nanda
Show answer
Correct answer: (C) J.C. Kumarappa
The Agrarian Reforms Committee chaired by J.C. Kumarappa reported in 1949, and its ideas influenced the land reform laws of the 1950s. D.R. Gadgil is better known for the Gadgil formula for central assistance to state plans.
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Q.104
Which of the following taxes was NOT subsumed in GST?
- A Service tax
- B Luxury tax
- C Entry tax
- D Basic customs duty
Show answer
Correct answer: (D) Basic customs duty
GST replaced indirect taxes such as service tax, central excise on most goods, State VAT, luxury tax and entry tax. Basic customs duty on imports continues to be levied separately.
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Q.105
In the economic reforms of 1991, often called the 'LPG' reforms, the letters L, P and G stand for:
- A Liberalisation, Privatisation and Globalisation
- B Licensing, Planning and Growth
- C Liberalisation, Planning and Globalisation
- D Land reform, Privatisation and Growth
Show answer
Correct answer: (A) Liberalisation, Privatisation and Globalisation
The 1991 reforms loosened controls such as industrial licensing (liberalisation), reduced the role of the public sector, including through disinvestment (privatisation), and linked India more closely with the world economy (globalisation).
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Q.106
The Governing Council of NITI Aayog comprises the Prime Minister and:
- A Only the Union Cabinet ministers
- B The Governors of all States
- C The Chief Ministers of all States and of UTs with legislatures, and Lt Governors/Administrators of other UTs
- D Members of the Rajya Sabha nominated by its Chairman
Show answer
Correct answer: (C) The Chief Ministers of all States and of UTs with legislatures, and Lt Governors/Administrators of other UTs
NITI Aayog was set up by the Cabinet resolution of 1 January 2015, and its Governing Council was first constituted in February 2015. As reconstituted in February 2021, the Council comprises the Prime Minister, the Chief Ministers of all States and of Union Territories with legislatures, the Lt Governors/Administrators of other UTs, the ex-officio members, Vice-Chairperson and full-time members of NITI Aayog, and special invitees. It reflects cooperative federalism.
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Q.107
In the Pradhan Mantri MUDRA Yojana, MUDRA stands for:
- A Micro Units Deposit and Rural Assistance
- B Medium Undertakings Development and Regulatory Authority
- C Micro Units Development and Regulatory Authority
- D Micro Units Development and Refinance Agency
Show answer
Correct answer: (D) Micro Units Development and Refinance Agency
MUDRA is the Micro Units Development and Refinance Agency; it refinances banks, NBFCs and microfinance institutions that lend to non-corporate, non-farm micro and small enterprises. It is a refinancing agency, not a regulator.
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Q.108
A tax levied on an activity that harms others, such as pollution, so that the polluter bears that cost, is called a:
- A Tobin tax
- B Poll tax
- C Windfall tax
- D Pigouvian tax
Show answer
Correct answer: (D) Pigouvian tax
Named after the economist Arthur Pigou, such a tax makes producers pay for negative externalities like pollution; a carbon tax is an example. A Tobin tax is a proposed levy on currency transactions.
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Q.109
The Commission for Agricultural Costs and Prices is an attached office of which ministry?
- A Ministry of Agriculture and Farmers Welfare
- B Ministry of Consumer Affairs, Food and Public Distribution
- C Ministry of Finance
- D Ministry of Commerce and Industry
Show answer
Correct answer: (A) Ministry of Agriculture and Farmers Welfare
CACP is an attached office of the Ministry of Agriculture and Farmers Welfare and advises the government on MSPs. The Ministry of Consumer Affairs, Food and Public Distribution oversees the Food Corporation of India, which procures grain.
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Q.110
Fiscal deficit of the government is defined as:
- A Revenue expenditure minus revenue receipts
- B Total expenditure minus total receipts excluding borrowings
- C Total imports minus total exports
- D Interest payments minus revenue deficit
Show answer
Correct answer: (B) Total expenditure minus total receipts excluding borrowings
Fiscal deficit = Total expenditure minus (revenue receipts + non-debt capital receipts). It shows the total borrowing requirement of the government. Revenue expenditure minus revenue receipts is the revenue deficit.
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Q.111
All revenues received and loans raised by the Government of India form the Consolidated Fund of India, which is constituted under:
- A Article 267
- B Article 280
- C Article 266
- D Article 112
Show answer
Correct answer: (C) Article 266
Article 266(1) creates the Consolidated Fund of India and Article 266(2) the Public Account of India. The Contingency Fund is provided for in Article 267.
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Q.112
In poverty measurement, the 'head count ratio' is:
- A The number of households counted in a village survey
- B The proportion of the population living below the poverty line
- C The ratio of working-age people to dependants
- D The share of national income earned by the richest 10%
Show answer
Correct answer: (B) The proportion of the population living below the poverty line
The head count ratio divides the number of people below the poverty line by the total population, so it shows how widespread poverty is. It does not show how far below the line the poor are.
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Q.113
Unemployment that arises temporarily when a worker is moving from one job to another is called:
- A Structural unemployment
- B Frictional unemployment
- C Cyclical unemployment
- D Seasonal unemployment
Show answer
Correct answer: (B) Frictional unemployment
Frictional unemployment is short-term joblessness during job search or transition. Structural unemployment comes from a mismatch between skills and jobs, and cyclical unemployment from a downturn in demand.
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Q.114
India's first cooperative law, the Cooperative Credit Societies Act, was passed in:
- A 1882
- B 1919
- C 1935
- D 1904
Show answer
Correct answer: (D) 1904
The Cooperative Credit Societies Act, 1904, passed under Lord Curzon, allowed rural credit societies to be registered so that farmers could escape moneylenders. The Cooperative Societies Act of 1912 extended registration to non-credit societies.
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Q.115
Consider the following statements about voting in the GST Council: 1. The vote of the Central Government has a weightage of one-third of the total votes cast. 2. Decisions are taken by a simple majority of the members present and voting. 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: (A) Only 1
Under Article 279A, the Centre's vote carries one-third weight and the States together two-thirds, and every decision needs a majority of at least three-fourths of the weighted votes of members present and voting. So statement 2 is wrong.
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Q.116
In conventional national income accounting, the term 'National Income' refers to:
- A GDP at market price
- B GNP at market price
- C NNP at factor cost
- D NDP at market price
Show answer
Correct answer: (C) NNP at factor cost
National Income is NNP at factor cost, i.e., GNP minus depreciation, minus indirect taxes, plus subsidies.
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Q.117
Which of the following is the main cause of cost-push inflation?
- A Increase in money supply
- B Rise in input costs such as wages and raw materials
- C Excess government spending
- D Fall in interest rates
Show answer
Correct answer: (B) Rise in input costs such as wages and raw materials
Cost-push inflation arises when producers pass higher costs of production (wages, raw materials, fuel) on to consumers. The other options are demand-side causes.
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Q.118
The Bhoodan (land gift) movement, which asked landowners to donate land to the landless, was started in 1951 by:
- A J.B. Kripalani
- B Vinoba Bhave
- C Ram Manohar Lohia
- D Acharya Narendra Dev
Show answer
Correct answer: (B) Vinoba Bhave
Vinoba Bhave began the Bhoodan movement in April 1951 at Pochampally, now in Telangana, where a landowner offered land for landless families. It later widened into the Gramdan (village gift) movement.
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Q.119
Net Domestic Product (NDP) of a country is obtained by:
- A Adding net factor income from abroad to GDP
- B Subtracting indirect taxes from GNP
- C Subtracting depreciation from GDP
- D Adding subsidies to NNP
Show answer
Correct answer: (C) Subtracting depreciation from GDP
NDP = GDP minus depreciation (consumption of fixed capital). Adding net factor income from abroad to GDP gives GNP, not NDP.
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Q.120
Arrange the following laws in chronological order of their enactment: 1. Foreign Exchange Regulation Act (FERA) 2. Industries (Development and Regulation) Act 3. Foreign Exchange Management Act (FEMA) 4. Monopolies and Restrictive Trade Practices (MRTP) Act
- A 4, 2, 1, 3
- B 2, 1, 4, 3
- C 4, 2, 3, 1
- D 2, 4, 1, 3
Show answer
Correct answer: (D) 2, 4, 1, 3
The Industries (Development and Regulation) Act came in 1951, the MRTP Act in 1969, FERA in 1973 and FEMA in 1999, giving the order 2, 4, 1, 3.
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Q.121
The agreement to establish the New Development Bank was signed at the BRICS summit held in 2014 at:
- A Durban, South Africa
- B Ufa, Russia
- C Goa, India
- D Fortaleza, Brazil
Show answer
Correct answer: (D) Fortaleza, Brazil
The Fortaleza summit of July 2014 produced the agreements creating the New Development Bank and the Contingent Reserve Arrangement. Durban hosted the 2013 summit, Ufa the 2015 summit and Goa the 2016 summit.
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Q.122
Under the WTO Agreement on Agriculture, 'Green Box' subsidies are those that:
- A Distort production and trade and are subject to reduction commitments
- B Cause no or only minimal distortion of trade and are allowed without limits
- C Are paid to farmers only on goods that are exported
- D Are tied to programmes that require farmers to limit production
Show answer
Correct answer: (B) Cause no or only minimal distortion of trade and are allowed without limits
Green Box support, such as research, extension services and certain income support not linked to output, is allowed without limit because it barely distorts trade. Trade-distorting support falls in the Amber Box, and production-limiting payments form the Blue Box.
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Q.123
What is the composition of the Monetary Policy Committee (MPC) of the RBI?
- A Four members, all from the RBI
- B Six members: three from the RBI including the Governor, and three appointed by the Central Government
- C Six members, all nominated by the Central Government
- D Five members headed by the Union Finance Minister
Show answer
Correct answer: (B) Six members: three from the RBI including the Governor, and three appointed by the Central Government
The MPC, constituted in 2016 under the amended RBI Act, has six members: the Governor (chair), a Deputy Governor, one RBI officer and three external members appointed by the Central Government. It decides the policy repo rate.
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Q.124
The value-added method of measuring national income is used mainly to avoid:
- A The effect of changes in the price level
- B The inclusion of indirect taxes
- C Under-reporting of exports
- D Double counting of intermediate goods
Show answer
Correct answer: (D) Double counting of intermediate goods
Value added at each stage is the value of output minus the value of intermediate inputs, so adding up value added counts every good only once. Removing the effect of price changes is done by measuring at constant prices, not by this method.
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Q.125
In the early phase of the Green Revolution (mid-1960s to mid-1970s), the use of high-yielding variety (HYV) seeds mainly benefited the regions growing which crop?
- A Pulses
- B Wheat
- C Jute
- D Cotton
Show answer
Correct answer: (B) Wheat
In its first phase the HYV package was used mainly in irrigated, wheat-growing areas; its spread to rice and to other regions came later. Pulses gained little from the Green Revolution.
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Q.126
Stand-Up India, launched in 2016, facilitated bank loans for setting up greenfield enterprises by which groups?
- A Ex-servicemen and retired government employees
- B Minority community youth only
- C Scheduled Caste or Scheduled Tribe and women entrepreneurs
- D Registered farmer producer organisations
Show answer
Correct answer: (C) Scheduled Caste or Scheduled Tribe and women entrepreneurs
Under Stand-Up India, each branch of a scheduled commercial bank was expected to lend to at least one SC or ST borrower and at least one woman borrower for a new (greenfield) enterprise. The scheme, run by the Department of Financial Services, Ministry of Finance, expired on 31 March 2025; in March 2026 the Finance Minister told Parliament that a revamped version for these groups was being prepared.
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Q.127
The separate Railway Budget, presented from 1924 on the recommendation of the Acworth Committee, was merged with the Union Budget from the financial year:
- A 2017-18
- B 2015-16
- C 2019-20
- D 2004-05
Show answer
Correct answer: (A) 2017-18
The Acworth Committee (1920-21) led to the separation of railway finances in 1924. The practice ended when the Railway Budget was merged with the Union Budget, beginning with the Budget for 2017-18.
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Q.128
Which institution of the World Bank Group gives concessional loans and grants to the poorest countries?
- A International Development Association (IDA)
- B International Finance Corporation (IFC)
- C Multilateral Investment Guarantee Agency (MIGA)
- D International Centre for Settlement of Investment Disputes (ICSID)
Show answer
Correct answer: (A) International Development Association (IDA)
IDA, set up in 1960, is the World Bank's soft-loan window for the poorest countries. The IFC lends to and invests in the private sector, and MIGA provides political-risk guarantees to investors.
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Q.129
Real GDP differs from nominal GDP because real GDP is measured at:
- A Constant prices of a chosen base year
- B Current market prices of the same year
- C Factor cost of the current year
- D International dollar prices only
Show answer
Correct answer: (A) Constant prices of a chosen base year
Real GDP values output at base-year (constant) prices, so changes in it reflect changes in physical output rather than price changes. Nominal GDP uses current prices.
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Q.130
For sugarcane, instead of an MSP, the Central Government fixes which price on the recommendation of the CACP?
- A State Advised Price (SAP)
- B Central Issue Price (CIP)
- C Fair and Remunerative Price (FRP)
- D Minimum Export Price (MEP)
Show answer
Correct answer: (C) Fair and Remunerative Price (FRP)
Since the 2009-10 season the Centre has fixed an FRP for sugarcane, the least that sugar mills must pay growers; it replaced the earlier Statutory Minimum Price. The SAP is a price that some state governments announce on their own.
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Q.131
The period 1966-69 in Indian planning history is known as the:
- A Plan holiday
- B Rolling plan
- C Emergency plan
- D Reform period
Show answer
Correct answer: (A) Plan holiday
After wars with China and Pakistan and severe droughts, three annual plans were implemented during 1966-69 instead of a Five-Year Plan. This gap is called the plan holiday.
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Q.132
The devaluation of the rupee in June 1966 took place when who was the Prime Minister of India?
- A Lal Bahadur Shastri
- B Indira Gandhi
- C Gulzarilal Nanda
- D Morarji Desai
Show answer
Correct answer: (B) Indira Gandhi
Indira Gandhi had become Prime Minister in January 1966, and the rupee was devalued in June that year after the 1965 war and severe droughts strained the balance of payments. Lal Bahadur Shastri had died in January 1966.
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Q.133
The Unified Payments Interface (UPI) was developed by:
- A Reserve Bank of India
- B National Payments Corporation of India (NPCI)
- C State Bank of India
- D Securities and Exchange Board of India
Show answer
Correct answer: (B) National Payments Corporation of India (NPCI)
NPCI built UPI, which lets users send money instantly between bank accounts through a mobile app using a virtual payment address. The RBI regulates payment systems but did not build UPI.
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Q.134
The central office of the Reserve Bank of India was first located in which city before it moved permanently to Mumbai in 1937?
- A New Delhi
- B Kolkata (then Calcutta)
- C Chennai (then Madras)
- D Shimla
Show answer
Correct answer: (B) Kolkata (then Calcutta)
The RBI's central office was set up in Calcutta in 1935 and shifted permanently to Bombay (Mumbai) in 1937, where the Governor sits.
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Q.135
Through a reverse repo operation, the RBI:
- A Lends to banks against government securities
- B Buys foreign currency from banks
- C Raises the cash reserve ratio of banks
- D Absorbs surplus liquidity by borrowing from banks against government securities
Show answer
Correct answer: (D) Absorbs surplus liquidity by borrowing from banks against government securities
In a reverse repo the RBI sells securities with an agreement to buy them back, in effect borrowing from banks and draining excess liquidity. Lending to banks against securities is a repo. Since April 2022, however, the floor of the RBI's policy rate corridor has been the Standing Deposit Facility (SDF), through which banks park surplus funds with the RBI without the RBI having to give collateral; the fixed-rate reverse repo is now used only at the RBI's discretion, while variable rate reverse repo auctions are still used to drain liquidity.
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Q.136
The Monopolies and Restrictive Trade Practices (MRTP) Act, 1969 was replaced by the:
- A Consumer Protection Act, 1986
- B Foreign Exchange Management Act, 1999
- C Competition Act, 2002
- D Companies Act, 2013
Show answer
Correct answer: (C) Competition Act, 2002
The Competition Act, 2002 replaced the MRTP Act and set up the Competition Commission of India, which targets anti-competitive agreements and abuse of dominance rather than size alone. The Consumer Protection Act deals with consumer complaints.
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Q.137
The First Five-Year Plan (1951-56) of India was based on which growth model?
- A Mahalanobis model
- B Harrod-Domar model
- C Gadgil formula
- D Rao-Manmohan model
Show answer
Correct answer: (B) Harrod-Domar model
The First Plan followed the Harrod-Domar model and gave priority to agriculture and irrigation. The Mahalanobis model was the basis of the Second Plan.
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Q.138
Which of the following is 'charged' on the Consolidated Fund of India and is therefore not put to the vote of Parliament?
- A Salaries and allowances of the judges of the Supreme Court
- B Salaries of Union Cabinet ministers
- C Expenditure on the purchase of defence equipment
- D Salaries and allowances of Members of Parliament
Show answer
Correct answer: (A) Salaries and allowances of the judges of the Supreme Court
Article 112(3) lists charged expenditure, such as the President's emoluments, the salaries of Supreme Court judges and the CAG, and debt charges. Parliament can discuss these items but does not vote on them.
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Q.139
In which year was the Unified Payments Interface (UPI) launched in India?
- A 2010
- B 2013
- C 2019
- D 2016
Show answer
Correct answer: (D) 2016
UPI went live in 2016, and the BHIM app built on it followed in December 2016. IMPS, an earlier instant-payment system, dates from 2010.
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Q.140
The Second Five-Year Plan (1956-61) is associated with the Mahalanobis model and gave priority to:
- A Agriculture and irrigation
- B Export of services
- C Heavy and basic industries
- D Poverty removal programmes
Show answer
Correct answer: (C) Heavy and basic industries
The Second Plan, designed by P.C. Mahalanobis, emphasised rapid industrialisation through heavy and basic industries such as steel and machine-building.
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Q.141
To deal with the balance of payments crisis of 1991, India:
- A Withdrew its membership of the IMF
- B Made the rupee fully convertible on the capital account
- C Pledged part of its gold reserves to raise foreign exchange
- D Pegged the rupee to the pound sterling
Show answer
Correct answer: (C) Pledged part of its gold reserves to raise foreign exchange
With reserves enough for only a few weeks of imports, India pledged gold abroad to raise loans, took IMF assistance and devalued the rupee in July 1991. Full capital account convertibility has not been adopted.
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Q.142
Among Central Public Sector Enterprises, which status carries the highest financial and operational autonomy?
- A Maharatna
- B Navratna
- C Miniratna Category I
- D Miniratna Category II
Show answer
Correct answer: (A) Maharatna
The hierarchy is Maharatna, then Navratna, then Miniratna I and II. Maharatna companies can make the largest investment decisions without government approval.
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Q.143
Special Drawing Rights (SDRs), an international reserve asset, were created in 1969 by the:
- A World Bank
- B International Monetary Fund
- C Bank for International Settlements
- D World Trade Organization
Show answer
Correct answer: (B) International Monetary Fund
The IMF created the SDR in 1969 to supplement its members' official reserves; its value is based on a basket of major currencies. The World Bank finances development projects rather than issuing reserve assets.
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Q.144
India's first Industrial Policy Resolution, of 1948, was presented by which Minister of Industry and Supply?
- A Syama Prasad Mookerjee
- B John Mathai
- C T.T. Krishnamachari
- D Gulzarilal Nanda
Show answer
Correct answer: (A) Syama Prasad Mookerjee
Syama Prasad Mookerjee, Industry and Supply Minister in Nehru's first cabinet, presented the 1948 resolution, which laid the basis of a mixed economy with roles for both the public and the private sector. John Mathai served as Railway and later Finance Minister in that period.
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Q.145
As enacted in 2005, MGNREGA guaranteed how many days of wage employment in a financial year to a rural household?
- A 50 days
- B 150 days
- C 100 days
- D 200 days
Show answer
Correct answer: (C) 100 days
The Mahatma Gandhi National Rural Employment Guarantee Act, 2005 gave a legal guarantee of at least 100 days of unskilled manual work per rural household that demanded it. It was repealed from 1 July 2026 and replaced by the VB-G RAM G Act, which guarantees 125 days.
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Q.146
Consider the following statements: 1. The Rangarajan Expert Group on poverty measurement was constituted by NITI Aayog. 2. The Lakdawala Expert Group recommended a single all-India poverty line in place of state-specific lines. 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: (D) Neither 1 nor 2
Both are wrong. The Rangarajan group was set up by the Planning Commission in 2012 and reported in 2014, before NITI Aayog existed. The Lakdawala group (1993) did the opposite: it introduced state-specific poverty lines, updated with CPI-AL for rural and CPI-IW for urban areas.
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Q.147
To curb high inflation, the RBI would most likely:
- A Raise the repo rate and sell government securities through OMO
- B Cut the repo rate to encourage borrowing
- C Reduce the cash reserve ratio
- D Lower the statutory liquidity ratio
Show answer
Correct answer: (A) Raise the repo rate and sell government securities through OMO
A contractionary stance reduces money supply: raising the repo rate makes credit costlier, and selling securities absorbs liquidity. Cutting rates or reserve ratios would expand money supply and add to inflation.
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Q.148
In the Indian money market, 'call money' refers to funds lent or borrowed for a period of:
- A One day (overnight)
- B 2 to 14 days
- C 15 days to one year
- D More than one year
Show answer
Correct answer: (A) One day (overnight)
Call money is overnight inter-bank borrowing and lending; notice money is for 2 to 14 days and term money for 15 days to one year.
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Q.149
The repo rate is the rate at which:
- A RBI borrows money from commercial banks
- B Commercial banks lend to each other overnight
- C Banks pay interest on savings deposits
- D RBI lends short-term funds to commercial banks against government securities
Show answer
Correct answer: (D) RBI lends short-term funds to commercial banks against government securities
Repo (repurchase) rate is the rate at which RBI lends to banks against the collateral of government securities. The rate at which RBI borrows from banks is the reverse repo rate.
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Q.150
The IMF and the World Bank were created as a result of which conference?
- A Bretton Woods Conference, 1944
- B Yalta Conference, 1945
- C Geneva Conference, 1947
- D Paris Peace Conference, 1919
Show answer
Correct answer: (A) Bretton Woods Conference, 1944
The 1944 Bretton Woods Conference in the USA created the IMF and the IBRD (World Bank), both headquartered in Washington DC. They are called the Bretton Woods twins.
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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.