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.151
The Asian Infrastructure Investment Bank (AIIB), which began operations in 2016, is headquartered in:
- A Shanghai
- B Singapore
- C Beijing
- D Hong Kong
Show answer
Correct answer: (C) Beijing
AIIB is based in Beijing and finances infrastructure in Asia and beyond; India is one of its founding members. Shanghai hosts the New Development Bank set up by the BRICS countries.
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Q.152
Arrange the following poverty-estimation bodies in chronological order of their reports: 1. Lakdawala Expert Group 2. Rangarajan Expert Group 3. Alagh Task Force 4. Tendulkar Expert Group
- A 1, 3, 4, 2
- B 3, 1, 4, 2
- C 3, 4, 1, 2
- D 3, 1, 2, 4
Show answer
Correct answer: (B) 3, 1, 4, 2
The Alagh Task Force reported in 1979, the Lakdawala Expert Group in 1993, the Tendulkar Expert Group in 2009 and the Rangarajan Expert Group in 2014.
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Q.153
'Fiat money' is money that:
- A Is legal tender by government order, without being backed by gold or any commodity
- B Is made of a precious metal whose value equals its face value
- C Is created only by banks through loans
- D Can be used only for international payments
Show answer
Correct answer: (A) Is legal tender by government order, without being backed by gold or any commodity
Fiat money, like the rupee note, has value because the government declares it legal tender, not because of any commodity backing. Money whose metal content is worth its face value is full-bodied (commodity) money.
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Q.154
Consider the following statements: 1. The Industrial Policy Resolution of 1948 divided industries into four categories. 2. The Industrial Policy Resolution of 1956 classified industries into three schedules. 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. The 1948 resolution set out four categories, from State monopolies such as arms and atomic energy to a field left open to private enterprise. The 1956 resolution grouped industries into Schedules A, B and C according to the role of the State.
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Q.155
Which Five-Year Plan aimed at establishing a 'self-reliant and self-generating economy' but fell well short of its targets because of the 1962 and 1965 wars and droughts?
- A Second Plan
- B Third Plan
- C Fourth Plan
- D Fifth Plan
Show answer
Correct answer: (B) Third Plan
The Third Plan (1961-66) sought a self-reliant and self-generating economy, but the wars with China (1962) and Pakistan (1965) and severe droughts derailed it, leading to the plan holiday of 1966-69.
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Q.156
Pradhan Mantri Ujjwala Yojana, launched in 2016, aims to provide:
- A Free electricity connections to rural households
- B LPG connections to women of poor households
- C Solar lamps to students
- D Toilets to every rural household
Show answer
Correct answer: (B) LPG connections to women of poor households
Ujjwala, launched on 1 May 2016 from Ballia (UP), gives deposit-free LPG connections to women of BPL households to replace smoky cooking fuels. Toilets are covered by Swachh Bharat Mission.
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Q.157
Under which Article of the Constitution is the Annual Financial Statement (Union Budget) laid before both Houses of Parliament?
- A Article 110
- B Article 112
- C Article 114
- D Article 116
Show answer
Correct answer: (B) Article 112
Article 112 requires the President to cause the Annual Financial Statement of estimated receipts and expenditure to be laid before Parliament every year. Article 110 defines Money Bills.
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Q.158
The Contingency Fund of India, used to meet unforeseen expenditure pending its authorisation by Parliament, is placed at the disposal of:
- A The Prime Minister
- B The Union Finance Minister
- C The Comptroller and Auditor General
- D The President
Show answer
Correct answer: (D) The President
Article 267 places the Contingency Fund at the disposal of the President, who can make advances from it for unforeseen expenditure; Parliament later authorises the spending and the fund is made good.
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Q.159
The committee headed by M. Narasimham in 1991 was set up to recommend reforms in:
- A Direct and indirect taxation
- B The insurance sector
- C The financial system
- D Agricultural price policy
Show answer
Correct answer: (C) The financial system
The first Narasimham Committee (1991) examined the financial system and the second (1998) the banking sector. Tax reforms were studied by the Raja Chelliah Committee and insurance by the R.N. Malhotra Committee.
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Q.160
Operation Flood, the dairy development programme behind India's White Revolution, was launched in 1970 by:
- A National Dairy Development Board (NDDB)
- B Indian Council of Agricultural Research (ICAR)
- C NABARD
- D Food Corporation of India
Show answer
Correct answer: (A) National Dairy Development Board (NDDB)
NDDB, set up in 1965 at Anand in Gujarat under Verghese Kurien, ran Operation Flood, which linked village milk producers' cooperatives with urban markets. NABARD was created much later, in 1982.
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Q.161
The Laffer curve illustrates the relationship between:
- A Inflation and unemployment
- B Income inequality and growth
- C Tax rates and total tax revenue
- D Money supply and interest rates
Show answer
Correct answer: (C) Tax rates and total tax revenue
The Laffer curve suggests that beyond a certain point, raising tax rates reduces total revenue because it discourages work, investment and compliance.
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Q.162
Under India's foreign investment rules, an investment by a foreign investor of less than 10% of the post-issue paid-up equity of a listed Indian company is treated as:
- A Foreign direct investment (FDI)
- B An external commercial borrowing (ECB)
- C Official development assistance
- D Foreign portfolio investment (FPI)
Show answer
Correct answer: (D) Foreign portfolio investment (FPI)
Under the FEMA (Non-debt Instruments) Rules, 2019, India uses a 10% line: a holding below 10% of a listed company's equity is portfolio investment, while 10% or more is treated as FDI; in an unlisted company, any foreign equity investment counts as FDI. A larger stake is taken to signal a lasting interest in the company.
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Q.163
The National Development Council (NDC), the body that gave final approval to the Five-Year Plans, was set up in:
- A 1952
- B 1950
- C 1956
- D 1965
Show answer
Correct answer: (A) 1952
The NDC was formed in August 1952 to bring the Prime Minister, Union ministers and Chief Ministers together on planning. The Planning Commission itself dates from 1950. The NDC last met in December 2012, when it approved the Twelfth Plan; after NITI Aayog replaced the Planning Commission in 2015, its role passed in practice to NITI Aayog's Governing Council.
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Q.164
In the current account of India's balance of payments, 'invisibles' consist of:
- A Services, income and current transfers
- B Merchandise exports and imports
- C Foreign direct and portfolio investment
- D External commercial borrowings and NRI deposits
Show answer
Correct answer: (A) Services, income and current transfers
Invisibles are the current-account items other than goods: trade in services (such as software), income flows such as interest and dividends, and transfers such as remittances. Merchandise trade forms the 'visible' part.
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Q.165
The Bombay Stock Exchange, the oldest stock exchange in Asia, was established in:
- A 1850
- B 1947
- C 1875
- D 1992
Show answer
Correct answer: (C) 1875
BSE began in 1875 as the Native Share and Stock Brokers' Association. The National Stock Exchange (NSE) was incorporated in 1992.
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Q.166
Which Union Minister of Food and Agriculture of the mid-1960s, later awarded the Bharat Ratna, is credited with steering the high-yielding variety strategy of the Green Revolution through the government?
- A Y.B. Chavan
- B Rafi Ahmed Kidwai
- C Charan Singh
- D C. Subramaniam
Show answer
Correct answer: (D) C. Subramaniam
C. Subramaniam backed the import and spread of HYV wheat seeds while heading the Food and Agriculture Ministry, and was later awarded the Bharat Ratna (1998). Rafi Ahmed Kidwai had held the food portfolio in the early 1950s, and Y.B. Chavan was Defence Minister in the mid-1960s. Charan Singh was also awarded the Bharat Ratna (2024), but he was not the Union Food and Agriculture Minister in the 1960s.
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Q.167
At the Centre, indirect taxes such as GST and customs duty are administered by the:
- A Central Board of Direct Taxes (CBDT)
- B GST Council
- C Goods and Services Tax Network (GSTN)
- D Central Board of Indirect Taxes and Customs (CBIC)
Show answer
Correct answer: (D) Central Board of Indirect Taxes and Customs (CBIC)
CBIC, called the Central Board of Excise and Customs until 2018, works under the Department of Revenue in the Ministry of Finance, as does the CBDT, which handles income tax. The GST Council recommends GST rates and rules but does not administer the tax.
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Q.168
Which of the following is a direct tax?
- A Goods and Services Tax
- B Corporation tax
- C Customs duty
- D Excise duty
Show answer
Correct answer: (B) Corporation tax
A direct tax is paid by the person on whom it is levied and its burden cannot be shifted, e.g. income tax and corporation tax. GST, customs and excise are indirect taxes whose burden is passed to consumers.
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Q.169
The Technology Mission on Oilseeds, launched in 1986, is linked with which 'revolution' in Indian agriculture?
- A Green Revolution
- B White Revolution
- C Yellow Revolution
- D Blue Revolution
Show answer
Correct answer: (C) Yellow Revolution
The Yellow Revolution was the drive to raise the output of oilseeds such as mustard, groundnut and soybean and to cut edible-oil imports, with the Technology Mission on Oilseeds as its main vehicle. The White Revolution concerned milk. Oilseed output is now promoted under the National Mission on Edible Oils – Oilseeds, approved in 2024.
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Q.170
The 'JAM trinity', used to deliver subsidies and benefits directly to beneficiaries, refers to:
- A Jan Dhan, Atal Pension Yojana and MUDRA
- B Jobs, Agriculture and Manufacturing
- C Jan Aushadhi, Ayushman Bharat and Make in India
- D Jan Dhan accounts, Aadhaar and mobile phones
Show answer
Correct answer: (D) Jan Dhan accounts, Aadhaar and mobile phones
The Economic Survey 2014-15 described the linking of Jan Dhan bank accounts, Aadhaar identity numbers and mobile phones as the JAM trinity, the backbone of direct benefit transfer.
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Q.171
Under MGNREGA as enacted in 2005, at least what proportion of the beneficiaries were to be women?
- A One-fourth
- B One-third
- C One-half
- D Two-thirds
Show answer
Correct answer: (B) One-third
Schedule II of the Act gave priority to women so that at least one-third of the beneficiaries who registered and asked for work were women. MGNREGA was repealed from 1 July 2026 and replaced by the VB-G RAM G Act.
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Q.172
PM-KISAN, launched in 2019, is best described as:
- A A Centrally Sponsored Scheme whose cost is shared by the Centre and the states
- B A Central Sector Scheme, fully funded by the Centre, paying income support by DBT to landholding farmer families
- C A crop insurance scheme whose premium is shared by farmers and the government
- D A farm-loan waiver scheme run through cooperative banks
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Correct answer: (B) A Central Sector Scheme, fully funded by the Centre, paying income support by DBT to landholding farmer families
PM-KISAN is a Central Sector Scheme: the Government of India bears its full cost and credits the support directly to the bank accounts of eligible landholding farmer families. Crop insurance is a separate scheme, the PM Fasal Bima Yojana (2016).
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Q.173
Which Five-Year Plan had the theme 'Faster, More Inclusive and Sustainable Growth'?
- A Eleventh Plan
- B Twelfth Plan
- C Tenth Plan
- D Ninth Plan
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Correct answer: (B) Twelfth Plan
The Twelfth Plan (2012-17), the last Five-Year Plan, carried this theme. The Eleventh Plan (2007-12) was titled 'Towards Faster and More Inclusive Growth', without the word 'sustainable'.
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Q.174
GST was introduced in India through which Constitutional Amendment Act?
- A 99th Amendment
- B 100th Amendment
- C 102nd Amendment
- D 101st Amendment
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Correct answer: (D) 101st Amendment
The Constitution (101st Amendment) Act, 2016 inserted Article 246A and Article 279A (GST Council). The 100th Amendment concerned the India-Bangladesh land boundary and the 102nd gave constitutional status to the NCBC.
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Q.175
Arrange the following initiatives in the chronological order of their launch: Startup India, Make in India, Digital India.
- A Digital India, Make in India, Startup India
- B Startup India, Digital India, Make in India
- C Make in India, Digital India, Startup India
- D Make in India, Startup India, Digital India
Show answer
Correct answer: (C) Make in India, Digital India, Startup India
Make in India was launched on 25 September 2014, Digital India on 1 July 2015 and Startup India on 16 January 2016.
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Q.176
The 'Basel norms' are international standards concerning:
- A Capital adequacy and risk management of banks
- B Tariffs on international trade
- C Insurance company solvency
- D Corporate accounting disclosures
Show answer
Correct answer: (A) Capital adequacy and risk management of banks
Basel norms are issued by the Basel Committee on Banking Supervision (hosted by the Bank for International Settlements in Basel, Switzerland). They prescribe minimum capital that banks must hold against their risk-weighted assets.
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Q.177
Pradhan Mantri Jan Dhan Yojana (PMJDY), the financial inclusion scheme for opening bank accounts, was launched in:
- A 2015
- B 2016
- C 2019
- D 2014
Show answer
Correct answer: (D) 2014
PMJDY was launched on 28 August 2014 to give every household a basic bank account with a RuPay debit card and accident insurance cover.
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Q.178
Which of the following is NOT a function of money?
- A Factor of production
- B Medium of exchange
- C Store of value
- D Unit of account
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Correct answer: (A) Factor of production
Money serves as a medium of exchange, a unit of account (measure of value), a store of value and a standard of deferred payment. It is not itself a factor of production like land, labour or capital.
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Q.179
A 'liquidity trap' is a situation in which:
- A Interest rates are so low that monetary policy fails to stimulate spending, as people prefer to hold cash
- B Banks have no cash to meet withdrawals
- C The government cannot borrow from the market
- D Prices rise so fast that money loses value daily
Show answer
Correct answer: (A) Interest rates are so low that monetary policy fails to stimulate spending, as people prefer to hold cash
In a liquidity trap, described by Keynes, additional money supply is simply hoarded because interest rates are near their floor, so monetary policy loses its effectiveness.
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Q.180
Demand-pull inflation occurs when:
- A Wages and raw material costs rise sharply
- B Aggregate demand exceeds the available supply of goods and services
- C Crop failure reduces food supply
- D The government raises indirect taxes
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Correct answer: (B) Aggregate demand exceeds the available supply of goods and services
Demand-pull inflation is 'too much money chasing too few goods': excess aggregate demand pulls prices up. Rising input costs cause cost-push inflation instead.
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Q.181
Which measure of money supply is called 'broad money' by the RBI?
- A M0
- B M1
- C M3
- D Currency with the public
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Correct answer: (C) M3
M3 (broad money) = M1 + time deposits with banks. M1 (currency with the public + demand deposits + other deposits with the RBI) is narrow money, and M0 is reserve money.
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Q.182
A 'token cut' motion moved during the discussion on demands for grants seeks to reduce the amount of a demand by:
- A Re 1
- B 50 per cent
- C A specified amount representing a possible economy
- D Rs 100
Show answer
Correct answer: (D) Rs 100
A token cut reduces the demand by Rs 100 to voice a specific grievance. A policy cut reduces the demand to Re 1 to show disapproval of a policy, and an economy cut reduces it by a specified amount.
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Q.183
Which leader discussed the idea of a poverty line for India in his book 'Poverty and Un-British Rule in India'?
- A R.C. Dutt
- B M.G. Ranade
- C Dadabhai Naoroji
- D Gopal Krishna Gokhale
Show answer
Correct answer: (C) Dadabhai Naoroji
Dadabhai Naoroji estimated a minimum subsistence cost of living in pre-independence India and used it to argue that British rule was draining India's wealth. R.C. Dutt wrote 'The Economic History of India'.
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Q.184
A 'scheduled bank' in India is a bank that is:
- A Wholly owned by the Government of India
- B Listed on a recognised stock exchange
- C Registered only under the Companies Act
- D Included in the Second Schedule of the RBI Act, 1934
Show answer
Correct answer: (D) Included in the Second Schedule of the RBI Act, 1934
Banks included in the Second Schedule of the RBI Act, 1934 are scheduled banks; they are eligible to borrow from the RBI and must meet its reserve requirements. Public or private ownership does not decide this status.
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Q.185
The World Trade Organization (WTO) replaced GATT in which year?
- A 1947
- B 1986
- C 1991
- D 1995
Show answer
Correct answer: (D) 1995
WTO came into being on 1 January 1995 after the Uruguay Round, replacing the General Agreement on Tariffs and Trade (GATT) of 1947. Its headquarters are in Geneva.
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Q.186
Pradhan Mantri Jan Dhan Yojana, the national mission for financial inclusion, is run by which ministry?
- A Ministry of Finance (Department of Financial Services)
- B Ministry of Rural Development
- C Ministry of Electronics and Information Technology
- D Ministry of Commerce and Industry
Show answer
Correct answer: (A) Ministry of Finance (Department of Financial Services)
PMJDY is administered by the Department of Financial Services in the Ministry of Finance and began with the aim of a basic bank account, with a RuPay debit card, for every household; since 2018 its focus has been every unbanked adult. The Ministry of Rural Development runs rural employment and housing schemes instead.
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Q.187
Unanticipated inflation generally benefits which of the following?
- A Lenders who receive fixed repayments
- B Borrowers who repay fixed loan amounts
- C Pensioners living on a fixed income
- D Savers holding fixed-interest deposits
Show answer
Correct answer: (B) Borrowers who repay fixed loan amounts
When prices rise unexpectedly, borrowers repay loans in money of lower purchasing power, so they gain. Lenders, savers and fixed-income earners lose in real terms.
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Q.188
Cash Reserve Ratio (CRR) refers to:
- A The share of deposits a bank keeps in government securities with itself
- B The rate at which RBI lends to banks
- C The share of a bank's net demand and time liabilities kept as cash with the RBI
- D The minimum capital a bank must hold against risk-weighted assets
Show answer
Correct answer: (C) The share of a bank's net demand and time liabilities kept as cash with the RBI
CRR is the percentage of a bank's net demand and time liabilities (NDTL) that must be kept as cash balances with the RBI. Banks earn no interest on CRR balances.
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Q.189
The Finance Commission of India is constituted by the President under which Article of the Constitution?
- A Article 280
- B Article 112
- C Article 324
- D Article 356
Show answer
Correct answer: (A) Article 280
Article 280 provides for a Finance Commission every five years to recommend the distribution of tax revenues between the Union and the States. Article 112 deals with the Annual Financial Statement.
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Q.190
The Tendulkar Committee (2009) and the Rangarajan Committee (2014) are associated with:
- A Banking sector reforms
- B Tax reforms
- C Disinvestment policy
- D Estimation of the poverty line
Show answer
Correct answer: (D) Estimation of the poverty line
Both committees were set up to review the methodology for estimating poverty in India. The Rangarajan Committee proposed a higher poverty line than the Tendulkar Committee.
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Q.191
The 'bank rate' in India is:
- A The rate RBI pays banks on their reserves
- B The rate at which RBI lends long-term funds to banks or rediscounts bills, without collateral
- C The rate at which RBI absorbs excess liquidity from banks
- D The lowest rate at which banks lend to their best customers
Show answer
Correct answer: (B) The rate at which RBI lends long-term funds to banks or rediscounts bills, without collateral
Bank rate is the standard rate at which RBI rediscounts bills of exchange and lends long-term to banks without security. Short-term collateralised lending happens at the repo rate.
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Q.192
'Monetised deficit' refers to:
- A The part of the fiscal deficit met by external borrowing
- B The deficit in the current account of the balance of payments
- C Revenue deficit minus interest payments
- D The part of the fiscal deficit financed by borrowing from the RBI
Show answer
Correct answer: (D) The part of the fiscal deficit financed by borrowing from the RBI
Monetised deficit is the increase in the RBI's net credit to the government, that is, deficit financed by the central bank. It adds directly to money supply and can be inflationary.
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Q.193
Which of the following is NOT a component of the current account of the Balance of Payments?
- A Export of goods
- B Foreign Direct Investment
- C Remittances from Indians working abroad
- D Export of software services
Show answer
Correct answer: (B) Foreign Direct Investment
The current account records trade in goods and services, income and transfers (such as remittances). FDI, portfolio flows and loans belong to the capital (financial) account.
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Q.194
The National Planning Committee set up by the Indian National Congress in 1938 was chaired by:
- A Subhas Chandra Bose
- B Jawaharlal Nehru
- C Vallabhbhai Patel
- D Rajendra Prasad
Show answer
Correct answer: (B) Jawaharlal Nehru
The National Planning Committee was set up in 1938, when Subhas Chandra Bose was Congress president, with Jawaharlal Nehru as its chairman. It was an early effort at planning for independent India.
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Q.195
The four canons of taxation – equality, certainty, convenience and economy – were laid down by:
- A Adam Smith
- B John Maynard Keynes
- C David Ricardo
- D Alfred Marshall
Show answer
Correct answer: (A) Adam Smith
Adam Smith set out these four canons in 'The Wealth of Nations' (1776): taxes should be fair, clearly fixed, convenient to pay and cheap to collect.
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Q.196
Effective revenue deficit, a concept introduced in the Union Budget 2011-12, is equal to:
- A Fiscal deficit minus interest payments
- B Revenue deficit plus capital expenditure
- C Revenue deficit minus grants for creation of capital assets
- D Fiscal deficit minus revenue deficit
Show answer
Correct answer: (C) Revenue deficit minus grants for creation of capital assets
Effective revenue deficit removes from the revenue deficit the grants given for creating capital assets, since such spending builds assets even though it is booked as revenue expenditure. Fiscal deficit minus interest payments is the primary deficit. The 2018 amendments to the FRBM Act dropped the revenue deficit and effective revenue deficit targets, making the fiscal deficit the operational target, but the Budget still reports the effective revenue deficit.
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Q.197
The term 'demographic dividend' refers to the economic growth potential arising from:
- A A rising share of elderly people in the population
- B A falling birth rate alone
- C Migration of workers to foreign countries
- D A large share of working-age people relative to dependents
Show answer
Correct answer: (D) A large share of working-age people relative to dependents
Demographic dividend arises when the working-age population (15-64) grows larger than the dependent population, raising the potential for savings, investment and growth, provided jobs and skills are available.
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Q.198
Which of the following pairs of institution and headquarters is correctly matched?
- A EXIM Bank : Kolkata
- B NABARD : New Delhi
- C SEBI : Chennai
- D SIDBI : Lucknow
Show answer
Correct answer: (D) SIDBI : Lucknow
SIDBI is headquartered in Lucknow. The EXIM Bank, NABARD and SEBI all have their headquarters in Mumbai.
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Q.199
Under Article 116, the Lok Sabha can grant an advance for part of a financial year, pending completion of the voting on demands for grants. This is called a:
- A Vote of credit
- B Exceptional grant
- C Vote on account
- D Supplementary grant
Show answer
Correct answer: (C) Vote on account
A vote on account lets the government draw money for a few months until the full budget is passed, as is usual in an election year. A vote of credit is for an unexpected demand that cannot be stated in detail, such as in a war.
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Q.200
Which statement correctly distinguishes tax avoidance from tax evasion?
- A Avoidance is illegal, while evasion is legal tax planning
- B Both are legal ways of reducing tax
- C Both refer to taxes that the government decides to waive
- D Avoidance lowers tax by legal means, while evasion is the illegal non-payment of tax that is due
Show answer
Correct answer: (D) Avoidance lowers tax by legal means, while evasion is the illegal non-payment of tax that is due
Tax avoidance uses deductions and provisions that the law allows. Tax evasion, such as concealing income, is a punishable offence.
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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.