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.201
The Fifth Five-Year Plan was ended a year early in 1978 and replaced by a 'Rolling Plan' by:
- A Indira Gandhi's Congress government
- B The National Front government
- C The United Front government
- D The Janata Party government
Show answer
Correct answer: (D) The Janata Party government
The Janata Party government led by Morarji Desai ended the Fifth Plan in 1978 and adopted a Rolling Plan (1978-80), under which the plan was reviewed every year. The Congress government that returned in 1980 began a fresh Sixth Plan.
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Q.202
The Gadgil formula, first used in the Fourth Five-Year Plan, was meant for:
- A Estimating the poverty line
- B Fixing minimum support prices for crops
- C Allocating central plan assistance among the States
- D Calculating national income
Show answer
Correct answer: (C) Allocating central plan assistance among the States
Named after D.R. Gadgil, then Deputy Chairman of the Planning Commission, the formula used criteria such as population, per capita income and special problems to share central plan assistance among States. It was later revised as the Gadgil-Mukherjee formula (used from the Eighth Plan). Formula-based Normal Central Assistance to the States ended from 2015-16, when it was subsumed in the higher share of central taxes recommended by the Fourteenth Finance Commission, after NITI Aayog had replaced the Planning Commission.
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Q.203
India made the rupee fully convertible on the current account in:
- A 1991
- B 1994
- C 1997
- D 2004
Show answer
Correct answer: (B) 1994
In August 1994 India accepted Article VIII of the IMF and allowed full current account convertibility. The Tarapore Committee (1997) examined capital account convertibility, which remains partial.
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Q.204
Which of the following activities does NOT belong to the primary sector of the economy?
- A Fishing
- B Mining
- C Textile manufacturing
- D Forestry
Show answer
Correct answer: (C) Textile manufacturing
The primary sector extracts natural resources: agriculture, fishing, forestry and mining. Manufacturing of textiles is a secondary sector activity.
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Q.205
Which of the following has been kept outside the scope of GST by the Constitution itself?
- A Alcoholic liquor for human consumption
- B Mobile phones
- C Restaurant services
- D Railway freight services
Show answer
Correct answer: (A) Alcoholic liquor for human consumption
Article 366(12A) defines GST as a tax on the supply of goods or services except alcoholic liquor for human consumption, which therefore remains under State excise. Mobile phones, restaurant services and rail freight are all taxed under GST.
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Q.206
Which of the following is NOT included while estimating the national income of a country?
- A Unemployment allowance paid by the government
- B Wages paid to factory workers
- C Rent received by landlords
- D Profits earned by companies
Show answer
Correct answer: (A) Unemployment allowance paid by the government
Unemployment allowances, old-age pensions and scholarships are transfer payments: they are not payments for any productive service, so they are excluded. Wages, rent and profits are factor incomes and are included.
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Q.207
The Human Development Index (HDI) is published annually by:
- A United Nations Development Programme (UNDP)
- B World Bank
- C International Monetary Fund
- D World Health Organization
Show answer
Correct answer: (A) United Nations Development Programme (UNDP)
The HDI appears in the UNDP's Human Development Report, first published in 1990 under Mahbub ul Haq. It combines life expectancy, education and GNI per capita.
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Q.208
Who is known as the 'Father of the Green Revolution in India'?
- A Verghese Kurien
- B Vikram Sarabhai
- C M.S. Swaminathan
- D Sam Pitroda
Show answer
Correct answer: (C) M.S. Swaminathan
M.S. Swaminathan led the introduction of high-yielding wheat and rice varieties in the mid-1960s. Verghese Kurien is the father of the White Revolution (milk).
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Q.209
Before it became a statutory body, the Securities and Exchange Board of India (SEBI) was set up by a government resolution in:
- A 1988
- B 1985
- C 1990
- D 1995
Show answer
Correct answer: (A) 1988
SEBI was constituted as a non-statutory body on 12 April 1988 and received statutory powers through the SEBI Act, 1992.
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Q.210
A State Finance Commission, which reviews the financial position of panchayats, is constituted by the Governor under which Article?
- A Article 280
- B Article 243-K
- C Article 263
- D Article 243-I
Show answer
Correct answer: (D) Article 243-I
Article 243-I requires the Governor to constitute a Finance Commission every five years to review panchayat finances, and Article 243Y applies it to municipalities. Article 243-K deals with the State Election Commission.
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Q.211
Which of the following was NOT a component of land reforms in independent India?
- A Abolition of intermediaries such as zamindars
- B Regulation of tenancy and security for tenants
- C Compulsory pooling of all farms into State-run collective farms
- D Ceilings on the size of landholdings
Show answer
Correct answer: (C) Compulsory pooling of all farms into State-run collective farms
India's land reforms covered abolition of intermediaries, tenancy reform, land ceilings and consolidation of holdings. Compulsory collectivisation on the Soviet model was never adopted.
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Q.212
Regional Rural Banks (RRBs) were first set up in India in:
- A 1969
- B 1982
- C 1991
- D 1975
Show answer
Correct answer: (D) 1975
RRBs were established in 1975 on the recommendation of the Narasimham Working Group; the first was Prathama Bank in Moradabad, Uttar Pradesh, on 2 October 1975.
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Q.213
In the case of a direct tax, such as income tax:
- A The impact and the incidence of the tax fall on the same person
- B The burden is always passed on to the final consumer
- C The tax is collected only at the point of sale of goods
- D The tax is levied only on imported goods
Show answer
Correct answer: (A) The impact and the incidence of the tax fall on the same person
Impact is on whom the tax is legally imposed and incidence is on whom its burden finally rests; for a direct tax they are the same person. With indirect taxes such as GST, the seller pays the tax but passes its burden on to the buyer.
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Q.214
Consider the following statements: 1. India was one of the original members of the International Monetary Fund. 2. India became a member of the World Trade Organization only in 2001. 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
Only statement 1 is correct. India was an original member of the IMF in 1945 and has been a member of the WTO from its creation on 1 January 1995; it was China that joined the WTO in 2001.
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Q.215
The second phase of bank nationalisation in India, in which six more private banks were nationalised, took place in:
- A 1980
- B 1975
- C 1985
- D 1991
Show answer
Correct answer: (A) 1980
On 15 April 1980, six private banks, each with deposits of Rs 200 crore or more, were nationalised, following the 14 banks nationalised in 1969. Of these six, all except Punjab & Sind Bank have since been merged into other public sector banks.
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Q.216
Under Article 279A, GST on petroleum crude, high speed diesel, petrol, natural gas and aviation turbine fuel is to be levied from the date:
- A Notified separately by each State Legislature
- B Recommended by the GST Council
- C Fixed by the Finance Commission
- D Decided by the Reserve Bank of India
Show answer
Correct answer: (B) Recommended by the GST Council
Article 279A(5) leaves it to the GST Council to recommend the date from which GST will apply to these five petroleum products; until then they continue to bear central excise duty and State VAT.
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Q.217
Net National Product (NNP) is derived by deducting which of the following from GNP?
- A Depreciation
- B Indirect taxes
- C Subsidies
- D Net factor income from abroad
Show answer
Correct answer: (A) Depreciation
NNP = GNP minus depreciation (consumption of fixed capital). Indirect taxes and subsidies are used to move between market price and factor cost, not between gross and net.
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Q.218
When NREGA came into force in February 2006, it was first implemented in how many districts?
- A 100
- B 200
- C 330
- D 625
Show answer
Correct answer: (B) 200
The Act was first applied to 200 of the most backward districts on 2 February 2006, extended to 130 more districts in 2007-08 (113 from 1 April 2007 and 17 in Uttar Pradesh from 15 May 2007), and to all remaining rural districts from 1 April 2008. MGNREGA was repealed from 1 July 2026 and replaced by the VB-G RAM G Act.
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Q.219
No money can be withdrawn from the Consolidated Fund of India except under appropriation made by law. The bill passed for this purpose after the demands for grants are voted is the:
- A Finance Bill
- B Appropriation Bill
- C Annual Financial Statement
- D Economic Survey
Show answer
Correct answer: (B) Appropriation Bill
Under Article 114, after the Lok Sabha votes the demands for grants, an Appropriation Bill authorises withdrawal of money from the Consolidated Fund. The Finance Bill carries the tax proposals.
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Q.220
Which of the following pairs of early economic plan and its author is correctly matched?
- A Gandhian Plan : M. Visvesvaraya
- B Bombay Plan : Shriman Narayan Agarwal
- C Sarvodaya Plan : Jawaharlal Nehru
- D People's Plan : M.N. Roy
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Correct answer: (D) People's Plan : M.N. Roy
The People's Plan (1945) was drafted by M.N. Roy. The Gandhian Plan (1944) was by Shriman Narayan Agarwal, the Bombay Plan (1944) by a group of industrialists and the Sarvodaya Plan (1950) by Jayaprakash Narayan, while M. Visvesvaraya wrote 'Planned Economy for India' (1934).
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Q.221
Which of the following is classified as revenue expenditure of the government?
- A Interest payments on government debt
- B Construction of a new national highway
- C Purchase of land for a dam
- D Loans given to State governments
Show answer
Correct answer: (A) Interest payments on government debt
Revenue expenditure neither creates assets nor reduces liabilities; interest payments, salaries and subsidies are examples. Building highways, buying land and lending to States are capital expenditure.
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Q.222
The 'Navratna' status for Central Public Sector Enterprises was first introduced in:
- A 1991
- B 2004
- C 1997
- D 2010
Show answer
Correct answer: (C) 1997
The Navratna scheme began in 1997, giving selected profit-making CPSEs greater financial and operational autonomy; the Miniratna categories were introduced the same year. The Maharatna category was added later for the largest enterprises.
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Q.223
The Liberalised Exchange Rate Management System (LERMS), introduced in 1992, provided for:
- A A dual exchange rate, with part of foreign exchange converted at the official rate and the rest at a market rate
- B A fixed peg of the rupee to the US dollar
- C Full capital account convertibility of the rupee
- D A return of the rupee to the gold standard
Show answer
Correct answer: (A) A dual exchange rate, with part of foreign exchange converted at the official rate and the rest at a market rate
LERMS was a transitional dual-rate system; in March 1993 the two rates were unified and the rupee moved to a market-determined exchange rate. Capital account convertibility was not part of it.
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Q.224
The Export-Import Bank of India (EXIM Bank), set up to finance and promote India's international trade, began operations in:
- A 1982
- B 1964
- C 1975
- D 1990
Show answer
Correct answer: (A) 1982
The EXIM Bank was set up under the Export-Import Bank of India Act, 1981 and began operations on 1 January 1982. It provides credit and guarantees for exports and imports.
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Q.225
Open Market Operations (OMO) of the RBI refer to:
- A Buying and selling of government securities in the open market
- B Changing the cash reserve ratio of banks
- C Printing and issuing new currency notes
- D Fixing the exchange rate of the rupee
Show answer
Correct answer: (A) Buying and selling of government securities in the open market
Through OMO, RBI buys government securities to inject liquidity and sells them to absorb liquidity. It is a quantitative tool of monetary policy.
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Q.226
Which of the following is a capital receipt of the Government of India?
- A Income tax collections
- B Dividends received from public sector enterprises
- C Proceeds from disinvestment of PSU shares
- D Goods and Services Tax collections
Show answer
Correct answer: (C) Proceeds from disinvestment of PSU shares
Capital receipts either create a liability (borrowings) or reduce an asset (disinvestment, recovery of loans). Taxes and dividends are revenue receipts.
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Q.227
Under the revised classification of micro, small and medium enterprises (MSMEs) notified in 2020, an enterprise is classified on the basis of:
- A Investment alone, with separate limits for manufacturing and service enterprises
- B The number of workers it employs
- C Both investment in plant, machinery or equipment and annual turnover, with common limits for manufacturing and services
- D Annual turnover alone
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Correct answer: (C) Both investment in plant, machinery or equipment and annual turnover, with common limits for manufacturing and services
The 2020 revision introduced a composite test of investment and turnover and removed the separate limits for manufacturing and service enterprises. Before that, under the MSMED Act, 2006, only investment counted, with different limits for the two kinds of enterprise. The limits were raised again from 1 April 2025, but the composite test and the common limits for manufacturing and services remain.
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Q.228
The Reserve Bank of India commenced operations on:
- A 1 April 1949
- B 1 January 1935
- C 1 April 1935
- D 15 August 1947
Show answer
Correct answer: (C) 1 April 1935
RBI was set up under the RBI Act 1934 and began functioning on 1 April 1935. It was nationalised on 1 January 1949.
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Q.229
The Indian economy is described as a 'mixed economy' because:
- A It depends equally on agriculture and industry
- B Public and private sectors coexist and both take part in production
- C It exports both goods and services
- D It uses both direct and indirect taxes
Show answer
Correct answer: (B) Public and private sectors coexist and both take part in production
A mixed economy combines features of capitalism and socialism: the private sector and the public (government) sector both own means of production and participate in economic activity.
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Q.230
Which sector contributes the largest share to India's GDP?
- A Tertiary (services) sector
- B Primary (agriculture and allied) sector
- C Secondary (industry) sector
- D All three sectors contribute equally
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Correct answer: (A) Tertiary (services) sector
The services sector contributes more than half of India's GDP. Agriculture, however, still employs the largest share of the workforce, which is a common trap.
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Q.231
Arrange the following rural employment and livelihood programmes in chronological order of their launch: 1. National Rural Livelihoods Mission 2. Jawahar Rozgar Yojana 3. National Rural Employment Guarantee Act 4. Swarnajayanti Gram Swarozgar Yojana
- A 4, 2, 3, 1
- B 2, 4, 3, 1
- C 2, 3, 4, 1
- D 4, 2, 1, 3
Show answer
Correct answer: (B) 2, 4, 3, 1
Jawahar Rozgar Yojana began in 1989 and Swarnajayanti Gram Swarozgar Yojana in 1999; NREGA was enacted in 2005; and the National Rural Livelihoods Mission (Aajeevika), which restructured SGSY, was launched in 2011. NRLM now runs as the Deendayal Antyodaya Yojana–NRLM (DAY-NRLM), while MGNREGA was repealed from 1 July 2026 and replaced by the VB-G RAM G Act.
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Q.232
A Gini coefficient of zero indicates:
- A Perfect inequality of income
- B Zero national income
- C Perfect equality of income distribution
- D Zero economic growth
Show answer
Correct answer: (C) Perfect equality of income distribution
The Gini coefficient, derived from the Lorenz curve, ranges from 0 (everyone has the same income) to 1 (one person has all the income). Higher values mean greater inequality.
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Q.233
An ad valorem tax is levied:
- A As a fixed amount per unit of quantity
- B Only on luxury goods
- C As a percentage of the value of the good
- D Only on income earned abroad
Show answer
Correct answer: (C) As a percentage of the value of the good
'Ad valorem' means 'according to value', so the tax is a percentage of the price, as with most GST rates. A fixed amount per unit, such as so many rupees per litre, is a specific tax.
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Q.234
The National Statistical Office (NSO) was formed in 2019 by merging which two bodies?
- A RBI and SEBI
- B NITI Aayog and the Planning Commission
- C Central Statistical Office and the Finance Commission
- D Central Statistical Office (CSO) and National Sample Survey Office (NSSO)
Show answer
Correct answer: (D) Central Statistical Office (CSO) and National Sample Survey Office (NSSO)
In 2019 the CSO (which prepared national income estimates) and the NSSO (which conducted large sample surveys) were merged into the NSO under the Ministry of Statistics and Programme Implementation.
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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.