Indian Economy UPSC Prelims PYQs with Explanations

Consider the following statements:

I. The Reserve Bank of India mandates all the listed companies in India to submit a Business Responsibility and Sustainability Report (BRSR). II. In India, a company submitting a BRSR makes disclosures in the report that are largely non-financial in nature.

Which of the statements given above is/are correct?

Consider the following statements:

Statement I: As regards returns from an investment in a company, generally, bondholders are considered to be relatively at lower risk than stockholders.

Statement II: Bondholders are lenders to a company whereas stockholders are its owners.

Statement III: For repayment purpose, bondholders are prioritized over stockholders by a company.

Which one of the following is correct in respect of the above statements?

With reference to Central Bank digital currencies, consider the following statements:

1. It is possible to make payments in a digital currency without using US dollar or SWIFT system.
2. A digital currency can be distributed with a condition programmed into it such as a time-frame for spending it.

Which of the statements given above is/are correct?

Consider the following:

1. Exchange-Traded Funds (ETF)
2. Motor vehicles
3. Currency swap

Which of the above is/are considered financial instruments?

With reference to investments, consider the following:

I. Bonds II. Hedge Funds III. Stocks IV. Venture Capital

How many of the above are treated as Alternative Investment Funds?

Which of the following activities constitute the real sector in the economy?

1. Farmers harvesting their crops.
2. Textile mills converting raw cotton into fabrics
3. A commercial bank lending money to a trading company
4. A corporate body issuing Rupee Denominated Bonds overseas

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With reference to the sectors of the Indian economy, consider the following pairs:

How many of the pairs given above are correctly matched?

What is/are the most likely advantages of implementing ‘Goods and Services Tax (GST)’?

1. It will replace multiple taxes collected by multiple authorities and will thus create a single market in India.
2. It will drastically reduce the ‘Current Account Deficit’ of India and will enable it to increase its foreign exchange reserves.
3. It will enormously increase the growth and size of the economy of India and will enable it to overtake China in the near future.

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The sales tax you pay while purchasing a toothpaste is a

Consider the following items:

1. Cereal grains hulled
2. Chicken eggs cooked
3. Fish processed and canned
4. Newspapers containing advertising material

Which of the above items is/are exempted under GST (Goods and Services Tax)?

In India, which one of the following is responsible for maintaining price stability by controlling inflation?

Which one of the following is likely to be the most inflationary in its effect?

India has experienced persistent and high food inflation in the recent past. What could be the reason?

1. Due to a gradual switchover to the cultivation of commercial crops, the area under cultivation of food grains has steadily decreased in the last five years by about 30%.
2. As a consequence of increasing incomes, the consumption patterns of the people have undergone a significant change.
3. The food supply chain has structural constraints.

Which of the statements given above are correct?

A rise in the general level of prices may be caused by:

1. an increase in the money supply
2. a decrease in the aggregate level of output
3. an increase in the effective demand

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With reference to inflation in India, which of the following statements is correct?

Consider the following statements:

1. The Governor of the Reserve Bank of India (RBI) is appointed by the Central Government.
2. Certain provisions in the Constitution of India give the Central Government the right to issue directions to the RBI in public interest.
3. The Governor of the RBI draws his power from the RBI Act.

Which of the above statements are correct?

If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do?

1. Cut and optimize the Statutory Liquidity Ratio
2. Increase the Marginal Standing Facility Rate
3. Cut the Bank Rate and Repo Rate

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In India, the central bank’s function as the ‘lender of last resort’ usually refers to which of the following?

1. Lending to trade and industry bodies when they fail to borrow from other sources.
2. Providing liquidity to the banks having a temporary crisis.
3. Lending to governments to finance budgetary deficits.

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Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of Indian rupee?

Consider the following statements: The Reserve Bank of India’s recent directives relating to ‘Storage of Payment System Data’, popularly known as data diktat, command the payment system providers that

1. they shall ensure that entire data relating to payment systems operated by them are stored in a system only in India
2. they shall ensure that the systems are owned and operated by public sector enterprises
3. they shall submit the consolidated system audit report to the Comptroller and Auditor General of India by the end of the calendar year

Which of the statements given above is/are correct?

In the context of Indian economy, Open Market Operations’ refers to:

Supply of money remaining the same when there is an increase in demand for money, there will be:

An increase in the Bank Rate generally indicates that the:

The lowering of Bank Rate by the Reserve Bank of India leads to -

Which one of the following activities of the Reserve Bank of India is considered to be part of 'sterilization'?

Which of the following is/are included in the capital budget of the Government of India?

1. Expenditure on acquisition of assets like roads, buildings, machinery, etc.
2. Loans received from foreign governments.
3. Loans and advances granted to the States and Union Territories.

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In the context of the Indian economy, non-financial debt includes which of the following?

1. Housing loans owed by households
2. Amounts outstanding on credit cards
3. Treasury bills

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Consider the following statements

1. The Fiscal Responsibility and Budget Management (FRBM) Review Committee Report has recommended a debt to GDP ratio of 60% for the general (combined) government by 2023, comprising 40% for the Central Government and 20% for the State Governments.
2. The Central Government has domestic liabilities of 21% of GDP as compared to 49% of GDP of the State Governments.
3. As per the Constitution of India, it is mandatory for a State to take the Central Government’s consent for raising any loan if the former owes any outstanding liabilities to the latter.

Which of the statements given above is/are correct?

Which one of the following effects of creation of black money in India has been the main cause of worry to the Government of India?

With reference to Indian economy, demand pull-inflation can be caused/increased by which of the following?

1. Expansionary policies
2. Fiscal stimulus
3. Inflation-indexing wages
4. Higher - purchasing power
5. Rising interest rates

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