Indian Economy MCQs
Indian Economy Multiple Choice Questions (MCQs) for SSC, State and all One Day Examinations of India. Objective Questions on Indian Economy for competitive examinations.
1. What is the number of members in the Monetary Policy Committee (MPC)?
[A] 4
[B] 5
[C] 6
[D] 7
Show Answer
Correct Answer: C [ 6 ]
Notes:
Monetary Policy Committee (MPC) committee comprises six members – three officials of the Reserve Bank of India and three external members nominated by the Government of India.
2. In which situation does investment increase?
[A] Increase in output and increase in capital stock
[B] Decrease in output and increase in capital stock
[C] Increase in output and decrease in capital stock
[D] Decrease in output and decrease in capital stock
Show Answer
Correct Answer: A [Increase in output and increase in capital stock]
Notes:
Investment rises when both output and capital stock increase. According to investment theory, higher output raises firms’ desired capital stock, and greater actual capital stock often results from increased investment activity. The investment function states that investment depends positively on output levels. Firms expand productive capacity by investing when higher output raises desired capital stock beyond the existing level.
3. Which among the following defines ‘currency depreciation” of a currency?
[A] Fall in the exchange rate of one currency in terms of other currencies
[B] Fall in the exchange rate of other currencies in terms of one currencies
[C] Decrease in the volume of a particular currency
[D] Increase in the exchange rate of a currency
Show Answer
Correct Answer: A [Fall in the exchange rate of one currency in terms of other currencies]
Notes:
Currency depreciation is the loss of value of a country’s currency with respect to one or more foreign reference currencies. This is a term used in floating exchange rate system, where the exchange rates of a currency are market driven and not fixed by the country’s central bank.
4. The concept of weaker sections under ‘priority sector’ was introduced on the recommendation of which of the following committees?
[A] Krishnaswami Committee
[B] Varshney Committee
[C] Gadgil Committee
[D] Abid Hussain Committee
Show Answer
Correct Answer: A [Krishnaswami Committee]
Notes:
The term Priority Sector Lending was defined in the year 1972 by Krishnaswamy Committee. Initially banks were given an Priority sector lending target of 33.33%. But following the Krishnaswami Committee’s recommendations, the targets were raised to 40%.
5. Round-tripping is associated with which of the following?
[A] Capital Markets
[B] Foreign Direct Investments
[C] Cash Deposits
[D] Foreign Remittances
Show Answer
Correct Answer: B [Foreign Direct Investments]
Notes:
Round-tripping involves domestic funds sent abroad and returning as foreign direct investment (FDI), often through offshore financial centers like Mauritius and Cyprus. India has observed FDI inflows suspected to involve round-tripping, especially in the 2000s and 2010s. The Department for Promotion of Industry and Internal Trade monitors FDI trends. Round-tripping bypasses tax regulations on FDI in multiple countries, including India.
6. Which of the following is not a Selective Credit Control measure?
[A] Margin Requirements
[B] Regulation of Consumer Credit
[C] Rationing of Credit
[D] Open Market Operations
Show Answer
Correct Answer: D [Open Market Operations]
Notes:
Qualitative or selective methods of credit control refers to those methods which limit the nature or variety of money supply rather than its quantity. Such methods include regulation of margin requirement, credit rationing, regulation of consumer credit and direct action. Open Market Operations is a quantitative method of credit control.
7. The trade of Nylon Fibers in India is governed by which ministry?
[A] Ministry of Textiles
[B] Ministry of Chemicals and Fertilizers
[C] Ministry of Petroleum
[D] Ministry of Commerce
Show Answer
Correct Answer: B [Ministry of Chemicals and Fertilizers]
Notes:
Nylon fiber is a synthetic polymer regulated under petrochemicals. The Department of Chemicals and Petrochemicals operates under the Ministry of Chemicals and Fertilizers. The ministry monitors petrochemicals and synthetic fiber industries in India. This ministry administers policies, development, and regulation of nylon production and trade. The department was previously under the Ministry of Petroleum until 1991, then reassigned.
8. Which of the following Government gets the stamp duty collected on promissory notes?
[A] State Government 100%
[B] Central Government 100 %
[C] State Government 50% and Central Government 50%
[D] State Government 25% and Central Government 75%
Show Answer
Correct Answer: A [State Government 100%]
Notes:
The correct answer is “State Government 100%.” In India, stamp duty on promissory notes is governed by the Stamp Act of 1899, which allows state governments to levy stamp duty. Each state has the authority to set its own rates, and the revenue collected from stamp duty is retained entirely by the state government. This is a important source of revenue for states, contributing to their financial resources for development and public services.
9. The Direct Taxes Code (DTC) is associated with which tax?
[A] Income Tax
[B] Sales Tax
[C] Excise Duty
[D] Service Tax
Show Answer
Correct Answer: A [Income Tax]
Notes:
The Direct Taxes Code (DTC) was proposed in 2009 to replace the Income Tax Act, 1961. It aimed to simplify and consolidate laws related to direct taxes in India. The DTC focused on income tax and other direct taxes. The DTC Bill was introduced in Parliament in 2010 but has not been enacted as of 2024. Indirect taxes like sales tax and excise duty are not covered.
10. What is the objective of the Central Government in creating the “Non-lapsable Central Pool of Resources”?
[A] To provide development funding in Naxalite affected areas
[B] To provide additional development grant to most backward 200 districts all over country
[C] To provide time to time fiscal stimulation to the economy
[D] To provide development funding to North East and Sikkim
Show Answer
Correct Answer: D [ To provide development funding to North East and Sikkim ]
Notes:
NLCPR The broad objective of the Non-Lapsable Central Pool of Resources (NLCPR) is to ensure speedy development of infrastructure in the North Eastern Region and Sikkim by increasing the flow of budgetary financing for specific viable infrastructure projects/schemes in the region. The provision is for funding these projects. The outlay includes a provision of Rs. 50 crore for funding special projects/schemes for the economic development of the Karbi Anglong Autonomous Territorial Council (KAATC) area in Assam.
