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. 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.
2. Which of the following is an example of a progressive tax?
[A] Customs duty
[B] Sales tax
[C] Excise duty
[D] Income tax
Show Answer
Correct Answer: D [Income tax]
Notes:
Income tax was introduced in India in 1860 by Sir James Wilson. Income tax rates in India increase with higher income slabs as per the Finance Act. The income tax structure is defined in the Income Tax Act, 1961. Income tax collection is administered by the Central Board of Direct Taxes. A progressive tax system is implemented where tax liability rises as an individual’s income increases, with no fixed single rate for all.
3. In which Five Year Plan was the Khadi and Village Industries Commission launched?
[A] First
[B] Second
[C] Third
[D] Fourth
Show Answer
Correct Answer: B [Second]
Notes:
The Khadi and Village Industries Commission was established in April 1957 during the Second Five Year Plan. It assumed the functions of the former All India Khadi and Village Industries Board. The commission operates as a statutory body under the Ministry of Micro, Small and Medium Enterprises, Government of India. Its objectives include promoting and developing khadi and village industries in rural areas.
4. Which is India’s largest multi-state co-operative bank?
[A] Vijaya Bank
[B] Saraswat Bank
[C] Union Co-operative Bank
[D] The Madhya Pradesh Rajya Sahakari Bank
Show Answer
Correct Answer: B [Saraswat Bank]
Notes:
Saraswat Bank was founded on 14 September 1918. It is the largest multi-state and urban co-operative bank in Asia. Saraswat Bank operates across eight Indian states with over 300 branches and 350 ATMs as of March 2025. Total business reached ₹91,814 crores in 2024–25. The bank reported zero Net NPAs for three consecutive years and a Gross NPA ratio of 2.25% as of March 31, 2025.
5. What is India’s rank in steel production in the world?
[A] 1st
[B] 2nd
[C] 3rd
[D] 4th
Show Answer
Correct Answer: B [2nd]
Notes:
In 2024, India was the second-largest steel producer after China. India produced around 149.4 to 149.6 million tonnes of crude steel. China produced 1,005.1 million tonnes, and Japan ranked third with 84 million tonnes. Major Indian companies include Tata Steel, JSW Steel Limited, and SAIL. India plans to expand steel production capacity to 300 million tonnes by 2030 and 500 million tonnes by 2047.
6. The secondary market deals in which of the following?
[A] Only newly issued securities
[B] Only government bonds and certificates of deposit
[C] Securities already issued and previously traded
[D] Only short-term trading instruments
Show Answer
Correct Answer: C [Securities already issued and previously traded]
Notes:
The secondary market is for trading securities that have already been issued. Transactions involve investors buying and selling among themselves. The issuing company does not receive any funds from these trades. Major examples include stock exchanges like NYSE and NASDAQ. The market provides liquidity and facilitates price discovery for already existing securities including shares, bonds, and debentures.
7. Which of the following Acts mandates the Ministry of Finance to present reports on budgetary trends to Parliament?
- Constitution of India
- Finance Acts of every year
- Fiscal Responsibility and Budget Management Act, 2003
- Order of President of India
Select the correct option from the codes given below:
[A] Only 1 & 2
[B] Only 3
[C] Only 2 & 3
[D] 1, 2 & 4
Show Answer
Correct Answer: B [Only 3]
Notes:
The Fiscal Responsibility and Budget Management Act, 2003 specifically mandates, under Section 7(1), periodic reporting by the Finance Ministry to Parliament on budget receipts and expenditures. The Constitution of India and the Finance Acts do not impose this requirement, nor does an Order of President make such reporting statutory for the Ministry of Finance.
8. Which statement about indirect taxes in India is correct?
[A] They decrease as value of goods increases
[B] They are not part of Consolidated Fund of India
[C] They apply same tax rate to all income groups
[D] Most governments avoid indirect taxes
Show Answer
Correct Answer: C [They apply same tax rate to all income groups]
Notes:
Indirect taxes such as GST and excise duties are levied at uniform rates regardless of the income level of the consumer. This results in all consumers, irrespective of their earning capacity, paying the same rate on goods and services. Indirect taxes are considered regressive for this reason. The tax rate is not linked to income or earning ability.
9. The report of Vijay Kelkar committee is related to which of the following?
[A] Trade Reforms
[B] Centre-State Financial Relations
[C] Disinvestment in Public Sector Enterprises
[D] Tax Reforms
Show Answer
Correct Answer: D [Tax Reforms]
Notes:
Impetus to direct tax reforms in India, came with the recommendations of the Task Force on Direct & Indirect Taxes under the chairmanship of Vijay Kelkar in 2002. The main recommendations of this task force related to the direct taxes related to increasing the income tax exemption limit, rationalization of exemptions, abolition of long term capital gains tax, abolition of wealth tax etc.
10. Per Capita Income of a country is obtained by dividing National Income by which of the following?
[A] Total working population
[B] Total population of the country
[C] Area of the country
[D] Volume of the capital used
Show Answer
Correct Answer: B [ Total population of the country ]
Notes:
Per capita income or average income measures the average income earned per person in a given area in a specified year. It is calculated by dividing the area’s total income by its total population.
