Indian Economy MCQs

Notes:
The correct answer is “Lowering reserve requirements / increasing volume of reserves”, because lowering reserve requirements allows banks to lend a larger proportion of their deposits, thereby increasing the money multiplier, while increasing the volume of reserves gives banks more funds to create loans and deposits; together, these actions expand the deposit component of the money supply.

Notes:
The correct answer is Suresh Tendulkar. He chaired the expert committee set up by the Planning Commission of India in 2009, which recommended using “Consumption Expenditure” as a criterion for identifying Below Poverty Line (BPL) households. This approach aimed to provide a more accurate assessment of poverty by focusing on actual consumption rather than income, reflecting the living standards of households. The Tendulkar Committee’s recommendations have importantly influenced India’s poverty measurement and policy formulation.

Notes:
Euribor stands for Euro Interbank Offered Rate and is published by the European Money Markets Institute. It is a benchmark interest rate at which banks can borrow funds from one another in the euro money market. Euribor is published for five maturities. The rate is used as a reference for financial contracts such as mortgages and loans denominated in euro.

Notes:
Deflation increases the real value of money, allowing salary earners with stable employment to purchase more goods and services with unchanged nominal wages. Since their income remains steady while prices fall, their purchasing power temporarily rises. The Reserve Bank of India has identified deflation’s short-term impact on employed individuals as increased real wages due to price drops. Deflation generally reduces income for most others.

Notes:
Competitive devaluation refers to countries deliberately reducing their currency value to make exports cheaper. When multiple countries do this, the benefit to any one country’s exporters is reduced, harming their export competitiveness. In recent years, central banks have intervened to devalue currencies, impacting exporters most. Exporters lose price advantage if other nations devalue simultaneously. The phenomenon is termed a currency war.

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Consider agriculture in the developed countries such as United States and Canada. There, the small family farms are not able to earn a profit and are being replaced by large corporate farms.  

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City Gas Distribution sector accounted for the highest consumption share of domestically produced natural gas in India as of FY2026. The CGD segment supplies households and sectors including CNG and PNG. Gas consumption by fertilizers, power, and refineries declined until FY2026. Government reports show CGD maintained demand growth, unlike other sectors. Policy measures support expansion in urban gas infrastructure since 2018.

Notes:
There are two different sets of classifications ‘revenue vs capital expenditure’ and ‘ plan vs non-plan.’
In general, expenditure used to create assets (building a road for instance) is capital expenditure while revenue expenditure consists of expenses such as salaries and other administrative costs. Plan expenditure covers money spent on schemes or projects run by different ministries under the five-year plans.
Schemes Such as the MG National Rural Employment Guarantee Scheme can have both revenue and capital components. For instance, the administrative costs of a plan scheme could be classified as revenue expenditure while the expenditure on the scheme itself (e.g. building a village road) might be capital expenditure. Non-plan expenditure consists of any expenditure by the government not covered by the five year plans. These include interest payments on government debt and expenditure on organs of the state such as the judiciary and the police.

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The real exchange rate measures the price of foreign goods relative to the price of domestic goods. Mathematically, the real exchange rate is the ratio of a foreign price level and the domestic price level, multiplied by the nominal exchange rate.

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A mixed economic system is a system that combines aspects of both capitalism and socialism. A mixed economic system protects private property and allows a level of economic freedom in the use of capital, but also allows for governments to interfere in economic activities in order to achieve social aims.