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. If India’s external commercial borrowings increase, what is the likely macroeconomic impact?
[A] External debt will increase, but macroeconomic impact depends on hedging and exchange rates
[B] External debt will increase, but forex reserves will remain unaffected
[C] External debt will remain unaffected due to RBI’s forward book management
[D] External debt will increase proportionally, with no impact on current account deficit
Show Answer
Correct Answer: A [External debt will increase, but macroeconomic impact depends on hedging and exchange rates]
Notes:
At end-March 2025, India’s outstanding commercial borrowings reached $291.6 billion, a 16.4% rise from the previous year. Increase in ECBs directly raises external debt. Macroeconomic stability varies with hedging costs and exchange rate fluctuations, which can affect inflation and liquidity. The impact is also influenced by RBI’s management of foreign exchange reserves and currency volatility, not only the debt quantum.
2. 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%.
3. In which year did the Balance of Payments (BOP) crisis occur in the Indian economy?
[A] 1990
[B] 1991
[C] 1995
[D] 1999
Show Answer
Correct Answer: B [1991]
Notes:
The Balance of Payments (BOP) crisis struck India in 1991. This triggered an economic crisis due to escalating oil prices, inflation and low foreign exchange reserves, which beleaguered India’s ability of import payments. Repercussions included severe rupee devaluation. The crisis incited economic liberalization, lowering of import tariffs and eased foreign exchange restrictions. With help from International Monetary Fund and other organizations, India managed to stabilize its situation, highlighting the necessity for constant economic overhauls to sustain financial equilibrium.
4. Robin Hood effect is related to which of the following?
[A] Income and consumption
[B] Income generation
[C] Income redistribution
[D] Proportional tax
Show Answer
Correct Answer: C [Income redistribution]
Notes:
The Robin Hood effect refers to the concept of income redistribution, where wealth is transferred from the rich to the poor, akin to the legendary figure Robin Hood who “stole from the rich to give to the poor.” This effect highlights the social and economic policies aimed at reducing income inequality. Historically, progressive taxation and social welfare programs are examples of mechanisms that embody this principle.
5. 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.
6. Which among the following coal producers of India is outside Coal India Limited?
[A] South Eastern Coalfields (Bilaspur)
[B] Bharat Coking Coal (Dhanbad)
[C] Mahanadi Coalfields (Sambalpur)
[D] Singareni Collieries Company Limited (Telangana)
Show Answer
Correct Answer: D [Singareni Collieries Company Limited (Telangana)]
Notes:
Singareni Collieries Company Limited (SCCL) is not a subsidiary of Coal India Limited. It is a separate coal mining company in India, jointly owned by the Government of Telangana and the Government of India. By contrast, South Eastern Coalfields, Bharat Coking Coal, and Mahanadi Coalfields are all subsidiaries of Coal India Limited. Hence, the correct answer is Singareni Collieries Company Limited (Telangana).
7. Which of the following bodies procures, distributes, exports and imports agricultural commodities?
[A] FCI
[B] NAFED
[C] NABARD
[D] All of them
Show Answer
Correct Answer: B [ NAFED ]
Notes:
NAFED is the apex body in cooperative sector and deals in procurement , distribution, export and import of selected agricultural commodities.
8. Imposing an Import quota helps in__:
- correcting unfavourable balance of payments
- improving balance of trade
- protecting domestic industries
- promoting exports
Select the correct option from the codes given below:
[A] Only 1 & 2
[B] Only 1 & 3
[C] Only 1, 2 & 3
[D] 1, 2, 3 & 4
Show Answer
Correct Answer: C [ Only 1, 2 & 3 ]
Notes:
An import restriction imposed on imported goods, to reduce the quantity of certain goods allowed into a country from a particular exporting country, in a stated period. The purpose may be to conserve foreign currency, if there is an unfavourable balance of payments, or to protect the home market against foreign competition (see protective duty). Quotas are usually enforced by means of import licenses.
9. Consider the following statements:
- Stocks offer higher average returns than bonds and other fixed-income investments, but with correspondingly higher volatility and risk.
- Stock prices are primarily governed by supply and demand, with earnings being the most important influencing factor.
Which of the above statements is/are correct?
[A] Both 1 and 2
[B] Only 1
[C] Only 2
[D] Neither 1 nor 2
Show Answer
Correct Answer: A [Both 1 and 2]
Notes:
Both statements are correct. Historically, stocks have yielded higher average returns than bonds, but with greater short-term volatility and risk. Stock prices move according to supply and demand dynamics, but corporate earnings are widely recognized as the most significant fundamental factor driving these price changes and influencing investor sentiment and market pricing.
10. Which scenario best describes a Goldilocks economy?
[A] High inflation, High economic growth
[B] Low inflation, High economic growth
[C] Low inflation, Steady economic growth
[D] High inflation, Low economic growth
Show Answer
Correct Answer: C [Low inflation, Steady economic growth]
Notes:
A Goldilocks economy signifies a balance of low inflation and steady growth, avoiding extremes. The term is widely used in macroeconomics to represent optimal conditions for policy makers. It is named after the fairy tale character Goldilocks, indicating “just right” economic conditions.
