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. Which best defines Gross Budgetary Support?
[A] Value of gross revenue receipts by the government
[B] Fraction of total expenditure on Central sectors, ministries, and State/UT plans
[C] Value of total plan expenditure
[D] Fraction of expenditure on different Central sectors plans
Show Answer
Correct Answer: B [Fraction of total expenditure on Central sectors, ministries, and State/UT plans]
Notes:
Gross Budgetary Support is the portion of the government budget allocated to central sectors, ministries, departments, and as support to State/UT plans. It forms a part of the total expenditure in India’s Union Budget. GBS funds plan expenditures and is used for the implementation of schemes and programs under different government ministries and departments. It is released annually by the Government of India.
2. At which of the following places steam engines were originally manufactured by India Railway ?
[A] Varanasi
[B] Perambur
[C] Chittranjan
[D] Patiala
Show Answer
Correct Answer: C [Chittranjan]
Notes:
The first steam locomotive produced by Chittaranjan Locomotive Works (CLW) was dedicated to the nation on November 1, 1950. This significant event coincided with the renaming of the Loco Building Works as Chittaranjan Locomotive Works, in honor of the freedom fighter, leader, and statesman Deshbandhu Chittaranjan Das. The dedication ceremony was conducted by the first President of India, Dr. Rajendra Prasad. This marked an important milestone in the history of CLW, establishing it as a key manufacturer in India’s locomotive industry. The production of steam locomotives commenced earlier on January 26, 1950, and over the years, CLW evolved to become the largest locomotive manufacturer in the world.
3. Narsimham Committee Report 1991 was related to which of the following ?
[A] Agriculture Reforms
[B] Trade Reforms
[C] Tax Reforms
[D] Financial Sector reforms
Show Answer
Correct Answer: D [Financial Sector reforms]
Notes:
In 1991 The Reserve Bank of India had proposed the committee chaired by M. Narasimham, former RBI Governor to review the Financial System and aspects relating to the Structure, Organization, Procedures and Functioning of the financial system. Committee submitted two reports, in 1992 and 1998, which laid significant thrust on enhancing the efficiency and viability of the banking sector. The Narasimham Committee laid the foundation for the reformation of the Indian banking sector.
4. Which among the following curve defines the principle that zero tax rate would produce zero revenue for the government and a 100% tax rate would also generate zero revenue for the taxing Government?
[A] Laffer curve
[B] Lorenz curve
[C] Engel curve
[D] Kuznets curve
Show Answer
Correct Answer: A [Laffer curve]
Notes:
The Laffer curve is a theoretical concept in economics that illustrates the relationship between tax rates and government revenue. The curve is named after economist Arthur Laffer, who popularized the concept in the 1970s. The basic idea behind the Laffer curve is that there is a certain tax rate that will maximize government revenue. At a 0% tax rate, the government will obviously not collect any revenue. At a 100% tax rate, the government will also not collect any revenue because people will have no incentive to work. The Laffer curve suggests that there is a point in between these two extremes where the government will collect the most revenue. The exact shape and location of the Laffer curve will vary depending on various factors, such as the state of the economy and the efficiency of the government’s tax collection system.
5. Which country is the world’s largest exporter of tea in 2025?
[A] China
[B] India
[C] Sri Lanka
[D] Kenya
Show Answer
Correct Answer: A [China]
Notes:
In 2024–25, China led global tea exports by value with $1,739 million, holding nearly 45% share and surpassing Kenya and Sri Lanka. While Kenya leads in black tea by volume, China remains the largest exporter overall based on latest official data.
6. What is the main purpose of margin requirements in securities trading?
[A] To fulfill central bank regulatory mandates
[B] To comply with Basel III standards
[C] To protect lenders by requiring sufficient borrower equity
[D] To increase brokerage firm profits
Show Answer
Correct Answer: C [To protect lenders by requiring sufficient borrower equity]
Notes:
Margin requirements ensure investors maintain a minimum equity percentage in their accounts. Initial margin is set before a trade, and maintenance margin must be upheld throughout. If equity falls below the maintenance margin, a margin call is issued. This system aims primarily to protect brokers and lenders from losses if securities lose value. U.S. regulations on margin trading are set by the Federal Reserve Board under Regulation T.
7. Which currency did Keynes propose for global trade from 1940 to 1942?
[A] The Whuffie system managed by the International Trade Organization
[B] The Unitas managed by the World Monetary Authority
[C] The Bancor managed by the International Clearing Union
[D] The Terra managed by the Global Central Bank
Show Answer
Correct Answer: C [The Bancor managed by the International Clearing Union]
Notes:
Keynes and E. F. Schumacher proposed the Bancor as a supranational currency between 1940–1942. The International Clearing Union was suggested to manage its use in global trade. The Bancor proposal was presented by the United Kingdom at the Bretton Woods Conference in 1944. The concept was intended to prevent persistent surpluses or deficits among countries. The Bancor was not adopted; instead, the U.S. dollar was chosen as the main reserve currency.
8. Ad valorem tax is levied on which of the following?
[A] The price of a commodity
[B] The value added to a product
[C] The assessed value of property or transaction
[D] The unit of the commodity
Show Answer
Correct Answer: C [The assessed value of property or transaction]
Notes:
Ad valorem tax is calculated as a percentage of the assessed value of property or transaction. Sales tax, property tax, and import duties are common examples. This tax is proportional to the value, not a fixed amount per unit. The term originates from Latin meaning “according to value.” The assessed value is used to determine the actual tax liability.
9. Consider the following statements regarding Narrow Banking:
- In Narrow Banking, banks primarily accept deposits and invest largely in safe, liquid assets such as government securities, while avoiding risky activities including proprietary trading and complex derivatives.
- Asset-Liability Mismatch is rare in Narrow Banking because the liabilities are aligned with the risk and maturity characteristics of the assets.
Which of the above statements is / are correct?
[A] Only 1
[B] Both 1 and 2
[C] Only 2
[D] Neither 1 nor 2
Show Answer
Correct Answer: B [Both 1 and 2]
Notes:
Statement 1 is correct because Narrow Banking limits banks to investing in liquid, safe assets, such as government securities, avoiding higher-risk strategies. Statement 2 is also correct since matching the maturity and risk of assets and liabilities reduces the possibility of asset-liability mismatches. Therefore, both statements correctly describe the essential features of Narrow Banking.
10. Which is India’s first shore-based integrated steel plant?
[A] Durgapur Steel Plant
[B] Salem Steel Plant
[C] Bhadravati Steel Plant
[D] Visakhapatnam Steel Plant
Show Answer
Correct Answer: D [Visakhapatnam Steel Plant]
Notes:
Visakhapatnam Steel Plant, known as Rashtriya Ispat Nigam Limited, was commissioned in 1982 in Andhra Pradesh. It was the first shore-based integrated steel plant in India. The foundation stone was laid in 1971. The plant initially had a capacity of 3.0 million tonnes per annum. The capacity later expanded to 7.3 MTPA by 2017. The plant was established with technological support from the USSR and Germany.
