Indian Economy MCQs

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Hindustan Shipyard Limited is the country’s premier shipbuilding organization. It is located on the East Coast of the Indian peninsula, at Visakhapatnam, Andhra Pradesh. In 2010, the company was transferred from the Ministry of Shipping to the Ministry of Defence.

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The correct answer is “RBI announces selective credit control in the quarterly review of the monetary policy.” Selective credit control is a qualitative tool used by the Reserve Bank of India (RBI) to regulate the flow of credit to specific sectors, ensuring that credit is directed towards priority areas of the economy. This approach allows the RBI to manage inflation and economic growth more effectively. In contrast, the other options (Reverse Repo rate, CRR, and Bank rate adjustments) are quantitative tools aimed at controlling the overall money supply.

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Net National Product at Factor Cost generally denotes National Income.

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The correct answer is the Banking Regulation Act. This act governs the operations of banking companies in India and allows them to engage in non-banking activities, provided these are in accordance with the provisions set forth. The act was enacted in 1949 to regulate the banking sector and ensure financial stability. It also empowers the Reserve Bank of India to oversee and regulate banking operations.

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Competition is generally measured by calculating concentration ratios. Concentration ratios indicate whether an industry consists of a few large firms or many small firms. Two of the most commonly used metrics are the Herfindahl Hirschman Index (HHI) and the N-firm concentration ratio.

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The Public Debt Office (PDO) functions as an investment banker to the Government. It manages the issuance and servicing of government securities, ensuring that the government can finance its operations and manage public debt effectively. The PDO plays a crucial role in maintaining the stability of the financial system by facilitating government borrowing and managing the national debt portfolio.

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The term “Austerity Budget” is commonly not associated with budgets in India. While India has implemented various budget types, such as Outcome Budgets (which focus on results and accountability) and Gender Budgets (which aim to address gender disparities), “Austerity Budget” is less prevalent. Austerity measures are typically associated with economic crises and are not a standard budget classification in India. The Gross Budgetary Support refers to the total allocation for government programs and is a recognized term.

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The correct answer is “Elimination of primary deficit.” The Fiscal Responsibility and Budget Management (FRBM) Act of 2003 aimed to ensure fiscal discipline in India by targeting the elimination of revenue deficits and limiting government borrowing. However, it did not explicitly mandate the elimination of the primary deficit, which is the fiscal deficit excluding interest payments. The Act focuses on sustainable fiscal management rather than eliminating all forms of deficits.

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The correct answer is WPI (Wholesale Price Index). Headline inflation in India is primarily measured using the WPI, which reflects the price changes at the wholesale level for a basket of goods. The WPI includes prices of commodities like food, fuel, and manufactured goods, making it a comprehensive measure of inflation. In contrast, the CPI (Consumer Price Index) focuses on retail prices and consumer goods, while the GDP deflator measures price changes in all domestically produced goods and services. The WPI has been used in India since 1978, and it is crucial for policymakers to gauge inflation trends.

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The quantitative instruments are Open Market Operations, Liquidity Adjustment Facility (Repo and Reverse Repo), Marginal Standing Facility, SLR, CRR, Bank Rate, Credit Ceiling etc.
On the other hand, qualitative instruments are: credit rationing, moral suasion and direct action (by RBI on banks).