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 among the following is First Indian Special Economic Zone(SEZ)?
[A] Visakhapatnam SEZ
[B] Kandla SEZ
[C] Noida Special Economic Zone
[D] Cochin SEZ
Show Answer
Correct Answer: B [Kandla SEZ]
Notes:
The Kandla Special Economic Zone (KASEZ) was established in the year 1965 as the first Export Processing Zone in India. It is also the first special economic zone in India and in Asia. It is located in Kutch District of Gujarat.
2. Ad Valorem Tax is levied on the basis of which among the following?
[A] Volume
[B] Value
[C] Production
[D] Export
Show Answer
Correct Answer: B [Value]
Notes:
Ad valorem tariff is calculated on the basis of the value of the imported good, expressed as a percentage of such value. For example, an ad valorem tariff of 10% on an imported car worth US$ 10000 would lead to a requirement to pay US$ 1000 as customs duty.
3. Which option is an example of Green Field Investment?
[A] Investment in agriculture land for future development
[B] Investment in a new factory complex on undeveloped land
[C] Cleaning and converting an old cement factory to commercial use
[D] Cleaning and converting an old cement factory to residential use
Show Answer
Correct Answer: B [Investment in a new factory complex on undeveloped land]
Notes:
Green Field Investment refers to setting up a new facility on previously undeveloped land. The term is commonly used in foreign direct investment when a parent company builds its operations in a foreign country from scratch. Such investments involve construction of new plants, buildings, and infrastructure, often in areas where no prior facilities exist. This is distinct from Brown Field Investment, which involves modifying or upgrading an existing facility.
4. What percentage of global oil production is attributed to OPEC?
[A] 25%
[B] 35%
[C] 40%
[D] 55%
Show Answer
Correct Answer: C [40%]
Notes:
OPEC accounted for about 40% of global crude oil production as of 2023. OPEC’s production ranged near 34 million barrels per day in 2023. The organization also holds over 70% of the world’s proven oil reserves. OPEC was founded in 1960 in Baghdad. Major OPEC members include Saudi Arabia, Iran, Iraq, and Venezuela.
5. The government has responsibility to ensure availability of which among the following to all consumers regardless of their ability to pay price?
[A] Giffen Goods
[B] Supplementary Goods
[C] Merit Goods
[D] Complementary Goods
Show Answer
Correct Answer: C [Merit Goods]
Notes:
The correct answer is Merit Goods. Merit goods are products or services that the government believes are beneficial for individuals and society, and thus should be available to all, regardless of their ability to pay. Examples include education and healthcare. Governments often subsidize these goods to ensure equitable access, as they can lead to positive externalities, such as a more educated workforce and improved public health.
6. Which is the biggest borrower in India?
[A] Indian Government
[B] Reserve Bank of India
[C] Indian Railways
[D] State Governments
Show Answer
Correct Answer: A [Indian Government]
Notes:
The Indian central government projected total debt is ₹214.82 lakh crore by March 2027. In FY 2026-27, the government plans to borrow ₹17.2 lakh crore through gross market borrowings. Net market borrowings are projected at ₹11.7 lakh crore. Reserve Bank of India mainly conducts monetary operations and does not borrow such amounts. State governments’ borrowings are lower than the Centre.
7. 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.
8. Which fund did NABARD launch in 1995-96 for rural infrastructure financing?
[A] National Credit Fund
[B] National Rural Credit Fund
[C] National Credit Stabilization Fund
[D] Rural Infrastructure Development Fund
Show Answer
Correct Answer: D [Rural Infrastructure Development Fund]
Notes:
The Rural Infrastructure Development Fund was set up by the Government of India in 1995-96 through NABARD. It began with an initial corpus of Rs. 2,000 crore. RIDF aims to provide low-cost finance for rural infrastructure, including roads, irrigation, and bridges. By 2023-24, total allocation reached approximately Rs. 4,98,411 crore. The fund covers 39 eligible activities across India.
9. Which statement defines RBI’s lender of last resort (LOLR) function?
[A] RBI meets all commercial bank demands, regardless of financial status
[B] RBI meets reasonable demands of solvent banks with temporary liquidity crises
[C] RBI lends exclusively to governments for budget deficits
[D] RBI offers LOLR facilities to all NBFCs without restrictions
Show Answer
Correct Answer: B [RBI meets reasonable demands of solvent banks with temporary liquidity crises]
Notes:
The Reserve Bank of India acts as lender of last resort by granting emergency funds to solvent commercial banks facing temporary liquidity shortages. RBI does not provide funds to insolvent banks. RBI charges a penal rate to discourage frequent usage. This function aims to avert bank runs and ensure overall banking system stability. RBI’s LOLR role traditionally applies to commercial banks, not all financial institutions.
10. Consider the following with respect to the components of Internal Debt:
- Market Loans
- Treasury Bills
- Compensation and other bonds
- External loans from World Bank
Which of the above is/are included in the Internal Debt of India?
[A] Only 1 and 2
[B] Only 1, 2 and 3
[C] Only 2 and 3
[D] 1, 2, 3 and 4
Show Answer
Correct Answer: B [Only 1, 2 and 3]
Notes:
Internal debt includes borrowings by the government within the country, such as Market Loans, Treasury Bills, and Compensation and other bonds. External loans from the World Bank are categorized as external debt since they are sourced from outside the country. Thus, only 1, 2 and 3 are components of India's internal debt.
