Indian Economy MCQs

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Agricultural Finance Corporation Limited (AFC) is a development organization that provides consulting, advisory, and implementation support for agriculture and rural development in India. AFC was established in 1968 by India’s banking industry.

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The “Soft Loan Window” of the World Bank is commonly referred to as the International Development Association (IDA). It was founded in 1960 and provides low or zero-interest loans and grants to the world’s poorest countries. These “soft” loan terms allow for improved economic development and poverty reduction. Unlike the World Bank, the IDA seeks to reduce poverty by providing loans to developing countries for programs that are intended to boost economic growth and improve living conditions.

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Dematerialization of securities refers to the process of converting physical paper certificates of shares into electronic form. This transition allows for easier and faster transactions, reduces the risk of loss or theft, and enhances the efficiency of trading. The practice gained momentum with the advent of electronic trading systems and is now standard in many markets worldwide. For instance, in India, the dematerialization process was facilitated by the introduction of the Depositories Act in 1996, leading to the establishment of depositories like NSDL and CDSL.

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The Consolidated Fund of India was created under Article 266 of the Indian Constitution. The government meets all its expenditure from this fund and it needs parliamentary approval to withdraw money from this fund.

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The correct answer is the Reserve Bank of India (RBI). The RBI regulates foreign exchange transactions under the Foreign Exchange Management Act (FEMA) of 1999. This includes overseeing the opening of overseas bank accounts by Indian residents and managing outward and inward remittances. The RBI ensures compliance with foreign exchange laws to maintain economic stability and prevent illegal activities.

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In India, interest rates on savings bank accounts are not regulated by any government body. Instead, they are determined by individual banks based on their own policies and market conditions. The Reserve Bank of India (RBI) provides guidelines but does not set specific rates. This allows banks to compete for deposits, leading to varying interest rates across institutions.

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Frictional unemployment is the time period between jobs when a worker is searching for, or transitioning from one job to another. It is sometimes called search engine and can be voluntary based on the circumstances of the unemployed individual.

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Internal debt is that part of the total debt that is owed to lenders within the country. It is the money the government borrows from its own citizens. The government borrows by issuing the Government Bonds and T-Bills (Treasury Bills). It also includes the Market borrowings by the government. The government bonds and T-Bills are traded in the market which is also known as Gilt Market.Please note that when government borrows from the domestic sources, the increase in inflation is less in comparison to simply printing the money and increased the more liquid forms of wealth (i.e., the money supply).

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The Directorate General of foreign Trade (DGFT) is the agency of the Ministry of Commerce and Industry of the Government of India, responsible for execution of the import and export Policies of India.

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A letter of credit is a letter from a bank guaranteeing that a buyer’s payment to a seller will be received on time and for the correct amount.