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 of the following is/are Money Market Instruments?
[A] Treasury Bills
[B] Commercial Papers
[C] Certificate of Deposits
[D] All of the above
Show Answer
Correct Answer: D [All of the above]
Notes:
Money market securities are debt issues with maturities of one year or less. Treasury Bills, Certificate of Deposit as well as Commercial papers are money market instruments.
2. In September 1999, which organization established the Poverty Reduction and Growth Facility (PRGF) to make the objectives of poverty reduction and growth more central to lending operations in its poorest member countries?
[A] Asian Development Bank
[B] International Monetary Fund
[C] World Bank
[D] US Federal Bank
Show Answer
Correct Answer: B [International Monetary Fund]
Notes:
The Poverty Reduction and Growth Facility (PRGF) was set up by the International Monetary Fund in September 1999. Its objective was to formulate policies focusing on growth and poverty reduction.
3. National Rural Credit Stabilization Fund is a Institution of purpose-specific funds in which of the following?
[A] IDBI
[B] SIDBI
[C] IFCI
[D] NABARD
Show Answer
Correct Answer: D [NABARD]
Notes:
The National Rural Credit stabilization fund is a sector specific finds maintained with National Bank for Agriculture and Rural Development. This fund includes contributions from Central and State Governments, sums contributed by RBI and the sums contributed by NABARD’s board every year.
4. Which of the following institution releases “World Economic Outlook Report”?
[A] World Bank
[B] Federal Reserve Bank
[C] International Monetary Fund
[D] International Finance Corporation
Show Answer
Correct Answer: C [International Monetary Fund]
Notes:
The correct answer is the International Monetary Fund (IMF). The World Economic Outlook Report is published biannually by the IMF, providing analysis and projections of the global economy. It includes data on economic growth, inflation, and other key indicators, helping policymakers and economists understand global economic trends. The IMF was established in 1944 and has 190 member countries, focusing on global monetary cooperation and financial stability.
5. Which sector is the largest contributor to India’s GDP?
[A] Secondary sector
[B] Primary sector
[C] Tertiary sector
[D] Quaternary sector
Show Answer
Correct Answer: C [Tertiary sector]
Notes:
The tertiary (services) sector contributed about 54.93% to India’s GVA in 2024-25 (PE), making it the largest contributor. The primary sector contributed around 19.74%, and the secondary sector approximately 25.33%, consistently reflecting the dominance of the services sector over recent years.
6. In which of the following actions will be taken by Reserve bank of India, to curb the excess liquidity, when the deficit financing increases?
[A] Increases CRR
[B] Decreases Bank rate
[C] Resorts to open market operations
[D] Raises the Tax rates
Show Answer
Correct Answer: A [Increases CRR]
Notes:
RBI can reduce the excess liquidity by using the liquidity adjustment facility to manage high levels of inflation. This can be done by increasing the repo rate or cash reserve ratio. This will reduce the money supply in India’s economy.
7. Deficit financing is a common practice in many countries in the world today. Which among the following is an incorrect statement regarding Deficit Financing?
[A] Deficit Financing was popularized by J M Keynes
[B] Deficit Financing generates employment to some extent
[C] Deficit Financing helps in curbing the bad effects of Depression
[D] All are correct
Show Answer
Correct Answer: D [All are correct]
Notes:
Deficit financing involves government spending exceeding revenue, often used to stimulate economic growth. J.M. Keynes advocated for this approach during the Great Depression, arguing it could boost demand and reduce unemployment. While it can create jobs and mitigate economic downturns, it can also lead to increased national debt and inflation if mismanaged. Therefore, the statement “All are correct” is incorrect because it implies that deficit financing is universally beneficial without acknowledging potential drawbacks.
8. It has been generally viewed that when an economy grows beyond its potential growth rate, it causes inflation. How does growing faster than the potential rate cause inflation?
[A] Fast growth causes quick resource utilization to fulfill the higher demand
[B] Fast growth causes more employment opportunities which leads to rise in prices
[C] Fast growth causes more productivity which leads to higher supply and cost push inflation
[D] All of above mentioned reasons
Show Answer
Correct Answer: A [Fast growth causes quick resource utilization to fulfill the higher demand]
Notes:
There are two major determinants of the potential rate at which an economy can grow in the long run. One is the rate of increase in key inputs such as labour and capital, while the other is the rise in productivity. Within the two key inputs, labour has a bigger say in determining the potential growth rate. The increase in labour supply – through an increase in number of workers or the numbers of hours put by a given number of workers – and an increase in labour productivity will result in an increase in the long-term potential growth rate. Anything that aids productivity increases can help boost potential growth rate. Infrastructure investments and skilling of labour can raise India’s potential growth rate because the country has ample labour supply. The overall demand in the economy picks up due to fast growth and more resources are used to meet higher demand. After a point, the economy may not find enough inputs to meet the demand, leading to an increase in prices. If there is surplus capacity in the economy then it can grow above the potential rate for a while. But for an economy already working at full capacity, excessive demand results in increase in the price level.
9. The government of India provides food subsidy by __:
[A] Fixing Central Issue prices
[B] Selling grains via PDS mechanism
[C] Funding FCI in purchase of foodgrains
[D] All of above
Show Answer
Correct Answer: D [ All of above ]
Notes:
The government of India provides food subsidies through multiple mechanisms: 1. Fixing Central Issue Prices (CIP): The government sets these prices to ensure affordable access to essential food items for the public. 2. Public Distribution System (PDS): This system distributes subsidized food grains to low-income households, ensuring food security. 3. Funding the Food Corporation of India (FCI): The FCI is responsible for procurement, storage, and distribution of food grains, and government funding supports these operations. These combined efforts aim to alleviate hunger and improve nutrition among the population.
10. Which among the following is the top seafood exporting port of India in terms of dollar value?
[A] Visakhapatnam
[B] Tuticorin
[C] Kochi
[D] Mangalore
Show Answer
Correct Answer: A [ Visakhapatnam ]
Notes:
Visakhapatnam port is the major seafood exporting port in terms of dollar value (22.59%). Pipavav is the major port in terms of quantity (25.27%).
