Indian Economy MCQs

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Inflation reduces currency purchasing power and drives general price increases. Banks respond by raising loan prices due to higher costs, including increased wages and operational expenditures. Central banks often hike interest rates during inflation to control rising prices. Higher interest rates result in increased loan pricing by banks to maintain profit margins.

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Adam smith is considered as father of Modern Economics. In his book “The nature & causes of wealth of the Nation’s 1776, he has described economics as science of wealth. According to him economy is the study of wealth only and it deals with its production and consumption. Only material goods which are scarce and useful are wealth.

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Transfer payments made by the Government including subsidies, government aid, social security assistance such as health insurance payment and scholarship are not included in the national income. Because they do not represent any economic activity.

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Tubewells provide the highest share of irrigation among artificial sources in India after rainfall. According to the 2015-16 Agricultural Census, tubewells accounted for about 46% of the net irrigated area. Tubewell irrigation is most prevalent in northern Indian states such as Uttar Pradesh and Punjab. Canals, rivers, and tanks contribute comparatively less to the total irrigated area.

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The 11th Five Year Plan was implemented from 2007-2012, when Manmohan Sigh was India’s Prime Minster. The main slogan for the 11th FYP was “Faster and more inclusive growth”. The 11th FYP made special emphasis on Financial Inclusion, poverty reduction, empowerment through education and skill development etc.

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Fair price shops form part of India’s Public Distribution System since 1947. They provide essential commodities such as grains, sugar, and kerosene to people below the poverty line at subsidized prices. The Targeted Public Distribution System was introduced in 1997 to further improve the food security for economically vulnerable sections. Only ration cardholders can purchase from these shops as per government rules.

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The tertiary (services) sector is the largest contributor to India’s GDP in FY26, with a share of 56.4% in Gross Value Added, according to the First Advance Estimates. The services sector grew by 9.1% in FY26.

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Deposits received from customers are shown as a liability in the balance sheet of a bank. The Profit and Loss account records income and expenses such as interest earned on advances, interest expense on deposits, and profit or loss on sale of assets. Hence, unlike the other three options, customer deposits do not appear as a P&L entry. This makes deposits received from customers the correct choice.

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Deficit financing refers to the government covering the shortfall between expenditure and revenue by printing new currency or borrowing. This process has been used in various countries during budget deficits. Printing money to cover deficits can lead to increased money supply and may contribute to inflation. Deficit financing does not refer to the deficit itself but to the method used to address the gap.

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The Trade and Economic Relations Committee (TERC) in India is headed by the Prime Minister. This committee was established to enhance India’s trade relations and economic policies, reflecting the government’s focus on international trade as a key driver of economic growth. The Prime Minister’s leadership underscores the importance of trade in India’s economic strategy.