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. Who among the following scholars is associated with Law of Rent?
[A] Richard Jones
[B] Thomas Robert Malthus
[C] David Ricardo
[D] Adam Smith
Show Answer
Correct Answer: C [David Ricardo]
Notes:
David Ricardo, an English classical economist, developed the law of rent in 1809. He presented the law in his book On the Principles of Political Economy and Taxation in 1821.
Ricardo’s theory defined rent as the portion of the earth’s produce that is paid to the landlord for the original and indestructible powers of the soil. In other words, rent is the price paid for the use of land.
Ricardo developed his theory to explain the origin and nature of economic rent. He used the economy and rent to analyze the large rise in corn and land prices during the Napoleonic wars (1805-1815).
The term “Ricardian rent” comes from Ricardo’s theory.
2. Which is India’s largest multi-state co-operative bank?
[A] Vijaya Bank
[B] Saraswat Bank
[C] Union Co-operative Bank
[D] The Madhya Pradesh Rajya Sahakari Bank
Show Answer
Correct Answer: B [Saraswat Bank]
Notes:
Saraswat Bank was founded on 14 September 1918. It is the largest multi-state and urban co-operative bank in Asia. Saraswat Bank operates across eight Indian states with over 300 branches and 350 ATMs as of March 2025. Total business reached ₹91,814 crores in 2024–25. The bank reported zero Net NPAs for three consecutive years and a Gross NPA ratio of 2.25% as of March 31, 2025.
3. Consider the following statements regarding Narrow Banking:
- In Narrow Banking, banks primarily accept deposits and invest largely in safe, liquid assets such as government securities, while avoiding risky activities including proprietary trading and complex derivatives.
- Asset-Liability Mismatch is rare in Narrow Banking because the liabilities are aligned with the risk and maturity characteristics of the assets.
Which of the above statements is / are correct?
[A] Only 1
[B] Both 1 and 2
[C] Only 2
[D] Neither 1 nor 2
Show Answer
Correct Answer: B [Both 1 and 2]
Notes:
Statement 1 is correct because Narrow Banking limits banks to investing in liquid, safe assets, such as government securities, avoiding higher-risk strategies. Statement 2 is also correct since matching the maturity and risk of assets and liabilities reduces the possibility of asset-liability mismatches. Therefore, both statements correctly describe the essential features of Narrow Banking.
4. Who decides the interest rates on savings bank accounts in India?
[A] Central Government
[B] Banks themselves
[C] Reserve Bank of India
[D] Individual account holders
Show Answer
Correct Answer: B [Banks themselves]
Notes:
Banks in India have the authority to set savings bank account interest rates since May 2011. The Reserve Bank of India deregulated savings deposit rates in October 2011. Each bank decides its own rate, subject to RBI guidelines on calculation and credit of interest. RBI requires interest calculation on a daily basis. Rates are publicly notified by each bank.
5. 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.
6. Consider the following statements regarding the Rashtriya Arogya Nidhi (RAN) Scheme:
- The scheme provides one-time financial assistance up to Rs. 15 lakh to patients living below the poverty line and suffering from life-threatening diseases.
- Financial assistance under the scheme is available only for treatment at government hospitals.
- Individuals working in Central Government, State Government, or Public Sector Units (PSUs) are eligible for assistance under the scheme.
Which of the above statements is/are correct?
[A] Only 1
[B] 1 and 2 only
[C] Only 3
[D] None of the above
Show Answer
Correct Answer: B [1 and 2 only]
Notes:
Statements 1 and 2 are correct: Rashtriya Arogya Nidhi offers up to Rs. 15 lakh for poor patients with life-threatening diseases, provided treatment is availed in government hospitals only. Statement 3 is incorrect; individuals working in Central/State Government or PSUs are not eligible for assistance under this scheme, as per official guidelines.
7. At which HAL facility are MiG aircraft engines assembled and manufactured?
[A] Engine Division at Koraput, Odisha
[B] Engine Division at Bangalore, Karnataka
[C] Sukhoi Engine Division at Koraput, Odisha
[D] Nasik Airframe Factory, Maharashtra
Show Answer
Correct Answer: A [Engine Division at Koraput, Odisha]
Notes:
The Engine Division of Hindustan Aeronautics Limited at Sunabeda, near Koraput, Odisha, was established in 1964. It manufactures engines for MiG fighter aircraft, including R11, R25, R29B, and RD-33 series. Since 2007, the facility has produced RD-33 engines for MiG-29 aircraft under license from Russia. Over 1,300 engines have been manufactured at this division.
8. Which of the following industries is considered as “Mother of all industries”?
[A] Textile industry
[B] Coal industry
[C] Iron and steel industry
[D] Jute industry
Show Answer
Correct Answer: C [Iron and steel industry]
Notes:
The finished products of Iron and steel industries are used as raw material for other industries such as automobile and manufacturing industries. Iron and steel industry is called the mother of all industries because they need steel and iron for production, for machinery and for infrastructure.
9. What is the purpose of Ways and Means Advances scheme?
[A] to give insurance to the large corporates for their investment in abroad projects
[B] to handle the mismatch between cash flow of the receipts and payments of the State Governments
[C] to promote export oriented projects by giving interest free credit
[D] None of the above
Show Answer
Correct Answer: B [to handle the mismatch between cash flow of the receipts and payments of the State Governments]
Notes:
Ways and means advances (WMA) is a mechanism used by Reserve Bank of India (RBI) to help the states tide over temporary mismatches in the cash flow of their receipts and payments.
10. Which of the following steps should be taken by investor who wishes to form a portfolio that lies to the right of the optimal risky portfolio on the Capital Allocation Line?
[A] Lend some of her money at the risk-free rate and invest the remainder in the optimal risky portfolio
[B] Borrow some money at the risk-free rate and invest in the optimal risky portfolio
[C] Such a portfolio cannot be formed
[D] None of the above
Show Answer
Correct Answer: B [Borrow some money at the risk-free rate and invest in the optimal risky portfolio]
Notes:
An investor who wishes to form a portfolio that lies to the right of the optimal risky portfolio on the Capital Allocation Line must invest only in risky securities and borrow some money at the risk-free rate and invest in the optimal risky portfolio.
