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. In which year, Planning Commission was established in India?
[A] 1950
[B] 1951
[C] 1952
[D] 1955
Show Answer
Correct Answer: A [1950]
Notes:
Planning Commission was set up by a Government of India Resolution in 1950 as an advisory and specialized institution. It was charged with the responsibility to formulate a strategy of development for independent India in a long-term perspective and for making assessment of all resources of the country, augmenting deficient resources, formulating plans for the most effective and balanced utilization of resources and determining priorities.
2. In the capital market, simultaneous purchase and sale of securities to reduce the loss on purchase is known as __?
[A] Arbitrage
[B] Hedging
[C] Trend following
[D] Shorting
Show Answer
Correct Answer: A [Arbitrage]
Notes:
Arbitrage is a type of trade in which a security is simultaneously bought and sold, in different markets. This type of trade takes advantage of the difference in prices of the same financial instrument being offered on different exchanges.
3. Which organization aids members in balance of payments problems?
[A] World Bank
[B] International Monetary Fund
[C] Asian Development Bank
[D] World Economic Forum
Show Answer
Correct Answer: B [International Monetary Fund]
Notes:
The International Monetary Fund was created in 1944 at the Bretton Woods Conference. Its main function is to provide temporary financial assistance to member countries facing balance of payments deficits. The IMF uses facilities like Stand-By Arrangements and Extended Fund Facility. Membership includes 190 countries as of 2023. The IMF also conducts economic surveillance and policy advice, but direct financial support for balance of payments stability is its core function.
4. Which of the following indices measures gender inequalities in human development achievements across health, education, and economic resources?
[A] Gender Inequality Index
[B] Gender Development Index
[C] Gender Empowerment Measure
[D] Human Development Index
Show Answer
Correct Answer: B [Gender Development Index]
Notes:
The Gender Development Index was introduced by UNDP in 1995. It assesses gender gaps in health (life expectancy at birth), education (years of schooling), and income (estimated earned income). GDI uses the ratio of female to male Human Development Index values. A value of 1 indicates gender parity. It was released with the Gender Empowerment Measure. The Gender Inequality Index was introduced in 2010 and includes reproductive health and labour market participation.
5. Who among the following are the beneficiaries of Ways and Means Advances (WMA) facility of Reserve Bank of India?
[A] Commercial Banks
[B] Regional Rural banks
[C] State Governments
[D] Authorized Dealers of Foreign Exchanges
Show Answer
Correct Answer: C [State Governments]
Notes:
The Reserve Bank of India (RBI) provides temporary loan facilities to the central and state governments. This loan facility is called Ways and Means Advances (WMA).
6. What is the meaning of the “Government Route” in Foreign Investments?
[A] Investments without government approval.
[B] Investments made by government.
[C] Investments that requires prior government approval
[D] Foreign investments in government bonds
Show Answer
Correct Answer: C [Investments that requires prior government approval]
Notes:
The “Government Route” in the language of foreign investments refers to the scenario where a foreign investor needs to acquire prior approval from the government to make an investment. This route is usually applicable for sectors which are of strategic importance or have implications for national security, where it would be imperative for the host country to have an additional level of scrutiny and control.
7. Which statement is true about an equity fund?
[A] It guarantees fixed returns to investors
[B] It invests equally in debt and equity securities
[C] It invests mainly in stocks for long-term capital growth
[D] It assures predictable growth regardless of markets
Show Answer
Correct Answer: C [It invests mainly in stocks for long-term capital growth]
Notes:
An equity fund is a pooled investment scheme that invests predominantly in shares of companies. SEBI regulations in India require at least 65% of total assets in equities or equity-related instruments for classification as an equity fund. These funds seek long-term capital appreciation by investing in listed companies. Returns depend on market performance and Net Asset Value. Equity funds do not offer guaranteed or fixed returns.
8. Which statement about White Label ATMs is correct?
[A] ATMs owned by foreign companies
[B] ATMs owned by private ATM service providers, not banks
[C] ATMs outsourced by banks with sponsor branding
[D] ATMs owned by the government
Show Answer
Correct Answer: B [ATMs owned by private ATM service providers, not banks]
Notes:
White Label ATMs in India are owned and operated by non-banking entities authorized by the Reserve Bank of India since 2012. These ATMs do not display any bank logo and can be used by customers of any bank for basic transactions. Tata Communications Payment Solutions was the first company to set up White Label ATMs under the ‘Indicash’ brand in India.
9. Which among the following is the chief characteristic of the primary industry of the developed countries?
[A] Larger farm size and increasing corporate ownership of farms
[B] Larger farm size and more government ownership of farms
[C] Smaller farm size and a diversity of crops on each farm
[D] Smaller farm size and fewer family-owned farms
Show Answer
Correct Answer: A [Larger farm size and increasing corporate ownership of farms]
Notes:
Consider agriculture in the developed countries such as United States and Canada. There, the small family farms are not able to earn a profit and are being replaced by large corporate farms.
10. What is transfer pricing as per Indian taxation context?
[A] Method of tax evasion involving only illicit capital flows
[B] Mechanism for pricing transactions between associated enterprises
[C] Factor causing rise in food prices
[D] Recent cause of Indian banks’ bad loans
Show Answer
Correct Answer: B [Mechanism for pricing transactions between associated enterprises]
Notes:
Transfer pricing refers to pricing of transactions between associated enterprises, specified in Section 92 of the Income Tax Act, 1961. India implemented transfer pricing provisions in 2001 to prevent shifting profits to low-tax jurisdictions by related parties. The law requires use of the arm’s length principle for cross-border and certain domestic transactions between related parties.
