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. What is the Bank Rate as per RBI's current definition?
[A] The rate at which RBI is ready to buy or rediscount bills of exchange or other commercial papers eligible for purchase
[B] The rate at which RBI lends short-term funds to banks against government securities under repo operations
[C] The rate at which commercial banks lend money to their customers
[D] The rate at which banks borrow overnight funds from RBI without collateral
Show Answer
Correct Answer: A [The rate at which RBI is ready to buy or rediscount bills of exchange or other commercial papers eligible for purchase]
Notes:
The Bank Rate is the standard rate notified by RBI for buying or rediscounting eligible bills of exchange or other commercial papers. It is not the same as the repo rate, which applies to short-term borrowing by banks against government securities. In the current operating framework, the Bank Rate is aligned with the MSF rate and is also used as the benchmark for certain penalty charges and related calculations.
2. The headquarters of the World Bank is located in:
[A] Switzerland
[B] Washington DC
[C] New York
[D] Paris
Show Answer
Correct Answer: B [Washington DC]
Notes:
The World Bank’s headquarters are in Washington, D.C. It is the largest development bank in the world and works through the World Bank Group, whose original institution, the IBRD, was established at the 1944 Bretton Woods Conference. The institution is closely associated with global development finance, but its main office has remained in Washington, D.C.
3. Which economic law states “bad money drives out good money”?
[A] Wagner’s law
[B] Keynes’ law
[C] Grimm’s law
[D] Gresham’s law
Show Answer
Correct Answer: D [Gresham’s law]
Notes:
Gresham’s law, enunciated by Sir Thomas Gresham, states that inferior currency (bad money) in circulation displaces valuable or superior currency (good money) if both are accepted at same face value, as people hoard the good currency and spend the bad.
4. At which of the following places was the first steam locomotive of Chittaranjan Locomotive Works manufactured?
[A] Varanasi
[B] Perambur
[C] Chittaranjan
[D] Patiala
Show Answer
Correct Answer: C [Chittaranjan]
Notes:
Chittaranjan Locomotive Works was established at Chittaranjan in West Bengal, and it produced its first steam locomotive in 1950. The workshop later became one of India’s major locomotive manufacturing centres. Among the given options, Chittaranjan is the correct place associated with the manufacture of the first steam locomotive by CLW.
5. In which Union Budget was “basic reform in the international financial system” stressed?
[A] 1969
[B] 1980
[C] 1983
[D] 1984
Show Answer
Correct Answer: C [1983]
Notes:
The phrase was highlighted in the Union Budget for 1983-84. Finance Minister Pranab Mukherjee emphasized India’s efforts towards reforming the international financial and trading system. This Budget was presented for the fiscal year starting 1983, linking the statement directly to this period.
6. Which tool absorbs excess liquidity from banks most effectively?
[A] Repo Rate
[B] Cash Reserve Ratio (CRR)
[C] Prime Lending Rate
[D] Statutory Liquidity Ratio (SLR)
Show Answer
Correct Answer: B [Cash Reserve Ratio (CRR)]
Notes:
The Reserve Bank of India uses the Cash Reserve Ratio under the Reserve Bank of India Act, 1934. CRR is the percentage of total deposits that banks must keep as reserves with RBI in cash only. An increase in CRR immediately reduces available funds for banks to lend. RBI reviews and announces CRR regularly in its monetary policy statements.
7. Which are the top three country borrowers of the World Bank’s IBRD in fiscal 2025?
[A] Brazil, Türkiye, Argentina
[B] India, Indonesia, Colombia
[C] Brazil, India, Mexico
[D] India, Türkiye, Philippines
Show Answer
Correct Answer: A [Brazil, Türkiye, Argentina]
Notes:
In fiscal 2025, the World Bank’s IBRD top country borrowers were Brazil, Türkiye and Argentina, based on net commitments. The annual report ranks these three countries ahead of the others in IBRD borrowing for the year. This makes option 1 the correct answer. The question now specifies the reference period and metric, which removes ambiguity and matches the official World Bank dataset.
8. Who regulates foreign bank accounts and remittances by Indian residents?
[A] Ministry of External Affairs
[B] Ministry of Finance
[C] Ministry of Overseas Indians
[D] Reserve Bank of India
Show Answer
Correct Answer: D [Reserve Bank of India]
Notes:
The Reserve Bank of India regulates foreign currency accounts and remittances for Indian residents. RBI acts under the Foreign Exchange Management Act, 1999 and the Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2015. Amendments until 2025 empower RBI to set conditions for outward and inward remittance and opening of overseas bank accounts. RBI issues notifications for compliance with FEMA rules.
9. Which option defines ‘shares outstanding’ most accurately?
[A] Total shares authorized minus never issued shares
[B] Total issued shares minus treasury shares
[C] Shares held only by institutional investors and insiders
[D] All authorized shares sold to investors
Show Answer
Correct Answer: B [Total issued shares minus treasury shares]
Notes:
Shares outstanding equals total issued shares minus treasury shares. Treasury shares are shares repurchased by the company and held in its treasury. Shares outstanding are used in calculating market capitalization and earnings per share. Only shares held by external shareholders are considered outstanding. This figure changes when the company buys back or issues new shares.
10. Consider the following:
Real Estate Investment Trust
Railway operation
Insurance sector
As of February 2026, foreign direct investment (FDI) is not permitted in which of the above sector(s)?
[A] 1 Only
[B] 2 Only
[C] 1 and 2 Only
[D] None
Show Answer
Correct Answer: B [2 Only]
Notes:
FDI is not permitted in railway operation as a broad sector, though investment is allowed in specified rail infrastructure activities under the policy. Real Estate Investment Trusts (REITs) registered and regulated under SEBI regulations are excluded from the definition of real estate business, so FDI is permitted in them. The insurance sector has also been opened up to 100% FDI under the automatic route. Therefore, only statement 2 is correct.
