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. Which fertilizer contains the highest percentage of nitrogen?
[A] Urea
[B] Ammonium nitrate
[C] Calcium nitrate
[D] Calcium ammonium nitrate
Show Answer
Correct Answer: A [Urea]
Notes:
Urea is a white crystalline solid containing about 46% nitrogen. Urea is widely used as a fertilizer and animal feed additive in agriculture. No other solid fertilizer has a higher nitrogen content than urea. Ammonium nitrate contains about 34% nitrogen, calcium ammonium nitrate about 26%, and calcium nitrate about 15.5% nitrogen.
3. Which among the following is the main feature of Democratic planning?
[A] Inducement
[B] Government
[C] Direction
[D] Flexibility
Show Answer
Correct Answer: D [Flexibility]
Notes:
Democratic planning is the planning process generally adopted in mixed economy. Mixed economy possesses characteristics of both capitalist economy as well as socialist economy. Democratic planning involves participation of all the citizens of an economy directly or indirectly.
4. Round-tripping is associated with which of the following?
[A] Capital Markets
[B] Foreign Direct Investments
[C] Cash Deposits
[D] Foreign Remittances
Show Answer
Correct Answer: B [Foreign Direct Investments]
Notes:
Round-tripping involves domestic funds sent abroad and returning as foreign direct investment (FDI), often through offshore financial centers like Mauritius and Cyprus. India has observed FDI inflows suspected to involve round-tripping, especially in the 2000s and 2010s. The Department for Promotion of Industry and Internal Trade monitors FDI trends. Round-tripping bypasses tax regulations on FDI in multiple countries, including India.
5. Progressive taxation aligns with which principle in tax theory?
[A] Benefit principle
[B] Cost of service theory
[C] Ability to pay principle
[D] Equity of sacrifice approach
Show Answer
Correct Answer: C [Ability to pay principle]
Notes:
The ability to pay principle is a basis for progressive taxation, taxing individuals according to their income levels. Progressive tax rates increase as income rises under this principle. India’s income tax is based on this principle, with tax slabs laid down in the Income Tax Act, 1961. Most modern tax systems, including those of the UK and India, use this approach.
6. 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.
7. Who designed the Indian Rupee symbol (₹)?
[A] Ashvini Rai
[B] Umesh Kumar
[C] D Udaya Kumar
[D] S.K Paul
Show Answer
Correct Answer: C [D Udaya Kumar]
Notes:
The Indian Rupee symbol was designed by D Udaya Kumar in 2010. He was then an assistant professor at IIT Guwahati. The government conducted a public contest in 2009 for the symbol’s design. His design combines the Devanagari ‘र’ and the Latin ‘R’. The government officially adopted the symbol on 15 July 2010. Kumar received a cash award of ₹2.5 lakh for his design.
8. Which price index measures headline inflation in India?
[A] GDP Deflator
[B] WPI
[C] CPI (Combined)
[D] CPI-IW
Show Answer
Correct Answer: C [CPI (Combined)]
Notes:
In India, headline inflation for monetary policy and general price monitoring is measured using the all-India Consumer Price Index (CPI), specifically CPI (Combined). MoSPI releases CPI for Rural, Urban and Combined sectors, and inflation is usually calculated as the year-on-year change in CPI. The Reserve Bank of India uses CPI headline inflation as its main inflation indicator for policy decisions, not WPI or CPI-IW.
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. In the context of share markets in India, a public issue refers to which of the following?
[A] An offer of shares to the general public through a prospectus
[B] An issue of shares only to existing shareholders of the company
[C] An issue of shares to a select group of identified persons on a private basis
[D] A transfer of shares between two existing shareholders on the stock exchange
Show Answer
Correct Answer: A [An offer of shares to the general public through a prospectus]
Notes:
A public issue means an invitation to the public to subscribe to securities through a prospectus. In the Indian market, public issues are broadly classified into IPO and FPO. An IPO is the first public offer by an unlisted company, while an FPO is a later public offer by a listed company. Issues made only to existing shareholders are rights issues, and issues to selected persons on a private basis are private placements.
