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.
11. Which body decides the allocation of tax shares between Union and States?
[A] Parliament
[B] Finance Commission
[C] Ministry of Finance
[D] Public Accounts Committee
Show Answer
Correct Answer: A [Parliament]
Notes:
Parliament decides the allocation of tax shares between Union and States as per Articles 270 and 272 of the Constitution. Parliament enacts laws based on recommendations from the Finance Commission, such as the 16th Finance Commission’s recommendation of a 41% share to States for 2026–31. The Ministry of Finance implements these decisions after they are legislated by Parliament.
12. Which tool involves central banks signaling future interest rate intentions?
[A] Forward guidance
[B] Quantitative easing
[C] Open market operations
[D] Reserve requirements
Show Answer
Correct Answer: A [Forward guidance]
Notes:
Forward guidance was widely adopted after the 2008 global financial crisis. The Federal Reserve began explicit forward guidance in 2011. The European Central Bank used this tool in 2013. The Bank of Japan started using forward guidance in 2013. Forward guidance aims to influence market expectations about future monetary policy. It became prominent when policy rates approached zero, limiting conventional monetary tools.
13. What is a golden share in share market parlance?
[A] Share with highest profit from price rise
[B] Share with special voting and veto rights
[C] Share sold before market crash
[D] First share subscribed in an IPO
Show Answer
Correct Answer: B [Share with special voting and veto rights]
Notes:
A golden share grants special voting rights and veto power over company decisions. The share is often held by the government or promoters during privatization or restructuring. The golden share can block major corporate actions regardless of the actual shareholding percentage. Golden shares have been used in countries like India and the UK for strategic interests. They are typically non-transferable and limited in duration or scope.
14. 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.
15. What does a decreasing agricultural sector share in GDP indicate for a country?
[A] The country is heading toward developed nation status
[B] The country is becoming a developing nation
[C] The country is becoming less developed
[D] Agricultural production has completely stopped
Show Answer
Correct Answer: A [The country is heading toward developed nation status]
Notes:
The agricultural sector’s GDP share typically declines as countries industrialize and modernize. In 2023, developed economies like the United States had agriculture contributing less than 1% to GDP. In developing nations, the sector’s share is higher—such as Kenya at around 33%. A falling agricultural share indicates structural transformation toward an industrial and service-based economy.
16. 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.
17. Which is a major drawback of capital-intensive industries? (UPSC Prelims 1982)
[A] High flexibility in demand adjustment
[B] Increased unemployment from automation
[C] Lower initial investment costs
[D] More worker innovation opportunities
Show Answer
Correct Answer: B [Increased unemployment from automation]
Notes:
Capital-intensive industries use automated machinery for production, as seen in sectors like automobile manufacturing. Automation reduces the need for human labor. This leads to displacement of workers, causing structural unemployment. In 2022, India’s manufacturing sector showed a trend toward greater automation. Labor-intensive industries offer more jobs, while capital-intensive ones contribute to unemployment.
18. Which focus marked the Seventh Five-Year Plan’s long-term fiscal policy? (UPSC Prelims 1987)
[A] Capital formation by increasing money income
[B] Reforming the taxing system
[C] Making tax laws easily comprehensible
[D] Tackling deep-seated poverty and unemployment
Show Answer
Correct Answer: D [Tackling deep-seated poverty and unemployment]
Notes:
The Seventh Five-Year Plan emphasized reducing poverty and unemployment, aiming to improve quality of life and create productive rural employment opportunities. The policy focused on social objectives alongside economic growth, prioritizing poverty alleviation over tax reforms or comprehension.
19. Which industry employs the most workers in India? (UPSC Prelims 1988)
[A] Jute
[B] Sugar
[C] Textiles
[D] Iron and Steel
Show Answer
Correct Answer: C [Textiles]
Notes:
The textile industry is the largest employer in India after agriculture. It directly employs about 45 million people as of 2023. Including allied sectors, total employment exceeds 100 million. The industry includes handlooms, powerlooms, spinning, and garment manufacturing. The Indian textile and apparel market was valued at USD 223 billion in 2021 and has significant export share globally.
20. Which among the following has the regulatory powers to prevent recurrence of scams in Indian Capital Market? (UPSC Prelims 1995)
[A] SEBI
[B] RBI
[C] SBI
[D] SBI
Show Answer
Correct Answer: A [SEBI]
Notes:
The various functions of SEBI are:
• To protect the interests of investors in securities market
• To promote the development of securities market
• To regulate the business in stock exchanges and any other securities markets.
• To register and regulate the working of stock brokers, sub-brokers, share transfer agents, bankers to an issue, trustees of trust deeds, registrars to an issue, merchant, bankers, underwriters, portfolio managers, investment advisers.
