Test: Indian Economics - 1

25 Questions MCQ Test Indian Economy for UPSC CSE | Test: Indian Economics - 1

Attempt Test: Indian Economics - 1 | 25 questions in 30 minutes | Mock test for UPSC preparation | Free important questions MCQ to study Indian Economy for UPSC CSE for UPSC Exam | Download free PDF with solutions

The central banking functions in India are performed by the

I. Central Bank of India

II. Reserve Bank of India

III. State Bank of India

IV. Punjab National Bank



Explanation: Main Functions of RBI


Monetary Authority:


  • Formulates, implements and monitors the monetary policy.
  • Objective: maintaining price stability and ensuring adequate flow of credit to productive sectors.

Regulator and supervisor of the financial system:


  • Prescribes broad parameters of banking operations within which the country's banking and financial system functions.
  • Objective: maintain public confidence in the system, protect depositors' interest and provide cost-effective banking services to the public.

Manager of Foreign Exchange


Manages the Foreign Exchange Management Act, 1999.

  • Objective: to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.

Issuer of currency:


  • Issues and exchanges or destroys currency and coins not fit for circulation.
  • Objective: to give the public adequate quantity of supplies of currency notes and coins and in good quality.

Developmental role


  • Performs a wide range of promotional functions to support national objectives.
  • Related Functions


  • Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker.

Banker to banks: maintains banking accounts of all scheduled banks.


Development expenditure of the Central government does not include​


defense expenditure


Gilt-edged market means


market of government securities

Explanation: The gilt-edged market is the market in government securities or the securities guaranteed (as to both principal and interest) by the government. The former include securities of the Government of India and of the slate governments; the latter are securities issued by Local authorities (like city corporations, municipalities, and port trusts) and autonomous government undertakings like development hanks, state electricity boards, etc.The term gilt-edged means ‘of the best quality”. It has come to be reserved for government securities as they do not suffer from the risk of default. Besides, government securities are highly liquid, as they can be easily sold in the market at their going market price. The open market operations of the RBI are also conducted in government securities.


Devaluation of a currency means


reduction in the value of a currency vis-a-vis major internationally traded currencies

Explanation: A currency is considered devalued when it loses value relative to other currencies in the foreign exchange market. A currency's devaluation is the result of a nation's monetary policy. currency devaluation reduces the price of a country's domestic output. This has the potential to benefit the economy by helping to increase its export volume. Conversely, import volumes become stifled as the price of foreign-produced goods and services increases dramatically.


Depreciation means


loss of equipment over time due to wear and tear

Explanation: Depreciation is the systematic reduction in the recorded cost of a fixed asset. Examples of fixed assets that can be depreciated are buildings, furniture, leasehold improvements, and office equipment. The only exception is land, which is not depreciated (since land is not depleted over time, with the exception of natural resources).


In India, rural incomes are generally lower than the urban incomes, which of the following reasons account for this?
i.    A large number of farmers are illiterate and know little about scientific agriculture
ii.    Prices of primary products are lower than those of manufactured products
iii.    Investment in agriculture has been low when compared to investment in industry


I is correct because if the farmers were literate, they wouldn't be exploited for prices. They would know the actual market prices for their crops along with ample scientific methods to boost their crop production and reap benefits.

II is correct since the price paid for raw products is significantly less as compared to the processed item it is used to manufacture. Primary products are basically the raw products that initiate the chain of production of any product. Example: Price of Sugar cane is very less as compared to price of Jaggery.

III is correct since the impact of urbanization has led to a growing interest in the manufacturing industry sector. On the other hand, traditional methods are used in the field of agriculture. Since the sector is ignored, there has been no technological advancement to lure people into working for this sector or develop machineries for the same. Hence it remained confined largely to the rural population which is easy to exploit.


In which among the following years, a new ” Liberalized Industrial Policy ” in India was announced for the first time?


The correct answer is B as a new ” Liberalized Industrial Policy ” in India was announced for the first time 1991


In which among the following years, the MRTP act became effective?


Explanation: MRTP (Monopolies and Restrictive Trade Practices) Act. 1. The act came into force from 1st June, 1970. The act aims to prevent concentration of economic power, provide for control of monopolies, and protect consumer interest.


In the Industrial Policy of 1991, how many industries were reserved only for Public Sector?



Explanation: The number of industries reserved for public sector was reduced from 17 (as per 1956 policy) to only 8 industries viz. Arms and Ammunition, Atomic Energy, Coal, Mineral Oil, Mining of Iron Ore, Manganese Ore, Gold, Silver, Mining of Copper, Lead, Zinc, Atomic Minerals and Railways.


In an oligopolistic or monopolistically competitive market, firms do not raise their prices because even a small price increase will lose many customers. Which among the following is the most suitable terms used for this concept ?

Solution: The Kinked-Demand curve theory is an economic theory regarding oligopoly and monopolistic competition. Kinked demand was an initial attempt to explain sticky prices.

In context with the two way trade of India with different regions, which among the following region is India’s largest trade partner?


The correct option is B.
Because India has a big volume of crude oil imports and has a bit of decent trade with gulf countries.


Consider the following statements in context with the Free Market Economy:
1.    The role of market forces and competition is eliminated by law
2.    There is a high degree of competition in both commodity and factor markets
3.    Private gains are the main motivating and guiding force for carrying out economic activities

Which among the above is/ are correct statements?


Which among the following was NOT a reason behind India’s poverty as pointed out by Dadabhai Naoroji in his famous work “Poverty and Un-British Rule in India” ?


The correct option is C.
After a close study of the dynamics of exchange, Dadabhai Naoroji formulated six major postulates that justified how the British administration in India was plundering its wealth without any measure by the former to fulfil the void. The first factor that enabled such exploitation was due to the nature of administration of India where the country was being governed not by its own elected people but rather, a foreign government. The second postulate highlighted the lack of the influx of immigrants in India that directly caused the choking of the inflow of labour and capital; the two variables that are an absolute essential for an economy to flourish. Thirdly, the major expenses of the army of the British along with the administration personnel from various civil bodies were all sustained by India. Additional to this, the fourth highlight spoke of the miscellaneous expenses that arose on account of the building of England along with her infrastructure were too, borne by India. The fifth point depicted how India in the name of free trade was being plundered of its resources without any kind of compromise where the jobs with handsome packages were all offered to the foreign nationals. The final justification to this wealth drain spoke of how there was a drain in capital as most income earners were foreign nationals themselves and by the virtue of them returning to their own lands caused the tremendous loss of capital.


Which among the following State/ UT / city has the highest per capita electricity consumption in the country?


The correct option is D.
In India, the highest per capita consumption in 2018-19 is in Dadra and Nagar Haveli, at 15,179 kWh. The Union Territory is followed by the states of Gujarat (2,378), Goa (2,274), Haryana (2,082) and Punjab (2,046).


Which among the following represents a decrease in the Owner’s equity?


Redemption of the Debentures

Explanation: Redemption of debentures means payment of the amount of debentures by the company. When debentures are redeemed, liability on account of debentures is discharged. Amount of funds required for redemption of debentures is quite large and, therefore, prudent companies make sufficient provision out of profits and accumulate funds to redeem debentures.


Which among the following will be a debit entry in India’s balance of payments?


Income of Indian investments abroad.


Which among the following states leads in the Infant Mortality Rate in India?


Madhya Pradesh
Explanation: The IMR for girls in Madhya Pradesh stands at 55 per 1000 live births compared to 52 for the boys. The average IMR for girls in the country is 42 compared to 39 for the boys


Yashaswini rural healthcare scheme is being implemented in which among the following states of India?



Explanation: "Yeshasvini Cooperative Farmers Health Care Scheme" (Yeshasvini Scheme) was introduced by the State Government to the Co-operative farmers of Karnataka. Then the Hon’ble Chief Minister of Karnataka Sri S.M.Krishna inaugurated the scheme on 14th of November 2002 and the scheme was operationalised with effect from 1st June 2003. Scheme was implemented through network hospitals to provide cost effective quality healthcare facilities to the Co-operative farmers spread across the state of Karnataka.


Which among the following states of India is running the Dhanwantari Yojana in the healthcare sector?


Madhya Pradesh is one of the largest states in the country with 13.5 percent of the total area. With vast expanse and ever growing population the health care need and concern is but obvious. Thankfully there are satisfactory arrangements for public health in this part of India. Various medical colleges imparting medical and clinical education further adds to the healthcare services of the state. Due to increased health facilities and governmental health programs, the death rate has sharply declined in the last few decades. 
The main aim of the department is to take care of the proper functioning health care organizations. The department has launched several health care schemes under the flagship of Madhya Pradesh government. Several health care organizations such as Madhya Pradesh National Rural Health Mission (NRHM), Madhya Pradesh Family Welfare Department and Madhya Pradesh Public Health Engineering Department (MP PHE), working in coordination with each other under the state health department to offer all round health care facilities to the citizens. In recent years, the state has seen the emergence of the region in health care facilities. Mostly,  people from nearby states prefer visiting Madhya Pradesh for better health care treatment. The state of Madhya Pradesh is home to several hospitals, medical clinics, blood banks, medical colleges and path labs.


Which among the following sectors has largest contribution in Gross Domestic Savings in India?


In the initial stages of planned development starting from its Second Five Year Plan, the strategy of development adopted by India was based on which of the following?
1.    Heavy industries
2.    Export promotion
3.    Light industries
4.    Import substitution

Select the correct answer using the code given below’:


The World Bank’s Environmentally Sustainable Development Division hasdeveloped Green Index. Which one of the following is not a constituent of  this index?


The World Bank's Environmentally Sustainable Development Division has developed Green Index.It includes three constituents:
a) Produced assets
b) Natural resources
c) Human resources
In 2001, Per capita on the basis of the above given constituent (of India) was $ 4300.


According to population experts, the possible demographic bonus mayaccrue to India by 2016 A.D. Which phenomenon are they referring to ?


What is the long-term objective of National Population Policy (NPP), 2000 ?


The main part of fiscal policy is:


Tax policy

Explanation: Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy. It is the sister strategy to monetary policy through which a central bank influences a nation's money supply.

Use Code STAYHOME200 and get INR 200 additional OFF
Use Coupon Code