Tertiary Sector in the Indian Economy - Solved Questions (1995-2009) | UPSC Topic Wise Previous Year Questions PDF Download

Question 1: Which one of the following pairs is not correctly matched?   [2009]
(a) Japan : Nikkei
(b) Singapore : Shcomp
(c) UK : FTSE
(d) USA : Nasdaq

Correct Answer is Option (b)

Shangai – Shcomp; Singapore – SIMEX, Straits Time.  Shcomp is a composite index of Shanghai Stock exchange. SIMEX and Strait Times are indicators for Singapore.

Question 2: Consider the following statements:    [2007]
1. The repo rate is the rate at which other banks borrow from the Reserve Bank of India.
2. A value of 1 for Gini Coefficient in a country implies that there is perfectly equal income
for everyone in its population.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Correct Answer is Option (a)

Repo Rate is the rate at which commercial banks borrow funds from RBI. A reduction in the repo rate will help banks to get money from the central bank at a cheaper rate. When the repo rate increases borrowing from RBI becomes more expensive. 

A value of (0) for Gini Coefficient in a country implies that there is perfect equality in the system. If the value is 1 then there is complete inequality in the country.

Question 3: The National Housing Bank was set up in India as a wholly owned subsidiary of which one of the following?   [2007]
(a) State Bank of India
(b) Reserve Bank of India
(c) ICICI Bank
(d) Life Insurance Corporation of India

Correct Answer is Option (b)

National Housing Bank has been set up under the National Housing Bank Act of 1987, which was passed on 9th July, 1988. It is wholly owned by the Reserve bank of India and was created to encourage housing, finance institutions and provide them with financial support.

Question 4: Which one of the following Indian banks is not a nationalized bank?    [2006]

(a) Corporation Bank
(b) Dena Bank
(c) Federal Bank
(d) Vijaya Bank

Correct Answer is Option (c)

Federal Bank is a major Indian commercial bank in the private sector, headquartered at Kochi, Kerala.

Question 5: Consider the following statements: [2006]
1. Life Insurance Corporation of India is the oldest insurance company in India.
2. National Insurance Company Limited was nationalized in the year 1972 and made a subsidiary of General Insurance Corporation of India.
3. Headquarters of United Indian Insurance Company Limited are located at Chennai.
Which of the statements given above are correct?
(a) 1, 2 and 3
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1 and 3 only

Correct Answer is Option (c)

The oldest existing insurance company in India is the National Insurance Company, which was founded in 1906, and is still in business.

Question 6: Consider the following statements: [2005]
1. Sensex is based on 50 of the most important stocks available on the Bombay stock Exchange (BSE).
2. For calculating the Sensex, all the stock are assigned proportional weightage.
3. New York Stock Exchange is the oldest stock exchange in the world.
Which of the statements given above is/are correct?
(a) 2 only
(b) 1 and 3
(c) 2 and 3
(d) none

Correct Answer is Option (a)

The ‘BSE SENSEX’ is a value-weighted index composed of 30 stocks and was started in 1 January, 1986. The origin of the NYSE can be traced to 17 May, 1792. Amsterdam stock exchange (1602) is considered oldest in the world and was established by the Dutch East India company.

Question 7: In the last one decade, which one among the following sectors has attracted the highest Foreign Direct Investment inflows into India?    [2004]
(a) Chemicals other than fertilizers
(b) Services sector
(c) Food processing
(d) Telecommunication

Correct Answer is Option (b)

Service sector received 21% of total FDI flow between 2006 to 2010.

Question 8: Consider the following statements: [2004]
1. The National Housing Bank the apex institution of housing finance in India, was set up as a wholly-owned subsidiary of the Reserve Bank of India

2. The Small Industries Development Bank of India was established as a whollyowned subsidiary of the Industrial Development Bank of India
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Correct Answer is Option (c)

The National Housing Bank (NHB) is a state owned bank and regulation authority in India, created on July 8, 1988 under section 6 of the National Housing Bank Act (1987). The headquarters is in New Delhi. The institution, owned by the Reserve Bank of India, was established to promote private real estate acquisition. NHB is regulating and re-financing social housing programs and other activities like research and IT-initiatives, too.

Small Industries Development Bank of India is an independent financial institution for the growth and development of micro, small and medium scale enterprises in India. Set up in 2 April, 1990 through an Act of Parliament, it was incorporated initially as a wholly owned subsidiary of Industrial Development Bank of India.

Question 9: Consider the following statements:   [2004]
1. Reserve Bank of India was nationalized on 26 January, 1950
2. The borrowing programme of the Government of India is handled by the Department of Expenditure, Ministry of Finance
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Correct Answer is Option (d)

RBI was established in 1935 and was nationalized on 1 January, 1949. RBI handles the borrowing programme of the central and State Governments.

Question 10: Debenture holders of a company are its: [2003]
(a) shareholders
(b) creditors
(c) debtors
(d) directors

Correct Answer is Option (b)

Debenture is a long-term bond issued by a company in return for a loan which have a fixed rate of interest.

Question 11: Consider the following:   [2002]
1. Currency with the public
2. Demand deposits with banks
3. Time deposits with banks
Which of these are included in Broad Money (M3) in India ?
(a) 1 and 2
(b) 1 and 3
(c) 2 and 3
(d) 1, 2 and 3

Correct Answer is Option (d)

Narrow money is the most liquid part of the money supply because the demand deposits can be withdrawn anytime during the banking hours. Time deposits on the other hand have a fixed maturity period and hence cannot be withdrawn before expiry of this period. When we add the time deposits into the narrow money, we get the broad money, which is denoted by M3.

M3 = Narrow money + Time Deposits of public with banks. We note here that the Broad money does not include the interbank deposits such as deposits of banks with RBI or other banks. At the same time, time deposits of public with all banks including the cooperative banks are included in the Broad Money.

Question 12: Consider the following financial institutions of India:    [2002]
1. Industrial Finance Corporation of India (IFCI)
2. Industrial Credit and Investment Corporation of India (ICICI)
3. Industrial Development Bank of India (IDBI)
4. National Bank for Agriculture and Rural Development (NABARD)
The correct chronological sequence of the establishment of these institution is :

(a) 1, 2, 3, 4
(b) 2, 3, 4, 1
(c) 3, 4, 1, 2
(d) 4, 1, 2, 3

Correct Answer is Option (a)

IFCI – 1948; ICICI – 1955; IDBI – 1964; NABARD - 1982

Question 13: Consider the following statements regarding Reserve Bank of India:   [2001]
1. It is a banker to the Central Government
2. It formulates and administers monetary policy
3. It acts as an agent of the Government in respect of India
4. It handles the borrowing programme of Government of India
Which of these statements are correct?
(a) 1 and 2
(b) 2, 3 and 4
(c) 1, 2, 3 and 4
(d) 3 and 4

Correct Answer is Option (c)

Functions of RBI: sole authority to issue currency; government’s bank; banker’s bank; guardian of money market; lender of the last resort; sole reservoir of Foreign exchange reserves; controller of credit; clearing house for settling inter bank transactions. It follows an independent monetary policy.

Question 14: The farmers are provided credit from a number of sources for their short and long term needs. The main sources of credit to the farmers include:   [1999]
(a) the Primary Agricultural Cooperative Societies, commercial banks, RRBs and private money lenders
(b) the NABARD, RBI, commercial banks and private money lenders
(c) the District Central Cooperative Banks (DCCB), the lead banks, IRDP and JRY

(d) the Large Scale Multi-purpose Adivasis Programme, DCCB, IFFCO and commercial banks

Correct Answer is Option (a)

Regional rural banks were established under RRB Act 1976. They provide credit to agriculture and other rural activities. As of March 2014, the number of RRBs has been reduced to 57.

Question 15: Since 1980, the share of the tertiary sector in the total GDP of India has: [1999]
(a) shown an increasing trend
(b) shown a decreasing trend
(c) remained constant
(d) been fluctuating

Correct Answer is Option (a)

The share of the tertiary sector in the total GDP or Gross Domestic Product of India is increasing which is a sign of economic development. This reproduces the trend shown by western countries as they were developing.

Question 16: The banks are required to maintain a certain ratio between their cash in hand and total assets. This is called:    [1998]
(a) SBR (Statutory Bank Ratio)
(b) SLR (Statutory Liquid Ratio)
(c) CBR (Central Liquid Reserve)
(d) CLR (Central Liquid Reserve)

Correct Answer is Option (b)

SLR or the Statutory Liquidity Ratio is that portion of total deposits which a commercial bank has to maintain with itself at any given point of time in the form of liquid assets like cash in hand, current balances with other banks and first class securities which can be turned into cash (gold, cash or other approve securities). This ratio at present is 25%. Some assets have to be in liquid form to take care of financial emergencies which every bank has to face. It regulates the credit growth in India.

Question 17: The accounting year of the Reserve Bank of India is:   [1998]
(a) April-March
(b) July-June
(c) October-September
(d) January-December

Correct Answer is Option (b)

The central bank's accounting year runs from July 1 to June 30. On 11 Mar, 1940, RBI Accounting Year changed from Jan-Dec to July-June.

Question 18:  Which one of the following is the correct sequence of decreasing order of the given currencies in terms of their value in Indian Rupees?    [1998]
(a) US dollar, Canadian dollar, New Zealand dollar, Hong Kong dollar
(b) US dollar, New Zealand dollar, Canadian dollar, Hong Kong dollar
(c) US dollar, Hong Kong dollar, Canadian dollar, New Zealand dollar
(d) Hong Kong dollar, US dollar, New Zealand dollar, Canadian Dollar.

Correct Answer is Option (a)

Question 19: The sum of which of the following constitutes Broad Money in India?    [1997]
1. Currency with the public
2. Demand deposits with banks
3. Time deposits with banks
4. Other deposits with RBI
Choose the correct answer using the codes given below:
(a) 1 and 2
(b) 1, 2 and 3
(c) 1, 2, 3 and 4
(d) 1, 2 and 4

Correct Answer is Option (c)

Narrow money is the most liquid part of the money supply because the demand deposits can be withdrawn anytime during the banking hours. Time deposits on the other hand have a fixed maturity period and hence cannot be withdrawn before expiry of this period. When we add the time despots into the narrow money, we get the broad money, which is denoted by M3. M3 = Narrow money + Time Deposits of public with banks. We note here that the Broad money does not include the interbank deposits such as deposits of banks with RBI or other banks. At the same time, time deposits of public with all banks including the cooperative banks are included in the Broad Money.

Question 20: Hawala transactions relate to payments:    [1996]
(a) received in rupees against overseas currencies and vice versa without going through the official channels
(b) received for sale/transfer of shares without going through the established stock exchanges
(c) received as commission for services rendered to overseas investors/buyers/sellers in assisting them to get over the red tape and/or in getting preferential treatment
(d) made to political parties or to individuals for meeting election expenses

Correct Answer is Option (a)

Hawala is an illegal method of remittance across countries. There are money brokers who are the middle men who undertake hawala transfer. This method of remittance does not involve physical movement of cash. It is also known as Hundi. The word Hawala means trust. The Hawala system works as it is based on mutual trust between the hawala agents. It works outside the banking system and legal financial systems. The remittance happen based on communication between the hawala agents. It is an alternate to traditional remittance system.

Question 21: Which one of the following is not an instrument of selective credit control in India?    [1995]
(a) Regulation of consumer credit
(b) Rationing of credit
(c) Margin requirements
(d) Variable cash reserve ratios

Correct Answer is Option (d)

Variable Reserve Ratio (Cash Reserve Ratio) is aimed to control only volume of credit (quantitative method) not both volume and purpose of credit for which bank gives loans. (Qualitative method and selective control method are used for these purposes. It has a number of limitations.

Question 22: Bank Rate implies the rate of interest:    [1995]
(a) paid by the Reserve Bank of India on the Deposits of Commercial Banks
(b) charged by Banks on loans and advances
(c) payable on Bonds
(d) at which the Reserve Bank of India discounts the Bills of Exchange

Correct Answer is Option (d)

Bank Rate is that rate of interest at which central bank of a country provides refinancing facilities to commercial banks. The bank rate, a benchmark rate at which RBI buys or re-discounts bills of exchange or other commercial papers eligible for purchase. Every bank needs refinancing as it is very difficult to match borrowings and flow of deposits.

Question 23: Consider the following:    [1995]
1. Industrial Finance Corporation of India
2. Industrial Credit and Investment Corporation of India
3. Industrial Development Bank of India
4. Unit Trust of India
The correct sequence in which the above were established is:
(a) 1, 2, 4, 3

(b) 1, 3, 2, 4

(c) 4, 3, 2, 1

(d) 1, 4, 3, 2

Correct Answer is Option (a)

IFCI – July 1948; ICICI – 1955; IDBI – July 1964; UTI – 1963

Question 24: As part of the liberalisation programme and with a view to attract foreign exchange, the government and the RBI have, devised two scheme known as FCNR ‘A’ and FCNR ‘B’. Which of the following is/are true regarding these two schemes?   [1995]
1. Under scheme ‘A’ RBI bears exchange rate fluctuations.
2. Under scheme ‘B’ other banks are to meet out the difference in exchange rate fluctuations.
3. Both the schemes stand withdrawn now.
4. Only scheme ‘A’ has been withdrawn

(a) 3 only
(b) 1 and 2
(c) 1, 2 and 3
(d) 1, 2 and 4

Correct Answer is Option (d)

Under the FCNR (A) Scheme, the RBI bore any exchange rate risk, while in the case of FCNR (B) Scheme banks have to bear the exchange rate risk. The FCNR (A) Scheme was replaced by the FCNR (B) Scheme in 1994.