Poverty, Planning, Finance & Economic - Solved Questions (1995-2010) | UPSC Topic Wise Previous Year Questions PDF Download

Question 1: In India, the tax proceeds of which one of the following as a percentage of gross tax revenue has significantly declined in the last five years?    [2010]
(a) Service tax
(b) Personal income tax
(c) Excise duty
(d) Corporation tax

Correct Answer is Option (c)

The excise duty’s share in the total tax revenue, which was 41.3 percent in 1992-93, declined to 25.1 percent in 2006- 07. The customs duty’s share in the total tax revenue, which was 31.9 percent in 1992-93, fell to 17.5 percent in 2006-07, as a result of massive structuring on excise and customs.

Question 2: Which one of the following authorities makes recommendation to the Governor of a State as to the principles for determining the taxes and duties which may be appropriated by the Panchayats in that particular State?   [2010]
(a) District Planning Committees
(b) State Finance Commission
(c) Finance ministry of that State
(d) Panchayati Raj Ministry of that State

Correct Answer is Option (b)

State Finance Commission governs the distribution between the State and the Panchayats of the net proceeds of the taxes, duties, tolls and fees leviable by the State, which may be divided between them under this Part and the allocation between the Panchayats at all levels of their respective shares of such proceeds; the determination of the taxes, duties, tolls and fees which may be assigned as, or appropriated by, the Panchayats; the grants-in-aid to the Panchayats from the Consolidated Fund of the State.

Question 3: Consider the following statements: In India, taxes on transactions in Stock Exchanges and Futures Markets are   [2010]
1. levied by the Union
2. collected by the States
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)

In India taxes on transactions in Stock Exchange and Future Markets are levied and collected by the Union Govt.

Question 4: The SEZ Act, 2005 which came, into effect in February 2006 has certain objectives. In this context, consider the following:    [2010]
1. Development of infrastructure facilities.
2. Promotion of investment from foreign sources.
3. Promotion of exports of services only.
Which of the above are the objectives of this Act?
(a) 1 and 2 only
(b) 3 only
(c) 2 and 3 only
(d) 1, 2 and 3

Correct Answer is Option (a)

The objectives of establishing SEZs Special export Zones include making available goods and services free of taxes and duties supported by an integrated infrastructure for export production, and single window approval mechanism and a package of incentives to attract foreign and domestic investments for promoting export-led growth.

Question 5: A great deal of Foreign Direct Investment (FDI) to India comes from Mauritius than from many major and mature economies like UK and France. Why?    [2010]
(a) India has preference for certain countries as regards receiving FDI
(b) India has double taxation avoidance agreement with Mauritius
(c) Most citizens of Mauritius have ethnic identity with India and so they feel secure to invest in India
(d) Impending dangers of global climatic change prompt Mauritius to make huge investments in India

Correct Answer is Option (b)

India has comprehensive Double Taxation Avoidance Agreements (DTAA) with 23 countries. This means that there are agreed rates of tax and jurisdiction on specified types of income arising in a country to a tax resident of another country. Under the Income Tax Act 1961 of India, there are two specific provisions, Section 90 and Section 91, which provide specific relief to taxpayers to save them from DTAA. Section 90 is for taxpayers who have paid the tax in a country with which India has signed DTAA, while Section 91 provides relief to taxpayers who have paid tax to a country with which India has not signed a DTAA. Thus, India gives relief to both kind of taxpayers Mauritius by itself is a low tax counting.

Question 6: India-based Neutrino Observatory is included by the Planning Commission as a mega science project under the 11th Five-Year Plan. In this context, consider the following statements:    [2010]
1. Neutrinos are chargeless elementary particles that travel close to the speed of light.
2. Neutrinos are created, in nuclear reactions of beta decay.
3. Neutrinos have a negligible, but non-zero mass
4. Trillions of Neutrinos pass through human body every second.
Which of the statements given above are correct?
(a) 1 and 3 only
(b) 1, 2 and 3 only
(c) 2, 3 and 4
(d) 1, 2, 3 and 4

Correct Answer is Option (d)

A neutrino is an elementary particle that usually travels close to the speed of light, is electrically neutral, and is able to pass through ordinary matter almost undisturbed. This makes neutrinos extremely difficult to detect. Neutrinos have a very small, but nonzero rest mass. Neutrinos are affected only by a ‘weak’ sub-atomic force of much shorter range than electromagnetism, and are therefore able to pass through great distances in matter without being affected by it.

Question 7:  Inclusive growth as enunciated in the Eleventh Five Year Plan does not include one of the following: [2010]
(a) Reduction of poverty
(b) Extension of employment opportunities
(c) Strengthening of capital market
(d) Reduction of gender inequality

Correct Answer is Option (c)

Inclusive growth is ‘broad-based growth’, ‘shared growth’, and ‘pro-poor growth’. It excludes the capital markets which is left to operate by itself in the open market.

Question 8:  Who of the following shall cause every recommendation made by the finance Commission to be laid before each House of Parliament?    [2010]
(a) The President of India
(b) The Speaker of Lok Sabha
(c) The Prime Minister of India
(d) The Union Finance Minister

Correct Answer is Option (a)

As per provisions given under Article 281 of the Indian Constitution the recommendations of the finance commission go to the president who is constitutionally bound to place it before the two houses of the parliament.

Question 9: Which one of the following is responsible for the preparation and presentation of Union Budget to the Parliament?    [2010]
(a) Department of Revenue
(b) Department of Economic Affairs
(c) Department of Financial Services
(d) Department of Expenditure

Correct Answer is Option (b)

The DEA or the Department of Economic Affairs is responsible for preparation and presentation to the Parliament of Central Budget and the Budgets for the State Governments under President’s Rule and Union Territory Administration.

Question 10: Consider the following actions by the Government: [2010]
1. Cutting the tax rates
2. Increasing the government spending
3. Abolishing the subsidies in the context of economic recession
Which of the above actions can be considered a part of the “fiscal stimulus” package?
(a) 1 and 2 only
(b) 2 only
(c) 1 and 3 only
(d) 1, 2 and 3

Correct Answer is Option (a)

Abolishing the subsidies will lead to higher prices of goods and services which are subsidzed. A reduction in the tax rate would be a stimulus. While increase in government expenditure would increase the level of demand in the economy.

Question 11:  In the context of India’s Five Year Plans, a shift in the pattern of industrialization, with lower emphasis on heavy industries and more on infrastructure begins in   [2010]
(a) Fourth Plan
(b) Sixth Plan
(c) Eighth Plan
(d) Tenth Plan

Correct Answer is Option (c)

It was during eighth plan period (1992-97) that emphasis was put on infrastructure development.

Question 12:  With reference to the Nationa1 Investment Fund to which the disinvestment proceeds are routed, consider the following statements:    [2010]
1. The assets in the National Investment Fund are managed by the Union Ministry of Finance.
2. The National Investment Fund is to be maintained within the Consolidated Fund of India.
3. Certain Asset Management companies are appointed as the fund managers.
4. A certain proportion of annual income is used for financing select social sectors.
Which of the statements given above is/are correct ?
(a) 1 and 2
(b) 2 only
(c) 3 and 4
(d) 3 only

Correct Answer is Option (c)

On 27 January 2005, the Government had decided to constitute a ‘National Investment Fund’ (NIF) into which realization from sale of minority shareholding of the Government in CPSEs would be channelised. This fund is managed by professionals and a part of it is used for use in social sector – like education, health care and employment.

Question 13: During which Five Year Plan was the Emergency clamped, new elections took place and the Janata Party was elected?   [2009]
(a) Third
(b) Fourth
(c) Fifth
(d) Sixth

Correct Answer is Option (c)

This all happened from 1975-78 during fifth five year plan the period of which is (1974-78)

Question 14: Consider the following statements regarding Indian Planning:     [2009]
1. The Second Five-Year Plan emphasized on the establishment of heavy industries.

2. The Third Five-Year Plan introduced the concept of import substitution as a strategy for industrialization.
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)

The second five-year plan emphasized on the development of the public sector and “rapid industrialization. The third five –year plan, stressed on agriculture and improvement in the production of food grains with long term development

Question 15: Which one of the following brings out the publication called “Energy Statistics” from time to time?    [2009]
(a) Central Power Research Institute
(b) Planning Commission
(c) Power Finance Corporation Ltd.
(d) Central Statistical Organization

Correct Answer is Option (d)

It is published by Ministry of Statistics and Programme Implementation, Central Statistical Organization.

Question 16: In the context of independent India’s economy, which one of the following was the earliest event to take place?   [2009]
(a) Nationalization of Insurance companies
(b) Nationalization of State Bank of India
(c) Enactment of Banking Regulation Act
(d) Introduction of First Five-Year Plan

Correct Answer is Option (c)

Nationalization of State Bank of India – 1955; Introduction of First Five-Year Plan – 1951; Enactment of Banking Regulation Act – 1949; Nationalization of Insurance Companies – 1955-56

Question 17: Which one of the following is the correct statement? Service tax is a/an:    [2006]
(a) direct tax levied by the Central Government.
(b) indirect tax levied by the Central Government.
(c) direct tax levied by the State Government.
(d) indirect tax levied by the State Government.

Correct Answer is Option (b)

All taxes which are the personal liability of an assessee come under direct taxes. They include income tax, professional tax, wealth tax, securities transaction tax, commodity transaction tax and the like. On the other hand, the taxes which a person can recover from some other person but the liability of which remains of the person collecting such taxes are indirect taxes. These are custom duty, excise, service tax, vat, CST and the like.

Question 18: Global capital flows to developing countries increased significantly during the nineties. In view of the East Asian financial crisis and Latin American experience, which type of inflow is good for the host country?    [2002]
(a) Commercial loans
(b) Foreign Direct Investment
(c) Foreign Portfolio Investment
(d) External Commercial borrowings

Correct Answer is Option (b)

FDI is defined as investment by a foreign multinational or its subsidiary or a foreign company in terms of setting up a project in another country either by way of a 100% subsidiary or by way of a joint venture. Thus, FDI investment is long term in nature. Thus, it can not be pulled out of the country at short notice. It is also non-debt creating.

Question 19: Five Year Plan in India is finally approved by:    [2002]
(a) Union Cabinet
(b) President on the advice of Prime Minister
(c) Planning Commission
(d) National Development Council

Correct Answer is Option (d)

In India plans are formulated by Planning Commission and are finally approved by National Development Council. All state chief ministers are members of NDC. The NDC is headed by prime minister of India.

Question 20: A country is said to be a debt trap if:    [2002]
(a) it has to borrow to make interest payments on outstanding loans
(b) It has to abide by the conditionalities imposed by the International Monetary fund.
(c) it has been refused loans or aid by creditors abroad
(d) the World Bank charges a very high rate of interest on outstanding as well as new loans

Correct Answer is Option (a)

Debt Trap is a situation where you add on a new debt in order to repay an existing debt.

Question 21: Consider the following:    [2001]
1. Market borrowing
2. Treasury bills
3. Special securities issued to RBI
Which of these is/are components(s) of internal debt?
(a) 1 only
(b) 1 and 2
(c) 2 only
(d) 1, 2 and 3

Correct Answer is Option (d)

Internal debt is that part of the total debt that is owed to lenders within the country. Market borrowings, Treasury bills and special securities issued to RBI are all sources of internal borrowings

Question 22: A rise in ‘SENSEX’ means: [2000]
(a) a rise in prices of shares of all companies registered with Bombay Stock Exchange
(b) a rise in prices of shares of all companies registered with National Stock Exchange
(c) an overall rise in prices of shares of group up companies registered with Bombay Stock Exchange
(d) a rise in prices of shares of all companies belonging to a group of companies registered with Bombay Stock Exchange

Correct Answer is Option (c)

Increase in SENSEX reflects the overall mood of the economy. A rise in it means that investors and FIIs are positive about the growth of Indian economy and expect that it will be sustained in future.

Question 23: Assertion (A): The rate of growth of India’s exports has shown an appreciable increase after 1991.   [2000]
Reason (R): The Govt. of India has resorted to devaluation.
(a) Both A and R are true and R is the correct explanation of A
(b) Both A and R are true but R is not a correct explanation of A
(c) A is true but R is false
(d) A is false but R is true

Correct Answer is Option (a)

Devaluation of currency is conscious decision taken by Central bank of country to lower the external value of domestic currency. As a result of this Indian goods become cheaper for Foreigners. Import decrease and exports increases.

Question 24: Match List I with List II and select the correct answer using the codes given below the lists:   [2000]
(a) A-1; B-2; C-3; D-4
(b) A-4; B-2; C-1; D-3
(c) A-2; B-3; C-4; D-1
(d) A-2; B-1; C-4; D-3

Correct Answer is Option (a)

UN Development programme brings out UN India Human Development Report. National council of Applied Economic Research brings out India Development Report. Human Development Report is bring out by world Bank. World Development Research is carried out by Indira Gandhi Institute of Development Research.

Question 25: “...instil into the vast millions of workers, men and women, who actually do the job, a sense of partnership and of cooperative performance...” The above passage relates to:   [2000]
(a) Planned Development
(b) Community Development
(c) Panchayati Raj System
(d) Integrated Development Programme

Correct Answer is Option (b)

Community Development is a process where community members come together to take collective action and generate solutions to common problems.
It seeks to empower individuals and groups of people with the skills they need to effect change within their communities.

Question 26: Economic liberalisation in India started with:   [2000]
(a) substantial changes in industrial licensing policy
(b) the convertibility of Indian rupee
(c) doing away with procedural formalities for foreign direct investment
(d) significant reduction in tax rates

Correct Answer is Option (a)

Economic liberalization in India started with industrial de-licensing.

Question 27: Consider the following statements:    [2000]
The Indian rupee is fully convertible:
1. in respect of Current Account of Balance of payment
2. in respect of Capital Account of Balance of payment
3. into gold
Which of these statements is/are correct ?
(a) 1 alone
(b) 3 alone
(c) 1 and 2
(d) 1, 2 and 3

Correct Answer is Option (a)

In respect of capital account of balance of payment, the indian rupee is partially convertible after 1991.

Question 28: The growth rate of per capita income at current prices is higher than that of per capita income at constant prices, because the latter takes into account the rate of :    [2000]
(a) growth of population
(b) increase in price level
(c) growth of money supply
(d) increase in the wage rate

Correct Answer is Option (b)

The growth rate of per capita income at current prices is higher than that of per capita income at constant prices, because current prices are influenced by the effect of price inflation

Question 29: The planning process is the industries sector in India has assumed a relatively less important position in the nineties as compared to that in the earlier period. Which one of the following is not true in this regard?    [1999]
(a) With the advent of liberalisation, industrial investment development have largely been placed within the domain of private and multinational sectors

(b) With market assuming a central place, the role of central planning in many sectors has been rendered redundant
(c) The focus of planning has shifted to sectors like human resource
(d) The nation’s priorities have shifted away from industrial development to rural development

Correct Answer is Option (d)

Statement (a), (b) and (c) are true which explain the declining important position of industries sector after nineties in the planning process.

Question 30: Which one of the following is the objective of National Renewal Fund? [1999]
(a) To safeguard the interests of workers who may be affected by technological upgradation of industry or closure of sick units
(b) To develop the core sector of the economy
(c) For the development of infrastructure such as energy, transport communications and irrigation
(d) For human resource development such as full literacy, employment population control, housing and drinking water

Correct Answer is Option (a)

The concept of the National Renewal Fund was announced by the Government as a part of the New Industrial Policy, 1991. The Government established the National Renewal Fund (NRF) by a Government of India resolution on 3rd February , 1992.

Question 31: The Employment Assurance Scheme envisages financial assistance to rural areas for guaranteeing employment to at least:   [1999]
(a) 50 percent of the men and women seeking jobs in rural areas
(b) 50 percent of the men seeking jobs in rural areas
(c) one man and one woman in a rural family living below the poverty line
(d) one person in a rural landless household living below the poverty line

Correct Answer is Option (c)

Employment Assurance scheme was launched on 2nd October, 1993. It is open to all adult rural poor who are in need of wage employment. A maximum of two adults per family would be provided wage employment, when there is demand during lean agricultural season, subject to availability of funds.

Question 32: Economic Survey in India is published officially, every year by the: [1998]
(a) Reserve Bank of India
(b) Planning Commission of India
(c) Ministry of Finance, Govt. of India
(d) Ministry of Industries, Govt. of India

Correct Answer is Option (c)

Economy Survey in India is published officially, every year by the Ministry of Finance, Govt. of India. and issued before the annual budget. It reviews the development in the Indian economy over the previous 12 months.

Question 33: Which one of the following regions of the world supplies the maximum of our imported commodities (in terms of rupee value)?   [1998]
(a) Africa
(b) America
(c) Asia and Oceania
(d) Europe

Correct Answer is Option (d)

India imported most of their commodities from Asia and Oceania.

Question 34: The Sixth and the Eighth Five Year Plans covered the period 1980-1985 and 1992-1997 respectively. The Seventh Five Year Plan covered the period:   [1997]
(a) 1987-1992
(b) 1986 -1991
(c) 1985-1990
(d) 1988 -1994

Correct Answer is Option (c)

Period between 1990-92 was second plan holiday. The first plan holiday was between 1966-69.

Question 35: Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R).
Assertion (A): An important policy instrument of economic liberalization is reduction in import duties on capital goods.
Reason (R): Reduction in import duties would help the local entrepreneurs to improve technology to face the global markets.
In the context of the above two statements, which one of the following is correct? [1996]
(a) Both A and R are true and R is the correct explanation
(b) Both A and R are true R is not a correct explanation
(c) A is true but R is false
(d) A is false but R is true

Correct Answer is Option (a)

Both statements are correct and explain one of the instruments to liberalise the Indian economy .

Question 36: The Eighth Five Year Plan is different from the earliest ones. The critical difference lies in the fact that:    [1996]
(a) it has a considerably larger outlay compared to the earlier plans
(b) it has a major thrust on agricultural and rural development
(c) considerable emphasis is placed on infrastructure growth
(d) industrial licensing has been abolished

Correct Answer is Option (a)

Eighth Five Year Plan (1992-97) had a bigger outlay with energy being given 26.6% of total outlay to a cheque a targeted growth rate of 6.78% per annum.

Question 37: Consider the following statements: Most international agencies which find Development Programme in India on intergovernmental bilateral agreements, mainly provide:   [1996]
1. Technical assistance
2. Soft loans which are required to be paid back with interest
3. Grants, not required to be paid back
4. Food assistance to be paid back
(a) 2 and 4 are correct
(b) 1, 2 and 3 are correct
(c) 1, 2 and 4 are correct
(d) 3 and 4 are correct

Correct Answer is Option (b)

A soft loan is a loan with a below market rate of interest. It also includes concessions to borrowers such as long repayment periods or interest holidays. Technical assistance is aid involving highly educated or trained personnel, such as doctors, who are moved into a developing country to assist with a program of development. Food assistance is given to countries in urgent need of food supplies, especially if they have just experienced a natural disaster. Grant is usually given to governments through individual countries, international aid agencies and through multilateral institutions such as the world Bank and by through development charities.

Question 38: Consider the following items imported by India:    [1996]
1. Capital goods
2. Petroleum
3. Pearls and precious stones
4. Chemicals
5. Iron and Steel
The correct sequence of the decreasing order of these items (as per 94-95 figures), in terms of value is:
(a) 1, 2, 3, 4, 5
(b) 1, 2, 4, 3, 5
(c) 2, 1, 3, 4, 5
(d) 2, 1, 4, 5, 3

Correct Answer is Option (d)

Value of import in India as per 94-95 figures

1. Petroleum oils and oils - US$ 3,285,560.58 million obtained from bituminou
2. Petroleum oils oils, etc.-US $ 2,642,351.87 millions (excl. crude), Preparation
3. Diamonds non-industrial-US $ 1,500, 668.80 million unworked or simply swan

Question 39: Which one of the following Five Year Plans recognised human development as the core of all development efforts?   [1995]
(a) The Third Five Year Plan
(b) The Fifth Five Year Plan
(c) The Sixth Five Year Plan
(d) The Eighth Five Year Plan

Correct Answer is Option (d)

In the eight five year plan (1992-1997), the top priority was given to the development of the human resources i.e., employment, education, and public health.

Question 40: Which of the following are among the non-plan expenditures of the Government of India?    [1995, 1997]
1. Defence expenditure
2. Subsidies
3. All expenditures linked with the previous plan periods
4. Interest payment
(a) 1 and 2
(b) 1 and 3
(c) 2 and 4
(d) 1, 2, 3 and 4

Correct Answer is Option (d)

Non-plan expenditures include non-developmental expenditure (interest payment, subsidies, defence expenditure, civil administration), developmental expenditure and expenditure incurred on projects which remained unfinished in the earlier plans.

Question 41: What is the annual rate aimed in the Eighth Five Year Plan    [1995]
(a) 5.6%
(b) 6%
(c) 6.5%
(d) 7%

Correct Answer is Option (a)

The targeted annual growth rate was 5.6% but the actual growth rate was 6.7%.

Question 42: The largest source of financing the public sector outlay of the Eighth Five Year Plan comes from:   [1995]
(a) balance from current revenue
(b) contribution of public enterprises
(c) government borrowings
(d) deficit financing

Correct Answer is Option (d)

Financing of Eighth five year plan outlay In the Public sector (Rupees in crores)

Question 43: The New Exim Policy announced in 1992, is for period of :   [1995]
(a) 3 years
(b) 4 years
(c) 7 years
(d) 5 years

Correct Answer is Option (d)
The New Exim Policy was for five years (April 1, 1992 –March 31, 1997).