UPSC Prelims Previous Year Questions 2025: Indian Economy | Indian Economy for UPSC CSE PDF Download

Ans: (b) Only two

Alternative Investment Funds (AIFs) in India, as per the Securities and Exchange Board of India (SEBI) regulations, are funds that invest in asset classes other than traditional investments like stocks, bonds, and cash. They include private equity, venture capital, hedge funds, and other non-conventional investments.

• Bonds: These are traditional fixed-income securities and not classified as AIFs.
• Hedge Funds: These are pooled investment funds using complex strategies and are considered AIFs under SEBI’s Category III.
• Stocks: These are traditional equity investments and not classified as AIFs.
• Venture Capital: These funds invest in startups and early-stage companies and are classified as AIFs under SEBI’s Category I.
  Thus, only Hedge Funds and Venture Capital are treated as AIFs, making the answer two.

The Reserve Bank of India (RBI) generates income primarily through its monetary and financial operations:

• I. Buying and selling Government bonds: Correct. The RBI earns interest on government securities it holds and profits from trading them in open market operations.
• II. Buying and selling foreign currency: Correct. The RBI earns income through foreign exchange transactions, including gains from currency appreciation or forex reserves management.
• III. Pension fund management: Incorrect. The RBI does not manage pension funds as a source of income; this is handled by entities like the Pension Fund Regulatory and Development Authority (PFRDA).
• IV. Lending to private companies: Incorrect. The RBI does not directly lend to private companies; it provides liquidity to banks and financial institutions.
• V. Printing and distributing currency notes: Incorrect. Printing currency is a cost for the RBI, not a source of income, though it earns seigniorage (the difference between the face value of currency and its production cost) indirectly, but this is not the same as income from distribution.
  Thus, only I and II are correct.

Ans: (b) II only

• Statement I: The RBI does not mandate the BRSR. The Securities and Exchange Board of India (SEBI) mandates listed companies (top 1,000 by market capitalization) to submit a BRSR as part of their annual reporting to promote sustainability and ESG (Environmental, Social, Governance) disclosures. Thus, this statement is incorrect.
• Statement II: Correct. The BRSR includes disclosures on non-financial metrics such as environmental impact, social responsibility, and governance practices, focusing on sustainability and ethical operations.
  Thus, only Statement II is correct.

Ans: (d) Statement I is not correct but Statement II is correct  

Statement I: "In India, income from allied agricultural activities like poultry farming and wool rearing in rural areas is exempted from any tax.": This statement is incorrect.

Ans: (a) Both Statement II and Statement III are correct and both of them explain Statement I   

• Statement I: Correct. Bondholders are generally at lower risk than stockholders because they have a fixed claim (interest and principal) on the company’s assets, while stockholders bear the residual risk of ownership.
• Statement II: Correct. Bondholders are lenders (creditors) who provide debt to the company, while stockholders are owners with equity stakes. This explains the lower risk for bondholders, as creditors have priority over ownersburgo shareholders.
• Statement III: Correct. In case of liquidation or bankruptcy, bondholders are prioritized over stockholders for repayment, as debt obligations are settled before equity claims. This also explains the lower risk for bondholders.
• ​Both Statement II and Statement III explain why bondholders face lower risk (Statement I), as their creditor status and repayment priority reduce their exposure compared to stockholders.
  Thus, both II and III are correct and explain Statement I.

Ans: (a) I and II only

• Statement I: Correct. India has become a global leader in equity options trading, with the National Stock Exchange (NSE) accounting for a significant portion of global equity option contracts due to high trading volumes in index and stock options.
• Statement II: Correct. India’s stock market has grown rapidly, with its market capitalization surpassing Hong Kong’s in early 2024, driven by strong economic growth and investor interest.
• Statement III: Incorrect. The Securities and Exchange Board of India (SEBI) regulates the stock market and options trading, issuing warnings to investors about risks and taking action against unregistered financial advisors. SEBI’s investor education initiatives and regulations on advisory services contradict this statement.
  Thus, only I and II are correct.

Ans: (a) Both Statement II and Statement III are correct and both of them explain Statement I   

• Statement I: Correct. A circular economy reduces greenhouse gas emissions by promoting recycling, reuse, and sustainable production practices.
• Statement II: Correct. The circular economy minimizes the use of raw materials by emphasizing recycling, refurbishing, and reusing resources. This reduces emissions by lowering the need for energy-intensive raw material extraction and processing.
• Statement III: Correct. The circular economy reduces wastage in production through efficient design, recycling, and waste-to-resource strategies, which also lowers emissions.
• Both Statements II and III explain how the circular economy reduces emissions (Statement I) by addressing resource efficiency and waste reduction.
  Thus, both II and III are correct and explain Statement I.

Ans: (a) I and II only

• Statement I: Correct. Capital receipts either create a liability (e.g., borrowings) or reduce assets (e.g., disinvestment of government-owned shares).
• Statement II: Correct. Borrowings (e.g., loans or bonds) and disinvestment (e.g., selling stakes in public sector enterprises) are examples of capital receipts, as they affect the government’s balance sheet.
• Statement III: Incorrect. Interest received on loans is a revenue receipt, not a capital receipt, as it does not create a liability or reduce assets but represents income earned.
  Thus, only I and II are correct.

Ans: (d) I, II and III
Given:

• Revenue Expenditure = ₹80,000 crore
• Revenue Receipts = ₹60,000 crore
• Borrowings (Fiscal Deficit) = ₹10,000 crore
• Interest Payments = ₹6,000 crore

Calculations:

1. Revenue Deficit = Revenue Expenditure – Revenue Receipts
   = 80,000 – 60,000 = ₹20,000 crore
   Statement I is correct.

2. Fiscal Deficit = Total Expenditure – Total Receipts (excluding borrowings)
   This is directly given as ₹10,000 crore (since borrowings fill the gap).
   Statement II is correct.

3. Primary Deficit = Fiscal Deficit – Interest Payments
   = 10,000 – 6,000 = ₹4,000 crore
   Statement III is correct.
   Thus, Option (d) I, II and III is correct

Ans: (a) 48,500 crores

• Fiscal Deficit = 50,000 crores.
• Interest Liabilities = 1,500 crores.
• Primary Deficit = Fiscal deficit – interest payments = 50,000 – 1,500 = 48,500 crores.
• Non-debt creating capital receipts (e.g., disinvestment) do not affect the primary deficit calculation, as they are part of the fiscal deficit financing.
  Thus, the gross primary deficit is 48,500 crores.

Ans: (c) I and III only

• Statement I: Correct. The IBRD, part of the World Bank, provides loans and guarantees to middle-income and creditworthy low-income countries.
• Statement II: Incorrect. The IBRD works alongside other institutions, governments, and organizations to reduce poverty, not single-handedly.
• Statement III: Correct. The IBRD was established in 1944 to help rebuild Europe after World War II, though its focus later expanded to global development.
  Thus, I and III are correct.

Ans: (a) I only

• Statement I: Correct. Real-Time Gross Settlement (RTGS) processes transactions instantly, while National Electronic Funds Transfer (NEFT) settles payments in batches, causing a delay.
• Statement II: Incorrect. The RBI does not charge customers for inward RTGS or NEFT transactions; charges, if any, are determined by banks, and inward NEFT transactions are typically free.
• Statement III: Incorrect. Both RTGS and NEFT operate 24/7 as of 2025, following RBI’s expansion of operating hours in recent years. There are no restrictions on specific days for either.
  Thus, only Statement I is correct.

​Ans: (b) Only three

The countries where UPI international merchant payments are already accepted (excluding India) from your list are:

1. United Arab Emirates
2. France
3. Singapore

Both Germany and Bangladesh are not currently supporting UPI-based merchant payments 

Thus, only three countries are accepted under UPI.