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.
1. If India’s external commercial borrowings increase, what is the likely macroeconomic impact?
[A] External debt will increase, but macroeconomic impact depends on hedging and exchange rates
[B] External debt will increase, but forex reserves will remain unaffected
[C] External debt will remain unaffected due to RBI’s forward book management
[D] External debt will increase proportionally, with no impact on current account deficit
Show Answer
Correct Answer: A [External debt will increase, but macroeconomic impact depends on hedging and exchange rates]
Notes:
At end-March 2025, India’s outstanding commercial borrowings reached $291.6 billion, a 16.4% rise from the previous year. Increase in ECBs directly raises external debt. Macroeconomic stability varies with hedging costs and exchange rate fluctuations, which can affect inflation and liquidity. The impact is also influenced by RBI’s management of foreign exchange reserves and currency volatility, not only the debt quantum.
2. In which five year plan self-reliance as an object of planning was emphasized?
[A] First Five Year Plan
[B] Second Five Year Plan
[C] Third Five Year Plan
[D] Fourth Five Year Plan
Show Answer
Correct Answer: D [Fourth Five Year Plan]
Notes:
The Fourth Five-year plan was implemented during 1969 to 1974 in India. The plan has twin objectives of “Growth with stability” and “progressive achievement of self-reliance”. It focused on the growth rate of Agriculture.
3. A new private bank in India is established under which act?
[A] Banking Regulation Act 1949
[B] Companies Act 2013
[C] RBI Act 1934
[D] Banking Companies (Acquisition and Transfer) Act 1970
Show Answer
Correct Answer: B [Companies Act 2013]
Notes:
In India, a new private bank is legally incorporated under the Companies Act 2013 as a banking company. The Companies Act 2013 governs formation, registration, and operation of companies in India. Banks must first be incorporated as companies before applying for a banking license from the Reserve Bank of India. The Companies Act 2013 replaced the Companies Act 1956.
4. Which is India’s largest multi-state co-operative bank?
[A] Vijaya Bank
[B] Saraswat Bank
[C] Union Co-operative Bank
[D] The Madhya Pradesh Rajya Sahakari Bank
Show Answer
Correct Answer: B [Saraswat Bank]
Notes:
Saraswat Bank was founded on 14 September 1918. It is the largest multi-state and urban co-operative bank in Asia. Saraswat Bank operates across eight Indian states with over 300 branches and 350 ATMs as of March 2025. Total business reached ₹91,814 crores in 2024–25. The bank reported zero Net NPAs for three consecutive years and a Gross NPA ratio of 2.25% as of March 31, 2025.
5. Which body regulates housing finance companies (HFCs) in India?
[A] Reserve Bank of India (RBI)
[B] National Housing Bank (NHB)
[C] Housing Development Finance Corporation
[D] State Housing Development Boards
Show Answer
Correct Answer: A [Reserve Bank of India (RBI)]
Notes:
The Reserve Bank of India (RBI) is the primary regulator for Housing Finance Companies (HFCs) in India, having taken over these powers from the National Housing Bank (NHB) in 2019. While the NHB remains responsible for the supervision and development of the housing finance sector, regulatory authority, including licensing and setting prudential norms, rests with the RBI. In 2019, the Finance Act 2019 amended the National Housing Bank Act, 1987, transferring regulatory control from the NHB to the RBI to ensure uniform regulation of all lending institutions.
6. The secondary market deals in which of the following?
[A] Only newly issued securities
[B] Only government bonds and certificates of deposit
[C] Securities already issued and previously traded
[D] Only short-term trading instruments
Show Answer
Correct Answer: C [Securities already issued and previously traded]
Notes:
The secondary market is for trading securities that have already been issued. Transactions involve investors buying and selling among themselves. The issuing company does not receive any funds from these trades. Major examples include stock exchanges like NYSE and NASDAQ. The market provides liquidity and facilitates price discovery for already existing securities including shares, bonds, and debentures.
7. Which is NOT a qualitative instrument of credit control in India?
[A] Moral Suasion
[B] Credit Rationing
[C] Cash Reserve Ratio (CRR)
[D] Margin Requirements
Show Answer
Correct Answer: C [Cash Reserve Ratio (CRR)]
Notes:
Cash Reserve Ratio (CRR) is a quantitative instrument set by the Reserve Bank of India under Section 42(1) of the RBI Act, 1934. CRR mandates banks to keep a percentage of deposits with RBI in cash. It controls the total volume of credit by affecting banks’ lending power. Qualitative credit control instruments in India include moral suasion, credit rationing, and margin requirements.
8. Ad valorem tax is levied on which of the following?
[A] The price of a commodity
[B] The value added to a product
[C] The assessed value of property or transaction
[D] The unit of the commodity
Show Answer
Correct Answer: C [The assessed value of property or transaction]
Notes:
Ad valorem tax is calculated as a percentage of the assessed value of property or transaction. Sales tax, property tax, and import duties are common examples. This tax is proportional to the value, not a fixed amount per unit. The term originates from Latin meaning “according to value.” The assessed value is used to determine the actual tax liability.
9. Consider the following statements regarding Narrow Banking:
- In Narrow Banking, banks primarily accept deposits and invest largely in safe, liquid assets such as government securities, while avoiding risky activities including proprietary trading and complex derivatives.
- Asset-Liability Mismatch is rare in Narrow Banking because the liabilities are aligned with the risk and maturity characteristics of the assets.
Which of the above statements is / are correct?
[A] Only 1
[B] Both 1 and 2
[C] Only 2
[D] Neither 1 nor 2
Show Answer
Correct Answer: B [Both 1 and 2]
Notes:
Statement 1 is correct because Narrow Banking limits banks to investing in liquid, safe assets, such as government securities, avoiding higher-risk strategies. Statement 2 is also correct since matching the maturity and risk of assets and liabilities reduces the possibility of asset-liability mismatches. Therefore, both statements correctly describe the essential features of Narrow Banking.
10. National Small Savings Fund is a part of which among the following?
[A] Consolidated Fund of India
[B] Public Account of India
[C] Contingency Fund of India
[D] Prime Minister’s Relief Fund
Show Answer
Correct Answer: B [Public Account of India]
Notes:
The National Small Savings Fund (NSSF) is part of the Public Account of India. The Public Account includes funds that the government holds on behalf of others, such as small savings schemes, provident funds, and other deposits. The NSSF primarily manages the savings from various small savings schemes like the Public Provident Fund (PPF) and the National Savings Certificate (NSC). These funds are used for financing government projects and development activities.
