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. Who is the ex-officio Chairperson of the Monetary Policy Committee (MPC)?
[A] The Finance Minister of India
[B] The Deputy Governor of RBI
[C] Secretary, Department of Economic Affairs
[D] Governor of Reserve Bank of India
Show Answer
Correct Answer: D [Governor of Reserve Bank of India]
Notes:
The Monetary Policy Committee was formed in 2016 after an amendment to the RBI Act, 1934. The Committee consists of six members: three from the Reserve Bank of India and three nominated by the Central Government. The Governor of the Reserve Bank of India is designated as the ex-officio Chairperson of the Monetary Policy Committee.
2. An autonomous increase in expenditure should result in an increase in a country’s real GNP only if ?
[A] The country’s balance of trade is negative
[B] The country’s economy is working under conditions of less than full employment
[C] It is government expenditure
[D] The multiplier is at least 1.5
Show Answer
Correct Answer: B [The country’s economy is working under conditions of less than full employment]
Notes:
When the economy is working under conditions of less than full employment, the GDP gap is positive and the economy operates at less than potential. At this point, an increase in expenditure would result in an increase in a country’s real GNP.
3. What was the period of India’s First Five Year Plan?
[A] 1951-56
[B] 1961-66
[C] 1969-1974
[D] 1979-1984
Show Answer
Correct Answer: A [1951-56]
Notes:
India’s First Five-year Plan was implemented from the year 1951 till 1956. It mainly focused on the development of primary sector. The Plan was based on the Harrod–Domar model implemented with some modifications.
4. In context of Budget, which among the following is NOT a Non-Plan Expenditure?
[A] Interest payments on loans
[B] Defense expenditure
[C] Pension payments to government employees
[D] Central Assistance to States for developmental projects
Show Answer
Correct Answer: D [Central Assistance to States for developmental projects]
Notes:
Non-Plan Expenditure covers routine government expenses such as interest payments, defense costs, and pensions. Central Assistance to States for developmental projects is categorized as Plan Expenditure, intended for developmental activities as per the Planning Commission guidelines before 2017. After 2017, India merged Plan and Non-Plan expenditure in Union Budget, but the classification in this question refers to the pre-2017 structure.
5. Consider the following statements about the Government Securities (G-sec) market in India:
- Speculation exists in the G-sec market, particularly through activities such as margin trading and short-term position trading.
- Institutional investors dominate the G-sec market, accounting for the majority of trading volume.
Which of the above statements is/are correct?
[A] Only 1 is correct
[B] Only 2 is correct
[C] Both 1 and 2 are correct
[D] Neither 1 nor 2 is correct
Show Answer
Correct Answer: C [Both 1 and 2 are correct]
Notes:
Both statements are correct. The G-sec market does witness speculative activities, including margin trading and short-term trades, often leading to price volatility. Furthermore, institutional investors such as banks, insurance companies, and pension funds are the predominant participants in the G-sec market, holding and trading most government securities for liquidity and investment purposes.
6. Consider the following components related to the balance of payments (BoP):
- Balance of Trade
- Foreign Direct Investments
- Foreign Portfolio Investments
- Foreign Aid
- Foreign Tourist Expenditures
- Domestic Tourism Expenditures
Which of the above are included in the balance of payments?
[A] Only 1, 2 & 5
[B] Only 1, 2, 3, 4 & 5
[C] Only 2, 3, 4 & 5
[D] Only 1, 2, 3 & 5
Show Answer
Correct Answer: B [Only 1, 2, 3, 4 & 5]
Notes:
The Balance of Payments (BoP) records all economic transactions between residents and the rest of the world. Items 1 (Balance of Trade), 2 (Foreign Direct Investments), 3 (Foreign Portfolio Investments), 4 (Foreign Aid), and 5 (Foreign Tourist Expenditures) are included in BoP. Item 6 (Domestic Tourism Expenditures) involves only domestic money flow and is not recorded in BoP.
7. Which one of the following is NOT a sign of economic development?
[A] Changing structure of GDP in favour of industry
[B] Larger share of GDP coming from primary sector
[C] Larger capital inflows
[D] Institutional changes in an economy.
Show Answer
Correct Answer: C [ Larger capital inflows ]
Notes:
Larger capital inflows are not always sign of economic development.
8. Which term represents government’s total borrowing needs from all sources?
[A] Revenue Deficit
[B] Fiscal Deficit
[C] Primary Deficit
[D] Effective Revenue Deficit
Show Answer
Correct Answer: B [Fiscal Deficit]
Notes:
Fiscal deficit is calculated as total expenditure minus the sum of revenue receipts and non-debt capital receipts. Fiscal deficit data is published annually in the Union Budget. It shows the full amount the government must borrow in a financial year. The government’s fiscal deficit for 2023-24 was targeted at 5.9% of GDP.
9. Consider the following statements:
- Stock Exchanges and Future Markets are placed under the union list of Indian Constitution
- Bombay Cotton Trade Association was the first organized futures market in India
Which of the above statements is/are correct?
[A] 1 Only
[B] 2 Only
[C] Both 1 & 2
[D] Neither 1 nor 2
Show Answer
Correct Answer: C [ Both 1 & 2 ]
Notes:
Both are correct statements
First statement is correct because stock exchanges and future markets both are placed under the union list of Indian Constitution. Second statement is also correct because the first organized futures market was established in 1875, under the name of ‘Bombay Cotton Trade Association’ to trade in cotton derivative contracts.
10. What is the resource curse in economic terms?
[A] A country with large resources but lack technology to exploit them
[B] Export from resource-rich countries increases currency value and hurts other sectors
[C] Countries with large reserves but only short-term market gains
[D] A paradox where resource-rich countries lack economic growth
Show Answer
Correct Answer: D [A paradox where resource-rich countries lack economic growth]
Notes:
Resource curse refers to the paradox where nations rich in natural resources tend to experience low economic growth, poor governance, and greater instability. Examples include Nigeria, where oil wealth has resulted in economic and political challenges. The term was first coined in 1993 by economist Richard Auty. The phenomenon is studied in the context of various minerals including oil, diamonds, and other extractive industries.
