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. 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.
2. Which among the following is a suitable term for the state of economy in which economic activity is slowing down but wages and prices continue to rise ?
[A] Inflation
[B] Deflation
[C] Skweflation
[D] Stagflation
Show Answer
Correct Answer: D [Stagflation]
Notes:
Stagflation refers to persistent high inflation coupled with high unemployment and stagnant demand /growth in economy.
High Inflation + Low Economic Growth {or conditions of recession} + Low Employment Generation = Stagflation
3. Which Indian state is the top producer of large cardamom?
[A] Kerala
[B] Sikkim
[C] Assam
[D] Gujarat
Show Answer
Correct Answer: B [Sikkim]
Notes:
Sikkim produces about 80% of India’s large cardamom. It is grown mainly in the Himalayan region of Sikkim due to the favorable climate and altitude. Sikkim’s production reached approximately 5.591 thousand tonnes in 2025. The government initiative “Mero Alaichi, Mero Dhan” supports cardamom cultivation in Sikkim. Assam, Gujarat, and Kerala do not match Sikkim’s output in this crop.
4. At which of the following places was the first steam locomotive of Chittaranjan Locomotive Works manufactured?
[A] Varanasi
[B] Perambur
[C] Chittaranjan
[D] Patiala
Show Answer
Correct Answer: C [Chittaranjan]
Notes:
Chittaranjan Locomotive Works was established at Chittaranjan in West Bengal, and it produced its first steam locomotive in 1950. The workshop later became one of India’s major locomotive manufacturing centres. Among the given options, Chittaranjan is the correct place associated with the manufacture of the first steam locomotive by CLW.
5. Which tool absorbs excess liquidity from banks most effectively?
[A] Repo Rate
[B] Cash Reserve Ratio (CRR)
[C] Prime Lending Rate
[D] Statutory Liquidity Ratio (SLR)
Show Answer
Correct Answer: B [Cash Reserve Ratio (CRR)]
Notes:
The Reserve Bank of India uses the Cash Reserve Ratio under the Reserve Bank of India Act, 1934. CRR is the percentage of total deposits that banks must keep as reserves with RBI in cash only. An increase in CRR immediately reduces available funds for banks to lend. RBI reviews and announces CRR regularly in its monetary policy statements.
6. The Tobin tax was originally proposed for which type of transactions?
[A] Real estate transactions
[B] Foreign exchange transactions
[C] Stock and bond transactions
[D] All financial transactions
Show Answer
Correct Answer: B [Foreign exchange transactions]
Notes:
James Tobin proposed the Tobin tax in 1972 as a tax on international foreign exchange transactions. The proposal followed the end of dollar convertibility to gold and adoption of floating exchange rates. Tobin suggested tax rates between 0.1% and 1% on currency conversions. The original focus was specifically on foreign exchange markets to curb currency speculation and exchange-rate volatility.
7. Who decides the interest rates on savings bank accounts in India?
[A] Central Government
[B] Banks themselves
[C] Reserve Bank of India
[D] Individual account holders
Show Answer
Correct Answer: B [Banks themselves]
Notes:
Savings bank deposit rates in India are determined by individual banks. The Reserve Bank of India deregulated these rates with effect from October 25, 2011, so banks gained the freedom to set their own savings account interest rates. However, they must follow RBI directions on the method of calculation and disclosure. In practice, each bank notifies its savings deposit rate publicly and may revise it from time to time according to its own policy.
8. How many key infrastructure sectors are known as Core sector in Indian Economy, used for Index of Industrial Production (IIP) data?
[A] 5
[B] 6
[C] 7
[D] 8
Show Answer
Correct Answer: D [8]
Notes:
There are 8 Core Industries or core sectors of the economy viz. coal, crude oil, natural gas, refinery products, fertilizer, steel, cement and electricity used in Index of Industrial Production (IIP).
9. Which agency approves FDI proposals in Single Brand retail under Government Route?
[A] Regional Office of Reserve Bank of India
[B] Department of Economic Affairs (Ministry of Finance)
[C] Department for Promotion of Industry and Internal Trade (Ministry of Commerce and Industry)
[D] Foreign Investment Promotion Board
Show Answer
Correct Answer: C [Department for Promotion of Industry and Internal Trade (Ministry of Commerce and Industry)]
Notes:
Under India’s FDI policy, proposals for single brand retail trading that require Government approval are examined by the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry. DPIIT is the competent authority for processing such approval-route FDI proposals. The Reserve Bank of India’s regional offices do not grant these approvals, and the Foreign Investment Promotion Board no longer functions as the approving body for such cases.
10. What is unlimited in an ‘unlimited company’ in India?
[A] Number of shares it can issue in market
[B] Liability of its members
[C] Amount of investment by its promoters
[D] All of the above
Show Answer
Correct Answer: B [Liability of its members]
Notes:
An unlimited company in India is defined under the Companies Act, 2013 as a company not having any limit on the liability of its members. Members of such a company are fully liable for all debts and liabilities incurred, without restriction. Unlimited companies are recognized under Indian company law but are rare in practice due to full personal liability.
