Indian Economy MCQs

Notes:
Bank NIFTY is an index that includes 14 of the most liquid and large-cap Indian banking stocks as of February 2026. The constituents are HDFC Bank Ltd. (22.02%), ICICI Bank Ltd. (18.18%), State Bank of India (10.42%), Axis Bank Ltd. (10.05%), Kotak Mahindra Bank Ltd. (8.85%), Federal Bank Ltd. (5.02%), IndusInd Bank Ltd. (4.15%), Bank of Baroda (3.86%), IDFC First Bank Ltd. (3.78%), AU Small Finance Bank Ltd. (3.76%). Bank of India is excluded.

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.

Notes:
Disinflation means the decrease in the rate of inflation. It is a slowdown in the rate of increase of price levels of goods and services. This is different from deflation, in the way that Disinflation is only a marginal and short term decrease in rate of inflation.

Notes:
Under the Banking Regulation Act, 1949, unclaimed deposits are defined as funds not operated for 10 years in India but commonly considered 5 years under US state dormancy laws. Indian Reserve Bank amendments in 2014 require banks to transfer such amounts to the Depositor Education and Awareness Fund after 10 years.

Notes:
Fiscal policy uses government taxation and spending to affect economic growth, employment, and inflation. Main tools are tax adjustments and expenditure management. These decisions are made through the government’s annual budget process. Fiscal policy is distinguished from monetary policy, which is implemented by central banks using instruments such as interest rates, reserve requirements, and open market operations.

Notes:
Collateralized Borrowing and Lending Obligation (CBLO) was introduced in India in 2003. It is a money market instrument developed by the Clearing Corporation of India Limited (CCIL) and approved by the Reserve Bank of India. CBLO facilitates collateralized borrowing and lending among financial institutions by using government securities as collateral and operates under the RBI’s regulatory framework, with maturity periods from one day to one year.

Notes:
The Laffer curve is a theoretical concept in economics that illustrates the relationship between tax rates and government revenue. The curve is named after economist Arthur Laffer, who popularized the concept in the 1970s. The basic idea behind the Laffer curve is that there is a certain tax rate that will maximize government revenue. At a 0% tax rate, the government will obviously not collect any revenue. At a 100% tax rate, the government will also not collect any revenue because people will have no incentive to work. The Laffer curve suggests that there is a point in between these two extremes where the government will collect the most revenue. The exact shape and location of the Laffer curve will vary depending on various factors, such as the state of the economy and the efficiency of the government’s tax collection system.

Notes:
The Consolidated Fund of India was created under Article 266 of the Indian Constitution. The government meets all its expenditure from this fund and it needs parliamentary approval to withdraw money from this fund.

Notes:
Karnataka produced 13,278 tonnes of raw silk in 2024-25, about 32% of India’s total. The state contributes approximately 45% of India’s mulberry silk. Major silk-producing districts are Mandya, Kolar, Chikkaballapur, and Ramanagara. Silk cultivation in Karnataka covers about 1.2 lakh hectares. The Silk Samagra-2 scheme supports sericulture in the state.

Notes:
Business transactions that occur with no exchange of tangible goods called Invisible Trade. It involves the transfer of non-tangible goods and/or service, intellectual property and patents. Examples of invisible trade including consulting, income from foreign investment, shipping services and tourism.